Kaye v Lawrence revisited: The Party Wall etc. Act 1996 and the revolution of 1894

First published in the peer reviewed Journal of Building Survey, Appraisal & Valuation
Vol. 2. No. 3, 2013, pp. 233-238
© Henry Stewart Publications
2046-9594

Abstract

As the High Court itself anticipated two-and-a-half years ago, the judgment of Mr Justice Ramsey in Kaye v Lawrence [2010] EWHC 2678 (TCC) generated much interest among party wall surveyors, in particular the perceived extension of the availability of “security for expenses” to an adjoining owner where a building owner is carrying out work entirely on his own land.

The issue of security for expenses is to some extent merely the tip of the iceberg, being one logical outcome of a defining of the relationship of established common law rights with rights conferred by the Party Wall etc. Act 1996. The judgment is in fact a mine (some may say minefield) of long-awaited clarification on a number of matters that have sharply divided party wall surveyors for years.

Mr Justice Ramsey’s ruling gives clear guidance not only on the application of security for expenses but also rights of access onto an adjoining owner’s land in order to carry out works on the building owner’s land and the authority of surveyors to deal with insurance by the building owner and the design team.

Uncertainty and differences of opinion between appointed surveyors on fundamental matters are unhelpful to parties caught up in the Act and can lead to significant unnecessary costs for the hapless building owner. Party wall surveyors of all persuasions would better serve the parties who appoint them and the intention of parliament by welcoming the clarity given by the few cases that reach the higher courts and then applying it with the practical even-handedness for which they are justly regarded by the judiciary.

Caution

Writing in this journal in 2012, Vivien King says:^[1]

“Judges are required to give judgment based on the very particular facts and circumstances of the case before them. They do not, generally speaking, aim to give general guidance to the world at large.

While much quoted by surveyors and lawyers alike, case law should, therefore, be treated with caution…

There are occasions, however, when judicial guidance is given and can generally be applied.”

The High Court judge in Kaye v Lawrence was clearly of the view that this judgment fell into the latter category.

Why all the fuss?

Section 12(1) of the Party Wall etc. Act 1996 (the Act) provides that “An adjoining owner may serve a notice requiring the building owner before he begins any work in the exercise of the rights conferred by this Act to give such security as may be agreed between the owners or in the event of dispute determined in accordance with section 10.”

“Security for Expenses” (the title of Section 12), when requested, is commonly provided by a building owner placing an agreed sum in an escrow account or providing some form of bond or insurance.

Party wall surveyors have tended to use this provision sparingly and it is not even generally suggested that this right should be drawn to the attention of an adjoining owner. It has been held for many years that security is only applicable when a building owner is intending to carry out work on the adjoining owner’s property.^[2]

As a matter of common practice surveyors have also been reluctant to agree security in respect of possible damage to an adjoining owner’s property or other matters that can be protected against by normal insurance provision though this practice seems to have been eroded in recent years.

The decision in Kaye v Lawrence appeared to blow this convention wide open confirming that surveyors have a wide jurisdiction to award security in respect of the risk of future damage arising out of any work notifiable under the Act including work on the building owner’s own land.

This upset a great number of surveyors who saw this as an open invitation to adjoining owners to frustrate perfectly lawful development by unreasonable requests for security for expenses and it is this aspect of the judgment that has been most debated among practising party wall surveyors.

Before considering the wider implications of the reasoning that led Mr Justice Ramsey to his conclusions it is worth revisiting the main arguments of the dissenters.

High Court or County Court?

A number of commentators on this decision have expressed relief that it is “only a County Court decision” and gone on to suggest that it can safely be ignored. This matter of jurisdiction was considered in detail by the judge and needs to be carefully considered by any practitioner seeking to dilute the authority of the judgement.

As this case is an appeal against an award made under the Act it can, by virtue of Section 10(17), be appealed only in the County Court. On the face of it, therefore, the decision of the County Court would have to be appealed to the Court of Appeal and that decision would be the binding authority.

The parties themselves recognised the significance of the issues and asked that the appeal be heard in the High Court referring the judge to Section 42(2) of the County Courts Act 1994 by which “a County Court may order the transfer of any proceedings before it to the High Court“.

At para. 13 of his judgement Mr Justice Ramsey confirms “given the importance of the matter and the fact that the parties have agreed that the appeal should be determined in the TCC in London, I consider that it was appropriate for this appeal to be dealt with in the High Court.”

The citation number confirms it as a High Court case and I submit that it would need a very exceptional circumstance indeed for the judgment to be dismissed as having no binding authority.

The wrong question?

Opponents have argued that the judgment is misleading because the judge was asked to decide the wrong question. The issue that the judge would have decided if he had only been asked is the premise that “expense” and “compensation” are entirely different things and that there is no provision in the Act for security for “compensation”, only for “expenses”.

