Stamp duty - Conveyance on sale of dairy processing factories, plant and equipment in factories - Whether plant and equipment exempt from duty as "goods, wares or merchandise" - Exemption not available because certain items of plant and equipment were fixtures not chattels - Principles to be applied

Stamp Act 1921 (WA) s 16, Second Schedule, Third Schedule, Item 2(7)

Hewett v Court [1983] HCA 7; (1983) 149 CLR 639

Hobson v Gorringe [1897] 1 Ch 182

Reid v Smith (1905) 2 CLR 656

Sadler v Johnson [1847] EngR 413; (1847) 16 M&W 775

Webb v Frank Bevis Ltd [1940] 1 All ER 247

1 MALCOLM CJ: This is an appeal under s 33 of the Stamp Act 1921 (WA) against an order made by Murray J dated 27 August 1999, by which the learned Judge dismissed an appeal against a decision of the Commissioner of State Revenue to disallow an objection by the appellant to an amended assessment of stamp duty under s 32 of the Act. In such an appeal, if the Judge concludes that the assessment is in error, the Judge is required by s 33(4) of the Act to assess the duty chargeable under the Act and order the Commissioner to refund any excess of duty paid by the appellant. By s 33A, if such an order is made, the amount to be refunded carries interest at the prescribed rate from the date of payment of the duty.

2 The evidence in the appeal was by way of an affidavit sworn by a Mr Martin, the General Manager of the appellant since 8 April 1994. Mr Martin was also the Regional General Manager in Western Australia of the National Foods Group of Companies from April 1994 and he was General Manager of the company within the group which became the appellant. The appellant conducted the dairy processing business of the National Foods Group in Western Australia. Mr Martin, who was residing in Brisbane at the time of the hearing, was cross-examined by way of video-link.

3 The corporate name of the appellant was originally Masters Dairy Ltd. It was a wholly owned subsidiary of Wesfarmers Ltd. Mr Martin was the General Manager. By an agreement dated 8 April 1994, Wesfarmers Ltd sold the Masters Dairy business to the appellant. As a result, the business became part of the National Foods Group. The business was acquired as a going concern. At the time of the sale and at the time of the appeal, the main factory was at Bentley. There was another factory at Boyanup and at the material time there was also a plant at Albany.

4 The appellant agreed to purchase the land, factory premises and plant and equipment of the dairy business for $9,029,243. The transaction was recorded in an agreement in writing dated 8 April 1994. The question raised by the appeal was whether various items of plant and equipment were "goods, wares and merchandise" exempt from stamp duty under item 2(7) of the Third Schedule to the Act. The appellant was liable to pay duty on the agreement in accordance with s 16(1) and the Second Schedule of the Act, subject to the exemption set out in the Third Schedule: s 16(2). The relevant item in the Second Schedule at the material time was item 4 "conveyance or transfer on sale of property" and, in particular, par (1) of that item, which made the appellant as purchaser liable to pay stamp duty on a sale, conveyance or transfer of land or any other property at the rates relevant where the amount or value of the consideration exceeded $500,000.

5 At the relevant time, there was provision for an exemption from duty in the Third Schedule, item 2(7) in respect of:

"A conveyance or transfer of any estate or interest ... in goods, wares or merchandise, ..."

6 That exemption was deleted by an amendment which came into effect on 30 June 1998, but the liability for duty falls to be determined in accordance with the legislation as it stood at the material time.

7 On 3 June 1994 the subject agreement was lodged for assessment of stamp duty. The process of valuation and assessment took some time and involved the respondent issuing requisitions. On 29 August 1996 an amended assessment was issued for stamp duty in an amount of $363,350.25. On 14 November 1996 the appellant objected to the assessment of duty under s 32(1) of the Act to the extent of $227,372.70 in respect of items of plant and equipment which were valued at $5,455,240. Following an exchange of correspondence, the duty on certain items was paid by the appellant. Further items were the subject of concessions by the appellant on 20 December 1996 and the duty with respect to them was paid. The objection was finally disallowed by the respondent on 26 February 1997 for the reasons stated in a letter of that date from the respondent to the appellant, namely:

"It is considered that the items of plant and equipment have a sufficient degree of annexation to the premises and are intended to remain in position for an indefinite or substantial period of time integral to the business operation so as to constitute fixtures for the purpose of assessment under the Stamp Act."

8 The value of the items of plant and equipment the subject of the appeal is $5,122,868. The duty payable in respect of them was paid on 12 March 1997 and the appeal was initiated by a request that the Commissioner treat the objection as an appeal dated 11 April 1997. The appeal was brought under s 33(1) of the Act.

9 The question raised in the appeal is whether all or any of the items of plant and equipment the subject of the appeal comprise "goods" within the meaning of item 2(7) of the Third Schedule or whether they are fixtures. As his Honour noted in par 10 of his judgment:

"It is accepted by the parties that that question is to be determined by giving to the term 'goods' the meaning personal property or chattels so as to exclude pieces of property having the quality of fixtures to the land upon which they are situated so that they would be treated as real property."

10 The question whether a chattel has become a fixture and part of the land to which it is affixed is a question of fact to be determined having regard to all of the relevant circumstances, which include the purpose or object of annexation and the mode or degree of annexation: Holland v Hodgson [1872] LR 7 CP 328; Lee v Taylor [1902] UKHL 1; [1902] AC 157. In Holland v Hodgson, supra, at 334 - 335, Blackburn J said of the question whether an annexation was sufficient for a chattel to become part of the land:

"... is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz, the degree of annexation and the object of the annexation. When the article in question is no further attached to the land than by its own weight it is generally to be considered a mere chattel. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land ... On the other hand, an article may be very firmly fixed to the land and yet the circumstances may be such as to show that it was never intended to be part of the land, and then it does not become part of the land. ... Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to show that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to show that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel."

