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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Ltd [2014] EWCA Civ 100 (14 February 2014) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2014/100.html Cite as: [2014] EWCA Civ 100 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Morgan
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE McFARLANE
and
LORD JUSTICE VOS
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PEEL LAND AND PROPERTY (PORTS NO. 3) LIMITED |
Appellant |
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- and - |
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TS SHEERNESS LIMITED |
Respondent |
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A Merrill Communications Company
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Mr Kirk Reynolds QC and Mr Greville Healey (instructed by McGuirewoods London LLP) for the Respondent
Hearing date: 20 January 2014
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Crown Copyright ©
Lord Justice Rimer :
Introduction
The facts
The terms of the lease
'ALL THAT piece or parcel of land situate at [Sheerness, Kent] shown on the plan annexed hereto and thereon edged red (hereinafter called "the Site") Together with the Buildings erected thereon or on some part or parts thereof (hereinafter called "the said premises") '
The upper case 'B' in 'the Buildings' might suggest that the words would be defined, but they are not. The site comprised about 50 acres of industrial land. The parties agree that there were three buildings on the site at the time of the lease, as was recorded in Nourse LJ's judgment in Sheerness Steel Co PLC v. Medway Ports Authority [1992] 1 EGLR 133, at 133.
' 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") '
And by clause 1(2) the tenant covenanted that:
'The Works shall be carried out in all respects in a substantial and workmanlike manner and to the reasonable satisfaction of the Lessor's Surveyor or Architect (whose fees shall be borne by the Tenant) and in accordance with:
(a) detailed plans elevations sections specifications and materials based thereon to be previously submitted to and approved in writing from time to time by the Lessor's Surveyor or Architect (whose approval shall not be unreasonably withheld or delayed) (whose fees shall be paid by the Tenant) '.
'(6) 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
(7) To keep the said premises and all other buildings erected on the said premises or on some part or parts thereof the fixtures and fittings and all additions thereto in good and substantial repair and condition and to paint such parts of the exterior thereof as are normally painted not less than once in every seven years
(11) At the end or sooner determination of the said term to yield up the said premises so repaired and maintained amended and kept as aforesaid together with all additions and improvements made thereto in the meantime and all fixtures and fittings of every kind in or upon the said premises or which during the said term may be affixed or fastened to or upon the same except tenants or trade fixtures
(13) To permit the Lessors their agents surveyors workmen and other persons to enter upon the said premises during the continuance of this lease
(c) To take inventories of the Landlord's fixtures
(d) To view the condition of the said premises and to give or leave notice in writing upon the said premises for the Tenant of all defects and wants of repair or removal of fixtures then and there found And the Tenant will within three months or as soon thereafter as may be reasonably possible after every such notice well and sufficiently repair and make good and reinstate in accordance with the covenants in that behalf hereinbefore contained all such defects and wants of repair and removal of fixtures whereof notice shall have been so given or left as aforesaid
(14) 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)
(21) (a) At all times during the continuance of the term to keep the said premises and all buildings now or hereafter to be erected thereon and the Lessors' fixtures therein insured in the full rebuilding value thereof
(b) In case the said premises or any part thereof shall at any time be destroyed or damaged by the insured risks then and as often as the same shall happen to lay out with all reasonable speed all moneys received in respect of such insurance in rebuilding and otherwise reinstating the said premises '.
'(6) 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)' (My emphasis)
The amendment substituted the emphasised words for 'the purposes of steel making steel rolling and operations ancillary thereto' in the original form of clause 2(6). One reason for it was probably because if the landlord were to consent under clause 2(14) to the premises being used other than 'for the purposes of steel making steel rolling and operations ancillary thereto', clause 2(6) in its original form would have prevented the tenant from making alterations etc in connection with such new permitted use.
The operations carried out on the premises
'76. In his report, Mr Singleton described the steel making processes which had been carried on upon the premises and for which the fixed plant had been used. The processes used scrap steel which was melted in an electric arc furnace. The molten steel was then poured into a ladle and this steel was reheated, with additives, using one of two ladle furnaces. This prepared molten steel was poured through a tundish, a refractory lined vessel, into a continuous casting machine where it was formed into the desired shape and size of a billet. The semi-molten billets were cut to the required lengths and cooled. The billets were later re-heated and processed further through the bar and rod mills. The bar mill comprised an 18 stand rolling mill where the billets were rolled smaller and stretched to the desired profile. The bar product was then cut to length and cooled. Bars that required to be further reduced to rods were passed to a 10 stand rod mill by a sophisticated conveying system. All of the above plant was serviced by electrical equipment, cooling systems, dust extraction and by cranes and other engineering equipment. Although Mr Singleton referred to the plant by reference to the 131 headings in the schedule attached to the Particulars of Claim, he stated that these were the principal parts of an integrated steelmaking plant so that the separation into numbered items belied the fact that the plant formed an integral unit. If one took away a part of that unit, then what remained ceased to be "steel recycling plant".'
We were told that the 'electric arc furnace' to which the judge there referred, one of the tenant's fixtures, is an item of plant weighing some 1,195 tonnes.
The appeal
'(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.'
