Shaw v Devshi and Co. (C.C. No. 8/1936) [1936] EACA 149 (1 January 1936)

### ORIGINAL CIVIL

### Before LANE, AG. J.

# DACRE ASHE SHAW, Plaintiff ν.

## SHAH VERSHI DEVSHI AND CO., Defendants

## C. C. No. 8/1936

Charge on land—Rights of chargee—Machinery and fixtures attached to land and used for the development thereof form part of the immovable property-Not attachable as movable property-Determination of charge—Extinction of chargee's rights over fixtures.

In execution of two decrees held by the defendants, Shah Vershi Devshi and Co., against Mrs. Hatley, the lessee of a sisal plantation, certain sisal machinery upon the plantation was attached. The <br> plaintiff held a charge upon the plantation and he filed objection proceedings against the attachment, claiming that the machinery was part of the security for his charge upon the land. Before these proceedings were decided he, by arrangement with Mrs. Hately, caused the plantation to be sold by auction, excluding the machinery, and bought the plantation himself still excluding the machinery. The charge was extinguished by this sale. The plaintiff having obtained leave, filed an amended summons asking the Court to say that the machinery was still subject to the charge.

Held (25-4-36).—That machinery and fixtures attached to land constitute part of the immovable property if they are for the permanent improvement and better enjoyment of the land; that where there is a charge upon the land,<br>they form part of the security of the chargee, who has the rights of a<br>mortgagee, and cannot be attached as moveable assets; that upon the determination of the charge upon the land the chargee's rights over the machinery and fixtures are exhausted: that a chargee of immoveable property has no right to deal with it by sale without an order of the Court.

Stratton, for the plaintiff.—The machinery is a fixed permanent improvement for the better enjoyment of the land as such forms part of the chargee's security; it cannot be attached as movable property; it is immovable property and could only be attached as such; the chargee has the rights of a mortgagee: the fact that the charge has come to an end since the proceedings were first filed does not affect the position.

Figgis, K. C., for the defendants.—The fixtures are not fixed improvements to the land and do not form part of the chargee's security. In any event the plaintiff's rights as chargee were extinguished before the amended originating summons was filed; any rights that he may have had have been done away with by his purchasing and taking over the land excluding the fixtures. He had no right so to deal with the land without an order of the Court.

JUDGMENT.—It has been agreed that civil cases Nos. 8 and 9 of 1936 be taken together and that one judgment be delivered in respect of both, since the point at issue is the same in both.

The defendants in both cases attached certain sisal machinery and fixtures connected therewith, situate upon a sisal plantation, Yatta Ranch, L. O. No. 2304, in execution of the decrees in civil cases Nos. 65 and 66 respectively, both of which decrees they held against Mrs. Hately, who was at that time the owner of the plantation.

The plaintiff in this case and in C. C. No. 9 asks the Court to say that the defendants have no right to attach and sell the machinery and fixtures in execution of those decrees, apart from the land.

The Originating Summonses now before the Court ask for the Court's determination of this point:—Whether the machinery (in C. C. No. 8, 3 pairs Raspadors 1 Brushing machine and some galvanized iron sheets, and in C. C. No. 9, a Marshall engine and boiler, a Petter engine and a Bijoli baling press) constitute permanent fixed improvements of and to the land of the Farm, L. O. No. 2304, and as such form part of the security of the plaintiff under two charges registered against the title of the said land, and whether or not the defendants have the right to attach and sell the same in execution of their decrees in civil cases Nos. 65 and 66 of 1935 apart from the said land and free from the plaintiff's charges. The summonses ask the Court to make the appropriate orders thereon. The plaintiff had a charge upon this land, in fact two charges, registered in 1930; these were discharged on 18-3-36. The charges were in force when the originating summonses in these two cases were first filed, on 11-1-36, but they had been discharged, as stated, on 18-3-36, by the time that the amended originating summonses were filed on $27 - 3 - 36.$

In the originating summonses as first filed on 11-1-36 a different point was put before the Court for determination; applications to amend were filed on 20-3-36 and the Court gave leave to amend the pleadings on 25-3-36, and the amended pleadings were filed on 27-3-36. In the meantime, actually on 25th February, 1936, the farm, by arrangement between the plaintiff and Mrs. Hately, the chargor, and the Land Bank, who were also creditors by reason of advances, had been put up for auction and sold: the plaintiff had bought it in. The sale had not included the machinery and fixtures in question which were expressly excluded. The plaintiff's charges had been discharged as stated. So that when the proceedings started in these cases the plaintiff was a chargee, but by the time that the amended pleadings were filed, he had ceased to be a chargee.

