Most Read Contributor in South Africa, September 2016
A SERVICE provider can rely on a debtor/creditor lien as
security for its claim. This type of lien, conferred by virtue of
an agreement between the creditor and the debtor, is a subspecies
of a broader right to retain physical control of another's
property, whether movable or immovable, as a mechanism for securing
payment of a claim, until the claim has been met. In other words,
the service provider, who makes provision for such a lien in its
contract, can refuse to release goods which are in its possession
until it has received payment.
An example of the clause which introduces this right into a
contract is that often used by clearing and forwarding agents and
which might be worded along the following lines: "All goods
shall be subject to a special and general lien either for moneys
due in respect of such goods or for any other moneys due to the
company from the customer, sender, owner, consignee, importer or
the holder of the bill of lading or their agents, if any".
Such clause would go on to deal with the right of the clearing and
forwarding agents to sell the goods after notice has been given to
the debtor, if the debt remains unpaid. Other examples of creditors
who may make provision for a lien in their contracts would be
builders, motor vehicle repairers, warehousemen, transporters and
professionals such as lawyers, accountants and architects.
A clause with wording similar to that quoted above has been
tested and applied in cases which have come before our courts in
the past – see for example Section 27 Ridgeprop CC t/a
Tile Distributors SA v Sharaf Cargo (Pty) Ltd 2009 JDR 1022
The point which immediately jumps out on reading this clause is
that it envisages a lien which can be exercised over goods which
are unrelated to the debt.
Our law accepts that it is reasonable for a creditor to require
security for its claim – much commercial activity is
entirely dependent on this construct. Our courts recognise the
validity of a lien which can be exercised over goods of a debtor in
the possession of the lien holder, even where the debt relates to
other goods of that debtor which may no longer be in the possession
of the lien holder. See for example the case of Danzas Trek (Pty)
Ltd v du Bourg and Another 1979 (4) SA 915 (W).
Our law, relating to all types of lien, dictates that possession
of the goods which constitute the subject matter of the lien is an
intrinsic prerequisite for the exercise of this right by the lien
holder. It is worth noting that our courts have found, most
recently in Oceana Leasing Services (Pty) Ltd v BG Motors (Pty) Ltd
1980 (3) SA 267 (W), that where a lien holder voluntarily releases
the property subject to the right, the lien is lost and remains
irrevocably extinguished, and it does not revive if the property at
a later stage reverts to his control. Hence a service provider may
well have to look to other goods in its possession where it has
already delivered or released the goods in respect of which the
There is little for the debtor to complain about if the goods
which are subjected to the lien are owned by that debtor, who has
failed to pay the debt, even if the debt relates to other goods of
A more problematic application of such a clause arises when the
lien holder contracts with an agent who acts for several
principals. In that scenario one may find that a debt relating to
goods owned by principal "A" are secured by a lien over
goods belonging to principal "B".
The fact that the clearing and forwarding agent is appointed by
an agent who is not the owner of the goods over which the lien is
exercised will not ordinarily be a problem for the service provider
seeking to enforce its lien, because the agent will have been
authorised to bind his principal, the owner, to the terms of the
contract concluded with the clearing and forwarding agent. It is
only when he acts as agent for several owners that issues of
ownership are put in the spotlight.
The lien discussed above is a personal right which the lien
holder can exercise against its debtor. This type of lien is not
one which can be exercised against the world at large, because of
its personal nature.
This personal right can be exercised by the service provider
against the agent and accordingly also against its principal, the
owner of the goods which are the subject of that lien and who owes
the debt – but not against another person who owns goods
which happen to be in the possession of the service provider, by
virtue of another contract between them.
Because of the personal nature of the lien, where an agent acts
for two different principals, the goods belonging to principal
"B" cannot lawfully, we submit, be the subject of a lien
arising from a debt due in respect of the goods of principal
"A", despite the wording of the clause.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Security in one form or another is given by people who transact with each other on a daily basis. The bigger the transaction, the greater the security required.
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