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SPML/LMC anyone claimed for mis selling and unfair charges?


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Hi ANW,

 

I agree. It is sad that people hinder rather than help. I am disappointed to learn that Suetonius only entered the debate because somebody asked him to, and sad that he succeeded in stopping people from asserting the potential defences. There is no hard and fast answer to this conundrum even though the LRA 2002 is straight forward and overwhelming. Plus, there is the inference that can be drawn from the fact that the banks will never reveal the transaction documents which suggests (on the balance of probabilities) that the argument LRA 2002 is correct.

 

What is more disappointing is that Suetonius never offered any alternative suggestion as to any possible defences. So how did it help anyone when he shuts down one of the few defences that could potentially prevail sometime somewhere? What harm would it do if some borrowers tried to use the defence even if they just put it in as an alternative to other defences such as CCA, UTCCR, s.2 LPA (MP) 1989 etc.,?

 

There will be a break through sometime, somewhere. Somebody will shame the judiciary into abiding by their judicial oath and re-instate the rule of law in this country. Until then, it will be more injustice. But in the words of EIE, just gotta keep the faith in the meantime.

 

Keep up the good work,

Superslueth

 

 

I know Suetonious - you are sadly mistaken - take that line of argument at your peril.

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Good Evening SS, good to see you back in the world of CAG.

 

My ears have been burning today, someone must have been talking about me :D

 

Ownership

 

Legal and Equitable titles are derived from ownership. Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties.

 

Title is a legal term for a bundle of rights in a piece of property in which a party may own either a legal interest or an equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document that serves as evidence of ownership. Conveyance of the document may be required in order to transfer ownership in the property to another person. Title is distinct from possession, a right that often accompanies ownership but is not necessarily sufficient to prove it. In many cases, both possession and title may be transferred independently of each other.

 

The equitable title refers to the actual enjoyment and use of a property, whereas a legal title implies actual ownership. An example of such is a trust. In a trust, one person may own the legal title, such as the trustees. Another may own the equitable title such as the beneficiary.

 

A trust is the separating of the legal (legal title) and the beneficial (equitable title) ownership of property. A trust consists of three parties:

 

  • Settlor (the owner of both the legal and equitable title aka absolute owner)
  • Trustee (Administor of the trust, which owns the legal title)
  • Beneficiary (the owner of the equitable title)

In UK securtisation, the settlor and the trustee is usually the same party (i.e mortgage lender). Therefore, the trustee is granted the legal powers to enforce any rights in relation to the property.

 

The beneficiary is the SPV, which purchases the equitable title to the property. However, as beneficiary and the owner of the equitable title, it does not have any legal powers to enforce any rights in relation to the property.

 

Trusts have always been used as a method of limiting the exposure of assets to taxes and other legal claims as well as to specify the use of those assets in ways not otherwise recognised under the law.

In the scope of a trust, the trustee (mortgage lender) acts to protect the interests of the beneficary (SPV).

 

Therefore, when a mortgage lender instigates repossession proceedings (and the mortgage has been securitised), it is doing so as the trustee of the trust. Therefore, any actual financial loss directly to the mortgage lender is immaterial.

 

I think that Her Majesty's Revenue & Customs (HMRC) explains far simplier than I can:

 

What is a trust?

 

The law of trusts is based upon the concept of English law that property rights can be split into:

  • the legal ownership,
  • and the beneficial interest.

A person who is the absolute owner of property has both the legal and beneficial interest in it.

 

This means that the owner will show up as legal owner, e.g. on a land register or on a company register, and will also enjoy any benefit produced by the property.

 

The absolute owner may split the legal interest from the beneficial enjoyment. This can be done by giving the legal ownership to trustees and the beneficial interest to a named beneficiary (or beneficiaries). Alternatively the owner can retain the legal title and make himself a trustee."

 

Legislation

 

Two important pieces of legislation to consider.

Section 136 of the Law of Property Act 1925 states:

 

136 Legal assignments of things in action

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

 

Any absolute assignment of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, is effectual in law to pass and transfer from the date of such notice.

For an absolute (legal) assignment to be effectual in law a notice has to be given to the debtor.

 

Section 4(3) of the The Financial Collateral Arrangements (No.2) Regulations 2003 says:

 

(3) Section 136 of the Law of Property Act 1925 (legal assignments of things in action) shall not apply (if it would otherwise do so) in relation to a financial collateral arrangement, to the extent that the section requires an assignment to be signed by the assignor or a person authorised on its behalf, in order to be effectual in law.

 

Section 4(3) does not affect the requirement of a notice of assignment being sent to the borrower, it only states that it does not have to be signed by the assignor.

 

In summary, legislation states that for an absolute (legal) assignment to be effectual in law, a notice of assignment has to be given to the borrower.

 

Court Cases

 

The Importance of Judicial Precedence

 

The doctrine of judicial precedent involves application of the principle of "stare decisis", which means to 'stand by cases already decided'. Decisions made in the House of Lords bind all courts in the Country except the House itself. The House of Lords will usually follow its own decisions but will depart where it seems right to do so.

 

Decisions made in the Court of Appeal bind courts below it and usually bind itself, unless its own previous decisions conflict, are incompatible with a decision made in the House of Lords even if not expressly overruled, or were made "per incuriam" (by mistake). The precedent is followed less rigidly in the criminal division where a person's liberty is at stake.

 

It is the "ratio decidendi" of a case which gives the principle of law that becomes binding under the doctrine of judicial precedent. "Ratio Decidendi" is a latin phrase meaning 'the reason for the decision'. It refers to the way a court reasons and applies the law in order to come to a particular decision. The ratio of a case will only be binding on a later case where the legal principle involved is the same and the facts are sufficiently similar. Any other reasoning within the case is said to be "obiter dicta", meaning 'by the way'.

 

Comments made "obiter dicta", together with decisions of lower courts, dissenting judgements, legal journals and text books, roman law, and decisions of courts in Scotland, Ireland, the Comnwealth and the USA may all be persuasive precedent. Persuasive precedent is not binding but may be considered, particularly where there is no authority on the point of law.

 

There have been relatively few cases that have directly resulted in judgements being handed down with regard to Securitisation and the impact (if any) on the right to instigate litigation.

 

Paragon v Pender

 

Time Line of Events

 

* 5th January 1995, an order of possession was granted to Paragon Finance

* 21st January 2002, Mr & Mrs Pender applied unsuccessfully for a set aside

* 9th January 2003, oral application for appeal dismissed

* 17th February 2003, stay of execution granted

* 25th November 2003, application for permission to appeal

* 29th July 2004, limited permission to appeal granted

* 27th June 2005, Appeal heard

* 31 January 2006, a petition to appeal was submitted to the House of Lords. The House of Lords refused to give leave to appeal.

 

Notable Judgements

 

Pender 2003

 

137. I am only concerned of course with the taking of possession, because there was no monetary judgment. I do not see that either section 114 LPA 1925 nor the provisions of the LRA 1925 have impact on the enforcement of the mortgage debt. For there to be a legal assignment of that it seems to me self evident that it must be completed by notice under section 136 LPA 1925 and until so done, even by virtue of section 114, it will remain an equitable assignment only.

Pender 2005 (paragrapgh 109 onwards)

1) In my judgment Mr and Mrs Pender's case on this issue is misconceived. It is common ground that Paragon, as registered proprietor of the Legal Charge, retains legal ownership of it. One incident of its legal ownership – and an essential one at that – is the right to possession of the mortgaged property. I can see no basis upon which it can be contended that an uncompleted agreement to transfer the Legal Charge to the SPV (that is to say an agreement under which, pending completion, the SPV has no more than an equitable interest in the mortgage) can operate in law to divest Paragon of an essential incident of its legal ownership. In my judgment as a matter of principle the right to possession conferred by the Legal Charge remains exercisable by Paragon as the legal owner of the Legal Charge (i.e. as the registered proprietor of it), notwithstanding that Paragon may have transferred the beneficial ownership of the Legal Charge to the SPV.

 

2) It follows, in my judgment, that Paragon, so long as it remains the registered proprietor of the Legal Charge, is a necessary party to any claim to possession of the Property in right of the Legal Charge.

 

3) The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

 

4) In my judgment, therefore, there is no substance in the contention that the SPV should have been joined as an additional claimant in the proceedings. Nor, in my judgment, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee affect the validity of the proceedings or of the orders made in the proceedings (in particular, the possession order). In any event, even if that failure could be said to amount to a formal defect in the proceedings (and I do not regard it as such) the court has ample powers under the CPR to correct such defects (e.g. under CPR Pt 17).

