Scottish Court of Session Decisions

At advising on 23rd May 1985,—

LORD PRESIDENT (Emslie).—In this action the principal declarators sought by the pursuers are that they are entitled to the proceeds of sale of two very large scrap shears which they had supplied under hire-purchase agreements to Alexander David Stewart, a scrap metal merchant, and which had been installed by Stewart in the scrap yard of which he was the heritable proprietor. The pursuers are a finance company. The defenders are first, the trustee in the sequestration of Stewart, second, Langtry Investment Company Ltd., another finance company, the holders of a standard security over the subjects in which the shears had been installed, and third, the trustees under a deed of trust for creditors which Stewart had granted shortly before the date of his sequestration.

The events which gave rise to the action can be summarised briefly:

1. (i) In 1977 the pursuers supplied to Stewart under a hire-purchase agreement a second-hand Lindemann scrap shear and press, model Lugam T.A. 42. It weighed between 90 and 100 metric tonnes. This was the larger of the two very large scrap shears which have been mentioned. In terms of the agreement the balance of hire fell to be paid by 36 monthly instalments and it was provided, inter alia, that until the shears had been "purchased" by Stewart in accordance with the agreement the pursuers would retain their rights of ownership, that Stewart would do nothing to jeopardise or prejudice these rights of ownership, and that in the event of default by Stewart the pursuers would have the right to terminate the hiring and the agreement and to recover the shears.

2. (ii) In 1979 the pursuers supplied to Stewart the smaller of the two very large shears, a second-hand Lindemann luges shear. It weighed between 60 and 70 metric tonnes. As in the case of the larger shear the supply was on hire-purchase and the agreement was in all essential respects the same as that applicable to the larger shear.

3. (iii) Each of the scrap shears, on delivery to Stewart's yard in the large parts to which it was designed to be broken down for movement from one site to another, was duly installed in specially designed foundations, the cost of which was about one-third of the cost of the shear. The foundations were substantial and the shear was secured to them by a number of large bolts embedded in the concrete. The foundations required to be substantial and the shear required to be secured to them by these bolts to prevent the shear destroying itself and the foundations by vibration when in operation. Power supplies were permanently connected to each shear. To each, pieces of scrap steel plate were welded to protect the shear from damage by slewing loads. In the case of the smaller shear a metal roof covering or shelter was erected over the rear end although this was not essential for the protection of this shear which was hand-operated. This roof or shelter supported a small control hut. In the case of the larger shear a substantial shelter with brickwork and roof was built around it. The horizontal beams thereof were welded to the body of the shear for greater structural stability. This shelter was necessary for the protection of the machine and its limit switches and solenoid valves from the weather. When the shelter for the larger shear was constructed the opportunity was taken to extend the structure for some distance to the rear to provide Stewart with a small workshop for general purposes.

4. (iv) The scrap shears were, it seems, used for the purpose of the business carried on by Stewart in his scrap yard.

5. (v) On 30th October 1980 Stewart granted to the second-named defenders, "Langtry", a standard security over the whole heritable subjects consisting of the scrap yard.

6. (vi) Early in 1981 Stewart, who had become financially embarrassed, became insolvent. He was unable to keep up the monthly hire charges for the shears, and on 9th March 1981 the pursuers terminated the hires and the two agreements.

7. (vii) On 31st March 1981 Stewart granted a trust deed for his creditors. Sequestration followed shortly.

8. (viii) About the end of March 1981 a dispute arose as to who had title to the shears which were still in their installed positions on Stewart's land. The pursuers, who had begun to take steps to sell the shears, contended that they were the owners, and that the shears had retained the moveable character which they possessed when they were supplied to Stewart. The second-named defenders, on the other hand, maintained that the shears had become fixtures and were thus heritable and subject to their security. The third-named defenders obtained interim interdict against the proposed sale by the pursuers.

9. (ix) Since it was obviously desirable and in the interests of all parties that the shears should be sold, it was eventually agreed that the pursuers should proceed to sell them, and that the interim interdict should be recalled to permit this to be done. The terms of the agreement were recorded in letters dated 27th April and 8th May 1981 and each agreement provided as follows:—

   "The proceeds net of commission at 2 per cent will be deposited with the Royal Bank of Scotland Limited in the joint names of S.D.C., the Trustees and Langtry Investment Company Limited (Langtry) when removal commences. The proceeds of sale will be uplifted only by agreement and failing agreement in accordance with a Judicial Determination as to the respective rights and interests of S.D.C., the Trustees and Langtry in the Shear or the net proceeds of sale. This agreement is without prejudice to the respective rights and interests of the three parties."

10. (x) The shears were duly sold, dismantled and removed from the scrap yard and delivered to their purchasers. Dismantling and removal, which were effected without any material damage to the shears or their foundations took, in the case of the smaller shear, about three days, and in the case of the larger shear, about five days.

In this action which went to proof before answer the first question for decision was whether the shears had, on installation, become fixtures and, accordingly, part of Stewart's heritable estate which was subjected to the standard security granted to the second-named defenders. The Lord Ordinary examined a long list of Scots and English authorities before and after 1876 which appeared to demonstrate that in both jurisdictions the question whether a moveable thing had become a heritable fixture was a question of fact which fell to be answered upon consideration of a number of factors of which physical attachment to the land was only one. He then observed that in the case of Cliffplant Ltd. v. Kinnaird 1981 S.C. 9 an Extra Division appears to have held that the law of Scotland had been altered by the case of Brand's Trustees v. Brand's Trustees (1876) 3 R. (H.L.) 16 to the effect that the only relevant consideration is that of physical attachment to the land. Conceiving himself, quite correctly, to be bound by the case of Cliffplant Ltd. he concluded reluctantly that he must hold that the shears became fixtures because they were physically attached to the scrap yard, and that he must shut his eyes to many other apparently relevant factors, including the circumstances in which the shears were supplied under hire-purchase agreements to Stewart and were thereafter installed by Stewart for use as machines in his business. A second question then arose in these circumstances. The shears which were sold by the pursuers when dismantled and removed from the scrap yard ceased to be heritable fixtures. By operation of law they became moveables again. The action is concerned with the proceeds of the sale of these moveables. Did the agreement under which the pursuers were allowed to sell the shears mean that it was open to the court to find that the second-named defenders were entitled to these proceeds of sale because the shears which were fixtures, were detached from the scrap yard and sold only with their consent, and because the agreement had provided that the proceeds of sale lodged in joint names on deposit receipt would be uplifted in accordance with a judicial determination of the respective rights and interests of the parties, and that the agreement itself was without prejudice to the respective rights and interests of the parties? The Lord Ordinary answered that question in the negative saying:—

"I think that in this context the effect of the agreement which was reached without prejudice was not, as it were, to suspend or stay the operation of the ordinary rules of law applicable to the facts as they actually were, but was rather to prevent the agreement itself being founded on as a concession by any of the parties to it whereby another party should succeed on any of the issues of fact and law about which they were in dispute. My conclusion therefore is that on detachment of the shears in the course of their delivery to third party purchasers they reverted to their original status of moveables. Discount's right of repossession revived fully, and their primary claim to the proceeds of sale of the shears thereupon arose."

