Supreme Court New South Wales Medium Neutral Citation: Agripower Barraba Pty Limited v Blomfield [2013] NSWSC 1598 Hearing dates: 25 and 27 September 2013 Decision date: 05 November 2013 Jurisdiction: Equity Division Before: Black J Decision: Judgment that disputed items are fixtures and the proceedings should be dismissed. Parties to bring in draft short minutes of order to give effect to judgment. Catchwords: PROPERTY - fixtures to land - intention of parties - degree of annexation - where uncertainty over who owned disputed items prior to transfer of title - where uncertainty over whether party held rights of ownership or rights of a secured creditor over the disputed items - where certain items partly welded in place and structures built around them which would have to be demolished, in part, to remove them - where certain items are part of an integrated processing and bagging facility - whether removal would destroy the items - whether the cost of removal would exceed the value of the items - whether removal would damage the property - whether terms of a lease assists with determining the intention of parties. Legislation Cited: - Environment Operations Act 1997 (NSW) - Evidence Act 1995 (NSW) ss 48(4)(a), 48(4)(b), 48(4)(d) - Sale of Goods Act 1923 (NSW) s 27 - Uniform Civil Procedure Rules 2005 (NSW) r 14.26(1) Cases Cited: - Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164 - Attorney-General (Cth) v RT Company Pty Ltd (1957) 97 CLR 146 - Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 - Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145 - Commissioner of Stamps (WA) v L Whiteman Ltd [1940] HCA 30; (1940) 64 CLR 407 - Commissioner of State Revenue v Uniqema Pty Ltd [2004] VSCA 82; (2004) 9 VR 523 - Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 - Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors [2010] NSWSC 1133; (2010) 15 BPR 29,689 - May v Ceedive Pty Ltd [2006] NSWCA 369; (2006) 13 BPR 24,147 - Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712 - National Australia Bank Ltd v Blacker [2000] FCA 1458; (2000) 104 FCR 288 - National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112; (2001) 24 WAR 70 - Pegasus Gold Australia Ltd v Metso Minerals (Australia) Limited [2003] NTCA 03 - Re Cancer Care [2013] NSWSC 37 - Re Starline Furniture Pty Ltd (in liq) (1982) 6 ACLR 312 - Reynolds v Ashby & Son [1904] AC 466 - TEC Desert Pty Limited v Commissioner of State Revenue (WA) [2010] HCA 49; (2010) 241 CLR 576 Texts Cited: Peter Butt, Land Law, 6th ed, 2010 Category: Principal judgment Parties: Agripower Barraba Pty Limited (Plaintiff) Dean Robert Innes Blomfield (First Defendant) Penelope Mary Blomfield (Second Defendant) Representation: Counsel: P.P. O'Loughlin/J.C. Conde (Plaintiff) T.G.R. Parker/M. Castle (Defendants) Solicitors: Neil Scott Lawyers (Plaintiff) Lyons Barnett Kennedy (Defendants) File Number(s): 2012/320018 Judgment 1By Amended Statement of Claim filed on 30 October 2012, the Plaintiff, Agripower Barraba Pty Limited ("Agripower") seeks, among other things, a declaration that it is the true owner of various items of plant and equipment set out in a Schedule to the Statement of Claim ("disputed items") and is entitled to possession of the disputed items; orders that the Defendants, Mr and Mrs Blomfield, deliver the disputed items to it or alternatively grant access to their property, known as "Kyooma" situated at Barraba, New South Wales, to permit removal of the disputed items; and other relief. Mr and Mrs Blomfield accepted, in their opening, that the primary issue in these proceedings is whether the disputed items were fixtures and accepted that, if the disputed items were not fixtures, they would permit their removal from the property. 2By way of factual background, mining activity on the property now occupied by Mr and Mrs Blomfield has been conducted by several entities, including by West Australia Sands from 1984; by Australian Diatomite Mining Pty Limited ("Australian Diatomite Mining") from 1992, under a 10 year lease which would terminate on 25 March 2002; and by Supersorb Minerals NL ("Supersorb"), which took a new lease on or about 24 September 2001 for a 10 year period. Agripower contends that, in about November 2006, another entity, ADE Environmental Pty Limited ("ADEE") acquired Supersorb's right, title and interest in the mining tenements and the disputed items and in Supersorb's lease of the portion of the property on which the disputed items were located. I will address the evidence as to that transaction below. ADEE subsequently granted security over the disputed items by Deeds of Charge in favour of St George Bank (now a division of Westpac Banking Corporation Limited) which had made loans to ADEE. ADEE's lease of the premises was terminated on the grounds of non-payment of rent on 5 September 2008 and Mr and Mrs Blomfield re-entered the property on that date. ADEE was placed in receivership in October 2008, it was then placed in liquidation; the liquidator subsequently ceased to act as liquidator in April 2011 and the receivers and managers retired no later than 25 September 2012. 3By Deed of Assignment and Release dated 4 September 2012 ("St George Assignment Deed"), St George assigned all its rights, powers, title and interest in certain property to Agripower. I will address that assignment in more detail below. Mr and Mrs Blomfield were subsequently notified of the assignment and of Agripower's intention to take possession of the disputed items and other items. Mr and Mrs Blomfield claimed that the disputed items were fixtures or at least were tenant's fixtures. By agreement between the parties, other items that were not claimed to be fixtures were subsequently removed from the property. The pleadings as to ownership of the disputed items 4As I noted above, Agripower seeks, among other things, a declaration that it is the true owner of the disputed items. Mr and Mrs Blomfield contend that, even if the disputed items are chattels rather than fixtures, Agripower has not established that it has acquired ownership of those chattels from their affixers. I will first deal with this question. 5In paragraph 3 of the Amended Statement of Claim, Agripower pleaded that, in November 2006 ADEE acquired from Supersorb all the right, title and interest in, relevantly, chattels on the property and in Supersorb's lease of a portion of the property on which such chattels were located. That paragraph implicitly assumed that Supersorb initially had the right title and interest in those chattels, prior to ADEE acquiring that right, title and interest from Supersorb. Mr and Mrs Blomfield did not, relevantly, admit that paragraph. 6In paragraph 13 of the Amended Statement of Claim, Agripower pleaded that St George was the legal and beneficial owner of certain securities taken over property of ADEE and, in paragraph 14, pleaded that St George was the legal and beneficial owner of the relevant chattels. Mr and Mrs Blomfield did not admit paragraph 13 and denied that St George was the beneficial owner of any "tenant's fixtures". In its written submissions, Agripower points out that it pleaded in paragraph 14 of its Further Amended Statement of Claim that St George was, before assignment of its interests to it, the legal and beneficial owner of the disputed items and that, in response, Mr and Mrs Blomfield pleaded that St George was not the beneficial owner of any "tenant's fixtures" (Defence, [14]). Agripower contends, with some force, that the proper reading of that paragraph is that Mr and Mrs Blomfield accepted (or, more accurately, did not contest) that St George was the legal and beneficial owner of those items that were not fixtures. Agripower contends that the Defence did not constitute a traverse of its allegation and, by virtue of Uniform Civil Procedure Rules 2005 (NSW) r 14.26(1), it constituted an admission of the allegation. However, even if that were correct, I do not understand Mr and Mrs Blomfield's position would bind the Court to proceed on the basis that a creditor holding security over chattels is, without more, their beneficial owner - as distinct from having the rights given by its security - either before or after default by a debtor. 7In paragraph 15 of the Amended Statement of Claim, Agripower pleaded that, by the St George Assignment Deed, St George assigned to Agripower all rights, powers, title and interest to and under the securities, the property mortgaged or charged by the securities, all covenants, representations, warranties and acknowledgements given to St. George under the securities, and a Subordination Deed dated 30 September 2005 between St George and other entities. Mr and Mrs Blomfield did not admit that allegation. 8In paragraph 16 of its Amended Statement of Claim, Agripower in turn pleaded that: "Pursuant to the Deed and by virtue thereof, [Agripower] is the true owner of the chattels described in the Schedule One [to the Amended Statement of Claim] and is entitled to the immediate possession thereof." The chattels described in Schedule 1 to the Amended Statement of Claim included the disputed items. The reference to the "Deed" in this paragraph is to the St George Assignment Deed. Mr and Mrs Blomfield in turn pleaded in their Defence that they: "(a) Admit that some of the items referred to in Schedule 1 [to the Amended Statement of Claim] are "chattels" at law; (b) Admit that in respect of those items which are chattels [Agripower] is entitled to immediate possession; (c) Says that [Agripower] was not entitled at all times to immediate possession of the chattels; (d) Deny that every item referred to in Schedule 1 is a "chattel" at law; (e) Say that some items referred to in Schedule 1 are "tenant's fixtures" at law; (f)Otherwise deny paragraph 16." Agripower initially contended that it was caught by surprise when Mr and Mrs Blomfield, in their written opening submissions, did not admit its ownership of the disputed items, however, Agripower ultimately accepted that this issue was sufficiently raised by paragraph 16 of Mr and Mrs Blomfield's Defence and led further evidence to seek to establish their ownership of the disputed items. Whether ADEE owned the disputed items prior to any transfer of title to Agripower 9The evidence as to ownership of the disputed items was incomplete and there, at times, seemed to be a degree of inconsistency between the position taken by the parties in written and oral submissions. 10Mr Blomfield's evidence in his affidavit dated 19 April 2013 was, relevantly, that Australian Diatomite Mining acquired the mining tenements and plants owned by its predecessor, West Australia Sands, in 1992 (Blomfield [14]) and Mr Blomfield adhered to that evidence in cross-examination (T73). Mr Blomfield's evidence was also that Supersorb acquired Australian Diatomite Mining in 1999, which appears to refer to an acquisition of an interest in that company rather than to an acquisition of its assets (Blomfield [15]) and he adhered to that evidence in cross-examination (T74). That evidence provides some support for steps in Agripower's claim to ownership of the disputed items, although both the form of that evidence and the basis on which Mr Blomfield could give it would have been open to question, had that point been taken. 