Chapter 2 – Register of Statutory Pledges
Register of Statutory Pledges
Section 81 – The Register of Statutory Pledges
348.Subsection (1) establishes the new register in which statutory pledges are to be registered. The register is to be known as the Register of Statutory Pledges (“
349.Subsection (2) provides that the register is to be under the management of the Keeper of the Registers of Scotland. Various provisions in this Chapter also require payment of a fee to the Keeper for certain things. The Keeper has powers under section 110 of the Land Registration etc. (Scotland) Act 2012 to set the level of fees payable in relation to any register under the Keeper’s management and control. As such, the effect of subsection (2) is also that these powers apply automatically to the RSP.
350.Subsection (3) states that, subject to the requirements laid down by the Act, the Keeper has discretion as to the form in which the register is kept. That would include the RSP being kept in a wholly electronic form.
351.The RSP, as with the other registers under the Keeper’s control, is a public asset. Subsection (4) therefore provides that the Keeper is to take such steps as appear reasonable to protect the RSP from interference, unauthorised access, or damage (for example by hacking).
352.See also section 111 of the Act, which provides for the Scottish Ministers by regulations to be able to make rules (“RSP Rules”) as to the keeping of the RSP and related matters.
Structure and contents of the register
Section 82 – The parts of the register
353.This section provides that the Keeper must make up and maintain, as parts of the register, the statutory pledges record and the archive record (see sections 83 and 84).
Section 81 – The statutory pledges record
354.This section sets out the information which must be included in an entry in the statutory pledges record, and provides that the statutory pledges record is the totality of such entries. The information which must be included is largely self-explanatory.
355.The details of the secured creditor will be included in an entry in the statutory pledges record, but a search against the secured creditor is not permitted under section 104 of the Act (unless the Scottish Ministers specify in RSP Rules made under section 111 of the Act that such a search is permitted). It will, however, be possible for an entitled person (within the meaning given in section 107 of the Act) to request certain information about the pledge from the secured creditor.
356.A provider or secured creditor may be a legal person with an identifying number, such as a UK limited company or limited liability partnership. The Scottish Ministers will be able to specify that these identifying numbers are to be included in the entry in the statutory pledges record: see section 111(2)(a)(ii) of the Act.
357.This section provides that an entry in the statutory pledges record must include a copy of the constitutive document of the statutory pledge. The Scottish Ministers may, however, specify in RSP Rules that information in the record, including information in the constitutive document, will not be disclosed in a search of the RSP in order to protect confidential information of the parties (see section 111(2)(f)). Rules can also be made about information which can be redacted in the copy of the document which is submitted (see section 111(2)(d) and (e)).
Section 84 – The archive record
358.This section sets out that the archive record consists of—
first, all entries and copy documents which have been transferred to that record from the statutory pledges record as a result of the correction of the statutory pledges record or as a result of a statutory pledge being extinguished by virtue of regulations made by the Scottish Ministers under section 95,
second, copies of any document which discloses, or contributes to disclosing an inaccuracy in respect of which a correction has been made,
third, any other documents as the Keeper considers it appropriate to include and,
fourth, any other information required to be entered in the record by RSP Rules.
359.Entries will not automatically move from the statutory pledges record to the archive record when a pledge is discharged. However, an application for a correction can be made in such cases if desired (the term “inaccuracy” is defined in section 101(2)(a)(ii) to include the record becoming inaccurate because of supervening events, which would include the pledge having been discharged). See paragraphs 369 and 433 of these Notes for further details. While it will normally be a choice whether to seek a correction, it is compulsory where the pledge is extinguished by enforcement (see section 78 and paragraph 342 of these Notes).
360.In addition, as noted above, it is possible for a duration period for a pledge to be introduced under section 95, in which case entries that were not renewed would be extinguished and moved to the archive record (see paragraphs 399 to 401 of these Notes).
Registration process
Section 85 – Order in which applications are to be dealt with
361.This section provides that the Keeper must deal with applications for registration of a statutory pledge, and applications for registration of an amendment to a statutory pledge, in the order in which they are received. The effect is to protect the priority of registration of, or amendments to, statutory pledges (and therefore the ranking rights in security as regards the encumbered property).
Section 86 – Application for registration of statutory pledge
362.Subsection (1) enables the secured creditor, and only the secured creditor (or the secured creditor’s agent – see section 120(4)), to apply to the Keeper for registration of a statutory pledge in the RSP.
363.Subsection (2) sets out that the Keeper must accept the application if it is submitted with a copy of the constitutive document, contains all the information the Keeper requires to make up an entry, conforms to RSP Rules, and the fee due to the Keeper is – or will be – paid. Rules can be made about information which can be redacted in the copy of the constitutive document which is submitted (see section 111(2)(d) and (e)).
364.Subsection (3) provides that the Keeper must reject an application if any of the requirements mentioned in subsection (2) are not satisfied.
