Young & Anor v Bemstone Ltd (t/a Bemstone Homes)

These are cross-appeals but, for the sake of clarity, the appellants will be called Dr. and Mrs. Young, and the respondents will be Bemstone Ltd.

The appellants are the owners of 8 Salter Road, Sandbanks, a traditional 1930s two storey family house in an elevated position enjoying wide and open views of Poole Harbour. The respondent is a speculative building company which built two four storey houses at number 6 Salter Road on the site of a similar dwelling to that at number 8, which was demolished. This case relates to damage sustained to 8 Salter Road, allegedly, after the construction of the two four storey houses built into the deeply excavated site at number 6.

As the name Sandbanks indicates, the peninsula upon which these houses are built principally comprises sand. It is of a fine quality produced over the millennia by sea and wind activity. In its dry state it is very fine and free-running. The steep hill into which the houses at number 6 and upon which number 8 are built comprises quantities of this sand which becomes wetter and therefore stiffer as one excavates deeper into it. To the front of number 8 is a steep slope to the roadway. To the front of number 6 there was a similar slope. Much of the site at number 6 from the road level was excavated from the pavement level to accommodate the new development of the two four storey houses built by the respondents.

The house at number 6 was demolished in late 1999/early 2000. In January 2001 the respondents began their excavation into the site at 6 Salter Road. The ground level previously occupied by the house was substantially reduced in level and a ramp built up from the roadway. Surprisingly, by the time work commenced no party wall notices had been served by the respondents, despite the clear and obvious risk posed by the removal of support from the neighbouring land on which number 8 was built.

On 29th January 2001 Mr. Richard Colman, an engineer already employed by Bemstone Ltd., belatedly served a notice under section 6 of the Party Wall Act 1996 as the respondents' nominated party wall surveyor. The notice included some details of a proposed continuous bored power retaining wall and associated foundations for the proposed two new dwellings.

The appellant appointed a Mr. Brian Willis as his party wall surveyor. Mr. Colman and Mr. Parnian, an associate of Mr. Willis, compiled a schedule of condition of number 6 on 30th January 2001. This was signed some time later, probably on 6th February 2001.

Number 8 was occupied by tenants from 6th January 2001 until the end of July on a six month short-hold tenancy. They were Mr. and Mrs. Russell. Mrs. Russell in her unchallenged sworn evidence says:

Mr. and Mrs. Green occupied the house from August. They experienced what she described as a shift in the building and cracks becoming progressively worse. Windows became progressively more difficult to open and shut, and plastic sheeting was needed to prevent drafts. Mr. and Mrs. Green came from the United States and were perhaps more sensitive than the home grown tenants. They were subjected to the noise and the occurrence of disruption from the building site. I accept that theirs may have been a very subjective account but the picture emerges from the tenants' evidence that, coincident with significant and radical site preparation and building activity next door, a seemingly undamaged and comfortable house became difficult to live in and began to show signs of structural damage both internally and externally.

In relation to these cross-appeals, I have had the benefit of hearing the evidence of the original party wall surveyors and two structural engineering experts, together with the builder who is the principal shareholder of the respondent company. He is Mr. James. Mr. James, although a respondent and cross-appellant, prior to this hearing has done little to lend his cooperation in matters of disclosure. I am still not satisfied that there has been full and frank disclosure. During the trial it became evident that there was relevant and important material relating to the design of the works, its cost, and the management of the site, and the development, which was in his possession and that he had neglected to provide to the other party or to the court. Most significant was the correspondence wherein Bemstone Ltd. (Mr. James in fact) questioned the workmanship and quality of the vital piled retaining structures between number 8 and the deep excavated void at number 6 into which the two four storey houses were eventually built.

Counsel have helpfully identified and agreed a number of issues for the decision of the court hearing these cross-appeals. I will deal with those issues in the order that counsel helpfully made their submissions.

Issue number 1: what was the damage caused to 8 Salter Road? In order to determine this question, it is necessary to consider what was the condition of number 8 before the works commenced at number 6. Mr. Peter May, an independent surveyor, conducted surveys of the condition of number 8 both in May 1998 and in December 1999. His evidence as to the state of the building then was not seriously questioned. He was an impressive and a reliable witness and his written reports were accompanied by colour photographs showing both the exterior and the interior state of the property. Had there been any manifest evidence of structural damage in May of 1998 or change in December of 1999, I have no doubt that he would have observed it and recorded it. The house in 1998 clearly needed redecoration and therefore signs of historic cracking and structural damage would not have been covered by new decoration. He was careful as to levels and he went around the building using a spirit level in order to check the levels when he carried out his inspections.

