Re-reading the Riot Act: compensation for riot damage

Edward Coulson looks at the Court of Appeal's recent decision in Mitsui Sumitomo on the recovery of consequential (including business interruption) losses from police authorities by property owners and their insurers.

On the night of 8 August 2011 a group of 20 to 25 gang members aged between 12 and 20 with faces concealed by headscarves and armed with at least three petrol bombs, sticks, iron bars, a hammer and a baseball bat attacked the Sony distribution warehouse at Enfield. They broke open a door, swarmed inside stealing some items before setting fire to the building with the petrol bombs. This took less than half an hour but the warehouse and its contents were completely destroyed.

The law on riot

The origins of the law go back to King Alfred. Briefly, the principle is that the inhabitants of a district stand as sureties for the rioters and are liable to pay compensation for the damage they cause. That liability was transferred by 19th century legislation to local police authorities.

While seemingly arcane, the historical background is important in understanding the outcome of this case. In essence, and in sharp contrast to the general legal position of the police, the legislation provides property owners with an indemnity for the damage caused by the rioters as trespassers and for which the police are strictly liable.

“Riot” is defined in s.10(1) Public Order Act 1986 and its essential ingredients are:

• 12 or more persons present together.
• Threatening violence for a common purpose.
• Such as to cause a person of reasonable firmness to fear for his personal safety.

The legislation dealing with compensation is the Riot (Damages) Act 1886 which provides that where a house, shop or building has been injured or destroyed “or the property therein has been injured, stolen or destroyed” by persons “riotously and tumultuously assembled” compensation shall be paid out of the police fund for the area.

The definition is highly fact sensitive. In this appeal, it was accepted that the events at the Sony warehouse were a “riot” within the meaning of the Public Order Act so attention shifted to analysis of “tumultuous” and the effect of threats of violence.

Again, the decision was fact based and turned heavily on the findings of the first instance judge, Mr Justice Flaux, that the rioters’ behaviour had not been furtive and it had been “agitated, excited and volatile”. The Court of Appeal refused to overturn these factual findings and upheld this part of the decision.

The law on compensation

The Court of Appeal’s decision on compensation is more significant. Flaux J had held that the affected property owners were entitled to compensation only for physical damage to their property and not for consequential loss.

As the Court of Appeal observed, that conclusion hung by a surprisingly narrow thread and had certainly not been the law before 1714. In particular:

• The 1886 Act and its preamble (subsequently repealed) make it clear that compensation extends to contents (see the quotation above) and says nothing to exclude recovery of consequential loss.
• Although regulations made under the 1886 Act between 1886 and 2011 (and now repealed) envisaged only the recovery of compensation for damage to property, that was not a sufficient pointer to the refusal of compensation for consequential loss.

There was a surprising dearth of authority on consequential loss. Only one Scottish case on different statutory language had found against its recovery but it was overturned or distinguished by the Court of Appeal.

Against that background, it is not surprising that the Court of Appeal found that consequential losses are recoverable. The tribunal cautioned against an over-literal interpretation of the indemnity for damaged caused by the rioters’ trespass: the 1886 Act makes it clear that the compensation award may take account of the conduct of the applicant, the precautions taken, being an accessory to the riotous conduct and any provocation offered.


The decision is significant because of the scale and extent of the damage caused by the August 2011 riots and because it opens the way to the recovery of business interruption losses from the police. The 1886 Act provides for insurers who have paid out to be subrogated to their insureds’ claims against the police. However, given the amounts involved at the Sony warehouse, it seems likely there will be an application for permission to appeal to the Supreme Court.

In June the Home Office commenced a consultation on the 1886 Act recommending (apparently before this decision was handed down) that the Act should not extend compensation to consequential loss. That is of course exactly what the Court of Appeal has now done. It remains to be seen whether a government with parliamentary time to spare will amend the law before the next election in May 2015.

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