The plaintiff's case is that the machinery and corrugated iron sheets were fixed permanent improvements placed upon the land for the improvement and better enjoyment of the property, and that they formed part of the immovable property which was the plaintiff's security for his charges, and that they continue to this day to form part of that security. He says that they were immovable property and not movable and ought not to have been attached as such; that they were part of the land and that the defendants followed the wrong procedure in attaching them as movables; that if at the date when the attachment was made these articles were subject to the plaintiff's charges, whatever has happened since cannot affect his rights as chargee of the land.

The defendants' case is that the articles referred to did not constitute fixed improvements of or to the land, or form any part of the plaintiff's security, and that in any event the plaintiff's rights as a chargee ceased on 18th March, before the amended originating summons was filed, and that by purchasing the land apart from the machinery and fixtures in dispute the plaintiff exhausted his rights under the charge; that the fact of his taking over the land excluding these articles has done away with any rights that the plaintiff might $\cdot$ have had.

The plaintiff's argument resolves itself into four parts: -

(1) That the articles are immovable and attached to the earth.

(2) That they are subject to the charges.

- (3) That the position with regard to them has not been altered by reason of the termination of the charges on the land. - $(4)$ As a result that the plaintiff has rights over them which defeat the defendants' rights as attaching-creditors.

To consider $(1)$ :—

Mr. Stratton has referred the Court to the Interpretation and General Clauses Ordinance, section 2 (19) which defines immovable property, it states "immovable property shall include land and things attached to the earth or permanently fastened to anything attached to the earth"; also to the Registration of Titles Ordinance, section 2 where the definition of land is as follows: "land includes land and benefits to arise out of land, or things embedded or rooted in the earth or attached to what is so embedded for the permanent beneficial enjoyment of that to which it is so attached ... "; also to section 46 of that Ordinance as amended by the Ordinance of 1933, referring to the extent of the rights of a chargee as follows: "Such charge when registered shall render subject to the security thereof the same property as would have been affected by a legal mortgage had the lands comprised in the charge not been registered under this Ordinance and had the transaction been effected by a legal mortgage instead of by such charge."

This amendment which was subsequent to the date of the plaintiff's charges, did not alter the state of the law or enact new law: it clarified the position as it would seem to have been accepted before, that in the ordinary course of events a charge on land included fixtures, in that a chargee had the same rights as those of a simple mortgagee. It was further pointed out to the Court that the improvements, which were required to be made under the grant of this farm, included fixed machinery as one of the alternative permanent improvements that would count towards the development that had to be done under the grant.

Section 3 of the Indian Transfer of Property Act was referred to, with its definition of things attached to the earth. Also section 100 of that Act, where it is provided that a chargee has the rights of a simple mortgagee. In reference to section 3 it is stated in Gour, 6th Edition, p. 66, "With regard to permanent fixtures the law appears clearly to be that they must be added to the principal from which they may not be removed (per Lord James in Reynolds v. Ashby (1904 A. C. 466). But this rule receives a liberal construction in

the case of trade fixtures, the increasing cost and importance of which is forcing a number of exceptions to the rule so as almost to circumvent it." The grounds on which different decisions have been based will be discussed later.

It is pertinent here to refer to section 8, Indian Transfer of Property Act which, although it deals with the operation of transfers and not with the rights of mortgagees, is to some extent apposite. In Gour, 6th Edition, Vol. I, p. 266, in discussing the position regarding machinery attached to the earth and after quoting Reynolds $v$ . Ashby as deciding the rights of a mortgagee in regard to it, it is stated, "But in this respect the Indian rule is different since it looks less to the extent of fixity than the nature of the fixture and the purpose for which it was fixed and whether it was necessary for the enjoyment of the property sold. For instance upon the sale of a house, machinery brought into it for carrying on a business will not pass by necessary implication however much it might be fixed to the soil."

One must therefore have primary regard to the question whether the machinery in this case was necessary for the enjoyment of the property.

With regard to section 100, I. T. P. A. the chargee has a mortgagee's rights but he cannot bring the property to sale without instituting a suit and obtaining an order for sale from the Court.

A very large number of English authorities have been cited. I will review the more important ones.

Reynolds v. Ashby has been referred to already. It decided that machines which were fixed to the building were fixtures and not chattels and passed to the mortgagee.

Longbottom v. Berry (5 Q. B. D. 123) decided that machinery attached to the floor of a building in a quasi-permanent manner by bolts and screws passed to the mortgagee.

Hobson v. Gorringe (1897 1 Ch. 182) decided that a gas-engine was sufficiently fixed to the land to become a fixture and it passed to the mortgagee.

In re Yates (38 Ch. D. 112) decided that trade machinery passed to the mortgagee by virtue of being attached to the freehold.

In *Wake v. Hall* (8 A. C. 195) it was decided that the maxim "Quicquid plantatur solo, solo cedit" did not apply because the buildings in question, although attached to the soil, were held to be accessory to mining and there was nothing to show that they were irrevocably annexed to the soil.

