ON APPEAL FROM ROTHERHAM COUNTY COURT
His Honour Judge Bullimore
Case No: 9RT01173
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MOORE-BICK
LORD JUSTICE RIMER
| NYK LOGISTICS (UK) LIMITED
|- and -
|IBREND ESTATES BV
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7404 1424
Official Shorthand Writers to the Court)
Mr John de Waal (instructed by Reed Smith LLP) for the Respondent
Hearing date: 8 March 2011
Crown Copyright ©
Lord Justice Rimer :
'3.1 If the Tenant shall wish to determine the term hereby granted on 3rd April 2009 (the "first date of determination") then the Tenant shall give the Landlord not less than 6 months previous notice in writing to that effect and in such event upon the first date of determination the term hereby granted shall cease and determine but without prejudice to any claim by any party against the other in respect of any antecedent breach or claim under these presents provided that the Tenant must on the first date of determination:-
(a) Have paid all the rent due under these presents up to an [sic] including the first date of determination without deduction; and
(b) Have delivered up vacant possession of the Premises
And in the event that the above conditions have not been satisfied on or before the first date of determination then unless (at the Landlord's discretion) the Landlord waives the conditions the term hereby granted shall not cease and determine.'
The dispute turned primarily on whether NYK, in its claim to have exercised the break option, had satisfied condition 3.1(b) by giving vacant possession of the warehouse to Ibrend on 3 April 2009. If it had not, there was a secondary issue as to whether Ibrend had waived its right to claim that condition 3.1(b) had not been satisfied. That argument was not based on the provisions of the coda to paragraph 3.1 but on general principles. I must now summarise the facts that the judge found leading up to and following 3 April 2009.
'I did manage to inspect the roof yesterday having bunged the collection driver a fiver to give me a lift. It was a bid [sic] hairy at full stretch but I saw all that I needed. I will need to speak to you further on the condition of the plastisol coating and the incidence of spot corrosion.
I also have some more information on the racking.
As agreed yesterday there were a number of (relatively minor) defects which [Mr Tate] has agreed to undertake and indeed this would seem to be the most pragmatic way of achieving a resolution. However time is now pressing so we have a proposal that NYK will fund the existing security cover for the building for a further week during which time his tradesmen will be able to deal with the remaining items. NYK would not however pay rent/rates etc but we would hand over the keys on the due date so your client has full access.
Can you come back to me on this today, please? As I will not be in the office this afternoon can you also copy [Mr Tate] into your response? ….'
'A small number of works are still outstanding which they would like to attend to and have put forward a proposal for your consideration in the [forwarded] email. … In the meantime if you could confirm your position as to the [forwarded] proposal I will revert to the tenant accordingly.'
There was no further communication between Ibrend and NYK, or their agents, on 2 April.
'I have been attempting to contact you today to make arrangements for the handover of keys and to take final meter readings etc as this is the last day of my client's tenancy but as this is now unlikely I would be grateful if you would contact me as soon as possible next week.
I met on site with Neil Latham [sic: should be Leetham] on Wednesday, following which I sent the attached mail which should be self-explanatory. I gather also that he has been unable to make contact with you.'
The attached email was the one he had sent Mr Leetham at 9.42 am on 2 April (paragraph  above).
'… have security on site until tomorrow, you will need to make arrangements after that. If you do not the site will almost certainly be wrecked very quickly. Please advise your intentions asap.'
'As you are aware, it is a condition of exercising the right to break that you pay all rents due and give vacant possession of the premises by the 3 April 2009. We are advised that the latter has not been complied with and that your representatives still remain on the premises. In the circumstances, the lease has not been effectively determined and you therefore remain liable for payment of rents and compliance with covenants until lease expiry.'
'In the meantime I must say that this is outrageous, the site is vacant possession [sic]. We have tried to return the keys on several occasions to no avail – as you are aware, given you were contacted on several occasions but did not respond – !!
We have maintained a security presence as agreed – this helps the landlord given the area and likelihood of vandalism.
Please advise where the keys need to be returned – if I do not have a response then these will be returned to your office.'
Mr Richardson's response at 12.56 pm was that Ibrend stood by its solicitors' advice that 'the break is now invalid' and that it would not accept the keys.
