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Riot Compensation Bill

Volume 769: debated on Friday 26 February 2016

Second Reading

Moved by

My Lords, I am pleased to propose this Bill, which would help individuals and businesses to recover from the devastating impact of rioting in our communities. The Bill has been through the other place in the skilful hands of my honourable friend Mr Wood, and it is on that basis that I bring it before your Lordships.

After the 2011 riots, many vulnerable communities were left counting the cost of some of the most destructive public disorder in a generation. The Government should of course provide a safety net to ensure that the victims of riots are adequately compensated, but they should not attempt to act as an insurer. Yet we still have a system that pays out millions of pounds in riot compensation from police budgets to large businesses, most often insurance companies. That, I suggest, was not the intention of the 1886 Act.

The Bill before your Lordships today will achieve the following. First, it will remove the archaic language of the current Riot (Damages) Act 1886, which has led to confusion and uncertainty for both claimants and decision-makers. Secondly, it will set a cap of £1 million for each claim, which will allow the vast majority of claimants to be fully compensated and, at the same time, protect the public purse. Thirdly, it will extend time limits for making a claim and submitting evidence. Fourthly, it will allow for the formation of a riot claims bureau to deal with claims arising from widespread disturbances. Fifthly, it will bring in new entitlements for motor vehicles and compensation to cover the cost of alternative accommodation. The Bill also includes a number of other provisions that would improve the process of making a claim and help to ensure that decisions can be made more efficiently in future.

The Bill balances the need to protect the public purse from unlimited liability, on the one hand, and maintains the responsibility of the Government to help the most vulnerable, and of individuals and businesses to make adequate provisions in respect of insurable risks, on the other. It retains the principle that the police are responsible for maintaining order, provides that local accountability remains in place, and ensures that communities have the right mechanisms in place to recover quickly from serious disorder. These measures represent a vastly improved and modernised scheme, with sufficient flexibility to stand the test of time. The Bill protects, above all, the truly vulnerable. I beg to move.

My Lords, I thank the noble Lord, Lord Trefgarne, for introducing this Bill, which is a welcome reform, so far as it goes, of a very odd area of English law. My interest in the subject derives from having argued a case in the Supreme Court last month on behalf of the London Mayor’s Office for Policing and Crime resulting from the 2011 riots. The issue was whether the 1886 Act, which this Bill would repeal, permits recovery for consequential losses to the property owner, such as loss of profits and loss of rent. Judgment in that case is awaited. Clause 8 would exclude almost all consequential loss, but I will say no more on that subject.

A bit of history might assist noble Lords. Statutory compensation for riot damages has its origins in the Riot Act 1714, which was enacted to address the widespread riots which occurred on the accession to the throne that year of George I. The 1714 Act made the “hundred”—that is, the local inhabitants—liable for property damage caused by persons who were, as the statute said, and as the 1886 Act repeats, “riotously and tumultuously assembled”. As the noble Lord mentioned, one merit of this Bill is that it will remove such antiquated language. The 1886 Act transferred the liability to local police authorities.

The 1714 Act is the origin of the phrase “reading the Riot Act”, because Section 1 required the local justice of the peace to approach the rioters, as the Act says,

“as near to them as he can safely come”,


“with a loud voice command”,

that, in the words of the statutory proclamation, the King wished them to disperse. If they refused, under the Act, any officer of the law assisting the justice of the peace and other authorities would have no liability for “killing, maiming or hurting” any of the rioters.

The Act also made the local inhabitants liable for any damage to buildings caused by the rioters. The 18th century judgments of Lord Mansfield and other judges explained that the liability of the local inhabitants was designed to encourage them to take action to stop the rioting. That statutory liability has persisted even though, in 1886, the obligation to pay compensation was transferred from local inhabitants to police authorities, which need no inducement to take action against rioters.

The Bill perpetuates an anomaly, because there is no statutory right to compensation in the event of a natural disaster, such as flooding, or in the event of an epidemic. Other public bodies, such as hospitals, have a liability only if negligence can be proved. Under the riot compensation law, the police are liable to pay large sums of compensation whether or not they are at fault. That is particularly striking because the general common-law rule, which was confirmed by the Supreme Court last year in the case of Michael, is that the police generally owe no liability in negligence for failing to prevent serious crime, even if they are at fault. I represented the police forces in that case.

