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

Compensation under section 2 of the Riot (Damages) Act 1886 is confined to physical damage to specified buildings and property within them. It does not extend to consequential losses such as loss of profit or rent.

The Act creates a self-contained statutory scheme. Its scope does not mirror a rioter’s liability in tort and cannot be enlarged by treating the police authority as standing in the wrongdoer’s shoes. Compensation for physical damage may be measured by reasonable repair or replacement costs, or by diminution in value where appropriate. Lost income remains a distinct, irrecoverable head of loss.

Rioters set fire to a distribution warehouse during the London riots of August 2011, destroying the building and property within it. Property owners, customers and insurers sought compensation from the Mayor’s Office for Policing and Crime under section 2 of the Riot (Damages) Act 1886.

Flaux J held in the Commercial Court that the Act compensated physical damage but not consequential loss. The Court of Appeal, in [2014] EWCA Civ 682, reversed that ruling and held that all heads of loss proximately caused by compensable physical damage were recoverable unless excluded by the statute.

The central issue was whether compensation could include consequential losses, particularly lost profits and rent, and, if so, on what basis.

1. The appeal was allowed unanimously. Lord Hodge delivered the judgment, with which Lord Neuberger, Lord Clarke, Lord Hughes and Lord Toulson agreed. Section 2 of the Riot (Damages) Act 1886 compensates physical damage to property but does not compensate consequential losses such as loss of profits or rent.

2. The words “loss by” injury, stealing or destruction did not, considered alone, resolve the issue. The statutory context showed that they did not establish an unrestricted causal test governed by ordinary tort principles. The Act omitted personal injury and damage to property outside the specified buildings. It therefore provided only partial compensation for losses caused by rioters.

3. The Act had to be construed against the legislative history beginning with the Riot Act 1714. The eighteenth-century decisions construed that remedial legislation liberally by extending compensation for damage to a building to furniture and goods destroyed with it. They did not establish recovery for consequential loss. Later legislation progressively identified additional buildings, machinery and contents, but continued to compensate the value of property destroyed or the physical damage done.

4. The Remedies against the Hundred (England) Act 1827, which the 1886 Act replaced, confined compensation to physical damage. Nothing in the 1886 Act disclosed an intention to remove that limitation. Its principal changes transferred liability to police authorities, regulated claims, allowed adjustment for claimant conduct, added theft and insurers’ claims, and created a judicial remedy. They did not enlarge the measure of compensation.

5. The historical description of the community or police authority as standing surety for rioters could not override the statutory language. The 1886 scheme was self-contained and did not place the authority in the offender’s shoes for every purpose or evolve with the common law of tort damages.

6. Diminution in the value of a damaged commercial building is a measure of the physical damage itself and may reflect its income-producing capacity. A separate claim for rent or profits lost during restoration is a different head of loss. Where diminution exceeds reasonable restoration costs, compensation will normally be capped at the latter amount.

1. United Kingdom Supreme Court: Allowed the appeal unanimously and restored the conclusion that section 2 of the Riot (Damages) Act 1886 excludes consequential loss: [2016] UKSC 18.
2. Court of Appeal: Reversed Flaux J on the second preliminary issue and held that all heads of loss proximately caused by compensable physical damage were recoverable unless statutorily excluded: [2014] EWCA Civ 682.
3. Commercial Court: Flaux J held that the warehouse had been destroyed by persons assembled riotously and tumultuously, but that section 2 compensated physical damage only and excluded consequential loss. No citation is stated.