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|Judgments - Elitestone Ltd. v. Morris and Another
I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Lloyd of Berwick and Lord Clyde. For the reasons which they give I would allow the appeal and restore the order of the assistant recorder.
LORD LLOYD OF BERWICK
The plaintiffs, Elitestone Ltd., are the freehold owners of land known as Holt's Field, Murton, Near Swansea. The land is divided into 27 lots. The defendant, Mr. Morris, is the occupier of a chalet or bungalow on Lot No. 6. It is not known for certain when the chalet was built. But it seems likely that it was before 1945. Mr. Morris has lived there since 1971.
The plaintiffs acquired the freehold in 1989 with a view to redevelopment. On 30 April 1991 they issued proceedings in the Swansea County Court claiming possession against all 27 occupiers. Five lead actions were selected, including that in which Mr. Morris was defendant. They came on for trial before Mr. Assistant Recorder Bidder in November 1994. The assistant recorder had a number of issues to decide. He dealt with them in a most impressive manner. So far as Mr. Morris is concerned, his defence was that he is a tenant from year-to-year, that he occupies the premises as his residence, and is therefore entitled to the protection of the Rent Act 1977. He claims a declaration to that effect.
The assistant recorder held, correctly, at the end of what was necessarily a very lengthy judgment that the question in Mr. Morris's case turned on whether or not the bungalow formed part of the realty. If it did, then Mr. Morris was entitled to his declaration.
Having visited the site, the assistant recorder had this to say:
The Court of Appeal disagreed (unreported), 28 July 1995, Court of Appeal (Civil Division) Transcript No. 1025 of 1995. Aldous L.J., who gave the leading judgment, was much influenced by the fact that the bungalow was resting by its own weight on concrete pillars, without any attachment. He was also influenced by the uncertainty of Mr. Morris' tenure. Although Mr. Morris had been in occupation since 1971, he was required to obtain an annual "licence." At first the licence fee was £3 a year. It rose to £10 in 1984, then to £52 in 1985, and finally to £85 in 1989. In 1990 the plaintiffs required a licence fee of £1,000: but Mr. Morris, and the other occupiers declined to pay.
On these facts Aldous L.J. inferred that it was the common intention of the parties that the occupiers should acquire the ownership of their bungalows, but the ownership of the sites should remain in the freeholders. On that footing Mr. Morris' bungalow was to be regarded as a chattel. It was never annexed to the soil, so it never became part of the realty. It followed that the tenancy did not include the bungalow, and Mr. Morris was not a protected tenant.
Unlike the judge, the Court of Appeal did not have the advantage of having seen the bungalow. Nor were they shown any of the photographs, some of which were put before your Lordships. These photographs were taken only very recently. Like all photographs they can be deceptive. But if the Court of Appeal had seen the photographs, it is at least possible that they would have taken a different view. For the photographs show very clearly what the bungalow is, and especially what it is not. It is not like a Portakabin, or mobile home. The nature of the structure is such that it could not be taken down and re-erected elsewhere. It could only be removed by a process of demolition. This, as will appear later, is a factor of great importance in the present case. If a structure can only be enjoyed in situ, and is such that it cannot be removed in whole or in sections to another site, there is at least a strong inference that the purpose of placing the structure on the original site was that it should form part of the realty at that site, and therefore cease to be a chattel.
There were a number of other issues in the Court of Appeal. I need only mention one. This was an argument by the plaintiffs that Mr. Morris was estopped by convention from denying that the bungalow was a chattel. There was, so it was said, a common assumption that the chalets were owned separately from the land, since each occupier purchased his own chalet from the previous occupier (Mr. Morris paid £250 for No. 6 in 1971), and each occupier paid an annual licence fee to the freeholders. Since the Court of Appeal held that the bungalow was a chattel, they did not find it necessary to deal with the estoppel argument. The plaintiffs might have renewed the argument before your Lordships. But in the meantime the House had given judgment in Melluish v. B.M.I. (No. 3) Ltd.  A.C. 454. In that case Lord Browne-Wilkinson said, at p. 473:
If an express agreement cannot prevent a chattel from becoming part of the land, so long as it is fixed to the land, it is obvious that a common assumption cannot have that effect. It is not surprising, therefore, that Mr. Thom abandoned his estoppel argument.
