Signed, sealed and dismissed

Public Law and Judicial Review, Property

Synopsis

The Court of Appeal (Asplin, Nicola Davies and Andrews LJJ) dismissed a second appeal against the dismissal of a high value claim under the tenancy deposit legislation. This decision confirms the applicability of Mannai principle in the interpretation of information received by a tenant, and a purposive interpretation of the statutory requirements.

Background

The lengthy background to the litigation is summarised in our e-flash on the High Court decision here. For these purposes, a potted history is sufficient.

C was D’s tenant at Flat 2, Preacher’s Court within a complex known as Sutton’s Hospital in Charterhouse. His tenancy began in January 2010, and was the subject of intermittent ‘renewals’ in the interim. C paid a £3,300 deposit at the time of the initial grant (“the Deposit”).

At the date of grant, the level of the rent meant that the tenancy was not an assured (shorthold) tenancy, being above the threshold in paragraph 2(1)(b) Schedule 1 Housing Act 1988 (“HA 1988”). However, on 1 October 2010, the Assured Tenancies (Amendment) (England) Order 2010 [SI 2010/908] (“the 2010 Order”) came into force amending those thresholds. This had the agreed effect of converting C’s contractual tenancy into an assured shorthold tenancy as at that date.

At paragraph 4.6 of its Explanatory Note to the 2010 Order, the DCLG stated, “The Housing Act 2004 made provision for a tenancy deposit scheme for the purposes of safeguarding tenancy deposits. Landlords of all assured shorthold tenancies entered into on or after 6 April 2007 had to protect their tenants’ deposits in a recognized scheme. We consider that those common law tenancies entered into on or after that date, and which will become assured shorthold tenancies when the rental threshold is increased, must protect their tenants’ deposits in a recognised scheme.” This guidance is difficult to reconcile with the clear wording of section 213(1) Housing Act 2004 (“HA 2004”), which tends against retrospective effect.

Nonetheless, in preparation for the effect of the 2010 Order, and in line with the DCLG guidance:

• on 7 September 2010, D’s agent protected the Deposit with a recognised tenancy deposit scheme; and
• on 28 September 2010, D’s agent sent a letter to C confirming the fact of the protection of the Deposit (“the Letter”), and enclosing (inter alia) an unsigned certificate of prescribed information relating to this (“the Certificate”).

Thereafter, C remained in occupation. The parties intermittently, and informally, ‘extended’ their arrangement by fixed terms that were interspersed by statutory periodic tenancies arising under section 5 HA 1988.

In June 2021 (11 years after the material events, but after D had served a notice seeking possession upon C), C issued a claim seeking some £120,888 for asserted breach(es) of the tenancy deposit provisions within HA 2004.

As far as now material, C asserted that:

• D failed give C a signed certificate as required by article 2(1)(g)(vii) of the Housing (Tenancy Deposits) Order 2007 [SI 2007/797] (“the 2007 Order”); and
• (by a case not originally pleaded) that D failed to comply with article 2(1)(g)(vi) of the 2007 Order as it had not provided C with information as to, “the circumstances when all or part of the deposit may be retained by the landlord, by reference to the terms of the tenancy”.

These matters proceeded to a full trial before HHJ Luba KC. By his reserved judgment dated 28 October 2022, the Judge found in favour of D, and dismissed the claim with costs. As far as relevant he considered:

• On the ‘Certification Ground’, it did not matter that the Certificate was not itself signed by the landlord, because the covering letter was signed by the landlord’s agent on its behalf. That was sufficient to comply with the statutory requirement. Alternatively, any deficiency was addressed by the language of the statute which validates performance if it is “substantially to the same effect” as that required, and here sending a certificate under cover of a signed letter was “substantially to the same effect” as sending a signed certificate (section 213(6)(a) HA 2004).
• On the ‘Information Ground’, it also did not matter that the Certificate referred mistakenly to Clause 6, because it must have been obvious to him that this was a mistake, and he would have known to look instead at clause 5.3 of this own tenancy agreement. So on a proper interpretation of the Certificate the prescribed information was Even if that were wrong, it was “substantially to the same effect” as what was required.

C’s appeal below advanced ten pleaded grounds (some of which overlapped). By a reserved judgment on 21 March 2024, Adam Johnson J dismissed the Appeal. On these issues, he determined:

• The requirement of a signature in article 2(1)(g)(vii) was a requirement of form. The provision of that information in an unsigned certificate, but under cover of a signed covering letter from the landlord’s agent was a in a form ‘substantially to the same effect’ within section 213(6)(a). The purpose of the certificate was to confirm that the landlord considered the information provided to be correct. That purpose was satisfied by its provision under a signed covering letter. The same approach had been taken in Stidolph v American School in London Educational Trust [1969] 20 P&CR 801 in the context of an unsigned notice served under LTA 1954.
• The Trial Judge had been right to conclude that though the certificate contained an obvious error, it caused no real prejudice, on the established line of authority from Mannai Investments v Eagle Star [1997] AC 749, as summarised in Pease v Carter [2020] 1 WLR 1459. A reasonable recipient of the certificate in these circumstances would have appreciated there was an error (as there was no clause 6), and seen that clause 5.3 set out the circumstances in which part of the deposit might be retained by the landlord. Adam Johnson J agreed with C that the savings words of section 213(6)(a) (in ‘a form substantially to the same effect’) did not apply, as the requirement of article 2(1)(g)(vi) was not one of form. However, the conclusion on the correct interpretation of the information provided remained correct. The statutory purpose of promoting transparency with a view to avoiding disputes had been satisfied.