The state of the house in December 1999 was described by him as "recently decorated and in good condition". No evident defects were noted. The steep front garden of number 8, planted with bushes and vegetation was stable, and no soil creep was observed either, or any sign of ground movement. The paths were in good condition around the house. The front retaining wall at pavement level was observed to be leaning by about three degrees but apparently stable.

The party wall surveyors in January - the schedule of condition prepared by Messrs. Colman and Parnian - noted no visible signs of structural defect. That is why they were there: to see and record any such signs as would have existed. No observation was made. I reject Mr. Colman's evidence that the schedule did not encompass structural matters. He was not there on a fool's errand to record the state of the painting and the decorating. I am satisfied that before January 2001 there was no evidence of any significant structural defect in number 8.

The evidence of Mr. James that number 8 was known to be in a fairly poor state of repair prior to its purchase by Dr. Young in August 1998 I reject. It is based upon untested hearsay and contradicted by the clear evidence of Mr. May. The likelihood is that the decoration was tired and that some upgrading of facilities was warranted, as indeed was noted by Mr. May in 1998 and clearly remedied by the time of his second inspection in December 1999.

I also accept the evidence of Dr. Young in relation to this matter, confirmed as it is by the expert observation of Mr. May and by the lay evidence of the tenants, Mr. and Mrs. Green, who were in the best position to observe and experience the condition of the house that they chose to rent. They are in the best position of course to observe and experience the progress of the cracking in the walls, the changes of levels, and the windows becoming progressively out of true.

Was there any evidence of structural damage that was not immediately obvious? Mr. Frank Hodgson, the consultant engineer giving evidence on behalf of the respondents, was placed in a difficult position during the trial insofar as his client was constrained to disclose documents to the court that he had not made his legal or professional advisers privy to before the hearing. These related in part to the mechanism whereby damage was caused to number 8 which he accepted was post January 2001. That is the mechanism in relation to the piling and the criticisms of it.

In February and March 2001 two shallow service holes were dug by Southern Electricity and Transco near to the western flank of number 8. The depth of the Southern Electric hole, in my judgment, clearly did not extend below the bottom of the house foundations. Both experts, Mr. Hodgson, and Mr. Whittington for the Youngs, regarded that excavation as of little significance in the event.

A hole dug by Transco in March, however, was deeper, it is said, than the Southern Electric excavation. A contemporary record made by Bemstone Ltd.'s engineer shows it to be 800mm deep and 1350mm away from the western flank wall. Mr. Hodgson, the consultant engineer giving evidence on behalf of the respondents, expressed the view of this excavation that it was likely that it did extend below the bottom of the house foundations and would have locally reduced containment of the underlying soils, thus contributing to foundation movement and to the cracking recorded. In his considered written report Mr. Hodgson expressed the view that the service openings were more likely than not to be the primary cause of foundation movement and were likely to be implicated in the recent cracking. The difficulty in Mr. Hodgson's hypothesis is that it depended upon what was the ground level from which the depth of the excavations were measured. I do not accept his judgment based upon the interpretation of a photograph that depicted a level, he says, below the western pathway. The ground which contained the excavations was at the level of the pathway as directly observed on site by Mr. Mark Whittington, the consultant engineer who gave evidence on behalf of Dr. and Mrs. Young. I regarded Mr. Whittington as an accurate and reliable witness as to the state of the house at number 8 and its site. He impressed me as a professional who was thorough and painstaking. Indeed, Mr. Hodgson accepted Mr. Whittington's data as to levels in the property based upon the careful and extensive line and level of surveys carried out by Mr. Whittington.

The most helpful and reliable record of the nature and extent of the damage which occurred to number 8 is the revised schedule of condition prepared by Mr. May on 17th March - as to the damage at that date of course. He had inspected in May 1998 and December 1999. He identified several cracks in excess of 2mm: 2.5mm to 3mm, 4mm and 6mm on the north external wall; 2.5mm and 6.5mm on the rear elevation, 3mm to 4mm and 5mm cracks in the internal masonry walls, and 10.5mm between a fitted wardrobe and the wall upstairs; these qualifying as moderate to serious damage on the issue to structural engineers table classifying the severity of damage resulting from subsidence in low-rise buildings (the second edition of that).

Figure 4 is a floor plan depicting the ground and first floor of number 8, indicating the cracking, the monitoring studs, both external damage and internal damage. Figure 5 shows the elevations and the pattern of principal cracks with a dimension of crack width and, importantly, the direction of taper. The survey carried out by the Dorset Land Surveying body in September shows the state of the building at that time. Figures 6 and 7 are the definitive depictions of the levels in the ground floor and ground floor ceiling levels. Figures 9 and 10 depict the levels of the first floor and the first floor ceilings. Figures 8 and 9 show settlement of the ground floor and first floor respectively.

