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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Capitol Park Leeds Plc v Global Radio Services Ltd [2020] EWHC 2750 (Ch) (23 October 2020) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2020/2750.html Cite as: [2020] EWHC 2750 (Ch) |
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BUSINESS AND PROPERTY COURTS IN LEEDS
PROPERTY TRUSTS AND PROBATE LIST (ChD)
The Court House Oxford Row Leeds LS1 3BG |
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B e f o r e :
(Sitting as a Judge of the High Court
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CAPITOL PARK LEEDS PLC |
Claimant |
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- and – |
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GLOBAL RADIO SERVICES LIMITED |
Defendant |
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Date handed down: 23rd October 2020 at 10am
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Crown Copyright ©
Judge Benjamin Nolan QC:
"10. OPTION TO DETERMINE10.1 The Tenant may terminate the Lease on …… the 12th November 2017 ("Tenant's Break Date") if the Tenant:10.1.1 Gives the Landlord at least six months and not more than nine months written notice to expire on the Tenant's Break Date of its intentions to do so.10.1.2 (not applicable)10.1.3 Has, at the date of the notice paid the rent and all other payments due under the Lease.10.1.4 Gives vacant possession of the Premises to the Landlord on the relevant Tenant's Break Date.10.2 The Landlord may in its absolute discretion and at any time expressly waive compliance with all or any of the conditions in clause 10.1.10.3 The termination of the Lease under this clause shall be without prejudice to any right of action of either party in respect of any previous breach of covenant or condition or this Lease by the other.10.4 The termination of the Lease under this clause shall be without prejudice to the right of the Landlord to demand from the Tenant the amount of any increase in the rent for any period from a review date to the end of the term together with any interest which is due and payable on the increase where the rent payable from that review date has not been determined or agreed by the end of the term."
(i) Ceiling grids;
(ii) Ceiling tiles;
(iii) Fire barriers;
(iv) Boxing to columns;
(v) Floor finishes to offices and the majority of the common areas;
(vi) Window sills;
(vii) Fan coil units;
(viii) Ventilation duct work;
(ix) Pipework connections for the fan coil unit system;
(x) Office lighting;
(xi) Smoke detection system;
(xii) Emergency lighting;
(xiii) Radiators;
(xiv) Heating pipework to serve radiators;
(xv) Floor boxes;
(xvi) Ceiling void small power; and
(xvii) Sub mains cables.
""Premises" means the property known as 1 Sterling Court, Capitol Park, Topcliffe Lane, Tingley, Leeds, shown for the purposes of identification only edged red on the plan, including the air space lying above the existing roof of the building but including all fixtures and fittings at the Premises whenever fixed, except those which are generally regarded as tenant's or trade fixtures and fittings, and all additions and improvements made to the Premises and any outside parts and any signage erected by or on behalf of the Tenant upon the estate and references to the Premises include any part of it."
"Take this letter and the Schedule as notice to reinstate the property in accordance with clause 3.20 of the Lease.
The attached Schedule is served entirely without prejudice to the Landlord's position, including in respect of the Lease termination. Further, the Landlord reserves the right to serve a further Schedule of Dilapidations prior to and following the Lease terminating. …"
"Tim,
Yes, I have just spoken this morning and unfortunately he was very unhelpful and said it was down to us to comply with the obligations of our Lease in order to exercise a break clause. That said, they are keen to talk about a financial settlement."
"I do not remember the words used, but I am sure Gavin told me Mr Burns had agreed that Global should stop works on site subject to completing a few minor tasks so that the parties could agree a financial settlement. Gavin had also copied me into his email to Absolute that morning, instructing them to stop the works following some finishing off, which Mr Burns had specifically required. I do not remember further details as to the call, but I do recall being cautious about requiring clear confirmation that the agreement to stop works was something the Landlord had agreed to. As I have reiterated, I did not want to do anything which would disrupt the Break Option or put the operation of it at risk in any way. Unless Gavin had confirmed that Mr Burns had agreed that the works should be stopped, I would not have allowed him to tell Absolute to stop the works."
"I agreed to Gavin instructing Absolute to stop works because he told me that had been agreed by the Landlord. I had already gone through the process of instructing a tender for the works, negotiated the tender and contracts, and authorised the works to be carried out. I was happy with that position. I wasn't surprised that Mr Burns had agreed we should stop work. I had thought from an early stage that would make sense from the Landlord's perspective. If Gavin had not reached agreement with Mr Burns, I would have instructed the works to continue. We had a contract in place for the works and my concern throughout had been to ensure Global completed the works required to successfully operate the Break Option, so I was only willing to instruct the works to be stopped if this had been agreed on behalf of the Landlord. Accordingly, Absolute completed the final items of work agreed with Mr Burns and then left the Property on or around the 23rd of June 2017 …"
"Generally, Global Radio are stripping out and apparently finished their stripping out on Friday last week. They are looking to agree a financial settlement as they are worried about the break and the level of reinstatement works. I have met with their agent on site and have gone through some of the dilapidation items. I have also spoken with their L&T Surveyor to discuss the break and the merits of a financial settlement. I have also asked an M&E Consultant to inspect and comment upon the services and what parts of these can realistically be salvaged. I expect most will require replacement. Global are to propose a figure when they have sight of the M&E Services Report and we will take it from there. They have until November on the Lease, but clearly the merits of a financial settlement are greater the further away from the break we are. I expect to move this on later this week, once we have the known facts on the M&E."
