General Motors UK Ltd v The Manchester Ship Canal Company Ltd

Relief from forfeiture may exceptionally be available for a contractual licence where the rights have substantial possessory characteristics. The jurisdiction is not confined to proprietary interests in land. A perpetual and exclusive right to use drainage infrastructure, granted for a nominal annual payment and forfeited for non-payment, may qualify.

Where relief is granted in a non-payment case, the court should generally restore the parties to their pre-forfeiture position. It may require payment of arrears, interest, reasonable compensation and costs, but cannot rewrite the licence to impose current market rent. Statutory drainage protections applying to historic drainage arrangements do not ordinarily require facilities for substantially different drainage needs created by later industrial development.

The claimant operated a manufacturing plant adjoining land owned by the defendant. A 1962 licence granted in perpetuity a right to discharge surface water and trade effluent into the Manchester Ship Canal for an annual payment of £50. The payment due in October 2013 was not made. The defendant served notice and terminated the licence in March 2014.

The claimant abandoned its challenge to the validity of termination but sought relief from forfeiture. It also relied on sections 63(9) and 63(10) of the Manchester Ship Canal Act 1885, alleging a continuing statutory right to drainage. The issues were whether relief was available, whether the claimant was estopped from seeking it, how the discretion should be exercised, and whether the 1885 Act applied.

1. Relief jurisdiction. The licence created no proprietary interest. However, relief from forfeiture is not confined to proprietary rights in land. The relevant question is whether the contractual rights have sufficient possessory character. The claimant had enjoyed perpetual and exclusive use of the spillway for more than 50 years, had constructed it at substantial cost, and paid only a nominal annual sum. Those rights could not aptly be treated as purely contractual. The court therefore had jurisdiction to grant relief.
2. Estoppel. The parties negotiated on the basis that the licence had been terminated, but there was no sufficiently communicated assumption that termination was irrevocable. In any event, it would not be unjust to permit the claimant to seek relief. The defendant’s negotiation costs could be compensated as a condition of relief.
3. Discretion. The failure to pay resulted from significant carelessness, but was not deliberate. The claimant continued discharging water, the defendant did not seek to prevent that discharge, and proceedings were brought promptly after legal advice was obtained. Relief was therefore appropriate. Its effect was to restore the parties to the position before termination. The court could require payment of arrears, interest, negotiation losses and costs, but could not rewrite the licence to substitute an annual payment of £450,000.
4. Statutory drainage rights. Section 63 of the Manchester Ship Canal Act 1885 protected the drainage and floodwater arrangements existing when the Act came into force. It did not require the defendant to provide substantially more extensive facilities necessitated by the later construction and industrial use of the claimant’s site. The statutory claim failed.
5. Alternative relief. If relief had been refused, continued discharge would have constituted trespass and an injunction would have been granted, deferred for 12 months. Damages would have been assessed by reference to a hypothetical licence fee. Breach of the obligation to remove the spillway would have attracted nominal damages only.

Relief from forfeiture was granted substantially on the claimant’s proposed terms. Assessment of the defendant’s negotiation losses and costs was reserved.

First-instance decision of the High Court (Chancery Division). The claimant obtained relief from forfeiture. Its claim under the Manchester Ship Canal Act 1885 was rejected.