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Student name – Jayodya Mallikarachchi Student ID number – s4681214
Unit of Study – Law of Financial Institutions and Securities (BLO3405)
Title of Assessment – Assessment 2, Part B
Date due -14/08/2022 Date submitted – 14/08/2022
Lecturer’s name (Higher Education only) – Mr. Dhiren Goonesinghe
Teacher/tutors name - Mr. Dhiren Goonesinghe Tutorial/class time

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 1. Introduction

The main area reviewed under this case is Personal Properties Act 2009. Accordingly, security
interests secure the performance as well as the payment obligations regardless its form of
transaction. This case mainly outlines leases, security interests of loans, liens.

Adrian who has recently moved into Melbourne is a chef who had rented a property from Norman
and also have borrowed a loan from JKN Bank to start a new business. The case specifies that
Adrian has signed an agreement with Norman before lease. Furthermore, JKN Bank have secured
assets by claiming ownership for the kitchen equipment’s till the loan money is paid. In here Adrian
is a customer of JKN Bank, whereas in leasing agreement Adrian is the lessee and Norman is the
lessor.

2. Issue

The main issue is to clarify JKN Bank’s Legal Position regarding their interest on Kitchen Equipment
Norman registered under JKN Bank when borrowing the loan.
Furthermore, there are issues regarding.
i. leasing agreement,
ii. security interests implemented by both creditors
iii. creditors hierarchy
iv. legal interest of creditors
v. steps lessor has taken to secure the property and the validity of those security interests.

3. Rules

Under Personal Properties Act 2009 we can apply ‘Section 10 which defines the contents of secured
agreement, section 12 which interprets the characteristics of security interests, section 13 which
states areas like disclosing the functions of personal property security lease, section 19 that
defines the implications of such enforceable attachments of security interests, section 21 which
merely provides information regarding ways and means of perfection, perception of perfection
where secured part having possessions regarding collateral, interest perfecting, security
agreement and its provision for interest are discussed. ’. And, under PPSA 2009 the registration
under PPS registry, validity of interest laws can also be used in this case.

Fundamental relationship among bank and customer is defined and analyzed under Banking Act
1959 section 5. And the interpretation regarding the banking business by courts can be realized in
the case of commissioner of the state savings bank VS Permawan Wright & Co Ltd (1914).

Furthermore, Bankruptcy and Insolvency Act S136 (1), Commercial Tenancies Act and Common
Law also can be used apart from above to review lessees’ rights. And Dura Constructions Australia
V Hue Boutique Living (2014) showcase the advantages of registering in Personal Properties
Security Act 2009.
Moreover, the PPS Act 2009 can be applied to advice JKN Bank regarding Distress and Landlord
Waivers, Creditors remedies and rights against debtor, Valid notice of intention for disposal,
voluntary foreclose.

4. Analysis

Researcher, need to mainly review areas like the leasing agreement, Personal properties Act 2009,
legal position of two creditors, Bank and Customer Relationship, Security Interests involved,
Commercial Tenancy Agreement act to resolve the case.

When analyzing the Bank and Customer relationship Adrian, seeks for financial assistance from
JKN Bank through a loan. Accordingly, Adrian is the debtor and the JKN Bank is the Creditor. The
case specifies that the bank had secured the lent money through registering the ownership of the
kitchen equipment’s according to the loan’s conditions.

The kitchen gears can be identified as non- circulating tangible assets of the Adrian’s cafeteria/
business. And in here Norman claim to have interest over the kitchen equipment’s.
Furthermore, the common law states that currently jurisdictions do not encourage self-help
repossessions as they may use excessive, pathetic efforts that may violate civil rights. Therefore,
Norman changing the lock of the door can be discouraged by the court since it can cause severe
impacts.

Accordingly, JKN Bank registering equipment’s under Personal Property Act 2009 is the ideal
remedy for this kind of situations because there’s a precise evidence of security interest, which
makes them a secured creditor under PPSA Act section 10. So, under the act it’s clear that in order
to have an effective claim to the property the creditor need to register under PPSA.

