A judgment in a case involving an insurer and a towing company confirms that a lien (right of retention) can be defeated by providing adequate security for an alleged debt.
The case arose because of dispute over the release of a motor vehicle that was insured by Old Mutual Insure (the applicant).
In March 2023, the insured vehicle was involved in an accident on the road between Port St Johns and Lusikisiki. The vehicle was towed away by Saider Towing Service’s tow truck and kept at its storage place in Port St Johns.
The following month, Old Mutual contested Saider’s charge of R18 112.50 for towing, recovery, and storage, saying the cost was unreasonable compared to industry norms.
In a letter to Saider, Old Mutual said the insured considered R8 780.25 to be a fair and reasonable amount. The insured was further prepared to set security for the balance of the alleged claim. The insurer confirmed it held the balance (R9 332.25) on trust as security pending institution of an action by Saider within 30 days for payment of whatever amount it believed was owing. It therefore asked Saider to release the vehicle immediately.
In its response, Saider said the vehicle would not be released until the full invoiced amount had been paid. It also advised Old Mutual that the storage fee would continue to accumulate.
The deadlock led to Old Mutual bringing an application before the High Court in Mthatha in which it sought an order for the vehicle to be released within 24 hours of the order being served on Saider. The balance of Saider’s invoice would be held in trust for 30 days, on the condition that it instituted legal proceedings within this period.
Saider opposed the application, asserting a right of lien over the vehicle until its claim for the balance of the invoice was satisfied.
In the judgment, the High Court said the right of lien is a right to retain physical control of another’s property, whether movable or immovable, as means of securing payment of a claim relating to the expenditure of money or sometimes of monetary value by the possession until the claim is satisfied. This right of lien may be defeated by the furnishing of adequate security for the payment of debt secured.
Acting Judge V Kunju said noted Old Mutual Insure’s letter to Saider of April 2023 stating that the balance of the invoice (R9 332.25) was kept by the insurer’s attorney in a trust account. The attorneys confirmed this.
He said Saider’s attorneys did not dispute the contents of the letter, nor did they propose any other form of security that would satisfy them. Saider’s approach was “very unreasonable and attracted an unnecessary litigation”.
Old Mutual’s payment to the attorney’s trust account of the balance of Saider’s claim and its undertaking to pay the balance on the success of Saider’s claim was a reasonable approach, to which Saider “paid no deserving attention”, Kunju AJ said.
Saider had chosen to invest its resources in opposing Old Mutual’s application instead of in recovering the debt. “No doubt, the envisaged claim of the respondent would have progressed significantly by now,” he said.
The court ruled in Old Mutual’s favour, ordering the release of the vehicle upon the security already provided. It concluded that the security offered by Old Mutual was sufficient and reasonable, negating the need for Saider not to release the vehicle.
The court also mandated that any further storage costs from 3 April 2023 be covered by the trust account pending the resolution of the legal dispute over the towing charges.
Saider was ordered to pay Old Mutual’s legal costs for bringing the application.
