England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
CHANCERY APPEALS LIST (CHANCERY DIVISION)

		Rolls Building Fetter Lane, London, EC4A 1NL
		13 November 2018

MR JUSTICE ARNOLD :

Introduction

1. This is an appeal by the Defendants ("Grosvenor") against an order of His Honour Judge Bailey sitting in the County Court at Central London dated 8 December 2017 declaring that the flank wall of 39 Headfort Place, London SW1X 7DE ("39HP") which adjoins the Halkin Street Garden ("the Garden") is a party wall within the meaning of section 38(1) of the Law of Property Act 1925 and of section 20 of the Party Wall etc Act 1996. The issue on the appeal is whether the judge was right to make those declarations on the true construction of a transfer dated 25 April 1990 whereby Grosvenor transferred 39HP to Lady Anthea Peronelle Rees ("the Transfer"), and in particular clause 3(b) of the Transfer. The Claimant ("Wellington") is Lady Rees' successor in title.

39HP

2. 39 HP is on the south-west side of Headfort Place. Its main elevation faces roughly north-east across that street. Adjoining 39HP to the north-west lies No. 1 Halkin Street. No. 1 Halkin Street is a corner property. Its main façade faces north-west onto Halkin Street. To the south-west it abuts No. 2 Halkin Street, the north-eastern wall of which also abuts 39HP.

The Garden Wall

3. The wall in question is the south-east wall of 39HP ("the Garden Wall"). The Garden Wall does not abut any building, but adjoins the Garden, a communal garden which lies at the rear of the Halkin Street properties. The Garden Wall includes a small window at ground floor level providing light to the basement, a two-storey bay window, French doors leading to the Garden and further windows at second and third floor levels.

The statutory provisions

4. Section 38(1) of the Law of Property Act 1925 provides:

"Where under a disposition or other arrangement which, if a holding in undivided shares had been permissible, would have created a tenancy in common, a wall or other structure is or is expressed to be made a party wall structure, that structure shall be and remain severed vertically as between the respective owners, and the owner of each part shall have such rights to support and user over the rest of the structure as may be requisite for conferring rights corresponding to those which would have subsisted if a valid tenancy in common had been created."

5. Section 20 of the Party Wall etc Act 1996 defines a "party wall" as:

"(a) a wall which forms part of a building and stands on lands of different owners to a greater extent than the projection of any artificially formed support on which the wall stands; and

(b) so much of a wall not being a wall referred to in paragraph (a) above as separates buildings belonging to different owners."

The background to the Transfer

6. Prior to the Transfer, Lady Rees was the tenant of 39HP under a lease dated 19 June 1979 which demised 39HP to her from 25 December 1977 until 29 September 2051 ("the Lease"). The Lease was enfranchiseable pursuant to the Leasehold Reform Act 1967.
7. The demise was of:

"… all that piece of land situate on the South West side of Headfort Place Grosvenor Place in the City of Westminster Greater London which said piece of land with the dimensions thereof (be the same little more or less) is delineated and coloured in the plan annexed hereto Together with the messuage and buildings erected thereon and now known as number 39 Headfort Place …".

8. The annexed plan shows the dimensions of 39HP in feet and inches. It also indicates in a schematic manner the locations relative to 39HP of No. 1 Halkin Street, the Halkin Street Garden and Headfort Place.
9. It is common ground that the Garden Wall was part of the property demised.
10. The Lease contained in clause 2(III) a tenant's covenant to repair the whole of the demised premises and as to the exterior to paint the whole of the outside woodwork, ironwork, metalwork, cement, stuccowork and other external parts and to repoint the external brickwork of the demised premises if called upon to do so.
11. In 1990 Lady Rees exercised her entitlement pursuant to the Leasehold Reform Act 1967 to acquire the freehold of the house demised to her.

The Transfer

12. By the Transfer Grosvenor transferred the freehold and superior leasehold interests in 39HP to Lady Rees so as to give effect (as was recited in clause 1 of the Transfer) to section 8 of the Leasehold Reform Act 1967 as amended by the Housing Act 1974.
13. Recital (1) of the Transfer recited that the freeholders were "seised of the property hereinafter described". Recital (2) referred to a superior lease of "land and premises in Belgravia (including the property hereinafter transferred)". Recital (4) referred to the Lease as being of "the land and premises known as" 39HP.
14. Clause 1 of the Transfer transferred:

"… ALL THAT the land which with the dimensions thereof (be the same little more or less) is shown edged red on the plan annexed hereto Together with the dwelling house situate thereon known as 39 Headfort Place in the City of Westminster … TO HOLD unto the Purchaser in fee simple so that the Headlease is merged with the freehold to the extent that it affects the property hereby transferred…".

