Five Supreme Court judges yesterday unanimously upheld an appeal against the Royal Bank of Scotland for attempting to repossess the homes of two brothers without serving a calling-up notice, a legal warning that the debt has to be repaid within two months.

The judges ruled that a calling-up notice should be issued by all lenders before court action can begin.

As a result, thousands of similar cases currently before Scottish courts could effectively be deemed invalid and halted.

Standard practice in Scotland has seen possession orders raised by lenders based upon mortgage arrears, with experts estimating that as many as four out of five Scottish repossessions are carried out without a calling-up notice.

RBS took action to repossess the homes of brothers Francis and John Wilson in 1998 at Edinburgh Sheriff Court after they built up business debts of nearly £50,000.

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The Sheriff ruled that the letters RBS had sent to the brothers demanding the debt be settled did not constitute a formal legal warning.

RBS then took the case to the Court of Session which ruled in its favour, only for the Wilsons to appeal to the Supreme Court which upheld the Sheriff’s original judgement.

Mike Dailly, principal solicitor of the Govan Law Centre, said: “This will send shock waves to lenders and their solicitors in Scotland. More than that, it could mean thousands of cases might have been raised incompetently.”

Eleanor Hamilton, principal solicitor at Shelter Scotland, said: “This is a highly significant judgment. It will definitely have a bearing on ongoing and future repossessions.”

A spokesman for RBS said: “We accept this judgment and, along with the rest of the industry in Scotland, are considering its implications.”