SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH
Judgement
Of
Sheriff Kathrine EC Mackie
In causa
Ross Fraser and Alison Pease
Pursuers
against
Andrew Meehan
Defender
Act: Nisbet Brodies Solicitors Edinburgh
Alt: Dean ADLP Solicitors Edinburgh
B641/13
Edinburgh 29 August 2013
The Sheriff having resumed consideration of the cause Finds and Declares that the defender failed to comply with his duty in terms of regulation 3 of the Tenancy Deposit Schemes (Scotland) Regulations 2011 by failing to pay the pursuers' tenancy deposit to the scheme administrator of an approved tenancy deposit scheme on or before 24th November 2012; grants decree against the defender for payment to the pursuers of the sum of Three Thousand Four Hundred and Fifty Pounds (£3450) Sterling; finds the defender liable to the pursuers in the expenses of the cause as the same may be taxed, allows an account thereof to be lodged and when lodged remits same to the Auditor of Court to tax and report.
NOTE
[1] This is an application under The Tenancy Deposit Schemes (Scotland) Regulations 2011 ( hereinafter "the 2011 Regulations"). The facts were not in dispute and evidence did not require to be led at the proof fixed to take place on 19th August 2013. The defender's agent advised that the declarator sought in crave two was not opposed.
[2] On 11th and 12th May 2009 the pursuers entered into a short assured tenancy agreement with the defender in relation to the property at 32 (2F1) Cumberland Street Edinburgh. The lease was for a period of 12 months terminating on 12th May 2010. Thereafter the lease continued on a month to month basis being renewed on the 13th of each month by agreement in terms of Clause Three of the lease. The lease was last renewed on 13th October 2012. On 1st November 2012 the defender gave the pursuers two months' notice in writing of his intention to terminate the lease in terms of Clause Three of the lease. The lease was terminated on 12th January 2013. The pursuers removed from the property on that date.
[3] Prior to commencement of the lease the pursuers paid to the defender the sum of £1,150 by way of a deposit. Following the making of the 2011 Regulations the defender was obliged to pay the deposit to the scheme administrator of an approved tenancy deposit scheme on or before 24th November 2012. The defender was also obliged to provide to the pursuers by said date information in terms of Article 42 of the 2011 Regulations including that he was, or had applied to be, entered on the register of landlords maintained by the local authority under section 82 of the Anti-Social Behaviour etc (Scotland) Act 2004 (hereinafter the 2004 Act"). The defender did not make payment of the deposit and did not provide the required information. As at 26th February 2013 the defender was not entered on the register of landlords with the City of Edinburgh Council.
[4] Following termination of the lease the defender raised no issues with regard to the property until after he was contacted by the pursuers on 17th February 2013 seeking return of their deposit. Thereafter the defender claimed entitlement to retain the deposit in respect of alleged damage to the property caused by the pursuers. Lengthy correspondence was exchanged in which the pursuers accepted responsibility for minimal damage but otherwise denied responsibility for any alleged damage. The defender did not produce any evidence to support his claims with the exception of a couple of photographs. A compromise was reached for economic reasons whereby the defender returned to the pursuers the sum of £575 being 50% of the deposit.
Pursuers' Submissions
[5] Mr Nisbet submitted that the 2011 Regulations had been introduced to address difficulties which were being experienced in the return by landlords of tenants' deposits. The 2011 Regulations provided not only that a tenant's deposit be held by a scheme administrator and certain information provided to the tenant but also a procedure whereby disputes in relation to the return of deposits may be resolved without cost to parties. In a situation where a landlord claimed entitlement to retain all or part of a deposit he would require to produce to an independent arbiter evidence in support of his claim. Where as in this case the landlord does not pay the deposit to the scheme administrator the tenant is denied access to the free dispute resolution procedure. Litigation would in most cases be uneconomical since actions would most likely be Small Claims and limited expenses were recoverable.
[6] It was further submitted that in terms of Regulation 10 of the 2011 Regulations the Sheriff must order the landlord to pay an amount not exceeding three times the amount of the deposit. The payment is not a form of compensation. It should be considered a form of sanction and requires to be such amount as will act as a deterrent to landlords.
