A ruling that a car manufacturer can continue to discharge water from its Ellesmere Port plant into the Manchester Ship Canal for just £50 a year is to come under challenge at the Supreme Court.
Lord Reed, Lord Briggs and Lady Arden have granted the Manchester Ship Canal Company permission to appeal against a Court of Appeal decision in May 2018, in a technically complicated and potentially controversial case about “relief from forfeiture”.
The case, which “bristles with points of law”, according to Behrens J in his initial 2017 High Court judgment, is about the circumstances in which licence contracts can be equitably resurrected after being terminated for breach.
Specifically, it relates to a licence granted in 1962 by the Manchester Ship Canal Company to General Motors (GM), allowing it drainage rights into the canal.
The licence, which was of great use to GM’s Vauxhall plant in Ellesmere Port, came at the cost of just £50 a year. However, GM stopped paying it in 2013 and the Manchester Ship Canal Company terminated the licence in 2014.
Behrens J granted GM “release from forfeiture”, a decision that surprised some property lawyers. This meant that GM, by then known as Vauxhall, could continue to exercise the rights granted under the original licence, and discharge surface water and trade effluent into the canal for £50 a year, even though the market rate is between £300,000 and £440,000.
The Court of Appeal upheld that decision, ruling that the judge had been entitled to resurrect the contract and allow the car plant to continue to discharge water at the original charge of £50 a year.
Following last year’s judgment, Matthew Bonye, head of real estate dispute resolution at Herbert Smith Freehills, said the case was being watched closely by property lawyers because of the “potentially far-reaching and unexpected issue” it raises.
He said: “The lower court ruling blurred what was thought to be an important distinction between leases and licences: the finality of a termination. Property owners enter into licences partly to avoid the complications of relief that can apply to almost every lease where it is forfeited.”
But he added that the Court of Appeal’s “helpfully clear and detailed analysis” made it clear that most licences granted for use of premises should not be subject to a right of relief from forfeiture by the licensee. “Property owners who grant licences will be relieved by that,” he said.
No date has yet been set for the Supreme Court to hear the appeal.
Main image © High Level/REX/Shutterstock
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