While not always definitive, the labels that parties attach to documents often indicate what the parties intended. General Motors UK Ltd v Manchester Ship Canal Co Ltd [2016] EWHC 2960 (Ch); [2016] PLSCS 331 concerned a document that was described as a “licence”.
The instrument granted the licensee, Vauxhall, rights to discharge surface water and treated trade effluent from its main manufacturing plant at Ellesmere Port into the adjoining canal in return for an annual payment in the sum of £50. The rights were granted in perpetuity, but the licence was terminable for non-payment of the licence fee. During negotiations that followed termination of the licence for non-payment of an instalment of the licence fee, the owner of the canal priced the rights at over £440,000 per annum. Did the court have the jurisdiction to grant Vauxhall for relief from forfeiture instead?
Relief from forfeiture is generally limited to contracts that involve the transfer of proprietary or possessory rights as opposed to merely contractual rights: The Scaptrade [1983] AC 694. The canal owner argued that it had granted a contractual licence, which did not create any proprietary or possessory rights. The parties had called it a licence and, in IDC v Clark [1993] 65 P&CR 179, the court had decided that a document that called itself a “licence” was, indeed, a licence.
The canal owner also drew attention to provisions in the document that did not sit well with the suggestion that it had granted an easement. For example, the licensee was required to make annual payments under the licence and the rights were expressed to be personal to the licensee and other companies in the same group (although the parties subsequently extended the rights granted for the benefit of Vauxhall’s successors in title and the owners, tenants and occupiers from time to time of its land). In addition, the rights were terminable for non-payment.
The judge stated that it was far from clear what the parties had intended. Since nothing pointed sufficiently clearly in any other direction, he accepted that the draftsman had deliberately chosen to use the word “licence”, instead of words ordinarily associated with the grant of an easement. Consequently, he decided that the deed did not create any proprietary rights.
However, the court can also grant relief from forfeiture if rights are possessory in nature. And the judge took the view that contractual rights that entitled Vauxhall to indefinite and exclusive use of the spillway to discharge surface water into the canal so long as annual payments were duly made, and which qualified and limited the canal owner’s general rights over the spillway, could not be described as purely contractual rights. Consequently, albeit hesitantly, the judge decided that he did have jurisdiction to grant relief from forfeiture, which he then granted. Finally, the judge rejected the canal owner’s suggestion that the court could, as a condition of granting relief, rewrite the licence so as to increase the fee to £450,000 per annum. And, even if he could, the judge stated that he would not, as a matter of discretion, do so.
Allyson Colby is a property law consultant
