Toll Logistics (Nz) Ltd v Andrew John McKay and John Joseph Cregten Coa

• Jurisdiction: New Zealand
• Judge: Randerson J
• Judgment Date: 16 May 2011
• Neutral Citation: [2011] NZCA 188
• Docket Number: CA442/2010
• Court: Court of Appeal
• Date: 16 May 2011

BETWEEN

Toll Logistics (NZ) Limited

Appellant

and

Andrew John Mckay and John Joseph Cregten

Respondents

[2011] NZCA 188

Court:

Arnold, Randerson and Harrison JJ

CA442/2010

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from High Court decision that the appellant did not have a security interest in respect of the respondents’ property that ranked in priority to a security interest held by the ASB — appellant provided logistical services — appellant claimed a general packer's lien over the respondents’ DVDs held in the appellant's distribution centre — whether such a common law general lien existed — whether the application of any such lien was excluded by contractual arrangements — whether a packer's lien was part of the custom of packers in New Zealand.

Counsel:

B J Upton and L Barnard for Appellant

M R Bos and C L Clayton for Respondents

• A The appeal is dismissed.

• B The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

Introduction	[1]
The facts in more detail	[6]
The judgment under appeal	[13]
Is Toll entitled to a general lien at common law?	[16]
General liens	[16]
The Majeau decision	[17]
The English authorities	[21]
The New Zealand cases	[44]
Texts and commentaries	[49]
Modification of a common law rule in this context	[53]
Packer's lien — discussion	[55]
Whether, in any event, the application of a general packer's lien is
excluded by the contractual arrangements between Toll and Scene 1	[64]
Conclusion	[72]
Packer's lien – discussion	[55]
Whether, in any event, the application of a general packer's lien is excluded by the contractual arrangements between Toll and Scene 1	[64]
Conclusion	[72]

Introduction

1 This appeal raises issues about common law general liens and their priority in relation to general security agreements under the Personal Property Securities Act 1999 (the PPSA). The appellant (Toll) provided a range of logistical services to Scene 1 Entertainment Ltd (Scene 1). On 22 June 2009, ASB Bank Limited (ASB) appointed the respondents as Scene 1's receivers. ASB acted pursuant to a general security deed executed on 27 February 2008 under which Scene 1 granted ASB a security interest over all of Scene 1's present and after-acquired personal property. ASB registered its financing statement on the personal properties securities register under the PPSA on 4 March 2008.

2 At the date of receivership, Scene 1 owed Toll $287,368.50. Toll was then holding in its warehouse on behalf of Scene 1 approximately 500,000 DVDs valued at approximately $2.6 million. Toll asserted a general packer's lien over the DVDs. Toll said it was entitled to the lien because part of the services it provided to Scene 1 involved the packing of the DVDs to the order of Scene 1's customers. Toll claimed that a lien arose either at common law or pursuant to contractual arrangements agreed with Scene 1 and recorded in a letter dated 5 June 2009.

3 The receivers of Scene 1 (the receivers) concede that there is a contractual lien but contend there is no common law general lien for the services provided by Toll (ie a general lien which exists as a matter of law requiring no proof of custom). The receivers alternatively submit that if there is such a common law general lien, then it is excluded in the present case by the contractual arrangements between the parties.

4 The receivers applied for directions under s 34 of the Receiverships Act 1993. The broad question before the High Court was whether the amount due to Toll had priority under the PPSA over the general security deed granted by Scene 1 to ASB, under which approximately $7 million was owed. In the judgment of Rodney Hansen J under appeal, 1 the Judge held that Toll did not have a security interest or other right in respect of the property of Scene 1 which ranked in priority to the security interest held by ASB. The reasons for the Judge's findings will be discussed further below but, for the purposes of understanding the issues on appeal, it is common ground that:

• (a) If Toll has only a contractual lien, then the ASB general security deed has priority. 2

• (b) If Toll is entitled to a general lien at common law, it has priority over ASB pursuant to s 93 of the PPSA.

5 Against that background, the issues for determination are:

• (a) Whether the High Court was correct to hold that there was no common law general lien for the services provided by Toll.

• (b) Whether, in any event, the application of any such lien is excluded by the contractual arrangements between Toll and Scene 1.