The judge's decision
'60. … NYK are in the unhappy position of having to ride two horses, or at least one-and-a half, namely that they gave vacant possession, and also that they remained on site in the belief they had a degree of or informal permission or agreement to do so. Their presence was by no means great – and I prefer Mr Tate's evidence on how many men were on site [which was that there were "just a couple of chaps on site" in the week commencing 6 April] and Mr Louch's evaluation of how much was to be done in that week [which was that what was required to finish the outstanding items was two to three days of intensive work], rather than Mr Richardson's, whose information was less, and second-hand – but it was in essence for their own purposes. There was nothing to stop them clearing out on the 3 April, and leaving any dispute about un-repaired items to be resolved thereafter. Ibrend could not have complained if they had done that. There was no obligation on NYK to complete any works before quitting, only to pay rent up to date and give vacant possession. This is not a conclusion I have come to happily or lightly, and I am well aware that Ibrend's interests were not in fact affected at all. NYK however remained in possession simply for their own purposes.'
'68. … needed time to digest what he had been told, investigate and take advice. To make arrangements for recovering of the keys on the following day through a colleague, does not seem to me an unequivocal assertion that (if) there had been a breach (which of course NYK have been at pains to deny), that it was being waived.'
'9. If it had been put to Tate at the time: so you're not giving us vacant possession (because of the presence of security and the workmen on site), that would have been met with a spirited denial. That was not such an obvious and clear position, as [NYK's] stance at the trial underlines, that Richardson must have understood vacant possession had not been given, so that to ask for the keys in those circumstances would say in effect, never mind you have not complied with the terms for breaking the lease, we will accept possession from you. …
11. Again this is all put forward as a later interpretation of the course of events. Richardson may well have been aware of [Ibrend's] right to waive the condition that vacant possession be given, but this was not a case of tenants accepting they were in breach and seeking indulgence, quite the contrary. There is nothing in the evidence which suggested that Tate believed any breach was being forgiven; Tate firmly believed there was no such breach. Until Richardson realised that what he had been told did amount to a failure to give vacant possession – or at least until a reasonable man in his position and aware of the surrounding circumstances that Richardson himself would have known of, would have done so – then no waiver could occur. As at the end of the telephone conversation, I find that Richardson was not in that position.'
(a) Vacant possession
'Subject to the rule de minimis a vendor who leaves property of his own on the premises on completion cannot, in our opinion, be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment'
'But there is, we think, a quite different ground upon which the judgment under appeal can be supported. The phrase "vacant possession" is no doubt generally used in order to make it clear that what is being sold is not an interest in reversion. But it is not confined to this. Occupation by a person having no claim of right prevents the giving of "vacant possession," and it is the duty of the vendor to eject such a person before completion. See Royal British Permanent Society v. Bomash (1887) 35 Ch.D. 390, 395 and Engell v. Fitch (1869) LR 4 QB 659. The reason for this, it appears to us, is that the right to actual unimpeded physical enjoyment is comprised in the right to vacant possession. We cannot see why the existence of a physical impediment to such enjoyment to which a purchaser does not expressly or impliedly consent to submit should stand in a different position to an impediment caused by the presence of a trespasser. It is true that in each case the purchaser obtains the right to possession in law, notwithstanding the presence of the impediment. But it appears to us that what he bargains for is not merely the right in law, but the power in fact to exercise the right. When we speak of a physical impediment we do not mean that any physical impediment will do. It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property. Such cases will be rare, and can only arise in exceptional circumstances, and there would normally be (what there is not here) waiver or acceptance of the position by the purchaser. The facts as found by the county court judge are of a very exceptional nature, since the presence of the rubbish which the purchaser never bought and to whose presence he never submitted did in fact make it impossible for him to use a substantial part of the property which he had bought. The appeal must be dismissed with costs.'
'41. It seems to me that the difference between the two tests is as follows. The first test looks at the activities of the person who is required to give vacant possession. If he is actually using the property for purposes of his own otherwise than de minimis, he will be held not to have given vacant possession. Thus in the Norwich case the borrower continued to keep his household furniture in the mortgaged property after he had been ordered to give possession of it. That was an activity carried out by a person who ought to have given possession.
42. The second test looks at the physical condition of the property from the perspective of the person to whom vacant possession must be given. If that physical condition is such that there is a substantial impediment to his use of the property or a substantial part of it then vacant possession will not have been given. As the Court of Appeal said in the Cumberland case, that is likely to be satisfied only in exceptional circumstances.'
(b) The waiver point
Lord Justice Moore-Bick :
Lord Justice Ward :