Party Wall Appeals – lessons from the Rolls Building case

 

Introduction

Section 10 of the Party Wall etc. Act 1996 (‘the Act’) provides a now well-known and established mechanism for resolving disputes between building owners and adjoining owners in respect of matters concerned with works to which the Act relates, that is principally building on the line of the junction between different lands (s.1), the repair or rebuilding of party walls (s.2), and works of excavation within a specified distance of the adjoining owner’s building (s.6). Under s.10(10) the ‘agreed surveyor’ appointed by the parties, or more usually the two surveyors appointed by each of them working together, or the ‘third surveyor’ appointed by the two surveyors, settle the dispute by making an award.

In fact, in order to benefit from the provisions of the Act and to ensure that the adjoining owner is properly compensated for his loss and expense, it is very common for a ‘dispute’ to be deemed to have arisen even when the relationship between the two owners is perfectly amicable.

An award made under the Act is non-speaking, that is it determines the dispute and solves the problem that has arisen, usually by permitting the works required by the building owner to take place on terms, but it does so without giving reasons. But what if one of the parties is dissatisfied by the award?
By section 10(17) of the Act:

“Either of the parties to the dispute may, within the period of fourteen days beginning with the day on which an award is made under this section, appeal to the county court against the award and the county court may – rescind the award or modify it in such manner as the court thinks fit; and make such order as to costs as the court thinks fit.”

The terms of s10(17) raise questions and cause problems for lawyers advising and acting for a building owner or adjoining owner who wishes to appeal, or indeed is made respondent to an appeal.

One potential concern is that, despite the fact that the conduct of appeals is governed by CPR 52, there is no filter process which prevents unmeritorious appeals being heard. That is significant because it is generally considered that an appeal operates as an automatic stay on the enforcement of the award under appeal (consider the practical problems that would arise if that were not the case – works to a building could be carried out under an award which was later modified or rescinded).

Another is the question of how the hearing and disposition of an appeal from a non-speaking award fits into a structure of civil litigation where, conventionally, the ‘appeal court’ reviews the decisions of the ‘lower court’ with the assistance of a reasoned fact-finding judgment. How then should a county court judge hear and dispose of an appeal from a decision where no reasons were given and where there is no ‘evidence’ in the conventional form of witness statements or transcripts which will allow him or her to see what information it was that led the surveyor or surveyors to make their decision?

It was this last question which was raised and discussed, if not conclusively answered, in the Rolls Building case, being the appeal of Gross & Klein v Delancey which was heard by HH Judge Edward Bailey in the Central London County Court over four days in November 2012 with a final judgment handed down on 13th March 2012.

The award under appeal

Delancey Rolls UK Limited and Delancey Arnold UK Ltd (‘Delancey’) were the companies incorporated for the purpose of acquiring and developing the site of the former Rolls and Arnold Building in Fetter Lane into the Rolls Building, now home to the Chancery Division, the Admiralty and Commercial Courts, the TCC and Chancery Division, and billed as the largest specialist centre for the resolution of financial, business and property litigation anywhere in the world.

Such a building cannot be constructed in the middle of London without causing some inconvenience to the adjoining owners. In the case of this development, they included the library of King’s College, London, a barristers’ chambers at 4 Breams Building and a firm of accountants Gross & Klein at 6 Breams Building, all potentially sensitive neighbours. It is a tribute to the success of the development that despite the fact that 14 separate Party Wall Act notices were served on those affected by the necessary works, all claims for compensation were resolved satisfactorily except for one – that made by Gross & Klein.

No party wall dispute is complete without a site visit and the lawyers, and perhaps the judge, enjoyed the early morning ‘site visit’ to the offices at the rear of the Rolls Building (confidentiality forbids us from saying whose chambers we strayed into) from where we could look down onto the roof and rear of 6 Breams Building, now a rather tired Victorian building, and examine the point where it adjoins what was 8 Breams Building, now incorporated into the Rolls Building development.

Between 2007 and 2012 four Awards were made by the parties’ Joint Surveyors, Christopher Dowsing MRICS of GIA for Delancey, the Building Owner and Simon Price FRICS for Gross & Klein, the Adjoining Owner – the Demolition Award in August 2007 providing for a temporary support to the exposed party wall of 8 Breams Building; the Foundation and Temporary Works Award in December 2007 which authorised the construction of foundation piling to a depth of 35m and the removal of an existing undersail a Superstructure Award in March 2009 which permitted the reconstruction of the new retaining wall; and the Compensation Award of February 2012 which dealt of course with the compensation due to the Adjoining Owners.

