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In this case comment, Michael Cox of CMS comments on the judgment handed down in the matter of The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd (Formerly General Motors UK Ltd) [2019] UKSC 46.  Michael is a senior associate in the Real Estate Dispute team at CMS.  Michael advises on all aspects of property law, with a particular emphasis on development advice and dispute resolution.

The Supreme Court has recently confirmed that the courts can, in certain circumstances, grant relief from forfeiture to a licensee (The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd [2019] UKSC 46). Whilst this might be good news for some, it does nothing to clarify the parameters of this equitable relief, maintaining uncertainty in this area and meaning landowners should proceed with caution when granting such rights.

The Facts

Vauxhall Motors (“Vauxhall”) own a large manufacturing plant on the banks of the Manchester Ship Canal.  In 1962, it entered into a perpetual licence with the Manchester Ship Canal Company (“MSCC”) to drain surface water and treated waste into the canal across the MSCC’s land.

Vauxhall agreed to pay an annual fee of £50 and the licence provided that the MSCC could terminate it if the fee was not paid within 28 days of demand.

In early 2014 Vauxhall failed to pay the annual fee and the MSCC terminated the licence.

Following termination the parties negotiated, but failed to agree, terms for a new licence, largely due to the £300,000+ annual rent demanded by the MSCC.

Almost a year after termination of the licence, Vauxhall applied for relief from forfeiture.

Different approaches to the question were taken at first instance and in the Court of Appeal, however the result in both cases was that relief from forfeiture was granted by reference to possessory rights held to have been enjoyed by Vauxhall.

The MSCC then appealed the decision to the Supreme Court, arguing that relief from forfeiture can only be granted for proprietary rights, not for possessory rights – meaning rights under licences would be insufficient for relief.

The judgment of the Supreme Court

The Supreme Court unanimously dismissed the MSCC’s appeal and confirmed that:

    1. Relief from forfeiture can, depending on the circumstances, be granted in relation to both proprietary rights and possessory rights.
    2. Where a licence over land grants possessory rights, the Court has jurisdiction to grant equitable relief from forfeiture to a licensee.
    3. The rights granted to Vauxhall by the licence were possessory because it provided virtually exclusive possession to Vauxhall and a high degree of control indefinitely. The licence was “very unusual” in this respect.

Comment

Relief from forfeiture will not apply to all licences. The facts in the case, particularly the degree of control in perpetuity, were somewhat unusual.  Landowners should carefully consider what rights are granted over their land – and more specifically – that possessory rights are not granted by mistake.