A ruling that car manufacturer Vauxhall can continue to discharge water from its Ellesmere Port plant into the Manchester Ship Canal for just £50 a year has been backed by the Supreme Court.
The decision means that Vauxhall retains rights, the market value of which, Lord Briggs said, now “runs to hundreds of thousands of pounds a year”.
The Supreme Court unanimously backed earlier decisions of the High Court and Court of Appeal granting the manufacturer “relief from forfeiture” after it neglected to pay the annual sum as a result of administrative oversight in early 2014.
In the wake of that failure, Manchester Ship Canal Company (MSCC) served notice terminating its licence to drain surface water through a spillway across MSCC’s land, granted back in the early 1960s.
This would have meant that Vauxhall faced having to negotiate a new licence at a hugely increased annual price – the market rate is believed to be in the region of £400,000 – all for the failure to pay £50.
As a result, Vauxhall sought relief from forfeiture, which was granted by the High Court in 2017 and upheld by the Court of Appeal in May 2018.
Before the Supreme Court, MSCC argued that relief from forfeiture was not available in respect of “possessory” rights of land, only proprietary rights.
But Lord Briggs, giving the court’s main ruling, said the licence in this case granted rights over MSCC’s land “very similar to, and indeed more extensive than, rights in the nature of an easement”, adding: “It is common ground that an easement creates an interest in land, so that its forfeiture may be relieved against. There is no principled reason why the perpetual rights granted by the Licence should not do.”
He acknowledged that this recognition that equity may relieve against the forfeiture of possessory rights over real property, falling short of a proprietary interest, means that the assumption of the editors of Gray & Gray’s Elements of Land Law – that relief may never be granted from the forfeiture of a licence – “calls for re-examination”. But he added: “It by no means follows from a conclusion that the rights conferred by this Licence are within equity’s jurisdiction to relieve from forfeiture, that licences in relation to land will fall generally within that same boundary.”
In the alternative, MSCC had challenged the decision that the licence even granted possessory rights, but Lord Briggs dismissed this argument.
He said that the works carried out entirely by Vauxhall to create the spillway became part of MSCC’s land, and the infrastructure consisted largely of underground pipes and chambers which were, in practice, only or at least mainly accessible from Vauxhall’s treatment plant. As a result, Vauxhall had “exclusive use” of the spillway and was the “dominant player” in its maintenance and operation.
Alison Hardy, partner at Ashurst, said this was an “unusual” relief from forfeiture case, adding: “This Supreme Court decision confirms that the courts do have the ability to grant relief from forfeiture where the underlying document is not a lease, but is instead a contractual licence.
“Lady Arden confirmed that the key question when deciding whether to grant relief is not what category of rights are at stake but rather whether the court should exercise its equitable discretion to grant relief. The court held that it was acceptable for the Court of Appeal to have extended the right to relief to cover possessory rights, rather than it only being available to those with proprietary rights.
“Lady Arden’s confirmation that possessory rights under a licence may be sufficiently certain to merit relief from forfeiture again demonstrates the Supreme Court’s underlying intention to implement a more uniform approach across different types of property. It is hoped that this decision will bring more certainty to the use of this particular equitable remedy.”
Matthew Bonye, head of real estate dispute resolution at Herbert Smith Freehills, London, said the judgment has “potentially far-reaching consequences”, adding: “A key test as to whether a licence of land is in fact a lease will be whether it actually gives the licensee exclusivity of possession. If so, the agreement may be a lease whatever it is called. Here, however, the discussion is about ‘possession’ generally. The Supreme Court concludes that where licences give possessory rights, relief from forfeiture will be available to the licensee.
“The court has left the door open to a more nuanced analysis of all licences, with a spectrum of possible outcomes. There may well be licences of more traditional property than this test case which, nevertheless, meet the test for availability of relief from forfeiture. The point is a universal one so it may be equally applicable to a licence given to a lodger as it would be (say) a hefty hotel management agreement. The court itself has said that textbooks will need to be rewritten.
“Real estate practitioners should be aware of this intermediate class of rights when drafting bespoke agreements which may flirt with the boundary between traditional licences and arrangements which confer a greater degree of possession. It is now beyond debate that more factors need to be taken into account than simply whether a lease is inadvertently being granted.”
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