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URL: http://www.bailii.org/ew/cases/EWHC/Comm/2017/3348.html
Cite as: [2018] Bus LR 294, [2017] EWHC 3348 (Comm)

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Neutral Citation Number: [2017] EWHC 3348 (Comm)
Case No: CL-2016-000712

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
21/12/2017

B e f o r e :

THE HON. MR JUSTICE POPPLEWELL
____________________

Between:
(1) GLENCORE ENERGY UK LTD
(2) GLENCORE LTD
Claimants

- and –


FREEPORT HOLDINGS LTD
Defendant

____________________

Robert Thomas QC and Benjamin Coffer (instructed by Clyde & Co LLP) for the Claimants
Timothy Hill QC and Andrew Feld (instructed by Norton Rose Fulbright LLP) for the Defendants

Hearing dates: 29 & 30 November, 4 December 2017

____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©


     

    The Hon. Mr Justice Popplewell :

    Introduction

  1. In this action the Claimants ("Glencore") claim as the purported owners of a cargo of about 62,250 m.t. of fuel oil against the Defendant ("the Owners") as owners of the vessel "Lady M" ("the Vessel"). The claim arises out of a fire which started inside the engine control room of the Vessel in the early hours of 14 May 2015 while the Vessel was on her loaded voyage from Taman, Russia to Houston, USA. As a result of the fire the Owners engaged salvors, the Vessel was towed to Las Palmas, and the Owners declared general average. Glencore incurred liability to the Vessel's salvors, as well as further costs defending arbitration proceedings, in the total sum of around US$3.8m. Glencore seeks to recover these costs from the Owners for alleged breach of the contract or contracts of carriage contained in or evidenced by four bills of lading dated 28 April 2015, alternatively in bailment; and a declaration that it is not liable to make a general average contribution. The Owners deny liability and counterclaim a general average contribution of approximately US$560,000.
  2. The contract or contracts of carriage contained in or evidenced by the bills of lading, and the bailment of the cargo, were subject to the Hague-Visby Rules. The Owners rely in particular upon defences under Article IV Rule 2(b) and/or (q) of the Hague-Visby Rules which provide in relevant part:
  3. "Article III
    […] 2. Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
    Article IV
  4. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:-
  5. (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.
    (b) Fire, unless caused by the actual fault or privity of the carrier.
    (c) Perils, dangers and accidents of the sea or other navigable waters. […]
    (q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage."
  6. The provisions with which I am concerned are in the Hague-Visby Rules, but there is no material distinction between those and the Hague Rules for the purposes of the issues I have to decide. It is therefore to the Hague Rules and their origin and background that I will refer in this judgment.
  7. On 16 June 2017 Sara Cockerill QC sitting as a Deputy High Court Judge, as she then was, ordered the hearing of two preliminary issues on the basis of agreed and assumed facts set out in a schedule. Subject to some refinement which was agreed in the course of the hearing, those agreed and assumed facts are as follows:
  8. "Agreed Facts
  9. It is reported that a fire broke out inside the main electrical switchboard in the Vessel's Engine Control Room at approximately 01:00hrs (lt) on l4th May 2015, in a position reported to have been 0300 56' N, 0300 46' W and in water said to have been 4,200m deep.
  10. It is reported that the fire was put out by 1:36hrs (lt) on 14th May 2015.
  11. Approximately two hours later, the Chief Engineer is said to have inspected the switchboard and immediately concluded that it could not be repaired and that the Vessel was, therefore, immobilised.
  12. As a result of the alleged immobilisation, the Defendant engaged Tsavliris Russ (Worldwide Salvage and Towage) Ltd ('the Salvors") upon the terms of a Lloyds Standard Form of Salvage Agreement dated 14th May 2015 ("the Salvage Agreement").
  13. Pursuant to the Salvage Agreement, the tug "TSAVLIRIS HELLAS" attended the Vessel on 16th May 2015, a tow connection was established and the Vessel was towed to Las Palmas where the convoy arrived on the evening of 31st May 2015.
  14. Salvage services were eventually terminated on 12th June 2015 and the Vessel was thereafter redelivered to the Defendant.
  15. The Vessel remained at Las Palmas until l4th July 2015, at which she departed for Houston where the Cargo was eventually delivered between about 19th and 22nd August 2015.
  16. Arbitration proceedings were duly commenced by the Salvors against "The Owners of "M.V. LADY M", Her Cargo, Freight, and Bunkers" and thereby against (amongst others) the Claimants and the Defendant.
  17. The Defendant settled the Salvors' claim on terms that are unknown to the Claimant.
  18. The Claimants settled the Salvors' claim on the terms evidenced by a written Settlement Agreement dated 13th June 2016, whereby they agreed to pay US$3,729,413.40 in respect of principal and accrued interest, together with £41,000 in respect of the arbitrator's costs and the Salvors' legal costs. Further, the Claimants have incurred costs in the sum of £46,328.40 in the reasonable investigation and defence of the arbitration proceedings.
  19. On 18th May 2015, the Defendant declared General Average (though the validity of this declaration is in dispute). Average Security was duly provided by and/or on behalf of the Claimants.
  20. The fire was started deliberately by a member of the crew with the intent to cause damage.
  21. Assumed Facts for Purposes of Preliminary Issues (only):
  22. The perpetrator was the Chief Engineer.
  23. He acted alone.
  24. At the time of starting the fire deliberately and with intent to cause damage he was:
  25. a. under extreme emotional stress and/or anxiety due to the illness of his mother;
    b. alternatively, suffering from an unknown and undiagnosed personality disorder and/or mental illness;
    c. alternatively, neither a nor b above."

