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PropertyMonday 15 May 2023

R (Annington Property Ltd) & Ors v Secretary of State for Defence & Ors [2023] EWHC 1154 (Admin)

On 15 May 2023 Mr Justice Holgate handed down judgment in the case of R (Annington Property Ltd) & Ors v Secretary of State for Defence & Ors [2023] EWHC 1154 (Admin).

The question at stake was whether the MoD had the right to enfranchise eight homes occupied by the families of military personnel, in a test case named as one of The Lawyer’s Top 20 Cases of 2023. The Judge decided that the MoD could enfranchise all eight houses.

In 1997, the MoD entered into a £1.662 billion sale and leaseback arrangement with Annington in relation to 80% of its family accommodation for military personnel. There were then 765 sites comprising more than 55,000 residential units. At the time, the MoD was satisfied that the agreements represented value for money, but over time concern has been expressed, including by the National Audit Office and the Public Accounts Committee, about the benefits of the deal to the taxpayer.

Under the 1997 agreement, the MoD granted Annington 999-year headleases and took underleases of each site for a term of 200 years. The rent was subject to review, including by way of a “site review” for each site on a date between 2021 and 2024. The MoD could terminate its underleases of sites or parts of sites on 6 months’ notice.

By the time that the first site review approached, there were 488 underleases still covered by the arrangements, comprising about 38,000 houses and flats.

In 2019, the parties entered into an arbitration agreement to streamline the site review process and a very distinguished arbitral panel, comprising Lord Neuberger of Abbotsbury, Professor Graham Chase FRICS and Mr Martin Butterworth FRICS, issued five awards between December 2019 and July 2021, before the arbitration was settled in December 2021. The rental values for each site were determined on the basis of a hypothetical letting between a landlord and tenant. The arbitral panel decided that the rental value for some of the sites was increased because the hypothetical tenant would appreciate that it had the ability to enfranchise the properties on them.

On 16 December 2021, immediately following the settlement of the arbitration proceedings, the MoD served an enfranchisement notice in relation to a house on a site next to RAF Cranwell in Lincolnshire; this was followed in March 2022 by a further notice in relation to the next-door house. Between 8 and 13 April, the MoD served a further six notices in relation to six houses on a site in Bristol.

Annington challenged the MoD’s right to enfranchise all eight houses, both as a matter of private law in proceedings in the Chancery Division and by way of judicial review on numerous public law grounds in proceedings in the Administrative Court. The two sets of proceedings were heard together by Holgate J, sitting in both jurisdictions, across a five-day hearing in February 2023.

The six grounds of judicial review raised  a large number of complex issues of law, including about the operation of the enfranchisement and business tenancies legislation and the application of that legislation to Government departments and to companies owned by them. The MoD succeeded on all grounds. The judgment contains much that will be of interest to practitioners specialising in both property and public law.

Joanne Wicks KC and Daniel Petrides acted for the Ministry of Defence together with a large team of Counsel, working together with Slaughter and May, Forsters and Gowlings WLG.

A copy of the judgment is available here.

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