[2024] UKUT 59 (LC)

There was no dispute between the parties on the proper approach to statutory interpretation. The Tribunal’s task is to identify the meaning of the words used by Parliament in the light of their context and the purpose of the provision. In O (a minor), R (on the application of) v Secretary of State for the Home Department [2022] UKSC 3, at [30], Lord Hodge DPSC stressed the primacy of the language enacted by Parliament, read in its immediate and wider statutory contexts, and the secondary role of external aids to interpretation. Although I was also reminded of Pepper v Hart [1993] AC 593, the only extract from Hansard to which I was referred was at best peripheral to Mr Morshead’s argument and did not seem to me to be sufficiently specific or material to meet the stringent test which would allow it to be admitted. In any event, I have not found the language of section 72 to be ambiguous such as to make reference to Hansard necessary or permissible.

Mr Dovar prefaced his submissions by referring to what Lord Briggs JSC said in Settlers Court RTM Co Ltd v First Port Property Services Ltd [2022] 1 WLR 519, SC, at [54], that:

Mr Dovar submitted that the Manager was an accountable person because he was under repairing obligations in relation to the common parts as a result of the FTT’s management order and those obligations were both “under a lease” and “by virtue of an enactment” and were therefore relevant repairing obligations. The FTT had taken too narrow a view of the statutory language and had paid insufficient regard to the “absurd” consequences of finding that a tribunal appointed manager could not be an accountable person.

He suggested that the exclusion of a tribunal appointed manager from the status of accountable person produced such an absurd and inconvenient result that it cannot have been the intention of Parliament. The consequence of the FTT’s construction, Mr Dovar submitted, was that “managers of higher risk buildings would at a stroke be stripped of the majority of their management responsibilities, in particular those relating to the most serious risks in the building”. Management of those parts of a building which represented the greatest safety risk would revert to the original landlord. A professional manager, vetted by the FTT before appointment and held by it to high professional standards, would be replaced by a landlord whose past conduct had warranted them being stripped of the management of their own property.

If the landlord then failed to adhere to its duties as accountable person, the leaseholders would be obliged to seek redress through the Regulator, as they are unable themselves to seek an appointment of a special measures manager. Meanwhile, the manager would be left to manage the parts left to them. The divide between the Part 4 duties and those retained by a section 24 manager were far from clear and would at the very least necessitate a high degree of co-operation and co-ordination between the manager and the landlord. Mr Dovar referred to what Lord Briggs had said in Settlers Court,at [50], about “the very real problems of making workable a shared management concept in relation to estate facilities”; these were “so great as to amount to absurdity” if the statute there under consideration (the Commonhold and Leasehold Reform Act 2002) was construed in such a way as to require different interests to co-operate in managing the same property.

The FTT itself had acknowledged the ‘significant practical consequences’ of its decision in this case, including the ‘risk of disagreement’ between the Manager and the principal accountable person over how the cladding-removal works should be progressed.

As for the statutory language, in the context of the management regime of the 1987 Act it was perfectly possible to refer to a manager’s obligations as being conferred “by virtue of” the 1987 Act. Given the consequences of the alternative construction, that reading should be preferred.

For the same reason, Mr Dovar submitted that it was apt to view a manager’s obligations as arising “under a lease”. In K Group Holdings Inc v Chuan-Hui [2021] 1 WLR 5981 at [56], in considering whether the statutory provisions regulating service charges applied to a tribunal appointed manager, Henderson LJ had analysed the manager’s rights as arising both under the tribunal’s order and under the lease itself:

“It is true that the manager’s right to recover the charges is dependent upon the order made under section 24, but in a case (such as the present) where the manager is directed to operate the service charge machinery in the lease, it also remains true to say that the charges are paid under the lease. The important point, in my judgment, is that the provisions contained in an order made under section 24 of the 1987 Act are superimposed on the existing contractual framework of the lease, …’

The Residents’ Association made submissions supportive of the Manager’s appeal, settled by Mr Upton. He additionally suggested that a specific provision excluding managers from being accountable persons would have been included if that had been intended. He acknowledged that section 24(2E) precludes a management order from imposing the statutory obligations of an accountable person on a manager but submitted that it does not preclude an order under section 24 imposing general management functions (which may include a “relevant repairing obligation”). Nor does it prohibit a manager from being an accountable person or from being responsible in that capacity for managing building safety risks. Where a manager is under relevant repairing obligations, and is therefore an accountable person, compliance with the building safety functions would be enforced by the Regulator under the 2022 Act, and not through the FTT, which would achieve the statutory objective of a single duty holder and enforcement route.

