Bedfordshire Police Authority v Constable & Ors

Ever since 1886 each police authority, or the statutory body responsible for its funds, has been under a liability for injury to or theft or destruction of certain types of property in its area caused by “any persons riotously and tumultuously assembled together.” The words quoted currently appear in the Riot (Damages) Act, 1886 (“the 1886 Act”). They echo words used in the Riot Act of 1714 (“the 1714 Act”), best known for its enactment of the proclamation to be read by a justice commanding those assembled to disperse. Under s 6 of that Act a similar liability was imposed on the hundred (an ancient subdivision of the county), or on a city or town where such city or town either was a county of itself or was not within any hundred. That liability was confirmed with certain revisions in the Remedies against the Hundred (England) Act 1827 (“the 1827 Act”), before being replaced in 1886 - initially by special statutory provision for the Black Monday riot in London on 8 February that year, and later more generally by the liability imposed on police authorities under the 1886 Act.

A Home Office consultation paper of July 2003 recorded concern that such a liability may be inappropriate to modern conditions. Any such concern has not so far led to any further statutory reform, and police authorities remain under a liability which has its origins in the tumultuous times when George I ascended to the throne. The broad question in the present case is whether that liability falls within the public liability section of a policy of insurance taken out by the claimant (“BPA”).

BPA is the police authority for Bedfordshire. The Chief Constable of Bedfordshire (“the Chief Constable”) has operational responsibility for policing in Bedfordshire under the Police Act 1996 (“the 1996 Act”). The Chief Constable is appointed by and reports to BPA, which under s 6 of the 1996 Act is required to secure the maintenance of an efficient and effective police force in Bedfordshire. BPA and the Chief Constable together took out insurance for the period 1 April 2001 to 31 March 2002 under policies which were in two layers. The primary layer (“the Underlying Policy”) was insured by the American Re-Insurance Company (“ARC”) and included public liability cover for amounts up to £2 million. The defendant is the active underwriter of Syndicate 386 at Lloyd’s (“the Syndicate”). The Syndicate insured BPA on an excess layer (“the Excess Policy”) which included public liability cover for amounts greater than £2 million and up to £38 million. A dispute has arisen between BPA and the Syndicate as to whether and if so to what extent a potential liability of BPA under the 1886 Act would give rise to a valid claim by BPA under the Excess Policy. These proceedings have been brought in order to resolve that dispute. For this purpose the defendant is sued on his own behalf and on behalf of all other members of the Syndicate.

The alleged liability of BPA under the 1886 Act concerns an outbreak of violence which began at the Yarls Wood Detention Centre (“Yarls Wood”) on 14 February 2002. Yarls Wood was operated under a contract with the Secretary of State by a private company. The violence, along with a fire which broke out during the course of the violence, was associated with various types of injury to or theft or destruction of property. I shall refer to property owners who made claims against BPA under the 1886 Act in this regard as “the Yarls Wood Claimants”, and to their claims as “the Yarls Wood Claims”. ARC has accepted that, subject to the terms and conditions of the Underlying Policy, a liability on the part of BPA to meet the Yarls Wood Claims falls within that policy. The Syndicate has declined to accept that this is so as regards the Excess Policy. The Excess Policy expressly gives cover for sums which BPA becomes legally liable to pay in respect of damage insured in accordance with the terms of the Underlying Policy, but it is not contended by BPA that the Syndicate is under any obligation to adopt such stance as may be taken on the Underlying Policy by ARC. An action has been brought against BPA by the Yarls Wood Claimants; this is expected to come to trial shortly.

It is common ground that the Excess Policy and Underlying Policy were intended to insure BPA and its employees, and the Chief Constable and police officers reporting to the Chief Constable, against public liability for “accidental” injury or damage falling within the extent of the cover. The Syndicate accepts that the Yarls Wood Claims are claims for “accidental” damage, on the basis that the damage in question was not intentionally caused by the assured. However the Syndicate denies that these claims are within the extent of the cover. For the purposes of the present trial the parties formulated 6 issues on the basis of alternative hypothetical facts. As argument proceeded however it became clear that I would not need to refer to hypothetical facts and that only two issues arose. I shall call them Issue 1 and Issue 2. Both concern words in the Underlying Policy which limited cover. I set out the relevant indemnifying clause with the words in question italicised:

The COMPANY will indemnify the ASSURED in respect of all sums which the ASSURED may become legally liable to pay as damages … for … (b) accidental DAMAGE to PROPERTY …occurring within the Geographical Limits during the Period of Insurance arising out of the BUSINESS.

[Words in block capitals were defined in the General Definitions section of the Underlying Policy; for convenience they appear later in this judgment with only the initial letter in capitals.]

Issue 1 concerns the words “legally liable to pay as damages”. The Syndicate contends that such sums as BPA may be legally liable to pay under the 1886 Act are not payable as damages within the meaning of the Underlying Policy. BPA says that they are. The issue thus is as to what the policy means when it says “legally liable to pay as damages” and whether a legal liability under the 1886 Act falls within that meaning. Issue 2 concerns the words “arising out of the Business”. The Syndicate contends that they mean that accidental damage to property is covered only if that damage arises out of “the Business” as defined in the Underlying Policy. Here there are two sub-issues. Sub-issue 2(1) is whether the words “arising out of the Business” apply to the initial phrase “sums which the Assured may become legally liable to pay” (as BPA contends) or the later phrase “accidental damage” (as the Syndicate contends). Sub-issue 2(2) arises if BPA is wrong on sub-issue 2(1). In that event BPA contends, but the Syndicate denies, that the damage which is the subject of the Yarls Wood Claims arises out of “the Business” as defined in the Underlying Policy.

In order to describe and analyse the arguments on these issues I begin with an account of the 1886 Act and its predecessors.

A common feature of relevant provisions in the 1714, 1827 and 1886 Acts is that liability is strict. In that regard they adopt an approach found in much older statutes. Mr Colin Edelman QC, who appeared with Mr Andrew Burns for BPA, cited two examples. The first was the Statute of Winchester of 1285, which made the hundred where a robbery was committed answerable for any such robbery unless the bodies of the robbers were produced. The second was the Statute of Hue and Cry of 1585 which - in addition to providing machinery for enforcement against residents of a hundred liable under the Statute of 1285 - entitled such a hundred to claim over against an adjoining hundred after hue and cry was made in that adjoining hundred.

The liability is strict in the sense that it arises whether or not the claim is made for something which could or should have been prevented. It gives those potentially liable a strong incentive to do what they can to prevent the relevant circumstances from arising. There are differences, however, in the way that the liability is expressed in each of the 1714, 1827 and 1886 Acts.

Under the 1714 Act the provisions imposing liability on the hundred, repeated in similar terms for cities or towns which either formed counties of themselves or did not form part of a hundred, were as follows:

…the inhabitants of the hundred in which such damage shall be done, shall be liable to yield damages to the person or persons injured and damnified by such demolishing or pulling down wholly or in part; and such damages shall and may be recovered by action to be brought in any of his Majesty's courts of record at Westminster …

Under the 1827 Act laws relative to remedies against the hundred were consolidated and amended. As regards relevant types of injury to property caused by persons riotously and tumultuously assembled together the 1827 Act stated in s 2 (with similar provision in s 12 for localities not in the nature of a hundred):

… the Inhabitants of the Hundred, Wapentake, Ward, or other District in the nature of a Hundred, by whatever name it be denominated, … shall be liable to yield full Compensation to the Person or Persons damnified by the Offence …

In cases where “… the Damage alleged to have been sustained … shall not exceed the Sum of Thirty Pounds …” ss 8 and 9 of the 1827 Act provided a summary remedy under which Justices at Petty Sessions, if they found that a claimant had sustained relevant damage,

… shall make an Order for Payment of the Amount of such Damage …

The long title of the 1886 Act in its original form was “An Act to provide Compensation for Losses by Riots.” This preceded a preamble in the following terms:

Whereas by law the inhabitants of the hundred or other area in which property is damaged by persons riotously and tumultuously assembled together are liable in certain cases to pay compensation for such damage, and it is expedient to make other provision respecting such compensation and the mode of recovering the same:

The 1886 Act originally comprised eleven sections and two schedules. Section 1 set out the short title: “The Riot (Damages) Act, 1886.”

Section 2 had the marginal note, “Compensation to persons for damage by riot”. It read:

2.

- (1.) Where a house, shop, or building in any police district has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as herein-after mentioned shall be paid out of the police rate of such district to any person who has sustained loss by such injury, stealing or destruction; but in fixing the amount of such compensation regard shall be had to the conduct of the said person, whether as respects the precautions taken by him or as respects his being a party or accessory to such riotous or tumultuous assembly, or as regards any provocation offered to the persons assembled or otherwise.

(2.) Where any person having sustained such loss as aforesaid has received, by way of insurance or otherwise, any sum to recoup him, in whole or in part, for such loss, the compensation otherwise payable to him under this Act shall, if exceeding such sum, be reduced by the amount thereof, and in any other case shall not be paid to him, and the payer of such sum shall be entitled to compensation under this Act in respect of the sum so paid in like manner as if he had sustained the said loss, and any policy of insurance given by such payer shall continue in force as if he had made no such payment, and where such person was recouped as aforesaid otherwise than by payment of a sum, this enactment shall apply as if the value of such recoupment were a sum paid.