Section 87 – Registration of statutory pledge
365.Subsection (1) provides that the Keeper must, on accepting an application, make up and maintain the appropriate entry in the RSP, which includes allocating a registration number (as defined in section 120(1) of the Act).
366.Subsection (2) provides that the statutory pledge is taken to be registered on the date and at the time originally entered for it. In other words, even if the registration of a statutory pledge is ineffective and becomes effective only once it is corrected (see section 91(3)), the date and time of registration of the statutory pledge will still be the date and time of the initial (i.e. ineffective) registration. However, it is the time of effective registration that is critical for matters such as creation or ranking (see sections 48 and 60).
Section 88 – Application for registration of amendment
367.This section makes the same provision in respect of an application for registration of an amendment of a statutory pledge as section 86 of the Act makes in respect of the application for registration of the pledge itself (the only change being that the relevant document is an amendment document rather than a constitutive document). See paragraphs 362 to 364 of these Notes.
368.An amendment to a statutory pledge may only be registered under this section where it is an amendment to add property to the encumbered property, or to increase the extent of the secured obligation in a case where the extent is clear in the original entry (see also the discussion at paragraph 272 of these Notes). As set out in more detail at section 58(6) and (7), an amendment which can be (and which requires to be) registered under this section takes effect only when registered effectively.
369.Although these are the only changes which can be registered as “amendments”, a pledge may be assigned in accordance with section 57 or restricted or discharged off-register by way of a written statement under section 59 of the Act. Other events may also lead to the pledge being extinguished off-register – for example, due to the encumbered property being destroyed, due to the property being acquired unencumbered under one of the Act’s good faith acquisition rules, due to the pledge being enforced, or due to the operation of the anti-avoidance rule under section 52. The RSP may be corrected for any such change by an application for a correction, if desired (see sections 96 to 99). The Keeper also has an obligation to correct the RSP in certain circumstances under section 100 upon becoming aware of a manifest inaccuracy in the RSP (and see section 101(1) of the Act for the meaning of “inaccuracy”).
Section 89 – Registration of amendment
370.Subsection (1) provides that the Keeper must, on accepting an application, revise the entry for the statutory pledge to which the application relates.
371.Subsection (2) has the same effect with regard to the timing of the registration of the amendment as section 87(2) has with regard to the pledge itself. See paragraph 366 of these Notes (but for cross-reference purposes, the relevant sections here are 92(3), 49 and 60).
Section 90 – Verification statement as to registration of statutory pledge or amendment
372.Subsection (1) provides that the Keeper must, after registering a statutory pledge or amending it, send a statement to the secured creditor (i.e. the applicant) and the provider verifying what has been done – but only if the application contains email addresses for them. If an email address has not been included for either the secured creditor or the provider then there is no obligation on the Keeper to send that person a statement. Subsection (2) makes provision about the content of the statement.
373.As the application will have been made by the secured creditor, it can be assumed that they will provide their correct email address. However, the correct email address may not be given for the provider. In circumstances where the provider does not receive a verification statement from the Keeper (for example, because no email address was provided by the secured creditor or the email address provided was incorrect), the provider may, under subsection (3), request a copy of the verification statement from the secured creditor. Under subsection (4), the secured creditor must supply the copy within 21 days.
Effective registration
Section 91 – Effective registration of statutory pledge
374.Subsection (1) sets out three cases in which a purported registration of a statutory pledge in the statutory pledges record is ineffective, with the result that the statutory pledge is not created—
The first case is that the entry does not include a copy of the constitutive document.
The second case is that the entry contains an inaccuracy which, as at the time of registration is “
seriously misleading ” (for which see section 94(1)).The third case is that the constitutive document is invalid, for example because it is a forgery.
375.As such, it is crucial that the constitutive document is included in the entry (and is valid). If anything else is missing from the entry, the registration will still be effective unless the entry is considered seriously misleading by reason of the omission (i.e. the second case cited above applies, under which missing or incorrect text can lead to the entry being considered seriously misleading).
376.The effect of determining whether or not an entry is seriously misleading as at the time of registration is that a supervening inaccuracy will not render ineffective the creation of the pledge which took place by reason of the registration (although see section 93 of the Act as to other consequences).
377.Subsection (2) makes subsection (1) subject to section 94(1)(c) and (d), with the effect that a registration may be partially effective as regards the encumbered property or as regards co-providers or co-secured creditors.
378.Subsection (3) enables an ineffective registration to become effective by means of a correction. The effect of this provision, when read with section 101(3) of the Act, is that the registration becomes effective (and the pledge is created) on the date of the correction.
Section 92 – Effective registration of amendment to statutory pledge
379.This section makes the same provision for the registration of an amendment of a statutory pledge as section 91 of the Act makes for the registration of the pledge. See paragraphs 374 to 378 of these Notes.
380.See also section 88 (in relation to when an amendment, as opposed to a correction, may be registered) and section 58(6) and (7) (in relation to when such amendments take effect).