Some cracks have been monitored indicating measured movement - some increasing, some decreasing. Of course not all of the cracks have been subject of prior pinning and subsequent measurement. They have been the subject, of course, of direct evidence of observation by tenants and of course of Mr. Whittington.

I am satisfied that there was no significant historic cracking to number 8. I reject the evidence of Mr. Hodgson and his theory that there must have been historic cracking and damage prior to the commencement of works. It is at odds with the clear and reliable evidence of Mr. May and the confirmatory and reliable evidence of Dr. Young and the tenants.

On 30th January 2001, Mr. Colman was party to the compilation of a schedule of conditions with Mr. Parnian for Dr. Young. He noted:

One can readily appreciate Mr. Colman's difficult position as a retained engineer to Bemstone, the respondents, knowing that substantial works had been commenced without prior notification to the neighbouring site owners, which works were of a nature inevitably to put the stability of the adjoining site at some risk if not carried out carefully and sensitively on notice.

Mr. James, his employer, clearly was alive to the risks and would have known of his obligations as a builder and in relation to the safe and proper development of the site. He chose not to take heed of these risks either in letter or in spirit. Even during the trial of the issues in the appeal, he chose, in my judgment, to close his eyes to the effects of the works that his company undertook on the site at number 6. I do not think he was a cowboy builder, but he displayed a degree of arrogance and presented as a developer who was distinctly unneighbourly despite the fact that he had access to all the technical and professional support that he needed had he chosen to seek that proper advice. It is of some significance that there was not a qualified engineer who had the oversight of the building works and development on the site of number 6, particularly in view of the hazards observed by Mr. James in relation to the insertion of the piles.

Was damage caused by the building works on number 6? If Dr. Young is to succeed, the obligation upon him is to prove that the most likely cause of damage to number 8 was the construction work that Bemstone Ltd. undertook. In a claim such as this, the court is constrained to take a robust and commonsense view of issues of causation.

Mr. Mark Whittington, the expert relied upon by Dr. Young, in expressing his opinion that all of the damage resulted from the execution of the works, relies upon a number of causes. Firstly, following demolition of number 6, there was the reduction in the level of the site and the creation of a ramp from the pavement level. It became evident at trial that the original design of the piling works was significantly altered. The capping being constructed was to a greater depth than the original design, necessitating greater disturbance to the ground levels adjacent to the foundations at number 6 and the dividing wall. No evidence is presented to the court to show that the method of construction, the manner and sequence of excavation or of temporary or permanent retention or containment of the fine-grained material of number 8 was put into operation. Sequencing of the driving of piles was not apparent in evidence. There are no records which show whether the methodology accorded with competent engineering practice, particularly as to the restraint provided to the site at number 8.

That there was physical interference to the site of number 8 and the foundation levels is confirmed by the tenants, who felt the vibrations and observed the effects upon the structure as the interference went on. Of course interference of a physical nature and the consequence of it, particularly the consequences, is something that continues thereafter.

Bemstone saw fit themselves to complain to the piling contractor as to the quality of their works. On 19th February 2001 Mr. James wrote:

On 7th March he wrote to Geo Mechanical Foundations, the piling contractor, again saying:

On 29th May he wrote:

He elicited a reply reminding him of the difficult conditions pertaining on the site - I will come to those later in another context. These are:

Mr. Whittington, thirdly, expresses the view that there would in any event be movement of the piled wall. The so-called wall in fact more closely resembles a picket fence with gaps between the uprights or piles. They are not contiguous, they do not touch. There is no evidence of any restraint between the piles to prevent the inevitable seepage of the free running soft fine sand from number 8 into the lower excavated site at number 6.

Fourthly, it is evident that prior to the completion of the building work there was insufficient restraint to the head of the piles. This gives rise to the proper inference that there would have been movement of the head of the piles which would have affected the consistency of support to the adjoining site and restraint and containment. The completed structure now may give some support to the head of the piled wall. The extent of this restraint is not, however, apparent from the design and no figures were put forward from Bemstone's engineers.

