Protect yourself against nasty surprises

However, there are ways the operator can protect itself. For example, the English court has held that a party exercising a lien is entitled to a reasonable period to review any documents provided by the claiming parties in order to form a view as to who has title to the goods and to which party the goods should be released.

However, when faced with competing claims for goods from multiple parties, an operator is often not in a position to form a view as to who has title. Given that releasing the goods to the wrong party could result in a claim for conversion and potentially damages, many operators will require further protection.

Operators seeking further protection often receive an indemnity from the party to whom it releases the goods. The indemnity usually covers the full value of the goods as well as the costs of defending any claims that the operator might face as a result of releasing the goods.

Parties are often reluctant to provide such indemnities, despite being adamant that they are entitled to delivery of the goods. Helpfully, the English High Court in Re La Senza held that an operator is entitled to receive an indemnity when releasing goods that are subject to competing claims.

If there are grounds to challenge whether the operator is entitled to exercise a lien, the courts will often order that the goods are delivered, subject to the owner of the goods providing suitable security for the unpaid debts. For example, the owner is often required to give an undertaking to the court or to make a payment into court. If the matters are not resolved, the court will be asked to consider the validity of the lien and, if it considers that the operator was not entitled to exercise the lien, the court may find the operator guilty of conversion. This could lead to a possible claim for damages from the shipping line or owner of the goods.

In light of the risk associated with exercising a lien, a cautious operator may be well advised to apply to the court for permission to enforce its lien before taking action. This would help ensure that no nasty surprises arise at a later date. Another solution may be to engage the debtor in commercial negotiations in an attempt to satisfy the lien without engaging the courts.