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Photo Production Ltd v Securicor Transport Ltd [1980] AC 827

Due diligence, negligence and exclusion clauses in contracts

Facts

Photo Production Ltd and Securicor had a contract for the provision of security services by the latter to the former.  One Securicor’s staff, Mr Musgrove, decided to warm himself while providing these security services on Photo Production’s premises, and he did so by starting a fire. The fire spread and burned down Photo Production’s factory, causing them damage amounting to £615,000. Photo Production sued Securicor, who however defended by pointing to an exclusion clause in the contract which stated that Securicor would "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]." On those grounds, Securicor asserted that they were not liable for the damage caused. Photo Production in turn asserted that Mr Musgrove’s actions as agent of Securicor constituted a fundamental breach of the contract, and therefore invalidated it along with the exclusion clause. In the Court of Appeal it was held that similarly to Karsales (Harrow) Ltd. v Wallis, [1956] 1 WLR 936, [1956] 2 All ER 866, the doctrine of fundamental breach did apply in this case and that Securicor was therefore liable. Securicor appealed to the House of Lords.

Issues

The issue in this case was whether the doctrine of fundamental breach applied and was relevant, and whether an exclusion clause could be effective on the facts of this case.

Held

The House of Lords held that the doctrine of fundamental breach was not relevant here, and that the case was a matter of construction of the contract. The exclusion clause did on the facts, cover the damage in question and therefore Securicor were not liable for the damage.


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