Clive Faggotter v Dowell Australia Limited No. SCGRG 92/2350 Judgment No. 3799 Number of Pages 7 Landlord and Tenant

[1993] SASC 3799

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PERRY J.

CWDS
Landlord and tenant - fixtures and fittings - Appeal from decision of Commercial Tribunal that an air-conditioning unit installed in shop premises was a fixture which, on termination of the lease, remained the property of the landlord - the unit was a 'split' system, the compressor being mounted in a bracket or framework bolted onto the rear of the premises, and the fan unit being mounted above a suspended ceiling in the shop - copper pipes connected the compressor with the fan unit, and ducting installed above the ceiling distributed cool air to registers in the ceiling - held that the characterisation of the unit as a fixture was correct.
Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR(NSW) 700 and Pan Australian Credits (SA) Ptv Ltd v Krolim Pty Ltd (1981) 27 SASR 353, considered.

HRNG ADELAIDE, 14 January 1993 #DATE 26:3:1993
Counsel for appellant:         Ms A Simpson
Solicitors for appellant:     Adams Kandelaars
Counsel for respondent:         Mr G D Edmonds-Wilson
Solicitors for respondent:     Baker O'Loughlin

ORDER
Appeal dismissed.

JUDGE1 PERRY J. This is an appeal pursuant to s.20 of the Commercial Tribunal Act 1982 against the order of the Commercial Tribunal made on 22 September 1992, by which the Tribunal ordered that the appellant pay to the respondent the sum of $8,256. 2. The respondent, as lessee of shop premises situated at 157 Main North Road, Salisbury East, initiated a claim in the Commercial Tribunal pursuant to s.68 of the Landlord and Tenant Act, seeking payment of damages, unpaid rent and other outgoings against the appellant, who was sub-tenant to the respondent of the premises in question, following the cessation of the sub-tenancy and the appellant's vacation of the premises in July 1991. From the premises, the appellant conducted a business known as "Fish Haven". When the appellant vacated the premises, he removed a partition wall, a suspended insulated ceiling, and an air-conditioning plant, including ducting which had been installed above the ceiling. The issue before the Commercial Tribunal was whether the appellant was in breach of the sub-lease in doing so. 3. On the hearing of the appeal before this Court, the appellant abandoned the appeal insofar as it related to all of the items the subject of the claim against it by the respondent, save for the claim with respect to the air-conditioning unit. The amount awarded by the Commercial Tribunal for the removal by the appellant of the air-conditioning unit was $3,000. 4. At all relevant times, the respondent held the subject premises on lease from the registered proprietor, Scott Pools Pty Ltd. The lease between it and Scott Pools, current at the relevant time, was for a term commencing on 1 February 1990. One of the covenants of the head lease was as follows: "1.2 "demised premises" shall mean and include the land or part thereof hereinbefore described and all buildings and improvements from time to time erected thereon and where the context so requires or admits shall mean and include all the Lessor's fixtures fittings plant equipment (including all air conditioning plant if any) and chattels installed therein or thereon and all the services thereto or therein and any alterations additions improvements or modifications made thereto from time to time." 5. Among the lessor's covenants was a further provision as follows:
    "3.2 Lessee's Property That the Lessee may at or prior to the
    expiration of the Lease take remove and carry away from the
    demised premises all fixtures fittings plant equipment or other
    articles upon the demised premises in the nature of trade or
    tenant's fixtures brought upon the demised premises by the
    Lessee (other than the Lessor's fixtures and fittings) but the
    Lessee shall in such removal do no damage to the demised
    premises and shall forthwith make good any damage which the
    Lessee may occasion thereto." (The emphasis is mine.) 6. Before the appellant came into possession of the premises, they were sub-let to a Mr Fossleitner for a term commencing on 1 April 1985. Mr Fossleitner conducted the Fish Haven business, which he sold to the appellant, together with an assignment of the sub-lease, as from 2 March 1987. The assignment of the sub-lease was expressly agreed to be upon the terms and conditions struck between the respondent and Mr Fossleitner. Those terms and conditions were set out in a letter from the respondent to Mr Fossleitner dated 1 April 1985. The relevant part of the letter reads as follows:
    "Agreement between Dowell Australia Ltd (Dowell) and
    T. Fossleitner (Fish Haven), to sublet portion of premises at
    1579 Main North Road, Salisbury East.
    1. The portion to be sublet is approx. 9m x 8m in the southern
    end of the premises as presently partitioned.
