PHOEBE RUSSEL-SMITH, STEPHANIE DION-JONES AND ALEXIS HERSKOWIT AGAINST IJEOMA UCHEGBU
SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH
[2016] SC EDIN 64
B610/16
JUDGMENT OF SHERIFF T WELSH QC
In the cause
PHOEBE RUSSEL-SMITH, STEPHANIE DION-JONES and ALEXIS HERSKOWIT formerly residing at 5/25 Drummond Street, Edinburgh EH8 9TT
Pursuers
Against
IJEOMA UCHEGBU residing at 14 Approach Road, St Albans, AI1 1SR
Defender
Pursuer: Mr Gardner, Lay Rep, with Party
Defender: Mr Wells, ELP Arbuthnott McClanachan, Edinburgh
The Issue
[1] This case called before me on 12 September 2016. The pursuers are three Edinburgh University students who took a lease over a flat at 5/25 Drummond Street, Edinburgh, with another student, Marc Fitchett. The tenancy was a Short Assured Tenancy in terms of s32 of the Housing (Scotland) Act 1988. The landlady was the defender Ijeoma Uchegbu. The rental term ran from 1 September 2015 until 31 July 2016 (334 days excluding the ish day). A tenancy deposit was paid by the tenants to the landlady in the sum of £1550 on 16 May 2015. The landlady fully admits she breached her statutory duty and failed to lodge the deposit in an approved Tenancy Deposit Scheme in terms of the Tenancy Deposit Schemes (Scotland) Regulations 2011. After the commencement of this action the money was eventually paid into an approved scheme on 28 May 2016 (some 240 days late excluding the 30 working days grace the landlady is given by regulation 3). The landlady also failed to provide the tenants with information in terms of regulations 3 and 42 of the Tenancy Deposit Schemes (Scotland) Regulations 2011. Three tenants now sue for sanction against the landlady for her breach of statutory duty in the maximum sum available of £4650. The fourth tenant, Marc Fitchett, has not conjoined with the others seeking sanction. Breach of the regulations is admitted, the issue for the court is therefore to determine what level of sanction is appropriate in a case such as this.
The Parties
[2] Mr Gardner from Community Help & Advice Initiative (CHAI) appeared as lay representative for the pursuers. The first pursuer appeared in person. Mr Wells, solicitor appeared for the defender who was personally present. Given that the breach was admitted Mr Wells moved me to hear this case on the basis of submissions. Mr Gardner wanted to lead the first pursuer in evidence to speak to the extent of the wilfulness involved in the breach. I decided to hear submissions only and informed Mr Gardner he could address me on wilfulness in his submission.
The Submissions
Mr Gardner
[3] There was significant agreement between the parties as to what happened in this case. Mr Gardner set out the factual background. The pursuers and Marc Fitchett, all students, rented the property from the defender who is a biology professor in London. The lease was signed well in advance of the commencement of the tenancy. The tenancy ran for 11 months from 1 September 2015 until 31 July 2016 and was signed on 23 May 2015. On 16 May 2015 the tenancy deposit was paid to the landlady in the sum of £1550. This was contributed to, equally, by all four tenants. The deposit was not paid into an approved scheme as it should have been. I was told the money has now been returned to the tenants. Mr Gardner reminded me of the statutory duty on the landlady to place the deposit in an approved scheme within 30 days of the beginning of the tenancy, in terms of reg 3(1) of the Tenancy Deposit Schemes (Scotland) Regulations 2011. In this case he said for 8 months there had been no protection and no information given to the tenants as to their rights. He indicated I was entitled to consider whether the breach was an oversight or a deliberate act. He referred me to P5/1 which is a letter from the City of Edinburgh Council, the regulatory authority, dated 16 November 2015, reminding the landlady of her duty to comply with regulation 3. Mr Gardner said there were ongoing concerns regarding the defender’s management of the property and she was further reminded of her obligations in relation to the tenancy deposit scheme by e mail from Robert Forrester, an official from the Council, on 20 January 2016. I was informed that as no progress was made in obtaining confirmation from the defender that the deposit had been lodged in an approved scheme, the pursuers lost patience and raised this action in May 2016. The deposit was then lodged in an appropriate scheme on 28 May 2016. Mr Gardner said the defender in this case was an experienced landlady who received strong advice that the deposit had to be lodged in an approved scheme from the tenants and the regulatory authority. However it was only after this action was raised that the deposit was lodged. That is a feature of the case which indicates a wilful refusal on the part of the landlady to comply with the regulations. I was invited to take that into account. Mr Gardner stated the award lay at the higher end of the scale. He said there was no formula for calculating the award. It was a matter of discretion. The award should be at the top end unless there is significant mitigation. The maximum penalty should be the starting point in this case. He referred me to a number of authorities including Fraser v Meehan 2013 S.L.T. (Sh Ct) 119; 2013 Hous. L.R. 78 and Tenzin v Russell 2014 Hous. L.R. 17
