Claim against flats management company and against firm of surveyors acting as managing agents for negligence resulting in the theft of jewellery, worth £23,250, from plaintiff’s leasehold flat — Theft of jewellery by porter, actually a professional thief with 33 convictions and 11 prison sentences — Duties and liabilities of management company and agents — Allegations of negligence related both to the system for dealing with tenants’ keys and to recruitment procedure for the employment of porters — Judge rejected the criticisms of the system for dealing with keys, but found negligence proved in relation to the recruitment procedures — Not enough was done to find out the full details of the past history of the porter, who turned out to have been a professional thief with a bad criminal record, or to check information given by him as to his antecedents — Alternatively, the flats management company were vicariously liable, on the Lloyd v Grace, Smith principle, for the theft carried out by their servant — Authorities on vicarious liability reviewed — Defence of contributory negligence rejected — Plaintiff’s claim not defeated by voluntary payment made by insurance brokers — Judgment for £23,250 — A cautionary tale for flats management and agents
In this action
the plaintiff Mrs Anne Nahhas, sued the first defendants, Pier House (Cheyne
Walk) Management Ltd, and the second defendants, Harold Williams Bennett &
Partners, chartered surveyors, who were engaged by the first defendants as
managing agents. The plaintiff alleged that the theft of jewellery worth
£23,250 from her flat at Pier House, Cheyne Walk, Chelsea, by a porter at the
block of flats, was due to the defendants’ negligence.
D Serota
(instructed by Needham & James, of Birmingham) appeared on behalf of the
plaintiff; John Laws (instructed by Reynolds Porter Chamberlain) represented
both defendants.
Giving
judgment, MR DENIS HENRY QC said: In this case the plaintiff claims the value
of jewellery stolen from her flat at Pier House, Cheyne Walk, in Chelsea. That
value has been agreed at £23,250. The theft was committed by a porter at that
block of flats, and the plaintiff sues first Pier House (Cheyne Walk)
Management Ltd, a management company incorporated with the primary object of
the management and provision of services at Pier House, the directors of whom
are residents in the flats. Second, she sues Harold Williams Bennett &
Partners, a firm of chartered surveyors who are engaged by the first defendants
to act as managing agents for the flats, their duties including the engagement
and dismissal of the staff of the management company. Both those defendants are
represented by the same solicitors and counsel.
The plaintiff
is a young woman, single at the time of the theft but now married. The flats in
question are a modern, purpose-built, luxury block containing some 136 flats
built by Wates Construction Ltd. Wates wished to sell individual flats on
leases with the cost of maintenance and provision of services to be shared
among the tenants. To that end they set up the management company, granted the
superior lease to that company, and procured that that company should grant an
underlease to the tenants, including inter alia the plaintiff, to whom
they granted an underlease for a 99-year term running from December 25 1974.
The underlease required her to pay 0.99 of 1% of the budgeted costs and
expenses that the management company expected to incur in the management and
provision of services and amenities of the flats in any given year. In 1980
this service charge amounted to some figure just under £2,000 per annum. These
flats are and were expensive. At today’s prices a 90-year lease for a
one-bedroom flat would be about £55,000; for a three-bedroom flat £180,000 or thereabouts.
Two-thirds of the tenants are foreign. They are often absent abroad. Not
surprisingly, in these circumstances, the sales literature for the flats does
and did emphasise both their security and that they enjoy a 24-hour porterage
service.
The theft. On November 24 1980 the plaintiff was due to go into hospital. She
worked full-time in London and usually or often stayed with her parents in the
country over the weekend. At the time in question, owing to the coincidence of
various social events, she had rather more jewellery in London than normal. She
had approximately £35,000 worth. This jewellery, some 40 pieces, was in a jewel
box hidden in a drawer under some clothing. She had three security devices on
her door: an alarm, which had to be switched off by a key before the door could
be opened; a mortice lock and a Yale lock. Usually she had two operative sets
of keys, one she kept with her and the other was left with the porters. But
some 10 weeks before the theft she had returned from the country to find that
she did not have her keys with her and that her mother had taken the second
set. As a result she could not gain entry that night to her flat, and she had
to sleep in an empty flat in the building overnight. The next day the mortice
lock was drilled and replaced by another, and to do this it was necessary to
put the alarm out of action, with the result that, until it was repaired, there
was no alarm operative at the flat.
What with one
thing and another, she had not succeeded in getting the alarm repaired by
November 24 when she went into hospital, nor had she got a second mortice key
for her new lock. So at the time in question there was no alarm on the door and
she had only one set of keys that worked.
