NYK Logistics (UK) Ltd v Ibrend Estates BV
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Moore-Bick,Lord Justice Ward |
| Judgment Date | 16 June 2011 |
| Neutral Citation | [2011] EWCA Civ 683 |
| Docket Number | Case No: B2/2010/2445 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 June 2011 |
[2011] EWCA Civ 683
Lord Justice Ward
Lord Justice Moore-Bick
and
Lord Justice Rimer
Case No: B2/2010/2445
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ROTHERHAM COUNTY COURT
His Honour Judge Bullimore
Case No: 9RT01173
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Dermot Woolgar (instructed by Franklins Soliciors LLP) for the Appellant
Mr John de Waal (instructed by Reed Smith LLP) for the Respondent
Hearing date: 8 March 2011
Introduction
This appeal is by NYK Logistics (UK) Limited ('NYK'), the defendant in the proceedings. The respondent (the claimant) is Ibrend Estates BV ('Ibrend'). NYK's appeal is against an order dated 28 September 2010 made in Sheffield County Court (although the claim had been issued in Rotherham County Court) by His Honour Judge Bullimore, who also gave permission to appeal. NYK was represented before us by Dermot Woolgar, and Ibrend by John de Waal, both of whom also appeared below.
NYK is a former lessee of a warehouse owned by Ibrend. NYK claimed that it had terminated the lease on 3 April 2009 by exercising a right under a break clause. Ibrend disputed that NYK had validly exercised the break option, asserting that it had failed to give vacant possession on 3 April 2009, a condition of its exercise. If Ibrend was right, it was agreed that the lease continued after 3 April 2009 until 25 December 2009, when it was terminated following the exercise by NYK of a further break option (which was exercised without prejudice to its claim that the lease had already terminated).
By its claim, Ibrend sought a declaration that the lease had continued after 3 April 2009 and claimed payment of the rent due since then (which had been paid by NYK also on a without prejudice basis). By its defence and counterclaim NYK denied that the lease had so continued and claimed repayment of the rent it had paid (a claim which was not disputed if NYK was correct that it had validly exercised the break option).
The judge found that NYK had not given vacant possession on 3 April 2009 and so had not validly exercised the break option. He also rejected NYK's alternative case that Ibrend had waived its right to claim that it had not been validly exercised. NYK challenges both limbs of the judge's decision.
The facts
Ibrend is a Netherlands investment company that owns several properties in the United Kingdom. At the material time they included warehouse premises known as Mangham 2, Barbot Hall Industrial Estate, Rotherham ('the warehouse'). Commercial Estates Group Limited ('CEG') managed Ibrend's properties; and Paul Richardson, CEG's asset manager, had relevant involvement with the warehouse. Neil Leetham, a chartered surveyor with Savills Commercial Limited, also acted for Ibrend in relation to it.
The warehouse premises occupy an area of some 80,000 square feet and include a building three or more storeys high and a two-storey office block. They also include a large tarmac yard that was surrounded during most of the relevant time by a temporary security fence. There was a portacabin at the entrance to the yard from which security checks would be made on vehicles passing in and out. The local area was said to suffer from vandalism and theft.
NYK is a business providing haulage and storage services. It holds a number of commercial properties, usually on lease. It is a former lessee of the warehouse. Its original interest in it was as an assignee of a 10-year lease dated 6 April 2003. It had taken the assignment in order to meet the needs of a continental sweet manufacturer. Those needs ceased and so NYK exercised its right to terminate the lease. They then, however, re-arose and NYK negotiated with Ibrend a new lease of the warehouse. It was dated 3 April 2008 and incorporated the provisions of the old lease save as varied by the new one. The term of the lease was two years from and including 3 April 2008 and the yearly rent was £278,000.
The Schedule to the lease included two tenant's break clauses. The first entitled NYK to terminate the term on 3 April 2009. If that option was not exercised, the second entitled NYK to terminate the term at a subsequent date. The terms of the first break clause, the material one, were as follows:
'3.1 If the Tenant shall wish to determine the term hereby granted on 3 rd 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.
NYK gave a valid notice to Ibrend on 26 September 2008 of its wish to end the term on 3 April 2009. In January 2009 Ibrend, via CEG, instructed Savills to prepare a 'terminal' schedule of dilapidations. It was prepared in January and was reviewed by Mr Leetham. Its preparation overlooked, however, a provision in the lease that, by reference to a Schedule of Condition, limited the standard to which the repairs and decorations needed to be performed.
Savills' schedule was passed to NYK on 11 March. There was no explanation for the delay in doing so, even though everyone knew of the 3 April deadline. NYK passed it to David Louch, of Douglas Luff Limited, its chartered surveyors. Mr Louch emailed Mr Leetham on 23 March, pointing out that the schedule had not been prepared with reference to the Schedule of Condition but also explaining his response to it. He wrote that 'In short my client will yield up the premises substantially (if not totally) in compliance with its lawful obligations.' He proposed a site meeting before the end of the tenancy 'to review the position and the works which NYK are in the process of completing' and suggested a meeting on Thursday 26, Friday 27 March or any day the following week. Mr Leetham replied on 26 March, agreeing to a meeting on Wednesday 1 April, which was just two days before the lease was due to end. Mr Louch's evidence was that NYK liked to do any necessary repairs itself and that he advised it that it would generally be better off if it extinguished the liability for dilapidations before handing the premises back. NYK knew that there could be a liability for dilapidations. Robin Tate, its fleet engineer, also gave evidence that NYK preferred to do any repairs itself: it could thereby control the cost and quality of the work.
The meeting duly took place on 1 April. In addition to Messrs Leetham and Louch, it was attended by Mr Tate. Only Mr Louch had what the judge called a 'usable' copy of the Schedule of Condition. Mr Leetham conceded at the meeting that Savills' schedule had been prepared on an incorrect basis. Whilst the two surveyors agreed that NYK had substantially complied with its repairing and redecorating obligations, they also agreed that there were still some outstanding items of repair, some of which were first identified at the meeting, although the judge found that 'there was uncertainty about the extent of some roof repairs and repairs to certain windows.' That was apparently because they were unable to gain access to the relevant parts in order to carry out an inspection. The judge also found that it was clear that the outstanding matters could not be dealt with by Friday 3 April (just two days later) but could be completed shortly afterwards. He found yet further that by 1 April the warehouse was empty of NYK's fixtures, fittings, furniture and stock save for a small quantity of items that would easily fit into a small van. In addition, NYK had removed the temporary security fence around the tarmac yard.
Mr Tate asked Mr Leetham at the meeting how long NYK had in order to complete the outstanding repairs, to which Mr Leetham replied 'technically two days – i.e. until the 3 rd', meaning 3 April. Mr Tate then suggested to him that there should be a week's extension to allow NYK to complete the works and offered to continue to pay for security guards for that period. Mr Leetham saw the sense of that. There was a dispute at the trial as to how that matter was left. NYK's case was that Mr Leetham was to take Ibrend's instructions, whereas Mr Leetham contended that it was for NYK to take the matter up with Ibrend. The judge did not resolve that dispute by his findings but that omission was not material because it was neither side's case that any agreement on the matter was...
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