LIEN. A lien is the right to hold a person's property until payment of a debt is received. A lien does not, however, give the banker any right to sell the property, and legal advice should be obtained before dealing with securities held by way of lien.
A banker has a lien upon all negotiable securities deposited with him in his capacity as banker, by a customer, unless there is an express contract, or there are circumstances showing an implied contract, inconsistent with the lien. The lien is not affected by reason that the negotiable securities do not belong to the person depositing them, if the banker is unaware of the fact.
A banker has no lien on securities which are deposited for some particular purpose. For example, it has been held that where a conveyance of two separate properties was deposited, with a memorandum of charge upon only one of the properties, the banker had not a general lien upon the other property.
Bills and documents left for collection are part of a banker's ordinary business, and he has a lien upon them.
Section 27, s.s. 3, of the Bills of Exchange Act, 1882, provides :—" Where the holder of a bill has a lien on it, arising either from contract or by implication of law, he is deemed to be a holder for value to the extent of the sum for which he has a lien." If a bill has been transferred absolutely to a banker he is entitled to the full amount of it, but if he has merely a lien upon it his interest is limited to the extent of that lien.
Where bearer bonds are left with a banker in order that the coupons may be cut off and collected by him, Sir John R. Paget considers that a lien probably attaches to the bonds, but no lien would attach if left for safe custody, and the customer looked after the coupons himself. (See " The Law of Banking," p. 301.) The securities over which a banker has a lien are understood to be negotiable ecurities such " as promissory notes, bills of exchange, exchequer bills, coupons, bonds of foreign governments, etc. ; and the Cour s have held that if such securities are deposited by a customer with his banker, and there is nothing to show the intention of such deposit one way or the other, the banker has, by custom, a lien thereon for the balance due from the customer " (Kinderslev, V.-C., in IFylde v. Radford, 18(33, 33 L. J. Ch. 51). In Davis v. Bowsher (1794, 5 T.R. 488), Lord Kenyon said : " Whenever a hanker has advanced money to another, he has a lien on all the paper securities which come into his hands for the amount of his general balance." A banker, as gratuitous bailee, has no lien upon articles left for safe custody.
A conveyance of land is not subject to a banker's general lien, but where deeds are deposited with the intention of creating a security, without any memorandum of charge, they form an equitable mortgage by deposit.
In In re Bowes, Earl of Strathinor_. v. Vane (188(3, 33 Ch. D. 58(3), where a customer deposited a life policy for with a memorandum stating that it was to form a security to the extent of L4,000 with interest, commission and other charges, it was held that the banker could not claim more on the policy than the £4,000 and charges, as limited in the charge. Mr. Justice North said : " It is said that the bankers have a banker's lien ; that Bowes was their cus tomer, and handed over to them the policy as security, that they had it in their hands and were entitled to hold it, not only for the /4,000, interest and commission, for which they had a written agreement, but that in addition they had a further right as bankers to hold it in respect of the rest of his debt to them ; or in other words they claim a right under the special contract in writing and also under an implied contract. It appears to me that that is inconsistent with the terms of the agreement, which is for a security for a sum not exceeding /4,000 principal and no more, with interest and commission, and that when the contract says in so many words that the charge is for a sum not exceeding £4.001), the charge is limited to that amount. . . . It has not been suggested that the sale was wrong in any way ; and it may well be that bankers who have a power of selling securities de posited, when they have sold, and have clear money in their hands after satisfying the charge, may be entitled to say they will set off that money against further sums due to them ; but that seems to me a totally different case from the present, where the security is of a wholly different nature, and the bank had no power of sale. It is quite true that, after a demand for payment had been made, the bank might have insisted on having a mortgage with a power of sale. No such demand was made or mortgage given. the bank never had a power to sell and con vert the policy into money. . . . It seems to me that the express terms of this deposit were that stuns not exceeding 0,000 were to be paid out of the policy moneys, and it would be inconsistent x‘itli that, in the absence of any additional agreement, to allow the bank to hold the policy for some thing more." Where a customer has a credit balance on one account and is cm ing money on another, the banker has a right to set off one balance against the other. This right is sometimes referred to as a banker's " lien," but the more exact term is " set off." A credit balanc on an account which has been opened by him in a fiduciary capacity cannot be set off against an overdrawn private account ; neither has a banker the right to set off the credit balance of a partner's private account against a debt on the partnership account.