Are workshops allowed to hold onto cars until payment is made?
Are workshops allowed to charge storage fees?
Are workshops entitled to dispose of unclaimed cars?

MIWA has through the years been inundated with requests for clarity on the subjects of workshops rights to a vehicle contracted in, storage fees and the calculation thereof and abandoned vehicles left in workshops for lengthy periods. MIWA decided to set the record straight by obtaining legal opinion that will shed light on the topics. Should you feel that you need more information in this regard, contact your MIWA Director Vishal Premlall on vishal.premlall@rmi.org.za or RMI-4-law on info@legalex.co.za or call 0861 102 092.

The opinion below relates to various aspects which pose concerns to workshops of MIWA and/or other members of the Retail Motor Industry Organisation.

Although these aspects may be interwoven, they can be differentiated and we will deal with those aspects separately below:

1. Do workshops have a legal right of retention to a vehicle where contracted work was done?

Lien of the Workshop: A lien is a right of retention which may flow from a contract which covers all that is due to the creditor (a workshop) under the contract in respect of the work done and the expenses incurred in respect of the property. Therefore if a member, being a workshop or otherwise, does work on a vehicle and it has a contract to determine payment for such work, the workshop will have a right of retention of the vehicle until such time as it has been paid in full. In other words a workshop may retain the vehicle lawfully for a period equal to the time it takes the owner of the vehicle (or other property) to pay in terms of the contact. Various terms can be negotiated such as the real fees and expenses towards the repair of a vehicle; storage costs; expenses towards courtesy vehicles and the like. We will deal with the issue of storage costs below.

• A question that arises, is whether a member may exercise its right of retention in case of a bank or other financial institution that claim delivery of the vehicle as a result of the owner not complying with its obligations in terms of its agreement with the bank or such financial institution. It seems trite that no owner can demand such delivery without providing adequate security for such workshop that may hold the lien. However, the Court also placed weight on the issue of the Applicant’s ownership over the vehicle and will not include issues such as unreasonable periods of storage costs and courtesy vehicles if the matter could have been settled between the owner and the workshop quite some time before the parties approach the Court as it would tantamount to depriving the owner of its property unreasonably – this was referred to in the matter of Smiths –vs- Kitching. The Court will have due regard to what is reasonable to be furnished as security by a Bank in the event of it claiming delivery of the vehicle. In the matter of ABSA Bank Ltd –vs- Storm & Another (67427/2011) [2013] ZAGPPHC 15 (not reportable) the position was dealt with by the Court in detail. In its judgment the Court stated that the starting point is that an earner (which may include the Bank) does not have an automatic right to demand delivery of its property on tender of adequate security. It remains in the Court’s discretion to order such delivery to the owner against a liquid security.

• Therefore, in the event that a bank or other financial institution or any other third party may claim delivery of the vehicle or other property, the workshop may exercise its right of retention lawfully if such right of retention exists on the grounds described above.

• Workshops are however warned to peruse the detail of a Court order that a Sheriff serves upon a workshop and in the event that such a Court order does make provision for the vehicle to be removed against payment of security or without such payment and with disregard to the lien/right of retention in a declaredly order of a Court the member will be well advised to rather deliver the vehicle against such non-receivable of such security or without it respectively. It would however be an unrealistic occurrence in the event that a Sheriff would serve a declaredly Court order asking for delivery of a vehicle without proper security in place and members are advised to treat those Court orders cautiously and to immediately phone an attorney or the RMI’s Associational Director upon receipt thereof before exercising any rights that it may or may not have.

2. Are workshops entitled to charge storage fees?

Storage Fees: A workshop is entitled to charge for storage fees in the event that a vehicle is not collected and for the period that it remains so uncollected. There seems to be no guideline on what is to be charged and for the sake of cautiousness with regards to the provisions of the Competitions Legislation we will not endeavour to provide advice thereon by mentioning amounts and can only state that such amount should be reasonable. Workshops would have a good idea of what a reasonable amount is to be charged per vehicle for storage fees in the industry and should, for purposes of it not to be recognised in a Court for it to be awarded as part of the costs to be repaid endeavour to remain within the parameters of the accepted price charged in the industry.

However, a contentious issue that remains with regards to the issue of storage costs is whether such storage costs may be the subject matter that gives rise to a right of retention. Whilst a lien can only be exercised in terms of a contract it is of utmost importance to ensure that the aspect of storage costs be a term to such contract. Although a contract need not be written to be one that is lawful and binding upon the parties the terms of unwritten (or oral) agreements are always much harder to prove and usually result in the disputes to be determined by way of a trial which poses its own long lapses in time. The advices that in the event to prevent an owner use its vehicle with a workshop for a reasonable time and the workshop wishes to exercise its right of retention in terms of the aspect of storage costs it be agreed upon in writing beforehand. It may occur that an owner pays for the actual work done on a vehicle and use the vehicle with a workshop for an unreasonable time which naturally lead to storage costs (which holds an element of direct expense of a workshop). Should the aspect of storage costs together with the amount to be charged per day not be agreed in writing a workshop will be well advised to rather release the vehicle to the owner upon demand to avoid Court applications in terms of rey vindication for orders to direct the workshop to deliver the vehicle or otherwise. However, in the event that such storage costs is a substantial amount and the parties (the workshop and the owner) has agreed in writing to storage costs on a certain amount, being reasonable, per day it seems to be accepted that such storage costs alone can form the basis of a right of retention.


3. Can workshops dispose of unclaimed vehicles after a period of time?

Unclaimed Property: In the event that the vehicle or other property remains with a workshop of a member, be it as a result of the workshop or member exercising its right of retention or just as a result of the owner disappearing or not willing to collect its vehicle, a workshop or member should take the necessary steps in law to secure payment of its costs, at least the extent possible.

The steps referred to above are the following:

a. Write a letter of demand demanding payment and collection of the vehicle within seven (7) days;

b. Depending on the amount claimed the matter can proceed through the Small Claims Court or an attorney consulted to issue summons for the amount and have it served by Sheriff;

c. Depending on whether the summons is defended by the owner or not a default judgment application can be brought or in the case of a defence a summary judgment application since such costs will form a liquidated claim based on the signed contract between the parties and the invoice delivered. At this juncture it is important for workshops to ensure that the owner agrees to the domicilium citandi et executandi address to prevent situations where the Sheriff cannot serve the summons on the owner in the event that such owner is untraceable;

d. Depending on the route of a defended matter or undefended matter respectively, once judgment is obtained a warrant of execution can be issued and the Sheriff can be requested to execute property by way of a sale in execution, the proceeds of which will cover the claim of the workshop in principal.