On November 24
the plaintiff went into hospital. She left her keys at the porter’s desk,
informing the duty porter that she was going to hospital for a week, that her
mother would be using the flat in her absence and that she wished to leave the
keys for her mother to collect. Mr Beanland, the deputy manager of the flats,
overheard this conversation. The porter entered the instructions as to the keys
in the book provided for that purpose. The plaintiff’s mother came to London
the next day, the 25th, collected the keys, as is shown by the key books, and
entered the flat. On later visiting the plaintiff in hospital she told her that
she suspected that a particular piece of jewellery was missing, and on the
plaintiff’s return to the flat on the 27th she discovered that of the 40 pieces
of jewellery she bad left in her box 13 pieces, generally the best pieces, had
been taken. There was no sign of any forced entry, and the police soon
concluded it was an inside job accomplished with the keys that the plaintiff
had left at the porter’s desk.
The thief. On December 8 1980 a night porter, Mr Joseph Iannucci, was
interviewed by the police. Found on him were a Hermes necklace and a pair of
Aspreys scissors inlaid with diamonds which apparently had been taken from flat
52, which again showed no sign of forcible entry. He admitted responsibility
for the theft from the plaintiff’s flat and eventually pleaded guilty to it,
asking for the theft from flat 52 to be taken into consideration. None of the
plaintiff’s jewellery was ever recovered. Iannucci was sentenced to 3 1/2
years’ imprisonment. His record shows him to have been a professional thief.
Then 29, he had already served 11 sentences in various custodial institutions
dating back to 1966, with 33 convictions and findings of guilt for burglary
and/or theft.
The security
system. The porter’s desk was in the front lobby
with the manager’s office just off it. It was manned day and night with two
porters on duty at any one time. In all, the flats employed eight porters, four
day porters and four night porters. There was a resident manager at the flats,
Mr Toome, and a deputy manager, Mr Beanland. Each had a flat in the block. One
of them at least was on duty all the time. They worked five-day weeks, and
whichever was on duty at night would occasionally patrol until midnight and
then retire, while remaining on call. A security guard was also on duty at
nights. The desk porter’s duties had been committed to writing. They include:
(1) The desk must not be left unmanned at any
time. (2) Every key must be signed out and the key cabinet kept locked. (3) All
visitors to be challenged and announced before allowing entry. This equally
applies to visitors who are regular and are known to you. (4) Workmen with
deliveries must not be allowed access unless proper authority has been granted
by the flat owner.
In 1979, some
18 months before the incident in question, the theft, a reminder had been sent
to all staff in a memorandum dated April 6 of that year. It was signed by Mr
Shirley, the gentleman responsible in the managing agents, the second
defendants, and he said as follows:
I wish to
remind all members of staff how essential it is that every stranger visiting
the building must be courteously challenged if they fail to report to the
reception desk and not be allowed to pass through the reception area without
the consent of the resident they are visiting. The fact that some people may be
regular visitors is no excuse for not challenging them. I would also take this
opportunity of reminding you that instructions concerning the issue of keys
must be strictly adhered to at all times, ie under no circumstances can flat
keys be issued without the prior written consent of the flat owner concerned.
Any difficulties or queries which arise in this connection should be
immediately referred to the house manager or his deputy.
The keys were
signed in and out by the porters. The key cabinet was kept by the desk. The key
book was kept at the desk. The cabinet was locked but the key was kept at the
desk. Virtually every tenant habitually or occasionally kept a set of keys
there. The plaintiff always kept her second set, when they were effective,
there. It was possible to leave keys with the manager. On the occasions when
the plaintiff had left her keys with the manager she would find that they would
still be kept in the cabinet and signed out to her when she claimed them on her
return by a porter. It seems that the system for signing keys in and out and
only signing them out on prior authorisation was adhered to in practice and
worked well. There is no criticism of it.
The
plaintiff’s evidence was that Mr Toome, the manager, had encouraged her to
leave a set of keys with the porter, saying it was convenient if he, the
manager, had to enter in case of emergencies such as a flood. Mr Toome’s
evidence is that he neither required nor encouraged tenants to leave their keys
with porters, but in fact they nearly all did, and no one suggested to tenants
that they should not. The key book shows a regular traffic of keys in and out.
I am inclined to accept the plaintiff’s account that she was encouraged to
leave a set with the porters, but in view of the universal and accepted
practice for tenants to do so I do not think that this finding is in itself
significant.
To summarise,
in the normal case the duty porters would have under their control a set of
keys to nearly every flat in the building and would inevitably be, through the
key book and their own observation, in a good position to know which flats were
empty. They had an intercom system to each flat. In this situation common sense
suggests that, when one considers the wealth of the occupants of these flats,
allied to the fact that many of them were foreign and away for long periods,
any professional thief who obtained a job as porter would find the possibilities
for theft tempting in the extreme.
