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When is relief from forfeiture available?

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26th January 2017

Property analysis: Is relief from forfeiture only available to claimants with proprietary or possessory rights? Barrister Robert Bowker, of Tanfield Chambers, considers the recent High Court decision in General Motors UK v Manchester Ship Canal Company.

Original news

General Motors UK Ltd v Manchester Ship Canal Company Ltd [2016] EWHC 2960 (Ch)

The Chancery Division held that it had jurisdiction to grant the claimant relief from forfeiture of its licence to discharge surface water into the defendant’s canal and decided to exercise its discretion to grant relief.

What was the background to the case?

The defendant owned a canal and the claimant owned a car manufacturing plant near the canal. In 1962, the defendant granted the claimant a licence giving it the right to discharge surface water from its plant into the canal. The right was granted in perpetuity, as long as the claimant paid the defendant an annual sum of £50.

In 2013, the claimant did not pay the annual sum and the defendant validly terminated the licence.

The claimant and defendant entered into negotiations for the grant of a temporary new right, but the defendant required a substantially higher annual sum and the negotiations ended without an agreement.

The claimant issued proceedings, seeking relief from forfeiture. The defendant maintained that the court lacked power to grant such relief.

What issues arose?

A number of issues arose, but the main issue concerned relief from forfeiture.

On that issue there were three questions:

• whether the court had jurisdiction to grant relief
• if so, whether this was a case in which relief was appropriate
• if so, on what terms relief ought to be granted

What is the significance of the case?

With regard to the law of forfeiture, the decision is profoundly important in one respect and significant in two other respects.

Its main importance is in the finding that the court has jurisdiction to grant relief from forfeiture not only in cases where a claimant has proprietary or sufficient possessory rights, but also in exceptional cases when the claimant has rights which may fall short of possessory rights but are more than purely contractual rights.

The case’s secondary significance is in relation to the appropriate terms of relief, in particular the court’s refusal to re-write the terms of the licence, and in relation to the terms that the court will impose in respect of costs.

What did the court decide?

The claimant in the instant case had contended that it had a sufficient possessory right. The court did not conclusively decide that question. Instead, it assumed that the claimant’s right to discharge surface water into the canal did not amount to a possessory right, albeit that it came ‘about as close to a possessory right as it is possible to imagine’. On that assumption, it was nevertheless to be observed that the claimant’s right not only entitled it to indefinite and exclusive useof the channel into the canal but also qualified and limited the defendant’s general rights in the channel. It accordingly could not aptly be described as a purely contractual right.

Thus the question of whether or not sufficient rights exist is one of fact and degree to be answered by examining the circumstances of the case. The case suggests that even some possessory rights might be insufficient to invoke the jurisdiction to grant relief while other rights, short of possessory rights, might be sufficient.

On the matter of costs, an interesting point is a possible difference between this case and the costs decision in Pineport Ltd v Grangeglen Ltd [2016] EWHC 2170 (Ch). In Pineport, the costs of the litigation were excluded from the costs which were a term of relief. In General Motors, relief appears to have been granted on terms that the claimant pays the costs of the litigation up to the date of filing the defence. It remains to be seen what the court says about costs after the date of the filing of the defence. There will be further argument on that point.

To what extent is the judgment helpful in clarifying the law in this area?

The case is of limited benefit because an appeal seems almost inevitable. At the moment, there is real doubt as to whether the Court of Appeal will be persuaded that the proper test is ‘sufficiency’ of possessory rights and, if so, whether those rights were made out in this case.

What are the implications for practitioners?

In practical terms, the case is consistent with the general movement in the direction of relief being granted in exceptional circumstances. This is the third such case in a fairly short time, the other two being Pineport LTD v Grangeglen Ltd [2016] EWHC 1318 (Ch) and Freifeld and another v West Kensington Court Ltd [2015] EWCA Civ 806, [2015] All ER (D) 37 (Aug). The key for those advising is not to dismiss too easily the possibility that relief will be granted in unusual or controversial circumstances.

It is important to identify carefully the factual pros and cons in relation to each case. That might sound obvious but in Freifeld, Pineport and General Motors, the result was not easy to predict and, in fact, probably went against the outcome many experienced practitioners would have expected.

This article was originally published in LexisPSL on 15th December 2016.

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