 

5) In my judgment Mr Page's reliance on section 114 of the Law of the Property Act 1925 is wholly misplaced, for the reason which the judge gave: viz. that section 114 is concerned with transfers of mortgages of unregistered land (transfers of mortgages of registered land being dealt with by section 33 of the Land Registration Act 1925). To interpret section 114 as applying also to transfers of mortgages of registered land would produce a fundamental and wholly illogical conflict between the two regimes in relation to transfers of mortgages. Bearing in mind what Lord Oliver of Aylmerton said in Flegg (quoted in paragraph 85 above), I can see no conceivable basis for interpreting section 114 in a way which produces that result and every reason for not doing so. Accordingly I respectfully agree with the observations of this court in Marks with reference to the instant case (see paragraph 95 above).

 

6) Nor, in my judgment, can Mr Page find any support for his submission in the Land Registration Act 2002, or in the Law Commission Report which preceded it. In my judgment it is verging on the absurd to seek to interpret a provision in a statute by reference to a provision in a different statute enacted some eighty years later.

 

In any event, I agree with the judge that the administration agreements demonstrate a clear contrary intention, sufficient to disapply section 114 if (contrary to the conclusion which I have just expressed) the section would otherwise apply.

 

GMAC RFC LIMITED - v - SINCLAIR

 

1. During the course of the argument my attention has been drawn to an interesting case, namely City Mortgage Corporation Ltd v Reilly and Reilly, which was an unreported decision of Judge Rubery in the Stroke-on-Trent County Court, dated 28th November 1997. On analysis that decision does not, in my judgment, assist the applicant for this reason. There the claimant was City Mortgage Corporation Ltd, which was the original lender and mortgagee. The original mortgage was dated 15th March 1996. On I think the same day a transfer of what Judge Rubery held to be the legal and beneficial interest in the charge was transferred to another company called Greenwich International Ltd. The transfer was not dated and it was submitted on behalf of the claimant, which was City Mortgage Corporation Ltd, that it took effect only in equity and not in law. I should add that notice to the defendants of the transfer was given on the same day, 15th March 1996.

 

2. The judge rejected the claimant's submission and held that the transfer operated as a transfer of the legal interest and that notice of that transfer had been given to the defendant, so that the transferor or assignor, City Mortgage Corporation Ltd, no longer had any rights under the charge. Those rights were vested in the transferee or assignee, namely Greenwich International Ltd. Accordingly, the claim failed.

 

City Mortgage Corporation Ltd v Reilly and Reilly

 

An unreported decision, details of judgements as detailed above

Additional Information

 

Difference Between America & UK securitisation

 

"21. Two of the exceptions are the consequence of US requirements. The first, which the Appellant contends is reflected in substance and in form in the structure which has been achieved, is that the assignment must be a true sale; it may not be an assignment by way of security if US accounting standards are to be respected (necessary because COBE is a wholly-owned subsidiary of a US corporation which is subject to US standards). No such requirement is imposed by UK accounting standards, nor by the FSA"

 

It would appear that in the US, securitisation has to be via a true sale. However, that is not a requirement in the UK. Therefore, if the lender retains legal title in law in the UK, securitisation has no effect on the ability of the lender to instigate legal proceedings.

Her Majesty's Revenue & Customs (HRMC)

 

Securitisation is a method of raising finance on the capital markets at advantageous rates of interest. Types of businesses likely to use securitisation are financial institutions, insurance companies, trading companies and any other type of business with a regular source of income. If these bodies borrow money from a bank the rate of interest charged will depend on their credit worthiness. Securitisation involves the transfer of their income into a separate trust. This enables money to be borrowed against the security of the income stream in such a way that, if the company goes bankrupt, the investor will still be repaid.

 

In the case of credit card securitisations, the arrangement involves the establishment of a receivables trust, often in Jersey (receivables are the payments due to the credit card company from its customers, including repayment of the principal on a loan or credit arrangement. This can also apply to interchange commission paid by the retailer).

 

"The credit card company transfers the beneficial interest (not the legal interest) in the receivables on a block of accounts to the trust. This is done in return for payment of the principal amount of credit provided plus a proportion of the interest due (known as the excess spread). A separate company is then set up to issue debt securities on to the capital markets to third party investors. The issuer contributes the funds received from investors to trust assets and later receives funds from the trust as necessary when payments of interest and repayments of principal fall due to investors. In the meantime, the credit card company uses the funds received from the investors to fund its business."

 

Her Majesty's Revenue & Customs confirm that (in relation to credit cards) it is only the beneficial interest and not the legal interest that is transfered.

 

Capital One tribunial

 

As mentioned above. (please see point one)

 

MBNA Case

 

"57. The recitals to the RSD refer to the Transferor and Receivables Trustee (MBNA and CCSE respectively) having agreed that for the purposes of facilitating a possible securitisation, the Transferor may from time to time offer to assign all Receivables (existing and future) arising on such accounts of its credit card customers as are nominated to become Designated Accounts. It is acknowledged that upon acceptance of such an offer to assign by the Receivables Trustee, the Receivables will be assigned by way of equitable assignment only unless notice of assignment should later be given. It is also expressly contemplated by the recitals that the Receivables Trustee will appoint the Operating Party for the purpose of giving instructions in relation to any available discretion capable of being exercised by the Receivables Trustee upon the terms of a separate agreement described as the "RT Operating Agreement"."

 

Halsbury (as in Halsbury's Laws of England

 

586. Securitisation of mortgages.

 

Securitisation is the sale of a package of mortgage debts to a corporate vehicle (the 'issuer') established for the purpose of issuing securities usually in bearer form such as bonds1. One or more mortgagees (the 'originator') may agree to sell debts and related security to the issuer.

 

This effects an equitable assignment of the mortgages which is not perfected by notice to the mortgagors or by registration. The issuer is entitled to call for a legal transfer of legal title to the mortgages in certain circumstances such as the persistent default or insolvency of the originator.

 

The issuer is given an irrevocable power of attorney to effect the transfer and for certain other purposes2. The originator retains the powers of the mortgagee, including the right to possession3 but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement.

 

The undertaking and assets of the issuer, including the mortgages, are in turn charged in favour of a security trustee for the benefit of the holders of notes or bonds issued by the issuer4. The security trustee is given custody of the charge certificates or, in the case of unregistered land, mortgages and title deeds, and is given an irrevocable power of attorney to effect a legal transfer of the mortgages.

 

 

1 See companies; financial services and institutions.

2 See the Powers of Attorney Act 1971 s 4; and agency vol 1 (2008 para 175.

3 See Paragon Finance plc v Pender [2005] EWCA Civ 760, [2005] All ER (D) 307 (Jun).

4 The charge takes effect as an equitable sub-charge.

 

This view would appear to be supported by HM Revenue & Customs (well at least in relation to credit card debt securitisation)Guidance for specific trade sectors: Finance: Securitisation arrangements

 

"The credit card company transfers the beneficial interest (not the legal interest) in the receivables on a block of accounts to the trust."

 

AND

 

"The credit card customer is not informed of these arrangements and the contract between the company and the cardholder is unchanged (i.e. there is no novation of the contract). This means that the exempt supply is still between the credit card company and the cardholder.

 

This was confirmed by the Tribunal in Capital One Bank (Europe) Plc (COBE) [VTD19238] and the High Court in MBNA Europe Bank Ltd."

 

I have also found this from the House of Commons

 

House of Commons - Explanatory Note

 

11. If, as expected, the loans eventually sold are securitised, legal structures will be created to hold the legal and equitable interests in the loans in the names of different parties. Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

 

 

The following extracts are taken from the attached document Holmes Financing (NO.5) PLC

 

Page 44

The sale by the seller to the mortgages trustee of the mortgages has taken effect, and any sale of mortgages in the future will take effect, in equity only. This means that legal title to the loans in the trust property remains with the seller, but the mortgages trustee has all the other rights and benefits relating to ownership of each loan and its related security (which rights and benefits are subject to the trust in favour of the beneficiaries).

 

Page 101

Under the mortgage sale agreement, on 26th July, 2000 the seller transferred by way of equitable assignment to the mortgages trustee its interest in a portfolio of loans, together with all of the related security to those loans.

 

Page 104

The loans in the current portfolio were assigned, and any new loans (including the new loans to be assigned on the closing date) will be assigned, to the mortgages trustee by way of equitable assignment. This means that legal title to the loans and their related security remains with the seller until notice of the assignment is given by the seller to the borrowers.

 

Page 206

The sale of the mortgages by the seller to the mortgages trustee will take effect in equity only.

