In Mitsui Sumitomo Insurance v Mayor's Office for Policing and Crime [2013] EWHC 2734 (Comm), Flaux J in the Commercial Court determined two preliminary issues relating to coverage under the Riot (Damages) Act 1886 (the "RDA") for property damage and consequential losses caused by the destruction by fire and looting of Sony's Enfield warehouse during the nationwide riots of August 2011. The first preliminary issue concerned whether the claimed losses were caused by "persons riotously and tumultuously assembled" such as to trigger section 2(1) of the RDA. In concluding that the losses had been so caused, Flaux J readily found that elements of the statutory offence of riot were satisfied but considered at some length whether the rioters were also "tumultuously assembled together"– particularly in light of previous authority to the effect that a criminal enterprise such as a planned raid on a jeweller's shop did not involve tumultuous behaviour. The second preliminary concerned whether there was cover for consequential losses under the RDA. In the face of a vacuum of authority on the point, Flaux J answered the issue resoundingly in the negative, thus clarifying for the first time that on its true construction the RDA does not extend cover to losses of this type.
- Background
On the evening of 8 August 2011, a Sony distribution warehouse in Enfield was broken into by a gang of 25 youths who had come across the fields from a nearby housing estate where they had congregated earlier. The youths looted some of the warehouse's stock (but no more than they could carry without a getaway vehicle) and two of them threw petrol bombs into the stacking within the warehouse. The attack lasted a mere three minutes but the fire caused by the petrol bombs took hold and burned for some ten days, ultimately resulting in the total destruction of the building including plant, equipment and stock.
Following the fire, claims were made under the RDA to the defendant as the compensation authority (being the statutory body responsible for oversight of the Metropolitan police) in whose geographical area the warehouse was located. Being aggrieved by the refusal of the defendant to award the compensation sought, three separate High Court actions were commenced against the defendant by respectively Sony DADC's insurers for indemnified losses in respect of property damage, stock and business interruption losses of £49.5 million; the warehouse owner's insurers for indemnified losses in respect of property damage and loss of rent of £9.35 million; and the owners of certain stock held at the warehouse for uninsured losses in respect of stock of £3.96 million. The preliminary issues in all three actions were tried together.
Following a hearing in July 2013, Flaux J handed down judgment on 12 September 2013 in respect of the following two preliminary issues:
- Do the losses claimed by the claimants (in so far as proved) arise out of the injury to or the destruction of a house, shop or building, or injury to, theft or the destruction of any property therein, by any persons riotously and tumultuously assembled together within the meaning of section 2(1) of the RDA at the warehouse on 8 August 2011?
- Are consequential losses (including loss of profit and loss of rent) in principle recoverable pursuant to section 2(1) and/or 2(2) of the RDA and if so on what basis?
- The first preliminary issue: riotous and tumultuous assembly
Section 2(1) of the RDA provides a right to compensation for persons who have sustained loss by riot as follows:
"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."
Section 2(2) of the RDA provides insurers with an independent right to compensation to the extent that they have indemnified any person for losses within Section 2(1).
The first preliminary issue specifically concerned whether the gang of youths who broke into, looted and set fire to the warehouse were "persons riotously and tumultuously assembled together" within the meaning of section 2(1).
The Public Order Act 1986 requires the word "riotously" to be construed in accordance with the statutory offence of riot under section 1 of that Act, which applies where "12 or more persons who are present together use or threaten unlawful violence for a common purpose and the conduct of them (taken together) is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety…". Flaux J found that there was no doubt that the elements of this statutory offence were satisfied in this case – and this had not seriously been disputed by the defendant. More than 12 persons were present and, in Flaux J's judgment, even if not all of them were smashing down the door or throwing petrol bombs, the others by their presence were still threatening unlawful violence which is defined under the legislation to include violence towards property. Objectively the conduct of the group was such as would have caused a person of reasonable fortitude present at the scene to fear for his personal safety; and indeed there was factual evidence of witnesses having feared for their personal safety.
The arguments on the first preliminary issue were primarily directed to whether the group of youths had been gathered together tumultuously as well as riotously. Previous case law had established that the word "tumultuously" added an additional concept to "riotously". Following a detailed examination of the authorities, Flaux J concluded that a tumult required that:
- The assembly must be of some size. While 25 people in the present case was sufficient, Flaux J declined to comment upon whether this aspect of the concept of a tumult would always be satisfied by twelve or more persons, as required to constitute a riot;
- The assembled persons must be acting in an agitated, excited and volatile manner, usually also making a noise. In this regard, in both JW Dwyer Ltd v Metropolitan Police District Receiver [1967] 2 QB 970 and the unreported Court of Appeal decision of DH Edmonds Ltd v East Susses Police Authority (15 July 1988), the court found that a raid by robbers on jewellers' shops did not trigger the RDA. This was partly because the provision of compensation under the RDA is premised on the police being in breach of a strict but notional duty to prevent what has happened. It does not matter whether the police actually could or should have responded. As Flaux J put it: the real touchstone is that there must be some "public" element to the behaviour giving rise to a perceived or palpable threat of a riot to which the police could, notionally, have responded. That is to be contrasted with, for example, a planned raid executed not openly but furtively or with stealth; and
- The persons involved must engage in wanton damage to property or, put another way, display an animus toward the property rather than any damage being incidental to, for example, looting or theft.