Section 3 had the marginal note, “Mode of awarding compensation”. It read:

3.

– (1.) Claims for compensation under this Act shall be made to the police authority of the district in which the injury, stealing, or destruction took place, and such police authority shall inquire into the truth thereof, and shall, if satisfied, fix such compensation as appears to them just.

(2.) A Secretary of State may from time to time make, and when made, revoke and vary regulations respecting the time, manner, and conditions within, in, and under which claims for compensation under this Act are to be made, and all claims not made in accordance with such regulations may be excluded. Such regulations may also provide for the particulars to be stated in any claim, and for the verification of any claim, and of any facts incidental thereto, by statutory declarations, production of books, vouchers, and documents, entry of premises, and otherwise, and may also provide for any matter which under this Act can be prescribed, and for the police authority obtaining information and assistance for determining the said claims.

(3.) The said regulations shall be published in the London Gazette, and every police authority shall cause the same to be published in their police district, and copies thereof to be at all times sold to any applicant at a price not exceeding sixpence for each copy.

Section 4 had the marginal note, “Right of action to person aggrieved.” It read:

4.

– (1.) Where a claim to compensation has been made in accordance with the regulations, and the claimant is aggrieved by the refusal or failure of the police authority to fix compensation upon such claim, or by the amount of compensation fixed, he may bring an action against the police authority to recover compensation in respect of all or any of the matters mentioned in such claim and to an amount not exceeding that mentioned therein, but if in such action he fails to recover any compensation or an amount exceeding that fixed by the police authority, he shall pay the costs of the police authority as between solicitor and client.

(2.) If the amount of compensation for which such action is brought does not exceed one hundred pounds, the action shall be brought in the county court for any district in which any part of the police district is situate.

Sections 5 and 6 I need not set out. Section 7 provided that in the case of churches and public buildings those in whom the legal estate was vested, or certain others, should be:

… deemed to be the persons who have sustained loss from such injury, stealing, or destruction, and claims may be made by any one or more of such persons in relation both to the building and to the property therein, and payment to any such claimant shall discharge the liability of the police authority to pay compensation, but shall be without prejudice to the right of any person to recover the compensation from such payee.

Section 8 made special provision enabling certain police authorities to declare that claims in respect of losses during the previous 12 months might be made under the Act. Section 9 gave definitions, among other things stating:

The expression “police district” means one of the districts set forth in the first column of First Schedule to this Act; and the expressions “police authority” and “police rate” mean, as respects each police district, the authority and rate respectively mentioned opposite to that district in the second and third columns of that Schedule, and the expressions defined in that Schedule shall have the meanings thereby assigned to them:

Section 10 dealt with the repeal of Acts in the second schedule. Among the Acts repealed was the 1827 Act. Section 11 stated that the Act was not to extend to Scotland or Ireland.

The first schedule was headed “police districts and authorities”. The schedule had three columns. The first set out the police district. The second identified the police authority for that district, and the third identified what was meant by “police rate” in relation to that police district. It is apparent from the first schedule that there was already in existence a “police rate” for the City of London and its liberties, and for any county or area within a county maintaining a separate police force, and the third column identified that police rate as what was meant by the words “police rate” in the 1886 Act. In other areas, however, there was not a police rate as such. Thus where a borough maintained a separate police force the expression “police rate” in the 1886 Act was defined by the first schedule to mean the borough fund or borough rate. Similarly for a town not being a borough and maintaining a separate police force under a local Act of Parliament, the expression “police rate” meant the fund or rate applicable under the local Act for the expenses of the police force. In relation to the Metropolitan Police district, the police authority was described in the first schedule as being “the receiver for the Metropolitan Police district”, and the expression “police rate” was defined to mean, “the rate authorised to be levied for raising that proportion of the sum required for defraying the expenses of the Metropolitan Police force which can be raised by a rate.”

I have helpfully been provided with a legislative history setting out amendments to the 1886 Act. The words “riot” and “riotously” are, by virtue of s 10 of the Public Order Act 1986, to be construed in accordance with that Act. The expression “compensation authority” was substituted for “police authority” by the Police Act 1964, this being a consequence of the restructuring brought about by that Act. As a result of further restructuring the expression “compensation authority” now is defined simply to mean “police authority”. The preamble was repealed by the schedule to the Statute Law Revision Act 1898. The Syndicate placed reliance on the use of the expression “compensation authority.” Subject to that, neither these principal amendments nor other minor amendments are material to the issues in the present case.

In the present case it is necessary for the court to determine what the Underlying Policy means when it uses the words “legally liable to pay as damages” and “arising out of the Business”. It is now well established (see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R. 896, 912-913) that as a matter of general principle the court must seek to identify:

the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

I heard oral testimony of two witnesses called to give evidence on behalf of BPA and cross-examined on behalf of the Syndicate. Mrs Carole Taylor is an administrator who at various times handled insurance administration on behalf of BPA. She described the type of claims regularly made by BPA on its public liability cover. Mr John Riddell is a solicitor who explained how BPA had approached its obligations under the 1886 Act in the present case and described certain of its dealings with its insurers. Both gave evidence honestly and to the best of their abilities. It is no discredit on them to record that their evidence has not, in the event, given me assistance in the application of the general principle in the Investors Compensation Scheme case or in any other relevant respect. As I shall explain, in the present case the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract can, so far as material, be readily identified from the terms of the Underlying Policy and an overview of the circumstances in which police authorities and chief constables may find themselves to be under a liability to the public.

On behalf of BPA Mr Edelman began with a proposition which can conveniently be described as the foundation stone of BPA’s arguments. This was that the Syndicate must be taken to have known that police authorities may potentially incur liabilities under the 1886 Act. On the basis of this foundation stone he advanced a principal submission which was couched in slightly different words at different stages of the argument. The general thrust of the principal submission however was clear. It was that the obvious purpose of the public liability section of the Underlying Policy was to protect the police fund against claims by members of the public for personal injury or damage to property. Mr Edelman anticipated an argument that a liability to pay “compensation” under the 1886 Act differed from the liability to pay “damages” referred to in the Underlying Policy. He robustly asserted that any such argument sought to draw a distinction without a difference, and that it was not appropriate in the context of the Underlying Policy to use a “lawyer’s definition” of the words relevant to Issues 1 and 2. Even if, however, a lawyer’s definition were used he advanced fallback submissions urging that a potential liability under the 1886 Act would fall within such a definition.

Mr Gavin Kealey QC and Mr Andrew Wales on behalf of the Syndicate submitted in paragraphs 9 and 10 of their written opening submissions:

9.

The proper approach … is to analyse the meaning of the policy, specifically the relevant coverage provision, and, having gained an understanding of its meaning, then to ascertain whether the particular putative liability on the part of the assured falls within its scope.
10. When construing the relevant coverage provision, it is wise not to fracture the sentences or phrases too much. The words and phrases in the sentences take their colour not only from (i) the established legal background of meaning against which they came to be agreed and the commercial background associated with public liability policies …, but also from (ii) their immediate context and the inter-relationship between them. One should endeavour to construe the provision as a whole, while also taking into account the established meaning of words and the commercial background.

The particular points mentioned in paragraph 10 are or may be elements in the task of identifying the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. There is a danger, however, that by focusing on these particular points one may lose sight of the fundamental task identified in the citation above from the Investors Compensation Scheme case. The approach which I think right to adopt is one in which that task is the focus, and particular aspects are seen as no more than actual or potential elements in that task.

It is in the context of that approach that, before summarising the arguments on Issues 1 and 2, I make some observations about three of the points mentioned in paragraph 10 of the Syndicate’s written opening submissions: the extent to which there was an “established legal background of meaning against which [relevant words and phrases] came to be agreed”, the commercial background associated with public liability policies, and the “immediate context [of relevant words and phrases] and the inter-relationship between them”.

The relevant principle here is sometimes described as the Hooley Hill Rubber principle: see Re Hooley Hill Rubber and Royal Insurance Co [1920] 1 K.B. 257. It is a special principle which may have a role when the court is considering commercial contracts, of which the Underlying Policy is one. It was summarised by Hobhouse LJ in Toomey v Eagle Star Insurance Company Limited [1994] 1 Lloyd’s Rep 516. After referring to the general principle now embodied in the Investors Compensation Scheme case Hobhouse LJ added:

It is also necessary that the court should have regard to previous decisions of the courts upon the same or similar wording. Parties to a commercial contract are to be taken to have contracted against a background which includes the previous decisions upon the construction of similar contracts.

In Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] EWCA Civ 12; [2003] 1 Lloyd’s R 138 Clarke LJ, with whom Peter Gibson and Scott Baker LJJ agreed, explained that the relevant principle was :

… essentially a principle of construction. Thus the court is trying to ascertain the intention of the parties in using the expression deployed in the contract. Where a contract has been professionally drawn, as in the case of the Institute Clauses, the draftsman is certain to have in mind decisions of the courts on earlier editions of the clause. Such decisions are part of the context or background circumstances against which the particular contract falls to be construed. If the draftsman chooses to adopt the same words as previously construed by the courts, it seems to me to be likely that, other things being equal, he intends that the words should continue to have the same meaning.

