Hastings Borough Council v Manolete Partners Plc

The court considered the meaning of the proviso in section 106(1) of the Building Act 1984 that compensation is excluded where the claimant has been "in default" in relation to the matter to which the authority's powers were exercised. The critical issues were identifying the "matter" which triggered the council's emergency action under section 78 and whether the claimant (Stylus) was in default in relation to that matter.

The Supreme Court held that the relevant "matter" was the specific risk of collapse from crowd-loading at imminent events in June 2006, not the general structural condition of the pier or earlier reports about long-term defects. Stylus was not in default as to that matter and therefore was entitled to pursue compensation under section 106 for losses caused by the emergency closure. The court also explained that the arbitrator remains entitled to take into account Stylus's statutory and common-law duties when assessing quantum.

This was an appeal by Hastings Borough Council against the Technology and Construction Court's declaration that the council was liable to pay compensation under section 106 of the Building Act 1984 for loss to a business on Hastings Pier caused by the council's emergency closure under section 78 in June 2006. The claimant's claim was pursued by Manolete as assignee of Stylus Sports Ltd. The central factual background was that engineering reports (notably the Hamill Davies Limited report of 2004 and the Gifford report of June 2006) identified serious defects in the pier. The council closed the pier under section 78 after the Gifford report, citing an immediate risk from possible crowd-loading at planned events.

Nature of the claim: a declaration that the council was liable to pay compensation under section 106 for loss suffered during the period the council closed the pier under emergency powers.

Issues framed:

• What was the "matter" in relation to which the council exercised its emergency power under section 78?
• Was Stylus "in default" in relation to that matter within the meaning of section 106 so as to preclude recovery?
• Whether the phrase "in default" in section 106 is confined to default under the Building Act 1984 or extends to breaches of other statutory or common-law duties (for example Occupiers' Liability Act 1957 and Health and Safety at Work etc. Act 1974).

Procedural history: Proceedings began in the Technology and Construction Court ([2013] EWHC 842 (TCC)). The Court of Appeal ([2014] EWCA Civ 562) agreed with the judge on the result but took a narrower view of the phrase "in default". The case came on appeal to the Supreme Court.

Court's reasoning and outcome: Lord Carnwath (with the court agreeing) analysed section 106 by asking (i) what was the matter in relation to which the authority acted and (ii) whether the claimant was in default as to that matter. The evidence showed the council acted because of the immediate risk of crowd-loading at imminent events identified in the Gifford report and communicated in the tenants' letter. Stylus was not responsible for that triggering matter (it was not responsible for the state of the pier in that respect or for the events), so it was not in default as to the relevant matter and could recover under section 106. The court observed that it was unnecessary to decide finally whether "in default" must be confined to the 1984 Act; on the materials there was nothing to require such a narrow construction. The Supreme Court dismissed the appeal. The court also emphasised that issues bearing on quantum, including Stylus's statutory duties and the structural condition of the pier, remain open for the arbitrator to consider.

Appeal dismissed. The court held that the relevant "matter" which led the council to exercise emergency powers under section 78 was the immediate risk from crowd-loading at planned events identified in June 2006; Stylus was not "in default" as to that matter and so was entitled to pursue compensation under section 106. The court also indicated that there is no necessity to construe "in default" as limited to breaches under the Building Act 1984, but that point did not need to be decisive on the facts. Issues of quantum remain for arbitration where Stylus's statutory and common-law duties may be taken into account.

Appeal to the Supreme Court from the Court of Appeal [2014] EWCA Civ 562, following the Technology and Construction Court decision Ramsey J [2013] EWHC 842 (TCC).