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Latest decision on assigned securities

22nd March 2018

We previously reported on the potential difficulties caused to lenders by the sheriff court ruling in One Savings Bank v Burns and also on the later Court of Session decision of Shear v Clipper Holdings which took a different, and arguably more “lender friendly”, approach.

The latest decision on assigned securities from the sheriff court is Promontoria (Henrico) Limited v Portico Holdings. Although decided in August 2017 the case has only just been published.

Once again there was an issue, raised by the borrower, to the effect that the assignation of the security, in this case Clydesdale Bank PLC to Promontoria, was not in the correct format as set out in the legislation and therefore Promontoria did not have legal title to bring proceedings for repossession on the basis of the assigned security.

In the circumstances of this case (and with reference to the particular wording of the assignation in question) the court decided that the form of assignation used was as close “as may be” to the statutory form and the sheriff was therefore satisfied that the assignation complied with the legislation. Accordingly, the assignation had the effect of transferring the title in the security from Clydesdale to Promontoria.

The sheriff indicated that he preferred the approach of the Court of Session in the Shear case. As with Shear this ruling is not necessarily definitive as much will depend on the particular circumstances and wording of any assignation which is subject to criticism and challenge by a borrower. Nevertheless, it is a further welcome trend from the perspective of the many lenders who hold and administer assigned securities and who have been concerned as a result of the One Savings case.

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