The high court has jurisdiction to determine a dispute under the Party Walls etc Act 1993 notwithstanding the comprehensive code for dispute resolution contained within it.

This was the decision in Lea Valley Developments Ltd v Derbyshire decided earlier this year.

Facts

Lea Valley was a wholly-owned subsidiary of a not-for-profit housing provider. It planned to build twelve houses on the site of 26-30 Muswell Hill. Mr Derbyshire owned the property next door, at 32 Muswell Hill. This was an Edwardian house that had been converted into six flats which were tenanted.

The development works planned by Lea Valley included notifiable excavation works under section 6 of the Party Wall etc Act 1996 (the Act). It gave the requisite notice of its intention to carry out the works to Mr Derbyshire and obtained a party wall award authorising those works.

Fairly soon it became apparent that the development works caused severe damage to Mr Derbyshire's property and it was accepted by the parties that the house on his land would need to be demolished and completely rebuilt.

Dispute

Section 7(2) of the Act provides that a building owner should compensate an adjoining owner for any loss or damage which may result to them as a result of work carried out.

A number of compensation awards were made by the surveyors appointed by the parties and these awarded sums to Mr Derbyshire in relation to of loss of rent and fees at 32 Muswell Hill. However, Lea Valley and Mr Derbyshire disagreed about how compensation should be assessed in relation to the demolition and reconstruction of the property.

Lea Valley's position was that the correct measure of compensation was by reference to the diminution in value suffered by Mr Derbyshire as a result of the damage. This was estimated to be between £448,000 and £1 million.

Mr Derbyshire argued that compensation should be assessed by reference to the cost of demolition and rebuilding of the property, which he estimated to be a little under £2 million.

Lea Valley issued a claim under Part 8 of the Common Practice Rules for a declaration that damages should be assessed based on the diminution in value of 32 Muswell Hill.

Mr Derbyshire disputed that the court had jurisdiction to determine how the compensation should be assessed and argued that this was a matter for the appointed surveyors in accordance with the terms of the Act.

Decision

In the High Court, O'Farrell J found in favour of Lea Valley.

She started her judgment by considering the provisions of the Act that provide for the resolution of disputes. These are contained in section 10 and they provide a comprehensive code by which any disputes in relation to party wall matters can be determined without recourse to the courts. Set against this is the courts' inherent discretionary jurisdiction to provide declaratory relief. For that to be ousted, very clear wording is needed.

The judge held that it was clearly the intention of the Act that the parties should be able to have their disputes resolved without recourse to the courts but the Act did not go so far as to exclude the power of the court to grant relief in appropriate circumstances.

The Arbitration Act 1996 expressly precludes the court from interfering with an arbitration agreement except in defined circumstances and makes provision for any proceedings to be stayed pending arbitration. By contrast, the Act does not prohibit the court from participating in a dispute and it allows wide powers of appeal. Accordingly, the Act could not be said to oust the court's inherent jurisdiction.

O'Farrell J went on to consider whether it was appropriate for the court to stay proceedings pending the decision of the surveyors in relation to the dispute but she decided not. In fact the declaratory relief sought was narrow and the issue should be capable of determination by the court at a relatively short hearing because it dealt with a matter of law, not of fact and it did not require expert evidence before it could be determined. Moreover, the court need only determine the mechanism by which the compensation should be calculated; it would not be trespassing on the role of the surveyors who could then move forward and settle the amount of the compensation itself.