In its written opening submissions the Syndicate relied on the Hooley Hill Rubber principle in one respect only. It was not said to be relevant to Issue 2. On Issue 1, however, the Syndicate relied on it in support of a contention that “damages” are quintessentially sums which fall to be paid by reason of some breach of duty or obligation. Two authorities in particular were said to show an established legal meaning. First, in Hall Brothers Steamship Company Limited v Young [1939] 1 KB 748 at p. 756 Sir Wilfrid Greene MR said:

The word ‘damages’ is one which to an English lawyer conveys a sufficiently precise meaning. .. it is necessary in my opinion, in construing a document of this kind, to give to the word ‘damages’ its ordinary meaning in English law. ‘Damages’ to an English lawyer, imports this idea, that the sums payable by way of damages are sums which fall to be paid by reason of some breach of duty or obligation, whether that duty or obligation is imposed by contract, by the general law, or by legislation.

Second, in F & K Jabbour v Custodian of Absentee Property for the State of Israel [1953] 2 Lloyd’s Rep 760 at p. 774 Pearson J said:

The usual meaning of the word ‘damages’ is as stated in Halsbury’s Laws of England, 2^nd Ed vol 10 p 82, where it is said: ‘Damages may be defined as the pecuniary compensation which the law awards to a person for the injury he has sustained by reason of the act or default of another, whether such act or default is a breach of contract or tort; or, put more shortly, damages are the recompense given by the process of law to a person for the wrong that another has done him.’

I do not accept that either of these authorities ought properly to be regarded as applicable to the present case by virtue of the Hooley Hill Rubber principle. Neither of them involved a policy of the kind now under consideration, nor did they involve the same indemnifying clause as is found in that policy. The Hall Brothers case concerned a running down clause in a marine insurance policy. Mr Kealey noted that Sir Wilfrid Greene MR’s description of “damages” as “sums which fall to be paid by reason of some breach of duty or obligation” was cited by Stuart-Smith LJ in Yorkshire Water Services Ltd v Sun Alliance & London Insurance PLC [1997] 2 Lloyds Rep 21. That case was concerned with the question whether the costs of flood alleviation works were recoverable under public liability insurance policies. It thus involved contracts which were closer in nature to the Underlying Policy than the contract in Hall Brothers. The Yorkshire Water case, however, was not a case in which the meaning of the words “as damages” played a central part. I think it would be wrong to assume that the parties to the Underlying Policy chose the words “as damages” in order to lock in to the meaning of the policy particular observations made in either the Hall Brothers case or the Yorkshire Water case.

In the Jabbour case Pearson J was concerned with the effect of foreign regulations on the ownership of a right of action under an insurance policy, and for that purpose examined whether the plaintiff’s claim against the insurance company was a “mere right to claim damages”. It is not a previous decision upon the construction of any contractual provision similar to that in issue in the present case.

In oral argument Mr Edelman was willing as part of his fallback submissions to accept that the words “legally liable to pay as damages” limit cover to cases where BPA’s liability to pay arises for actionable wrongs involving breach of duty, albeit that the breach of duty need not be breach of an express duty. To that extent the legal meaning of the relevant words is common ground. Insofar as differences remain, however, I unhesitatingly reject any assertion that the words “as damages” in the Underlying Policy have an established meaning under the Hooley Hill Rubber principle.

Applying the general principle in the Investors Compensation Scheme case it seems to me that the background knowledge which would reasonably have been available to both parties must include knowledge that as a police authority BPA might be liable for injury to property under the 1886 Act. The arguments which BPA builds upon this foundation stone are the subject of specific responses by the Syndicate. I shall summarise these later in this judgment.

Both in response to those arguments and more generally the Syndicate contends in paragraph 7 of its opening submissions that public liability insurance:

is quintessentially insurance against liability – typically tortious liability - to pay damages to members of the public for actionable wrongs committed by the assured …

In Tesco Stores Ltd v Constable [2008] EWCA Civ 362 Tesco voluntarily agreed to indemnify a third party for economic loss. When that third party claimed under the indemnity for economic losses arising out of damage to property of another, Tesco sought to claim under its public liability policy covering “all sums for which the Insured shall be liable at law for damages in respect of... loss of damage to material property ...”. Tesco’s claim was rejected both by Field J and the Court of Appeal. Tuckey LJ, with whom Thomas and Hughes LJJ agreed, gave the leading judgment in the Court of Appeal. He said at paragraph 14:

A public liability policy provides cover against liability to the public at large. By contrast private liability arises from contracts entered into between individuals. Public liability in this sense arises in tort; it does not and cannot arise only in contract. As a general rule a claim in tort cannot be founded upon pure economic loss. So the judge was right to say that the fact that this was public liability insurance was important and that such policies do not generally cover liability in contract for pure economic loss. It is a strong pointer to the meaning of the words used.

Mr Kealey did not suggest that Tuckey LJ was laying down a proposition that public liability cover only applies to torts. The Tesco case was concerned with whether a contractual liability fell within a public liability cover, and for that purpose Tuckey LJ contrasted liability to the public at large and liability arising from contracts entered into between private individuals. Mr Kealey acknowledged that Sir Wilfrid Greene MR in the Hall Brothers case had not confined cover to tortious liability. It was in this context that the Syndicate advanced its proposition that the liability insured under a public liability cover was liability to pay damages to members of the public for actionable wrongs committed by the assured, and was typically tortious liability.

Public liability insurance takes many different forms. In relation to public liability insurance generally (without at this stage examining the Underlying Policy in particular) I consider that the proposition can only be right if the word “damages” is understood as including “compensation.” Public liability policies are not required to use any standard wording, and commonly refer to a liability to pay compensation: examples can be found in the Yorkshire Water case mentioned above and in the Lancashire County Council casementioned below. On this basis the Syndicate’s proposition as to the general nature of public liability insurance will not on its own get the Syndicate home. If the liability insured against is “typically tortious,” that means that there may be other types of liability – albeit not typical – which are not tortious and are nonetheless covered by public liability insurance.

As Mr Kealey observed, both syntax and context have importance. Lord Hoffman said in Charter Reinsurance Co Ltd v. Fagan [1997] A.C. 313 at 391:

I think that in some cases the notion of words having a natural meaning is not a very helpful one. Because the meaning of words is so sensitive to syntax and context, the natural meaning of words in one sentence may be quite unnatural in another. Thus a statement that words have a particular natural meaning may mean no more than that in many contexts they will have that meaning. In other contexts their meaning will be different but no less natural.

While keeping that observation well in mind, I find it helpful – in agreement with paragraph 57 of the Syndicate’s written opening submissions - to adopt the approach of Langley J in Tioxide Europe v. CGU International Insurance plc [2005] Lloyd’s Rep. I.R. 114 at para 40:

The general principle is that the proper construction is to be determined by the ordinary and natural meaning of the words used in the contractual and commercial setting in which the words appear. The niceties of language may have to give way to a commercial construction which is more likely to give effect to the intention of the parties.

Mr Edelman stressed BPA’s primary case on the basis of the foundation stone and principal submission described above. It was submitted that the Syndicate had offered insurance knowing that 1886 Act claims are part of the usual liabilities of a police authority, and that it hardly lay in the Syndicate’s mouth to draw fine linguistic distinctions in order to argue that the compensation under 1886 Act did not fall within the wording of the Underlying Policy.

In that regard BPA’s skeleton argument put forward a contention which I mention only in order to dismiss it. This was that powerful recognition of the point mentioned in the preceding paragraph was found in ARC’s acknowledgement of liability under the Underlying Policy. I dismiss this contention because the Syndicate is not bound by any view that ARC may take. I know nothing about the reasons which may have led ARC to take the view it has expressed. Nor do I desire to know anything about them: ARC’s view is simply irrelevant to the questions which I have to decide.

More substantially, BPA’s skeleton argument stressed that the Underlying Policy should be construed using the common and ordinary meaning of the words as understood by commercial laymen, not lawyers. In support the skeleton argument cited two authorities. The first was Lancashire C.C. v. Municipal Mutual Insurance Ltd [1997] QB 897, a case where questions concerning public liability insurance for local authorities and chief constables arose. The defendant agreed to indemnify the insured “in respect of all sums which the insured shall become legally liable to pay as compensation arising out of” various matters including wrongful arrest, malicious prosecution and false imprisonment. A defence contention that the use of the word “compensation” excluded awards of exemplary damages was rejected both at first instance and on appeal. The Court of Appeal held that exemplary damages fell within the meaning of ‘compensation’. Simon Brown LJ said at 903:

Although I accept Mr. Glasgow's submission that the natural and ordinary meaning of "compensation" in the context of a legal liability to pay damages is one which excludes any element of exemplary damages, I cannot accept that this meaning is wholly clear and unambiguous. On the contrary it involves very much a literal, lawyer's understanding of the term and is one which would not command universal acceptance. Many, including no doubt most recipients, would regard compensation to mean instead all damages (of whatever character and however calculated) payable to the victim of a tort.

