Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Ltd

A tenant’s prima facie right to remove tenant’s fixtures during the term may be modified or excluded by the lease. No prescribed formula or express reference to fixtures is required. The question is whether ordinary contractual construction, reading the lease as a whole and commercially, makes the intention to restrict removal clear. If construction leaves the court unsure or the provision ambiguous, the right remains. A covenant against alterations or changes to the premises can include fixtures installed during the term where the premises are construed as the buildings and plant from time to time. An obligation to construct plant does not itself displace the right; the operative restriction must be found in the lease.

The landlord appealed against paragraph 3(c) of an order made after Morgan J’s judgment in the Chancery Division, reported at [2013] EWHC 1658 (Ch). The judge held that the tenant could sever and deal with items accepted to be tenant’s fixtures during the currency of the lease.

The appeal concerned the construction of clause 2(6), which prohibited alterations or changes to the premises except in connection with permitted industrial use. The central issue was whether that covenant restricted the tenant’s general right to remove tenant’s fixtures before the end of the term.

1. Disposition. Rimer LJ, with McFarlane LJ agreeing and Vos LJ adding brief observations, allowed the appeal. Clause 2(6) prevented the tenant from removing the tenant’s fixtures during the term except where the removal fell within its permitted-use proviso. The parties were invited to agree a variation of the order.
2. Applicable principle. A tenant’s prima facie right to remove tenant’s fixtures can be modified or excluded by the lease. The lease need not use a prescribed form of words or expressly mention fixtures. It must, however, make the intention to remove the right clear on ordinary principles of contractual construction. If the court remains unsure, or the provision is ambiguous, the right is preserved. Lambourn v. McLellan [1903] 2 Ch 268 was explained as establishing no more than that principle. The broader statement by Vaughan Williams LJ was not treated as a binding rule prescribing particular language. The approach in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896 was applied.
3. Construction of clause 2(6). In context, the words “the said premises” referred to the site, buildings and plant from time to time, rather than only to the buildings and site as they stood when the lease was granted. It was commercially unrealistic to confine the covenant to the original state of the premises, because the lease required the tenant to construct and equip a steelmaking plant. The phrase therefore included attached landlord’s and tenant’s fixtures. Removing a fixture constituted a change to the premises. Removal for sale was not connected with the permitted steelmaking use and was prohibited.
4. The tenant’s obligation to construct the plant did not itself remove the right to sever tenant’s fixtures. That subsidiary point was supported by Mowats Ltd. v. Hudson Bros Ltd (1911) 105 LT 400 and Young and Others v. Dalgety Plc [1987] 1 EGLR 116. The operative restriction arose from clause 2(6), notwithstanding the end-of-term provision in clause 2(11).

1. Court of Appeal (Civil Division): The appeal was allowed. The court held that clause 2(6) restricted removal of tenant’s fixtures during the term and invited the parties to agree a variation of the order: [2014] EWCA Civ 100.
2. High Court (Chancery Division): Morgan J held that the tenant was entitled to sever and deal with the tenant’s fixtures during the term. The present appeal was limited to the construction of clause 2(6): [2013] EWHC 1658 (Ch).