 

Page 269

The principal purpose of the Company is to acquire an equitable interest in a portfolio of mortgages and enter into all financial arrangements in that connection.

 

Page 277

The principal purpose of the Company is to acquire an equitable interest in a portfolio of mortgages and enter into all financial arrangements in that connection

 

Mortgage Solutions - GMAC RFC announces first transaction in an alternative exit strategy

 

GMAC RFC has announced its first sale of residential UK mortgage assets, worth £125m, into a new funding vehicle, complementing its existing whole loan sale and securitisation programmes.

 

show.html?img=34192

Within the new structure the equitable interest in the mortgage loans was purchased through the issuance of Credit Linked Notes, which have been bought by Deutsche Genossenschafts-Hypothekenbank (DGH).

 

DGH also acted as sole arranger for the deal. GMAC has retained legal title to the loans and will continue to administer the loans on behalf of the vehicle

The House of Lords take on securisitation

 

http://www.publications.parliament.uk/pa/cm200708/cmbills/121/en/2008121en.pdf

 

Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

The following relates to the attached document SPVs and Securitisations.

 

Slide 14 stands out;)

Originator transfers the residential mortgages to the SPV by equitable assignment, at an agreed upon value plus an amount of deferred consideration;

 

The following extract was taken from Mortgage Backed Securitisation in the United Kingdom(attached to this post)

 

Page 323

 

"under securitisation the mortgage itself is not sold"

 

The following two extracts are taken from An Analysis of the Law and Practice of Securitisation (copy attached to this post)

 

Page 64

 

"A legal assignment is, therefore, one, which in writing absolutely transfers the whole contractual right to a cashflow, and the parties give express notice reflecting this transfer to the underlying debtors affected. In practice, some originators do not provide the underlying debtors with notice of the transfer. An assignment, which falls short of this, has validity and enforceability deriving from the principles of equity. An equitable assignment is one where the originator purposely fails to give notice of the transfer to the underlying debtors."

 

Page 68

 

"The clear passing of ownership and risk is another determinative factor of true sale. Under English law, both ownership and risk passes if a transfer complies with s.136 Law of Property Act 1925 which passes all legal rights, risks and remedies respecting the receivables to the transferee. It further, gives the transferee authority to discharge the debt without the aid of the transferor.

 

Once such receivables have been assigned pursuant to s. 136, the purchaser then registers its interest by filing a registration statement and/or a registration with HM Land Registry (in the case of mortgages). Typically, the originator does not give the required notice under s. 136 to the underlying debtors since such a requirement involves additional administration and costs. Thus, the transfer of the receivables does not strictly comply with s. 136 and as such the transfer is accomplished by an equitable assignment."

 

The following extract is taken the attached file - Loan securitisation and risk transfer

 

Page 2

 

"Assignment is the transfer of the benefit but not the burden of an agreement. To be a valid legal assignment under English law and so transfer title from assignor to assignee, an assignment of a loan must be in writing, be signed by the assignor, be absolute and unconditional, cover the whole of the loan and be notified in writing to the borrower. A legal assignment of a loan would therefore involve the borrower being notified of the assignment, which may not be commercially desirable."

 

 

Page 4

 

"the originator can continue to administer the loans without entering into a complex administration agreement, as it is still the legal owner. It will not need to identify and segregate payments on securitised assets from those on unsecuritised assets, which may have undesirable administrative complexities"

 

"the SPV is sometimes compelled to seek the transfer of an equitably assigned loan into its name as lender of record, which involves notifying the underlying borrower."

To me personally, it would not make sense for a law firm to provide it's clients with incorrect information.

 

Not a judgement or a decision, but an extract from Pender.

 

"As Dr Eilis Ferran MA (presently Reader in Corporate Law and Financial Regulation at Cambridge University) points out in a book entitled 'Mortgage Securitisation – Legal Aspects' (Butterworths, 1992) to which we were helpfully referred by Mr Ali Malek QC (for Paragon) in the course of argument, if the transfer of the mortgages is not completed by registration, the SPV acquires an equitable title to the mortgage but the transferor retains the legal title, albeit as trustee for the SPV (assuming, as will usually be the case, that the full consideration has been paid). Dr Ferran goes on to point out that, for reasons essentially of administrative convenience and cost, transfers by way of securitisation are usually left uncompleted, but with provision being made for completion in certain specified circumstances, e.g. if the transferor persistently defaults on its obligations under the securitisation arrangements. Typically, such obligations will be contained in an 'administration agreement' between the transferor and the SPV. These general observations about securitisation (for which I am indebted principally to Dr Ferran's book) are not the subject of dispute in the instant case."

 

To place the above extract into context, Dr Eilis Ferran is a Professor of Company and Securities Law at the University of Cambridge:

As you would anticipate with someone with her credentials, she is published:

'The Place for Creditor Protection on the Agenda for Modernisaiton of Company law in the European Union' (2006) 3 European Company and Financial Law Review 178

'Transatlantic Financial Services Regulatory Dialogue' (with K Alexander, HE Jackson and N Moloney) (forthcoming European Business Organization Law Review Building an EU Securities Market (CUP, 2004)

'Financial Assistance: Changing Policy Perceptions but Static Law' [2004] Cambridge Law Journal 225 - 243

'The Role of the Shareholder in Internal Corporate Governance: Enabling Shareholders to Make Better-informed Decisions' [2003] European Business Organization Law Review 491 - 516

'Examining the UK Experience in Adopting the Single Financial Regulator Model' (2003) 28 Brooklyn Journal of International Law 257-307

'Dispute Resolution Mechanisms in the UK Financial Sector' [2002] Civil Justice Quarterly 135-155 (also published in a report to the Korean Stock Exchange, Self-Regulation in the Korean Securities Market Korean Securities Law Association, 2002)

'Corporate Law Codes and Social Norms - Finding the Right Regulatory Combination and Institutional Structure' [2001] Journal of Corporate Law Studies 381-409

Ferran and Goodhart (eds) The Challenges Facing Financial Regulation (Hart Publishing, 2001)

'Company Law Reform in the UK' (2001) 5 Singapore Journal of International and Comparative Law 516-568

Boyle and Birds Company Law (Jordans, 2000) (with Boyle, Birds and Villiers)

Company Law and Corporate Finance (OUP, 1999)

 

Employment History:

Reader in Corporate Law and Financial Regulation (2000 – 2005)

University Lecturer, (1991 – 2000)

University Assistant Lecturer, (1988–1991)

Director of the Centre for Corporate and Commercial Law, (April 1999 – September 2003)

Assistant Director, Centre for Corporate and Commercial Law, (1997–1999)

College Lecturer, St Catharine’s College, Cambridge (1986–1988 )

Trainee Solicitor, Clifford Chance, solicitors (1984–1986)

 

Qualifications

PhD, University of Cambridge, 1992, (by special regulations)

BA, University of Cambridge 1983 (Law Tripos First Class with Distinction)

 

Securitization: The Financial Instrument of the Future by Vinod Kothari

 

  • Publisher: John Wiley & Sons; Har/Cdr edition (18 Aug 2006)
  • Language English
  • ISBN-10: 0470821957
  • ISBN-13: 978-0470821954

Page 611 (continued on Page 612)- Equitable Assignment

"Why Equitable Assignment?

 

"Why do entities resort to equitable assignment? Essentially, to avoid the difficulties involved in full-scale legal transfer. These difficulties may either include having to notify the debtor (as under U.K. or Hong Kong law) or the stamp duties associated with a conveyance that the receivables (as in U.K. and India). Some preconditions for effecting an equitable transfer are:

 

  • There must be an express intention on the part of the transferor to assign receivables.
  • The receivables must be identified
  • The buyer must have paid the consideration
  • Though the obliger is not notified, the transaction must be carried out between the transferor and transferee as if full scale transfer had taken place. Therefore, the seller must not be paying from his general funds, but out of a specific fund or collections from the receivables.
  • To allow the transferee to proceed against the obligors if the need arises, the transferor should be given a power of attorney authorizing the transferee to collect payments from the obligors.
  • To support and strengthen the power of attorney specified above, a mandate should also be given requiring the obligors to pay the transferee."

And.......

