Lien vs Security Interest - who wins?

A lien is the right to hold on to goods, and in some cases sell them, in order to ensure payment. Often the debt will be connected with services related to the goods.

A lien can be obtained by contract, or in certain specific situations the law creates it automatically. The difference can be significant.

Under the Personal Property Securities Act (PPSA), the holder of a common law or statutory lien may in some cases have special priority over a company's secured creditors.

Types of lien

There are, generally speaking, three categories of lien: contractual, statutory and common law. Different rights will be available depending on the type of lien claimed.

A contractual lien will simply provide such rights as are stated in the contract.

In contrast to contractual liens, there is a range of specific types of statutory and common law liens, each with its own set of rights. The more common statutory and common law liens include:

Statutory liens

Seller's lien – a seller of goods may have a lien over goods that have been sold but remain in the seller's possession, securing the purchase price (Sale of Goods Act 1908). Carrier's lien – a carrier may have a lien over goods that have been transported, securing the freight charges accrued against the particular goods in possession (Carriage of Goods Act 1979). Common law liens

Worker's lien – a person who has improved goods by performing work on those goods may have a lien securing the costs of the work performed. Mere maintenance of the goods is not enough. In Stockco Limited v Walker (CIV 2011-441-110), the High Court recently confirmed that a worker's lien will arise where the work has resulted, or is intended to result, in an overall improvement to the goods. In that case, the express purpose of the contract was to improve the goods (livestock), so a common law lien was created. Shipowner's lien – a ship owner may have a lien over goods that have been transported, securing the freight charges accrued against the particular goods in possession. In addition, the ship owner has the right to deliver the goods to a wharf or warehouse for storage subject to the lien. Banker's lien – a banker may have a lien over a customer's securities deposited with the bank, securing the customer's general account with the bank. There is no lien over money held by the bank, and this will generally be subject to contractual rights of set off. Solicitor's lien – a solicitor may have a lien over client documents securing...