Commentary on Sections Part 2 – Security over Moveable Property Effective registration 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.