DEFINITION OF LAND

What is covered

1. Definition of ‘land’ under NLC

2. English Law of Fixtures: Holland v Hodgson

3. Degree of Annexation Test

4. Purpose of Annexation Test

5. Applicability in Malaysia: Goh Chong Hin v Consolidated Malay Rubber Estate

6. Effect of a Retention of Title clause

7. Exceptions to the law of fixtures

Definition of ‘land’ under NLC• S 5 NLC:

Land includes:

a) The surface of the earth and all substances forming that surface;

b) The earth below the surface and all substances therein;

c) 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;

d) All things attached to the earth or permanently fastened to anything attached to the earth, whether on or below the surface; and

e) Land covered by water.

• 1st limb• (d) all things attached to the earth or permanently

fastened to anything attached to the earth, whether on or below the surface;

• 2nd limb• (d) all things attached to the earth or permanently

fastened to anything attached to the earth, whether on or below the surface;

• whether on or below the surface

Importance of defining what constitutes land

1. To determine the right of a purchaser on certain items in a sale and purchase transaction of a piece of land.

Example• Mr A is the registered proprietor of a piece of land with a

house built on it. He wishes to sell the land to Mr B. Who has the right over all the items attached to the house on the land?

2. To determine the right of chargee banks over the land charged to them as security.Example• Mr A is the registered owner of a piece of land. He applies

for loan from a bank. As security for the loan, he charges the land to the bank. Therefore, if Mr A defaults in payment, the bank can sell the land. Who has the right over all the items attached to the house on the land?

Legal maxim on fixtures• Quicquid plantatur solo, solo cedit• "whatever is affixed to the soil belongs to the soil”• 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.

Fixtures and Chattels

FIXTURE• a fixture is an item that is attached to the land and immovable.

• shall form part of land

CHATTEL• a chattel is an item even if attached to the land, it is removable.

• shall not form part of land

The English law of fixturesLaid down in Holland v. Hodgson• (1872) L.R. 7 C.P. 328• The owner of a mill purchased some looms for use in his

mill. They were attached to the stone floor by nails driven into wooden beams. They could quite easily be removed. The owner then mortgaged the mill and failed to keep up the payments and the mill was repossessed. The question for the court was whether the looms were fixtures forming part of the land or whether they remained chattels.

• Held: The looms had become fixtures and thus formed part of the land mortgaged.

• Blackburn J introduced the degree and object of annexation test:

“Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder's yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to show that it was never intended to be part of the land, and then it does not become part of the land.”

• He continued:“…articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel."

English Law of Fixtures• Two tests to determine if an article is a fixture or a chattel:

1. Degree of annexation test

2. Purpose/object of annexation test

• BOTH tests must be applied

Degree of annexation test• An objective test on the physical attachment of the article.• Raises a prima facie finding of fact by looking at the

degree to which an article is affixed to the land.• (Raises a PRESUMPTION which can be rebutted by the

Purpose Test)

1. If an article is affixed to the land even slightly the presumption is that it is a fixture.

2. If an article is attached to the land by its own weight remains a chattel.

The Damage Factor

1. If the removal of the article would result in damage to the article the presumption is that it is a fixture.

2. If the removal of the article does not result in damage to the article cannot presume that it is a chattel but to look at the purpose

Purpose of annexation test• The prima facie finding in the Degree Test may be

strengthened or rebutted by the Purpose Test.

• Applying the degree 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:

• To enhance the value and utility of the land / for the improvement or more complete enjoyment of the land / for the use or enjoyment of the land

• Or, for the more complete 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 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 rebuts the presumption that it is a fixture.

Mather v Fraser

• “where and article is affixed by the owner of the fee, though only affixed by bolts and screws, it is to be considered part of the

land, at all events when the object of setting up the articles is to enhance the

value of the premises to which it is annexed for the purpose to which those premises

are applied”.

Application to Malaysia• The English law of fixtures applies to Malaysia• Goh Chong Hin v. Consolidated Malay Rubber (1924)

5 FMSLR 86:

Goh Chong Hin v ConsolidatedApril 1921 - Goh Chong Hin charged his land including buildings and factory to SRMS Lechman Chetty (chargee).