 

Securitization Law and Practice: In the Face of the Credit Crunch (International Banking & Financial Law Series) by Jan Job de Vries Robbe

 

 

  • Publisher: Kluwer Law International (30 Jun 2008)
  • Language English
  • ISBN-10: 9041127151
  • ISBN-13: 978-9041127150

 

Page 399 - 9.26 Legal Risks

 

"In English Law governed securitization transactions, one of two forms of assignments are used, equitable or legal assignment. If the assignment is equitable only, without notification to the borrower, then it only allows for protection under equity to the SPV as assignee. To ensure full protection at law however, the underlying borrowers must be notified of the assignment. The is generally done after the occurance of certain trigger events, which could indicate an increased risk of insolvency of the seller"

 

 

 

TraditionalMortgageSecuritisation.jpg

 

In my opinion, the important segments of the above securitisation structure are:

 

1) "Equitable Assignment of mortgage loans. The legal title is retained by the Originator (trustee) and the SPV aquires an equitable one (beneficary)"

 

2) "The SPV, who is the issuer of the MBS (mortgage backed securities) and a bankruptcy remote vehicle, creates, owns in equity and manages the pool of mortgages. He is the new equitable mortgagee."

 

Point 1, confirms that the originator retains the legal title and the SPV aquires the equitable title. Point 2, confirms that the SPV becomes the new equitable mortgagee, which may explain the letters some caggers have received relating to insurance policies.

 

3) "He (trustee of the issue) receives a mortgage over the pool of mortgage loans (sub-mortgage) and a floating charge over the SPV's assets in warranty of the over the MBS holders."

The above diagram was taken from:

 

Innovation in Securitisation: Yearbook 2006 (International Banking & Finance Law) (International Banking & Finance Law Series)

  • Publisher: Kluwer Law International (1 Jun 2006)
  • Language English
  • ISBN-10: 9041125337
  • ISBN-13: 978-9041125330

Page 126 - Section 3.2 The Role of the Trust in an English Securitisation Process.

 

Book Description:

 

"Despite fears that regulators around the world would act to curtail securitisation severely in the aftermath of the collapse of Enron, WorldCom, and Parmalat, the securitisation industry has witnessed what can only be described as relentless innovation. Securisation remains one of the most important means for financial institutions to diversify their funding, transfer credit risk and manage solvency requirements.

 

This volume, the second in a series focusing on the latest innovations in the global securitisation industry, provides advisers with detailed guidance on key structural and legal issues of innovative securitisations, as well as describing the most recent developments in the accounting and risk-capital treatment of securitisation transactions.

 

The contributors represent a wide range of expert participants in the design, execution, and regulation of securitisation transactions. Among the critical features of contemporary securitisation covered are the following: project finance CLOs; securitisation of equity risk; securitisation of commodity risk through commodity trigger swaps; the convergence of structured credit and securitisation markets; innovation in RMBS: negative equity transactions; innovation in CMBS: A/B structure; new markets in Europe, Japan, and Islamic countries; catastrophe risk securitisation; effect of recent US bankruptcy legislation on synthetics; microfinance loan securitisation in emerging markets; public sector securitisation; securitisable intellectual property; application of accounting standards in a rapidly changing environment, and updated analysis of Basel II.

The above is not based purely upon my own personal opinion. I have provided a number of sources that I have quoted them directly. I have not felt the need to interpret or translate as others continually do to support their arguments.:cool:

 

But it is ok the following listed below and above in great detail can be ignored.:???::???:

 

Case Law (common law)

Leglisation

Halbury's

House of Commons

Securitisation Documentation

House of Lords

A Cambridge Professor

Author's

 

It is clear this is a topic we will never agree on, so why don't we just agree to disagree.

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Hello Sue,

 

Thanks for your extensive post. The last words you say are the most important. To quote you:

 

PLEASE DO NOT ACCEPT ANY POSTS MADE BY ANYONE ON FACE VALUE.

PLEASE TAKE THE TIME TO VERIFY ANY OPINIONS YOURSELF.

 

That's the only sound advice in your post.

 

Kind regards

Supersleuth

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Suetonius

Something that puzzles me why do the Americans use a different model of securitization than in the UK is it solely because of this as you quote above:

"Why do entities resort to equitable assignment? Essentially, to avoid the difficulties involved in full-scale legal transfer. These difficulties may either include having to notify the debtor (as under U.K. or Hong Kong law) or the stamp duties associated with a conveyance that the receivables (as in U.K. and India)."

and they are able to use such equitable assignment of course because of the 75 year old law of property act 1925 s136 notification ,which I assume exists in no other legislation and whose draftsmen would never have envisaged it being used in such transactions today.The purpose of s136 being notification of the debtor not its use in the avoidance of a "little difficulty."

 

I am particurlarly fond or this one:"These difficulties may either include having to notify the debtor."

So the reality is that an archaic law is invoked to avoid this "little difficulty".

I would welcome your personal opinion on what difficulties you anticipate the lender might meet with?

unfair practices perhaps ? as has currently been the norm with our adversaries on this thread?

Was the use and intention of s136 every really fully explored in Pender?

Given the Pender's background and their attempted escape from debt liability, it was hardly the right moment to challenge s136 on the grounds of unfairness to the consumer.

 

Moving on from this I have no disagreement with you that s136 stands and can be exploited until a High Court judgement states otherwise.Indeed I cannot see the end point of the argument the debt simply transfers from one entity to another.

 

Previously as stated in my other posts your undoubted skill,diligence and research would be hugely appreciated by all on this thread and many like it if it could be directed into other areas and if you could suggest and participate in a way forward to provide customers of these dreadful entities with an alternative viable defence.

Such as, an uneforceable agreement for example as most of these loans are regulated under FSA rules.

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I know Suetonious - you are sadly mistaken - take that line of argument at your peril.

 

Suetonius has been around for a long time on CAG and personally I would concur with andrew1.

 

It's important to look at both sides of an issue, and better to investigate them now than face them head on in a court room against a hard nosed barrister.

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Should you be offered help that requires payment please report it to site team.

Advice & opinions given by Caro are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.

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Hi - this is interesting but cant see if it was awarded against a broker or not? capstone seem to be the only ones referring to a broker and I'd have a thought that this was their agent and representative in any case, any ideas/more info? thanks:)

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Good Evening SS, good to see you back in the world of CAG.

 

My ears have been burning today, someone must have been talking about me :D

 

 

Ownership

 

Legal and Equitable titles are derived from ownership. Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties.

 

Title is a legal term for a bundle of rights in a piece of property in which a party may own either a legal interest or an equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document that serves as evidence of ownership. Conveyance of the document may be required in order to transfer ownership in the property to another person. Title is distinct from possession, a right that often accompanies ownership but is not necessarily sufficient to prove it. In many cases, both possession and title may be transferred independently of each other.

 

The equitable title refers to the actual enjoyment and use of a property, whereas a legal title implies actual ownership. An example of such is a trust. In a trust, one person may own the legal title, such as the trustees. Another may own the equitable title such as the beneficiary.

 

A trust is the separating of the legal (legal title) and the beneficial (equitable title) ownership of property. A trust consists of three parties:

 

 

  • Settlor (the owner of both the legal and equitable title aka absolute owner)
  • Trustee (Administor of the trust, which owns the legal title)
  • Beneficiary (the owner of the equitable title)

In UK securtisation, the settlor and the trustee is usually the same party (i.e mortgage lender). Therefore, the trustee is granted the legal powers to enforce any rights in relation to the property.

 

The beneficiary is the SPV, which purchases the equitable title to the property. However, as beneficiary and the owner of the equitable title, it does not have any legal powers to enforce any rights in relation to the property.

 

Trusts have always been used as a method of limiting the exposure of assets to taxes and other legal claims as well as to specify the use of those assets in ways not otherwise recognised under the law.

In the scope of a trust, the trustee (mortgage lender) acts to protect the interests of the beneficary (SPV).

 

Therefore, when a mortgage lender instigates repossession proceedings (and the mortgage has been securitised), it is doing so as the trustee of the trust. Therefore, any actual financial loss directly to the mortgage lender is immaterial.

 

I think that Her Majesty's Revenue & Customs (HMRC) explains far simplier than I can:

 

What is a trust?

 

The law of trusts is based upon the concept of English law that property rights can be split into:

 

  • the legal ownership,
  • and the beneficial interest.

A person who is the absolute owner of property has both the legal and beneficial interest in it.

 

This means that the owner will show up as legal owner, e.g. on a land register or on a company register, and will also enjoy any benefit produced by the property.

 

The absolute owner may split the legal interest from the beneficial enjoyment. This can be done by giving the legal ownership to trustees and the beneficial interest to a named beneficiary (or beneficiaries). Alternatively the owner can retain the legal title and make himself a trustee."

 

Legislation

 

Two important pieces of legislation to consider.

 

Section 136 of the Law of Property Act 1925 states:

 

136 Legal assignments of things in action

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

 

Any absolute assignment of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, is effectual in law to pass and transfer from the date of such notice.

