Canary Riverside Estate Management Limited & Ors v Leaseholders Represented by The Residents' Association of Canary Riverside

This is my decision given orally at the conclusion of the hearing of an appeal from a decision of the First Tier Tribunal Property Chamber (the FTT). At a case management hearing on 25 November 2024 the FTT dealt, amongst other matters, with the listing of an application issued by the appellants on 25 October 2024 for the variation of a management order. For reasons given in writing on 9 December (at paragraphs 13 to 28) the FTT directed that the appellant's application should be heard together with a number of other applications at a single final hearing, which was then expected to take place shortly after 1 July 2025 but which is now known will take place in October.

The background to the appeal is an order under section 24 of the Landlord and Tenant Act 1987 made originally in 2016 and extended in 2021 by which the FTT appointed a manager of the residential buildings at Canary Riverside, and prohibited the appellants from involvement in the provision of services to the leaseholders, including undertaking works of maintenance or repair (the Order). The main proceedings before the FTT are either to extend that order for a further period or to allow it to expire. On top of that background a very substantial additional layer of complexity has been applied by the commencement on 28 April 2022 of the Building Safety Act 2022 (the 2022 Act).

This is far from the first dispute, or the first appeal, involving the FTT appointed manager, Mr Unsdorfer, the three appellant landlords (Octagon, Canary Riverside Estate and Riverside CREM 3), Circus Apartments Ltd, a corporate leaseholder of one of the buildings included in the Order, and the more numerous residential leaseholders represented by the Residents’ Association of Canary Riverside. It is not necessary for me to dwell on the circumstances of the dispute or the relevant statutory provisions, all of which are familiar to the parties. They were also referred to in sufficient detail in a decision of my own published on 15 March 2024, Unsdorfer v Octagon Overseas Ltd [2024] UKUT 59 (LC), and I will assume that any reader of this decision will be familiar with my earlier decision.

The current appeal is another step in the same process of working through the consequences of the commencement of the Building Safety Act for the manager and the parties. Whether the Order should be renewed or continued and, if so, which statutory or contractual building safety responsibilities the manager should retain or assume and which should be surrendered or left to the appellants is to be considered by the FTT at final hearing in October this year.

Some of the applications for determination at that hearing were made as long ago as 2021 and the parties have waited a long time for a final resolution. My decision in March last year was on a separate application but it was, in effect, a preliminary issue in the larger dispute about the future management of the building. That issue was whether a tribunal appointed manager may be an accountable person for the purposes of Part 4 and Schedule 7 of the 2022 Act. I decided, in agreement with the FTT, that they could not. An appeal against my decision to the Court of Appeal, for which I gave the manager permission, was discontinued in August 2024. The appellants in this appeal, who were respondents to the manager’s appeal against my previous decision, had filed a respondent’s notice seeking to uphold my decision on different grounds.

The discontinuance of the appeal makes it necessary to consider whether the manager could, and if he could, whether he should, continue to carry out functions which are made responsibilities of the accountable person under the 2022 Act. The need for that consideration is made acute in this case by the fact that the Canary Riverside Estate suffers from defective cladding which, it is agreed, requires remediation. Since 2019 the manager has been progressing a scheme of remediation for which he has sought support from the Building Safety Fund (the Fund). His application has been delayed by consideration by the Fund of whether it is able or willing to support a scheme proposed to be undertaken by someone who is not, as is now known, an accountable person.

The points which have been ventilated in this hearing by Mr Morshead KC on behalf of the appellants include, I assume, many of the same points which deployed in his respondent's notice challenging the reasoning (though not the outcome) of my previous decision.

The discontinuance of the manager's appeal has cleared the way for the determination of the outstanding applications pending since 2021 for the renewal of the Order. Quite properly, having withdrawn his appeal to the Court of Appeal, the manager sought the directions of the FTT on how he should proceed now that it had been established he was not an accountable person. He was being pressed by the appellants to abandon his proposed remediation scheme which is expected to cost in excess of £20 million and to leave them, as landlords, free and without interference to undertake works of their own which they believe can be completed at a very much lower cost, less than half or perhaps even less than quarter as much.

