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Party Wall Surveyors and property owners beware, works on party walls which uncover pre-existing defects and increase costs may need to be apportioned between owners and neighbours by reference to expert evidence.   

Mr Taylor was the owner of a flat in London. He carried out works to excavate his garden and to construct an extension. The works involved the underpinning of a wall at the rear of the garden which backed onto two neighbouring properties. Shortly following the construction works, the floor levels dropped in the two neighbouring properties. A surveyor awarded to Mr Taylor's neighbours, costs in excess of £380,000, divided between the two neighbours, payable by Mr Taylor pursuant to The Party Wall etc Act 1996 (the Party Wall Award). 

Mr Taylor appealed the Party Wall Award to the County Court. The County Court reduced the Party Wall Award, but ordered that Mr Taylor pay 75% of the neighbour's costs in the application. 

Mr Taylor appealed this decision to the Court of Appeal.

In concluding that the Party Wall Award ought to be reassessed and the compensation reduced to allow for the cost of repairing the damage which was not caused by Mr Taylor's works, the Court of Appeal was assisted by the joint statement of evidence given by a Structural Engineer and a Civil Engineer. This statement revealed pre-existing structural issues with the neighbouring properties. The works to Mr Taylor's property had triggered these pre-existing issues to manifest as dropping of floor levels in the neighbours' properties. 

Section 7(2) of the 1996 Act states: 

"The building owner shall compensate any adjoining owner and 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."

In assessing the compensation payable under Section 7(2) of the 1996 Act, the Court of Appeal set out that the following questions should be asked and gave the following answers on the facts of this case:

What damage has been caused by the work?

The works caused: (1) the rear wall to drop by a minimal amount (2mm); which resulted in; (2) "some fairly minor cracking"; which also caused; (3) the internal walls to separate and drop; which in turn caused; (4) the floor slabs to drop by up to 40mm.

The floor slabs dropped into voids with the experts assessed had probably developed over 10 years before they had prepared their joint statement. 

How should the adjoining owners be compensated for the relevant damage?

They should be compensated by awarding them the cost of repairing the damage caused by the works. 

What work needs to be done in order to repair the relevant damage?

The Court excluded some of the works which were needed for repair but which were not needed to remedy the damage caused by Mr Taylor's works. 

Should any deduction or allowance be made for betterment?

The court referred to three classes of case for betterment: (1) works which were chosen by the reinstating party but which were not needed for reinstatement; (2) works where the reinstating party had no choice but derived a monetary benefit from an improvement; and (3) works where the reinstating party has no choice and derived a non-monetary benefit from an improvement. 

The court found that the works in question fell within the third category, as the facts did not support the position that the defects would have come to light had Mr Taylor not carried out his works. 

What is the cost of carrying out the relevant repairs? 

This question was not addressed a trial. The Court of Appeal asked the parties to seek to agree a figure or refer the matter to the court to be assessed separately if it could not be agreed on the decision that the costs should be apportioned between Mr Taylor and his neighbours. 
Property owners and surveyors carrying out work on party walls should be alive to the risk of increased damage to a party wall which can result from undiscovered pre-existing defects to a neighbour's property. 

When practicable, surveys should be carried out to seek to identify pre-existing defects before work begins. If defects are only revealed by the works to a party wall, surveyors will need to carefully consider whether it is necessary to account for any increased repair costs in the compensation given to neighbours in a Party Wall Award. 

In doing so, the surveyor will need to ask whether the works caused the damage. The test of causation is a legal one and professional legal advice should be sought when addressing it.