Sweet Relief

The court grants relief from forfeiture in a case involving a basic licence

The case of General Motors UK Ltd v The Manchester Ship Canal Company Ltd concerned a licence agreement which allowed General Motors to discharge surface water into the canal for a modest annual fee of £50. 
In 2013, due to what appears to have been a simple administrative error, General Motors failed to pay the licence fee. The Canal Company therefore terminated the licence.
General Motors quickly offered to pay the outstanding fee of £50 and requested reinstatement of the licence but the Canal Company played hardball and refused to reinstate the licence. 
Instead, the Canal Company stated that they were prepared to negotiate the terms of a new licence. But there was a catch. The Canal Company now wanted an annual licence fee of £500,000. That sum, in their view, was the correct market rate.
Faced with an increase from £50 per annum to £500,000 per annum, General Motors applied to the Court seeking an order reinstating the licence (relief from forfeiture). 
The Court has a wide discretion to grant relief from forfeiture in cases involving leases, but this has not normally extended to cases involving simple licences. Licences have typically been treated as being capable of termination in a quick and easy fashion with none of the baggage associated with leases. 
However, in this case, the Court was presented with a case where a simple administrative oversight in relation to an absurdly small amount of money had potentially put the Canal Company in a position of gaining a huge financial windfall. Was it fair and proper for the Canal Company to profit so massively from a failure to pay a £50 fee?  
The answer to this, in the Court’s view, was “no”, this was not an acceptable outcome. It could not be right for a party to profit so excessively from a minor contractual transgression. Accordingly, relief was granted and the original licence was reinstated.  
This, and other recent cases, demonstrates the court’s increasing willingness to exercise its wide discretion to grant relief from forfeiture where it believes that it is fair to do so, and particularly where a landlord or licensor stands to receive a disproportionate windfall if relief is not granted. 

If you have any questions about this article please contact Andrew Turner on 01242 586841 or you can email him. 

This article features in the Hughes Paddison Winter 2017 Property Disputes Update. You can view a summary of the full content of the newsletter and download a copy here.