Liens Explained

A quick guide as to when you can hold goods as security

What is a lien?

1. A lien is the right to hold another person’s property as security for the performance of an obligation or the payment of a debt.

2. For example, in specific circumstances you may be able to refuse to return goods you hold in storage for a customer until they pay all your outstanding storage charges. In these circumstances you are exercising a lien over the customer’s goods.

What types of liens are there?

3. Liens generally arise in four different ways: under common law, under statute, under contract, or in equity.

Common law lien

4. Broadly speaking, there are two kinds of lien under general law:

 Possessory liens, which may be exercised by a restricted class of people who hold goods on behalf of others – this class includes innkeepers, common carriers and repairers

 Maritime liens, which attach to a ship even if it has been sold or transferred.

Statutory lien (liens arising under legislation)

5. Examples of statutory liens include the unpaid seller’s lien under the Sale of Goods Act 1896 (Qld) and the storer’s lien under the Storage Liens Act 1973 (Qld).

Contractual lien

6. A lien may be expressly granted in a contract. A court may also imply such a lien into a contract but will not do so where this is inconsistent with the parties’ intentions.

Equitable lien

7. A court may find there is an equitable lien based on general considerations of fairness and justice, and the relationship of the parties. Equitable liens may arise despite the claimant not having possession of the goods, and regardless of whether there is or is not a contract providing for a lien.

What is the difference between a general lien and a particular lien?

8. A particular lien can only be exercised over specific goods in your possession where you are owed money in respect of those goods. Such a lien is not transferrable to other goods.

9. A general lien can be exercised over any goods in your possession for amounts owed for past and present services, even though you may have been paid for services in respect of the goods currently in your possession.

10. A general lien is a better security than a particular lien. A general lien may arise either by agreement of the parties or by reason of custom or trade usage. Because they operate to the detriment of unsecured creditors of the owner of the goods, courts have tended to approach general liens cautiously.

What if I have a lien and then I deliver the goods to my customer? Do I still have a lien?

11. The short answer is – probably not. Generally, you must have continuous possession of the goods to maintain a lien over them. Therefore, the lien will be extinguished if you return the goods to the owner, even by mistake.

What happens if I wrongly claim a lien?

12. If you wrongly claim a lien you may be subject to legal action.

13. An example of wrongly claiming a lien would be refusing to release goods where the owner of the goods has paid you all of the money that is legally owed to you.

14. If you refuse to release someone’s goods and a court finds that you did not have a valid lien, ‘continued possession of the goods will be capable of constituting a tortious infringement of the possessory or proprietary rights of the owner’.1 Essentially this means you may be liable for any financial losses that are suffered by the owner as a result of your wrongful refusal to release the goods.

15. If you realise that you have wrongly claimed a lien, generally you should release the goods as soon as possible to reduce the likelihood of the owner taking legal action against you.

1 Coshott v Barry (2016) 248 FCR 534 at [26].

Can I exercise a lien against a third party who is not my customer and who does not owe me money?

16. There may be times when you are holding goods on behalf of someone who owes you money and then you discover that the goods are in fact owned by a third party.

17. There are only very limited circumstances in which you can maintain a lien against the property of someone who does not owe you money.

18. The Personal Property Securities Act 2009 (Cth) also makes these sorts of situations very complex. It is therefore essential that you seek legal advice before claiming a lien over property owned by a person who does not owe you money.

Please note that this publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely upon this publication as legal advice.