Annington Property Ltd v The Secretary of State for Defence
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Holgate |
| Judgment Date | 15 May 2023 |
| Neutral Citation | [2023] EWHC 1154 (Admin) |
| Docket Number | Case Nos: CO/889/2022; CO/2389/2022 |
| Court | King's Bench Division (Administrative Court) |
The King on the application of
and
[2023] EWHC 1154 (Admin)
Neutral Citation Number: EWHC 1155 (Ch)
THE HON. Mr. Justice Holgate
Case Nos: CO/889/2022; CO/2389/2022
Claim No: PT-2022-000206
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (CH D)
Monica Carss-Frisk KC, Jason Pobjoy and Emmeline Plews (instructed by Linklaters LLP) and Zia Bhaloo KC, James Maurici KC, Toby Watkin KC, Mark Sefton KC and Tamsin Cox (instructed by Eversheds Sutherland (International) LLP) for the Claimants
Sir James Eadie KC, Ivan Hare KC, David Lowe, Tom Cleaver and Daniel Cashman (instructed by Slaughter and May) and Joanne Wicks KC, Philip Rainey KC, Adam Rosenthal KC, Ceri Edmonds and Daniel Petrides (instructed by Forsters LLP) for the Defendant. The Interested Parties did not appear and were not represented.
Hearing dates: 13, 14, 15, 16 and 17 February 2023
JUDGMENT APPROVED
This judgment was handed down remotely at 12 noon on 15 May 2023 by circulation to the parties or their representatives and by release to the National Archives.
This judgment is set out under the following headings:-
Introduction
| Headings | Paragraph |
| Introduction | 2 – 58 |
| The parties, participants and proceedings | 59 – 70 |
| The issues | 71 – 77 |
| Statutory framework | 78 – 100 |
| 78 – 95 | |
| Part II of the Landlord and Tenant Act 1954 | 96 – 100 |
| The Ramsay principle | 101 – 107 |
| The indivisibility of the Crown | 108 – 139 |
| Issue 1 (Ground 1) – Whether the consent of APL to enfranchisement was required | 140 – 180 |
| Issue 2 (Ground 2(i)) – The decision in Gratton-Storey v Lewis | 181 – 193 |
| Issues 3 to 5 (Ground 2(ii)) – Whether the Secretary of State's underleases were business tenancies (areas other than the common parts of the Cranwell site) | 194 – 251 |
| General principles in Part II of the 1954 Act for the protection of business tenancies | 196 – 199 |
| Occupation | 200 – 206 |
| Deemed occupation | 207 – 218 |
| Section 56 of the 1954 Act – the application of Part II of the 1954 Act to the Crown | 219 – 226 |
| Section 56(3) of the 1954 Act | 227 – 238 |
| Section 56(4) of the 1954 Act | 239 – 251 |
| Issue 5(1) – Houses occupied by service personnel | 252 – 307 |
| Legal and policy framework Service Licence Occupation | 254 – 276 277 – 288 289 – 307 |
| Issue 5(2) – Occupied garages at the Cranwell site | 308 – 312 |
| Issue 5(3) – SFA units at the Cranwell site sublet by the Secretary of State to private sector tenants | 313 – 320 |
| Issue 5(4) – Void SFA units and garages at the Cranwell site | 321 – 334 |
| Issue 5(5) – Contact houses at the Cranwell site | 335 – 355 |
| Issue 6 (Ground 2(iii)) – Whether the Secretary of State's underleases were business tenancies (the common parts of the Cranwell site) | 356 – 360 |
| Issue 6(1), (3), (4) and (5) – Occupation of the common parts of the Cranwell site | 361 – 375 |
| Issue 6(2)(ii) – The application of s.23(1A) and (1B) of the 1954 Act | 376 – 377 |
| Issue 6(2)(i) – The indivisibility of the Crown | 378 – 380 |
| Overall conclusion on Issues 5 and 6 | 381 |
| Issue 7 (Ground 2(iv)) – The de minimis principle | 382 |
| Issues 8 and 9 (Ground 2(v)) – Section 1AA of the 1967 Act and the adjoining land test | Adjoining land |
| “Not occupied for residential purposes” | “Owned together with adjoining land” since 1 April 1997 |
| 383 – 415 | 384 – 400 401 – 406 407 – 415 |
| Issue 10 – The validity of the 8 enfranchisement notices | 416 |
| Issue 11 (Ground 3) – Tests applicable to compulsory acquisition | 417 |
| Submissions | 417 – 420 |
| Discussion | 421 – 437 |
| Issues 12 to 14 (Ground 4) – Improper motives | |
| Issue 12 – Public law limits on the exercise of the right to enfranchise | 438 – 466 |
| Issues 13 and 14 – Whether the defendant's decision to enfranchise was based upon any motive that was legally improper | 467 – 532 |
| How the decision to serve the enfranchisement notices came to be made | 467 – 500 |
| Analysis of the Secretary of State's purposes | 510 – 532 |
| Issues 15 to 18 (Ground 5) – Breach of legitimate expectations | 533 |
| Submissions | 533 – 535 |
| Discussion | 536 – 544 |
| Issues 19 to 20 (Ground 6) – Whether there has been a breach of Article 1 of the First Protocol to the ECHR | 545 |
| A summary of the parties' submissions | 546 – 559 |
| Deprivation and interference | 560 – 568 |
| The decision in James and the purposes of the legislation on enfranchisement | 569 – 587 |