The argument runs that under Section 1(7) of the Act the building owner “shall compensate any adjoining owner and any adjoining occupier for any damage to his property … ” and that only the rights accorded under Section 2(2)(a), (e), (f), (g), (h) and (j) are “subject to making good all damage occasioned by the work … “. The other rights under 2(2) are not so subject and any damage caused would have to be dealt with by compensation under 7(2).

Under Section 7(2) “The building owner shall compensate any adjoining owner and any adjoining occupier for any loss or damage which may result to any of them by reason of any work executed in pursuance of this Act” and the word “compensation” does not appear in any of the categories of expenses in Section 11.

On this basis, it has been argued that with regard to security for expenses:

Sections 1 and 6 are out of the equation because compensation is the given remedy for damage, not money in lieu of making good, and the security provision does not operate for compensation.

We can therefore only be concerned with the exercise of five of the thirteen section 2 rights that are given with the condition that all damage occasioned by the work to the adjoining premises is made good, including furnishings and decorations, and then a sixth right which is conditional only on making good damage to the wall of the adjoining owner’s property. The other seven are out.^[3]

Dissenters have sought to distinguish between the different rights, notices, procedures and language in Sections 1, 2/3 and 6, arguing that these differences demonstrate a different intention of parliament for the three sets of circumstances.

In the course of the trial Mr Justice Ramsey was asked to distinguish between “any right conferred on him by this Act” as referred to in Section 7(1) and 12(1) and “any work executed in pursuance of this Act” in Section 7(2) in a similar attempt to constrain the application of security for expenses. Whether or not the difference between these phrases has any practical significance has also been the subject of much debate among party wall surveyors. Counsels’ arguments were on the effect that this distinction might have rather than any distinction between “expense” and “compensation” but the judge’s conclusion indicates the rationale that he would have applied if asked. He said: “The question, though, is whether they give rise to an intended distinction.”

He goes further in para. 51 saying “the distinction which Mr Hutchings seeks to make between provisions that give rights and those which do not is an artificial one”. Mr Hutchings was counsel for the building owner, Mr Lawrence.

At para. 53 he says:

“I do not consider that the use of different phrases within the Act leads to the conclusion that they were applying to different subject matter … in the context of sections 7(1) and 7(2), there is no commonsense reason why the obligation of the building owner in section 7(1) not to cause “unnecessary inconvenience”should not apply to section 6(1) and 6(2) works but the obligation in section 7(2) to compensate for any loss or damage should apply to section 6(1) and 6(2) works.”

To what extent this argument and approach should guide us with regard to any legal difference between “expense” and “compensation” in the context of the Act will keep surveyors disputing until some disgruntled party of sufficient means decides to test it at law. Nevertheless, at para. 63, Mr Justice Ramsey says “it does not make sense to grant security for some works but not other works when … liability for loss and damage under section 7(2) would apply to all works”.

Another commentator^[4] has suggested that the anomalies arising out of various different phrases of similar meaning is simply a result of the evolutionary history of the Act and that the courts “will seek to create a regime of the most consistent applicability, and indeed practicability”. Mr Justice Ramsey’s judgment seems to support this hypothesis admirably.

The revolution of 1894

The big upset in the conventional view of security for expenses stems from the statement at para. 61 of Mr Justice Ramsey’s judgment:

“I do not consider that there is a proper distinction between rights that only exist under the 1996 Act and rights that exist at common law and which are regulated by the 1996 Act. The Act creates new rights which do not exist at common law permitting the building owner to carry out work on the land of the adjoining owner. However, whilst at common law the building owner would have a right to carry out work on their own land, those rights in relation to the area within 3 or 6 metres of the boundary are supplanted or substituted by the provisions of sections 6(1) and 6(2) of the 1996 Act.”

In short, this means that the Act effectively extinguishes a landowner’s common law right to excavate beyond a certain depth on his own land within three or six metres of a building on adjoining land, replacing it with a conferred right subject to the provisions of the Act.

The idea that common law rights are effectively repealed and replaced with conferred rights is not new but based on a number of authorities referred to in the trial and judgment.

In Selby v Whitbread [1917] 1 KB 736, Mr Justice McCardie referring to the party wall provisions of the London Building Act 1894, said: “An examination of the code at once shows that common law rights are dealt with in a revolutionary manner … The common law was seen to be insufficient for the adjustment of modern complex conditions … and the common law is by implication repealed.”

Referring to the 1996 Act Lord Justice Evans in Louis and Louis v Sadiq [1997] 74 P&CR 325 said, “The adjoining owner’s common law rights are supplanted when the statute is invoked which can have the effect of safeguarding the building owner from common law liabilities.”

The revolutionary effect of repealing common law rights by implication and replacing them with conferred rights goes beyond excavating on one’s own land as in Section 6 of the Act to embrace the building of a new wall entirely on your own land at “the line of junction” (boundary) which requires notice to be served under Section 1(5).

