Can I sell goods which belong to someone who owes me money?

Can I sell goods in my possession which belong to someone who owes me money?

I recently had a query from the owner of a haulage business which had a customer that owed them over £10,000 in total, from a number of previous jobs. They were about to deliver a new consignment of goods for their customer to the North East, when they discovered the customer had gone into administration.

Fearing that they would not be paid the amount they were owed, the query was, “Can we sell the goods to recoup the money we are due?”

The value of the goods (held at their yard) was roughly the amount they were owed by their customer.

I stressed that they should be extremely careful before taking any steps. The first thing I advised was that they contact the administrator to see who they considered owned the goods, the company in administration, or the customer in the North East.

It was clear that the goods did not belong to the haulage company and despite being owed over £10,000, they could not simply sell the goods to recoup their losses, without carefully checking their position.

An important issue to consider was whether the haulage company was entitled to exercise a lien over the goods. A lien is a right which entitles a party to hold on to assets in its possession, pending payment of a debt owed.

If title had passed to the end customer, the question is whether that end customer is entitled to take the goods free and clear of any lien. In other words, was it a bona fide purchaser for value without notice of the lien?

If the end customer was such a purchaser, who had obtained title to the goods free of the lien, then it is possible that the end customer may have a claim against the haulage company for conversion, if it retained or sold the goods.

Alternatively, if the goods still belong to the haulage company’s customer, under the terms of the purchase contract between it and the end customer, then the question is whether the administration prevents the haulage company from exercising, or continuing to exercise, a lien (assuming it is otherwise valid).
The answer to this is that the lien cannot be exercised except with the permission of the administrator, or the court.

Perhaps the moral of this story is that haulage and transport companies should seek to include a clause in their terms of business permitting them to exercise a lien over their customer’s goods, if their invoices are not paid.

If you have a similar situation, please feel free to call us on 0121 355 0011.