Potts v Densley & Anor

This is an appeal from the dismissal on 15 July 2010 by Her Honour Judge Hallon of an application made by Miss Karen Potts, as the tenant, against her landlords, Mr Robert Densley and Ms Shirley Pays, pursuant to sections 213 and 214 of Chapter 4 of Part 6 of the Housing Act 2004 (the Act) in which she asked they be ordered to pay to her three times the amount of the deposit she had paid to them in connection with a shorthold tenancy (£4,770). The parties were unrepresented below. Mr James Browne now appears for the Appellant and Mr David Giles appears for the Respondents. Permission to appeal was given by Griffiths Williams J on 21 December 2010.

The judge’s decision pre-dated by several months the Court of Appeal’s judgment in the conjoined appeals of Tiensia v Vision Enterprises Ltd (t/a Universal Estates) and Honeysuckle Properties v Fletcher and others [2010] EWCA Civ 1224 which was handed down in November 2010.

Chapter 4 of Part 6 of the Act is headed Tenancy Deposit Schemes. As explained in Tiensia, it set up tenancy deposit schemes to safeguard tenancy deposits paid in connection with assured shorthold tenancies, provided for the imposition of sanctions (that is the payment of three times the deposit under section 214(4)) for the failure to comply with the requirements of such schemes and set up structures to facilitate the resolution of disputes in connection with such deposits. The schemes are either custodial ones in which an amount representing the deposit is paid by the landlord into a designated account and held by the scheme administrator until it falls to be paid back (either wholly or in part) to the landlord or tenant; or insurance-based in which the landlord keeps the deposit but its return is protected by insurance cover maintained by the scheme administrator.

As well as safeguarding a deposit, it is provided by section 213(5) of the Act (see below) that a landlord who has received such a deposit must provide the tenant with certain prescribed information the particulars of which are set out in The Housing (Tenancy Deposits) (Prescribed Information) Order 2007.

The effect of the decision in Tiensia in short, is that the landlord has until the date of the hearing to comply with the dual obligations of safeguarding the deposit and providing the prescribed information. Provided by that date he has done so, no sanction can be imposed under section 214(4) of the Act.

Unusually in this case, the deposit was paid late, and after Miss Potts had given notice of termination of the tenancy. She then refused the Respondents’ offer to pay the deposit back to her directly, required it to be paid into a custodial scheme, and then issued this claim shortly afterwards. In the result, the deposit was not paid into a custodial scheme until two days after the tenancy had come to an end, though nearly a year before the date of the hearing. The prescribed information was not provided to Miss Potts at all. The judge decided there had been a technical breach of the requirement to secure the deposit. She refused nonetheless to impose the sanction laid down by section 214(4) of the Act on the grounds that in the unusual circumstances of the case, it would not be in the interests of justice to do so. She did not deal with the issue of prescribed information at all.

Two main issues are raised by this appeal. First it is said by the Appellant that the judge was correct to conclude there had been a breach of the requirement to secure the deposit, because notwithstanding the decision in Tiensia even if a deposit is paid before the hearing, the initial requirements of the scheme cannot be complied with after a tenancy has come to an end. The judge however had no discretion to refuse to impose a sanction once she had decided there had been such a breach and it thus follows she was wrong to refuse the application for £4,770. It is not suggested by the Respondents that the statute permits the exercise of any such discretion as the judge purported to exercise. However the Respondents seek to uphold the judge’s decision on a different ground, namely, that following the decision in Tiensia the Respondents had until the hearing of the application to secure the deposit: this they did, and therefore they had a complete defence to the section 214(4) application.

The second issue raised is whether the judge erred in failing to deal with the issue of prescribed information. The Appellant says she erred, because a claim was made in the court below that the prescribed information had not been provided to the Appellant: if the judge had addressed that issue, she would have been bound to impose a sanction on the Respondents for not providing it, as it is common ground they never did so. The Respondents dispute whether such a claim was made; and if it was not, they say it is too late to raise the issue now.

Sections 212 to 215 of the Act provide as follows:

“212 Tenancy deposit schemes

(1)

The appropriate national authority must make arrangements for securing that one or more tenancy deposit schemes are available for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies.

(2)

For the purposes of this Chapter a “tenancy deposit scheme” is a scheme which–

(a)

is made for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies and facilitating the resolution of disputes arising in connection with such deposits, and

(b)

complies with the requirements of Schedule 10.

(3)

Arrangements under subsection (1) must be arrangements made with any body or person under which the body or person (“the scheme administrator”) undertakes to establish and maintain a tenancy deposit scheme of a description specified in the arrangements.

(4)

The appropriate national authority may–

(a)

give financial assistance to the scheme administrator;

(b)

make payments to the scheme administrator (otherwise than as financial assistance) in pursuance of arrangements under subsection (1).

(5)

The appropriate national authority may, in such manner and on such terms as it thinks fit, guarantee the discharge of any financial obligation incurred by the scheme administrator in connection with arrangements under subsection (1).

(6)

Arrangements under subsection (1) must require the scheme administrator to give the appropriate national authority, in such manner and at such times as it may specify, such information and facilities for obtaining information as it may specify.

(7)

The appropriate national authority may make regulations conferring or imposing–

(a)

on scheme administrators, or

(b)

on scheme administrators of any description specified in the regulations,

such powers or duties in connection with arrangements under subsection (1) as are so specified.

