Will_Holder_phOn 21 January 2016, the Supreme Court heard an appeal to determine whether claimants are entitled under the Riot Damages Act 1886 to obtain compensation for not only repairing the damage done to property during a riot but also for any loss of profit which may consequently have flowed from that damage and for other indirect adverse economic consequences of the riot.

Factual Background

During the London riots in August 2011, a gang of approximately 20 to 25 youths broke into the Sony distribution warehouse in Enfield, looted it and threw petrol bombs inside the warehouse. The incident left the warehouse and its contents completely destroyed.

The first, second and third respondents were insurers who subsequently paid out under insurance policies with Sony and the owner of the warehouse. The fourth, fifth and sixth respondents had stock in the warehouse but were not insured. The respondents claimed compensation including consequential losses from the Mayor’s Office for Policing and Crime (“MOPAC”) under the s 2(1) of the Act.

At first instance, Mr Justice Flaux decided that the MOPAC was liable, but that this liability did not extend to consequential loss. The MOPAC appealed against the finding of liability and the respondents cross-appealed against the extent of the liability.

Issues the Court of Appeal ([2014] EWCA Civ 682) considered

(1) Were the gang members “riotously and tumultuously assembled” under s 2(1) of the Act?

The MOPAC submitted that the gang had not been “riotously and tumultuously assembled” as this required the gang, amongst other things, to be behaving in such an agitated, volatile, noisy, angry and threatening manner that it should be obvious to the police that something needed to be done. The Court of Appeal rejected this submission and highlighted that liability under the Act is not based on any real or notional fault of the police. Whether persons are “riotously and tumultuously assembled” is based on a factual assessment, rather than an inquiry into what the police should have done.

The Court of Appeal also held that it is a question of degree concerning whether an assembly is riotous or tumultuous. Tumultuous assembly would be generally, although not necessarily, accompanied by noise. It is relevant to consider the effect of the noise on those who were present at the scene (or in the immediate vicinity) but it is not a prerequisite that the assembly be actually or potentially confrontational. Riotous and tumultuous assembly is possible in private places, and violence is required only in respect of property.

Mr Justice Flaux had directed himself correctly in law and the result of his evaluation was one to which he was entitled to come. The MOPAC’s appeal on the issue of liability was therefore dismissed.

(2) Does liability under the Act extend to consequential losses?

The MOPAC construed the wording of s 2(1) of the Act, which provides for compensation for “loss by such injury, stealing or destruction” could only mean compensation for damage to the building or the property inside it. The Court of Appeal dismissed this submission and held that there is nothing in the wording of s 2(1) itself which supports the proposition that the loss sustained cannot include consequential losses caused by the injury or destruction of the property. The consequences of property damage were capable of being loss by such injury or destruction.

The Court of Appeal held that neither the preamble to the Act nor s 7 thereof support an interpretation of s 2(1) as meaning that loss sustained by damage to a building may not include consequential losses suffered as a result of the damage. Whilst the Court of Appeal accepted that the preamble could be used as an aid to construction, it respectfully disagreed that its wording “compensation for such damage” meant compensation for the cost of repairing property damage or the diminution in value of the property caused by property damage. As a matter of ordinary language, this statement includes all compensation necessary to make good the loss caused by the damage to the relevant property. The Court of Appeal also did not accept that s 7 purports to prescribe what losses may be recovered; holding that the purpose of the section is to identify who may be a claimant for the purposes of the Act.

The Court of Appeal also held that the legislative history behind the Act could be used as a guide to construction provided that the relevant case-law was considered. The object of the previous legislation was to compensate victims of property damage by trespassers. The Act changes the mode of recovery to the extent that it makes express provision for the liability of the compensating authority not to be co-extensive with that of the trespassers, but does not reflect any intention of Parliament to change the law to deprive claimants of the right to compensation for consequential losses.

The Court of Appeal rejected the MOPAC’s submission that 1886 regulations, which prescribed the manner in which claims under the Act were to be presented and was not consistent with claims for consequential loss, should act as a guide to interpretation of the Act. Firstly, the meaning of s 2(1) was not ambiguous and therefore the regulations did not need to be relied on.  However, in any event, the regulations were not subject to any form of Parliamentary scrutiny and so could not give any insight into what Parliament intended.

The Court of Appeal concluded that s 2(1) of that Act provides a right to compensation for all heads of loss proximately caused by physical damage to property for which the trespasser is liable at common law, save to the extent that they are excluded or varied by statute. The respondents’ cross-appeal on the issue of damages was therefore allowed.