Arena Property Services Ltd. v Europa 2000 Ltd.

J U D G M E N T

1. LORD PHILLIPS, MR: I will ask Lady Justice Arden to deliver the first judgment.

2. LADY JUSTICE ARDEN: The wall which divides 98 Farringdon Road, EC1 from 96 Farringdon Road is a party wall for the purposes of the Party Walls Etc Act 1996. In 2000 the owners of the freehold of 98 Farringdon Road and the owners of a leasehold interest in 96 Farringdon Road desired to do work to the party wall. They served notices in July and November 2000 respectively. Work done by the freeholders of 98 gave rise to a claim for damages in nuisance which was the subject of a claim in this action out of which this appeal arises. We are not concerned with that aspect of the litigation.

3. The appeal arises out of the notice given by Arena Property Services Limited ("Arena"), the leaseholders of 96 Farringdon Road and the respondents to this appeal. They wished to extend their property. In order to do so they removed a boiler flue and soil vent pipe which protruded on to the property of 96 Farringdon Road. The soil vent pipe came from 98 Farringdon Road and passed across the party wall at the first floor level and travelled to near the ground, at which point it passed through the party wall back on to the property forming part of 98 Farringdon Road. From there it was, or ought to have been, connected to the mains drainage. This soil vent pipe served the upper floors of 98 Farringdon Road which, as I shall explain, were subsequently the subject of a leasehold interest created in favour of the appellants in May 2001.

The relevant law

4. Before turning to the facts, I should outline the material provisions of the 1996 Act and set out the provisions which this court has to consider. Section 2 of the 1996 Act gives a building owner certain rights. The works which the leaseholders desired to do to the party wall fell within section 2(2), paragraphs (f), (g) and (h). Section 2(5) provides that:

"Any right falling with in subsection (2)(f), (g) or (h) is exercisable subject to making good all damage occasioned by the work to the adjoining premises or to the internal furnishings and decorations."

5. In order to exercise any right conferred by section 2(2) a building owner must serve on "any adjoining owner" a notice complying with section 3(1). Section 20 defines an adjoining owner as follows:

" 'adjoining owner'.... means any owner .... of land, buildings, storeys or rooms adjoining those of the building owner.

'owner' includes-

(a) a person in receipt of, or entitled to receive, the whole or part of the rents or profits of land;

(b) a person in possession of land, otherwise than as a mortgagee or as a tenant from year to year or for a lesser term or as a tenant at will;

(c) a purchaser of an interest in land under a contract for purchase or under an agreement for a lease, otherwise than under an agreement for a tenancy from year to year or for a lesser term."

6. Provision is made for the service of a counter-notice. Section 5 provides that:

"If an owner on whom a party structure notice or a counter notice has been served does not serve a notice indicating his consent to it within the period of fourteen days .... he shall be deemed to have dissented from the notice and a dispute shall be deemed to have arisen between the parties."

7. Section 10 makes provision for the appointment of surveyors to resolve such a dispute. When the award or survey is issued, section 10(16) provides that:

"The award shall be conclusive and shall not except as provided by this section be questioned in any court."

8. Section 10(17) provides a limited right of appeal to the county court. Section 7 confers a right to compensation:

"(2) 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."

The Pleaded Case

9. In this case the judge gave permission to appeal and annexed to his written permission a summary of the case in the following terms:

"1. The appeal point, stemming from the Party Wall Etc Act 1996, only arises out of the Counterclaim in this case, the counterclaimant being Europa 2000 Ltd, the leaseholder of a 99 years term in the first and second floors of number 98, and the defendant to the counterclaim being Arena Property Services Ltd, the leaseholder of a 20 years term of the whole of number 96. The order of events was.

(i) Notice under section 3 of the 17 November 2000 (page 202f) was given by Arena to the freeholders of 98 seeking removal from 96 of a soilpipe and drainpipe attached to the party wall, Arena stating that the pipes trespassed on the land of 96; the freeholders of 98 were M. Macit and A. Bas.

(ii) On 14 December 2000 Europa agree to buy for £170,000 the 99 years term and on 25 May 2001 Europa was granted by the freeholders of 98 a 99 years term in the first and second floors of 98. The soilpipe obviously served those floors of 98.

(iii) On 8 October 2001 the Award by the two surveyors (266) was made enabling Arena to remove the soilpipe and drainpipe.

(iv) In March 2002 the soilpipe was cut and removed from 96; since August 2002, when the floors had been refurbished, Europa has been unable to let those floors because of the absence of a soilpipe.

2. The counterclaim by Europa is for compensation for loss and damage occasioned to it as an adjoining owner under section 7(2) of the Act. Europa alleged that there was an easement appurtenant to 98 for the soilpipe to be over 96. Arena called it a trespass. No evidence was called by either party on the matter, and so it was impossible to decide whether or not an easement did exist.