11 As Kearney J said in Palunberi v Palunberi [1986] NSW Conv R 55,673 at 56,671:

"It is now further recognised that although both these factors are relevant, neither is conclusive. Thus, there are instances in the authorities of a chattel which has been securely affixed to the premises, nevertheless not being treated as a fixture, while on the other hand there are instances of a chattel becoming a fixture notwithstanding that the party annexing it may have had no such actual intention."

12 In Australian Provincial Assurance Co Ltd v Coroneo [1938] SR (NSW) 700 at 712, Jordan CJ said:

"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 ... or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose ..."

13 As Kearney J noted in Palunberi v Palunberi, supra, at 56,672:

"The correctness of this proposition has been doubted in the judgment of Mahoney JA in N H Dunn Pty Ltd v L M Ericsson Pty Ltd [1979-1980] ANZ Conv R 301 at 303, where his Honour says:

'I would with respect, find difficulty in accepting that the matter can be tested simply by reference to whether the annexation to the realty is intended to be temporary or otherwise'."

14 In other words, it is not a matter of subjective intention but a matter of ascertaining the intention objectively, having regard to all of the circumstances. As Lord Macnaghten said in Lee v Taylor, supra, at 162:

"To determine that question you must have regard to all the circumstances of the particular case ... the mode of annexation is only one of the circumstances of the case, and not always the most important - and its relative importance is probably not what it was in ruder or simpler times."

15 In Anthony v The Commonwealth (1973) 47 ALJR 83 at 89, Walsh J held that certain items were not fixtures, notwithstanding that they had obviously been annexed securely and for a purpose which was not a temporary purpose. While accepting that evidence of the actual or subjective intention of a party may be admissible, Mahoney JA concluded in N H Dunn Pty Ltd v L M Ericsson Pty Ltd [1979] 2 BPR 97102 that the ultimate question was one of the objective intention that ought to be imputed or presumed from the circumstances of the case.

16 Having reviewed these authorities, Kearney J concluded in Palunberi at 56,672:

"It would seem from perusal of these and other authorities in the field that there has been a perceptible decline in the comparative importance of the degree or mode of annexation, with a tendency to greater emphasis being placed upon the purpose or object of annexation, or, putting it another way, the intention with which the item is placed upon land. This shift has involved a greater reliance upon the individual surrounding circumstances of the case in question as distinct from any attempt to seek to apply some simple rule or some automatic solution.

Bearing in mind the principles to be derived from the above references, and seeking to apply them to the facts of the present case, it might be noted that whilst some guidance may be obtained from other decisions in similar circumstances or concerning similar items, no standard solution is to be derived from such cases, which upon ultimate analysis, are found to turn upon their individual facts."

17 I note that although Palunberi was cited to Murray J, it was not referred to in his Honour's judgment.

18 In North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) [1940] HCA 7; (1940) 63 CLR 52 at 63, Starke J said:

"The phrase 'goods, wares and merchandise' comprehends all tangible moveable property (Blackburn on Contract of Sale, 1st ed (1845) p9). And Platt B said in Sadler v Johnson ((1847) [1847] EngR 413; 16 M&W 775, at p777 [153] ER 1403, at p1404]) that the exemption in the Stamp Act was for the purpose of protecting commerce and ought therefore to receive a liberal construction but it is well enough settled that it does not include fixtures, nor scrip certificates, nor shares, and so forth."

19 In that case, Dixon J said at 67 that the phrase "goods, wares and merchandise" was derived from s 17 of the Statute of Frauds and should receive the same interpretation, namely:

"The words were understood to include all tangible moveables; that is to say, they covered all chattels personal not being choses in action or indicia of title thereto."

20 The test formulated by Jordan CJ in Australian Provincial Assurance Co Ltd v Coroneo, to which I have already referred, seems generally to have been interpreted as requiring intention to be objectively determined by reference to the circumstances applicable at the time of annexation.

21 Having reviewed the authorities, Murray J said at par 16:

"Whilst all the circumstances must be considered, it is to be accepted, I think, that the crucial determinative factor will be the object, purpose or objective intention of the annexation of the thing in question to the land. The degree of annexation may of itself be a factor having a particular persuasive power in that regard, but it will never alone be sufficient."

22 Murray J then referred to the following comment by Ipp J in Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 at 4845 as follows:

"It is plain that while regard should be had to all relevant circumstances, no particular factor necessarily has primacy and every case depends on its own facts. Nevertheless, there does appear to be trend towards attaching particular significance to the intention with which the item is placed upon the land."

"As regards intention, while subjective intention may be relevant, it is objective intention that is of paramount significance. ... the ultimate fact to be proved is the objective intention that ought to be imputed or presumed from the circumstances of the case."

24 That comment was made by Ipp J in the context of a reference to the decision of the Court of Appeal of New South Wales in N H Dunn Pty Ltd v L M Ericsson Pty Ltd, supra, at 303-304:

"Whatever be the correct formulation of the fact to be proved in such disputes, it is not whether the owner of the chattel or any other person subjectively intended that it should become part of the realty. Therefore a statement of the intention as to that particular matter is not a statement tending, as such, to prove the fact to be proved. But that intention as such, is not necessarily irrelevant. Whether the question of whether chattels have become part of the realty is a question of fact or a conclusion of law, various matters have been seen as of assistance in the final determination of it. The period of time for which the chattel was to be in position, the degree of its annexation to the land, what was to be done with it, and the function to be served by its annexation, are all matters which have been seen to be relevant for this purpose. In particular circumstances, statements made by the owner of the chattel or of the realty as to his intention that the chattel shall or shall not be part of the realty may, if appropriately proved in evidence, be relevant as facts probative of such matters and therefore as relevant in the determination of the ultimate fact to be proved."

