David Bowden & Associates

DAVID BOWDEN & ASSOCIATES

CHARTERED BUILDING SURVEYORS

partywalls@davidbowden.co.uk

Specialising in boundaries in England and Wales- where they are and what rights exist across them. Working on the edge - facilitating construction in the urban environment, helping to maximise site use, minimise cost and delay caused by neighbours, and protecting the rights of owners of land and buildings from building works and associated activities nearby.

Does the Party Wall etc Act 1996 set up a statutory arbitration under the Arbitration Act 1996?

A discussion paper based on a talk given to the Surrey Branch of the Pyramus & Thisbe Club by David Bowden on May 7, 1999, under the title "The Relationship between the Arbitration Act 1996 and the Party Wall etc Act 1996".

Introduction

There will be one of two relationships dependent on whether the procedure laid down in the Party Wall etc Act is arbitration.

If it is arbitration, then the Party Wall etc Act will be an arbitration agreement for the purposes of the Arbitration Act, and the procedure will be a statutory arbitration subject to the Arbitration Act except where there is any contradiction, in which case the Party Wall etc Act procedure will prevail.

If it is not arbitration, then the rules and procedures laid down in the Arbitration Act will only be persuasive at best in attempting to understand the Party Wall etc Act procedure.

Whether it is arbitration or not is not at all clear. The Arbitration Act in section 94(1) states “The provisions of Part I apply to every arbitration under an enactment (a "statutory arbitration"), whether the enactment was passed or made before or after the commencement of this Act, subject to the adaptations and exclusions specified in sections 95 to 98” but there is no statutory definition of arbitration.

The Party Wall etc Act procedure is certainly similar to arbitration. A dispute arises and is determined by a tribunal appointed by the parties and that tribunal makes an award which is enforceable in Court with a limited right of appeal.

We therefore need to consider what arbitration is, and whether the Party Wall etc Act process fits the definition. I shall start by considering the Party Wall etc Act process.

What is the Party Wall etc Act Procedure?

Under the Party Wall etc Act, owners of adjacent land are given certain rights over each other’s land. The exercise of these rights is subject to prior service of notice and generally, either receipt of written assent or an award made by surveyors appointed by each party, with various provisions for proceeding where a party refuses or declines.

In the case of Woodhouse v Consolidated Property Corporation Ltd [1993] 1 EGLR 174 it was held that surveyors only had the right to determine the right of the building owner to do works. Their jurisdiction did not extend to any other matter such as damage, an apparently nonsensical conclusion which due to the changed wording in the 1996 act should now be easily distinguished. Although here, it should be noted that it was not the award that was being appealed against. The question was whether in the plaintiff’s amended pleadings he could admit an award as evidence, with the determination in the award as to damage thereby being held as fact. So it is perhaps not surprising that the Court found the way it did.

The Party Wall etc Act came into force on July 1, 1997 and Part VI of the London Building Acts (Amendment) Act, 1939 and Sections xxvii to xxxii of the Bristol Improvement Act 1847 were repealed on the same date, although they continue to apply where any work has been started, notice given or other action taken under them.

Outside Inner London the effective date of commencement was September 1 except for any work carried out under or by virtue of any right granted by the Act.

The Act applies to England and Wales except to land in Inner London in which there is an interest belonging to the Honourable Societies of the Inner Temple, the Middle Temple, Lincoln’s Inn, or of Gray’s Inn. It also applies to Crown land except that vested in and occupied by Her Majesty in right of the Duchy of Lancaster or vested in and occupied by the possessor for the time being of the Duchy of Cornwall.

Essentially, with respect to the London Building Acts (Amendment) Act 1939 and preceding legislation, the ethos of party wall legislation has changed in that more matters lead automatically to a dispute, foundation notices not responded to, security and costs of works, for example. The effect of this is that more matters now fall within the jurisdiction of the appointed surveyors instead of the courts. The slant of this is similar to the Arbitration Act where the position of the courts has been changed to one of a supporting rather than intervening role.

The terminology has also changed. Differences used to be presumed to arise, not disputes. These are both terms used in arbitration, although the difference between them is either slight or non-existent.

The procedure for dispute determination set down in the 1996 Act is found in Section 10:

S10 (10) The agreed surveyor or as the case may be the three surveyors or any two of them shall settle by award any matter-

(a) which is connected with any work to which this Act relates, and

(b) which is in dispute between the building owner and the adjoining owner.

