Photo Production Ltd v Securicor Transport Ltd

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Photo Production Ltd v Securicor Transport

Ltd [1980] UKHL 2 Photo Production Ltd v Securicor Transport
Ltd
Court House of Lords
Citation [1980] AC 827, [1980] UKHL 2
(s) (http://www.bailii.org/uk/cases/UKHL/1980/2.html)
Case history
Prior [1978] 1 WLR 856
action
(s)
Keywords
Fundamental breach, construction

(http://www.bailii.org/uk/cases/UKHL/1980/2.html) is an English contract law case decided by the

House of Lords on construction of a contract and the doctrine of fundamental breach.

Contents
1 Facts
2 Judgment
2.1 Court of Appeal
2.2 House of Lords
3 Significance
4 See also
5 Notes
6 External links

Facts
Photo Productions Ltd sued Securicor Transport Ltd after Securicor's employee, Mr Musgrove, started a
fire at Photo Production's factory to warm himself while at work and accidentally burnt it down, costing
648,000. Securicor argued that an exclusion clause in its contract meant they were not liable, as it said
"under no circumstances be responsible for any injurious act or default by any employee unless such
act or default could have been foreseen and avoided by the exercise of due diligence on the part of
[Securicor]." Photo Productions argued that the clause could not apply under the doctrine of
fundamental breach, that the breach of the contract went to the root of the contract and invalidated the
whole agreement, and extinguished the exclusion clause.
Judgment
Court of Appeal

Lord Denning MR held that the doctrine of fundamental breach did apply, and that Securicor was liable.
[1]
He said if the breach was fundamental then the exclusion clause would be invalid, following his
decision in Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd.[2] He said the following.[3]

It seems to me that the two ways can be seen to meet in practice so as to produce a result
in principle which may be stated thus: although the clause in its natural and ordinary
meaning would seem to give exemption from or limitation of liability for a breach,
nevertheless the court will not give the party that exemption or limitation if the court can
say: The parties as reasonable men cannot have intended that there should be exemption
or limitation in the case of such a breach as this. In so stating the principle, there arises
in these cases the figure of the fair and reasonable man; and the spokesman of this fair
and reasonable man, as Lord Radcliffe once said, is and must be the court itself: see
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728729.

Thus we reach, after long years, the principle which lies behind all our striving: the court
will not allow a party to rely on an exemption or limitation clause in circumstances in
which it would not be fair or reasonable to allow reliance on it; and, in considering
whether it is fair and reasonable, the court will consider whether it was in a standard
form, whether there was equality of bargaining power, the nature of the breach, and so
forth.

Shaw and Waller LJJ concurred. Securicor appealed.

House of Lords

The House of Lords overturned the Court of Appeal and held that Securicor's exclusion clause was
effective and exempt it from liability for damage. Lord Diplock held that the clauses effectiveness was
a question of construction of the contract, and that it did cover the damage. He noted the reports are full
of cases in which what would appear to be very strained constructions have been placed upon exclusion
clauses though the need should have gone since the passage of the Unfair Contract Terms Act 1977.

Lord Wilberforce, writing for the Court, overturned Denning and found that the exclusion clause could
be relied upon. Wilberforce explicitly rejected Denning's application of the doctrine of fundamental
breach and opted for a "rule of construction" approach. Exemption clauses are to be interpreted the same
as any other term regardless of whether a breach has occurred. The scope of the exclusion is determined
by examining the construction of the contract. On the facts, Wilberforce found that the exclusion clause
precluded all liability even when harm was caused intentionally. He went out of his way to disapprove
the doctrine of fundamental breach of contract.

Lord Denning M.R. 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 M.R. 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 Suisse Atlantique Societe d'Armament SA v
NV Rotterdamsche Kolen Centrale [1967] 1 AC 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 [1970] 1 Q.B. 447 , 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 [1967] 1 A.C. 361 , 362 - "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.

Significance
The case is remembered for two principal reasons:

firstly, the explicit rejection of the doctrine of fundamental breach under English law (and hence,
by extension, for much of the common law world); and
secondly, it is remembered as the high-water mark of the disputes between the Lord Denning led
Court of Appeal and an increasingly unamused House of Lords, who strongly disapproved of
Denning's attempts to remould the law in a manner that he perceived to fit the justice of the
situation before him.

See also
English contract law
Notes
1. [1978] 1 WLR 856 3. [1978] 1 WLR 856, 865
2. [1970] 1 QB 447

External links

Retrieved from "https://en.wikipedia.org/w/index.php?

title=Photo_Production_Ltd_v_Securicor_Transport_Ltd&oldid=695675738"

Categories: English termination case law English unfair terms case law English contract case law
House of Lords cases Lord Wilberforce cases Lord Denning cases 1980 in British law
1980 in case law

This page was last modified on 17 December 2015, at 19:37.

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