This year we saw not just one, but two, legal battles concerning the ownership of steel mills. In Lictor Anstalt v Mir Steel UK Ltd [2014] EWHC 3316 (Ch), the court decided that the components of a mill had been annexed to, and formed part of, the land. As a result, legal ownership of the mill passed to the new owner of the land when the site was sold.
This was not the end of the story – but perhaps we should start at the beginning. The owner of the land assembled and began using the mill pursuant to an agreement that stated that the equipment belonged to the company that had supplied the components. The site owner promised not to sell or mortgage the mill and the agreement gave the company the right to dismantle and remove the equipment at any time, after giving reasonable notice of its intentions.
In due course, the site owner went into administration and the administrators sold the business lock stock and barrel, subject to the company’s claim. However, the sale of the site made it impossible for the company to go on to the land to dismantle and remove the mill, because it had become part of and passed with the title to the land itself.
The fact that the sale extinguished the company’s rights to repossess the mill constituted a breach of its contract with the previous site owner. The contract still regulated their relationship and it is unlawful for a third person to procure a breach of contract between two parties. Consequently, the company was able to argue that the buyer was liable in tort for procuring a breach of its contract with the previous site owner.
The judge upheld the claim. The parties had known that the site owner would be breaking its contract with the company. This was why the administrators had made the buyer responsible for settling any claim made by the company – and why the price paid for the assets was substantially lower than it would otherwise have been.
The judge accepted that the administrators did not believe that they would be causing any harm to the company because they sold “such rights, title and interest” as the original site owner possessed. However, intention to cause loss is not a necessary element of the tort and the fact that the administrators sold subject to the company’s claim did not excuse the breach of contract that occurred; it merely determined who would be liable for it.
The judge dismissed the buyer’s argument that to saddle a purchaser of a registered title with liability for breaches of unregistered contractual rights that affect land would offend the philosophy that underpins the scheme of land registration. The Land Registration Act 2002 is concerned with property interests only and the judge did not believe that buyers need be unduly concerned because the tort of inducing breach of contract is based on actual knowledge of the contractual rights that are broken.
It seems, therefore, that buyers have a tightrope to walk. Making enquiries about unregistered contractual rights could fix them with too much information. However, knowing or reckless indifference to the possibility of a breach of a contract might also suffice to fix a buyer with tortious liability.
Allyson Colby is a property law consultant
