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By D
08/05/2011

Not So Protected

Potts v Densley & Anor [2011] EWHC 1144 (QB)

Another case on tenancy deposit protection has hit the High Court, with a rather strange outcome.

P was the tenant of D and another party. The deposit was not protected during the tenancy. This was raised by P towards the end of the tenancy and D apparently offered to return the money to her. She declined and insisted it was protected. The tenancy was then ended by notice from P and she vacated the property. The deposit money was then placed with the DPS but the prescribed information was never served on P. In fact, it seems that DPS had not really protected the deposit at all and had placed it in a ‘suspense’ account as it was given to them after the end of the tenancy. At first instance HHJ Hallon found that there had been a technical breach of the legislation but refused to make the usual award of 3 times the deposit as she felt it unjust to do so. At this stage P obtained representation and appealed to the High Court. At the High Court both sides were represented.

On appeal 2 contentions were advanced for P:

  1. That having found the deposit was not properly protected it was not open to HHJ Hallon to refuse to make the award of the usual penalties; and
  2. HHJ Hallon did not deal properly with the issue raised before her of the failure to provide prescribed information, had she done so she would have been compelled to find in favour of P and make the appropriate award.
  3. However, in between the first instance hearing and the appeal the Court of Appeal had produced its decision in Tiensia v Vision Enterprises. Accordingly, D responded to the first ground of appeal by seeking to support HHJ Hallon’s decision on the basis that the deposit had been protected prior to the hearing of the claim and therefore, following Tiensia, it was properly protected. On the second ground it was said for D that the issue of the prescribed information was not raised at first instance and that it was not possible to raise it on appeal.

    The Court agreed that if HHJ Hallon had found the deposit was unprotected then she could not refuse to make the order for the penalties. However, the Court did not accept the argument for P that Tiensia was distinguishable on the facts because the tenancy was over before the deposit was protected. The Court held that the legislation clearly used the terms “Landlord” and “Tenant” to refer both to the parties both during and after the tenancy and therefore it was not possible to distinguish the decision in Tiensia on this basis. Accordingly, the first ground of appeal was dismissed.

    On the second ground the Court did not accept that the issue of the missing prescribed information had been pleased in the initial claim form and held that the passing reference to it made in P’s witness statement was insufficient to bring it before HHJ Hallon. Therefore it could not be raised on appeal.

    Accordingly, appeal dismissed.

    One of the factors in this case was the decision in Tiensia. Leaving aside the rightness of that decision which we have previously discussed this appeal really turned on the basis of a somewhat throwaway remark made by LJ Rimer near the end of his decision (at para 45) in which he said that in the

    overwhelming majority of cases the net result will be that the legislation will have achieved its primary objective, that of the due protection of the tenant’s deposit. What more can reasonably be asked of it?

    This phrase has become a touchstone for landlords who have failed to properly fulfil their obligations in all aspects of tenancy deposit protection and is now the primary line in all defences to tenant’s claims where the landlord can show that they have fixed things by either protecting the deposit or giving it back. This from of ‘no harm, no foul’ defence is fair enough in that the tenant does have their money back but it was manifestly not what the government intended and it does little to improve the confidence of tenants in the Private Rented Sector that was the real intention of the legislation to begin with (see Dave’s post on this issue).

    This case precedes the upcoming decision of the court of Appeal in Hashemi v Gladehurst which covers some of the same issues. This may well undo the decisions reached here. Unfortunately we are not sure when this decision will appear (although we would be grateful for an indication). The case also did not deal at all, because it was not pleaded at first instance and so could not be argued on appeal, of whether the landlord had breached an actual or implied requirement of the DPS scheme by seeking to register the deposit after the end of the tenancy. It may well be the case that the schemes will seek to intervene if they can find a suitable case to do so as the suggestion that deposits can be registered with them after the end of a tenancy and still be protected places them in a somewhat complex business position which they may find unsatisfactory. On the other hand the ruling by the Court that the terms “landlord” and “tenant” are used in the legislation to refer to the relationship both during and after the tenancy will dispose of a line of defence advanced by some landlord’s that the tenant cannot bring a claim after the end of the tenancy because they are no longer a tenant.

    With thanks to PainSmith Solicitors (who acted for Potts) who pointed this one out to us although we were rather slow to actually get on with posting it (entirely my fault I hasten to add).

D is a solicitor specialising in landlord and tenant matters with a London firm.

2 Comments

  1. kigurumi

    On this reasoniung why would any landlord ever protect a deposit? They can just wait until after the end of the tenancy and then and only then, if the tenant turns out to be clued up legally, they can protect it and escape any liability.

    The court has effectively repealed the statutory protection that was brought in to remedy an obvious and major evil in our society.

    Reply
  2. W Acathan

    The tenancy scheme is massively flawed anyway. By breaking the law and not protecting has given my former landlord the abilty to keep my deposit.
    I didnt know about protection schemes until after my landlord decided to keep my deposit.
    My landlord did not use one, did not supply me with the information, and after i moved out, he kept the deposit. I then find out that because i had already moved out, there was nothing i could do about him not using a scheme.
    However, my landlord was a bit dim and has now found himself facing fraud charges, and all because of ANOTHER loophole in the scheme. When i questioned him on the scheme and demanded the information, after i moved out, he registered the deposit with the DPS. But its also the landlords responsibility to give the DPS, the contact details of the tenant. My landlord gave a false email address which he set up, and changed a digit on my phone number. He hadnt passed the information on to us and as the DPS had the wrong info for us, were unable to contact us.
    The landlord then filed a single claim statutory declaration saying that we were not responding and was awarded our deposit.
    Its ludicrous that a scheme set up to protect both parties, hands all the power to the landlord, and the very breaking of the law in the first place, then gives him the opportunity to get away with it.
    The Schemes should refuse to protect the deposit, until the tenant has somehow confirmed receipt by way of contact at the protected deposits property. Unless that happens, the deposit stays unprotected and the landlord is liable. Lets face it, its in the tenants interest to have it protected, so i cant see tenants not cooperating that way.
    But at the moment, the landlord not protecting it, also allows him to get away with doing so.
    REMEMBER: ITS THE LANDLORDS OBLIGATION TO COMPLY WITH THE LAW, NOT THE TENANTS OBLIGATION TO ENSURE HE IS!

    Reply

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