National Bank of Scotland v Union Bank of Scotland: HL 10 Dec 1886

Right in Security – Absolute Disposition with Back-Letter – Assignation by Debtor of Right to Reconveyance, intimated to Creditor – Retention.
A, in security of advances by the National Bank, disponed to that bank, by disposition ex facie absolute, duly recorded, certain heritable property belonging to her. By separate back-letter, never recorded, it was agreed that the National Bank should hold the disposition ‘in security and till payment of all sums now due, or which may hereafter become due,’ by A’s firm and by A, and that on payment of all such sums the subjects should be reconveyed to A. Thereafter A, in security of advances by the Union Bank, assigned to the Union Bank her whole right in the heritable property under the right of reversion which arose out of the transaction with the National Bank. This assignation was intimated to the National Bank. After the intimation the National Bank continued as before to make advances to A, who eventually executed a trust for creditors, being largely indebted to both banks. The subjects were not sufficient to pay both. Held ( reversing judgment of majority of whole Judges of Court of Session) that as the transaction was one of security only, the preference of the National Bank did not extend to its whole advances before and after the intimation of the assignation and down to the granting of the trust-deed, but was limited to the amount due to it at the date of the intimation of the assignation.


Lord Chancellor Halsbury, Lord Blackburn, and Lord Watson


[1886] UKHL 227, 24 SLR 227






Updated: 04 July 2022; Ref: scu.637739