[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Gladehurst Properties Ltd v Hashemi & Anor [2011] EWCA Civ 604 (19 May 2011) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2011/604.html Cite as: [2011] 4 All ER 556, [2011] 29 EG 90, [2011] EWCA Civ 604, [2011] HLR 36, [2011] 2 P &CR DG17

[New search] [Printable RTF version] [Help]

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CLERKENWELL AND SHOREDITCH COUNTY COURT
His Honour Judge Cryan
9EC01126

		Royal Courts of Justice Strand, London, WC2A 2LL
		19th May 2011

Lord Justice Patten :

1. Gladehurst Properties Limited ("Gladehurst") is the landlord of flat 8, 238 City Road, London EC1V 2PQ which it let to Mr Farid Hashemi and Mr Matthew Johnson under an assured shorthold tenancy agreement dated 8^th August 2007. The tenancy was granted for a fixed term of one year commencing on 6^th September 2007 subject to a break clause under which either the landlord or the tenants could terminate the lease after 6 months by giving two months' notice in writing.
2. The rent payable under the tenancy was £2,080 per calendar month. It was payable in advance on the 6^th day of each month. Under clause 1 of the general tenancy conditions the tenants covenanted to keep the interior of the flat in a good and clean state of repair and condition and to deliver up the premises in that state at the end of the term. They also paid a deposit of £6,240 which was held by the landlord as stakeholders on the following terms:

"The Tenant shall pay to the Landlord's Agent as stakeholder on the signing of this Agreement the amount of the Deposit and the first payment of Rent provided always that the Landlord may, at the end of the tenancy, howsoever determined apply to the stakeholder to deduct and pay over from the Deposit whatever monies may be due to him from the Tenant either against the Inventory or by virtue of any breach by the Tenant of any of his obligations under this Agreement including rent owed to the Landlord including rent in advance which has fallen due and any sum expected by the Landlord in remedying any breaches of this Agreement by the Tenant.

As soon as practicable after the determination of the tenancy (howsoever the same may be determined) the Stakeholder shall retain (and account to the Landlord) such part of the Deposit as the Landlord's Agent shall deem necessary to enable the Landlord as at the date of such determination to make good any breach or non-compliance by the Tenant with his obligations hereunder and pay all costs, charges and expenses incurred in connection therewith including the Landlord's Agent's reasonable fees and disbursements and shall account to the Tenant for any balance of such sum. If the deposit shall be insufficient for the purposes aforesaid the Tenant shall pay to the Landlord forthwith on demand such further sum as shall in the opinion of the stakeholder be required for such purposes."

3. The Housing Act 2004 introduced provisions for the creation of tenancy deposit schemes which 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. Until 2000 the taking of deposits (which are a common feature of short residential tenancies) was entirely unregulated. In March 2000 a voluntary scheme was set up by the Independent Housing Ombudsman but it was not widely used and subsequently closed down. The government then decided to legislate.
4. The purpose of tenancy deposit schemes is to safeguard the deposit during the term of the lease and then to provide machinery to resolve any disputes which arise about the proportion of the deposit which the landlord is entitled to retain to meet the tenant's liability for rent or any breaches of covenant. To this end, s.212 of the Act requires the appropriate national authority to arrange for one or more tenancy deposit schemes to be made available. The schemes must comply with the requirements of Schedule 10 to the Act which contains detailed provisions about the contents of the schemes and what they must provide for on the termination of the tenancy.
5. I shall return later to some of those provisions but, for the moment, it is enough to record that tenancy deposit schemes must take one of two forms: either a custodial scheme under which the deposit is paid to the landlord and then transferred to a designated account held by the scheme administrator or an insurance scheme under which the landlord retains the deposit but pays over to the scheme administrator at the end of the lease any part of the deposit which is in dispute between the landlord and his tenant. The administrator is then responsible for paying out the disputed sums under the scheme, subject to a right of re-imbursement from the landlord, which is backed by insurance: see Schedule 10, paragraph 1.
6. The Act requires all deposits to be dealt with in accordance with an authorised scheme. Section 213 provides that:

"(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.

