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R (Annington Properties Limited) v Secretary of State for Defence [2023]

Judgment was handed down in R (Annington Properties Limited) v Secretary of State for Defence [2023] EWHC 1154 (Admin), 1155 (Ch) by Holgate J. This high-profile litigation was named as one of The Lawyer Top 20 cases for 2023.

The judgment was given in respect of a judicial review application in the Administrative Court which was heard with a claim for declaratory relief in the Chancery Division, arising out of eight enfranchisement notices served by the Secretary of State for Defence under the Leasehold Reform Act 1967.

In 1996, the Ministry of Defence entered into a sale and lease-back transaction in respect of 765 sites across the UK containing 55,000 dwellings used to house military service personnel. Each site was subject to a 999-year headlease with underleases granted back to the MoD at a discounted market rent. The price paid by APL was £1.662 billion.

The underleases provided for 25-yearly site rent reviews. The first of these site reviews was the subject of a recent arbitration process, resulting in a number of awards by a panel of three arbitrators (Lord Neuberger of Abbotsbury, Prof Graham Chase FRICS and Martin Butterworth FRICS). During the course of the arbitration, the parties reached a settlement which was signed in December 2022.

Immediately following the settlement agreement, the Secretary of State served a notice on Annington under s.5 of the 1967 Act to enfranchise a house on one of the sites. This was followed by seven further notices relating to houses on two of the many sites held by the Secretary of State on underleases from Annington.

Annington challenged these notices on various grounds in declaratory proceedings in the Chancery Division and applied for permission for  judicial review in Administrative Court. Given the substantial overlap, the different claims were managed and heard together by Holgate J sitting in both the Administrative Court and the Chancery Division.

The six grounds on which the notices were challenged raise a number of novel questions under both the Leasehold Reform Act 1967 and the Landlord and Tenant Act 1954. These included:

(1)          the scope of the Crown application provisions in s.33 of the 1967 Act and s.88 of the 1993 Act;

(2)          the application of the so-called Gratton Storey principle (under which an undertenant cannot enfranchise where he also owns the freehold, following the decision of the Court of Appeal in Gratton Storey v Lewis (1987) 19 HLR 546);

(3)          the approach to s.1AA of the 1967 Act in relation to excluded tenancies in a designated rural area;

(4)          numerous issues under Part II of the Landlord and Tenant Act 1954, including the circumstances in which a Government Department will have the protection of the Act under s.56(3) and (4) and the application of the business occupation test in s.23 and Graysim Holdings Ltd v P&O Properties Holdings Ltd [1996] AC 329.

In addition, the judicial review raised a number of public law challenges to the decision of the Secretary of State to serve the enfranchisement notices.

Holgate J. dismissed Annington’s claim, holding that the enfranchisement notices served by the Secretary of State were all valid notices under the 1967 Act and rejecting the claims for judicial review of the decision to serve those notices.

A copy of the judgment can be found here.

Mark Sefton KC and Tamsin Cox were part of the counsel team acting for Annington and Adam Rosenthal KC was part of the counsel team for the Secretary of State.

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