3. Assuming that such an easement existed before the Award was made these questions arose:

(i) could the award extinguish the easement? It seemed to me that it could because the 1996 Act provided its own code which superseded the common law, the only easements being preserved being those mentioned in section 9 of the Act.

(ii) Given that the easement was extinguished by the Award was Europa entitled to claim under section 7(2) of the Act, the scope of which is wide (see Gale on Easements, 17th Ed, paragraph 11-20), compensation for the loss and damage it suffered on account of the absence of any soilpipe serving its property? It seemed to me that if the easement had been extinguished this was a case of 'damnum sine injuria' since Europa was not being deprived by Arena of any right it had, and that section 7(2) could not be so widely construed as to give compensation for the inevitable permanent and lawful consequences of implementing the Award.

4. The Award (a matter between the freeholders of 98 and Arena) was not disclosed by the solicitor advocate for Arena to the solicitor advocate for Europa until the first morning of the trial, a matter which affected my order for costs; its early disclosure may perhaps have resulted in an argument more focussed on the effect of the Award. I gave permission to appeal on the basis that Europa should be encouraged to take the advice of counsel expert in property matters before deciding whether to proceed with it. It seemed to me that the points of law in subparagraphs (i) and (ii) of the last paragraph might not be correct, though I think they are, but it is to be noted that section 7(2) is a new statutory provision, the full scope of which should perhaps be considered by an appellate court.

5. It is unknown what remedies may have against the freeholders, or why the freeholders did not ensure that a soilpipe should serve the premises they leased to Europa nor, if they could, why the appear to have permitted the Award not to provide for such a thing."

10. I need only add a few points to this summary. The freeholders of 98 Farringdon Road did not consent to the works proposed in the notice dated 17 November 2000. Accordingly a dispute was deemed to arise between them and the leaseholders of 96 Farringdon Road. Surveyors were appointed in accordance with the Act in February 2001. At the time of the service of the section 3 notice, the appellant, Europa 2000 Limited ("Europa") was not an adjoining owner for the purposes of section 20 of the 1996 Act. At the time Arena served its party structure notice, the freeholders of Farringdon Road were the only adjoining owners. They had purported to grant a lease to themselves, but that was of no effect. The leasehold interest acquired by Europa has thus been carved out of the freehold interest since service of the notice in November 2000. To the extent of that interest, Europa is the successor in title to the adjoining owner on whom the notice was served. The surveyors were appointed in accordance with the Act in February 2001.

11. I would make a further point on the judge's summary which refers to the parties' pleaded cases. The claim was a claim for nuisance for works carried out in 2001 by Europa in pursuance of its party structure notice. Before the notice was served, Arena had to obtain an interim injunction without notice. In the course of those proceedings, Arena discovered that Europa was in possession. It thought that Europa was the freehold owner. It was not until May 2002 that Arena discovered that Europa was only the owner of a leasehold interest in the first and second floors.

12. By its defence in this action, Europa denied liability in nuisance. It also served a Part 20 claim which referred to the notice served by Arena. It stated that the pipe to be cut proposed by that notice was subject to an easement by prescription. The Part 20 claim further alleged that Europa became equitable owner of a leasehold estate in 98 Farringdon Road in December 2000 and that it was therefore adjoining owner by virtue of paragraph (c) of the definition of "adjoining owner" in section 20 of the 1996 Act which I have quoted. Accordingly, Europa counterclaimed for damages for trespass, damage under section 2(5) and compensation under section 7(2). It also sought an order for the restoration of the pipe, although it now accepts that it can only seek damages or compensation.

13. A reply and defence to counterclaim was served by Arena. This contended that the pipe trespassed onto 96 Farringdon Road.

The Judge's Judgment

14. The judge held that it had not been established that there was an easement with respect to the use of the pipe. It held that any such easement would have been extinguished by the award made by the surveyors. He held that section 2(5) was only an obligation to make good, therefore it did not apply. Section 7(2) not apply because the easement had already been extinguished in November 2000 by the award. The judge added that if he held there was a claim under section 7(2), he would have adjourned the case so that the freeholder could be joined and the amount of compensation established. On that footing the judge dismissed the counterclaim. Europa submits on this appeal that the judge should have found that there was an easement.

The Appellant's Case

15. Mr Banning, for the appellant, contends that Arena did not challenge the evidence led by Europa as regards the age of the pipe. This evidence included a statement by Mr Meisels, a director of Europa. He states in paragraph 14 of his witness statement:

"I am informed that the soil pipe has been in place for a number of years, and in all probability since the building was constructed."