[7] In this case the landlord was an experienced property agent. He had been employed by Rettie & Co Edinburgh, a firm of property agents. Despite such experience he had failed to comply with his obligations in terms of the 2011 Regulations and in terms of the 2004 Act. He had taken no steps in relation to the pursuers' deposit until after contacted by them. They had had no warning of possible issues from the defender's agent who had inspected the property on termination of the lease. Accordingly they had had no opportunity to photograph the property prior to their departure for their own protection. Repeated requests to the defender for production of evidence to support his claims had been unsuccessful. It was submitted that this was the sort of behaviour that the 2011 Regulations were intended to eliminate and that the court should enforce the Regulations robustly.
Defender's Submissions
[8] Mr Dean intimated an intention to "put things into perspective". This was a "storm in a teacup". It was admitted that the defender had failed to pay the deposit to the scheme administrator by the due date. The defender was habitually resident in Australia. He did not own multiple properties and did not earn his living by letting properties. It was accepted that there had been an exceptional amount of email exchange with the pursuers in connection with return of the deposit and alleged damage to the property. Settlement had been reached between the parties. The defender believed that would be the end of the matter. Thereafter various offers had been made to settle this issue.
[9] It was submitted that to order payment of three times the deposit would be excessive. The fact that settlement had been reached was a relevant factor to take into account. If the pursuers had succeeded fully in any arbitration under the 2011 Regulations the most they would have recovered would have been £1,150. An offer had been made to return the balance of the deposit namely £575. The pursuers' position could not have been any better. In fact the defender had offered to pay more.
Pursuers' Response
[10] In reply Mr Nisbet emphasised that settlement was reached on the grounds of economy and not after consideration of any evidence to support the defender's claims. Offers to compromise this action had been made by both parties. During discussions there had been no indication that the defender would agree to the declarator sought. It was submitted that it was important that any payment ordered was of such an amount to act as a real deterrent.
Discussion
[11] Evidence in this case was rendered unnecessary by the agreement between parties in relation to the essential facts. It was admitted that the defender had not complied with his obligations in terms of the 2011 Regulations and declarator to that effect was not, and indeed could not be, opposed. Accordingly it being conceded that the landlord did not comply with a duty in Regulation 3 of the 2011 Regulations the only issue for the court is the amount that the landlord should be ordered to pay.
[12] No authorities were, or could be, referred to since it would appear that there has been no previous application under Regulation 9 of the 2011 Regulations. Regulation 10 provides:- "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."
[13] The amount to be paid to the tenant is not said to refer to any loss suffered by the tenant. Accordingly the amount cannot be said to be compensatory. I note that Part 2 of the 2011 Regulations is headed "Sanctions". Giving the regulation its ordinary meaning the amount to be paid is in the form of a sanction, as the heading states, or a penalty. It may be analogous to an award of punitive or exemplary damages which is a form of damages unknown today in the law of Scotland. Such awards may be made in other jurisdictions to punish the defender's behaviour and to express condemnation of or indignation at the enormity of the offence. A pursuer's receipt of such an award may be regarded as a windfall.
[14] The 2011 Regulations were introduced to address a perceived mischief. Actions by former tenants for return of deposits are a frequent occurrence in this court. All landlords are required to comply and both landlords and tenants have the opportunity of the dispute resolution procedure should any issues arise on termination of any leases. The regulations will be meaningless if they are not enforced.
[15] In this case the landlord was someone who may be presumed to have special knowledge of his obligations both in terms of the 2011 Regulations and the 2004 Act. He failed to comply. It is averred that it was due to "oversight". No further information was provided by Mr Dean. In my opinion no proper explanation for his failure has been provided. He claimed retention of the pursuers' deposit but failed to produce any evidence to support his claims. Had the dispute resolution procedure been available he would have been unable to seek retention of any part of the deposit without producing relevant evidence. The pursuers were placed in an invidious position and a compromise was reached on economic grounds. The fact that offers to settle this action have been made is in my opinion irrelevant to the issue to be determined.
[16] The amount to be paid to a tenant is dependent upon the amount of any deposit and will vary accordingly. The amount is not to exceed three times the amount of the deposit. That implies that the court has unfettered discretion.
Decision
[17] Nothing by way of mitigation was proffered other than the compromise reached between the parties. In all the circumstances I consider than an amount of £3,450 should be paid to the pursuers.