(8) In subsection (7) "deposit" means a transfer of property intended to be held (by the landlord or otherwise) as security for—

(a) the performance of any obligations of the tenant, or

(b) the discharge of any liability of his,

arising under or in connection with the tenancy.

(9) The provisions of this section apply despite any agreement to the contrary.

(10) In this section—

"prescribed" means prescribed by an order made by the appropriate national authority;

"property" means moveable property;

"relevant person" means any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant."

7. Clause 8.1(i) of the tenancy agreement provided that:

"The Tenant agrees to pay the Landlord's costs of and in connection with:

(i) The sum of £176.25 being £150 + VAT for the set up costs of this tenancy including the preparation and completion of this contract together with the checking of the said Inventory at the commencement of the tenancy. A further £100 + VAT will become payable if the tenant wishes the Landlord to register the deposit with the government deposit scheme."

8. But the deposit which the tenants paid was never registered or paid into a tenancy deposit scheme. Instead it was retained by Gladehurst in its own bank account until October 2008 when the tenants vacated the flat. There were various breaches of the cleaning and repairing covenants outstanding at the end of the lease and Gladehurst arranged for an independent inventory clerk to inspect the flat and to assess the cost of cleaning and making good the disrepair. He recommended the deduction of £1,123.99 from the deposit. This was therefore retained by Gladehurst and the balance of £5,116.01 was repaid to the tenants via a bank transfer to their nominated account.
9. In November 2008 Mr Hashemi contacted Gladehurst and requested receipts and a breakdown of the amount deducted from the deposit. At the same time he put the landlord on notice that he would issue a claim for three times the deposit as provided for under s.214 of the 2004 Act. Section 214 provides that:

"(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.

(5) Where any deposit given in connection with a shorthold tenancy could not be lawfully required as a result of section 213(7), the property in question is recoverable from the person holding it by the person by whom it was given as a deposit.

(6) In subsection (5) "deposit" has the meaning given by section 213(8)."

10. Both parties accept that the tenancy came to an end when the respondents vacated the premises in October 2008. The principal issue on this appeal is whether the tenants are entitled to judgment in a sum equal to three times the deposit which the Court is obliged to order the landlord to pay under s.214(4). A claim form was issued in the names of both tenants and served on 16^th February 2009. The defence filed referred to the tenants not having taken up the option of registering the deposit which is referred to in clause 8(i) of the tenancy agreement but it is now accepted that this is not a defence to a breach by a landlord of its obligations under s.213 of the Act.
11. The claim was considered on paper by District Judge Manners on 2^nd April 2009. She struck out the claim on the ground that it had been made after the tenancy had come to an end and that the provisions of s.214 no longer therefore applied. The tenants applied to set that order aside and their application was heard by District Judge Stary on 9^th July 2009 when Mr Hashemi appeared in person. The District Judge dismissed the application insofar as it related to the claim for three times the deposit but allowed the claim to stand in respect of the sum of £618 out of the £1,123.99 retained by Gladehurst from the deposit.
12. The £618 represents the cost to the landlord of repainting the flat and of various other items of repair. These are disputed by the tenants. But they accept that the landlord was entitled to deduct unpaid water rates; unpaid inventory charges and the cost of cleaning the premises, all of which totalled £505.99. The District Judge ordered that the dispute about the £618 should continue as a small claim and gave directions for a new defence to be filed in relation to that.
13. The tenants appealed against the striking out of their claim for three times the amount of the deposit. This was heard by HH Judge Cryan who allowed the appeal; restored the claim under s.214(4) of the Act; and gave judgment for the tenants in respect of the deposit and for a further sum of £18,720 representing the s.214(4) claim. He also ordered that the balance of the claim in respect of the sum of £618 should be stayed for a period of 28 days and struck out if no application to restore it was made by the tenants within that period.
14. Gladehurst now appeal against the judge's order with the permission of Arden LJ. The principal ground of appeal relates to the order for payment of the £18,720 but the landlord raises two further issues which I propose to deal with before coming to the substance of the appeal. These relate to Mr Hashemi's authority to bring the claim in the name of himself and Mr Johnson and the correctness of the judge's order for the return of the deposit without deduction.