The anomaly is even more strange because the independent Kinghan review, which was conducted on behalf of the Home Office in 2013 to examine the application of the 1886 Act, found that there is no comparable statutory scheme in other countries. Indeed, the anomaly is even worse because the 1886 Act allows insurance companies to claim compensation for sums which they pay out, despite the fact that they have charged premiums to cover the risk. This Bill will perpetuate that right for insurance companies.

The Kinghan review found that many people were concerned that, without this statutory scheme, people might find it difficult to obtain insurance to cover riot damage in some parts of the country, but in this respect Kinghan proceeded on the basis of concern rather than any hard evidence. The Minister may be able to enlighten the House. Is there any hard evidence that this statutory scheme is actually required because people would be unable to obtain insurance against riot damages?

For all these reasons, I am doubtful that we should be perpetuating the legal anomaly of statutory compensation for riot damage. As the noble Lord, Lord Trefgarne, said, the Bill will limit the compensation to £l million per claimant, but should there be any special right to compensation at all in this area alone?

If Parliament is to retain this statutory scheme, we need to consider the details of its content, and there are some odd features about it. Since 1714, when this statutory scheme was first enacted, the compensation has been confined to property damage. The exclusion of any compensation for personal injuries caused by a rioter is anomalous but is understandable because, in practice, the victim can nowadays claim under the criminal injuries compensation scheme.

However, there is a very important arbitrary distinction in the 1886 Act which is maintained in this Bill in relation to property damage. The statutory compensation is confined to damage to real property—a house or other building—and to any personal property contained within that building. So I am not entitled under the 1886 Act, and I will not be entitled under the Bill, to compensation if a rioter damages my property on the highway. If a rioter comes into my house and smashes my computer, I will be entitled to compensation, but if I am walking home along my street and a rioter grabs and smashes my computer, I have no right to compensation under the Bill. I ask the Minister: why is that?

The Bill extends liability a little way: it will allow for compensation claims for some vehicles on the highway and it will allow compensation for property on land being used for the purposes of a business, but what is the justification for otherwise distinguishing between damage to property done in a building and damage done on the highway? I cannot think of any rationale for such a distinction. There is the same riotous conduct and the same damage. The only possible rationale is a wish to limit the scope of compensation, but the distinction is simply perverse.

I want to mention three other provisions in the Bill. I welcome Clause 1(6) which will exclude compensation for a riot in a prison or similar facility. This provision is necessary to reverse the effect of the decision of the Court of Appeal in the case of Yarl’s Wood Immigration Ltd. The claimants, who maintained and operated an immigration detention centre under contract with the Home Office, applied for compensation under the 1886 Act after it was destroyed in a riot. The Court of Appeal said that in principle compensation was available under the 1886 Act. The Bill is right to remove any such liability. If a company is responsible for a prison or other secure unit, it should bear responsibility for preventing a riot, and it should not be able to claim compensation if a riot occurs on its watch.

I am concerned about Clause 8(3), which will allow the Secretary of State power to make regulations setting out factors to be taken into account in deciding on claims. These matters should, in principle, be in primary legislation so we can debate them and, if necessary, amend them. I appreciate that detail can be in regulations, but surely the principles should be set out in primary legislation. The 1886 Act is more detailed in this respect. Section 4 expressly states some of the factors to be taken into account: any failure by the claimant to take reasonable precautions to protect their property and any provocation offered by them to the rioters.

Finally, I want to mention Clause 9, which will allow a claimant who is dissatisfied with the award of compensation to have both a right of review, which I understand to mean an internal appeal, and a right to appeal, which I understand to mean a right to take the case to court. Again, the detail is to be left to regulations to be made by the Secretary of State. A point of principle arises. I do not see why a claimant should enjoy a de novo appeal right to a court. The decision on the compensation claim is an administrative decision by a public body, and if the claimant is aggrieved by that decision after a review they should be left to their remedy by way of judicial review requiring them to show that the claim has been assessed by an unfair procedure or in breach of the requirements of the statute or in some arbitrary manner.

I hope at least some of these comments are of value to the noble Lord, Lord Trefgarne, and to the Minister.

My Lords, as ever when I find myself following the noble Lord, Lord Pannick, in a debate in your Lordships’ House, I profoundly regret ever having put my name down in the first place. Either he will have said everything that one had thought worth saying or he will have exploded in advance what one had supposed had been the merits of one’s own position. Certainly, from a historical point of view my speech would have been a little more interesting had he not already shot every one of my foxes.

