Lien “on” me

In Sheianov and another v Sarner International Ltd [2020] EWHC 1214 (QB), the High Court granted summary judgment to the claimant for the delivery-up of 27 vintage motorcycles, on which the defendant had claimed a particular lien. This recent case has provided a welcome reminder of the law relating to liens.

Background

The defendant company agreed to create materials for a travelling exhibition which included 27 vintage military motorcycles which the claimant lent to the defendant to assist the defendant with creating the materials. The work under the contract was later suspended, and an invoice for over £500,000 remained unpaid. The defendant retained possession of the 27 motorcycles as security for the unpaid invoice. The claimants sought summary judgment for delivery-up of the motorcycles and the defendant claimed that it was entitled to exercise a particular lien over them as security against the unpaid invoice.

The law of liens

A lien is a type of security interest – it entities a party to hold on to assets in its possession pending payment of a debt owed. It can arise in a number of different legal situations, this case involved a “particular lien”, i.e. where a creditor retains possession of the debtor’s property until the debt relating to that property is repaid. A

A particular lien can arise under the common law where a party has carried out work on and incurred expenses on goods thereby creating a “moral and legal obligation” on the owner of the goods to pay for the work before the goods can be taken away.

Judgment

In this case the court concluded that the five key and essential requirements for the exercise of a particular lien in this sort of situation were as follows:

• A particular lien can only operate on something physical, a chattel. It cannot operate on something intangible , such as an idea or intellectual property.
• Work must be done “on” the goods being retained and not merely “with” it or “using” it or “in relation to” it.
• The work must improve or give additional value to the goods, which is a question of fact.
• The improvement need not be physical, but it must be inherent to the goods themselves.
• If the agreed work is of a hybrid nature, some of which is sufficient to create a particular lien and some of which is not, and the work cannot be severed into those two constituent parts –a particular lien is not created at all.

Applying these principles, the judge held that the defendant had not established a particular lien over the motorcycles. Although the defendant had carried out a considerable amount of work for the exhibition which related to the motorcycles (including research and the creation of life-like human figures to sit on the motorcycles), these activities did not involve work “on” the motorcycles. In addition, the work being carried out would not increase the value of the motorcycles.

The judge also noted that the defendant could not point to which part of the unpaid final invoice related to work said to have been done on the motorcycles, as opposed to other work on the exhibition which did not involve these motorcycles meaning that (as mentioned in the fifth point above) no lien was created.

This case is a good reminder to businesses that while exercising a line can be a useful practical remedy where an invoice is unpaid, care must nonetheless be taken to make sure that the right to retain goods has in fact arisen in a particular case – otherwise wrongfully withholding the goods could give rise to a claim in the tort of conversion.