Authority to sue

15. The claim form was issued in the name of both tenants but did not contain a statement of truth signed by them. Ms West, who appears for Gladehurst, submitted to Judge Cryan that Mr Johnson appeared to have taken no part in the proceedings and that Mr Hashemi was conducting them on his behalf with no apparent authority to do so. Mr Johnson had not instructed the solicitors who acted for them; had not filed a witness statement or other documents in the proceedings and had had no direct communication with the Court or with her clients. The same applied to the appellant's notice filed in respect of the order of District Judge Stary.
16. The issue about Mr Johnson's involvement in the proceedings and the appeal was important because it is, I think, common ground that any remedy which the tenants are entitled to either under the lease or under s.214 is enjoyed by them as joint tenants and can only be enforced by both of them. In these circumstances, CPR 19.3(1) requires both of them to be parties to the action unless the court orders otherwise.
17. At the hearing of the appeal Judge Cryan gave leave for Mr Hashemi to rely upon a witness statement from Mr Johnson dated 6^th December 2009 in which he says that he was consulted by Mr Hashemi about the claim and agreed that they should issue the proceedings. He confirms that he is content for Mr Hashemi to pursue the appeal on the basis that they will split between them any damages which are awarded.
18. The judge was satisfied on the basis of this evidence that Mr Hashemi did have authority to instruct solicitors to issue the claim in the names of both tenants. But to correct any technical defect in the proceedings he ordered that Mr Hashemi should have permission under CPR 19.6 to continue the proceedings on behalf of himself and Mr Johnson.
19. Gladehurst do not seek to challenge the veracity of Mr Johnson's evidence on this appeal but Ms West submits that the judge erred in making the representation order. Neither Mr Hashemi nor Mr Johnson had applied for such an order and the making of the order led to unfairness.
20. I do not think that there is anything in this point. Like Ms West, I think that the effect of Mr Johnson's evidence was in fact to confirm that he was always a party to the action. He had authorised the commencement of the proceedings in his name and his failure to sign a statement of truth on the claim form or the appellant's notice does not invalidate that. It was therefore unnecessary for the judge to make a representation order. But it has caused the landlord no prejudice because the effect of such an order is to allow the court to make orders (including orders for costs) which are binding on both the representative party and on those whom he represents. I can see no reason therefore to set aside the judge's order on this point.

Return of the deposit

21. This is more complicated. As mentioned earlier, the parties were agreed that of the £1,123.99 deducted from the deposit, only £618 is in dispute. The claim form did not include a claim for the return of the deposit but the District Judge allowed the tenants to proceed with a claim for the £618 in the small claims court. On the first appeal Judge Cryan accepted that only this sum was in dispute out of the original deposit and that £5,116.01 had already been repaid to the claimant. But he expressed doubts as to whether the orders which he regarded himself as bound to make under s.214(3) and (4) could be subject to a set-off in respect of what was due contractually to the landlord out of the deposit.
22. The order which was made therefore recites that the £5,116.01 has already been paid to the tenants; that they accept that £505.99 of the deposit is due to the landlord; and that the landlord is to retain the £618 pending the resolution of the tenants' claim for that sum. But it then goes on and orders Gladehurst to pay both the £18,720 and the £6,240 to the tenants and merely stays the tenants' claim for the £618 on the terms referred to above.
23. Ms West submits that the orders made are inconsistent with the recitals and highlight the artificiality of the Court being required to order the refund of the deposit after the lease has come to an end and the landlord has repaid to the tenant what he accepts is due. Mr Gannon for the tenants says that the order was simply the obvious way of producing a practical solution for the circumstances of this case. The recitals make it clear that the tenants cannot seek to enforce the order for the repayment of the whole of the deposit and that the £618 remains to be litigated (if at all) in further proceedings.
24. Although Mr Gannon is right about the effect of the order, it is, I think, over-complicated. Even if the landlord is not entitled to a set-off in respect of its contractual claims, I cannot see why the agreed retention of the £505.99 and the agreed repayment of the £5,116.01 should not be reflected by a reduction in the order for repayment of the £6,240. The order as drawn also fails to make it clear that if the tenants fail to pursue their small claim for the £618, this sum should also be credited to Gladehurst. The order should therefore be amended to that extent as least regardless of the outcome of the main ground of appeal.