Section 93 – Supervening inaccuracies: protection of third parties
381.This section protects a person who for value, in good faith and exercising reasonable care acquires encumbered property, or a right in encumbered property, in circumstances where there was previously an effective registration under which the pledge was created but, at the time of acquisition:
the entry has been incorrectly removed from the record,
in a case where the acquired property does not have an identifying number which must be used, the entry has become seriously misleading in respect of the acquired property, or
in a case where the acquired property does have an identifying number which must be used, a search of the record for that number would not produce the entry.
382.This provision could therefore cover register malfunctions under which entries were incorrectly removed or search results were not producing the correct results. It could also apply where, for example, the provider marries after the pledge is registered and changes their name.
383.The effect of this section is that the pledge will be extinguished as regards the acquired property.
Example
In year 1, Rachel Smith grants a statutory pledge to Mark over her piano. Mark registers the pledge and the piano becomes encumbered property. In year 2, Rachel marries and changes her name to Rachel Jones. In year 3, Rachel sells the piano to Luke without obtaining Mark’s permission under section 51. However, Luke is in good faith, and does not know that Rachel Jones was once known as Rachel Smith. A search against Rachel Jones will not reveal the pledge, and so he will acquire the piano unencumbered by the pledge.
In contrast, if Rachel had chosen not to change her name upon marrying, a search against her would continue to reveal the pledge. There would be no supervening inaccuracy so this section would not be relevant because there would be no error to mislead Luke. However, if Luke did not search the register, he might still benefit from protection under section 53 (if Rachel is a sole trader whose business is selling musical instruments) or section 54 (if he is buying the piano in good faith for personal purposes and the value is below any cap introduced under that section).
384.The protection offered by section 93 makes different provision in respect of encumbered property that is required by RSP Rules to be identified by an identifying number, such as a vehicle identity number (VIN). Any person intending to acquire such an asset could readily obtain information about the pledge by searching the statutory pledges record against the VIN. The expectation is that where the use of such numbers is mandated, they should be the primary means of searching as they ought to be the most reliable. As such a number would not change, it would not be the subject of a supervening inaccuracy unless the register malfunctioned (and any initial inaccuracy would be seriously misleading under section 94, meaning that no pledge was created over it).
385.There are a number of things a person could do to satisfy the section’s requirements to be in good faith and to take reasonable care. However, if they have failed to carry out a search of the register in respect of their purchase then they will not meet this test. The inaccuracy will have been irrelevant to their decision to purchase if they did not consult the register. This does not mean, though, that consulting the register will always be enough on its own. If the person has reason to be suspicious of the information on the register, they might be expected to make further enquiries.
Section 94 – Seriously misleading inaccuracies in the statutory pledges record
386.This section makes provision as to whether an entry in the statutory pledges record is seriously misleading as a result of an inaccuracy or inaccuracies in it. This applies for determining whether a registration is an effective registration for the purposes of sections 91, 92 and 93 of the Act. Section 101(1) of the Act provides for the meaning of “inaccuracy” in the statutory pledges record.
387.Subsection (1)(a) of section 94 provides that an inaccuracy will be seriously misleading if any of subsections (2) to (6) apply or if, despite none of them applying, the inaccuracy or inaccuracies are such that a reasonable person would be seriously misled by the entry. In other words, if any of the examples in subsections (2) to (6) apply then the inaccuracy will be seriously misleading (whether or not any person was actually misled), but those examples are not exhaustive and there may be other inaccuracies that are found by the courts to be seriously misleading. Whether such an inaccuracy is seriously misleading or not is to be determined objectively.
388.Subsection (1)(b) provides that any inaccuracy is to be disregarded to the extent that it appears in the constitutive or amendment document but is not replicated elsewhere in the entry. The effect is that the person searching the record does not have to look at the document to determine whether the details in the record are seriously misleading (although a copy of the constitutive document – and, if applicable, any amendment document – must still be part of the entry in the statutory pledges record and can, for instance, be used as evidence to show that the entry itself was inaccurate).
389.Subsections (1)(c) and (d) deal with an inaccuracy that relates only to part of the encumbered property, or to one co-provider or co-secured creditor. These provisions have the effect that an inaccuracy in the statutory pledges record may be seriously misleading in that respect only, and therefore the registration of the statutory pledge, or amendment to the statutory pledge, will be partly effective.
390.Subsections (2) and (3) focus on whether an entry contains an inaccuracy that prevents it being disclosed by a properly formatted search. Such an inaccuracy will generally be regarded as being seriously misleading.
391.Subsection (2) has the effect that an entry is seriously misleading where the provider (or co-provider) is a person required by RSP rules to be identified in the statutory pledges record by an identifying number (e.g. a company is likely to be required to be identified by their company number) and where, if a search of the record were to be carried out for that number using the search facility provided under section 104 of the Act, it would not disclose the entry. However, it does not matter if the company’s name is wrong as the expectation is that it should be searched for by reference to its number (which will not change in the way that its name might).