I turn now to
the allegations of negligence that are made against both defendants. These fall
into two categories. First there is the criticism of the system. The criticism
is made of the fact that the porters had access to keys and to the fact that
they had such access without supervision from a manager. Secondly, criticism is
made of the recruitment procedures, in that those procedures had allowed a
professional thief to slip through the net. I deal first with the criticisms of
the system. The plaintiff’s case is that the keys should have been locked away
in the safe. They should only have been available from the manager, or at any
rate this certainly should have been so during any porter’s probationary
period. The defendants submit first that that would be very inconvenient for
tenants, whose wishes must be respected, for, after all, the management company
is their company. To that extent, submit the defendants, the tenants choose the
degree of security they wish, and it is patent that they do not want the
trouble of finding the manager, who may not be immediately at hand, on every
occasion when keys are required. In any event, they submit, access is not
totally unsupervised. The duty manager is about at any rate from when he comes
on duty in the morning until midnight, there is another porter on duty and at
night additionally a security guard. Mr Toome, who clearly took his task most
seriously, gave evidence that his introduction of this system at the previous
block of flats he had managed had reduced the burglary rate spectacularly and
had proved to be equally effective here. He could not think of any practical
way of improving the system. That would be possible only if he were to deny
tenants and their authorised visitors the convenience of immediate access to
their keys, or alternatively that more money was spent on providing security.
Lastly,
counsel for the defendants rightly reminded the court of the dangers of fine
tuning, of founding a finding of negligence on a small alteration prompted by
hindsight in a system devised by experienced men which had worked well and to
the tenants’ advantage.
I found those
submissions compelling, and in my judgment the plaintiff has failed to make out
her criticisms of the system. It seems to me to be a good system, and the fact
that the key book and instructions book appear to have been properly kept is
good evidence that it worked.
I come now to
the criticisms of the recruitment procedures. The system which I have approved
above necessarily depended on having honest porters. No one knowing of
Iannucci’s record could possibly have considered him for that job under that
system. Were the defendants’ recruitment procedures sufficiently rigorous or
were the defendants negligent in allowing such an unsuitable candidate to slip
through the net?
Recruitment
of porters. Nominally this was the responsibility
of the managing agents, the second defendants. In practice Mr Shirley, an
associate partner of the second defendants, left it to Mr Toome and Mr
Beanland. They would interview all applicants. But despite the recession and
unemployment the jobs were not in great demand. The pay was then a basic £75
gross per week and is now £90. The job, particularly for night porters, was
boring and a dead-end without real promotion prospects. Over the nine years he
had worked at the flats, Mr Beanland has had to fill 60 vacancies for the post
and interviewed upwards of 200 people for those vacancies. Both he and Mr
Beanland, who has been there an equal time, see each candidate. Unless they
agree, no candidate is taken. One can calculate from those figures: first, that
two candidates are rejected for each one that is accepted; second, that the
average porter stayed in his job for about 15 months, and, thirdly, that on
average six or seven porters were recruited each year. For the provision of
candidates Mr Toome and Mr Beanland relied on their local Job Centre. That Job
Centre knew their requirements and knew that they insisted on a reference and
wanted somebody presentable, well-spoken, who could write both passably and
legibly. The quality of applicants was clearly dependent on the quality of
people attending the Job Centre who were prepared to take a job which,
particularly in the case of a night porter, was solitary, not particularly well
paid and without prospects for promotion.
When we come
to the actual interviews, Mr Iannucci’s was a typical interview. We have the
written record that Mr Beanland kept of that interview. First it shows that the
interview took place on July 15. We know that that is about six weeks after
Iannucci had been released from prison. His name appears on the form as Joseph
Jannuli. It is suggested that this was a false name. Between the
there is no evidence on the point, I was told by counsel for the plaintiff that
Iannucci’s prison discharge papers wrongly called him Jannuli, so he just
carried on using that name. I do not attach any particular sinister inference
to the fact that he gave his name as Jannuli rather than Iannucci. His address
is then given. The police inquired at that address. A person at that address
who was questioned denied knowledge of Iannucci. That person may or may not
have been telling the truth. The defendants admit that they did not themselves
check the address. A reference is given. Under ‘Previous employment and
experience’, it says ‘Porter (night). Fisher’s Arms, Scott Street, Maidstone,
Kent’, and there is a reference to a Mrs Fry with a telephone number.