I cannot pretend to any particular expertise in this area of the law, but I have been intrigued by some of the litigation which followed the 2011 riots. Indeed, I have the full 36-page transcript of the Court of Appeal judgment in the Mitsui Sumitomo case in which the noble Lord, Lord Pannick, appeared for the Mayor of London in that court. It makes extremely interesting reading, at any rate for lawyers.

Having noted the basic curiosity under the 1886 Act, and indeed before that in the 1714 Act, that the community as a whole is under a strict liability to pay compensation for the consequences of a riot, whereas of course ordinarily, generally speaking, the police, as the noble Lord, Lord Pannick, has made plain, are under no such tortious liability, even in cases where they can be shown to have been at fault, the court quoted the celebrated Lord Mansfield’s explanation, given in 1776. The noble Lord, Lord Pannick, has already referred to this but I think that Lord Mansfield is worth a quotation, so I quote him:

“If the act had never been made, the trespassers would have been liable to answer for the whole injury in damages. To encourage people to resist persons thus riotously assembled, and to reward those, who, by doing their duty, shall have incurred their resentment, the same law has made a further provision, that as the trespassers are to be hanged, the country shall pay the damages: And this, by way of inducement to the inhabitants to be active in suppressing such riots, which it is their duty to do: and which being thus made their interest too, they are more likely to execute. This is the great principle of the law, that the inhabitants shall be in the nature of sureties for one another. It is a very ancient principle; as old as the institution of the decennaries by Alfred, whereby the whole neighbourhood or tithing of freemen were mutually pledges for each other’s good behaviour. The same principle obtains in the statutes of hue and cry. It is the principle here”.

The central reason why I refer to the judgment, besides that pleasing piece of historical elegance, is that it overturned the first-instance decision in that case about the range of allowable compensation in these cases. Unlike the trial judge, as the noble Lord, Lord Pannick, said, the Court of Appeal held that the claimants were entitled to all their losses, which include consequential losses, loss of profits, loss of rent and so forth. Displeased, the Mayor of London, represented by the noble Lord, Lord Pannick, failed to get leave of appeal from the Court of Appeal but got it directly from the Supreme Court. As the noble Lord has said, the judgment of that court, the argument having concluded, is now awaited.

With Clause 8, this Bill would pre-empt that decision, obviously not in respect of cases past, including that particular one, but for future cases. It would provide in Section 8(2) and (3), as your Lordships have already noted, that direct loss only is to be recoverable except in the case of temporary accommodation required by those whose houses are rendered uninhabitable. It is subject to the cap of £1 million, designed, reasonably and sensibly, to ensure that it is really the smaller people, individual householders, shop owners and so forth—the uninsured, for the most part—who will be benefited by this legislation, rather than the large insurance companies and those who can afford the fees of the noble Lord, Lord Pannick, who, as he himself points out, will already have obtained premium payments to cover these selfsame losses.

Generally speaking, I find myself rather more supportive of the Bill than it would appear the noble Lord, Lord Pannick, is. It introduces a number of clarifications and improvements. True, as all too often these days, rather more than one would wish is left to secondary legislation, regulation and so forth. It may be that one could improve on those aspects in the course of Committee.

It is of course true that Lord Mansfield’s justification for this particular type of compensation now seems perhaps a little dated; trespassers are no longer removed from the possibility of paying compensation by being hanged. The fact is, though, that there remains, certainly for the uninsured and the smaller people who suffer from these riots, some wish on the part of the wider public that these outrageous incidents of lawlessness should be compensated beyond those in the way of ordinary day-to-day criminality. It is strongly to be hoped, of course, that this Act will seldom, if ever, need to be invoked in future, but if it is I am confident that once it has been through Committee here, it will serve us better than its now obviously somewhat archaic ancestor. In general terms, I wish the Bill well as it progresses further.

My Lords, I shall detain the House only for a short period, I feel that that this is another of those occasions where my intention is never to allow the lawyers to have it all their own way. As a non-lawyer, I should point out that Lord Mansfield was of course extremely prejudiced on this matter because he himself had been the subject of a riot. His house was entirely destroyed and his books thrown out in the Gordon riots. He was saved in his major house, Kenwood, only by ensuring that the rioters were liberally supplied with drink as they appeared on the edge of Hampstead Heath. Most of them having drunk enough, they decided it was better to go home than to burn Kenwood House. We owe our present ability to visit Kenwood entirely to the provision of drink by Lord Mansfield.