Thus the sole remaining issue for your Lordships is whether Mr. Morris' bungalow did indeed become part of the land, or whether it has remained a chattel ever since it was first constructed before 1945.
It will be noticed that in framing the issue for decision I have avoided the use of the word "fixture." There are two reasons for this. The first is that "fixture", though a hallowed term in this branch of the law, does not always bear the same meaning in law as it does in everyday life. In ordinary language one thinks of a fixture as being something fixed to a building. One would not ordinarily think of the building itself as a fixture. Thus in Boswell v. Crucible Steel Co.  1 K.B. 119 the question was whether plate glass windows which formed part of the wall of a warehouse were landlord's fixtures within the meaning of a repairing covenant. Atkin L.J. said, at p. 123:
Yet in Billing v. Pill  1 Q.B. 70, 75 Lord Goddard C.J. said:
There is another reason. The term fixture is apt to be a source of misunderstanding owing to the existence of the category of so called "tenants' fixtures", (a term used to cover both trade fixtures and ornamental fixtures) which are fixtures in the full sense of the word (and therefore part of the realty) but which may nevertheless be removed by the tenant in the course of or at the end of his tenancy. Such fixtures are sometimes confused with chattels which have never become fixtures at all. Indeed the confusion arose in this very case. In the course of his judgment Aldous L.J. quoted at length from the judgment of Scott L.J. in Webb v. Frank Bevis Ltd.  1 A.E.R. 247. The case concerned a shed which was 135 feet long and 50 feet wide. The shed was built on a concrete floor to which it was attached by iron straps. Having referred to Webb v. Frank Bevis Ltd. and a decision of Hirst J. in Deen v. Andrews  1 E.G.L.R. 262 Aldous L.J. continued:
A little later he said: "Unit 6 was just as much a chattel as the very large shed was in the Webb case and the greenhouse in Deen v. Andrews."
But when one looks at Scott L.J's. judgment in Webb v. Frank Bevis Ltd. it is clear that the shed in question was not a chattel. It was annexed to the land, and was held to form part of the realty. But it could be severed from the land and removed by the tenant at the end of his tenancy because it was in the nature of a tenant's fixture, having been erected by the tenant for use in his trade. It follows that Webb v. Frank Bevis Ltd. affords no parallel to the present case, as indeed Mr. Thom conceded.
For my part I find it better in the present case to avoid the traditional two-fold distinction between chattels and fixtures, and to adopt the three-fold classification set out in Woodfall, Landlord and Tenants, Release 36 (1994), vol. 1, pp. 13/83, para. 13.131:
So the question in the present appeal is whether, when the bungalow was built, it became part and parcel of the land itself. The materials out of which the bungalow was constructed, that is to say, the timber frame walls, the feather boarding, the suspended timber floors, the chip-board ceilings, and so on, were all, of course, chattels when they were brought onto the site. Did they cease to be chattels when they were built into the composite structure? The answer to the question, as Blackburn J. pointed out in Holland v. Hodgson (1872) L.R. 7 C.P. 328, depends on the circumstances of each case, but mainly on two factors, the degree of annexation to the land, and the object of the annexation.
