Simon Bradshaw considers recent guidance from the High Court as to what involves ‘work on goods’ sufficient to give rise to a lien over them.
A lien is a right over property that arises from work done in connection with it. ‘Property’ here typically means chattel goods rather than ‘real’ property (land or buildings), although a lien can arise in respect of a wide range of property, and lawyers may be familiar with a solicitor’s lien over a client’s papers if fees are not paid. But that lien, like others, comes into existence because the party asserting it has done something of value for the party otherwise entitled to the property. What will suffice for this?
This was the question before Mr Justice Griffiths earlier this month in Sheianov v Sarner International Ltd [2020] EWHC 1214(QB), an application for summary judgment. As Griffiths J explains at paragraph 51 of his decision as handed down on 15th May, the law of lien “…has the interesting quality of being an important commercial right which derives entirely from the common law. […] Like all common law, the law of lien has developed on a case by case basis.” This means, as he explained, that any case about a lien that falls outside the typical well-established examples has to be analysed in light of some 200 years of prior case law.
Sheianov was not, as Griffiths J frankly accepted, a typical lien case. It centred on 27 vintage motorcycles, said to be owned either by the First Claimant, Mr Dmitrii Sheianov, or by the Second Claimant, a company “Motorworld by Vyacheslav Sheianov” (“MVS”) owned by Mr Vyacheslav Sheianov, the First Claimant’s brother. I say ‘said to own’ as the Defendant company, Sarner International Ltd (“Sarner”) did not accept that the motorcycles were owned by either Claimant, although it did not say who else might. Stepping outside the judgment for a moment, an online search on MVS quickly brings up the website and YouTube channel of Vyacheslav Sheianov’s motorcycle museum, from which it is clear both that the Sheianov brothers really, really like old motorcycles and that they appear to have a large number of them. It is thus not surprising that the Claimants were able to adduce paperwork to prove their ownership of the motorcycles to Griffiths J’s satisfaction, even in the context of a summary judgment application where courts are wary of accepting evidence that might be in dispute.
Back to the dispute itself: Sarner specialises in putting together exhibitions and it initially contracted with MVS to prepare proposals for one about the motorcycles of World War II. This led to a further contract for an exhibition (“the Attraction”) that would involve Sarner creating full-size dioramas with character figures kitted out with appropriate uniforms and weapons in recreations of various WWII environments. This must have been quite an undertaking and indeed Sarner’s quotation was for £1.75 million. The Attraction contract was between Sarner and a company set up in the British Virgin Islands but owned by Vyacheslav Sheianov, with the motorcycles being leased through the BVI company. The motorcycles themselves were delivered to Sarner in late 2018 and work commenced.
Sadly, the parties fell out before work on the Attraction was completed, with £525,000 of Sarner’s invoices unpaid. The Claimants asked the BVI company to return the motorcycles and it duly asked Sarner for the motorcycles back. Sarner promptly refused, referring to its unpaid invoice and describing the motorcycles as “security.” At this point the BVI company fell out of the picture and the Claimants sued Sarner directly for return of their property. Sarner defended on the basis of having acquired a lien over the motorcycles by way of work done on them. The question for Griffiths J was whether Sarner had any real prospect of establishing at trial that it did have such a lien.
As Griffiths J explains (paragraphs 52 – 79) case law since the early 19th century establishes that liens may arise in three ways: by an express contract, by custom in a particular trade, or as a result of legal arrangements between the parties. Within the third category are ‘particular’ liens, which arise as described by Joseph Chitty as long ago as 1824:
“…where, from circumstances, a party has bestowed his labour and expense upon the property detained, thereby creating a moral and legal obligation on the owner of such property to make a remuneration before he can take them away.”
But what suffices as “labour and expense upon the property detained”? After a detailed review of nearly two centuries’ worth of authorities Griffiths J summarised the requirements for a particular lien as follows:
i) A particular lien can only operate on something physical, a chattel. It cannot operate on something incorporeal, such as an idea, or intellectual property.
ii) Work must be done “on” the chattel being detained and not merely “with” it or “using” it or “in relation to” it.
iii) The work must improve or give additional value to the chattel in question. Whether it does so is a question of fact.
iv) The improvement need not be physical, but it must be inherent to the chattel itself.
v) If the agreed work is of a hybrid nature, some of which is apt to create a particular lien and some of which is not, and the work cannot be severed into those two constituent parts, no particular lien is created.
This is where Sarner’s assertion of a lien fell into difficulty. Griffiths J noted that Sarner’s own evidence spoke of work “in respect of” the motorcycles. A video it produced showed work being done around the motorcycles but, other than what he described as “a wipe with a cloth”, no actual work on them. They were used as part of the process of creating the Attraction, with appropriate character figures manufactured in some cases to sit on them. But that could not be said to be work on the motorcycles themselves.
Sarner tried arguing that the Attraction had increased the value of the motorcycles. Griffiths J rejected this; as he pointed out (paragraph 108) the motorcycles would be returned in the state they were delivered, so even if they were ‘more valuable’ in some way in the context of the Attraction, this did not affect their intrinsic value. He also gave short shrift to Sarner’s “ingenious” argument that a motorcycle with a figure on it was in some way a new chattel.
A final point also fatal to Sarner’s asserted lien was that Sarner could not point to which part of the unpaid final invoice related to work said to have been done on the motorcycles, as distinct to other work on the Attraction that did not involve them. As per the fifth of Griffiths J’s principles, this therefore meant that no lien could arise.
Taking these points together, Griffiths J was satisfied that Sarner had no real prospect of establishing that it had a lien and granted summary judgment against it. Given that Sarner complained that the BVI company – which it would normally have had a contractual claim against – had no assets, that probably deprives Sarner of a remedy, but the court will not impose an alternative remedy to do justice to a party without a sound legal basis for it. On the facts, Sarner could not set up a lien to entitle it to goods in lieu of a contract sum it could not recover; in reaching that conclusion, Griffiths J helpfully summarised the law of lien in a way that may assist lawyers in a much wider range of cases.