Policy & Compliance

Spotlight on when and how to use a lien

BIFAlink answers some of your questions involving the complex subject of liens – and looks at some specific cases

My customer has ceased trading but I have control over one shipment. Have I lost everything? If you have released past shipments and invoiced your customer then you cannot expect to be paid if the customer ceases trading. The company that you dealt with no longer exists so you are an unsecured creditor. You can hold a lien on the one shipment where you retain control, however, you must deal with the administrator of the failed company.

Can I sell the goods that I have control over? Be careful before taking any action. Do you know who the owner of the goods is? Your customer may not have paid for them and title may be retained by the shipper. If you sell the goods you could face a legal suit from the owner – you should be negotiating with it for any payments that you can obtain. When an administration is running, a court moratorium is in

place and no liens, judgments or liabilities can be enforced. It is as if everything stands still while the administrator tries to save the company. It does not mean the lien no longer exists and this is why security is often given in return for release of the goods. It means that the right of sale may not be exercised. If there is a formal administration in place, you should be dealing with the administrator and not the customer, which would no longer have any powers to manage itself.

My customer is experiencing cashflow problems and I am holding goods – what should I do? Answer: do not delay giving notice of lien Whilst threatening to seize, and possibly sell, your customer’s goods is a hostile move, you should ensure that you provide notice of a lien as early as possible. Of course, your relationship with the client could be delicate and you may not want to be too heavy handed at an early stage of negotiation. However, there are good reasons why you should serve the 21 days’ notice without delay by multiple communication methods and registered post. An e-mail can be used so long as you have proof your customer has acknowledged receipt of your communication. If you serve notice of a lien then the goods cannot be sold

on to another party as an encumbrance is in place. This protects you if a third party appears saying it has title to the goods and is not interested in your past debts. The lien must be disclosed should such a transaction be planned by your


customer who cannot fulfil its contract if there is misrepresentation by non-disclosure.

I have discovered that a buying agent is involved – how does that affect me? It may be that a buying agent has control of the goods and is holding title with the original bills of lading. With hindsight it would have been better to have understood the supply chain fully from the start, but faced with this predicament you may now have a particular lien. However, the definition of owner in the 2017 BIFA STC brings the STC into play. The customer’s agent can become an owner when holding the bills of lading. This is linked to clause 3: The customer warrants that he is either the owner, or the authorised agent of the owner and, also, that he is accepting these conditions not only for himself, but also as agent for and on behalf of the owner. This scenario is quite complex and formal legal advice should be taken at the earliest possibility.

Nobody wants to know – what do I do? We have control of two containers from two overseas shippers, both for a UK consignee that has failed. The administrator is not interested but has not put this in writing and we understand that the goods have not been paid for and that the overseas shipper is still the owner of the goods. We have asked the overseas owner/shipper for disposal instructions but there is no response. We are worried about mounting charges and we need to know what we can do with the shipper to force a decision.

Answer Firstly, determine if it is indeed correct that the shipper owns the goods because it has not been paid (that is not necessarily the case and depends on the terms of the international sale contract). A carrier has a particular lien on goods (which arises out of common law) that is lawfully held, but the goods cannot be sold without a court order allowing this. You need to act quickly if the shipper will not respond. You need it in writing that the administrator accepts there is no entitlement to the goods and that they have not been paid for. You also need evidence of reasonable attempts made to get instructions from the shipper. Once you have this, you should apply to a court for an order for sale. You will need formal legal advice from a solicitor.

July 2020

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