25 The learned Judge below commented with respect to that passage at par 18 of his judgment:

"I would respectfully adopt that view and think it is sufficient to say that the parts of the affidavit to which objection is taken on this ground are admissible for such persuasive power as they have as statements bearing upon the ultimate question in issue, the purpose or the objective intention of the original annexation."

26 Murray J also relied upon the discussion of tenants' fixtures in three cases, namely, Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 at 148 - 149 per Hill J; Elitestone Ltd v Morris [1997] UKHL 15; [1997] 1 WLR 687 at 691 - 693; 695 - 696; and 698 - 699; and Wincant Pty Ltd v South Australia [1997] SASC 6287; (1997) 69 SASR 126 at 127; and 142 - 143. Drawing on these cases, Murray J said:

"A tenant's fixture is a chattel which the tenant annexes to the land for the purposes of trade or domestic convenience or ornament in such a way that, applying the ordinary tests, the thing becomes a fixture and therefore loses its identity as a chattel and during the period of its annexation is properly to be regarded as part of the land. It will therefore be the property of the owner of the land, subject to the right which may be secured by agreement to the tenant to remove the chattel and thus sever its annexation to the land during or upon the expiration of the term, or within a reasonable time thereafter. That capacity has been developed by the law in mitigation of the strict application of the general rule that what becomes annexed to the land is a fixture to be treated as being part of the land and the property of the owner. The rule is to make severable and again a chattel that which would otherwise be part of the land and incapable of severance as a matter of law."

27 In that context the learned Judge also said at par 20:

"The issue of removeability in that way, as a right afforded by the law which may again confer ownership of the chattel upon a tenant or other limited owner, is, of course, different from the question whether the original annexation of the chattel to the land was of the character sufficient in all the circumstances to make the chattel become part of the land. But it does not follow, and indeed I would think it to be wrong that, as the respondent argues, the physical and economic capacity to remove the object in question and the likelihood of that occurring to enable the object to be used elsewhere is irrelevant to the question whether the degree and purpose of annexation was such as to make it a fixture in the first place. Clearly, such considerations will be relevant aspects of the circumstances concerning the degree and object of annexation and will have the capacity to provide the answer to the question whether the objective intention with which the annexation of the object to the land was accompanied was such as to make it a fixture or lead to the conclusion that it retained its character as a chattel. Such considerations are commonly adverted to in that regard."

28 The learned Judge referred to two other cases, namely Attorney-General (Cth) v R T Co Pty Ltd (No 2) [1957] HCA 29; (1957) 97 CLR 146; and Re Starline Furniture Pty Ltd (1982) 6 ACLR 312. In the latter case at 314 Neasey J said that:

"The core principle has often been said to be that the relevant intention is to be gathered from the circumstances, including in particular the degree and object of annexation. All of the items in question here fall into the category of factory machinery and associated equipment installed for purposes of trade, which a strong line of authority in England classifies firmly as fixtures passing with the land when the issue is between mortgagor and mortgagee."

"... this machinery and equipment was primarily installed and affixed for the better use and enjoyment of the land and premises as a furniture factory, and passed with the land."

"... that conclusion provides a convenient means to reinforce in my mind the fact that the answer to the question whether a particular item is a fixture or not as at the time of conveyance must be provided [sic proved] by having regard to the degree and object of annexation as at the time of its installation into the dairy processing plant in question."

30 In my opinion a major difficulty which arises for the appellant in this case is the absence of evidence relating to the mode of annexation of the various items of equipment at the time when they were placed on the land. There was at least a paucity, if not an absence of, evidence with respect to individual items of equipment which related to the mode of annexation; the significance of the particular item of equipment in the process; its degree of annexation to the land; and how it related to other items of equipment with which it was connected by a system of piping.

31 Mr Martin's evidence on affidavit described the plant as he came to know it following the acquisition of it by the appellant in 1994, but he was not in a position to give evidence with respect to the circumstances under which equipment installed prior to his appointment became annexed to the land.

32 The facts as found by Murray J were that raw milk which arrived at a processing plant was pumped into a storage tank. It was then pasteurised by being heated and cooled rapidly. The treatment varied, depending upon the type of milk which was the desired end product. The next step in the process was to homogenise the milk to break up concentrations of cream and disperse it evenly. Following that, the milk is again pumped into one or more storage tanks. Thereafter there may be further processing required or mixing of the milk with other ingredients if the end product is to be other than pure milk. Finally, the milk product will pass through filling machines which package it before it is ultimately transported for distribution through retainers or milk vendors.

33 The learned Judge described the plant and equipment in question in par 26 and par 27 of his judgment as follows:

"By and large the items of property in question here are items of plant and equipment used in the processing of the milk. They are as I understand it all connected to a power supply and they are connected in the processing line by pipes fixed to ceilings of rooms in the processing plant or under floors and running through walls. By that means then, the items of equipment may be described as being fixed to the factory and thereby to the land. But, again speaking generally, they are not otherwise so fixed except by their own weight. Very few pieces of equipment, notably compressors and centrifuges, are bolted to the floor of the factory. Those that are are so fixed because that is required by law for safety reasons or otherwise to keep the machine steady and fixed in position during its operation. There are various ladders and raised platforms bolted to the floor and some of these are fixed to the machines, but that form of fixation is to provide a firm ladder or platform which will not move so as to endanger the user.