The second authority cited was Charterhouse Development (France) Limited –v- Sharp (1998) 7 Lloyds Rep IR 266. The French courts held that the claimant was liable to pay sums to remedy the deficiency of an insolvent company’s assets under article 180 of Law 95-98 of 25 January 1985. Longmore J held that this fell within the cover provided by a professional indemnity insurance policy giving an indemnity “in respect of the Assured’s legal liability to third parties for any third party claim…for compensatory damages…”. The passage from his judgment which I quote below appears at page 279 of the report, and began with a discussion of the first question in the Lancashire case:

The first question was whether the phrase “all sums which the insured shall become legally liable to pay as compensation” applied on its true construction to cases where exemplary or punitive damages were awarded. The Court of Appeal held that it did, since all damages in tort, whether compensatory or punitive, go to the plaintiff by way of compensation. The primary consideration was that the policy expressly included cover for torts, which by their nature, attracted claims for exemplary damages and that, if insurers were correct, cover would be excluded for all claims where exemplary damages were sought, even though the claim for such damages might be roundly rejected. A secondary consideration was the difficulty of handling claims if insurers’ construction were correct, because it would be difficult, if not impossible, to separate out the punitive element as opposed to the ordinary compensatory element even after award, let alone before award, when the insured would want insurers to take over their defence.

It is of course true that the policy with which I am concerned does not expressly cover torts which, by their nature, attract awards for exemplary or punitive damages. Nevertheless, both the above considerations have some bearing on the present case. I cannot differentiate sensibly between the phrases “compensation” and “compensatory damages”. “Compensatory damages” is equally a phrase which cannot be accepted as being “wholly clear and unambiguous” …

In these circumstances it seems to me that the phrase “compensatory damage” must be given a broad meaning, viz that the damages, if they are to be recoverable, must be claimed by or on behalf of a person in respect of loss which that person has suffered, rather than a sum claimed by an entity, such as the State, (or perhaps the court, to use the wording of Article 180 itself), which has suffered no personal loss.

These authorities were not said by Mr Edelman to be applicable under the Hooley Hill Rubber principle. They were cited as examples of a recognition by the courts that a “literal, lawyer's understanding” may not be the right approach to construction. BPA’s skeleton argument added that even the “literal, lawyer's understanding of the term” damages has become obscured as exemplified by the opening words of McGregor on Damages (17^th ed):

To the extent that observations in Hall Brothers might remain relevant, Mr Edelman submitted that nothing in that case required that a claim under a policy of liability insurance be expressed as one for breach of duty. It would suffice that the liability in question was premised on an unexpressed duty. Mr Edelman gave examples which included common law and statutory liabilities for animals, and liability for non-natural use of land under the principle in Ryland v Fletcher (1868) LR 3 HL 330. In none of these cases had those liable done anything wrong, nor need it be shown that they could have done anything different: they were simply strictly liable for the harm in question. Such strict liability arose from an unexpressed premise that there was an absolute duty to prevent the harm in question. He submitted that the 1886 Act imposed liabilities which similarly were premised on an unexpressed duty and thus could, if necessary, be regarded as giving rise to liability for “damages” within Sir Wilfrid Greene MR’s definition.

A first limb of Mr Edelman’s argument in this regard was a contention that the essence of liability under the 1886 Act was founded in an absolute duty, imposed on those responsible for policing, to prevent tumultuous riots. He accepted that the Underlying Policy was not intended to give cover for liabilities under modern statutes affording compensation for lawful actions, nor to give cover for liabilities imposed for a social purpose such as a liability to pay social security benefit. The 1886 Act was fundamentally different. It reflected a liability historically imposed on those responsible for policing - in 1714 and 1827 the hundred and other local government bodies, and in 1886 the police authorities – in order to counter defective policing in relation to riotous and tumultuous assemblies.

In this regard Mr Edelman sought to rely upon remarks made in the House of Commons on the second reading of the Bill which was to become the 1886 Act. BPA’s entitlement to place reliance upon such remarks was disputed on behalf of the Syndicate, and I am content for the purposes of this judgment to pay no regard to them.

Moving from Parliamentary observations to judicial ones, Mr Edelman drew strongly on passages in the judgment of Lyell J in J W Dwyer Ltd –v- Metropolitan Police District Receiver [1967] 2 QB 970. The question that Lyell J had to consider was whether the words “and tumultuously” added anything to “riotously” in s 2 of the 1886 Act. The conclusion reached by Lyell J was that the expression “riotously and tumultuously” required there to have been behaviour which was not merely riotous but also tumultuous. In reaching that conclusion he gave a historical analysis at page 980:

I now turn to consider both the meaning of the words and the question as to whether the words "riotously and tumultuously" from their history are to be read as cumulative requirements, differing in character. Until very recently the victims of crime had, in general, no claim to be compensated for the injury they suffered as a consequence of the crime. Compensation for loss caused by a riot was a special case. This raises the question: Why was it made a special case? If a crowd of people collect in angry and threatening fashion this should become obvious to the local forces of order, and it would then become their duty to prevent the crowd from becoming a riot. This is a duty which has been recognised for centuries, and which until the 19th century was put upon the local administrative area, the hundred or wapentake, or whatever name it might be called; and there was a duty upon them to compensate for damage which was done by persons assembled riotously and tumultuously. The Act of 1886, in fact, did no more than modernise the mode of obtaining compensation and transferred the burden from the inhabitants of the hundred or wapentake to the local police authority. There is nothing secret or furtive about a crowd of people who are acting riotously and tumultuously. It seems to me that the right to compensation from public funds was given because public authority had failed to protect the public who were menaced by a threat which was, or ought to have been, obvious to the forces of law and order as they existed from time to time. In my judgment, the word "tumultuously" was added to "riotously" for the specific reason that it was intended to limit the liability of compensation to cases where the rioters were in such numbers and in such state of agitated commotion, and were generally so acting, that the forces of law and order should have been well aware of the threat which existed, and, if they had done their duty, should have taken steps to prevent the rioters from causing damage.

In 1988 Lyell J’s analysis was considered by the Court of Appeal (Kerr, Balcombe LJJ, Sir Roualeyn Cumming-Bruce) in DH Edmonds Ltd v East Sussex Police Authority (6 July 1988; reported in The Times 15 July 1988). The plaintiffs were jewellers in Brighton who claimed compensation from the defendant police authority for a raid on the plaintiff’s premises by three or four men. Kenneth Jones J at first instance held that the incident did not involve a tumultuous assembly and accordingly the claim against the defendant police authority failed. On appeal it was conceded on behalf of the plaintiffs that the 1886 Act imposed an additional requirement that the assembly be tumultuous. It was submitted however that it would suffice if the assembly in question caused bystanders to behave tumultuously in the sense of making a lot of noise, and that Lyell J had been wrong in Dwyer when stating that “tumultuous” connoted an assembly of some considerable size. Kerr LJ (with whom the other members of the court agreed) rejected the first contention, regarding it as self-evident that whatever conduct or effect is involved in the adverb “tumultuously” must relate to the persons who are assembled together, both “riotously” and “tumultuously”. On the second point, Kerr LJ said that as a matter of first impression the connotation of “multitude” or “crowd” or “mob”, or of a large number of people, had been introduced into the meaning of “tumultuous” and “tumult”. He continued:

Moreover, these aspects were considered with great care, and after a full citation of all the authorities, by Mr Justice Lyell in the most recent of the cases to which we were referred, JW Dwyer Limited –v- Metropolitan Police District Receiver [1967] 2 QB 970, [1967] 3 WLR 731. Mr Justice Kenneth Jones followed that case and I would do exactly the same, because it is an admirable judgment on this very section…

Kerr LJ then set out passages from the judgment of Lyell J, including those cited above. After examining two further authorities he continued:

I would accept the analysis of the phrase “riotously and tumultuously” assembled together” of Mr Justice Lyell in Dwyer’s case. Looked at in that way, there is no error in concluding that “tumultuously adds something more than mere noise to the minimum assembly of three people required to constitute a riot.

The other point which Mr Poulton took was that Mr Justice Lyell’s suggestion that what matters is whether or not the police should have been alerted was satisfied in the present case, since there was a great deal of noise. He said that this should have attracted the attention of the police. I do not accept that. It is certainly not the kind of picture which Mr Justice Lyell had in mind when he gave his impression of a “riotous and tumultuous assembly”. After all, this was not a case of a crowd which had assembled and which should have attracted the attention of the police by its very presence. On the contrary. These robbers drew up in a van quietly and then stormed out, no doubt making a good deal of noise, but in the minimum time possible. And they then vanished as quickly as they could. The whole nature of the raid was one of furtiveness at the beginning, and then surprise and speed of departure thereafter. In my view that is far from a “riotous and tumultuous assembly”.

When recording his agreement with the reasons given by Kerr LJ, Balcombe J added:

I would also like to express my complete agreement with the judgment of Mr Justice Lyell in Dwyer’s case.