In the result the Lord Ordinary granted decree in favour of the pursuers in terms of the first four conclusions of the summons.

In this reclaiming motion for the defenders all parties were agreed that it was most unfortunate that the Lord Ordinary had had to decide the first important question in the case by applying the law as the judges of the Extra Division in Cliffplant Ltd. had apparently declared it to be. In so doing they purported to follow the case of Brand's Trustees v. Brand's Trustees and the parties in this reclaiming motion were united in submitting that if the case of Cliffplant is taken to be authority, binding on this Division of the court, for the proposition that all that is required to convert a moveable machine into a heritable fixture is physical attachment to the land, the opportunity should be taken at once to have the case reconsidered and overruled by a larger court. The common argument was that the Extra Division fell into error by misunderstanding Brand's Trustees. Nothing in the speeches of their Lordships in Brand's Trustees falls, it was said, to be understood as intended to innovate upon the well-established principles which should be applied in deciding whether an article attached in some way to heritage is or is not a fixture. These principles, expressed in different ways, are to be discovered in English and Scots authorities before and after 1876 which demonstrate that many factors fall to be taken into account and that the answer is not to be found merely by asking whether the article has been physically attached to the land. In this situation, since we were unable to find any good reason to hold that the judges in Cliffplant Ltd. did not mean what they appear to us to have said quite unequivocally, we decided that the problem presented by the case of Cliffplant Ltd. had to be resolved, one way or the other, before we could proceed to judgment upon the important first question in this reclaiming motion. To that end, accordingly, a larger court of the requisite size was convened at a continued hearing after we had heard full argument from both sides of the bar upon the reclaiming motion on the assumption that the law on the question of fixtures was as it had always been understood to be before Cliffplant Ltd.

At the continued hearing before the enlarged bench it became perfectly clear upon examination of the many authorities cited to us from both British jurisdictions, before and after 1876, that if no account is taken of Cliffplant Ltd., which purported to apply what the judges understood to have been laid down in Brand's Trustees, the rule of law is that in deciding whether a moveable article has become a heritable fixture consideration must be given to a number of factors, and that the question is not to be answered merely by asking whether the article has been physically attached to the land or building. For the purposes of this chapter of my opinion it matters not what are the several factors, according to this consistent line of authority, which are or may be relevant in an inquiry of this kind. All that we are concerned to discover is whether the judges in Cliffplant did rule that the only relevant test is one of physical fixation or attachment to the heritage and, if so, whether they were well-founded in so doing. Did they so rule as the essential foundation of their judgment? It is, in my opinion, impossible, reading the opinion of Lord Avonside at p. 25, the opinion of Lord Dunpark, at pp. 30, 35 and 36 and the opinion of Lord McDonald at p. 38 to be certain that they did not. Lord McDonald, indeed, expressed the result of his consideration of Brand's Trustees in the following simple terms:—

"The House of Lords decision was binding on the Lord Ordinary as it is on us, and the sole question for decision on this aspect of the case is therefore whether the building is physically affixed to the land".

The remaining question is whether, as their Lordships appear to have thought, this was the rule of law to be discovered in the case of Brand's Trustees. I have no doubt that Brand's Trustees did not so decide. The House of Lords was not concerned at all to ascertain whether the machinery with which the case was concerned was a fixture in law. The dispute was between the heir of the tenant who had installed this machinery which then had the character of a tenant's trade fixture, and the tenant's executor. The Lord Ordinary (Shand) held that the machinery was heritable in the tenant's succession. The Second Division recalled his interlocutor to that extent and found that all the machinery referred to therein "is to be considered as moveable in a question as to the tenant's succession" not because the machinery ought not to have been regarded as a fixture in law but for a quite different reason which may conveniently be taken from the opinion of Lord Gifford who said this:—

"I take it to be perfectly fixed law, and it was not disputed on either side of the bar, that in leases of ordinary duration, where the tenant erects fixtures solely for the purpose of his trade, these trade fixtures remain his property, and cannot be claimed by the landlord as partes soli, as it is said they are moveable in a question between landlord and tenant. Syme v. Harvey and other cases are illustrations of the application of this principle. Now, it humbly appears to me that if trade fixtures do not go to the landlord, they must of necessity remain the moveable property of the tenant, and must remain moveable quoad omnia".

The issue for decision in the House of Lords, accordingly, was whether fixtures were moveable because they were trade fixtures erected by a tenant for the purpose of working leased minerals. Upon that issue the House of Lords exposed the fallacy in the opinion of Lord Gifford and the Lord Chancellor (Cairns), in particular, said this at p. 22:—

"This is the basis of the decision of Lord Gifford, and if this statement were correct I possibly should arrive at the same conclusion at which he has arrived. But there is, as it appears to me, a complete fallacy in this mode of stating the facts. Lord Gifford appears to assume that you are to determine at the moment the fixture is placed in the soil what is to be its destiny during the whole of the lease, and he asserts that it never becomes attached to the inheritance so as to be capable of being called a part of the inheritance—that it remains, quoad omnia, moveable, and amongst the moveables of the tenant. It appears to me that that is an error; it does become attached to the inheritance; it does become part of the inheritance; it does not remain a moveable quoad omnia;there does exist on the part of the tenant a right to remove that which has been thus fixed; but if he does not exercise that right it continues to be that which it became when it was first fixed, namely, a part of the inheritance."