In brief the creditors who hold a lien over the debtor’s property whether it’s a personal property
or a real property is known as a secured creditor. This lien provides the benefit of selling the
debtors property in case of any default to recover the loss that can happen to creditor. While the
unsecured creditor doesn’t hold a lien over debtors’ property whereas the alternative for them is
to sue the defaulted party and win the case in the court in order to get the repayment of the debt.
And priority in here is given to secured creditor. (Cerruti, 2018)

Basically, the personal property is known to be ‘collateral’ if there’s any security interest attached.
Moreover, for a PPS Lease normally the secured party will ensure and perfect their security
through a written agreement with lessee that has signed the agreement or by registering financial
statement on PPS Register. Although there was a signed leasing agreement between Norman and
Adrian, according to the case theirs no sufficient evidence to prove that Norman had registered
the Property under PPSA since no security interest measures had been taken during the lease
agreement.
Further findings under landlords’ rights and common law states that Norman can usually seize
Adrian’s’ chattels (personal property) and goods and can sell those in order to satisfy the payment
for due rent because according to a lease agreement the lessee failing to pay the rent is a material
breach. But under this case we can reasonably presume that Norman is an unsecured creditor.
Therefore, under PPS Act 2009, Norman will not have the priority over Adrian’s registered security
holders or secured creditors. And there’s a clear competition between the lender’s rights (JKN
Bank) and landlords rights (Norman). Therefore, those equipment’s cannot be owned by Norman.

If we can assume that Adrian is bankrupt, we can apply Bankruptcy and Insolvency Act S136 (1)
and PPSA to further assure that secured creditor which is JKN bank can be evidently rank ahead of
Norman in this situation. If debtor files a bankruptcy assignment the case becomes more complex.
Through this the unsecured creditor can be legally prevented and limited taking actions against the
debtor.

Under the case Hue Vs Dura, we can presume the landlords benefits of registering the security
interest under PPSA 2009. The case showcase that although secured party or creditor is not a party
of lease, in these types of obligations the priority is given to Lessees Secured Creditor. (VR |
Judgment, 2022). The Victorian Court of Appeal identifies for lease having characteristics like this
case obligations its ideal to be secured by registering under PPSA. In case of Norman V JKN Bank V
Adrian we can reasonably presume that being an unsecured creditor will be a main disadvantage.

So as there’s no more than one security interest which is attached to kitchen equipment’s legally
it need not to be divided between the two creditors. Because the lessor is unable to exercise
lessors’ rights for the attachment of equipment’s inside the premises which he doesn’t have a
security interest upon.

5. Conclusion

Since there’s no sufficient evidence to prove that Norman had registered a security interest before
lease agreement, we can conclude that Norman is not eligible to lock the property with the kitchen
equipment’s inside. Norman has ownership rights towards the premises but not the equipment’s
inside. And In brief the JKN Bank has registered the kitchen equipment’s as a remedy to secure the
lending under PPSA 2009. In the case of Norman V JKN Bank, priority is given to JKN Bank in
hierarchy of creditors.

Applying interpretation towards this case we can conclude that JKN Banks position regarding to
their interest is secured and JKN Bank is a secured creditor which makes them eligible to claim for
the kitchen equipment’s inside the premises under Personal Property Act 2009.
 6. Further Recommendations and Comprehensive advice from researcher
regarding legal position of JKN Bank

Under this circumstance, Commercial Tenancies Act and Common Law specifies normally Norman
can change the locks of premises due to payment due, but when evaluating creditors hierarchy in
this situation the researcher concluded that JKN Bank is given the first priority. So JKN Bank can
claim for their registered gears inside Normans premises.
Researcher can further advice JKN Bank to refer the ‘creditors remedies against debtors and other
parties ‘under part 5 of PPSA where ‘Rights and remedies are outlined in ss56, Rights regarding
seizer or repossessions outlined in ss58, notice of intending for disposal of collateral in s59(6)’.

