Lea Valley Developments Ltd v Derbyshire

Property – Party Wall etc Act 1996 – Measure of damages – Claimant obtaining award authorising works under section 10 of Party Wall etc Act 1996 – Defendant’s adjoining property damaged by works – Issue arising as to measure of damages – Claimant seeking declarations as to appropriate basis for assessment of damages and factors to be taken into account – Whether damages being awarded on basis of diminution in value – Whether proper basis for damages being cost of reinstatement – Declarations refused The claimant was the freehold owner of a property in Muswell Hill, London. The defendant owned the adjoining property which consisted of flats, let out on assured shorthold tenancies. The claimant decided to carry out building works, including notifiable excavation works under section 6 of the Party Wall etc Act 1996. The claimant obtained an award authorising those works under section 10 of the 1996 Act. The award contained at para 4(D) a requirement that the claimant should: “Make good all structural or decorative damage to the adjoining owners property occasioned by the works… If so required by the adjoining owner, make payment in lieu of carrying out the works to make the damage good, such sums to be determined by the agreed surveyor”. The works caused damage to the defendant’s property and it was agreed in principle that the property had been so badly damaged that it could not be economically repaired and had to be demolished and rebuilt. A dispute arose concerning the basis on which damages should be assessed. The court was asked to make declarations as to the appropriate basis for the assessment of damages payable to the defendant under the 1996 Act and the factors to be taken into account when making the assessment. Held: The declarations were refused. (1) Paragraph 4(D) of the award was not determinative in this case. The award referred to making good, which was not apt to cover the situation which had now arisen, whereby complete demolition and rebuilding was required. The draftsman of the award clearly had in mind works of repair “in material to match the existing [sic] fabric and finishes”, a quite different undertaking from demolition and rebuilding. Further, the reference to “payment in lieu of carrying out the works to make the damage good” did not answer the question of the basis upon which any such payment should be made. The central issue between the parties was what payment was to be made and how it was to be assessed which was not resolved by para 4(D). The provision did not refer to demolition and rebuilding, still less the cost of demolition and rebuilding. Therefore, the award did not resolve the issue between the parties as to the proper basis upon which compensation was to be paid to the defendant.  (2) The vires of the award and the question of approbation thus became academic. However, had it been necessary to do so, the court would have decided that para 4(D) was ultra vires the 1996 Act, and that the doctrine of approbation and reprobation did not apply to defeat the claimant’s arguments. The claimant had argued that para 4(D) was mistakenly based on section 2, which made express provision for making good, but there was no such provision in section 6 and there was no power to include para 4(D) in the award. Section 10(10) concerned settlement of matters in dispute by the surveyor, but the parties were not in dispute about a right of making good when the award was made, and it did not arise from a dispute under section 6. The court would be reluctant to hold that the doctrine approbation and reprobation applied in the present statutory context when it applied in situations far removed from the present case: Lissenden v CAV Bosch Ltd [1940] AC 412 considered. (3) There was no authority on the proper construction of section 7(2) of the 1996 Act which provided: “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”. If it were not for the 1996 Act, many of the activities it permitted would constitute nuisance. One would expect similar principles for assessing damages to apply. If Parliament had intended the expression “loss or damage” in section 7 to have some different meaning it would have said so. Compensation should be assessed according to the principles of damages for torts to land. A claimant should be placed in the position he would have been in had the tort not occurred, and damages were to be reasonable. (4) Reinstatement or diminution in value might be the appropriate basis for assessing damages depending upon the circumstances. It was impossible to identify all the relevant circumstances in the abstract. Even if diminution in value was the appropriate measure, the cost of reinstatement might be a useful guide or starting point to determine what the diminution in value in fact was. It was impossible to conclude that the appropriate measure of damages was not the cost of reinstatement but the relevant diminution in value. The issue of damages was, by its nature, fact sensitive. Not all the facts were yet available and the court had no agreed set of facts upon which to proceed. Seeking to enumerate all the relevant factors in the abstract was likely to be unhelpful and confusing. The cases showed that a wide range of factors might be relevant and might lead to different conclusions depending upon the facts: CR Taylor (Wholesale) Ltd v Hepworths Ltd [1977] 1 WLR 659 applied. Ruxley Electronics & Construction Ltd v Forsyth [1995] EGCS 117; [1996] AC 344 followed. Nicholas Isaac QC (instructed by Devonshires Solicitors LLP) appeared for the claimant; Justin Mort QC (instructed by Child & Child) appeared for the defendant. Eileen O’Grady, barrister Click here to read a transcript of Lea Valley Developments Ltd v Derbyshire