On the
evidence, Mr Beanland, in the course of that interview, did telephone that
number in the presence of Iannucci and with his encouragement. The phone was
answered ‘Fisher’s Arms’, Mrs Fry was asked for, she came to the phone and gave
an account of Iannucci’s previous employment with her, which seems to have been
quite false. The suggestion is that this reference was clearly set up by Mr
Iannucci. He was asked as to whether he had other references. He said no, he
had simply worked in his family’s own guest-house. He was now coming to London
because his father was ill, so he offered no other references. No further
verifiable details, such as previous addresses or where the family guest-house
was or other matters of that kind were taken from him. He was asked if he had
any convictions and said that he had not. The interview took 20 or 30 minutes. He
impressed both Toome and Beanland favourably and was employed on the spot
without further inquiry on a three-month probationary period. He gave
satisfaction right up to the time 4 1/2 months later when his thefts were
discovered.
The criticisms
that the plaintiff makes of that procedure are first the false name, second the
fact that no check was made on the address and it might have been false, third
that he produced no documents, fourth that no written reference was obtained,
fifth that a second reference was not sought, and sixth that other than the
phone call to Mrs Fry no check of any kind was made on any of the information
given by him nor was sufficient information required of him.
The
defendants’ response to these criticisms is: first that the name was
immaterial, second that there was no positive evidence that the address was
false, and in any event it is unlikely that inquiring there would have made any
difference to what eventually happened, third that applicants seldom come along
with documents, to have a P45 at that interview is rare, fourth that an oral
reference is better than a written, and that a false reference so carefully set
up would not have been likely to have been exposed by a request for
confirmation in writing, fifth on his story there was no obvious second
reference to take, and sixth they asked the right questions; and as to taking
time to verify any details independently, the defendants emphasised that with
the quality of applicants who come for these jobs if you send them away while
references etc are checked they seldom attend the second interview, and so that
way you lose suitable candidates. For all practical purposes, say the
defendants, they must take applicants on trust, relying on the nine years’
experience working together that Mr Toome and Mr Beanland had had.
However, as
this case shows, ‘There’s no art to find the mind’s construction in the face’,
and, as that passage continues, Mr Toome and Mr Beanland could say of lannucci
‘He was a gentleman on whom I built an absolute trust’ (Macbeth Act I,
Scene IV).
Among the
inquiries suggested by the plaintiff was contacting the police to ask them as
to whether the applicant had any previous convictions. Certainly the defendants
did not do so. Both Mr Shirley and Mr Toome had tried to do this in the past,
only to find that the police would not disclose that information. I am not
surprised to hear this, and in the absence of any evidence that the police
would have helped in this way I am not disposed to criticise the defendants for
not contacting them.
My finding,
then, on the six criticisms made of the recruitment procedures are as follows:
First, I attach no particular importance to the fact that he was employed as
Jannuli rather than Iannucci. The names are both similar and unusual, almost
any explanation would have satisfactorily accounted for the difference. Second,
it is not clear that his address would have proved to be false. Certainly in my
opinion it should have been checked as a matter of routine. Third, I accept
that applicants for this job seldom have other documents with them and that the
absence of a P45 is on the evidence neither unusual nor necessarily suspicious.
Fourth, Iannucci had clearly taken care to set up a false reference. Lies so
glibly told over the telephone might have been equally easily committed to
paper. Certainly I am not prepared to find that to ask for a reference to be
confirmed in writing would have been likely to have exposed the falsity of the
reference. Fifth, the reason given for not seeking a second reference, namely
that it would have been from a family business, does not seem to me wholly
convincing. Certainly the inquiries relating to the possibility of this would
have provided additional facts to verify the address of that business, who had worked
there, where Iannucci’s father was and matters of this kind. When we come to
this criticism, and the last, namely that other than the phone call to Mrs Fry
no inquiries at all were made by the defendants, we come to the most difficult
part of this case. Mr Toome and Mr Beanland were experienced interviewers. I
also accept what they say as to the fact that Job Centre applicants tend not to
come back for second interviews while their references are being checked. But
here we come to the real problem. The security system in these flats turns on
the honesty of porters whose own account of themselves in their initial
interviews, if supported by one reference, is, if they are successful in
obtaining the post, apparently accepted without any further inquiry. Mr
Shirley, who had overall responsibility for recruiting on behalf of the second
defendants, gave evidence which was significant on this point. He originally
used to attend the interviews himself, but it turned out to be impractical as
he was based in Croydon and Job Centre applicants proved unlikely to trouble to
attend a second interview if sent away once. ‘People from the Job Centre’, he
said, ‘can’t be interrogated too strongly.’
