Legal experts debate shipper's rights when purchaser goes into liquidation

CAN A SHIPPER claim a lien over goods cleared by it for and on behalf of a purchaser which is now in liquidation, if the goods over which the lien are claimed were supplied on consignment?
Geerally speaking the shipper is the purchaser's agent, says legal firm Bell Dewar and Hall, even though everything depends on the contract between the parties.
Therefore if the goods are still in the possession of the shipper at the time that the purchaser goes into liquidation, it has a secured claim in the insolvent estate for moneys owed to it by the insolvent, they state.
The value of its security is the value which can be realised for the goods in its possession over which it claims a lien.
This legal advice is published in Credit Guarantee's latest newsletter.
That principle is, however, based upon a sale of goods to the insolvent where the liqui-dator is entitled to claim the goods for the insolvent estate. Where the goods are on consignment, the situation is, in our view, different.
In a case where goods are on consignment, ownership remains vested in the supplier. No sale has taken place and so it is not akin to a credit sale with a reservation of ownership.
Ownership would only pass as and when the consignee (the insolvent) sells the goods to a third party.
The services were rendered for and on behalf of the insolvent and not the supplier who retains ownership of the goods.
This being the case, there is no privity of contract between the shipper and the supplier of goods and the shipper can therefore not claim a debtor/ creditor lien.
The article points out that the shipper has also not incurred expenditure that will enhance the market value of the goods. The only expenditure it has incurred in connection with the goods would be for the preservation or protection of the goods, such as warehousing.
Accordingly, to the extent that the shipper has incurred expense in storage or warehousing of goods, it does have a lien over the goods in question and is entitled to receive payment from the supplier before it releases the goods to the supplier.