Section 214

25. The mandatory provisions of s.214(3) and (4) apply if two conditions are satisfied. First the Court must be seized of an application by "the tenant" under s.214(1); and secondly the Court must be satisfied on that application either that the initial requirements of an authorised scheme (as defined by s.213(4)) have not been complied with or that s.213(6)(a) (the landlord's obligation to give the tenant the prescribed information relating to the authorised scheme applicable to the deposit and his compliance with the initial requirements of the scheme) has not been complied with.
26. The grounds upon which a tenant may make a s.214 application include the landlord's failure to observe and comply with the initial requirements as defined and the provisions of s.213(6)(a). One might therefore suppose that once the 14 day time limit set by s.213(3) had passed the tenant's cause of action was, so to speak, complete. But in Tiensia v Vision Enterprises Ltd [2010] EWCA Civ 1224; [2011] HLR 10 this Court held (Sedley LJ dissenting) that the sanction provisions contained in s.214 are focussed on the date of the hearing so that, where the landlord has by then complied with the initial requirements and with s.213(6)(a), the Court has no power to make the orders described in s.214(3) and (4). The position (as summarised by Rimer LJ in paragraph 36 of his judgment) is that:

"the pre-condition of a tenant's application to the court under section 214 is not a failure by the landlord to comply with the 'initial requirements' or the notification thereof to the tenant within the 14-day period specified in section 213. It is the failure to comply with either of those obligations at all. It follows in my judgment that if, therefore, the landlord is late in complying with his dual section 213 obligations, but he nevertheless duly does so before any section 214 proceedings are brought by the tenant, the tenant will have no cause of action under section 214 and any claim he brings under it will fall to be dismissed."

27. The cut-off date for compliance is the hearing date. In a case where compliance by the landlord post-dates the issue of the proceedings but occurs prior to the hearing date then the Court will likewise have no power to make a s.214 order but the tenant will be able to recover his costs:

"As I have said, the objective of the legislation is not the punishment of landlords but the achieving of proper protection of tenants' deposits. The legislation should not be interpreted in a sense that implicitly encourages the ambushing of landlords by tenants who have grounds for believing that the landlords have not complied with their section 213 obligations. It should be interpreted in a way that avoids litigation. Litigation will or should be avoided if, following a letter before claim, the landlord promptly puts his house in order. If the landlord declines or fails to do so, then of course it is open to the tenant to pursue his section 214 claim. If the landlord later (before the hearing) repents and remedies his defaults, the claim will still fail, although the tenant will ordinarily recover his costs. He may not recover his full costs, but there is nothing unusual about a claimant not doing so. The tenant will bring his claim knowing of that risk."