(11) Either of the parties or either of the surveyors appointed by the parties may call upon the third surveyor selected in pursuance of this section to determine the disputed matters and he shall make the necessary award.

(12) An award may determine-

(a) the right to execute any work;

(b) the time and manner of executing any work; and

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

(17) Either of the parties to the dispute may, within the period of fourteen days beginning with the day on which an award made under this section is served on him, appeal to the county court against the award and the county court may-

(a) rescind the award or modify it in such manner as the court thinks fit; and

(b) make such order as to costs as the court thinks fit.

Essentially, therefore, we have a defined dispute over property rights which is to be settled by a tribunal chosen by the parties. The determination is called an award, and there are only limited rights of appeal.

What is arbitration?

Arbitration is a very old concept, predating our legal system as we now know it. There is no legal definition so we have to approach the concept by considering what others have written, what characteristics it is generally agreed to have, and what it does not.

John Parris in his book, The Law and Practice of Arbitrations, starts by quoting Angliæ Notitia by Edward Chamberlayne, 12th ed, 1684

“The English have always been more given to peacableness and industry than other people and rather than go so far as London and be at so great charges with Arrorneys and Lawyers, they will refer their differences to the Arbitration of their Parish Priests … or to the Arbitration of honest neighbours.”

He then continues in the first chapter of his book to explain:

Conflict is inevitable, and probably necessary, in every human society. How conflicts are resolved is a criterion of civilisation, and there are basically three ways in which men who differ can settle their disputes. The earliest method, dignified by legal philosophers under the title ‘self help’, consists of beating an opponent over the head with a club. It tends to be counter-productive and lacking in finality ? especially if the opponent has relatives and friends. It is still highly popular, however, in international affairs.

The second method is not greatly superior to the first. It consists of submitting the argument to be settled by somebody who has a bigger club than either of the disputants and who is powerful enough to belt both over the head. That is the principle of the English legal system which owes its origins, and many of its characteristics today, to the sale of a small portion of the absolute power of an absolute monarch by his servants for their personal profit. It may be effective, but all too often the disputants end up feeling that both have in fact been belted over the head. As Richard Burton put it, two hundred years ago: ‘He who goes to law takes a wolf by the ears.’

The third, and most civilised method of settling a dispute is for those concerned to agree to submit it to a third person in whom both have confidence, and to undertake to abide by his decision. That, in essence, is arbitration. In more formal language, an arbitration is the submission of a dispute between two parties for decision to a third party of their own choice.

Not only is arbitration more ethical than any other method ? involving as it does consent rather than coercion ? it is historically older, ante-dating both legal systems and courts. In fact, in classical Roman times all litigation was no more than private arbitration with the approval and assistance of a magistrate, the Prætor, elected annually for that purpose. ‘None would our ancestors permit to be a judex’, wrote Cicero, ‘even in the most trifling money matter, not to speak of affairs concerning the dignity of a man, unless the opposing parties were agreed upon him.’ In England, merchants resorted to arbitration to settle trading disputes in the early middle ages, long before the King’s Courts had found any way to enforce contractual obligations. Shakespeare was familiar with it, for he wrote:

The end crowns all,
And that old common arbitrator, Time,
Will one day end it.
Troilus and Cressida

But it was not until a century later that the first legislation was passed about arbitration. Then the intention was to limit and discourage it, for it has never been popular with those who make their fortunes out of the misfortunes of others.

In modern times, arbitration was regulated by an Act of 1889 and by an Act of 1934. These, with other statutes, were consolidated into the Arbitration Act 1950.

He wrote that in 1974 and since then we have had three further Arbitration Acts, of which the only one of any relevance is the Act of 1996.

Mustill and Boyd in The Law and Practice of Commercial Arbitration, Second edn, 1989, do not attempt to define arbitration but after pointing out that there is no statutory definition nor any cases in which the matter has been tried as a primary issue, say that there are many concepts which can be recognised as arbitration in the light of experience or intuition but that there is no complete list of the necessary characteristics. After saying that a procedure may be arbitration even if it lacks some of the features consistent with arbitration, they go on to give a suggested list of attributes which must, although not all, be present, and I paraphrase:

the tribunal’s decision must be expected to be binding on the parties
the process will be carried on between those persons whose substantive rights are determined by the tribunal
the jurisdiction of the tribunal must stem from agreement of the parties or a statute which makes it clear that the process is to be an arbitration
the tribunal must be chosen by the parties or by a method to which they have consented
the tribunal should be impartial owing an equal duty of fairness to both parties
the agreement must be enforceable at law
the tribunal should determine a dispute already in existence at the time of its appointment

and factors which are relevant:

whether the tribunal will receive evidence from the parties or at least give them the opportunity of putting it forward
whether the wording of the agreement is consistent with the view that the process was intended to be arbitration
whether the identity (or the method by which it is chosen) of the tribunal shows that the process was intended to be arbitration
whether the agreement requires the tribunal to determine the dispute according to law