The question of what work is required is the subject of separate proceedings for a remediation order or alternatively a remediation contribution order which have been brought by the Secretary of State appellants and which are being conducted in parallel with the management proceedings before the FTT.

The manager's application for directions about how he should proceed in light of the discontinuance of his appeal was made in September 2024. The FTT had already listed a series of procedural applications in both the management proceedings and in the remediation proceedings, which were listed to be heard on 25 November.

The manager initially sought to have his application for directions heard at the hearing on 25 November. He asked the FTT whether he should continue to press for funding from the Fund and, if it was granted, whether he should carry out the remediation work or whether he should request that those parts of the Order which prevent the appellants from carrying out their remedial scheme should be removed. The manager adopted a neutral position on the proper course and said that he would do as he was directed by the FTT.

The appellant's might have responded to the manager's application for directions by explaining why they considered that the second suggested course of action should be preferred, namely that the manager should step aside from involvement in remediation and leave them to get on with it. But the appellants did not do that. Instead, they issued a separate application of their own on 25 October in which, in substance, they asked for the manager's second option to be implemented by unspecified variations to the Order to remove some of his functions and to leave them free to undertake their own obligations under the Act. They also sought variations to enable them, once again, to levy service charges to fund the performance of their obligations to the extent permissible under the 2002 Act.

In some respects, the appellants’ application went further than the manager's, which was limited to remediation, whereas the appellants want to remove any overlap between the Order and the building safety functions in Part 4 of the Act. The rival applications were also slightly different in form, one requesting a variation of the Order, the other seeking directions for compliance or dispensation from compliance with the Order. But in substance both applications address the most significant issue facing the appellants and the manager and impacting the lives of the leaseholders, namely the remediation of building safety defects by a significant programme of works. The appellants recognised that overlap and that the issues raised by the two applications, though not identical, could not sensibly be considered in isolation.

I have been taken through the relevant correspondence and directions by Mr Upton this morning and a number of matters are clear.

By the time of the case management hearing on 25 November, it was agreed that the manager's application and the appellants’ application should be considered together. For example, on 8 November, the appellants’ solicitors wrote to all relevant parties, including the FTT, describing the two applications as “inextricably linked” and arguing they ought to be heard together.

It was also agreed that the applications would take time and would require an exchange of evidence, which would make it impossible for them to be heard on 25 November. Time estimates of between three and five days was proposed for a hearing of both applications and, although the parties may have differed within that spectrum, there was a consensus that the applications could not be disposed of on 25 November.

It was recognised that there was some urgency in resolving an issue about information which the appellants wished the manager to provide to enable them to obtain a building assessment certificate (a document issued in respect of higher risk buildings by the Building Safety Regulator which the appellants were required to seek as accountable persons). That issue was separate from the main substance of the applications concerning who should progress remediation. The appellants wanted an early hearing of those applications but they did not suggest that the matter was so urgent that it required to be determined immediately.

Finally, all of those who attended the case management hearing did so in the expectation that the FTT would deal with case management and not with the substance of the applications. That expectation is reflected in a note prepared by Mr Justin Bates KC, who appeared for the appellants at the hearing on 25 November, where he posed the question, “What to do today?”. His answer was that if there was a dispute, which plainly there was, the FTT should give urgent directions to enable the matter to be decided on the basis of written representations in advance of 15 December 2024, a date by which the appellants were required to provide information in connection with their application for a building assessment certificate.

The position which the appellants themselves adopted at that hearing was therefore that the FTT should not determine either their own or the manager's application and that instead it should give directions. That is exactly what the FTT did; it managed the case.

The debate before the FTT appears to have been presented as involving a choice, either to determine the applications in advance of the final hearing or to consider them with all other issues at that hearing. The FTT prefaced the relevant part of its decision with the question whether the appellants’ application to vary the Order should be heard in advance of the final hearing. It decided that it should not, and gave the following reasons.

First, that this Tribunal's decision of March 2024 clearly contemplated that on an application to vary or discharge the Order, section 24(9A) of the Landlord and Tenant Act 1987 would oblige the FTT to consider whether there was a risk of recurrence of the circumstances which gave rise to the making of the Order, and if it concluded that there was, it might decline to vary the Order, even where its terms overlap with Part 4 duties. Any decision on the risk of recurrence would inevitably require evidence which would be likely to be the same evidence as would be relied on at the final hearing in any event. The FTT said that this was not an application which could possibly be decided on submissions alone, an assessment reflecting the consensus between the parties before the hearing.

