Over the Easter Bank Holiday weekend a major heist took place in the exclusive Hatton Garden jewellery district of London. It involved the raid of an estimated 300 safety deposit boxes, culminating in a loss of approximately £200 million worth of goods. Various news outlets report that an alarm inside the Hatton Garden company’s building was raised on Good Friday. However after checking that the front and back doors were still secure, no further action was taken by the security company. This may have left the burglars 4 days to execute the heist, which was eventually discovered on the following Tuesday.
No doubt the holders of the emptied safety deposit boxes will be counting their losses and wondering what they can do. In such circumstances (and without knowledge of the specific commercial relationship between the company and its customers in this case), it is usual to consider potential liability in contract, in the tort of negligence, and in bailment.
Bailment arises when one person is voluntarily and knowingly in possession of goods that belong to another. The bailor (in this case the safety deposit box holder) retains the reversionary rights to the goods, whilst the bailee (the safety deposit box company) has possession for a limited time and purpose. Bailment gives rise to duties on the part of the bailee, including the duty to take reasonable care of the goods entrusted to them.
If the bailee fails to discharge this duty to take reasonable care of the goods and as a consequence the goods are stolen, lost, destroyed etc. as the case may be, the bailee will be liable to the bailor for that loss, unless the bailee can prove that the loss or damage was not caused by a breach of his duty of care.
At the outset of a commercial relationship for the storage of goods, it is usual for customers to have entered into a written agreement with the company in relation to the services being provided. As well as the specifically agreed terms, there may be implied terms that the company shall provide its services with reasonable care and skill. Failure to do so could result in a liability for breach of contract. There may be other contractual terms which either specify the precise service to be provided (including in relation to security) or which purport to limit or exclude liability in certain circumstances.
Where a duty of care to take care of goods is breached, a liability in the tort of negligence may arise. It may be argued that the level of security provided, or the reaction to alarms, fell short of the standard expected to be provided by the company. If such a duty existed and was not fulfilled, and it foreseeably resulted in the theft and loss of goods, a good claim in negligence may result.
In bailment, contract and negligence, relevant considerations will be the kind of operation the company is running; the type of security that is purported to be provided (for example, is the building manned 24 hours 7 days a week, what kind of alarm system is in place, is there a protocol staff must follow in relation to security checks?).
In commercial arrangements of this type, the parties would be well advised to consider whether the contract contains provisions requiring one or other party to insure, and whether the obligation is adequate to cover such a sizeable loss as was reported this Bank Holiday weekend.
Due to the peculiarity of safety deposit boxes rendering the contents confidential, consideration should be given to the possible evidential difficulty in proving both the existence in the safety deposit box of the goods claimed to have been lost, and their value. Preparing a schedule of the goods being placed in the box and conducting an audit of the contents periodically may assist, supplemented by photographs and valuations of the goods.