The result of the appeal was that the interlocutor of the Lord Ordinary was restored. I now come to the passage in the speech of the Lord Chancellor which was taken by the judges in Cliffplant Ltd. to lay down the test to be applied in determining whether or not moveable articles such as machinery fall to be regarded in the law as fixtures. It is as follows:—

"I would remind your Lordships that there are with regard to matters of this kind, which are included under the comprehensive term of ‘fixtures’, two general rules, a correct appreciation of which will, as it seems to me, go far to solve the whole difficulty in this case. My Lords, one of those rules is the general well-known rule that whatever is fixed to the freehold of land becomes part of the freehold or the inheritance. The other is quite a different and separate rule. Whatever once becomes part of the inheritance cannot be severed by a limited owner, whether he be owner for life or for years, without the commission of that which in the law of England is called waste, and which, according to the law both of England and Scotland, is undoubtedly an offence which can be restrained. Those, my Lords, are two rules—not one by way of exception to the other, but two rules standing consistently together. My Lords, an exception indeed, and a very important exception, has been made, not to the first of these rules, but to the second. To the first rule which I have stated to your Lordships there is, so far as I am aware, no exception whatever. That which is fixed to the inheritance becomes a part of the inheritance at the present day as much as it did in the earliest times. But to the second rule, namely, the irremovability of things fixed to the inheritance, there is undoubtedly ground for a very important exception. That exception has been established in favour of the fixtures which have been attached to the inheritance for the purpose of trade, and perhaps in a minor degree for the purpose of agriculture. But, I repeat, the exception is not to the first of these rules, but the exception is to the second".

I have no doubt that the Lord Chancellor was not, in that passage, laying down any test which fell to be applied in deciding whether as matter of law moveable subjects erected or installed upon heritage were to be regarded as fixtures. The appeal was not concerned with that question at all. When the Lord Chancellor stated his first general rule he was concerned only to declare that once it is established that something has been "fixed" to heritage it becomes part of the heritage itself. He was not required to address his mind to the considerations to which a court must have regard in deciding whether moveables have become so annexed to heritage that they must be identified as "fixtures" in law. That was not an issue before their Lordships at all and, putting the matter quite shortly, I am quite unable to find in the speeches of their Lordships, or any of them, any intention to innovate upon the well-established rules which a court should follow in deciding whether articles which have been installed or erected upon heritage have lost their moveable character. The case of Cliffplant Ltd. should accordingly be overruled in so far as it may be thought to declare that whatever is physically attached to the soil is a "fixture" in the sense of the law.

As I have already said the Lord Ordinary's decision that the shears must be regarded as heritable fixtures was reached reluctantly because he felt himself bound by the case of Cliffplant Ltd. In light of my opinion, which I understand is shared by all the judges who took part in the examination of that decision, we are now free to consider afresh, by applying the corrects tests, whether the shears with which this action is concerned became fixtures on installation in Stewart's scrap yard or retained their moveable character. A number of considerations of importance fall to be taken into account. They have been described in various ways in many authorities, many of which have been drawn to our attention. It will, I am glad to say, be unnecessary to examine them all because multiplication of dicta is unhelpful, and because counsel for the parties are, save as regards one matter which I shall mention later, rightly, in substantial agreement that the broad approach which the court must take is | sufficiently explained in one or two selected statements of the law which are in line with the authorities as a whole. In his article on "Fixtures" in Green's Encyclopaedia of the Laws of Scotland, Vol. 7, Professor Gloag in section 2, entitled "What constitutes a fixture", said this in paras. 362 and 363:—

"362. The question whether a particular thing has become a fixture, that is, has become a part of the soil, or of some building attached to the soil, is not to be solved by the mere consideration whether it is, as matter of fact, affixed to the soil or building. That consideration, as well as the degree or extent of its attachment, is to be taken together with other elements. These elements are: whether it can be removed integre, salve et commode, i.e. without the destruction of itself as a separate thing, or of the soil or building to which it is attached; whether its annexation was of a permanent or quasi-permanent character; whether the building to which it is attached was specially adapted for its use; how far the use and enjoyment of the soil or building would be affected by its removal; the intention of the party attaching it. Intention, however, in this question means intention discoverable from the nature of the article and of the building, and the manner in which it is affixed, not intention proved by extrinsic evidence, or deducible from the consideration, in cases between landlord and tenant, that the tenant in attaching a fixture is not likely to have intended to make a present to his landlord.

"363. From the number of these considerations it is plain that it is impossible to lay down any very exact rules as to what constitutes a fixture, and that each case must depend greatly upon its particular circumstances. The degree of attachment may be conclusive in extreme cases. Thus if an article is so firmly attached to the solum or to a building that it cannot be removed without solving it into its constituent elements, there would seem no doubt that it is a fixture, whatever was the intention in so attaching it, or its adaptability to the structure to which it is attached."

The Lord President (Kinross) in Howie's Trustees v. McLay (1902) 5 F 214, in which the case of Brand's Trustees was before the court, expressed himself in these terms, at p. 216:—

"The first question, then, in such cases, is whether the thing has become a fixture, and this may depend upon, inter alia, the character and degree of its attachment to the soil or building, upon whether the attachment is of a permanent or quasi-permanent character, upon whether the building to which it is attached is specially adapted for it, or it is specially adapted for the building; the intention of the person who attached it, and how far the soil or building would be affected by its removal".

It is clear from these dicta that the question in all cases is a question of fact, that the list of the considerations mentioned is not exhaustive, and that each case must depend greatly on its own circumstances.

The only matter in dispute between the parties is whether, in attempting to decide in this action if the shears become fixtures after they were installed, it is relevant to have regard to the provisions of the hire-purchase agreements which bore to reserve the pursuers' right of property in the shears until they had been paid for at the end of the period of hire. The pursuers contend that these provisions must be looked at as constituting one of the relevant factors in attempting to ascertain the intention of Stewart who installed them on his land, and that the sentence in Professor Gloag's article which says that the intention of the party attaching the thing to the land is to be ascertained only from the nature of the article and the building and the manner in which it is affixed, is too restrictive, and is not warranted by the authority cited in support of it. The defenders, on the other hand, say that the intention expressed in the hire-purchase agreements that the shears should remain the property of the pursuers is quite irrelevant and that the proposition of Professor Gloag criticised by the pursuers is sound.

