I have managed to put in a temporary hacky fix for this which was to call

HtmlRewriteFilter.Initialize(0); on application start.

What I don't understand is why the HtmlRewriteFilter PlugIn is not being loaded and initialized?

After lots of decompilation and reflector pro debugging I have found out the cause to my problem.

Our custom Base class for pages was not inheriting TemplatePage because it was trying to modify the controls collection in the page.

The Controls collection cannot be modified because the control contains code blocks (i.e. <% ... %>).

So we inherited PageBase and were forced to add a constructor with enable, disable int flags :

PageBase() : base (0, 0)
{}

I now see that TemplatePage passes in a HtmlRewriteFilter flag, so this was the reason why it was not being enabled on my pages.

public TemplatePage(int enable, int disable) : base(HtmlRewriteFilter.OptionFlag | QuickNavigator.OptionFlag | enable, disable)
{
}

public PageBase(int enable, int disable) : this((PageTranslation.OptionFlag | LoadCurrentPage.OptionFlag | ServerTransferBugfix.OptionFlag | PageVisited.OptionFlag | enable) & ~disable)
{
}