Practical Law

On 25 January 2016, the Evening Standard carried an article headed, “City boss in ‘Wild West’ mega-basement battle“. This described the latest round in the long running battle between Mr and Mrs Fairholme and two sets of their neighbours, resulting from the construction of a new basement beneath their substantial semi-detached house in Kensington. The angry neighbours are the owner-occupiers of the other semi-detached house, and the owners of flats in a nearby block that shares a garden wall with the Fairholmes.

This note describes an earlier part of the confrontation, resolved in the County Court at Central London in September last year. It turned on whether the method of construction of the walls and floor of the new basement contravened the Party Wall etc. Act 1996 (PWA 1996).

Chaturanchanda v Fairholme

Under the PWA 1996, the Fairholmes’ (as building owners) had served notices on the neighbours (the adjoining owners) of their intention to construct the basement. Each party appointed a surveyor under section 10, and a third surveyor was selected in relation to the dispute. Surveyors’ duties under the PWA 1996 include making awards authorising work subject to the Act. If the party-appointed surveyors do not reach agreement, a third surveyor can decide the matter.

The proposed construction involved underpinning the party wall dividing the Fairholmes’ house from the neighbouring property with reinforced concrete underpins, resting on mass concrete (non-reinforced) strip foundations that had previously been placed. In the final operation, the underpins were connected by reinforcing bars projecting horizontally at the base of the underpins to a reinforced concrete floor slab constructed after the underpins had been constructed. The works to the wall shared with the block of flats involved a similar design.

Ironically, the owners of the other semi had already constructed a large basement of their own and extended the party wall downwards for that purpose. However, this did not stop them objecting to the Fairhomes’ works.

Both sets of neighbours argued that this method of construction contravened the PWA 1996 unless they consented, which they did not (written consent is required to special foundations under section 7). The third surveyor made awards between the Fairholmes and both sets of neighbours, holding that it did not do so. Both sets of neighbours appealed to the County Court under section 10(17).

The County Court directed a trial of a preliminary issue as to whether the Fairholmes’ works involved reinforced underpinning constituting a special foundation for the purposes of the PWA 1996.

In the event the court found for the Fairholmes. In practice, this was sufficient to dispose of the appeals, so that the Fairholmes were free to proceed with their basement. In fact, they had gone ahead as soon as the third surveyor’s awards were issued, so they faced a substantial risk of a mandatory injunction to demolish much of the works if the appeal had been dismissed.

Grillage or “special foundations”

In order to understand how the County Court decided the dispute, it is necessary to look at the PWA 1996, whose wording (which is based largely on previous legislation going back to the middle of the 19th century), leaves important questions unanswered.

Firstly, section 7(4) provides that:

“Nothing in this Act shall authorise the building owner to place special foundations on land of an adjoining owner without his previous consent in writing.”

The neighbours argued that the new works contained special foundations, and that these could not be placed across the boundary without their consent.

The PWA 1996 provides two other relevant definitions in section 20:

“‘Foundation’ in relation to a wall, means the solid ground or artificially formed support resting on solid ground on which the wall rests;

‘Special foundations’ means foundations in which an assemblage of beams or rods is employed for the purpose of distributing any load;”

The origin of section 7(4) goes back to the 1930’s. At that time, a new method of constructing buildings had evolved. Instead of the weight of the building being carried down through brick walls to conventional foundations running beneath the full length of the walls, the new method involved transmitting the load to the ground via a series of vertical concrete and steel columns, resting on reinforced concrete pads. These were known at the time as grillage foundations.

An advisory committee set up by London County Council to investigate the amendment of the London Building Act 1930 (a predecessor to the PWA 1996, but which only applied in London), looked at how to fit this new method of foundation construction in to the scheme of the 1930 Act that, like the PWA 1996, allowed the rebuilding of party walls including new foundations.

The practical importance of the issue was that grillage foundations were (and are) very difficult to remove or alter. Cutting into and removing concrete and steel efficiently and safely involves specialist techniques. Hence, installation of such foundations in the land might cause difficulties for an adjoining owner when he wishes to do work to the party wall at some time in the future.

A 1935 report of the advisory committee recommended that grillage foundations for columns of the building owner should be allowed to be placed below party walls provided they did not project further than the footings or foundation concrete of an ordinary wall. However, comments on the final report in 1938 recommended that the adjoining owner should have a right to veto grillage foundations being placed on his land. This was the position adopted by section 45(2) of the London Building Acts (Amendment) Act 1939, which changed the words “grillage foundations” to “special foundations”. It is the same position adopted in the PWA 1996.

