Tenancy Deposit Court of Appeal decision – the Judges’ dilemma

Tiensia v Vision Enterprises Ltd (t/a Universal Estates)

As has been reported elsewhere, the Court of Appeal decision in the Tiensia tenancy deposit case  is now out.  I am not going to report the details of the case – they can be read in the BAILII report.  I am going to concentrate on the issues raised.

Majority decision for the landlords

The majority decision in this case was for the landlords.  This is because (said the Judge) the language of the legislation seems to indicate that it is not the failure to protect within the 14 days period which is important, but the failure to protect at all.

Therefore, the relevant time by which the landlord needs to have protected the deposit, is the date of the court hearing.  Not 14 days after the deposit money was paid.  Or the date when court proceedings are issued.

So far as the reference to landlords complying with the initial requirements of an authorised scheme is concerned, this “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” .

Any differences in the schemes own terms and conditions, will not therefore affect the landlords liability for the penalty.  Which cuts out the prospect, raised in my post on the Draycott case, of the tenants’ chances of success depending on the rules of the particular scheme used.

This decision and interpretation is, said the Judge

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.

The above is the majority decision of the Court of Appeal, and the wording quoted is that of Lord Justice Rimer, who gave the leading judgement.  However in my view, it is the dissenting judgment of Lord Justice Sedley which is the more interesting.

The dilemma raised by the dissenting decision

Lord Justice Sedley starts by pointing out that

this legislation was passed to deal with a widespread abuse in a situation of housing scarcity – the retention by lessors of deposits, commonly of a month’s rent, at the termination of the tenancy. It makes compulsory provision for safeguarding tenants’ money and backs the scheme up by penalising defaulting landlords in triple damages. This much is plain.

he then goes on to say that if

a landlord is not culpably in default if, months or maybe years after the expiry of the fortnight given by law for compliance, he or she eventually complies with the initial requirements, then the scheme is a dead letter.

and if

the landlord’s opportunity for penitence extends not only to the date of issue of the tenant’s claim or (more probably) counterclaim but to the eve of judgment … no tenant could ever sensibly be advised to sue or counterclaim for the penalty.

He points out that if the alternative view was taken, this would be harsh on landlords who had inadvertently failed to comply, but

The fact that, on the tenants’ reading, the penalty falls on the inadvertent and the unlucky equally with the devious and the dishonest is morally questionable but perfectly explicable: Parliament has decided that recovery is to be in the tenant’s hands, that it is to depend on the simple question of compliance or non-compliance, and that strict liability for non-compliance will catch the devious and encourage the others. That is a matter for legislators, not for us.

However if this view is accepted, then what about the other penalty, that of making a section 21 notice invalid if it is served at a time when the landlord is in default?

It could mean that a landlord who was just one day late, could never recover his property under section 21. The Judge concluded

We are left with an intractable dilemma: to drain the legislative scheme of all effect by reducing the remedy for non-compliance to near-impotence, or to give what in my judgment was without doubt the intended meaning to the prescribed 14-day limit, with irreversible economic and proprietary consequences for landlords who fail, even if only through misfortune, to meet it.

The result of the majority decision of the Court, is that the financial penalty is effectively toothless, but it allows landlords to evict under section 21 if the deposit is protected late. Which will no doubt be of great relief to all landlords in this position.

A further appeal?

But why bother talking about a minority judgement, you might ask, however interesting?

Well because it seems that Ms Tiensia may be appealing the Court of Appeal decision to the Supreme Court.  It she does so, it is entirely possible that the Supreme Court could take the view of Lord Justice Sedley.

Post tenancy claims

There is one situation which was not covered by the Court of Appeal judgments.  What happens if the tenant brings his claim for the penalty award after he has moved out of the property and the tenancy has ended?

David Smith, writing on the Nearly Legal Blog, considers that this is one situation where the landlord will not be able to defeat the tenants claim by late protection:

it seems to me that it must be an implied condition of any scheme that the deposit which is being registered with it is one for a tenancy that is actually in existence at the date of registration otherwise the schemes become unworkable in an economic and business sense, particularly the insurance backed ones.

If the Tiensia case does go forward to the Supreme Court I hope that they will consider this aspect and give some guidance.

A call for clarity

However isn’t it disgraceful that a case has to go all the way to the Supreme Court before the meaning of legislation, which was intended to protect the public, can be properly understood?

As Lord Justice Sedley rightly said “legislation like this is or ought to be written for lay people“. Is the fact that it clearly is not, a gross breach of natural justice in itself?

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