The recent case of Manolete Partners plc v Hastings Borough Council serves as a timely reminder that Local Authorities should use extreme caution when exercising their emergency statutory powers.
In the first successfully litigated case for compensation under Section 106 of the Building Act 1984 (the “Act”), it was held that Hastings Borough Council (the “Council”) was liable to pay compensation to a tenant following exercise of its emergency powers to close Hastings Pier to the public in June 2006.
Balancing the rights of the Local Authority and the Owners/Occupiers
Sections 77 and 78 of the Act present a real “legal tussle” where the law attempts to provide Local Authorities with the powers to protect the public against dangerous buildings but at the same time seeks to prevent a Local Authority from taking unnecessary action to the detriment of the owners or occupiers.
Section 77 makes provision for a Local Authority to apply to a Magistrates Court for an order requiring an owner to carry out urgent remedial works if the property is considered to be in a dangerous state. Such an order may require works to be undertaken to reduce the danger, restrict the use of the building or allow the owner to elect to demolish the building/structure. A Local Authority may themselves carry out the work if the owner does not comply with the order within the time specified.
Section 78 provides a Local Authority with the right to take emergency measures in order to reduce the danger without having to apply for a court order. The powers under Section 78 can only be exercised if “immediate action” is required. A Local Authority is able to recover from the owner any expenses reasonably incurred in removing the danger.
Such powers are an extreme intervention into the rights of property owners. Therefore, owners are afforded protection by the oversight mechanism utilised by the Magistrates Court in accordance with Section 77.
Owners have less protection should the Local Authority choose to exercise its powers under Section 78. No Court proceedings are carried out prior to exercise of this power. However, should the Local Authority seek to recover the cost of exercising the emergency powers and the Court is of the opinion that it would have instead been reasonable to proceed under Section 77, then those costs will not be recoverable.
In addition, should the Local Authority choose to exercise its powers under Section 78, a further right of recourse can be found in Section 106 of the Act. This provides the owners or occupiers with the right to claim full compensation for any damages incurred as a result of the Local Authority’s actions, providing that the owner or occupier has not himself been in default of any obligations under this Act. It is irrelevant to the claim for compensation whether the Local Authority was justified in the use of its powers under Section 78.
Manolete Partners Plc v Hastings Borough Council  EWCA Civ 562
This recent case is a good example of how Section 106 works in practice. It concerned an old Victorian pier in Hastings which opened in 1872. Due to the age of the pier, the structure was in the early stages of severe dilapidation. A big event was planned on 17 June 2006 and, as a result, the Council exercised their emergency powers under Section 78 and closed the pier on 16 June 2006. In the meantime, the Council applied for an order under Section 77 requiring the owner to make the necessary repairs.
Hastings Magistrates Court made an order on 12 September 2006 prohibiting public access to the pier until necessary remedial works had been carried out. The order was made under the provisions of Section 77. This vindicated the Council’s decision to close the pier.
A bingo hall tenant, Stylus Sports Limited (via its assignee Manolete Partners plc) made a claim for compensation in respect of the loss and damage caused to Stylus’ business by reason of the Council’s exercise of its powers under Section 78 for the period between 16 June and 12 September 2006.
Stylus was relying on Section 106. The fact that the Council was entitled to exercise its powers under Section 78 was irrelevant to whether compensation was payable.
The Council sought to defend this claim on the grounds that Stylus had breached their obligations under Section 2 of the Occupiers Liability Act 1957 and Sections 2(1) and 3 of the Health and Safety at Work Act 1974. The Council argued that as a result, Manolete was debarred from claiming any damages due to the ex turpi causa rule (a claimant cannot succeed on a claim due to their illegality). This was however rejected by both the Technology and Construction Court and the Court of Appeal on the grounds that these were the Landlord’s obligations and as a result the tenant was not “in default” under a narrower definition of Section 106.
This is an important case in illustrating how a Local Authority needs to tread very carefully when utilising their powers under Sections 77 and 78.
The key propositions from this case are simple:
- A Local Authority should be proactive and take early action when faced with a dangerous building. It will be well advised to make an application to court under Section 77 as soon as possible and well before it becomes necessary to take immediate action under Section 78.
- Any action taken following an order under Section 77 will not result in the Local Authority having to compensate an owner or occupier.
- If a Local Authority exercises its powers under Section 78, an owner or occupier is entitled to compensation for its losses, so long as it is itself not in default. It does not matter whether the Local Authority was entitled to exercise the power.
- It should only exercise its powers under Section 78 in circumstances when it has no choice but to take immediate action to remove the danger and such action cannot await a decision under Section 77. In those circumstances, the Local Authority may still face claims from innocent owners or occupiers.
DWF LLP’s Construction, Infrastructure & Projects team has a wealth of experience advising clients on all areas of construction law including drafting bespoke amendments to construction contracts and dispute resolution.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.