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Is this the end of the battle for Dolphin Square?

18 July 2014

On 17 July 2014 Mr Justice Mann handed down his eagerly awaited Judgment in the long-running battle for control of Dolphin Square [1]. 

Westbrook, the Claimant, succeeded in defeating all seven grounds of challenge raised by the Defendant freeholder, Friends Life. Subject to any appeal by Friends Life, the way is now clear for Westbrook to proceed with the purchase of the freehold at a price to be agreed or, failing that, determined by the Residential Property Tribunal. 

The price will be comfortably the largest collective enfranchisement premium ever agreed under the Act [2] and could be anything up to £200 million. Dolphin Square comprises 13 blocks with a total of almost 1,300 flats and until relatively recently it was listed in the Guinness Book of Records as the largest block of flats under one roof in the world.  

The proceedings

Friends Life challenged Westbrook's entitlement to the freehold on a number of different grounds. These can be generally grouped under three headings: concerns regarding the corporate structuring of the purchasing entity; specific challenges under the governing legislation; and a curveball under the insolvency legislation. 

Challenges to the corporate structure

Whilst Friends Life dropped its original allegations that the corporate structure was a sham, it pursued a slightly diluted case that the artificiality of the structure should prevent it from giving rise to a valid enfranchisement claim.

Whilst the Court accepted that the sole purpose of the extremely complex structure was to bring about a successful collective enfranchisement claim, the Judge found that this should not prevent a successful claim being made. An associated Human Rights Act claim by Friends Life also failed.

Specific challenges under the governing legislation

In short Friends Life ran three separate challenges:

  • That the 612 Jersey companies, set up by Westbrook to each hold a lease comprising two flats, were "associated companies". This would have meant that all of the flats comprised in those leases would be considered to be within the same ownership. The Act provides that where one person owns three or more flats, they are prevented from being a qualifying tenant in relation to any of those flats. Had Friends Life succeeded on this point, Westbrook would not have met the basic qualification criteria under the Act. Having reviewed the corporate structure, and the underlying discretionary trusts, the Judge rejected Friends Life's argument.
  • That more than 25% of the floor area of the premises taken as a whole was put to non-residential use. Under the Act this would prevent a claim for collective enfranchisement.  Perhaps the most interesting legal point to arise out of the decision is that Friends Life had not raised this challenge in its original Counter-Notice. It was generally thought that failure to raise a challenge in the landlord's Counter-Notice would prevent the landlord from pursuing that challenge at Court.  Whilst the Judge surprisingly allowed Friends Life to run the point, he found as a matter of fact that the non-residential parts of the premises did not exceed 25%. This involved a detailed analysis of a number of different areas including flats let for as little as a few days at a time, company lets, offices, a fitness centre and spa and a champagne bar and restaurant.
  • That Westbrook's Initial Notice was invalid as the price specified was unrealistic. Reviewing a number of arguably conflicting authorities, the Judge found that there should be an objective test applied to the price proposed in the tenant's Notice. He went on to say "…that the figure proposed…must be a genuine opening offer…" He concluded that the offer of circa  £111 million was such an offer. It certainly could not be considered to be nominal or absurdly low. 

The curveball

The Judgment concluded with a thorough review of what can only be described as a very  unusual point raised by Friends Life. In short it was alleged that the arrangements giving rise to the claim amounted to a transaction to defraud creditors under the insolvency legislation [3].

It is difficult to fully understand let alone explain the precise nature of this challenge, but the Judge wasn't impressed with it. 


There will, no doubt, be detailed analysis of what is a significant decision in this area. With the amounts involved, an appeal would seem almost inevitable albeit the length and detailed nature of the Judgment will give Friends Life some food for thought in how to approach any appeal. 

In the meantime, we do not see the decision as necessarily opening the floodgates for similar claims in the future.  One of the unusual features of this case was that the underlying occupation of all of the flats was on the basis of short term tenancies. 

In the traditional model, long leases would be granted of each of the flats such that the right to collective enfranchisement would lie with the occupying tenants as opposed to the owner of a head-lease of the whole building as was the case with Westbrook. 

However, with significant growth in the private rented sector leading to shorter term tenancies being granted, it could be that there will be more buildings susceptible to this sort of claim by a head-lessee in the future.  Those responsible for designing the letting structures of such developments will need to have this decision firmly in mind.

[1] Westbrook Dolphin Square Limited v Friends Life Limited [2014] EWHC 2433 (Ch)
[2] The Leasehold Reform, Housing and Urban Development Act 1993
[3] Section 423 of The Insolvency Act 1986

This article was written by James Souter.

For more information please contact James on +44 (0)20 7427 6716 or james.souter@crsblaw.co