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A first under the Building Act 1984 (part 2)

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. But, like all Victorian piers, it reached the end of its design life and has, more recently, been in increasing dilapidation.

The pier made it into the law reports a year ago (which I commented on at the time), and has done so once again, this time before the Court of Appeal in Manolete Partners plc v Hastings Borough Council. It remains the first successfully litigated claim for compensation under section 106 of the Building Act 1984.

Manolete Partners plc v Hastings Borough Council

On 16 June 2006, Hastings Borough Council exercised “emergency” powers under section 78 of the Building Act 1984 to close Hastings pier to the public over its concerns about the pier’s structural integrity. Section 106 of the Act 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 Act except where the person was “in default”.

The claimant (under an assigned claim) was a tenant-owner of a bingo hall and amusement arcade whose business was closed by the exercise of the power just at the beginning of the profitable summer season. The tenant claimed “full compensation” from the council under section 106.

At first instance, the council put forward various defences, including that section 106 compensation did not apply as the tenant was “in default” because:

  • It was in breach of section 2 of the Occupiers Liability Act 1957 (in failing to take reasonable care to ensure that visitors were reasonably safe) and 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).
  • By reason of those breaches, the claim could not succeed because the claimant was relying upon its own illegality and sought the application of the ex turpi causa rule.

Ramsey J found in the claimant’s favour and determined that, even if the tenant was in breach of its duties under the 1957 or the 1974 Acts, that did not constitute “default” within the meaning of section 106(1) of the 1984 Act. “Default” meant default in relation to the provisions of the 1984 Act. All other defences were rejected.

On appeal, the council again ran the two defences identified above and, in a unanimous judgment, the Court of Appeal again rejected those defences, concluding that:

  • The tenant had no responsibility for the structure of the pier and was not responsible for the defects that had developed.
  • A breach of the 1957 or 1974 Acts by admission of the public onto its business premises did not constitute a default as understood in section 106 of the 1984 Act.
  • The defence of ex turpi causa was not available.

The case is the first successfully litigated claim for compensation under section 106 of the Building Act 1984.

The meaning of “default”

The meaning of “in default” under section 106 of the 1984 Act is at the heart of the judgment. Did it mean:

  • Default in relation to the provisions of the 1984 Act, as determined by Ramsey J and argued for by the claimant; or
  • Breach of legal obligations more widely, as the council argued.

The Court of Appeal’s approach to this task of statutory interpretation was an orthodox but widely-cast exercise containing copious references to Bennion on Statutory Interpretation and a full account of the development of the state’s interventions in relation to dangerous buildings and structures. From the pioneering Metropolitan Buildings Act 1844 for London, which provided the first laws regulating construction work as well as duties upon the City authorities to shore up dangerous buildings, to the development of the compensation provision which first featured in the Public Health Act 1875 and to modern consolidation under the Public Health Act 1961 and then the Building Act 1984.

The reasoning on the meaning of “default” features at paragraphs 74 to 79 of Jackson LJ’s leading judgment. The paramount principle was a requirement that the statute should be construed as a whole and the provision read consistently within that whole:

“74.   …Where the same phrase occurs more than once it should generally be construed in the same way on each occasion: see Bennion at page 1160. The phrase “in default” occurs in three significant places in the 1984 Act, namely in section 77(2)(b), section 78(7) and section 106(1). In both sections 77(2)(b) and section 78(7) “default” has a narrow meaning. It clearly refers to a failure to perform obligations under the 1984 Act.

75. This circumstance is a pointer towards construing “default” in section 106 narrowly, namely as meaning breach of an obligation under the 1984 Act.”

The council argued that the legislative history showed that “in default” in predecessor statutes must have included breaches of a number of other local statutes and bye-laws regulating building works. This was accepted by Jackson LJ. However, he noted that the position has changed in that the 1984 Act together with subordinate regulations are comprehensive. “In default” has a narrow construction meaning breach of an obligation arising under the 1984 Act:

“The provision does not require the court or the arbitrator to conduct a wide ranging review of other legislation and the common law in order to see whether the claimant is in breach of any duties arising outside the 1984 Act.”

The ex turpi causa rule

The council argued that as the tenant was in breach of section 2 of the Occupiers Liability Act 1957 and sections 2(1) and 3 of the Health and Safety etc. at Work Act 1974, the ex turpi causa rule prevented the tenant from bringing a claim against the council for barring access to its premises on the pier.

The Court of Appeal, going further than Ramsey J, determined that, in fact, the tenant had not incurred liability to a member of the public for breach of the 1957 Act and that there was no basis for saying that the tenant had committed a breach of the statutory duties owed under the 1974 Act. But, importantly, even if there was such a breach, this would not trigger the operation of the ex turpi causa rule. Under either the wide or narrow formulation of the ex turpi causa rule in Gray v Thames Trains Ltd, the rule had no application in this case:

“Stylus [the tenant] would not have been claiming compensation for the consequences of a criminal conviction. Nor would Stylus have been claiming compensation for the consequences of its own criminal conduct.”

Jackson LJ continued that the ex turpi causa rule had no real place here because the “default” proviso itself was the control mechanism that eliminated claims that were unacceptable on public policy grounds.

You have been warned

The case stands as a salutary warning to local authorities when dealing with dangerous premises or structures to think carefully about the approach they take from the array of actions and powers available to them as doing the minimum may well have costly consequences for them. Here the court said a failure to take timely alternative action resulted in the need to exercise emergency power under section 78 of the 1984 Act, which has ultimately resulted in a requirement to pay out under section 106.

An end to maintenance and champerty?

It is also a case that is very much of our time because of the Court of Appeal’s unblinking response to the nature of the claimant, a company that had purchased the cause of action in part for its own profit. The purchase and sale of causes of action and funding litigation by this means are now wholly acceptable: the final nail in the coffin of the doctrines of maintenance and champerty.

Samuel appeared on behalf of Manolete Partners plc, both at first instance and in the Court of Appeal.

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