Vehicle Manufacturer Relieved of Consequences of Administrative Blunder

canalEven minor and inadvertent breaches of contractual obligations can have very grave consequences, particularly when it comes to occupation of land. That was certainly so in the case of a vehicle manufacturer whose failure to pay £50 in rent on time very nearly led to the forfeiture of rights essential to the running of its business.

Under a contract dating back to the 1960s, the manufacturer was granted a licence to construct a surface water and trade effluent drainage system across land owned by the operator of a canal which adjoined its plant. The licence was perpetual, but the manufacturer was required to pay £50 in annual rent to the operator within 28 days of that sum being demanded.

After an administrative oversight resulted in that deadline being missed, the operator exercised its contractual right to terminate the licence. As a result of its failure to pay the £50 on time, the manufacturer thus faced the prospect of having to negotiate a new licence – at a likely six-figure annual cost.

After the manufacturer launched proceedings, a judge granted it equitable relief from the forfeiture of its rights under the contract. That was on the basis that the outcome would otherwise be unreasonably harsh. The licence was effectively reinstated on condition that the manufacturer paid off any arears and certain other costs. The judge’s ruling was subsequently upheld by the Court of Appeal.

In dismissing the operator’s challenge to that decision, the Supreme Court rejected arguments that, in the context of land, equitable relief from forfeiture is only available in respect of property rights, such as formal leases, as opposed to contractual rights of possession. There was no logical or principled reason for treating rights over land and rights over other forms of property differently, and the distinction the operator sought to draw would have arbitrary results.