(14/11/2019 NB, this post has been edited following a complaint from Mr Scott, details of which will be set out below)
Thank you to my colleague and fount of wisdom Deirdre Forster for this case note on a tenancy deposit claim.
Howard Davies v Scott, County Court at Clerkenwell & Shoreditch, 18 January 2018
In April 2013 Mr and Mrs Howard Davies signed an assured shorthold tenancy for a fixed term of two years. They paid a deposit of £4,600. On the expiry of the tenancy they held over on a statutory periodic tenancy for a further three months. After they had given notice, their landlord Mr Scott raised a complaint about moth damage to carpets in the loft area. At the end of the tenancy Mr Scott refused to return the deposit and alleged other items of damage. When asked about deposit protection Mr Scott provided a deposit scheme landlord ID number but the deposit was not protected under that ID. He then claimed that he had failed to protect the deposit because he had been unaware that the threshold for high rent tenancies had changed in 2010 and he had thought that his letting was exempt. He instructed a surveyor to negotiate with Mr and Mrs Howard Davies on his behalf. The surveyor quoted outdated law (Gladehurst Properties Ltd v Hashemi (2011) EWCA Civ 604) to suggest that Mr and Mrs Howard Davies had no claim. At this point they consulted solicitors. When further negotiations proved fruitless they issued a claim for the return of the deposit plus two sets of penalties. Mr Scott counterclaimed for some £15,000 worth of alleged damage.
District Judge Rand did not accept the large part of the counterclaim, finding that Mr Scott had not been forthright. The award on the counterclaim was £2421.72.
On the deposit penalty, the District Judge awarded three times the penalty for the failure to protect the deposit in April 2013, stating that a five minute computer search would have told Mr Scott that the high rent threshold changed in 2010 and that it is a landlord’s responsibility to know the law. She stated that misleading tenants is conduct justifying a penalty at the high end of the scale.
The Judge accepted the proposition that the periodic tenancy arising at the end of a fixed term was a new tenancy (section 5 Housing Act 1988 and Superstrike Ltd. v. Rodrigues (2013) EWCA Civ 669) but disagreed with submissions that a second penalty was payable when the statutory tenancy arose in April 2015. She referred to section 214 of the Housing Act 2004 which refers to “a penalty, a tenancy and a deposit” in the singular, and noted that the opportunity to clarify the point in the Deregulation Act amendments to Housing Act 2004, after Superstrike, had not been taken.
The District Judge ordered that the deposit be returned, less the sum of £2,421.72, giving a total judgment in the sum of £15,978 plus costs. In addition she ordered a payment of £15,000 on account of costs.
(14/11/2019. Mr Scott has contacted me with what he regarded as problems with this post. He claimed that the deposit scheme landlord ID was not for a different property. There is no comment on this in the judgment, but it is clear that the deposit was not registered under that ID, so I have amended to record that.
Mr Scott rightly corrected the figures on the total counterclaim. I was informed it was circa £25,000. It was in fact ‘in excess of £15,000’. The counterclaim was largely reduced at trial and an award of £2421.72 made on the counterclaim, That award figure has also been corrected in the post, and we are sorry that the original figures were not correct.
Mr Scott also wished me to correct any statement that he had been dishonest. This post entirely correctly recorded that the District Judge had found that Mr Scott had misled the tenants, and no change to the post has been made in that regard.
This judgment was appealed by Mr Scott, and a note of the appeal decision is forthcoming. The appeal decision did not alter the findings that Mr Scott had been misleading, or change the award on the counterclaim)
Comment
With respect to the District Judge, I do think this has to be wrong. Section 214 is in the singular (a penalty, a tenancy, a deposit) because it is in regard to an instance of non-compliance. A claim that includes as separate heads of claim a number of failures to protect a deposit (which was received afresh for each new/replacement tenancy as per Superstrike) in relation to a series of tenancies (fixed term to new fixed term, or fixed term to statutory periodic), is not pleading a single failure to comply with s.213. The claim is actually for a breach in relation to a tenancy and a deposit, but for a series of different tenancies and deposits. So s.214 operates, singularly, for each breach.
As a thought experiment, could a separate claim be brought for each breach? The answer has to be yes. So it must also be possible to bring a single claim with separate heads for each breach in relation to each subsequent tenancy, and have the penalty awarded for each breach.
