The English Law of Liens

Extracts from Halsbury’s Laws of England, widely regarded within the legal profession as ‘the bible of English Law’.

701. Types. The concept of lien in the simple sense of a legal right to keep possession of property until a claim has been met and has been extended to cover a number of analogous rights. Liens are now variously described as legal, non-possessory, equitable, general, particular, statutory, contractual, judicial and subrogatory. Some of these may exist concurrently.

A lien arising by operation of law or equity and not contractual in its nature does not seem to fall within the definition of ‘security’ in the Consumer Credit Act 1974 but is included for the purposes of the Insolvency Act 1986.

702. Legal Lien. In its primary or legal sense ‘lien’ means a right at common law for a man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims of the person in possession are satisfied, but this is given by law and not by contract. A written agreement to grant a lien is not a bill of sale, for a legal lien does not as a rule arise until possession of the property is obtained. However, in exceptional cases, possession is no essential to constitute a legal lien.

703. Non-possessory Lien. In its secondary sense, ‘lien’ may be applied to a right subsisting in a person who has no possession of the property concerned but who nevertheless has a right against the owner analogous (similar) to a legal lien.

Such a right may arise in equity, by statute or under a court order.

Thus, a trustee has an equitable lien on the estate or fund for money properly expensed on it and a solicitor, in addition to his legal lien on the client’s documents in his possession, has a statutory lien right to ask the court to direct that property recovered is to stand security for his costs.

So also where a party has by his efforts brought into court a fund in the administration of which various parties are interested, his costs and expenses are a first claim on the fund; and a provisional liquidator’s remuneration and his solicitor’s expenses are charged on the funds of the liquidation so that the provisional liquidator has a lien over the company’s assets in his hands.

Likewise, a receiver or receiver and manager appointed by the court has an indemnity over assets and is a secured creditor with a lien for his expenses, remuneration and costs.

A trustee’s lien on the trust estate or fund for money properly expended on it seems to extend to the payment of costs of proceedings authorised by the court.

However, where a beneficiary or minority shareholder is entitled to a similar indeminity there can be no legal lien because there is no possession; and it is not clear whether an equitable or judicial lien could be said to arise in such a case, or whether such a proposition could have any useful effect.

A trustee’s equitable and statutory rights to impound a beneficiary’s interest, where the trustee has committed a breach of trust at the instigation of the beneficiary, do not depend on the trustee’s actual possession of the trust fund.

704. Equitable Liens. An equitable lien is a specie of equitable charge arising by operation of law independent of possession. Re Bond Worth Ltd [1980] Ch 228 at 250-251, [1985] 3 WLR 610 at 613-614 per Nourse J. A right which arises by express contractual agreement is sometimes described as a lien; see Re Bond Worth Ltd supra.

Although the vendor’s and the purchaser’s equitable liens arise in circumstances where there is a contract, a contract is not necessary for the creation of an equitable lien. Eg the trustee’s lien: see Shirlaw v Taylor (1991) 102 ALR 551 at 557, Aust Fed Ct, Full Ct.

Since it arises in equity, it is subject to all the usual conditions affecting equitable rights. Thus relief may be refused where the conduct of the person claiming the right has been questionable or improper.