Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Ltd [2014] EWCA Civ 100 (14 February 2014)

The maxim quicquid solo plantatur, solo cedit   (whatever is affixed to the ground belongs to the ground) is well known to property lawyers. This case concerned a tenant’s right to deal with certain property which the parties accepted were tenant’s fixtures.
The landlord considered that the tenant intended to strip the premises of substantial, and valuable, tenant’s fixtures that formed part of a steel-making plant and sell them. 
At first instance the judge held that the tenant was entitled to remove certain items classed as chattels or removable tenant’s fixtures. The landlord appealed that order.
Background
The claimant was the landlord of certain property in Kent. A former tenant went into administration in January 2012. The landlord then commenced proceedings against the former tenant, seeking an order restraining it from selling, disposing of, interfering with or otherwise dealing with plant and machinery.
The defendant was in fact established to acquire the former tenants business and assets and took an assignment of the lease in June 2012, following which it was substituted as defendant.
The Issues
The proceedings raised issues as to the legal status of many items of plant and machinery.  At first instance the judge found that all but one of such items were either chattels or tenant’s fixtures.  There was no challenge to those conclusions. 
The challenge was as to the defendant’s right to deal with the tenant’s fixtures during the currency of the term. The landlord argued that the defendant did not have an unqualified right so to sever and deal with the items. 
The court noted that an ‘electric arc furnace’ being one of the tenant’s fixtures, was an item of plant weighing some 1,195 tonnes.

The issue required a consideration of the terms of a lease made in 1971 (and subsequently varied in 1992).

The 1971 Lease

The following were the material terms of the 1971 lease:
1. The tenant covenanted with the landlord to:’… erect and complete by [31 December 1973] a new building consisting of a fully equipped steelmaking plant and rolling mill capable of producing not less than [50,000] tons of steel products per annum (hereinafter called "the Works") …’
2. ‘Not at any time during the said term to erect make or maintain or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the premises for the purpose of steel making steel rolling and operations ancillary thereto (“the Fixtures Clause”).
3. Not to use or occupy the said premises other than for the purposes of steel making steel rolling and operations ancillary thereto or for such other purposes as may from time to time be approved by the Lessors (such approval not to be unreasonably withheld)
The 1971 lease was varied so as material to the Fixtures Clause to provide:
“Not at any time during the said term to erect make or suffer to be erected made or maintained any building erection alterations or improvements nor to make or suffer to be made any change or addition whatsoever in or to the said premises save in connection with the use of the said premises for such industrial purpose as may from time to time be approved by the Lessors under clause 2(14).”
The Appeal
1. The Court of Appeal noted the maxim quicquid solo plantatur, solo cedit was not in dispute between the parties. Whilst the original rule was that a fixture was irremovable by anyone with only a limited interest in the land there was of course exceptions. Notably between landlords and tenants. 
2. There are sub categories of fixtures. Thus ‘tenant’s fixtures’, which a tenant is entitled to remove, and ‘landlord’s fixtures’, he is not.  Woodfall, Landlord and Tenant, at 13.141, sets out a ‘tenant’s fixture’ as a chattel which is:
(a) annexed by a tenant to the land;
(b) is so annexed either for the purposes of his trade or for mere ornament and convenience; and
(c) physically capable of removal without causing substantial damage to the land and without losing its essential utility as a result of the removal.’
3. Whilst a tenant is in principle entitled to remove any tenant’s fixtures, such right can be modified or excluded by the terms of the lease. At first instance the court referred to paragraph 13.153 from Woodfall: In essence if, the landlord wishes to restrict a tenant’s ordinary right to remove trade machinery or fixtures attached to the demised premises the landlord must say so in plain language. If the language used leaves matters doubtful, the ordinary right of the tenant to remove trade fixtures will not be affected.
4. Many leases contain express covenants by the tenant to yield up the property at the end of the term together with all fixtures, or some similar phrase. Whether such a covenant is sufficient to exclude the tenant’s right to remove tenant’s fixtures will depend on the construction of the covenant.
5. In this case the Landlord argued that the Fixtures Clause had the effect of excluding the right to remove the fixtures. Counsel for the landlord argued that contrary to paragraph 13.153 of Woodfall, there was no rule of law that especially clear words must be used in a lease in order to exclude a tenant’s right to remove fixtures at any point during the term. All that is required is language that, upon its ordinary construction, has that effect. 
6. The Court of Appeal reviewed the authorities and noted that if a tenant’s right to remove tenant’s fixtures was to be ousted, the language of the lease must make that clear. It was a question to be answered by a consideration of the language of the particular lease, applying to it the approach to the construction of contractual documents (see Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896) If the court’s conclusion is that it is unsure that that was the intention of the parties, or that the lease is ambiguous as to whether that was their intention, the right will not be removed. 
7. The Landlord raised a further argument namely that the Fixtures Clause excluded the rights to remove tenant’s fixtures during the currency of the term. That was on the basis that the tenant’s obligations under the 1971 lease and the plant included equipment in the nature of tenant’s fixtures. It cannot have been the parties’ intention that the tenant would be at liberty to strip the tenant’s fixtures out of the property and so undo the work it had covenanted to do under the 1971 lease
8. However the Court of Appeal noted that the landlord’s case was not assisted, let alone supported, by the fact that such fixtures, or any of them, came to be installed on the premises in compliance with the tenant’s obligations under the 1971 lease.
9. Lord Justice Rimer noted that the Fixture Clause was directed at imposing a negative obligation in relation to the making of alterations or changes to ‘the property.  Such a negative obligation was not intended to be confined simply to what was proposed to be done to the original buildings and the site in their respective original states. A central commercial obligation under the lease was the imposition upon the tenant of a covenant to build and equip a steel-making plant. That involved an alteration and change to ‘the said premises’ as they were at the grant of the lease, because whether or not it involved any alteration to the original buildings, it certainly involved an alteration to the site.
Decision
Lord Justice Rimer held that reference in the Fixtures Clause to ‘the said premises’ was a reference to the buildings and site from time to time. Accordingly that included the new building and plant, including the fixtures, whether landlord’s or tenant’s, which form part of the demised premises.  Therefore during the currency of the term, the tenant was precluded from removing any tenant’s fixtures, save as permitted by the Fixtures Clause. 
Lord Justice McFarlane and Vos concurring, the landlord’s appeal was allowed. 
There can be no doubt, in my judgment, that the tenant would be breaching its covenant by making a change to the Buildings so defined if it were to remove the tenant’s fixtures, except for the purpose of steel making etc. on the premises. The tenant’s purpose in removing these fixtures would be to sell them, not to use them for steel making on the premises, nor to replace them with more modern facilities for that purpose.
Conclusion
This case highlighted the issue of sub species of fixtures, namely tenants fixtures. Whilst tenants can remove tenant’s fixtures, the key issue was the modification of that right in the 1971 lease. The Fixtures Clause did indeed modify the tenant’s rights,
Lord Justice Vos observed that although the term "Buildings" was not defined, given that the covenant was expressed to apply "at any time during the said term", it must be construed as referring to both existing buildings and those built in accordance with the 1971 Lease.  
Perhaps the commercial aim of the tenant to sell the fixtures influenced the Court of Appeal. Lord Justice Vos noted “The tenant’s purpose in removing these fixtures would be to sell them, not to use them for steel making on the premises, nor to replace them with more modern facilities for that purpose”
Kind regards
Do NOT follow this link or you will be banned from the site!
X