And, because this is something I had heard was raised in another deposit claim before a different District Judge in a different city, the Deregulation Act amendments to the Housing Act 2004 on deposits make no difference whatsoever to the position on penalty claims, with one exception – below. While a deposit protected late in the course of one tenancy might count as protected in the next replacement tenancy for the purposes of serving a s.21 notice, this in no way rectifies the initial breach for the purposes of a s.214 claim.
The one exception is the very limited class of the classic ‘Superstrike‘ case – where a fixed term tenancy began before 6 April 2007 but became a statutory periodic tenancy after 6 April 2007 – which basically gave the landlord 90 days to protect the deposit from the commencement of the Deregulation Act to achieve full retrospective compliance. If they didn’t, that is that.
This is another point we could do with having appealed to HHJ Luba QC so that those of us in London at least can know what a consistent view would be. I agree with you Giles and on the same reasoning. I have had this declined by a very experienced DJ on precisely the reasoning of DJ Rand (herself very experienced of course) with which I respectfully disagree; I have also had the multiple breach – multiple penalty line accepted by other DJs – from memory more have been with me than against.
DJ Rand’ s decision was totally [deleted by NL as we don’t allow people apparently involved in a case to make accusations that are not supported by the court’s findings, at first instance or on appeal.]
I just don’t get this in the first place at all. Isn’t a DJ clearly bound by EWCA in Superstrike? How could this decision even have been possible?
Superstrike is not an authority on this point.
Well then what point is Superstrike an authority on? I must be missing something because I had thought that this point is precisely and in controversially the main reason that Superstrike is a significant and such a widely cited case.
Here, it seems to me that the judge was disregarding the authority of Superstrike by rejecting its precedent that penalties are to be multiplied for each successively arising new tenancy within a claimable period.
The bit that gave me this impression:
“The Judge accepted the proposition that the periodic tenancy arising at the end of a fixed term was a new tenancy (section 5 Housing Act 1988 and Superstrike Ltd. v. Rodrigues (2013) EWCA Civ 669) but disagreed with submissions that a second penalty was payable when the statutory tenancy arose in April 2015.”
Superstrike does not address the multiple penalty point at all.
*precisely and uncontroversially
For examples of first instance decisions in which multiple awards have been made for multiple breaches, see: Kazadi v Brooks (2015) September Legal Action 51; Akrigg v Pidgeon (2016) May Legal Action 40; Chaudry v Cooley (2016) November Legal Action 40; Manu Ventures Ltd v Sida (2017) April Legal Action 39
Kazadi is here https://nearlylegal.co.uk/2015/09/all-of-the-wrong-and-then-some-more/
And Akrigg is here https://nearlylegal.co.uk/2016/06/county-courts-deposits-evictions-introductory-tenancies/
There is clearly a split of judicial opinion on the issue. I suppose we will have to wait for a higher court…
It would be nice to get some clarity on the multiple breach issue as it . The common line I have experienced in County Court’s is in line with DJ Rand’s reasoning – I would add that DJ’s often cite Luba et al’s Defending Possession Proceedings 8th edition at p.345 and its attendant note 108 to counter the multiple breach argument.
Although the note simply says there isn’t established case law on the point.
sorry failed to finish my sentence – ‘as it is a major area of uncertainty in Landlord and Tenant litigation’.
Yes, of course – the text suggests a single breach argument but the note is, in my experience, used to counter the ‘the conclusion from Superstrike must be a multiple breach conclusion’ line of argument or the citation of the Legal Action cases cited by DC above. I personally lean to the multiple breach argument, but have used both arguments (depending on the client) – given the split at the judicial level it is very difficult to advise both tenants and landlords – many of whom would rather settle matters and be done with it, than incur the expense of fighting it in Court.
Excellent that a Landlord that attempted to deceive the Tenant and the Court gets a smack, it shows the lengths some will go to.
Was very poor advice to quite Gladehurst Properties Ltd v Hashemi, really can only be seen as part of deception to fool the tenant.
I do wonder whether on the back of that partial success whether the claimant is minded to go for an appeal on the matter of the SPT?
Isn’t there is enough case law on Superstrike for tenancies pre Dereg to ensure success?
I remember so many cases from that period, which as you say led to Dereg act.
Will the 3 year retrospective aspect of Dereg prevent claims on pre Oct 2015 tenancies after October 2018?
