Appeal by landlords against threefold payment of deposit refused

An Extra Division of the Inner House comprising Lord Drummond Young, Lord Malcolm and Sheriff Principal Pyle (pictured) heard the appeal of Stuart Russell and Laura Clark against Tenzin Samdup, with whom they entered into a tenancy agreement for a house in Edinburgh in 2012.

At Edinburgh Sheriff Court Mr Samdup’s first crave was for declarator of entitlement to payment of three times the deposit: £2,250 under reg 3 of the Tenancy Deposit Schemes (Scotland) Regulations 2011. His second, upon amendment before the proof before the sheriff, was for payment of that sum under reg 9 of the 2011 Regulations.

The defence to that action was as follows. First, that the pursuer lacked title and interest, as per reg 9, since he failed to make payment of a tenancy deposit; secondly that the court lacked jurisdictional competence because the pursuer did not seek payment first in terms of reg 10. Finally, that decree should be for a lesser sum as the specified amount was excessive.

Sheriff Holligan, who heard the summary application, granted the declarator sought by the pursuer and decree for payment of it.

The defenders failed on appeal to the Sheriff Principal, who adhered to the sheriff’s interlocutor.

The parties entered into a lease in 2011. A deposit of £750 was paid to the defenders and held by them. A second lease was created, the reason for which was not material, and the deposit from the first lease was retained as deposit for the second. It was agreed the defenders did not pay the money to the administrator of an approved scheme as per reg 3(1)(a).

At the ish of the second lease the balance of the deposit was £327.77. This was returned to the pursuer 22 days after the expiry of the lease. The lease had required that it be paid within 21 days of termination.

Sheriff Principal Pyle said that there were essentially three grounds on which the landlords appealed. First, that the crave for declarator was incompetent; secondly, that the sheriff erred in adding a crave for payment; and thirdly, that the threefold figure was excessive.

They submitted that the court should not have made an award of payment under regs 9 or 10 as the declarator pertained solely to reg 3 and that Mr Samdup lacked interest to have a fact declared.

Sheriff Principal Pyle said that this was an “over technical view of the application” prior to its amendment and that there was no doubt as to the purpose of the application.

The judges distinguished the circumstances in Simpson v Downie 2013 SLT 178 which had been cited by the appellants. The only element missing from Mr Samdup’s application was, the Sheriff Principal explained, the relevant mechanism by which the court would grant the order – and this was always intended to be sought.

The landlords’ second ground of appeal concerned the sheriff’s acceptance that the unamended application was incompetent. They relied on authorities on the question whether a fundamental defect in an action could be cured by amendment. Sheriff Principal Pyle said the sheriff was “well entitled” to do so and cited Wilson v Lothian Regional Council.

In respect of their third ground of appeal the landlords submitted that the sheriff had taken irrelevant considerations into account. They said he had placed weight on the fact they held the deposit for a number of months before the tenancy deposit protection deadline and not that they were in breach for only 34 days.

They added that the sheriff did not pay heed to the phrase “not exceeding” in reg 10 which, they submitted, should have been reserved for the most serious of cases, rather than theirs with their short period of breach and the fact it occurred as the regulations were coming into force and at a time when the tenant had given notice under the lease.

Delivering the opinion of the court, Sheriff Principal Pyle said: “In para of his judgment the sheriff sets out in careful detail his reasons for deciding that the maximum amount ought to be paid. We can find no fault with his reasoning. He had the benefit of hearing evidence under oath at the proof. It is plain that he reached the conclusion that the breach by the defenders in this case was indeed a serious one. There is, in our opinion, no basis upon which we would be entitled to interfere with the decision he reached. It is not insignificant that the defenders had until 30 November 2012 to register the pursuer’s deposit with one of the approved schemes. That was over four months after the regulations had first come into force. They chose not to do so. The present time limit, now that the transitional arrangements no longer apply, is only 30 days.

“The overall result is that the court has identified no flaws in the decisions of the sheriff and the sheriff principal. The appeal falls to be refused.”