Degree of annexation
The importance of the degree of annexation will vary from object to object. In the case of a large object, such as a house, the question does not often arise. Annexation goes without saying. So there is little recent authority on the point, and I do not get much help from the early cases in which wooden structures have been held not to form part of the realty, such as the wooden mill in Rex v. Otley (1830) 1 B. & Ad. 161, the wooden barn in Wansborough v. Maton (1836) 4 Ad. & El. 884 and the granary in Wiltshear v. Cottrell (1853) 1 E. & B. 674. But there is a more recent decision of the High Court of Australia which is of greater assistance. In Reid v. Smith  3 C.L.R. 656, 659 Griffiths C.J. stated the question as follows:
The Supreme Court of Queensland had held that the house remained a chattel. But the High Court reversed this decision, treating the answer as being almost a matter of common sense. The house in that case was made of wood, and rested by its own weight on brick piers. The house was not attached to the brick piers in any way. It was separated by iron plates placed on top of the piers, in order to prevent an invasion of white ants. There was an extensive citation of English and American authorities. It was held that the absence of any attachment did not prevent the house forming part of the realty. Two quotations, at p. 667, from the American authorities may suffice. In Snedeker v. Warring, 2 Kernan 178 Parker J. said:
In Goff v. O'Conner, 16 Ill. 422, the court said:
Purpose of annexation
Many different tests have been suggested, such as whether the object which has been fixed to the property has been so fixed for the better enjoyment of the object as a chattel, or whether it has been fixed with a view to effecting a permanent improvement of the freehold. This and similar tests are useful when one is considering an object such as a tapestry, which may or may not be fixed to a house so as to become part of the freehold: see Leigh v. Taylor  A.C. 157. These tests are less useful when one is considering the house itself. In the case of the house the answer is as much a matter of common sense as precise analysis. A house which is constructed in such a way so as to be removable, whether as a unit, or in sections, may well remain a chattel, even though it is connected temporarily to mains services such as water and electricity. But a house which is constructed in such a way that it cannot be removed at all, save by destruction, cannot have been intended to remain as a chattel. It must have been intended to form part of the realty. I know of no better analogy than the example given by Blackburn J. in Holland v. Hodgson, L.R.7 C.P.P. 328, 335:
Applying that analogy to the present case, I do not doubt that when Mr. Morris' bungalow was built, and as each of the timber frame walls were placed in position, they all became part of the structure, which was itself part and parcel of the land. The object of bringing the individual bits of wood onto the site seems to be so clear that the absence of any attachment to the soil (save by gravity) becomes an irrelevance.
Finally I return to the judgment of the Court of Appeal. I need say no more about the absence of attachment, which was the first of the reasons given by the Court of Appeal for reversing the assistant recorder. The second reason was the intention which the court inferred from the previous course of dealing between the parties, and in particular the uncertainty of Mr. Morris' tenure. The third reason was the analogy with the shed in Webb v. Frank Bevis Ltd.  1 All E.R. 247, and the greenhouse in Deen v. Andrews  1 E.G.L.R. 262.
As to the second reason the Court of Appeal may have been misled by Blackburn J.'s. use of the word "intention" in Holland v. Hodgson, L.R.7 C.P. 328. But as the subsequent decision of the Court of Appeal in Hobson v. Gorringe  1 Ch. 182 made clear, and as the decision of the House in Melluish v. B.M.I. (No. 3) Ltd.  A.C. 454 put beyond question, the intention of the parties is only relevant to the extent that it can be derived from the degree and object of the annexation. The subjective intention of the parties cannot affect the question whether the chattel has, in law, become part of the freehold, any more than the subjective intention of the parties can prevent what they have called a licence from taking effect as a tenancy, if that is what in law it is: see Street v. Mountford  A.C. 809.
As for the third of the reasons, I have already pointed out that Webb v. Frank Bevis Ltd. does not support the Court of Appeal's conclusion, because the shed in that case was held to be a fixture, albeit a fixture which the tenant was entitled to remove.
In Deen v. Andrews the question was whether a greenhouse was a building so as to pass to the purchaser under a contract for the sale of land "together with the farmhouses and other buildings." Hirst J. held that it was not. He followed an earlier decision in H.E. Dibble Ltd. v. Moore  2 Q.B. 181 in which the Court of Appeal, reversing the trial judge, held that a greenhouse was not an "erection" within section 62(1) of the Law of Property Act 1925. I note that in the latter case Megaw L.J., at p. 187G, drew attention to some evidence "that it was customary to move such greenhouses every few years to a fresh site." It is obvious that a greenhouse which can be moved from site to site is a long way removed from a two bedroom bungalow which cannot be moved at all without being demolished.
For the above reasons I would allow this appeal and restore the order of the assistant recorder.