(8)

In this Chapter–

“authorised”, in relation to a tenancy deposit scheme means that the scheme is in force in accordance with arrangements under subsection (1);

“custodial scheme” and “insurance scheme” have the meaning given by paragraph 1(2) and (3) of Schedule 10;

“money” means money in the form of cash or otherwise;

“shorthold tenancy” means an assured shorthold tenancy within the meaning of Chapter 2 of Part 1 of the Housing Act 1988 (c. 50)

“tenancy deposit”, in relation to a shorthold tenancy, means any money intended to be held (by the landlord or otherwise) as security for–

(a)

the performance of any obligations of the tenant, or

(b)

the discharge of any liability of his,

arising under or in connection with the tenancy.

(9)

In this Chapter–

(a)

references to a landlord or landlords in relation to any shorthold tenancy or tenancies include references to a person or persons acting on his or their behalf in relation to the tenancy or tenancies, and

(b)

references to a tenancy deposit being held in accordance with a scheme include, in the case of a custodial scheme, references to an amount representing the deposit being held in accordance with the scheme.

213  Requirements relating to tenancy deposits

(1)

Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.

(2)

No person may require the payment of a tenancy deposit in connection with a shorthold tenancy which is not to be subject to the requirement in subsection (1).

(3)

Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 14 days beginning with the date on which it is received.

(4)

For the purposes of this section “the initial requirements” of an authorised scheme are such requirements imposed by the scheme as fall to be complied with by a landlord on receiving such a tenancy deposit.

(5)

A landlord who has received such a tenancy deposit must give the tenant and any relevant person such information relating to–

(a)

the authorised scheme applying to the deposit,

(b)

compliance by the landlord with the initial requirements of the scheme in relation to the deposit, and

(c)

the operation of provisions of this Chapter in relation to the deposit,

as may be prescribed.

(6)

The information required by subsection (5) must be given to the tenant and any relevant person–

(a)

in the prescribed form or in a form substantially to the same effect, and

(b)

within the period of 14 days beginning with the date on which the deposit is received by the landlord.

(7)

No person may, in connection with a shorthold tenancy, require a deposit which consists of property other than money.

(8)

In subsection (7) “deposit” means a transfer of property intended to be held (by the landlord or otherwise) as security for–

(a)

the performance of any obligations of the tenant, or

(b)

the discharge of any liability of his,

arising under or in connection with the tenancy.

(9)

The provisions of this section apply despite any agreement to the contrary.

(10)

In this section–

“prescribed” means prescribed by an order made by the appropriate national authority

“property” means moveable property;

“relevant person” means any person who, in accordance with arrangements made with the tenant paid the deposit on behalf of the tenant.

214 Proceedings relating to tenancy deposits

(1)

Where a tenancy deposit has been paid in connection with a shorthold tenancy, the tenant or any relevant person (as defined by section 213(10) ) may make an application to a county court on the grounds–

(a)

that the initial requirements of an authorised scheme (see section 213(4)) have not, or section 213(6)(a) has not, been complied with in relation to the deposit; or

(b)

that he has been notified by the landlord that a particular authorised scheme applies to the deposit but has been unable to obtain confirmation from the scheme administrator that the deposit is being held in accordance with the scheme.

(2)

Subsections (3) and (4) apply if on such an application the court

(a)

is satisfied that those requirements have not, or section 213(6)(a) has not, been complied with in relation to the deposit, or

(b)

is not satisfied that the deposit is being held in accordance with an authorised scheme, as the case may be.

(3)

The court must, as it thinks fit, either–

(a)

order the person who appears to the court to be holding the deposit to repay it to the applicant, or

(b)

order that person to pay the deposit into the designated account held by the scheme administrator under an authorised custodial scheme,

within the period of 14 days beginning with the date of the making of the order.

(4)

The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.

(5)

Where any deposit given in accordance with a shorthold tenancy could not be lawfully required as a result of section 213(7), the property in question is recoverable from the person holding it by the person by whom it was given as a deposit.

(6)

In subsection (5) “deposit” has the meaning given by section 213(8).

215  Sanctions for non-compliance

(1)

If a tenancy deposit has been paid in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy at a time when–

(a)

the deposit is not being held in accordance with an authorised scheme, or

(b)

the initial requirements of such a scheme (see section 213(4) ) have not been complied with in relation to the deposit.

(2)

If section 213(6) is not complied with in relation to a deposit given in connection with a shorthold tenancy, no section 21 notice may be given in relation to the tenancy until such time as section 213(6)(a) is complied with.

(3)

If any deposit given in connection with a shorthold tenancy could not be lawfully required as a result of section 213(7), no section 21 notice may be given in relation to the tenancy until such time as the property in question is returned to the person by whom it was given as a deposit.

(4)

In subsection (3) “deposit” has the meaning given by section 213(8).

(5)

In this section a “section 21 notice” means a notice under section 21(1)(b) or (4)(a) of the Housing Act 1988 (recovery of possession on termination of shorthold tenancy).”

There is no appeal against the judge’s findings of fact, which in summary were as follows.

The Respondents own a property, Pavilion End, Back Lane, Beenham, Reading, ‘the property’ which for family reasons they needed to vacate, and which they decided to let.

On 12 May 2007 the Respondents let the property to the Appellant on a one-year assured short hold tenancy beginning on the 12 May 2007, using a letting agent, Chancellors. A security deposit of £1,500 was taken which was protected using the TDS insurance based scheme. The deposit was increased to £1,590, still within the TDS scheme when the tenancy was renewed in May 2008 for one further year at a higher rent.

In 2009 the Appellant found a different property at a lower rent, but there was then a negotiation direct between the Respondents and the Appellant which led to a further one year shorthold tenancy, starting on 11 May 2009. The rent was agreed at a lower level. The property was no longer under the management of Chancellors; indeed no agent was involved. The amount of the deposit specified in the agreement was the same as had been paid previously.

