Is Possession Really 9/10ths of the Law?

This morning I ended up in a lively discussion over breakfast about who ‘owned’ Pooka, the cat in the photo. Our discussion was frivolous.

But what about plant, materials, equipment or goods on a construction site? Then the debate really does matter.

Who owns construction materials?

There are two types of materials we need to consider: known as fixed and unfixed.

Fixed goods: as soon as goods or materials are attached to land, whether directly – such as dug into the ground – or indirectly – window frames, attached to brickwork which is attached to the foundations – then those goods or materials belong to the landowner. No contract clause can disturb this principle of property law.

Unfixed goods, plant or equipment: In Alstom v Somi the court had to try and separate the emotions, moral rights and contractual rights on a subcontract which had gone badly wrong. The contractor had terminated the subcontract, and subsequently tried to prevent the subcontractor from returning to the site to reclaim its plant and equipment. The police had even become involved!

The dispute arose partly because the contract provided that the Subcontractor’s Equipment (as defined) was ‘deemed’ to be the property of Alstom until completion of the works, whether or not by that subcontractor. Based on Re Cosslett, the court stated that:

  • the contract terms were the main (but not the only) means of passing ownership of subcontractor plant, equipment, materials or goods;
  • the court has to intrepret those terms to decide whether such items are supplied by one party to or for the benefit of the other;
  • permanent ownership will only occur where there are crystal clear words to that effect.

The contract said that the items were ‘deemed’ to become the property of the contractor (the parties agreed this interpretation).

The court considered whether there were other contract terms which ‘cast light’ on the purpose, extent and duration of that deemed ownership. The issue was whether the deemed ownership was temporary or permanent. As the subcontractor was insolvent, the items were thought to be assets in its liquidation.

The court had was not satisfied that both parties intended that the transfer of ownership would be permanent. But the contractor (Alstom) did have temporary possessory rights over the equipment until completion of the works, and could prevent the subcontractor from attempting to re-take its assets for a limited period.

What should you do?

For suppliers: make sure you get paid before items are fixed and mark goods until payment as your property. Keep on top of payments. Read your contract to check who can use and ‘own’ your plant and equipment, especially between termination/insolvency and project completion – it may come as a surprise!

For employers: do not use plant and equipment if you have no ownership or title to it. That is an offence.

Cases: Alstom Power Ltd v Somi Impianti SRL [2012] EWHC 2644 (TCC), Re Cosslett (Contractors) Ltd [1998] 2 WLR 131

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