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Further decision on assigned securities

25th June 2018

The 2017 decision of the sheriff court in OneSavings Bank v Burns caused considerable worry to those holding or administering assigned securities. OneSavings Bank had purchased a loan portfolio from JP Morgan. The individual standard securities ( mortgages) required to be assigned. The borrower’s lawyers argued that the assignation document which sought to transfer the security was not in conformity with the statutory provisions. The court agreed, preventing OneSavings Bank from repossessing the property covered by the security.

Since this case however there have been two further decisions (which we have reported on) called Shear v Clipper Holdings and Promontoria (Henrico (Limited) v Portico Holdings    where the courts took more flexible and pragmatic approaches to challenges to assigned securities, ruling in effect that a failure to follow statutory provisions did not necessarily mean that assignation of a security was invalid.

There has now been a further case called Clipper Holding II SARL v SF & SFX, earlier in 2018, at Edinburgh sheriff court. Whilst this latest case is subject to appeal it is understood that the sheriff has followed the two most recent cases (Shear being a Court of Session decision), both of which took a flexible approach when interpreting whether or not an assignation was valid.

Time will tell, but it does appear that following the scare of the OneSavings case the broad trend of the Scottish courts has been away from that case and in favour of a more flexible and commercial interpretation of the validity of assignations used to assign standard securities.

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Morisons Solicitors Brian Fairgreave

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