Materials Handling/Storage Solutions

Liens and the Mercantile Law Act

by Barbara Versfelt

Warehouse and wharf owners, are you familiar with the Mercantile Law Act 1908?

The Mercantile Law Act can be viewed online at www.legislation. govt.nz. Part 4 of the Act refers to two liens: the ship owner’s lien and the warehouse/wharf owner’s lien.

Simply put, a lien is the right to hold property belonging to someone else, until a claim is satisfi ed. For example, when you bring your car to the garage to be repaired,
the garage has the right to retain possession of your car until you have paid the bill.

Some statutes codify or create liens. A lien can also arise by agreement between the parties.

Ship owner’s lien

A carrier/ship owner has a lien for unpaid freight over the goods it carries. That means that the ship owner can refuse to deliver the goods until the freight has been paid. The ship owner’s lien is a possessory lien. It exists, by operation of law, as long as the ship owner has possession of the goods. However, the Act extends that lien. The Act provides that the ship owner’s lien may continue after the goods have been landed from the ship and placed in a warehouse or on a wharf where the goods may be lawfully placed.

To achieve that, the ship owner must give notice to the wharf or warehouse of the lien and the amount that is owed. The wharf or warehouse must then retain the goods so landed from the ship, until the lien has been discharged. If the warehouse owner fails to do so and releases the cargo to the owner of the goods, the warehouse will be
liable to the ship owner for the freight up to the value of the goods released.

The cargo owner can either pay what is owed to the ship owner direct, or deposit that sum with the warehouse or wharf owner in order to obtain the release of the goods. If the cargo owner pays to the warehouse, the warehouse owner should hold on to
the deposit for 15 days before remitting it to the ship owner. That is because, during this period, the cargo owner can give notice to the warehouse that the claim is disputed, in which case the deposit may need to be refunded by the warehouse to
the cargo owner.

If no payment is made to discharge the ship owner’s lien within 90 days (or, in case of perishable goods, possibly earlier), the warehouse owner may sell the goods. Hopefully, the cargo will be suffi ciently valuable to meet all claims and costs. Customs duties, if any, and sale expenses must be paid from the proceeds of sale fi rst. Subsequently, unless there is a different agreement in place between the warehouse and the ship owner, the warehouse owner shall be paid its rent and expenses from the proceeds of sale. If there is still a balance left, the ship owner will be paid next. Any surplus may be refunded to the cargo owner.

Warehouse/wharf owner’s lien

The Act also provides for a lien for the warehouse/wharf owner. This arises where goods are placed in the custody of a wharf or warehouse owner under the authority
of Part 4 of the Act, i.e. when the goods are entered into New Zealand. The warehouse is entitled to charge rent in respect of storing the goods, and may also perform all such reasonable acts as are necessary for the proper custody and preservation of the goods.

The Act provides that the wharf/ warehouse owner has a lien on the goods for the rent and the expenses incurred with the proper custody and care. In circumstances other than under Part 4 of the Act, a warehouse owner (including a third party
warehouse) does not automatically have a lien for storage costs. Accordingly, when goods are placed in a warehouse in other circumstances, the warehouse does
not have a lien over the goods for unpaid storage costs. However, the warehouse owner can provide in its storage contract that it will have a contractual lien over the
principal’s goods for unpaid storage costs. The operation and effect of the lien will depend on the terms of the contract.

Barbara Versfelt is a senior solicitor at Wilson Harle, a commercial litigation firm with particular expertise in transport law. Barbara can be contacted at barbara.versfelt@ wilsonharle.com or visit www.wilsonharle.com.