Relief for licensees

28 December, 2016

The remedy of relief from forfeiture is most commonly encountered in a landlord and tenant relationship.  The High Court case of General Motors UK Limited v Manchester Ship Canal Company Limited confirms for the first time that the same principles can apply to a licence arrangement over land.

 

General Motors had a contractual right to discharge water and trade effluent from its land into the Manchester Ship Canal via a spillway located on MSCC’s land.  The document recording and regulating that right was described on its face as a perpetual licence granted in 1962 in return for an annual ‘rent’ of £50.  GM missed a payment and MSCC terminated the agreement.  It did propose terms for a new arrangement but at a consideration of £450,000 per annum.

 

The court had to consider, amongst other questions, whether the arrangement was properly a licence and whether there was an implied right to relief from forfeiture in the event that the agreement was construed to be a licence.  As to the first of these questions, the court determined that the agreement was properly on its face a licence rather than a tenancy and so did not create any proprietary interest in or over MSCC’s land.  However, as to the question of relief from forfeiture, the court determined (with some hesitation it has to be said) that there could be implied a right to relief from forfeiture and that consequently the licence could be reinstated by the court.

 

On the terms of relief, it was said by MSCC that relief should only be granted on condition that an annual fee of between £400,000 and £500,000 is paid.  On behalf of GM it was said that relief should be granted on the basis that arrears and interest be paid together with certain other costs.  The judge determined the case on relief in favour of GM, preferring its conditions to those proposed by MSCC which it said would result in an unacceptable windfall to MSCC.

 

The decision is an interesting one as it is the first recorded decision of the doctrine of relief from forfeiture being applied to a licence over land.  However, there are two important caveats.  The first is that the facts are quite unusual and it might be said that the decision would be confined to its facts.  The licence was a perpetual licence.  The spillways were constructed and maintained by GM under the agreement.  GM had exclusive use of the spillway.  It is perhaps difficult to imagine other more commonly encountered licences to occupy where such extensive long term rights would be conferred or enjoyed.  The second is that the judge found it a difficult case to decide and it is conceivable that the decision may be the subject of appeal to the Court of Appeal.