Hastings Borough Council v Manolete Partners Plc (TCC)

The court held that s.106 of the Building Act 1984 gives a right to full compensation where a local authority has exercised powers under s.78 to prevent access to premises and that the exercise of statutory powers is not, of itself, a defence to such a claim. The correct cause of action for s.106 purposes is interference with access which, if done by a private individual, would give rise to actionable loss; therefore the Council's closure of Hastings Pier gave rise to a compensatable cause of action. The exclusion in s.106 for persons "in default" applies to default under the Building Act 1984 (or obligations under that Act) and does not extend to breaches of other statutes such as the Occupiers Liability Act 1957 or the Health and Safety at Work etc Act 1974. On the facts the owner of the Pier, Ravenclaw, was in default under the Building Act and the Claimant was not in default; accordingly the Claimant was entitled to declarations that the Council was liable under s.106 for the period 16 June 2006 to 12 September 2006 and that the Claimant was not "in default" within s.106.

Background and parties: The Claimant, as assignee of Stylus Sports Limited (in liquidation), owned the tenant rights to Units C2 and C15 on Hastings Pier where it operated a bingo hall and an amusement arcade. Ravenclaw Investments Incorporated was the freeholder and covenanting repairer. Concern about the Pier's structure led the Council to exercise powers under s.78 of the Building Act 1984 and to close parts of the Pier on 16 June 2006. Barriers were erected; a s.77 application to the magistrates followed and an order was made on 12 September 2006.

Relief sought and procedural posture: The Claimant sought compensation under s.106 of the Building Act 1984 for loss suffered by reason of the Council preventing public access between 16 June and 12 September 2006. Proceedings were Part 8 at first instance in the Technology and Construction Court. The Claimant relied on an assignment from Stylus' liquidator.

Issues framed:

• whether damage by reason of the Council's exercise of s.78 gave rise to a cause of action for s.106 compensation;
• whether making a s.77 application to the magistrates absolved or altered the Council's liability under s.106;
• whether the Claimant was "in default" within s.106 so as to be disentitled to compensation, including whether default could include breaches of other statutory duties such as under the Occupiers Liability Act 1957 or the Health and Safety at Work etc Act 1974.

Court's reasoning: The court found that the Council's initial exercise of s.78 was the operative act preventing access until any subsequent magistrates' order took effect and that bringing an application under s.77 did not negate the earlier exercise of s.78. The statutory scheme and authorities (including Lingke and Leonidis) establish that interference with access by a public authority, which if done by a private individual would be actionable, gives rise to compensatable damage under provisions like s.106; statutory authority is not itself a defence to s.106 claims. On the meaning of "in default" the court concluded the phrase should be read in the context of the Building Act and limited to default under the Act (or obligations created by it), not to defaults under unrelated statutes. The evidence showed the owner Ravenclaw, not the Claimant, was in default in relation to the dangerous Pier structure. The Claimant therefore was not in default and was entitled to compensation; the claim succeeded in the Part 8 proceedings.

Wider observations: The court observed that Parliament could have drafted s.106 to limit liability where a magistrates' order subsequently replaced council action, but it did not. The judgment also applied established principles of statutory construction on public policy cited from Welwyn Hatfield, but concluded those did not require extending "in default" beyond the Act.

First instance: The court granted declarations for the Claimant. The Claimant succeeded: the Council was liable under section 106 of the Building Act 1984 for preventing public access to Hastings Pier from 16 June 2006 to 12 September 2006, and the Claimant was not "in default" within the meaning of section 106. The rationale was that interference with access by the Council gave rise to a compensatable cause of action and "in default" is confined to default under the Building Act rather than breaches of unrelated statutory duties.