It was agreed between the parties that the deposit would be removed from the TDS scheme and paid directly by the Appellant to the Respondents, who would then be responsible for protecting it themselves. Out of consideration to the Appellant as the judge found, the Respondents agreed to accept payment of the deposit not at the outset of the new tenancy, but when the earlier deposit was released to the Appellant, so she would not be out of pocket.

Matters then did not proceed smoothly however. The May rent was then paid late because of an error by the Appellant’s bank, and further complications then arose concerning the payment of the deposit (dealt with at paragraphs 8 to 11 of the judge’s judgment; and see paragraphs 22 and 23 of her conclusions, set out at paragraph 23 below). On 15 June 2009, the Appellant exercised a break clause in the new tenancy agreement; and gave two months notice of termination of the tenancy. The Respondents were in receipt of the full amount of the deposit by the 18 June 2009; but only became aware of this on 27 June 2009.

The First Respondent’s sister had died unexpectedly in the meantime, and various matters including his illness intervened. On 10 August 2009, the Respondents offered to refund the deposit direct to the Appellant, rather than pay it to a third party. On 11 August 2009 the First Respondent sent the Appellant an email saying he was about to refund the deposit and there was little point in handing it over to a third party. The Appellant insisted the deposit be paid to an authorised deposit holder, and on the 12 August 2009 started these proceedings (see paragraph 17 and following below). On 14 August 2009 the Respondents emailed the Appellant confirming everything was in order in relation to the property and asked for confirmation as to where the amount of the deposit should be sent. On 15 August 2009, the tenancy came to an end and the property was vacated. On 16 August 2009, the Respondents opened an account with the Deposit Protection Service (DPS) an authorised custodial scheme for the protection of deposits under the Act. It was not possible to pay money into the account on the same day as it was opened; and on the following day, the 17 August 2009, the Respondents paid £1,590 into the DPS account.

On 12 August 2009 the Appellant issued this claim for the return of the deposit of £1,590 paid by her, together with a claim under section 214(4) for £4,770, that is, three times the value of the deposit, on the ground that the deposit had not been protected in accordance with section 213(3) the Act. Whether her claim also encompassed one under section 213(5) (i.e. a claim for three times the deposit because she had not been given the prescribed information in accordance with section 213(5) of the Act) is, as I have indicated, a matter in dispute in this appeal.

The Particulars of Claim endorsed upon the claim form said this:

“Applicants deposit (£1590) within her Assured Shorthold Tenancy wasn’t held in an appropriate tenancy deposit scheme (section 213(1) of the Housing Act 2004). The applicant didn’t receive information concerning which Scheme was to hold the deposit within 14 days of defendants receipt of deposit 18/6/09 (in accordance with section 213(3) of the Housing Act 2004 clearly defining the 14 days).

The applicant asks the court to make an order in accordance with Housing Act 2004. Section 214(4) – I quote – The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.”

In their defence, the Respondents denied that the deposit had not been properly protected in accordance with the Act, and counterclaimed on the basis of alleged dilapidations following the termination of the tenancy. The issue of prescribed information was not addressed by them, either in the pleadings or in their witness statements. A Reply and Defence to Counterclaim was filed by the Appellant. She subsequently prepared a trial bundle running to 530 pages which was put before the judge. Witness statements were lodged by the Appellant, a house cleaner, and the Appellant’s mother; and by the Respondents.

The Appellant’s witness statement on its own was 117 pages in length. The first sentence of the witness statement said this:

“I am the Claimant in this case and I make this statement about the non-protection of my Tenancy Deposit during my tenancy with the 1^st Defendant and the 2^nd Defendant…”

The Appellant dealt with the issue of prescribed information in paragraphs 136 and 152 where she said:

“Under the Housing (Tenancy Deposits) (Prescribed Information) Order 2007, the Defendants were also required to give me the access information within 14 days of receipt and to provide me with confirmation. The 14 days I calculate to have expired on 2^nd July 2009.

…As an aside, to date the Defendants have still not complied with the Housing (Tenancy Deposits) (Prescribed Information) Order 2007.”

In their witness statements the Respondents offered to discontinue the Counterclaim and not to seek costs from the Appellant. They withdrew the Counterclaim on the morning of the trial.

It is obvious that the judge had considerable sympathy with the position of the Respondents on the facts found by her and considered it would be unjust for them to be subject to the sanction provided for non-compliance under section 214(4) of the Act. She said this at paragraphs 21 to 26 of her judgment:

“21.

The facts of the case with which I am dealing are very unusual. It is a situation in which there had been a history of dealings between the claimant and the defendant, albeit with the assistance of or through agents, Chancellors. There had been no difficulty at all in the two earlier tenancies in relation to the deposit being held as was required by the law. The only difficulty was in relation to this third tenancy where the agents were not involved and, therefore, there was not an automatic passing over of the existing deposit to relate to the new tenancy.

22.

The initial difficulties were caused by the claimant in that the May rent payment was missed. It was not she personally who was responsible for that but nevertheless the payment was, as a matter of fact, missed. Then there was something for which she certainly was responsible, namely she paid the wrong amount in relation to the deposit because she had failed to take sufficient notice of what was contained in the new tenancy agreement which had been negotiated between the two of them with, as I understand it, various matters being raised by one side or the other and discussed and finalised.

23.

There was then delay in the full amount of the deposit being paid to the defendant because of the attempts that there were to resolve difficulties arising out of what should or should not be the amount of that deposit and then the failure to resolve those by way of a new substitute tenancy agreement. Clearly in retrospect the sensible thing would have been if the defendant had required payment of the new deposit at the commencement of the new tenancy and that that payment had been made in the amount required by the agreement. However, as I indicated when going through the history, the defendant did not wish to cause difficulties for the claimant and, therefore, showed consideration by agreeing that the new deposit need be paid only when the original deposit was returned or was about to be returned to her.