Mr Wells
[4] Mr Wells frankly admitted that his client was in breach of the regulations. He said she had learned her lesson. She had been aware of the obligation but had been dilatory in the way she had dealt with the tenants and managed the tenancy. He accepted that it was only after the present action was raised that the defender complied with the regulations but the answers to the summons contain a full admission that the defender was in breach. That was important in mitigation. The defender took legal advice after the action was raised and immediately lodged the deposit in an approved scheme. Furthermore the money has now been returned to the tenants. Albeit they were without the protection of the scheme for a long period, in the end they were not prejudiced and got their money back. Mr Wells accepted his client had not informed the tenants of their rights in terms of the regulations. Again he candidly admitted his client was in breach. His client was an amateur landlady who had another professional occupation. She had let property for 12 years, though this particular property only for a few years. He accepted that his client had been written to by the Council and that she had not managed that intervention well. There were problems with the tenancy from an early stage and while that was not an excuse there seemed to be a breakdown in communications. He indicated the defender tried to respond helpfully with requests from the tenants but failed to follow through. He accepted that on the face of it his client did not comply with the regulations until threatened with court action. She has been put to the cost of obtaining professional representation to deal with this action though that, he said, was a problem of her own making. He said the deposit was returned so the purpose of the regulations was not defeated. His client was not a large undertaking or a multiple offender. He said this was not the worst example of regulatory breach. In relation to the calculation of the quantum of sanction he said the three tenants who sue should only be entitled to up to 3 times their own individual share of the deposit in a multiple tenancy case and not 3 times the whole deposit. He said the fourth tenant, Marc Fitchett, could be said to have waived his right to seek sanction and the deposit should be reduced by 25% for quantification purposes. He indicated the fourth tenant could still make an application for sanction as the time limit had not run out. He invited me to make an award at the lower end of the scale. He indicated his client had learned her lesson and had to pay for her travel expenses and legal costs to be represented at these proceedings. He referred to Jenson v Fappiano 2015 SC EDIN 6 and Cooper v Marriot 2016 G.W.D. 10-204.
Discussion
[5] This case is essentially a proof on quantum. I require to take into account the purpose of an application in terms of regulation 9 for a monetary order which operates as a sanction on the landlady. This is a punishment for her non-compliance with the statutory scheme which is intended to regulate the private housing market and provide enforceable protections to tenants against non-compliant landladies such as the defender. The regulations provide:
“9.—
(1) A tenant who has paid a tenancy deposit may apply to the sheriff for an order under regulation
10 where the landlord did not comply with any duty in regulation 3 in respect of that tenancy
deposit.
(2) An application under paragraph (1) must be made by summary application and must be made
no later than 3 months after the tenancy has ended.
10.
If satisfied that the landlord did not comply with any duty in regulation 3 the sheriff— (a) must order the landlord to pay the tenant an amount not exceeding three times the
amount of the tenancy deposit; and
(b) may, as the sheriff considers appropriate in the circumstances of the application, order
the landlord to—
(i) pay the tenancy deposit to an approved scheme; or
(ii) provide the tenant with the information required under regulation 42.”