11Mr Blomfield's evidence was that ADEE acquired the mining tenements and plant owned by Supersorb in late 2005 (Blomfield [17]) and his evidence in cross-examination was that evidence was correct "[a]s far as the plant they did own was transferred" (T74). That evidence provides support for Agripower's claim that at least ADEE was the owner of the disputed items, although the form of that evidence and the basis on which Mr Blomfield could give it would again have been open to question, had that point been taken. 12Agripower sought to lead secondary evidence of an agreement entered into between Supersorb and ADEE at the end of 2004, by which (it contended) ADEE acquired certain equipment from Supersorb. Mr Prentice gave evidence that he had access to ADEE's business records and had made searches through storage boxes containing ADEE's records, through email records of ADEE over the relevant period and through emails between Mr Prentice and the managing director of Supersorb. 13Mr Prentice's further evidence as to this issue was given on the voir dire, on the basis that I would rule as to the admissibility of that evidence in this judgment. Mr Prentice's further evidence was that he could not find signed copies of agreements between Supersorb and ADEE for the acquisition of Supersorb's business, including separate agreements which dealt respectively with the business conducted at Barraba and another business conducted in the Mount Barker area in Western Australia. Mr Prentice's evidence was that he located a final draft of an agreement dated 22 December 2004 and that his recollection was that the agreement was executed on 23 December 2004 (T95). His evidence was that his best recollection of what Supersorb agreed to do under that agreement was that: "They agreed to sell to ADEE all of its ... minerals business located at the Barraba tenements, employees' intellectual knowledge, all plant and equipment" (T96) His evidence was also that an appendix to the draft agreement which set out the plant and equipment to be acquired was included in the final version of that agreement (T96). The draft agreement was tendered as Ex VD1 on the voir dire. Mr Prentice could not say whether material that appeared in the draft agreement as shaded text was included in the final signed document, or that any unshaded part of the draft document represented what was contained in the final document (T101). However, he gave evidence on re-examination that the shaded materials recorded final amendments to the agreement for execution purposes, in the form provided by him to the managing director of Supersorb (T102). 14Mr Prentice's evidence in cross-examination was that he had an independent recollection, apart from the draft documents that he had recently reviewed, about the terms of the final agreement (T97). He qualified that evidence by noting that the terms of that agreement were "quite straightforward" and he recollected those terms, but did not recall what was on every page of the final agreement derived from the draft (T97) and could not remember exactly the clauses in the final agreement (T99). He gave further evidence that: "The whole of the negotiation was on the basis we were buying the whole operation, which was walk in or walk out." (T98) 15Mr Ernest Scott, a solicitor acting for Agripower, also gave evidence on the voir dire that he had made searches through his own files and records to seek to obtain a final version of the agreement between Supersorb and ADEE and had made inquiries of the receivers and managers of ADEE to seek to obtain a final copy of that agreement from them without success (T103). 16Mr O'Loughlin, who appears with Mr Conde for Agripower, submitted that the evidence given by Mr Prentice on the voir dire should be admitted and established that ADEE acquired the assets of Supersorb at Barraba on a walk-in and walk-out basis. Mr O'Loughlin recognised that Mr Prentice conceded that he could not remember the detail of the agreement but submitted that it was not surprising that he recalled the substance of the agreement in a matter that was of some importance to ADEE. Mr O'Loughlin made clear that Agripower did not contend that the draft agreement was a copy of or extract of the final agreement, for the purposes of s 48(4)(a) of the Evidence Act, and submitted that Mr Prentice's recollection of the contents of the agreement, or the final draft of the agreement and Mr Prentice's oral evidence together, constituted evidence of the contents of the final agreement for the purposes of s 48(4)(b) of the Evidence Act. It does not seem to me that Mr Prentice's evidence that the substance of the transaction was a "walk-in and walk-out" purchase of assets, whether on its own or combined with the draft agreement was admissible as evidence of the content of the final agreement for the purposes of s 48(4)(d) of the Evidence Act, where the draft agreement was conceded by Mr Prentice not to be identical with the final agreement and Mr Prentice did not recall which clauses were adopted in that final version. 17Mr Parker, who appeared with Ms Castle for Mr and Mrs Blomfield, submitted that, irrespective of whether Agripower had proved the transfer of ownership from Supersorb to ADEE, it has not proved Supersorb previously had title to the relevant property. Mr O'Loughlin accepted, in oral submissions, that even if Mr Prentice's evidence that the acquisition was of Supersorb's assets on a "walk-in and walk-out" basis was admissible, that did not establish which assets had been owned by Supersorb and acquired by ADEE from Supersorb (T107). 18Agripower also relied on evidence of Mr Peter Prentice (who is a director of Agripower's ultimate holding company and was previously a consultant and later a director of ADEE) as to his understanding of the beneficial ownership of the disputed items (Prentice [9]). Mr Prentice's evidence, to which no objection was taken, was that he understood that the disputed items were "beneficially owned" by Supersorb until November 2006; by ADEE from November 2006 until 3 October 2008; and by St George Bank from 27 October 2008 until the date of their assignment and transfer to Agripower on 4 September 2012. Notwithstanding that no objection was taken to that paragraph, I consider that I can give it limited weight, since Mr Prentice does not identify the basis on which he held that understanding and the question of the rights which were transferred by the relevant agreements depends upon their terms and construction, which Mr Prentice did not address. Agripower also contended that ADEE was in possession of the disputed items and it should be presumed to have been the owner of them absent a claim of superior title and pointed out that an information memorandum issued by the receivers and managers appointed to ADEE later included the disputed items in a list of the assets of ADEE (CB 75) and did not disclose a claim of superior title or other dispute in relation to those items. 19Had it been necessary to decide the point, I would have held, with some hesitation, that Agripower had established that ADEE was owner of the disputed items, having regard to Mr Blomfield's evidence in that regard to which I referred above and in the absence of any evidence of any challenge to ADEE's title to the equipment during the relevant period. Whether Agripower acquired ownership of the disputed items from ADEE 20Agripower relies on its dealings with St George, as secured lender to ADEE, and the receivers appointed by St George to ADEE to establish that it acquired ownership of the disputed items (other than items which it later acquired, to which I refer below) from ADEE. Mr and Mrs Blomfield accepted, in supplementary written submissions concerning ownership of the assets, that St George's powers under its security documents entitled St George to convey to Agripower any title that ADEE may have had in the assets in question, assuming them to be chattels, but pointed out that: "... this only assists [Agripower] to the extent that it is established that ADEE acquired title to the assets from the parties which originally installed them." 21ADEE had given charges in favour of St George over the disputed items (among other equipment) and that St George later relied on those charges to exercise rights in relation to the disputed items. At least two of the securities in favour of St George were fixed and floating charges over all of the present and future assets of ADEE (Exs P3 and P4) and provided that, in the event of a default, St George was entitled to take or give up "possession" of the charged property (Ex P3, clause 18.2(c), 19.4(c) and Ex P4, clause 9.2(a)(vii)). In my view, these provisions conferred a right of possession, and the rights that could be exercised by a receiver, on St George as a secured creditor, and allowed St George to exercise powers over the secured property as if it were its owner, but did not in themselves transfer ownership of the secured property to St George. 22On 12 April 2010, Agripower and the receivers of ADEE entered into a Sale of Assets Agreement, the schedule to which included the disputed items ("Plaintiff's Additional Documents", Tab 3). However, Agripower did not ultimately acquire ownership of the disputed items under that Agreement, since the rights arising under that Agreement were subsequently released by clause 3 of the St George Assignment Deed (CB 121) and the large part of the deposit initially paid by Agripower was refunded to it. The Sale of Assets Agreement also expressly disclaimed any suggestion that ADEE as vendor or the receivers had the ability to deliver title to the disputed items to Agripower. Recital A noted that: "[Agripower] has agreed to buy the rights, titles and interest, if any, of [ADEE] in the Assets and [ADEE] has agreed to sell the same to [Agripower] on the terms of the Agreement." (Emphasis added) Clause 3.1 provided that property in the assets sold would pass upon the "Second Completion", as defined, and there is no evidence that took place. Clause 12.1 provided that ADEE, the receivers and associated persons gave no warranty and disclaimed all responsibility, to the fullest extent permitted by law, in respect of the Assets and "their interest, if any, in them" including as to "the nature or extent of any interest in any of the Assets" (emphasis added). Clause 12.3 expressly acknowledged that Agripower had no right of off-set or claim against ADEE, the receivers or their representatives for any reason, including if ADEE had no interest in the assets or some of them. 23Agripower contends that it ultimately obtained ownership of the disputed items from St George by the St George Assignment Deed (CB117). The Recitals to that Deed indicated that "ADEE is in default" under the financial accommodation secured by the Securities (Recital B, CB118). Clause 2.1 of the St George Assignment Deed relevantly provided that: "[St George] as legal and beneficial owner of the Securities assigns and transfers to [Agripower] free of all encumbrances all of [St George's] right, title and interesting [sic] to and under: (a) The Securities, including, without limitation, the full benefit and advantage of all rights, powers, authorities and discretions of [St George] conferred on or vested in [St George] at law, in equity or by virtue of the Securities; (b) The property mortgaged or charged by the Securities; (c) The full benefit of all covenants, representations, warranties and acknowledgements given to [St George] under the Securities; and (d) The Subordination Deed." (emphasis added) The term "Securities" was in turn defined as the "security interests registered on the Personal Property Securities Register as set out in Schedule Two, but to the extent only that such security interests attached to the Assigned Assets". The term "Assigned Assets" was defined as "the items of plant and equipment described in Schedule One". Schedule One in turn included the disputed assets and other assets that are not in dispute, and Schedule Two set out several securities granted in favour of Westpac. Clauses 3 and 4 of the Deed of Assignment and Release in turn provided for a release of rights under the Sale Agreement and provided that $10,000 of the deposit paid by Agripower under the Sale Agreement was to be retained by St George Bank as consideration for the assignments made by clause 2 of the Deed and the balance was refunded to Agripower on the execution of the Deed. 24Mr Parker submitted that St George's interest was a security interest in the property, which is not the same as ownership of the property. Agripower initially contended that St George had ownership and/or a power to transfer ownership of the disputed items by virtue of the Securities, and assigned and transferred all its right, title and interest in that property to Agripower. However, Mr O'Loughlin accepted in oral submissions that the interest that had been acquired by Agripower by reason of the assignment from St George was "perhaps of a secured creditor" and that that might go to the relief that was ultimately granted. 