Of these, there are only two questionable points

the jurisdiction of the tribunal must stem from agreement of the parties or a statute which makes it clear that the process is to be an arbitration, and
whether the wording of the agreement is consistent with the view that the process was intended to be arbitration

The Party Wall etc Act does not make it clear in as many words that the process is to be an arbitration but its wording is certainly consistent with the view that it was intended to be arbitration.

The Chartered Institute of Arbitrators describes arbitration as:

… a procedure for the settlement of disputes, under which the parties agree to be bound by the decision of an arbitrator whose decision is, in general, final and legally binding on both parties. It is governed by both statute law and the common law. The principal legislation in England and Wales are the Arbitration Acts 1950 - 1996 as amended. Different provisions apply in Scotland and Northern Ireland, but see the Arbitration Act 1996 for further details.

adding that:

As a dispute resolution procedure arbitration is the only means of dispute resolution which is an alternative to litigation because an arbitrator's award is final, binding and enforceable summarily in the courts

The Party Wall etc Act process certainly fits in with that.

The RICS in its advice on boundary dispute resolution gives the following explanations

There are various types of dispute resolution:
Arbitration
A procedure whereby two parties in a dispute agree to be bound by the decision of a third party acting as Arbitrator.

Mediation
A confidential process whereby parties to a dispute invite a neutral individual to facilitate negotiations between them with a view to achieving a resolution of their dispute.

Independent expert determinations
A process whereby the parties to a dispute agree to be bound by the decision of a third party who has expert knowledge of the subject matter in dispute.

Adjudication
A process whereby an adjudicator uses his or her own knowledge and investigations, whilst also weighing the evidence presented by the parties, in order to reach an enforceable decision. This method of dispute resolution is most commonly used in connection with construction related disputes.

If one allows for the degrees of oversimplification in the RICS description, and proselytising in the CIArb definition, it remains clear that the procedure may well be arbitration.

Arbitration Law

The Arbitration Act 1996 came into force on January 31, 1997, and as with previous arbitration legislation, has retrospective effect. It was designed to consolidate and restate the existing law, whilst reducing the power of the Court to intervene. It was thus hoped that London would regain its status as an arbitration centre, which had begun to become lost as parties fought shy of the lack of finality, essential to arbitration, that the rights of appeal etc allowed in this country and not others.

It is the first piece of legislation to set out its founding principles as a section of the statute. In section 1 under the note ‘General principles’ it states:

The provisions of this Part are founded on the following principles, and shall be construed accordingly-

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;

(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;

Section 94(1) of the Arbitration Act 1996 states that “The provisions of Part I apply to every arbitration under an enactment (a "statutory arbitration"), whether the enactment was passed or made before or after the commencement of this Act, subject to the adaptations and exclusions specified in sections 95 to 98.

The provisions of the Arbitration Act 1996 which would apply to the Party Wall etc Act 1996 if it were to be a statutory arbitration are discussed elsewhere.

The European Convention

It is important to note that the Party Wall etc Act only gives rights over other people's land. The restrictions it imposes on work on one's own land are effectively rights granted to other people to limit the potential effect on them of a building owner carrying out certain work on his own land or exercising rights given by the Act. As such, we are here dealing with civil rights, and hence the European Convention is involved.Article 6 of the.1950 European Convention for Protection of Human Rights and Fundamental Freedoms states that:

In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.

Whether the Party Wall etc Act is a statutory arbitration with its procedure governed by that legislation or not, the convention will still apply, meaning that at least the surveyors should be independent and impartial.

Natural Justice

There are two rules of natural justice: (i) audi alteram partem meaning every person has a right to a hearing and (ii) nemo debet esse index in propria causa meaning no man shall be a judge in his own cause.

Natural justice was originally a concept applied to justice meted out by bodies other than the Courts. As such, it must apply to arbitration and any procedure such as that under the Act even if it is not arbitration, simply because it is not a state administered court.

