Guy Hands’ property company loses legal case against UK government

A High Court decision to uphold the government’s unwinding of one of the country’s most costly privatisation deals risked setting a “dangerous precedent” for UK inward investment, the property company that brought the case said on Monday.

The warning by Annington, which is controlled by billionaire Guy Hands, came after it lost a legal challenge to block an attempt by the defence ministry to use property law to take back ownership of tens of thousands of homes for military service families.

Under the controversial £1.7bn sale and leaseback agreement concluded in 1996, the government signed over 57,434 properties to Annington, now controlled by Terra Firma, Hand’s private equity business. The Ministry of Defence then leased back the properties and shoulders the maintenance bill.

The deal, which was signed the year before the then-Conservative government lost power to Labour, has been widely criticised. The National Audit Office estimated in 2018 that over the first 21 years of the contract the taxpayer was between £2.2bn and £4.2bn worse off from the transaction, which was overseen by Michael Portillo, who was defence secretary at the time.

In late 2021 the MoD used property law to take back ownership of eight properties in the portfolio as test cases. Annington went to the High Court, arguing the actions were unlawful.

In his ruling, Mr Justice David Holgate found that Annington had “failed to justify their assertion that the [secretary of state’s] status as a public authority made it improper for him to act in that way, in contrast to the position of a private individual or company”.

Annington said it was “surprised and disappointed by the outcome” and planned to appeal. It warned that the ruling risked “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”.

Referring to the NAO report, the judge found that the MoD in agreeing to the original deal had “failed to protect long-term [value for money], and profit-sharing or clawbacks from increases in the value of the housing had ceased after 15 years”.

He said those failures were “some of the reasons why the agreements with [Annington] were widely recognised as being a bad deal for the public purse”. The judge added: “I do not see why it was legally improper for the defendant to have been motivated by these economic concerns which plainly are of national importance.” 

The judge noted that following his ruling the government may “serve more notices, possibly a large number of them” on other properties in the portfolio.

In a statement, the defence ministry welcomed the ruling, which found it had “acted lawfully in seeking, successfully, to establish its right to enfranchisement.” It added: “No decision has been taken on further enfranchisement cases, but we will consider the High Court’s decision and the potential implications for securing better value for money for the taxpayer.”