25In my view, the St George Assignment Deed provided for St George to transfer, not the property mortgaged or charged by the Securities, but its right, title and interest as secured creditor in that property. That conclusion is consistent with the fact that the consideration payable by Agripower under that Deed was $10,000, by contrast with the price of $137,500, net of GST, that Agripower had previously contracted to pay to acquire ownership of ADEE's plant and equipment and stock under the Sale Agreement. 26Agripower also draws attention to s 27 of the Sale of Goods Act 1923 (NSW) which provides that a buyer who buys goods in good faith and without notice of a defect in the seller's title acquires good title to the goods, notwithstanding that the seller's title was voidable but had not been avoided at the time of the sale. It does not seem to me that this section assists Agripower, first, because the proposition that ADEE bought the disputed items in good faith and without notice of any defect of title of Supersorb had not been established and, second, because it has not been established that Agripower bought the disputed items, as distinct from acquiring St George's interest in the security over them, from St George. Agripower points out that it has not been suggested that its contractual rights ought to be set aside or not given effect according to their terms. I accept that no such suggestion has been made. The question is, instead, whether the terms of the relevant contractual rights, to the extent that they have been established, are sufficient to support Agripower's claim to ownership of the disputed items. 27Agripower also contended that Mr and Mrs Blomfield have not previously disputed its title to the chattels that are not said to be fixtures, and the only difference between those chattels and the disputed items is the question whether the disputed items are fixtures. It does not seem to me that the conduct of Mr and Mrs Blomfield in respect of other chattels that are not in issue in the proceedings assists with determining the effect of dealings between ADEE, its predecessors, St George and Agripower, where Agripower did not plead a representational or conventional estoppel against Mr and Mrs Blomfield in this regard. 28Had it been necessary to decide the point the point, I would have held that St George had not in fact transferred ownership, but only its rights as secured creditor, to Agripower. There may have been little practical significance in that difference, since Agripower could potentially have exercised those rights to transfer ownership of the disputed items, although there was no evidence that it had done so. The legal principles applicable to determining whether the disputed items are fixtures 29The primary issue in the proceedings was whether the disputed items had the character of fixtures. In Land Law, 6th ed, 2010 [15 248], Professor Butt summarises the applicable legal principles as follows: "... in determining whether an item that was once a chattel has become a fixture, the guiding principle is the intention with which the item was brought onto the land, and pointers to that intention are the degree and purpose of the annexation. ... an intention to permanently improve the realty is easier to discern when an absolute owner brings the item onto the land than when a tenant does so, for a tenant is unlikely to intend to make a present of the item to the landlord." 30In Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712, Jordan J observed that: "A fixture is a thing once a chattel which has become in law land through having been fixed to the land. The question whether a chattel has become a fixture depends upon whether it has been fixed to the land, and if so for what purpose. If a chattel is actually fixed to the land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not; if it is not otherwise fixed but kept in position by its own weight, then prima facie it is not a fixture and the burden of proof is on anyone who asserts that it is." 31In Commissioner of Stamps (WA) v L Whiteman Ltd [1940] HCA 30; (1940) 64 CLR 407, Rich ACJ held that machinery was affixed to and had become part of the land, notwithstanding a subjective intention to shift it to another site in the future when clay on the land was exhausted. In particular, his Honour observed that: "In this case the parties have manifested their intention as to the degree and object of the annexation by bolting the machinery to the concrete bases and enclosing the machinery in sheds which must be ruined if the machinery is removed, the object being to use the machinery for transforming clay found on the land into bricks." His Honour referred to Reynolds v Ashby & Son [1904] AC 466 at 472, where Lord Lindley had in turn observed that: "The purpose for which the machines were obtained and fixed seems to me unmistakable; it was to complete and use the buildings as a factory. It is true that the machines could be removed if necessary, but the concrete beds and bolts prepared for them negative any idea of treating the machines when fixed as movable chattels." I recognise, of course, that these cases must be approached with a degree of caution, since developments in commercial practice mean that what was once classified as a fixture may today be classified as a chattel: National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112; (2001) 24 WAR 70. 32In Re Starline Furniture Pty Ltd (in liq) (1982) 6 ACLR 312, quoted with apparent approval by Malcolm CJ in National Dairies v Commissioner of State Revenue above, machinery in a factory was held to be annexed for the better use and enjoyment of the land as a furniture factory equipment. Neasey J observed (at 314) 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 the 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." His Honour also observed (at 320) that the machinery and equipment in issue in that case 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. 33The extent to which the disputed items are annexed to the land is as strong indicator of whether it is a fixture and the parties' objective purpose. In Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 at 148, Hill J summarised the relevant principles as follows: "There is little room for dispute as to the principles to be applied in determining whether a particular item is or is not a fixture. The generally accepted view is that the question will depend upon the degree of annexation and the object or purpose of that annexation: Commissioner of Stamps (Western Australia) v L Whiteman Ltd (1940) 64 CLR 407 at 411. The two matters are not exclusive of each other. The degree of annexation tells as to the object or purpose of the annexation. When the cases speak of object or purpose, they are not concerned with subjective purpose of some person, although intention will not be irrelevant: Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 at 4846; N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) (2) BPR 9241 at 9244-9245. The prima facie view, as expressed in cases such as Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR(NSW) 700, is that an object merely standing by its own weight on the land will not ordinarily be a fixture. On the other hand, if fixed to any extent prima facie it will be. But that is but a prima facie view as Mahoney JA pointed out in N H Dunn v Ericsson (supra) at 9246. ... When the cases refer to the degree and object of annexation to the land, what is meant is that the fixing of the item to the land, whether by bolts, concrete bases or whatever, is such that removal would be difficult as, for example, where the items could be ruined if sought to be removed: Whiteman (supra) at 411. That case is important in that it drew as a relevant distinction the question whether the affixation was for the better enjoyment of the land, in contrast to the case where the affixation was for the enjoyment of the item itself. That distinction is one later taken up by Mahoney JA in N H Dunn v Ericsson (supra), but subject to the qualification that much may turn upon the actual nature of the asset." 34In Metal Manufacturers Ltd v Commissioner of Taxation [1999] FCA 1712 at [165], Emmett J identified considerations which were relevant to whether a chattel had become a fixture including whether removal would destroy the chattel; whether the cost of removal would exceed the value of the chattel; whether removal of the chattel would occasion significant damage to the property; whether the attachment was for the better enjoyment of the chattel or for the better enjoyment of the property; the nature and contemplated use of the property; the period of time for which the property was to be in position and the function to be served by the annexation to the property. His Honour also noted (at [170]) the relevance of the intention of the person who affixed the equipment to the land and the degree of annexation, which in turn is indicative of the objective intention of that person. 35In National Dairies WA Ltd v Commissioner of State above, the Court held that equipment in a milk processing plant was annexed to the land for the better enjoyment and use of the land as a dairy processing plant. Malcolm CJ (with whom Kennedy and Wallwork JJ agreed) noted that a major difficulty for the party that sought to displace a presumption that the items were fixtures was the absence of evidence relating to the mode of annexation of the items of equipment at the time they were placed on the land. There is also no evidence of that matter, at the relevant time, in this case, although I will review the evidence as to the extent to which those items are presently affixed to the land below. His Honour also noted (at [87]) that the facts that items could be relocated within a factory or transported without damage to itself or any structure to which it was annexed provided: "... 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 inter-connected for the better enjoyment of the land." 36Agripower relies on Pegasus Gold Australia Limited v Metso Minerals (Australia) Ltd [2003] NTCA 03, where the Northern Territory Court of Appeal (Martin CJ, Mildren and Thomas JJ) held that substantial mining equipment was not a fixture. The Court of Appeal there concluded that the equipment was not a fixture because, on the objective facts and circumstances of the case, it "could be removed without causing any damage to the land" and it was "an economic proposition" to sell and relocate the mining equipment "as was and is common mining industry practice" (at [21]); significantly, there was a requirement, both under the terms of the lease and under the provisions of the relevant mining legislation, that all of the equipment be removed at the end of the lease (at [21]); the purpose or object of the annexation was not for the better enjoyment of the mineral lease (at [22]); as a practical matter the equipment "had to be fixed" to operate it, to prevent vibration and the equipment "could have been effectively located anywhere, although it was more economic to locate it as near as possible to the mine site in order to reduce the cost of transporting the ore" (at [22]). By contrast, in the present case, there is a real issue as to the extent of damage to the land and fixtures on it on removal of the relevant equipment; there is no corresponding evidence of a practice of removal of diatomite earth processing plants or equipment contained in them; and there is no statutory provision or provision in the lease contemplating such removal. 37In Commissioner of State Revenue v Uniqema Pty Ltd [2004] VSCA 82; (2004) 9 VR 523 at 544, Ormiston JA (with whom Phillips and Callaway JJA agreed) referred to Re Starline Furniture and National Dairies (WA) Ltd v Commissioner of State Revenue and observed that those cases made clear that: "Heavy factory plant and equipment, even if not permanently attached to the land on which they rest, may in all the circumstances be sufficiently attached as to constitute fixtures especially when it is expected that those fixtures will be used as such for an extensive period. Nevertheless each case must depend upon its own circumstances, especially having regard to the tests currently applied with respect to fixtures, which require, at the least, that first the degree and secondly the object of annexation be taken into account as well as all the other relevant surrounding circumstances." 38In TEC Desert Pty Ltd v Commissioner of State Revenue (WA) [2010] HCA 49; (2010) 241 CLR 576 at [23]-[24], the plurality of the High Court observed that the starting point for determining whether an item is a fixture is that "whatever is attached to the soil becomes part of it" and approved the following statements of principle by Conti J in National Australia Bank Ltd v Blacker [2000] FCA 1458; (2000) 104 FCR 288 at [10]: "There is a variety of general principles which should be considered in assessing whether an item of personal property has become attached to land in a manner designed to achieve a specific objective or a variety of objectives, such as to become a part of the realty and therefore, a fixture. Whether an item has become a fixture depends essentially upon the objective intention with which the item was put in place. The two considerations which are commonly regarded as relevant to determining the intention with which an item has been fixed to the land are first, the degree of annexation, and secondly, the object of annexation." The Court held (at [39]) that it did not have to decide whether the mining equipment at issue was a fixture because the relevant mining lease was personal property and, in consequence, there was no estate or interest in land for stamp duty purposes. 39The authorities were also recently helpfully summarised by Ball J in Loiero (aka Lero) v Adel Sportswear Pty Ltd & Ors [2010] NSWSC 1133; (2010) 15 BPR 29,689 at [11], where his Honour noted that: "The question whether an item is a chattel or a fixture depends on whether it was placed on the land with the intention that it become part of the land or whether it was placed on the land with the intention that it remain separate from it: Reid v Smith (1906) 3 CLR 656. Generally, the intention of the person who placed the item on the land is to be determined objectively: May v Ceedive Pty Ltd [2006] NSWCA 369 at [65] per Santow JA (with whom Mason P and Beazley JA agreed), although, in some cases, courts have been prepared to look at the subjective intention of the person who placed the item on the land: for discussion, see National Australia Bank v Blacker [2000] FCA 1458; 104 FCR 288 at [12] per Conti J. Of particular significance in determining the party's intention is whether the item has been affixed to the land and, if so, the degree of annexation: Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712-3 per Jordan CJ. Indeed, it is often said that if an item is affixed to the land then there is a presumption that it is a fixture (the strength of the presumption depending on the degree of annexation) and if it is not affixed then there is a presumption that it is not a fixture: Coroneo (1938) 38 SR (NSW) 700 at 712. However, the fact that the item is affixed to land is not determinative. An item may be a fixture where it simply rests on land by virtue of its own weight. A house resting on wooden piles is an obvious example: Reid v Smith (1906) 3 CLR 656, although even then there may be cases where a demountable house is not regarded as a fixture: Jiwira v PIBA [2000] NSWSC 1094. Conversely, an item that is fixed to land may not be a fixture. A typical case is where machinery is attached to land for the more effective use of the machinery rather than with the intention of improving the land: Reid v Smith (1906) 3 CLR 656 at 680-1 per O'Connor J; cf Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712 per Jordan CJ." 40In Commissioner of State Revenue (Vic) v Snowy Hydro Ltd [2012] VSCA 145, the Victorian Court of Appeal held (at [26]-[27]) that gas turbine generator units in a power station were fixtures where, inter alia, they were part of a facility that was purpose-built as a gas turbine electricity generation facility on the site; the generator units were on freehold land that had been purchased for the purpose of establishing the facility; the generator units were intended to be on site for at least 25 years; the generator units were the most valuable parts of the power plant; and there was no evidence that the units were considered for use for some other purpose (e.g., relocation to another site or for sale in the second hand market) or that there were other projects in mind. 41In Re Cancer Care [2013] NSWSC 37 at [21]-[22], I held that a separate, although substantial, item of medical equipment installed in premises where there was no long term lease in place was not a fixture. In Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164, Wilson J also held that mining equipment was not a "fixture", observing (at [73]) that: "The mining plant was brought on to that land for the purposes of the mining leases. In so far as it was physically attached to the land, I infer that this was to stabilise it and allow its efficient operation, rather than to add some additional feature to the land on which it rested. It had to be removed before the expiry of the mining leases. In the circumstances the common law requirements for the mining plant to become part of the land the subject of the mining leases (that is, fixtures) were not satisfied." Agripower points out that the mining equipment in that case was also substantial. However, there is, as I noted above, no corresponding requirement for removal of the equipment from the land at the conclusion of the lease in this case. The objective intention of the parties 42Mr and Mrs Blomfield accept that whether an item is a chattel or a fixture depends upon the intention of the affixer at the time of affixation. However, they rightly point out that there is no evidence of which entity affixed the majority of the disputed items, or when that occurred, which means that any intention of the affixer can only be inferred objectively, if at all. They also point out, and I accept, that neither the subjective intention of ADEE (with the exception of one or possibly two items installed in the period of its lease) nor the subjective intention of Agripower, can be relevant because the disputed items were substantially placed on the land well before ADEE took up occupation of it. Mr and Mrs Blomfield contend that Agripower has not discharged the burden of displacing the presumption that the disputed items are fixtures arising from their connection with the land. Mr and Mrs Blomfield also contend that the disputed items were annexed to the land on which the processing plant is situated for its better enjoyment for diatomite processing purposes and are therefore fixtures. Mr and Mrs Blomfield contend that the operation on the site is a processing complex and that removal of the individual disputed items would make the processing plant inoperable. They contend, relying on National Dairies WA Ltd v Commissioner of State Revenue above, that the items form part of an integrated whole and are fixtures even if they would be considered as chattels if used on their own. 43Agripower accepts that a number of the disputed items are fixed to Mr and Mrs Blomfield's property. However, it contends that "items affixed to land do not become, merely because of their affixation, 'fixtures' in the technical sense": TEC Desert Pty Ltd v Commissioner of State Revenue (WA) above at [38]. It rightly points out that whether an item has become a "fixture" depends upon the objective intention with which the item was put in place, to be determined having regard to the degree and object of annexation: NAB v Blacker above at [10], quoted with approval in TEC Desert above. Agripower also contends that the attachment of the disputed items was for the better enjoyment of those items rather than for the better enjoyment of the property, and that the disputed items were processing equipment placed upon the property for the purposes of the mining and processing ventures of the various entities concerned. It points out that there was a reconfiguration of the plant in 2001 and that two (or possibly one) of the disputed items were brought onto the property during ADEE's 6 year lease, namely the secondary roll crusher and packaged air compressor (T15). Agripower also submits that some of the disputed items require regular replacement (T20); however, that submission was not supported the evidence which is only that the rollers contained within the roller units, which are readily removable, require replacement in that time period. Agripower also relies on Mr Prentice's evidence that the attachment of the disputed items was "for balance" and support and not to be part of the relevant structures (T57). It seems to me that, as will emerge below, that evidence requires significant qualification, both in respect of the extent of integration of the outdoor items to the land and structures on it, and also in respect of the equipment installed indoors and connected with the building structure and power and compressed air supplies. 44The nature and function of the disputed items and the manner in which they are annexed to the land provides strong evidence as to the parties' objective intention. Mr and Mrs Blomfield relied on the evidence of Mr Gordon Atkinson, an experienced mining engineer, in respect of the nature and function of those items and the structure of the processing and bagging facility as a whole. In my view, Mr Atkinson's report demonstrated a comprehensive and balanced assessment of the relevant issues. He pointed to the extensive structural integration of some items and, on the other hand, recognised that several other items could be readily removed. Agripower relied on Mr Prentice's evidence and that of Mr Chadwick, who is the principal of CQ Tec Services Pty Limited and, I accept, has significant experience in the provision of technical services in respect of industrial minerals and extractive materials. Mr Prentice, on behalf of Agripower, had engaged CQ Tec to remove plant and equipment from the relevant property, including the disputed items. In his affidavits of 14 May 2013 (CB236) and 4 September 2013 (CB250), Mr Chadwick, gave evidence about the time, process and cost of removing the disputed items from Mr and Mrs Blomfields' property. I have reservations as to the usefulness of Mr Chadwick's evidence for reasons that I will explain below. 45Mr Blomfield's uncontested evidence is that the processing area in which the disputed items are located comprises approximately 3 hectares. Eight of the disputed items are outside a large shed and seven of those disputed items are contained in that shed (Chadwick XX T68). Photographs of the disputed items are in evidence in quotes obtained by Agripower from CQ Tec in 2011 for removal of those items from the property (Prentice 7.3.2013, Annexures Q and R). Colour photographs of each of the disputed items and their situation in the plant are also contained in Mr Atkinson's expert report dated 2 July 2013 on which Mr and Mrs Blomfield rely. 46Both Mr Prentice and Mr Atkinson gave evidence as to the steps involved in the processing of diatomaceous earth at the facility situated on the property. In particular, Mr Atkinson's evidence was that that processing involved three stages, involving a receiving hopper for ore delivered by truck, a plate feeder for discharge of ore stored in the receiving hopper, feed conveyor, roll crusher for size reduction, a discharge conveyor for conveying primary crushed ore to the drying shed and another conveyor for distributing ore within the drying shed. The subsequent processing steps involved screening over a triple deck vibrating screen and two kason screens, and product was then elevated via belt feeders to distribution boxes where it was fed to hoppers above the bagging stations. Mr Prentice accepted, albeit somewhat reluctantly, that that processing area was functioning as a processing plant for diatomaceous earth mined elsewhere on the property and it would also be possible for it to function in the same way as a processing plant for other deposits in the area. Mr Prentice had reservations as to the appropriateness of the plant for processing diatomaceous earth, although that was the use to which ADEE and its several predecessors had been putting it (Prentice XX T14). 47It is convenient to deal together with the first and second of the disputed items, a secondary and primary roll crusher, since they raise similar issues. The first item in dispute is a secondary roll crusher (small), described as: "Fredrick Parker Machine PP2256, Type PF, 22 inch x 16 inch Twin Roll Chain Driven with 25kw Drive Motor Belt Drive, Year of Mfg 1950." The second item in dispute is a primary roll crusher (large), described as: "Unbranded Twin Roll, approx 650 x 500mm diameter, Direct Drive powered by Twin Electric Motors, with Reduction Drive." 48Mr Prentice's evidence was that ADEE (with which he was involved as a consultant and later as a director) purchased and installed the small secondary roll crusher during the term of its lease of the property and that machine replaced a machine that was already in place and was performing a similar function (Prentice XX T15). There is a difficulty in respect of the evidence as to the secondary roll crusher, namely that the machine which Agripower seeks to remove is identified in the Statement of Claim is a Frederick Parker roll crusher whereas Mr Atkinson's report identifies the machine in fact located on the property as a Van Gelde roll crusher. In these circumstances, there is at least some uncertainty surrounding Mr Prentice's evidence as to the circumstances of installation of the secondary roll crusher, or at least as to whether the roll crusher that was to be installed in 2007 was either not installed or was replaced in circumstances not addressed in the evidence. 49Mr Prentice's evidence was that whether the electric motors forming part of the roll crusher would be removed by Agripower would depend on an inspection of them (Prentice XX T20), and he also left open in cross-examination whether the frame in which the primary roll crusher was mounted would be removed or left and indicated that the housing for the rollers might not be taken. Mr Prentice's evidence in this regard suggested that it is doubtful that Agripower in facts seeks to remove the roll crushers as complete items, as distinct from taking those parts of them that are useful to it and abandoning the rest. His evidence was that the rollers, which were replaced every 2 years, represented a large part of the roll crusher. Nonetheless, he accepted that the electric motors that Agripower may also seek to remove were not removed and replaced when rollers were removed for maintenance purposes (Prentice XX T20). 50Mr Prentice accepted in cross-examination that it would be necessary to cut away parts of the surrounding structure, possibly including parts of an elevated walkway, in order to remove the roll crushers. Mr Prentice also acknowledged that the roll crushers were wired to electrical services by connection to a control room (Prentice XX T21). Mr Prentice acknowledged that it was likely to be necessary to cut away the bolts by which hold down anchors were fastened, because they would be rusted, and that ancillary feed and discharge chutes would have to be unbolted or cut away and that some of the walkway (or at least the handrails on it) and access platforms would also be unbolted or cut away and accepted that there would be "some damage" to the structure on which the roll crushers were situated but did not accept that it would be substantial damage (Prentice XX T22). Mr Chadwick also acknowledged in cross-examination that, if the walkway above the roll crushers was in the way of their removal, then it would be necessary also to remove the walkway, and that he did not presently know whether that was the case until the crane for removal of the roll crushers had been set up (Chadwick XX T62). Mr Prentice accepted that what would be left after removal of the roll crushers was "waste metal", although he sought to emphasise in cross-examination that scrap metal is presently highly priced (Prentice XX T26). 51Mr Atkinson's evidence was that the secondary roll crusher is contained within a steel box frame that is part bolted and part welded to an assortment of steel "I" beams which support the secondary roll crusher, walkway platforms surrounding and above this unit and the feed conveyor and feed chute, and the secondary roll crusher is physically affixed to the land by a complicated arrangement of bolted and welded steel I beam structures and by electric power cables extending partly underground from the fixed electrical control box with a minor connection by pipe work to the compressed air system. He noted that the secondary roll crusher is an integral component of the diatomite processing and bagging facility. His evidence was that its removal would require electrical isolation and modification of steel supporting structures, most likely by oxy-acetylene cutting, to free the unit from the supporting structure that it is welded to and from attaching items including feed and discharge chutes, surrounding walkways and pipe work. In my view, Mr Atkinson's evidence provides strong support for a conclusion that, prima facie, the secondary roll crusher is so closely annexed to the structures on the land that it should be treated as a fixture. 52Mr Atkinson's evidence was that the primary roll crusher is partly welded and partly bolted onto a main steel base frame that is bolted to the same skid that supports the secondary roll crusher, and that steel frame supports the primary roll crusher, walkway platforms surrounding and above the unit and the feed conveyor and feed chute. He noted that this item is also physically affixed to the land by a complicated arrangement of bolted and welded steel structures and that the steel skid supporting the primary and second roll crushers is substantially buried below ground, and the primary roll crusher is also affixed by electric power cables extending partly underground and with a minor connection by pipe work to the compressed air system. Again, his evidence was that the primary roll crusher is an integral component of the diatomite processing and bagging facility. In my view, this evidence provides strong support for a conclusion that, prima facie, the primary roll crusher is also so closely affixed to the structures attached to the land as to be a fixture. 53The third item in dispute is a dust collection system to fluid bed driver, described as: "Comprising elevated extraction fan, overhead steel trunking, vertical welded steel wet air scrubber with bottom slurry discharge, overhead dust trunking, approx 650mm diameter to extraction fan, approx 1500mm diameter, powered by 160kw electric motor complete with exhaust stack to atmosphere (Lot)" Mr Prentice's evidence was that, after removal of the dust collector, there would remain concrete pads sunk into the ground which he accepted would have no useful purpose (Prentice XX T30), to which a steel structure would be attached which would be in the nature of scrap (Prentice XX T31). Mr Atkinson identified the components of the dust collector system to the fluid bed dryer, including overhead steel pipe work, a wet venturi scrubber unit, an extraction fan with electric drive motor and ducting to an exhaust stack and a vertical exhaust stack. He noted that this item is fixed to the top of the fluid bed driver by welded pipe work, and also pointed to physical connections involving steel "I" beams and bolting of particular items, and that the electric motor is wired to the power supply via an overhead cable tray that is in turn welded to part of the facility's infrastructure and separately supported by steel uprights bolted into concrete pad footings, and that fixed pipe work connections are in place for the wet venturi scrubber unit. He noted that the equipment is pollution control equipment required to meet the protection of the Environment Operations Act 1997 (NSW) and is an integral component of the diatomite processing and bagging facility. In my view, the extent of connections with the relevant structures and the necessity of the item to the conduct of a diatomite processing and bagging facility support the characterisation of this item as also a fixture to the land. 54The fourth item in dispute is the fluid bed dryer, described as: "Svedala Pyrotherm, Job No C1169 Date of Mfg Dec 2000 Burner Type & Model Eclipse 3216 MVTA Fuel Type Butane Gas, Max Fuel Rate 17,000 MJ/H Purge Time 67.5 seconds Regulated Pressure 19KPA Swept Volume 42 M/3 Combustion Chamber Volume 3.215 M/# S/No C1169-01 complete with Intake Fans, Svedala Pyrotherm Calciner Oven, S/No C1169-02 Burner Type/Model 3 off Eclipse TJ200 Medium Velocity, 4 Injectors Fuel Type Butane Gas, Max Fuel Rate 7200 MJ/H Purge Time 67.5 seconds Regulated Pressure 31 KPA Swept Volume 17.2m3 Combustion Chamber Volume 4.6m3, with Electric Controls to MCC Room." The diatomaceous earth is fed through the fluid bed dryer to dry the material after it is crushed and screened (Prentice XX T33). Mr Prentice's evidence was that, in order to remove the fluid bed dryer, it would be necessary to unbolt or cut various items of equipment including fans feeding the dryer and piping and a steel platform that would only be good for scrap would be left behind (Prentice XX T38). Mr Atkinson's evidence was that the fluid bed dryer is located within an 11 metre square open plant, concreted area, on an elevated steel platform with mesh walk way access, supported by eleven steel "I" beam legs with some sitting and some bolted to a concrete floor. The calciner which forms part of it is bolted to a steel base framework and supported on 4 steel legs, and 3 fans are located on the concrete floor and bolted to it. Mr Atkinson again expressed the view that drying equipment is an integral and necessary component of the diatomite processing and bagging facility, and that the fluid bed dryer was installed specifically for the purpose of drying the relevant ore used as raw material in the processing and bagging facility. In my view, these factors again suggest a degree of integration with the structures affixed to the land and necessity to the functioning of the processing and bagging facility such as to support the characterisation of the items as a fixture. 55The fifth item in dispute is a discharge belt conveyor, described as "9m x 400mm approximately, with Trough Base & Bottom Mounted Auger Conveyor, Electric Powered." To remove the discharge belt conveyor, it would be unbolted from the trestle on which it is set which would be left behind (Prentice XX T38). Mr Atkinson's evidence was that the discharge belt conveyor is approximately 10 metres in length and receives dried diatomite via pipe work chutes from the fluid bed dryer and/or the calciner and is fixed to the floor of the 11 metre x 11 metre open plant, concreted area by a steel skid frame and the conveyor support structure is welded to sections of the bucket elevator at its discharge end. Mr Atkinson noted that pipework extending from the fluid bed dryer was also welded in place to the conveyor supports and guarding around the tail drum and that the conveyor is driven by an electric motor, hard wired into the processing and bagging facility's electric power supply. Mr Atkinson's evidence was that a replacement conveyor or alternate means of transporting dried diatomite to the bucket elevator would be required to enable processing to continue operation. In my view, the extent of connections with the relevant structures also support the characterisation of this item as a fixture to the land. 56The sixth item in dispute is a vibrating screen described as: "3800 x 1100 Twin Deck with Electric Drive Motor on support structure (not serviceable - scrap value only)" The twin deck with electric drive motor would have to be unbolted and lifted out with a crane, leaving an empty framework which would be of no utility (Prentice XX T39). Mr Prentice accepted that vibrating screen is not serviceable and has scrap value only (Prentice XX T39). Mr Atkinson's evidence was that the vibrating screen was a redundant 3.8m x 1.1m twin deck screen and had not been used as part of the most recent processing operation. It is located on a separate elevated platform and suspended on springs as required for its voluntary operation, and its central shaft is powered by an electronic motor that had been disconnected and the majority of screen feed and discharge chutes had also been disconnected. Mr Atkinson's evidence was that that item could be removed from the processing and bagging facility with some structural steel alterations. I accept that the case for characterisation of this items as a fixture is possibly weaker, where the decommissioning of this item indicates that it is no longer necessary to the functioning of the processing and bagging facility. Nonetheless, I am not persuaded that it should be characterised differently from the other surrounding items. 57The seventh item in dispute is two Kason Vibra rotary screens described as "1200mm separated, Electric Powered with Support Structure to area (Lot)". The rotary screens are located within a corrugated iron structure about 7 metres about ground (Prentice XX T40) which is part of a very large shed known as the "screen house" or "bagging screen house". Mr Prentice's evidence was that, in order to remove that item, it would have to be disconnected from pipes which are presently attached to it, by cutting the pipe where it used to enter the rotary screen, and it is likely to be necessary to take corrugated iron off the edge of the screen house to remove it, leaving a metal structure with parts removed which would again only have value as scrap (Prentice XX T40). Mr Atkinson's evidence was that the rotary screens are two circular screens located within a screen house approximately 11 metres above ground level; the difference between Mr Prentice and Mr Atkinson as to the height if the items does not seem material to the proceedings. Mr Atkinson's evidence is that the screen house is a substantial structure including 3 to 4 elevated platforms supported on a structural steel base comprising 4 steel legs and bracing. The rotary screens are part bolted and part welded to the platform structure and mesh walkway supports and are wired into the processing and bagging facility electrical supply and control system. Mr Atkinson again expressed the view that these items are integral components of the diatomite processing and bagging facility and that they could not be removed easily, due to their elevated location and the complicated arrangement of surrounding structural steel work, auxiliary pipe work and chutes, and that roofing or side walls of the screen house might require removal to allow crane access to remove that item. In my view, the extent of connections with the relevant structures, and the necessity of the item to the conduct of a diatomite processing and bagging facility, support the characterisation of this item as also a fixture to the land. 58The eighth item in dispute is a vibrating screen approx 3.8m x 1000mm, 3 deck. Mr Prentice's evidence was that the vibrating screen is serviceable and also located in the screen house and would also be unbolted or cut off the mesh floor to which it is attached and the piping to it disconnected, leaving the screen house as, Mr Prentice accepted, "a worthless, scrap structure" (Prentice XX T41). Mr Atkinson's evidence was that the triple deck vibrating screen is located approximately 3 metres above the Kason vibra rotary screens, to an elevation of 14 metres above the ground, and is contained on a platform within the screen house to which I have referred above. It is part bolted and part welded within a supporting frame, which is part bolted and part welded to the platform structure and mesh walkway supports within the screen house structure, and is supported on 4 heavy duty steel springs welded to supporting steel plates. Mr Atkinson expressed the view, as to which he was not challenged and which I accept, that the vibrating screen could not be removed easily due to its elevated location and the complicated arrangement of surrounding structural steelwork and auxiliary pipe work and chutes, and that part of the roofing or side walls of the screen house may require removal to allow crane access. In my view, the extent of connections with the relevant structures also support the characterisation of this item as also a fixture to the land. 59In summary, the extent to which the eight disputed items to which I have referred above are annexed to the land seems to me to be a strong indicator of whether they are fixtures and of the parties' objective purpose, as was recognised by Jordan J in Australian Provincial Assurance Co Ltd v Coroneo above and by Hill J in Lees & Leech Pty Ltd v Commissioner of Taxation above. It seems to me that the first eight of the disputed items have been fixed to the land with a relatively high degree of annexation, and the fact that they have been partly welded in place and structures built around them which would have to be partly demolished to remove them, support a conclusion that prima facie they are fixtures. 60The items to which I now turn are contained in a substantial enclosed processing shed. The ninth item in dispute is the express scales bag batch filling and weighing system described as: "Model JM800GVD, Capacity 115 lbs complete with Electronic Scales, Syntron Feeder, Pneumatic Bag Clamp, Belt Conveyor, x 2 x Saxon 5 Continuous Hot Air Bag Sealer, Overhead Hopper Bin (Note: 1 complete with Batch Coder) (Lot)" Mr Prentice's evidence was that the express scales bag batch filling and weighing system is situated in a large building with corrugated coated external walls and a hopper feeds that system from silos, which bags material that has been processed through earlier stages (Prentice XX T41) and extraction fans in the roof of the shed provide dust extraction for the bagging process (Prentice XX T42). The bagging machines are fitted in place so that they can receive diatomaceous earth from the silo and hopper and some bagging units use compressed air to blow open the bags for filling (Prentice XX T43). A compressed air system within the shed is connected to those machines that are also connected by electrical cabling to the control room (Prentice XX T44). Mr Atkinson identified several items comprising the express scales bag batch filling and weighing system and notes that pipe work, flexible hose connections for compressed air supply are evident and that dust extraction pipe work is also fitted around the item. Nonetheless, he expressed the view that this item could be removed with little or minor damage to existing bagging shed structures, although some oxy-acetylene cutting and disconnection of compressed air pipe work would be required. 61The tenth item in dispute is a Propac automatic batch weighing & filling machine, described as: "Auto Plant Packaging Systems complete with Bag Sealing, Dereeling, Computer controlled, Air Electric Operated on Mobile Base, 8 Stainless Steel Formers, Overhead Production Hopper Compu-Weigh, Batch Coding System, Acer 17" Flat Screen Monitor." Mr Atkinson's evidence is that the Propac automatic batch weighing and filling machine is located on a freestanding steel skid base, with snap-lock flexible hose connections for compressed air supply and a plugged in power supply. Mr Atkinson noted that the item is mobile and could be easily removed with little or no damage to existing bagging shed structures. 62The eleventh item in dispute is a General Packaging Equipment semi-automatic form fill batch weigh & seal machine, described as: "General Packing Equipment Semi-Automatic Form Fill Batch Weight & Seal Machine with Bag Dereeling, Feed Hopper, Air Electric Operated." Mr Atkinson's evidence was that this machine is a freestanding unit, but is bolted to an overhead feed hopper arrangement and housing and is connected for compressed air supply and hard wired to the bagging shed facility's power supply. Mr Atkinson expressed the view that the lower part of that unit could be easily removed with little or no damage to exiting bagging shed structures and the overhead feed hopper arrangement and housing would require some oxy acetylene cutting for removal. 63The twelfth item in dispute is a Demag electric chain hoist, described as: "125kg Capacity, on Crawler Trolley, Hand Pendant Control." The Demag electric change hoist is used as a general lifting tool in the bagging section of the processing and bagging facility, and hangs from a wheel trolley running along a steel "I" beam section in that facility, and is "hard wired" to the bagging shed's electrical power supply. Mr Atkinson expressed the view that it could be easily attached without damage to the trolley on which it runs by unbolting the "U Bolt" and that trolley unit can also easily be detached. 64The thirteenth item in dispute is a bulk steel hopper bin, described as: "With Bucket Loan Conveyor, Twin Small Hopper Bins for Production Mixing, with Single Manual Bag Filler, 2 Sets Wedderburn Platform Scales, each 50 kg (Lot)" Mr Atkinson identified the components comprising the bulk steel hopper bin and notes that this arrangement could be removed with little or minor damage in the existing structures although some oxy-acetylene cutting would be required. The large grey bin is welded, at one corner, to the bagging shed steel structure; a bucket elevator is bolted to the concrete floor; and a pipe is welded between the bucket elevator and twin small hopper bins, although the twin small hopper bins are themselves partly mobile. 65The fourteenth item in dispute is electronic platform scales, CAS Model BI-100RB. Mr Atkinson noted that the electric platform scales are a freestanding unit, which are electrically powered and plugged via an adaptor into the 240 volt power supply. He noted that they can be removed by unplugging them and unbolting the power adaptor attachment and electric control display. 66The fifteenth item in dispute is a packaged air compressor, described as: "Atlas Copco, Mode: GA90VSDFT, serial number not visible, with 2 x vertical air receiving tanks and pipework throughout." Mr Prentice's evidence was that the air compressor was purchased by ADEE to be used in addition to an air compressor that was already in place (T16). Mr and Mrs Blomfield acknowledge that the packaged air compressor was installed more recently, apparently in addition to an earlier and smaller compressor. Mr Atkinson noted that the packaged air compressor is located in the workshop with two receiving tanks and pipe work, and appears to be self-standing, although inter-connected by pipe work to distribute compressed air supply throughout the processing and bagging facilities and "hard wired" to the power supply. Mr Atkinson also noted that compressed air is used throughout the diatomite processing and bagging facility to operate a range of equipment valves and hydraulics and the packaged air compressor is an integral component of the processing and bagging facility. Mr Atkinson notes that removal of the air compressor is possible following electrical isolation and disconnection from the compressed air pipe work, but replacement would be essential for effective operation of the facility, and replacement of the unit for maintenance and plant upgrade purposes would be an ongoing requirement. In my view, given Mr Atkinson's evidence as to the manner in which this item could be removed and the fact that it would be replaced for maintenance and upgrade purposes, it has not been established that it is a fixture, when considered on its own as distinct from part of an integrated processing and bagging facility. 67It does not seem to me that it has been established that the ninth-fifteenth items, considered on their own as distinct from part of an integrated processing and bagging facility, would be a fixture. I am also conscious that, as Agripower points out, Mr Atkinson accepted in cross-examination that the operational ability of the plant could be restored after the disputed items were removed and was not dependent on the specific disputed items (T85). Agripower also contends that it would be open to Mr and Mrs Blomfield to engage another entity to run the plant, to bring equipment onto the site to do so, although there was no evidence as to the feasibility of this course. 68It seems to me that, notwithstanding that the ninth-fifteenth disputed items could be removed individually and could potentially be replaced, their structure and function, the extent of their integration with the premises and with each other and with the functioning of the processing and bagging facility, is consistent with the affixation of these items for the better use of the land as a processing and bagging facility, in circumstances that the parties leasing the land prior to ADEE had, so far as the evidence goes, long term leases of the property. The position in that respect corresponds to that reflected in National Dairies WA Ltd v Commissioner of State Revenue, Re Starline Furniture Pty Ltd (in liq) and Commissioner of State Revenue (Vic) v Snowy Hydro Ltd to which I referred above. For this reason, and subject to the other relevant considerations addressed below, I would reach the prima facie view that these items are also fixtures. Other relevant factors 69Other factors relevant to whether the disputed items should be characterised as fixtures include whether removal would destroy the chattel. Agripower contends, and I accept, that removal of the disputed items would not destroy them. I note that Mr Atkinson accepted in cross-examination that the disputed items could be removed without damage to them, depending upon the skill of the person removing the item (T85). 70Others factors relevant to whether the disputed items should be characterised as fixtures include whether removal of the disputed items would occasion significant damage to the property and whether the cost of removal would exceed the value of the items. Agripower contends that the disputed items can be removed promptly and for a reasonable cost, relying on Mr Chadwick's evidence in this regard. There were, in my view, that evidence had limitations that reduce the weight that could be afforded to it. First, Mr Chadwick appears to have understood at least some of the relevant items differently from the way they were described in the Amended Statement of Claim and in Mr Prentice's evidence of what Agripower in fact seeks to remove. For example, Mr Chadwick described the secondary roll crusher as comprising "2 roll crushers, 600m x 600m and 560mm x 400mm", whereas these are only a part of the secondary roll crusher and it is plain, both from the Amended Statement of Claim and from Mr Prentice's evidence, that Agripower may also seek to remove other associated items that comprise part of that machinery. Similarly, Mr Chadwick described the "primary roll crusher" as comprising an unbranded roll crusher, approximately 650mm x 500mm, and this also appears to refer only to the roller and not to the associated equipment that Agripower may also seek to remove. Mr Chadwick acknowledged in cross-examination in respect of the secondary roll crusher that the item to be removed was not merely the rollers referred to in his affidavit but also electrical driving equipment and housings (Prentice XX T65). The same proposition would appear to follow for the primary roll crusher, where Mr Chadwick had described the removal process by the same words. 71Second, Mr Chadwick's evidence as to the steps required for removal is, with minor modifications, in common form for each of the items, identifying disconnection of "any" electrical services, without expressing any view as to whether such services exist; unbolting and/or oxy-acetylene cutting of "any" hold down anchors, without identifying whether such anchors exist or which of the two would be necessary; and removal by unbolting and/or oxy-acetylene cutting of, variously, ancillaries, feed and discharge chutes, walkways and access platforms for safe removal for loading, securing and transport, without identifying which particular structures need to be cut or removed or to what extent in order to remove particular disputed items. Mr Chadwick acknowledged in cross-examination that, in respect of the removal of several items addressed in his report, he had simply cut and pasted the wording he had used for the secondary roll crusher and, in one item, added extra words to it (Prentice XX T67). The form of that evidence did not satisfy me that Mr Chadwick had in fact given any detailed consideration to what would be involved in removing the particular items, beyond a recognition that he or his staff would unbolt them or cut them out if necessary and would also cut and remove anything else which obstructed access to them. I accept that this may be explicable by the fact that Mr Chadwick has had relatively limited access to the property, but that explanation does not increase the utility of evidence given in this very general form. 72Mr Prentice also gave evidence, based on having been on the property on several occasions in the years 2005-2008, that each of the disputed items was either standing by its own weight or was bolted on to some nearby structure or concrete block for balance and that "all of the bolts or any other items" securing the disputed items would "take no longer, in total, than 1 to 2 days to release and remove". Mr Prentice also gave evidence that: "Based on these observations and my experience, I do not believe that removing the disputed [items] from the property would be likely to cause substantial damage to the property." 73I cannot accept these propositions, having regard to Mr Prentice's cross-examination and the other evidence in the proceedings. First, many of the items are welded to structures and, to the extent that they are bolted to structures, the extent of corrosion is now such that they are likely to have to be cut free. Mr Prentice's evidence as to the time that would be taken to remove bolts securing the disputed items is either incorrect or inconsequential. Mr Chadwick's evidence was that the time which would be required for removal was significantly larger than that referred to in Mr Prentice's affidavit, involving a team of several people over approximately 10-12 days with an allowance of an additional 2-3 days for rain or other delay, for a total of approximately 12-15 days. In cross-examination, Mr Prentice said that his estimate of 1 or 2 days was the time taken only to unbolt (rather than to remove) the relevant machinery whereas Mr Chadwick's estimate of 10-15 days related to the additional time required to lift out and load the equipment onto trucks (Prentice XX T58). Mr Prentice also ultimately accepted in cross-examination that removing the disputed items would leave the land covered in waste, scrap metal structures and concrete pads for which there was no longer any use (Prentice XX T59). I also referred above to Mr Prentice's similar evidence in respect of the position after removal of particular items. Mr Parker submits, and I accept, that this evidence is a matter supporting a characterisation of the disputed items as fixtures. 74I turn now to the value of the disputed items, compared with the cost of their removal. Mr Parker submits that the relevance of cost of the removal of chattel is not directed only to whether the cost exceeds the value of the chattel, but to whether there is proportionality between the cost of removal and the value of the chattel. Mr Parker points out that there is some difficulty in applying that test, in circumstances where there is a lack of clarity as to what constitutes the relevant chattel, and there is no evidence as to the cost of removal of particular items. He also points out that, even on the evidence as to the chattels as a whole, the cost of removal of the chattels is not substantially less than their value. 75Agripower relies on Mr Prentice's evidence that the disputed items have independent value at an alternative site (Prentice [39]-[42]) and contends that the cost of removal would not exceed the value of the disputed items. It points out that Mr Chadwick's day rate would, at its highest, be approximately $13,800 which equates to a total of between $165,600 and $207,000 over the period of 12-15 days he estimates for removal (CB251) and that that estimate is less than Mr Blomfield's estimate of the disputed items' value as $281,700 (T73). Although Agripower led no evidence as to the value of the disputed items, it contends that the Court can also infer that it sees removal of the disputed items as a commercial proposition because that is what it seeks to do (Prentice 7.3.2013 [39]-[42]). That reasoning is of limited assistance in determining whether any particular disputed items is a fixture, since it is directed to the value of the disputed items as a whole rather than to particular items. 76It seems to me that the cost of removal of the disputed items generally is relatively high by comparison with their value, although I accept that is less likely to be the case in respect of the ninth to fifteenth items to which I referred above which could more readily be removed. This finding does not assist in displacing the prima facie view that the disputed items were fixtures that I had expressed above having regard to the extent of their connection to the land and the structures attached to it and their role within an integrated processing and bagging facility. 77In summary, it seems to me that the cost of removal of the disputed items as a whole is high relative to their value; removal of the disputed items would occasion significant damage to the property, in that it would be left littered with concrete bases and damaged metal structures that could not readily be used either as a processing and bagging facility (without acquiring and installing replacement items in a manner that was no addressed by detailed evidence) or as grazing land. The position in this regard is significantly different from that in Pegasus Gold Australia Ltd v Metso Minerals (Australia) Ltd above on which Agripower relies. By contrast with Agripower Australia Ltd v J & D Rigging Pty Ltd on which Agripower also relies, there is no evidence of any requirement or common practice that equipment of this character must be removed at the conclusion of the lease. The parties' intentions 78In an appropriate case, the intention of the person who affixed an item to land can be indicative of the objective intention of that person and relevant to whether it should be characterised as a fixture. The immediate difficulty here is that there is no direct evidence of the intention of the predecessor to ADEE on the land, who affixed all items other than the air compressor and possibly the secondary roll crusher. In the absence of evidence as to the terms of the original leases at the time those items were affixed, it is not possible to know, for example, whether those leases contained options for renewal which would have permitted the lease to be renewed during the useful life of the relevant equipment, or would have permitted the removal of the disputed items on a basis consistent with their treatment as tenant's fixtures. Mr Parker also points out that there is no evidence as to how long the processing and bagging facility was thought likely to continue, at the time the relevant chattels were fixed, and that the processing had in fact continued for three decades. 79Agripower contends that the lease of the property to ADEE (CB 50) anticipates that the equipment was not a part of the "land" being leased and would not be there permanently. There is, however, a fundamental difficulty with reliance on that lease, namely that, as I noted above, any attachment of the disputed items to the land (with the exception of the compressor and possibly the secondary roll crusher) arose during earlier leases by other parties. That seems to me to exclude reliance on the terms of the terms of the later lease with ADEE to determine whether those items were fixtures from an earlier time. 80I should nonetheless refer to the terms of the lease which were the subject of submissions before me. The term of the lease was for a period of six years commencing on 1 October 2005 and terminating on 30 September 2011. Agripower points to the definition of the "land" in item 1 of the annexure to the lease, which does not specifically refer to fixtures, as: "All that piece or parcel of land at Barraba in the Parish of Piedmont County of Murchison being the whole of the land in Certificate of Title FI 1/625276." Clause 12.4 provided that ADEE may not mortgage or charge the lease or any estate or interest in the land (CB 54). Clause 13.1 of the lease in turn required ADEE to keep the buildings and improvements, as defined, in good repair having regard to their condition at the beginning of the lease. The term "buildings and improvements" was defined in the lease as, relevantly: "Buildings, structures ... wiring, water pipes, gas pipes, sheds ... and plant and equipment". The use of the land defined in clause 18.1 and item 6 of the annexure to the lease was as a "mining management office, diatomite processing plant and other associated activities". Clause 18.2 provided that: "After using the land, the lessee shall leave the land clean and in good heart and condition subject to the prevailing weather conditions." 81Agripower contends, and I would accept, that the reference to "plant and equipment" in the wide definition of "buildings and improvements" does not support an inference that ADEE was taking a lease of the disputed items as "fixtures" on the property. Agripower also contends, and I would accept, that the obligation in clause 13 of the lease with ADEE to keep buildings and improvements in good repair was in the nature of a generic obligation, consistent with the requirement in clause 18.2 to "leave the land clean and in good heart and condition"). Agripower also points to item 7 of the annexure to the lease which describes the chattels included in the lease as "Nil" and submits that this is consistent with its position in that the chattels were not fixtures and accordingly were not included. Agripower also contends that equipment is mentioned only in item 6 of the annexure which provides that the lessee may only use the land for the purpose specified in clause 18.1 to which I referred above. Even if the lease were relevant, it seems to me that these provisions are of little assistance in determining whether the disputed items are properly characterised as fixtures. 82Agripower also point out that the lease was for 6 years with options for renewal, and was, it contends, not a long term lease of the kind seen in the Snowy Hydro case. This proposition is of little assistance where the disputed items (with the exception of the air compressor and the secondary roll crusher) were installed at an earlier point where 10 year leases to ADEE's predecessors were in place. The fact that the lessee has no right under the ADEE lease to remove the disputed items is in any event neutral since, if the items were fixtures, such a right might or might not be included in such a lease and, if they were chattels, no such right would be required. 83Agripower relies on clause 12.4 of the ADEE lease to contend that the parties to that lease treated the disputed items as chattels and not fixtures. It points out that that clause prohibited the lessee from mortgaging or charging the lease or "any estate or interest in the land" and contends that; if the disputed items were fixtures, they would be an interest in the land and that clause would apply to them. It points out that the disputed items were, as I noted above, the subject of registered charges in favour of St George and there is no evidence of any dispute between ADEE and Mr and Mrs Blomfield as to that matter. These matters are not capable of establishing the objective intention of the different parties to the earlier leases in place when the items (other than the air compressor and possibly the secondary roll crusher) became attached to the land. It does not seem to me that this matter is capable of establishing an admission by Mr and Mrs Blomfield where there may be many reasons - including most obviously lack of knowledge - why they had not protested ADEE's actions which were not explored in evidence, and no estoppel case is pleaded against them. 84Agripower also submits that subsequent conduct may assist the Court in drawing inferences and reaching conclusions as to that objective intent. I accept that, for example, it Attorney-General (Cth) v RT Company Pty Ltd (1957) 97 CLR 146 at 156, Fullagar J placed some weight on the absence of any subsequent suggestion that two items were fixtures, although ultimately determining that question by an analysis directed to the extent to which the items were annexed to the land. In May v Ceedive Pty Ltd [2006] NSWCA 369; (2006) 13 BPR 24,147, Santow JA similarly noted that the fact that no predecessor to the current tenant had purported to remove an item was relevant to its present characterisation, and to that extent took account of conduct after the affixation of the relevant items. 85Agripower submits that the Court can have regard to the sales of plant and equipment from tenant to tenant to which Mr Blomfield refers in his affidavit, to the fact that the receivers advertised the disputed items for sale in the information memorandum and were party to the disposal of those items, and to negotiations between Mr Blomfield and Agripower for the removal of items including the disputed items in that regard. It does not seem to me that these items have substantial weight, although I have had regard to them. As I have noted above, Mr Blomfield's evidence as to the transfer of plant and equipment is in general terms and the basis on which he holds the relevant understanding was not established in evidence; the receivers' conduct in advertising the disputed items for sale needs to be assessed having regard to the clear disclaimers as to title in the Sale Agreement; and the evidence that Mr Blomfield objected to the removal of some but not other items neutral as to whether the items to which objection was taken were or were not fixtures. 86To the extent that subjective intention is relevant, it does not seem to me that a contrary subjective intention has been demonstrated, so as to displace a characterisation of the items as fixtures, where there is no evidence as to the intention of the parties at the time the majority of the items were affixed. Orders and costs 87For these reasons, I would find that the disputed items are fixtures, and the proceedings should be dismissed. In the ordinary course, costs should follow the event. The parties should bring in draft short minutes of order within 14 days to give effect to this judgment. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 November 2013