FTT Appointed Manager subverts management order. Breaches fiduciary duties. Now what?

[Gulliver]

A friend has just forwarded me a copy of a recent service charge case where the First Tier Tribunal makes no less than 5x references to the Appointed Manager breaching his fiduciary duties. The Appointed Manager was also judged to have subverted the management order for his own financial gain. I have highlighted in yellow the most relevant portions of the 35 page report. Some examples given in the report are:

1. Charging £93,000 for major works that should have cost no more than £25,000.
2. Entering into a 'management agreement' with his own daughter's block management company - where he is the sole shareholder.
3. Granting major work contracts to companies that the Appointed Manager had an undeclared financial interest in - and denying the connections when explicitly questioned on the matter.
4. Transferring service charge and reserve fund monies into his own 'non-trading' company bank account - and denying any connection with the company when explicitly questioned on the matter.
5. Using leaseholders' reserve fund contributions to offset the service charge arrears of the freeholder.

Although this Appointed Manager's management order is at an end at this particular building, my friend informs me that the Appointed Manager is the FTT Appointed Manager at another 7 buildings; manages c.150 buildings through his daughter's block management company - where he is the sole shareholder and continues to operate without a care in the world.

Is it me, or is there something wrong with this picture?

[Lorimer]

I had to read the report a couple of times to get my head around it all. It is a bit of an epic read. Just as well that you provided a summary of the main findings in your post. Even so, nothing could have prepared me for just how arrogantly the appointed manager behaved. It seems mad that the function of the FTT would just end with a report - leaving the appointed manager free to continue doing the same thing to others ...

[Aidoo326]

Is it me, or is there something wrong with this picture?

No. It is not you. There is something very, very wrong with the picture. In the report, I counted 5 mentions of subverting the management order as well as 5 mentions of breaching fiduciary duties. In any other field of employment this kind of behaviour would be grounds for gross misconduct and dismissal. At the very least, the FTT should immediately strip this individual of all his other FTT Appointed Manager positions and refer his conduct to the PRS and ARMA.

[eagle2]

The decision highlights some of the problems with leasehold properties and sadly they are not uncommon, which can be confirmed by reading other decisions, The legislation should be changed and the local MP should be contacted. As stated elsewhere on this forum, the organisations which are supposed to represent leaseholders should address the real issues.

[Gulliver]

nothing could have prepared me for just how arrogantly the appointed manager behaved.

And I believe that this is why the Appointed Manager was given even more of a dressing-down than is evident in the report. Apparently during the two day hearing in the case, the lead Judge called the Appointed Manager "A moron in a hurry." The lead Judge also told the Appointed Manager "Making a bad point three times does not make it a good point," and "When you are in a hole, it is better to stop digging."

Obviously the lead Judge felt that the Appointed Manager needed to be taken down a peg or two.

[Gulliver]

The decision highlights some of the problems with leasehold properties and sadly they are not uncommon.

On another forum, someone is trying to convince me otherwise - that the actions of this particular FTT Appointed Manager are a one-off and that 99.99% of Appointed Managers are professional and honest.

My point is that this FTT report has found that the Appointed Manager and his various trading and 'non-trading' companies have inflated service charge costs at the building.

This FTT report also found that the only entities to have benefitted from this inflation of costs are the Appointed Manager and his various trading and ‘non-trading’ companies and contractors – such as one contractor company that is owned and controlled by the wife of the employee of the Appointed Manager.


Paragraph 86 (ii) of the report says: On 20 January 2021 sums of £2,011.50 and £819.50 were transferred to COMPANY NAME, a company in which the Appointed Manager is the sole director. The Appointed Manager was unable to provide an explanation for these transfers.

Isn’t this fraud?

The bottom line is had the leaseholders and the freeholder not stood their ground, they would have paid demands totalling £106,573.90 for service charges worth no more than £25,000.

Isn’t this attempted fraud?

The legislation should be changed and the local MP should be contacted.

Agreed.

[Lorimer]

Apparently during the two day hearing in the case, the lead Judge called the Appointed Manager "A moron in a hurry."

I must admit that I had to Google this phrase as I had never heard of it before. I was surprised to find that it is a real legal term. In this context, it means that something is so obvious that only a moron in a hurry could mistake it. I wonder what preceded the Judge calling the Appointed Manager a moron in a hurry?

[eagle2]

I would not be surprised to see an appeal to the Upper Tribunal, I am not sure that the FTT has the jurisdiction to order monies to be repaid by a manager, Otherwise there will be a lot of managers and agents extremely concerned. Some of the issues are widespread such as charging additional amounts for themselves or their connected businesses, failing to declare their interests, demanding excess monies for reserve funds and misusing those funds for other purposes,

Transferring service charge monies to an incorrect bank account is a breach of trust if not outright fraud,

The real problem is that the scams and the main offenders are well known but nothing is done to put a stop to them,

[Aidoo326]

I would not be surprised to see an appeal to the Upper Tribunal, I am not sure that the FTT has the jurisdiction to order monies to be repaid by a manager, Otherwise there will be a lot of managers and agents extremely concerned.

