Draft Uniform Liens Act 1995

ENFORCEMENT

Seizure by sheriff

16(1) A lien claimant may cause goods that are subject to a lien to be seized where

(a) the goods are under the control of a debtor;

(b) the lien claimant remains unpaid; and

(c) any period of credit has expired.

(2) Only a sheriff may seize goods to which a lien has attached.

Commentary

Under the Western garagekeepers acts, any asset to be seized had to be seized by the sheriff. As a general rule, a garagekeeper would have little experience in the seizure of goods. There was also no security agreement alerting the debtor of the possibility of seizure. By having the sheriff seize the goods, it was thought disputes arising from these two factors could be prevented. It should be noted that sheriff in this Act is defined to include sheriff's agent.

(3) The sheriff shall not seize goods unless the lien claimant or an agent of the lien claimant has executed and delivered a warrant in the prescribed form to the sheriff who is to carry out the seizure.

(4) In effecting a seizure, a sheriff may exercise any powers given to a secured party pursuant to section 57 of the Personal Property Security Act.

(5) A seizure by a sheriff does not affect the interest of a person who, pursuant to this Act or any other law, has priority over the rights of the lien claimant.

Sheriff may require security

17 A sheriff may refuse to make or continue a seizure of goods unless the sheriff is furnished with security sufficient to

(a) cover the sheriff's fees and expenses; and

(b) indemnify the sheriff for anything done in relation to a seizure, including indemnification for claims by the debtor or any third party.

Commentary

The requirement of security is consistent with sheriffs' practice.

Sheriff may appoint bailee

18(1) At any time after making a seizure, the sheriff may appoint the debtor, or any other person in possession of the goods seized, as bailee of the sheriff if the debtor or other person executes an undertaking in the prescribed form to

(a) hold the goods as bailee for the sheriff; and

(b) deliver up possession of the goods to the sheriff on demand.

(2) Seized goods held by a bailee appointed by the sheriff are deemed to be held under seizure by the sheriff.

Commentary

There will be occasions when the sheriff believes that the goods are better left in the possession of the debtor. This section permits the sheriff to do so.

Third party may request list

19 Where the sheriff seizes goods, the sheriff, on the written request of a person who on reasonable grounds claims to have an interest in or a right to those goods, shall deliver to that person a list of items seized that fall within the general description of goods in which or to which that person claims to have an interest.

Surrender of possession to lien claimant

20(1) A sheriff may surrender possession or the right of possession of the goods seized to the lien claimant or to a person designated in writing by the lien claimant.

Commentary

By means of this section, the sheriff can compel the lien claimant to receive the goods.

(2) Before or after seizure of goods, a sheriff may give a written notice to the lien claimant named in the warrant under which the seizure was made indicating that the seizure is to be released at a date specified in the notice unless the lien claimant takes possession of the seized goods before that date.

(3) If the person to whom the notice is given does not take possession of the goods mentioned in the notice on or before the date specified, the sheriff may release the seizure.

(4) After surrender of possession or right of possession as provided in subsection (1) or release of seizure as provided in subsection (2), the sheriff has no liability for loss or damage to the goods, or for unlawful interference with the rights of the debtor or any other person who has rights in or to the goods, occurring after the surrender or release.

Lien claimant may dispose of goods

21 If the debtor fails to pay the debt within 30 days from the day it was due, the lien claimant may

(a) dispose of the goods in accordance with section 22; or

(b) retain the goods in satisfaction of the obligation owed in accordance with section 25.

Commentary

A lien claimant has the right, by virtue of this section, to sell the goods 30 days after the debt becomes due.

Disposal of goods

22(1) Goods subject to a lien may be sold in their existing condition or after any repair, processing or preparation for sale, and the proceeds of sale are to be applied in the following order

(a) the reasonable expenses of enforcing the lien, holding, repairing, processing or preparing for sale and selling the goods and any other reasonable expenses incurred by the lien claimant; and

(b) the satisfaction of the obligations secured by lien.

(2) The goods may be sold

(a) by private sale;

(b) by public sale, including public auction or closed tender; or

(c) as a whole or in commercial units or parts.

(3) Not less than 20 days prior to the sale of the goods, the lien claimant shall give notice of sale to

(a) the debtor or any other person who is known by the lien claimant to be an owner of the goods;

(b) a creditor or person with a security interest or lien in the goods whose interest is subordinate to that of the lien claimant and

  • (i) who has, prior to the date that the notice of sale is given to the debtor, registered a financing statement according to the name of the debtor or according to the serial number of the goods when it is required or permitted for registration; or
  • (ii) whose security interest or lien is perfected by possession at the time the secured party seized or repossessed the goods; and

(c) any other person with an interest in the goods who has given notice to the lien claimant prior to the date that the notice of sale is given to the debtor.