28. The particular point decided in Tiensia does not assist the landlord in this case. Gladehurst has never complied with the initial requirements or with s.213(6)(a) and cannot now do so. But its very inability to comply post the termination of the lease and the return of the deposit is relied on by Ms West to support her argument that it cannot have been the intention of the legislature to require compliance with s.213 after the lease has expired and where in the majority of cases the deposit will have been returned safely to the tenant subject to any appropriate deductions.
29. In terms of statutory construction, this argument can only succeed if the tenant's right to make an application under s.214(1) or the Court's power to make an order under s.214(3) and (4) are to be treated as conditional on the continuing existence of the tenancy as at the relevant time. Sub-sections (3) and (4) are the mandatory consequence of the Court being satisfied on a s.214 application of the matters specified in s.214(2). Even applying the construction of that provision adopted in Tiensia, it is common ground that those conditions were satisfied in this case. Section 214(2) does not include a further express requirement that the lease should be subsisting at the date of the hearing so that the issue has to be whether the application which the respondents made and which came before Judge Cryan on appeal was "such an application" within the meaning of s.214(2): i.e. an application made under s.214(1).
30. Ms West therefore submits that the words "the tenant" in s.214(1) should be construed to mean a tenant under a subsisting lease. "Tenant" is not a defined term under the Act and, as the judge pointed out, it is used in paragraphs 4 and 4A of Schedule 10 in connection with the arrangements under a custodial scheme for the resolution of any disputes about retentions. Those disputes can only arise after the tenancy has come to an end and their resolution is one of the principal objects of the scheme. Schedule 10 is therefore a clear illustration of "the tenant" being used in that context to describe the former tenant who had paid the deposit under the now expired lease.
31. Ms West's argument has therefore to concentrate upon the context in which "the tenant" is used in s.214(1). Unlike paragraphs 4 and 4A of Schedule 10 which relate in terms to the termination of tenancies where the deposit is held under a custodial scheme, s.214(1) looks to the time, she submits, when the deposit is paid at the commencement of the lease and continues to be held by the landlord otherwise than in accordance with an authorised scheme. The principal purpose of s.214 is to remedy a landlord's continued failure to comply with s.213 by registering the deposit with or paying it to the administrator of an authorised scheme. This was recognised by the decision in Tiensia where Rimer LJ at paragraph 40 said:

"That interpretation of the legislation means that late, but nevertheless due, compliance by the landlord with his dual obligations under section 213(3) and (6) will furnish him with a complete defence to any claim by the tenant under section 214. Such interpretation appears to me to be not only firmly supported by what I would regard as the carefully chosen statutory language, it is also a properly precise, or strict, one to apply to legislation such as section 214 that is manifestly penal in intent. Moreover, it is 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."