Under cross-examination he insisted that all was done in this case which
could reasonably be expected to have been done, and that no precautions would
have worked. Then he volunteered the following. ‘If the application had been
for a post as a security guard, who handled money, or a house manager, the
defendants would have gone into things in greater detail.’ Asked by the court to amplify as to what they
would have done in those circumstances, he answered they would have checked out
their history and delved into their background. They could afford to do this
for applicants for those posts because such applicants would wait for the
outcome; but, he said, porters come and go; there is a large turnover; they are
the type of people who would have got another job or gone away in the time such
investigations would have taken. It is generally a mistake to base too much on
a single answer or series of answers. However, even having warned myself
against that danger, it seems to me that in this case the defendants had, as
counsel for the plaintiff submitted, perhaps because of the mediocre calibre of
applicants for the job, failed properly to appreciate the responsibilities
porters bore. Their system was dependent on the honesty of the porters, who
knew which flats were empty, had the keys to them and could reasonably infer
that rich pickings would be there.
In my opinion,
the investigation into their honesty ought, under this system, to be just as
thorough as if they had been security guards who handled money or managers, for
under the system their opportunities for theft would have been as great as, if
not greater than, even a trusted manager.
While I accept
that on the evidence it might have been impractical to send the applicant for
the post away while his previous history was checked, I can see no difficulty
in telling the successful applicant that as a matter of routine his history
will be checked and then carrying out such a check during the first days or
weeks of his employment. I am satisfied that in this case, if the threat of
such checks did not ensure that Iannucci decided not to take the post in the
first place, those checks would have discovered that his story was not true and
that he would have been exposed. I do not accept Mr Shirley’s suggestion that
you cannot interrogate Job Centre applicants too strongly. These men were being
interviewed with a view to being placed in a most sensitive position of trust
in a job where the quality of the applicants was not the highest. In my opinion
both defendants were negligent in that they did not do enough to find out the
full details of Iannucci’s past history or to check his account of it. They
should as a matter of routine have made independent inquiries as to it after
the interview, instead of regarding the matter as being closed at the end of
the interview when he was offered the job. For such a sensitive post the
inquiries must be searching, and in my opinion the probability is that such
inquiries would have revealed that Iannucci had not told the truth in his
interviews and would have led to his dismissal before the thefts, thereby preventing
the thefts from occurring.
If I were
wrong in that conclusion, the plaintiff puts her case against the first
defendants in another way. Iannucci, in committing the thefts, they say, was
acting in the course of his employment as a porter, and the first defendants
are vicariously liable for his theft. The starting point for this inquiry is Lloyd
v Grace, Smith & Co [1912] AC 716, which decided that a principal
was liable for the fraud of his servant or agent acting within the scope of his
authority, even though the fraud was not committed for the benefit of the
employer or principal but committed solely for the servant’s private benefit.
The defendants contend that the servant is only acting within the scope of his
employment when committing the fraud where that fraud is a perverted, because
dishonest, exercise of the servant’s allotted task. The defendants contend that
as porters were neither permitted nor required by their terms of employment to
enter a tenant’s flat and in fact were expressly forbidden to do so, therefore
what was done was not, in the language of Lloyd v Grace, Smith,
done ‘in the course of such business as authorised’ or ‘within his apparent
authority’ but was ‘beyond the scope of his agency’. This servant, so the
submission goes, was merely taking advantage of the position into which his
employment had put him and was not acting within the scope of his employment.
His job, so the argument must go, was restricted to looking after keys and not
to look after, let alone be responsible for, the contents of flats which he was
not authorised to enter.
The defendants
seek support for this argument from the Court of Appeal decision of Morris
v C W Martin & Sons Ltd [1966] 1 QB 716. In that case the plaintiff
sent a mink stole to a furrier to be cleaned. With the plaintiff’s consent the
furrier, who did no cleaning himself, delivered the fur to the defendants, who
were well-known cleaners, to be cleaned by them for reward. The contract
between the furrier and the defendants, which was made by the furrier as
principal and not as agent for the plaintiff, contained printed conditions of
trading with exemption from liability clauses. While the fur was with the
defendants it was stolen by one of their servants whose duty it was to clean
the fur. The fur was never recovered. It was held, allowing the appeal, that
the defendants, being sub-bailees for reward, owed to the plaintiff, the owner
of the fur, the duties of a bailee for reward to take reasonable care of the
fur and not to convert it. Accordingly the plaintiff could sue the defendants
direct for the loss of the fur caused by its theft by their servant who had
been employed to take care of it and clean it.
This is the
leading authority after Lloyd v Grace, Smith on the master’s
liability for his servant’s theft. The defendants seek to rely on the following
passage from Clerk & Lindsell on Torts, 15th ed at p179, where,
commenting on that case, the editors say:
The
defendants were held liable chiefly on the basis that their own duty as bailees
for reward had been broken by reason of the servant’s theft. They could not get
rid of their responsibility by passing it on to another, and having entrusted
their duty to their servant must answer for the way in which he conducted
himself therein. It is suggested, however, that in view of the fact that the
coat was stolen by the very servant to which it had been entrusted by the
defendants and that the result would have been different if the coat had been
stolen by a servant to whom the coat had not been entrusted, the case could
have been decided on the shorter and simpler ground that the servant had
converted the coat in the course of his employment. Having been entrusted with
the coat by his master, the conversion of it amounted to the dishonest
performance of that which he had been employed to do honestly, namely to keep
it safe for its owner.
