In this post, we examine the Supreme Court decision in the case of Hastings Borough Council v Manolete Partners Plc on 27 July 2016. The court considered whether a local authority was liable to pay compensation where it had taken emergency action under the Building Act 1984 to close a building which was in a dangerous state (Hastings Pier).
Anyone who sustains damage as a result of the closure can claim compensation for their loss under the 1984 Act in relation to a matter as to which he is not himself in default. The court decided that, on the facts of the case, a leaseholder was not in default as it was not legally responsible for the state of the building or the events which triggered the council's action. Therefore the local authority was liable to pay compensation.
However, the court also decided that "default" did not simply refer to default under the Building Act under which the council had acted. The case is discussed in more detail below.
The case concerned Hastings Pier which was a Victorian structure which had been in poor repair in recent times. The claimant was a tenant of the landlord and it was the landlord's responsibility to maintain the structure of the pier. However, the claimant had been concerned about the pier's structural integrity and obtained an engineer's report which showed that urgent work was required. Although the report was sent to them, neither the landlord nor the council took any action.
The council subsequently inspected the pier and commissioned another engineer's report which identified serious structural defects. The council then exercised its powers under Section 78 of the Building Act 1984 entitling it to take immediate action to remove the danger and close the pier. The council then appealed.
The council then applied to the Magistrates Court for public access to the pier to be prohibited until the necessary remedial works had been carried out. These were then carried out. The tenant then claimed compensation against the council.
The tenant was successful in the Technology & Construction Court and in the Court of Appeal. The council then appealed to the Supreme Court.
The appeal turned on the interpretation of Section 106(1) of the Building Act 1984 which gives a right to compensation to a person who is has sustained damage by reason of the exercise of a local authority's powers under the Act "in relation to a matter as to which he has not himself been in default". The court noted that the relevant power is to take emergency action and any resultant claim for compensation is for loss resulting from that emergency action.
The court identified the matter which led the council to take emergency action, which was the state of the pier combined with fear of possible collapse from crowd-loading during events which were then planned. The tenant was not legally responsible for the state of the pier or the events which triggered the council's action. Therefore it was not "in default" as to the matter which led to the council's use of its power. This alone was sufficient to dismiss the appeal.
The court also considered whether the reference to "default" in Section 106 referred only to default under the 1984 Act itself. It decided that it was not so restricted and that default might arise, for example, in relation to the common law duty of the owner of a vacant piece of land to prevent the land from becoming a public nuisance.
The court also stressed that the dismissal of the appeal would not limit the issues which might be taken into account by the statutory arbitrator in assessing compensation. The local authority might, for example, argue that the tenant's loss of profit would, in any event, be substantially reduced due to the structural condition of the pier whether or not emergency action had been taken.
The Supreme Court's decision makes it clear that, when considering entitlement to compensation under the Act, the court can only excuse the local authority from paying compensation where an owner or occupier is in default in relation to the matter giving rise to the power exercised, here emergency action to avert a danger. However, default under other legislation or at common law may be taken into account but only if it relates to the subject matter of the exercise of power. The crucial focus is, therefore, the events which trigger the exercise of the power in a particular case.