The authority cited by Professor Gloag on the matter of intention is Hobson v. Gorringe [1897] 1 Ch 182. The facts are described in the headnote thus:—

"A gas engine was let out on the hire and purchase system under an agreement in writing, which provided that it should not become the property of the hirer until the payment of all the instalments, and should be removable by the owner on the failure of the hirer to pay any instalment. The engine was affixed to freehold land of the hirer by bolts and screws to prevent it from rocking, and was used by him for the purposes of his trade. Default having been made in the payment of the instalments, the engine was claimed by the owner, and also by a mortgagee of the land, who took his mortgage after the hiring agreement and without notice of it, and had entered into possession while the engine was still on the land".

It was held, inter alia, that the engine was sufficiently annexed to the land to become a fixture, and that any intention to be inferred from the terms of the hiring agreement that it should remain a chattel did not prevent it from becoming a fixture; and consequently that it passed to the mortgagee as part of the freehold". The judgment of a powerful court was delivered by A. L. Smith L.J. and it is clear from that judgment that, leaving out of consideration the hire and purchase agreement, the evidence of the manner in which the gas engine was affixed to the hirer's freehold, and the purpose for which it was so affixed, left the court in no doubt that it ceased to be a chattel and became part of the freehold. It was argued, however, that the hire and purchase agreement showed an intention on the part of the supplier and the hirer that the gas engine should remain a chattel until paid for, i.e. that it was not to become a fixture. The submission was that if consideration of the agreement showed that this was the intention, the gas engine still remained a chattel (in spite of its having been actually fixed to the freehold). The court held that such an intention was not manifested by the agreement and, as I understand the judgment, went on to say, in any event, that any intention expressed in a hire and purchase agreement that an article sufficiently annexed to the freehold to become a fixture should remain a chattel could not be taken into consideration. In so saying A. L. Smith L.J. observed, in considering instances given by Lord Blackburn in Holland v. Hodgson L.R. 7 C.P. 328:—

"In each of these instances it will be seen that the circumstance to show intention is the degree and object of the annexation which is in itself apparent and thus manifested the intention. Lord Blackburn in his proposed rule was not contemplating a hire and purchase agreement between the owner of a chattel and a hirer or any other agreement unknown to either a vendee or mortgagee in fee of land and the argument that such a consideration was to be entertained in our judgment is not well-founded".

The question is what is to be taken from this case and the subsequent case of Reynolds v. Ashby & Son [1904] AC 466 which on its facts was similar to that of Hobson v. Gorringe which was before the House of Lords. In my opinion all that is to be taken from Hobson v. Gorringe is that where upon the evidence it is clear that an article has become a fixture no declaration of intent in any hire-purchase agreement or other agreement of a private nature that it should not become a fixture can influence the court's decision. As Lord Cockburn said in Dixon v. Fisher (1843) 5 D. 775, at p. 793, with reference to the view of the deceased in that case:—

"In considering this subject I entirely disregard the view said to have been formed upon it by the deceased himself. His opinion of the law is clearly immaterial; for no man can make his property real or personal by merely thinking it so".

I am not persuaded, however, that in asking the question whether an article has become a fixture it will never be permissible to notice that it was acquired by the person who installed it on his land, under a hire-purchase agreement. That circumstance, it seems to me, may, when the matter is otherwise in fine balance, be of some relevance in deciding whether the installation was or was not intended to be a permanent or quasi permanent addition to the land. Quite clearly the particular provisions of a hire-purchase agreement cannot be regarded as conclusive in a question whether the article hired became in fact a fixture, and could never be permitted to exclude an inevitable inference derived from the whole other evidence that the article became a fixture. In this case the pursuers accept this proposition and all they invite us to do is not to ignore altogether the circumstance that the shears when installed by Stewart were merely on hire under hire-purchase agreements, which reserved the pursuers' right to remove them on default. For my part I would be prepared to accept that invitation although, unless in this case the issue of the status of the shears is left in fine balance upon the evidence of what was done with them by Stewart, the fact that the shears were supplied to Stewart under hire-purchase agreements is unlikely to be of any materiality.

The question now is whether the shears did or did not become heritable fixtures on installation by Stewart. We are concerned with the shears only and a preliminary submission by Mr Morton for the defenders that each shear must be looked as part of a unit consisting of the shear, its foundations, and its shelter, appears to beg the question which we must answer. This submission which I shall call the "unum quid" submission was supported by reference to a number of cases decided by the Lands Valuation Appeal Court. In valuation law and practice the expression unum quid is a familar one but I derive no assistance from valuation cases dealing with machinery since that court is not concerned with any question as to a right of property, and is concerned only to apply statutory provisions which provide that lands and heritages for valuation purposes include fixed machinery but exclude machinery (which might at common law be regarded as "fixed") which is only so fixed that it can be removed from its place without necessitating the removal of any part of the building.

Having rejected Mr Morton's preliminary submission it will be convenient to summarise briefly the reasons why the pursuers say that the shears did not lose their status as moveables on installation. Although the shears were large and heavy, and were placed on substantial concrete foundations to which they were bolted, the object of so placing them and of bolting them was not to annex them to Stewart's heritable property, the scrap yard, but only to enable them to be used for the purposes of Stewart's trade without destroying themselves and the foundations by vibration. The degree of attachment was such that they could readily and easily be removed without damage to themselves or the foundations. They were in fact removed without difficulty or damage. The structures or shelters were merely accessories for the protection of the shears from the elements. The shears, and especially the smaller shear, were not accordingly adapted to any building. The attachment of the shears to their foundations in the scrap yard ought not to be regarded as permanent or quasi permanent. On the evidence shears of these models often change hands in the course of their life. These particular shears were second-hand. In practice such shears, which are expensive, are let on hire or hire purchase by finance companies and the agreements are susceptible to determination by both parties. If the person who hires such shears defaults, the supplier has the right to remove them from the premises in which they have been installed. This is clearly the position, at least if there is no standard security over the premises to complicate the issue. The shears installed by Stewart in his own premises were merely on hire to him at the time. Any annexation thereof to his heritable estate would put Stewart in breach of his contract with the pursuers. In all these circumstances the court should conclude that the shears were installed not to enlarge Stewart's heritable estate but merely to convenience the trade he was carrying on and so retained their status as moveables. In presenting this submission Mr Murray for the pursuers pointed out the consequences which would flow from its rejection. The suppliers of such shears who carry on business in the belief that they retain their right of property until the charges have been paid would not only have no security but, if there was a standard security over the premises, could not recover them under the agreement without the consent of the heritable creditor who could even prevent the owner of the premises from dealing with the shears as he pleases.