Then these are
the words that the defendants rely on:
It is
submitted, therefore, that in cases of theft by a servant the first question to
ask is whether or not the stolen goods had been put in the custody of the
servant by his master. If they had, then the theft will have been committed by
the servant in the course of his employment, and unless there is something in
the contract of bailment to the contrary the master will be vicariously liable.
If they were not, then the master will not be vicariously liable for the theft,
though the possibility that he may be liable on some other grounds, including a
breach of his own duty as bailee, remains open.
So, the
defendants contend, the stolen goods had not been put into the custody of the
servant by his master; only the key had been put in his custody. Therefore, it
is argued, the first defendants are not vicariously liable for their servant’s
theft.
The plaintiff
submitts that this approach is misconceived, essentially because while bailment
was emphasised in Morris v Martin and in the textbook discussion
of it, vicarious liability for a servant’s theft is not limited to bailed
objects. The case is put two ways, the first broad, the second more narrow.
First, adopting the defendants’ test, the plaintiff submits that this was a
dishonest exercise of the porter’s task. His task was to preserve the security
of the plaintiff’s flat. To burgle it was not just seizing an opportunity adventitiously
provided by the nature of his employment; it was simply a dishonest performance
of that which he was employed to do honestly, ie instead of preserving the
security of the flat, he violated it by theft. Morris v Martin is
merely an example, founded on bailment, of vicarious liability and not a
limitation restricting vicarious liability for theft to cases where the stolen
goods have been bailed.
Secondly, if
it were necessary in order to establish vicarious liability to put on the
defendants the role of bailees, then it was their duty to preserve the security
of the flat by keeping the key safe. If Iannucci had negligently permitted
others to take possession of the key bailed to the first defendants for safe
keeping, clearly the first defendants would be liable for the reasonably
foreseeable consequences of that breach of duty, ie the theft of the contents
of the room: see Olley v Marlborough Court Ltd [1949] 1 KB 532,
per Denning LJ (as he then was) at pp 548 and 549. It must be a fortiori
when the servant wrongfully uses the key to do the burglary himself. His
employers delegated to him performance of their duty as bailees of the key. He
broke that duty to take reasonable care to prevent unauthorised persons from
obtaining, that key for unauthorised access by using it for such unauthorised
access himself, and his employers are liable for the foreseeable consequences
of that breach of duty, ie the theft.
I have no
hesitation in accepting the plaintiff’s submissions on this point for the
following reasons. First, it is nonsense to suggest that as Iannucci was not
authorised to enter the flat so the first defendants could not be vicariously
liable for his theft were he to do so making use of the key he was employed to
keep safe. Photo Production Ltd v Securicor Transport Ltd [1980]
AC 827 is instructive. There a night security guard started a fire by
deliberately throwing a lighted match into a box which burnt down the factory
that he was guarding. His employers were held to be vicariously liable, the
eventual source of argument being whether their exemption clauses protected
them from that liability. Their liability was expressed in the speeches as
follows. First, Lord Wilberforce, p 846 at C:
The duty of
Securicor was, as stated, to provide a service. There must be implied an
obligation to use due care in selecting their patrolmen, to take care of the
keys and, I would think, to operate the service with due and proper regard to
the safety and security of the premises. The breach of duty committed by Securicor
lay in a failure to discharge this latter obligation. Alternatively it could be
put upon a vicarious responsibility for the wrongful act of Musgrove — viz,
starting a fire on the premises: Securicor would be responsible for this upon
the principle stated in Morris v C W Martin & Sons Ltd.
Next, Lord
Diplock on the same page at H:
It is not
disputed that the act of Securicor’s servant, Musgrove, in starting a fire in
the factory which they had undertaken to protect was a breach of contract by
Securicor; and since it was the cause of an event, the destruction of the
factory, that rendered further performance of the contract impossible, it is
not an unnatural use of ordinary language to describe it as a ‘fundamental
breach’.
There can be
no doubt that but for the clause in the contract which I have recited,
Securicor would have been liable for the damage which was caused by their
servant, Musgrove, whilst indubitably acting in the course of his employment: Morris
v C W Martin & Sons Ltd.
In that case it
was a servant obliged to protect premises from fire and their contents from
theft, ie to keep those premises and their contents safe, who broke that duty.
It was no answer to his employers to argue that starting a fire was not within
his authority. It was a failure to discharge his employer’s duty to keep the
premises safe. His employers would have been equally vicariously liable for his
actions had he used keys entrusted to him for this role to enter an office
which he was not allowed to enter and stolen therefrom.
