An interesting appeal was recently considered in the County Court at Central London concerning a seemingly straightforward claim for damages made by tenants as a result of the landlord’s failure to comply with his obligations relating to the deposit.

In Sandor Szorad & Eszter Andrea Kozma v Pritpal Singh Kohli [2023] EW Misc 12 (CC), the tenants initially had a fixed-term tenancy which upon expiry automatically became a statutory periodic tenancy. The landlord had failed to protect the deposit and did not return it to the tenants when they vacated the property.

Deputy District Judge Brooks had initially only awarded the tenants damages for the first breach as he considered that there could only be one failure to comply with the initial requirements to protect the deposit and provide the prescribed information within 30 days of commencement of the first tenancy. He would not make an award in respect of the statutory periodic tenancy.

His Honour Judge Johns KC heard the appeal by the tenants where they sought damages for two alleged breaches by the landlord:

1. the initial breach when the tenancy commenced; and
2. a second breach when the tenancy became a statutory periodic tenancy.

The tenants relied on the well-known Court of Appeal decision in Superstrike Limited v Rodrigues [2013] EWCA Civ 669 in their argument that the deposit is deemed to have been returned and repaid on renewal and therefore a new breach was then committed by the landlord.

The tenants were successful before HHJ Johns, who applied what seems to be the obvious interpretation of Superstrike: there had been two separate tenancies, the landlord’s obligations had arisen twice, and he had failed to comply twice. Therefore, the tenants are entitled to damages for both breaches.

This issue may now seem clear enough and HHJ Johns’ application of Superstrike represents a view which we have seen widely adopted by lawyers in practice in similar cases. However, HHJ Johns’ decision is not binding and this issue has not been tested before a senior court with the benefit of proper legal argument from both sides (the landlord did not take part in the appeal). The language used in Superstrike and in the Housing Act 2004 is different and it is open to judicial interpretation, which combined with often complex factual circumstances easily results in conflicting County Court decisions, as is evident from this latest appeal. This is not a new issue. HHJ Luba KC previously considered a similar case but involving tenant changeover and we wrote about it here.

There is another important point about the damages awarded by HHJ Johns. The legislation provides a scale for damages between one and three times the value of the deposit. The tenants had been awarded damages representing three times the value of the deposit for the first breach at first instance. HHJ Johns made a further award for the second breach of damages representing two times the value of the deposit. The Judge considered that the following two factors pointed “away from the further award being made at the top end of the scale”: there had already been an award made at the maximum value for the first breach; and the landlord may not have appreciated the existence of the further breach since DDJ Brooks had also rejected its existence.

This approach, while not binding, indicates that landlords could argue where there is a repeated breach for reduced awards to be made for further breaches. There is no senior court authority regarding the order in which awards are to be calculated, i.e. whether each breach should be considered separately and different awards may be made; or whether a Judge should decide the appropriate award level for the first breach and then just multiply by the number of breaches. It is easy to see how the different approaches may result in vast differences in the total award, especially in cases involving multiple tenancy renewals. Such an approach is used in criminal matters where multiple offences arising from the same set of facts will usually lead to a consideration of the overall penalty and a degree of reduction so that the total penalty does not outweigh the seriousness of the actual event.

While this case may seem to end the discussion on this matter, it is not absolute. Superstrike considered a quite different point and discussed the notional receipt of a deposit. The case is also to some extent irrelevant as the legislation has changed since. The deposit legislation talks about receipt of a deposit and it is open to question whether a notional payment of a deposit as set out in Superstrike should be seen as a new deposit receipt leading to a recirculating penalty. However, it will require a more senior court to deal with this now.

Considering the importance and extensive effect of deposit claims on landlords and tenants alike, there is a desperate need for consistency at the County Court level which can only be achieved now in the Court of Appeal.