Have you unknowingly created an equitable interest?

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Lictor Anstalt v Mir Steel UK 2014 EWHC 3316

Lictor Anstalt is on the face of it simply another case dealing with the issue of whether an item is a chattel or a fixture, however the decision of the Court of Appeal has an unpredicted element.

The case concerned a large piece of plant called a ‘hot strip mill’ used in the steel manufacturing industry and which was owned by a company called Lictor. This one was housed by a 300 metre long building and was set upon prepared foundations and in some places sunk below the surface of those foundations. Clearly  a very large and substantial piece of equipment.

Lictor lent the mill to Alphasteel, who erected and used it on their own land in Wales. Under a written agreement between Lictor and Alphasteel, Lictor remained the owners of the mill and had a right, on giving appropriate notice, to access Alphasteel’s land to dismantle and remove the mill.Alphasteel subsequently entered  administration. The Administrators placed all assets of Alphasteel, including the mill, into a subsidiary called Mir Steel (a ‘hive down’ company), which it then sold by way of a share sale. The purchaser was well aware at the time of the sale that there was a question as to who the owner of the mill was (based on whether it was a fixture or chattel).

The Court, unsurprisingly, found that the mill was a fixture and had therefore become part of Alphasteel’s land, such that ownership had passed to Mir Steel. The intentions of Lictor and Alphasteel as recorded in their agreement were irrelevant to this question of law.

The more surprising element of this case, however, was the Court’s finding that the agreement permitting Lictor to enter Alphasteel’s land and remove the mill created an equitable interest over the mill (which as a fixture was part of Alphasteel’s land) in Lictor’s favour. An equitable interest in land is binding on any subsequent owner except a bona fide purchaser without notice. Given an equitable interest had been created, Lictor could have protected their interest by placing a notice on the land register but had (unsurprisingly) failed to do so. Accordingly, even though Mir Steel had known there was a dispute as to ownership of the mill before acquiring the land, and knew that Lictor were claiming a right to enter and remove it, Lictor’s failure to protect their position with a notice at Land Registry meant Mir Steel acquired the land free of this right (less of an issue in practice since the court had determined the mill belonged to Mir Steel anyway).

The decision that a hot mill is a fixture is unlikely to be of that much interest to many readers; the fact that Lictor’s right to enter the land could and should have been protected by a notice at Land Registry however will be. It will apply wherever items remain the property of one party but are installed onto another’s land and particularly where there is a right on the owner to remove them e.g. a hire purchase agreement.