In Australia and other common law jurisdictions, remedies are drawn from two great streams of law: Common Law and Equity. Both operate within the courts and are available to provide redress when one person wrongs another. Among the remedies recognized in these jurisdictions are liens – rights to hold or claim property as security for an obligation.

This article explains how commercial liens are understood in genuine legal practice under common law and equity. It shows how the courts allow lien-like remedies to arise in response to wrongs between individuals, and how Equity may enforce them to ensure justice.

Common Law Liens

Nature of a Common Law Lien

At common law, a lien is a right to retain possession of another’s goods until a debt owed for services is paid. The lien does not transfer ownership; it simply allows the creditor to hold the goods until payment. This principle developed as a remedy between individuals – for example, a craftsman who repaired a carriage could lawfully hold it until the customer paid the agreed fee.

Key Features

• Possessory: The lien exists only while the creditor maintains possession of the property. If the goods are returned, the lien is lost.
• Specific obligation: The lien secures the debt directly related to the goods in question (e.g. cost of repair or improvement).
• Examples: A mechanic’s lien over a vehicle, an innkeeper’s lien over luggage until room charges are paid.

Execution under Common Law

To enforce a common law lien, the claimant does not need to obtain a court order to retain possession, but cannot sell the goods without further legal authority. If payment is refused, the next lawful step is to pursue a claim in court for the debt.

Equitable Liens

Nature of an Equitable Lien

Equity, as the jurisdiction of fairness, recognizes liens that go beyond possession. An equitable lien is a court-imposed right over property to secure payment of a debt or performance of an obligation. It arises not from possession, but from the circumstances of a transaction where justice requires security to be given.

Key Features

• Court imposed: Created by order of a court to prevent unjust enrichment or to enforce equitable obligations.
• Property focus: Often attaches to specific property – such as land or funds – as security for payment.
• Examples:
  • A vendor’s lien: a seller of land has an equitable lien over the property for unpaid purchase money.
  • A purchaser’s lien: a buyer may obtain a lien over land for deposits paid if the seller defaults.
  • Equitable liens in fiduciary relationships, where funds misapplied by a trustee can be traced into property.

Execution in Equity

Unlike common law liens, an equitable lien allows the court to order sale of property to satisfy the secured debt. This gives the lien holder a more powerful remedy – moving from mere retention to judicial enforcement.

Commercial Liens: Real vs. ‘Pseudo-Legal Usage’

The term “commercial lien” is sometimes interpreted by the courts in two very different senses:

Australian courts very often assert that such documents carry no legal effect, as the judicial system is typically hostile to remedies that bypass the judicial process. This indicates risks to the process and requires extreme caution when seeking to establish enforceable liens as remedy to a wrong. We advise to build the paperwork with commercial process such as Conditional Acceptance, Notice of Liability, Notice of Claim then to seek judicial ruling by way of Summary Judgement.

This article is informational basis only and is not legal advice.

Renaissance Entertainment provides a general overview of the lien process.