(4) The lien claimant may buy the goods only at a public sale and only for a price that bears a reasonable relationship to the market value of the goods.

(5) When a lien claimant sells goods to a good faith buyer for value who takes possession of them, the buyer acquires the goods free from the following whether or not the requirements of this section have been complied with by the lien claimant

(a) the interest of the debtor;

(b) an interest subordinate to that of the debtor;

(c) an interest subordinate to that of the lien claimant.

Commentary

The realization procedure for liens is rationalized by this procedure which, unlike theexisting system, will be the same for all liens covered by this Act. It is substantially the same as the modern PPSA systems with one difference. The lien claimant must wait for 30 days which will increase the redemption possibilities.

Notice requirements

23(1) The notice mentioned in subsection 22(3) is to contain

(a) a description of the goods;

(b) the amount required to satisfy the indebtedness secured by the lien;

(c) the amount of the expenses mentioned in clause 22(1)(a) or, where that amount has not been determined, a reasonable estimate;

(d) a statement that, on payment of the amounts due pursuant to clauses (b) and (c), any person entitled to receive the notice may redeem the goods;

(e) a statement that, unless the goods are redeemed, the goods will be disposed of and the debtor may be liable for any deficiency; and

(f) the date, time and place of any public sale or the date after which any private sale of the goods is to be made.

(2) The notice may be given in accordance with section 67 of the Personal Property Security Act.

(3) The notice is not required if

(a) the goods are perishable;

(b) the lien claimant believes on reasonable grounds that the goods will decline substantially in value if not immediately sold;

(c) the cost of care and storage of the goods is disproportionately large relative to their value;

(d) the court, on ex parte application, is satisfied that a notice is not required; or

(e) after default, every person entitled to receive a notice consents to the disposition of the goods without notice.

Commentary

The notice of sale must be given by the lien claimant to the debtor and to interested third parties at least 20 days prior to sale. It must include a description of the collateral and the amount owed. The method of sale must be described.

Disposition of proceeds

24(1) Where a lien secures an indebtedness and the goods have been disposed of in accordance with section 22, any surplus, unless otherwise provided by law or by the agreement of all interested persons, is to be accounted for and paid in the following order to

(a) a person who has a subordinate security interest or lien in the goods;

  • (i) who has, prior to the distribution of the proceeds, registered a financing statement according to the name of the debtor or according to the serial number of the goods where it is required or permitted for registration; or
  • (ii) whose interest was perfected by possession at the time the goods were seized;

(b) any other person who has an interest in the goods, if that person has given a written notice of the interest to the lien claimant prior to distribution of the proceeds;

(c) the debtor or any other person who is known by the lien claimant to be the owner of the goods.

(2) The priority of the interest in the surplus of a person mentioned in clause (1)(a), (b) or (c) is not prejudiced by payment to anyone pursuant to this section.

(3) Where there is a question as to who is entitled to receive payment pursuant to subsection (1), the lien claimant may pay the surplus in to court and the surplus shall not be paid out except on an application by a person claiming an entitlement to the surplus.

(4) Within 30 days after receipt of the written notice of a person mentioned in subsection (1), the lien claimant shall provide to that person a written accounting of

(a) the amount realized from the sale pursuant to section 22;

(b) the manner in which the goods were sold;

(c) the amount of expenses deducted pursuant to section 9;

(d) the distribution of the amount received from the sale; and

(e) the amount of any surplus.

(5) Unless otherwise agreed, or unless otherwise provided in this Act or any other Act, the debtor is liable for any deficiency.

Commentary

One does not normally think in terms of a deficiency with respect to liens, but there may be more justification with respect to liens than with secured interests where the secured creditor has more control over the process. For a warehousekeeper, there may be little control over product value in relation to the value of the services rendered.

A surplus must in turn be distributed in accordance with the PPSA.

Retention of goods

25(1) The lien claimant may propose to retain the goods in satisfaction of the indebtedness, and shall give a notice of the proposal to

(a) the debtor or any other person who is known by the lien claimant to be the owner of the goods;

(b) a creditor or person who has a security interest or lien in the goods whose interest is subordinate to that of the lien claimant and

  • (i) who has registered a financing statement according to the name of the debtor or according to the serial number of the goods where it is required or permitted for registration; or
  • (ii) whose interest was perfected by possession at the time the goods were seized;

(c) any other person with an interest in the goods who has given a written notice to the lien claimant of an interest in the goods prior to the date that notice is given to the debtor; and

(d) the sheriff, unless possession has been surrendered or seized goods released by the sheriff.