392.Subsection (3) has the effect that an entry is seriously misleading where the provider (or co-provider) is not a person required by RSP rules to be identified in the statutory pledges record by an identifying number and where, if a search of the record were to be carried out for the provider’s proper name, or their name together with their month and year of birth it would not disclose the entry. This means that even if the search function is programmed to be more forgiving of errors in names if the month and year of birth are also included in the search (and are correct), the entry will still be seriously misleading because it ought to be possible to find the entry by the name alone. However, it is not enough for the name to be correct; if it is correct but the month/year of birth is wrong, this will also be seriously misleading.
393.Subsection (4) has the effect that an entry is seriously misleading for the purposes of an initial registration (whether of a pledge or an amendment) where the name of the secured creditor (or co-secured creditor) at the date of application is incorrectly reflected in such a way that a reasonable person would be seriously misled. Because it will not be possible to search by secured creditor under section 104 (unless RSP Rules alter the position), the position is not determined by reference to whether a search result would return the entry. The application of the reasonable person test means that minor errors such as typos might be disregarded, particularly if other information is correct, but the position will be viewed as a whole in the circumstances of each case. In light of the fact that it is permissible for assignations to take place off-register and given that for the purpose of section 93 what will be of interest to a purchaser is simply whether the property is secured, not who benefits from the security, this provision is limited so as to not cover supervening inaccuracies.
394.Subsection (5) applies where the encumbered property is or includes property required by RSP rules to be identified in the statutory pledges record by an identifying number and where, if a search of the record were to be carried out for that number, it would not disclose the entry.
395.Subsection (6) applies where there is a requirement, by virtue of section 83(1)(g), for an entry in the statutory pledges record to specify the type of property encumbered and where the entry does not describes the claim as being of a type that it is or fails to allocate a type to the property.
396.Subsection (7) applies the rules in this section to circumstances where there are co-providers and co-secured creditors.
397.Subsection (8) enables the Scottish Ministers to modify this section to make provision about what does, and what does not, make an entry seriously misleading and how that is to be determined.
398.Subsection (9) provides that the proper name of a person means the person’s name in the form by RSP Rules, which might also prescribe a hierarchy of document that could be used to evidence a proper name: for example, a passport, driving licence, or a birth certificate.
Duration
Section 95 – Power of Scottish Ministers as regards duration of statutory pledge
399.This section provides for the Scottish Ministers, in consultation with the Keeper of the Registers of Scotland, to be able (by regulations) to specify a period at the end of which an entry in the statutory pledges record will be deleted and the statutory pledge extinguished. This power could be used, for example, in the event that a large number of pledges continue to appear in the record many years after registration but are believed to have been extinguished or restricted off-register.
400.However, the power would also allow for the creation of an application route which would allow the secured creditor to renew the pledge, to avoid its removal if the entry continues to be relevant. The concept of renewal would include renewal on more than one occasion.
401.The section relates only to removal of entries from the statutory pledges record. Nothing would be removed from the archive record under this section. The archive record would be affected only insofar as the any entries removed from the statutory pledges record would be placed on the archive record (see section 84(a) which requires the archive record to include all entries and copy documents transferred from the statutory pledges record by virtue of this section).
Corrections
Section 96 – Application by secured creditor for correction of statutory pledges record
402.There are many ways in which the register could become inaccurate – see paragraphs 369 and 433 of these Notes for discussion of some of them.
403.Subsection (1) enables a relevant person to apply to the Keeper for correction of an entry for a statutory pledge in the statutory pledges record. A “
404.The secured creditor does not for that purpose need to be identified as such in the entry in the statutory pledges record. There are a number of reasons why the creditor might not be so identified, including an error at the time of registration, a change of name, or an assignation of the pledge (see section 57 of the Act). So, for example, an assignee as a successor in title to the right of the secured creditor (see section 113(1) of the Act) may apply for correction. Alternatively, subsection (4)(b) has the effect that the assignor of a pledge (i.e. the previous secured creditor) can also apply for a correction.
405.The Keeper must accept an application that meets the requirements of paragraphs (a) and (b) of subsection (2), and, under subsection (3), must reject one that does not.
Section 97 – Correction of record in response to application under section 96
406.This section deals with what happens once an application for a correction is accepted under section 96.
407.Subsection (1) provides that the Keeper must, on accepting an application, correct the entry. See also section 102(2) and (3), which sets out the procedure that the Keeper must follow depending upon the nature of the correction (but, for example, in every case the Keeper must note in the register that a correction has been made). However, subsection 102(4) does not apply here, as notification requirements are dealt with by means of the issue of a verification statement.
408.Under subsection (2), the Keeper must issue both the applicant and provider with a verification statement, but only if their email addresses have been provided in the application. Subsection (3) makes provision about the content of the verification statement. Under subsections (4) and (5), there is an ability for the provider to obtain a copy of the verification statement from the applicant (i.e. the secured creditor) if the statement is not received by provider but is received by the secured creditor. Given that the secured creditor will be the one submitting the application, it is to be expected that they will supply their own email address correctly and will therefore receive the statement, but if they make a mistake in supplying the provider’s email address then this will allow the provider a means of obtaining a copy.
