Relief from Forfeiture: when can it be claimed?

4th February 2020 Commercial Litigation

The Supreme Court has recently considered when the availability for relief from forfeiture arises and if it can be claimed in the context of a licence.

The case of The Manchester Ship Canal Company Ltd v Vauxhall Motors Limited (Formerly General Motors UK Limited) (2019) UKSC 46 concerned a license granted by the Appellant in 1962 which gave the Respondent the possessory right to construct and maintain pipes across the Appellant’s land, which was adjacent to the Respondent’s land, in order to discharge trade effluent into the nearby canal. The licence was granted on the basis that an annual fee of £50 was paid for the possessory right across the Appellant’s land. The annual value of the rights was estimated to be in excess of £300,000. In the event of non-payment of the annual fee, the Appellant was entitled to terminate the license.

In 2013, the Respondent defaulted on the annual payment, resulting in a demand for the unpaid amount being issued by the Appellant. This was ignored by the Appellant, and it continued to exercise its rights over the land. After negotiations for a new license failed, the Appellant forfeited the license. In March 2015, the Respondent applied to the Court for relief.

What was the Court required to determine on this application?

This case posed fairly unique characteristics in that the Court was required to first determine whether it had jurisdiction to grant relief in the context of a license, and whether the right in question was of a possessory nature. Further, the circumstances of this case necessitated the Court to give consideration to whether the right to relief by the Appellant had been estopped, or prevented, by reason of the negotiations that took place for a new license in 2014.

The Appellant contested the application on the basis that the Respondent had delayed matters by waiting 12 months before bringing the 2015 relief proceedings and whether the negotiations of 2014, had caused an estoppel by convention to arise. In other words, the Respondent’s participation in negotiations for a potential new license had prevented them from bringing a claim for relief.

Decision

In its decision, the High Court held that it did have jurisdiction to consider a relief from forfeiture despite the subject matter of the claim concerning a licence and proceeded to award the Respondent relief.

The Appellant disagreed with this decision and made an appeal to the Court of Appeal. The Appeal Court agreed with the High Court allowing the Respondent relief from forfeiture despite the Appellant upholding that the Court’s jurisdiction to grant relief from forfeiture solely arose in the context of a lease and stated that relief was limited to proprietary and not possessory rights.

On an appeal to the Supreme Court, Lord Briggs gave the leading judgment which allowed the relief and dismissed the appeal. He emphasised the unusual nature of the license in this case as it was granted in perpetuity with rights akin to an easement as the Respondent clearly intended to be in control of the operation of the spillway across the Appellant’s land and further finding that no blanket distinction should be made between to proprietary and possessory rights.

Lady Arden agreed with this, emphasising that allowing relief from forfeiture in the context of possessory rights did not create uncertainty in law. It is the accepted position that with equitable doctrines, there comes an element of uncertainty due to the fact that equitable remedies are based on principles rather than strict rules.

What should be taken away from this case?

This case highlights that relief from forfeiture of a license granting possessory rights is possible, however due to the unusual nature of the case, a universal application of this authority is dissuaded.

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Matilda Hall is a Paralegal located in Manchesterin our Commercial Litigation department

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