Michalis Charalambous and Another v Maureen Rosairie NG and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lady Justice Eleanor King,Lady Justice Black |
| Judgment Date | 16 December 2014 |
| Neutral Citation | [2014] EWCA Civ 1604 |
| Docket Number | Case No: B5/2014/0981 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 December 2014 |
[2014] EWCA Civ 1604
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CLERKENWELL & SHOREDITCH COUNTY COURT
District Judge Manners
3EC00794
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Black
Lord Justice Lewison
and
Lady Justice King
Case No: B5/2014/0981
Mr Mark Tempest for the 1 st Appellant
Ms Brie Stevens-Hoare QC & Ms Morayo Fagborun Bennett (instructed by The Law Department) for the Respondent
Hearing date: 2 December 2014
Approved Judgment
The facts of this case are simple to state. The answer to the legal problem is less so.
Mr Charalambous and Ms Karali took a tenancy of 14 Sapphire Court in Spitalfields on 20 August 2002. The term was for one year less a day expiring on 18 August 2003. Under the terms of their tenancy they paid a deposit of £1,560. The tenancy was renewed on 19 August 2003 and again on 18 August 2004, in each case for a further period of one year. Under each tenancy agreement the same deposit was required to be paid. No further money actually changed hands. Instead the original deposit was carried over and credited against the renewed tenancy. When the last of the tenancies came to an end on 17 August 2005, a statutory periodic tenancy arose under the Housing Act 1988. On 17 October 2012 Mrs Ng served notice under section 21 of that Act requiring possession of the property to be given after 17 December 2012.
The deposit paid by Mr Charalambous and Ms Karali has never been held under a statutory scheme. Was the section 21 notice valid? This is a question that was raised but left unanswered in Superstrike Ltd v Rodrigues [2013] EWCA Civ 669, [2013] 1 WLR 3848. In our case DJ Manners was confronted with the question and held that the notice was valid. The tenants now appeal. For the reasons that follow, I would allow their appeal.
Statutory regulation of tenancy deposits was introduced with effect from 6 April 2007 by sections 212 to 215 of the Housing Act 2004. The provisions were:
"… designed to put an end to complaints by residential tenants that their deposits had been unreasonably withheld by their landlords at the termination of the lease or, in some cases, had even been misappropriated." Gladehurst Properties Ltd v Hashemi [2011] EWCA Civ 604, [2011] 4 All ER 556 at [3]
The provisions have since been amended by the Localism Act 2011, and I will need to look at the amendments in due course. The important point to stress at this stage is that by the time when these provisions became effective, the tenancy had already become a statutory periodic tenancy; Mrs Ng already held the deposit; and no further deposit was paid either actually or notionally.
Section 212 (1) of the Housing Act 2004 imposed on the appropriate national authority a duty to make arrangements for securing that one or more tenancy deposit schemes were available for the purpose of safeguarding tenancy deposits paid in connection with shorthold tenancies. Such schemes are of two kinds: custodial schemes and insurance schemes. Under a custodial scheme the landlord pays the deposit to a scheme administrator who keeps it in a separate account. Under an insurance scheme the landlord retains the deposit, but undertakes with the scheme administrator to comply with any direction the administrator may give about payment of the deposit. The scheme administrator maintains insurance against the risk of the landlord's failure to comply.
A tenancy deposit is defined by section 212 (8) as meaning "any money intended to be held … as security" for the performance of the tenant's obligations or the discharge of any liability of his arising under the tenancy.
The legislation imposes a number of requirements upon landlords. The most important of them (as originally enacted) are as follows:
"213 (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."
The period of 14 days referred to in sections 213 (3) and (6) has since been increased to 30 days by section 184 of the Localism Act 2011.
In order to compel landlords to comply with their obligations Parliament imposed sanctions on defaulting landlords. These were contained in sections 214 and 215 respectively. As originally enacted the relevant parts of sections 214 and 215 read:
"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.
…
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."
A "section 21 notice" is a notice seeking possession given under section 21 of the Housing Act 1988. A "relevant person" does not include the landlord.
The following features of these subsections should be noted. First, the prohibition on serving a section 21 notice in section 215 (1) applies "at a time when" one or other of the two conditions applies. The use of that phrase suggests that even if one or both of the conditions is or are satisfied at some point, there may come a time later when one or neither is satisfied. Second, the cross-reference in section 215 (1) (b) to section 213 (4) was a cross reference to the definition of "initial requirements" and not a cross-reference to the time limit within which those requirements had to be satisfied. Third, although section 215 (2) referred to section 213 (6) as a whole (which laid down both a requirement for the provision of information and a time limit for providing it) the sanction was capable of being removed by late provision of the information. It was these features that led this court in Vision Enterprises Ltd v Tiensa [2010] EWCA Civ 1224, [2012] 1 WLR 94 to conclude, by a majority, that a failure to protect a deposit could be cured by late protection. Since the same wording was used in section 214 (1) (a) as was used in section 215 (1) (b) and section 215 (2), it would have been open to a landlord to cure any default in timely compliance either by paying a deposit into an authorised scheme, or by giving the required information, or both, and thus avoid liability under section 214 (4) to pay three times the deposit. The sanctions applied if on the application the court "is satisfied" that the requirements have not been met or that the deposit "is not" being held...
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