24.

The result of that agreement was that the defendant did not know and could not know when he would receive the deposit. In fact he did not know until sometime after it had happened, that the full amount of the deposit was actually paid by the 18^th June. There were then his personal family difficulties, the time abroad, of which the claimant was aware, and his illness, (which is yet a further difficulty) intervened. To do justice as is required, those matters had to be taken into account.

25.

The proceedings in this case were, as I have pointed out, issued when the defendant had already said that the deposit was about to be refunded and indeed that would have happened. The only reason why the deposit was not paid back at the time when it was proposed by the defendant was that the claimant insisted that money should, at that very late stage, still be paid to an authorised deposit holder. Then because the actual payment to the deposit holder took place just after the tenancy had formally ended there is difficulty in the money being paid out. So in fact, whereas the deposit would have been returned at latest mid August 2009 it still, in mid July 2010, it remains held and has not been paid back.

26.

In the very unusual circumstances of this case and given the matters in particular which I have just referred to I am not prepared to make the order which is sought within this claim. To order the return of the deposit would be otiose because that was offered but refused and the claimant required the deposit to be paid to an authorised holder. I cannot order the deposit to be paid to an assured holder because that has already been done. There has been a breach of the terms of section 213 but on the facts of this case that breach is of a very technical nature and the claim for an order to have repaid what would have been repaid at the time the claim was issued but for the insistence of the claimant on the technicalities of section 213, means that to order the penalty which then is required to be ordered under section 214 would be to do a very considerable injustice.”

The judge did not deal with the issue of prescribed information at all. In the light of her findings set out above, she dismissed the claim. She also made an order by consent directed to DPS, who had placed the £1,590 in a suspense account pending the resolution of the claim, that it should release the monies to the Appellant and that there should be no order as to costs.

On 30 July 2010 (by which time the Appellant had the benefit of legal representation), an appeal was lodged on the Appellant’s behalf, which relied on three separate grounds. It was said:

In Tiensia the Court of Appeal decided that the natural meaning of “initial requirements” in section 213(3) and (4) of the Act did not include any requirement imposed by a particular scheme as to the time within which the landlord had to secure the deposit (approving Draycott v Hannells Letting Limited [2010] 3 All ER 411 QB). The pre-condition of an application by a tenant pursuant to section 214 was not a failure to comply with the initial requirements within the 14 day period specified in section 213. It was the failure to comply with these obligations at all, from which it followed that if a landlord was late in complying but nevertheless did so before the date of the hearing of the tenant’s application under section 214, the tenant would have no cause of action, and his claim would be dismissed. In neither case under consideration had the tenancy come to an end before the landlords complied with the relevant obligations in issue.

At paragraphs 35 to 46 Rimer LJ said this:

“Discussion and conclusion

35.

In my judgment Mr Hutchings and Mr Manning are correct in their submission that the natural interpretation of the phrase ‘the initial requirements’ as used in section 213(3) and (4) is that it does not include any requirement imposed by a particular scheme as to the time within which the landlord must secure the deposit. The quoted phrase must mean the same in both sub-sections and since section 213(3) itself imposes a time limit within which ‘the initial requirements’ must be complied with, it is necessarily implicit in the sub-section that it cannot be recognising that one such requirement is the (perhaps different) time limit for securing the deposit that may be imposed by a particular scheme. If it were otherwise, there would be the potential for unacceptable uncertainty and confusion as to the relationship between the section 213(3) time limit and the scheme time limit. The natural interpretation of section 213(3) and (4) is in my judgment that its reference to ‘the initial requirements’ of a scheme is only be to those requirements for protecting a deposit other than any time limit for doing so that may be imposed by the scheme. Tugendhat J in Draycott (at [2010] 3 All ER 411, paragraph [29]), was also of the view that a scheme time limit is not one of ‘the initial requirements’ within the meaning of the definition in section 213(4). I respectfully agree with him. The real issue in dispute in this case turns on the arguments that were originally advanced to us. I turn to those arguments

36.

In my judgment Judge Ellis was correct to hold that the pre-condition of a tenant’s application to the court under section 214 is not a failure by the landlord to comply with the ‘initial requirements’ or the notification thereof to the tenant within the 14-day period specified in section 213. It is the failure to comply with either of those obligations at all. It follows in my judgment that if, therefore, the landlord is late in complying with his dual section 213 obligations, but he nevertheless duly does so before any section 214 proceedings are brought by the tenant, the tenant will have no cause of action under section 214 and any claim he brings under it will fall to be dismissed. I consider that both Judge Clarke and Judge Stonier, neither of whom applied any apparent consideration to the precise terms of the legislation they were concerned to apply, interpreted it wrongly. My fuller reasons are these.

37.

Section 214(1)(a) entitles the tenant to apply to the court in a case in which ‘the initial requirements of an authorised scheme (see section 213(4))) have not, or section 213(6)(a) has not, been complied with in relation to the deposit; …’. In the case of both alternatives the focus is, apparently deliberately, not on whether there was compliance within the 14-day period but on whether there has been compliance at all. Had the time for compliance been in section 214’s sights, the ‘initial requirements’ reference would have been to section 213(3) rather than to 213(4); and the notification reference would have been either to section 213(6)(b), or else to section 213(6) as a whole, rather than simply to section 213(6)(a). Exactly the same points can be made in relation to the language of section 214(2)(a) in which the reference to ‘those requirements’ is plainly a reference back to the first limb of section 214(1)(a); and in which there is a repeat reference to section 213(6)(a).

