A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. Under Australian law, liens can be categorized primarily into two types: common law liens and statutory liens. The underlying principle of a lien is that it allows the lien holder (the person owed the debt) to retain possession of the property until the obligation has been satisfied.
1. Common Law Liens: These are created by the operation of law rather than by contract or statute. They fall primarily into two categories:
- General Liens: These allow a creditor to retain possession of all the debtor’s goods in their possession until all debts owed by that debtor to the creditor have been paid. General liens are rare in Australian law and arise mainly in specific professions, like solicitors who may hold a general lien over a client’s papers.
- Particular Liens: These are more common and allow a creditor to retain possession of a specific item until the debt relating to that item has been satisfied. A classic example is the lien a mechanic might have over a car they have repaired but not been paid for.
2. Statutory Liens: These are liens established by legislation. Different Australian states and territories might have specific statutory provisions that provide for liens in particular circumstances. For example, the Warehousemen’s Liens Act in some states allows a person who stores goods to claim a lien over those goods for unpaid storage fees.
Features and Principles of Liens in Australian Law:
- Possession: A fundamental characteristic of a lien is that the holder must retain possession of the property. If they voluntarily relinquish possession, the lien is typically extinguished. This is different from other security interests like a mortgage where the mortgagee does not need to have possession.
- No Power of Sale: Unlike other security interests, a common law lien does not grant the holder an automatic power of sale. If the debtor defaults, the lien holder might need to seek a court order to sell the property to satisfy the debt. However, some statutory liens do confer a power of sale.
- Priority: A lien usually has priority over other subsequent security interests in the property. This means that if the property is sold to satisfy debts, the holder of the lien will typically be paid before other creditors. However, the priority of a lien can be affected by other factors like the operation of the Personal Property Securities Act 2009 (Cth).
Challenges and Considerations:
In recent years, the Personal Property Securities Act 2009 (Cth) (PPSA) has reformed the way in which security interests over personal property are treated in Australia, including liens. The PPSA established a national online register where security interests over personal property can be registered. For a lien holder, especially one relying on a statutory lien, understanding how the PPSA interacts with their rights can be crucial, especially in terms of perfecting their security interest and ensuring its priority.
While liens offer a method for creditors to secure payment or performance of an obligation, their effectiveness and priority can be influenced by both common law principles and statutory regulations, notably the PPSA. As always, if navigating the intricacies of liens under Australian law, consulting with legal professionals or experts in the field is advisable.
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