The only reason I know this is that the house I live in was occupied at the time by the magistrate who called the Riot Act as far as the Gordon riots were concerned. As a Catholic, I understand that those sort of riots were very uncomfortable. His house was marked by the rioters; they would go through in the daytime and mark the house with a cross, and because others were on their side you would not dare rub this cross out. However, he stood in front of the doorway and rubbed it out with his hand behind his back and therefore saved his house, although he was unable to save Lord Mansfield’s.

When we discuss this later we should not do so with too much dependence upon Lord Mansfield, who had every reason to want compensation.

My Lords, first, I thank the noble Lord, Lord Trefgarne, for bringing this Bill before the House today. After being on the statute book for 130 years and in that time rarely used, it is not surprising that the Riot (Damages) Act 1886 is no longer fit for purpose.

The riots in August 2011 were a terrible event which I hope will never happen again. They resulted in five people losing their lives, criminality, theft and violent disorder on an unprecedented scale in recent years, and in London alone the damage was estimated to be half a billion pounds. As we have heard, the language of the Act is not what we expect today, which makes it difficult for people to understand and helps no one, as the noble Lord, Lord Trefgarne, said. There are of course important omissions in the Act; for understandable reasons there is no mention of motor vehicles, no consideration of interim compensation for victims while claims are processed, no consideration of “new for old” replacement of damaged goods, and no powers for the police to delegate the administration of the compensation process.

The present legal framework for compensating victims of riots has simply proved inadequate, so it is right that we carefully consider how the financial burden of any future riot is managed. As we have heard, there is an established principle that the police are liable for damages incurred during riots. The thinking here is of course that there is an implied contract between the public and the police, which again, the noble Lord, Lord Trefgarne, referred to.

In the other place my honourable friends Mr Steve Reed and Mr David Lammy have worked tirelessly on this issue. Both their constituencies were badly affected by the 2011 riots. Mr Reed used the Freedom of Information Act to show that, three years after the riots, 133 victims in London had yet to receive a penny in compensation from the police. Victims are still waiting for £40 million to be paid, which is unacceptable. The Prime Minister of course promised that no one would be left out of pocket but some of the victims have been waiting far too long already for that promise to be met.

The Government have recognised the problems that people have had in receiving compensation, commissioning the independent review chaired by Neil Kinghan. The Kinghan review was published in September 2013 and made a series of recommendations, including that the principle that the police are strictly liable for damages incurred during riots should be maintained. It recommended that legislation ought to protect insurers so as not to deter people from taking out insurance policies, or to inflate insurance costs. It recommended that payments to insurance firms should be limited to businesses insured with an annual turnover of less than £2 million, and it suggested that legislation should allow the police to delegate the administering of claims to a body made up of insurance professionals rather than having to do it themselves. A further important recommendation was that allowance be made for compensating at the cost of replacement goods; that is, “old for new”, as is the case in many modern insurance policies. It was judged by the review that the Act should be replaced.

While we support the principle that the police ought to be strictly liable for damages incurred during the course of a riot, it is important that our police forces are not asked to promise a blank cheque. It is impossible for police forces to plan and budget for the possibility of having to compensate victims of riots without some understanding of the likely costs they will have to bear. To deal with this problem, the Kinghan review originally proposed that insurers would be able to claim only for businesses with an annual turnover lower than £2 million. The Bill instead of course places a £1 million cap on the total claim that can be made, and removes any reference to company turnover, which we think is right.

As I said at the start of my remarks, we welcome the Bill, notwithstanding the very valid points made by noble Lords in this debate. The present arrangements for dealing with compensation after riots are clearly inadequate and a new legal framework is required. We must not fail victims of any future riots as, unfortunately, so many victims of the 2011 riots have been let down and are still waiting for proper redress today.

My Lords, I, too, join noble Lords in paying tribute to my noble friend Lord Trefgarne on securing, bringing forward and outlining the Bill with such clarity today. The noble and learned Lord, Lord Brown of Eaton-under-Heywood, spoke of his profound regret when he discovered that he was to speak after the noble Lord, Lord Pannick, in this debate, such was the noble Lord’s powerful exposition. It is a challenge for me to have to come to the Dispatch Box after the noble Lord, Lord Pannick, the noble and learned Lord, Lord Brown, and my noble friend Lord Deben’s historical exposition of Lord Mansfield’s conflict of interest. I was led to believe that this would be an uncontroversial Friday morning Bill but of course it has not turned out to be quite like that. I will try to address a number of the issues.

