A leases equipment from LP Pty Ltd for two years. A acquires possessory title for the duration of the lease contract and LP Pty Ltd is required to provide full and adequate notification of any intention to reclaim the property pursuant to a breach of contract. If A goes into bankruptcy and the trustee in bankruptcy claims the possessory title over the equipment for the purpose of distributing assets to A’s creditors, LP Pty Ltd may claim a superior proprietary title and reclaim the property. However, in such a scenario, if LP Pty Ltd does not give full and adequate notification of its intention to reacquire the property in accordance with their contractual obligations, the trustee T may raise a jus tertii defence against the title claimed by LP Pty Ltd arguing that the strongest title lies with A, because A is entitled to retain possession until LP Pty Ltd complies with the notification requirements set out in the original lease contract.
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