Secondly, as regards the risk of prosecution on which the appellants had relied, the FTT continued:

Those were the reasons the FTT gave for its decision to hear the appellants’ application at the final hearing and not before. Having heard that ruling the manager did not press for any earlier decision on his own application and the FTT was then able to give appropriate directions.

The FTT also recorded that it had been informed by the Secretary of State's representative, in attendance because of the remediation proceedings, that the Fund, or rather MHCLG, the government department which sponsors the Fund, had confirmed to the manager that it was content to progress his application for support from the Fund even though he was not an accountable person. That seems to have been a recent change, and is an interesting reflection on the approach of MHCLG to the involvement of a tribunal appointed manager; it is also perhaps some recognition of the practical necessity of undertaking a programme of works and of ensuring that works are not delayed by tribunal proceedings further than is absolutely necessary.

At the hearing before the FTT on 25 November the appellants were represented by leading counsel, Mr Bates KC. Its grounds of appeal against the case management decision were settled by Mr Morshead KC. They are strikingly different from the approach taken by Mr Morshead’s predecessor, and, as the FTT noted when it gave permission to appeal, three of the grounds were not even argued before it. It is a little surprising in those circumstances that the FTT was prepared to grant permission to appeal on those grounds, but it did so. Because the challenge is to the FTT’s directions for the final hearing which has been listed and for which all parties now need to prepare, this Tribunal has made time available to hear the appeal as early as possible.

In the event, the FTT granted permission on four grounds, although Mr Morshead KC has focused his submissions mainly on the first of them. That ground, as it appears in the grounds of appeal is that the FTT's order is said to “subvert” the scheme of the 2022 Act. That proposition very closely mirrors submissions made Mr Morshead KC in February 2024 in this Tribunal when the appellants resisted the manager’s appeal from the FTT's decision that he could not be an accountable person.

It said that the cladding works and responsibility for them belong exclusively to the accountable person and not to the manager and that the FTT has no jurisdiction to make orders under any guise, whether as a by-product of case management decisions or at all, which have the effect of impeding the accountable person's performance of its obligations under Part 4 of the Act or delegating those obligations to any other person. If it has jurisdiction to do so, it is irrational for it to have exercised it in the way that it did.

Ground 3 suggests that the FTT failed to take account of relevant factors when it made its decision. Those factors principally comprise the analysis of the relationship between the 1987 Act and the 2022 Act which is the subject of ground 1. They also include criticisms of the conduct of the other parties in, as the appellants now suggest, delaying final determination of the Order applications.

Ground 4 (the third ground of appeal for which permission was given) focuses on the suggested irrelevance of section 24(9A) of the 1987 Act and its prohibition on varying a management order on the application of a landlord where there is a risk of recurrence of the circumstances which led to the order being made. That ground is also predicated on the correctness of the analysis put forward in ground 1.

The final ground for which permission was given (ground 5) suggests that the FTT had given inadequate consideration to the risk of prosecution.

I can deal with the grounds of appeal in reverse order. Ground 5 was not developed by Mr Morshead KC and is, in my view, unsustainable. The FTT clearly had the risk of prosecution well in mind (see [22] above). It cannot be said to have overlooked the relevance of that factor and the complaint that by assessing its significance, the FTT was pre-empting the decision of another court or Tribunal is, with respect, sophistry. What else was it to do than to look at the facts and form a view about how serious the risk was? In November it was being said by the appellant to be a very serious risk. Nothing has eventuated which supports that assessment although five months have now passed since it was relied on.

Grounds 1, 3 and 4 are, in different packaging, an expression of the appellants’ disagreement with parts of the reasoning in my decision of March 2024. In that decision I addressed submissions by the manager based on the suggested absurdity or practical difficulties if his interpretation of the 2022 Act and his contention that he could be an accountable person were not accepted as correct. In particular, it was argued by the manager that Parliament could not have intended to take away “at a stroke” all of his responsibilities for aspects of management which concerned building safety. I agreed that that was an improbable intention to impute to Parliament but I did not consider that the Act had that effect.