Mr Edelman referred to a case which might be thought to take a different approach from that of Lyell J. In Kaufmann Brothers v Liverpool Corporation [1916] 1 KB 860 it was argued that a claim under the 1886 Act was a claim for “alleged neglect or default” within the meaning of the Public Authorities Protection Act 1893, with the result that the claim was time-barred under that Act. This argument was rejected by the Divisional Court. Lush J, with whom Rowlatt J agreed, said that it was

an action to recover compensation under the statute; it was not brought to recover damages for any default on the part of the police authority; it was simply an action to recover such an amount as the county court judge might think right to allow as compensation for the damage done to the plaintiffs' property”.

As to this, Mr Edelman submitted that the distinction drawn by Lush J was between strict liability damages, which the 1886 Act provided for, and damages for default, to which the 1886 Act made no reference. It was necessary for the judge to explain this distinction for the purpose of showing why the 1893 Act did not apply. As in other cases under the 1886 Act, Lush J used the words “compensation” and “damages” interchangeably. Nothing in the Divisional Court’s judgment was inconsistent with a claim under the 1886 Act being for an actionable wrong in the form of breach of an absolute duty.

A second limb of Mr Edelman’s argument was that in substance the remedy under the 1886 Act was a remedy in damages, and that history explained why the procedure for the award of damages involved a two stage process under sections 3 and 4 of the 1886 Act.

As to the substance of the remedy being damages, this was a theme already developed in BPA’s skeleton argument in support of the primary way in which BPA put its case. The submission was that the 1886 Act, in the word “Damages” found in its short title and the word “compensation” found in the body of the statute, used the words “damages” and “compensation” interchangeably. Moreover judgments considering questions arising under the 1886 Act used the words interchangeably. Thus Lyell J in the Dwyer case described the nature of the claim both at the outset of his judgment on page 974 and a little later at page 976:

In this case the plaintiffs … claim damages against the Receiver for the Metropolitan Police District for part of the damage … suffered when their premises … were the scene of a robbery, … The claim is brought under section 2 of the Riot (Damages) Act, 1886. [page 974, italics added] …The plaintiffs claim that they are entitled to recover such part of their loss as was not covered by insurance, … as compensation due to them under section 2 of the Riot (Damages) Act, 1886. [page 976, italics added]

As further examples BPA’s skeleton argument also cited (with the words “compensation” and “damages” italicised wherever they appear) quotations from other judgments:

(a)

“There must be judgment for the plaintiff, and the question of the quantum of damages must be referred”: Ford v Receiver for the Metropolitan Police District [1921] 2 KB 344 per Bailhache J at 351;

(b)

“The fact that the damage has been done in spite of the care and protection of the police or because of the negligence of the police does not affect the right of the claimant to have compensation. It is a right which is given to the individual who is hurt by a riot to have his damages shared by the whole of the community, and the community for the purpose of this sharing is the police district within which the building injured or destroyed is situated.”: Pitchers v. Surrey County Council [1923] 2 KB 57 per Swift J at 65;

(c)

“It has been agreed between the parties, subject to the legal points, that a further sum of 1250l. should be fixed as damages”: Jarvis v. Surrey County Council [1925] 1 KB 554 per Finlay J at 558;

(d)

“The second plaintiffs had paid some £5,000 for that theft; and for their respective losses these plaintiffs sought to recover damages under the Riot (Damages) Act, 1886”: Bearmans Ltd v Metropolitan Police District Receiver [1961] 1 All ER 384 per Sellers LJ at 386.

The history of the two stage process, submitted Mr Edelman, went back to the 1827 Act. Where a claim was made for more than £30 the 1714 Act procedure for an action at law remained unchanged. The summary procedure described in the account of the 1827 Act given above was introduced for claims not exceeding £30. That procedure introduced a remedy which was not an action at law. It involved the justices, who were responsible for law and order in the local community, deciding whether or not particular damage was damage for which the local community was liable. It was in that context that the 1827 Act used the nomenclature of being “liable to yield full Compensation” rather than being “liable to yield damages.” What happened in 1886 was that in all cases the police authority was required under s 3 to adopt the summary procedure in the first instance, with a right to an aggrieved claimant thereafter under s 4 to bring an action in court.

Mr Edelman sought in opening to meet a point made by the Syndicate that the Underlying Policy expressly provided cover in relation to two statutes. Sub-section I was concerned with the Defective Premises Act 1972. Mr Edelman explained that it made special provision for that Act in order to clarify that the policy would not pay for the cost of remedying any defect or alleged defect in premises disposed of by the assured. Sub-section K was concerned with the Data Protection Act. Mr Edelman explained that it extended the policy to cover losses which were not within the primary coverage of the insuring clause. The necessary coverage could only have been obtained by an extension to go beyond property damage and personal injury. When granting the extension the sub-section expressly used the word “compensation” so as to track what was in the statute.

The Syndicate’s response to BPA’s contentions on issue 1 began with the general contentions discussed earlier in this judgment. I do not address further the argument that the words “as damages” had an accepted meaning. The cases cited in support of that argument were, however, relied on more generally. It was said that they, along with other authorities where the word “damages” fell for consideration, showed a process of reasoning which ought to be adopted in the present case. Thus in Bartoline Ltd v Royal & Sun Alliance PLC [2007] 1 Lloyds Rep IR 423 His Honour Judge Hegarty QC drew a distinction between a statutory scheme to protect the environment and the law of torts operating to provide compensation for loss and damage sustained by individuals as a result of an unlawful interference with their private rights and interests. Mr Kealey submitted that in drawing that distinction it was relevant that the statutory scheme gave rise to a liability which was not for damages, and was not to pay compensation for an actionable wrong for breach of duty, whether that duty was strict or a duty of care.

The Bartoline case concerned the construction and scope of a policy of liability insurance issued by the defendant (RSA) to the claimant (Bartoline). It was alleged that a fire at Bartoline’s premises caused polluting matter to enter a watercourse known as Swinemoore Drain and to flow into another neighbouring watercourse known as Barmston Drain. The Environment Agency carried out emergency work under s 161 of the Water Resources Act 1981. It claimed to be entitled to recover from Bartoline the expenses reasonably incurred by it in this regard. In addition, the Agency served “works notices” under s161A of the Water Resources Act 1991 upon Bartoline requiring it to carry out works for the removal of contaminated matter and to prevent further pollution from entering Swinemoore Drain. RSA’s policy gave Bartoline cover against “legal liability for damages” in respect of “accidental… damage to property.” His Honour Judge Hegarty QC held that neither the amounts payable to the Environment Agency nor the cost of complying with the works notices fell within the cover. His judgment contains an analysis of common law and statutory liabilities which includes the following passages cited in the Syndicate’s written opening submissions:

108 … The core meaning of the term “damages” in English law is perhaps most conveniently summed up in Halsbury's Laws of England, 4th edition, 1998, Vol.12(1) para. 802 …:

“‘Damages’ are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him.”

109 … Furthermore, at least in the field of marine insurance, it seems to me to be quite clear that this is the meaning which will normally be attributed to the word. Indeed, in that particular context, an even narrower construction has been adopted, even in the absence of an express term to that effect, since it will normally exclude any damages payable by the insured pursuant to contract.

110 I can see no obvious reason why a different approach should be adopted in relation to other forms of public liability insurance. The essential purpose of such policies is to provide an indemnity in respect of certain types of tortious liability. That is reflected in the choice of the word “damages” in the insuring clause of the Policy in this case. …

The Syndicate’s written opening submissions added that the essential reasoning and approach taken in Bartoline was endorsed by Field J in Tesco Stores Ltd v Constable [2007] EWHC 2088 (Comm); [2008] Lloyd’s Rep. I.R. 302. In that case the judge referred to Bartoline when concluding that a public liability policy did not afford cover against liability in contract for pure economic loss. Field J’s decision has been upheld in the Court of Appeal (see paragraph 38 above), without, however, any reference to Bartoline.

The Syndicate further relied on the definition from earlier editions in paragraph 1-001 of McGregor on Damages, 17^th edition, quoted above, along with paragraph 1-010:

Actions claiming money under statutes, where the claim is made independently of a wrong which is a tort or breach of contract, are not actions for damages.

With that background the Syndicate rejected any suggestion that the words “damages” and “compensation” could properly be used interchangeably. Mr Kealey submitted that the word “Damages” in the short title of the 1886 Act was used in the sense of “injuries”. Instances of interchangeable use by judges were cases where no analysis was required or given for such use, the precise term used being irrelevant to the argument. The general characteristic of compensation payable under statutes was said by the Syndicate to be that “in most circumstances the paying body has acted lawfully but the lawful act has caused injury for which compensation must be made.” Thus, in the words of Lord Esher M.R. in Dixon v Calcraft [1892] 1 Q.B. 458, 463-4:

Then what is compensation? The expression "compensation" is not ordinarily used as an equivalent for "damages." It is used in such Acts as these in relation to a lawful act which has caused injury.”