That it cannot be demonstrated (or, worse, was not really addressed) would seem to illustrate the less than thorough approach of Bemstone and their designers to the project and its effect upon the neighbouring site. Neither was the matter directly addressed either by Mr. Hodgson in his evidence in a satisfactory way. There was clearly a design change. The length of the piles comprising the wall was reduced from 12.7m to 9m. It is uncertain what was the length of the ultimate embedded length, given the now newly-disclosed evidence of the variable height above ground. It was accepted by Mr. Hodgson, Bemstone's expert, that inevitably there would be some movement of the toe of the pile wall. He did not think it would be significant. Mr. Whittington felt that it would have been, particularly when considered with the other factors. I accept his evidence. Since Mr. Colman, Bemstone's engineer, has not produced calculations relating to these factors and his version of the "as built" drawings was clearly inaccurate as to vital matters such as of the size of the capping beam, his evidence in this regard cannot be relied upon by the court and could not of course be relied upon by Mr. Hodgson. Mr. Colman was not involved in the supervision of the works and the excavation, and cannot vouch for their quality.

Mr. James' concerns are well documented. I am satisfied that prior to the completion of the construction, in particular by provision of the floor slabs and packing of the space next to the piles, that there was inadequate lateral restraint to the pile warning and that movement of the piles directly may have affected the stability of the sandy mass under number 8 and thereby the foundations of the structure upon it during the construction process and shortly thereafter.

It was a project that needed close and careful project planning and management. That clearly was not provided. I reject Mr. Hodgson's evidence that the pile movement was de minimis and had no causative effect. As I have already observed, his opinion was based upon a version of events as to the construction process and design that was not in fact borne out by the evidence. He was driven to adjust his evidence in the course of the hearing to accommodate the newly disclosed state of affairs in the evidence of Mr. James. It was evident to me that, nonetheless, he disclosed a degree of partisanship in his evidence and seemed to lack the objectivity of Mr. Whittington, particularly as to the issue of historic damage, that is the damage he says that occurred prior to December 1999, and, in relation to the issue of the contribution of the shallow service holes, to possible foundation instability. He was reluctant to abandon his theories entirely, despite cogent and contrary evidence.

What remedial works would it be reasonable to carry out to number 8 to rectify the damage? Mr. Hodgson does not feel that underpinning is necessary because recent movement in his opinion was only slight and concentrated in the north west corner of the property. He criticises Mr. Whittington's view that there had been recent significant movement and says that Mr. Whittington's readings at the crack monitoring points were distorted by not being properly adjusted for temperature variations. I reject that view. Clearly account has been taken of these considerations, but also the cracking which was not the subject of monitoring also - that which developed subsequently. Mr. Hodgson's opinion was based upon the thesis that number 8 was the subject of significant historic cracking and that there was pre-existing damage and that post January damage was caused or significantly contributed to by shallow service excavations. I have rejected those theories. I accept wholly the evidence of Mr. Whittington.

There is no cogent evidence before me that number 6, even now, affords satisfactory and adequate lateral restraint to number 8. The need for underpinning, in my judgment, is wholly made out by Mr. Whittington. He based his evidence upon necessary remedies on an economical and logically thought out basis. There is, in my judgment, sufficient evidence at this stage as to the extent and cost of necessary remedial works. At the time that the third party wall surveyor considered the matter clearly there was not sufficient evidence. I have also considered the individual matters contained in Mr. Whittington's report and the comments of Mr. Hodgson upon them. I am satisfied that each of the items particularised in Mr. Whittington's report should be remedied. I do not accept Mr. Hodgson's evidence that tolerances of slope and the like should be lived with or that underpinning is not appropriate or necessary. I accept the evidence as to costs provided by Davies Langdon & Everest in the sum of £107,000 plus VAT. The total inclusive of VAT is £126,312. There is no reliable evidence before me as to the necessity of new services such as gas supply.

I turn to loss of rent. The 1966 Act clearly confers upon adjoining owners and adjoining occupiers a general right to compensation for any loss or damage which may result to them by reason of any work carried out pursuant to the 1996 Act. The claimants assert that the monthly rental value of number 8 from February 2001 to the present day, had no damage been caused, would have been £2,000 per month. A holiday tenant would pay far more. Holiday lets occupy only a small part of the year. Someone taking a holiday house is more likely to be attracted by considerations such as sea and harbour views. A conventional six month short-tenancy let is less likely to consider the view, more the accommodation and amenities such as bathrooms, whether en suite or otherwise, and the quality of the fit out.

There is difficulty in relation to conventional lettings to identify satisfactory comparables in this case. Mr. Greenwood gave evidence on behalf of the respondents. He supports a rental figure of £1,800 per month. His experience is in development rather than the close rental market. It is apparent also in his evidence that his impression of the internal decorative condition of the house at number 8 was not justified. Mr. May gives a figure of £2,000. He bases it upon comparables which are not strictly similar. Number 8 does not have bathroom facilities, it appears, that are en suite. Looking at all the evidence, the proper view as to rental value is £1,900 per month.

