Licence – Relief from forfeiture – Discretion – Defendant purporting to terminate claimant’s right to discharge surface water into canal – Claimant seeking relief from forfeiture – Whether court having power to grant relief – Whether claimant estopped from claiming relief because of negotiations for new right – Whether court should exercise discretion to refuse relief – Claim allowed
In 1962, the defendant granted the claimant the right to discharge surface water from its plant into the Manchester Ship Canal, which it owned, through a spillway. The claimant’s main manufacturing plant at Ellesmere Port adjoined the defendant’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 claimant to pay an annual sum of £50 and contained provisions which entitled the defendant to terminate the right if the £50 was not paid.
When the claimant failed to pay a sum due, the defendant validly terminated the right. Although the claimant subsequently offered to pay the overdue sum, the defendant refused to accept it. The parties then entered into negotiations for the grant of a temporary new right but the defendant sought a substantially increased annual sum. The negotiations reached an advanced stage but before a contract was concluded, the claimant decided to take external legal advice and issued proceedings seeking, among other things, relief from forfeiture.
The defendant contended that there was no power to grant relief from forfeiture; or, if there was, the claimant was estopped from claiming relief because of the negotiations which gave rise to an estoppel by representation and/or by convention. Accordingly, as a matter of discretion, this was not an appropriate case for relief.
Held: The claim was allowed.
(1) The 1962 document had created a licence. In light of the decision in IDC Group Ltd v Clarke (1993) 65 P & CR 179; [1992] EGCS 93, the use of the word licence was important and it was for the claimant to establish that some other interest was intended. The other terms of the document were also consistent with a licence. As it was not clear what the parties intended, and since there was nothing sufficiently clearly pointing in any other direction, the deed only created a licence with no proprietary rights. However, relief was not confined to cases where there was an interest in land. It could arise where there were sufficient possessory rights: Shiloh Spinners Ltd v Harding (No 1) [1973] AC 691, The Scaptrade [1983] AC 694, Transag Haulage Ltd v Leyland DAF Finance plc [1994] 2 BCLC 88, BICC plc v Burndy Corporation & Anor [1985] Ch 232, On Demand Information plc v Michael Gerson (Finance) plc [2001] 1 WLR 155, Celestial Aviation 71 Ltd v Paramount Airways Pte Ltd [2010] EWHC 185 (Comm), Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 and Çukurova Finance Ltd v Alfa Telecom Ltd [2015] 2 WLR 875 considered.
In the present case, there was a perpetual licence at a rent of only £50 per annum and there was jurisdiction to grant relief. It was for the claimant to construct the spillway in accordance with plans approved by the defendant and to maintain it, which it had done at substantial cost. The claimant alone had discharged surface water through it and had exclusive use of the spillway. The defendant had a limited right to connect to the pipes on the claimant’s land but had not done so. Contractual rights which entitled the claimant to indefinite and exclusive use of the spillway so long as the annual payments were duly made, and which qualified and limited the defendant’s general rights in the spillway, could not aptly be described as purely contractual rights: Celestial and The Scaptrade distinguished.
(2) Although negotiations were carried out on the assumption that the licence had been terminated, there was no assumption that the termination was irrevocable. The question whether relief from forfeiture was available had not been considered by either party. The only prejudice suffered by the defendant as a result of its reliance on the common assumption was the time spent and associated costs in negotiating the temporary licence and/or a possible delay in negotiating other profitable contracts. Whilst the costs were not trivial, they were small compared with the loss suffered by the claimant if denied an effective claim to relief from forfeiture. Furthermore, relief could be granted on terms that the claimant compensate the defendant for the costs incurred in the negotiations and/or the loss of business opportunities.
Save in exceptional circumstances, the function of the court in exercising its equitable jurisdiction was to grant relief when all that was due for rent and costs had been paid up, and in general to disregard any other causes of complaint that the landlord might have against the tenant. The question was whether, provided all was paid up, the landlord would not have been fully compensated; and if he got the whole of his rent and costs, he had got all he was entitled to so far as rent was concerned, and extraneous matters of breach of covenant, etc were generally speaking irrelevant: Gill v Lewis [1956] 2 QB 1, Inntrepreneur Pub Co (CPC) Ltd v Langton [2000] 1 EGLR 34 and Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (Ch); [2016] PLSCS 172 considered.
(3) The court would not refuse the claimant relief. Throughout the period when payment was due, the claimant continued to discharge water through the spillway and no proceedings were taken to prevent it. The refusal of relief would be a considerable windfall for the defendant since, under the terms of the new licence, the defendant sought £450,000 per annum. It might be that commercial conditions had changed but the licence was granted as part of a larger transaction involving the exchange of land so it could not be said that the licence was favourable to the claimant. In any event such considerations were not relevant to the question of relief. The effect of granting relief would be to restore the parties to the position they would have been in if the licence had not been terminated with the claimant paying a rent of £50 per annum. The court could not rewrite the licence to provide for a rent of £450,000 but, even if it could, it would not as a matter of discretion have done so: Thatcher v CH Pearce & Sons (Contractors) Ltd [1968] 1 WLR 748, Billson v Residential Apartments Ltd [1991] 1 EGLR 70 and Vision Golf Ltd v Weightmans [2005] EWHC 1675 (Ch); [2005] PLSCS 155 considered.
William Norris QC, Simon Edwards and Daniel Stedman Jones (instructed by Duane Morris LLP) appeared for the claimant; Katharine Holland QC and Katie Helmore (instructed by Hill Dickinson LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of General Motors UK Ltd v Manchester Ship Canal Co Ltd.
