Security for expenses – Kaye v Lawrence

News - 01/11/2010

It has long been thought that an adjoining owner could only request security from the building owner under s. 12(1) of the Party wall etc. Act 1996 (“the 1996 Act”) where works were being undertaken on or to the adjoining owner’s land.

However, in a recent appeal from a third surveyors’ award in Kaye v Lawrence [2010] EWHC 2678 (TCC) this was held not to be the case.

Mr Lawrence was the owner of 124 Panorama Road in Sandbanks, Poole (pictured). Mr Kaye owned the adjoining property at 126 Panorama Road. On 29 June 2009, Mr Lawrence served notice on Mr Kaye under ss. 6(1) and (2) of the 1996 Act. The notice stated that Mr Lawrence was not proposing to underpin Mr Kaye’s property. Mr Kaye dissented, and each appointed surveyors, who in turn selected a third surveyor, Mark Wittingham.

Mr Kaye requested, under s. 12(1) of the 1996 Act, that Mr Lawrence provide a bond or project-specific insurance in respect of potential damage to 126 Panorama Road. The appointed surveyors could not reach agreement and referred the issue to Mr Whittingham. Mr Whittingham stated in his award that:-

A bond or other form of security cannot be requested under s. 12(1)…unless the Building Owner [proposes] to carry out some work to the Adjoining Owner’s land or property”.

Mr Kaye appealed this decision to Bournemouth County Court. The parties agreed that, as the appeal concerned an important point of law, it should be heard by the Technology and Construction Court at the High Court in London.

    • Judgment was given by Mr Justice Ramsey on 26 October 2010.
    • His Lordship’s judgment addressed three important issues:-
    • (a) The High Court has no jurisdiction to hear appeals under s. 10(17) of the 1996 Act;
    • (b) An adjoining owner is entitled to request security under s. 12(1) of the 1996 Act where the building owner intends to carry out any work under the 1996 Act, whether to his own land or the adjoining owner’s land;
    • (c) The rights under the 1996 Act have replaced the corresponding rights at common law, both as to excavation and works to party structures.

 

The High Court’s jurisdiction

 

At the hearing, Mr Justice Ramsey questioned, given that s. 10(17) of the 1996 Act expressly provides for appeals to be made to a County Court, whether the High Court has jurisdiction to hear such appeals.

His Lordship, having considered Zissis v Lukomski [2006] EWCA Civ 341 and Chartered Society of Physiotherapy v Simmonds Church Smiles [1995] EGLR 155, found that the High Court:-

cannot ignore the fact that the county court is the appropriate court and seize jurisdiction which has not been given to it

However, his Lordship recognised that questions of general importance to practitioners, such as the appeal before him, are appropriately dealt with in the High Court.

In order to deal with the appeal before him, his Lordship decided to proceed by exercising his right under s. 5(3) of the County Courts Act 1984 to sit as a Judge of any County Court.

The right to request security

 

The right to request security for expenses is set out in s. 12(1):-

“An adjoining owner may serve a notice requiring the building owner before he begins any work in the exercise of his rights conferred by this Act to give security as may be agreed between the owners or in the event of dispute determined in accordance with section 10”.

The generally held view, as set out in the Green Book, is that s. 12(1) only entitles the adjoining owner to request security if the building owner is performing works on the adjoining owner’s land, and if the building owner “is simply excavating his own land then the adjoining owner has no right to receive security…”

His Lordship found that, although the views of the Pyramus & Thisbe Club command respect, in this instance their views are not correct, and that there is no distinction between works on the building owner’s land or the adjoining owner’s land for the purposes of s. 12(1). Mr Kaye was therefore entitled to request security, and his Lordship amended the Award accordingly.

Extinction of common Law Rights

 

It was argued before the Court that there is a distinction between rights that are granted exclusively by the 1996 Act, and rights that already exist at common law, but which are regulated by the 1996 Act.

His Lordship was referred to the authorities of Selby v Whitbred & Co [1917] 1 KB 736 and Louis & Louis v Sadiq (1997) 74 P. & C.R. 325 (decided under the earlier LondonBuilding Acts 1894 and 1939 respectively) and found the authorities

show that, when the provisions of the relevant Act are operated, the common law rights are “supplanted” or “substituted” by the rights under the Act in relation to matters dealt with under the Act.” [author’s emphasis]

However, his Lordship went further, and found that:-

…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. 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”. [author’s emphasis].

Although the difference between the two statements is subtle, it is an important one. Instead of enhancing the rights that existed at common law before the 1996 Act, his Lordship found that the 1996 Act operated as a wholesale replacement of those rights.

Therefore, the only way a building owner can undertake the type of works set out in ss. 1, 2 and 6 of the 1996 Act is to serve the relevant notice and follow the statutory procedure. He can no longer rely on common law rights.

Conclusion

 

The practical effects of this decision are yet to be seen.

As a County Court decision, it is not strictly of binding authority, and indeed may yet be appealed. However, given that Mr Justice Ramsey is both a High Court Judge and an eminent construction law expert it is thought that, in the absence of exceptional circumstances, the Court’s decision should be regarded as having the same authority as a decision of the High Court.

It is also thought that it will now be easier for adjoining owners to obtain injunctions to prevent or stop works in the absence of an award. Previously, the adjoining owner would have had to demonstrate not only the absence of a relevant notice and/or an award, but also that the works would have constituted a trespass and/or nuisance at common law.

However, in light of his Lordship’s decision, it is thought that all an adjoining owner will now need to demonstrate is a failure to comply with the 1996 Act; in particular, they may not need to prove any damage has been suffered or is likely to be suffered.

The decision has also clarified how important points of law arising from appeals under s. 10(17) may be referred to the High Court.

It should be remembered that, in addition to London, the Technology and Construction Court sits as both a High Court, as well as a County Court, at Birmingham, Bristol, Cardiff, Central London, Chester, Exeter, Leeds, Liverpool, Manchester, Mold, Newcastle upon Tyne and Nottingham Court Centres.

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