Manolete Partners Plc v Hastings Borough Council

A statutory compensation provision for damage caused by emergency action concerning dangerous buildings is controlled by its own default proviso. “In default” means breach of an obligation arising under the Building Act 1984, not breach of duties under other legislation or the common law. Repeated statutory language should generally be construed consistently, and the court need not conduct a wide-ranging review of external duties. A tenant is not in default where responsibility for structural repairs rests on the owner. The ex turpi causa rule does not defeat a claim where the claimant is not in statutory default. Structural defects may nevertheless affect the amount recoverable in the statutory arbitration.

Hastings Borough Council closed Hastings Pier under section 78(1) of the Building Act 1984 after structural reports indicated that it could not safely carry large crowds. Stylus Sports Ltd, tenant and operator of two businesses on the pier, claimed compensation under section 106(1) for losses during the closure. Its liquidator assigned the claim to Manolete Partners Plc.

Mr Justice Ramsey, sitting in the Technology and Construction Court, held that Stylus was not “in default” because responsibility for structural repairs lay with the owner, Ravenclaw. He also held that, absent section 78, the closure would have been actionable interference with Stylus’s leasehold right of way. The Council appealed, arguing that alleged breaches of occupiers’ liability and health and safety duties constituted default and that ex turpi causa barred the claim. The central issues were the meaning of “in default” and the effect of the common-law rule.

1. Appeal dismissed. Jackson LJ gave the leading judgment, with Aikens and Patten LJJ agreeing.
2. Meaning of default. “In default” in section 106 of the Building Act 1984 means breach of an obligation arising under that Act. The repeated use of the phrase in sections 77(2)(b), 78(7) and 106(1) supported a consistent and narrow construction. The historical fact that earlier compensation statutes operated alongside local building enactments did not justify a wider construction of the comprehensive 1984 Act.
3. Application to Stylus. The relevant repair obligations under the leases and section 77 rested on Ravenclaw as owner, not Stylus as tenant. Stylus had not carried out the remedial works in question and was not in breach of the Building Regulations. Its subsequent decision to undertake repairs did not alter its statutory position at the relevant time. Nor could it be criticised for failing to fence off the whole pier: it had no entitlement to prevent access to other tenants’ premises, and the Council had properly addressed its request to the owner.
4. Counterfactual cause of action and public policy. A claim under section 106 requires conduct which, without the section 78 power, would have constituted an actionable cause of action causing the damage. The barrier interfered with Stylus’s leasehold right of way. The ex turpi causa rule did not apply. As explained by Gray v Thames Trains Ltd [2009] UKHL 33, that rule concerns claims for the consequences of criminal conduct or conviction; this was not such a claim. The statutory default proviso was the relevant control mechanism.
5. Quantum. The structural condition of the pier remained relevant to the amount recoverable. In the arbitration under section 106(2), the Council could argue that loss of profit should be substantially reduced, potentially to nil.

1. Court of Appeal (Civil Division) dismissed Hastings Borough Council’s appeal on both grounds.
2. Technology and Construction Court, Queen’s Bench Division Mr Justice Ramsey gave judgment for Manolete and declared the Council liable to pay compensation under section 106 of the Building Act 1984.