THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND v. BRIAN MORTON [2000] ScotSC 10 (18th April, 2000)

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND v. BRIAN MORTON [2000] ScotSC 10 (18th April, 2000)

The appellant's pleadings, though sparse, give sufficient notice of a case that he is entitled to a pro tanto reduction in liability by reason of prejudice arising from the Bank's failure to perfect the security. The law imposes a duty on the creditor to preserve securities for the benefit of the cautioner, and the contract does not clearly exclude liability for such failure. A proof before answer is justified.

Citation
[2000] ScotSC 10
Parties
Pursuer/respondent: The Governor and Company of the Bank of Ireland; Defender/appellant: Brian Morton
Jurisdiction
Scotland
Procedural Posture
Civil Appeal / Appeal Against Refusal to Allow Proof Before Answer
Outcome
Appeal allowed
Legal Topics
Guarantee, Cautionary Obligations, Security Ranking, Negligence, Interpretation of Contract, Release of Guarantor
Contract Procedure Guarantee Cautionary Obligations Security Ranking Negligence Interpretation of Contract Release of Guarantor

Case Brief

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Parties

The Governor and Company of the Bank of Ireland

Pursuer/respondent

Brian Morton

Defender/appellant

Procedural Posture

Civil Appeal / Appeal Against Refusal to Allow Proof Before Answer

Legal Issues

  1. 1 Whether the appellant is entitled to a proof before answer on the claim that the Bank's failure to obtain a first ranking security prejudiced him as guarantor
  2. 2 Whether the Bank owed a duty to the appellant to obtain a first ranking security
  3. 3 Whether the terms of the guarantee exclude the Bank's liability for failure to perfect the security

Ratio Decidendi

The appellant's pleadings, though sparse, give sufficient notice of a case that he is entitled to a pro tanto reduction in liability by reason of prejudice arising from the Bank's failure to perfect the security. The law imposes a duty on the creditor to preserve securities for the benefit of the cautioner, and the contract does not clearly exclude liability for such failure. A proof before answer is justified.

Court Disposition

Appeal allowed

Orders

  • Interlocutor of the Sheriff dated 8 December 1999 recalled
  • Proof before answer allowed on parties' averments