Guy Hands’ Annington Property Ltd. lost a court bid to block the UK government from unwinding a costly privatization deal tied to an £8 billion ($10 billion) military estate.
(Bloomberg) — Guy Hands’ Annington Property Ltd. lost a court bid to block the UK government from unwinding a costly privatization deal tied to an £8 billion ($10 billion) military estate.
Annington sought to challenge UK plans that could lead to a forced sale on thousands of soldiers’ quarters. The UK Ministry of Defence is pursuing a series of test cases before deciding whether to push for the sale of the whole estate – some 55,000 homes.
Judge David Holgate dismissed the Annington judicial review on Monday, ruling that Defence Minister Ben Wallace could seek to extricate himself from the sale and leaseback agreements.
In 1996, the ministry sold a portfolio of residential housing for £1.7 billion to Annington, now backed by Hands’ Terra Firma Capital Partners, in a deal that left the UK government significantly out of pocket.
“The arrangements were and still remain a bad deal for the MOD,” the judge said. Wallace acted on the basis that “the lease arrangements have resulted in excessive or unreasonable rates of return” for Annington, he said.
Buying back the estate — known as enfranchisement — would create better value for money for taxpayers, the Ministry of Defence said in its legal filings. In one 2021 email, Wallace wrote: “as ministers we have a duty to fix historical messes.”
“The High Court has found that MOD does benefit from a right to enfranchise,” said Natasha Rees, a lawyer at Forsters, which acted for the government. “MOD will now consider whether enfranchisement might achieve better value for money for the taxpayer.”
The MOD said in separate statement that no decisions have been taken on further cases. A spokesman for Annington said it planned an appeal.
“We are surprised and disappointed by the outcome,” the company said. “It risks setting a dangerous precedent for businesses and international investors in the UK and if upheld would mean that the government can disregard long-term contracts if it believes it is in its interests to do so.”
Annington took to court to try to block the sale arguing that the government has no right to make the move without its consent. It accused Wallace of acting unlawfully by trying to take back ownership.
But the judge said Wallace didn’t act improperly.
“The commercial relationship was regarded as unsatisfactory,” he said. “The Secretary of State is entitled to make legitimate use of such bargaining power as he has.”
The initial deal to sell the homes was “disastrous” the Parliament’s Public Accounts Committee said in 2019, given the ministry pays Annington millions of pounds a year in rent for the houses it leases. The National Audit Office estimated that the department is between £2.2 billion and £4.2 billion worse off since the 1996 deal, mostly due to soaring house prices.
(Updates with Annington saying it planned an appeal in ninth paragraph)
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