16. The appellant further contends that Arena relied on the Party Walls Etc Act and, therefore, implicitly accepted that there was an easement since otherwise it would have had a right at common law to cut the projection on to its property without the consent of the owners of 98 Farringdon Road. Although I have not referred to the party structure notice served by Arena in detail, it did refer to more extensive works than simply the cutting of the flue and the cutting of the pipe.

17. The appellant further submits that Arena accepted that there was an easement in its submissions to the judge. However, in my judgment, it is clear from the transcript that counsel for Arena did not then accept that there was an easement. In his closing submissions before the judge, Mr Rosen, the solicitor/advocate for Arena, submitted with respect to the pleadings:

"I have always understood that seriatim clauses are effectively done away with and that now if I do not answer it does not mean that we accept it. I may be wrong but that has always been my understanding. In any event there is no evidence that it has been there for over twenty years, there is no evidence to show that it has been in continuous use."

However that may be, Mr Banning now fairly and properly accepts that the existence of the easement was in issue at the trial.

18. Mr Banning submits that there was an allegation of an easement in the Part 20 claim, which was verified by a statement of truth. This does not assist since an allegation so verified is not evidence for the purposes of the trial (see CPR 32.6(2)). He says that the witness statement of Mr Meisels dealt with the question of the easement. I have already read the passage. Mr Meisels was not cross-examined on this evidence and no other evidence was led.

19. Although Mr Banning submitted in his submissions before this court that the photographs in the trial bundle showed that the pipe was old, he fairly accepted that expert evidence would be needed to determine the age of the pipe if there was no factual evidence as to how long it had been there. He accepted that the toilets on the first floor could not be as old as the building itself if, as he submitted, it was about 100 years old.

20. With regard to compensation, Mr Banning submits that the Party Walls Etc Act is broader than the London Buildings Acts, which were repealed in 1996. He further submits that the award did not extinguish the easement. If it had so extinguished the easement, Europa could not have even have sued a third party who blocked the pipe, even if Arena decided not to carry out any work on the party wall after all. Moreover, the award itself stated that nothing in it was to affect any easement. Contrary to the judge's judgment, section 7(2) clearly confers a right to compensation for work lawfully done.

21. Mr Banning also referred in his submissions to section 9 of the Party Walls Etc Act which provides:

"Nothing in this Act shall-

(a) authorise any interference with an easement of light or other easements in or relating to a party wall; or

(b) prejudicially affect any right of any person to preserve or restore any right or other thing in or connected with a party wall in case of the party wall being pulled down or rebuilt."

So far as material to this appeal, section 9 was in the same form in the London Building Act 1894.

22. Mr Banning submits that section 9 does not apply to the easement on which Europa relied, because the easement did not "relate" to the party wall for the purposes of paragraph (a). Alternatively, if it did so relate because the pipe was attached to the wall, and where it went through the wall, those were separate easements to which section 9 did apply, but that meant that the remainder of the easement was outside section 9.

The Respondent's Case

23. Mr Mark Walsh, for the respondents, submits that the judge was right to find that the existence of the easement was not established. It could not simply be an easement to have a pipe; there had to be a benefit to the dominant tenant. Accordingly, it had to be an easement to use the pipe for the purposes of the flow of water. There was no evidence as to the age of the pipe. All the court had was Mr Meisels' statement based on information provided by an unspecified source. We have not been referred to any hearsay notice. The pipe could have been a later addition after 98 Farringdon Road was built, even after the extension to the property was built and it could also date from the time when the extension was re-roofed. There was certainly no evidence that the pipe was connected and had been used for 20 years.

24. The judge was right to reject the evidence of Mr Meisels since it was based on hearsay and it was not clear whether he was referring to the extension of 98 Farringdon Road which was clearly built more recently than the main structure. Mr Walsh further submits that the appellant can have no claim under section 7 since, by virtue of section 9 of the 1996 Act, interference with an easement is outside the procedure contained in the 1996 Act. Accordingly, section 7 did not apply.

25. As to the judge's failure to find that there was an easement, Mr Walsh contends that this was outside the permission to appeal which has been granted and that the point should have been taken in submissions before the judge immediately after judgment. I am not myself persuaded by this point since the judge gave permission to appeal on his dismissal of the counterclaim (see paragraph 4 of the judge's order).

26. Mr Walsh further submits that if the appellant is now able to take the point that the judge should have found that there was an easement, the respondent would seek to adduce evidence to show that the pipe was never connected in any event. However, there has been no application to adduce evidence as such on this appeal.

27. Mr Walsh also submits that the appellant relies on an easement of common law and not under the Prescription Act 1832. It has to show user since 1989 which is impossible. The judge does not seek to support the judge's holdings on section 7(2) of the 1996 Act. However, he submits that the question of compensation was within the exclusive jurisdiction of the surveyors and cannot now be adjudicated on by a court in these proceedings.

