3D Garages Limited v Prolatis Company Limited, 30 September 2016
3D Garages Limited v Prolatis Company Limited, 30 September 2016 – validity of securities enforceable by party other than creditor
This is a Sheriff Court case considering the enforceability of a number of standard securities granted by 3D Garages in favour of Prolatis over a variety of different properties.
The standard securities had been granted in security of sums due to a David Gill. However, the securities had been granted in favour of Prolatis (described as a security trustee) as part of a commercial arrangement aimed at allowing a single entity to enforce obligations on behalf of a number of creditors.
Prolatis sought to enforce the securities and proceedings were raised in court. However, 3D argued that the securities were void and unenforceable on the basis that, in terms of the Conveyancing and Feudal Reform (Scotland) Act 1970, the holder of a standard security must also be the creditor in the obligation secured by the standard security. In other words: only the creditor in respect of the debts secured by a security can enforce the security.
That argument was rejected by the sheriff and an appeal to the Sheriff Principal was also refused. After considering the terms of the 1970 Act, the Sheriff Principal found that:
“There is no provision in the 1970 Act or in the common law which requires or stipulates that the grantee in the standard security must be the creditor in the contract or personal obligation. The debtor in the personal obligation need not be the granter of the standard security. It is well settled that the granter of a standard security may be someone other than the debtor.”
The full judgement is available from Scottish Courts here: