Re Cosslett (Contractors) Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE MILLETT,Lord Justice Evans,Sir Ralph Gibson
Judgment Date29 July 1997
Judgment citation (vLex)[1997] EWCA Civ J0729-4
Docket NumberCHANF 96/0219/B
CourtCourt of Appeal (Civil Division)
Date29 July 1997
Ian Clark, Administrator Of Cosslett (Contractors) Ltd (in Administration)
Appellant
and
Mid Glamorgan County Council
Respondent

[1997] EWCA Civ J0729-4

Before:

Lord Justice Evans

Lord Justice Millett

Sir Ralph Gibson

CHANF 96/0219/B

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(Mr. Justice Jonathan Parker)

Royal Courts of Justice

MR. R. WILMOT-SMITH Q.C. and MR. A. MACLEAN (instructed by Messrs Hammond Suddards, Manchester) appeared on behalf of the Appellant/Appellant.

MR. S. MORTIMORE Q.C. and MR. A. ZACAROLI (instructed by Messrs Edwards Geldard, Cardiff) appeared on behalf of the Respondent/Respondent.

Lord Justice Evans
1

By an engineering contract dated 28 January 1991 incorporating the ICE Conditions (5th. ed.) with some amendments, the Company agreed to carry out permanent and temporary works in connection with the Upper Garw Valley Reclamation Scheme.

2

The Scheme covered an area of approx. 141 hectares, the majority of which were covered with shale tips associated with the former workings of the Garw and International Collieries. The "Brief Description of Works" (not part of the contract terms) included this :—

"Over an estimated period of 4 years the coal bearing shale will be processed through a washing plant and the residue used to raise the valley floors to provide plateaux for possible development and the provision of new river channels for the Nant Garw and Nant Hir. Both realigned rivers will be interspersed with two feature lakes complete with recreation areas and the whole of the newly created land forms will be landscaped in sympathy with the surrounding topography."

3

Two coal-washing plants were required for this purpose and they were duly installed on the site. We were told something of separate financial arrangements which enabled the Company or one of its associates to purchase the plants, but those arrangements are not relevant for the purposes of the appeal. As will appear below, it was agreed for the purposes of the contract that the washing plants should be regarded as constructional plant which the Company brought to the site for the purposes of the contract works.

4

The first washing plant was installed between June and December 1991 and the second between May and September 1992.

5

During 1993, disputes arose between the Company and the Contractor, and early in August 1993 the Company left the site. The Engineer duly certified on 6 August that the company had abandoned the Contract. This gave the Council certain rights under clause 63(1) of the ICE Conditions (quoted below) including a right to use the washing plants for the purpose of completing the contract works. This the Council, employing another contractor, did.

6

Soon afterwards, in September 1993, the appellant claimed that the Company was entitled to be paid by the Council for the continued use which it was making of the plants. Payment was refused and in October/November 1993 he demanded delivery up of the plants, unless the Council agreed to pay a rent of £10,000 p.w. or to purchase the plants for a reasonable sum, being not less than £1,200,000. This too was refused, and the appellant issued proceedings on 1 February 1994, claiming an order for delivery up of the plant as the Company's property, under section 234 of the Insolvency Act 1986. After hearing full argument, Jonathan Parker J. dismissed the appellant's claim. His admirable judgment is reported at [1997] Ch.23.

7

The issues

8

These can be stated in outline as follows. The Council does not dispute that the washing plants were purchased by the Company, presumably from the manufacturers, and initially became its property. They rely, however, on clause 53(2) of the Conditions, by which all plant, goods and materials owned by the Company "shall when on site be deemed to be the property of the employer" i.e. of the Council. Furthermore, they say that in the circumstances which arose when the Company left the site clause 63(1) entitled them to use the plants to complete the works and also "at any time" to sell them and to apply the proceeds towards whatever sums might be due from the Company under the contract. The power of sale was never asserted by the appellant but its existence is relevant to the legal issues which arise. These are :—

(1) the Council says that clause 53 had the effect of transferring legal ownership of the plants to it, at least until the contract works were complete, and therefore they were not the Company's property when the appellant made his demand for delivery up;

(2) alternatively, clauses 53 and 63 at least had the effect of creating a charge over the plants in the Council's favour, or if not a charge, then a lien based on their continued possession of the plants. In either event, they were entitled to refuse to return them to the Company or to the liquidator, when the demand for delivery up was made.

(3) the appellant contended in his Reply that if the contract Conditions created a charge in the Council's favour, then it was a floating rather than a fixed charge, and as such was void for want of registration under section 395 of the Companies Act 1985.

9

( Note the lien contention under (2) above was not raised before the judge and it is not referred to in his judgment.)

10

The judge held, in summary, that the contract conditions did not transfer legal ownership of the plants to the Council, but that they had the effect "of giving the employer an equitable proprietary interest in the relevant plant" which was an interest in the nature of a charge, because of the power of sale contained

11

in clause 63(1). The charge was not a floating charge for the purposes of the statutory registration provisions, and therefore the admitted fact of non-registration did not prevent the Council from relying upon clause 63(1) in accordance with its terms. The claim for delivery up therefore failed.

12

The Contract Conditions

13

The relevant parts of clauses 53 and 63, and of clause 54 which is relied upon as affecting the construction of clause 53, are set out in extenso in the judgment [1997] Ch. at pages 28–31. Only the following need be quoted here (amendments in italics) :—

"(1) For the purpose of this clause :- (a) the expression `plant' shall mean any constructional plant coal washing plant temporary works and material for temporary works but shall exclude any vehicles engaged in transporting any labour, plant or material to or from the site ….

(2) All plant, goods and materials owned by the contractor or by any company in which the contractor has a controlling interest shall when on site be deemed to be the property of the employer. The washing plant must be owned by the contractor or by a company in which the contractor has a controlling interest.

…….

(6) No plant (except hired plants) goods or materials or any part thereof shall be removed from the site without the written consent of the engineer which consent shall not be unreasonably withheld where the same are no longer immediately required for the purposes of the completion of the works but the employer will permit the contractor the exclusive use of all such plant goods and materials in and for the completion of the works until the occurrence of any event which gives the employer the right to exclude the contractor from the site and proceed with the completion of the works.

63(1) If the contractor shall become bankrupt or have a receiving order made against him …… or if the contractor shall assign the contract without the consent in writing of the employer first obtained or shall have an execution levied on his goods or if the engineer shall (a) has abandoned the contract … then the employer may after giving seven days' notice in writing to the contractor enter upon the site and the works and expel the contractor therefrom without thereby avoiding the contract or releasing the contractor from any of his obligations or liabilities under the contract or affecting the rights and powers conferred on the employer of the engineer by the contract and may himself complete the works or may employ any other contractor to complete the works and the employer or such other contractor may use for such completion so much of the constructional plant temporary works goods and materials which have been deemed to become the property of the employer may at any time sell any of the said constructional plant temporary works and unused goods and materials and apply the proceeds of sale in or towards the satisfaction of any sums due or which may become due to him from the contractor under the contract..".

14

General

15

The issue which the judge found against the appellant, and the only issue raised by his appeal, was whether the charge created by the Conditions was a fixed rather than a floating charge ; he held that it was a fixed charge, and it followed that the Council's rights were unaffected by the lack of registration under section 395. Mr Wilmot-Smith Q.C. therefore was able to present the appeal on the assumptions (1) that the Council did not become owners of the plants, and (2) that the Conditions did create some form of charge in the Council's favour. He submitted that the charge should properly be regarded as floating over such of the company's assets as were present on the site from time to time, and that those assets included the two washing plants in the circumstances of this case, however immobile or how much like fixed assets they might appear to be. In addition, however, Mr Simon Mortimore Q.C. for the Council submitted by way of cross-appeal that the judge was wrong to hold that legal ownership of, or `the general property' in, the plants was not...

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