Section 98 – Demand that application for correction be made under section 96
409.This section enables a person with a specified interest in the accuracy of the statutory pledges record, and who maintains that the record is inaccurate, to be able to:
demand that the person showing on the register as being the secured creditor in respect of a pledge apply to the Keeper for a correction of the record under section 96 of the Act, and
if no such application is made, apply for the correction themselves.
410.Subsection (1), read with subsections (2) and (3), has the effect that a person identified in the record as the provider or a co-provider can make a demand on the registered secured creditor if the person making the demand asserts either that they are not in fact a provider despite being identified as such, or that property identified as being the subject of the pledge is not in fact encumbered property. In addition, a person with a right in property which is identified as the encumbered property can make a demand on the registered secured creditor if the person making the demand believes that the property is not in fact encumbered property.
411.In both cases, it may be that the record was once accurate but has become inaccurate due to supervening events (e.g. the pledge has been restricted or discharged off-register), or it may be that the entry in the record has had incorrect information in it from the moment it was created.
Example 1
An entry states that a statutory pledge has been created over the car with VIN 12345. In fact, the statutory pledge was created over the car with VIN 12335. The owner of the car with VIN 12345 can demand a correction.
Example 2
An entry states that a statutory pledge has been created over a car with VIN 12335. This was accurate as at the date of registration, but the secured creditor has subsequently been discharged off-register. The provider can demand correction.
412.Subsection (4) sets out how a demand can be made. It must be in the form prescribed by the Scottish Ministers in regulations. In addition, it must specify a period within which an application is sought, and that period must be at least 21 days from the date of receipt.
413.Subsection (5) provides that no fee can be charged by the person registered as the secured creditor for complying with a demand.
414.In the event that the demand is not complied with within the period specified, the person becomes entitled to make an application themselves under subsection (6).
415.The person identified as the secured creditor in the entry in the statutory pledges record may no longer be the creditor because the pledge has been assigned. However, if they were once the secured creditor but subsequently assigned their interest, they would remain entitled to request a correction by virtue of section 96(4)(b). Alternatively, they could ask the new secured creditor to apply for a correction (by virtue of section 96(4)(a)) both in respect of the identity of the secured creditor and in respect of the change requested by the provider. The assignation document under which the identity of the secured creditor changed may well also make provision as to what the previous secured creditor is obliged to do in these circumstances.
Section 99 – Response to application for correction under section 98(6)
416.This section makes provision about what happens where an application is made to the Keeper for a correction under section 98(6) (i.e. following a failure by the registered secured creditor to comply with a demand under section 98(1)).
417.The Keeper must accept an application that meets the requirements of paragraphs (a) and (b) of subsection (1), and, under subsection (2), must reject one that does not.
418.On accepting an application, subsection (3) requires the Keeper to serve a notice on the registered secured creditor intimating that the record will be corrected on a specified date (at least 21 days from the date of the notice) unless action is taken by them. The Keeper must also note on the entry the details of the pending application, acknowledge receipt of the application and, in the event that the person showing on the entry as the provider is not the applicant, notify that person that notice of intention to correct the register has been served on the registered secured creditor.
419.Under subsection (4), the registered secured creditor may apply to the court before the date specified by the Keeper, opposing the making of the correction. They must notify the Keeper if they make any such application (so that the Keeper knows not to proceed with making the correction when the deadline passes).
420.Subsection (5) provides that where the registered creditor is not the secured creditor, the registered creditor must (to the extent that it is reasonable and practicable to do so) promptly notify the secured creditor of receipt of a notice from the Keeper under subsection (3). Subsection (4) will also apply to the secured creditor as it applies to the registered creditor – meaning that the secured creditor may apply to the court objecting to the making of the correction.
421.Where an application is made to the court, subsection (6) provides for the court to determine matters. However, subsection (7) recognises that if the Keeper was not told about the court action then the correction may already legitimately have been made. As such, no direction is to be made unless the court is satisfied that, before the date the Keeper had said was the intended date for making the correction, the Keeper received notice from the registered secured creditor of the court application. In establishing the date on which the Keeper received any such notice, the (rebuttable) presumptions as to service provided for in section 26 of the Interpretation and Legislative Reform (Scotland) Act 2010 may be relied upon. The Keeper can, if desired, enter the court process (see section 103 of the Act).
422.If the Keeper does not receive any notification of a court application before the date that the Keeper had said was the intended date for making the correction, the Keeper is required to make the correction on that date arriving (subsection (8)).
423.See also section 102, which sets out the procedure that the Keeper must follow, depending upon the nature of the correction being made (though in every case, the Keeper must note in the register that a correction has been made). That section also provides for notification to be given to interested parties of the entry having been corrected.
