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Lawbite: Is my debt secure or not?

  • United Kingdom
  • Litigation and dispute management
  • Real estate dispute resolution


This is another important Scottish Sheriff Court case on the competency of an assignation of standard securities (secured charges).  It follows two recent conflicting cases of OneSavings Bank v Burns, where the court found in favour of the borrower, holding that an assignation was invalid and the security was unenforceable; and Shear v Clipper Holdings, where the court found in favour of the lender.  The debtor challenged the validity of an assignation to Promontoria (the “Bank”) at the point the Bank attempted to enforce the securities.     

The case facts:

The borrower’s debt was secured by a portfolio of 34 standard securities, all of which were for ‘all sums due and to become due’.  Instead of specifying in the assignation the amount due under each security, it stated: “to the extent of all obligations and liabilities due or to become due by the relevant Chargor to the buyer”.  The competency challenge was based on the failure to specify the amounts actually due, which the borrower argued rendered the assignation invalid.

The facts were of some importance as the exact amounts due to the lender had been a matter of dispute for a number of years.  The court considered cases where multiple securities had been granted to cover multiple and substantial borrowings, commenting that it may not be possible to specify the exact amount due on each security.  The court understood that the statute provided some latitude by requiring that an assignation should be “as close as may be” to the prescribed statutory form (“Form A”). 

The decision: 

The court held that the adaptions to the Form A were in the circumstances wholly understandable and reasonable, and therefore the assignation complied with statutory requirements and had the effect of vesting the securities in the Bank.

The court also held that even if it was incorrect and the assignation did not conform to the statutory requirements, the borrower was not prejudiced - their challenge was purely technical and designed to delay repayment of the debt due to the Bank.  As such the assignation would have still had the effect of vesting the securities in the Bank.

One final interesting point discussed but not dealt with was whether specifying in an assignation the present sum outstanding would have the effect of converting an “all sums due” security to a fixed sum security.  In Shear v Clipper Holdings Lord Bannatyne concluded there was some merit in this.  Unfortunately we will have to wait for Parliament or for the outcome of another case before this point is settled. 

  • Any assignation of debt must clearly inform the debtor what is being assigned.
  • The court appears to recognise there is a degree of latitude which will be particularly useful for lenders assigning multiple securities covering multiple and substantial borrowings, but the form of the assignation should be “as close as may be” to Form A.
  • Where possible we advise specifying the amounts due under each standard security in the body of the assignation to avoid any challenge, however this must be weighed against the risk that it may convert an “all sums due” security to a fixed sum security.

Promontoria (Henrico) Limited v The Firm of Portico Holdings (Scotland) and Linda Arthur [2018] SC GRE 5