Having considered this well-presented submission with anxious care I find myself unable to accept it. I have no doubt that the shears which Stewart installed on his own land, the scrap yard, fall to be regarded as fixtures. They were installed to enable him to make better use of his land for the purposes of his trade. They were only capable of being moved by being broken down into their large constituent parts. Each, when its parts were assembled, was of huge weight and although, in relation to their size and weight, it could be said that installation of the shears was, from an engineering point of view, not difficult, the installation of such shears in a scrap yard was a substantial and costly and time-consuming operation. Specially designed foundations had, at substantial cost, to be constructed in the yard for the reception of the shears for which they were specially adapted. These foundations could only be used for shears of the model which they were designed to support. The shears had to be secured to these specially adapted foundations by huge bolts embedded therein in order that they could be used. Although no doubt the shears could, from an engineering point of view, be removed from the premises by being unbolted from the foundations and by being broken down into their constituent parts, without material damage to themselves or the foundations, the operation of removal was, on any view, formidable and time-consuming, and had to be preceded by removing all permanent service connections and to some extent at least, the shelter structures and beams of which, in the case of the larger shear, had been welded to the shear itself. All these considerations point strongly towards the intention of permanent or quasi permanent association between the shears and the yard to increase its usefulness as a scrap yard, and for what it is worth, the following evidence of Mr Rylands, the engineer who removed the shears, is consistent with that conclusion:—

"One knows that perhaps people go out of business for a variety of reasons but anyone setting out to put one of those machines there intends it to be there for a considerable time?"

— "Yes." "It is not something he would try out for a year or two. He has got to take a serious decision?"—"I would say he put them there to last for ever unless circumstances changed."

Had Stewart bought the shears before installing them in the manner described and with the object which has been identified, the conclusion that the shears were so fixed to the scrap yard as to become part of Stewart's heritable estate would have been inescapable. Can it make any difference that there was evidence that such shears may change hands in the course of their life, that in practice such shears are let on hire or hire-purchase, and that these particular second-hand shears had been supplied to Stewart under hire-purchase agreements with the pursuers? In my opinion it cannot. It was clearly in the contemplation of both Stewart and the pursuers that Stewart would proceed to install them as he did with the object which has been mentioned and the intention, and indeed the expectation, of both parties to the agreement, was that Stewart would purchase them at the expiry of the short three-year period of hire. In these circumstances no doubt is cast upon the clear inference from the whole other relevant material that these shears when installed were intended to be a permanent or quasi permanent feature of the land to which they were undoubtedly attached for the enhancement of the value to Stewart of the scrap yard itself. It may be that the conclusion which I have reached upon the main question in the case will have the consequences foreseen by Mr Murray. That cannot be helped and it will be for consideration whether there are other methods by which finance companies can arrange to supply such shears for commercial use without exposing them to the risks which agreements of hire and hire-purchase cannot eliminate.

The next question is whether the Lord Ordinary's decision that on severance the shears become moveable and that the proceeds of sale by the pursuers must go to the pursuers, was well-founded. In so deciding he was of the opinion that the agreements under which the defenders, and in particular the second-named defenders, allowed the pursuers to remove and sell the shears did not affect the matter at all. The relevant passage in his opinion has already been quoted. I am bound to say that I do not really understand this passage and I am in any event persuaded that the Lord Ordinary's decision was wrong. At the time when the dispute arose the shears were part of the heritable estate subject to the standard security in favour of the second-named defenders. They could not be dismantled, removed and sold by anyone in the circumstances without the agreement of the heritable creditors. As I see it the position clearly was that the opportunity of selling the shears which had presented itself was one which all parties recognised should not be missed, and that the second-named defenders agreed to allow the shears to be sold instead of leaving the shears in situ until the competing claims as to the title to dispose of them had been resolved. It was only because of the agreements that the shears came to be dismantled, removed and sold by the pursuers and the proper and, indeed, the only reasonable construction which can be placed on the agreements is that the parties agreed that the dispute which had arisen should be resolved as if the sale had not taken place and that the party in whose favour the dispute was resolved would have right to the proceeds of sale. In the result the reclaiming motion succeeds, in my opinion, and the interlocutor of the Lord Ordinary should be recalled.

In these circumstances one further matter arises. Should decree be pronounced in favour of the pursuers in terms of their 5th and 6th conclusions? They are in these terms:—

"5. Alternatively and in any event for declarator that the pursuers are solely entitled to the balance of the said sum held on deposit with the Royal Bank of Scotland Ltd. in the names of the pursuers, the trustees of Alexander David Stewart and the second defenders which remains after payment to the second defenders of the sums remaining due to them as heritable creditors of the said Stewart. 6. In the event of declarator in terms of the fifth conclusion being granted for decree ordaining the defenders to consent to payment to the pursuers of the balance of said sum held on deposit after the second defenders have had paid to them all sums due to them as heritable creditors of the said Stewart."

The argument is that in a question with Stewart the shears were, in the events which happened, recoverable by the pursuers. The agreement was terminated and the demand for the return of the shears was made before the first and third-named defenders were appointed. If the whole price obtained for the shears is not required to satisfy Stewart's indebtedness to the second-named defenders, as heritable creditors, Stewart, in a question with the pursuers, could not, by reason of his contractual obligations, have resisted a claim by the pursuers to any balance of the price which remained after the heritable creditors had been satisfied. The first and third-named defenders can have no higher or better right than Stewart in such circumstances and in this action they do not plead any right to any such balance which may remain.

In my opinion this argument ought not to receive effect. The shears were part of Stewart's heritable estate. The whole of that heritable estate was available for behoof of the general body of creditors subject to satisfaction of the prior claim of the heritable creditors. The sale of the shears falls to be regarded in all the circumstances as a realisation of part of Stewart's heritable estate and I cannot accept that by virtue of the hire-purchase agreements the pursuers, who lost their right of property in the shears, were accorded any preference over the general body of creditors.

Upon the whole matter in allowing the reclaiming motion the fourth plea-in-law for the defenders should be sustained.

LORD JUSTICE-CLERK (Wheatley).—I agree that the question relating to the case of Cliffplant Ltd.should be disposed of as proposed by your Lordship in the chair.