'Contractual requirements to deliver up fixtures
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 the phrase in question is sufficient to exclude the tenant's right to remove tenant's fixtures will depend on the construction of the particular covenant in question. Two general principles may, however, be stated. First there is nothing unlawful in parties agreeing to modify or exclude the tenant's right to remove fixtures. Secondly, "if the landlord wishes to restrict his 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." So a covenant by the tenant to install fixtures does not in itself prevent the tenant from removing such of them as are tenant's fixtures. .'
The quotation in the penultimate sentence is identified in footnote 2 as from Lambourn v. McLellan [1903] 2 Ch 268, at 277, per Vaughan Williams LJ. The last sentence is supported in footnote 3 by references to Mowat v. Hudson Bros Ltd (1911) 105 LT 400 and Young and Others v. Dalgety Plc [1987] 1 EGLR 116.
'169. Having reviewed all of the terms of the lease, including clause 2(6), and recalling the general legal principle that a provision (which is to take away from a tenant the right which the tenant would otherwise have to remove tenant's fixtures) must be expressed in clear terms, I have to determine whether clause 2(6) is in such terms. I consider that it is not sufficiently clear from the language of clause 2(6), read in the context of the lease as a whole, that the removal of a tenant's fixture is an alteration or a change "in or to the said premises" given the definition of that phrase and the absence of any reference to fixtures in clause 2(6). It follows that clause 2(6) does not regulate the tenant's ability to remove tenant's fixtures.'
' together with all doors, locks, keys, bolts, bars, staples, hinges, iron pins, wainscots, hearths, stoves, marble and other chimney-pieces, slabs, shutters, fastenings, partitions, pipes, pumps, sinks, gutters of lead, posts, pales, rails, dressers, shelves, and all other erections, buildings, improvements, fixtures, and things which are now or which at any time during the said term shall be fixed, fastened, or belong to the said messuage and premises or any part thereof.'
The tenant became bankrupt and his trustee, in whom the term vested, proposed to sell machinery the tenant had fixed to the premises. The landlord applied to restrain its removal and sale. Kekewich J held the machinery to be covered by the general words of the covenant ('all other erections things') and found for the landlord.
'But when we find a lease of premises for the express purpose of their being used for the manufacture of boots and shoes by machinery, it is as a matter of business very difficult to believe that, if the landlord intended that the machinery should not be removable by the tenant, even when it was fixed in such a way as it is fixed here, he should not have said so in plain words. It is a very important matter, and yet machinery is not mentioned in the covenant. If the tenant's right of removal is to be restricted, the restriction must be found in the general words' [ie in the words 'and all other erections, or any part thereof'].
Vaughan Williams LJ then said that the machinery fell within neither the particular nor the general words of the covenant; nor did it fall within the latter words even if the ejusdem generis rule of interpretation was not applied, as that rule was explained in Bishop v. Elliott (1855) 11 Ex. 113 and Dumergue v. Rumsey (1863) 2 H. & C. 777. That was to the effect that (see 275):
' if you can find that the things described by particular words have some common characteristic which constitutes them a genus, you ought to limit the general words which follow them to things of that genus. In the present case all the articles which are described by the particular words have according to the natural meaning of the words the common characteristic of irremovability; and under these circumstances I think the general words should be applied only to articles which possess that characteristic.'
'It is very desirable that we should lay down such a rule that landlords and tenants may know once for all that when a house is let to a tenant for the purposes of a trade, if the landlord wishes to restrict his tenant's ordinary right to remove trade machinery or fixtures attached to the demised premises, as these machines are, so as to be more conveniently used, and not placed there as an addition or improvement to the premises, the landlord must say so in plain language. If the language used leaves the matter doubtful, the ordinary right of the tenant to remove trade fixtures will not be affected.'
'I agree with the argument of the respondents' counsel that inasmuch as the lease is ordinarily prepared by the landlord, and the Court looks very favourably on the exemption in favour of trade fixtures, if the landlord wishes to get rid of the common law privilege to remove trade machinery he must do so in clear terms.'
He referred to Lambourn v. McLellan, noted that the one thing that the catalogue of the draftsman's words had not done was to mention the machinery, and said it was therefore not surprising that the court held that the tenant was not deprived of his right to remove trade fixtures. He continued, at 333:
'If you want to get rid of the privilege to remove trade machinery you must do so in clear terms. In this case the draftsman has said in one sentence that the fixed machinery is to be left.'
Eve J also agreed. He said the true construction of clause 13 was 'reasonably plain.'
'158. Accordingly, I will apply the reasoning in [the two authorities] in this case. Applying that reasoning, the fact that the tenant was under an obligation to construct a fully equipped steelmaking plant does not say anything about the tenant's ability to remove at any point in time such parts of that plant which would be regarded as removable tenant's fixtures under the general law. In particular, an obligation to construct the plant does not mean that in law the fixtures are not removable by the tenant or that they are to be regarded as landlord's fixtures or that they are to be regarded as owned by the landlord. Having reached that conclusion, it is not necessary to consider whether it would be appropriate to distinguish between the plant which the tenant introduced into the premises in order to comply with clause 1 of the lease and plant which the tenant introduced later.'
Lord Justice McFarlane:
Lord Justice Vos :
"[n]ot at any time during the said term to make or suffer to be made any change whatsoever in or to [the Site Together with the Buildings erected thereon or on some part or parts thereof] save in connection with [the permitted purpose of steel making etc.]".