The expression “foundations” in the PWA 1996, like so much else, takes no account of new technology, but is defined by reference to traditional walls with strip footings, or bearing directly on the ground. Hence not every element of a wall which is below ground is a foundation. In Standard Bank of British South America v Stokes (1878) 9 ChD 68, it was held that the power to raise a party wall under the Metropolitan Building Act 1855 included extending it downwards. The London Building Act 1894 expressly allowed underpinning for the first time (section 88(1)), and this was carried in to the PWA 1996 by section 2(2)(a).

Footings and underpinning

There are two other relevant concepts, not defined by the PWA 1996:

• “Footings”, mentioned in sections 1(6) and 1(7). These must mean the widening of a wall at its base where it is laid on the foundation, but separate from the foundation.
• “Underpin” which is a verb, not a noun in the PWA 1996. This involves supporting from below.

Adjoining owners’ arguments

The adjoining owners’ arguments may be summarised as follows:

• The foundations included both the mass concrete footings and the reinforced underpins, as these transmitted load to the footings.
• The reinforced concrete slab bore on the ground and was linked to the underpins. Therefore the underpins and the slab formed an integral foundation system, part of which lay astride the party wall and on the adjoining owners’ land.
• The method of construction was an impermissible attempt to evade the prohibition in section 7(4), in effect a sham. This argument was put in two ways:
  • the concrete foundations performed no structural function, and were purely cosmetic. The “real” foundations were the underpins and the slab together; or
  • alternatively, the method of construction adopted was deliberately chosen to evade the PWA 1996. The normal design of basement foundations would have involved reinforced concrete rather than mass unreinforced concrete. Thus following cases in other fields where the courts have invoked public policy principles to strike down arrangements which are calculated to evade the purpose of the legislation (see Snook v London and West Riding Investments Ltd [1967] 2 QB 786 and Stone v Hitch [2001] EWCA Civ 63), the court was asked to find that the design was to be treated as one which did not avoid section 7(4).

The Fairholmes’ response

The Fairholmes’ response was as follows:

• The expression “foundations” in the PWA 1996 only applies to the structure that actually bears on the ground. Any other interpretation would be contrary to the wording and involve the proposition that the whole load bearing structure (or at least that below ground level) could be regarded as foundations. Since it was held in Standard Bank of British South America v Stokes that a party wall could be extended downwards, and the Act expressly referred to underpinning as authorised, it could not be correct that such works were foundations under the Act.
• The slab did not transmit any of the building’s load to the ground. Expert engineering evidence (from the engineer who designed the basement) emphasised the sequence of construction. Once the mass concrete foundations had been placed and the underpins cast on top of them, all the loads were accounted for, prior to construction of the slab. This also applied to lateral loads that might otherwise act indirectly on the slab from twisting of the underpins downwards towards the slab.
• On the sham arguments, the mass concrete foundations were stated to act as the load bearing elements, which was confirmed by the construction sequence. Also, there were sound engineering reasons for the engineer’s decision to use mass concrete foundations.

The court decided the issue in favour of the Fairholmes, largely because it accepted the designer’s evidence who, in a further irony, had also designed the neighbours’ basement!

Implications of Chaturanchanda v Fairholme?

What are the longer term implications of this decision?

Party wall disputes are often bitter and irrational. Much construction, particularly of foundations, uses reinforced concrete. The case is a salutary warning of two points.

Firstly, every designer needs to be aware of section 7(4). Unless agreement is reached with the adjoining owner(s), reinforced construction of a party wall may be impossible. Given that any major scheme will likely involve party wall awards with many neighbours, the hazards are substantial.

Secondly, the “sham” arguments area remains a potential minefield. In Chaturanchanda v Fairholme, the judge was invited to reject the applicability of the cases on shams on the ground that these were concerned with consensual transactions dressed up in a form that did not represent their substance, to evade public policy. The choice of one method of construction in preference to another did not engage the same principles. Provided the method achieved its objective, it was a matter for the building owner. It was not legitimate for the court to investigate alternatives available, and measure them against some indefinite yardsticks, such as cost and time, to see if the method chosen was in some way contrary to public policy.

However, the court rejected this argument. HH Judge Bailey commented at paragraph 46 of the judgment:

“Where it is clear that a person has deployed an artifice or device purely to circumvent the clear intention of parliament it is unthinkable that the court will turn a blind eye to such behaviour.”

He went on to consider the design in detail before concluding that, given the substantial nature of the mass concrete foundations and the designer’s evidence (which he accepted), it might be over-engineered but could not be castigated as an “artifice or device” on that ground alone.

Thus, it would seem prudent for any party challenging an award on similar grounds, or resisting such a challenge, to arm himself with expert evidence on the philosophy of the design and the viability, rationality and cost of the alternatives.

Stephen represented Mr and Mrs Fairholme at the hearing of the preliminary issue, instructed by Gannons Solicitors.