 

For an absolute (legal) assignment to be effectual in law a notice has to be given to the debtor.

 

Section 4(3) of the The Financial Collateral Arrangements (No.2) Regulations 2003 says:

 

(3) Section 136 of the Law of Property Act 1925 (legal assignments of things in action) shall not apply (if it would otherwise do so) in relation to a financial collateral arrangement, to the extent that the section requires an assignment to be signed by the assignor or a person authorised on its behalf, in order to be effectual in law.

 

Section 4(3) does not affect the requirement of a notice of assignment being sent to the borrower, it only states that it does not have to be signed by the assignor.

 

In summary, legislation states that for an absolute (legal) assignment to be effectual in law, a notice of assignment has to be given to the borrower.

 

Court Cases

 

The Importance of Judicial Precedence

 

The doctrine of judicial precedent involves application of the principle of "stare decisis", which means to 'stand by cases already decided'. Decisions made in the House of Lords bind all courts in the Country except the House itself. The House of Lords will usually follow its own decisions but will depart where it seems right to do so.

 

Decisions made in the Court of Appeal bind courts below it and usually bind itself, unless its own previous decisions conflict, are incompatible with a decision made in the House of Lords even if not expressly overruled, or were made "per incuriam" (by mistake). The precedent is followed less rigidly in the criminal division where a person's liberty is at stake.

 

It is the "ratio decidendi" of a case which gives the principle of law that becomes binding under the doctrine of judicial precedent. "Ratio Decidendi" is a latin phrase meaning 'the reason for the decision'. It refers to the way a court reasons and applies the law in order to come to a particular decision. The ratio of a case will only be binding on a later case where the legal principle involved is the same and the facts are sufficiently similar. Any other reasoning within the case is said to be "obiter dicta", meaning 'by the way'.

 

Comments made "obiter dicta", together with decisions of lower courts, dissenting judgements, legal journals and text books, roman law, and decisions of courts in Scotland, Ireland, the Comnwealth and the USA may all be persuasive precedent. Persuasive precedent is not binding but may be considered, particularly where there is no authority on the point of law.

 

There have been relatively few cases that have directly resulted in judgements being handed down with regard to Securitisation and the impact (if any) on the right to instigate litigation.

 

Paragon v Pender

 

Time Line of Events

 

* 5th January 1995, an order of possession was granted to Paragon Finance

* 21st January 2002, Mr & Mrs Pender applied unsuccessfully for a set aside

* 9th January 2003, oral application for appeal dismissed

* 17th February 2003, stay of execution granted

* 25th November 2003, application for permission to appeal

* 29th July 2004, limited permission to appeal granted

* 27th June 2005, Appeal heard

* 31 January 2006, a petition to appeal was submitted to the House of Lords. The House of Lords refused to give leave to appeal.

 

Notable Judgements

 

Pender 2003

 

137. I am only concerned of course with the taking of possession, because there was no monetary judgment. I do not see that either section 114 LPA 1925 nor the provisions of the LRA 1925 have impact on the enforcement of the mortgage debt. For there to be a legal assignment of that it seems to me self evident that it must be completed by notice under section 136 LPA 1925 and until so done, even by virtue of section 114, it will remain an equitable assignment only.

Pender 2005 (paragrapgh 109 onwards)

 

1) In my judgment Mr and Mrs Pender's case on this issue is misconceived. It is common ground that Paragon, as registered proprietor of the Legal Charge, retains legal ownership of it. One incident of its legal ownership – and an essential one at that – is the right to possession of the mortgaged property. I can see no basis upon which it can be contended that an uncompleted agreement to transfer the Legal Charge to the SPV (that is to say an agreement under which, pending completion, the SPV has no more than an equitable interest in the mortgage) can operate in law to divest Paragon of an essential incident of its legal ownership. In my judgment as a matter of principle the right to possession conferred by the Legal Charge remains exercisable by Paragon as the legal owner of the Legal Charge (i.e. as the registered proprietor of it), notwithstanding that Paragon may have transferred the beneficial ownership of the Legal Charge to the SPV.

 

2) It follows, in my judgment, that Paragon, so long as it remains the registered proprietor of the Legal Charge, is a necessary party to any claim to possession of the Property in right of the Legal Charge.

 

3) The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

 

4) In my judgment, therefore, there is no substance in the contention that the SPV should have been joined as an additional claimant in the proceedings. Nor, in my judgment, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee affect the validity of the proceedings or of the orders made in the proceedings (in particular, the possession order). In any event, even if that failure could be said to amount to a formal defect in the proceedings (and I do not regard it as such) the court has ample powers under the CPR to correct such defects (e.g. under CPR Pt 17).

 

5) In my judgment Mr Page's reliance on section 114 of the Law of the Property Act 1925 is wholly misplaced, for the reason which the judge gave: viz. that section 114 is concerned with transfers of mortgages of unregistered land (transfers of mortgages of registered land being dealt with by section 33 of the Land Registration Act 1925). To interpret section 114 as applying also to transfers of mortgages of registered land would produce a fundamental and wholly illogical conflict between the two regimes in relation to transfers of mortgages. Bearing in mind what Lord Oliver of Aylmerton said in Flegg (quoted in paragraph 85 above), I can see no conceivable basis for interpreting section 114 in a way which produces that result and every reason for not doing so. Accordingly I respectfully agree with the observations of this court in Marks with reference to the instant case (see paragraph 95 above).

 

6) Nor, in my judgment, can Mr Page find any support for his submission in the Land Registration Act 2002, or in the Law Commission Report which preceded it. In my judgment it is verging on the absurd to seek to interpret a provision in a statute by reference to a provision in a different statute enacted some eighty years later.

 

In any event, I agree with the judge that the administration agreements demonstrate a clear contrary intention, sufficient to disapply section 114 if (contrary to the conclusion which I have just expressed) the section would otherwise apply.

 

GMAC RFC LIMITED - v - SINCLAIR

 

1. During the course of the argument my attention has been drawn to an interesting case, namely City Mortgage Corporation Ltd v Reilly and Reilly, which was an unreported decision of Judge Rubery in the Stroke-on-Trent County Court, dated 28th November 1997. On analysis that decision does not, in my judgment, assist the applicant for this reason. There the claimant was City Mortgage Corporation Ltd, which was the original lender and mortgagee. The original mortgage was dated 15th March 1996. On I think the same day a transfer of what Judge Rubery held to be the legal and beneficial interest in the charge was transferred to another company called Greenwich International Ltd. The transfer was not dated and it was submitted on behalf of the claimant, which was City Mortgage Corporation Ltd, that it took effect only in equity and not in law. I should add that notice to the defendants of the transfer was given on the same day, 15th March 1996.

 

2. The judge rejected the claimant's submission and held that the transfer operated as a transfer of the legal interest and that notice of that transfer had been given to the defendant, so that the transferor or assignor, City Mortgage Corporation Ltd, no longer had any rights under the charge. Those rights were vested in the transferee or assignee, namely Greenwich International Ltd. Accordingly, the claim failed.

 

City Mortgage Corporation Ltd v Reilly and Reilly

 

An unreported decision, details of judgements as detailed above

Additional Information

 

Difference Between America & UK securitisation

 

"21. Two of the exceptions are the consequence of US requirements. The first, which the Appellant contends is reflected in substance and in form in the structure which has been achieved, is that the assignment must be a true sale; it may not be an assignment by way of security if US accounting standards are to be respected (necessary because COBE is a wholly-owned subsidiary of a US corporation which is subject to US standards). No such requirement is imposed by UK accounting standards, nor by the FSA"

 

It would appear that in the US, securitisation has to be via a true sale. However, that is not a requirement in the UK. Therefore, if the lender retains legal title in law in the UK, securitisation has no effect on the ability of the lender to instigate legal proceedings.

 

Her Majesty's Revenue & Customs (HRMC)

 

Securitisation is a method of raising finance on the capital markets at advantageous rates of interest. Types of businesses likely to use securitisation are financial institutions, insurance companies, trading companies and any other type of business with a regular source of income. If these bodies borrow money from a bank the rate of interest charged will depend on their credit worthiness. Securitisation involves the transfer of their income into a separate trust. This enables money to be borrowed against the security of the income stream in such a way that, if the company goes bankrupt, the investor will still be repaid.

 

In the case of credit card securitisations, the arrangement involves the establishment of a receivables trust, often in Jersey (receivables are the payments due to the credit card company from its customers, including repayment of the principal on a loan or credit arrangement. This can also apply to interchange commission paid by the retailer).

