Following a period of some uncertainty, a recent decision obtained by this firm in Greenock Sheriff Court has provided further comfort to lenders who have obtained securities by way of assignations.


In OneSavings Bank v Burns, Sheriff Mann ruled that an assignation of an "all sums due" standard security which did not specify the sum outstanding as at the date of assignation was invalid. However, the decision of Lord Bannatyne in Shear v Clipper Holdings was  then welcomed by the market and, specifically, by lenders having acquired security by way of such similar assignation as this did not follow Sheriff Mann's decision and ruled that such forms of assignation were acceptable.  The decision of Lord Bannatyne has now been followed in Promontoria (Henrico) Limited v The Firm of Portico Holdings (Scotland) and others

The Sheriff in Portico placed particular weight on Section 53 of 1970 Act which states that there shall be sufficient compliance with any provisions requiring a document to be in conformity with a form specified in the legislation provided that the document conforms "as closely as may be" to the requirement. Unlike Sheriff Mann, he held that the wording used in this assignation was as close as may be to the required form in the circumstances of the case and where an "all sums due" security was involved. Accordingly, the requirements of the 1970 Act were all met and the result is a valid assignation. For completeness, the Sheriff went on to note that, had he concluded otherwise, he would equally have followed the approach of Lord Bannatyne in the Shear case and would have concluded that the omission of these words was not a serious enough breach to be fatal to the validity of the assignation. In this regard, he expressly noted that "the challenge being put forward by the Defenders is clearly only a technical challenge, and is one that is designed simply to delay repayment of the debt due by then."

This decision provides further welcome clarification in this area of law. Combined with the decision of Lord Bannatyne in Shear, we appear to be seeing a clear move away from the anomaly of Sheriff Mann's decision and back towards what had become an established market practice.

Addleshaw Goddard have represented the relevant lenders in both the Shear and Portico decisions.

The decision in Portico can be viewed here

Key contacts

Lynsey Walker

Lynsey Walker

Partner, Dispute Resolution
Edinburgh

View profile
Jamie McIntosh

Jamie McIntosh

Partner, Business Support and Restructuring
Edinburgh

View profile