Legal protection of factoring mortgage in accounts receivable.

Supreme Court judgment 20 April 2020, HR-2020-837-A, (case no. 19-144892SIV-HRET), civil case, appeal against judgment. 

ING Bank N.V. (Counsel Henning Harborg)

v.

Bergen Bunkers AS’s bankruptcy estate
(Counsel Egil Horstad)

A company had mortgaged its existing and future accounts receivable to a bank. The mortgage agreement met the requirements for a factoring agreement, see section 4-10 of the Mortgage Act. The agreement was not registered, and the accounts receivable were not individualised, but the customers had been notified of the agreement. In the dispute between the bank and the company's bankruptcy estate, the Supreme Court's majority of three justices found that an agreement such as this must be registered to have legal protection. A general prior notice to the customer of the mortgage is not sufficient to obtain such protection. It was assumed that the system of the Mortgage Act suggests this solution. Case law also supports the necessity of registration, while legal theory gives no clear answer. Judgment was therefore given in favour of the bankruptcy estate. The minority of two justices found that the provision on legal protection in section 4-5 of the Mortgage Act was applicable. Dissenting votes 3-2.  

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