The Repair and Storage Liens Act ("RSLA")1 covers the repair and/or storage of "articles," defined as "tangible personal property other than a fixture." A "repair" "means an expenditure of money on, or the application of labour, skill or materials to, an article for the purpose of altering, improving or restoring its properties or maintaining its condition…" Though the term "storage" is not defined in the Act, a "storer" is "a person who receives an article for storage or storage and repair on the understanding that the person will be paid for the storage or storage and repair, as the case may be."
To use the RSLA to full advantage, however, one must think creatively with respect to the foregoing definitions. If one believes the RSLA is confined to auto repairs and u-store outlets, the benefits of the RSLA will be lost. I once filed an RSLA lien on behalf of a company that was unpaid after having rented movie production equipment to a film producer. I took the position that the film negative was an "article" that had been altered and improved by the movie cameras and thus, had been "repaired" within the meaning of the RSLA. (I will tell you how this ended later in the article, so keep reading.)
Possessory and Non-possessory Liens
The RSLA lien world is further divided into possessory liens and non-possessory liens. A possessory lien is automatically created when a repairer or a storer obtains possession of the article and commences an authorized repair or storage. The possessory lien continues until the amount for such services is paid or until possession of the article is surrendered. Thereafter, an unpaid repairer or storer has a non-possessory lien.
Signed Acknowledgment of Indebtedness
In order for a non-possessory lien to be enforceable, the repairer or storer requires a "signed acknowledgment of indebtedness." This term is not defined in the statute; however, the statute does state that the written acknowledgment may be on an invoice or other statement of account. Case law has interpreted that this provision does not require that a specific or discrete amount has to be admitted as owing, but simply an acknowledgment that some amount is owing will be sufficient.2
The acknowledgment of indebtedness does not have to be signed by the owner of the article but may be signed by others on behalf of the owner. In the Ontario Court of Appeal decision, Royal Tire Service Ltd. v. Shelleby Transportation,3 an equipment lessee, and not the registered owner, executed the document relied upon as supporting the non- possessory lien. The Court of Appeal held that others in legal possession of the article had the authority to authorize repairs and to execute the required acknowledgment.
What is really surprising is that by simply carrying out their statutory duty to provide a listing of creditors of an insolvent person or corporation, a trustee or receiver can unwittingly provide a non-possessory lien claimant with the means to enforce his/her lien. It has been held that being enumerated on a "List of Creditors" in a Statement of Affairs signed by the Trustee was sufficient to constitute a signed acknowledgment of indebtedness for the purposes of the RSLA.4 Further, an RSLA lien claimant can then register their lien after a bankruptcy or receivership, and as a result, claim a higher interest in the article than any other interest, including that of the trustee or receiver.5
Timing and Priority
A non-possessory lien claimant has no prescribed time limit under the RSLA to register a lien in the article. By filing a registration of a lien, a lien claimant is giving notice to all others of that non-possessory lien. A non-possessory lien becomes enforceable against third parties after registration. If a third party acquires an interest in an article after a non-possessory lien in that article has arisen but before the lien is registered, that third party will have priority over the non-possessory lienholder.
One of the primary incentives for a non-possessory lien claimant to register quickly is to ensure they do not lose priority to a third party who acquires some interest in the article after the lien arises and who would be otherwise unaware of the unregistered non-possessory lien (and thus granted priority as a result). Further, registration is required in order to allow the non-possessory lien claimant to utilize the seizure mechanism in the RSLA.
Priority in an article is not determined by the order of registration. A subsequently registered non-possessory lien will have priority over a previously registered security interest. Further, priority amongst non-possessory lien claimants is not determined by the order of registration, but by the reverse order of giving up possession, the last repairer or storer having priority.
Each individual repair or storage of an article must be registered as a separate lien, as the statute prevents the tacking of liens. For example, if lien claimant "A" acquired rights in January and March, and lien claimant "B" acquired rights in February, then section 16 provides that the priorities, in order, would be A (March repair), B (February repair) and A (January repair). If A were allowed to tack his/her January claim to the March claim, it would defeat B's right to have the February claim have second priority, behind A's March claim and before A's January claim.
In the Canadian Imperial Bank of Commerce v. Kawartha Feed Mills Inc.6 case, Justice Ferrier explained that aggregating lien claims was only a concern between competing non-possessory lien claimants, and not between a non-possessory lien claimant and a prior Personal Property Security Act claimant.
Once a non-possessory lien is registered, a lien claimant can provide a copy of the registered lien to the local sheriff or a licensed bailiff and direct that the article be seized. Upon receipt of the registered lien and direction, the sheriff shall seize the article wherever it may be found and deliver it to the lien claimant. Note that in doing so, the lien claimant is not required to start any court proceeding nor obtain a court order.
To conclude my film story, after registering the lien, I provided a copy to the local sheriff who was directed to seize the negative which happened to be in the possession of another firm which was developing the negative. That firm could have asserted a possessory lien and resisted my sheriff under the RSLA, but they did not know they had such rights, and thus did not assert them. Following seizure and upon having possession of the film negative, I was able to secure funds for my client, who otherwise would have remained unpaid as an unsecured creditor, hopelessly seeking funds from an insolvent movie production company.
The following should be noted with respect to the RSLA:
- the priorities enjoyed by lien claimants over other interests;
- the fact that such priorities can be registered and asserted after an insolvency; and
- the fact that self-help remedies can be asserted quickly, simply and initially, without any court oversight.