Wood v Arkley, County Court at Bradford, 15 March 2018
Our grateful thanks to counsel Vilma Vodanovic and solicitor Nawaz Zeb of Foundation for the note of judgment.
A section 21 possession claim by the landlord Wood was met with a defence and counterclaim on the basis that that the prescribed information had not been provided to ‘a relevant person’ (s.213(10) Housing Act 2004), namely the tenant’s father, who had made the deposit payment.
(We note in passing that there was a factual dispute between the parties as to whether this happened. Which is both relevant and indeed not relevant to what happened next.)
So, a defence – no prescribed information, so no valid s.21 – and a counterclaim under s.214 for breach.
But (and here is the ‘things not to do’ moment), no defence to counterclaim was filed and served.
The defendant applied for default judgment on the counterclaim, and got it – with an amount to be paid to be assessed (ie, the one to three times penalty). At a subsequent directions hearing, the claimant – in person – was recommended to seek legal advice on the issue of the counterclaim judgment and res judicata. But no steps were taken about the default judgment by the claimant.
The possession claim proceeded to hearing. At the hearing, the defendant argued that the judgment on the counterclaim pre-determined the outcome of the possession claim, as the core issue – compliance with s.213 requirements – had already been determined.
The court decided that this was right. Per Goldcrest Distribution Ltd v McCole (2016) EWHC 1571 (Ch), the default judgment on the counterclaim necessarily addressed precisely the issues at stake in the defence – the failure to comply with s.213 HA 2004. Thus
“the entry of judgment in default must have determined the failure to comply with the prescribed information obligations. In light of that, the claim for the termination of the claim would necessarily fail and on the basis of my views and judgment on res judicata arguments, the claim stands dismissed.”
Possession claim dismissed, agreed damages on the counterclaim of £1425, and costs to the defendant, assessed at £11,675.
Comment
Depending on what the actual facts were about providing the prescribed information to the ‘relevant person’ (here the tenant’s father, but might be, say, the council housing options team), this is harsh or not harsh at all on the landlord. But the lesson to any such landlord is – one that was flagged at directions hearing by the court – do not ignore a counterclaim, do not ignore default judgment and do not ignore a recommendation from a Judge to seek competent legal advice. The situation could have been rescued, at least up to deciding on the facts at a final hearing.
The lesson to everyone else is ‘get default judgment on a deposit counterclaim if it is not defended, as that will see off the s.21 possession claim’.
I always operated under the impression (clearly a miss-impression) that you couldn’t counterclaim on an s21 inspired process. Is this allowable under case management powers?
It has to be related – so usually no. (Eg a disrepair counterclaim has no bearing on s.21 possession claim). But where deposit breach is both defence and counterclaim, I’ve never had any trouble running it.
I have had DJs getting themselves in a knot on this. They even on occasion decide the counterclaim for an award of 1-3 times deposit for failure to protect and then feel they can’t assess quantum and want to adjourn to a separate hearing. This means a Tenant waits before they get their money, it is not proportionate for the poor landlord who will inevitably face costs of a further hearing and it wastes a valuable hearing fixture. Only counsel benefits. I have even had to stand there representing a tenant and asking a DJ not to order a further hearing as it is unfair on an unrepresented landlord and a waste of court time as I can – given 5 minutes – guide DJ on points they should consider both for and against the Landlord in deciding quantum. It isn’t rocket science after all.
Thanks Giles. That makes perfect sense. I was looking at Nic Madge’s recent Coppard v. Barrington case on failure to serve prescribed information on all ‘Relevant persons’, which includes, as you allude to above, local authorities paying deposits for tenants in discharge of homelessness duties.
Loads of LA’s do this now. The difference being paying the deposit on the behalf of or merely lending the money, as is the case with credit union loans
Depends – if the credit union paid it to the landlord directly, arguably also a relevant person.
On the other hand, a ‘bond’ from the LA is arguably not a deposit payment at all.
I say a bond isn’t even arguably a deposit as the landlord hasn’t received anything (beyond a promise). There is thus nothing to protect.
Certainly. I was allowing for a certain vagueness in the use of the term
That is actually an interesting point. People working in council teams setting up lettings with their procured landlords often using the words deposit and bond interchangeably and without understanding the crucial difference. Depending on the council some use a mix of the two, causing even more confusion.
I’ve got two training courses coming up with councils explaining security of tenure and the requirements for setting up different types of letting without them knowing the differences between non secure licenses or ASTs and even less knowledge on how to evict them.
As the HRA bites down council TA teams are increasingly in the frame
That would certainly have helped with some of the cases I have done where we contacted LAs to see whether they had provided money or just a guarantee and they came up with contradictory information – presumably because they didn’t understand the difference.
I would say that would be exactly right. Although procurement teams are based in a homelessness unit, finding properties to discharge their Part VII duties, they are not involved in any kind of housing law. I’ve been asked to untangle all sorts of weird messes they have gotten themselves into. Many local,authorities, realising their staff lack certain skills have taken to employing people from lettings agencies. They certainly know how to best attract and relate to a landlord but fail to understand how a local authority works.
And dont even get me started on the common practice of procurement teams signing up landlords that the enforcement teams are prosecuting.
Ah, that feeling in your gut when a LA procurement officer tells you that actually, they don’t need you to give them a long-winded explanation on tenancies/licences, housing tenure and protection from eviction after all because they’ve decided to just copy a lodger agreement they found on the internet.
