Mitsui Sumitomo Insurance Company (Europe) Ltd and another v Mayor's Office for Policing and Crime Royal & Sun Alliance Insurance Plc v Same; Lace International Ltd and Others v Same

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Hodge,Lord Clarke,Lord Neuberger,Lord Toulson,Lord Hughes
Judgment Date20 April 2016
Neutral Citation[2016] UKSC 18

[2016] UKSC 18

THE SUPREME COURT

Easter Term

On appeal from: [2014] EWCA Civ 682

before

Lord Neuberger, President

Lord Clarke

Lord Hughes

Lord Toulson

Lord Hodge

The Mayor's Office for Policing and Crime
(Appellant)
and
Mitsui Sumitomo Insurance Co (Europe) Ltd and others
(Respondents)

Appellant

(The Mayor's Office for Policing and Crime)

Lord Pannick QC

Sam Grodzinski QC

David Pievsky

(Instructed by TLT LLP)

Respondents (1st and 2nd)

(Mitsui Sumitomo Insurance Co (Europe) Ltd and Tokio Marine Europe Insurance Ltd)

Michael Crane QC

Tamara Oppenheimer

Marianne Butler

(Instructed by DAC Beachcroft LLP)

Respondent (3rd)

(Royal & Sun Alliance Insurance plc)

Michael Crane QC

Charles Dougherty QC

(Instructed by Kennedys Law LLP)

Respondents (4th and 5th)

(Lace Intern'l Ltd and Clear Vision Ltd)

Simon Pritchard

(Instructed by Keystone Law)

Lord Hodge

(with whom Lord Neuberger, Lord Clarke, Lord Hughes and Lord Toulson agree)

1

London suffered from serious rioting for four days from 6 to 9 August 2011. The rioters caused extensive damage to property. Property owners and insurers suffered significant losses. Several owners of uninsured property, including two of the respondents in this appeal, lost their businesses when they became insolvent as a result of those losses. Property owners and insurers, which had compensated their assureds, submitted claims for compensation from the appellant police authority ("MOPC") under section 2 of the Riot (Damages) Act 1886 ("the 1886 Act"). The MOPC contested those claims initially on both liability to compensate and the quantification of loss. The liability of the MOPC to pay compensation is no longer in issue. The question is the quantification of the claims.

2

This appeal raises a question of statutory construction. It is 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 section 2 of the 1886 Act, and if so on what basis.

Factual background
3

This appeal is concerned with one riotous incident which occurred on the third night of the London riots. At about 11.40 pm on 8 August 2011 a gang of youths broke into the Sony DADC distribution warehouse, which is situated in a business park on Solar Way in Enfield. The youths stole goods from the warehouse and also threw petrol bombs which caused a fire. The fire destroyed the warehouse and the stock, plant and equipment within it.

4

The insurers of Sony DADC, which were the lessees of the warehouse, the insurers of the freehold owner of the warehouse, and companies which were customers of Sony DADC and whose stock in the warehouse had been destroyed, made claims against the MOPC.

The legal proceedings
5

In the Commercial Court of the High Court, Flaux J had to decide two preliminary issues. The first issue concerned liability and was whether the warehouse had been destroyed by persons assembled together "riotously and tumultuously" within the meaning of section 2(1) of the 1886 Act. In his judgment dated 12 September 2013 Flaux J held that it had been. The Court of Appeal (Lord Dyson MR, Moore-Bick and Lewison LJJ) in a judgment dated 20 May 2014 upheld that finding.

6

The second preliminary issue is the subject matter of this appeal. Flaux J held that section 2 of the 1886 Act provided compensation only for physical damage and not for consequential losses. The Court of Appeal reversed that finding. It held that section 2(1) of the 1886 Act provided a right to compensation for all heads of loss, including consequential loss, proximately caused by physical damage to property for which the trespassing rioter is liable at common law, save to the extent that they are excluded by the statute. The MOPC appeals to this court against that finding.