  26. The two preliminary issues ordered by Sara Cockerill QC were in the following terms:
  27. "(1) Whether on the basis of the agreed and assumed facts set out in the schedule hereto the conduct of the chief engineer constitutes barratry; and
    (2) if so whether the Defendant is precluded from relying upon Article IV Rule 2(b) and/or 2(q) of the Hague-Visby Rules."
  28. In the course of argument, the formulation of the preliminary issues which I was asked to decide was expanded and refined. Glencore contend that on the basis of the agreed and assumed facts:
  29. (1) the conduct of the chief engineer constitutes barratry;
    (2) the Owners are not exempt from liability under Article IV Rule 2(b) because barratrous fire does not come within Rule 2(b);
    (3) the Owners are not exempt from liability under Article IV Rule 2(q) because:
    (a) barratrous acts of servants of the carrier fall outside the exception in Article IV Rule 2(q); alternatively
    (b) the conduct of the chief engineer was neglect or default of a servant of the carrier so as to fall within the proviso in Rule 2(q).
  30. The Owners contend that:
  31. (1) the conduct of the chief engineer did not, or not necessarily, amount to barratry;
    (2) Article IV Rule 2(b) exempts the carrier from liability for loss caused by fire, whether or not the fire was barratrous;
    (3) Article IV Rule 2(q) exempts the carrier from liability for barratrous acts of the servant of the carrier unless they were committed within the scope of the servant's employment; the act of the chief engineer in commencing the fire was not, or not necessarily, within the scope of his employment; and accordingly the Owners are not, or not necessarily, precluded from relying upon the defence in Article IV Rule 2(q).
  32. In the light of these rival submissions, it is convenient to define and address the preliminary issues in the following order:
  33. (1) Did the conduct of the chief engineer constitute barratry?
    (2) Is Article IV Rule 2(b) capable of exempting the Owners from liability if the fire was deliberately or barratrously caused?
    (3) Are the Owners exempt from liability under the "any other cause" exception in Article IV Rule 2(q)?

    Issue 1: Did the conduct of the chief engineer constitute barratry?