In our case
the misuse of the keys was a breach of the self-same duty leading in my opinion
to the self-same consequences. Second and/or alternatively, Morris v Martin
above does not limit the
bailed: see the judgment of Lord Denning MR at p 726, where, under (iv), he
states:
Contract
to take care to protect the goods. Although there
may be no bailment, nevertheless circumstances often arise in which a person is
under a contractual duty to take care to protect goods from theft or
depredation: see, for instance, Stansbie v Troman [1948] 2 KB 48.
The most familiar case is the keeper of a boarding house or a private hotel. He
is under an implied contract to take reasonable care for the safety of property
brought into the house by a guest. If his own servants are negligent and leave
the place open so that thieves get in and steal he is liable: see Dansey
v Richardson (1854) 3 E & B 144 and Scarborough v Cosgrove
[1905] 2 KB 805. So also if they are fraudulent and collaborate with the
thieves. Again when a job-master lets out a brougham and coachman, he
undertakes impliedly that the coachman will take care to protect the goods in the
brougham. If they are stolen owing to the coachman’s negligence, the job-master
is liable. So also if the coachman steals them himself
and he
distinguishes from that line of authority cases where there is mere opportunity
to defraud, p 727 at F:
There are
many cases in the books where a servant takes the opportunity afforded by his
service to steal or defraud another for his own benefit. It has always been
held that the master is not on that account liable to the person who has been
defrauded: see Ruben v Great Fingall Consolidated [1906] AC 439.
If a window cleaner steals a valuable article from my flat whilst he is working
there, I cannot claim against his employer unless he was negligent in employing
him: see De Parrell v Walker (1932) 49 TLR 37. In order for the
master to be liable there must be some circumstance imposing a duty on the
master: see Coleman v Riches (1855) 16 CB 104, 121, per Williams
J.
As there was a
duty here to look after the key and as the reasonably foreseeable consequence
of loss of the key was the theft, so Iannucci’s employers are liable for his
actions, because their contractual duty was to take reasonable care for the
security of the flat and therefore of the property in it. The situation would
be otherwise if the theft, occurring without negligence on the employers’ part,
had been by, say, a boilerman who simply took advantage of an opportunity his
employment afforded and did not breach a duty delegated to him by his
employers.
Accordingly,
for those reasons I find the first defendants vicariously liable for the theft
committed by their servant, Iannucci.
I turn next to
the question of contributory negligence. Of the allegations of contributory
negligence originally made, only two are now persisted in. First, that the
plaintiff failed to activate her burglar alarm when leaving her flat, and
second that she handed her keys to the duty porter rather than the house
manager for locking away in the house manager’s safe. I deal with the burglar
alarm first. The plaintiff’s burglar alarm had been inoperative for some 10
weeks. I am satisfied that with reasonable diligence she could have got it
mended in that time. Having a burglar alarm was a relative rarity in those
flats. They were not standard or compulsory. Only 15 of the flats had them. It
is not surprising that there were so few. If the system was working as it
should, only authorised persons could get past the desk and so security should
be pretty good. In those circumstances, it seems to me to be stretching the
proper bounds of the duty to take reasonable care to look after your own
property to say that it was negligent not to have one. In any event, in my
judgment it would not have made any difference had there been one present or
not. The plaintiff had had to leave all her keys, including the alarm key, with
the porters, so that her mother could gain admission the next day. The alarm
key had to be used before entry. The keyhole was in a box behind a panel by the
front door, a box it shared with the electricity meters and the like. There is
no evidence that its position there in this flat was unusual for the flats nor
that it was difficult to find or identify as a burglar alarm key. It is
suggested that a porter would not have recognised the key in question as a
burglar alarm key. Of some porters that might be so, but of Iannucci, a
professional thief, I find that suggestion impossible to accept. I am quite
satisfied that he would have used the key to turn the alarm off had it been
working and the history of events would have been precisely the same whether
the alarm had been on or off.
The second
criticism made of the plaintiff is that she did not give her keys to the house
manager for locking in the safe. The answers to this submission seem to me as
follows. First, Mr Beanland was present when the plaintiff left for hospital,
he heard all the conversation about her anticipating that she would be away for
about a week, and never suggested that the keys should be left with him.
Second, on the plaintiff’s unchallenged evidence, whenever she did leave her
keys with the managers, she still, when she came back to collect them, found
that she had to collect them from the porters’ box, so it made no difference
with whom you left your keys; they ended up in the porters’ box. Third, it is
quite clear on the evidence that I have heard that the universal recognised
practice or rule was to leave the keys with the porters.
In those
circumstances, I find that the allegations of contributory negligence against
the plaintiff are not made out.