My Conclusions

28. In my judgment, Mr Banning is correct in his submission that the award made by the surveyors pursuant to the dispute which had arisen following the service of Arena's Party Structure Notice did not of itself extinguish the easement. The award merely authorised Arena to carry out certain work. The easement was not extinguished until Arena blocked the pipe so that no use could be made of it by any adjoining owner of 98 Farringdon Road. In my judgment, the judge was in error on this point.

29. I also accept Mr Banning's submission that a right to compensation arose under section 7(2) of the 1996 Act. Ex hypothesi, that provision confers a right to compensation even though work is lawfully done in accordance with the 1996 Act. If that were not so, a claim would lie in common law. Accordingly, in my judgment, if there was an easement, subject to the submission about the exclusive jurisdiction of the surveyors, the right order to have made was that an inquiry should be directed as to the appropriate amount of compensation. The assessment of that compensation would have to take into account that Europa merely had a leasehold interest in part of 98 Farringdon Road, and that, if it be the fact, it had a right as against the freeholders of 98 Farringdon Road to require them to cause the soil vent pipe to be constructed on their side of the party wall and to be connected to the main sewer.

30. The question then is whether the judge was right to conclude that no easement had been established. In my judgment, the existence of the easement was in issue on the pleadings. It was the plank in the case put by Arena. The only evidence in support of the easement was that of Mr Meisels. Mr Meisels had only recently become involved with the property. His evidence did not state the source of his information. It was vital for Europa to establish that the pipe had been in existence for more than 20 years, but Mr Meisels does not assist on this point and it cannot be right to say that it is as old as the building itself, which Mr Banning accepted.

31. In my judgment, the judge was fully entitled to reject the evidence of Mr Meisels as establishing the existence of the easement for more than 20 years and to hold that the existence of easement had not been established. I accept Mr Walsh's submission that it would not be right to send the matter back to the judge to give the appellant a second bite of the cherry by adducing further evidence. I do not need to go into the question whether the judge would, if he had been satisfied that the pipe was more than 20 years old, have been entitled to infer any fact as to its connection.

32. In those circumstances, it is not necessary for me to express any view on the effect of section 9 of the 1996 Act. It seems to me that the easement fell within section 9 because it related to a party wall. It cannot be split into a number of separate easements. That is the case if it was indeed an easement. A difficult and important question arises as to the relationship between this section and section 2 of the 1996 Act. However, the point was not argued at trial. This court has been taken to Selby v Whitbread [1917] 1 KB 726 and, in addition, to the note in Gale on Easements, 11th ed, page 389, note 33 which states that a predecessor of section 9 was section 101 of the London Building Act 1984, the Act considered in Selby v Whitbread, so that it would seem that section 9 is subject to the decision in that case.

33. Mr Walsh submits that the award of the surveyors would have been ultra vires the 1996 Act if it provided for the removal rather than the substitution of the easement (if it was an easement). If, on the other hand, the award was intra vires the 1996 Act, he submits that any challenge is subject to section 10(16). He submits that by virtue of section 10(6) surveyors have exclusive jurisdiction as between adjoining owners to award compensation and that, in that event, the right to appeal is limited by section 10(16). He accepted this would be a trap for a party who, as here, was not an adjoining owner on whom notice should have been served but who subsequently acquires a derivative interest.

34. As this submission does not need to be resolved on the facts of this case, I leave open the question whether the jurisdiction given by section 10 is exclusive and thereby excludes the ability of an adjoining owner to come to the court. However, I note that there is a wide jurisdiction given to surveyors and would, on the face of it, include the power to award compensation, as we understand from Mr Walsh's submission, that surveyors commonly do.

35. I would like to deal with one short submission made by Mr Banning in reply. He submitted that, even if there was no easement, there would still be a right to compensation on the plain wording of section 7(2). As I have said, the easement was the plank of the case as pleaded. Moreover, Europa had to establish an easement, otherwise the pipe could have been capped off at any time leaving no right to compensation.

36. For all these reasons, I would dismiss this appeal.

37. LORD JUSTICE DYSON: I agree.

38. LORD PHILLIPS, MR: I also agree. This appeal might have raised some interesting points under the Party Wall Etc Act 1996. In the event, however, the appellants have fallen at the first hurdle. Before the judge they failed to establish that they had enjoyed the easement which formed the foundation of their counterclaim. They have failed to satisfy us that the judge should have found that such an easement had existed or proceeded upon that basis.

39. For this simple reason, the appeal must be dismissed.

Order: Appeal dismissed. Appellants to pay the respondent's costs assessed in the sum of £5,600 within 28 days.