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Funder succeeds on Storage Charges and Lien

We recently successfully represented a funder at a High Court trial which reaffirmed a number of interesting points for asset financiers involved in funding parts of the motor trade.

The funder had arranged for one of its motor dealer clients to look after vehicles which had been provided by the dealer with finance from the funder but had subsequently been repossessed. There was a verbal agreement for payment of a commission for sales which the dealer achieved in respect of these vehicles.

Subsequently the funder decided to terminate its relationship with the dealer and requested that arrangements be made for it to collect approximately 30 vehicles which remained at the dealer’s premises. At this point the dealer alleged that a substantial sum was due for storage charges. The funder denied that any agreement had ever been made for such charges.

The dealer’s solicitors maintained that the vehicles would not be released until all storage charges were paid, and asserted that the dealer had a lien on the vehicles entitling it to retain possession until payment was made.

We took the view that the dealer had no right to storage charges, and that even if it did it did not have a lien on the vehicles and was obligated to return them. We therefore applied for an injunction requiring the dealer to release the vehicles to the funder, and shortly before the hearing of our Application terms were agreed to enable the collection to take place.

Notwithstanding this the dealer ran its arguments on storage charges and lien all the way to a contested trial.

Storage Charges

The High Court found that there had been no agreement for storage charges, and agreed with our submission is that in the absence of express agreement there is no legal basis upon which a claim for storage charges should succeed against a funder.

Lien

Even if the dealer had been correct that it was due storage charges, it would not have been entitled to assert a lien in respect of the vehicles because again, in the absence of express agreement, no lien arises in such circumstances. There are only a very limited category of circumstances in which a lien arises, for example where a garage carries out repair works on a vehicle.

Comment

This case is a good example of the service which businesses can expect from the modern court system when it works properly. We brought the case in Manchester Mercantile Court, which despite its heavy workload is always extremely helpful in making judges available for urgent hearings at short notice when justified, such as in our application for an injunction for the return of the vehicles.

The trial of the matter was concluded within just a few months of the dispute arising, and was conducted by one of two specialist mercantile judges who have vast experience in commercial law and practice. This is a far cry from the days when businessmen were often at the mercy of a court system tailored very much towards non-business types of dispute.

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