Does Section 213 apply if money is used for arrears first?

I am trying to understand the precise scope of section 213 Housing Act 2004 as amended by section 184 Localism Act 2011.

Section 213 (1) requires that any tenancy deposit paid in connection with a shorthold tenancy must be dealt with in accordance with an authorised scheme. Section 212 (8) defines a tenancy deposit as money intended to be held as security.

My question is this: If a landlord receives money from a tenant within the 30-day protection window, the landlord allocates the entire amount against existing rent arrears and other documented charges, so that nothing remains to be held as security. Does section 213 apply at all?

The argument would be that Section 213 requires receipt of a tenancy deposit, meaning money intended to be held as security. If the money was immediately applied to discharge existing obligations rather than held as security, the statutory definition in section 212(8) is not satisfied, and section 213 is never triggered.

This would be consistent with Johnson v Old [2013] EWCA Civ 415, where the Court of Appeal confirmed that the function of a payment determines its character and that money applied to discharge existing rent obligations is advance rent, not a security deposit.

Has anyone encountered this argument either successfully or unsuccessfully in a county court case? And does anyone know of any authority, case law or statutory guidance on whether section 213 applies where the entire payment was allocated against arrears within the 30-day window?

Thanks,

Simon