Cases - Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd

Record details

Name
Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd
Date
[2013]
Citation
EWHC 1658 (Ch)
Keywords
Landlord and tenant
Summary

The landlord sought a declaration as to ownership of certain plant on its land, and an order restraining the tenant from selling, disposing of, or otherwise dealing with, the plant.

The lease contained a covenant requiring the tenant to build a steel mill, which it did in 1973. The lease stated that the tenant could only make alterations to the premises in certain circumstances.

The dispute concerned entitlement to 126 items of plant within the premises, that included articles like:

  • cranes running on rails fixed to the building;
  • a chain hoist mounted on an overhead trolley;
  • furnaces and associated plant;
  • 95-tonne ladles to transport molten steel to and from the furnaces;
  • an old, obsolete, continuous casting machine;
  • systems to provide cooling water to the production plant; and
  • pumps, towers and screens.

Expert witnesses had separated the items into 3 categories of complexity of removal.

The simplest category envisaged removal by a small team of maintenance engineers using hand tools and some lifting equipment with an average cost of removal of £1,000 per item. The third category envisaged massively complicated removal involving specialist contractors and a cost of some £3.5m.

The landlord’s case was that the tenant had no right to remove the items because it had covenanted to erect a building and to equip it as a steel mill, and that any removal of plant would be an alteration contrary to the lease.

The tenant’s case was that the lease did not override its entitlement under the general law to remove chattels and removable fixtures. The issue was whether the items had become fixtures and, if so, whether the tenant  was entitled to sever them and restore them to chattel status.

The court was required to consider:

  1. the legal distinction between chattels and fixtures; and
  2. the effect of the terms of the lease on whatever conclusions would otherwise be appropriate.

The court decided that the right way to approach the issues in this case was to establish, first, whether any of the items were chattels and if not, whether they met the established requirements as to removability. The latter question involved making factual findings as to:

  • the physical extent of the item;
  • whether it had been installed for the purpose of the tenant's trade;
  • whether it could be physically severed and how difficult severance would be;
  • the effect of severance on both the severed item and the items left behind, and whether those effects were remediable; and
  • whether the severed item retained its essential character and utility.

Most of the cranes were chattels, but the tracks on which they ran were fixtures. The tracks were, however, removable tenant's fixtures because they could be removed without undue difficulty and without damage to themselves or to the land. Some of the cranes were also removable tenant's fixtures.

The remaining items were accepted to be fixtures:

  • The furnace and associated fixed plant were removable tenant's fixtures, but the mezzanine floor, which was laid on steel supports fixed to building columns was not.
  • A gas-fired furnace, that would be substantially destroyed in the removal process was not removable.
  • The ladles were removable and the continuous casting machine was also removable despite being in the third category of difficulty of removal; an item could not cease to be removable because of its age and obsolescence.

The court made findings about all the disputed items of plant. The majority were found to be removable.

A contractual obligation to construct a fully equipped steel-making plant did not mean that, in law, the fixtures were not removable, or that they were to be regarded as the landlord's fixtures.

Nor was it sufficiently clear from the language of the lease that removal of the tenant's fixtures was an alteration or change to the premises. Therefore the relevant clause could not regulate the tenant's ability to remove them.