  34. Glencore defined barratry as a wilful act of wrongdoing committed by the master or crew against the ship or goods without the privity of the shipowner; or alternatively an act or omission of the master or crew with intent to cause damage or recklessly with knowledge that damage would probably result. The Owners defined barratry as any wilful or intentional act of wrongdoing by the master or mariners to the prejudice of the owner or charterer, without the privity of that owner or charterer, where the intention is criminal or fraudulent.
  35. The critical difference for the purposes of this case is that Mr Hill QC contends that there must be an intentionally committed crime or fraud; that on the agreed and assumed facts of this case the necessary intention to commit a crime would be absent were the mental state of the chief engineer to afford a defence of insanity to the relevant criminal charge, which in English law would be one of criminal damage contrary to the Criminal Damage Act 1971; and that the agreed and assumed facts leave open that possibility which would have to be explored at trial; in English law a defence of insanity lies where a person is labouring from such a defect of reason, from disease of the mind, as not to know the nature and quality of the act he was doing, or, if he did know, that he did not know he was doing what was wrong: McNaughton's Case (1843) 10 Cl & F 200 at pp. 210-211; the assumed facts are that the chief engineer intended to cause damage, but they leave open the question whether by reason of a mental illness he understood that what he was doing was wrong. Mr Thomas QC submitted that barratry does not require the mens rea of intention to commit a crime; the relevant ingredient in barratry is simply wrongdoing, which can be committed by any serious breach of duty towards owners; and that however defined, the act of setting fire to the vessel intending to cause damage is so obviously contrary to the duty owed to the Owners and so clearly within the concept of wrongdoing that it amounts to barratry.
  36. Mr Thomas took a threshold point that it was not open to the Owners to submit that the definition of barratry was not conclusive of the result on the existing agreed/assumed facts. He submitted that the preliminary issues had been agreed and ordered to be tried on the understanding that the agreed and assumed facts would be sufficient to resolve one way or the other that there had or had not been barratry; and that the Defence does not in terms plead insanity or the necessary ingredients of it. I am unable to accept this threshold objection. Preliminary issues which are to be determined upon agreed and/or assumed facts are in principle capable of being answered in three ways, namely "yes", "no", or "it depends on further facts which are outside those which have been agreed and assumed". There was nothing in the particular way in which the Owners advocated the adoption of preliminary issues before Sara Cockerill QC, or the formulation of those issues or of the agreed/assumed facts, which involved an undertaking or assurance that the answer contended for would not be the third of the possibilities I have identified. Whilst of course it was hoped and desired by the parties as well as the Court that the formulations would be sufficient to allow a yes or no answer, there was no agreement by the Owners to waive any argument which would result in an answer that it depended on other facts. Although the Defence does not specifically allege insanity, it does plead reliance on mental illness and the submissions to me made clear that the allegation of insanity is made. It would not be right to shut it out on a pleading point which could at this stage be cured by amendment.
  37. The Hague Rules do not mention barratry. However, prior to the Hague Rules it was common for shipowners to include barratry amongst a list of exempted perils in bills of lading and charterparties; and barratry was, and remains, a peril commonly insured against in policies of marine insurance. At the time of the Hague Rules it was therefore an established concept within English law whose meaning had been the subject matter of considerable English jurisprudence, and a cause of loss which the framers of the Hague Rules can be taken to have had in mind. Indeed it is clear from the travaux préparatoires that at the Hague Conference in 1921 barratry was included in the draft at that stage as a separately enumerated exempted peril, but came to be deleted in circumstances which I shall consider further when addressing the fire exception. For present purposes it is sufficient to note that the discussion at the Conference, when the exception for barratry remained in the draft of Article IV, proceeded on the basis that the concept was to be that defined by English law and as understood in marine insurance, which already took account of practices in the law merchant of other European towns and countries, some of which made insurers mandatorily responsible for barratry at law irrespective of the policy terms. In Compania Naviera Bachi v Henry Hosegood & Son Ltd (The "Juan de Astigarraga") [1938] KB 236, 242 Porter J said in terms that the word meant the same in a charterparty as in an insurance policy. Accordingly, in seeking to define barratry for present purposes, it is to those sources that the Court should look. I did not understand either side to be contending to the contrary.
  38. The Marine Insurance Act 1906 defined barratry in paragraph 11 of the schedule entitled "Rules for Construction of Policy" as follows:
  39. "11. The term "barratry" includes every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer."
  40. The locus classicus for the scope of the concept of barratry at the time of the Hague Rules was Earle v Rowcroft (1806) 8 East 126 in which Lord Ellenborough CJ reviewed the previous authorities. His definition of barratry was described by Lord Blackburn in John Cory & Sons v Burr (1888) 8 App. Cas. 393, 399 as one which had never been departed from. The issue in Earle v Rowcroft was whether actions of the master in trading for the purchase of slaves with a Dutch fort on the African coast at a time when England was at war with Holland, resulting in the vessel being forfeit as prize, fell outside the scope of barratry because the master did not intend to injure his owners by so trading, but rather to promote their interests. The Court held that this was no bar to it being barratry, which did not require as a necessary ingredient an intention to injure the shipowner or his interests. The reasoning is contained in the following passage at pp. 138-9:
  41. "After these various decisions of Courts of Law, we are certainly warranted in pronouncing that a fraudulent breach of duty by the master, in respect to his owners; or, in other words, a breach of duty in respect to his owners, with a criminal intent, or ex maleficio, is barratry. And with respect to the owner of the ship or goods, whose interest is to be protected by the policy, it can make no difference in the reason of the thing, whether the prejudice he suffers be owing to an act of the master, induced by motives of advantage to himself, malice to the owner, or a disregard to those laws which it was the master's duty to obey, and which (or it would not be barratry) his owners relied upon his observing. It has been strongly contended on the part of the defendant, that if the conduct of the master, although criminal in respect of the State, were in his opinion likely to advance his owner's interest, and intended by him to do so, it will not be barratry. But to this we cannot assent. For it is not for him to judge in cases not intrusted to his discretion, or to suppose that he is not breaking the trust reposed in him, but acting meritoriously, when he endeavours to advance the interest of his owners by means which the law forbids, and which his owners also must be taken to have forbidden, not only from what ought to be, and therefore must be presumed to have been, their own sense of public duty, but also from a consideration of the risk and loss likely to follow from the use of such means. In laying down this doctrine we feel ourselves supported by the several eminent authorities already referred to. And in giving this opinion we do not feel any apprehension that simple deviations will be turned into barratry, to the prejudice of the under-writers; for unless they be accompanied with fraud, or crime, no case of deviation will fall within the true definition of barratry, as above laid down."
