Equitable relief from forfeiture

October 24th, 2019 by James Goudie KC

On the banks of the Manchester Ship Canal, Vauxhall Motors has a large manufacturing plant. It drains surface water and treated industrial effluent into the Canal. It does so pursuant to a licence from the Canal Company. This is a valuable right, similar to an easement. It is terminable if Vauxhall are late in their payment of the licence fee.  Inadvertently, Vauxhall was late with one instalment. The Canal Company terminated the Licence. Vauxhall asked the High Court to grant equitable relief from forfeiture. Relief was granted. The Court of Appeal upheld the grant of relief: (2018) EWCA Civ 1100.  The position has now been addressed by the Supreme Court, who have unanimously dismissed the Canal Company’s appeal: (2019) UKSC 46, especially from paragraph 35, per Lord Briggs.The Canal Company’s appeal to the Supreme Court concerned whether the Court had jurisdiction to grant relief. The Canal Company argued that in relation to land the Court can grant relief from forfeiture only when the forfeiture was of proprietary rights, rather than, as here, contractual rights under a licence. Vauxhall’s case was that the doctrine is broad enough to protect any right to use land.

The Supreme Court rejected the Canal Company’s argument that, in the context of land, equitable relief is available only for forfeiture of property rights, as opposed to a right to possession under a contract.

In the context of personal property (property which is not land), the decided cases suggest that equitable relief is available for forfeiture of “proprietary” or “possessory rights”. On a proper analysis, “possessory rights” means something falling short of ownership, or of a proprietary interest.

Now that it is settled that equitable relief may apply to forfeiture of possessory rights in the context of personal property, there are powerful reasons why it should also do so in the context of land. First, the doctrine of relief from forfeiture historically developed in the context of land. Secondly, there is no logical or principled reason for distinguishing between rights over land and rights over other forms of property. Thirdly, the Canal Company’s distinction would lead to arbitrary results. The Courts should identify the scope for equitable intervention by taking a principled approach and consider the nature and purpose of its power to grant relief.

The concept of “possessory rights” does not lead to significant uncertainty in the law. It is frequently used in the context of commercial law. There is no immediately obvious reason why it should not be used in relation to rights over land.

Therefore, the Supreme Court concludes that the Courts may relieve against the forfeiture of “possessory rights” over land. However, the majority rejects Vauxhall’s wider argument that relief from forfeiture should extend to all rights to use land.

On the facts, this Licence did grant “possessory rights” to Vauxhall. Vauxhall gained virtually exclusive possession of the pipes etc and a high degree of control over them in perpetuity. As a result, Vauxhall was entitled to ask the Court for relief from forfeiture of those rights.

The reference to commercial law is important. At paragraph 40, Lord Briggs said that it is undoubtedly true that certainty is, or should be, an important element of land law. However, at paragraph 41, he said that certainty is equally important in the law of commerce, and one of the reasons why English commercial law is chosen to govern contracts that have no connection with England. The authorities demonstrate that English commercial law has accommodated the concept of “possessory rights” in relation to personality as sufficiently defining the boundary of equity’s intervention by way of relief from forfeiture over a wide range of different and varied types of subject matter.

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