Welcome to the second edition of RED Alert of 2024.

Also featuring in this month's update:

• Adverse possession: the need for speed.
  
• Southwark misses last orders as pub is demolished.
  
• Minorities prevail over majorities: savage family fall-out.

Taylor v Jones and another [2024] EWCA Civ 170

Summary

The Court of Appeal recently allowed an appeal relating to the extent of building owner's liability for the cost of significant damage which occurred to neighbouring properties as a result of work which was undertaken within the remit of the Party Wall etc Act 1996.

The law

This case concerned a dispute over compensation which was payable by Mr Taylor, the appellant, to Mr and Mrs Jones and Mr Spriggs, the respondents, pursuant to the provisions of the Party Wall etc Act 1996 (the Act). 

The Act provides a statutory framework which must be complied with where a property owner is intending to do work to an existing party wall shared with their neighbour, build on the boundary line between two properties or excavate within 3 or 6 metres of a neighbouring building or structure. In particular, where any such works are proposed, the Act provides that:

• The building owner (ie the person undertaking the works) must serve a notice on their adjoining owner informing them of the proposed works. 
• If the adjoining owner does not consent to the works or a dispute otherwise arises, the Act provides that a surveyor can be appointed to resolve the dispute and make an award.

In this instance, the Court was particularly concerned with the obligation imposed on the building owner by section 7(2) of the Act to compensate any adjoining owners for "any loss or damage which may result to any of them by reason of any work executed in pursuance of this Act". 

The facts

Mr Taylor owned a ground floor flat which he planned to extend into his garden. As these works would require excavation with sufficient proximity to the rear wall of the mews properties owned by Mr and Mrs Jones and Mr Spriggs, Mr Taylor complied with the Act's notice procedure prior to commencing work. Shortly after the works begun, both adjoining properties showed signs of suffering significant damage. Most notably, the rear walls dropped by 2mm which in turn caused the internal walls and floor slabs to drop by 40mm. The remedial costs required to rectify the subsidence damage were substantial. However, following further investigation, it became apparent that both adjoining properties suffered from longstanding structural issues, including that the rear wall was unsupported by its foundations and that there were voids beneath both the floor slabs and internal walls. Experts determined that all of these pre-existing issues had been present long before Mr Taylor's works commenced, some perhaps since before the mews had been converted to residential use in the 1970s, and any slight movement could have caused significant damage. 

A surveyor had been appointed to resolve the dispute and had initially found that Mr Taylor's works were responsible for the full extent of the subsidence to both the rear wall and the internal walls and floor slabs. As a result, he awarded that Mr Taylor was liable to pay a total sum of £331,832 plus VAT. Mr Taylor appealed this award to the County Court on the basis that his liability should exclude the costs of any remedial works for defects which pre-dated his works. The County Court judge rejected Mr Taylor's arguments and ordered him to pay 75% of the respondents' costs. 

Mr Taylor subsequently appealed to the Court of Appeal on the following two grounds:

• Ground 1: that the County Court judge's decision to order that he pay 75% of the respondents' costs was wrong in principle; and
• Ground 2: that Mr Taylor should not be held liable for the cost of repairing pre-existing damage.

Court of Appeal

The Court of Appeal dismissed Mr Taylor's appeal in respect of ground 1. However, all three of the Court of Appeal judges held that Mr Taylor should not be liable for the cost of making good damage which already existed in the respondents' properties and that he was therefore not liable for all of the repair costs originally determined by the surveyor. 

Giving the leading judgment, Nugee LJ noted that the following five key questions should be considered in cases such as this:

• What damage had been caused by the works?
• How should adjoining owners be compensated?
• What work was necessary to repair the relevant damage?
• Should any deduction be made for betterment?
• What was the actual cost of carrying out the relevant repairs?

In particular, Nugee LJ emphasised that the third question was most important here; Mr Taylor should only be liable for the relevant damage being the damage actually caused by his works. On that basis, the Court held that Mr Taylor should not be required to pay for the underpinning to the rear wall as his works had not caused that damage, they had simply brought the issue to light. 

Our comments

Whilst disputes under the Act are commonplace, it is very unusual for them to reach the Court of Appeal. This judgment therefore provides helpful (and rare) guidance on the correct interpretation of section 7 of the Act and the requirement to pay compensation. In particular, homeowners who are planning works which may fall within the scope of the Act will be reassured that they should not face a hefty bill for works to remedy pre-existing issues. However, notwithstanding the Court of Appeal's judgment, it is still important to ensure that you have complied with all notice requirements under the Act before commencing any works. If you have any questions as to what will be required, get in touch with a member of our team.