  42. It was common ground in that case that the nature of the act of the master was illegal because it constituted trading with the enemy. This constituted wrongdoing because as Sir Henry Duke, President of the Probate Divorce and Admiralty Division, put it in 1919, shortly before he chaired the Hague Conference, in Steamships "Borgstein" (No 1069) (consignments to H.B. Thomsen) and other ships (1919) 1 Ll. L. Rep. 432, at p. 442:
  43. "Among civilised nations, at any rate since the Middle Ages, it has been the recognised right of belligerents to carry on their warfare against their enemies by, amongst other things, the seizure, the destruction, the interruption, and the cutting off by capture of the military supplies which are the means of a belligerent carrying on war. It is taken as a commonplace. It is impossible to question it. It depends upon what used to be called the Law of Nature and the Law of Nations- that is of the assent of civilised Powers to the conditions under which war is and can be carried on."
  44. Lord Ellenborough's formulation was not limited to crimes, but included "fraud or crime" or "a fraudulent breach of duty" being sufficient. This concept of fraud is to be understood in the light of his review of the authorities, and in particular the approval and explanation of the decision in Knight v Cambridge (1724) 1 Stra. 58. The facts of the case were, or were understood to be, that the master, whose duty it was to pay port duties before leaving port, had deliberately failed to do so, resulting in the forfeiture of the vessel. The case was treated by Lord Ellenborough as deciding that "barratry included every species of fraud in the relation of the master to his owners, by which the subject matter insured might be endangered." The concept of "fraud" as sufficient wrongdoing to amount to barratry was therefore equated with conduct which was a serious breach of duty owed by the master to the shipowner. It was not fraud in the more limited sense of a deliberate attempt by the master to deceive the shipowner or to enrich himself at the shipowner's expense. The same concept of the master "breaking the trust reposed in him" is echoed later in the passage cited above. This also reflects a passage from Marshall on Marine Insurance, 4th Edn (1861) at p. 411, later cited with approval by McNair J in Leesh River Tea Company Ltd and others v British India Steam Navigation Company Ltd (The "Chyebassa") [1966] 1 Lloyd's Rep 450, in which the author stated:
  45. "…barratry …..is a risk, and a very great one, incident to sea voyages because merchants are obliged to confide their ships and merchandise to the care of mariners who may sometimes so far forget their duty as to betray the important trust reposed in them."
  46. It is important to observe, however, that the word fraud, and the language used in explaining it, presuppose that the breach of duty is known to be such. A negligent breach of duty is not sufficient; it is the knowing, or at least reckless, breach of the trust reposed in the mariners which makes the conduct a fraud on the owner, even if misguidedly intended for the benefit of the owner rather than any personal or private benefit. In Mentz Drecker & Co v Maritime Insurance Co (1909) 15 Comm Cas 17, Hamilton J had to consider whether a deviation was barratrous in the context of an insurance claim. At p. 24 he said:
  47. "The authorities prior to the [Marine Insurance] Act [1906] show that where a captain is engaged in doing that which as an ordinary man of common sense he must know to be a serious breach of duty to his owners, and is engaged in doing that for his own benefit, then he is acting barratrously. He may act barratrously in other ways, but it is quite clear that if he disregards his duties to his owners, and does so for his own private purposes and ends, his conduct is barratrous."
  48. It is in my judgment clear from these authorities that although it is not necessary for the wrongful act to amount to a crime, and a "fraud" is sufficient to constitute the relevant wrongdoing, in order to do so it must be a knowing breach of the duty owed to owners (or at least reckless, as to which see below). If the crew member does not know or believe that he is acting in breach of duty, or is not reckless in that regard, he is not in any sense committing a fraud on the owner. This view is reflected in Arnould on Marine Insurance 18th edn. at paragraphs 23-35 to 23-37.
  49. It is not necessary for the purposes of this case to decide whether recklessness would be sufficient, but I see no good reason why it should not. Recklessness is essentially concerned with unjustified risk taking. In the criminal law it is equated in terms of culpability with intention, especially in the context of criminal damage. Causing damage recklessly is generally treated as being as much a crime as doing so intentionally (see for example s. 1 Criminal Damage Act 1971), but is very different from mere negligence, even gross negligence. Deliberate acts which are reckless breaches of duty are properly to be regarded as frauds on the owner in the same way as knowing breaches of duty. The vice lies in failing to comply with the duty owed to the owner in circumstances where the duty has been identified and ignored, not caring whether it is fulfilled. In The Tasman Pioneer [2010] 2 Lloyd's Rep 13 the Supreme Court of New Zealand considered recklessness as sufficient: see per Justice Wilson at paragraph [13]. Although the reasoning in basing the definition of barratry primarily on the terms of Article IV Rules 5(e) and bis 4 is questionable, those provisions do suggest that recklessly caused damage is to be equated with intentionally caused damage at least for the purposes of those provisions.
  50. I would therefore hold that although the act or omission in question must be a deliberate one, recklessness as to whether it is a breach of duty is sufficient. It follows that I do not agree with the obiter dictum of Channell J in Briscoe & Co v Powell & Co (1905) 21 TLR 128, 129 that the reckless damage to the cargo did not amount to barratry on the particular facts of that case. The issue was whether shipowners were protected by a contractual exception covering barratry, negligence or error of judgment of the master, mariners, engineers or anyone else in the service of the shipowners. The discharging stevedores, who were employed as the owner's servants for that purpose, recklessly caused damage to the cargo of iron in the course of discharging it into lighters, both by the manner in which the cargo was loaded into the lighters and the manner of pulling the chain from under the packages when deposited in the lighters. Channell J held that such was not barratry because "Barratry implied an intention. The men discharging did not intend to injure the goods. They thought that it did not signify whether the crates were injured" (i.e. were reckless whether the damage was caused). Channell J held that the conduct constituted an error of judgment or negligence within the meaning of the exception, so that the finding on barratry was obiter. The conduct in question involved a conscious and deliberate decision by the stevedores to continue to discharge into lighters in a manner which had been pointed out to them as one which had already caused damage, but which they deliberately continued to implement, after a temporary alteration, being reckless as to whether damage was thereafter caused. I would myself have held that such conduct constituted barratry, being a deliberate and conscious decision by the stevedores to conduct the operation by deliberate acts in a manner which they knew was likely to cause damage with indifference to that outcome.
