Claims under the Riot (Damages) Act 1886

The Commercial Court recently handed down its judgment in respect of claims against the Metropolitan Police arising out of damage to a Sony distribution warehouse in Enfield during the August 2011 riots. The decision has confirmed that compensation payable under the Riot (Damages) Act 1886 is limited to physical damage to premises and property in the premises, but does not extend to consequential damages such as loss of profit or rent.

Background

A group of 25 youths smashed their way into Sony’s warehouse on 8 August 2011, looting the building and throwing two petrol bombs into the warehouse. Fire took hold and burned for 10 days, leading to the total destruction of the plant, equipment and stock.

As explained in our previous Law-Now, in the immediate aftermath of the 2011 riots, the Government confirmed that any individual, homeowner or business that had suffered property damage in a riot could seek compensation under the Act, whether they were insured or not.

Claims for compensation under the Act were brought against the statutory body responsible for the Metropolitan Police by the insurers of the premises and stock as well as by owners of stock in the warehouse for uninsured losses. The hearing concerned two preliminary issues:

• Whether the gang of youths were “persons riotously and tumultuously assembled together” within the meaning of section 2(1) of the Act; and
• Whether consequential losses were in principle recoverable under the Act, and if so on what basis.

Decision

Did the incident qualify for compensation under the Act?

Mr Justice Flaux set out the characteristics required for a police authority to be liable for compensation under the Act. First, there must be a riot within the meaning of section 1 of the Public Order Act 1986. Second, the assembly must also be of some size, certainly more than three of four persons. Third, the persons assembled must be acting in an “agitated, excited, volatile manner, usually also making a noise”. However, the judge stated that the noise did not need to be tremendous; rather, there should be a “public” element to the behaviour, which would have made the police aware of a perceived or palpable threat.

The police authority had argued that rather than being a riotous and tumultuous assembly, the looting and fire at the warehouse had been a “planned criminal enterprise”. It submitted that the break-in had been on a “quiet industrial estate” and had lasted only three minutes. Both of these factors, it was argued, meant there was little likelihood of confrontation with the police, nor could it be said that the group’s presence was sufficiently public such that law enforcement agencies ought to have been aware of their presence and threat.

The judge rejected this argument, stating that the behaviour of the group could properly be described as “the behavior of an agitated, excited and volatile group, not the behavior of a gang of professional thieves”. He also held that on the facts there was undoubtedly a perceived threat of rioting in Enfield and specifically in the vicinity of the business park where the warehouse was located.

Consequential losses

The claimants argued that consequential losses were in principle recoverable under the Act. This was because the liability of the defendant to pay compensation under the Act was in the nature of a strict liability in tort sounding in damages. Therefore, the compensation payable should reflect the full measure of damages under the English law of tort for physical damage to property, unless the wording of the Act limited the damages recoverable. The claimants submitted that the Act contained no restrictive wording.

Mr Justice Flaux rejected this argument, on the basis that it was clear from the wording of the Act that compensation was only to be provided for physical damage and not for consequential losses. This was made “absolutely clear” by the preamble to the Act which, though now repealed, made it clear that Parliament had intended compensation to be limited to physical damage to premises and property in the premises.

The decision is expected to be appealed.

Comment

Although insurers have welcomed the ruling that the incident qualified for compensation under the Act, they have expressed disappointment that consequential losses were held to be irrecoverable. The decision may affect the rating and availability of riot insurance in the future, as insurers may be unwilling to write insurance where it is likely that BI losses will be incurred in relation to particular properties, compensation for which will seemingly be irrecoverable under the Act.

A review of the Riot (Damages) Act was announced by the Government in May 2013 to examine the criteria that determines whether compensation is payable by the police. The review, which has been welcomed by the ABI, is expected to be followed by a public consultation. The remit of the independent review is wide, and includes key issues such as the definition of a riot, who should be liable and what level of compensation is suitable. Insurers will be keeping a close eye on the findings of the review and whether any proposals for change will affect their right to compensation under the Act.

Further reading: Mitsui Sumitomo Insurance Co (Europe) Ltd and Another v The Mayor’s Office for Policing and Crime [2013] EWHC 2734 (Comm).