LORD CAMERON .—The Lord Ordinary in this case was faced with two main problems, the one consequential upon the other. The first, whether the two heavy machines were so attached to the ground of the insolvent's scrap yard as to become fixtures and so, by such attachment, heritable; and the second, if he so decided, whether the effect of their subsequent removal and sale in terms of the agreements between the parties interested in the ownership of the shears was to alter their character and consequently to determine the respective rights of the parties to the agreements in the proceeds of the sale.

Upon the first of these problems the Lord Ordinary regarded himself as bound by the decision of the Extra Division in the case of Cliffplant Ltd. v. Kinnaird 1981 S.C. 9 and consequently bound to reach the only conclusion which the terms of that decision permitted, without any consideration of the particular circumstances of the installation and use of the machines, each of which was a massive pair of mechanical shears, the dimensions and weight of which have already been described in the opinion of your Lordship in the chair and need not be repeated here. In regarding himself as bound by the decision the Lord Ordinary was of course correct but, agreeing with your Lordship and for the same reasons, I am of opinion that the case was wrongly decided and based principally on an erroneous interpretation of the case of Brand's Trustees v. Brand 3 R. (H.L.) 16. In my opinion, with all respect to the learned judges of the Extra Division, Brand's Trustees did not in any way innovate on the law of fixtures as previously understood or introduce a new and rigid rule into the law concerning fixtures. The basis upon which that judgment proceeded was that it was accepted that the pieces of equipment in question were initially fixtures. It was not a case which raised the question, which is basic to the decision of this case, of whether or not in the factual circumstances established at the proof, these shears became by attachment pars soli. The Lord Ordinary, properly regarding himself as bound by the decision in Cliffplant, held that once there was attachment then by imperative operation of law the shears became heritable. Having reached this point however, I am of opinion that thereafter the learned Lord Ordinary fell into error. Put shortly, the Lord Ordinary in his interpretation of the agreements failed to give proper effect and meaning to the critical words "without prejudice to the rights and interests of the…parties". At the time the agreements were entered into the estates of Stewart, who owned and carried on business in the scrap yard, had been sequestrated. The trustee in the sequestration is the first defender in the action. The second-named defenders are heritable creditors of the bankrupt while the third defenders are trustees under a deed of trust in their favour granted by the bankrupt dated 31st March 1981. It was between the pursuers and the second and third-named defenders that agreements were entered into, the effect of which was to permit the dismantling of the machines and their removal and sale for the benefit of whoever might be found to have good claim to the proceeds of sale. What then were the rights and interests which were not to be prejudiced by the projected sales? It appears to me that the answer to this question is plain enough. The rights of parties would necessarily be governed by the condition of affairs subsisting prior to the removal of the machines, and also the answer to the question whether the machines were heritable by attachment or still retained their moveable character and so at the disposal of the pursuers under their contract of hire-purchase. No doubt the Lord Ordinary was correct in his view that there was in fact a severance in a physical sense, but I do not think that this is in any way a relevant consideration: it begs the real question—what were the rights and interests of parties at the date of the agreements? It is on the answer to this question that in my opinion the decision of this case ultimately depends, not as the Lord Ordinary seems to have thought, upon the physical condition of these machines at the time of sale.

It is at this point that I think that the Lord Ordinary has fallen into fatal error. He says:

"The issue then narrows down to whether detachment of the shears and sale by Discount ‘without prejudice’ can achieve the same result, that is, prevent the heritable shears from reverting to their moveable status on detachment or delivery to the purchasers. I think that in this context the effect of the agreement which was reached without prejudice was not, as it were, to suspend or stay the operation of the ordinary rules of law applicable to the facts as they actually were, but was rather to prevent the agreement itself being founded on as a concession by any of the parties to it whereby another party should succeed on any of the issues of fact and law about which they were in dispute. My conclusion therefore is that on detachment of the shears in the course of their delivery to third party purchasers they reverted to their original status of moveables".

No doubt the shears were moveable property when sold and were moveable in the hands of the purchasers. With respect to the Lord Ordinary, I do not think that that is a relevant consideration, though no doubt as a statement of the legal character of the machines when sold it is accurate; but that circumstance appears to me to have no bearing upon the construction to be placed on the critical phrases in the agreements or upon the real issues in the case.

The Lord Ordinary's decision on the question of whether the shears had become "fixtures" and thus heritable in character was, as he made clear, determined by his necessary acceptance of the decision in the case of Cliffplant. I think, however, that when the facts are examined in detail they demonstrate that at the tempus inspiciendum, namely immediately prior to the shears being dismantled and removed, these machines were properly to be regarded as heritable from attachment to the ground of the scrap yard. Parties were agreed that the criteria for ascertaining whether articles of equipment or pieces of machinery become heritable in respect of attachment in relation to succession or security rights have been accurately and compendiously set out by Professor Gloag in his article on "Fixtures" in the Encyclopaedia of the Law of Scotland, Vol. 7, s.v. "Fixtures", para. 361. I do not need to repeat those as they have been quoted in your Lordship's opinion. I would only add a brief comment on the matter of "intention": it is clear enough that parties by private agreement cannot change the legal character of what the law regards and holds to be heritable in character so as to be effectual, in a question with third parties who are strangers to and ignorant of such an agreement, to affect the rights of such third parties. Such an agreement would in any event be res inter alias acta, but while the tests to be applied are essentially objective and not subjective, it does not necessarily or always follow, in my opinion, that the nature of the contract or agreement between the parties which was the legal instrument by which e.g. a piece of machinery was moved and installed in a factory or yard may not be taken into account as itself an item of evidence relevant to an objective determination of the matter of intention, in determining whether that piece of machinery has become so attached to the soil or some building attached to the soil as to be a "fixture" and so heritable in legal character.