  51. I return to the question of the relevance, if any, of the English criminal law and English law defence of insanity. The question of whether conduct comprises barratry for the purposes either of a marine policy or a contract of carriage may arise from conduct in any part of the world. The general principle applied in our courts, subject to particular exceptions, is that the criminality of conduct is to be judged by reference to the law of the place in which the conduct took place, not English law. Conduct on board ships provides a particular limited exception in that by virtue of s. 282 of the Merchant Shipping Act 1995 conduct on board a ship abroad is subject to English criminal law if the ship is a UK Ship and the perpetrator is a British citizen who is or has recently been employed on the ship as a master or seaman. But conduct of foreign nationals on board foreign ships abroad is not governed by domestic criminal law, nor is all maritime related shore activity in relation to UK Ships or British citizens abroad. It would therefore be surprising if for the purposes of the Hague Rules the concept of barratry were to be defined by reference to criminality solely under English law, including defences available under English law; and none the less so merely because it is in the context of English law governed marine insurance policies that the authorities in the eighteenth and nineteenth centuries identified the governing principles. I would hold that in order to qualify as a crime amounting to wrongdoing for the purposes of barratry, the conduct must amount to what would generally be regarded internationally as a crime. Since an important ingredient of most crimes is the mental element with which the acts (or omissions) are committed, that element too should be such as to assume general international recognition as giving rise to criminal liability. This avoids the problems which might otherwise arise with offences which are particular to English criminal law, including strict liability offences. If, for example, the acts of the crew would be criminal under English law as a result of particular health and safety legislation peculiar to English law, I can see no justification for treating those acts of the crew as barratrous if they comply with different standards which are set by the regulatory and legal framework imposed in the country where the conduct takes place. This would not prevent a deliberate breach of applicable local health and safety legislation being barratrous, even if the generally recognised international approach would not be to criminalise such conduct. It would still be barratrous, but under the alternative limb of a knowing and serious breach of duty owed to the owners.
  52. I would accordingly define barratry as (i) a deliberate act or omission by the master, crew or other servant of the owners (ii) which is a wrongful act or omission (iii) to the prejudice of the interests of the owner of the ship or goods (whether or not such prejudice is intended) (iv) without the privity of the owner. In order for the act or omission to qualify as wrongful for the purposes of (ii) it must be (a) what is generally recognised as a crime, including the mental element necessary to make the conduct criminal; or (b) a serious breach of duty owed by the person in question to the shipowner, committed by him knowing it to be a breach of duty or reckless whether that be so.
  53. I have referred to acts or omissions, because as the editors of Arnould on Marine Insurance 18th edn. observe at paragraph 23-40, there can be circumstances in which deliberately to do nothing may be as pernicious, and as much a breach of duty, as a positive act.
  54. It follows that it is not sufficient to dispose of the question in the present case that the chief engineer intended to cause damage when he set fire to the control panel. If he were suffering from a clinical mental disorder, such that he could not distinguish between right and wrong, he would not be guilty of the kind of knowing wrongdoing which would be sufficient. He would not be committing a crime, being legally insane under generally accepted concepts of criminal liability, and he would not be knowingly acting in breach of his duty to the owners. If, for example, by reason of a mental illness (which is an assumed fact as one possibility), he was in a psychotic state in which he heard voices telling him that the owners wished him to act as he did, he would not have been knowingly committing any wrongful act. This is not to import some test that in order to be barratrous the mariner must intend to harm the owners; but it is, in my judgment, necessary for him to have the necessary knowledge or intent that what he is doing is either a crime or a serious breach of duty owed towards his owners, or at least recklessness in that regard.
  55. A similar issue arose in a case before the US District Court for the Southern District of Texas in Isbell Enterprises Inc v Citizens Casualty Co of New York (1969) 303 F. Supp. 549. The owners of a fishing vessel brought a claim against underwriters under a hull policy for loss of the vessel which had been taken to sea without authority by a crewman in rough weather, as a result of which it grounded and sank. The state of mind of the crewman was characterised by the Court of Appeals as being "obviously under mental aberrations, whose condition was diagnosed as a schizophrenic reaction of the undifferentiated type, and whose pre-Odyssey behavior was characterised by a psychiatrist witness as a psychotic state". District Judge Garza at first instance held that whilst the crewman might have been clinically insane, he was not legally insane and accordingly his acts would amount to barratry because he formed an intent to take the vessel to sea and wilfully carried out that intention. The Judge's decision that such conduct constituted barratry (and that it also came within other perils insured under the policy) was not the subject of the decision on the appeal because the underwriters conceded coverage and fought the appeal in relation to a subrogated third party claim (see 431 F. 2d 409 (1970)). The limited reasoning of the Judge affords little assistance with the issue of principle in the current case, but his implicit finding that legal insanity would have negatived barratry is consistent with my conclusion in the current case, and suggests that the definition I have adopted is not merely a parochial domestic one.
  56. The answer to the first preliminary issue is therefore that the assumed/agreed acts of the chief engineer may or may not have constituted barratry, depending upon further facts as to his state of mind which have not been agreed or assumed.
  57. Issue 2: Is Article IV Rule 2(b) capable of exempting the Owners from liability if the fire was deliberately or barratrously caused?