 

"The credit card company transfers the beneficial interest (not the legal interest) in the receivables on a block of accounts to the trust. This is done in return for payment of the principal amount of credit provided plus a proportion of the interest due (known as the excess spread). A separate company is then set up to issue debt securities on to the capital markets to third party investors. The issuer contributes the funds received from investors to trust assets and later receives funds from the trust as necessary when payments of interest and repayments of principal fall due to investors. In the meantime, the credit card company uses the funds received from the investors to fund its business."

 

Her Majesty's Revenue & Customs confirm that (in relation to credit cards) it is only the beneficial interest and not the legal interest that is transfered.

 

Capital One tribunial

 

As mentioned above. (please see point one)

 

MBNA Case

 

"57. The recitals to the RSD refer to the Transferor and Receivables Trustee (MBNA and CCSE respectively) having agreed that for the purposes of facilitating a possible securitisation, the Transferor may from time to time offer to assign all Receivables (existing and future) arising on such accounts of its credit card customers as are nominated to become Designated Accounts. It is acknowledged that upon acceptance of such an offer to assign by the Receivables Trustee, the Receivables will be assigned by way of equitable assignment only unless notice of assignment should later be given. It is also expressly contemplated by the recitals that the Receivables Trustee will appoint the Operating Party for the purpose of giving instructions in relation to any available discretion capable of being exercised by the Receivables Trustee upon the terms of a separate agreement described as the "RT Operating Agreement"."

 

Halsbury (as in Halsbury's Laws of England

 

586. Securitisation of mortgages.

 

Securitisation is the sale of a package of mortgage debts to a corporate vehicle (the 'issuer') established for the purpose of issuing securities usually in bearer form such as bonds1. One or more mortgagees (the 'originator') may agree to sell debts and related security to the issuer.

 

This effects an equitable assignment of the mortgages which is not perfected by notice to the mortgagors or by registration. The issuer is entitled to call for a legal transfer of legal title to the mortgages in certain circumstances such as the persistent default or insolvency of the originator.

 

The issuer is given an irrevocable power of attorney to effect the transfer and for certain other purposes2. The originator retains the powers of the mortgagee, including the right to possession3 but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement.

 

The undertaking and assets of the issuer, including the mortgages, are in turn charged in favour of a security trustee for the benefit of the holders of notes or bonds issued by the issuer4. The security trustee is given custody of the charge certificates or, in the case of unregistered land, mortgages and title deeds, and is given an irrevocable power of attorney to effect a legal transfer of the mortgages.

 

 

1 See companies; financial services and institutions.

2 See the Powers of Attorney Act 1971 s 4; and agency vol 1 (2008 para 175.

3 See Paragon Finance plc v Pender [2005] EWCA Civ 760, [2005] All ER (D) 307 (Jun).

4 The charge takes effect as an equitable sub-charge.

 

This view would appear to be supported by HM Revenue & Customs (well at least in relation to credit card debt securitisation)Guidance for specific trade sectors: Finance: Securitisation arrangements

 

"The credit card company transfers the beneficial interest (not the legal interest) in the receivables on a block of accounts to the trust."

 

AND

 

"The credit card customer is not informed of these arrangements and the contract between the company and the cardholder is unchanged (i.e. there is no novation of the contract). This means that the exempt supply is still between the credit card company and the cardholder.

 

This was confirmed by the Tribunal in Capital One Bank (Europe) Plc (COBE) [VTD19238] and the High Court in MBNA Europe Bank Ltd."

 

I have also found this from the House of Commons

 

House of Commons - Explanatory Note

 

11. If, as expected, the loans eventually sold are securitised, legal structures will be created to hold the legal and equitable interests in the loans in the names of different parties. Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

 

 

The following extracts are taken from the attached document Holmes Financing (NO.5) PLC

 

Page 44

The sale by the seller to the mortgages trustee of the mortgages has taken effect, and any sale of mortgages in the future will take effect, in equity only. This means that legal title to the loans in the trust property remains with the seller, but the mortgages trustee has all the other rights and benefits relating to ownership of each loan and its related security (which rights and benefits are subject to the trust in favour of the beneficiaries).

 

Page 101

Under the mortgage sale agreement, on 26th July, 2000 the seller transferred by way of equitable assignment to the mortgages trustee its interest in a portfolio of loans, together with all of the related security to those loans.

 

Page 104

The loans in the current portfolio were assigned, and any new loans (including the new loans to be assigned on the closing date) will be assigned, to the mortgages trustee by way of equitable assignment. This means that legal title to the loans and their related security remains with the seller until notice of the assignment is given by the seller to the borrowers.

 

Page 206

The sale of the mortgages by the seller to the mortgages trustee will take effect in equity only.

 

Page 269

The principal purpose of the Company is to acquire an equitable interest in a portfolio of mortgages and enter into all financial arrangements in that connection.

 

Page 277

The principal purpose of the Company is to acquire an equitable interest in a portfolio of mortgages and enter into all financial arrangements in that connection

 

Mortgage Solutions - GMAC RFC announces first transaction in an alternative exit strategy

 

GMAC RFC has announced its first sale of residential UK mortgage assets, worth £125m, into a new funding vehicle, complementing its existing whole loan sale and securitisation programmes.

 

show.html?img=34192

 

Within the new structure the equitable interest in the mortgage loans was purchased through the issuance of Credit Linked Notes, which have been bought by Deutsche Genossenschafts-Hypothekenbank (DGH).

 

DGH also acted as sole arranger for the deal. GMAC has retained legal title to the loans and will continue to administer the loans on behalf of the vehicle

The House of Lords take on securisitation

 

http://www.publications.parliament.uk/pa/cm200708/cmbills/121/en/2008121en.pdf

 

Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

The following relates to the attached document SPVs and Securitisations.

 

 

 

The following extract was taken from Mortgage Backed Securitisation in the United Kingdom(attached to this post)

 

 

 

The following two extracts are taken from An Analysis of the Law and Practice of Securitisation (copy attached to this post)

 

 

 

 

 

The following extract is taken the attached file - Loan securitisation and risk transfer

 

 

 

Not a judgement or a decision, but an extract from Pender.

 

"As Dr Eilis Ferran MA (presently Reader in Corporate Law and Financial Regulation at Cambridge University) points out in a book entitled 'Mortgage Securitisation – Legal Aspects' (Butterworths, 1992) to which we were helpfully referred by Mr Ali Malek QC (for Paragon) in the course of argument, if the transfer of the mortgages is not completed by registration, the SPV acquires an equitable title to the mortgage but the transferor retains the legal title, albeit as trustee for the SPV (assuming, as will usually be the case, that the full consideration has been paid). Dr Ferran goes on to point out that, for reasons essentially of administrative convenience and cost, transfers by way of securitisation are usually left uncompleted, but with provision being made for completion in certain specified circumstances, e.g. if the transferor persistently defaults on its obligations under the securitisation arrangements. Typically, such obligations will be contained in an 'administration agreement' between the transferor and the SPV. These general observations about securitisation (for which I am indebted principally to Dr Ferran's book) are not the subject of dispute in the instant case."

 

 

To place the above extract into context, Dr Eilis Ferran is a Professor of Company and Securities Law at the University of Cambridge:

As you would anticipate with someone with her credentials, she is published:

 

'The Place for Creditor Protection on the Agenda for Modernisaiton of Company law in the European Union' (2006) 3 European Company and Financial Law Review 178

'Transatlantic Financial Services Regulatory Dialogue' (with K Alexander, HE Jackson and N Moloney) (forthcoming European Business Organization Law Review Building an EU Securities Market (CUP, 2004)

'Financial Assistance: Changing Policy Perceptions but Static Law' [2004] Cambridge Law Journal 225 - 243

'The Role of the Shareholder in Internal Corporate Governance: Enabling Shareholders to Make Better-informed Decisions' [2003] European Business Organization Law Review 491 - 516

'Examining the UK Experience in Adopting the Single Financial Regulator Model' (2003) 28 Brooklyn Journal of International Law 257-307

'Dispute Resolution Mechanisms in the UK Financial Sector' [2002] Civil Justice Quarterly 135-155 (also published in a report to the Korean Stock Exchange, Self-Regulation in the Korean Securities Market Korean Securities Law Association, 2002)

'Corporate Law Codes and Social Norms - Finding the Right Regulatory Combination and Institutional Structure' [2001] Journal of Corporate Law Studies 381-409

Ferran and Goodhart (eds) The Challenges Facing Financial Regulation (Hart Publishing, 2001)

'Company Law Reform in the UK' (2001) 5 Singapore Journal of International and Comparative Law 516-568

Boyle and Birds Company Law (Jordans, 2000) (with Boyle, Birds and Villiers)

Company Law and Corporate Finance (OUP, 1999)

 

Employment History:

 

Reader in Corporate Law and Financial Regulation (2000 – 2005)

University Lecturer, (1991 – 2000)

University Assistant Lecturer, (1988–1991)

Director of the Centre for Corporate and Commercial Law, (April 1999 – September 2003)

Assistant Director, Centre for Corporate and Commercial Law, (1997–1999)

College Lecturer, St Catharine’s College, Cambridge (1986–1988 )

Trainee Solicitor, Clifford Chance, solicitors (1984–1986)

 

Qualifications

 

PhD, University of Cambridge, 1992, (by special regulations)

BA, University of Cambridge 1983 (Law Tripos First Class with Distinction)

 

Securitization: The Financial Instrument of the Future by Vinod Kothari

 

  • Publisher: John Wiley & Sons; Har/Cdr edition (18 Aug 2006)
  • Language English
  • ISBN-10: 0470821957
  • ISBN-13: 978-0470821954

Page 611 (continued on Page 612)- Equitable Assignment

 

"Why Equitable Assignment?

