The Mayor’s Office for Policing and Crime v Mitsui Sumitomo Insurance Co (Europe) Ltd & Ors [2016] UKSC 18

During the 2011 London riots, a Sony warehouse in Enfield was destroyed by rioters. Insurers and uninsured property owners claimed compensation under the Riot (Damages) Act 1886. The Supreme Court held that the Act compensates only for physical damage, not consequential losses such as lost profits or rent.

Facts

On the night of 8 August 2011, during the four days of London riots, a gang of youths broke into the Sony DADC distribution warehouse on Solar Way in Enfield. They stole goods and threw petrol bombs, causing a fire that destroyed the warehouse along with its stock, plant and equipment. Claims were brought against the Mayor’s Office for Policing and Crime (MOPC) under section 2 of the Riot (Damages) Act 1886 by the insurers of Sony DADC (the lessee), the insurers of the freehold owner, and by customers of Sony DADC whose stock had been destroyed. Two of the customer claimants were largely uninsured and were rendered insolvent by the losses, partly because Sony DADC’s bailee liability had been contractually limited to manufacturing replacement cost.

The liability of MOPC to pay compensation had been settled in earlier proceedings (with Flaux J and the Court of Appeal both finding that the warehouse had been destroyed by persons assembled ‘riotously and tumultuously’). The remaining preliminary issue, the subject of this appeal, was the proper measure of compensation. Flaux J held that section 2 covered only physical damage. The Court of Appeal reversed him, holding the Act covered all heads of loss, including consequential loss, proximately caused by the physical damage save where excluded by statute. MOPC appealed.

Issues

The sole issue was one of statutory construction: whether section 2 of the Riot (Damages) Act 1886 entitles a person whose property has been destroyed or damaged by rioters to recover not only for the physical damage but also for consequential losses such as loss of profits and loss of rent.

Arguments

Appellant (MOPC)

Lord Pannick QC argued that Flaux J’s construction was correct. The 1886 Act constituted a self-contained statutory compensation scheme that was not co-extensive with the tortious liability of a trespasser. The historical legislative scheme since 1714 had always confined compensation to physical damage to premises and property within them, and the 1886 Act did not materially alter that scope. He also relied on the language of sections 2, 3 and 7, the (now repealed) preamble, and the contemporaneous 1886 regulations, although he abandoned reliance on settled practice for want of evidence.

Respondents

Mr Crane QC, supported by Mr Pritchard, argued that the historical principle, dating back to the 1714 Riot Act and beyond, was that the inhabitants of the hundred (and now the police authority) stood as sureties for the wrongdoer. Liability was transferred from the rioter to the local community, and so the police authority stepped into the shoes of the trespasser save where the statute provided otherwise. There was nothing in the 1886 Act expressly limiting recoverable heads of loss, and excluding consequential losses produced an anomaly compared with the recovery of diminution in value.

Judgment

The Supreme Court (Lord Hodge giving the leading judgment, with whom Lord Neuberger, Lord Clarke, Lord Hughes and Lord Toulson agreed) allowed the appeal and restored Flaux J’s order.

Linguistic analysis

The words of section 2(1) (‘loss by such injury, stealing, or destruction’) were ambiguous and did not, on their own, disclose whether compensation extended beyond the damage to the property itself. Significantly, the Act does not provide compensation for personal injury or for damage to property other than buildings and their contents (for example a parked car), demonstrating that it provides only partial compensation and does not embody an unqualified causal test analogous to tortious recovery.

Historical legislative context

Lord Hodge undertook a detailed survey of the legislative history. The Riot Act 1714 first imposed liability on the hundred to pay damages for the demolition of certain buildings. In Ratcliffe v Eden (1776), Lord Mansfield articulated the principle that ‘the inhabitants shall be in the nature of sureties for one another’, extending compensation to furniture and household goods destroyed at the same time. Hyde v Cogan (1781) similarly took a liberal, remedial approach. In Mason v Sainsbury (1782), Lord Mansfield stated that ‘the Act puts the hundred, for civil purposes, in the place of the trespassers’. However, Lord Hodge noted that in no case had recovery been allowed for anything other than physical damage to property.

Subsequent legislation, including the Black Act 1722, the Malicious Damage Acts 1812 and 1816, the Seditious Meetings Act 1817 and the Remedies against the Hundred (England) Act 1827, consistently framed compensation in terms of physical damage to buildings, contents and specified equipment. The wording of the 1827 Act, which the 1886 Act consolidated and replaced, made it clear that statutory compensation was confined to physical damage to property.

The 1886 Act

The repealed preamble referred only to property ‘damaged’ by rioters and disclosed no intention to alter the basis of compensation. The principal changes effected by the 1886 Act were administrative: transferring liability from the hundred to the police authority, regulating procedure, allowing reduction for the claimant’s conduct, providing for compensation for stolen property, allowing insurers to claim in their own names, and providing a right of appeal to the court. None suggested an intention to extend the measure of compensation to consequential loss.

Rejection of the ‘sureties’ rationalisation

Lord Hodge accepted the force of the historical ‘sureties’ principle but held it could not bear the weight the respondents placed on it. First, the older law of hue and cry imposed a different regime under which the community could escape liability by apprehending the offender. Secondly, the 1714 Act imposed strict liability but limited recoverable loss. Thirdly, and most importantly, the legislative history after 1714 demonstrated that the statutory scheme had never mirrored the offenders’ tortious liability and had always provided only partial, property-focused compensation.

Anomaly argument

The court rejected the Court of Appeal’s anomaly point: a claim for diminution in value (which might reflect income potential) and a free-standing claim for loss of rent or profits are different heads of loss. In any event, an apparent anomaly could not override clear statutory meaning.

Other points

The court did not rely on the 1886 regulations as an interpretative aid, although they were consistent with its conclusion. The Scottish 1822 provision gave only limited support. The court rejected MOPC’s broader public policy argument based on Michael v Chief Constable of South Wales Police as unhelpful, because the statutory scheme had never sought to mirror the common law.

Implications

The decision confirms that the Riot (Damages) Act 1886 establishes a self-contained statutory compensation scheme that is confined to the cost of repairing, or the diminution in value caused by, physical damage to buildings and to property within them (including stolen property). It does not extend to consequential losses such as loss of rent or loss of profits.

The decision is significant for insurers, businesses, property owners and police authorities. Insurers who have indemnified assureds under business interruption or similar policies cannot recoup those payments from police authorities under the 1886 Act. Uninsured businesses cannot look to the statutory scheme for recovery of trading losses. The judgment reinforces the principle that statutory compensation schemes created in response to public disorder are not to be treated as mirroring the developing common law of tort, and that judicial rationalisations of a scheme’s underlying principles cannot override the statutory language read in its historical context.

The judgment also illustrates the Supreme Court’s approach to statutory interpretation where modern language is ambiguous: historical legislative context can decisively determine meaning. The case was decided on the 1886 Act, which has since been replaced by the Riot Compensation Act 2016, but the reasoning remains an important example of contextual statutory interpretation.

Verdict: Appeal allowed. The Supreme Court held that section 2 of the Riot (Damages) Act 1886 does not provide compensation for consequential losses such as loss of profits or loss of rent, but is confined to compensation for physical damage to buildings and to property within them. Flaux J’s order on this preliminary issue was restored.

Source: The Mayor's Office for Policing and Crime v Mitsui Sumitomo Insurance Co (Europe) Ltd & Ors [2016] UKSC 18