Superstrike Ltd (Claimant Respondent) v Marino Rodrigues (Defendant Appellant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lewison LJ,Gloster LJ |
| Judgment Date | 14 June 2013 |
| Neutral Citation | [2013] EWCA Civ 669 |
| Docket Number | Case No: B5/2012/2579 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 June 2013 |
[2013] EWCA Civ 669
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE WANDSWORTH COUNTY COURT
HIS HONOUR JUDGE WINSTANLEY
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lloyd
Lord Justice Lewison
and
Lady Justice Gloster
Case No: B5/2012/2579
Martin Westgate Q.C. and Ben Chataway (instructed by Howells LLP) for the Appellant
Ranjit Bhose Q.C. and Jennifer Oscroft (instructed by Coffin Mew LLP) for the Respondent
Hearing date: 20 May 2013
Approved Judgment
Introduction and summary
This is another case about the legislation concerning tenants' deposits. Landlords of private sector residential property require their tenants to pay a deposit as security for the performance of the tenants' obligations under the tenancy. This could give rise to difficulties, especially for a tenant seeking to recover the deposit on leaving the premises. Until 2007 there was no legislation in the UK dealing with this subject. There had been a voluntary code, but it did not work well. Eventually, legislation was introduced in the Housing Act 2004, which was brought into effect with a commencement date of 6 April 2007. This appeal, from an order of His Honour Judge Winstanley in the Wandsworth County Court made on 17 September 2012, raises issues about the application of that legislation, where a deposit was paid under a tenancy already in existence on that commencement date.
A number of decisions of the courts about the legislation revealed problems in the drafting of the Act. It was therefore amended, with effect from 6 April 2012, by the Localism Act 2011. The events relevant to this appeal took place before that date, so we are concerned with the original text of the Act, but I will also refer to the amendments made in 2012.
The Defendant, who appeals with permission granted by Lewison LJ, took an assured shorthold tenancy of the relevant premises from the Claimant dated 8 January 2007 for a fixed term of one year less one day, at a monthly rent of £606.66, and paid a deposit of that amount under the terms of the tenancy agreement at that time. At the expiry of the fixed term, by the effect of section 5 of the Housing Act 1988, he became entitled to a statutory periodic tenancy on the equivalent terms. On 22 June 2011 the Claimant served a notice under section 21 of the 1988 Act requiring possession. The issue is whether it was entitled to do so, notwithstanding that the deposit, which remained outstanding, had not been protected by being dealt with in accordance with a scheme authorised under the 2004 Act.
The Claimant applied to the county court for possession, under the accelerated procedure which applies where notice has been given under section 21 in relation to an assured shorthold tenancy. A possession order was made on 8 May 2012 but it was then set aside by Deputy District Judge Whiteley on 26 June 2012, on the grounds of non-compliance with the provisions relating to tenants' deposits. The Claimant's appeal was allowed by His Honour Judge Winstanley, from whose order the present appeal is brought.
The appellant was represented before us by Mr Westgate Q.C. leading Mr Chataway, and the respondent by Mr Bhose Q.C. leading Ms Oscroft. The escalation of representation suggests a perception of the importance of the issues, for landlords and for tenants, which does not surprise me. I am grateful to Counsel for their assistance in relation to a problem which is of some importance.
For reasons which I set out below, my conclusion is that the legislation did require the tenant's deposit to be held in accordance with an authorised scheme, no later than the end of January 2008. Since it was not so held, the landlord was not entitled to serve a notice under section 21 in June 2011. Accordingly the landlord was not entitled to possession, and the appeal should be allowed.
The facts
I need to say almost nothing about the facts beyond what I have set out above in introducing the appeal. The terms of the original tenancy agreement included the following relevant obligations of the tenant:
"to pay on the signing of this agreement the sum of £606.66 held by the landlord as security against any claim by the landlord for any dilapidations or damage to the premises [etc. — the details do not matter]"
"the deposit cannot be used as the last month's rent and the tenant hereby signing the tenancy agreement hereby acknowledge this"
No new tenancy agreement was entered into on the expiry of the fixed term, and no change was made to the rent then or thereafter. The deposit which had been paid in January 2007 continued to be held by the landlord without any reference being made to it at that time by either landlord or tenant.
The legislation: assured shorthold tenancies
Under the Housing Act 1988 an assured tenancy which is for a fixed term may come to an end by an order of the court or by surrender by the tenant, or it may be replaced by a fresh contractual term. Otherwise, when it expires, the tenant "shall be entitled to remain in possession of the dwelling-house let under that tenancy and … his right to possession shall depend upon a periodic tenancy arising by virtue of this section": section 5(2). Section 5(3) provides that the periodic tenancy (a) takes effect in possession at the end of the fixed term tenancy, (b) is deemed to have been granted by the person who at the end of the fixed term was the landlord, to the person who was then the tenant, under the fixed term tenancy, (c) is of the same premises, and (d) is for the periods for which rent was last payable under the fixed term tenancy, and that:
"the other terms are the same as those of the fixed term tenancy immediately before it came to an end, except that any term which makes provision for determination by the landlord or the tenant shall not have effect while the tenancy remains an assured tenancy": section 5(3)(e).
There is provision for changing the terms but since nothing was done in that respect in the present case it is unnecessary to refer to this.
In the case of an assured shorthold tenancy, the landlord has the right to apply for possession of the premises, once any fixed term has expired, subject only to giving not less than two months' notice under section 21. The court has to be satisfied that the notice has been duly given and that any fixed term tenancy has come to an end, but otherwise there is no discretion in the court to refuse to make a possession order.
That is in contrast to section 8, under which the landlord can also give notice of proceedings for possession. Under sections 7 and 8 the court has to be satisfied that one of a number of grounds for making a possession order exists, that ground having been specified in the notice. Depending on which ground is relied on, the court may have to be satisfied that it is reasonable to make the order.
The landlord under an assured shorthold tenancy will rely on a notice under section 21 rather than on proceeding under section 8 unless there is some very good reason to do the latter. For that reason, one of the sanctions to ensure compliance with the law as regards protecting tenants' deposits is a fetter on the use of section 21.
The legislation: protection of tenants' deposits
Section 212 of the Housing Act 2004 obliges the Secretary of State (who is "the appropriate national authority" for England) to provide the infrastructure, so to speak, by making 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". Section 212(2) shows that the purpose of such a scheme is both that of safeguarding tenancy deposits paid in connection with shorthold tenancies and also that of facilitating the resolution of disputes arising in connection with such deposits. Schemes were to be either custodial or insurance schemes. A tenancy deposit means any money intended to be held (by the landlord or otherwise) as security for the performance of any obligations of the tenant or the discharge of any liability of his arising under or in connection with the tenancy: section 212(8).
As the legislation was originally enacted, section 213, headed "Requirements relating to tenancy deposits", was as follows:
"(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.
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