This was an action in which the pursuers, Onesavings Bank plc (the "Bank"), sought (i) a declarator that they were entitled to take possession of certain heritable property and to exercise all powers competent to a standard security holder, including the power of sale; (ii) a warrant in terms of section 24 of the Conveyancing and Feudal Reform (Scotland) Act 1970 (the "1970 Act") to exercise the remedies a creditor is entitled to exercise on default; and (iii) a warrant for ejection in terms of section 5(1) of the Heritable Securities (Scotland) Act 1894.
The standard security that the Bank sought to enforce was originally granted by the defenders in favour of another creditor. That other creditor assigned the standard security to a further creditor who then assigned the standard security to the Bank. The defenders argued that the assignation of the standard security to the Bank dealt with multiple standard securities and did not include certain wording required by the statutory form set out in the 1970 Act and, accordingly, the Bank had no title to sue and the standard security had not vested in the Bank.
Sheriff Philip Mann decided that the 1970 Act did not restrict an assignation by which a standard security might be transferred to an assignation which dealt solely with one standard security. The court, therefore, rejected the argument that the Bank had no title to sue on the basis that multiple standard securities were assigned pursuant to the assignation.
However, the assignation failed to include the mandatory words, "to the extent of £… being the amount now due thereunder". Sheriff Mann explained in his judgment that it would have been easy to include an additional column in the schedule to each assignation to specify the amount outstanding in respect of each standard security at the date of the assignation. On that basis, section 53(1) of the 1970 Act that the form of assignation need only conform "as closely as may be" to the statutory form did not help the Bank.
It was acknowledged that the omission was not fatal to the assignation itself but was fatal to the original standard security becoming vested in the Bank. The judgment noted that "all and any personal bonds, credit agreements or agreements for loan (however constituted) secured by the said standard securities and granted or entered into with [the defenders]" were effectively assigned. It was solely the assignation of the standard securities which had ineffectively been assigned.
The Bank, therefore, had no title to sue and the application referred to above was dismissed.
Whilst the decision may be appealed, it should in the meantime be borne in mind by banking solicitors acting in the sale and purchase of loan portfolios where standard securities are being assigned and transferred. Solicitors may need to pay closer attention to the form of assignation contained in the 1970 Act than perhaps current practice expects and less reliance may need to be placed on section 53(1) of the 1970 Act in circumstances like this case. However, the decision is persuasive rather than binding so whether the decision will be followed in future cases, time will tell.