(Security ownership – sale and lease-back – other non-possessory security rights in individualised movables)

B owns a car fleet, which he wants to use as collateral for a bank loan without the need to transfer direct possession of the cars to the bank. B does not deal in cars and will not sell the cars in the fleet in the ordinary course of trade. He approaches A, a financial institution. A would like to have a real right in the cars in the event of B's insolvency. Moreover, A does not wish an unsecured creditor to be able to obtain priority over its own rights in situations other than insolvency.

Questions

1. (a) How could this be done? How is it usually done? Please state the precise prerequisites.

2. (b) Can such a security be achieved through a sale and lease-back arrangement? Is that common?

3. (c) Is your answer confined to cars, or does it apply to different kinds of collateral?

4. (d) The parties have adopted your proposals, either to create a security right in the cars, or to provide for sale and lease-back. A becomes bankrupt (though that may be unusual in practice). What would B's position be?