I am sure that we are very thankful that serious rioting continues to be a rare occurrence in this country, but that is not a reason to be complacent. History has told us that a breakdown in order can occur at any time and we should not wait until victims are waiting for assistance before we improve the system to put in place support for them. The Government have used the time since the last serious riots to undertake an independent review followed by public consultation and to use these to create careful and considered new legislation. Her Majesty’s Government wholeheartedly support these measures, which represent the best possible replacement for the outdated and unsuitable Riot (Damages) Act.

The Bill addresses the need to protect public funds from unlimited liability while continuing to offer a vital safety net to communities recovering from the devastating effects of rioting. Based on the experiences of claimants, claims handlers and insurers, the Bill has been drafted in a way which is designed to be more flexible and responsive to the practical challenges that people face after a riot.

It is the Government’s intention that regulations will further enhance the measures set out in the Bill by providing the necessary details for claims handlers to improve consistency in decision-making and allowing flexibility for measures to be updated and adjusted in future. On that point, I say to the noble Lord, Lord Pannick, that the regulations will of course come before your Lordships’ House. In addition, the Government expect to produce guidance for both the public and claims handlers, as well as publicising these reforms so that potential claimants are well aware of the provisions in place to support them.

Having set out the Government’s position on that, I shall try to address some of the issues that were raised when the noble Lord, Lord Pannick, read the Riot Act in relation to the Bill. First, he made a number of detailed observations about apparent anomalies and differences in the way that highways and other issues are tackled. Rather than attempt to address these points individually, I shall be happy to write to him about them, placing a copy in the Library.

The noble Lord asked whether there was any hard evidence that people may not get insurance. In areas affected by riots, people can get insurance. However, the 2011 riots showed that a number of claimants simply could not afford insurance and, if the Act had not been in place, hundreds—not thousands—of people would have gone without compensation.

On the question of whether to allow the right to a judicial review of a case, the intention is to allow a right of appeal to a First-tier Tribunal. This is simply to enable more people to obtain an independent decision. The ability to take court action through a judicial review would have been beyond the financial ability of many who would have made a riot compensation claim.

In terms of police liability, the independent reviewer concluded that on balance, while the cause of riots can vary, their occurrence indicates a breakdown in law and order, and it is the responsibility of the police to prevent such a breakdown. This is a principle on which the 1886 Act is based and it remains valid today.

The noble Lord, Lord Pannick, then turned to international comparisons, saying that this was without precedent around the world. There is of course comparable legislation in Northern Ireland. The only other country where this legislation is in place that we have been able to come up with is Sweden.

On balance, for all the reasons that have rightly been identified, the Bill seeks to look at the outdated, anomalous and anachronistic legislation covering these important areas and seeks to update it for the modern era to ensure that, on the mercifully rare occasions when law and order breaks down and people’s lives and properties are affected, they have a means of redress which is both swift and fair for their purposes. The Government support the Bill.

I mentioned the victims of the 2011 riots and the fact that my honourable friend Steve Reed has found out that many victims have still not had a penny nearly three years after making a claim. Will the noble Lord confirm that he will talk to his right honourable friend the Prime Minister about that? Frankly, it is outrageous that three years on not a penny has been paid in some cases.

Some cases are still going through the courts. They are the subject of litigation and controversy, and therefore I am not able to comment on them. Perhaps in the letter that we are going to write in response to some of the detailed points raised by the noble Lord, Lord Pannick, we can provide an update on where we are more generally in relation to compensation that is being paid.

That would be helpful. The noble Lord has used the word “swift” many times. Considering where we are now, I would not say that things have been dealt with swiftly.

Perhaps that was not the best word to use. I am trying to recall the figure but I think that about 4,000 people have had their claims settled. Whenever there is an occurrence of this kind there will of course be significant disputes, often between the insurers and the authorities, about where liability rests. It may be that an individual has been compensated but the insurer is seeking to recover the amount. However, I will certainly look into that because, if matters have not been dealt with swiftly, the intention is that they certainly should be in future.

My Lords, I am grateful to all noble Lords, especially my noble friend the Minister and indeed the noble Lord, Lord Pannick, for their contributions to this debate.

Bill read a second time and committed to a Committee of the Whole House.