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Standard security assignation must state sum due, sheriff rules
An assignation of a standard security was invalid where it failed to state the amount owing at the time of assignation, a sheriff has ruled.
Sheriff Philip Mann at Banff Sheriff Court was giving judgment in a case brought by Onesavings Bank plc against John and Rhoda Burns, an action in which the pursuers sought repossession of the defenders' house and a power of sale, for non-payment of sums due under a secured loan.
The pursuers claimed to be creditors through two successive assignations by previous creditors. The defenders challenged the pursuers' title to sue on the basis that the assignations did not conform to form A in schedule 4 to the Conveyancing and Feudal Reform (Scotland) Act 1970, in that they did not contain the words "to the extent of £ being the amount now due thereunder". Instead they assigned the statndard securities "for all sums due, to the extent of all sums now due or at any time or times hereafter to become due under the respective Standard Securities, the creditor’s interest in which is currently vested in the Transferor".
Each assignation conveyed a large number of standard securities set out in a schedule.
It was argued for the pursuers that it was clear that what was being assigned were the mortgage, the defenders’ obligations in terms of the mortgage and the security for that mortgage. Given that the mortgage was an “interest only” mortgage, the defenders' obligations at the date of each assignation remained the same as at the date of granting of the standard security. Section 14(2) of the 1970 Act allowed the assignee to obtain all of the rights which the original creditor possessed, and it could not have been the intention to assign a fixed sum where the obligations of the debtor envisaged a situation where the balance of the mortgage might increase as well as decrease. The assignations sufficiently conformed to the statutory requirements.
Sheriff Mann did not accept a separate argument for the defenders that an assignation could only be in respect of a single standard security, but held that the assignations in question still failed to conform to the prescribed form. Specifying the amount due was a mandatory requirement in terms of note 2 to form A.
"I can identify no circumstances in this case which make it inappropriate or unnecessary to include the words which were omitted", he stated. The argument that the sums due might increase "might have had force if the defenders had been party to the assignations to the effect of confirming that the standard securities would remain effective to secure future amounts due to the assignees as well as the amounts then currently due under the security. But, as things stand, I do not see any justification for departing from the mandatory terms of an assignation on that account".
He added that he had reached his conclusion "reluctantly", as the defenders knew who their creditors were and had succeeded on a "technicality". He continued: "I have no doubt, however, that the pursuers are not bereft of effective remedies which they can pursue against the defenders."
In that respect he stated his view that while Mr Burns had said in evidence that the defenders had received advice from solicitors that they had no obligation to pay anything to the pursuers because the standard security had not been properly assigned, "that advice was erroneous in respect that it stated that there was no obligation to pay. This is because... the assignations were effective to make the pursuers the creditors in the mortgage account even though they failed to make them secured creditors".
Click here to view the sheriff's judgment.