    2. The sublet period shall commence on 1st April, 1985 and
    expire on 31st March 1986. Extension of the period will be
    granted provided the lease held by Dowell with the owners is
    itself renewed under existing option conditions which provide
    for a further two year period to 31st March 1988.
    3. The sublet rent shall be $295.00 per calendar month, payable
    monthly in advance.
    4. Termination of extension of this agreement may be effected by
    one months notice in writing prior to expiry date.
    5. The sublet portion may not be transferred to any other party
    without first obtaining approval in writing from Dowell.
    6. The sublet portion shall only be used as a Retail outlet for
    the sale of goods and services normally provided by Fish Haven.
    7. Dowell shall pay all Council Rates, Land Tax, and E. and W.S.
    charges relating to the property, other than excess water
    charges which shall be apportioned according to agreed usage.
    8. Fish Haven shall pay all Electricity and Telephone charges
    for those services to the sublet portion.
    9. Fish Haven shall arrange all alterations, provision of
    services, Council Approvals, fixtures and fittings, necessary to
    the proper conduct of their business, at their cost.
    10. All alterations and fixtures once installed shall remain the
    property of the owners of the building, and may not be removed
    or altered on termination.
    11. Fittings may be removed on termination provided their
    removal does not leave any residual damage.
    12. Dowell will allow Fish Haven use of Warehouse toilet and
    washing facilities by access through the partition door which
    will be accessible during Dowell business hours.
    13. The sublet rent shall be adjusted in the same proportion and
    at the same time as any adjustment under Dowell's Lease with the
    owners. This is prescribed as being Annually on 31st March in
    each year and based on the C.P.I. published rate.
    14. On termination all signwriting must be effaced and removed
    from the premises by Fish Haven, and any damage rectified.
    15. All obligations to Dowell under its lease with the owners
    shall equally apply to Fish Haven for its sublet portion as
    regards proper maintenance, fair wear and tear, and damage
    responsibility." 7. When Mr Fossleitner went into possession in 1985, he took the premises over from the former tenants, described in the proceedings as Comfort Engineering. At the time, Comfort Engineering sold the partition wall and suspended ceiling, which they had installed at their own expense, to the respondent. They owned the air-conditioning unit which was at that stage uninstalled, and was standing in the shop as a demonstration unit. They sold the unit to Mr Fossleitner, and at his expense installed it in the subject premises. 8. In turn, when Mr Faggotter took the premises over from Mr Fossleitner, a document headed "Client Inventory", which listed a number of items of plant taken over with the business by the appellant, included an item "reverse cycle air-conditioner (Quietline Carrier)". As is pointed out by the Commercial Tribunal in its reasons for decision, this undoubtedly led the appellant to believe that he had purchased the air-conditioner from Mr Fossleitner. This in turn gave rise to the question whether it was a fitting over which Mr Fossleitner had right of disposal, or whether it was a fixture the property in which vested in the respondent as head lessee. 9. In dealing with the matter, the Commercial Tribunal in its reasons made the following findings and observations:
    "To meet Mr Fossleitner's requirement, the fan coil unit was
    mounted above the ceiling and fitted with exit duct works to
    direct the air flow through ceiling mounted registers into the
    shop area. Refrigerant piping was installed between the
    compressor/condenser unit bolted to the exterior wall. In our
    view the system then comprised a fixture. See Re May Bros
Limited (1929) SASR at 512 and following per Murray CJ, and Pan
Australian Credits (S.A) Pty Ltd (1981) 27 SASR 353. Such a
    fixture, under the general rule of law must be delivered up to
    the landlord unless the tenant is entitled to remove them by
    force of some special provision. The principal tenant, in this
    case the applicant is therefore obliged to deliver such air
    conditioning equipment to the landlord should he so demand. The
    applicant is therefore entitled to receive payment from the
    respondent in order to accede to such a demand. Some costs that
