Westbrook Dolphin Square Ltd v Friends Life Ltd [2014] EWHC 2433 (Ch)
In Westbrook Dolphin Square Ltd v Friends Life Ltd [2014] EWHC 2433 (Ch), Mr Justice Mann held that the long lessees of flats in Dolphin Square were entitled to acquire the freehold of what was once the largest block of flats in the world, under the Leasehold Reform, Housing and Urban Development Act 1993. It is believed that the Dolphin Square enfranchisement is the largest-ever enfranchisement.
The case considers a number of points of importance, principally:
(1) The use of company schemes in the enfranchisement context
(2) The meaning of “residential purposes” under the 1993 Act scheme
(3) The test for the validity of initial notices under the Act, in particular in relation to proposed purchase prices
(4) The law in relation to transactions at an undervalue under the Insolvency Act 1986, section 423.
In a long, detailed and important judgment delivered on 17 July 2014, the freeholder’s defences were all rejected. The lessee companies each held two flat leases. The lessees were not companies in the same group, and thereby avoided the provision that no more than 2 flats could be held by the same person. The 1993 Act was not to be construed so as to prevent these lessees from enfranchising; nor were Friends Life’s human rights infringed. In addition, Mann J held that less than 25% of Dolphin Square was not occupied for residential purposes, contrary to Friends Life’s argument regarding flats let for short stays or on longer terms as corporate housing. There was consideration about what parts of the premises were common parts. Friends Life were allowed to advance their arguments on the 25% rule, even though it had not been mentioned in their counter-notice.
A challenge to the validity of the initial notice, on the ground that the proposed price (of £111.6 million) was unrealistically low also failed. It had to be a genuine opening offer, as opposed to a nominal figure. The Judge went on to hold on the evidence he heard that this notice satisfied a more stringent test, if it were necessary to apply one.
Finally, a counterclaim brought by Friends Life that the granting of the leases to the lessee companies amounted to a transaction at an undervalue under s. 423 of the Insolvency Act was dismissed.
Nicholas Dowding QC and Anthony Radevsky acted for Westbrook. Stephen Jourdan QC and Mark Sefton acted for Friends Life.
A full transcript of the judgment is available here
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