Practical Law

Hastings pier opened in 1872, enjoyed its prime in the 1930s and was a popular music venue in the 1960s, with many notable bands (including the Who and the Rolling Stones) playing there.

Like so many Victorian piers, since then, the pier was not kept in good repair (it also suffered major storm damage). Consequently, in June 2006 Hastings Borough Council exercised “emergency” powers under section 78 of the Building Act 1984 (BA 1984) to close the pier to the public. The local authority was concerned about its structural integrity. However, by closing the pier to public access, it closed the tenant’s bingo hall and amusement arcade.

There followed a claim (by way of an assignment) by the tenant for statutory compensation under section 106 of the BA 1984 and the matter came before Ramsey J, who delivered judgment earlier this year.

Manolete Partners plc v Hastings Borough Council

Section 106 of the BA 1984 provides for the local authority to pay full compensation to any person who has suffered damage as a result of the exercise of powers under the BA 1984, except where the person was “in default”.

The local authority argued that:

• There was no good independent cause of action. In particular, in relation to an analogous claim in nuisance, it relied on the defences of statutory justification and the lack of any evidence that it had acted “unreasonably”. Therefore, it argued, there was no entitlement to compensation.
• Section 106 compensation did not apply because the tenant was “in default” under section 2 of the Occupiers Liability Act 1957, in failing to take reasonable care to ensure that visitors were reasonably safe. Also, it was in breach of sections 2(1) and 3 of the Health and Safety at Work etc. Act 1974, as it allowed its employees and others to be on the pier.

Finding in favour of the tenant, Ramsey J determined that no independent cause of action in tort needed to be established to succeed in a claim for compensation under section 106 and that, absent the statutory power, there would have been a good cause of action for the loss suffered.

Further, he held that “default” required breach of some obligation to do something imposed by the BA 1984 itself, or at least the tenant being in breach of some obligation to the local authority, not some other obligation owed to third parties. No breach of obligation to the local authority existed:

“…the fact that a party may be in breach of a duty owed to third parties should not, in principle, prevent that party from obtaining compensation when that party sustains damage by reason of the exercise by the relevant authority of powers under the Act. Very often the acts of a party may give rise to compensation from one party whilst at the same time being in default as regards third parties. It is generally only default in relation to the party obliged to give compensation which would provide a defence. In my judgment it is that principle which applies here.”

It was Ravenclaw, the landlord and owner of the pier, that had failed to keep it in good repair and therefore it was in breach of section 106, not the tenant. Thus, the court granted the declaratory relief sought by the tenant, namely that it was entitled to the compensation it sought under section 106 and it was not “in default”, within the meaning in section 106.

Permission to appeal was sought by Hastings BC at first instance, but rejected. A further application for permission to appeal has been made to the Court of Appeal and is pending.

Implications of Manolete Partners v Hastings

The case stands as the first successfully litigated claim for compensation under section 106 of the BA 1984. The court adopted a narrow interpretation of the section, which is unsurprising. If it had held otherwise, it would give rise to the widest possible legal and factual enquiry on any such claim, as defendant local authorities scrabble around for any “default” of a claimant to any third party, to the effect of depriving the compensation provisions of section 106 of virtually all effect.

It is also interesting because it contains useful guidance as to the meaning of “default” in the statutory context. A sign of the times too, that the claim was brought by a specialist insolvency acquisition and funding company having had the cause of action assigned by the insolvency practitioners of the tenant in liquidation.

Samuel appeared on behalf of Manolete Partners plc.