A first! A licensee is granted relief from forfeiture 14 months after the event

When we think of forfeiture and relief, we typically think of a tenant being granted relief following forfeiture of their lease and, as a rule of thumb, we consider there to be a 6-month window in which to make the application for relief.

The case of Manchester Ship Canal Company Limited v Vauxhall Motors Limited [2018] EWCA CIV 1100 is a first, in that it involved a licensee, rather than a tenant, being granted relief from forfeiture. The case is therefore a good reminder that it is not only tenants who are entitled to apply for relief.

The Facts

The Manchester Ship Canal Company was the owner and operator of the Manchester Ship Canal. Vauxhall Motors owned neighbouring land at Ellesmere Port immediately adjacent to the Canal and had entered into a licence with the Canal Company in 1962. That licence allowed Vauxhall to discharge surface water and trade effluent into the Canal itself through a drainage system. There was an annual fee payable of £50 under the licence and the term was infinite, although the licence allowed the Canal Company to terminate it if the licence fee was not paid.

Vauxhall failed to pay the nominal licence fee in 2013, despite reminders, and this resulted in the termination of the licence in 2014. What followed then was a period of negotiation for a new licence, the commercial value of which was to be in the region of £300k-£440,000 per annum as opposed to the licence fee of £50.

The negotiations did not reach fruition and some 14 months after termination of the licence, Vauxhall applied to the court for relief from forfeiture in March 2015. The court decided that it could exercise its discretion in this case and grant relief, despite the fact there was no lease. It came to this decision on the basis that relief can be granted in cases where there are possessory rights and not just where there are legal interests such as a lease.

The question then was whether the 1962 licence granted possessory rights. The Canal Company argued not as, it contended, all that Vauxhall were entitled to was use of the drainage system in place (along with others) rather than possession of it. The court disagreed and found that Vauxhall did have possessory rights on the basis that it had responsibility for actually constructing the pipe infrastructure, control over it and responsibility for its repair.

As regards the 14-month delay in between the forfeiture and the application for relief, there had been a period of negotiation during which the licence fee had been paid, Vauxhall had carried on as normal and the Canal Company had suffered no detriment.

In light of these factors and also considering the substantial windfall the Canal Company would have received if relief had been refused, the court decided to exercise its discretion and grant relief.

The Canal Company did appeal against the decision but were unsuccessful.

This case is the first reported decision in which a court has granted relief following termination of a licence and is a useful reminder that relief is not limited only to landlord and tenant situations.

*These are English cases and the position may be different in Scotland.