When the evidence in this case is examined I am left in no doubt that there was such attachment to the soil as to render these large and heavy pieces of machinery "fixtures". The shears themselves are extremely heavy; they require to be set upon heavy concrete platforms constructed in accordance with detailed drawings so that they fit precisely the dimensions and proportions of the machines. These platforms themselves do not merely rest on the surface of the soil; excavation is necessary to provide them with a "bed". The platforms themselves would not be suitable for support of similar machines but of different dimensions. In order that the machines could operate at all they have to be secured to the platform or plinths by long and heavy bolts which fit into deep sockets specially designed and placed to receive them, and are then concreted in place. In addition, various structural adjustments were made to the premises which involved, in the case of one of the shears, welding of certain beams to the machine itself, also the welding of certain protective plating to protect the shears from damage whilst in operation in the scrap yard. In the case of the larger shears it was in fact installed within the shelter of a shed, part of which was also used as a workshop, while the smaller was protected by a specially provided protective roof. When the time came for removal the process had to be spread over a period of several days—not measured in hours—while the machines themselves had to be disarticulated for removal and transport, as well as disconnected from the permanent power lines which provided the necessary power and energy to enable the machines to be operated. All these circumstances appear to me to point almost inevitably to the conclusion that these machines became "fixtures" and so heritable. It is also, I think, of some significance that the witness Rylands indicated—for what it was worth—that in his view a trader who installed such a machine as the larger shear, with a purchase price of over £56,000, would "put it there to last for ever unless circumstances changed". It is of course clear that the fact that the shears came to be in the scrap yard and installed under a hire-purchase contract cannot be regarded as in any sense determinative of the issue, in light of a tract of authority—both in England and Scotland. The cases of Hobson v. Gorringe [1897] 1 Ch 182 and Reynolds v. Ashby [1904] AC 466 in England, cited in Howie's Trustees v. McLay 5 F. 214, make that sufficiently clear, but do not suggest that as an objective factor in determining intention, the fact that the instrument by which the machine came to be in place was a hire-purchase agreement is wholly irrelevant. Such a contract may, in my opinion, at least be taken into account as one of the facts which may bear upon the ultimate decision. I think this may be all the more so when the subject-matter of the inquiry is itself something such as a piece of machinery of a ponderous or expensive character requiring, as here, very substantial expenditure in relation to the cost of the machine itself, to provide a permanent means of installation and operation, and where the indications to be deduced from the surrounding circumstances are that the purpose of the contract is, by means of the covenanted instalment payments, permanent acquisition of the machine or machines.

In light of the proved facts in this case I am of opinion that it is clear that the shear's in question became in all the circumstances "fixtures" and therefore heritable, so that they became part of the heritable elements in the bankrupt's estate and so to be dealt with in his sequestration.

There remains for brief consideration and comment on a matter raised by Mr Murray in his closing submissions for the pursuers and respondents. He submitted that while the cases of Hobson v. Gorringe and Reynolds v. Ashby may well have represented and expressed the law as it then stood, the law has developed over the years and today, having regard to the very common use of hire-purchase agreements, the law required to be brought into line with contemporary commercial practice—in other words to recognise the permanent and conclusive effect of a contract of hire-purchase on the issue raised here. No doubt the law cannot and should not stand still, but I am of opinion that as the law now stands, the rights of parties to a hire-purchase agreement cannot of themselves have the decisive effect in deciding the issue of heritable or moveable in such a case as this.

If Mr Murray's subsidiary argument were given effect it would permit defeat of the rights of heritable creditors and as a result which would flow from the terms of private contracts to which heritable creditors were not party and of the existence of which they were in ignorance. In any event, to meet Mr Murray's practical point, parties to such contracts are at all times able should they deem it necessary or desirable, to discount risks of loss by insurance, by heritable security or by floating charge.

Further, the concept of hire-purchase is not new; commercial men have operated such contracts for many years in the knowledge that their contractual rights were conditioned by the common law of rights in security and still are. The submission, I fear, is not a sound one, nor, finally, is the contention in support of the pursuers' fifth and sixth conclusions and fifth plea-in-law. The short answer to that contention is that the facts are that the estates of the bankrupt Stewart have been sequestrated and his assets are to be distributed in accordance with the law of bankruptcy, in which the apparent preferential claim put forward here finds no place.

I am therefore for allowing this reclaiming motion and disposing of the case as your Lordship in the chair has proposed.

LORD GRIEVE .—I am in entire agreement with the opinion of your Lordship in the chair, and with the reasons which your Lordship gives for allowing this reclaiming motion, but, as the submissions made for both sides of the bar raised important issues, I feel I must do more than content myself with a simple concurrence.

Your Lordship has summarised the events which gave rise to the action, and, for the purposes of what I have to say, the most important of these are the following. (1) Both the scrap shears were large. (2) Both were purchased by Stewart by means of hire-purchase agreements, which, as is customary, preserved the pursuers' right of ownership in the shears, until the amount due under the agreement had been paid in full. (3) The shears were installed in specially designed foundations, which cost about a third of the cost of the shears. So far as the larger shears was concerned that amounted to some £15,000. (4) The foundations were substantial and suitable only for each type of shears—that is to say they would have been useless for another make of shears. (5) The shears had to be secured to the foundations by large bolts embedded in the concrete base. (6) Shelters, in the case of the large shears, a substantial one built of brick, had to be erected around the shears. (7) Both shears could be, and were in fact, removed, without material damage being caused to either, and they were delivered to their purchasers. The removal of the shears and their delivery to their purchasers followed on an agreement between the pursuers, Stewart's trustees in bankruptcy, and Langtry Investment Co. Ltd., who were the holders of a heritable security over Stewart's heritable subjects.

In my opinion from these facts certain inferences fall to be drawn. These are: Stewart required the shears for the purposes of his business. He could not afford to buy them and therefore, in order to obtain them, he entered into a hire-purchase agreement with the pursuers. From the structure of the machinery, the careful and elaborate preparations which had to be made for its installation, and the considerable cost of that installation, it is fair to infer that the shears were intended to be a quasi-permanent, if not a permanent, feature of Stewart's heritable property. This inference has support in the evidence of Mr Rylands, the experienced engineer who was in charge of the removal of the shears, who said, inter alia, in his evidence "I would say he (Stewart) put them there to last for ever". The purchase and installation of the shears was accordingly not a short term operation.

In my opinion the facts to which I have referred, and the inferences which I consider can legitimately be drawn from them, are factors which the court is entitled to take into consideration when trying to decide whether, when they were installed, they become, and were intended to become, part of Stewart's heritable property. The tempus inspiciendum, in my opinion, on the facts of this case is the time of installation.

