Landlord and tenant – Appointment of manager – Duty to account – Respondent manager appointed by First-tier Tribunal (FTT) being discharged – Respondent failing to comply with FTT order requiring him to account for funds received – FTT referring matter to Upper Tribunal – Consequences of respondent’s failure to account – Order accordingly
The applicants were the leaseholders of seven flats in a block known as Albert Court, in Market Street, Torquay. They applied for the removal of the respondent from his position as manager of the premises under an appointment by the First-tier Tribunal (FTT) under section 24 of the Landlord and Tenant Act 1987. The basis of the application was that the respondent had failed to carry out the duties assigned to him by the FTT.
The FTT removed the respondent and appointed a replacement manager. It also made consequential orders directing the respondent to file an account showing what sums he had received in the course of his appointment and what he had done with them. The period of that appointment was from 1 September 2017 to 29 August 2019.
The respondent failed to comply with the FTT’s order and had, so far, provided no account. The FTT made an order under rule 8(5) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 referring the application to the Upper Tribunal (UT) to exercise its powers under section 25 of the Tribunals, Courts and Enforcement Act 2007. The respondent failed to attend the hearing despite being required to do so.
Held: The order was made accordingly.
(1) A manager appointed by a court or tribunal under section 24 of the 1987 Act was a court or tribunal-appointed official, whose responsibility was to carry out the duties required by the order appointing them. The manager answered to the court or tribunal which appointed them: Maunder Taylor v Blaquiere [2002] EWCA Civ 1633; [2003] 1 EGLR 52 followed.
(2) Sums payable by leaseholders to a tribunal-appointed manager as contributions towards the cost of services, were service charges within the meaning of section 18(1) of the Landlord and Tenant Act 1985. It followed that the statutory protections afforded to leaseholders by the 1985 Act applied to such payments. Further, the additional statutory protections provided by section 42 of the 1987 Act applied to service charges paid by leaseholders to a tribunal-appointed manager. Section 42 required the landlord or other person to whom service charges were paid to hold any money they received 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. The tribunal which appointed a manager had power to require the manager to provide a final account of their receipts and expenditure at the termination of their appointment, and to direct that any surplus be paid to the leaseholders: Chuan-Hui v K Group Holdings Inc [2021] EWCA Civ 403; [2021] EGLR 19 and Kol v Bowring [2015] UKUT 0530 (LC) considered.
(3) Rule 8(5) of the FTT Rules entitled the FTT to refer to the UT any failure by a person to comply with requirements imposed by the FTT to produce a document or to attend for the purpose of giving evidence. The FTT had no enforcement powers of its own, and the purpose of a reference was to ask the UT to exercise its powers under section 25 of the Tribunals, Courts and Enforcement Act 2007.
Section 25(1) of the 2007 Act provided that in England and Wales and in relation to the matters mentioned in section 25(2), the UT had the same powers, rights, privileges and authority as the High Court. The matters mentioned in section 25(2) were the attendance and examination of witnesses, the production and inspection of documents, and all other matters incidental to the UT’s functions.
(4) It was not necessary to take further action at this stage to compel the respondent’s attendance as the minimum order the UT could make where a tribunal-appointed manager failed to account for money received was sufficiently punitive in this case.
The minimum appropriate response by the UT in the circumstances was to require the respondent personally to repay all monies received by him between 1 November 2017 and 29 August 2019 in his capacity as tribunal-appointed manager. The respondent assumed the responsibilities of a trustee when he accepted the FTT’s appointment. As a trustee he was under an obligation to account for all money he received. A trustee who failed to account for money entrusted to him was presumed still to hold it subject to the trust. Having been required to explain what he had done with the money received in his capacity as manager, and having failed to do so, it would therefore come as no surprise to the respondent that he was now required to repay that money.
The evidence before the UT suggested that the respondent did incur some expenditure in his capacity as manager. In particular, he might have arranged cleaning or insurance of the building. The opportunity was still open to the respondent to account for what he spent, but it was for him to do so.
(5) The UT would have to conduct an inquiry to establish how much the respondent received. The applicants had not played an active part in this matter following its transfer to the UT so an order would be made giving them, and any other leaseholder, the opportunity to provide evidence of the sums they paid to the respondent during his appointment. Evidence that payments had been made would include copies of service charge demands and any receipts issued by the respondent, together with copy bank statements showing payments made to the respondent. Once the total had been established, the respondent would be required to repay that sum either to the new manager, if she remained the manager of the property, or to the leaseholders who made the payments.
The parties did not appear and were not represented.
Eileen O’Grady, barrister
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