38.

Moreover, as Mr Hutchings rightly pointed out, the tense of the language in section 214(1)(a) and 214(2)(a) is consistent only with an inquiry as whether the ‘initial requirements’ and notification obligations have been performed at all, and not with whether there were performed within a particular period that is now past. That is the natural sense of ‘have not’ and ‘has not’ in both sub-paragraphs. There can plainly be no right to make any application to the court under section 214 before the 14-day period for compliance has expired, and so if the crucial trigger to the section 214 cause of action was the landlord’s non-compliance within such 14-day period, the more natural choice of language for the draftsman to have used in section 214(1)(a) and 214(2)(a) would have been ‘were not’ and ‘was not’ respectively.

39.

I also agree with Mr Hutchings that this interpretation finds support in section 215. Once again, section 215(1)(b) focuses exclusively on section 213(4), not on section 213(3), and so avoids any focus on the 14-day period within which compliance is required. Its plain sense is that, so long as the initial requirements have not been complied with (including after the expiration of the 14-day period), there will be a bar on the service of a section 21 notice. It is impossible to interpret section 215(1)(b) as intending to impose a permanent such bar in the event of a failure to comply with the 14-day requirement. Like points can also be made in relation to section 215(2), which opens by referring to section 213(6) generally (thus including a reference to an omission to comply with the 14-day requirement imposed by section 213(6)(b)), but then goes out of its way to make clear that the giving of a section 21 notice is only barred for so long as section 213(6)(a) is not complied with.

40.

That interpretation of the legislation means that late, but nevertheless due, compliance by the landlord with his dual obligations under section 213(3) and (6) will furnish him with a complete defence to any claim by the tenant under section 214. Such interpretation appears to me to be not only firmly supported by what I would regard as the carefully chosen statutory language, it is also a properly precise, or strict, one to apply to legislation such as section 214 that is manifestly penal in intent. Moreover, it is an interpretation that is consistent with the purpose of the legislation. That purpose is to achieve the due protection of deposits paid by tenants, ideally within the 14-day period but, if not, then later. It cannot be its purpose to punish landlords who may for example, for innocent reasons, be just a day late in securing such protection.

41.

The other question raised by the arguments is whether (as Judge Ellis held and Mr Hutchings and Mr Manning submitted) the landlord has until the hearing of the tenant's section 214 application to comply with his section 213 'initial requirements' and notification requirements. If he has until then to remedy any prior section 213 default, and does so, it must follow that the tenant's section 214 application will fail although no-one suggested that in such a case the tenant would not ordinarily be entitled to recover from the landlord the costs of his claim. The contrary case, advanced by Mr Bowen, was that the cut off point for section 213 compliance is not the hearing date but the issue of the tenant's section 214 claim or counterclaim. The theory is presumably that at that point the tenant's cause of action under section 214 has accrued and cannot be defeated by the landlord's subsequent compliance with his section 213 obligations by the time of the hearing. It would, it is said, be unjust if the claim could be so defeated and the tenant then left with at most a right to a probably less than full indemnity for his costs from the landlord.

42.

I agree with Judge Ellis, Mr Hutchings and Mr Manning that the date of the hearing is the relevant date and do not accept Mr Bowen's contrary argument. First, there is in my view nothing in the legislation that points to any date earlier than the date of the hearing date. On the contrary, the use of the present tense –'is satisfied' - in section 214(2)(a) appears to me to support the case for the hearing date; and, consistently with that (albeit in relation to the different breach with which it is concerned), I consider that section 214(2)(b) shows unambiguously that the relevant date for its own purposes is the hearing date. If that is the relevant date for section 214(2)(b) purposes, it would be odd if it were not also the relevant one for section 214(2)(a) purposes.

43.

Secondly, the 2004 Act was enacted at a time when the culture of the conduct of civil litigation had become one under which in ordinary circumstances a claimant should endeavour to avoid the need for litigation by applying any applicable pre-action protocol or otherwise by writing a letter before claim. A tenant ought therefore to write such a letter before making a section 214 claim and so give the landlord the opportunity to remedy his shortcoming and avoid proceedings. The landlord would, I should imagine, ordinarily be ready, willing and anxious to do so (he may, like Honeysuckle, have mistakenly believed that he had already duly protected the deposit) so as to bring to an immediate end the possibility of a section 214 claim and the visiting on him of a painful penalty. Although, however, the tenant ought to write a letter before claim, and his omission to do so may present him with a costs risk if he does not, if Mr Bowen's argument is right the prospect of a section 214(4) order in his favour may be sufficiently attractive to encourage him instead to ambush the landlord with an unheralded claim and run such costs risk as there may be – a risk that he may regard as making the game well worth the candle. Of course if (as in both the cases under appeal) the claim is made by a counterclaim in the landlord's action, there will ordinarily be no occasion for the tenant to write a letter before claim. I recognise that section 214 claims are in practice probably more commonly going to be made by counterclaim than by claim, but it appears to me helpful to consider the alternative position that I have. I note that Draycott was a tenant's claim, not a counterclaim.

44.

These considerations do in my view also tend away from an interpretation of the legislation to the effect that the cut off date for compliance is the issue date of the tenant's claim or counterclaim. As I have said, the objective of the legislation is not the punishment of landlords but the achieving of proper protection of tenants' deposits. The legislation should not be interpreted in a sense that implicitly encourages the ambushing of landlords by tenants who have grounds for believing that the landlords have not complied with their section 213 obligations. It should be interpreted in a way that avoids litigation. Litigation will or should be avoided if, following a letter before claim, the landlord promptly puts his house in order. If the landlord declines or fails to do so, then of course it is open to the tenant to pursue his section 214 claim. If the landlord later (before the hearing) repents and remedies his defaults, the claim will still fail, although the tenant will ordinarily recover his costs. He may not recover his full costs, but there is nothing unusual about a claimant not doing so. The tenant will bring his claim knowing of that risk.

