Case Preview: Manolete Partners plc v Hastings Borough Council
21 Tuesday Jun 2016
On 23 June 2016 the Supreme Court will hear the appeal of Manolete Partners plc v Hastings Borough Council. The case centres upon the emergency closure of the Hastings Pier in 2006 due to its poor state of repair. One tenant of the pier, Stylus Sports Ltd, did not agree with decision.
The pier was owned by Ravenclaw Investments Incorporated, a property investment company based in Panama. In 2001, Stylus took a lease of two units on the pier in order to run a bingo hall and arcade. By the time the claim reached the court of first instance in 2012, Stylus had become insolvent and the liquidators assigned Manolete Partners plc the rights to the claim.
Concerns regarding the maintenance of the pier had persisted throughout Ravenclaw’s ownership. By September 2004, the state of the pier had become bad enough that Stylus hired an independent specialist to conduct a survey of the pier’s structural integrity. The report was provided to Ravenclaw and the Council. By May of the same year, bits of metal were falling off of the underside of the pier and new piles needed to be installed. Ravenclaw was served with a notice to compel the structural repairs, yet still no remedial works were forthcoming.
The Council was aware that the nightclub on the pier was to have a party with over 500 paying guests on 17 June 2006. Consequently, on 15 June the Council asked Ravenclaw’s agent to close the pier. No action was taken, and so the following day the Council used the powers granted to it under the Building Act 1984, s 78, to enforce an emergency closure pending court review. On 12 September 2006, the court ordered that the pier be closed pending the completion of the necessary remedial works.
Separate to the Council’s action, Stylus obtained an order to compel Ravenclaw to effect the repairs. When Ravenclaw didn’t comply, Stylus carried out the works itself and sought to be indemnified by Ravenclaw. However, Ravenclaw had no assets in the jurisdiction against which Stylus could enforce the order (apart from the pier, which had a bank charge over it). Nonetheless, the works were completed and the pier reopened to the public in late September 2006.
This gave rise to Stylus’ claim against the Council for compensation, pursuant to s 106 of the 1984 Act, for the losses suffered between 16 June 2006 (the emergency closure) and 12 September 2006 (the court-ordered closure).
S 106 states, “A local authority shall make full compensation to a person who has sustained damage by reason of the exercise by the authority, in relation to a matter as to which he has not himself been in default, of any of their powers under this Act.” (emphasis added).
When the claim was lodged by Manolete in the Technology and Construction Court on 19 April 2012, the Council put forward the following defence:
- Stylus took a lease on an old pier run by an owner who did not reside in the jurisdiction;
- Stylus continued to operate its businesses on the pier despite being aware of the serious structural problems;
- Stylus did not take adequate steps to remedy the pier until 2006. Therefore, during 2004-2006, Stylus was in breach of its duties under the Occupiers Liability Act 1957 and the Health and Safety at Work Act 1974, by allowing its workers and the public to enter such a dangerous property; and
- accordingly, Stylus was “in default” as per section 106 of the 1984 Act and thus the Council was not liable to pay compensation.
Justice Ramsey ruled against the Council stating that the word “default” meant default in relation to the provisions of the 1984 Act and not the 1957 or 1974 Acts. By that rationale, Stylus was not “in default” and the Council was liable to pay full compensation.
Court of Appeal
On 1 May 2013, the Court of Appeal heard the Council’s two grounds of appeal, which were:
- Justice Ramsey had erred in deciding that the 1957 and 1974 Acts at did not apply when considering whether Stylus was “in default”. The Council sought to advance the argument that the Act should be construed purposively and, given that the dispute concerned the safety of pier users both public and private, the two acts must be read in to the legislation.
- Stylus should have been barred from bringing the claim by the rule of ex turpi causa (a claimant cannot pursue a claim if the claim arises in connection with his own illegal act). Stylus was clearly in breach of the other acts.
Justice Jackson ruled against the appellant. Agreeing with the court of first instance, Justice Jackson noted that the Act must be construed narrowly, namely as meaning a breach of an obligation under the Act. By that logic, if the claimant is not in default of the Act, then he cannot be barred by reason of ex turpi causa and the second defence also falls.
While sympathising with a Council whose only intention was to protect the public, Justice Jackson named Ravenclaw as “the true culprit” whose sheltering of assets outside of the jurisdiction and negligent behaviour left him obligated to reach this unfortunate decision.
The Supreme will be asked to reconsider the meaning of “in default” within s 106. What first appears to be a straight forward matter may well have much wider ramifications, given that the decision is one of legislative interpretation. The Court will consider whether to adopt the traditional approach of literal interpretation or the more modern, purposive approach, and in doing so will determine whether it should be minded of the effect this may have on the exercise of powers by local authorities acting in the public interest.