Photo Production Ltd v Securicor Transport Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Wilberforce,Lord Diplock,Lord Salmon,Lord Keith of Kinkel,Lord Scarman |
| Judgment Date | 14 February 1980 |
| Judgment citation (vLex) | [1980] UKHL J0214-1 |
| Date | 14 February 1980 |
| Court | House of Lords |
[1980] UKHL J0214-1
Lord Wilberforce
Lord Diplock
Lord Salmon
Lord Keith of Kinkel
Lord Scarman
House of Lords
My Lords,
This appeal arises from the destruction by fire of the respondents' factory involving loss and damage agreed to amount to £615,000. The question is whether the appellant is liable to the respondents for this sum.
The appellant is a company which provides security services. In 1968 it entered into a contract with the respondents by which for a charge of £8.15.0d. (old currency) per week it agreed to "provide their Night Patrol Service whereby four visits per night shall be made seven nights per week and two visits shall be made during the afternoon of Saturday and four visits shall be made during the day of Sunday". The contract incorporated printed Standard Conditions which, in some circumstances, might exclude or limit the appellant's liability. The questions in this appeal are (i) whether these conditions can be invoked at all in the events which happened and (ii) if so, whether either the exclusion provision, or a provision limiting liability, can be applied on the facts. The trial judge (MacKenna J.) decided these issues in favour of the appellant. The Court of Appeal decided issue (i) in the respondents' favour invoking the doctrine of fundamental breach. Waller L.J. in addition would have decided for the respondents on issue (ii).
What happened was that on a Sunday night the duty employee of the appellant was one Musgrove. It was not suggested that he was unsuitable for the job or that the appellant was negligent in employing him. He visited the factory at the correct time, but when inside he deliberately started a fire by throwing a match on to some cartons. The fire got out of control and a large part of the premises was burnt down. Though what he did was deliberate, it was not established that he intended to destroy the factory. The judge's finding was in these words:�
"Whether Musgrove intended to light only a small fire (which was the very least he meant to do) or whether he intended to cause much more serious damage, and, in either case, what was the reason for his act, are mysteries I am unable to solve".
This, and it is important to bear it in mind when considering the judgments in the Court of Appeal, falls short of a finding that Musgrove deliberately burnt or intended to burn the respondents' factory.
The condition upon which the appellant relies reads, relevantly, as follows:
"Under no circumstances shall the Company [Securicor] be responsible for any injurious act or default by any employee of the Company unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of the Company as his employer; nor, in any event, shall the Company be held responsible for (a) Any loss suffered by the customer through burglary, theft, fire or any other cause, except insofar as such loss is solely attributable to the negligence of the Company's employees acting within the course of their employment�".
There are further provisions limiting to stated amounts the liability of the appellant upon which it relies in the alternative if held not to be totally exempt.
It is first necessary to decide upon the correct approach to a case such as this where it is sought to invoke an exception or limitation clause in the contract. The approach of the Master of the Rolls in the Court of Appeal was to consider first whether the breach was "fundamental". If so, he said, the court itself deprives the party of the benefit of an exemption or limitation clause ( [1978] 1 W.L.R. 863). The Lords Justices substantially followed him in this argument.
The Master of the Rolls in this was following the earlier decision of the Court of Appeal, and in particular his own judgment in Harbutt's "Plasticine" Ltd. v. Wayne Tank & Pump Co. Ltd. [1970] 1 Q.B. 447. In that case Lord Denning distinguished two cases (a) the case where as the result of a breach of contract the innocent party has, and exercises, the right to bring the contract to an end, (b) the case where the breach automatically brings the contract to an end, without the innocent party having to make an election whether to terminate the contract or to continue it. In the first case the Master of the Rolls, purportedly applying this House's decision in the Suisse Atlantique case [1967] 1 A.C. 361, but in effect two citations from two of their Lordships' speeches, extracted a rule of law that the "termination" of the contract brings it, and with it the exclusion clause, to an end. The Suisse Atlantique case in his view "affirms the long line of cases in this court that when one party has been guilty of a fundamental breach of the contract � and the other side accepts it, so that the contract comes to an end � then the guilty party cannot rely on an exception or limitation clause to escape from his liability for the breach" ( Harbutt's case p.467). He then applied the same principle to the second case.