It was this last Award that the Adjoining Owners appealed. By that Award (1) the Adjoining Owners were awarded £21,528 in respect of reimbursement of their costs of repairs already carried out of a claim for £35,538 (‘the repairs cost claim’); (2) the Building Owner was directed to carry out repairs by reference to a schedule of repair or make a payment of £93,672 in lieu (‘the remedial works claim’); (3) no award was made for loss of rent or profits (‘the financial claims’).
In their appeal, the Adjoining Owners argued (1) that none of the invoices submitted by them to the joint surveyors should have been ‘disallowed’; (2) that the scope of the damage caused by the notifiable works was in fact much wider than the joint surveyors found and that therefore more works should be done under the schedule of repairs; and (3) that they had suffered a significant loss of rent from the rooms in 6 Breams Building that were let out and, in addition, lost profits of £1.7m.

The appeal – rehearing or review?

It is now settled that appeals to the county court under section 10(17) of the Act are governed by CPR Part 52 – Zissis v Lukomski [2006] EWCA Civ 341; [2006] 1 WLR 2778. CPR 52.11 provides that

“(1) Every appeal will be limited to a review of the decision of the lower court unless –
a practice direction makes a different provision for a particular category of appeal;
the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a re-hearing.
(2) Unless it orders otherwise, the appeal court will not receive
(a) oral evidence; or
(b) evidence which was not before the lower court.”

Paragraph 9.1 of PD 52 provides that:

“The hearing of an appeal will be a re-hearing (as opposed to a review of a decision of the lower court) if the appeal is from the decision of a minister, person or other body and the minister, person or other body – did not hold a hearing to come to that decision; or held a hearing to come to that decision but the procedure adopted did not provide for consideration of evidence.”

Thus appeals under the Act take place as re-hearings.

Admissible evidence

In Zissis Sir Peter Gibson said (obiter) at para. [44] that:

“… there are ample powers under rule 52.11 to enable the court to receive evidence, and in the exercise of any power or discretion the court will be alive to the overriding objective of dealing with the case before it justly. Given that an award under the 1996 Act is non-speaking and made without a hearing, I would envisage that the appeal by way of rehearing will ordinarily require the county court to receive evidence in order to reach its own conclusion on whether the award was wrong.”

The problematic question is that of what evidence should be admitted? The party who is respondent to an appeal will want to hold the position it has achieved as a result of the award and be keen to prevent the appellant from going out and obtaining lots of new evidence, in particular expert evidence, and thus having a second bite at the cherry.

Delancey’s legal team were therefore keen to ensure that the evidence admitted at the hearing of Gross & Klein’s appeal was restricted to that available to the joint surveyors who made the award and at an early stage made an interim application to the court for a direction to that effect.

Delancey referred to Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2000 the Court of Appeal decision (which had not been cited in Zissis), that the pre-CPR Ladd v Marshall principles that govern the admission of new evidence (to be admitted (1) the evidence could not have been obtained with reasonable diligence at trial; (2) evidence must be such that if given it would have an important influence on the result of the case; (3) the evidence must be apparently credible) still applied. Thus in principle no new evidence should be admitted.

It was submitted that an analogy could be made with another post-CPR decision E.I. Dupont de Nemours & Co. v S.T. Dupont [2003] EWCA Civ 1368; [2006] 1 WLR 2793 (which was in fact a patent case). In that case Aldous LJ discussed the difference between a review and a rehearing with reference to the former RSC and referred to Order 55 which applied to statutory appeals to the High Court under which provision the Court had power to receive further evidence on questions of fact and the power to draw inferences of fact. These were not however rehearings: “..in the fullest sense of the word[the Court] …reviewed the decision under appeal giving it the respect appropriate to the nature of the court or tribunal, the subject matter and importantly, the nature of those parts of the decision making process which were challenged.” (para. 90).

These submissions were accepted and an order was made permitting either party to object to the admission of written evidence filed which it considered inadmissible.

In the event, most of the Adjoining Owners’ expert building surveyor’s report was excluded from evidence and there was no expert evidence from a forensic accountant (albeit that Messrs. Gross & Klein were themselves accountants).

The result

The hearing in this case was complicated by the fact that by the time the appeal came on for hearing the Adjoining Owners had instructed and then dispensed with the services of two firms of solicitors and three barristers and had decided to represent themselves. Thus the judge made the kind of adjustments that are necessary when one party to a case is a litigant in person.

In the end on (1) the repairs costs claim, the judge made a small adjustment of £3,000 or so in favour of the Adjoining Owners. The issue on appeal had been whether the joint surveyors had been correct to apportion invoices for repairs and decoration on the basis that some of the water damage had been caused, for example, by the poor state of repair the roof was in as opposed to blockage caused by debris from the notifiable works. The expressed rationale for departing from the surveyors’ findings was that the surveyors had not gone back to Messrs. Gross & Klein to ask for an explanation or commentary on the invoices, as a result of which he (the judge) felt able to come to a different conclusion based on the evidence of the Adjoining Owners about the cause of the problems to their building.

