Licence – Relief from forfeiture – Jurisdiction – Appellant purporting to terminate respondent’s right to discharge surface water into canal – Respondent seeking relief from forfeiture – Whether equitable relief only available for forfeiture of property rights as opposed to right to possession under contract – Whether court having power to grant relief from forfeiture – Appeal dismissed
The appellant granted the respondent the right to discharge surface water from its plant into the Manchester Ship Canal, which it owned, through a spillway. The respondent’s main manufacturing plant at Ellesmere Port adjoined the appellant’s land and drained through it to the canal. The document granting the right was described as a licence and the right was granted in perpetuity; it required the respondent to pay an annual sum of £50. The appellant was entitled to terminate the right if the £50 was not paid.
When the respondent failed to pay a sum due, the appellant validly terminated the right pursuant to clause 5 of the licence. Although the respondent subsequently offered to pay the overdue sum, the appellant refused to accept it. The parties then entered into negotiations for the grant of a temporary new right but the appellant sought a substantially increased annual sum. Before a contract was concluded, the respondent issued proceedings seeking, among other things, relief from forfeiture. The appellant contended that there was no power to grant relief from forfeiture; or, if there was, the respondent was estopped from claiming relief because of the negotiations which gave rise to an estoppel by representation and/or by convention.
The judge granted relief from forfeiture, effectively reinstating the licence on condition that the respondent paid its arrears and certain other costs: [2016] EWHC 2960 (Ch); [2016] PLSCS 331. The Court of Appeal upheld his decision: [2018] EWCA Civ 1100; [2018] PLSCS 93.
The appellant appealed to the Supreme Court. The issue was whether the court had jurisdiction to grant relief on the facts. The appellant contended that, in relation to land the courts could only relieve parties from the forfeiture of proprietary rights, which excluded the respondent’s contractual rights under the licence. The respondent argued that the doctrine of relief from forfeiture was broad enough to protect any right to use land.
Held: The appeal was dismissed.
(1) The appellant’s argument that, in the context of land, equitable relief was only available for forfeiture of property rights, as opposed to a right to possession under a contract, was rejected. In relation to personal property, equitable relief was available for forfeiture of proprietary or possessory rights. The was no reason in principle to distinguish the types of property in which the rights subsisted. The frequent use in decided cases of the words proprietary or possessory as alternatives in relation to rights over personalty recognised that a purely possessory right was something falling short of ownership, or of a proprietary interest. As it was settled that equitable relief might apply to forfeiture of possessory rights in relation to a wide range of chattels and other personalty, there were powerful reasons why it should also do so in relation to land. Commercial law accommodated the concept of possessory rights and there was no obvious reason why it should not be used in relation to rights over land. It was a practical and workable concept which, although necessarily fact-based, involved no inherent uncertainty. Accordingly, relief from forfeiture could be given where rights in land were possessory only and the conclusion of the Court of Appeal that the rights were possessory was unassailable.
(2) The original proving ground for equitable relief from forfeiture consisted of rights in relation to land, originally, but not only, leases and mortgages. There was no logic or reason in principle for drawing a distinction as to the type of property in which the rights subsisted, when considering the extent of equity’s jurisdiction to relieve from forfeiture. If therefore it was the nature of the right rather than the identity of the property over which it might be exercised that mattered, there was every good reason to apply a jurisdiction applicable to possessory rights as much to rights over land as to rights over other forms of property. While it was essential for the certainty of the law that the scope for equitable intervention on grounds of unconscionability should be delimited by reference to reasonably clear boundaries, they should be identified by reference to a principled understanding of the nature and purpose of the relevant equity, rather than be merely arbitrary. The careful examination and development of the reasons why that boundary should accommodate relief from the forfeiture of possessory rights in the decided cases was clearly in accordance with that principled approach. The slavish adoption of a rule that nothing other than a proprietary interest would do, in relation to land, did nothing of the kind.
(3) On the facts of the present case, the licence granted possessory rights to the respondent as it gained virtually exclusive possession of the spillway and a high degree of control over it in perpetuity. The infrastructure works carried out entirely by the respondent for the purpose of creating the spillway became, on their completion, part of the appellant’s land, because they were fixtures. However, the respondent clearly had the requisite degree of possession and control of the spillway itself. The infrastructure consisted largely of underground pipes and chambers which were, in practice, only or at least mainly accessible from the respondent’s treatment plant. The practical reality was that the spillway formed an integral part of the infrastructure for the transmission of surface water and treated effluent from the respondent’s factory site, the remainder of which all lay on the respondent’s land. Although the appellant had certain default rights to intervene if the respondent failed adequately to maintain and operate the spillway, and a right to re-route it if it caused difficulties at its point of discharge into the canal, none of those significantly impacted upon the reality that the respondent would be the dominant player in the maintenance and operation of the spillway once constructed. The whole of the construction itself was the respondent’s undertaking. Accordingly, the respondent was entitled to ask the court for relief from forfeiture of those rights.
Katharine Holland QC, Galina Ward and Yaaser Vanderman (instructed by Hill Dickinson LLP, of Manchester) appeared for the appellant; William Norris QC, Simon Edwards and Daniel Stedman Jones (instructed by Duane Morris LLP) appeared for the respondent.
Eileen O’Grady, barrister