The plant and equipment in question was acquired and introduced into the relevant factory on many different dates between October 1984 and February 1994. That reflects the fact that for such milk processing plants to be operated successfully it is necessary that the processing equipment may be changed to be disposed of or transferred to another factory location and to be replaced by different or more modern pieces of equipment. By that means the factory owner and operator is enabled to respond in an efficient manner to market forces such as demand generated for a different milk product, or changes in regional consumer demand which may necessitate the upgrading of the capacity of a particular factory, perhaps at the expense of another. There may be, and have been, changes made to accommodate the different packaging of milk products. New technology may appear which will cause a modification of the processing plant to provide for processes of greater efficiency and capacity. All of this obviously has to do with the cost effectiveness of the processing plant to produce the milk product, whatever it may be, in such a manner that it may be marketed competitively."

34 His Honour went on to express the view that this was not a case where the degree of annexation of specific items of equipment would by itself be of much assistance in answering the question whether or not they were fixtures. As his Honour put it:

"The court is much more concerned with the objective intention behind annexation in the form of the incorporation of the item into the processing plant, bearing in mind that I am looking to the character of particular pieces of plant and equipment which, whilst they continue to be incorporated in the processing plant, all play a part in an integrated system of milk processing, no matter how economically effective may be the capacity to remove them and replace them so as to change the nature of the processing plant. While they play their role they must do so as parts of the system which is an integrated whole."

35 Having reviewed individual items of equipment and their purposes, his Honour concluded that:

"As at the time the above items of equipment were respectively placed upon the land and incorporated into the dairy processing factory they were undoubtedly readily removable and might have been removed and transferred to another place, or sold, or otherwise disposed of as required, but in my opinion, they were items which were placed on the land for the purpose of their integration into the factory system into which they were firmly incorporated. They were not placed there for a temporary purpose, but for an indefinite period of time. They were interconnected and incorporated into the factory, although the degree of annexation was variable and generally not otherwise than by the weight of the units. Nonetheless, as photographs reveal, their operative use was in various quite complex ways a part of the way in which the factory was structured. I have no doubt that the items of equipment described above were annexed to the land for the purpose of its better enjoyment or use as a dairy processing plant. When they were sold with the land the sale was of a factory as a going concern. The items of property described above were in my opinion fixtures and not able to attract the exemption provided in the Third Schedule to the Act.

The appeal is not pursued with respect to a number of originally contested items, particularly airconditioners and a stainless steel steam line. A furnace is in contest, but the evidence tells me nothing about its use in the factory process. Similarly, that is the situation with respect to a PABX digital switchboard and a Simpson dishwasher. Although in the N H Dunn case a similarly described switchboard was held to be a chattel because it was concerned with office communication, the evidence in this case tells me nothing about the use to which the switchboard was put. For all I know it may be an essential part of communication between those responsible for various parts of the factory process. In my view the proper conclusion with respect to those items of equipment not covered by the evidence is that I am simply unable to find that the appeal is made out with respect to them.

In the final analysis therefore, the appeal is dismissed in its entirety."

36 The grounds upon which the appellant appeals, as amended at the hearing, were:

"1. The learned Judge erred in law and in fact in failing to give any or any adequate weight to the following relevant considerations in relation to each item of equipment the subject of the proceedings.

(a) The fact that, or the possibility that, items of equipment were removed from the land or moved upon the land between the time they were initially placed on the land and the time of the conveyance.

(b) The rights of the owner of the equipment as against the owner of the land upon which the equipment was situated including in particular the right of the owner of the equipment to remove the equipment.

(c) The likelihood of removal of each item of equipment during its useable lifetime and the lifetime of the factory in which it was employed.

(d) The value of each item of equipment relative to the costs of its removal.

(e) The facility with which each item of equipment could be detached and the damage or lack thereof that detachment would cause to the item and the land.

(f) The degree to which and the method by which each item of equipment was annexed to the land if at all.

(g) The purpose of annexure, if annexed, of each item of equipment.

(h) The intention of the owner of the equipment and the owner of the land that the equipment should be able to be removed and relocated in the ordinary course of the Masters Dairy business.

2. If the learned Judge had given weight, alternatively adequate weight, to the relevant considerations set out in paragraph 1 above, he would have held that all, alternatively some, of the items of equipment were not fixtures but were 'goods' within item 2(7) of the Third Schedule to the Stamp Act 1921."

37 As a general proposition it was contended on behalf of the appellant that for the purposes of assessing stamp duty, it was necessary to consider the legal effect of the relevant instrument in the context of the facts and circumstances at the time of execution of the instrument. Counsel for the appellant further submitted that the critical question for the Court was to determine whether, as at the date of execution of the agreement, namely 8 April 1994, each of the relevant items of equipment was a fixture or not. So much may be accepted. Critically, in the context of this case, it was submitted that, given the increasing emphasis the courts have placed on the relevance of all of the circumstances of the case, an inquiry regarding the circumstances under which and the purposes for which the equipment in question was placed on the land was determinative. It was submitted that it was necessary to examine not only the degree of annexation and the objective intention with which it was originally fixed and remained affixed, but also the manner in which the equipment was used as at the date of the execution of the agreement and not at the time that it was brought onto the land.

38 It was common ground between the parties in this Court that the question whether an item is a fixture or a chattel is a question of fact to be determined having regard to all relevant circumstances: N H Dunn Pty Ltd v L M Ericsson Pty Ltd, supra, at 302 per Mahoney JA; and 305 per Moffitt P; and Australian Provincial Assurance Co v Coroneo, supra, at 711 per Jordan CJ; and Palunberi v Palunberi, supra, at 56,671 per Kearney J.