Further written submissions in support of the appeal were made on behalf of the fourth respondent, Circus Apartments Ltd, by Mr Rainey KC. He submitted that the Manager plainly has all the obligations of the Landlords in respect of repairs. There is a sufficient nexus or connection between those obligations and the order appointing the Manager for those obligations to be said to be “under a lease” or “by virtue of an enactment”. Moreover, a manager is in an analogous position to an RTM company; nothing in section 72 says specifically that an RTM company may be an accountable person but it is clear enough from section 161, 2022 Act and section 30E, Landlord and Tenant Act 1985 that an RTM company does have that status. That is because the acquisition of the right to manage confers repairing obligations of the RTM company “by virtue of an enactment”.

For the Landlords, Mr Morshead KC submitted that the FTT’s decision had been correct and that the statutory scheme envisaged that a tribunal appointed manager would have no role to play concerning building safety. The obligations imposed on the accountable person were onerous and on its true construction section 72 “protected” a manager from them. As performance of the functions of the accountable person was backed by criminal sanctions, Mr Morshead KC submitted that they could only be imposed by clear language. It was ironic, he suggested, that the Manager in this case should be so anxious to assume those functions for himself.

The legislative purpose which could be discerned from the structure of Parts 4 and 5 and from the Explanatory Notes was to allocate responsibility for those new functions to the freeholder or other person with repairing obligations closest to the top of the chain of property interests, and to maintain a clear demarcation between those functions (with their own regulator and enforcement regime) and other property management functions including those of a tribunal appointed manager.

The statutory duties in respect of building safety created by Part 4 were entirely new and did not depend on any contractual allocation of repairing obligations. Where the functions of the accountable person overlapped with a manager’s duties it had been necessary for Parliament to decide which was to take priority, and Mr Morshead KC suggested that it was clear from section 110 and from paragraph 8 of Schedule 7 that the manager was intended to “yield” to the accountable person. He vigorously resisted any suggestion that a manager’s functions could coexist with those of the accountable person (a possibility which he referred to as a “third way”), even for a temporary period between the commencement of the 2022 Act and the manager seeking directions from the FTT. That would subvert the intention that there should be a single duty holder who could be held to account for building safety.

The Manager’s obligations did not arise “under a lease”.His powers and duties come from the management order, as the Court of Appeal had explained in Maunder Taylor v Blaquiere [2003] 1 WLR 379. Nothing which Henderson LJ said in K Group v Chuan-Hui was directed to the question whether a tribunal appointed manager was appointed “under a lease” for the purposes of section 72 of the 2022 Act.

Nor did the manager’s repairing obligations arise “by virtue of an enactment”. That expression was a reference to repairing obligations imposed by statute including, most relevantly, sections 9A, 10A and 11, Landlord and Tenant Act 1985 (which imply covenants on the part of a landlord concerning fitness for human habitation, compliance with prescribed repairing requirements, and repair of the structure and exterior of the dwellings and buildings containing them). Mr Morshead KC acknowledged that the context in which that expression was used was critical to its meaning. Nevertheless, in General Medical Council and others v Michalak [2017] UKSC 71 (when considering whether the right to apply for judicial review arises “by virtue of an enactment”), the words “by virtue of an enactment” were said to be “… directed to cases in which specific provision is made in legislation …” (Lord Kerr JSC at [33]).

Mr Morshead KC also relied on sections 47A(3) and 49A(3), 1987 Act, which had been inserted by section 113, 2022 Act, as demonstrating that the drafters of the 2022 Act did not treat tribunal appointed managers as appointed by virtue of a statute (instead referring to their appointment as being “by virtue of an order of any court or tribunal”). Similarly, the heading of section 110, 2022 Act refers to managers “appointed under” the 1987 Act, not “by virtue” of it.