Lea Valley Developments Ltd v Derbyshire

Under section 7(2) of the Party Wall etc. Act 1996, compensation for loss or damage caused by authorised works is assessed by applying ordinary common-law principles governing damages for torts to land. Reinstatement cost and diminution in value are both potentially appropriate measures. The choice is fact-sensitive. There is no universal rule requiring one measure in every case. Even where diminution in value is appropriate, reinstatement cost may assist in assessing it. A declaration under CPR Part 8 will generally be inappropriate where the relevant facts are unsettled and the court cannot determine the measure of compensation in the abstract.

The claimant and defendant owned adjoining properties. The claimant’s works, authorised under the Party Wall etc. Act 1996, damaged the defendant’s property. An award made under section 10 included provision for making good structural or decorative damage and, if required, payment in lieu.

The parties disputed whether compensation should be assessed by reference to the cost of demolishing and rebuilding or by diminution in value. The claimant sought declarations concerning the effect of the award and the proper approach under section 7(2). The defendant contended that the award already required reinstatement-cost compensation, or that no useful declaration could be made in fact-sensitive Part 8 proceedings.

1. Effect of the award. Paragraph 4(D) of the award did not determine the basis of compensation. Its reference to making good contemplated repair, not complete demolition and rebuilding. Payment in lieu did not specify how the payment was to be assessed.
2. The court would, if necessary, have held paragraph 4(D) ultra vires. Section 2 expressly addressed making good damage, whereas section 6 did not. Sections 10(10) and 10(12) did not authorise an award imposing an obligation to make good damage where that obligation was not a matter in dispute or incidental to a section 6 dispute.
3. The doctrine of approbation and reprobation did not prevent the claimant from challenging the award. Its usual basis, as explained in Lissenden v C. A. V. Bosch, Limited [1940] A.C. 412, was equitable election involving intention and knowledge. That doctrine had little relevance in this statutory context. In any event, the necessary intention had not been shown, and the issue was unsuitable for determination under Part 8.
4. Section 7(2) adopts the ordinary common-law approach to damages for torts affecting land. The governing aim is to place the claimant in the position it would have occupied absent the wrong, subject to the requirement that the award be reasonable as between the parties. The principles are substantially similar to those in contract.
5. Reinstatement cost or diminution in value may be appropriate, depending on all the circumstances. Where remedial expenditure is out of all proportion to the benefit obtained, diminution in value may be the appropriate measure, consistently with Ruxley Electronics and Construction Ltd. v Forsyth [1996] A.C. 344. The court cannot identify all relevant factors in the abstract.
6. The claimant’s first declaration was refused because it sought to establish diminution in value as the appropriate measure generally. The proposed alternative declaration was also refused. The facts were incomplete, the issue was inherently fact-sensitive, and an abstract enumeration of factors would be unhelpful. Consequential matters were left for later submissions.

First-instance decision. No prior appellate decision is stated in the judgment.