32. But once the lease has terminated the landlord cannot comply with the initial requirements of a scheme. None of the authorised schemes which have been set up intend a deposit to be protected under the scheme once the contractual term has come to an end. Moreover, if the respondents are right and it remains open to a former tenant to take proceedings under s.214 after the termination of the lease, their landlords could be faced with proceedings for three times the amount of the deposit even years after the lease has come to an end and the initial deposit has been returned.
33. As an alternative to her main argument, Ms West submitted that s.214(4) should be interpreted so as to read "the amount of the deposit" as meaning the amount of the deposit still retained by the landlord at the date of the hearing or the order. This would reduce the landlord's liability under s.214(4) in this case from £18,720 to £1,834. I am not persuaded by this. "Deposit" is a defined term and has the meaning set out in s.213(8). It clearly means the deposit as paid by the tenant at the commencement of the lease. Section 214(4) is a penal provision, set in amount, which does not create a kind of sliding scale depending on how much of the original deposit the landlord happens to retain at the relevant time. That would be entirely arbitrary and it is unsupported by the language and structure of Chapter 4 of the Act.
34. The strongest argument against the landlord's construction of the Act is that it would operate as an incentive to landlords to avoid complying with s.213. A failure to deal with the deposit in accordance with an authorised scheme would carry no penalty (except perhaps as to costs) if the tenant did choose to make a s.214 application during the term of the lease. The landlord would have until the hearing date in which to comply. But if the tenant delayed in making an application (as in this case) until after the termination of the lease then the landlord would never need to comply with s.213 and would have a complete answer to the claim.
35. Mr Gannon for the respondents supported the judge's view that the protection of a deposit under an authorised scheme was intended to operate as much after the lease has terminated as it did before it expired. The provisions of Schedule 10 which I have referred to are an obvious example of this. Without a scheme in place, the tenant will encounter all the former problems of having to bring proceedings in the County Court to secure the return of his deposit. These were intended to be avoided by the compulsory machinery of an authorised scheme. The unscrupulous landlord, by contrast, could, on Ms West's argument, sit on his hands and hope for the best knowing that he could always avoid a s.214 order by delay.
36. Mr Gannon submits that it is nothing to the point that the scheme rules do not allow deposits to be protected after the end of the tenancy. The provisions of s.213 require the deposit to be placed into an authorised scheme at the beginning of the tenancy and to remain so protected during the whole of the term. The landlord is not legally entitled to take a deposit on any other basis. His obligation therefore falls to be performed at a time when the deposit can be protected as required and if he fails to comply with his legal duties at the time when they fall to be performed then the consequences prescribed by s.214(3) and (4) follow.
37. The point is not an easy one but I have come to the conclusion that the power of the Court to make an order under s.214(3) and (4) is no longer exercisable once the tenancy has come to an end. Although s.213 makes it unlawful for a landlord to require the payment of a deposit which is not to be dealt with in accordance with an authorised scheme and requires the landlord within 14 days of receipt of a deposit to comply with the initial requirements of such a scheme, it is important to note that no criminal penalty is imposed for non-compliance with these provisions. Instead, they are made enforceable at the option of the tenant under s.214. It is entirely a matter for him as to whether he chooses to take advantage of the provisions in s.213 which were created for his benefit.
38. The answer therefore to the argument that the construction of s.214 contended for by Gladehurst will encourage landlords not to comply with their legal obligations under s.213 is the same as applies to any breach by a landlord of its covenants or other obligations under the lease. The tenant always has it within his hands to secure their enforcement by the taking of proceedings. That is the remedy prescribed by s.214 of the Act and it is up to the tenant to make use of it.
39. Looked at in this way it is entirely understandable if some temporal limits apply to the exercise of the right of enforcement under s.214. The initial requirements of an authorised scheme are, as Mr Gannon submitted, matters to be dealt with at the inception of the lease and not later than the expiry of the term. Section 214(1), as interpreted in Tiensia, speaks in terms of these requirements not yet having been complied with and therefore carries the strong implication that the default can still be remedied. This impression is confirmed by s.214(3) which requires the Court either to order the repayment of the deposit to the applicant or to order the landlord to pay it into an authorised scheme. For the Court to have a genuine discretion to exercise both alternatives must be available. On the facts of this case, neither was. Although Judge Cryan treated the £618 as part of the deposit retained by Gladehurst, it was artificial to do so. The tenants had agreed to Gladehurst retaining the £618 pending the prosecution of their claim for its return which it was for them to pursue and make out. The retention was therefore consensual.
40. The issue raised by the landlord has also to be resolved in a case where the landlord has returned the entirety of the deposit on the termination of the lease. Mr Gannon accepted that if this were the case then no s.214 claim could be made. Section 214 envisages that it must still be open to the Court to make both a s.214(3) and a s.214(4) order. Where this is not the case neither applies.
41. But that argument would mean that a defaulting landlord who nevertheless was scrupulous in dealing with the deposit at the end of the lease would be in a worse position with a defaulting tenant than he would be with a tenant who observed his own covenants to the letter. If the landlord was able to refund the deposit in its entirety he would escape the consequences of s.214(4) but not if he had legitimate grounds for retaining part of it to pay for repairs.
42. Anomalies of this kind are avoided by reading s.214(1)(a) as meaning that the initial requirements of an authorised scheme have not been but are still capable of being complied with. This is consistent with the decision in Tiensia and is the only meaning which ties in with the two alternatives in s.214(3) continuing to be available. In practice, this means that the grounds for a s.214 application will cease to exist once the lease expires and no order under either s.214(3) or (4) can therefore be made after that date. From that moment on the application will cease to be "such an application" as is described in s.214(2).
43. It follows that the District Judge was right to reject the s.214(4) claim in this case. I would therefore allow this appeal and set aside the orders for repayment of the deposit and for the payment of the £18,720.

Mrs Justice Baron :

44. I agree.

Lord Justice Carnwath :

45. I also agree.