Fixtures and chattel - Lecture notes 2 PDF

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Fixtures and chattelAccording to Section 5 of the National Land Code, Land includes the surface of the earth and all substances forming that surface, the earth below the surface and all substances therein, all vegetation and other natural products, whether or not requiring the periodical application...

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Fixtures and chattel According to Section 5 of the National Land Code, Land includes the surface of the earth and all substances forming that surface, the earth below the surface and all substances therein, all vegetation and other natural products, whether or not requiring the periodical application of labour to their production and whether on or below the surface all things attached to the earth or permanently fastened to anything attached to the earth, whether on or below the surface and land covered by water. Malaysian courts have turned to the English Law of Fixtures to determine whether an item in dispute is a fixture or a chattel. In English law the concept of land is very extensive that it is sometimes more aptly, than correctly expressed in a Latin phraseology:“Cujus est solum euis est usque as coelum et ad inferos."means that whoever owns a piece of land owns everything extending upwards into the limitless skies and downwards to the middle of the earth. Chattels are items of personal property. It is a principle of land law that any chattels attached to land, become part of the land and are known as fixtures. This is expressed in the Latin maxim Quicquid plantatur solo, solo cedit (whatever is attached to the soil becomes part of it). This legal principle means that something that is or becomes affixed to the land becomes part of the land therefore, title to the fixture is a part of and passes with title to the land and consequently whosoever owns that piece of land will also own the things attached. It is important to distinguish between fixtures and chattels as this will affect ownership rights of the items. A fixture will always belong to landowner whereas a chattel may belong to another. It is especially important to distinguish fixtures from chattels when there is a transfer in ownership of the property. Any items that are fixtures will belong to the transferee. If it is a sale of the land, the ownership of the fixtures transfers as soon as the contract of sale is binding and the seller can no longer remove these items from the property. Another time when it is highly relevant to know if items are fixtures or chattels is when a tenant attaches his own items or those belonging to another to the property, for example in the case of Hobson v Gorringe [1897]. This would transfer ownership to the landlord and the tenant is not entitled to remove the items at the end of the tenancy. In Goh Chong Hin v Consolidated Malay Rubber, it was held that the English law of fixtures is applicable in Malaysia. Section 5(d) of the NLC does not specify on what is a chattel or a fixture. A fixture is an immovable property. On the other hand, a chattel is a movable property. Section 5(d) of the NLC merely looks at the physical aspect of annexation. It does not by itself determine whether an article affixed or permanently attached to land is a fixture or a chattel. The general principle on fixture was laid down in Holland v Hodgson that all fixtures attached to the land form part of the land. “…an article which is affixed to the land even slightly is to be considered part of land, unless the circumstances are as such as to show that it was all along to continue as a chattel, the onus lying on those who contend that it is chattel”. There are two tests to determine if an article is a fixture or a chattel, namely, the degree of annexation tet and the purpose/object of annexation test. Both tests must be applied. The Degree of annexation test is an objective test on the physical attachment of the article. It raises a prima facie finding of fact by looking at the degree to which an article is affixed to the land and also raises a presumption which can be rebutted by the Purpose Test. If an

article is affixed to the land even slightly, the presumption is that it is a fixture. However, if an article is attached to the land by its own weight then it remains as chattel. If the removal of the article would result in damage to the article, the presumption is that it is a fixture but if the removal of the article does not result in damage to the article then it cannot presume that it is a chattel but to look at the purpose. Whether removal of those items would cause damage to the premises such as holes that may be left behind after removal of those items? The more difficult it is to remove the item without serious damage, the more likely it is that the item will be interpreted as something intended to comprise a permanent enhancement of the real property. In Purpose of annexation test, The prima facie finding in the Degree Test may be strengthened or rebutted by the Purpose Test. If there is no physical attachment to the land, the presumption is that it is a chattel. However, Blackburn J. in Holland v. Hodgson : "But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land.“ Intention in this context is to be assessed objectively and not subjectively. It is the purpose which the object is serving which has to be regarded, not the purpose of the person who put it there. The question is whether the object is designed for the use or enjoyment of the land or for the more complete or convenient use or enjoyment of the thing itself. If an article is attached to the land for the better enjoyment of the land as a whole so as to improve its usefulness and value, it strengthens the presumption that it is a fixture. If an article is attached to the land merely for the more complete enjoyment and use of the item as a chattel, it rebuts the presumption that it is a fixture. A conflict would reflect the ability of the presumption under the Degree test to be rebutted by applying the Purpose test. The presumption arrived at under the Purpose test will prevail. Purpose test has a larger effect compared to degree test

CASE LAW: Goh Chong Hin & Anor v The Consolidated Malay Rubber Estates Ltd Goh Chong Hin charged his land including buildings and factory to SRMS Lechman Chetty (chargee). There was machinery in the factory. Annexed by nuts and bolts to concrete foundations sunk in the soil. Next, Goh Chong Hin executed Bill of Sale over the machinery in the factory to Consolidated Malay Rubber Estates Ltd (grantee). The chargee by the consent of Goh Chong Hin took possession of the land and the factory. The grantee applied for order to seize and sell the machinery by virtue of the Bill of Sale. It was held that machinery, which was fixed to the foundation of the building and was securely attached into the soil with bolts, was classified as fixtures forming part of the land. Reason for decision: Based on the Degree Test, the presumption is that the machinery were fixtures and applying the Purpose Test, the machinery were attached to enhance the value and utility of the land for a rubber estate. This strengthens the presumption that the machinery were fixtures.