I reject the submission that the appellants failed to mitigate their loss. I am satisfied that, having received the evidence of the tenants, and considered the general evidence of the condition of the premises, that it made it an unattractive renting proposition and will remain so until remedial works are properly carried out.

What value would number 8 be worth save for the damage? Mr. Greenwood on behalf of Bemstone values it at £725,000; Mr. May for Dr. Young at £815,000. Both seek to exercise a judgment founded on experience and comparables. Valuation is not an exact science and honestly held opinions as to value may vary and each have a validity, particularly in the absence of satisfactory comparables. The difference between the experts, however, is considerable - in this case of £90,000. Mr. Greenwood relied upon 8 Grassmere Road as a comparable. It was of similar age and size to 8 Salter Road -- and the question of the existence of en suite bathrooms. The comparable, however, lacks the elevation and the special view of number 8. That is significant if one is purchasing a house. It is a critical element of its value. It must not be forgotten that the reason that number 8 was purchased and retained by the Youngs was for both its views and to ensure that the similar view, that is somewhat higher up, was continued to be enjoyed by the Youngs without any risk of development and the height of any development building being added to.

Mr. Greenwood was of the view that £75,000 needed to be spent on number 8 in any event to up-rate the facilities. He estimated the value of the property up-rated as being no greater than £800,000. In my judgment, he is wrong. Firstly, he has not taken account of the modernisation already carried out by Dr. Young. Neither has he factored in, in my judgment, the value represented by the amenity of the view. Mr. May has based his value upon Sandbanks' houses and others nearby. His experience incorporates a good knowledge of local properties and he had the edge, in my judgment, over Mr. Greenwood, whose experience more recently is development-based. I am satisfied upon the evidence that the property valuation is presently of the order of £800,000 for a comfortable family house in good order with exceptional sea and harbour views. Before repair the house would be valued at £510,000.

What would the site value of number 8 be? There is evidence of a trend to tear down traditionally built houses in the Sandbanks area and develop the sites made available. The experts agree that the usual ratio of gross development value to site value is of the order of 50%. If one house with a very generous floor area was erected on site, its value would be of the order of £1.5 million. Such is not contentious. The experts disagree as to the percentage of the £1.5 million of the gross development value that a developer would be prepared to pay for number 8 site. Mr. May's view is that a developer would pay approximately 40%, and the sum of £620,000 is given by both experts in that connection. He uses as a comparable, 78 Banks Road, where a developer paid 50% gross development value of the site. He argues that the difference is accounted for by factoring in the additional difficulties of building into the site at number 8 that would have to be done, and the necessity of expensive excavation works and support.

I accept Mr. Greenwood's evidence that as a rule of thumb 50% is a sound approach as to what developers would pay for development sites in the Sandbanks area of the gross development value. I am not satisfied that he has, however, taken sufficient account of the building costs in relation to this site at number 8. Those difficulties are exemplified in the instant case that I have heard so much evidence about. Furthermore, Mr. Greenwood has not had the benefit of seeing the actual development costs of number 6 which were not disclosed to the court until mid hearing, and then in an unsatisfactory and questionable form.

I am satisfied that only a single house would be permitted on the site of number 8. An application was made by Dr. Young for planning permission for two houses in order that he could be assisted in obtaining financing for the purchase of number 8 at the outset. This was refused by the planning authority, and a subsequent appeal also failed. The site at number 8 is narrower than that at number 6. The inspector reasoned that two houses on such an important site would give an over emphasis to the vertical. That was the reason given and it holds good, in my opinion and judgment, because the height of the subsequent development of number 6, with its modern gothic houses, semi-detached houses, serves to emphasise that criticism, and the justified basis of it. It is more telling now than perhaps it was before. I reject Mr. Greenwood's evidence that planning permission for two houses would succeed. He has an overly-optimistic view of his client's case and, in my judgment, failed to give proper weight to the planning history of the site.

In my judgment, the evidence of Mr. May as to the difficulties in developing the site is borne out by the considerations I have already made mention of. I judge the development value to be of the order of £620,000.

Has the value of number 8 diminished by the reason of the damage caused by the building works at number 6 and by how much? There is a difference between £800,000 and £620,000, namely £180,000.

Are the Youngs entitled to recover compensation for loss of rent and diminution in value under section 7(2) of the Act? Yes.

What costs, if any, incurred by the successful appellants should be paid by the unsuccessful appellants apart from the costs of these proceedings? The costs of the appeal. It would be appropriate under the Party Wall Act provisions the reasonable costs they incurred in relation to the investigations and the making of the awards the subject of these appeals. They should be recoverable by the successful appellants.

I order that there be a transcript of the judgment that I have given made and copies provided free of charge to each of the parties.