    were given in evidence by Mr Bogers of Comfort Engineering are:
    - Complete replacement with $4,500 - $5,000 new unit and
    ductwork - Compressor(/Condenser?) unit $3,000 - Second hand
    unit - if $1,000 available The landlord, Scott Pools, could not
    reasonably expect the respondent to provide a complete new
    system. It is therefore determined that the respondent should
    pay to the applicant the sum of $4,500 less one third, amounting
    to $3,000 in compensation for the removal of the air
    conditioning system." 10. In his Notice of Appeal, the appellant asserts that the Tribunal "erred in fact and in law in holding that the air-conditioning unit installed in the premises comprised a fixture", and goes on to plead:
    "That the Tribunal should have found as a matter of fact and law
    that
    (a) the property in the air-conditioning unit remained in the
    appellant;
    (b) the appellant was entitled to remove the air-conditioning
    unit at the termination or expiration of the agreement between
    the parties." 11. Although at times during the course of her argument, Ms Simpson for the appellant seemed to suggest that the matter was not necessarily governed by the agreement which I have set out above between the respondent and Mr Fossleitner, entered into in April 1985, it seems to me that the statement of agreed facts upon which the matter was argued before the Commercial Tribunal puts that issue beyond doubt. In the course of the statement of agreed facts there appears the following:
    "1. Dowell Australia Limited ("the landlord") is the lessee
    of the whole of the land situated at and known as 157 Main North
    road, Salisbury East in the State of South Australia ("the
    land"), of which Scott Pools Pty Ltd is the registered
    proprietor and lessor.
    2. By an agreement to lease dated 1 April 1985 ("the sub-lease")
    executed by the landlord and T Fossleitner ("the sub-lessee")
    the landlord agreed to lease to the sub-lessee trading as Fish
    Haven ("the business") a portion of the land for fish sales
    ("the premises").
    3. On about 1 April 1985 the sub-lessee entered into occupation
    of the premises in accordance with the terms of the sub-lease.
    4. By letter dated 23 January 1987 the sub-lessee requested that
    the sub-lease be transferred to Clive Faggotter ("the tenant")
    as the purchaser of the business.
    5. By letter dated 13 February 1987 to the tenant's solicitors,
    Lempriere Abbott McLeod, the landlord confirmed its consent to
    the transfer of the sub-lease to the tenant.
    6. The tenant entered into occupation of the premises on or
    about 2 March 1987 and in accordance with the terms of the
    sub-lease.
    7. The premises are shop premises within the meaning of the
    Landlord and Tenant Act (as amended) ("the Act").
    8. The sub-lease as transferred to the tenant was a commercial
    tenancy agreement within the meaning of the Act.
    9. On 31 July 1991 the tenant vacated the premises and the
    sub-lease was terminated.
    10. ......." (The emphasis is mine.) 12. Returning then to the terms of the sub-lease, although Fish Haven was to arrange: "...all alterations ......... fixtures and fittings, necessary to the proper conduct of their business, and at their cost." (Clause 9) under clause 10: "All alterations and fixtures once installed shall remain the property of the owners of the building, and may not be removed or altered on termination." 13. Fittings, on the other hand, might be removed by Fish Haven on termination, pursuant to clause 11: "...provided their removal does not leave any residual damage." 14. The short question then is whether the air-conditioning installation was a "fixture", with the result that upon installation it became and remained the property of the owners of the building, or whether it was a "fitting" within the meaning of clause 11 of the sub-tenancy agreement, in which case it was open for the sub-tenant to remove it. 15. In the passage which I have cited from the reasons given by the Tribunal, there is a short description of the manner in which the air- conditioning unit was installed. More detail was given in the evidence of a Mr Bogers, the managing director of Comfort Engineering, which, as I have said, sold the unit to Mr Fossleitner and installed it in the premises before the latter entered into possession. In his evidence, Mr Bogers described the unit as a split system, Carrier, two and a quarter horse power, single phase unit. The unit was in two parts, the compressor being mounted outside the premises, and the fan unit above the ceiling inside the premises. The outside unit was mounted in a sheetmetal frame bolted to the outside wall at the rear of the building. The fan unit was installed in a bracket or framework suspended from the roof timbers above the ceiling. The compressor was connected to the fan unit by copper piping, which ran up the wall and across the ceiling. The fan unit was then, in turn, connected by ducting to registers in the ceiling, through which the cool air was distributed. 