What is the position of an underground petrol tank buried two feet below the ground? The Shell Co of the Federation of Malaya v Commissioner of the Federal Capital of Kuala Lumpur The Shell Company’s tanks were buried two feet below ground level and were covered with concrete. The respondent in determining the annual value of the appellant's holdings for rating took into account the storage tanks. The issue is whether the underground tanks were classified as fixtures which form part of the land and therefore rate able. The court held that underground petrol storage tanks that were two feet deep below ground and concreted over, with the intention that it should remain there permanently, should be considered as fixtures. The tanks when placed underground were intended to remain in site for as long as the filling stations continue in operation Lyon & Co v London City and Midland Bank The claimants hired out some seating to Mr Brammall for use in his cinema for a period of 12 weeks. The terms of the contract granted an option to purchase the chairs but this option was never exercised. The local authority required the seating in the cinema to be fastened to the floor and therefore Mr Brammall fixed the chairs to the floor with screws. Mr Brammall then mortgaged the cinema to the defendant bank and defaulted on payments. The defendants took possession of the cinema and the claimant brought an action for delivery up of the seating and damages for their wrongful detention. The defendants argued that the seating had become fixtures and therefore title had passed to them. It was held that the chairs were chattels because the annexation is for a mere purpose and for more complete enjoyment. Wiggins Teape (M) Sdn Bhd v Bahagia Trading Sdn Bhd Whether a printing machine affixed by bolts to the floor and ground of the defendants’ premises on a land charged to the chargee has become a fixture despite the existence of a hire-purchase agreement by which the owner of the printing machine had retained the title until full payment? Held: The machine has become a fixture and passes to the chargee notwithstanding the retention of title clause. Sungei Way Leasing v Lian Seng Properties The defendant, owner of KL Plaza had took up a loan and charged the building. Later, a ‘custom-made’ air conditioning unit bought under a hire-purchase agreement, was affixed to the building. Clause 11 of the HP Agreement provided that the lessor was to remain as the owner of the unit and the lessee had no right to pass title of the air-cond. to any third party. Dispute arise where lessor sought to remove the air-cond. unit from the building and the chargee bank objected. Held: Although the air-cond. unit was in the nature of a fixture as it was ‘custom-made’ for the building, the court must give effect to the intention of the parties arising from the hire purchase agreement. Thus, the lessor had a better right to the air-cond. unit. “The chargee was not entitled to the equipment affixed to the land as there was a retention of title clause in favour of the plaintiffs”

MBF Finance v Global PacificTextiles S/B & Anor. [1993] Issue: Whether 2 sets of dyeing machines obtained under an ‘equipment rental’ agreement and affixed to the land are considered part of the land? There was a retention of title clause. Defendant defaulted in paying the rental for the equipment and the lessor terminated the agreement and sought to remove the machines from the land. Defendant and chargee objected claiming the machines had become part of the land. Held: the retention of title clause rendered the machines to continue as chattels although attached to the land. Since the machines were installed in the factory temporarily, their removal would not cause material injury to the land. What is the position of a semi-wooden hut used temporarily? Billing v Pill [1954] 1 QB 70 Position of chairs in a cinema Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 seats secured to the floor by screws, a patent screen covered with cloth fresco paintings, and advertising boards outside the hall are not 'fixtures' in a cinema hall.

Exceptions to the law of fixtures 1. Tenants fixtures o Trade fixtures o Agricultural fixtures o Domestic fixtures 2. Malay wooden house Tenant’s fixtures Spyer v Phillipson [1931] Held: A tenant has the right to remove his fixtures provided no substantial damage was done to the premises. Smith v City Petroleum [1940] 1 All ER 260, The tenant must exercise his right to remove his fixtures during the tenancy period or a reasonable time after the tenancy ends, otherwise the fixtures may become part of the land and belongs to the landlord. Held: A tenant could remove petrol pumps from the land because they were trade fixtures and could easily removed since they were only bolted to the land. However, it was held that the petrol tanks could not be removed because they have become an integral part of the land and could not easily detached. Malay wooden house

An exception to the law of fixtures based on custom. Re Tiambi bt Ma’amin (1904) Innes 285 A Malay wooden house is moveable property and thus, a chattel and can be removed. Kiah v Som [1953] A Malay traditional wooden house built on stilts are regarded as personalty by proved custom and not subject to the English law of fixtures....