In Canada carriers of goods enjoy lien rights over cargoes under the common law, but these traditional rights, arising out of old English law, were developed long before the modern global logistics industry and of course were not designed to take account of the best interests of freight forwarders.
The CIFFA Standard Trading Conditions, on the other hand, have been designed to protect forwarders and to anticipate the commercial issues that arise in our industry. The Right of Detention and Lien at paragraph 18 of the STCs is an important example.
Under the common law, a carrier’s lien is “specific” for the charges incurred in moving the goods: a given cargo can only be detained for the charges incurred carrying that particular cargo, and not for general sums owing by the same customer.
For example, imagine that you arranged the import of 10 cargoes, each a single container, on 10 separate BLs, invoicing each on credit terms for $4000 in freight. Imagine further that 8 of these cargoes have been released and the $32,000 in freight invoiced, while only two are in transit. You remain unpaid.
The common law right of lien applicable to carriers only permits you to hold those two containers against their freight charges of $4000 each, although the total outstanding charges are $40,000. The customer may at law pay $4000 to recover one or $8000 to discharge both liens and force you to deliver them up. The $32,000 account receivable is a general sum, not a sum owing on those cargoes. On payment of the specific freight owing on the cargo the lien in the cargo is discharged and continued detention of the cargo is unlawful.
Worse, imagine that you did not act as NVOC: it is not clear that you would even have a carrier’s lien at all under the common law, and you would have possession only of negotiable documents but not custody of any cargo that you could detain.
In the CIFFA STCs the rights of a freight forwarder are stipulated differently. Paragraph 18 protects against these possibilities, providing that: All goods (and documents relating to goods) shall be subject to a particular and general lien and right of detention for monies owing either in respect of such goods, or for any particular or general balance or other monies owed…
As long as the STCs have been properly incorporated into your agreements and quotations, your customer has agreed by contract to this general lien – not dependent on your status as a carrier or on possession of the goods, and extending over all goods and documents for all sums owing.
How should you take steps to enforce your lien? Of course, you should seek legal advice on your particular circumstances before taking steps that can have serious repercussions in terms of rights and liabilities. Paragraph 18 describes your obligations:
- You must provide 10-days’ notice of your intention to enforce these rights;
- You may use “any means reasonable in the circumstances” to provide this notice; and
- You should provide notice to your Customer as well as the Shipper, Consignee, and owner of the cargo (where different).
If you have provided ten-days’ notice in writing and the account remains unpaid, you are entitled to arrest the cargo and sell the goods on account of the amounts owing. This process will vary in different jurisdictions and you will need the assistance local counsel where the Cargo is situated.
In order to avoid any perception of misfeasance, it is ideal if goods are sold via public auction, but the CIFFA STCs provide that they “may be sold by private contract or otherwise at the sole discretion of the Company…” and “The Company will not be liable for any deficiencies or reduction in value received on the sale of the goods…”
It is important to note that you do not obtain the goods, but the proceeds from the sale of the goods which are applied to the Customer’s account. If the proceeds exceed the debt, the excess must be returned to the Customer. On the other hand, if the proceeds do not entirely satisfy the debt the Customer is not “relieved from the liability merely because the goods have been sold.” They remain responsible for remaining debt on their account and where the sum is substantial you should seek legal advice in respect of your right to claim for that debt.