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

Photo Production hired Securicor to provide night patrols at its factory. Securicor’s printed conditions limited responsibility for employees’ wrongful acts and certain losses. During a patrol, an employee deliberately started a small fire which spread and destroyed the factory. Photo Production sought substantial damages for the failure of the security service. Securicor relied on its contractual exclusion. The trial judge upheld that defence, but the Court of Appeal treated the serious breach as preventing reliance on the clause. The House of Lords considered whether fundamental breach operated as an overriding rule of law.

Did a fundamental breach automatically prevent Securicor relying on an exclusion clause, or did the clause’s effect depend on construing the parties’ agreement?

The House of Lords allowed Securicor’s appeal. Fundamental breach was not a rule automatically nullifying an exclusion clause. The court had to construe the contract and determine whether the parties’ language allocated responsibility for the loss in question. On the wording and commercial circumstances, the clause protected Securicor against this employee’s conduct. The House also rejected the idea that termination for breach retrospectively erased the contract and every provision governing liability. Contractual obligations to perform and the secondary obligations arising after breach had to be distinguished. The decision therefore respected the allocation of risk in this agreement, without holding that serious breach makes an exclusion valid regardless of its wording or any applicable statutory control.

Fundamental breach does not automatically invalidate an exclusion clause. Its effect is a matter of construing the agreement, subject to applicable legislation. Termination for breach does not retrospectively erase provisions that govern the parties’ resulting liabilities and remedies.

Photo Production is the leading rejection of fundamental breach as a free-standing device for striking down exclusions. It redirects analysis to the contract’s wording, allocation of risk and applicable legislation. Modern answers must add the relevant statutory controls, including UCTA or the consumer regime where applicable. The case is not permission to exclude every kind of liability. Its separate discussion of primary and secondary obligations also helps explain why some clauses continue to operate after performance obligations have ended.