DEFINITION OF LAND UNDER NLC

DEFINITION OF LAND

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.

The use of the word ‘includes’ in the definition given in section 5 indicates that the definition of land so given is not exclusive.

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.

2. To determine the right of chargee banks over the land charged to them as security.

Cases often arise under paragraph (d) on the issue whether it is a fixture or chattel. If the item is a fixture it will form part of 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

Fixtures	Chattel
- an item that is attached to the land and immovable. - shall form part of land	- an item even if attached to the land, it is removable. - shall not form part of land

The English law of fixtures Laid 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:

• Degree of annexation test

• Purpose/object of annexation test

BOTH tests must be applied

Degree of annexation test

It is 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)

If an article is affixed to the land even slightly à the presumption is that it is a fixture.
If an article is attached to the land by its own weight à remains a chattel.

The Damage Factor

If the removal of the article would result in damage to the article à the presumption is that it is a fixture.
If the removal of the article does not result in damage to the article à 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 à 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 à 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 à 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 in Malaysia

The English law of fixtures applies to Malaysia in the case of GOH CHONG HIN v. CONSOLIDATED MALAY RUBBER (1924) 5 FMSLR 86:

April 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. The charge in possession opposed the application.

The trial judge decided in the respondent’s favour and the charge then appealed.

Held:

1. The ordinary English law of fixtures applies in this country

2. It is well settled by that law that prima facie machinery affixed to earth becomes fixture and part of the land

3. Even if the machinery was set up after the date of the charge, it nevertheless accrued to the land and became part of the chargee’s security.

THE SHELL COMPANY OF THE FEDERATION OF MALAYA LTD v COMMISSIONER OF THE FEDERAL CAPITAL OF KUALA LUMPUR [1964] 30 MLJ 302

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.

Held : The underground tanks are fixtures and therefore are land within the definition of land under NLC

SOCFIN CO LTD v CHAIRMAN, KLANG TOWN COUNCIL [1964] 1 MLJ 325

The respondent in determining the annual value of the appellant's holdings for rating took into

account the bulk storage tanks standing thereon.

The storage tanks were used for storing palm oil & they were vertical cylinders resting on pre-cast concrete pillars which stood freely on a reinforced concrete platform foundation. The tanks themselves consisted of pre-cast bottom, side & roof steel plates which were assembled & riveted on site to form the bulk storage tanks. The platform foundation rested on prepared ground. The appellant's contended that the tanks were not rateable since they were neither "land" nor "building'.

HELD:

(1) The storage tanks were buildings, being structures connected with platforms & pillars & were accordingly rateable;

(2) The storage tanks were annexed to the land for its better use &enjoyment &formed part of it & accordingly rateable;

(3) The storage tanks enhanced the value of the holdings on which they stood & as they were not machinery used for industrial purposes under Sec.2 of Town Board Enactment they were accordingly rateable on this ground also.

Court says structure is a something we build it. So, storage tanks is a building & structure are acceptable for this permit.

Effect of Retention of Title Clause

It is also called the Romalpa Clause. The clause provides that the title to the goods remains vested in the seller until fully paid by the buyer. Usually this clause is found in a hire-purchase agreement.

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

Issue:

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

a. Trade fixtures

b. Agricultural fixtures

c. 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.

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.