There were machinery in the factory. Annexed by nuts and bolts to concrete foundations sunk in the soil.

June 1921 – Goh Chong Hin executed Bill of Sale over the machinery in the factory to Consolidated Malay Rubber Estates Ltd (grantee)

October 1923 – The chargee by the consent of Goh Chong Hin took possession of the land and the factory.

December 1923 - The grantee applied for order to seize and sell the machinery by virtue of the Bill of Sale.

land machinery

Goh Chong Hin(LANDOWNER)

CHARGEEGRANTEE

(Respondent)

Item in dispute:

Machinery in the factory. Annexed by nuts and bolts to concrete foundations sunk in the soil.

• Chargee: They are fixtures!!!

• Grantee/Respondent: They are chattels!!!

the court held…

• Trial judge held in favour of grantee/respondent• The machinery chattel.

• On appeal, held:• English law of fixtures applies.• Applied the test laid down in Holland v Hodgson• The machinery fixture.

• 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.

• (Note: The respondent/grantee had failed to rebut the presumption that the machinery were fixtures.)

Points from Goh Chong Hin1. The first case in Malaysia where the court applied the English

Law of Fixtures.

Sproule CJC:

“ I have no doubt that we are to apply in this country the ordinary English law of fixtures”

2. In relationships between chargor and chargee, all fixtures whether attached before or after the date of the charge, pass to the chargee unless otherwise provided for in the charge agreement.

3. The Degree Test raises a presumption that the machinery was a fixture. So the onus of proof was on the grantee (who contended that they were chattels) to rebut the presumption.

The Shell Company v Commissioner• Underground tanks at petrol station buried two feet below

ground level, turfed over and covered with concrete.• The manner of their removal, if it has to be done, shows

how firmly the tanks are embedded in the earth:• To remove the tanks, the turf, concrete or tarmacadam is

taken up, the earth excavated, the concrete manhole boxes removed, all pipe connections unbolted and the tank, with its concrete sinker weights can then be raised with blocks and tackle.

• The tanks, when placed underground, were intended to remain there.

• Court: They are fixtures.

Effect of Retention of Title Clause

• Also called the Romalpa Clause

• Title to the goods remains vested in the seller until fully paid by the buyer.

• Usually found in a hire-purchase agreement.

Owner of article under hire-purchase agreement / Lessor

chargee

Landowner / Chargor / Lessee

Wiggins Teape (M) Sdn Bhd v Bahagia Trading Sdn Bhd• Issue:

• 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?

• There was a ‘retention of title’ clause.

• e.g. “the hirer is the absolute owner of the hired item until full payment of the purchase price”

Court 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

land air-cond.

unit

LANDOWNER(Chargor/Lessee)

CHARGOR LESSOR

Dispute:

• Lessor sought to remove the air-cond. unit from the building.

• 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.

Exceptions to the law of fixtures• There are several exceptions to the law of fixtures:

1. Custom, e.g. Malay wooden house

2. Tenants fixtures • Trade fixtures• Agricultural fixtures• Domestic fixtures

1. Custom• An exception to the law of fixtures based on custom. E.g. a Malay

wooden house by custom is moveable property even when the usual Malay plank house is built upon bricks and pillars with foundations let into the soil, the house is nevertheless a chattel.

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.

2. Tenant’s fixtures• Things which are annexed to the land for the purpose of

trade or of domestic convenience or ornament in so permanent a manner as to become part of the land and yet the tenant who has erected them is entitled to remove them during his term or within a reasonable time after its expiration.

• The law will presume that they were only put up with the intention of being severed from the land and removed by the tenant, and not for the purpose of improving the reversionary interest of the landlord.

• Note that this exception only applies to tenants (in tenant-landlord relationships), and not to landowners (chargor-chargee).

• For landowners, the law is strict to presume intention of permanent annexation.

• Mather v Fraser: “where and article is affixed by the owner of the fee, though only affixed by bolts and screws, it is to be considered part of the land, at all events when the object of setting up the articles is to enhance the value of the premises to which it is annexed for the purpose to which those premises are applied”.

• 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,

Held:

A tenant could remove petrol pumps from the land because they were trade fixtures and could be 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 be easily detached.