 

"Why do entities resort to equitable assignment? Essentially, to avoid the difficulties involved in full-scale legal transfer. These difficulties may either include having to notify the debtor (as under U.K. or Hong Kong law) or the stamp duties associated with a conveyance that the receivables (as in U.K. and India). Some preconditions for effecting an equitable transfer are:

 

 

  • There must be an express intention on the part of the transferor to assign receivables.
  • The receivables must be identified
  • The buyer must have paid the consideration
  • Though the obliger is not notified, the transaction must be carried out between the transferor and transferee as if full scale transfer had taken place. Therefore, the seller must not be paying from his general funds, but out of a specific fund or collections from the receivables.
  • To allow the transferee to proceed against the obligors if the need arises, the transferor should be given a power of attorney authorizing the transferee to collect payments from the obligors.
  • To support and strengthen the power of attorney specified above, a mandate should also be given requiring the obligors to pay the transferee."

And.......

 

Securitization Law and Practice: In the Face of the Credit Crunch (International Banking & Financial Law Series) by Jan Job de Vries Robbe

 

 

  • Publisher: Kluwer Law International (30 Jun 2008)
  • Language English
  • ISBN-10: 9041127151
  • ISBN-13: 978-9041127150

Page 399 - 9.26 Legal Risks

 

"In English Law governed securitization transactions, one of two forms of assignments are used, equitable or legal assignment. If the assignment is equitable only, without notification to the borrower, then it only allows for protection under equity to the SPV as assignee. To ensure full protection at law however, the underlying borrowers must be notified of the assignment. The is generally done after the occurance of certain trigger events, which could indicate an increased risk of insolvency of the seller"

 

 

 

TraditionalMortgageSecuritisation.jpg

 

In my opinion, the important segments of the above securitisation structure are:

 

1) "Equitable Assignment of mortgage loans. The legal title is retained by the Originator (trustee) and the SPV aquires an equitable one (beneficary)"

 

2) "The SPV, who is the issuer of the MBS (mortgage backed securities) and a bankruptcy remote vehicle, creates, owns in equity and manages the pool of mortgages. He is the new equitable mortgagee."

 

Point 1, confirms that the originator retains the legal title and the SPV aquires the equitable title. Point 2, confirms that the SPV becomes the new equitable mortgagee, which may explain the letters some caggers have received relating to insurance policies.

 

3) "He (trustee of the issue) receives a mortgage over the pool of mortgage loans (sub-mortgage) and a floating charge over the SPV's assets in warranty of the over the MBS holders."

 

The above diagram was taken from:

 

 

Innovation in Securitisation: Yearbook 2006 (International Banking & Finance Law) (International Banking & Finance Law Series)

  • Publisher: Kluwer Law International (1 Jun 2006)
  • Language English
  • ISBN-10: 9041125337
  • ISBN-13: 978-9041125330

Page 126 - Section 3.2 The Role of the Trust in an English Securitisation Process.

 

Book Description:

 

"Despite fears that regulators around the world would act to curtail securitisation severely in the aftermath of the collapse of Enron, WorldCom, and Parmalat, the securitisation industry has witnessed what can only be described as relentless innovation. Securisation remains one of the most important means for financial institutions to diversify their funding, transfer credit risk and manage solvency requirements.

 

This volume, the second in a series focusing on the latest innovations in the global securitisation industry, provides advisers with detailed guidance on key structural and legal issues of innovative securitisations, as well as describing the most recent developments in the accounting and risk-capital treatment of securitisation transactions.

 

The contributors represent a wide range of expert participants in the design, execution, and regulation of securitisation transactions. Among the critical features of contemporary securitisation covered are the following: project finance CLOs; securitisation of equity risk; securitisation of commodity risk through commodity trigger swaps; the convergence of structured credit and securitisation markets; innovation in RMBS: negative equity transactions; innovation in CMBS: A/B structure; new markets in Europe, Japan, and Islamic countries; catastrophe risk securitisation; effect of recent US bankruptcy legislation on synthetics; microfinance loan securitisation in emerging markets; public sector securitisation; securitisable intellectual property; application of accounting standards in a rapidly changing environment, and updated analysis of Basel II.

 

The above is not based purely upon my own personal opinion. I have provided a number of sources that I have quoted them directly. I have not felt the need to interpret or translate as others continually do to support their arguments.:cool:

 

But it is ok the following listed below and above in great detail can be ignored.:???::???:

 

Case Law (common law)

Leglisation

Halbury's

House of Commons

Securitisation Documentation

House of Lords

A Cambridge Professor

Author's

 

It is clear this is a topic we will never agree on, so why don't we just agree to disagree.

 

 

And that's just a simplified version :roll:

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Hi All,

I had to look again to see if it was the correct date or was it April 1st?

 

I for one can not see why some one would have so many names, if not some thing to hide.

As for your post and as always its 20 pages long

I am not going into why or if but I posted a question which you have failed to answer many many times ' Do you have a copy of the mortgage sale agreement'? which is the last thing to be signed off.

As this is the only one which will state what the bond holders have and would ask this question,

You have a mortgage of £210k

the company puts that in a pool and get there £210K in FULL

so by law which you quote you owe them nothing

They collect the interest for the bond holders which they pay monthly

So WHAT have they got for there millions?

 

I went though all the pages you posted last and can see why people think like me you are a) a banker b) a lawyer in this field

by the way there IS so much wrong with your last post of 21 pages

and have or did you check the accounts of RFC and then GMAC as asked, no I don't think so.

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And that's just a simplified version :roll:

 

Hi Crapstone,

 

Maybe Suetonious posted the simplified version as a kindness taking his lead from JebediahSpringfield. You see, JebediahSpringfield had commented on his posts that he would simplify his/her arguments for my simple brain....

 

or maybe, in the words of Shakespere

 

methinketh he doth protesteth too much

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Mmmmmm.....

 

I can that it is open season on Suetonius (me) and everyone is taking potshots..

 

Feel free to make any comments that make you feel better or give you any comfort.

 

However, I have noticed that the information I have posted is not being disproved.

 

So Halbury's got it wrong, the authors of those books, the Cambridge Professor and all the other sources I have quoted and linked too directly have all got it wrong.. Are they all part of the great securitisation conspiracy..

 

How about instead of taking swipes at the person, disprove the argument. (that is also an open invitation to others posting on other sites/blogs)

 

Instead of telling people what things mean, link to it and let them decide what it means... provide actual supporting evidence..

Edited by tbern123

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

  1. Cabot again !!! Urgent Help Needed
  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
  3. No more calls from Cabot... lol

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The ball is firmly in your court, prove that I am wrong and that all of the sources I have quoted have unlike you, it would appear misunderstood the securitisation process, within the UK

Edited by tbern123

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

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  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
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And that's just a simplified version :roll:

 

Lol you should see the unabridged version, it is shocking ;-)

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

  1. Cabot again !!! Urgent Help Needed
  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
  3. No more calls from Cabot... lol

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If I am wrong and all of the sources of information that I have provided are wrong, prove it.

 

Quote one source (excluding your personal opinion/interpretation) that expressly says that the legal title has been sold to the SPV.

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

  1. Cabot again !!! Urgent Help Needed
  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
  3. No more calls from Cabot... lol

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I can't see what the problem is here, you either understand it or you don't. However, that should not deviate anything away from the consumer relationship or potential for losses.

