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Storage Charges – Are They Enforceable?

We have noticed a recent trend in third parties attempting to claim storage charges against Financiers after termination of Finance Agreements. This situation can arise where the customer is insolvent and either a landlord or a purchaser of the business from the insolvent customer is in possession of goods which the Financier does not wish to collect. Thus in one recent example a Financier did not wish to go to the expense of dismantling and transporting a large vending machine which had minimal resale value, and in another case the Financier chose not to exercise a power of sale over troublesome equipment which it did not own but which was subject to a chattel mortgage as security for a loan.

There is no legal basis upon which a claim for storage charges should succeed against a Financier. There has been no reported case on the subject, but the nearest legal authority is Kolfor Plant Hire Limited v Tilbury Plant Hire Limited 1The Times 17 May 1977 in which Judge Newey QC pointed out that an involuntary bailee has no general right to recover the costs of storing unwanted goods or of removing them to a place of storage. This is because storage charges can only be created by contract.

There are circumstances in which an involuntary bailee is given a power of sale over uncollected goods under the Torts (Interference with Goods) Act 1977, but this is unlikely to apply in leasing and hire-purchase.

In theory it has been suggested that an involuntary bailee such as the landlord or a business successor of an insolvent customer may have a right to sue the owner for damages for trespass if the owner fails to comply with a request to remove the goods on reasonable notice, but even if such a claim were to succeed the measure of damages would be restricted to the actual loss which could be proved to have flowed from the goods remaining on site, and would not be measured by reference to a reasonable storage charge. Any such proven loss would be likely to be minimal.

In our view if a Financier has decided to abandon goods and is being threatened with a claim for storage or related charges it should point out that there is no legal basis for such a claim but would be wise to make it clear that the goods have been abandoned. There would remain a theoretical risk of liability to someone injured as a result of the goods being defective, but that would normally be a remote prospect.

Liens and Storage Charges

The only circumstance in which a Financier is likely to be subject to a valid lien on goods is where the customer has delivered the goods to a repairer and the repairer has completed repairs without knowledge both that the goods are subject to a Finance Agreement and also that the Agreement prohibits the creation of a lien.

However, even in these circumstances the legal precedents establish that the lien will be restricted to payment of the agreed repair costs and will not extend to storage charges.

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1. The Times 17 May 1977