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Extent of jurisdiction to award compensation under section 7(2) of the Party Wall Act 1996

The question of just how wide a party wall surveyor’s jurisdiction is to award compensation to an adjoining owner (under section 7(2) of the Party Wall Act 1996) has been the subject of a considerable amount of debate among party wall surveyors, so every opportunity for judicial scrutiny and clarification should be welcomed. Therefore, the slightly unusual circumstances that unfolded in the 2012 unreported case of Davis v Trustees of 2 Mulberry Walk provides us with some useful guidance in relation to the operation of section 7(2).

Section 7(2) of the PWA 1996

Section 7(2) provides that:

“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.”

It is likely that an adjoining owner is entitled to be awarded compensation for all loss or damage arising in the course of the works and any loss or damage stemming from the very existence of the finished works. However, if the works that led to the loss were carried out in breach of an award or beyond the scope of the building owner’s statutory rights, the adjoining owner’s remedy may be a common law claim for damages in trespass or nuisance, rather than under the PWA 1996.

Davis v Trustees of 2 Mulberry Walk

In 2 Mulberry Walk, the unusual circumstances arose out of two separate sets of works by two neighbours, a decade apart:

  • In 1998, Peter and Mary Davis constructed a basement, having served the requisite notices under the PWA 1996. A party wall award was made (the 1998 award). On completion of their works, they paid a sum of money to their neighbour, the Trustees of 2 Mulberry Walk, on account of some minor damage.
  • In 2007, The Trustees started work on their own basement. Not long after the works had begun, their contractor discovered that the foundations for the Davises 1998 basement extended well beyond what they were expecting, beyond the party wall and into the area where the Trustees were intending to build their basement. The third surveyor appointed in relation to the Trustees’ 2007 party wall works made an award of compensation to the Trustees in respect of their losses arising out of that encroachment and its effect (among other things) on the Trustees’ basement plans (the 2007 award).

The Davises disputed the extent of their liability and the matter ended up in the County Court. It included disputes about whether and to what extent there was an unlawful encroachment into the Trustees’ land, a breach of the 2007 award and about the quantum of the Trustees’ loss as a result.

Technical arguments under section 7(2)

In the latter part of his judgment, HHJ Bailey had to deal with two technical arguments under section 7(2) of the PWA 1996, and his response to both questions is noteworthy:

  • Firstly, that the works which comprised laying foundations that went beyond the party wall and beyond the zone prescribed in the 1998 award were not works “executed in pursuance of [the] Act”, so fell outside the third surveyor’s jurisdiction to award compensation under section 7(2).
  • Secondly, that the third surveyor, appointed by the Trustees in respect of the 2007 works, could not have jurisdiction to award compensation to the Trustees in respect of the losses they had suffered, because that jurisdiction lay with the party wall surveyor appointed in respect of the works out of which the losses arose (the 1998 award).

On the first argument, the judge preferred to interpret section 7(2) as empowering the third surveyor to make an award of compensation in respect of works executed in pursuance of “or in purported pursuance of” an award made under the PWA 1996, so that works which deviate slightly or inadvertently from the party wall award plans do not fall outside the jurisdiction of the Act.

On the second argument, the judge felt compelled (apparently reluctantly) to agree with the Davises. The PWA 1996 allows the party wall surveyors to make an award of compensation from the building owner to the adjoining owner. In the present case, under the 2007 award, the third party wall surveyor had purported to award compensation from the adjoining owner (that is, from the Davises, who were the building owner under the 1998 award) to the building owner (that is, the Trustees, who were the adjoining owner under the 1998 award):

“It is not open to a building owner under s.7(2) to obtain compensation from an adjoining owner. It is one-way traffic only.”

Why this is noteworthy

Before embarking on a claim for recompense in respect of party wall works carried out by a neighbour, it is important to identify the correct respondent, the correct forum for the claim and the correct cause of action:

  • If the loss arises out of works carried out in pursuance of or in purported pursuance of an award, then the correct course of action is likely to be to seek an award of compensation (under section 7 of the PWA 1996) from the third surveyor who made that award, and against the original building owner (with the rights and liabilities under the 1996 Act being non-transferable).
  • If the loss arises out of something entirely unrelated to the award (or where the party wall procedure has not been followed at all), then – while it might still be possible in some circumstances to seek compensation under the PWA 1996 – it is quite likely that the right course of action would be a County Court claim for damages for trespass or nuisance. There will be a six-year limitation period on such claims, but the clock only starts ticking when the loss first arises. In 2 Mulberry Walk, that is likely to have been when the Trustees first discovered that their neighbour’s foundations would interfere with their own building work.

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