  58. There are a number of authorities on the correct approach to the construction of the Hague Rules, including Stag Line v Foscolo, Mango & Co Ltd [1932] AC 328 per Lord Atkin at pp. 342-3 and Lord MacMillan at p. 350; Aktieelskabet de Danske Sukkerfabriker v Bajamar Compania Naviera S.A. (The "Torenia") [1983] 2 Lloyd's Rep 210 per Hobhouse J at p. 219; CMA CGM S.A. v Classica Shipping Co Ltd [2004] 1 Lloyd's Rep 460 per Longmore LJ at pp. 463-4; Jindal Iron & Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (The "Jordan II") [2005] 1 Lloyd's Rep 57 per Lord Steyn at pp. 63-4; Effort Shipping Co Ltd v Linden Management S.A. (The Giannis N.K.) [1998] AC 605 per Lord Lloyd at p. 615 and Lord Steyn at p. 623; and Serena Navigation Ltd v Dera Commercial Establishment (The "Limnos") [2008] 2 Lloyd's Rep 166 per Burton J at paragraph [9]; from which I derive the following principles:
  59. (1) The Hague Rules as convention treaty obligations are subject to Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties. As such the primary duty of the Court under Article 31 is to ascertain the ordinary meaning of the words used, not only in their context but also in the light of the evident object and purpose of the convention. The language of the text is to be taken as a whole against this background.
    (2) Because the Hague Rules are the outcome of international conferences and have an international currency, being applied by foreign courts, it is in the interests of uniformity that they should be construed on broad principles of interpretation which are generally accepted rather than rules of construction particular to English law. For the same reasons, their interpretation is not to be controlled by the English law cases which preceded the Rules, and the court should not pay excessive regard to earlier decisions of English Courts in construing the international code. Where there are words or expressions which have received judicial interpretation as terms of art, the words may be presumed to have been used in the sense already judicially imputed to them; but the words have to be given their plain meaning, which should be given effect to without concern as to whether that involves altering the previous law.
    (3) Recourse may be had to the travaux préparatoires, in accordance with Article 32 of the Vienna Convention, but only in the circumstances there identified, namely to confirm the ordinary meaning, or where without them the meaning would be ambiguous, obscure or lead to a result which is manifestly absurd or unreasonable. The travaux will only be determinative in a case in which they clearly and indisputably lead to a definite legal intention. In the words of Lord Steyn in The Giannis N.K. "Only a bull's-eye counts. Nothing less will do."