15. The annexed plan was similar to the plan annexed to the Lease save that it gave the dimensions in metric measurements.
16. Unchallenged evidence was given at trial by Nigel Hughes, a chartered building surveyor who had been employed by Grosvenor since 1985, that Grosvenor has long adopted a convention when preparing plans attached to leases and transfers whereby an open arrow is used to show the outside face of a boundary and a crossed arrow to show the centre line of a party or boundary wall. If the plan annexed to the Transfer is interpreted in accordance with that convention, open arrows indicate that the Garden Wall is not a party wall, while crossed arrows show that the walls of 39HP which abut Nos. 1 and 2 Halkin Street are party walls. As counsel for Wellington pointed out, however, the judge made no finding that this convention would have been known to Lady Rees or her representatives.
17. Nevertheless, it was and remains common ground that, but for clause 3(b), the effect of the Transfer would have been that the Garden Wall was wholly within the curtilage of 39HP. Thus Wellington admitted in paragraph 3(2) of its Reply that:

" ... the [Garden] Wall is shown on the plan as entirely within the curtilage of [39HP] …".

18. Furthermore, Wellington stated in paragraph 18 of its skeleton argument at trial that (emphases in the original):

"It is admitted by Wellington in its Reply, and has never been disputed, that the Transfer prima facie conveys the entirety of 39 HP including the wall to the purchaser. This is consistent both with the purpose of the 1967 Act (to enfranchise houses) and with the measurements contained on the plan to the Transfer."

19. Clause 1 of the Transfer contained the following reservation:

"Subject (in addition to all other matters referred to in section 10 of the Leasehold Reform Act 1967 and as hereinbefore mentioned) to the right which is hereby reserved to the Freeholders and all persons claiming through or under them at any time hereafter to rebuild or alter any of the adjoining or neighbouring buildings and to build upon or otherwise use any adjoining or neighbouring land notwithstanding any interference thereby occasioned to the access of light or air to the premises hereby transferred (it being hereby agreed that the access of light and air to any buildings now standing or at any time hereafter erected on the premises hereby transferred shall until interrupted be deemed to be enjoyed by virtue of these presents which shall be deemed to constitute a consent or agreement in writing for that purpose within the meaning of Section 3 of the Prescription Act 1832)".

20. Clause 3(b) of the Transfer provided that it was agreed between the parties:

"that the walls and/or fences separating the property hereby transferred from adjoining properties are party walls and/or fences and shall be used maintained and repaired as such."

21. Mr Hughes gave evidence that that this was a standard clause which Grosvenor had included in many transfers.

The issue

22. The issue is as to the true construction of clause 3(b). Wellington contends that it means exactly what it says, and that it deems all the walls separating 39HP from adjoining properties, including the Garden Wall, to be party walls. Grosvenor contend that, interpreted in the context of the Transfer as a whole and against the relevant background, the words "adjoining properties" mean "adjoining buildings". Since the Garden is not a building, on this interpretation clause 3(b) would not deem the Garden Wall to be a party wall.

The judge's judgment

23. The judge held that Wellington's construction of clause 3(b) was the correct one. His reasoning, in very brief summary, was that the natural meaning of the words was that contended for by Wellington, that there was nothing to suggest that something had gone wrong in the drafting, that there was no want of business common sense in such an interpretation and that Grosvenor's construction would deprive the clause of any effect.

