NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683

This is a commercial leasehold case, but it is the first significant case on the meaning of ‘vacant possession’ since about 1946 and is of general application, so here it is.

NYK was the lessee of a warehouse owned by Ibrend. NYK purported to exercise a break clause in the lease on 3 April 2009. Ibrend denied that NYK had validly terminated the cease because it had failed to give vacant possession on 3 April 2009 (a condition of the break clause) and that the lease continued until 25 December 2009, when NYK exercised a further break clause, without prejudice to its claim that the lease had already ended.

Ibrend sought a declaration that the lease had not ended on 3 April 2009 and rent between then and December (paid by NYK on a without prejudice basis). NYK defended.

At first instance, the Court found that NYK had not given vacant possession on 3 April 2009and the lease continued. NYK appealed.

The relevant facts were that NYK had given valid notice of its intention to exercise the break clause for April 2009 in September 2008. IN March 2009, Ibrend served a terminal schedule of dilapidations, but that did not properly address the schedule of condition in the lease. NYK wanted to do the repairs itself and a site meeting was arranged for 1 April 2009 to address necessary works and the issue of the schedule of condition.. Some outstanding items of repair were identified, roof repairs and works to windows. It was apparently clear to both parties that the repairs would not be completed by 3 April, but could be soon afterwards. NYK were told they had ‘technically’ only till 3 April to do the repairs. NYK asked for a further week and offered to pay for a security guard for that time. No agreement was reached on this at the site meeting. NYK sought Ibrend’s approval of this plan on 2 April and on the morning of 3 April, but without response. The deadline for vacant possession was midnight on 3 April.

Between Monday 6 April to 9 April, NYK’s contractors entered the warehouse and carried out the remaining repairs. NYK kept a security guard on the property during this time, who apparently refused access to an agent of Ibrend, who did not insist on Ibrend’s right to enter. But NYK had also repeatedly from 3 April sought to make arrangements to return the keys, with no response until 8 April.

The first instance court noted that Ibrend’s interests were not affected at all, but it remained that NYK had people on site after 3 April for their own purposes and NYK could simply have cleared out on 3 April, regardless of the remaining repairs which were an issue which could have been addressed otherwise.

NYK’s appeal was based on a waiver argument – that Ibrend had waived the apparent breach by not demanding the return of the keys or saying that it would accept the return of the keys at a time when it had been told that there were still NYK people on site. This was based on evidence about a phone call that the Judge below made no findings about.

NYK also argued that it had given vacant possession and that it was unjust to hold that the modest repairing activities up to 9 April should be held to be a failure to give vacant possession. In addition although NYK had remained in occupation, but as a trespasser and without any intention to possess or to exclude Ibrend from access and occupation of the warehouse. The question was whether NYK’s continued occupation was a substantial hindrance, impediment or interference , or even inconsistent with Ibrend’s right to immediately enter, occupy and beneficially enjoy the warehouse. NYK’ case was that there was no such hindrance or inconsistency.

This argument was based on Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264 arguing that instead of two grounds, as previously held, that case only identified one ground of failure to give vacant possession, that being a failure to give “actual unimpeded physical enjoyment”.

This did not impress the Court of Appeal. The grounds in Cumberland were twofold, to be taken as the second was not the mere presence of unwanted goods in the property (which would have been a re-statement of the fact of failure to give unimpeded physical access) but rather the right purportedly reserved and asserted by the vendor to use the property as a depository of his own goods and recover them at will.

But in any event, Cumberland was of limited help on the quite different facts here. The court below had drawn an analogy with a vendor claiming a right to use the premises for his own purposes, albeit with no goods deposited.

There was no need to explain the position by way of this stretched analogy. At para 44:

If NYK was to satisfy the vacant possession condition in the break option, it had to give such possession to Ibrend by midnight on 3 April and by not a minute later. What, to that end, did it need to do? The concept of ‘vacant possession’ in the present context is not, I consider, complicated. It means what it does in every domestic and commercial sale in which there is an obligation to give ‘vacant possession’ on completion. It means that at the moment that ‘vacant possession’ is required to be given, the property is empty of people and that the purchaser is able to assume and enjoy immediate and exclusive possession, occupation and control of it. It must also be empty of chattels, although the obligation in this respect is likely only to be breached if any chattels left in the property substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property.

NYK’s misfortune was to continue to have people in the property to carry out repairs, a decision made when it knew that it had not received agreement from Ibrend to do so.

NYK had done nothing to manifest that it was giving up possession on 3 April, It had offered to return the keys, but not done so. It maintained the same control on 4 April that it had on 3 April and manifested that occupation by bringing in workmen on 6 April.

The waiver argument went nowhere. At the time of the telephone conversation at issue, the lease had not been validly determined. Unlike waiver of forfeiture, Ibrend was not faced with an elective choice. NYK’s argument that the mere words in the telephone conversation could amount to a ‘pure waiver’ was supported by no authority and at para 56:

Mr Woolgar’s proposition [for NYK], namely that a landlord, by the mere oral uttering of such words as Mr Richardson used, can thereby extinguish a legal estate in a term of years vested in his tenant is one that, with respect, I cannot understand. All that happened was that Mr Richardson [Ibrend’s agent] said that he would arrange for the keys to be collected. In the event, he did not do so; and the reason for that is that, following its solicitors’ advice, Ibrend had changed its mind. Had Ibrend in fact accepted the keys, it might perhaps have been arguable that there had been a surrender of the lease by operation of law. But that never happened. Mr Woolgar was compelled to submit that it was Mr Richardson’s mere words, and those alone, that brought the lease to an end, despite (i) the absence of any writing satisfying section 53(1)(a) of the Law of Property Act 1925, (ii) any consideration moving between the parties, (iii) any acts performed by NYK in reliance on Mr Richardson’s statement that might have enabled it to assert that it would have been inequitable for Ibrend to go back on Mr Richardson’s words, or (iv) anything else that might have entitled NYK to hold Mr Richardson to them. In these circumstances, I do not accept that there is any substance in the waiver argument. Mr Richardson’s words had no effect on the parties’ respective rights and legal positions.

Appeal dismissed.

So, a clear definition of vacant possession is given at 44 of general application. It is, frankly, bit of a surprise that this hasn’t needed to be addressed in the years since 1946…

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