    The object and context

  60. The essential feature of the Hague Rules was a compromise whereby shipowners accepted statutory restrictions on their freedom to contract out of their strict liability as common carriers. In The Giannis N.K. Lord Steyn said at p. 621:
  61. "This much we know about the broad objective of the Hague Rules: it was intended to rein in the unbridled freedom of contract of owners to impose terms which were "so unreasonable and unjust in their terms as to exempt from almost every conceivable risk and responsibility" (1992) 108 LQR 501, 502; it aimed to achieve this by a pragmatic compromise between the interests of owners and shippers; and the Hague Rules were designed to achieve a part harmonisation of the diverse laws of trading nations, at least in the areas which the convention covered."
  62. The 1992 LQR article referred to is a book review by Lord Roskill of the scholarly three volume work by Michael F. Sturley tracing the legislative history of the UK Carriage of Goods by Sea Act 1924 and the US Act of 1936, with collected travaux préparatoires, including those of the main series of international meetings and conferences which led to the final terms of the Hague Rules. It quotes the Imperial Shipping Committee report issued in 1921 as recognising that the renewed pressure on shipowners to relax their exclusions meant that although they generally continued to insert the exculpatory clauses, many of them, perhaps a majority, did not fully rely upon them. This is a further reason for caution in construing the Rules by reference to decided cases. The practice of shipowners at the time was not necessarily to treat the clauses as giving the protection in practice which a strict application of the legal precedents might have warranted. Conversely, in giving up the right to freedom of contract and a number of their contractual protections, it is not to be assumed that shipowners and cargo interests should have intended others to be circumscribed by the precedents which had sought to construe them restrictively in an environment of total exclusions of liability "so unreasonable and unjust in their terms as to exempt from almost every conceivable risk and responsibility."
  63. In summary, the context in which the Rules fall to be interpreted was one of trade off and compromise. If a word or expression had acquired a universally accepted meaning, there is a reasonable presumption that it was used in the Rules with that meaning; but beyond that, the language used must be taken to speak for itself.
  64. The ordinary meaning of the words used

