Licence with no provision for termination – implied term

The Hong Kong Polytechnic University v Rehabaid Society ([2022] HKCFI 2830) concerned a licence granted by the Hong Kong Polytechnic University (‘the licensor’) to Rehabaid Society (‘the licensee’) in 1988.

The licence contained no express provision as to how it could be ended.

Part of the motivation for the grant of the licence was that the parties foresaw the possibility of fruitful collaboration between the licensee and the licensor’s Rehabilitation Engineering Centre (‘the REC’).

This collaboration ceased and the licensor was very short of space for its other activities.

It argued that there was an implied term that the licence was revocable on reasonable notice should the collaboration between the licensee and the REC end.

The licensee argued that the licence was intended to be irrevocable.

The court agreed that whether a licence was revocable or not depended on the proper construction of its terms ([73]).

The party who seeks to terminate the licence has the burden of proving its right to do so ([82]).

The court reviewed the law on implied terms (Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Limited [2016] AC 742 and Lo Yuk Sui v Fubon Bank (Hong Kong) Limited [2019] HKCA 261).

The court found on the facts that there was no implied term that the licence would end should the collaboration between the licensee and the REC cease.

The licensor’s claim that it was entitled to possession was dismissed and specific performance of the licence was ordered.

This did not mean that the court accepted that the licence was irrevocable ([125]) only that it could not be revoked in the circumstances argued for by the licensor.

Michael Lower

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Relief from forfeiture of a contractual licence

In The Manchester Ship Canal Company Limited v Vauxhall Motors Limited  ([2019] UKSC 46) the UK Supreme Court considered whether contractual licensees were entitled to apply for relief from forfeiture of a contractual licence. Lord Briggs gave the judgment with which the other members of the Supreme Court agreed. Lady Arden gave a separate judgment reflecting on whether the judgment introduced unacceptable uncertainty into the law.

Facts

In 1962 The Manchester Ship Canal Company Limited (‘MSCC’) granted Vauxhall Motors Limited (‘Vauxhall’) a perpetual licence (‘the licence’) relating to land owned by MSCC next to the Manchester Ship Canal (‘the Canal’).

The licence entitled Vauxhall to install pipes between Vauxhall’s land and the Canal under land owned by MSCC and to discharge surface water and treated effluent through the pipes into the Canal.

Vauxhall had to pay a ‘rent or annual sum’ of GBP 50. If it failed to make this payment on the due date then MSCC had a right to serve a notice requiring payment within 28 days. If payment was not made within this 28 day period then MSCC had the right to serve notice on MSCC to terminate the licence.

Vauxhall failed to pay the sum due in 2013. MSCC gave 28 days notice but Vauxhall did not pay the sum due within the notice period. MSCC served notice to terminate the licence. Vauxhall claimed relief from forfeiture.

When is relief from forfeiture available?

MSCC argued that relief from forfeiture was only available in respect of proprietary interests. The UK Supreme Court rejected this and held that the court could grant relief from forfeiture where:

•  the primary object is the securing of a stated result for which the forfeiture provision is added by way of security ([18]); and
•  ‘where what is in question is forfeiture of proprietary or possessory rights as opposed to merely contractual rights, regardless of the type of property concerned’ ([94])

Lady Arden may be expressing the first requirement in other words where, in her judgment, she says that there will be no relief where:

‘it was inconsistent with the terms of the parties’ bargain that there should be any relief from strict performance of the contract if the other party chose to enforce his rights’ ([87]).

The Supreme Court did not accept Vauxhall’s contention that the right to relief applies to all forms of right to use property ([49]). The Supreme Court did not commit itself to the idea that the right to possession had to be of indefinite duration ([51]).

‘Possessory rights in relation to land’

In the Court of Appeal, Lewison LJ explained possessory rights as involving factual possession and an intention to possess:

‘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 ..’ ([2018] EWCA Civ 1100 at [59])

and the Supreme Court accepted this understanding ([42]).

Outcome

The rights in this case were possessory ([55] – [58]). There was no reason to disturb the decision of HHJ Behrens to grant relief from forfeiture.

Michael Lower