Loan Repayment and Collateral Security - Law Assignment Help

Assignment Task

In the given case law, Xavier wanted to pawn an old painting called ‘Rafflesia Flower’ for getting quick cash in his financial difficulties. Xavier approached his friend yazmin for the valuation of such painting so that he can apply for the loan against it. Yazmin was a licensed valuer of artistic personal properties. The actual value of painting was RM 2000 but Xavier asked Yazmin to assign the value of painting as RM 5000 as per the valuation. Yazmin made a valuation report for the painting stating the value of RM 5000. Xavier took a loan of RM 5000 by presenting the report before Zach Pawnbroker Sdn Bhd. Also the Zach Pawnbroker Sdn Bhd believed the valuation report of painting as Yazmin was a licensed appraiser. After 6 month, Xavier failed to repay the loan amount and accrued interest to redeem Rafflesia Flower. On the failure of Xavier to repay the loan, Zach Pawnbroker Sdn Bhd had decided to sell the painting. At the time of valuation, auctioneer informed them that the value of painting was RM 2000 and it was finally auctioned off at RM 2500 only.
 

Here in that case, the issue is that whether Zach Pawnbroker Sdn Bhd has any right to file its claim against Yazmin and about the remedies available to Yazmin. As per the details given, Yazmin made an overvalued report of painting which causes a loss to Zach Pawnbroker Sdn Bhd. The Zach Pawnbroker Sdn Bhd had entered into a pawn contract with Xavier and gave him a loan of RM 5000 against a painting which was overvalued by Yazmin. Generally, pawn refers to an arrangement to use any property or goods as collateral for borrowing the money. In this agreement, the person who is borrowing the money against his property is known as pawnor and another party is called as pawnee. In this arrangement, Pawnee is entitled to receive his principal amount back along with the interest on it. He is also liable to maintain and safeguard the property collateral by the pawnor. On the other hand, the pawnor is obligate to pay back the amount of loan and the interest on pre-determined time. By this mode of borrowing money, the person in need i.e. pawnor can get the quick cash in no time. As per the property laws by Australian government, a property is required to be valued by an authorized appraiser before entering into an agreement of pawn. The value of collateral property appeared from this valuation plays a major role in the process of pawn on the basis of which the amount of borrowing is decided. For example: if a person wants to borrow money by giving any of his property as security then he can provide a security which has the equal value of amount. For finding the fair value of such property, a valuation has been made by a certified valuer or appraiser. It is the duty of this valuer to provide an appropriate valuation report of the property.

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