Having referred to the relevant provisions of the Act in which it was clear that the draftsman was well aware of the possibility of a manager undertaking functions which mirror the responsibilities of the accountable person, I explained between paragraphs [109] and [113] how, in the absence of transitional provisions, I considered the functions of the manager and the responsibilities of the accountable person related. I concluded at paragraph [113] by recognising that there is a potential impasse between section 24(2E) and section 24(9A) of the 1987 Act. The first, inserted by section 110 of the 2022 Act, prohibits any new (or modified) order which has the effect of conferring building safety functions on the manager, while the second (inserted in 1996) prevents the FTT from modifying or discharging an order on the application of a landlord unless it is satisfied that the circumstances which led to the making of the order will not recur.

I suggested that, in the absence of transitional provisions and for so long as the FTT is not satisfied that a section 24(9A) condition for modification or discharge is met, the only way to resolve this impasse may be for the FTT to make no order on an application by the appellant, leaving the manager to continue to perform the functions originally conferred by the order until either the manager himself or another interested person applies (free of the section 24(9A) restrictions) for discharge or modification. (Although, when I said that, I did not anticipate that it might take 18 months or more for the FTT to be given the opportunity to consider whether the Order should be varied in light of the 2022 Act, the mere passage of time does not alter what appears to me to be the relationship which Parliament intended between the two regimes.)

I went on at paragraph [114] to comment on what I had then been told of the arguments which the parties might deploy at the final hearing. I said this:

“When a management order expires no new order made by the FTT may require the manager to perform functions which Part 4 imposes on the accountable person. Mr Dovar hinted that at Canary Riverside, because the FTT is being asked to vary the existing order (by extending it), rather than make a new order, it might be possible to avoid the restrictions in section 24(2E). Although I heard no argument on that proposition, the FTT will not be able to confer functions on the Manager which Part 4 provides are to be carried out by an accountable person and it appears to me to be far-fetched to suggest that it has power, by extending the Manager’s term, to continue functions falling into that category which the Manager already has.”

I should emphasise, as I did at the time, that I had heard no argument on the proposition which Mr Dovar outlined. It is clear from submissions today that the leaseholders intend to seek a continuation of the Order on terms which allow the manager to take charge of the remediation programme, notwithstanding section 24(2E) of the 1987 Act. What I said in March last year was, as I said at the time, an observation which was intended to be helpful but which was made without hearing proper argument. I say nothing about it today.

The substance of Mr Morshead's submissions was directed at the analysis in my March 2024 decision and in particular paragraphs [106] to [113]. It was, he courteously submitted, a flawed analysis. The correct analysis was, as he had argued 13 months previously in the same room, that from the commencement of the 2022 Act those functions of a Tribunal-appointed manager which were co-extensive with the functions of the accountable person under Part 4 were suspended or overridden and became legally irrelevant. Once that is recognised, there is no need for further consideration and the appellants’ application should be granted summarily.

I will abstain from recording Mr Morshead's argument in further detail. I intend no disrespect to him or to his argument by that abstention, but take that course for these reasons.

First, this is an appeal against the case management decision of the FTT. I have explained the positions taken by the parties before the hearing on 25 November. It was no part of the appellants’ case at that time that the analysis in my own previous decision was wrong. In fact, that analysis was relied on in part by them and was incorporated into the FTT’s own reasoning.

Secondly, given that the FTT was not invited to make its case management decision on the basis of Mr Morshead's analysis of the correct relationship between the statutes, but was asked instead to allocate between three and five days of hearing time at which evidence would be heard, it cannot have erred in law by failing to treat the issue as a point of law on which no evidence was required.

Thirdly, I am not persuaded that the description of the relationship between the two acts I gave in March 2024 was wrong. Whether it was wrong or not, the FTT was at the very least entitled to proceed on the basis that it was correct.

Fourthly, because these are new points, they can only be raised on appeal with the permission of the Tribunal. Mr Upton reminded me of my own review of the authorities on the introduction of new points on an appeal in the Riverside CREM 3 Ltd v Unsdorfer [2022] UKUT 98 (LC), at [38]-[39].