45.

The only remaining point I should deal with is Mr Bowen's point that the interpretation of the legislation that I favour will have the practical consequence of robbing section 214 of virtually all its force. That is because it will be an unusual landlord who will not, faced with a section 214 claim, ensure that by the time of the hearing he has fulfilled his outstanding obligations under section 213, with the consequence that in practice section 214 will be likely only to bite in the most exceptional and unusual cases. I recognise all of that. Equally, however, it can also be said that in that 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?

46.

I comment that in the Draycott case the deposit was protected late and the section 213(5) information was necessarily also provided late. The tenant's section 214 claim was only commenced subsequently. Tugendhat J held that in those circumstances the court could not be satisfied under section 214(2)(a) and so could not make an order under section 214(3) and (4). I respectfully agree with his decision. He did not, however, also have to decide, as we have had to, whether the landlord will have until the hearing to put his house so in order as to avoid the making of an order under those subsections.”

As to the first ground of appeal, Mr Browne submits that the provisions of chapter 4 of the 2004 Act are brief but clear. By section 213(3) the landlord must comply with the initial requirements of an approved scheme within 14 days of receipt of a deposit. By section 213(5) and 213(6) the person receiving the deposit must give the prescribed information to the tenant within 14 days of receipt of the deposit. Section 214 prescribes the penalties for breach of the provisions contained within section 213. Upon an application to the court by the tenant, the court must inquire as to whether the initial requirements of an authorised scheme have not been complied with (the first limb of section 214(1)(a)) and/or whether prescribed information has not been given to the tenant (the second limb of section 214(1)(a)).

If the answer to either question is yes (section 214 (2)(a)) then the court must go on to make the orders under section 214(3) and section 214(4). Thus, where a breach of either condition is found, the court must order the person holding the deposit to return it to the tenant, or pay it into a custodial scheme, and must also order that the landlord pay the tenant a penalty of three times the value of the deposit.

He submits on the facts found by the judge she was therefore correct to find there had been a breach of section 213(3); but erred in purporting to exercise a discretion she did not possess, by refusing to make an order under section 214(4).

In an amendment to the skeleton argument lodged in support of the appeal, he submits that the Court of Appeal’s decision in Tiensia is distinguishable on its facts, and that the statutory obligations cannot in fact be complied with after tenancy has ended. The statute itself at section 213(1) and 213(3) plainly envisages the procedure being complied with at the inception of the tenancy he says. Further, throughout the Chapter, it refers to “the landlord” as being under the obligation to comply with the statutory requirements. Once a tenancy comes to an end the parties are no longer in a relationship of landlord and tenant, and he says, it is implicit in the wording of the statute that a “shorthold tenancy” is in place to which the deposit is connected.

He further submits that it cannot have been the intention of the Parliament that a tenancy deposit may be taken, that the statutory obligations may be ignored throughout the terms of the tenancy but may still be complied with after the tenancy ends. That, much more so than “late compliance” with which Tiensia (and before it Draycott) was concerned, would defeat the purpose of the statute.

Mr Browne submits that this case is precisely the “unusual case” to which Rimer LJ refers in paragraph 45 of his judgment. Here the tenant’s deposit was not protected until the tenancy in respect of which it was taken had ended, and the prescribed information was not given at all. He says that the observations in Tiensia at [39] that the statute is not robbed of all effect because the landlord who fails to comply with section 213 is debarred for the time being (by section 215) from serving a termination notice under section 21 of the 1988 Act simply does not apply to a situation such as this where the tenancy has been ended by the tenant exercising a break clause.

Finally, he submits that this interpretation applies the general presumption of statutory interpretation that the court should prefer a construction which provides a remedy for the mischief against which the statute is directed – here, the non protection of tenancy deposits – rather than one which facilitates evasion.

He also observes that, as it happens, had the DPS been aware that the tenancy had ended at the time when the money was lodged, the scheme would have refused to accept the funds, though he accepts that this is not determinative of the construction he contends for, though he says, it adds weight to it.

As for the second ground, and the provision of prescribed information, Mr Browne submits a claim was made for prescribed information in the Particulars of Claim; the matter was dealt with by the Appellant in her witness statement, and the judge should have dealt with the issue. Insofar as it is now suggested that the Appellant did not raise the matter before the judge, or that it was incumbent on her to go back to the judge and invite her to deal with the point (points now made in the Respondents’ Notice, served on 7 February 2011, see below), he submits it is too late for the point to be raised now.

On the issue of costs, the Appellant’s simple submission is the Respondents withdrew their Counterclaim very late, costs had been incurred in meeting it, and the judge should have made an order for costs which reflected this.

On the first ground of the appeal, Mr Giles for the Respondents does not seek to uphold the reasons the judge gave for dismissing the Appellant’s claim, namely that it would be unjust to penalise the Respondents in the circumstances. By a Respondents’ notice served on 7 February 2011 he seeks to uphold the judge’s conclusion on a different ground, namely that, following the decision in Tiensia the Respondents did comply with the initial requirements of an approved scheme under section 213(3) of the 2004 Act 2004 before the hearing of the claim; and while the Respondents’ compliance with section 213(3) of the Act was late, because they had complied by the date of the hearing of the Appellant’s section 214 application, they therefore had a complete defence to that claim.