The rules of natural justice, together with the European Convention and whether section 24 of the Arbitration Act 1996 applies or not (it gives as a ground for removal of an arbitrator “that circumstances exist that give rise to justifiable doubts as to his impartiality”) must mean in my view that loss adjusters acting for the insurers of one of the parties, as well as employees, cannot be appointed as surveyors.

There is also the difficulty that the Party Wall etc Act procedure may be arbitration, but not a statutory arbitration within the meaning of the Arbitration Act. As such, it would be covered by common law and some case law but not by statute. Isn’t law just wonderful?

Case Law

Then we have case law. There are two cases which are particularly relevant, one from the turn of the century when most cases seem to have been made, presumably following the 1894 Act. At that time there seemed to be little dispute as to whether appointed surveyors were arbitrators.

Selby v Whitbread & Co, [1917], 1 KB 736 was one of the more important in which it was held that appointed surveyors were arbitrators. Following from that Leach in Party Structure Rights in London concluded that their appointment could only be rescinded with the leave of the Court under the Arbitration Act.

However, Humphrey Lloyd J in his judgment in the more recent case of The Chartered Society of Physiotherapy v Simmonds Church Smiles [1995] 1 EGLR 155 said that, again when the main question was a different one, if asked, he would say they were not.

".....the Act envisages that if three surveyors are to be appointed, a party-appointed surveyor while no doubt retaining his professional independence is not obliged to act without regard to the interests of the party who appointed him."

and also:

"In the absence of authority I would not conclude from section 55(a) to (l).....that an award under the Act was an arbitration award.......The Act does not require the award to be a 'speaking' award and there is no apparent obligation for the award to contain findings of fact or conclusions of law and, of course, awards are customarily and commendably direct and to the point. Furthermore section 55(m) plainly excludes the Arbitration Acts."

I see no difficulty with the first point in that a surveyor could act as an arbitrator-advocate. This is particularly common in shipping arbitrations where each party to the dispute appoints an assessor to act for him and put his case but with the final determination being an award. Thus, we have perhaps the best of both types of procedure. Adversarial, but only to an extent, leading through inquisitorial, to a determination by arbitration.

This is remarkably similar to the procedure generally adopted by appointed surveyors. In the initial stages each surveyor puts to the tribunal his party's point of view and effectively represents his interests much as a barrister would at court, except here the surveyors constitute the tribunal. s55(m). It states “The award shall be conclusive and shall not except as provided by this section be questioned in any court.” It seems to me that if that excludes anything it is the jurisdiction of the Court, not the Arbitration Act.

If one accepts Humphrey Lloyd's view, then on what basis are appointed surveyors to make their determinations? Do they simply negotiate with each other until the building owner gives in because his money is at risk, both so far as fees are concerned and also so far as the viability of his project is concerned? Or are they effectively determining the civil rights of the parties as granted or modified by the Party Wall etc Act?

Conclusion

If the appointed surveyors, the two or three, or sometimes just one, of them, do not constitute such a tribunal, then the Party Wall etc Act, and its preceding legislation, must be bad. If they do constitute such a tribunal, then what governs it? It must, in my opinion, be arbitration law. If the Party Wall etc Act is to be regarded as standing on its own and having some form of unique procedure for determination of disputes, how can the requirements of the Act be enforced without resorting to civil proceedings for injunctive relief or whatever at proportionately high cost. There is no longer any offence for failure to comply with the Act or an award made under it, there are only offences for hindering a building owner in exercising his rights against another, which would not on its own be fair.

I have had awards enforced as if they were County Court judgments under the 1950 Arbitration Act simply by sending them to the local County Court under the Arbitration Act and on an ex parte application asking that they be adopted as judgments of that court. There has never been any question raised against this. I have also had the Land Registry postpone the registration of a charge against a property on the basis that it had no power to do so until the award had been concluded under the 1939 Act.

Legal Reform

It is also clear that legal reform is moving in favour of any dispute resolution procedure that takes some of the pressure off the Courts. Having spent the last few centuries trying to gain control of everything, they now find themselves overwhelmed and unable to dispense justice through the inevitable delays and costs.

In June 1995 Lord Justice Woolf presented his interim report on Access to Justice. He had been appointed by the Lord Chancellor on 28 March 1994 to review the current rules and procedures of the civil courts in England and Wales.