As I read his opinion the Lord Ordinary was reluctant to hold that the shears had, on installation, become part of Stewart's heritable property. He did not seem to think that the decision in Brand's Trustees v. Brand (1876) 3 R. (H.L.) 16 required him so to hold, but (arid I think correctly) that the decision in Cliffplant v. Kinnaird 1981 S.C. 9, did. Having been shackled by Cliffplant he sought to escape from its grip by holding that the dismantling and removal of the shears together with the agreement, albeit without prejudice, of all the interested parties, put the shears back into the realm of moveables, where, in his view they always had been. At this point is it worth noting that, at the time the agreement to remove the shears was entered into, and immediately prior to their removal, the shears were in precisely the same position vis-à-vis Stewart's heritable property as they had been when their installation was completed. Accordingly, it probably does not matter, in this case, whether the time of removal, or the time of installation, is regarded as the tempus inspiciendum, but for my part I prefer the latter.

There can be no doubt that the learned judges in Cliffplant considered that the physical attachment to the land of the structures in that case compelled them to conclude that they were fixtures and, as such, heritable property. They felt driven to that conclusion by the decision in Brand's Trustees, a decision which, according to Lord Dunpark at p. 30 of the report in Cliffplant, altered the law of Scotland as it had been previously understood. Neither of the other two judges dissented from that view, although Lord Avonside at p. 25 did say:

"Speaking for myself I am not at all convinced that Brand's Trusteesinnovated on our proper law, if one goes back to basic principles".

With great respect I am not at all clear what his Lordship meant by that observation, standing the fact that, in the same paragraph, he refuses to consider a submission that the decision in Brand's Trustees had wrongly overturned the law of Scotland. Be all that as it may, it seems clear that all their Lordships considered that what is known as "the first rule" in Brand's Trustees compelled them to hold that a structure which was physically attached to heritage, became pars soli, by reason only of that physical attachment. I am quite satisfied that the so-called rule did not compel their Lordships so to decide. As your Lordship in the chair has pointed out the decision in Brand's Trustees was concerned with machinery which was agreed to have the character of a tenant's trade fixture. As such, when it was attached to the heritage, it became part of it, and would have remained part of it unless the tenant exercised his right to remove it at the termination of the lease. But, as the Lord Chancellor pointed out in the passage at p. 22 of the House of Lords Report in Brand's Trustees"…if he (the tenant) does not exercise that right it continues to be that which it became when it was first fixed, namely a part of the inheritance". That dictum is one of the reasons which inclines me to the opinion that the tempus inspiciendum in cases of this sort is the time of installation of the structure concerned. In so saying I recognise that the Lord Chancellor was not addressing his mind to the factors which should be considered when trying to decide whether a moveable structure which had been attached to heritable subjects had been so affixed to these subjects that it had to be regarded as a "fixture" in law. Agreeing with both your Lordships, I find nothing in the speeches of their Lordships in the House of Lords to indicate that they considered they were overruling the established principles which should guide a court in reaching a decision as to whether a moveable structure, which has been attached to heritable subjects, has lost its moveable character and become heritable by reason of that attachment.

Happily, counsel on both sides of the bar were agreed that the established principles to which I have referred were accurately set out by Professor Gloag in his article on "Fixtures" in Green's Encyclopaedia of the Law of Scotland which your Lordship in the chair has quoted in extenso.

It is quite apparent from that article that no precise rules can be laid down by which it can be asserted what does or what does not constitute a fixture; each case must be examined against the background of its own facts and circumstances. In some cases, for example, the degree and nature of the attachment may be decisive; in others it may not. In some cases the intention of the person attaching the structure to the soil as evinced by the circumstances, particularly when he is the heritable proprietor of the soil, may be a critical factor; in others it may not. Although Professor Gloag does not mention the matter I would not be prepared to exclude a hire-purchase agreement relative to the structure in question as a factor which could be considered in this context. While not binding on this court, the opinions of the learned Lords Justice in the case of Hobson v. Gorringe [1897] 1 Ch 182 and the speeches of their Lordships in the House of Lords in Reynolds v. Ashby & Son [1904] AC 466 are entitled to respect, but I am not persuaded that they go so far as to say that the terms of a hire-purchase agreement in relation to a moveable structure which has become attached to heritable subject are wholly irrelevant when considering whether that moveable subject has become a fixture or not. What these cases do decide, as I understand them, is that no agreement, between the person who attaches a moveable to heritable subjects and a third party, can be decisive as to whether that moveable has or has not become part of the heritage to which it has been attached, and must therefore be regarded as a fixture. The decisions do not, in my opinion, preclude consideration being given to the terms of a hire-purchase agreement as illustrative of the intention of the person who purchases equipment, and thereafter attaches it to his heritable property. For instance, the agreement might be of a very short duration and thus indicative of an intention that the article in question was not to be regarded as even a quasi-permanent feature of the heritage to which it had been attached. In this case the hire-purchase agreement was not of that kind. It has however in my opinion some relevance. It is this. As I have already said it is a reasonable inference from the evidence that Stewart could not afford to purchase either of the shears outright. He required them, however for his business. In order to get them he had to make use of a hire-purchase agreement. In the result, what he did with the shears, by way of installation in, and attachment to, his heritable property, was precisely what he would have done had he been able to purchase the shears outright. If, as Mr Rylands said, the probability was that the shears were intended to be there "for ever" had Stewart purchased them outright, and attached them to his heritable property in the manner in which he did so attach them, I cannot think that any stateable argument could have been presented to justify the shears being regarded as moveable. The clear inference would have been that the shears had been attached to the heritage so as to become part of it. Why then should the fact that the shears were obtained by means of a hire-purchase agreement make any difference? In my opinion it makes no difference, and the manifest intention of Stewart at the time he installed the shears, coupled with the method of installation and attachment, and the other facts set out at the beginning of this opinion persuade me that the shears, on affixation, became part of Stewart's heritable property, and therefore part of the subjects covered by the heritable security held by the second defenders.

I cannot see that the agreement to dismantle the shears and the fact that they were capable of being dismantled without doing material damage to them, or to the heritage to which they had become attached, affects the matter. It was a practicable step taken in the interests of all parties concerned for good reasons.

For these reasons and for those set out by your Lordships I am for allowing the reclaiming motion and disposing of the case as proposed by your Lordship in the chair.

LORD BRAND .—I also agree that the question relating to the case of Cliffplant Ltd. should be disposed of a proposed by your Lordship in the chair.

LORD COWIE .—I, too, agree that the question relating to the case of Cliffplant Ltd. should be disposed of as proposed by your Lordship in the chair.

LORD JAUNCEY .—I also agree that the question relating to the case of Cliffplant Ltd. should be disposed of as proposed by your Lordship in the chair.