Szorad & Anor v Kohli (2023) EW Misc 12 (CC)
A county appeal to a circuit judge on the perennial question of how many deposit regulations breaches can be claimed for in respect of the same deposit.
(To be honest, I’d though that although we don’t have a higher court judgment on the point, some sort of consensus had been reached. It appears not. Some of the history is here, and here, and here and here and here. )
Mr Szorad and Ms Kozmar were the assured shorthold tenants of Mr Kohli initially on a 12 month tenancy from July 2019, then on a statutory periodic until they left in December 2020. A deposit of £1,326.92 was paid. The deposit was never protected and was not returned to the tenants. The tenants brought a claim for the return of the deposit and statutory penalties for breach of the deposit regulations.
At first instance, the claimant tenants sought two penalties, one for the initial tenancy and another for the statutory periodic, arguing, as per Superstrike Limited v Rodrigues (2013) EWCA Civ 669 that the deposit was received again on the stat periodic tenancy arising.
The Deputy District Judge rejected this argument, holding
“(7) Those requirements under section 213 all presuppose that, once the deposit is received, it must be dealt with in a particular way, and of course there is an obligation to return it. But what they do not say, and what they could have said in clear terms (and I think this is germane to the interpretation of the obligations under the Housing Act) is that upon the creation of a statutory periodic tenancy, the deposit having not been secured in relation to the assured shorthold tenancy, a new obligation or a new right to compensation based upon that failure can be founded distinctly and separately on the subsequent alleged breach.
(8) In my judgment, although Superstrike is clearly authority for the proposition that it makes (see paragraph 5 above) it cannot be used for the purpose of construing the 2004 Act to give rise to what would in effect be the separate and distinct entitlement to another penalty in relation to the non-compliance with the deposit security requirement by reason of the creation of an SPT. In my judgment, although the claimants are entitled, due to the failure to protect, to claim the penalty in relation to that, they are not entitled to claim in relation to the subsequent failure to protect on the creation of the statutory periodic tenancy. Had the law wanted to do that, it could have done that in very straightforward and clear terms. So far as that is concerned, I find the entitlement is in relation to one breach, that breach being in relation to the failure to notify and secure within 30 days of receipt of the deposit.”
The DDJ added their view of what Superstrike meant.
“The relevant passages in the judgment really begin at paragraph 35. Lloyd LJ in that case held in effect that where a tenancy deposit was held under an assured shorthold tenancy which then converted into a statutory periodic tenancy, the deposit would continue to be held in relation to the statutory tenancy as it was held in relation to the assured shorthold tenancy. Any other interpretation of the relevant statutory provision would have necessitated the deposit having to be returned and then redeposited. It was perhaps therefore unsurprising that the correct interpretation of the statutory provision avoided this otherwise cumbersome administrative process.”
So a penalty of three time the deposit for a single breach only was awarded.
The tenants appealed to a circuit judge. HHJ Johns KC allowed the appeal.
Superstrike was authority for a statutory periodic tenancy being a new tenancy on which the obligation to protect arose again and the deposit previously received to be treated as received again.
S.215B Housing Act 2004 made no difference to that in that it treated deposits as protected for a replacement tenancy (new fixed term or statutory periodic) where the deposit had been protected during the original tenancy. This did not undo Superstrike save in those specific circumstances, which were not the case here.
The analysis in Superstrike not being altered by section 215B and that section not applying to this case, what I regard as the consequence of the analysis in Superstrike is not undone by the section. That consequence, as I have said, is that there must be multiple awards in this case. I will therefore allow the appeal and make the decision as to the level of the further award for the failure to deal with the deposit in accordance with an authorised scheme on the commencement of the statutory periodic tenancy.
Ms Alvarez asked for an award at a level of three times the value of the deposit. In my judgment, the right level is two times the value of the deposit. My reasons are these. The following factors, some of which inform the award made by the judge for the failure relating to the original tenancy, mean that an award in the amount of the deposit only would not be sufficient to do justice: (1) the respondent appears to be a professional landlord; (2) the deposit was not returned; (3) the respondent failed to participate in these proceedings, now including the appeal; (4) the respondent has failed to comply with the judgment, even by repaying the deposit.
However, two further factors point away from the further award being at the top end of the scale: (5) there has already been an award at the maximum level for the original failure between the same parties in respect of the same property having regard to some of the same factors; (6) it is hard to say that a landlord must have appreciated that there was a further failure on the commencement of the statutory tenancy in circumstances where the judge below did not accept the tenant’s argument. This reduces culpability in relation to this further failure.
So, overall 3x the deposit on first breach, 2x the deposit on second breach. And return of the deposit, which the landlord still hadn’t done.
I’ve always maintained the validity of ‘multiple penalties for multiple tenancies’, though it is a bit of surprise to see a full on misreading of Superstrike going on, rather than arguments over the extent of s.214 Housing Act 2004 in permitting multiple claims.
That said, reducing the penalty to 2x because the landlord had won at first instance, so shouldn’t be considered as culpable for the second breach, seems a bit of stretch. The landlord had never protected the deposit, or returned it, at all, and still hadn’t post first instance judgment. As the award is a penalty against the landlord, not compensation to the tenant, this was generous to him, I’d say.