A lien is a form of security, a common law right, which permits A to retain Bs property, until B satisfies an outstanding claim to A.
For example, an accountant engaged to prepare a general ledger and draft income tax return may be entitled to exercise a lien over the documents until such a time as payment is made.
It is prudent to proceed on the basis that the law does not recognise a general lien in favour of accountants over their clients property, unless such right has been granted in writing by the client to the accountant.
A lien claimed by an accountant is only effective if the documents over which the lien is exercised belongs to the client who owes the accountant fees.
APES 305 Terms of engagement suggests the following be included in the engagement document:
4.9 Ownership of documents: The engagement document should make clear who owns any documents produced as a result of the engagement or provided by the client for such a purpose including electronic data. If a member in public practice has a policy of seeking to exercise a right of lien over such documents in the event of a dispute with the client, this policy should be disclosed in the engagement document communicated to the client including the process for dealing with disputes over the lien.
It is open for the client and tax agent to discuss whether the tax agent has a lien over a clients tax refund cheque. The tax agent may be able to negotiate the clients cheques or deduct their professional fees from the proceeds of the tax refund cheque.
Any such authorisation granted to an accountant should be expressly stated in a written agreement or engagement letter. There is no implied authority to do so.
Members who incorrectly negotiate a tax refund cheque or who deduct fees without written permission may be subject to disciplinary action as well as being held liable for conversion to the client.