39 The actual subjective intention of the parties, or of one of them, is not conclusive of the status of something affixed to the land, but such intention is not irrelevant. In Dunn at 303-304 Mahoney JA said:

"Whatever be the correct formulation of the fact to be proved in such disputes, it is not whether the owner of the chattel or any other person subjectively intended that it should or should not become part of the realty. Therefore a statement of the intention as to that particular matter is not a statement tending, as such, to prove the fact to be proved. But that intention, as such, is not necessarily irrelevant. Whether the question of whether chattels have become part of the realty is a question of fact (see supra) or a conclusion of law, various matters have been seen as of assistance in the final determination of it. The period of time for which the chattel was to be in position, the degree of its annexation to the land, what was to be done with it, and the function to be served by its annexation, are all matters which have been seen to be relevant for this purpose. In particular circumstances, statements made by the owner of the chattel or of the realty as to his intention that the chattel shall or shall not be part of the realty may, if appropriately proved and evidenced, be relevant as facts probative of such matters and therefore as relevant in the determination of the ultimate fact to be proved."

See also Eon Metals at 4846 - 4847 per Ipp J.

40 It may be accepted that the relevant intention includes the intention of the owner for the time being of the chattel or of the real estate. It may also be accepted that developments in commercial practice mean that what was once almost invariably classified as a fixture may today be classified as a chattel: Neylon v Dickens [1979] 2 NZLR 714. In that case, a prefabricated transportable house, fuel tanks, helicopter hanger and game freezing and storage facility placed on the defendant's land by a venison recovery company were held not to be fixtures. Despite the high degree of annexation, it was accepted by Jeffries J that the intention objectively ascertained was that the annexation was temporary and the structures concerned were not fixtures. As his Honour said at 721 - 722:

"There was an argument advanced by Mr Burn for the defendants that times change and with the development of kitset construction (of which the hangar was an example), and prefabricated dwellings, what was once almost invariably accepted as a fixture can today be easily accepted as a chattel. This trend has been complemented by the heavy haulage facilities available to transport large structures. I think such an argument has validity.

Many of these observations were foreseen in Leigh v Taylor [1902] UKHL 1; [1902] AC 157 where a p162 Lord Macnaghten said:

'I do not think the law has changed. The change I should say is rather in our habits and mode of life. The question is still as it always was, has the thing in controversy become parcel of the freehold? To determine that question you must have regard to all the circumstances of the particular case - to the taste and fashion of the day as well as to the position in regard to the freehold of the person who is supposed to have made that which was once a mere chattel part of the realty. The mode of annexation is only one of the circumstances of the case, and not always the most important - and its relative importance is probably not what it was in ruder or simpler times.'

See also Adkin and Bowen on Fixtures (3rd ed, 1947) pp10 and 11, and Stonham's Vendor and Purchaser (1964) pp257 and 258."

41 It does not follow, however, that every transportable house that is constructed off-site, carted to the site and erected on stumps is a chattel because it is capable of being lifted by a crane and put on a transporter and is, therefore, not a fixture. If the circumstances, looked at objectively, evidence an intention on the part of the owner that the house should remain permanently or indefinitely on the land, the mere fact that it is capable of being removed relatively easily, will not result in its characterisation as a chattel. Where the circumstances are as I have described, they would be likely to lead to an inference of an intention that the house should remain on the site permanently or for an indefinite period. In such circumstances, I consider that it would be characterised as a fixture. The indicia of such an intention would no doubt take into account the extent to which the house was connected to a sewerage or septic tank system, connected to a water supply, whether public or private, and such matters as whether the house was supplemented by the construction of ancillary outbuildings, the installation of a swimming pool and the creation of an extensive garden.

42 In Permanent Trustee Australia Ltd v Esanda Corporation Ltd (1991) 6 BPR 9741, Permanent made a loan secured by a mortgage of land on which two ATCO transportable houses were erected. Such homes were designed so that they could easily be transported from the construction site to the site on which they were erected with reasonable ease and could also subsequently be removed to another or other sites. Rolfe J found at 13,422 - 13,423 that the homes could be removed from one site to another without difficulty and without causing "any real damage either to them or to the land". The houses were erected for occupation by employees required to be on site 24 hours a day to attend to the needs of plants grown commercially by the company. The plant growing project was intended to continue for five years, with two options for renewal, each of five years. The company involved in the project had no interest in the land, and no interest in increasing the value of the land. To the extent relevant, the subjective intention of the owner of the houses was to use the houses because they were removable and transportable and could be used elsewhere or sold to a person wishing to remove them.

43 Rolfe J referred to the decision in Neylon v Dickens at 1426 - 1427 in some detail and said at 13,427 - 13,428:

"Whilst certain factual elements in that case have a similarity to factual elements in the present case and are, therefore, of assistance to me, I cite it more for the statements of principle. Significantly, so far as I am concerned, his Honour placed emphasis upon the intention of the parties and, so it seems to me, his emphasis was consistent with that in the authorities to which I have referred specifically and also with the decision of Carruthers J in Goulburn City Council v McIntosh, supra. At 33 his Honour said:

'I am satisfied in the light of the evidence as a whole that the machinery and equipment were intended to remain indefinitely upon the land.'

