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Factual backgroundWill_Holder_ph

During the London riots of August 2011, a gang of youths broke into a Sony distribution warehouse in North London. The gang stole goods from the warehouse and also threw petrol bombs which caused a fire and destroyed the warehouse and the stock, plant and equipment within it.

The insurers of Sony, which were the lessees of the warehouse, the insurers of the freehold owner of the warehouse, and companies whose stock in the warehouse had been destroyed, made claims against the Mayor’s Office for Policing and Crime (MOPC). The MOPC contested those claims on both its liability to pay compensation and the quantification of the loss.

The High Court and the Court of Appeal held that the MOPC was liable and that finding was no longer in issue. The issue that the Supreme Court had to consider was the quantification of the claims. This raised a question of statutory construction: whether persons who suffer loss when rioters destroy their property can in principle obtain compensation for consequential losses, including loss of profits and loss of rent under s.2 of the Riot (Damages) Act 1886, and if so on what basis.

Decision

The Supreme Court allowed the MOPC’s appeal, finding that the MOPC was not obliged to pay compensation in respect of consequential losses. In reaching this decision, Lord Hodge held that linguistic analysis of the wording of the 1886 Act by itself does not determine the issue and therefore the prior legislative history needed consideration.

Legislative history

Section 6 of the Riot Act 1714 provided that when rioters had demolished certain buildings, the inhabitants of the hundred (the administrative division of a shire or region) should pay damages to the injured party. The 1714 Act did not specify the scope of damages that the local community should pay and so guidance was provided by the courts which extended the right to compensation for loss occasioned to furniture and household goods (Ratcliffe v Eden (1776) 2 Cowp 485 (98 ER 1200). However, Lord Hodge did not accept that the case law supported a general principle that the hundred’s members stood as sureties for the wrongdoer for three reasons:

  1. The law of hue and cry which preceded the 1714 Act did not require the hundred to compensate the injured party;
  2. The law of hue and cry allowed the hundred to escape liability if hue and cry were raised and the offenders caught; and
  3. The legislative history after the 1714 Act shows that there was no broad principle of compensation. In particular, the wording of the Malicious Damage Acts 1812 and 1816 and the Remedies against the Hundred (England) Act 1827 makes it clear that the statutory compensation was confined to physical damage to property. Further, whilst the 1886 Act introduced changes such as making the local police force rather than the hundred liable to pay compensation, none of the provisions suggested any intention to extend compensation beyond physical damage to the property.

Conclusion

Having regard to the 1886 Act and its prior legislative history, Lord Hodge held that there is no reason to think that Parliament ever intended that the compensation scheme should mirror the offenders’ liability in tort or that its scope should develop as the law of damages for tort developed. Further, there is nothing in the wording of the 1886 Act that supports an intention to extend the scope of the compensation to cover consequential loss. All of the other Justices agreed with Lord Hodge’s decision.

A large number of other compensation claims arising out of the London riots hinge on this issue. The Supreme Court’s decision will mean that those claims will now be limited to the costs of repairing any property damage and that any consequential losses (such as loss of profits and loss of rent) will not be recoverable from the MOPC.