- Bromley020 8290 0333
Could the court grant equitable relief from forfeiture?
The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd was a case about equitable relief from forfeiture.
Specifically, the issue in question was whether the court had jurisdiction to grant such relief from the loss of rights to make use of neighbouring land granted in a perpetual licence, where that loss was due to failure to pay.
Vauxhall Motors had a large manufacturing plant at Ellesmere Port in Cheshire on the banks of the Manchester Ship Canal. When the plant was built in the early 1960s, Vauxhall entered into a contract (the licence) with the Manchester Ship Canal Company (MSCC), allowing Vauxhall to construct a system of pipes and chambers across MSCC’s land (the Spillway) and to drain surface water and treated industrial effluent into the canal. Vauxhall agreed to pay £50 per year to MSCC in exchange for these rights. Clause 5 of the licence allowed MSCC to terminate the licence if (among other things) Vauxhall did not pay its annual rent within 28 days of a demand.
Vauxhall built the Spillway and has used it for drainage from its Ellesmere Port factory ever since. Its right to use the Spillway was worth several hundreds of thousands of pounds per year. In early 2014, by oversight, Vauxhall failed to pay its rent within 28 days.
On 10 March 2014, MSCC served notice terminating the licence under clause 5. This meant that Vauxhall faced having to negotiate a new licence at a cost of hundreds of thousands per year for its failure to pay £50. Vauxhall asked the High Court to grant equitable relief from forfeiture.
The High Court granted relief from forfeiture, effectively reinstating the licence on condition that Vauxhall paid its arrears and certain other costs. The Court of Appeal upheld this decision. MSCC’s appeal to the Supreme Court concerned whether the court had jurisdiction to grant relief on the facts of this case. MSCC argued that, in relation to land, the courts could only relieve parties from the forfeiture of proprietary rights – which would exclude Vauxhall’s contractual rights under the licence. Vauxhall argued the doctrine was broad enough to protect any right to use land.
The Supreme Court unanimously dismissed the appeal. It rejected MSCC’s argument that, in the context of land, equitable relief was only available for forfeiture of property rights, as opposed to a right to possession under a contract. The Court concluded that the courts may relieve against the forfeiture of “possessory rights” over land. However, the majority rejected Vauxhall’s wider argument that relief from forfeiture should extend to all rights to use land.