Flaux J found that the group of youths who attacked, looted and set fire to the warehouse were "persons riotously and tumultuously assembled together" for the purposes of the RDA. Flaux J considered the evidence of the behaviour of the group from several witness reports and CCTV footage which revealed the incident to be a frenetic, agitated, chaotic process, with some youths almost dancing around outside whilst others were smashing their way into the building. Whilst Flaux J considered the raid to be planned and co-ordinated amongst the youths, he rejected the defendant's argument that it was an example of a planned criminal enterprise (akin to the burglaries in Dwyer and Edmonds) on the basis of the group's lack of organisation. Had the raid been a systemic burglary, the group might have been expected to use more sophisticated tools for entry and stolen vehicles to remove more goods. As it was, the group's behaviour was agitated and volatile when gathering on a playground before the incident, when moving towards the warehouse and when they were attacking the warehouse during the raid. The group made no attempt to hide what they were doing, moving quite openly and being observed by several witnesses throughout the day. Flaux J concluded that there was a perceived and palpable threat which the police could, notionally, have responded to and prevented.
Although it was suggested by the defendant that the petrol bombs were intended as a measure to destroy forensic evidence, Flaux J preferred the view that the use of petrol bombs objectively evidenced a wanton violence towards property being a hallmark of riotous and tumultuous behaviour.
- The second preliminary issue: consequential losses
Several of the claims made against the defendant included consequential losses such as loss of profit and loss of rent. The second preliminary issue concerned whether such losses are recoverable as part of the compensation payable under the RDA. The claimants' case was essentially that consequential losses are in principle recoverable because the liability on the defendant under the RDA is akin to a strict liability in tort sounding in damages, such that, subject to any limitation in the wording of the RDA, the measure of compensation should reflect the measure of damages under the English law of tort for physical damage to property. In that regard, it was submitted that the law of tort extends to consequential losses and the RDA includes no words of limitation in respect of consequential losses. The primary position adopted by the defendant was that, on a correct construction of the RDA (particularly when read in conjunction with the now repealed preamble), the compensation payable is limited to physical damage to buildings or other property and does not encompass consequential losses.
Flaux J had no hesitation in agreeing with the defendant and concluded that the answer to the second preliminary issue was ultimately a short one: 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 loss of profit or loss of rent.
This answer was not provided by the wording of the operative compensation provision at section 2(1) of the RDA, which refers to "any person who has sustained loss by" the injury to property. Flaux J accepted that the word "by" is dealing with causation but says nothing about what loss is covered. However, the restriction to property damages losses was, he found, made absolutely clear by the (repealed) preamble, which referred to compensation "for" property damage. Moreover, section 7 of the RDA envisages claims being made by "persons who have sustained loss from" property damage "in relation both to the building and the property therein" – and these words could not encompass the wider meaning of loss for which the claimants had contended.
While Flaux J considered the wording of the Act to be clear and unambiguous, such that it was not strictly necessary or appropriate to have regard to the Regulations made under it in construing the statute, those Regulations make it quite clear that the loss which is to be compensated is only physical loss and damage, including because Regulation 5 envisages only limited categories of claim and because of the relatively short period in which claims must first be brought.
Flaux J held that this analysis was not affected by the claimants' argument that the liability to pay compensation under the RDA is akin to a strict liability in tort sounding in damages. Although it was not necessary to determine the point, Flaux J considered obiter that the scheme of compensation under the RDA is analogous to a form of statutory insurance – with similarities to other statutory compensation schemes such as the Law Society Compensation Fund. Flaux J also suggested that, once the analogy with insurance is recognised, there was nothing in the slightest bit surprising or alarming in the exclusion of consequential losses because most insurance policies will not cover consequential loss without an express provision to that effect. Moreover, the RDA provides a self-contained regime of compensation under which the compensation authority is to award such compensation as appears to it just and, in particular, regard may be had to the conduct of the person who has suffered injury; that concept of taking into account failings by the injured person which reduce but may not extinguish the claim were alien to the law of tort at the time when the RDA was enacted prior to the later developments in the law of contributory negligence. As such, the RDA was never intended to reflect damages which would have been awarded in tort – and clear words would have been required (but were absent here) for the RDA to provide compensation by reference to damages in the law of tort as they are recoverable from time to time.
- Commentary
The case serves as a useful guide to what constitutes tumultuous action for the purposes of section 2(1) of the RDA. The main distinguishing factor setting Mitsui apart from cases such as Dwyer and Edmonds, in which small groups committed raids on jewellery shops, was the wanton nature of the damage to the property, which was more than incidental, and the agitated, excited and volatile manner of the perpetrators.
Importantly the case also brings a degree of much-needed clarification as to the issue of whether consequential losses fall for compensation under the provisions of the RDA. Previous cases had not addressed this as an issue of interpretation leaving rather a lacuna in the authorities. While Flaux J may well have reached the right conclusion on the proper construction of the RDA, such construction is not perhaps quite as black and white as his judgment suggests. The wording of the statute does not specifically exclude consequential losses; and the operative compensation provision at section 2(1) is not explicit as to the scope of loss covered. Ultimately, Flaux J was compelled to have regard to the now repealed preamble and section 7 (which is concerned with the identity of the proper claimant and not scope of loss) in determining the scope of covered loss.
Recent decisions on the RDA, both in Mitsui and in the Yarl's Wood litigation, have involved lengthy and technical legal debates about the underlying rationale for compensation under the Act, involving a trawl through the history of predecessor statutes and old case law. As far back as 2002 the Home Affairs Select Committee had called for the RDA to be repealed on the basis that it appeared arcane; and on 9 May 2013 the government announced that it had set up an independent review into the RDA which was expected to conclude by September 2013 although nothing has yet been published. The future for this long standing piece of legislation therefore remains uncertain.
