Hold the vehicle until repairs are paid for!

Public news

MTA members are being urged to instruct relevant employees and managers to hold vehicles they have repaired until full payment is received whether customers are regulars or first time.

The MTA has developed the following FAQ special for any MTA member involved in the repairing of vehicles.

Who has a legal right to exercise a lien (retain the vehicle) until the customer has paid for authorised repairs?

Any person such as an automotive repairer, dealer or collision repairer, who in the course of business carries out work on any article which has been “authorised” by the owner (including his nominee/regular user of the vehicle) “for the purpose of altering the condition thereof, or improving the same”, is entitled under common law to be paid for his work and if necessary, to retain the article in his possession until the business has been paid for the materials and labour the business expended on it.

The right to exercise the lien is brought about by carrying out the work (including any sublet work) and no special procedure or process is necessary to implement the lien.

How does the repairer minimise disputes over authorised repairs?

Provide an estimate of costs or repair with the proviso that it is subject to change where prices rise or additional work or parts not included in the quote are necessary to ensure the repair is to trade standard. Specify the vehicle must be collected and paid in full within a set period of time from completing repairs to avoid storage fees.

Ensure the work order or job card is signed for. If this is not practical, you must note the time, date and name when verbal approval was given which can include emails. In the case of collision repairs, have the customer supply the claim number, check with the Insurer and obtain credit card facilities to cover any insurance excess.

In what limited circumstances may a repairer recover reasonable storage fees where a vehicle is left without payment.

First, ensure the customer signs an authority, emails or even text messages their consent to pay storage charges after a certain date. Second, if storage charges are to be applied without written agreement or notification to the owner by registered mail, the South Australian Minor Claims Court is less likely to enforce charges beyond two weeks of fees. Third, refer to the MTA for a list of regularly revised storage charges set by the SA Government for vehicles in open and closed locked storage. Members are encouraged to contact the MTA by clicking here.

Each repairer has a duty to minimise storage time. Call the MTA to discuss individual matters as there are various reasons for delays in releasing a stored vehicle which include police impounding, finance companies directing the repairer not to release the vehicle or insurer directives.

Repairers holding vehicles or components in storage have a reasonable, but not absolute duty of care to ensure it is not damaged or stolen and with some qualification, maintained in reasonable condition.

When may a repairer have no right to hold a vehicle until full payment is received?

First, a lien cannot be exercised if the worker has agreed to give credit but the credit is withdrawn. Members should confirm electronically, via text message or by phone before further repair work is done to enable the repairer to restore his or her right to hold the vehicle for payment.

Second, never release the vehicle before payment is cleared in the business account. A lien is only applicable to the value of the work and the materials expended on the particular job and cannot apply to jobs done previously for which payment is outstanding. It is referred to as a possessory lien and once the vehicle is released it cannot be re-imposed even if it is returned to the repairer.

Third, never allow the customer access to the vehicle before payment is made. The customer may want to road test it and the repairer should only do this with customer as passenger.

Fourth, a lien on a vehicle is purely a right to hold the vehicle or component until payment is received. Case law indicates where repairs are undertaken that the repairer’s lien cannot include charges for storage or on items not connected with the work done.

What is the status of a Lien where the customer seizes the vehicle unlawfully or by reason of fraud?

Case law indicates there is only one situation where a lien over a vehicle or article being repaired is capable of being revived or re-enforceable, in the case where the vehicle or article leaves the repairer’s premises and has been surrendered by reason of fraud or unlawfully taken from the lienholder.

Case law indicates in such circumstances, temporary loss of possession for a limited purpose no longer results in loss of the lien however, there is a duty to try and regain the vehicle as soon as possible and occasionally police have helped by attending to ensure there is no disturbance to the peace.

If the vehicle cannot be found and is seized unlawfully or by reason of fraud, a pre-lodgement summons leading to minor claim (now up to $12,000) can be issued with customer not permitted to have legal representation.

Can a repairer exercise a lien if the vehicle is under finance or lease?

Yes. Section 90 of the Personal Property Securities Act 2009 gives a repairer’s lien priority over a security interest such as that held by a finance company. If the customer fails to pay for repairs the repairer will have to deal with the bank or financier.

For further information on exercising a lien where a vehicle is under finance or where ownership is in dispute click here.

Where a vehicle is not under finance, can the repairer dispose of the vehicle if the customer refuses to pay?

