Manager had to personally re-pay service charge received

When a manager is appointed under section 24 of the Landlord and Tenant Act 1987, the manager is a court or tribunal-appointed official who is answerable to that court or tribunal and whose responsibility is to carry out the duties required by the order appointing them. What happens when a court-appointed manager fails to comply with tribunal requirements? This was the situation that had to be dealt with in Suchorski and others v Norton [2021] UKUT 166 (LC). In 2017, the First-tier Tribunal granted the request of a group of leaseholders and appointed a manager (N) to manage a residential block known as Albert Court, Market Street Torquay. N had never held a tribunal appointment before and so the FTT directed that the three-year appointment would be reviewed after 18 months. This proved to be a very prescient direction. The review revealed that leaseholders were not satisfied with N’s performance, the condition of the block had deteriorated and a request was made for a replacement manager. The FTT ordered that N should indicate whether he consented to a replacement or attend the tribunal but he did neither. Directions were made that he attend and produce service-charge information but to no avail. A replacement manager was appointed, further directions were made directing N to provide a final closing account, provide insurance documentation and reimburse unexpended sums. He was warned that a failure to cooperate could lead to a referral to the upper tribunal.   Still there was no attendance. The replacement manager advised that she could not ascertain whether the block was insured, and that N had not provided required documentation. Rule 8(5) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 entitles the FTT to refer to the UT any failure by a person to comply with requirements imposed by the FTT to produce documents or to attend to give evidence. As the FTT has no enforcement powers of its own, the purpose of a reference is to ask the UT to exercise its powers under section 25 of the Tribunal, Courts and Enforcement Act 2007, which gives the UT (for some matters) the same powers, rights, privileges and authority as the High Court. The FTT referred N’s failures to comply to the UT and also ordered that N reimburse the £300 tribunal fee to the leaseholder applicants. When N was eventually located by court enforcement officers and effectively served, he attempted to provide some explanation to the UT as to his failings. However, despite adjournments he continued to fail to provide the statements and accounting information required to ascertain the service charge position. Although N again failed to attend a hearing, Martin Rodger QC, Deputy Chamber President, held that it was unnecessary to compel N’s attendance – the order the tribunal could make where a tribunal-appointed manager fails to account for money received would be sufficiently punitive. Sums payable by leaseholders to a tribunal appointed manager are contributions towards the cost of services and are service charges within the meaning of s18(1) Landlord and Tenant Act 1985. The statutory protections afforded to leaseholders by the 1985 Act apply to such payments as do the additional statutory protections provided by section 42 of the 1987 Act. Section 42 requires the landlord or other person to whom service charges are paid to hold any money they receive on trust to defray the costs incurred in connection with the matters for which the relevant service charges were paid, and otherwise on trust for the contributing leaseholders for the time being. Accordingly, N was a trustee who had failed to account for money entrusted to him and so was presumed still to hold the money subject to the trust. He was required to personally repay all monies received by him in his capacity as tribunal appointed manager of the block. Before making the order directing that N repay monies personally, he had been given many opportunities to provide the proper information to the FTT and UT. Further, even though the order was made the opportunity to account for monies properly expended was still open to him. Elizabeth Haggerty is a barrister