The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd

Equitable relief against forfeiture may be available where termination would forfeit possessory or proprietary rights, rather than merely contractual rights, and the termination provision secures payment or performance of obligations. Possession depends on sufficient factual custody and control, assessed in light of the property and its ordinary use, together with an intention to possess.

A contractual licence may satisfy that requirement where it gives the licensee exclusive practical control of physical infrastructure and responsibility for its construction, maintenance and use. Delay in seeking relief for non-payment does not itself bar relief; equitable relief may be granted where there is no prejudicial delay.

A statutory drainage protection preserving existing rights does not authorise drainage created by a radical redevelopment which substantially increases the burden on neighbouring land.

Vauxhall operated a manufacturing plant beside the Manchester Ship Canal. Under a 1962 perpetual licence it constructed and maintained drainage infrastructure on the Canal Company’s land, enabling surface water and trade effluent to be discharged into the canal for an annual payment of £50.

After Vauxhall failed to pay the annual sum, the Canal Company terminated the licence. The High Court granted Vauxhall relief against forfeiture but rejected its alternative claim to drainage rights under the Manchester Ship Canal Act 1885: [2016] EWHC 2960 (Ch).

The Canal Company appealed the relief order. Vauxhall cross-appealed on the statutory claim. The central issues were whether the licence conferred possessory rights sufficient to engage equitable relief, whether relief should be refused for delay, and whether the 1885 Act protected the developed drainage system.

1. Appeal and cross-appeal dismissed. Lewison LJ, with whom Floyd LJ and David Richards LJ agreed, held that the judge had jurisdiction to grant relief against forfeiture and had properly exercised his discretion.
2. Relief against forfeiture is in principle confined to forfeiture of proprietary or possessory rights, not purely contractual rights. The relevant inquiry was whether the licence as a whole, rather than the right of water passage viewed in isolation, conferred possessory rights. Possession required factual custody and control appropriate to the property, and an objectively established intention to possess.
3. The licence gave Vauxhall sufficient control of the infrastructure on the Canal Company’s land. Vauxhall alone could use it for the authorised discharge, had primary responsibility and power to construct, maintain, repair, renew, alter and divert it, and the Canal Company could not interfere with it save in limited circumstances. Those rights gave Vauxhall possession of the infrastructure and its enclosed airspace, though not of the surrounding soil. The 1997 variation did not retrospectively alter the character of the 1962 grant or remove Vauxhall’s control.
4. The termination clause secured payment of the annual sum and performance of the licence covenants. It was therefore a forfeiture provision to which equitable relief could apply. The judge’s grant of relief for non-payment was not wrong in principle. The asserted delay caused no prejudice, Vauxhall continued to exercise the licensed rights, and the judge could take account of the substantial windfall which refusal would give the Canal Company.
5. Section 63 of the Manchester Ship Canal Act 1885 preserved, but did not enlarge, the former owner’s drainage rights. Those rights did not extend to drainage caused by the factory and hardstanding. The redevelopment radically changed the land’s character and greatly increased the flow into the ravine. Vauxhall consequently had no independent right to use the Canal Company’s structures or discharge water as it did.

• Court of Appeal (Civil Division): dismissed the Canal Company’s appeal against relief from forfeiture and dismissed Vauxhall’s cross-appeal on the statutory drainage claim: [2018] EWCA Civ 1100 .
• High Court, Chancery Division: granted Vauxhall relief against forfeiture of the 1962 licence and rejected its claim to rights under the Manchester Ship Canal Act 1885: [2016] EWHC 2960 (Ch) .