Mitsui Sumitomo Insurance Co (Europe) Ltd and others v Mayor’s Office for Policing and Crime

Compensation – Riot (Damages) Act 1886 – Destruction of distribution warehouse by fire as a result of rioting in London – Respondents claiming compensation from appellant under section 2 of 1886 Act – Whether compensation payable only for physical damage or extending to consequential losses such as loss of rent or loss of profit – Appeal allowed In August 2011, serious rioting took place in London over four days, leading to extensive property damage and significant losses to property owners and insurers, including the respondents. The respondents all suffered losses as a result of the petrol bombing of a distribution warehouse in Enfield, which caused a fire leading to the destruction of the warehouse and of the stock, plant and equipment inside it. Some of the respondents were the insurers of the freeholder and lessee of the warehouse, while others were customers of the warehouse lessee whose stock had been stored in the warehouse. The respondents claimed compensation from the appellant police authority under section 2 of the Riot (Damages) Act 1886. The appellant initially contested the claims both on liability and on the quantification of loss. It later accepted that it was liable to pay compensation but disputed the amount claimed. The central issue was whether compensation was payable only in respect of physical damage or whether it could also include consequential losses, including loss of profits and loss of rent. That turned on the proper construction of section 2, which, in cases where a building was injured or destroyed by rioters, or the property therein was injured stolen or destroyed, provided for the payment of compensation to “any person who has sustained loss by such injury, stealing, or destruction”. In the High Court, the judge held that section 2 provided compensation only for physical damages and not for consequential losses: see [2013] EWHC 2734 (Comm). Reversing that decision, the Court of Appeal held that section 2 provided a right to compensation for all heads of loss, including consequential loss, proximately caused by physical damage to property for which the trespassing rioter would be liable at common law, save to the extent that it was excluded by the statute: see [2014] EWCA Civ 682. It found that there was no evidence of any settled practice of interpreting the 1886 Act as excluding compensation for consequential losses and that any such exclusion would produce anomalous results. The appellant appealed. Held: The appeal was allowed. Properly construed, section 2 of the 1886 Act provided a right of compensation only in respect of physical damage and did not compensate for any consequential losses. The wording of the 1886 Act had to be interpreted against the backdrop of the prior legislative history since that wording, referring to compensation for “loss by” the injury or destruction of a building or the injury, stealing or destruction of property within the building, did not by itself disclose what the relevant “loss” was. It was striking that the 1886 Act did not expressly provide compensation for either personal injury caused by rioters or damage to property in the streets such as a parked car, and the court had been referred to no jurisprudence to support the view that such losses could be claimed under the 1886 Act. On any view, the 1886 Act therefore provided only partial compensation for damage caused by rioters. Other provisions of the 1886 Act did not shed light on the extent of the compensation provided under section 2; however, light was shed by a consideration of earlier legislative provisions for compensation for riot damage, beginning with the Riot Act 1714. The 1714 Act had provided for the payment of damages by the members of the local community or “hundred” where certain buildings were demolished or pulled down by rioters. While it did not specify the scope of the damages to be paid by the local community, the courts had interpreted the hundred’s liability as extending to loss occasioned to furniture and household goods but no further. Despite certain judicial rationalisations in the decided cases, the case law did not support a general principle that the community stood as sureties for the wrongdoer: Ratcliffe v Eden (1776) 2 Cowp 485; Hyde v Cogan (1781) 2 Doug 699, Mason v Sainsbury (1782) 3 Doug KB 61, London Assurance Co v Sainsbury (1783) 3 Doug KB 245 and Yarl’s Wood Immigration Ltd v Bedfordshire Police Authority [2009] EWCA Civ 1110; [2010] QB 698 considered. There were three reasons for that position: (i) while the 1714 Act imposed on the hundred the obligation to compensate only for loss occasioned by the destruction of, or damage to, buildings, the prior law of hue and cry imposed no such restriction; (ii) while the 1714 Act imposed strict liability on the hundred for the riot, the prior hue and cry legislation allowed the community to escape liability if hue and cry were raised and the offenders caught, with the result that the hundred were not sureties for the offender unless they failed to apprehend him; and (iii) most importantly, the legislative history after the 1714 Act showed that there was no broad principle of compensation. In particular, the wording of the Remedies against the Hundred (England) Act 1827, which amended and consolidated the prior legislation and remained in force until the 1886 Act, made it clear that statutory compensation was confined to physical damage to property. There was nothing in the 1886 to remove that limitation. None of its provisions suggested any intention to extend the measure of compensation beyond physical damage to property. In those circumstances, it was not appropriate to use a judicial rationalisation of a statutory scheme to override the words used by parliament. From 1714 to the present day, the community, whether in the form of the hundred or the police authority, had not stood in the shoes of the offender for all purposes of compensation. When regard was had to the words of the statute, in the context of the prior legislative history, there was no reason to think that parliament ever intended that the compensation scheme should mirror the offenders’ liability in tort or that its scope should develop as the law of damages for tort developed. The 1886 Act, like its predecessors, created a self-contained statutory scheme which did not mirror the common law of tort. Lord Pannick QC, Sam Grodzinski QC and David Pievsky (instructed by TLT LLP) appeared for the appellant; Michael Crane QC, Tamara Oppenheimer and Marianne Butler (instructed by DAC Beachcroft LLP) appeared for the first and second respondents; Michael Crane QC and Charles Dougherty QC (instructed by Kennedys Law LLP) appeared for the third respondent; Simon Pritchard (instructed by Keystone Law) appeared for the fourth and fifth respondents. Sally Dobson, barrister Click here to read a transcript of Mitsui Sumitomo Insurance Co (Europe) Ltd and others v Mayor’s Office for Policing and Crime