As for the second ground, Mr Giles submits in summary an appeal court is not the forum to embark upon a trial of an issue which was not properly pleaded or raised in the court below; and he submits there are special reasons why the Respondents would suffer irremediable prejudice if that course was permitted here. He submits that the Appellant’s claim as set out in her claim form and Particulars of Claim only relied on a breach of section 213(3) of the Act. It did not rely on a breach of section 213(5) – the relevant provision relating to the failure to provide prescribed information.

Given that the effect of Tiensia was that a landlord could, in effect, remedy a breach of section 213(3) or section 213(5) at any time prior to the hearing of the tenant’s section 214 application, if a breach of section 213(5) had been pleaded the Respondents would have been on notice that it was an issue and, if necessary, they would have had the opportunity to remedy their failure to comply before the hearing of the claim and thereby had a complete defence to the claim.

The extract from the Appellant’s witness statement is not he submits a substitute for pleading a breach in the claim form or the Particulars of Claim. Mr Giles submits it would be fundamentally unfair therefore to allow a claimant, at the stage of an appeal to rely on the defendant’s non-compliance with section 213(5) when the pleaded case did not rely on that point. There was no application to amend, and there is nothing to suggest it was raised at the trial. In short, the judge he says made no findings on compliance with section 213(5) because that was not an issue raised before her; and it is too late to raise it now.

He further submits that if (notwithstanding) it is asserted this was a live issue at trial, there is an additional obstacle in the Appellant’s path. Her appeal was filed on 5 August 2010 (at a stage when she did have legal advisers acting for her). However, she did not then ask the judge below to amplify her findings or deal with the point as she should and could have done. (See English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605; [2002] 1 W.L.R. 2409).

As for the issue of costs, he submits this was a matter for the judge’s discretion, and there is nothing to suggest she erred in exercising her discretion in the way that she did.

In my judgment, as Mr Browne submits, section 214(4) is mandatory in that once a finding has been made that a deposit has not been secured in accordance with the Act, or that the prescribed information has not been provided(and in either case, the relevant date for that determination is the date of the hearing of the section 214(4) application, as Tiensia has decided)there is no discretion to refuse to make an order for the payment of three times the deposit sum under section 214(4). Once the judge had determined there had been a breach of section 213(4), she was wrong therefore to refuse to make an order under section 214(4) in purported exercise of a discretion which the Act does not provide for.

The real question which arises on this aspect of the appeal therefore, as both parties recognised in argument, concerns the effect on the judge’s conclusions of the decision in Tiensia.

The difficulties which sections 213 to 215 of the Act have given rise to were recognised in Tiensia (see the dissenting judgment of Sedley LJ at [48] to [60] and what is said by Thorpe LJ at [61]); and I do not think it can be said that their application to the factual situation which arises here is straightforward.

As Tiensia has now determined, a landlord can comply with the requirements of section 213(3) and (5) well after the inception of the tenancy, indeed at any point until the hearing of the application under section 214(4).

In the light of that approach (and the necessary limitation it places on an argument based on what otherwise might be said to be the implicit assumption that these provisions should be complied with at the outset of the tenancy) Mr Browne submits Tiensia is distinguishable on the facts because in this case, unlike Tiensia, the relationship of landlord and tenant had come to an end; and, so his argument goes, once that occurs, a person ceases to be “the landlord” for the purposes of these provisions and cannot therefore comply with them thereafter. Mr Browne did not however address the language of the statute for the purposes of this submission, nor the potentially wider consequences of such an argument.

I can see the sense of Mr Browne’s argument on policy grounds for the reasons he gives (and not least because a landlord could escape sanction even though the deposit was unprotected throughout the period of the tenancy, provided he secured it appropriately before the hearing of the application). However, it seems to me there are considerable difficulties in drawing the distinction he contends for, following the decision in Tiensia that there is no clear cut-off time for compliance of 14 days and in the light of the language of the statute itself.

It is true that the obligations arising under section 213 fall on “the landlord” when the deposit is paid in connection with a shorthold tenancy. But section 214(4) then goes on to provide that once the court finds there has been a failure to secure the deposit or provide the prescribed information:

“(4)

The court must also order the landlord to pay to the applicant a sum of money equal to three times the amount of the deposit within the period of 14 days beginning with the date of the making of the order.” (Emphasis added)

Quite apart from the normal principle of statutory interpretation that the same word is to be given the same meaning in the same statute, it is difficult to see how someone at one and the same time can no longer be the landlord for the purposes of compliance, but nonetheless still be the landlord for the purposes of sanction. If, hypothetically, Mr Browne was correct in his submission that a person who received a deposit as a landlord, could no longer comply with the relevant provisions of the Act relating to the securing of a deposit or the provision of prescribed information once the tenancy had come to an end because he then ceased to be the landlord for the purposes of the Act, it would follow he could not then be sanctioned under section 214(4) as he was no longer the landlord for the purposes of that section either. Moreover, by parity of reasoning if the relationship of landlord and tenant comes to an end for the purposes of the Act on the determination of the tenancy, it might also follow (if a dispute between the parties arises, as it commonly does after the end of the tenancy) that there could then be no application under section 214(4) at all, since by section 214(1) an application for sanction can only be made by “the tenant”.

In this context, it should also be noted that Schedule 10 of the Act as amended, uses the term “landlord” and “tenant” to describe the parties when dealing with their rights and obligations post termination of the tenancy. It provides as follows:

Custodial schemes: termination of tenancies

(1)

A custodial scheme must make provision

(a)

for enabling the tenant and the landlord under a shorthold tenancy in connection with which a tenancy deposit is held in accordance with the scheme to apply, at any time after the tenancy has ended, for the whole or part of the relevant amount to be paid to him, and

(b)

for such an application to be dealt with by the scheme administrator in accordance with the following provisions of this paragraph.

