Aidan Cosgrave, Partner, Delva Patman Redler
Last week, in the case of Wellington Properties Ltd v Second Duke of Westminster, Trustees of the Will of & Anor  EWHC 3048 (Ch) (13 November 2018), the High Court upheld Grosvenor Estate's appeal and held that the flank wall of a house at 39 Headfort Place, London SW1 was not a wall separating the property from adjoining properties and was therefore not a party wall within the meaning of the transfer by which the freehold and superior leasehold interests had been enfranchised. The case highlights the importance of reading a clause in a transfer in the context of the transfer as a whole and against the relevant background.
The case involved an appeal by the Trustees of the Will of the Second Duke of Westminster and Grosvenor Estate Belgravia against the decision by HH Judge Bailey in the Central London County Court in which he had held the flank wall to be a party wall. His reasoning was that the natural meaning of the words in the transfer was that it was a party wall, 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 relevant transfer clause of any effect.
Prior to the transfer, Wellington’s predecessor was the tenant of 39 Headfort Place under a lease. The lease contained a tenant's covenant to repair the whole of the demised premises. The demise was of:
"… all that piece of land situate on the South West side of Headfort Place … 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 …".
The flank wall adjoins a communal garden and contains a number of windows, including a two-storey bay window and French doors, providing light to the house. The French doors also provide access to the communal garden.
In 1990, Wellington’s predecessor exercised her entitlement pursuant to the Leasehold Reform Act 1967 and Grosvenor transferred to her the freehold and superior leasehold interests in the following:
"… 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 … 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…".
It was common ground between the parties that, but for clause 3(b), the effect of the transfer would have been that the flank wall was wholly within the curtilage of 39 Headfort Place.
Clause 3(b) of the transfer provided 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."
The issue between the parties was the true construction of clause 3(b). Wellington contended that it meant the flank wall was a party wall. Grosvenor contended that (i) interpreted in the context of the transfer as a whole and against the relevant background, the words "adjoining properties" meant "adjoining buildings" and (ii) since the communal garden was not a building, on this interpretation clause 3(b) would not deem the flank wall to be a party wall.
Mr Justice Arnold was swayed by two particular arguments put forward on behalf of Grosvenor, which do not appear to have been put before the judge in the County Court. He held that:
The starting point was that it was common ground that (i) the flank wall was entirely within the curtilage of 39 Headfort Place and (ii) that was consistent with the purpose of the Transfer, which was to enfranchise the whole house. In those circumstances he considered that there was an inconsistency between the parcels clause (and indeed the purpose of the transfer) and clause 3(b) if it was interpreted in the manner contended for Wellington.
Grosvenor's interpretation of clause 3(b) avoided the inconsistency. He did not agree with the judge's view that there was nothing to suggest that something had gone wrong with the drafting of clause 3(b). It was common ground that the references to "fences" in the clause were out of place and of no effect because there were no fences and he considered that the court should be readier to accept that another part of the clause was poorly drafted.
Grosvenor's construction of clause 3(b) did not deprive it of any effect as it confirmed that the walls between 39 Headfort Place and the adjoining properties at Nos. 1 and 2 Halkin Street were party walls and had to be maintained and repaired as such.
Wellington’s construction of clause 3(b) would have surprising consequences which are unlikely to have been intended:
it would be surprising if Grosvenor were to be obliged to maintain half of the wall, given that under the lease this was the responsibility of the lessee;
on Wellington's construction, the lessee failed to acquire all of the house which she was entitled to, which was contrary to the expressed purpose of the transfer;
it would be very surprising if Grosvenor were to be able to block up the windows in the flank wall (which did not enjoy rights of light by virtue of a reservation in the transfer); and
it would be surprising if the front wall facing onto Headfort Place, which was shown on the transfer plan as the boundary between Headfort Place and Headfort Place, was a party wall.
The judge therefore concluded that Grosvenor’s construction of clause 3(b) was the correct one and that the flank wall was not a party wall within the meaning of section 38(1) of the Law of Property Act 1925 or section 20 of the Party Wall etc Act 1996.
The judgment is a reminder that where there is a conflict between provisions in a contract, the court will construe a document as a whole and against the relevant background in such a way as to eliminate inconsistency between its provisions if possible. When encountering clauses in transfers that purportedly deem certain walls to be party walls, it is important to interpret such clauses in the context of the whole document.
Read the full judgment at https://www.bailii.org/ew/cases/EWHC/Ch/2018/3048.html