Fixtures - personal property and fixtures - what happens when personal property is affixed to land or buildings?

Where personal property is affixed to land or buildings with the objective intention that the personal property should become part of the land or building, then the personal property will become a fixture and so part of the land or building. This will mean the personal property will lose its character as personal property, and become part of the land or building in question. This matter was considered in In re Cancer Care Institute of Australia Pty Ltd (administrators appointed) [2013] NSWSC 37 (Cancer Care Institute).

In the matter of whether medical machines installed in a building leased by a tenant that operated a cancer treatment facility had become a fixture and so fed the building owner’s and the building and land mortgagee’s estate and mortgage, was considered.

Two linear accelerators (which deliver high-energy radiation to areas affected by tumours in cancer suffers) worth approximately $4M each (Medical Machines) were installed in the basement of a medical facility run by a company that later entered administration.

The Medical Machines were installed by being bolted to steel bases (Bases) that themselves were installed into recessed pits in the concrete floor of the building. The steel bases were grouted into the concrete floor but the grouting was not structural and could be removed. The bolting of the Medical Machines to the steel frame was designed to prevent the machines moving around while in use. The Medical Machines were readily removable from both the steel frames, and from the building given door heights and widths would readily permit their removal (see judgment at paragraphs [6]-[7]).

There was a duly-registered purchase money security interest over the Medical Machine by its supplier, owed approximately $10M. Despite this, the building owner appeared to opportunistically argue that the Medical Machines became fixtures upon installation and so lost their character as personal property, and became part of the building and land.

The court held first that the Medical Machines were separate items of personal property from the Bases, given they plainly had separate viability (see judgment at paragraphs [12]-[13]).

The court held that the Medical Machines did not become fixtures, rather they retained their character as fittings and so remained personal property and did not become part of the land.

The court identified the test for determining whether personal property affixed to land or a building had become a fixture, as primarily turning on the intention of the person who affixed the chattel to the building or land, assessed objectively. Was the intention that the chattel become part of the building or land, or was the intention that the chattel remain separate from the land. Factors that assist in ascertaining this objective intention include whether removal of the chattel destroy the chattel, or occasion significant damage to the building or land; whether the cost of removal would exceed the value of the chattel; whether the attachment was for the better enjoyment of the chattel or the better enjoyment of the land; the period of time for which the chattel was to be in place; the function served by the annexation of the chattel to the building/land. The court cited Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712 at [165] for this iteration of the test.

Applying this test to the Medical Machines, the court found it unlikely to be the objective intention of the tenant that the installation of the Medical Machines would become part of the building/land, and so no longer owned by the tenant. The court pointed to the fact that Medical Machines of this nature were often removed after being installed, and moved around. The court also focused on the fact that removal could be achieved quickly and at low relative cost, and that the Medical Machines were expensive and paid for by the tenant, to reach its conclusion that the objective intention of the party installing the Medical Machines (the tenant) was that they would not become part of the building/land (see judgment at paragraphs [23]-[28]).