I thought that that jurisdiction was given in paragraph 114 of the decision report? Within that paragraph, it is written that the terms of the FTT management order specifically stated that any overpayment was to be credited to the payee ...

Anyway, I don’t think that the Appointed Manager can go straight to the Upper Tribunal to appeal. I think that the Appointed Manager would first need to seek permission to appeal from the FTT. Then if the FTT refuses the Appointed Manager permission to appeal, the Appointed Manager can apply to the Upper Tribunal for permission to appeal. The Upper Tribunal could refuse that permission.

[Gulliver]

The real problem is that the scams and the main offenders are well known but nothing is done to put a stop to them,

You are so right.

On another forum it has been pointed out that there are only 5x units in this block and the financial abuses were still quite high e.g. c 25K to be repaid by the Appointed Manager. It could have been much more had the leaseholders and the freeholder not dug their heels in. The size of financial abuses would be greater in blocks of 20 units or even 100 units.

If similar financial abuses are occurring at the 150 buildings that this Appointed Manager claims to be managing, this could result in millions of pounds per year being defrauded from leaseholders and freeholders alike – by the same Appointed Manager. Yet the FTT has no internal system for referring systemic behaviours like those demonstrated by this particular Appointed Manager to the authorities. When leaseholders refer such issues to other authorities, they can only do so in respect of their own building – which makes the issues look less systemic and smaller scale than they actually are.

It appears that this particular FTT Appointed Manager has come a cropper many times before. I found a First Tier Tribunal report dated 21-07-2021. It concerns another building where the same Manager was appointed by the FTT on a three year management order which expired in August 2020. There was no application made to extend the management order before it expired and the FTT Appointed Manager is now seeking another three year management order for the same building. The FTT panel suspended making another management order for three months stating:

1. The FTT Appointed Manager had achieved nothing at all during the 1st three years.
2. The FTT Appointed Manager had breached the terms of the 1st management order by not sending the FTT annual reports and accounts.

[Lorimer]

I am not sure that the FTT has the jurisdiction to order monies to be repaid by a manager, Otherwise there will be a lot of managers and agents extremely concerned.

Perhaps the FTT has no jurisdiction to order an Appointed Manager to make personal repayment of the sums. However, I think in this particular case, if there were an appeal to the Upper Tribunal, the Upper Tribunal would say exactly what the FTT said and would order the Appointed Manager to make personal repayment of the sums. Also, I don’t think that the Upper Tribunal would interfere with the other rulings made by the FTT because all the other rulings were made on the basis of the evidence that the FTT had in front of it from the parties.

In Suchorski and Others v Norton UTLC 8 Jul 2021 a discharged FTT Appointed Manager failed to comply with the FTT order to send them a closing account showing the sums of money that he had received during his tenure and what he had done with them. The FTT referred the failure to comply to the Upper Tribunal which again ordered the Appointed Manager to file the account. The Appointed Manager vaguely responded that all the money that he’d received during his tenure had been spent on the building but he still failed to provide the account that had been requested. The Upper Tribunal made an order stating that the Appointed Manager must personally repay all the sums which he had received during his appointment as manager - not just the unspent sums. The Upper Tribunal Judge in Suchorski said:

“The minimum appropriate response by the Tribunal in the circumstances of this case is to require the Appointed Manager personally to repay all monies received by him [during his tenure]".

[eagle2]

The manager appears to be a member of ARMA, PRS and IRPM. It makes you wonder what steps these organisations are taking to control their members and improve standards.

[Gulliver]

The manager appears to be a member of ARMA, PRS and IRPM. It makes you wonder what steps these organisations are taking to control their members and improve standards.

Good question. On another forum, the following comment has been posted and I could not agree more:

“By his conduct in this and many other cases, the Appointed Manager is thumbing his nose up at all the gate-keepers e.g. the FTT, the PRS, ARLA and ARMA. What is really needed is for all of these organisations to do what they say they will do and do it with alacrity and consistency.

For example, in 2015 a certain freeholder was given a 12 month prison sentence for failing to comply with the order of the FTT to hand over documents to an FTT Appointed Manager. If the FTT saw to it that that freeholder received a prison sentence for disobeying an FTT order why is the FTT allowing this Appointed Manager to get away with a simple slap on the wrist which permits him to continue financially abusing leaseholders and freeholders at other buildings that he manages?”

http://www.flat-living.co.uk/advice/...up-behind-bars

[Gulliver]

Glad to see that word is getting out about this. Hopefully the FTT, PRS, ARMA and other bodies will take note.

[Moderator2]

Gulliver, Lorimer, Aidoo326, I'm not sure what game you are playing, but it's not acceptable. Game Over.