Mitsui Sumitomo Insurance Co (Europe) Ltd and Others v Mayor's Office for Policing and Crime 1
Court of Appeal, 20 May 2014
The Court of Appeal has overturned the High Court's decision that consequential losses were not recoverable under the Riot (Damages) Act 1886 (the "Act") and has held that the Mayor's Office for Policing and Crime (the "MOPC") was liable for such consequential losses arising out of damage caused by riotous behaviour. This liability arose in respect of uninsured claimants as well as insurers claiming in relation to sums paid out under policies.
On 8 August 2011, during the 2011 riots in London (and other cities across the UK), a gang of youths looted and set fire to a Sony distribution warehouse in Enfield. Sony (the occupier of the warehouse) claimed under its insurance policy for damage to the contents and business interruption losses while Cresta Estates Ltd (the owner of the warehouse) claimed under its insurance policy for physical damage to the warehouse and loss of rent. The insurers, Mitsui Sumitomo Insurance (Europe) Ltd, Tokio Marine Europe Insurance Ltd and Royal & Sun Alliance Insurance PLC paid out under these policies and sought recovery against the MOPC under the Act. The other claimants to the proceedings claimed against the MOPC for destruction of stock stored in the warehouse (they were not insured against this loss).
The Act provides 2 that:
"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..."
Where insurers have indemnified an insured against those losses falling under the scope of the Act, they are entitled to claim compensation in place of the insured 3.
At first instance, the High Court held that the gang involved in the looting and arson were "persons riotously and tumultuously assembled" and that the MOPC was liable under the Act to compensate the claimants for their direct losses – but that this liability did not extend to consequential losses.
The MOPC appealed against the finding of liability while the claimants cross-appealed against the decision on the extent of the liability. The Court of Appeal, therefore, considered two issues in the appeal:
- whether the perpetrators of the damage fell within the description of "persons riotously and tumultuously assembled together"; and
- whether compensation was recoverable only in respect of the physical damage/destruction, or whether it also extended to consequential losses caused by that damage/destruction.
Persons riotously and tumultuously assembled
The Court of Appeal agreed with the High Court's ruling that the perpetrators were persons riotously and tumultuously assembled together and that the MOPC was therefore liable to the claimants.
The Court of Appeal considered specifically the meaning of the terms "riotously" and "tumultuously". The MOPC argued that a "riotous and tumultuous" assembly is one which is: (i) of considerable size; (ii) excited and emotionally aroused; and (iii) behaving in such an agitated, volatile, noisy, angry and threatening manner that it should be obvious to the police that something needs to be done. That definition, the MOPC argued, was to be contrasted with a group acting secretly or furtively (which the MOPC argued was how the perpetrators of the damage acted in this case).
However, the Court of Appeal determined that the test is not whether the perpetrators' behaviour is such that it should have been obvious to the police that something needed to be done, nor whether the police could notionally have prevented the incident. This would entail a counter-factual assessment of whether the police could have prevented the damage which comes very close to asking whether the police were in some way at fault (the Act creates strict liability and not fault-based liability). Whether persons are riotously and tumultuously assembled is a factual assessment which does not turn on the ability of the police. The focus of the inquiry is, therefore, whether the property has been damaged or destroyed as a result of mob violence. This is a question of degree and it is for the trial judge to carry out an evaluative exercise on the primary facts of the case.
The Court of Appeal determined that the High Court judge had directed himself correctly in law and that the conclusion which he reached on his evaluation was one to which he was entitled to come. The Court of Appeal was reluctant to reassess such an evaluation and dismissed the appeal on the question of liability.
The Court of Appeal overturned the High Court's findings that consequential losses were not recoverable under the Act.
The High Court considered the wording in the preamble to the Act (which has since been repealed but the High Court took it as indicative of what Parliament had intended) and section 7 of the Act (which deals with the persons deemed to have sustained the loss in relation to damage to particular buildings) and came to the conclusion that recoverable loss under the Act was limited to physical damage. In particular, the High Court judge considered that the preamble wording "…which property is damaged…liable in certain cases to pay compensation for such damage…" indicated that compensation was only available "for" damage to property.
The Court of Appeal noted that the purpose of compensation under the Act was remedial and that it should therefore receive a "liberal interpretation" – it did not see any reason to construe the preamble of the Act in the limited way as the High Court had done. Further, the Court of Appeal considered that the purpose of section 7 of the Act was simply to identify who may be the claimant (and not the type of losses which are recoverable). Therefore, the Court of Appeal held that there was nothing in the Act which showed that consequential losses could not be recovered.
The MOPC also submitted that if a police authority is strictly liable for the consequences of riotous behaviour it could only be because it was fair and appropriate for them to be notionally and collectively responsible for failing to prevent those consequences – and that it was one thing to be taken to have knowledge of, for example, the property about to be attacked but quite another to suggest that it should also have knowledge of a private citizen's economic affairs (and thus be liable for consequential losses). The Court of Appeal rejected this appeal to fairness. It noted that the law as well as the liberal interpretation of the law on this matter was well established. Even if it was unfair, it was for Parliament to change this position and, although Parliament could have excluded consequential losses from the Act, it had not done so.