On (2), the remedial works claim, the judge here was faced with a schedule of damage and disrepair to 6 Breams Building that had been drawn up, by agreement, by a further surveyor and then apportioned as to disrepair / damage caused by notifiable works by the joint surveyors. There was no expert evidence before the court to challenge their conclusions and the appeal was dismissed.

On (3) the claim for loss of rent was abandoned (in closing) and the claim for lost profits failed.

The costs consequences that followed were that Delancey had all of its costs up to the first day of the hearing and 80% thereafter had the unfortunate but predictable consequence that the compensation properly due to the Adjoining Owners will be more than extinguished by their liability in costs to the Building Owner.

Discussion

If CPR 52.11 governs appeals under the Act, as it does, then an appeal from an award made under the Act will only be allowed it is wrong (it is difficult to argue procedural irregularity when there is no procedure).

It seems to me that it must follow from that, that if a judge is to find that the surveyors are ‘wrong’, that can only be on the basis of the evidence that was available to them, that is the submissions that the parties made to the surveyor(s) making the award, or the evidence that was reasonably available to them on inspection of the buildings but which they neglected to consider. Thus fresh evidence ought not to be admitted.

However this does not mean that evidence from an expert building surveyor commenting on the questions and issues that faced the surveyor(s) who made the award is irrelevant or inadmissible, so long as the starting point is to consider what information was available to the decision maker at the time. In fact, an appellant will inevitably need to obtain such evidence if he is to have any realistic prospect of challenging the award, and the respondent will need to follow suit.

In this case there was, effectively, no such expert evidence. The judge rationalised his decision to modify the repairs cost claim on the basis that the joint surveyors had, as it were, not interrogated the invoices or at least sought more of an explanation from the Adjoning Owners about their provenance. This may be thought to be rather a harsh judgment on the particular facts of this case but is not inconsistent with the principled approach suggested above.

Putting that to one side, the problem about the admission of evidence is most likely to arise in claims for compensation for financial losses by businesses that have been subject to work done under the scheme of the Act and suffered disruption and inconvenience.

Business interruption claims are difficult to prove and surveyors are understandably wary of trespassing into other disciplines. The risk is that a dissatisfied adjoining owner who has not properly prepared its case for submission to the surveyor(s) will thus fail to persuade the surveyor who makes the award, and find itself shut out from adducing that evidence on appeal.

Bearing in mind that surveyors appointed under the Act will not case manage a claim for compensation in the way a court will, those advising commercial entities that have been served with notices under the Act thus need to be pro-active at an early stage in collating evidence of loss and instructing appropriate experts to report on that loss if compensation is to be obtained.

The result in this case is also a salutary reminder of the importance of setting an agenda at the beginning of any case, in particular so far as the defined issues and the scope of expert evidence are concerned. Whilst it is not always true that the party who sets the agenda wins the case, it is almost always true to say that the party who allows its opponent to do so will lose. But that of course is not news to property litigators and members of this Association.

John de Waal QC, instructed by Kennedys, acted for the Respondents Delancey in this appeal.

