The Mayor’s Office for Policing and Crime v Mitsui Sumitomo Insurance Co (Europe) Ltd & ors
20.4.16
UK Supreme Court

The Supreme Court has allowed the MOPC’s appeal and confirmed that the Riot (Damages) Act 1886 created a self-contained statutory riot compensation scheme which did not extend to cover consequential losses. Neil Irving and Kieran Walshe review the outcome and look ahead to the Riot Compensation Act 2016 which has recently received Royal Assent.

Background

During the August 2011 riots, a gang of youths looted and set fire to a distribution warehouse leased by Sony DADC in Enfield. Goods were stolen from the warehouse and the fire destroyed the warehouse and the stock, plant and equipment inside.

Sony DADC’s insurers, the insurers of the freehold owner of the warehouse, and various companies whose uninsured stock had been destroyed, made claims for compensation from the Mayor’s Office for Policing and Crime (the MOPC) under s.2 Riot (Damages) Act 1886 (the 1886 Act). The MOPC contested those claims on both its liability to pay compensation and quantification of loss. The High Court and the Court of Appeal decided that the MOPC was liable but the issue remaining before the Supreme Court was whether anyone who suffers loss when rioters destroy their property can obtain compensation for consequential losses, including loss of profits and loss of rent, under s.2 of the 1886 Act.

The High Court had held that s.2 provided compensation only for physical damage and not for consequential losses but the Court of Appeal reversed that decision, holding that s.2 provided a right to compensation for all heads of loss, including consequential loss, caused by physical damage to property for which the trespassing rioter is liable. The MOPC appealed.

Supreme Court judgment

Lords Neuberger, Clarke, Hughes, Toulson and Hodge unanimously allowed the MOPC’s appeal:

  • The wording of the 1886 Act did not by itself provide a clear-cut answer to the issue, in particular, s.2 (1) did not clarify whether the “loss” for which a claimant may claim compensation was simply the physical damage to his property, or extended to consequential losses. It was therefore necessary for the Supreme Court to look at the Act in the light of the prior legislative history. A review of prior legislation uncovered no broad principle of compensation and there was nothing in the wording of the 1886 Act to support an intention to extend the scope of the compensation to cover consequential loss. In fact, several provisions suggested a contrary intention, in particular the absence of an express provision for compensation for personal injury, or for injury to property other than buildings and their contents, together with the unusual provision for compensation to be reduced according to very broad assessments of the conduct of the claimant.

  • Together, these supported the conclusion that the 1886 Act, like its predecessors, created a self-contained statutory compensation scheme which did not mirror the common law of tort and did not extend to cover consequential losses.

Comment

  • Although the judgment is a disappointing outcome for insurers, it is a ‘common sense’ exercise of statutory interpretation of the 1886 Act in the context of the backdrop of the prior legislative history. It is to be welcomed for laying to rest the question as to whether or not consequential losses are recoverable under the 1886 Act and clarifying (albeit on an obiter basis) that claims for damage to property other than buildings and their contents (such as cars on the street) are also not recoverable.

  • The Riot Compensation Act 2016, which has recently received Royal Assent, will replace the 1886 Act and create a new compensation scheme for property damaged, destroyed or stolen during a riot. Amongst provisions widening the class of property damage and loss in respect of which claims may be made and a broad definition of motor vehicles included in the scheme, the 2016 Act expressly excludes claims for consequential losses, and will hopefully therefore obviate the need for unnecessary litigation on that point going forward.

  • Regulations are awaited which will bring the 2016 Act into force and provide further detail of the scheme, including guidance documents and claim forms, but in general terms, the 2016 Act preserves the general principle of state compensation for a riot, introduces a compensation cap of £1 million per claim, and provides a new, modernised definition of “riot” and reforms to the claims process.

Judgment and Supreme Court press summary available on the Supreme Court website