To dispose collateral, they must give a valid Notice of Intention to several parties under Personal
Property securities Act 2009. As per the case facts JKN Bank is advised to notify Adrian and Norman
regarding the deposing of collateral under PPSA ss59(6) -(12). After this the other interested parties
collectively with the debtor have 15 days to object JKN Banks Proposal under voluntary foreclose
according to section 61 of PPSA.

If Norman refuses to provide the equipment’s to JKN Bank after the claim of ownership to
equipment’s inside, the bank can coniser an additional option to file a court action against Norman.
The secured creditor also can sue the debtor regarding this situation but if the debtor files for
bankruptcy the case becomes complex.

If JKN Bank applies for a court order the judgement is given evaluating on value of collateral,
discharged amount of obligation, defaults reason, impact on financial position of the parties of
the case.

After regaining the equipment’s from Norman under the procedure, Researcher further specifies
‘collateral description, amount which is needed to satisfy the security interest, owing arrears,
expenses under seizers and repossession, planned date time and place of expected deposition’
need to be informed to Norman and Adrian.

Concisely JKN Banks Legal Position regarding the equipment’s is secured and is legally entitled
towards its ownership and the Bank can follow above advisory procedures recommended by
Researcher to recover the debt.
References

Cerruti, C. (2022, March 2). Secured Creditors and Unsecured Creditors: What’s the Difference?
First Corporate Solutions. Retrieved August 13, 2022, from
https://ficoso.com/ucc/secured-creditors-and-unsecured-creditors-whats-the-difference/

Landlord and Tenant. Tenant Holder of Title Acquired after Lease Held Liable for Rent Accruing
Prior to Surrender of Premises to Original Landlord. (1948). Virginia Law Review, 34(3),
358. https://doi.org/10.2307/1069174

Law Institute Victoria. (2020, July 16). Secured Creditors vs Unsecured Creditors: The Differences.
Lord Commercial Lawyers. Retrieved August 13, 2022, from
https://www.lordlaw.com.au/dispute-and-litigation/secured-creditors-vs-unsecured-
creditors-the-differences/

L.U.I.S.A., & Vukovich, N. (n.d.). Microsoft Word - PPSA - Distress & Landlord Waiver. Daoust
Vukovich BARRISTOR & SOLICITORS. https://www.dv-law.com/docs/default-
source/Articles/pdf_8-10.pdf?sfvrsn=e2eb6a10_0

Mitchell, M. & Sharrok Pitman Legal. (2015, August 18). Landlords beware! How safe is your
security deposit? | Sharrock Pitman Legal. Sharrockpitman.Com.Au. Retrieved August 13,
2022, from https://www.sharrockpitman.com.au/post/landlords-beware-safe-security-
deposit

PERSONAL PROPERTY SECURITIES ACT 2009. (2009). Common Wealth Consolidated Acts.
Retrieved August 13, 2022, from
http://classic.austlii.edu.au/au/legis/cth/consol_act/ppsa2009356/

R. Brusa, E., Dugan, A., & Malone-Smolla, E. (2021, April 29). Bankruptcy Basics: Secured vs.
Unsecured Claims. The National Law Review. Retrieved August 13, 2022, from
https://www.natlawreview.com/article/bankruptcy-basics-secured-vs-unsecured-claims

Sze, D. (Ed.). (2022, July). CHAPTER TEN: CREDITORS’ REMEDIES AND DEBTORS’ ASSISTANCE.
https://www.lslap.bc.ca/uploads/2/9/3/5/29358111/lslap_manual_ch_10_-
_creditors_and_debtors.pdf

Tyree., A. L. (2021). BANKING LAW IN AUSTRALIA, 10TH EDITION. (10th Edition). LexisNexis
Butterworths.

Wilson, A. (2020, May 27). Priority Contest Between Distraining Landlord and a Registered
Security Interest Holder. JSS Barristers. Retrieved August 13, 2022, from
https://jssbarristers.ca/litigation-law-firm/insights/priority-contest-between-distraining-
landlord-and-a-registered-security-interest-holder/