“[38] A concise and frequently cited summary of the relevant principles to be applied in deciding whether a new point may be advanced on appeal was provided by Haddon-Cave LJ in Singh v Dass [2019] EWCA Civ 360, as follows:

“[16] First, an appellate court will be cautious about allowing a new point to be raised on appeal that was not raised before the first instance court.

[17] Second, an appellate court will not, generally, permit a new point to be raised on appeal if that point is such that either (a) it would necessitate new evidence or (b), had it been run below, it would have resulted in the trial being conducted differently with regards to the evidence at the trial…

[18] Third, even where the point might be considered a 'pure point of law', the appellate court will only allow it to be raised if three criteria are satisfied: (a) the other party has had adequate time to deal with the point; (b) the other party has not acted to his detriment on the faith of the earlier omission to raise it; and (c) the other party can be adequately protected in costs.”

[39] I was also referred to passages from the judgment of the Court of Appeal (Lewison, Christopher Clarke and Sales LJJ) in Prudential Assurance Co Ltd v HMRC [2016] EWCA Civ 376, which discussed these principles and explained them in greater detail. The approach to taking new points is justified on a number of grounds, which include: the right of the parties to define in their statements of case the issues on which the court is invited to adjudicate; the unfairness of exposing a party to issues and arguments of which fair warning has not been given; the expectation, for reasons of fairness and proportionality, that parties will put before the trial judge all questions both of fact and of law upon which they wish to have an adjudication; and the general public interest in the finality of litigation.”

It is a subject of legitimate complaint by the leaseholders that, as the Riverside CREM 3 case illustrates, this is not the first occasion on which new points have been taken on an appeal, putting them to additional expense and anxiety, when the appellant could have taken the same points before the FTT and had them resolved there.

For those reasons, I am not prepared to express any further view on the issue Mr Morshead placed centrally in his argument, namely whether the task of the FTT was simply a practical exercise in bringing the manager's functions, so far as they relate to building safety, to an end and providing for a transition or handover to the appellants without room for a different destination; or whether what is required is an evaluative or discretionary decision to be made under the 1987 Act, having regard to the provisions of the 2022 Act, on which functions, if any, should be conferred on or remain with the manager and whether these might result in the manager undertaking the remediation works. That is not a question which the FTT considered and it would not be fair to the leaseholders for it to be determined against them without them having had the opportunity to present full argument (which they have not done today). It would hijack and pre-empt the final hearing of the applications and would disrupt the FTT's own case management timetable.

My only reason for hesitating at all in coming to the conclusion that I should not address Mr Morshead’s argument is that when it gave permission to appeal, the FTT suggested that it was “reasonably arguable” that the appellant was right, and that evidence was not required to enable it to dispose of the two rival applications. That appears to have been why it gave permission to appeal, notwithstanding that it had been presented with no argument before it made its own determination and had not been asked to consider the way in which Mr Morshead now puts the appellants’ case. It may have considered that it would be assisted by having that issue addressed by this Tribunal before it considered the applications now listed before it. But it is not the function of an appeal to determine the appropriate case management of issues which the parties have previously agreed do require evidence and should not yet be determined, nor, except in the circumstances mentioned in Singh v Dass (which do not apply), to determine issues which have not yet been considered by the FTT.

I am anxious to be as helpful as I can but this Tribunal can only express views on matters which are properly the subject of an appeal, and can only substitute a decision of its own if it is satisfied that the FTT has gone wrong in law. The status of any preliminary expression of opinion by me would be very questionable indeed (it was perhaps ill-advised for me to go as far as I did in paragraph [114] of my decision of March last year). I am quite sure any observations by me adverse to the submissions put forward by Mr Morshead would be the subject of an immediate application for permission to appeal to the Court of Appeal. The whole orderly determination of issues by the FTT, with a right of appeal to this Tribunal, would be disrupted.

So I decline Mr Morshead's invitation and, if it was the intention of the FTT, the FTT's invitation to have the first bite at those questions. The first bite should be the FTT’s in October.

Those are my reasons for dismissing the appeal. They deliberately do not do justice to the full extent of the argument which has been presented, but in my own defence, that is because the argument has been presented prematurely. I cannot sit as a tribunal of appeal from my own decision of March last year, and that is effectively what I have been asked to do.