 

I for one am glad that Sue has taken the time to post up, what may seem lengthy articles. I just wouldn't have the patience to do it or the IT skills if I'm totally honest. I took me along time to understand and just when you think you know, you realise something else and have to fit that into the chain.

 

The one thing we don't need is personal attacks. It's Marmite..love it or hate it but at least give a valid reason.

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Hi All,

I had to look again to see if it was the correct date or was it April 1st?

 

I for one can not see why some one would have so many names, if not some thing to hide.

As for your post and as always its 20 pages long

I am not going into why or if but I posted a question which you have failed to answer many many times ' Do you have a copy of the mortgage sale agreement'? which is the last thing to be signed off.

As this is the only one which will state what the bond holders have and would ask this question,

You have a mortgage of £210k

the company puts that in a pool and get there £210K in FULL

so by law which you quote you owe them nothing

They collect the interest for the bond holders which they pay monthly

So WHAT have they got for there millions?

 

I went though all the pages you posted last and can see why people think like me you are a) a banker b) a lawyer in this field

by the way there IS so much wrong with your last post of 21 pages

and have or did you check the accounts of RFC and then GMAC as asked, no I don't think so.

 

Something to hide? This isn't a Bond movie and does it matter what profession they are in, if any? Anything and everything is helpful and it's up to the reader to use it or or lose it.

 

The only thing wrong here is some of the attitudes.....they should be saved and vented towards Capstone, SPML and the spin-offs and not at each other... Rant over! :) Keep smiling , we can do this ..

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Thanks Crapstone, I do realise I am guilty as charged with regard to using a sledgehammer to crack a nut though :-)

 

As for IT skills.... All I did was to cut & paste directly from each source (unamended) which is easy to do. I did it that way so people could read what is actually said without to much of my person spin (opinion/interpretation) blurring what it says with what I want it to say..

 

I will make more of an effort to leave the sledgehammer at home though :-)

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

  1. Cabot again !!! Urgent Help Needed
  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
  3. No more calls from Cabot... lol

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Suetonius has been around for a long time on CAG and personally I would concur with andrew1.

 

It's important to look at both sides of an issue, and better to investigate them now than face them head on in a court room against a hard nosed barrister.

 

Thanks Caro and I have learnt so much since I started using this site... CAG is like the University of Life..

Remember if you find anything I say helpful, please click the scales

 

 

tbern123 vs Cabot

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  2. Litigation - tbern123 V Cabot Financial (Uk) Limited
  3. No more calls from Cabot... lol

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this is getting personal with some people and that's not good ...

 

the facts as i have seen/read them is that in the securitisation process the transfer is done in equity with the bank continuing to hold legal title and the SPV/Trustee will not complete the transfer until a trigger event (such as the originator bank going bankrupt) makes them complete it, i.e. legal title finally passes to the SPV/Trustee.

 

this is a manipulation of the law but clearly not illegal as it is accepted by the public, private and legal sectors.

 

many of us wish it were not so and we could prove that legal title has passed to the SPV/Trustee but this cannot be done (yet) as there is no proof of this for the UK.

 

and we know the govt isn't going to let the originator banks go bankrupt with those 'bad debts' .... so the transfer is never going to be completed.

Edited by tifo
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I know Suetonious - you are sadly mistaken - take that line of argument at your peril.

 

Suetonius has been around for a long time on CAG and personally I would concur with andrew1.

 

It's important to look at both sides of an issue, and better to investigate them now than face them head on in a court room against a hard nosed barrister.

 

Observe that the CAG site team concur with Suetonius and Andrew1. Andrew1 has just started posting on this thread but he/she warns us that it is perilous to use that line of defence because if you do, you will loose your home. Quite frankly, the lender's are going to take your home whatever defence you run. So if you've got the mettle to stand up to these criminals, run every and all potential defences of your choosing.

 

It's shocking that one member of the CAG site team rallies in to support the new poster to this thread, namely Andrew1 (and as a natural consequence, Suetonius) to impress upon us that we must not attempt any line of defence that would expose what is really going on. In view of the excellent pioneering and ground breaking work that the consumer action group achieved in the field of bank account charges, it is disappointing that the consumer action group doesn't want any of us to disturb or lawfully challenge the lawfulness of the securitisation structure.

 

Litigation with these financial giants is always going to be the David and Goliath battle, but one of us, somewhere, sometime may be the one that throws the proverbial stone.

 

Good luck to all of you impressive geniune caggers that have, and do have the guts to stand-up for your rights. One of you may break through just like the original CAG consumers did in the days of the bank charges fiasco.

 

For me, it seems that members of the CAG site team have forgot the fundamental reason for providing this forum - to help consumers defend themselves against these extortioners.

 

Supersleuth

Edited by supersleuth
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SS,

I hope that I was not get personal but I agree

Observe that the CAG site team concur with Suetonius and Andrew1. Andrew1 has just started posting on this thread but he/she warns us that it is perilous to use that line of defence because if you do, you will loose your home. Quite frankly, the lender's are going to take your home whatever defence you run. So if you've got the mettle to stand up to these criminals, run every and all potential defences of your choosing.

Tifo

he facts as i have seen/read them is that in the securitisation process the transfer is done in equity with the bank continuing to hold legal title and the SPV/Trustee will not complete the transfer until a trigger event (such as the originator bank going bankrupt) makes them complete it, i.e. legal title finally passes to the SPV/Trustee.

 

this is a manipulation of the law but clearly not illegal as it is accepted by the public, private and legal sectors.

 

many of us wish it were not so and we could prove that legal title has passed to the SPV/Trustee but this cannot be done (yet) as there is no proof of this for the UK.

So there you have it, just we now have to wait.

And yes SS I would put this as a defence and hope that I get a judge who knows about this!

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Suetonius

Something that puzzles me why do the Americans use a different model of securitization than in the UK is it solely because of this as you quote above:

"Why do entities resort to equitable assignment? Essentially, to avoid the difficulties involved in full-scale legal transfer. These difficulties may either include having to notify the debtor (as under U.K. or Hong Kong law) or the stamp duties associated with a conveyance that the receivables (as in U.K. and India)."

and they are able to use such equitable assignment of course because of the 75 year old law of property act 1925 s136 notification ,which I assume exists in no other legislation and whose draftsmen would never have envisaged it being used in such transactions today.The purpose of s136 being notification of the debtor not its use in the avoidance of a "little difficulty."

 

I am particurlarly fond or this one:"These difficulties may either include having to notify the debtor."

So the reality is that an archaic law is invoked to avoid this "little difficulty".

I would welcome your personal opinion on what difficulties you anticipate the lender might meet with?

unfair practices perhaps ? as has currently been the norm with our adversaries on this thread?

Was the use and intention of s136 every really fully explored in Pender?

Given the Pender's background and their attempted escape from debt liability, it was hardly the right moment to challenge s136 on the grounds of unfairness to the consumer.

 

Moving on from this I have no disagreement with you that s136 stands and can be exploited until a High Court judgement states otherwise.Indeed I cannot see the end point of the argument the debt simply transfers from one entity to another.

 

Previously as stated in my other posts your undoubted skill,diligence and research would be hugely appreciated by all on this thread and many like it if it could be directed into other areas and if you could suggest and participate in a way forward to provide customers of these dreadful entities with an alternative viable defence.

Such as, an uneforceable agreement for example as most of these loans are regulated under FSA rules.

 

Perhaps after all this time and the many personal battles ,all parties could contribute in constructing a viable defence to s136 and viable defences in other areas as detailed above.

The opportunity to use such defences will not be long in coming and as long as they are used in a secondary role the chance is they might actually be heard.

 

One word of caution,I would strongly suggest everyone read the final Pender decision extremely carefully,because there was a virtual bucket load of reasons given as a defence,not solely title to sue.Pender is the obstacle that must be overcome and it is a mountainous obstacle.

For example on title to sue.The esteemed justice Peter Smith "If the party's need to be joined is purely technical i.e. the arrangements mean that the Claimants are not the correct parties to sue for the debt, it is proper that the correctly constituted party is joined to ensure that there is debt recovery provided the Defendants suffer no disadvantage by that. No actual disadvantage so far as I can see has been suffered, even if the Defendants' case on Title to Sue is correct."

In other words the spv is simply joined as the Claimant as detailed in the spv prospectus or alternatively substituted as in Walker v SPPL.

This warning is in no way intended to be negative but the basis of this case is the benchmark and to confine it to one issue ie title to sue is unrealistic because title to sue is in the end game ,irrelevant as the above judgement clearly shows it will merely transfer to the spv in the end,how can this be disputed?

Edited by actionnotwords
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