05 February 2016
Does a possessory lien arise without the need for any special contractual term to be stated regarding the lien?
Our client has repaired a ship and now intends to retain the ship until the repair bill is paid.
Our client's terms of trade do not explicitly contain a retention clause although it is assumed a possessory lien arises by the conduct.
Does the owner of the property, and any mortgagee, need to be advised in order for the lien to be effective? Thank you for any comments you can offer on the issue.
The general common law lien allows the lienee to retain the goods as security for unpaid money in respect of those goods being held. This is to be distinguished from a contractual retention clause.
Under sections 8 and 73 the PPSA does not apply to a common law or statutory lien over goods, which has priority over all security interests in those goods if:
a. the materials/services provided which gave rise to the lien were provided in the ordinary course of business by the lienee;
b. no other Act prevents the lien from having priority; and
c. the holder of the lien did not have actual knowledge of the breach of a security agreement relating to those goods.
In general terms a lien allows a person to retain possession of another's property pending satisfaction of the lien holder's claim against that person and has no obligation to give notice to a secured party mortgagee.
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