Section 100 – Correction of the statutory pledges record at instance of the court or the Keeper
424.This section deals with corrections which do not emanate from an application for a correction.
425.Subsection (1) ensures that the courts can (where appropriate) direct the Keeper to correct an entry in the RSP. The Keeper would be required to comply with any direction, as to do otherwise would risk the Keeper being found to be in contempt of court.
426.Court proceedings might arise in a number of ways. The Act does not provide for an express right of appeal against, or review of, any decision by the Keeper. However, an issue relating to the accuracy of the register might be raised in other proceedings, such as a judicial review of a decision by the Keeper, or proceedings in which it is alleged that a constitutive document is a forgery. The Keeper can, if desired, enter the court process (see section 103 of the Act).
Example 1
A constitutive document is reduced by the court because it has been forged by one of the apparent parties. The court can direct the Keeper to correct the entry in the statutory pledges record.
Example 2
An entry has been created in the statutory pledges record for a security by Andrew in favour of Bruce. But in the application form for registration of the assignation, Bruce erroneously states that Carol is the creditor. Carol could seek removal of the entry by the court (as an alternative to a demand for a correction).
427.Subsection (2) of this section sets out circumstances in which the Keeper will (under subsection (3)) be required to take action upon becoming aware of a manifest inaccuracy in the statutory pledges record. Subsection (3) will not apply where—
that awareness comes from a court direction (as the matter will be dealt with under subsection (1))
that awareness comes from an application having been made (as the matter will be dealt with under the application process), or
the Keeper considers that the appropriate way of addressing the inaccuracy is to make an application (as the matter would then be dealt with under the application process) – but only where the inaccuracy is not the Keeper’s fault.
428.As such, if the inaccuracy is something that has been introduced by the Keeper then it is not open to the Keeper to redirect parties to the application route. However, an inaccuracy would not be attributable to the Keeper simply because the Keeper has taken information from an application and entered it on the register.
429.Where the Keeper becomes aware of such an inaccuracy, other than in the cases set out above, subsection (3) requires the Keeper to correct the manifest inaccuracy where what is needed to correct the inaccuracy is also manifest and to note any inaccuracy that cannot be corrected.
430.See also section 102, which sets out the procedure that the Keeper must follow, depending upon the nature of the correction being made (though in every case, the Keeper must note in the register that a correction has been made). That section also provides for notification to be given to interested parties of the entry having been corrected.
Section 101 – Meaning of “inaccuracy” and how a correction is made
431.This section sets out the meaning of “inaccuracy”, as well as providing more information about corrections.
432.There is an “inaccuracy” in the statutory pledges record whenever the record mistakes the true position (in law or in fact) in relation to a pledge.
433.Where there is an inaccuracy, a correction can be sought. Subsection (2)(a) clarifies that a need for a correction may arise because the record has always been wrong, or because supervening facts have meant that it has become wrong. For example, legally there is no requirement to register restrictions or discharges of statutory pledges. These can take effect without any requirement as to registration. However, if a pledge is discharged, it would then be the case that the record misstated the position as regards that pledge, so a correction could be sought if desired. There are a number of other reasons why the record could become incorrect, including the pledge being extinguished by the encumbered property being destroyed or as a result of one of the good faith protections in the Act.
434.Subsection (2)(b) sets out what the correction of the statutory pledges record may involve (which will depend on the nature of the correction).
435.Subsection (3) makes provision about the date and time of a correction. This is particularly important as regards sections 91 and 92 of the Act, under which an ineffective registration may be made effective by correction (thereby creating the pledge).
Section 102 – Correction of statutory pledges record: procedure
436.This section applies where the Keeper corrects the statutory pledges record by virtue of any of the provisions of the Act under which it can be corrected.
437.Subsection (2) provides that where the Keeper corrects the statutory pledges record by removing an entry, the Keeper must transfer the entry to the archive record. The Keeper must also note on the transferred entry the section by virtue of which the transfer is made.
438.Subsection (3) provides that where the Keeper corrects the statutory pledges record by restoring, removing or amending information included in an entry, the Keeper must note on the entry that it has been corrected. In the case of the replacement of a copy document, the Keeper must also transfer the replaced copy to the archive record.
439.In both instances, the Keeper must give details of the correction including the date and time of the removal or (as the case may be) the correction of the entry. The Keeper must also include in the archive record a copy of any document which discloses or contributes to disclosing the inaccuracy which is the subject of the correction.
440.Subsection (4) provides that once the record has been corrected the Keeper must, to the extent that it is reasonable and practicable to do so, notify every person required by RSP rules and any other person who appears to the Keeper to be affected by it materially that a correction has been made. This is not an objective test and will be confined to facts within the Keeper’s knowledge. This section does not apply to corrections under section 97(1), as in such cases a verification statement will instead have been issued.
441.Subsection (5) provides that the validity of a correction of the record will not be affected if the Keeper fails to include in the archive record a copy of any document which contributes to disclosing the correction or fails to notify any person of the correction.