It seems to me that the fact that s214 refers to “tenancy”, in the singular, undermines rather than supports the conclusion that only one penalty is payable: given that it was accepted that there were two separate tenancies, the conditions in s214 surely fall to be considered – and are met – in relation relation to each “tenancy” individually. Similarly in relation to “deposit”, given the definition in s212, as discussed in Superstrike.
Also, if the reasoning is correct, it is not immediately obvious to me why it would be confined to Superstrike cases and would not apply equally to cases where, for example: (a) a landlord grants one 12 month AST followed by another 12 month AST on the expiry of the first; and even perhaps (b) where the first and second AST are separated by a period where the tenant lives elsewhere. It is hard to imagine that the latter could be correct.
I didn’t think a subsequent ( albeit continuing ) tenancy which had a correctly protected deposit, allowed a Sec 21 to be served ?
Could you point me to the particular part of the Housing Act that explains this please.
S.215B (as amended)
DC,
my understanding and experience is that for POST Dereg Act it comes down to those famous words “SUBSTANTIALLY THE SAME”, prior to that we have law at the time, but we also have the Dereg changes post Oct 2018
Chris Daniel,
Look at Dereg Act 2015, parts 33 to 40, which updates said act
http://www.legislation.gov.uk/ukpga/2015/20/contents/enacted
A Sec21 can be served if the requirements were met, failures to meet those requirements may void an S21 but can be rectified by subsequent adherence and new S21 except for the Gas Safety Certificate, that issue is covered here
https://nearlylegal.co.uk/2018/02/i-can-serve-gas-safety-certificates/
Part 32 covers what is DEEMED as protected
http://www.legislation.gov.uk/ukpga/2015/20/section/32/enacted
Specifically:
215B Shorthold tenancies: deposit received on or after 6 April 2007
(1)This section applies where—
(a)on or after 6 April 2007, a tenancy deposit has been received by a landlord in connection with a shorthold tenancy (“the original tenancy”),
(b)the initial requirements of an authorised scheme have been complied with by the landlord in relation to the deposit (ignoring any requirement to take particular steps within any specified period),
(c)the requirements of section 213(5) and (6)(a) have been complied with by the landlord in relation to the deposit when it is held in connection with the original tenancy (ignoring any deemed compliance under section 215A(4)),
(d)a new shorthold tenancy comes into being on the coming to an end of the original tenancy or a tenancy that replaces the original tenancy (directly or indirectly),
(e)the new tenancy replaces the original tenancy (directly or indirectly), and
(f)when the new tenancy comes into being, the deposit continues to be held in connection with the new tenancy, in accordance with the same authorised scheme as when the requirements of section 213(5) and (6)(a) were last complied with by the landlord in relation to the deposit.
David, ‘substantially the same’ has nothing to do with it, I think.
And on the rest – short version, as I said, s.215B.
Giles is right, I think. Whether the premises let are “substantially the same” is part of determinibg whether you have a “replacement tenancy”, such that compliance during a previous (“original”) tenancy results in deemed compliance under s215B. That is the way Parliament chose to deal with the effect of Superstrike (having to reserve the PI at the start of each new tenancy). Here we are talking about cases where there has been no compliance during any tenancy. In these circumstances, there is nothing applying the concept of replacement tenancies to limit the number of penalties payable under s214 – which Parliament could have chosen to do while they were at it, but didnt. (Nor was it the basis of DJ Rand’s decision by the looks of things).
Of course Giles is right, I do not mean it as a legal term albeit that it is used in some areas, it is just the way I have reminded myself for years of what usually counts.
For example if there is a new tenancy for the same tenant but less of the property is let or if there is a another tenancy for the same property with the same tenant plus one other, they would be treated differently, probably requiring separate claim.
Many Landlords do not understand the differences between an AST and SPT which is also an AST, a Replacement and a Renewal, some are preferring the CPT to avoid the SPT obligations such as 1 month tenant notice when they have to give two.
The case this blog highlights is a terrible one, it suggests deceit from the beginning to end and a blatant disregard for deposit protection legislation.
I have had cases where Landlords have been lazy in their renewals, one had 3 separate tenants each with their own contract, first for 6 months, then annual. They did not bother to renew on time, so SPT’s were created, they then did issue new tenancies but from current date, then let those expire. This happened for 3 years so they technically ended up with 3 tenants, each with 4 AST’s and 3 SPT’s. They were lucky it was not an HMO due to layout of buildings.