The aims of the review were:

to improve access to justice and reduce the cost of litigation;
to reduce the complexity of the rules and modernise terminology;
to remove unnecessary distinctions of practice and procedure.

In his interim report he stressed the need to reduce cost, delay (note the similarity with section 1 of the Arbitration Act) and also suggested that greater use be made of systems of Alternative Dispute Resolution, with the Courts taking into account the behaviour of the parties in any subsequent litigation.

He suggested extending the Small Claims procedure, itself a form of arbitration.

It is of course after this that both the Arbitration Act 1996 and the Party Wall etc Act 1996, came into force.

In a press release welcoming the Woolf report, Access to Justice, the Royal Institution of Chartered Surveyors (RICS). RICS spokesman, Anthony Salata said:

"Disputes between landlords and tenants, contractors and clients, and others in the property industry, can be incredibly expensive and time-consuming to settle in the courts."
"Alternative dispute resolution has had a long adolescence in the UK; now it is coming of age. Mediation - the least formal and potentially quickest and cheapest method - has an impressive track record in the USA. It has massive potential here, especially in commercial landlord and tenant disputes, boundary disputes and joint venture development schemes. But ADR can be applied generally to an infinitely wider range of disputes."

The RICS has a panel of trained mediators and adjudicators who can be appointed at short notice at the request of the disputing parties. Where there is a prior agreement to use ADR, either one of the parties can call for its introduction.

The Woolf report comes hard on the heels of several pieces of legislation promoting alternatives to expensive court action. The Party Wall Act enables neighbours throughout England and Wales to settle disputes over work on shared walls by a procedure which by-passes the court. The Housing Grants, Construction and Regeneration Act, which received Royal Assent yesterday, provides for construction industry disputes to be settled by expert adjudication so that building work is not held up for long periods while the parties battle it out in court or at formal arbitration.

Again, perhaps fighting its own corner,and apparently not having read the Woolf report, or at least not the parts disparaging about the type of mediation employed in the USA, the RICS seems to put arbitration in the same box as expensive court action. In its press release welcoming the introduction of the Party Wall etc Act, it said

Good news for homeowners: Party wall bill to become law
The Royal Institution of Chartered Surveyors (RICS) welcomes the news that the Party Wall Bill has been approved by Parliament today (12 July). John Anstey, RICS spokesman and treasurer of the Pyramus and Thisbe Club, said:

"This is great news for homeowners throughout the country. Millions of property owners, both residential and commercial, share a common or "party" wall with a neighbouring owner. Problems arise when neighbours cannot agree on building work involving party walls. "Until now the only redress outside London has been to take the matter to court with all the expense, delay and stress of litigation. Thanks to this Bill the rest of England and Wales can enjoy the benefits afforded by the London Building Act, a straightforward procedure which avoids the need for court action."

The Bill sets out a simple procedure:

- Where a person wants to carry out work on a party wall he must inform his neighbour. - After 14 days if there is no reply the neighbour is deemed to dissent and must appoint a "surveyor", who could be a chartered surveyor, architect, engineer or solicitor. - Two surveyors, one representing each party, then draw up an "award" - an agreement which describes the work and specifies that any damage caused will be rectified and the neighbour's costs paid. - A "third surveyor" is named in the award and will intervene if the two original surveyors disagree.

Again a simplistic approach, and not entirely relevant to this question. Aside from the fact that millions of homeowners were to wake up one day and find that for the vast majority of small building works that would have been carried out without any difficulty before the Act, they now would be led towards paying for two surveyors to decide when and how they could carry out works, which at perhaps £1000 would not really justify the benefits of avoiding expensive court action in the largely preventable event of things going wrong, there is again no indication as to whether the Party Wall etc Act procedure is arbitration or not. Possibly this is because John at about that time had failed to convince a judge that it was and lost the case as he had always used to in earlier years.

In conclusion, I consider that the dispute resolution procedure laid down in the Party Wall etc Act is arbitration and that the Act is a statutory arbitration within the meaning of the Arbitration Act 1996. It is not clear that this would be accepted by the Courts, which is perhaps more important when advising clients. However, whether the Party Wall etc Act procedure is a statutory arbitration or not, there are so many similarities that surveyors should take appointments and make determinations within the rules set down in the Arbitration Act, and could be held to be at fault if they failed to do so.

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DAVID BOWDEN & ASSOCIATES CHARTERED BUILDING SURVEYORS

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Last updated June 1999