Surveyors have long been divided on whether or not notice under Section 1(5) will give a building owner rights of access to the adjoining owner’s land under Section 8 in order to build a wall standing entirely on his own land. Those who said that access did not follow argued that the right to build a wall entirely on one’s own land was a common law right not a right conferred by the Act. The purpose of the notice was to gain the right to put the projecting toe of any foundation under the land of the adjoining owner. Some surveyors would concede access for the placing of the foundation, a conferred right, but not for the building of the wall.

In 2006, to the dismay of many surveyors and the delight of others, Her Honour Judge Pearl ruled in Sleep v Wise^[5] that notice under Section 1(5) did not give a building owner rights of access under Section 8. On this occasion, however, dissenters were able to point out that this was a bona fide County Court judgment and was not binding.

Mr Justice Ramsey again at para. 61: “the common law rights are supplanted and substituted by the provisions of the Act and that this applies as much to sections 6(1) and 6(2) as it does to section 6(3) or any other provision of the 1996 Act”. Any other provision includes Section 1(5) and it seems to me an inescapable conclusion of this judgment that notice under Section 1(5) does indeed give rights of access under Section 8.

Insurance and Security for Expenses

In practice, many surveyors consider that insurance is a matter outside the jurisdiction of the Act and rely on a standard clause in the award along the lines of: “The building owner shall indemnify the adjoining owner in respect of injury to or loss of life of any person or damage to property caused by, or in consequence of, the execution of the works and the costs of making any justified claims.”

At para. 50, referring to the power of surveyors (in this case the third) to determine “any other matter arising out of or incidental to the dispute including the costs of making the award”, Mr Justice Ramsey confirms that this is “a broad power which permits the award to deal with such matters as insurance as it does in this case”.

At para. 64 he wraps things up pretty conclusively thus:

I should add that given the wide terms of section 10(12)(c) … I see no reason why the award cannot also deal with security under that provision and I understand that commonly, as here, such matters as insurance are included under this provision. I consider that this broad power is consistent with section 12(10) (sic) applying to all provisions of the Act, including sections 6(1) and 6(2).

It should not normally be necessary to seek security for expenses for damage arising out of an insured risk but it is important to ensure that the adjoining owner is protected by such insurance. This itself is technically complicated and may require advice from an insurance specialist.

The adjoining owner is also exposed to the risk of damage arising out of uninsured events and also the expense of reinstating something removed by the building owner in order to prevent damage arising later. Non-negligent insurance may help reduce this but this is the area where security for expenses needs to be carefully considered. The most quoted illustration is a project in which the building owner’s works are abandoned part way through leaving the adjoining owner’s premises exposed or vulnerable, where an acceptable temporary state would become an unacceptable semi-permanent state.

Conclusions

If a surveyor is appointed using one of the commonly adopted forms of words then that surveyor has been authorised to make a request for security on behalf of the appointing owner. The adjoining owner is unlikely to be aware of this and if the surveyor does not make such a request and has not explained the option to the appointing owner then that surveyor may find himself liable for any losses incurred by his appointing owner. At the very least an adjoining owner’s or agreed surveyor must explain the Section 12 provisions to an adjoining owner.

As other commentators have pointed out, if security is requested and falls to the surveyors to resolve under Section 10, the surveyors have authority to determine the form and amount of security that is appropriate. Chapter 12 of Party Walls Law and Practice by Stephen Bickford-Smith and Colin Sydenham is most helpful on how this should be approached.^[6]

It may be quite appropriate to deal with security by way of insurance. The judge in Kaye v Lawrence confirmed that the surveyors have “a broad power which permits the award to deal with such matters as insurance…” This suggests that merely requiring the building owner to indemnify the adjoining owner without also requiring that suitable insurance is in place may not be enough. Whether this implies a duty on the surveyors to check that such insurance is in place or is adequate is another matter for another day.

Until and unless a higher court overturns this decision there can no longer be any doubt that a notice served under Section 1(5) brings with it rights of access under Section 8.

References

1. King, V. (2012) ‘Vacant possession’, Journal of Building Survey, Appraisal & Valuation, Vol. 1, No. 1, pp. 58–62.
2. The Pyramus & Thisbe Club (1996) ‘The Party Wall Act explained’, (The Green Book), Second Edition, The Pyramus & Thisbe Club ISBN 978-0-9558454-0-6
3. Jessop, D. (2012) ‘To be or not to be secure’, Whispers, September, The Pyramus & Thisbe Club.
4. Frame, S. J. (2011) ‘FPWS Case Commentary re Kaye v Lawrence’, Faculty of Party Wall Surveyors
5. Sleep v Wise, unreported appeal in the Barnet County Court against a Third Surveyor’s award.
6. Bickford-Smith, S. and Sydenham, C. (2009) ‘Party Walls Law and Practice’, Third Edition, Jordans Publishing Ltd, ISBN 978-84661-179-7