In the last sentence in the Comment from Giles, should there by a NOT. i.e should the sentence “The claim is actually for a breach in relation to a tenancy and a deposit, but for a series of different tenancies and deposits. So s.214 operates, singularly, for each breach.” read as “The claim is actually NOT for a breach in relation to a tenancy and a deposit, but for a series of different tenancies and deposits. So s.214 operates, singularly, for each breach.”
also, is there any clear authority in this issue of “multiple breach-multiple penalty” now please?
Hi
No, that sentence said exactly what I meant. The claim is for a breach singular in respect of each tenancy.
On the multiple breach issue, it has been settled in favour of multiple breaches for London at least by the appeal decision of HHJ Luba KC in Sturgiss v Boddy in 2021 – https://nearlylegal.co.uk/2021/07/surrender-to-the-churn-deposits-and-shared-houses/
Thanks Giles. That make sense.
Regarding s213 (3) and (6) being two different breaches, hence gives rise to ‘twin heads’ of penalty under 214, I know “Howard v Dalton” ruled otherwise. Does that mean it is also settled in London ?
I would have thought, a claimant providing PI first (with the tenancy as seems to be the standard practice) and then going onto not protect as per the PI later (uses a different scheme altogether) gives raise to technical argument that s213 (3) and (6) ‘can be’ separate breaches ?
Howard v Dalton ( https://nearlylegal.co.uk/2019/06/deposit-penalties-how-many-breaches-is-too-many/ ) was a Kent case, not London. I haven’t seen it come up elsewhere. But I think the finding is right – A s.213(3) breach is also inevitably a s.213(6) breach because the PI (as given in your example) would be wrong, and the Act gives these as alternative claims, not cumulative.
I see Giles’s point although I am still holding out hope that the statute is ambiguous and that courts may still opt to interpret it as cumulative, even though that isn’t the conventional way that claims are framed.
From a comment on another post:
Ryan Hocking at Gatehouse Chambers agrees with (Vivian) fairly convincingly to my mind that the statutory language is rather more ambiguous than so clearly cut as suggested by the (Dartford) circuit judge:
“ It is an open question whether breaches of sections 213(3) and 213(6) are cumulative – each giving rise to a separate entitlement to damages under section 214.
The wording of section 214 does not suggest a clear answer to this question. The wording of sections 214(1), 214(2), and 214(2A) means that an entitlement to damages hinges on whether “section 213(3) or 213(6) has not been complied with in relation to the deposit”. The question is whether the word “or” renders these different routes to an entitlement to damages mutually exclusive or cumulative.
In the face of that ambiguity, broader and less technical arguments are available. At the core of those arguments is this: where a landlord has breached section 213(3), compliance with section 213(6) is impossible. Whereas a breach of section 213(6) is capable of standing alone, a breach of section 213(3) must inherently also be a breach of section 213(6).
On the one hand, this suggests that damages ought to be higher: a failure to protect is arguably more serious than a failure to provide information, and this “doubling up” takes account of that without interfering with the assessment of quantum for each breach. Further, this approach ensures that each of the obligations under sections 213(3) and 213(6) are taken seriously by landlords, as each carries its own penalty.
As against that, this interpretation effectively results in a double penalty arising from one omission. That is an inherently surprising result, and one which is not made explicit in the wording of the statute. Further, landlords are still incentivised to comply with both obligations under sections 213(3) and 213(6), as the amount of damages payable does not necessarily reduce merely because the first step of complying with section 213(3) is taken.
In the author’s view, these arguments are finely balanced, and neither can be regarded as plainly correct in the absence of authority on the point.”
https://gatehouselaw.co.uk/shorthold-tenancy-deposit-protection-quantifying-statutory-compensation/
I am not convinced. It would require 213(3) and 213(6) to be true alternatives. But they aren’t. A 213(3) breach of necessity also involves a 213(6) breach, as Ryan points out. And a double penalty for a s.213(3) breach would require something much clearer on the face of legislation.
So the HHJ Luba KC as a circuit judge for the County Court at (Central) London binds all district judges and circuit judges sitting anywhere else in the Greater London area?
Pretty much. They would need very clear reasons to depart from his decision.
Parliament clearly didn’t intend multiple penalties, s the wording is ‘a penalty’ and how could Prescribed Information be served, if a deposit wasn’t protected.