"The upcoming Break Date is 12 November 2017. We are instructed to contact you to remind you that the Break Provision contained in the Lease dated 4th March 2002 is conditional upon you having paid the rent and all other payments due under the Lease, and upon delivery up of vacant possession of the Property (Clause 10.1).
The Lease also provides that you are to remove all alterations, additions or improvements made to the Property during your occupation and before the end of the term to reinstate the Property. In accordance with our client's reasonable request to do so (Clause 3.4.5) we would like to take this opportunity to confirm that our client does require you to remove all alterations, additions and improvements made to the Property.
Please confirm whether or not you intend to undertake the work specified in our client's Schedule of Dilapidations to ensure that the Property is delivered up in accordance with the terms of the Lease.
For the avoidance of doubt, our client reserves its right to refuse to accept that the Break Option has been validly executed if vacant possession is not delivered up and/or to claim for its losses as a consequence of any failure to comply with the yielding up provisions contained in the Lease. This includes claiming for the cost of any works but also for any loss of future rent.
Should you be in any doubt as to the meaning of or the contents of this letter, then you should take legal advice."
"I am going to issue our detailed response over the next couple of days. That said, if they remain at the £400k mark I suggest the best thing to do is tender the works, ensuring that we have a contractor in the running, and negotiate on the back of the return. I will call tomorrow to discuss."
The Estoppel Issue
"We welcome this approach, the order of play needs to be Break Notice, agreement on delaps, then settlement on rent, rates and service charge. David, please proceed with the delaps as soon as you are able. No doubt you will collect fees from the Tenant in the usual way."
"Unfortunately, the Landlord's surveyor is away on holiday this week. I am keen to get him down to the Property as I think it would be in the Landlord's best interests to discuss us stopping works after strip-out and negotiating a cash settlement for the remaining works if he intends to update the unit with a full refurbishment."
"I spoke with Tim. He sounds a lot happier. I am going to update him next week after I have met the Landlord. He agrees we should maybe pull the contractor if the Landlord is reasonable. I explained there may be some abortive costs in doing so. I said I would assess this and go back to him."
The Main Issue
(a) The existing building which was there when the Lease was granted; and
(b) "All fixtures and fittings at the Premises whenever fixed (except Tenant's fixtures)".
"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989, 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30".
"10. The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds [1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties' contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extrajudicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374-390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree.
11. Lord Clarke elegantly summarised the approach to construction in Rainy Sky at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky (Lord Neuberger paras 13-14; Lord Hodge para 76; and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: Arnold (paras 20 and 77). Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms."
"There is no dispute that "the Demised Premises" which originally meant the factory described in Class 1 of the Lease now means the factory as rebuilt after the fire."
"To yield up the Premises to the Landlord at the end of the Term with a vacant possession, in a state of repair, condition and decoration which is consistent with the proper performance of the Tenant's covenants in the Lease."
"Interpretation is … a unitary exercise, where there are rival meanings, the Court can give weight to the implication of rival constructions by reaching a view as to which construction is more consistent with business common sense."
"39. ….it is also common ground that what the obligation to give vacant possession normally requires is threefold. That is to return the premises to the landlord free of, or vacant of: first, people; secondly, chattels (subject to the decision of the Court of Appeal in Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264, which is to the effect that a party is only in breach of the obligation to give vacant possession by leaving chattels on the property if the physical impediment substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property); and, thirdly, legal interest. So, a person does not comply with the obligation to give vacant possession if it is subject to a legal right in somebody else to take possession. That trilogy of people, chattels, and interest, which was put forward by Mr Seitler, was not dissented from by Mr Sefton and I accept accurately reflects the general law of vacant possession.
40. Mr Sefton, however, says that if you are obliged as a tenant to remove your trade fixtures, then a failure to do so means that you are in breach of the obligation to give vacant possession and he is able to rely in support of that submission on a decision of HHJ Saffman, sitting as a judge of the High Court, in Riverside Park Ltd v NHS Property Services Limited [2016] EWHC 1313 (Ch). In that case, the judge first of all decided that the things in question, which were partitioning, kitchen units, window blinds and the like were, in fact chattels and, as such, the tenant had to remove them in order to give vacant possession. However, at the end of his judgment he dealt with the position (necessarily obiter) if the relevant things were tenant's fixtures. Having considered at some length the question of whether they were incorporated into the premises, he came to the conclusion that there was an obligation to remove them.
