Manolete Partners plc v Hastings Borough Council
 UKSC 50  WLR (D) 426
2016 July 27
Baroness Hale of Richmond DPSC, Lord Kerr of Tonaghmore, Lord Carnwath, Lord Toulson, Lord Hodge JJSC
Building — Compensation — “In default” — Tenant of arcade on pier continuing to operate despite surveyors’ report highlighting need for repairs to columns supporting arcade and adjacent decking — Decking providing means of access to and from remainder of pier — Local authority having knowledge of report but taking no action — Second surveyors’ report warning failure to repair supporting columns risking overloading of decking in event of emergency evacuation — Local authority exercising statutory power to close pier as dangerous building in response to second report — Tenant’s assignee claiming statutory compensation for loss of business caused by closure — Exclusion from compensation where claimant having itself been ”in default” — Local authority claiming tenant’s continued use of arcade after first report in breach of statutory duties as employer and occupier and amounting to “default” — Whether “default” relating only to matter in relation to which authority exercised power — Building Act 1984 (c 55), ss 78, 106
The tenant carried on a bingo hall and amusement arcade business in units on a pier which it leased from the landlord. Having become concerned about the structural integrity of the pier, the tenant commissioned a survey, which reported in 2004 that there were structural defects in the supporting columns underneath its units and surrounding deck area, which it recommended should be remedied within one year but which the landlord did not adequately address. The local authority was aware of the report and took no action but, in 2006, commissioned a second report which warned that the deck area outside the tenant’s units, which provided the only means of exit from the pier was, given the structural defects, at risk of collapse from any crowd-loading, in particular an evacuation of a night club at the end of the pier. It therefore recommended immediate restrictions. The local authority, acting under section 78 of the Building Act 1984, closed the pier to the public on the stated grounds that it was unsafe for large numbers of people, particularly in the event of an emergency evacuation. The tenant eventually carried out the necessary works itself following the landlord’s failure to do so, but subsequently went into liquidation. The claimant, as assignee of the tenant, brought a claim against the local authority under section 106 of the 1984 Act as a person having sustained damage by reason of a local authority’s exercise of its powers under section 78 “in relation to a matter” as to which it had not been “in default”. The local authority resisted the claim for compensation on the ground that the tenant had been “in default” by having continued to operate its businesses on the pier after the first report despite being made aware of the structural problems, thereby exposing its employees and members of the public to danger, in breach of its duties under the Occupiers’ Liability Act 1957 and the Health and Safety at Work etc Act 1974. The judge held that the reference to “default” was to be read as default in respect only of obligations under the 1984 Act itself and so granted a declaration that the local authority was liable to make full compensation under section 106. On appeal by the local authority, the Court of Appeal upheld the judge’s decision for like reason.
Held, appeal dismissed. Section 106 of the Building Act 1984, in giving a right to compensation to a person who had sustained damage by reason of the exercise of a local authority’s powers under the Act in relation to “a matter as to which” he had not himself been in default, required the court first to identify the “matter” in relation to which the authority had exercised its powers and then to ask whether that was a matter “as to which” the claimant had been in default. Here, the matter which had triggered the closure of the pier had been the state of the pier combined with fear of possible collapse from overloading, particularly during an emergency evacuation. The tenant had not been legally responsible for the state of the pier, nor had it been responsible for the events which triggered the local authority’s action. It followed that whatever might have been its position as respects its clients and employees, it had not been “in default” as to the matter which had led to the authority’s use of section 78. The decision of the Court of Appeal that the claimant was entitled to have its compensation under section 106 assessed by an arbitrator would therefore be upheld, albeit for different reasons (since, contrary to its view, there was nothing which required the words “in default” in section 106 to be limited to default under the 1984 Act) (paras 25, 28, 36).
Steven Gasztowicz QC and Jack Parker (instructed by Head of Legal Services, Hastings Borough Council, Hastings) for the local authority.
Martin Bowdery QC (who did not appear below) (instructed by Gaby Hardwicke, Eastbourne) for the claimant.
Reported by: Colin Beresford, Barrister
© 2016. The Incorporated Council of Law Reporting for England and Wales.