7

Section 2(1) of the 1886 Act as amended provides:

"Where a house, shop, or building in a police area has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as hereinafter mentioned shall be paid out of the police fund of the area to any person who has sustained loss by such injury, stealing, or destruction; but in fixing the amount of such compensation regard shall be had to the conduct of the said person, whether as respects the precautions taken by him or as respects his being a party or accessory to such riotous or tumultuous assembly, or as regards any provocation offered to the persons assembled or otherwise." (emphasis added)

8

I can cover the other relevant provisions of the 1886 Act briefly. Section 2(2) allows the insurer which has indemnified its assured in whole or in part to claim compensation. Section 3(1) provides:

"Claims for compensation under this Act shall be made to the compensation authority of the police area in which the injury, stealing, or destruction took place, and such compensation authority shall inquire into the truth thereof, and shall, if satisfied, fix such compensation as appears to them just."

Section 3(2) empowers the Secretary of State to make regulations governing when, how and under what conditions claims for compensation are to be made under the Act and subsection (3) provides that the regulations are to be published in the London Gazette. The compensation authority does not have the final say on the fixing of compensation, as section 4 provides that an aggrieved claimant may bring an action against the authority to recover compensation. Section 6 provides that the Act applies to damage to or the destruction of machinery, plant and equipment used in manufacturing, agriculture and mining. Finally, section 7 identifies the appropriate claimants if a church or chapel, or school, hospital, public institution or public building is damaged or destroyed.

The Court of Appeal's judgment
9

In support of its view that the 1886 Act provides for the recovery of consequential losses, the Court of Appeal began with a linguistic analysis of section 2(1). It pointed out that the words, which I have emphasised in para 7 above, compensated for loss "sustained … by such injury, stealing, or destruction". This was loss that was caused by (i) damage to or destruction of a building, or (ii) damage, destruction or stealing of property in the building. Such loss could as a matter of linguistic analysis include consequential losses, such as the loss of rent while an owner repaired his building. Secondly, the other provisions in the 1886 Act, including the now-repealed preamble (which I discuss in para 31 below), did not militate against this view. Case law on predecessor legislation suggested that remedial statutes should be given a liberal interpretation. Thirdly, that case law, which I discuss in paras 20 to 23 below, also suggested a principle that the relevant community, which was then the hundred, stood as sureties for the trespassers. There was no reason to think that a rioter would not have been liable in tort for consequential losses before Parliament legislated in 1714. Thus the local authority incurred such liability under statute. The 1886 Act did not depart from what the Court of Appeal described as "the fundamental 'standing as sureties' principle".

10

Fourthly, the court rejected any reliance on the regulations which the Secretary of State promulgated in the London Gazette in 1886 as an aid to the interpretation of the 1886 Act. Fifthly, the court rejected for lack of evidence a submission on behalf of the MOPC that there was a settled practice of interpreting the 1886 Act as excluding compensation for consequential losses. Sixthly, the court considered that there was an anomaly if the 1886 Act did not cover consequential loss. An owner of a commercial building which was damaged in a riot might choose to sell it in a damaged state and claim as his compensation the diminution in value caused by the physical damage. Where a building was valued by reference to its capacity to generate income, part of that diminution in value could be attributable to loss of rent or loss of profits that the purchaser would suffer pending the completion of remedial works. By contrast, if an owner decided to repair the building and suffered a loss of rent or a loss of profits while the remedial works were carried out, he could not recover such losses if the 1886 Act did not extend to consequential losses. The court said that there was no rational basis for imputing to Parliament an intention to allow recovery for such losses as part of a claim for diminution of value but to exclude a free-standing claim for losses of the same character. Seventhly and finally, the court derived no assistance from parallel Scottish legislation, namely section 10 of the Riotous Assemblies (Scotland) Act 1822 (3 Geo IV, c 33) because of its use of different language.

The MOPC's challenge and the respondents' answer
11

Lord Pannick QC for the MOPC submitted that Flaux J had reached the correct conclusion on the interpretation of section 2 of the 1886 Act and that his order on this point should be restored. In support of his contention he relied on what he called the purpose and the plain meaning of the words in section 2(1) and also on sections 3 and 7 and the repealed preamble of the 1886 Act. He also relied as a contemporaneous exposition of meaning on the first regulations under the 1886 Act which the Home Secretary promulgated on 28 July 1886. He departed from the argument of settled practice which had been included in his written case, accepting that evidence of such practice had not been adduced. But he submitted that the historical background to the 1886 Act and in particular the history of prior legislation and judicial pronouncements on that legislation supported the view that the legislation from the...

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