That's a relief

The Supreme Court has held that relief from forfeiture can be granted to prevent the termination of rights over land where the person with the benefit of those rights does not have a proprietary interest in the land.

Background

Vauxhall Motors Limited (Vauxhall) own a large manufacturing plant on the banks of the Manchester Ship Canal. When the plant was built in the 1960s the Manchester Ship Canal Company Limited (MSCC) granted Vauxhall a perpetual licence to install and maintain a system of pipes and chambers across land owned by MSCC and to drain surface water and treated industrial effluent into the canal. A licence fee of £50 a year was payable.

The licence permitted MSCC to forfeit the licence if, among other things, the licence fee was not paid within 28 days of demand. In early 2014 by administrative oversight, Vauxhall failed to pay the licence fee and MSCC sought to terminate the licence. The annual value of the rights that were lost was agreed to be in excess of £300,000.

Vauxhall applied to court for relief against the forfeiture of the rights. They were successful in the High Court and in the Court of Appeal. MSCC appealed to the Supreme Court arguing that relief against forfeiture in respect of rights over land is available only where someone has a proprietary interest in the land such as the ownership of a freehold or leasehold interest.

Decision

MSCC lost its appeal. The Supreme Court held that relief from forfeiture was available. However, the Supreme Court did not agree with Vauxhall’s submission that relief from forfeiture was available in respect of all rights over land. Whether relief against forfeiture will be available will depend on the nature and extent of the rights involved.

The Supreme Court looked at the history and development of the law relating to relief from forfeiture as an equitable remedy. In the context of personal property (property that is not land), cases had decided that relief from forfeiture is available where someone has possessory rights over an asset falling short of actual ownership – for example the right to use and have control over a ship for a limited period of time (a charter demise). On the basis that relief against forfeiture is available in respect of possessory rights over personal property, there were powerful reasons for allowing relief where there were possessory rights over land.

The Supreme Court said that there was no logical or principled reason for distinguishing between rights over land and rights over other forms of property. However, it would be extending the law relating to relief against forfeiture too far to say that relief was available in respect of all rights over land.

Commentary

The Supreme Court has trodden a thin line between allowing relief in this case without opening the door for all holders of licences over land to claim relief from forfeiture if their licences are terminated.

The Supreme Court emphasised certain features of the licence that made it appropriate to grant relief in this case:

• The licence was perpetual and gave Vauxhall a high degree of control over the use of the rights and virtually exclusive possession over the land.
• The right to forfeit in the licence was a form of security for performance of a monetary obligation. It was more than a simple commercial bargain to withdraw the rights if there was a breach of the licence.

Whilst the Supreme Court said that there might be circumstances where a licence for a limited period could be subject to relief against forfeiture, it seems from the judgment that relief will not be given in the case of simple licences to use and occupy land for a limited period. It seems that the rights would have to be much closer to the type of rights that would be granted under a long lease or the grant of an easement before relief will be available.

The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd [2018] EWCA Civ 1100