16. It is not without significance that in order to remove the air- conditioning unit, the appellant was obliged to remove the partitioning wall and then dismantle the ceiling. 17. In my opinion, the Tribunal correctly found that the air-conditioning unit was a fixture. In reaching that view, I have been assisted by the decision of this Court in Pan Australian Credits (SA) Pty Ltd v Kolim Pty Ltd
(1981) 27 SASR 353, and in particular by the passage in the judgment of Jordan CJ in Australian Provincial Assurance Co Ltd v Coroneo cited by Matheson J in the course of his judgment in Pan Australian Credits (355):
    "It is widely acknowledged that one of the clearest expositions
    of the principles applicable in determining whether an article
    is a fixture is to be found in the following passage of the
    judgment of Jordan CJ in Australian Provincial Assurance Co Ltd
v Coroneo (1938) 38 SR(NSW) 700 at 712: 'A fixture is a thing
    once a chattel which has become in law land through having been
    fixed to land. The question whether a chattel has become a
    fixture depends upon whether it has been fixed to land, and if
    so for what purpose. If a chattel is actually fixed to land to
    any extent, by any means other than its own weight, then prima
    facie it is a fixture; and the burden of proof is upon anyone
    who asserts that it is not: if it is not otherwise fixed but is
    kept in position by its own weight, then prima facie it is not a
    fixture; and the burden of proof is on anyone who asserts that
it is: Holland v Hodgson (1872) LR 7 CP 328 at 335. The test of
    whether a chattel which has been to some extent fixed to land is a
    fixture is whether it has been fixed with the intention that it
    shall remain in position permanently or for an indefinite or
substantial period: Holland v Hodgson (1872) LR 7 CP 328 at 336, or
    whether it has been fixed with the intent that it shall remain in
    position only for some temporary purpose: Vaudeville Electric Cinema
Ltd v Muriset (1923) 2 Ch 74 at 87. In the former case, it is a
    fixture, whether it has been fixed for the better enjoyment of the
    land or building, or fixed merely to steady the thing itself, for
    the better use or enjoyment of the thing fixed: Holland v Hodgson
(supra), Reynolds v Ashby &; Son (1904) AC 466, Colledge v H.C.
Curlett Construction Co Ltd (1932) NZLR 1060, Benger v Quatermain
    (1934) NZLR s.13. If it is proved to have been fixed merely for a
    temporary purpose it is not a fixture: Holland v Hodgson (1872) LR 7
    CP at 337; Vaudeville Electric Cinema Ltd v Muriset (supra). The
    intention of the person fixing it must be gathered from the purpose
    for which and the time during which user in the fixed position is
contemplated: Hobson v Gorringe (1897) 1 Ch 182, Pukuweka Sawmills
Ltd v Winger (1917) NZLR 81. If a thing has been securely fixed, and
    in particular if it has been so fixed that it cannot be detached
    without substantial injury to the thing itself or to that to which
    it is attached, this supplies strong but not necessarily conclusive
    evidence that a permanent fixing was intended: Holland v Hodgson
(supra); Spyer v Phillipson (1931) 2 Ch 183 at 209-210. On the other
    hand, the fact that the fixing is very slight helps to support an
    inference that it was not intended to be permanent. But each case
    depends on its own facts'." 18. A number of other cases were cited to me during the course of argument. But as Jordan CJ said in the passage which I have just set out, they turn on their own facts. Ms Simpson for the appellant has put everything that can be said in favour of the appellants, but without pausing to deal with every point made by her, which I have carefully considered, it seems to me that, given the terms of the sub-lease and the degree of annexation of the air-conditioning unit, the conclusion reached by the Commercial Tribunal was inevitable. 19. The appeal is dismissed. I will hear the parties as to costs.