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Party Walls: Who decides – the court or your surveyor?

24 Aug 2017

In the recent case of Lea Valley Developments Ltd v Derbyshire, the court considered their jurisdiction in relation to the Party Walls etc Act 1996.

 

Facts

 

Lea Valley was a subsidiary for a not-for-profit local housing provider and the defendant was a freeholder of a property which had been converted into six flats.  In 2014, Lea Valley entered into a JCT Design and Building contract to construct 12 houses adjacent to the defendant’s property. 

 

Lea Valley had to serve a notice of excavation works under section 6 Party Walls etc Act 1996 and the parties appointed surveyors to review the works.  Section 7(2) states that Lea Valley would have to compensate the defendant for any loss or damage connect with the work.

 

There was severe damage to the defendant’s property so much so that the tenant had to vacate it.  Lea Valley accepted that the damage had been caused and accepted that the property would have to be demolished and rebuilt.

 

The defendant brought a number of claims against Lea Valley including compensation claims to cover the loss of rent.  However, this particular hearing was in relation to the cost of demolishing and rebuilding the defendant’s property and how any such compensation should be assessed.

 

The defendant’s surveyor set out that the estimated costs of the project would be £1.95m.  Lea Valley disputed this figure and argued that the compensation should be determined in relation to the diminution in value of the property as a result of the damage, which in its view would be somewhere between £488,000 and £1m.

 

On 21 February 2017, Lea Valley issued a Part 8 claim requesting that the court make a declaration that compensation should be assessed by reference to the diminution in value of the property.

 

The defendant informed Lea Valley that they would be requesting a stay.  The defendant should have filed an acknowledgement of service by 10 March 2017 but they did not do so until 21 March 2017.

 

Decision

 

The court had to consider whether (1) the defendant should be granted an extension of time for filing the acknowledgement of service, and (2) the court lacked jurisdiction to hear or determine the claim, or if it did not, whether the claim should be stayed for a surveyor’s decision.

 

In relation to the jurisdiction issue, the defendant argued that assessment of compensation was a matter for the surveyors to determine, as set out in section 10 which states that such a dispute “shall” be settled by surveyors, and that the court had no jurisdiction to determine the value to be awarded.  Lea Valley submitted that the court were able to determine the correct level of compensation as they have an inherent jurisdiction.

 

The court held that they have an inherent jurisdiction to provide declaratory relief under Senior Court Act 1981 and CPR 40.20.  Despite the defendant arguing that the Party Walls etc Act 1996 provided a code that ousted the court’s jurisdiction, the court held that in order for the court’s overriding jurisdiction to be ousted there had to be clear wording stating to that effect.  The court also held that the defendant had been aware of the claim since 21 February 2017 and that both the defendant and Lea Valley were aware of the fact that Lea Valley was going to dispute the claim.  However, the court granted the defendant relief from sanction after considering the defendant’s delay determining that the breach was not serious and that it had not prejudiced Lea Valley.

 

The court held that the relief Lea Valley sought was narrow and could be determined via a short court hearing.  The court held that in order to determine the compensation award, the court would have to consider whether the claimant’s obligation should be calculated in relation to diminution in value or through the cost of reinstatement.

 

The court held that they would not be determining the amount of compensation but that they would identify the correct test and the surveyors would determine the compensatory award themselves.

 

Comment

 

This case sets out the court’s jurisdiction in relation to determining party wall disputes and also emphasises the court’s powers in relation to relief from sanction.  Parties can be confident that they are able to apply to the court to determine narrow matters and do not have to use a surveyor for such matters.

 

For more information please contact Alexandra Withers.

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