The question then arises as to the intention which I should impute or presume so far as the parties in the present case are concerned. In my opinion the degree of annexation of each house to the land, the purpose for which each house was placed upon the land, the limited, (although not insubstantial), time that the houses were to be upon the land, the fact that at the time the houses were purchased Growth Industries had other projects in mind, the fact that the houses could be moved in the way in which I have described to other sites and, in so far as it is relevant, the stated intention of the parties, all lead me to the conclusion that on the facts of this case it was not intended that the houses should become fixtures.

All counsel relied in their written submissions on statements from the various judgments in Reid v Smith [1905] HCA 54; (1905) 3 CLR 656. I have not been able to discern in those judgments that the ultimate matter for consideration is not the intention. That certainly was the view to which Walsh J came in Anthony.

Mr Wales, for the plaintiff, relied upon certain passages from Reid, but I do not consider they are inconsistent with the conclusions to which I have come. Nor do I consider that the decision in Hewett v Court [1983] HCA 7; (1983) 149 CLR 639; 46 ALR 87, upon which Mr Wales relies, is.

Mr Wales also relied upon the fact that the houses rested on concrete piers sunk into the site. That may mean that the piers become fixtures, but it does not mean, in my view, that the houses resting upon them do. I consider Webb v Frank Bevis Ltd [1940] 1 All ER 247 is authority for this. Similarly, I do not consider that the concession that the verandah may constitute a fixture affects the houses. Indeed, the ease with which the verandah posts could, on the evidence, be removed from the 'U' bolts, strengthens me in this view and makes me wonder whether the concession should have been made. However, it was and I have decided the matter on that basis. I do not accept Mr Wales' submission that 'the building is not, it is submitted, an accumulation of parts, as to some of which the defendant can "waive" its claim'. In my opinion the authorities make it clear that one must look at each thing under consideration to determine whether or not it is a fixture or a chattel. A number of things may fall into one category or the other. That supports the view I consider to be correct. A simple and perhaps homely example arises from a consideration of a domestic stove and refrigerator. Usually the former is treated as a fixture - a purchaser would be surprised, in the absence of an express term in the contract, to take possession and find it removed. A purchaser would, I think, be equally, but pleasantly, surprised to find a refrigerator still in the house."

44 By contrast to the situation in Permanent Trustee, in Lockward Buildings Ltd v Trust Bank Canterbury Ltd [1995] 1 NZLR 22, the respondent bank was the first mortgagee of land owned by S on which was a show home supplied by L, which was a building company. The house was not used as a dwelling, but was designed and furnished as such. It was the only structure on the land apart from a shed. It was a "kit set" home erected on site and attached to foundations in the same way as a permanent dwelling. It was not connected to the sewer, but such a connection could readily be made. Water had been laid on. The electricity connection was possibly temporary, but sufficient to comply with the requirements for a permanent connection.

45 At first instance, the trial Judge found that, because of the appearance of the house and its affixation to the ground, it would have been regarded by anyone looking at it as part of the land. The show home was required to be on view for a minimum period of 12 months. An earlier show home had been put on the same site for nearly two years and had been replaced by a new model which had been on the site for a year.

46 S had given a first debenture to the Bank of New Zealand and a second debenture to Lockward. As a result of S getting into financial difficulty, the Bank of New Zealand appointed a receiver under its debenture. The next day the Trust Bank removed the show home to a temporary site, where it was subsequently sold. It claimed to be entitled to do this because the house was a chattel and secured to it under its debenture. No notice had been given under the Property Law Act 1952 (NZ).

47 The Court of Appeal confirmed the decision of the trial Judge who had held that Lockward had not displaced the prima facie finding by the trial Judge that the show home had become part of the land. It could not be reasonably concluded that the show home had been affixed to the land for some purpose which clearly demonstrated an intention to preserve its status as a chattel. Tipping J (with whom McKay J agreed) at 31 referred to a decision of Dunphy J in Wellsmore v Ratford (1973) 23 FLR 295 which involved an exhibition home at an exhibition site where the home was exhibited. Dunphy J held that the home was so firmly fixed to the soil as to bring it within the definition of a fixture. It was the mode of annexation which was decisive in that case.

48 Tipping J also referred to the decision of the High Court in Commissioner of Stamps (Western Australia) v L Whiteman Ltd [1940] HCA 30; (1940) 64 CLR 407. In that case, the question was whether a particular piece of machinery was a fixture or a chattel (in the context of the expression "goods, wares and merchandise" for the purposes of stamp duty under the Stamp Act 1921 (WA)). The machinery was bolted to a concrete base and used for brick making clay. Rich ACJ said at 411:

"No doubt, when the clay is exhausted the machinery will be moved from its present position, but in the meantime it is affixed to the land and is essentially being used for the better enjoyment of the land. Even if the machinery is affixed, the respondent contends that the intention of the parties is required to pass it as land and that the facts show that it was not the intention of the vendor and purchaser that the machinery should be sold as fixtures or as part of the soil, but it was intended that it should be sold as chattels. But 'the circumstance to show intention is the degree and object of the annexation which is in itself apparent and thus manifested the intention' (Hobson v Gorringe [1897 1 Ch 182, 193]."

49 In Lockward, supra, at 31, having quoted the above passage, Tipping J said:

"His Honour went on to make it clear that in the case before him the parties had manifested their intention as to the degree and object of the annexation by the method by which the machine had been affixed to the land. He noted again that the machinery could be removed if necessary but said that the method of affixation negatived any idea of treating it in the meantime as a moveable chattel.

