Head 26: 1 Flashcards
(17 cards)
What is the signalling function of securities?
By giving security you are ‘signalling’ that you are creditworthy and you will pay the debt.
What is the hostage function of securities?
The asset is acting as a hostage - until you repay the loan the hostage (asset) is not released.
General principles of true securities:
1) Publicity
2) Real liability
3) Accessoriness
4) Types
5) Ranking
6) Restricted and unrestricted
7) Enforcement
8) Doctrine of catholic and secondary securities
Nisbet’s Creditors v Robertson (1791)
Contract to smuggle goods from the Netherlands to Scotland. The person importing the goods granted a security over land which the seller could enforce if he didn’t pay.
The court held that a smuggling contract is illegal and therefore there was no valid debt and thus there was also no valid security.
If a security is transferred by assignation then…
The debt must also be transferred by assignation.
McKichen v Muir (1849)
The Muir family were going to a ball in a neighbouring town. They booked into an inn where they took some refreshments. They then changed for the ball and left their ordinary clothes in their room. On returning from the ball their was a dispute with the innkeeper as to the amount of the bill. The family refused to pay whereupon the innkeeper retained their clothes. The innkeeper said that he had a right of lien over the clothes. The family went to court for damages but the court held that the innkeeper was within his rights - he was entitled to asset a lien.
If more than one security over the same asset possible?
Yes
If the creditor enforces the security then they have an obligation to…
Obtain the best price.
What is a standard security?
It is an express hypothec over immoveable property.
What Act regulates standard securities?
Conveyancing and Feudal Reform (Scotland) Act 1970
s 9 Conveyancing and Feudal Reform (Scotland) Act 1970
Standard securities must be registered in the Sasince / Land Register.
Companies Act 2006 s 878
Where the granter is a company a standard security must be registered in the Companies Register too.
What can a standard security be granted over?
Real rights in land (s 9(2)):
Real right in land is defined in s 9(8)(b) as a real right capable of registration:
- ownership
- registered long lease
- standard security itself
Can a standard security be granted over a short lease?
NO
Model forms for standard securities are found in…
Schedule 2 of the 1970 Act
Model “Form A”
Includes the debt contract whereby the debtor undertakes to repay the loan (typically used in residential properties)
Model “Form B”
Does not include the debt contract (typically used in commercial properties)