The facts in more detail

6 Toll began to provide services for Scene 1 in May 2008. It did so using a distribution centre located in South Auckland. Scene 1 was an importer and distributor of DVDs which it acquired from an overseas company (VDL). Scene 1 directed the DVDs to be sent to Toll's distribution centre where they generally arrived on pallets directly from VDL. Upon arrival, the DVDs would be stacked at the distribution centre either on pallets or on shelves. Upon receipt of orders from

Scene 1's local customers, Toll would select the DVDs required to fulfil the order, pack them in cartons and arrange for delivery of the DVDs to Scene 1's customers

7 Prior to June 2009, Toll's services were undertaken without a formal agreement being in place. By 5 June 2009 there were outstanding invoices for Toll's services amounting to $243,374.34. A repayment programme was agreed between Toll and Scene 1. This was recorded in a letter from Toll to Scene 1 dated 5 June 2009. Relevantly, the letter concluded:

2 We note that there is currently no formal agreement in place between Toll and Scene 1 Entertainment. There is a signed letter of intent, but no binding contract was ever subsequently signed by the parties. To address this lack of formal terms Toll requires Toll's standard terms and conditions (see attached) to be agreed to by Scene 1 Entertainment and to apply to all services provided by Toll from the date of this letter. These terms and conditions have been modified to incorporate Schedule B of the signed letter of intent in order to articulate a description of the services that Toll has previously undertaken to provide to Scene 1 Entertainment and the terms and conditions applicable to those services.

8 The terms and conditions attached with the letter included the following terms:

7. Lien

• 7.1 TOLL has a general lien on the Goods and on any other goods of the Sender or the person nominated by the Sender for all Charges due or which become due on any account whether for the Services concerning the Goods or any other goods or any other TOLL service.

• 7.2 If the Charges are not paid or the Sender or the person nominated by the Sender or Receiver fails to take delivery or return of the Goods, TOLL may without notice and, in the case of perishable or dangerous Goods immediately:

• 7.2.1 store the Goods as TOLL thinks fit at the Sender's or the person nominated by the Sender's risk and expense, or

• 7.2.2 open any package and sell all or any of the Goods as TOLL thinks fit and apply the proceeds to discharge the lien and costs of sale.

• 7.3 TOLL may deduct or set-off from any monies due from TOLL to the Sender or the person nominated by the Sender under any contract, debts and monies due from the Sender to TOLL under these conditions or any contract.

• …

9. Exclusions and Limitations

• 9.1 Subject to 10, TOLL excludes from these conditions all conditions, warranties and terms implied by statute, general law or custom.

9 A copy of Toll's letter was signed by the General Manager of Scene 1 on 14 June 2009, signifying Scene 1's agreement to the conditions. A few days later, on 22 June 2009, ASB appointed the receivers. During the period after 5 June 2009, Toll provided further services to Scene 1 of $43,994.16, the total sum due at the date of receivership being $287,368.50.

10 Toll's New Zealand Business Manager, Mr A B Cox, explained in an affidavit that Toll's charges were based on a weekly fixed fee and a variable charge per unit. The fixed charge covered fixed costs and was invoiced weekly in arrears. The variable charge covered variable costs such as labour and overtime and these charges were invoiced weekly in arrears following despatch of the goods from Toll's distribution centre.

11 A breakdown prepared by the receivers of the amount due by Scene 1 to Toll may be summarised as follows:

Fixed Charges	56,541.39
Transport and fuel costs	156,556.01
Variable charges for picking and packing	62,848.97
Packaging materials	11,422.09
Total 3	$287,368.47

12 By agreement between Toll and the receivers, the DVDs have been sold and a sum sufficient to meet Toll's claim is held in trust pending the resolution of the dispute over priority.

The judgment under appeal

13 The Judge noted that Toll claimed it had a common law general lien for the sum of $243,374.31 4 owed in respect of services provided prior to 5 June 2009. Toll

also claimed that it had both a contractual and a common law general lien for the sum of $43,994.16 owed to it for services provided after 5 June 2009

14 As to the central question of the existence or otherwise of the common law general lien, the Judge carefully reviewed the relevant authorities, paying particular attention to a judgment of the High Court of Australia in Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd 5 in which Stephen J discussed at length the way in which possessory liens have achieved recognition at common law. The Judge also reviewed the decision of the English Court of Appeal principally relied upon by Toll ( Re Witt) 6 and other authorities,...