Grosvenor's submissions

24. Grosvenor contend that the judge fell into error and that the correct interpretation of clause 3(b) is that "adjoining properties" means "adjoining buildings". Counsel for Grosvenor (who did not appear below) made three main criticisms of the judge's judgment.
25. First, counsel for Grosvenor pointed out that the judge had not set out, or considered, either of the statutory provisions in question. He submitted that the Garden Wall was incapable of being a party wall within section 38(1) of the 1925 Act even if clause 3(b) was interpreted in the manner contended for by Wellington. I do not propose to consider the basis for this submission, because in my judgment it has no bearing on the issue on the appeal. It is common ground that, if clause 3(b) is interpreted in the manner contended for by Wellington, then the Garden Wall is a party wall within the meaning of section 20 of the 1996 Act. A declaration to that effect is the primary relief sought by Wellington. Whether Wellington is also entitled to the additional declaration it seeks is a separate question which depends on different considerations. I would add that this question does not appear to have been ventilated before the judge.
26. Secondly, counsel for Grosvenor pointed out that it did not appear from the judgment that the judge was aware that there was any conflict between the parcels clause of the Transfer and clause 3(b). He submitted that there was a conflict, and relied on the well-established principle of contractual construction that the court will construe a document as a whole and in such a way as to eliminate inconsistency between its provisions if possible. He argued that there was an easy way to construe clause 3(b) so as to avoid inconsistency with the parcels clause, namely by reading "adjoining properties" as meaning adjoining buildings. This would not do any violence to the wording of the Transfer. "The property hereby transferred" was a building, so "property" was not, on this interpretation, being used in two different senses in clause 3(b).
27. It was true, as the judge had pointed out, that there were references in the Transfer to "buildings", but that was in a part of the parcels clause (namely the reddendum) which drew a distinction between rebuilding or altering adjoining or neighbouring buildings and building upon adjoining or neighbouring land. The distinction there was between "buildings" and "land", but there was no apparent distinction drawn between "property" and "buildings". Indeed, in the first recital to the Transfer, the entity about to be transferred, namely the land together with the house, was referred to as "the property hereinafter described". "Property" was thus being used to refer to land with a building on it. That was the sense in which "adjoining properties" was used in clause 3(b) and that construction resolved any conflict between the parcels clause and clause 3(b).
28. It was also true, as the judge had pointed out that, "fences" could not separate adjoining buildings, but it was common ground that there were no fences between 39HP and any adjoining plots, and thus that part of clause 3(b) was inapplicable in any event.
29. Thirdly, counsel for Grosvenor submitted that the consequences of the judge's interpretation of clause 3(b) were startling. If the Garden Wall were a party wall, then:

i) Grosvenor would own half of it and would be obliged to keep that half in repair.

ii) Although Lady Rees had been entitled to acquire the freehold of the whole house under the 1967 Act, part of it, namely half of the Garden Wall, would have been excepted from the Transfer.

iii) Difficult questions would arise over the plane of the vertical division and the ownership of the windows. Assuming, however, that the windows lay in Grosvenor's half of the Garden Wall, Grosvenor would be entitled to block them up, because the Transfer conferred no right to light on Lady Rees.

iv) The front wall of 39HP facing Headfort Place would also be a party wall, half of which was owned by Grosvenor.

30. Counsel submitted that these consequences could not have been intended and that they were all avoided by interpreting clause 3(b) as applying to adjoining buildings.

Wellington's submissions

31. Counsel for Wellington submitted that the judge had reached the right conclusion. His main points were as follows.
32. First, counsel for Wellington submitted that it was ironic that Grosvenor were trying to rewrite, under the guise of interpretation, their own standard clause.
33. Secondly, counsel for Wellington disputed that there was any inconsistency between the parcels clause of the Transfer and clause 3(b), relying on the proviso "be the same little more or less". He accepted, however, that the context provided by the fact that the Transfer was for the purposes of enfranchisement created a degree of tension with Wellington's interpretation of clause 3(b).
34. Thirdly, counsel for Wellington submitted that there was a clear distinction between "building" on the one hand and "property" on the other hand. As a matter of the general law, "property" had a far wider meaning than "building". Furthermore, the Transfer used the expressions "property"/"properties", "building(s)" and "land" and there was nothing to suggest that the first two expressions were being used interchangeably. On the contrary, the first recital used the word "property" to include both "land" and "building(s)", as one would expect.
35. Fourthly, counsel for Wellington submitted that the judge had been correct to conclude that Grosvenor's interpretation deprived clause 3(b) of any effect. Given that the walls between 39HP and Nos. 1 and 2 Halkin Street were party walls anyway, and there were no fences between 39HP and the adjoining plots, if "properties" meant "buildings", the clause would have no effect (he addressed the front wall of 39HP separately, as discussed below). He nevertheless argued that the word "fences" remained relevant to the interpretation of the clause, as confirming the draftsman's understanding of "properties".
36. Fifthly, counsel for Wellington disputed that the judge's interpretation of clause 3(b) led to startling consequences:

i) The existence of a party wall carried with it rights as well as obligations.