Haha If only t’were that benign D Norton. Try giving £10,000 grants to bring a property back into use when the landlord owes £32,000 to council tax, or signing up a landlord to provide nightly paid accommodation for vulnerable people that another arm of the council has prosecuted, essentially for demanding money with menaces…..twice!!!
In relation to deposit protection on the S21 flowchart it shows that if you have protected the deposit ‘late’ in the first Tenancy and provided the correct prescribed information that you can legally serve a S21 on a subsequent Tenancy although will be liable for penalties on the first Tenancy?
Can you confirm, is this advised on the basis of Section 215B of the Housing Act 2004 and when applying to court with an N5B in such a case would you recommend referencing this section of the Housing Act?
Yes, and we can’t advise on a specific claim.
This case dealt with the landlord’s non-protection of the tenant’s deposit. Am I right in thinking that the tenants might also have had additional claims due to the Prescribed Information never being served? (see Ayannuga v Swindells). Especially given that Mr and Mrs Howard Davis tenancy was signed in 2013, prior to the Deregulation Act of 2015?
The case actually was about not providing the prescribed information to a relevant person.
Do my eyes deceive me????
So a mistake such as this and what seems a straightforward defence to s21 can cost the landlord almost £12k in costs alone.??????
And what I mean by straightforward is the judgement was already pre determined s there can’t have been much work to do for the defence
Well no, it was a defence to s.21 and a counterclaim for the deposit penalty.
Court fee on the counterclaim, depending on how much for, c £200, application fee for default judgment £255.
At least three hearings, hearing of application, directions hearing and trial hearing, plus correspondence, witness statements, disclosure and trial prep and bundles.
The overall figure would be about £9K in costs plus VAT.
The landlord’s big mistake was not to fold at the point of the default judgment when he had effectively lost, when costs would have been more like £4000, I’d guess. Taking the possession claim all the way to trial was what got expensive.
As the post points out, that was done despite the landlord being firmly advised by the Judge to get legal advice.
Ah ok. so if he defended the counterclaim there would have been one hearing and costs of about 6k Is that about what it costs to defend a section 21?
Doesn’t even that smaller amount put it outside of The realms of most tenants to defend a section 21? ( taking into account they might lose)
No, if the landlord had defended the counter claim there would have been a directions hearing and full trial. If the landlord had won – that is if there actually was a good defence to the counterclaim – the landlord would have got his costs. If he had lost at trial he would have had to have paid the tenant’s costs, which might have been in the same area – £10K or so.
If there was no defence to the counterclaim, the landlord should have given up the possession claim at the point where the tenant got default judgment, to avoid having to pay the further costs up to trial.
Defending a s.21 possession claim always carries the risk to the tenant of losing and having to pay the landlord’s costs, rather than just the fixed costs on an undefended accelerated possession claim. However, if the tenant is eligible for legal aid and is lucky enough to get representation under legal aid, then they have protection from the other side’s costs, and their costs are paid by legal aid (which is repaid to the Legal Aid Agency if the tenant wins and and is awarded costs.)
“No, if the landlord had defended the counter claim there would have been a directions hearing and full trial. If the landlord had won – that is if there actually was a good defence to the counterclaim – the landlord would have got his costs. If he had lost at trial he would have had to have paid the tenant’s costs, which might have been in the same area – £10K or so.”
Sorry. I explained incorrectly
So if the landlord wasn’t so foolish and this was a “normal” case and had representation. They go to the first hearing. Tenant turns up with defence and counterclaim landlord advised they have pretty much lost the case and fold at that point. I’m guessing that whole process costs about 6k I suppose
By the way. I am a landlord.
Or if the landlord has got legal advice after the default judgment, as urged by the judge, and ended the possession claim, tenant’s costs at that point probably more like £4000 or so.
Or, of course, if he had got advice and promptly folded when he received the defence and counterclaim, less again. Maybe £2000.
“However, if the tenant is eligible for legal aid and is lucky enough to get representation under legal aid, then they have protection from the other side’s costs, “
If the tenant is eligible for legal Aid is the landlord required to be told about it?
If the tenant gets legal aid funding, yes, the parties and court have to be informed, otherwise no protection from costs b
Thankyou. So no surprise attacks in court which is great. I’m told that in housing tenants can mount a defence at any point unlike other cases
Not really. Any point up to and including first hearing.
I might be involved in litigation soon and just doing some research. Thank you for your help
“Not really. Any point up to and including first hearing.”
Sorry. Just a further point. Does that include if they have legal representation
Or is it that if they have representation then they must adhere to strict timelines.? And if the self represent then they are given some leeway?
By and large no, as unlikely to have representation before the claim is issued. If they did, such that the claim is served on solicitors, they should meet deadlines, but that situation is rare.
Ok thanks. What I get from your response is that they must let the landlord know if claiming legal aid but little else and they can turn up on the day to present their defence.
No, if solicitors are instructed before first hearing they need to go on the record with the court and the other side. Sorry Jay, I’m not here to explain the basics of civil courts procedure, I’m afraid.
Dear Giles
Will the LAA fund counterclaims when a LL brings a possession claim under s21 or would the client have to fund the CC separate to the funding certificate?
I’m not sure, but it would depend on there being a defence to the possession claim in any event.
There is a potential defence that the prescribed information was not provided in accordance with the deposit rules. There is also disrepair to the property and this was reported to the Council so possibly a retaliatory eviction and a possible CC for disrepair?
Only a retaliatory eviction if the council has served an improvement notice. Sounds like may be a deposit penalty and disrepair CC, but depends on the facts of course.