[6] It is not disputed the landlady in this case failed to comply with her duty to lodge the tenancy deposit in an approved scheme and inform the tenants of their rights. Only three of the four tenants under the tenancy make this application. I do not know if Marc Fitchett has waived his right to apply for sanction. He can apply up to 31 October 2016. However, if he did, the landlady could not, in my opinion, be sanctioned twice. The scheme does not provide for that. Further I do not accept Mr Wells suggestion that the multiplicand available to me for sanction should be restricted by 25% to take account of the absence of the fourth tenant from these proceedings. Regulation 10 is quite clear that the multiplicand is the tenancy deposit and the multiplier is anything up to 3 times that value. A tenant is defined in terms of regulation 2 in the following way:
““tenant” refers to a tenant of a relevant tenancy and includes joint tenants and former tenants
by whom a tenancy deposit was paid;”
Accordingly, I do not consider that the reduction suggested by Mr Wells is open to me. Any tenant or group of tenants can make an application for sanction. Serial sanctions against landladies such as the defender are not, in my opinion, competent. Once an order is made in this case the issue is res judicata. However, in my opinion, Marc Fitchett does have a legally enforceable right of relief against his co-tenants for an equal share of the sanction should he choose to exercise that option. The tenancy agreement specifies the tenants are jointly and severally liable under the lease.
[7] In my opinion in assessing the level of sanction the function of the court is to impose a fair, proportionate and just sanction in the circumstances of the case, always having regard to the purpose of the regulations and the gravity of the breach, see Jenson v Fappiano. In my opinion, important to the assessment of sanction is the fact that the landlady has admitted her non-compliance. She has not wasted the courts time in defending a proof unnecessarily. Equally, the deposit in this case was returned to the tenants who at the end of the day have no doubt been greatly inconvenienced, deprived of their full regulated entitlement to protection but not actually prejudiced. I also accept the assurance given by Mr Wells that Professor Uchegbu has learned her lesson. However, the regulations are there to be complied with for the protection of tenants. Also, the breach in this case is aggravated by the fact the landlady must be taken to have known of and ignored or at least procrastinated in implementing her obligation to lodge the deposit and inform the tenants, because the Council were twice in communication with her to that effect and in relation to other unrelated issues to do with tenant complaints fully documented in the pursuer’s productions.
[8] Every case will depend on its own specific facts and at the end of the day the exercise of a judicial discretion is a balancing exercise. I do not, however, accept the proposition advanced by Mr Gardner that the starting point in this exercise is the maximum sanction discounted by any mitigating features. That approach seemed to me to create a downwardly adjustable, default maximum sanction which, in my opinion, is inconsistent with a sanction based on the free exercise of a balanced judicial discretion.
[9] Turning then to the level of sanction. I considered this very carefully. In my judgement there are two broad aspects to the sanction:
i. Firstly, the lease lasted 334 days, for 270 days of which, the deposit was unprotected and the tenants deprived of protection from the scheme and the proper information. In my judgement, to mark the fact that the defender breached the regulations for a sustained period of time which subjected the tenants and the deposit to a risk the regulations are designed to avoid, the proportionate and appropriate starting point for sanction in these circumstances is £1550 divided by 334 multiplied by 270. This produces a figure of £1253.
ii. Secondly, to that sum I will add a weighting to reflect the fact that the landlady was repeatedly officially informed of her obligations and still failed to comply. I do not accept the suggestion this was wilful defiance of the regulations. I am more inclined, on a balance of equities, even if finely judged in this aspect of the case, to accept the submission that the defender was dilatory in attending to her obligations to protect the deposit and advise the tenants of their rights rather than in wilful defiance of the purpose of the scheme. In assessing this aspect I also weigh in the balance the fact that no actual prejudice occurred and in the final analysis the purpose of the regulations was not defeated and the deposit was returned to the tenants, in full, without dispute. I also take into account the early admission of breach in these proceedings and the responsible way the defender has remedied the situation through her agents. I had the benefit of seeing the defender during the proceedings and while it may be said; ‘There’s no art to find the mind’s construction in the face’, I am satisfied the assurances given by Mr Wells, that she deeply regrets the position she now finds herself in, are genuine. For all these reasons, I will set the financial penalty to reflect this second factor, at £600.
Accordingly, the total sanction I shall impose on the defender and award the pursuers is £1853.
Expenses
[10] Mr Gardner moved for expenses restricted to £303.60 for court fees and a process server fee. I intend to award expenses to the pursuers restricted to that sum. Mr Wells moved for a hearing on expenses but I do not consider that necessary.
Sheriff T Welsh QC
Sheriff Court
Edinburgh
30 September 2016