Commercial Landlord & Tenant: Less Technicality, More Commerciality The Case of London Trocadero Ltd v Family Leisure Holdings Ltd [2012] EWCA Civ 1037 The Facts On 30 September 2002, a lease was granted to West End Amusement Parks Ltd (‘the Tenant’) in respect of part of the Trocadero building. The Trocadero building is located in the heart of London and extends to over 600,000 square feet. The building has many tenants and licensees running different kinds of businesses and has an estimated ‘footfall’ in excess of 9 million per annum. The Tenant’s lease granted rights to the Tenant over the building but it also contained detailed provisions regarding deliveries and removals to ensure good estate management and to avoid unreasonable disruption to other businesses in the building. The lease stated: Section 2 3.2 There are granted the rights and easements set out in Schedule 1. Schedule 1 1 …, a right of way … for the Tenant and all others authorised by the Tenant to pass to and from the premises on foot over and along the Common Parts … 2 …, the right … to load and unload vehicles in the Loading Area … Clause 52 of the lease provided that a person who was not a party to the lease had no right to enforce its terms but that this prohibition did not affect that person’s rights outside the terms of the lease. The Tenant allowed its subsidiary company, West End Amusements Ltd (‘WEA’), to trade from the premises. On 14 January 2003, WEA entered into a hire agreement with the Tenant’s parent company, Family Leisure Holdings Ltd (‘the Claimant’) in respect of gaming and amusement machines. It was a term of the hire agreement that (a) ownership of the machines remained with the Claimant (b) the agreement would terminate if WEA became insolvent and (c) on termination of the agreement, the Claimant could enter WEA’s premises and take the machines. Around 450 bulky machines were subsequently installed in the premises. On 22 June 2011, the Tenant and WEA notified their intention to appoint administrators. In the circumstances, the Claimant treated the hire agreement as terminated and, on 6 July 2011, the Claimant indicated its wish to enter WEA’s premises for the purpose of taking back its machines. The Tenant, WEA and their joint administrators (who acted together) agreed that the Claimant should take its machines to avoid potential third party liabilities arising and financial exposure to the Claimant and so the joint administrators informed the Landlord that they proposed to allow the Claimant to attend the premises and remove its machines. The Landlord asked for a method statement and the Claimant’s removal company prepared a method statement but it was incomplete. Despite having previously indicated its desire that the machines be removed, on 5 August 2011, the Landlord claimed that the Claimant’s proposed removal operation was unclear and expressed concern that it may cause disruption. On 18 August 2011, the Landlord accepted the Tenant had a right of access to the premises but claimed that the Claimant did not despite it had the Tenant’s consent and the administrators’ consent. On 31 August 2011, the Claimant commenced proceedings in the Manchester District Registry for the wrongful interference with its machines and, on 6 September 2011, the Claimant applied for an order for the delivery up of its machines. On 3 October 2011 and following the Court’s criticism of the Claimant’s incomplete method statement for the removal of the machines, the Claimant provided a complete method statement. Nevertheless, the Landlord continued to claim that the Claimant did not have a right to access the premises (although it was willing to accept compensation in return for its permission). The Landlord also claimed that the Claimant had no standing to commence legal proceedings against it based on a number of grounds including the fact that clause 52 of the lease provided that a person who was not a party to the lease had no right to enforce its terms. On 10 November 2011, the Court declared that the Claimant had a right to remove the machines and rejected the Landlord’s claim that the Claimant had no standing. That said, the Court stayed the effect of its order pending a possible application by the Landlord for permission to appeal. The Landlord subsequently applied for, and was granted, permission to appeal to the Court of Appeal. The Court of Appeal’s Decision Lord Justice Davis gave the Court of Appeal’s decision on 26 July 2012 to which Mrs Justice Baron and Lady Justice Arden agreed. The Claimant’s Right of Access The Court immediately recognised that the lease granted rights to the Tenant and that the lease’s definition of ‘the tenant’ did not include the Claimant. Nevertheless, it was clear that the right to pass over common parts set out in paragraph 1 of Schedule 1 to the lease was granted to ‘all others authorised by the Tenant’ and that this included the Claimant. However, the right to load and unload vehicles in paragraph 2 of Schedule 1 was not expressly granted to ‘all others authorised by the Tenant’ so the Court considered whether to imply such words (which would benefit the Claimant because it had the Tenant’s consent). The Landlord submitted that such words should not be implied on the basis that their omission was intended for good estate management and, in the context of a building such as the Trocadero, there was a need for the Landlord to deal only with the contractually-named Tenant. The Court dismissed the Landlord’s submission and implied the words ‘all others authorised by the Tenant’ (otherwise, it was noted, the Tenant could not even engage companies like DHL or Pickfords to load and unload vehicles in the loading area). The Claimant’s Standing to Commence Proceedings The Court of Appeal agreed with the lower court that the Claimant’s claim was not based on a wrongful interference with rights of access granted by the Tenant’s lease. Instead, the Claimant’s claim was based on the wrongful interference with its machines which was a separate right it had outside the terms of the Tenant’s lease. Taking into consideration the Court had already implied a right of access for ‘all others authorised by the Tenant’ and the Claimant had the Tenant’s consent, the Landlord was liable for wrongfully interfering with the Claimant’s machines because the Landlord prevented the Claimant from taking possession of them by refusing to allow the Claimant access to the premises. The Message For Landlords Commercial landlords should not rely entirely on what a lease expressly states and what it does not expressly state. The Courts can, and do, imply terms into leases thereby changing the nature and effect of what is expressly stated. Furthermore, landlords should not rely entirely on the express (and implied) terms of a tenant’s lease. Tenants and third parties outside the landlord and tenant relationship often possess separate causes of action, under statute or in common law, irrespective of the terms of a lease. Finally, there are occasions (illustrated by the case of London Trocadero) when it would be more appropriate to adopt a less technical, and more commercial, position. In the case of London Trocadero, the machines were located in the premises and the Landlord had previously indicated its desire that the machines be removed. However, their removal would have been costly and the Tenant was insolvent. Nevertheless, the third party owner of the machines was not insolvent and it was the third party owner who offered to remove the machines from the premises at its cost. The Landlord should have taken the commercially sensible decision and agreed. Richard Moss Solicitors 17 August 2012