Section 103 – Proceedings involving the accuracy of the statutory pledges record
442.This section provides that the Keeper is entitled to appear and be heard in any civil proceedings where a question arises regarding the accuracy of the statutory pledges record, or what is needed to correct it.
Searches and extracts
Section 104 – Searching the statutory pledges record
443.The RSP is a public register (see section 81(1) of the Act). Subsection (1) of this section provides that the Keeper must provide a search facility by which the statutory pledges record may be searched.
444.Subsection (2) sets out that only such searches in the statutory pledges record as are specified in this subsection, or as are specified under RSP Rules, are permitted. This restriction on searches has two effects:
First, it reduces the risk of identity theft by ensuring that it will not be possible to search against date of birth, or against the month and year of birth alone. The Scottish Ministers will also be able (through RSP Rules) to prevent dates of birth from being disclosed on the face of the Register, or to limit the number of searches by reference to the same name and different months and years of birth that can be made in a particular time period.
Second, it reduces the risk of unfair commercial practices by not permitting a search against the secured creditor (typically, a bank or finance company) which might enable a competitor to obtain a list of customers.
445.Subsection (3) provides that any person may search the statutory pledges record on payment of any fee (or making an arrangement to pay).
446.Subsection (4) provides that no fee is payable for a search of the statutory pledges record carried out by a not-for-profit money adviser who does not charge individuals for the services that they provide and who is acting on behalf of an individual in carrying out the search. Under subsection (5), the Scottish Ministers are given the power by regulations (subject to the negative procedure) to make further provision about what “
447.The Act does not make provision for the Keeper to provide a search mechanism for the archive record, nor for a person to be entitled to use that mechanism. The Scottish Ministers may, however, make provision to that effect in RSP Rules made under section 111(1)(c) of the Act. It is also open to any person to obtain from the Keeper an extract of an entry in either the statutory pledges record or archive record under section 106 of the Act.
448.Sections 91 to 93 of the Act have the effect that it must be possible to carry out searches for the purposes of the “seriously misleading” test. It will therefore be for the Scottish Ministers to make such RSP Rules as are needed under this section for those purposes. RSP Rules will, amongst other matters, be able to determine whether the search criteria will provide for an exact match or a close match search.
Section 105 – Admissibility and evidential status of search results
449.This section provides that a copy of a search result, relating to a search carried out by means of a search facility provided by the Keeper, may be used as evidence of certain matters and, moreover, to prove certain matters unless there is evidence to the contrary. A search result may be in printed or electronic form.
450.This section should be read with section 106, which provides that an extract from the RSP will provide evidence of the contents of the relevant entry at the relevant date. It cannot be rebutted by other evidence (though liability is imposed on the Keeper for errors in extracts under section 109(1)(e) of the Act). It should also be noted that RSP Rules may prescribe by virtue of section 111(2)(f) that certain information on the register (for example, a precise date of birth) is not to be included in search results.
Section 106 – Extracts and their evidential status
451.This section enables any person to obtain from the Keeper an extract of any entry or part of an entry in the RSP, on payment of any fee (or making an arrangement to pay). An extract is (irrebuttable) evidence of the contents of an entry at the relevant time (which is either the time the extract is issued or, in the case of a point-in-time extract requested by virtue of subsection (3), the time to which the extract relates), and can be used for the purpose of proving a fact in any court or tribunal proceedings. Liability is imposed on the Keeper for errors in extracts under section 109(1)(e) of the Act. It should also be noted that the ability to obtain an extract is subject to the ability by virtue of section 111(2)(f) for RSP Rules to prescribe that certain information on the register (for example, a precise date of birth) is not to be included in an extract.
Request for information
Section 107 – Secured creditor’s duty to respond to request for information
452.This section provides for an entitled person (as defined) to be able to request information about a statutory pledge from the person identified as the secured creditor in the statutory pledges record.
453.Subsection (1) sets out that the information to be provided in response to a request will vary depending on the facts. If the person is the secured creditor, they can be asked to specify, whether property specified in the request is encumbered property. If the person is no longer the secured creditor, or has never been the secured creditor, they must provide information to that effect and, if relevant, details of the person to whom they assigned the pledge and any further known details of subsequent assignees. The request does not require to be in writing, but the response does.
454.Subject to subsection (8) (which enables the Scottish Ministers to modify this section so as to specify further entitled persons), by virtue of subsection (2), an entitled person is:
a person who has a right in the specified property,
a person who has a right to execute diligence against the property (including, in the case of a charge for payment, where that right will only arise once the days of charge expire without payment), or
a person who has the consent of the registered provider to make the request.
455.Subsection (3) gives the person named as secured creditor in the statutory pledges record 21 days to respond. An exception to the obligation to respond applies where—
it is clear that the registration is ineffective in relation to the statutory pledge being enquired about,
it is clear from the entry that the property is not encumbered, or
the information has been given to the person within the last three months and it has not changed.