The Syndicate’s written opening submissions noted that the right to compensation under the 1886 Act is independent of any conduct or misconduct on the part of the police. Pitchers v Surrey County Council [1923] 2 KB 57 concerned an outbreak of violence in 1919. The incident in question involved a large number of Canadian soldiers stationed at Witley Camp, a part of Witley Common which had been taken into possession of the military authorities under statutory powers. The Canadian soldiers, after releasing some fellow soldiers in custody and raiding the officers’ mess, damaged and stole the contents of a tailor’s shop and other shops known as “Tin Town” – a group of shops erected with the permission of the military authorities on a part of the Portsmouth Road which ran through the camp. The plaintiff was the owner of the tailor’s shop and sued the defendant police authority under the 1886 Act. At first instance Swift J in the High Court rejected contentions that the 1886 Act did not apply if the injury to property was done by soldiers in a camp and was done to property situated in that camp. Observing that the fact that the camp was a private place did not prevent it from being a place in which a riot could take place, Swift J continued:

But it is said that the police had no control over the soldiers and that they were helpless to do anything. I do not think that that contention is right. I think that the police had the right of control directly a felony was committed in their presence. Of course they had not the power of exercising control. I have stated what opinion I have formed of the three police officers who gave evidence before me. I have not the slightest doubt that they had sufficient courage to try to stop the disturbance; they would, however, have been foolish men had they attempted to do so, as it could not possibly have done any good and they might have been very seriously hurt if not actually killed in endeavouring to quell the disturbance, but the fact that it may not be physically possible for the police to quell a disturbance does not affect the question of their legal rights. I am far from being satisfied that if the police in the neighbourhood of a military camp see the soldiers breaking it up they have not a legal right to apprehend them for the breach of the peace or for the felony which they are committing.

At page 64 Swift J added:

The right to compensation does not seem to me to be in the least degree dependent upon any action or inaction on the part of the police. It is quite clear that it would have been physically impossible for all the police in Surrey, who I think numbered 280 at this time, to have taken control of that camp without the assistance and support of the military authorities. It would have been a physical impossibility for them to have reduced some hundreds of rioters, many of whom I suppose were armed or had access to arms, to such a state that they could say that the riot was quelled. But no one here suggests any neglect or impropriety on the part of the police. Every one who has heard this case I should think has come to the conclusion that they acted with great discretion and great propriety in the matter. But the Act of Parliament does not give a citizen a right to compensation for damage by riot on any principle of blaming the police over the matter. The fact that the damage has been done in spite of the care and protection of the police or because of the negligence of the police does not affect the right of the claimant to have compensation. It is a right which is given to the individual who is hurt by a riot to have his damages shared by the whole of the community, and the community for the purpose of this sharing is the police district within which the building injured or destroyed is situated. The plaintiff is entitled to have the wrong which was done to her shared by all the contributors to the police fund in the police district of Surrey.

There was an unsuccessful appeal by Surrey County Council to the Court of Appeal (Lord Sterndale MR, Warrington and Atkin LJJ). Lord Sterndale MR noted that it was more convenient and very much wiser that soldiers, especially Dominion soldiers, should be controlled by their own police than by the civilian police of the district, but that did not mean that the civilian police were in law deprived of the rights they would otherwise have within part of the police district.

In oral argument Mr Kealey sought to counter BPA’s willingness to accept if necessary that cover was limited to cases where BPA’s liability to pay arises for actionable wrongs involving breach of duty, albeit that the breach of duty need not be breach of an express duty. The true position, submitted Mr Kealey, was that a hidden and unexpressed breach of duty would not suffice. Thus in the Hall Brothers case Sir Wilfrid Greene MR contemplated that an absolute obligation not to do certain things could fall within the cover, and gave as an example liability under s 9(1) of the Air Navigation Act 1920 – a provision which expressly made “damages” recoverable as if the injury in question had been caused by wilful act, neglect or default.

Mr Kealey submitted that there needed to be certainty, a person should be able to determine with objective ease what was and was not covered. The parties should not be expected to conduct an intensive and artificial investigation into the historical antecedents of an Act to see whether liability under that Act fell within the policy wording. As to the Animals Act 1971 it was plain that it expressly imposed a civil statutory liability. It was not surprising to find that civil liability referred to as a statutory tort. By contrast the 1889 edition of Clerk & Lindsell on Tort had defined “tort” as a wrong independent of contract, for which the appropriate remedy was a common law action, and from 1889 until 1937 (when the 1886 Act ceased to be mentioned) expressed the view that liability under the 1886 Act stood outside this classification altogether. It was common ground that there was nothing to prevent the legislators in 1886 enacting a statute which clearly created a statutory duty. There was no issue between the parties as to what the 1886 Act meant, but it did not do on its face what BPA said it did. Mr Kealey acknowledged that in strict liability cases under the Animals Act and the principle in Rylands v Fletcher neither statute nor common law defined a duty, but he submitted that they were civil wrongs to which ordinary principles of causation and remoteness applied.

Under the 1886 Act, submitted Mr Kealey, compensation was to be paid out of the police fund purely on a geographical basis. It sufficed that relevant damage had been caused in the particular police area by riotous and tumultuous assemblers. The entity which had the money and was liable to pay was the “compensation authority of the police area”. In substance, he contended, this was no different from a national or provincial insurance scheme, where the nation is divided into local compensation areas providing limited compensation to those whose property is damaged by riot. It was well known that central government provided funding for the police in addition to what was raised locally.

At paragraph 20 of the Syndicate’s written opening submissions 7 particular factors were identified. These were said to make plain the difference between tortious liability and liability under the 1886 Act. I shall comment on those factors when analysing paragraph 20 later in this judgment.

Assertions by BPA that the 1886 Act involved an unexpressed duty and a presumed breach were, submitted Mr Kealey, inconsistent with the Kaufmann Brothers case. It could not be right that claims for strict liability fell outside the limitation provision invoked in that case. The true explanation for the decision was that a claim under the 1886 Act – unlike a claim in nuisance or under Rylands v Fletcher – did not involve an actionable wrong. The idea that there was an unexpressed duty and a presumed breach was said to be equally inconsistent with the Pitchers case, which showed that any such concept was a fiction in the minds of the legislators, and was not the nature of the liability which the legislators created.

When pressed Mr Kealey accepted that part of the factual matrix in 2001 was that BPA might incur a liability under the 1886 Act, but he contended that there was no basis on which an underwriter and an insured could be deemed to know the legislative predecessors of the Act. The parties should not be taken to be willing to do more than examine the Act to ascertain whether it created a private law actionable wrong which sounded in damages. It was not appropriate to look for unexpressed intentions, or to make an “esoteric investigation of the origins of British police forces.” Thus if a potential liability under the 1886 Act were part of the factual matrix it was of a completely different nature from normal liabilities for damages. The 1886 Act was complete in itself, with neither a need nor a justification for going behind the words. What was being attempted was to shoehorn into inapposite wording an obligation imposed not as a statutory duty but as a compensation authority to provide compensation for certain limited purposes for damage caused by riots.

The Syndicate further observed that under the 1886 Act compensation was available in the first instance without recourse to the courts by determination of the police authority. The person fixing the level of compensation could hardly be the person who had committed a civil wrong – and in truth the wrongdoer was the rioter. It was difficult to think of another example of a legal liability to pay damages being self-imposed. It would mean that the Syndicate would assume a “perverse” risk that by performing its statutory duty BPA itself would create a liability to which the policy must respond. It was difficult to see how such a determination could be made consistently with General Condition 5(b), which entitled the insurer to take over absolute conduct and control of all negotiations and proceedings which may arise in respect of any claim for indemnity or damages, and how it would apply to that part of the cover which included costs and expenses incurred by BPA in defending any claim for damages. Moreover (as was common ground) the nature of the claim by an aggrieved claimant in court is for compensation under the Act, not for wrongful refusal to grant compensation sounding in damages. This, maintained the Syndicate, was not a claim in tort.

A further point made by the Syndicate can be described as the “particular provision point”. It was founded on an assertion that the parties to the Underlying Policy had clearly made a special effort to turn their minds to the specific meanings to be attributed to particular words and phrases in their contract; and that, when drawing up the policy terms and conditions, they had clearly made efforts to be precise, detailed and comprehensive. The Underlying Policy could not be said to be a comprehensive cover against all liabilities of whatever type and nature. In recognition of the limited coverage in the main insuring clause that clause was supplemented by specific additional coverage provisions in focused and precise language catering for particular statutory exposures of the assureds. The Syndicate cited as examples sub-sections I and K of the Underlying Policy, dealt with in opening by Mr Edelman. Sub-section I referred to sums which the assured became liable to pay by virtue of s 3 of the Defective Premises Act 1972. Sub-section K referred specifically to sums which the assured became liable to pay “as compensation” under ss 22 and 23 of the Data Protection Act 1984. The Syndicate acknowledged in its written opening submissions that this statute had been repealed by the time that the Underlying Policy incepted. Nevertheless Mr Kealey placed reliance on the fact that the words “as compensation” in sub-section K reflected the statutory language in s 23 of that Act. In these circumstances it was said that if the parties had intended liability under the 1886 Act to be covered then specific and clear provision for its coverage would have been incorporated.

As regards the main argument which BPA built upon the foundation stone identified earlier, the Syndicate’s written opening submissions made three responses. The first was in effect a blunt, “So what?” The mere fact that the Syndicate must be taken to have known that police authorities may potentially incur liabilities under the 1886 Act did not show that the parties intended that the Underlying Policy should provide protection against such liabilities. The second was that the argument was answered by the particular provision point. The third repeated the assertion that I have discussed earlier in this judgement that public liability cover ordinarily was confined to liabilities that arose as a consequence of an actionable wrong.