The point then on which these decisions turned was whether the fixtures in question were mere trade fixtures, i.e. accessories for the carrying on of a trade, or whether they were for the improvement of the inheritance.

As a maxim of general application "Quicquid plantatur solo solo cedit" does not apply in India, nor in this country. Certainly, as has been pointed out by Mr. Figgis, it does not apply in the case of leases under section 108 I. T. P. A. in the sense that in India and Kenya a lessee may move things attached to a property which he could not remove in England.

But the law and authorities cited do establish in my opinion that machinery of the nature of the articles in question here does form part of the immovable property included in a charge upon a farm, provided it is there for the beneficial use and improvement of the property. The result of the authorities is that the fixtures are part of the immovable property if-

- (1) they are for the permanent enjoyment of it; - $(2)$ they are accessory thereto; - (3) they are for beneficial enjoyment of that to which the fixture is attached.

Machines and other trade fixtures do not come within the scope of this rule if they are not there essentially to develop the property.

Now in this case it is not disputed that the articles are attached to the soil; the machinery is bolted to concrete beds in the factory situated upon the farm and the corrugated iron forms a roof to the factory or part of it. The planting of sisal is in the nature of a permanent form of developing the land; sisal is a crop which lasts for a number of years and its cultivation is progressive extending normally over a period of years. A factory for producing fibre from the leaves grown on the plantation is virtually a necessity for working the crop and developing the property. It deals with the produce of the land itself and in this sense is to be distinguished from the fixed accessories used in normal commercial manufacture, as opposed to agricultural.

I am not aware of any authority in this country or elsewhere in which the distinction has been drawn between machinery or fixtures used to deal with the produce of the land on which those things are fixed, and machinery or fixtures used for dealing with materials derived from elsewhere. But in the case of sisal machinery used to deal with the produce of the land to which it is affixed, it seems to be a clear case of fixtures for the permanent beneficial enjoyment of the land. In this instance the land is held on a 999 years grant from the Crown. One might contrast a sisal or tea factory with a brewery or tannery in this respect: the latter would not deal with the produce of the land where the manufacture takes place. There might be a doubt about fixtures in the latter case, it would depend on the circumstances; but in the former case it seems clear that the machinery forms part of the land.

Therefore I find in this case that the machinery and fixtures were subject to the plaintiff's charges. This decides the plaintiff's first point and partially his second.

Are the plaintiff's rights as chargee still in existence in spite of the fact that the charges are discharged? The property was sold and bought in by the plaintiff excluding the machinery and fixtures. The charges were upon the land and it has been held that the land included the machinery and fixtures.

The charges were terminated on 18-3-36. It would seem that the plaintiff's rights as chargee had thereby ceased to exist when the amended summons was filed.

#### What are the facts?

The plaintiff has the rights of a mortgagee over Yatta Ranch plus machinery, of which the owner is Mrs. Hately; the machinery is part of the land.

Shah Vershi and Co. (Defendants) attach the machinery using the wrong procedure: they attach it as chattels when it is immovable property. The plaintiff objects under O. 19 r. 55 and 56. He seeks to amend his originating summons. Meanwhile to preserve the assets by arrangement with Mrs. Hately (and the Land Bank) he puts. up for sale Yatta Ranch, excluding the machinery, and buys in Yatta Ranch.

His charge is discharged and his rights as mortgagee 'exhaused. He files an amended originating summons to ask for a decision whether the machinery is subject to his charge. The machinery is<br>still under attachment. What is the position? Mr. Stratton argues that the position of the parties is to-day as it was at the time of the attachment, i.e. that the plaintiff is still chargee with rights over the machinery. Mr. Figgis says that he is not.

It seems clear that the plaintiff's rights as chargee are exhausted and that his cause of action ceased when the charges came to an end. It seems further that the defendants adopted the wrong procedure in attaching the machinery as chattels which should have been attached in conformity with O. 19 r. 51, as immovable property.

There is a further point raised for the defendants that the plaintiff had no right to deal with the land by sale without an order of the Court. Under sections 58 and 100 I. T. P. A. it is clear that he had no right so to deal unless and until he should have got an order of the Court ordering payment of the money and that the original owner be debarred from dealing. For this reason, as well as because his charge was at an end when the summons was filed, the plaintiff must fail on the issue whether the property attached was part of his security when the amended summons was filed. As regards the machinery the position would seem to be that it is still the property of Mrs. Hately and that it has not been lawfully attached. The attachment must be raised.

As to the costs of these proceedings, the plaintiff has succeeded on the issues that the fixtures were originally part of the immovable property and that the form of attachment was wrong and that the attachment must be raised.

The defendants have succeeded in the issue that the plaintiff's rights as chargee were exhausted at the date of summonses.

I therefore order that each party is to bear his own costs.