Example
Adam grants a statutory pledge over his Rolls Royce. A search in the RSP against Adam reveals only the entry for that pledge. A request to the person named as secured creditor as to whether the pledge covers Adam’s yacht is exempt, as it will be clear from the register that it does not.
456.Subsection (4) allows the reasonable costs of responding to the request to be charged to the person making the request.
457.If the person of whom the request is made wishes to, they can apply to the court for either an exemption from complying (in whole or in part) or an extension. Subsection (5) gives the court power to grant either of these things. For example, depending on the circumstances, 21 days may be too short a period to assemble the necessary information.
458.If the entitled person does not receive a response, they can apply to the court in respect of that failure. Subsection (6) enables the court to order the registered creditor to comply with the request for information within 14 days or such other period as the court specifies. Failure to comply with such an order would risk the person being held to be in contempt of court.
459.Subsection (7) allows for the information request mechanism to be applied against anyone whose name is provided to the entitled person by the registered secured creditor as being the person to whom they assigned the pledge or, where applicable and known, any subsequent assignees. Such persons can be treated as being the registered creditor for the purposes of a further request under this section.
460.Where incorrect information is supplied under this section, there may be consequences under either section 108 or section 110.
Section 108 – Acquisition of property confirmed by creditor not to be encumbered property
461.This section sets out a special rule to protect purchasers of encumbered property. It should be read with section 107.
462.If a person making a request under section 107 is advised wrongly by the person to whom the request was made that the particular property is not subject to the pledge and the person then acquires the property (or a right in it) in good faith within 3 months, then the pledge is extinguished in relation to the property (or right) acquired.
Entitlement to compensation
Section 109 – Liability of Keeper
463.This section provides for the Keeper to compensate any person who has suffered a loss in consequence of a matter specified in subsection (1). Liability under subsection (1) is strict, in that the person does not have to show that the Keeper is at fault (as opposed to, say, arising from an unavoidable malfunction of the Keeper’s automated systems). However, subsection (2) limits the losses that can be recovered by excluding certain types of claim.
464.Subsection (3) provides more information about what is meant in subsection (1)(a) by “an inaccuracy which is attributable to the making up, maintenance or operation of the register”. It provides that an inaccuracy in information included in an entry in the statutory pledges record when the entry is made up, revised for an amendment document or corrected is not covered by subsection (1)(a) to the extent that the Keeper has been misled into making the inaccuracy and reasonably believed the information to be accurate. Subsection (4) provides that circumstances in which the Keeper is entitled to reasonably believe information to be accurate include if it is provided in connection with an application to which the entry relates, or by the court. As such, if the Keeper faithfully replicates the information provided in an application form and that information proves to be incorrect, that is not an inaccuracy for which the Keeper is liable, though the person who submitted the application may be liable under section 110. Subsection (4) is not exhaustive of the circumstances in which the Keeper is entitled to reasonably believe that information is accurate.
Section 110 – Liability of certain other persons
465.This section provides for certain persons to be liable, on fault being shown, for losses suffered by another person in consequence of a matter specified in subsection (1).
466.Subsection (1)(a) applies where a person suffers loss as a result of an inaccuracy in an entry. It applies where the person who made the application which led to the entry did not exercise reasonable care or where the person notified the Keeper of an apparent inaccuracy without taking reasonable care.
Example
Alan maliciously registers a forged constitutive document bearing to be granted by Bruce over property owned by Claire. Claire has a claim against Alan for any loss.
467.Subsection (1)(b) applies, where as a result of a failure to take reasonable care, there is an inaccuracy in responding to an information request under section 107 of the Act. It should be read with section 108 of the Act, which provides for certain pledges to be extinguished where property is acquired within 3 months after faulty information is given to an entitled person.
Example
Information is supplied to Ailsa by Brendan that certain property is not pledged. Brendan does not take reasonable care, and the information is wrong. Ailsa takes a pledge over the property in reliance on that information. She expects that the pledge will be a first-ranked security, but it is in fact subject to the existing pledge. Ailsa will have a claim against Brendan.
468.Subsection (1)(c) applies where a person has failed, without reasonable cause, to provide information under section 107 of the Act.
469.Subsection (2) imposes the same restrictions on liability as those set out in section 109(2) of the Act.
Rules
Section 111 – RSP Rules
470.This section sets out that the Scottish Ministers may, by regulations, make rules (RSP Rules) providing for the operation of the Register of Statutory Pledges. They must consult the Keeper before doing so.
471.The power to make RSP Rules includes the powers to authorise the redaction of information or signatures from an entry in the RSP (paragraphs (d) and (e) of subsection (2)), as well as the power in subsection (2)(f) to make certain information unavailable to searchers (which might include an individual’s date of birth). Subsection (1)(c) would also permit the rules to specify the specificity with which the search mechanism for the register is to operate – for example, whether it returns close results or only exact matches.