| Developments since James | 588 – 595 |
| Whether APL's interest was delimited by the 1967 Act from the outset | 596 |
| Whether individual cases need to be evaluated against A1P1 | 597 – 603 |
| Whether the decisions were “provided for by law” | 604 |
| The public interest and whether the decisions pursued a legitimate aim | 605 – 614 |
| The fair balance test | 615 – 633 |
| Issues 21 to 22 – The challenge to a wider scheme | 634 |
| Conclusions | 635 – 636 |
| Annex A: The agreed list of issues |
The central issues in these claims are whether the Secretary of State for Defence (“the SoS”) is entitled to enfranchise 8 properties under the Leasehold Reform Act 1967 (“the 1967 Act”) and, if so, whether his decisions to exercise those rights are unlawful on public law grounds. There are additional issues about whether the SoS has adopted a wider scheme for serving further enfranchisement notices to acquire the “married quarters estate” (“MQE”) and, if so, whether that scheme is unlawful.
In 1995 the Ministry of Defence (“MoD”) decided to pursue a bulk sale to the private sector of about 80% of its service family accommodation (“SFA”). There were excluded from the sale properties in Scotland and Northern Ireland and about 6,300 properties in England and Wales. The MQE refers to the portion of the SFA which in due course was sold. The MoD's objects included raising funds to enable it to upgrade the condition of the accommodation, to dispose of surplus properties and to secure “value for money” (“VFM”) through a competitive sale.
A tender exercise took place attracting 19 bidders. On 3 September 1996 the MoD announced that Annington Properties Limited (“APL”) was the successful bidder. Contracts for a sale and leaseback agreement were exchanged on 24 September 1996 (“the sale agreement”) and completion took place on 5 November 1996. The commercial documents are complex and what follows is based upon an agreed summary.
On 5 November 1996 the SoS granted 740 999-year headleases of 765 sites across England and Wales compromising 55,060 residential units. The SoS retained the freehold reversion to those headleases. APL paid a purchase price to the SoS of £1.662 billion.
On the same date APL leased back each of the sites to the SoS by underleases, each for a term of 200 years. For the first 25 years of this term the rent payable by the SoS was, in effect, the aggregate open market rental value of the residential units on each site, discounted by 58% to reflect MoD's responsibility for maintenance and the cost of voids, the bulk nature of the transactions and the strength of the MoD's covenant.
The SoS disposed of surplus properties through two routes. First, the SoS immediately transferred the freehold of over 55 sites comprising over 2,350 residential units to APL. Second, the SoS has the right (subject to various conditions) to terminate an underlease of a site or part thereof at any time on 6 months' notice. These are referred to as “released units” or “handbacks”. Upon termination APL has the right to purchase the SoS's freehold reversion of the premises handed back for a nominal sum of £500. Although the underleases do not impose on the SoS a repairing obligation during the 200-year term, he is obliged to ensure that any premsies handed back is in good and tenantable repair.
Pursuant to the “master agreement” between SoS and APL dated 5 November 1996, the SoS was obliged to hand back a total of 13,213 residential units by 2021 in staged releases. This took place under the SoS's break clause in the underleases. The SoS satisfied that obligation by 2007.
Under a profit-sharing agreement entered into on 5 November 1996 the SoS was entitled to receive a share of the increase in property values on certain disposals by APL, but only for the first 15 years and on a decreasing scale. This resulted in the SoS receiving a further £161.2m.
The rent payable by the SoS under the underleases was subject to two different review mechanisms. First, “beacon rent reviews” were to be carried out on a 5-year rolling basis beginning in 1999. A review would be carried out for 4 roughly equal tranches of the MQE in each of four years (with no review in the fifth year). The open market rent was assessed for a representative unit, the “beacon unit”, specified in each underlease and the percentage change in that rent applied to the site rent as a whole, subject to the 58% reduction.
Second, a “site review” was to be carried out of approximately 25% of all sites in each of the years 2021 to 2024. Each review was to determine the open market rent which a hypothetical lessee would pay for a lease in substantially similar terms as the...
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