2 Entertain Video Ltd & Ors v Sony DADC Europe Ltd  EWHC 972 (TCC) – TCC gives judgment in major insurance claim arising out of the 2011 London Riots
O’Farrell J has handed down judgment in this claim arising out the widely publicised arson attack on Sony’s warehouse in Enfield, North London, during the London Riots. The warehouse was burned down on the night of 8 August 2011 by a gang of rioters carrying petrol bombs. The warehouse and all of its contents were destroyed.
The Claimants were commercial divisions of BBC Studios and the owners of stock within the warehouse at the time of the fire. They were compensated for the value of their lost stock following a successful claim by Sony’s Insurers under the Riot Damages Act 1886. However, they began these proceedings to pursue claims for further losses, such as loss of sales.
The Court was required to make factual findings as to the adequacy of the security and fire protection arrangements at the warehouse. This raised an important question as to the content of a warehouseman’s duty of care in respect of such matters. Sony had taken advice from external consultants on both the security and fire protection of the site. Sony’s overarching position was that it was reasonable for it to rely on the advice it had received from ostensibly competent professionals. It contended that the measures it had put in place in reliance on that advice were reasonable, but it argued, in the alternative, that even if they were not, it would impose too onerous a duty on a warehouse-owner for it to have to investigate whether or not the specialist advice it received was correct. The Judge rejected this argument, and held that Sony was not entitled to such a defence because it had not appointed the right people to advise it. This leaves open the question of what a reasonable warehouse-owner may be expected to do in such circumstances, how far they have to go in order to be able to be confident that they are acting reasonably when they rely on the expertise of others, and how far the warehouseman has to cater for unforeseen and unprecedented threats such as a riot.
The case also raised a legal issue as to the meaning and effect of a series of exclusion and limitation clauses in the warehousing contract between Sony and the Claimants. Among these was an express exclusion of liability for losses which were ‘indirect’ or ‘consequential’, which were described as including “loss of profits, loss of sales, loss of revenue, damage to reputation, loss or waste of management or staff time or interruption of business”. Sony argued that the Claimants’ claims were comprised of such losses, and therefore could not be pursued or recovered. In determining this issue, O’Farrell J made reference to the recent line of authority addressing the so-called “second limb” of Hadley v Baxendale following from the decisions of the House of Lords in Caledonia North Sea Limited v British Telecommunications plc  BLR 139 (HL), and Transfield Shipping Ltd v Mercator Shipping Ltd  1 AC 61 (HL) both of which cast doubt on whether the traditional Hadley v Baxendale analysis holds good. It is noteworthy that in this case, O’Farrell J sought to distinguish both Transocean Drilling UK Limited v Providence Resources plc  EWCA Civ 372 and Star Polaris LLC v HHIC-PHIL Inc  EWHC 2941, so as to find that the Claimants’ losses were not excluded.
In addition, the Court was required to interpret a force majeure clause. The clause relieved Sony of its obligations to perform its contract with the Claimants where it was unable to do so by ‘circumstances beyond [its] reasonable control….including but not limited to…riot’. O’Farrell J found that although the riot was unprecedented and unforeseen, Sony’s inability to perform its contract was caused by circumstances which were within its control, because it could have put measures in place to deal with the risk posed by riot. This raises a highly topical issue as to when a contracting party will be entitled to avail of force majeure provisions and what, if anything, it must do to prepare for force majeure events.
A copy of the judgment can be found here.