ii) There was nothing unusual about a freehold of a house only including half of the width of walls separating the house from other properties. This was the case with every terraced house.

iii) The existence of windows in party walls was unusual, but no more than that.

iv) Headfort Place was a public highway and the presumption ad medium filum was likely to mean that the centre of the road, rather than the front wall of 39HP represented the boundary. In any event, there was no evidence or argument about the front wall at trial.

Analysis

37. In my view these arguments are quite finely balanced. I have considerable sympathy with the conclusion reached by the judge, and I agree with him that the natural meaning of the words used in clause 3(b) is that contended for Wellington. I have been swayed, however, by the second and third arguments advanced by counsel for Grosvenor, which do not appear to have been advanced before the judge.
38. The starting point, as I see it, is that it is common ground that (i) the Garden Wall as shown on the plan annexed to the Transfer is entirely within the curtilage of 39HP and (ii) that is consistent with the purpose of the Transfer, which was to enfranchise the whole house. In those circumstances I consider that there is an inconsistency between the parcels clause, and indeed the purpose of the Transfer, and clause 3(b) if it is interpreted in the manner contended for Wellington. I do not accept counsel for Wellington's ingenious attempt to avoid this inconsistency by relying upon the proviso to the parcels clause, because that is contrary to Wellington's admission that the plan shows the Garden Wall as being entirely within the curtilage of 39HP.
39. Grosvenor's interpretation of clause 3(b) avoids the inconsistency. Moreover, it does so while avoiding the word "property" being used in two different senses in the same clause. I acknowledge the force of the points made by Wellington, and relied by the judge, as to the ordinary meanings of the words "property" and "building", and that other parts of the Transfer show that the draftsman of the Transfer understood the two words to mean different things. Nevertheless, I do not agree with the judge's view that there is nothing to suggest that something has gone wrong with the drafting of clause 3(b). It is common ground that the references to "fences" in the clause are inapposite and of no effect because there were no fences. Given that part of the clause is inapposite, I consider that the court should be readier to accept that another part of the clause is poorly drafted.
40. As for the point that Grosvenor's construction of clause 3(b) deprives it of any effect, I do not think this is correct. In the first place it confirms, without the need to resort to the measurements shown on the plan or reliance upon Grosvenor's convention, that the walls between 39HP and Nos. 1 and 2 Halkin Street are party walls. Secondly, it makes it clear that the party walls must be maintained and repaired as such.
41. Furthermore, I agree with Grosvenor that Wellington's construction of clause 3(b) has surprising consequences which are unlikely to have been intended. Dealing with each the points in turn:

i) I agree that the existence of a party wall carries with it rights as well as obligations (albeit that the Transfer was executed prior to the 1996 Act). Nevertheless, it would be surprising if Grosvenor were to be obliged to maintain half of the Garden Wall given that under the Lease this was the responsibility of Lady Rees.

ii) It is, of course, correct, that, where a terraced house is enfranchised, then the freehold acquired by the enfranchisor will only include half of each party wall, But the Garden Wall is not a wall between adjacent houses in a terrace, it is a wall between a house and a garden. On Wellington's construction, Lady Rees failed to acquire all of the house which she was entitled to. That is contrary to the expressed purpose of the Transfer.

iii) The fact that a party wall can sometimes contain one or more windows provides no answer to the point that it would be very surprising if Grosvenor were to be able to block up the windows in the Garden Wall.

iv) The plan shows the boundary between 39HP and Headfort Place as being the front wall, not the middle of the road. If that is correct, it would be surprising if that wall were a party wall. (The arrows indicate that it is not.) Counsel for Grosvenor submitted that, even if the boundary of the land was in the middle of the road, the highway authority would own the surface of the road, and thus the result would be the same. There was no evidence or argument before the judge concerning either the application of the presumption ad medium filum or the ownership of the highway, however. In those circumstances I place little weight on this point.

Conclusion

42. For the reasons given above, I have come to the conclusion that Grosvenor's construction of clause 3(b) is the correct one. The appeal is therefore allowed.