My Lords, whatever the intrinsic merit of this doctrine, as to which I shall have something to say later, it is clear to me that so far from following this House's decision in the Suisse Atlantique it is directly opposed to it and that the whole purpose and tenor of the Suisse Atlantique was to repudiate it. The lengthy, and perhaps I may say sometimes indigestible speeches of their Lordships, are correctly summarised in the headnote�holding No. 3�"That the question whether an exceptions clause was applicable where there was a fundamental breach of contract was one of the true construction of the contract". That there was any rule of law by which exceptions clauses are eliminated, or deprived of effect, regardless of their terms, was clearly not the view of Viscount Dilhorne, Lord Hodson, or of myself. The passages invoked for the contrary view of a rule of law consist only of short extracts from two of the speeches�on any view a minority. But the case for the doctrine does not even go so far as that. Lord Reid, in my respectful opinion, and I recognise that I may not be the best judge of this matter, in his speech read as a whole, cannot be claimed as a supporter of a rule of law. Indeed he expressly disagreed with the Master of the Rolls' observations in two previous cases ( Karsales (Harrow) Ltd. v. Wallis [1956] 1 W.L.R. 936 and U.G.S. Finance Ltd. v. National Mortgage Bank of Greece [1964] 1 Lloyd's Rep. 446 in which he had put forward the "rule of law" doctrine. In order to show how close the disapproved doctrine is to that sought to be revived in Harbutt's case I shall quote one passage from Karsales:
"Notwithstanding earlier cases which might suggest the contrary, it is now settled that exempting clauses of this kind, no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects. He is not allowed to use them as a cover for misconduct or indifference or to enable him to turn a blind eye to his obligations. They do not avail him when he is guilty of a breach which goes to the root of the contract". ( 1.c. p.940).
Lord Reid comments as to this that he could not deduce from the authorities cited in Karsales that the proposition stated in the judgments could be regarded as in any way "settled law" (p.401).
His conclusion is stated on p.405: "In my view no such rule of law ought to be adopted"�adding that there is room for legislative reform.
My Lords, in the light of this, the passage cited by the Master of the Rolls has to be considered. For convenience I restate it:
"If fundamental breach is established the next question is what effect, if any, that has on the applicability of other terms of the contract. This question has often arisen with regard to clauses excluding liability, in whole or in part, of the party in breach. I do not think that there is generally much difficulty where the innocent party has elected to treat the breach as a repudiation, bring the contract to an end and sue for damages. Then the whole contract has ceased to exist including the exclusion clause, and I do not see how that clause can then be used to exclude an action for loss which will be suffered by the innocent party after it has ceased to exist, such as loss of the profit which would have accrued if the contract had run its full term." ( Suisse Atlantique [1967] 1 A.C. at p.398.)
It is with the utmost reluctance that, not forgetting the "beams" that may exist elsewhere, I have to detect here a note of ambiguity or perhaps even of inconsistency. What is referred to is "loss which will be suffered by the innocent party after (the contract) has ceased to exist" and I venture to think that all that is being said, rather elliptically, relates only to what is to happen in the future, and is not a proposition as to the immediate consequences caused by the breach: if it were that would be inconsistent with the full and reasoned discussion which follows.
It is only because of Lord Reid's great authority in the law that I have found it necessary to embark on what in the end may be superfluous analysis. For I am convinced that, with the possible exception of Lord Upjohn whose critical passage, when read in full, is somewhat ambiguous, their Lordships, fairly read, can only be taken to have rejected those suggesstions for a rule of law which had appeared in the Court of Appeal and to have firmly stated that the question is one of construction, not merely of course of the exclusion clause alone, but of the whole contract.
Much has been written about the Suisse Atlantique. Each speech has been subjected to various degrees of analysis and criticism, much of it constructive. Speaking for myself I am conscious of imperfections of terminology,...
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