The Court of Appeal this week had the unenviable task of weighing a novel case on relief from forfeiture that “bristles with points of law”.
The case, General Motors UK v Manchester Ship Canal Company is about whether, and how, 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 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.
The case ended with a High Court ruling in 2017 in which Behrens J granted GM “release from forfeiture”, something that surprised some properly lawyers, who had assumed that it was a legal mechanism restricted mainly to leases and contracts granting proprietary interests.
The judge said at the end of his ruling that it is “a case that bristles with points of law” and he would be “provisionally willing to grant permission to appeal to either side on the points of law, if it is requested”.
As a result, it ended up being heard this week at the Court of Appeal.
The case is being watched closely by property lawyers because of the “potentially far-reaching and unexpected issue” that the lower court judgment raised, said Matthew Bonye, head of real estate dispute resolution at Herbert Smith Freehills.
“It will be interesting to see what appetite the Court of Appeal has to resurrect a licence contract terminated for breach, on an equitable basis,” he said.
“If the Court of Appeal upholds the High Court’s decision, there will be a blurring of what was thought to be an important distinction between leases and licences, namely 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.”
Indeed, the attractiveness of a licence until now has been that they can be terminated, without debate, if there is a breach, he said.
In the appeal, lawyers for the Manchester Ship Canal Company asked for, among other things, GM’s relief from forfeiture to be dismissed and an order forcing GM to pay “damages for trespass”.
The company is seeking around £1.5m in damages for trespass from 2013 until 2017, plus daily damages of of £1,178.08 “until the acts of trespass on the part of General Motors cease”.
GM is also appealing the ruling, and is seeking to assert a historical right of free drainage based on the Manchester Ship Canal Act 1885.
“In a sentence, it was (and is) VM’s case that the 1885 Act preserved a right of free drainage of surface water (and sewage) from its land in Ellesmere Port into (or under) the canal in the same way as it had drained into the River Mersey before the canal was built,” lawyers for GM said in their skeleton argument.
In the current proceedings GM is now being referred to as “Vauxhall Motors” (VM).
“The same rights (in relation to surface water) were later embodied (and/or implicitly acknowledged) in the 1962 licence in respect of which VM sought relief from forfeiture,”the skeleton argument said.
Judgment was reserved. The legal teams were asked to provide written submissions on various points raised in the hearing.
Vauxhall Motors Ltd (formerly General Motors UK Ltd) v Manchester Ship Canal Company Ltd
Court of Appeal
William Norris QC, instructed by Duane Morris for the claimant.
Katharine Holland QC, instructed by Hill Dickinson LLP, for the defendant.