I would adopt a similar approach in the present case, as is evident from what I have already written. The show home was undoubtedly affixed to the land. The degree and object of the annexation, as objectively apparent, did not displace the prima facie inference from such annexation. No-one looking at the show home could reasonably have thought that the person affixing it to the land intended that its status was to remain a chattel. The apparent prospect that in due course the structure might be removed from the land cannot in the circumstances of this case lead to the conclusion that it remained throughout a chattel. For these reasons I would reject Lockward's submission that the show home never became part of the realty and remained a chattel throughout."

50 I note that in Lockward at 25 - 26 Cooke P was content to apply the classic statement of Blackburn J in Holland v Hodgson [1872] LR 7 CP 328 at 335 saying:

"Tentative though Blackburn J's statement expressly was, it has often been cited and whether it can be improved upon is doubtful. Attempts to tabulate more precise rules can create more difficulties than they solve. For example, to limit the inquiry to circumstances 'patent to all to see', or to exclude altogether consideration of the 'subjective' intention of one or more affected parties, could be a self-defeating and unjustly limiting exercise in clarification. Common intention is taken into account as between landlord and tenant, and there seems to be no reason in principle why it should be rigidly excluded in other cases, although against third parties it is likely to carry little weight: compare 'Fixtures' by Roger Connard in Studies in the Law of Landlord and Tenant (1975) p266, n76."

51 Counsel for the appellant submitted that the approach adopted by Cooke P was correct and that attempts to formulate more precise rules could create more difficulties than they would solve. In my opinion, that submission is correct and I would adopt the same approach.

52 As I have already mentioned, the learned trial Judge decided that, first, when the relevant equipment was placed upon the land and incorporated into the dairy processing factory, it was undoubtedly readily removable and might have been removed and transferred to another place, or sold, or otherwise disposed of as required. Secondly, however, the equipment was placed on the land for the purpose of its integration into the factory system into which it was found to be "firmly incorporated". Thirdly, the equipment was not placed there for a temporary purpose, but for an indefinite period of time. Fourthly, the equipment was interconnected by piping and otherwise incorporated into the factory, although the degree of annexation to the floor was variable, and generally not otherwise than by the weight of the units. Fifthly, the operative use of the equipment was in various quite complex ways a part of the way in which the factory was structured. Sixthly, the equipment was annexed to the land for the better enjoyment of the land for use as a milk processing plant. Finally, when the equipment was sold, it was sold as a part of the plant as a going concern.

53 It was contended on behalf of the appellant in support of both grounds of the appeal that the learned Judge erred in failing to give any or any adequate weight to a number of relevant considerations in relation to each item of equipment the subject of the proceedings. They were:

(i) At all material times Wesfarmers carried on a dairy business known as Masters Dairy from premises in Bentley and from premises at other locations in Western Australia;

(ii) At all material times Dairy Transport Ltd was the registered proprietor of the land and premises at Bentley;

(iii) At all material times Wesfarmers used the land at Bentley and other land in Western Australia to conduct the Masters Dairy business;

(iv) Prior to 8 April 1994 (that is, prior to the date of the Sale Agreement), Wesfarmers transferred to Dairy Transport the goodwill, trade names, business records, trade debtors, stock and other assets comprising the Masters Dairy business;

(v) After the transaction referred to in the preceding subparagraph, items of plant and equipment necessary for the conduct of the Masters Dairy business (including the items of equipment the subject of these proceedings) continued to be owned by Wesfarmers;

(vi) By the Sale Agreement the appellant acquired from Wesfarmers, among other things, the items of plant and equipment referred to in par (v) above;

(vii) As at the date of the Sale Agreement the relevant items of plant and equipment were situated on the land at Bentley, or on land at Boyanup or Albany;

(viii) The equipment which processes the milk product and the equipment which provided services to the process generally (such as boilers, refrigeration units and water purifiers) were not fixed to the land;

(ix) It was a feature of the appellant's business that individual items of equipment could be taken out of the process and either removed or replaced at minimal cost and with minimal disruption to the overall process;

(x) Particular items of this kind included, as the learned Judge found:

"(1) Pasteurising and homogenising equipment. Two of the milk processing machines in this group were very valuable indeed being valued at over $750,000 and $870,000 respectively. They are machines which rest on the factory floor secured by their own weight, connected to the power system and bolted to the piping by which milk is brought to them and taken from them. They are also connected to the refrigeration piping system. Essentially these machines operate within the process by separating the cream from the milk, by heating and cooling the milk using a heat exchanger, and by homogenising the milk.

(2) There are various tanks or vats, some of which are as large as a 20,000 litre capacity. They are storage tanks. They rest on the factory floor or on a steel mezzanine, held in place by their own weight, but again, obviously connected to the pipe system. They are easily removable and on occasions are moved between factories.

(3) Blow moulders. These also are merely secured on the factory floor by their own weight. They are machines used to manufacture plastic bottles. They are connected to the power source of the factory and merely by chutes to the factory's conveyor system. Again they may be moved from factory to factory as demand fluctuates. Associated with them at the relevant time was a blow moulder recycling baling machine, a piece of equipment not bolted to the factory floor, but connected to the power source and used to recover and recycle imperfect plastic bottles or scrap plastic resulting from the operation of the blow moulders. As I understand it, the conveyor takes these plastic bottles to that part of the factory where they may be filled by a milk product which has concluded its processing through the hygienically separate processing room which accommodates the pasteurising and homogenising equipment. Associated with the blow moulders are annealing machines in which the plastic bottles produced by the blow moulders are heated to stabilise them to the appropriate size. These are relatively small units bolted to the conveyor system.