When developing the Syndicate’s response orally Mr Kealey postulated that a commercial layman would begin with the observation that the policy was “in the normal public liability language.” If asked to consider whether a liability under the 1886 Act fell within the policy this person would look at Halsbury’s Statutes and see that from the notes to s 3 that regulations permitted an appeal to the Secretary of State if the compensation authority refused an extension of time for making a claim. Examination of Clerk & Lindsell on Tort would show that this work made no mention of the 1886 Act. All of this would lead to the conclusion that the policy language was totally inapposite to include the right of compensation under the 1886 Act. A lawyer’s assertion that the Act contained an unexpressed duty imposing a liability akin to tort would lead to a shake of the head in disbelief.

Finally on issue 1 the Syndicate referred to other parts of the coverage provision: the definitions of “damage” and “injury” emphasised facts and matters in the nature of tortious responsibility alone, and the definition of “business” pointed to a need for wrongful conduct. It was submitted in this latter regard that in construing the coverage requirement that a liability be “to pay as damages” the court should have regard to the coverage limitation – as alleged by the Syndicate on Issue 2 – that any such liability must “have arisen out of [BPA’s] usual activities – i.e. out of [BPA’s] (mis)conduct.”

In reply Mr Edelman acknowledged that typically liabilities covered under the Underlying Policy would be tortious, but observed that Sir Wilfrid Greene MR contemplated in Hall Brothers that liabilities not strictly involving tort could also be covered. Liabilities which the Syndicate accepted were within cover included those for police dogs where liability was imposed on the owner without the need for any causative relationship between the owner’s conduct and the occurrence causing damage. An actionable wrong might be established merely by the suffering of relevant damage.

Noting that the Syndicate had not contested the accuracy of Lyell J’s analysis in Dwyer, Mr Edelman submitted that BPA’s potential liability under the 1886 Act was thus the same in nature as its potential liability for torts and in particular strict liability torts – as could be seen from the particulars of claim in the present case. He contrasted this with the Bartoline case, where HHJ Hegarty QC identified numerous and significant differences from a tort claim. Mr Edelman acknowledged that the procedure under the 1886 Act differed from that of a normal tort claim, but he submitted that such differences were insignificant. In that regard s 3 required the police authority to make an initial decision both whether to accept the claim and as to the amount. Under s 88 (2)(b) of the 1996 Act, ultimate control of the settlement of claims against the police by the police authority was a feature of all claims against the police. There could, he submitted, be no inconsistency with the claims control clause in the Underlying Policy, for that clause was not intended to require BPA to give to insurers powers of control beyond those which BPA could lawfully confer. The provision in the Underlying Policy for cover for defence costs was applicable to a claim under the 1886 Act in the same way that it would be applicable to any other claim against the police for damages.

Turning to the Syndicate’s argument as to what a commercial layman would think at the time the contract of insurance was made, Mr Edelman responded on two levels. At a general level he submitted that the correct approach was to seek to identify what sort of liabilities the parties were referring to generically when they used the words “legally liable to pay as damages”. Once that was done, the only remaining question was whether liability under the 1886 Act fell within what the parties had in mind. In the present case the Underlying Policy had not restricted liabilities to those which arose in tort, plainly it was intended to cover tort-like liabilities, and liability under the 1886 Act was indeed tort-like. At a more detailed level, if the commercial layman were indeed looking at Halsbury’s Statutes, asking what sort of liability s 2 of the 1886 Act was concerned with, the first case cited in the notes on that section was Dwyer.

The proper approach when examining the 1886 Act was, submitted Mr Edelman, to begin on the basis that the title used the word “damages” not in the Syndicate’s archaic sense, but in the more common meaning of “compensation” found in the dictionary and in the insuring words of the policy. He acknowledged that the Home Office consultation paper had used the word “damages” in the “archaic” sense, but observed that the author of that paper was apparently unaware of the 1714 Act – which used the word “damages” in its more common meaning. Nothing in the cases cited by the Syndicate was inconsistent with analysis of compensation payable under the 1886 Act as essentially the same as damages for strict liability torts.

For reasons which will become apparent, it is convenient at this stage to describe the argument on issue 2(2) only. Issue 2(2) assumes that the Syndicate is right to say that the damage to the property of the Yarls Wood Claimants must have arisen out of the “Business” as defined in the Underlying Policy. The word “Business” features in the “General Definitions” section of the Underlying Policy, where it is defined to mean “the usual activities of the assured as a police authority”. The definition adds examples of such activities, including the Police Sports and Social Club, canteens and welfare facilities. Two points are taken by the Syndicate in this regard. The Syndicate accepts that for present purposes the usual activities of BPA include maintaining an efficient and effective police force for the area of Bedfordshire, and paying compensation in accordance with the 1886 Act. The first point taken by the Syndicate, which I shall call issue 2(2)(a) is whether BPA are right to contend that “the usual activities of the assured as a police authority” include policing activities, in particular the duty and responsibility to maintain law and order, and to prevent riots from causing damage, within the police area for Bedfordshire. The second point, which I shall call issue 2(2)(b) is whether the damage to the property of the Yarls Wood Claimants arose from those usual activities.

At the outset of his submissions on issue 2(2)(a) Mr Edelman stressed that his client did not need to succeed on this issue. It would be enough that the damage to the property of the Yarls Wood Claimants arose from the activity of maintaining an efficient and effective police force for the area of Bedfordshire. Nevertheless if necessary BPA submitted that the “usual activities of the BPA of a police authority” when used in the Underlying Policy was plainly intended to include policing generally. The policy provided cover for the Chief Constable as well as the BPA. That cover was afforded by precisely the same insuring words as those used for BPA. It must follow that the definition of “arising out of the business” and the subsidiary definition of the business as “the usual activities… as a police authority” referred to policing generally – otherwise the cover afforded to the Chief Constable would be worthless. Second, the policy provided an indemnity to other persons “under the terms of this section” and with the proviso that the assured would have been liable if the claim had been made against the assured. Only if the “business” were construed to mean “activities associated with policing generally” would the policy offer any worthwhile cover in that regard.

On issue 2(2)(b) BPA accepted that there needed to be a causal link. It was not necessary for BPA to establish that its activities were the proximate cause, but the causative link had to be a significant rather than a weak one: see Rix LJ in Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] Lloyd’s Rep IR 696, at paragraph 63. There could be no doubt that if BPA had happened to have sufficient officers posted actually within Yarls Wood at the time of the riot, the damage would not have occurred. Accordingly, whether the activities constituting the “business” were given a wide formulation which included “policing generally” or a narrow formulation limited to the provision of an efficient and effective police force, there was a significant causative link between those activities and the damage to the property of the Yarls Wood Claimants.

More generally on issue 2(2), Mr Edelman repeated BPA’s principal submission, saying that the obvious purpose of the Underlying Policy was to protect the police fund against claims by third parties for personal injury or damage to property. The words “arising out of the Business” must accordingly be read in a manner which would give effect to that purpose.

The Syndicate’s arguments on issue 2(2)(a) began with an assertion in its written opening submissions that the usual activities of the BPA were not to be equated with the usual activities of the Chief Constable or members of the police force. BPA was separate and distinct from both the Chief Constable and the police force. It had separate functions and responsibilities. Mr Kealey submitted orally that the policy was concerned with physical damage, and was looking for a fact-based act or omission on the part of the assured in the usual activities of the assured. The BPA and the Chief Constable were separately insured for their respective rights and interests, and there was no good reason to construe the policy as permitting a “pick-and-mix” approach, conflating the usual activities of different assureds. On issue 2(2)(b), the Syndicate was content to adopt the approach of Rix LJ in the Scott case. What was required was a significant causative link. This, submitted the Syndicate, could not be shown merely from the fact that if sufficient numbers of police had been present the damage to property of the Yarls Wood Claimants could have been prevented. In this context Mr Kealey repeated his earlier submission that it was inappropriate to “fracture” the clause providing coverage.

In reply Mr Edelman acknowledged that the Underlying Policy referred to “the respective rights and interests” of the BPA and the Chief Constable. The fact remained, however, that the coverage clause specifically referred to the usual activities of the assured “as a police authority”. The Syndicate’s construction involved treating the words “as a police authority” as though they had been omitted from the policy, but the court should not re-write the policy in the way that the Syndicate suggested. BPA’s construction of the words “as a police authority” would make commercial sense and would cover the position of BPA in relation to police dogs or premises which it owned, but which were used by the Chief Constable’s officers.

As mentioned earlier, I consider that the court must focus on the task identified in the Investors Compensation Scheme case. The question for consideration is what the document would convey to a reasonable person having all the background knowledge which would have reasonably been available to the parties at the time of the contract.

I am not persuaded by Mr Kealey’s contention that the Underlying Policy was drafted by parties who had made efforts to be precise, detailed and comprehensive. The examples he cited at sub-sections I and K of the Underlying Policy did not support this proposition. As regards sub-section K of the policy, the Syndicate acknowledged that the relevant statute had been repealed by the time that the policy incepted. This is hardly consistent with the parties having given careful thought to the liabilities of police authorities and arriving at a precise formulation of how such liabilities might or might not fall within the general coverage clause. As regards both sub-sections there was no response to Mr Edelman’s explanation why insurance companies might well wish, as a matter of general practice, to devise specific provisions to cope with particular consequences of the statutes in question. In each case that explanation makes good sense. A reasonable person with the relevant background knowledge would conclude that sub-sections I & K were simply standard form supplemental provisions which as a matter of course were slotted in to a policy issued by ARC if such a policy included public liability cover.