I turn now to
the last point in the case. The plaintiff’s jewellery was covered on her
father’s policy of insurance. When she first came to London some years before,
insurers were told that she might have with her in London some £3,000 worth.
They were never told that she would be likely to have in London rather more
than that. The insurance, apart from that £3,000 limit, apparently applied only
when the jewels were kept at the family home in the country. Accordingly,
eventually insurers refused to pay under the policy, except for a payment of
£3,000 which they made ex gratia. The plaintiff’s father, chairman of a public
company, was a valued client of insurance brokers Reed Stenhouse, through which
he placed his company’s and his family’s insurance. Reed Stenhouse realised
early on that insurers would be unlikely to pay in full, at any rate without a
struggle, but they thought that the plaintiff would be likely to recover
against the defendants. They sympathised with the plaintiff at this difficult
time, the loss of her jewellery coinciding with the fact that she had to go
into hospital. For reasons of benevolence, mixed with the commercial
desirability of cementing and maintaining their business relations with her
father, which was worth some £50,000 a year to them in commissions, they agreed
with her father to pay her out for the jewellery provided that the family
co-operated with them in pursuing the action, whether against underwriters on
the insurance policy or against the present defendants. That action was to be
brought in the plaintiff’s name and she was to be indemnified against costs.
Should she recover, she would be under a legal liability to account to Reed
Stenhouse for the proceeds. They made this contract with the father, acting on
the plaintiff’s behalf, within a couple of weeks of the theft, hoping to
relieve the plaintiff of worry and stress at this difficult time for her. All
in all, it was a gesture both benevolent and commercially sensible.
The defendants
submit that as the plaintiff has been paid out by insurance brokers, so she has
suffered no loss. Before considering their submissions and the authorities, I
stand back and ask myself whether there can be any public policy objection to
what was done here. Reed Stenhouse’s gesture seems to me to be both sensible
and admirable, their motives of the best, and I can see no reason why the law
should discourage what they have done by penalising them at the expense of the
wrongdoer. One can imagine cases where the third party intervening as Reed
Stenhouse have done would do so for improper or mischievous reasons, perhaps to
stir up litigation or to pester or pursue defendants against whom they have a
grudge. I am satisfied that should such occasions arise the law will be broad
enough to deal with it; but I would not allow the possibility of such
undesirable interventions to prevent this money being recovered on Reed
Stenhouse’s behalf unless I was driven to that conclusion by authority or by
principle.
The starting
point is the rule as to avoided loss. There can be no recovery for loss which
the plaintiff has avoided unless the matter is collateral: see MacGregor on
Damages, 14th ed para 245 et seq. This is really the duty to mitigate under
another name. The rule is not designed to bite on the facts of this case. Mr
Laws for the defendants distinguishes this case first from the normal
subrogation case where the plaintiff has been paid out by insurers. The
principle there is not to penalise prudence or, to put it another way, not to
make the prudent subsidise the wrongdoer. Second, he distinguishes the normal
benevolence case where the damages of the injured are not reduced by charitable
contributions from sympathisers and where the law permits double recovery to
that extent. But accepting, as I do, the distinction on the facts of those
well-known categories of case, I am left at the end of the day with first, no
authority cited to me which suggests that the brokers’ payment kills the
plaintiff’s claim, and second no rule of law or policy formulated before me to
suggest that that should be the result. For my part, it seems to me that the
right policy is that wrongdoers should pay and that third parties motivated by
a genuine benevolent and/or commercial
relationship, should not be discouraged from helping victims at a time when
they need that help most.
I am happy to
find that this appears to be in line with, or at any rate not inconsistent
with, authority: see Donnelly v Joyce [1974] QB 454; Cunningham
v Harrison [1973] QB 942; and Dennis v The London Passenger
Transport Board [1948] 1 All ER 779.
While it is
unnecessary to go further, I would also justify the plaintiff’s position by the
ordinary principle of subrogation. The basis of subrogation is a contract to
indemnify, ie a contract to make good a loss suffered by the other: see the
remarks of McCardie J in John Edwards & Co v Motor Union
Insurance Co Ltd [1922] 2 KB 249, p 255. In my opinion the contract made on
the plaintiff’s behalf with Reed Stenhouse was such a contract of indemnity,
and stemming as it did from a pre-existing commercial and benevolent
relationship, and motivated as it was by good motives to assist the plaintiff
in a difficult time rather than to attack the defendants, in my judgment this
claim can properly be brought by way of subrogation. Certainly I have been
referred to no authority or principle to compel me to uphold the defence put
forward, and in my judgment that defence fails.
Judgment was
given for the plaintiff for £23,250 with interest and costs and it was directed
that the costs of the first defendants be paid by the second defendants.