At [92], he says:
"In all the circumstances, even if I had found that the Works and particularly the partitions were not chattels but fixtures or otherwise formed part of the Premises, I would have found that there was an obligation to remove them arising out of the fact that the licence to erect them had ceased to have effect and that their presence, in the Premises on the date of purported termination of the Lease meant that vacant possession of the Premises was not given."
41. Mr Sefton can undoubtedly say that it is implicit in that that HHJ Saffman took the view that if the tenant was obliged to remove fixtures then his obligation to give vacant possession included removing those fixtures. Mr Seitler said that I should not follow that case. It was obiter and that part of his judgment contains no reasoning or reference to the well understood concept of vacant possession, and that I should say that, in my view, it is wrong.
42. I do not propose to decide this question. I accept the ordinary meaning of what it is to give vacant possession in terms of the trilogy of people, chattels, or interests. I accept that one cannot find in HHJ Saffman's judgment in Riverside any real discussion of the point as to whether the conclusion that the works in question were fixtures which the tenant had to remove meant that the tenant was in breach of an obligation to give vacant possession – indeed, for all one knows from the judgment, the point may not have been argued at all and may have been conceded – but I do not regard it as necessary for the purposes of this case to resolve the question."
"The first question arising under this head is vacant possession of what? In this case vacant possession of the premises. The premises will, in my view, exclude anything that is not demised. This means first in case of Unit 15 it will exclude the yard and in the case of all the units it will exclude the grass verges. Items left in these areas may amount to a trespass for which damages are recoverable, but they do not affect compliance with the condition itself.
Secondly, in my judgment the premises will include anything which in law has become part of the premises by annexation. A fixture installed by the tenant for the purposes of his trade become part of the premises as soon as it is installed, although the tenant retains a right to sever the fixture on termination of the tenancy. Whether something is a fixture depends on the degree and purpose of annexation; in each case looked at objectively. If something has become part of the premises by annexation, then it is part of a thing of which vacant possession has to be given. Its presence does not amount to an impediment to vacant pos- session itself.
…….
Mr. Wood rightly submits that vacant possession is a phrase in regular use in domestic conveyancing of both freehold and leasehold property up and down the country and it is necessary to have some certainty as to what it means. The leading case on the topic is the decision of the Court of Appeal in Cumberland Consolidated Holdings Limited v Ireland [1946] 1 K.B. 264. The case concerned the sale of a fire damaged warehouse for the sum of £1,000. Underneath the ware- house were approximately 1,900 square feet of cellars and two-thirds of the cellars were filled with rubbish consisting mainly of bags of cement which had gone hard and empty drums. Although it seems that part of the contents of the cellars was removed before completion, none the less the continuing presence of the hardened cement and other material in the cellars meant that the cellars were unusable until the rubbish had been removed. The claimant had removed the rubbish at a cost of approximately £80, that is to say some 8 per cent of the overall purchase price. It was held that leaving the premises in that condition was a breach of the obligation to give vacant possession.
The judgment of the Court of Appeal was given by Lord Greene M.R.. He proposed, as I see it, two possible tests for deciding whether or not vacant possession had been given. The first appears at p.270 of the judgment in the following terms:
"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 the purchaser has on completion to undisturbed enjoyment.
The second possible test is that which appears at p.271 of the report in which Lord Greene says the right to actual unimpeded physical enjoyment is comprised in a right to vacant possession. He continues:
''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.''
In Norwich Union Life Insurance Society v Preston [1957] 1 W.L.R. 813 Wynn Parry J. applied the first of those tests. The situation was that a borrower under a mortgage had been ordered to give possession of the mortgaged property. Although he personally had been evicted by the sheriff, he had refused to remove his furniture, motor car and household goods. The judge held (applying the first of the two tests I have mentioned) that possession had not been given and ordered the removal of the furniture and so on.
In Hynes v Vaughan (1985)50 P. & C.R. 444 Scott J. applied the second of the two possible tests enunciated in the Cumberland Consolidated Holdings case. That was a case of rubbish left on property. Plainly it was not a continuing activity of the vendor. Rather he was dealing with the physical condition of the property.
In a judgment of mine in Royal Bank of Canada v Secretary of State for Defence [2004] 1 P. & C.R. 28 I also applied the second of these two tests.
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 mini- mis, 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.
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.
"…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."
"Deterioration of the condition of building services plant and installations can lead to failures resulting in a number of undesirable outcomes:
- Significant losses due to business disruptions;
- Non-compliance with legal requirements;
- Damage to property;
- Health and safety problems;
- Depreciation of asset value;
- Increase of energy and environmental costs."