The case of Photo Production v Securicor is a landmark decision in English contract law that firmly settled the fate of the doctrine of fundamental breach. Decided by the House of Lords in 1980, it clarified the approach to exclusion clauses in contracts and established that their applicability should be determined through construction of the contract, not by any rigid rule of law.
The ruling explicitly rejected Lord Denning’s fairness-driven doctrine of fundamental breach, confirming that courts should interpret exclusion clauses like any other contractual term, while statutory control under the Unfair Contract Terms Act 1977 provides the safeguard against unreasonable clauses.
Facts of Photo Production Ltd v Securicor Transport Ltd
Photo Production Ltd entered into a contract with Securicor Transport Ltd to provide night-time security services for its factory premises. During his shift, a night-watchman employed by Securicor, Mr Musgrove, lit a fire in a brazier to keep himself warm. Unfortunately, the fire spread uncontrollably and destroyed the entire Photo Production factory. The loss was estimated at approximately £615,000 (some reports state £648,000).
When sued for damages, Securicor relied on an exclusion clause in the contract. The clause stated:
“Under no circumstances shall Securicor 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 Production argued that such an exclusion clause could not apply where the breach was fundamental. They contended that the act of the security guard destroyed the very purpose of the contract – namely, protecting the premises from harm – and therefore the exclusion clause was rendered ineffective.
Procedural History
Court of Appeal
- Lord Denning MR, with Shaw and Waller LJJ concurring, held that the doctrine of fundamental breach applied.
- Denning argued that when a breach goes to the root of the contract, exclusion clauses cannot protect the breaching party. He drew on his earlier reasoning in Harbutt’s “Plasticine” Ltd v Wayne Tank and Pump Co Ltd (1970).
- Denning emphasised the perspective of the “fair and reasonable man”, suggesting that no reasonable party could have intended an exclusion clause to cover such a breach.
House of Lords
- On appeal, the House of Lords unanimously overturned the Court of Appeal decision.
- They held that the question was one of construction of the contract rather than the automatic application of any doctrine.
- Securicor was entitled to rely on the exclusion clause, which clearly exempted them from liability for their employee’s actions.
Issues
The case raised two main legal issues:
- Was the doctrine of fundamental breach applicable to invalidate the exclusion clause?
- Should exclusion clauses be treated differently from other terms when serious breaches occur, or are they to be interpreted solely by reference to the wording of the contract?
Photo Production Ltd v Securicor Transport Ltd Judgement of the House of Lords
Lord Wilberforce
- Delivered the leading judgement, rejecting the doctrine of fundamental breach as a rule of law.
- Affirmed that the proper approach is one of construction: exclusion clauses are to be interpreted according to their wording, regardless of whether a breach is fundamental or not.
- Stated that even serious or deliberate acts may fall within the scope of an exclusion clause if the clause is drafted widely enough.
- Criticised Denning’s attempt to introduce fairness considerations, pointing out that the Unfair Contract Terms Act 1977 now provides a statutory framework for addressing unfairness in contracts.
Lord Diplock
- Noted that many earlier cases had engaged in strained interpretations of exclusion clauses to avoid unfair outcomes.
- Argued that such judicial manoeuvres were unnecessary after the introduction of the 1977 Act.
- Reaffirmed that courts should simply interpret the clause as they would any other term of the contract.
Other Law Lords
- The decision was unanimous, confirming that exclusion clauses remain effective even in cases involving serious or fundamental breaches, provided that the wording covers the situation.
Conclusion
Photo Production v Securicor represents a critical turning point in English contract law. It firmly rejected the doctrine of fundamental breach, replacing it with a construction-based approach to exclusion clauses. The decision underscores the principle that freedom of contract should prevail, subject only to statutory intervention where necessary.
By resolving the long-standing judicial controversy between Lord Denning’s approach and earlier House of Lords authority, the case restored coherence to the law on exclusion clauses. Today, it stands as a reminder that contractual certainty is a priority in commercial law, while fairness and consumer protection are matters for Parliament.