Supreme Court confirms relief from forfeiture available to licensees with “possessory rights”

The Supreme Court has dismissed the appeal in Manchester Ship Canal Company Ltd Vauxhall Motors Ltd (formerly General Motors UK Ltd) [2019] UKSC 46, bringing to an end a long running case in which the High Court, the Court of Appeal and now the Supreme Court have considered the extent of ‘relief from forfeiture’.

Relief from forfeiture is an important safeguard for tenants and leaseholders – a protection from a landlord’s draconian power bring a lease to an abrupt end by forfeiting it. The question before the Supreme Court in this matter was essentially whether there was a power to grant relief from forfeiture to a licensee. Licensees have much lesser protection that lessees and so the general thinking was that the right to grant relief would not extend to them.

Background

Manchester Ship Canal Company Ltd had granted a licence to Vauxhall Motors to discharge water and trade effluent into the Manchester Ship Canal. The licence was granted on 12 October 1962 for a fee of £50 per annum, and the licence was granted perpetually on the condition that the Vauxhall Motors continued to pay the annual fee. In 2013, Vauxhall Motors failed to pay the annual sum and the Ship Canal Company forfeited the licence. The parties were unable to agree terms for a new licence, with Vauxhall unwilling to accept a 900,000% increase in their fee.

Vauxhall Motors issued proceedings for relief from forfeiture. At trial in the High Court HHJ Behrens granted relief.  The argument that the court had no jurisdiction to grant relief because the licence did not confer any proprietary or possessory rights was rejected. The decision made at first instance was upheld by the Court of Appeal, and now again by the Supreme Court. Lord Briggs, giving the main judgment in the Supreme Court, held that relief from forfeiture was available where there had been forfeiture of proprietary or possessory rights, even for licences.

What are “possessory rights”?

“Possessory rights” means rights which fall short of full ownership but which give possession. Lord Briggs made reference approvingly to the analysis of “possessory rights” given by the Court of Appeal:

“There are two elements to the concept of possession: (1) a sufficient degree of physical custody and control (‘factual possession’); (2) an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (‘intention to possess’). What amounts to a sufficient degree of physical custody and control will depend on the nature of the relevant subject matter and the manner in which that subject matter is commonly enjoyed. The existence of the intention to possess is to be objectively ascertained and will usually be deduced from the acts carried out by the putative possessor …”

This is reasonably precise as a legal test – but there will of course be uncertainty when applying the test to particular facts.

Practical implications

The Court’s decision does not mean that relief from the forfeiture of a licence is always available. Not all licences grant “possessory rights” this means that relief from forfeiture will not be available for all types of licence.

Those drafting licences will want to reflect on whether they wish to bring the licence within the scope of relief from forfeiture or not. This may have an impact on decisions about what rights and responsibilities each party should have under the licence.

For the majority of licences, it should be reasonably straightforward to establish whether or not the licensee has “possessory rights” and this will form part of the analysis when advising licensor or licensee about their options when it comes to enforcement of the terms of a licence. However, there will be more complex cases where licences have unusual terms.

Residential Context

The Supreme Court’s decision produces one interesting quirk in a residential context. An assured shorthold tenant facing possession proceedings based on a mandatory ground has no opportunity to appeal to the Court’s discretion – and relief from forfeiture does not apply to termination of ‘ASTs’.

But a licensee of residential property, who might well have “possessory rights”, could apply for relief from forfeiture and therefore does have an opportunity to appeal to the Court’s discretion. This means that a residential licensee has a right which most residential tenants will not have.