(2)

Sub-paragraph (3) applies where the tenant and the landlord notify the scheme administrator that they have agreed that the relevant amount should be paid–

(a)

wholly to one of them, or

(b)

partly to the one and partly to the other.

(3)

If, having received such a notification, the scheme administrator is satisfied that the tenant and the landlord have so agreed, the scheme administrator must arrange for the relevant amount to be paid, in accordance with the agreement, within the period of 10 days beginning with the date on which the notification is received by the scheme administrator.

(4)

Sub-paragraph (5) applies where the tenant or the landlord notifies the scheme administrator that–

(a)

a court has decided that the relevant amount is payable either wholly to one of them or partly to the one and partly to the other, and

(b)

that decision has become final.

(4A) Sub-paragraph (5) also applies where the tenant or the landlord notifies the scheme administrator that a person acting as an adjudicator under the provision made under paragraph 10 has made a binding decision that the relevant amount is payable either wholly to one of them or partly to one and partly to the other.

(5)

If, having received a notification as mentioned in sub-paragraph (4) or (4A), the scheme administrator is satisfied as to the matters mentioned in that sub-paragraph, the scheme administrator must arrange for the relevant amount to be paid, in accordance with the decision, within the period of 10 days beginning with the date on which the notification is received by the scheme administrator. ”

It seems to me a more natural and consistent reading of these provisions is therefore that a party’s position as “the landlord” or “the tenant” for the purposes of these provisions crystallises when a deposit is paid in connection with shorthold tenancy. Thereafter, “the landlord” (i.e. the person receiving the deposit paid in connection with a shorthold tenancy) continues to be “the landlord” for the purposes of the statute whether the tenancy has been determined or not and remains under a continuing obligation to comply with the initial requirements of the scheme and to provide the prescribed information. Moreover, it remains the case that the landlord will still be subject to sanction if he has not complied with the initial requirements of the scheme or provided the prescribed information by the time of hearing of the section 214(4) application (following Tiensia). I recognise this has the considerable disadvantage that the landlord might then not protect the deposit during the tenancy itself as I have indicated; but at least, then he can be pursued thereafter by “the tenant” and subject to sanction in the event he is unable (unlike the landlord here) to protect the deposit appropriately before the hearing.

It is correct as Mr Browne submits, that if a tenant exercises a break clause the sanction for non-compliance provided for in section 215 will not apply (viz. the landlord will be unable to issue a section 21 notice on a tenant, the service of which is a pre-condition of obtaining a mandatory possession order on or after the coming to an end of an assured shorthold tenancy, unless he has complied with his obligations under sections 213(3) and (5)). But in my view, the court’s decision in Tiensia did not hinge on this argument, but on the court’s construction of sections 213 and 214 themselves (see what is said by Rimer LJ at [39]). Nor do I accept for the reasons given in paragraph 53 above that in the absence of such a sanction, the statute is thereby robbed of all effect.

It therefore follows that subject to the second ground of appeal, the judge’s decision should be upheld on the ground that the Respondents had until the date of the hearing of the Appellant’s section 214(4) application to comply with the provisions of section 213(3); and having secured the deposit before the hearing, albeit after the determination of the tenancy, they had a complete defence to the section 214(4) claim.

I turn next therefore to the second ground of appeal. It is common ground that the Respondents did not provide the prescribed information to the Appellant before the hearing of the Appellant’s application before the judge. If a claim had been made under that head therefore, there could be no dispute that it should have been dealt with by the judge, and, if she had dealt with it, that she would have been bound to make an order under section 214(4). However, in my view, it is plain from the Particulars of Claim looked at objectively, that the Appellant’s application was made, as the Respondents submit, on the ground that there had been non-compliance with the initial requirements of an authorised scheme in relation to the deposit; and that the reference to the fact that she had not received information as to which scheme was holding the deposit, was not in itself a claim that the Respondents had failed to provide her with prescribed information pursuant to section 213(5). I also consider that Mr Giles is correct in submitting that the passing references to the issue of prescribed information in the Appellant’s witness statement (see paragraph 21 above) was not a substitute for a properly pleaded claim in this respect.

It may well be, if the parties had had the benefit of legal representation, this matter could and would have been sorted out either before the hearing (in which case it would then have been open to the Respondents to provide the prescribed information in response to such a claim) or at the hearing itself. But I do not consider the judge can be criticised for failing to deal with an issue which was not clearly pleaded, and in my view it is too late to raise the matter now for the reasons Mr Giles gives. I should add that it has not been suggested (let alone established) by the Appellant that this issue was raised before the judge, save for what is said in the Particulars of Claim and the Appellant’s witness statement. In all these circumstances, the question whether the judge should have been given an opportunity to deal with the matter, following the hearing and before this appeal, in accordance with the procedure set out in English v Emery Reimbold & Strick Ltd simply does not arise.

Finally, I should deal with the issue of costs. It raises a short point which Mr Browne dealt with in a sentence only during submissions. I do not have the benefit of a transcript of the judge’s reasons for making no order for costs; and the only point raised is that some allowance should have been made in the Appellant’s favour, in view of the withdrawal of the Respondents’ Counterclaim on the day of the trial. I am not persuaded however this provides a discrete ground for interfering with the exercise of the judge’s discretion on costs. In my view, the order for costs by the experienced judge dealing with a trial between litigants in person was a sensible and proportionate one in circumstances where the result might be described as “a score draw”. Albeit the Counterclaim was withdrawn, it is also the case that the judge found against the Appellant on a number of factual issues raised in her claim, which in the event was dismissed.

For the above reasons therefore, this appeal is dismissed.