The Administration of Coslett (Contracting) Ltd v Mid Glamorgan County Council (1995)

© Daniel Atkinson    2000

The case of The Administrators of Coslett (Contractors) Limited -v- Mid Glamorgan County Council (1995) was concerned with the interpretation of Clause 53 of the ICE 5 Edition and in particular whether the Employer had legal title to the Contractor's plant or if not whether and what type of proprietary interest the Employer had in the plant.

In 1989 the Employer embarked upon a scheme for reclamation and redevelopment of part of the Upper Garn Valley in Mid-Glamorgan. This involved processing coal bearing shale through a washing plant which separated coal from the residue. The coal was transported off- site and sold. The residue was used to raise the valley floor for possible development.

In 1989 the contractor tendered for the substantial engineering works involved and following signing of the contract on 28 January 1991 work began on the site. Two coal washing plants were established, but in August 1993 having encountered financial difficulties the Contractor abandoned the site. On 31 August 1993 the Employer gave notice under the Contract expelling the Contractor from the site. The coal washing plants remain on the site.

In September 1993 the administrator for the Contractor's firm demanded delivery up of the coal washing plants or alternatively payment for their use. This demand was refused and an application was made under Section 234 of the Insolvency Act 1986 for delivery up of two coal washing plants - the instant case.

Clause 53(2) of the Contract provided that all plant, goods and materials owned by the Contractor "shall when on site be deemed to be the property of the Employer". The meaning of "plant" was specifically defined to include the coal washing plant.

Reference was made to the decision of the Privy Council in Bennett & White (Calgary) Ltd -v- Municipal District of Sugar City (1951). The case involved a building contract in which a distinction was made between two types of clauses. The first type were clauses which provided that, as and when plant or materials were brought to the site they were "considered" or "deemed" to become the property of the building owner. The second type were clauses which provide that they "be or become" the property of the building owner.

The second type of clause is effective to transfer legal title to plant from time to time on the site for so long as it remains there.

It was held however that Clause 53(2) of the Contract was of the first type and did not fall within the category of "be and become" cases. Legal ownership did not pass, but the parties were agreeing to proceed for the purposes of the contract as if it had. In interpreting Clause 53(2) the language adopted was contrasted with the language employed in Clause 54 where clear terms were used to transfer legal ownership.

Having decided that legal ownership did not pass to the owner, the next issue which arose was whether the equitable proprietary interest was either a floating charge or a specific charge on the coal washing plant. If the interest was a floating charge then this was required to have been registered and it was argued by the Administrator that since this had not been done the charge was void.

It was held that there was no express statement of intention to create a proprietary interest. The Employer had several rights in relation to the Plant under Clause 53(6) as follows:

(i) an absolute right to refuse to permit the Contractor to remove from the site plant which was immediately required for the completion of the works; and

(ii) a right to refuse to permit the Contractor to remove from the site plant which is not immediately required for completion of the works, providing that the Employer acted reasonably in so refusing.

In addition the Employer had certain rights in the plant in the event of a forfeiture under Clause 63 including the selling of any plant and to apply the proceeds towards satisfaction of any sums due.

It was held that these contractual rights had the consequence of giving the Employer an equitable proprietary interest in the plant, enforced by the remedy of specific performance. The right to sell the plant under Clause 63 was crucial to the interest being in the nature of a charge.

The ability of the Employer to refuse removal of plant from site meant that the charge was a specific charge and not a floating charge. It was held that the clauses create a specific equitable charge on plant for the time being on site and as and when the plant was (with the consent of the Employer) removed from site it ceased to be subject to the charge. As and when further items of plant are brought onto the site, they become subject to the charge, by way of substitution for the items which have been removed.

In the result, the Administrator's contention failed and the application was dismissed.