There are other provisions in the Underlying Policy which suggest that no great degree of thought was given by the parties to the policy wording. One example is the claims control clause. I have no doubt whatever that applying the Investors Compensation Scheme principle the clause must be read as giving to the insured only such power as BPA could lawfully confer. A reasonable person having background knowledge of the position of BPA as a public authority would take this to be what the document conveyed. In reaching that conclusion I apply the approach of Langley J in the Tioxide case, forcing the niceties of language to give way to a commercial construction which is more likely to give effect to the intention of the parties. This is necessary because as a public body BPA is subject to restrictions on its ability to delegate its powers to others. Those restrictions are capable of applying to all BPA’s powers and duties. The extent of those restrictions may depend on the precise power or duty being exercised. I do not attempt to analyse precisely what those restrictions would be when BPA exercises powers and duties under the 1886 Act. There is no need to do so for present purposes – the simple and straightforward position is that whatever those restrictions may involve, the parties did not intend to over-ride them. I reject the notion that BPA by carrying out its duty to consider and where appropriate accept claims under s 3 of the 1886 Act is “creating a liability”. Whether a claim is made under the 1886 Act or otherwise, BPA must consider it and if it is satisfied that the claim is sound then as a public body it has no choice but to accept it. Further, the consideration of a claim may give rise to application of the defence costs provision in the Underlying Policy, whether the claim is under the 1886 Act or otherwise.

Another example of lack of thought is found in the words which are the subject of Issue 2. Whatever their true meaning – which I shall turn to examine in due course – the reference to “the Business”, thereby bringing in the definition referring to activities “as a police authority”, was simply inappropriate in a document which gave cover to the Chief Constable and offered an indemnity to others.

Taken as a whole, I consider that the wording of the Underlying Policy has not been the subject of any great degree of thought. It is a collection of various standard form provisions assembled with a view to giving to BPA the types of cover which the parties had agreed upon.

The Syndicate argued that the 1886 Act is effectively a compensation scheme. It plainly provides a mechanism for compensation by seeking it from the police authority in addition to or instead of seeking it from the rioters. This is not, however, in any sense a claim to a payment in the nature of social security. It is how the injury to or theft or destruction of property came about, rather than the individual circumstances of the claimant, that gives rise to the claim. The carrying out of social security objectives is not a part of the functions of police authorities, and there is no reason to categorise the duties imposed on police authorities by the 1886 Act as involving such functions. Nor is there any reason to think that the 1886 Act is using “compensation” in the special sense identified by Lord Esher M.R. in Dixon v Calcraft: see the analysis of the 1886 Act in Dwyer, discussed below. The words “compensation authority” were substituted for “police authority” in 1964. That change has no significance for present purposes, as the substitution arose only to cater for a restructuring: see paragraph 22 above.

In these circumstances I consider that BPA’s principal submission is compelling. There is no reason to think that the purpose of the Underlying Policy was anything other than the protection of the police fund against claims by third parties for personal injury or damage to property. For the reasons given above, the Underlying Policy is not a document which has been carefully designed to confer only a restricted cover. I readily accept – see Tesco – that it is not the commercial purpose to confer cover against private liability in the sense of contractual liability arising from private agreements. There is no suggestion by the Syndicate that liability under the 1886 Act falls into this category. What seems to me clear is that a police authority and an insurer when arranging public liability cover would, in the ordinary course, have every reason to think that a liability under the 1886 Act was a type of liability which was expected to fall within that cover. In the vast majority of cases the words used by the parties in the written document will determine the contractual meaning. However where, as here, the document has been drafted with an obvious lack of care, the Syndicate’s analysis of particular words and groups of words has a reduced value. If the words used in the written document had indicated that the parties had applied their minds to the matter and intended to distinguish between liabilities under the 1886 Act and other liabilities to the public generally, the position would have been different. In the absence of any such indication, it seems to me that the case for giving the document a meaning consistent with its ordinary commercial purpose is overwhelming. Thus on both issue 1 and issue 2 I conclude that the words found in the Underlying Policy are to be read as giving effect to the commercial purpose that I have described. It follows that BPA succeeds on both these issues.

Even if that approach were wrong, I would have held that BPA succeeded on its fallback case that even on legalistic analysis the particular words used in the Underlying Policy did not have a meaning which excluded claims under the 1886 Act. In that regard I shall examine Issue 1 and Issue 2 separately.

On issue 1, the Syndicate said that a claim must be for damages, and must be to pay compensation for an actionable wrong for breach of duty. Those requirements turned out to be the same thing, for the definition of “damages” adopted by the Syndicate was compensation for an actionable wrong for breach of duty. The analysis of Lyell J in Dwyer, approved by the Court of Appeal in the D HEdmonds case, clearly shows that the approach taken by Parliament was to impose a duty on the police authority to ensure that riotous and tumultuous assemblies did not cause the damage in question.

There is nothing in the insurance cases cited by the Syndicate which is inconsistent with regarding the 1886 Act as imposing a liability for an actionable wrong amounting to a breach of duty. As to the cases on the 1886 Act, the decision in Kaufmann Brothers concerned a statute referring to “any alleged neglect or default in the execution” of a duty. The decision of the Divisional Court proceeds squarely on the basis that a claim under the 1886 Act does not involve any allegation of neglect or default on the part of the police authority. Thus the Divisional Court was not concerned with the question which arises under issue 1, and the case is of no assistance to the Syndicate. Other cases on the 1886 Act cited by the Syndicate simply show that the liability is strict.

The Syndicate conceded that if there is an express duty it does not matter that the duty is a strict duty rather than a duty of care. Why should this be confined, however, to express duties? Duties may be wholly express, partly express and partly implied, or wholly implied. I cannot see any good reason in the present context for distinguishing duties arising in those different ways.

I do not consider that the Syndicate’s submissions on the word “damages” in the title of the 1886 Act advance the Syndicate’s case significantly. While that word can be used to mean “injuries” or “losses”, the use of the word “damages” to mean compensation has long been a more common use. Its use in the title of the 1886 Act is, in my view, a clear enough indication by Parliament that there was no difference in principle between an award of damages and an award of compensation under the 1886 Act. Both the 1827 Act and the 1886 Act identify procedures additional to an action at law, and it is probably for that reason that those statutes speak generally of “compensation” where the 1714 Act spoke of “damages.”

Mr Kealey postulated a commercial layman taking various steps by way of legal research. This seems to me to turn the commercial layman into a student lawyer. To my mind the commercial layman must be treated as possessing reasonable background knowledge, and on that footing the result is that described when discussing BPA’s principal submission above.

Returning to BPA’s fallback argument on Issue 1, the 1886 Act plainly imposes a civil liability on the police. Whether it is described as a tortious liability or a liability “akin to tort” does not seem to me to matter. It is a statutory liability. The Animals Act, which is generally regarded as creating tortious liability, has features which are similar, for in certain circumstances it imposes a strict liability on the owner of the animal. BPA would be subject to that liability in relation to police dogs, police horses, and any other animal that it owned. If its liability under the 1886 Act is not tortious, then it is certainly “akin to tort”. In those circumstances it does not seem to me that the Syndicate’s case is advanced by identifying differences between tortious liability and liability under the 1886 Act. I shall nevertheless set out in italics and comment on the factors cited in paragraph 20 of the Syndicate’s opening written submissions:

As to BPA’s fallback arguments on issue 2, it seems to me that the issue is resolved by my conclusions in favour of BPA on issue 1. It is common ground that there is a statutory duty on BPA to maintain an efficient and effective police force in Bedfordshire. The 1886 Act imposes a strict liability on BPA for a failure to prevent tumultuous and riotous assemblies causing injury to or theft of or destruction of certain types of property. If as part of the activity of maintaining an efficient and effective police force in Bedfordshire BPA fails to prevent such assemblies from doing this, then it is liable. That liability directly flows from BPA’s activities as a provider of an efficient and effective police force in Bedfordshire. It is true that the statutory framework envisages that BPA will achieve its statutory obligations by the maintaining of a police force in Bedfordshire responsible to the Chief Constable. That does not in any way detract from the fundamental activity of BPA as a police authority responsible for maintaining an efficient and effective police force, and liable should there be a riotous and tumultuous assembly with the consequences described. In those circumstances there is no need to examine Issue 2(1) or the alternative arguments of Mr Edelman on issue 2(2)(a).

Accordingly I find in favour of BPA. It follows that the claimant is entitled to be indemnified by the defendant pursuant to the Excess Policy in respect of any liability of the claimant to pay compensation under the 1886 Act to the claimants in the main action together with all costs and expenses incurred in defending the claim, subject to the Limit of Liability provisions set out in the Excess Policy and subject to any policy defences which could not have been taken by the defendant at the trial of this claim. I shall grant a declaration accordingly.