The legal costs of applying for an injunction to prevent works from being carried out without a party wall award can be significant. However, the financial risk of the required cross-undertaking in damages as part of that application is often greater.
What is a Cross Undertaking in Damages?
A cross-undertaking in damages is a legally binding promise to the court to compensate the respondent to an injunction for any loss or damage they might suffer if the interim injunction is granted at the initial hearing, but is later found to be improper at the final hearing.
Why is a Cross Undertaking Required?
Interim injunctions are a way of stopping potentially unlawful works from being completed before a trial (a proper investigation of their lawfulness) can take place. There is a risk that the judge deciding whether to grant an interim injunction before that investigation may not have all the facts and when it comes to trial it becomes clear that an interim injunction should not have been granted. A cross-undertaking in damages is a tool to compensate the respondent for loss if this happens.
What is the Risk?
The liability under a cross-undertaking in damages may be significant.
For example, many building contracts contain a ‘liquidated and ascertained damage’ clause (commonly referred to as “LADS”) which sets a fixed sum that is payable to the contractor in the event of a site shut down, or the building works being restricted. Depending on the terms of the contract, this could be a weekly financial penalty of hundreds or sometimes thousands of pounds. Even in smaller residential construction projects potential losses can quickly add up.
Does giving a Cross Undertaking make applying for an injunction too risky?
Depending on the basis of the application, probably not.
An application for an injunction to stop a breach of the Party Wall Act is usually made to restrain:
- notifiable work from being carried out in the absence of a party wall award; or
- non-compliance with works or methods of work authorised under a party wall award;
both of which are often simple to establish with the help of a party wall surveyor who has inspected the site.
Steps which can be taken to reduce the risk are:
- sending a formal letter setting out why the works are unlawful and giving the respondent an opportunity to remedy this; and
- obtaining a surveyors report confirming that the works are indeed unlawful.
Finally, decisions about injunctions are at the judge’s discretion; even if you are unsuccessful, acting in a transparent and reasonable manner may help you avoid or at least minimise liability.
At Morrisons, we specialise in obtaining and defending this type of application. If you have any questions about the issues raised in this blog, please feel free to contact Matthew Hearsum or Kate Cooper at our Woking office.