Court of Appeal considers liability under the Riot (Damages) Act 1886 and whether consequential losses are covered
The first instance decision in this case was reported in Weekly Update 32/13. The judge found that the insurers of a warehouse and stock damaged and stolen during the UK riots in 2011 were entitled to compensation from the statutory body for the Metropolitan Police Service under the Riot (Damages) Act 1886. Two issues arose on this appeal:
- Had the judge been entitled to conclude that the gang of youths in question had been “persons riotously and tumultuously assembled” (as required under the Act)? The Court of Appeal held that he had. The relevant test was not whether the police (even notionally) could have prevented the damage (even though the rationale behind the Act is that “the community is responsible for the wrongdoing of rioters within their midst”). The focus instead should be on whether property has been damaged or destroyed as a result of mob violence. That test had been satisfied here because the judge had found on the facts that the attack was “excited, agitated and ill-disciplined, in other words that it was tumultuous”.
In particular, the Court of Appeal held that it did not matter whether the location was a remote one (“a group may be riotously and tumultuously assembled even in a remote location”) and nor did it matter whether the individual participants could be recognised. The speed of the incident was relevant, but the judge had taken this into account. The judge had also been entitled to take into account how the group had been behaving before they reached the warehouse and it did not matter whether the police could have dispersed the group earlier on.
- Had the judge been correct to conclude that the insurers were not entitled to consequential losses (including loss of profit and loss of rent)? The Court of Appeal held not. Section 2(1) of the Act provides for compensation to be paid “to any person who has sustained loss by such injury, stealing or destruction”. The Court of Appeal held that there was nothing in that wording to exclude consequential losses caused by the injury or destruction of the property. Nor did anything in the preamble or other sections of the Act alter that view. The phrase “compensation “for” property damage” meant “all compensation necessary to make good the loss caused by the damage to the relevant property”. Caselaw on legislation pre-dating the Act also supported this conclusion. Furthermore, if an owner of a building damaged by rioters chooses to sell it in its damaged state, he would be entitled to the whole of the diminution in value of the property (including loss of rent or profits) and it would therefore be anomalous for an owner who repairs his property to be unable to recover the same loss.
COMMENT: One issue which was not discussed by theCourt of Appeal was the judge’s point that the Act is analogous to a form of statutory insurance and “most insurance policies will not cover consequential losses without an express provision to that effect”. That general rule would appear to be unaffected by this ruling since the Court of Appeal did not refer to it, but the argument might be raised by an insured that the Court of Appeal’s interpretation of compensation “for” property damage should be applied to similar wording in an insurance policy.