(2) If any person who is entitled to notification pursuant to subsection (1) and whose interest in the goods would be adversely affected by the lien claimant's proposal gives to the lien claimant a written notice of objection not later than 15 days after the giving of the notice pursuant to subsection (1), the lien claimant shall dispose of the goods in accordance with section 22.

(3) If no notice of objection is made, the lien claimant, at the expiry of the 15-day period mentioned in subsection (2), is deemed to have irrevocably elected to retain the goods in satisfaction of the indebtedness secured by it, and is entitled to hold or dispose of the goods free from all rights and interest of the debtor and any person who is entitled to receive a notice and has received notice

(a) pursuant to clause (1)(b); or

(b) pursuant to clause (1)(c) and whose interest is subordinate to that of the lien claimant.

(4) The notice required pursuant to subsection (1) or (2) may be given in accordance with section 67 of the Personal Property Security Act.

(5) The lien claimant may require any person who has made an objection to furnish proof of that person's interest in the goods and, unless the person furnishes the proof not later than 10 days after the lien claimant's demand, the lien claimant may proceed as if no objection had been received from that person.

(6) On application by a lien claimant, the court may determine that an objection to the proposal of a lien claimant is ineffective on the grounds that

(a) the person made the objection for a purpose other than the protection of that person's interest in the goods; or

(b) the market value of the goods is less than the total amount owing to the lien claimant and the costs of sale.

(7) Whether or not the requirements of this section have been complied with by the lien claimant, where a lien claimant sells the goods to a good faith buyer for value who takes possession of them, the buyer acquires the goods free from

(a) the interest of the debtor;

(b) any interest subordinate to that of the debtor; and

(c) any interest subordinate to that of the lien claimant.

Commentary

A lien claimant who elects to retain the goods becomes the owner of the goods and the debt is thereby extinguished eliminating the possibility of claiming a deficiency. Notice is given to the debtor and interested third parties so as to prevent the lien claimant from using this procedure to claim a surplus it would not otherwise be entitled to.

Redemption of goods

26(1) At any time before the lien claimant has disposed of the goods or contracted for their disposal pursuant to section 22 or before the lien claimant is deemed to have irrevocably elected to retain the goods pursuant to section 25, any person entitled to receive a notice of disposition may redeem the goods unless otherwise agreed in writing.

(2) Goods may be redeemed by tendering fulfilment of all obligations secured by the lien together with payment of an amount equal to the reasonable expenses of seizing, holding, repairing, processing and preparing for disposal and any other reasonable expenses incurred by the lien claimant.

Commentary

Only redemption as opposed to reinstatement of the goods is permitted, but third parties may also redeem the goods. In addition to satisfying the lien amount, the person redeeming the goods must also pay seizure and storage costs.

Court may resolve dispute

27 A debtor or other person entitled to any goods may apply to the court to have a dispute resolved where the dispute concerns

(a) the existence of a lien or the amount secured by a lien;

(b) the increased market value of goods mentioned in clause 15(1)(a); and

(c) the right of the lien claimant to take or retain possession of the goods.

Payment into court

28(1) An application to the court to resolve a dispute is to include the full amount claimed by the lien claimant or security posted with the court for that amount.

(2) Where money is paid into court or security is posted with the court, the clerk of the court shall issue a certificate to the applicant setting out details of the payment, security or offer of settlement.

(3) The applicant shall serve the certificate on the lien claimant, who shall

(a) release the goods; or

(b) file a notice of objection with the court not later than three days after receiving the certificate claiming that an additional amount should be paid into court.

(4) Where an objection has been filed with the court, the applicant may pay into court or post security for the additional amount claimed by the lien claimant.

Where goods released

29(1) Where goods are released after a certificate has been issued by the court, the lien is discharged and is replaced by a charge on the amount paid into court or the security posted.

(2) The charge is discharged 90 days after the goods are returned by the applicant unless thelien claimant has accepted the applicant's offer of settlement or commenced an action to recover the amount claimed.

(3) After the expiry of 90 days, the clerk of the court may return to the applicant the money paid into court or the security posted if the applicant files with the clerk an affidavit confirming that the lien claimant has neither accepted the applicant's offer of settlement nor commenced an action to recover the amount claimed.

Commentary

Sections 27 to 29, which are taken from the Alberta Institute's Report, recommendation #34, are modeled after Rule 469 of the Alberta Rules of Court. This rule provides an effective dispute resolution mechanism to balance the lien claimant's power of retention and seizure where there is a dispute about work quality or price or similar matter.

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