In South Australia, if payment is not forthcoming in respect of work done on the property of the customer, then the person undertaking repairs may, in order to obtain payment, proceed to sell the article provided the following requirements are strictly observed:

(1) The amount claimed must be still unpaid one month after it became due.

(2) The sale must be by public auction.

(3) A notice of the sale must be sent to the last known address of debtor by registered post fourteen (14) days before the date of the sale stating:

(a) The description of the article (vehicle) to be sold;

(b) The amount of the debt;

(c) The date, time and place of the sale; and

(d) The name of the proposed auctioneer.

(4) Details of the public auction, vehicle year and model, etc. should be advertised in the Public Notices column of a newspaper (i.e. Advertiser). Refer MTA for letter/process if needed.

From the proceeds of the sale, the worker is entitled to deduct the amount of this claim, arguably reasonable expenses and the costs of conducting the sale. Any surplus funds must be paid to the clerk of whichever local court is nearest to the place of the sale.

If prior to sale, the vehicle is found to be stolen or subject to matrimonial or other court orders for disposal, contact the MTA as soon as possible as these issues do require separate negotiations. If the repairs improve the value of the vehicle the repairer is entitled to make a claim or negotiate with the owner for repairs under a common law concept of “unjust enrichment”. Critically, photographic evidence prior to and after repairs, old parts etc. and evidence that the repairer was authorised to do the job would help justify the claim and hopefully avoid court action!

Where the customer fails to meet his loan repayments to the financier and the repairer retains the vehicle awaiting payment for repairs, what can be done?

In South Australia, the repairer no longer has the right to sell or dispose of the vehicle without consent of the party with a registered security interest. This is usually the bank or finance company.

If the vehicle is under finance, contact the MTA to discuss the best way forward. There are a few aspects to be aware of:

Contact the bank or financier listed on the Personal Properties Securities Register (PPSR) as having a registered security interest and arrange for full payment before the vehicle is released. The relevant bank or finance company will be interested in repossessing the vehicle if the current market value of the vehicle is significantly higher than the repair cost

Where the current market value of the vehicle is potentially lower than the repair cost the relevant bank/finance company may agree to permit the sale of vehicle by public auction without repossession. This needs to be in writing with removal of the registered security interest as part of the agreement.

As the repairer has performed fully authorised work on the vehicle it must not be released until payment in full has been received. The longer it is stored by the repairer, the greater the potential depreciation. It is therefore important to remind the relevant bank or finance company to act swiftly. Arguably, storage fees may be applicable if the financier asks the repairer to hold the vehicle.

How does a business check the Personal Properties Securities Register (PPSR) to see if a vehicle is under finance prior to sale by public auction?

All registered security interests may be identified via the Personal Properties Securities Register (PPSR) available on the website since January 2012. To search the PPS Register either create an account or search as a casual user. A casual user will use the register on a pay-as-you-go capacity.

Should a repairer, prior to undertaking repairs, check to see if a vehicle is under finance/lease via a registered security interest? Or a receiver has been appointed?

In nearly all circumstances, this would seem totally unnecessary for practical and cost reasons. The process can be costly and customer authorisation to do any work is the critical factor. If however you knew the customer’s vehicle was in liquidation or receivership prior to starting work, contact the MTA to discuss and arrange with the receivers or liquidators to approve essential repairs that improve the value of the vehicle and obtain a pre-agreement for payment. Realistically such search should be done where the customer defaults and payment could be negotiated via the financier with subsequent release and indemnity.

What if there is a dispute as to ownership. For example, a stolen vehicle / disputed ownership / vehicle on loan?

If prior to selling a vehicle by public auction, the vehicle is found to be stolen or subject to matrimonial or other court orders for disposal, contact MTA as these issues do require separate negotiations.

If the repairs improve the value of the vehicle, the repairer is entitled to claim for repair costs under a common law concept of “unjust enrichment”. Critically, photographic evidence prior to and after repairs, old parts and evidence that the repairer was authorised to do the job by the person in possession of the vehicle would help justify the claim. Under no other circumstances should a repairer give up a vehicle held under a valid lien for work done unless ordered to do so by the court or, as happens occasionally, police impound the vehicle.

Do not be threatened by bullying actions such as potential legal action, claims the essential repairs were not authorised by the owner or police intervention, call the MTA’s Workplace Relations team for advice by calling 8291 2000 or by clicking here.