Despite nearing its two year anniversary, the aftermath of the London riots has yet again been in the headlines following a landmark decision at the Court of Appeal awarding compensation for consequential losses related to the Sony distribution warehouse which was looted and set on fire during the riots.
Mitsui Sumitomo Insurance Co (Europe) Ltd & Ors v Mayor's Office for Policing and Crime  EWCA Civ 682
"The principle that the community stands in the shoes of the trespasser is long established. So too is the liberal approach of the courts to the interpretation of the legislation" – Moore-Bick LJ
In August 2011 riots broke out across the country following the fatal shooting by police of Mark Duggan in Tottenham. A large distribution warehouse owned by the Sony Corporation was attacked, looted and set on fire. The fire burned for 10 days and resulted in the total destruction of Sony's premises, equipment and stock.
Claims were brought under the Riot (Damages) Act 1886 ('the 1886 Act') against the Mayor's Office for Policing and Crime (MOPC) by Sony's insurers for property, stock and business interruption losses and the warehouse owners for property damage and loss of rent. Further actions were pursued by a number of parties who owned stock stored in the warehouse. The actions were consolidated in the Commercial Court and heard before the Honourable Mr Justice Flaux between 8-11 July 2013. At first instance the judge concluded that whilst liability had been established and MOPC were liable to pay compensation under the Act this did not extend to compensation for consequential losses. MOPC appealed on the issue of liability and a cross-appeal was lodged by the other parties on the issue of quantum. The case was referred to the Court of Appeal.
"Persons riotously and tumultuously assembled"
The 1886 Act provides that where a building has been "injured or destroyed…by any persons riotously and tumultuously assembled together…" the relevant police authority is liable to compensate "any person who has sustained loss" as a result.
The offence of riot is set out in Section 1 of the Public Order Act 1986 ('the POA') as being 12 or more persons present together who use or threaten unlawful violence for a common purpose such that a person of "reasonable firmness" would fear for their safety. This is an objective test, meaning no such person actually needs to be present at the scene. Section 10(1) of the POA says the word "riotously" should be construed in accordance with the Section 1 definition.
Whilst the word 'riotously' benefits from some form of statutory interpretation the adverb 'tumultuously' does not. The definition for the purposes of the 1886 Act was clarified by Kerr LJ in D.H. Edmonds Ltd. v Sussex Police Authority Court of Appeal (Civil Division) 6 July 1988 as meaning:
"'…full of tumult or commotion; marked by confusion and uproar; disorderly and noisy; violent and clamorous; turbulent’. If one then goes to the definition of the word ‘tumult’… one finds the first definition… is… ‘Commotion of a multitude, usually with confused speech or uproar; public disturbance; disorderly or riotous proceeding.’ Rightly or wrongly…as a matter of common usage nowadays the connotation of ‘multitude’ or ‘crowd’ or ‘mob’ or of a large number of people, has been introduced into the meaning of ‘tumultuous' and ‘tumult’".
Flaux LJ found that to establish liability under the 1886 Act the following characteristics concerning the assembly of persons must be present:
- There must be a riot within the meaning of Section 1 of the Public Order Act 1986.
- The assembly of persons must be "of some size, certainly more than three or four persons". Flaux LJ said it was for "another case than the present" whether 12 or more persons must be present.
- The persons assembled must be acting in an "agitated, excited, volatile manner, usually (in the light of Edmonds) also making a noise, rather than acting stealthily, so that it can be said that their riotous behaviour could at least notionally have been prevented by the police".
Despite technical arguments based on the facts of the case being raised by MOPC, Flaux LJ found in favour of the claimants on the issue of liability. The Court of Appeal concluded that Flaux LJ had "carried out an evaluative exercise on the basis of the primary facts…and the result of this evaluation was one to which he was entitled to come". The appeal was dismissed on the question of liability.
"Claims for compensation under this Act shall be made to the compensation authority of the police area where 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 appear to them to be just" – Section 3 of the 1886 Act.
The historical context of the 1886 Act was considered at some length in both the first instance decision and the subsequent appeal. The beginning of a statutory compensation scheme for riot began with the Riot Act 1714 ('the 1714 Act'), the etymological source of the common idiom "reading the Riot Act". Section 6 of the 1714 Act provided for compensation to injured parties by the inhabitants of the city or town where the riotous damage occurred or, in rural areas, the inhabitants of the "hundred" (an archaic term referring to the division of a larger region into smaller administrative divisions) where the building was situated. Injured parties received from the hundred the compensation which they were previously entitled to recover from the trespassers themselves. The hundred therefore stood as sureties for the trespassers for the losses arising from the riot. The statutory compensation scheme was varied further over the years until the 1886 Act transferred the burden of local inhabitants to pay compensation to the police authority.
The 1886 Act was accompanied by a set of regulations (the Regulations under the Riot (Damages) Act 1886 as to claims for compensation (1921) ('the 1886 Regulations')), which deal with important issues such as the time limit for making a claim and how claims must be particularised. The Court of Appeal ruled that there was "…nothing to suggest that the fundamental "standing as sureties" principle embodied in the 1714 Act was completely swept away by the 1886 Act".
At first instance, Flaux LJ decided that MOPC's liability did not extend to consequential losses arising from the riot and that "on the correct construction of the statute as a whole,
the compensation payable is limited to physical damage to the relevant premises or property in it and does not extend to consequential losses such as a loss of profit or loss of rent".
However, the appeal court ruled that compensation includes all losses consequent on damage to property subject only to the usual common law rules of causation and remoteness of damage. The Master of the Rolls said, "In our view, there is nothing in the wording of section 2(1) itself which supports the proposition that the loss sustained cannot include consequential losses caused by the injury or destruction of the property". Therefore, whilst physical damage to property is the "trigger" under the Act other losses "proximately caused by such damage…are recoverable".
The 1886 Act will be a likely target for reform following this ruling. However, the present law provides a statutory compensation scheme for damage caused by riot that includes the types of consequential losses recognised by the law of damages, which will provide welcome relief for both property damage insurers and those with uninsured losses.
A summary of the key provisions:
- The Riot (Damages) Act 1886 allows an injured party to recover compensation for physical loss to property and consequential losses (but not personal injury).
- The "trigger" is physical damage to property caused by persons "riotously and tumultuously assembled together".
- Any claim must be made within 14 days of the date of the incident.
- The claim must be properly particularised in accordance with Regulations 3 and 4 of the 1886 Regulations.