(4) There are various filling machines, including a glass bottle filler which has now been removed, sold and shipped overseas, and machines for filling plastic bottles and bulk milk containers, particularly for the sale of milk to various institutions. Again, these machines rest on the factory floor and are secured by their own weight, being connected to the factory's power source, its pipe system and conveyor system. The plastic bottle filler, acquired in May 1993, was valued at over $220,000. Associated with these machines at the end of the conveyor system is a bottle packer with the obvious task of packing plastic bottles into crates. This machine is bolted to the conveyor system and connected to the power source of the factory.

(5) Boilers. There are various items of this kind of varying size and positioned in different ways into the processing system. The main boiler, acquired in 1990, was valued in the contract of sale at over $209,000. Again, the boilers are annexed to the floor only by their own weight and are connected to the pipe system. They produce steam for various purposes including the pasteurisation process.

(6) There are two butter printers, as they are called, for printing codes on wrappers into which butter is packed. These machines stand alone on the factory floor connected to the factory's power source.

(7) An evaporator. Valued at the time of contract at nearly $100,000. Again, this is a free standing unit which may be moved within the factory or to another factory. The equipment is used to reduce the water content in a milk product to produce a concentrated milk product. As one would expect, it is connected to the power source of the factory and is bolted to the transmission pipe system.

(8) A separator. Valued at over $100,000 in the contract. Used to separate cream from unhomogenised milk to produce cream, sour cream and cheese products. The separator is bolted to the pipe system and connected to the power source. Because of its mode of operation it is bolted to the floor for stability. A separator has a centrifugal operation.

(9) An evaporative condenser. This piece of equipment is again bolted to the factory floor for stability. Its purpose is to cool compressed ammonia gas into liquid ammonia for purposes of refrigeration. It is therefore bolted to the refrigeration pipe system as well as being connected to the factory's power source.

(10) There is a hot water softener and water filtering machine. They are designed to soften and purify water before it is converted by the boiler into steam. Their effect is to reduce damage to the boilers and they are bolted into the water pipe system.

(11) Water cooling towers. As their name suggests these machines are used to cool milk in the pasteurisation process. They sit on frames outside the factory building. They are bolted to water pipes and pumps.

(12) Refrigeration compressor. This is the main refrigeration unit for the factory. It was valued in the contract at over $170,000. It had been acquired in November 1988. It is used to refrigerate water to cool the milk. Being a compressor the unit is required to be fixed in position for safety reasons. It is connected to pipes and any fracture of pipes might allow liquid ammonia to escape. It is therefore the case that the solid fixing of this unit is required by law, but the unit may be disconnected and removed.

(13) A gram wrap machine. This is an icecream packing machine for icecream products which are sold on sticks. Again, although this machine, valued in the contract at over $40,000, is merely secured to the floor by its own weight, it is connected to the power source for the factory and is bolted to the liquid ammonia refrigeration system. The purpose of the machine is to mould and freeze the icecream product."

54 It was submitted that each of the items of equipment referred to above were not a fixture for a variety of reasons. First, it was submitted that there was no physical annexation to the land or, alternatively, the degree of annexation was slight. This does not answer the point of interconnection of the various items of plant into an integrated whole. Secondly, it was said that at all material times each item of plant and equipment could easily be severed, if necessary, and removed from the factory with no or immaterial damage to itself or any structure to which it was annexed. In my opinion, this evidence is equivocal, having regard to the evidence that items of plant were installed for an indefinite period.

55 Thirdly, it was said that each item could be easily re-located within the factory or transported between factories with no or immaterial damage to itself or any structure to which it was annexed. This provides no answer to the point that the items of plant in question, while annexed to the land, formed part of a whole factory process in respect of which each item of plant was interconnected for the better enjoyment of the land.

56 Fourthly, it was the intention of the owner of each item of equipment, namely Wesfarmers, and the owner of the land, namely Dairy Transport, that each item could and should be capable of removal and relocation as set out above. There was no specific evidence that this was the intention of the relevant parties at the time when the equipment was originally installed, as distinct from on or after 8 April 1994 when Wesfarmers transferred the assets of the Masters Dairy business to Dairy Transport. After that transaction, items of plant and equipment necessary for the conduct of the Masters Dairy business, including the plant and equipment the subject of these proceedings, continued to be owned by Wesfarmers. Such items of plant and equipment were subsequently acquired by the appellant from Wesfarmers.

57 It was in this context that the items of plant and equipment in question which were used to process the milk were said not to be fixed to the land because it was a feature of the business that individual items of equipment were not or were not necessarily fixed to the land. This was for the reason that individual items could be taken out of the process and either removed or replaced at minimal cost and with minimal disruption to the overall process. In my opinion, none of these points answers the basic point that the plant and equipment was installed for the purpose of the better enjoyment of the land in question. It also does not answer the point that all of the items of plant were interconnected by the system of pipes to which I have referred. Even in the case of items which were not fixed to the land other than by being connected to items of plant and equipment which were fixed or supported by their own weight, the interrelationship in the context of the use of the land for the purposes of a factory for an unlimited period (in the sense that no limits were pleaded or proved) was in the context of the better enjoyment of the land.

58 In my opinion, it has not been demonstrated that the learned Judge was in error in concluding as he did that the various items of interconnected plant and equipment in this case were fixtures which had been annexed to the land for the purpose of the better enjoyment of the land for milk processing purposes.

59 For these reasons I am of the opinion that the decision of the learned Judge was correct and that the appeal should be dismissed.

60 KENNEDY J: I have had the advantage of reading in draft the reasons to be published by the Chief Justice. I agree that the appeal should be dismissed for the reasons given by his Honour.

61 WALLWORK J: I agree with the reasons for judgment of the Chief Justice. I agree that the decision of the learned Judge appealed from was correct and that the appeal should be dismissed.