C appealed, asserting each of the above decisions was wrong.

The Decision

The Court of Appeal unanimously dismissed the appeal.

As to the Confirmation Ground:

• There was no doubt a notice or certificate could be construed together with its covering letter [64]: Stidolph v American School in London Educational Trust [1969] 20 P&CR 801 at p805 and Pease v Carter [2020] 1 WLR 1459 at [45].
• It was not necessary for the signed covering letter to expressly confirm the accuracy of its enclosures to satisfy the requirement of Article 2(1)(g)(vii)(aa) [65].
• Sub-article (bb) requiring that the tenant had been ‘given’ the opportunity to confirm the contents of the information provided was satisfied if construed purposively: the tenant had been given the opportunity to check the details by the document containing them, and the covering letter asking him to sign the Certificate [69].

As to the Information Ground:

• C’s primary submission construed Article 2(1)(g)(vi) too literally by requiring that the information spell out verbatim every situation in which the deposit might be withheld [38]. The statutory requirement was that the tenant be informed of the circumstances in which the deposit might be retained by reference to the terms of his tenancy [55].
• The principle derived from Mannai Investments v Eagle Star [1997] AC 749 was not confined to ‘slips of the pen’ or obvious errors: Fernandez v McDonald [2004] 1 WLR 1027 at [20]. The obviousness of the error was simply a factor in determining what the reasonable recipient would have understood by the document. The Mannai principle applied in the circumstances [50].
• The tenancy agreement contained the circumstances in which the deposit might be retained. It was clear that the reference to ‘clause 6’ was an error as there was no clause 6. The reasonable recipient would have understood that he was being referred to a provision within his tenancy dealing with deposits: that was clearly identified in the tenancy at clause 5.3. The provision of the information in that clause satisfied the statutory requirement [56].
• In the circumstances, it was unnecessary to determine whether it was also possible to rely upon the section 213(6)(a) proviso (‘substantially to the same effect’) [59].

Analysis

The High Court decision had already provided clarity on the relevant limitation period for tenancy deposit claims, and as to the effect of section 215B HA 2004 to claims where the original tenancy may not originally have been assured.

The Court of Appeal has now confirmed that:

• The statutory requirements should be interpreted purposively. Section 212(2) outlines the relevant purposes. The specific requirements of the 2007 Order were to be construed with those in mind. Overly literal (and unrealistic) interpretations of these requirements were deprecated.
• The Mannai principle was not confined to ‘obvious errors’, and was applicable in the case of mistakes within information provided to tenants.
• The courts below had determined these two issues by orthodox application of these established principles.
• A certificate of information containing an error should be construed as any statutory notice. Here, the reasonable recipient of that document would have understood that his tenancy agreement contained the circumstances in which deductions might be made from his deposit. In fact, the tenancy agreement did contain this information. That satisfied the requirements of the legislation: the tenant have been given the relevant information.
• The lack of signature upon the Certificate was not fatal to its validity. The Certificate had been provided under a covering letter which had been signed by the agent of the landlord. The documents should be construed together. On that basis, the Certificate was duly authenticated (not simply given in a form ‘substantially to the same effect’ as that required in the 2007 Order).

The Court of Appeal left open whether the section 213(6)(a) proviso was open to requirements within the 2007 Order other than that for certification in article 2(1)(g)(vii) (c.f. Ayanugga v Swindells [2012] EWCA Civ 1789 at [9]).

The Court of Appeal also declined to express any view on argument as to the effect of the obiter remarks of Lewison LJ in Northwood Solihull v Fearn [2022] EWCA Civ 40 at [66-69]. Did these create a further way in which a breach of the requirements could be avoided by reference to the line of authorities dealing with the consequence of a failure to comply with a statutory requirement (e.g. R v Soneji [2005] UKHL 49 and Elim Court RTM v Avon Freeholds [2014] UKUT 397 (LC))? If so, did that mean that a court can and should consider whether any prejudice has been caused by the omission relied upon (c.f. A1 Properties v Tudor Studios [2024] UKSC 27 at [91])? These issues remain open for further consideration.

Nonetheless, this decision should provide welcome respite for landlords that are the subject of unduly technical or otherwise unmeritorious tenancy deposit claims.

The judgment will be of interest to all residential landlord and tenant practitioners, and can be found here.

Shomik Datta represented the successful Respondent (as he did below), instructed by Dan Carter and Tony Pidgeon of Stone King LLP.

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