  65. The language used strongly supports the argument of Mr Hill that "fire" simply means fire, without any qualification implicit in that word about how the fire started, whether intentionally negligently or accidentally, or any qualification as to who may have been responsible for it. That is the natural meaning of the word.
  66. It is reinforced by the addition of the words which follow "unless caused by the actual fault or privity of the carrier". These import a limited qualification to the exception by reference to some identified causes of the fire; the natural inference being that the word fire is otherwise unqualified, and that unless the cause falls within the proviso it does not remove fire from the class of exempting perils.
  67. This interpretation is even more strongly supported by the contrast with the wording of Rule 2(q), which expressly carves out of the protection afforded to the carrier losses contributed to by the neglect or default of servants or agents of the carrier. The natural implication from the contrast with the wording of Rule 2(b) is that fault on the part of servants or agents is not sufficient to prevent shipowners' reliance on loss caused by fire, however caused, unless within the specific proviso in Rule 2(b) involving actual fault or privity of the carrier himself.
  68. That this is the natural meaning of the word fire is confirmed by its interpretation as an insured peril in policies of insurance. In that context it is well established that it means fire however caused, whether through the deliberate acts of servants, agents or third parties (provided of course it is without the connivance of the owners which precludes recovery on general principles of insurance law): see Slattery v Mance [1962] 1 QB 676 per Salmon J at pp. 680-681; Continental Illinois National Bank & Trust Co of Chicago and Xenofon Maritime S.A. v Alliance Assurance Co. Ltd (The "Captain Panagos D.P.") [1986] 2 Lloyd's Rep 470 per Evans J at pp. 510-511; and Schiffshypothekenbank Zu Luebeck A.G. v Compton (The "Alexion Hope") [1988] 1 Lloyd's Rep 311 per Lloyd LJ at pp. 316-317.
  69. This meaning is further confirmed by the travaux préparatoires. For present purposes the history of the drafting of the Rules can be taken from the time of the International Law Association conference in Gray's Inn between 17 and 20 May 1921, which had produced a draft of the Rules. A few months later the International Law Association Conference took place at The Hague between 30 August and 3 September 1921 ("The Hague Conference"), involving detailed negotiation between representatives of interests on both sides, and redrafting by the Maritime Law Committee, culminating in a draft being agreed and presented by the Chairman, Sir Henry Duke on the last day as an agreed text which became known as the 1921 Hague Rules. The negotiations involved cargo interests, including Mr Paine and M. Dor, and shipowner interests represented by Sir Norman Hill, as well as judges including Lord Phillimore. In October 1922 there was a conference of the Comité Maritime International in London, at which further amendments were negotiated and agreed in what became known as the 1922 Hague Rules or London Rules. Shortly thereafter a diplomatic conference in Brussels appointed a sous-commission to consider the rules further, and after meetings of the sous-commission in Brussels in 1922 and 1923 the final version of the Hague Rules were adopted at the Brussels Conference on 25 August 1924 as the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading.
  70. The wording of the draft of the Rules which first came before the 1921 Hague Conference included "fire" simpliciter as an excepted peril. At some stage before the second day, the draft was amended so that Rule 2(b) exempted "barratry" and Rule 2(c) exempted "fire". On that day both were debated and negotiated in a discussion heavily relied on by Mr Hill which I consider below. The upshot was that the wording of both exceptions was retained. At some stage before the end of the Conference the barratry exception was removed, and the 1921 Hague Rules contained at Rule 2(b) the exception of "fire" simpliciter. The words "unless caused by the actual fault or privity of the carrier" were added during the discussions a year later in October 1922 following a proposal by the US delegation.
  71. The discussion on day 2 of the Hague Conference first addressed whether the correct approach should be the English one of enumerating specific perils, or a more generally worded continental approach. Despite M. Dor's plea for the latter, observing that the Marine Insurance Act 1906 alone was longer than the entire French Civil Code, the former approach was agreed on, recognising that it might involve some overlap between the separately enumerated perils.
  72. The relevant part of the subsequent discussion is recorded as follows:
  73. "The Chairman: "(b) Barratry of master or mariners." Is that agreed? Mr. Paine, I think, has something to say upon that.
    Mr. W. W. PAINE: Mr. Dor has objected to the inclusion of the word "Barratry," I think for sound reasons. I do not know whether that definition of "Barratry" is absolutely correct; I am one of the ignorant ones; I should like to know exactly what "Barratry" means; perhaps Sir Norman Hill will tell us?
    The CHAIRMAN: Mons. Franck, who has the goodness to be with us to-day, points out that "Barratry" here is used as a term of art in its meaning in the English law, and that when the matter comes to be dealt with by producing the corresponding conclusions in the French tongue, or in any other Continental tongue, the easiest thing to do will be to express the English meaning in the French words.
    Mr. W. W. PAINE: Mr. President. My doubt was whether Barratry ought to be included in this list of exceptions.
    Lord PHILLIMORE: It has always been included in bills of lading.
    The CHAIRMAN: The question is that (b) be passed. (Agreed.)
    "(c) Fire"
    Mr. W. W. PAINE: Well, fire not wilfully caused by agents of the shipowner.
    The CHAIRMAN: Mr Paine has an amendment.
    Mr. W. W. PAINE: "Unless wilfully caused by the carrier or his agents or servants."
    The CHAIRMAN: What do you say to that, Sir Norman?
    Sir NORMAN HILL: I do not think one could take that. I do not think the Shipowner has ever been held responsible for fire.
    Lord PHILLIMORE: Mr. Paine says "wilfully.'' Of course, if the owner causes it wilfully he is responsible; no exception in the world would take away his responsibility.
    Mr. W. W. PAINE: His agent, Sir.
    The CHAIRMAN: If it is done wilfully by the agent, it is a criminal act which is not within his agency.
    Sir NORMAN HILL: I think the agent must be had up.
    Mr. DOR: Does it mean that if the fire is caused, not wilfully, but by the negligence of the agent, the shipowner is not responsible?
    Mr. W. W. PAINE: Yes.
    Sir NORMAN HILL: Clearly not.
    Mr. DOR: He is not responsible? That is going further.
    Sir NORMAN HILL: That is the "servants of the carrier," is it not? In the cases you take is not fire one of the things we all insure against? It is the first peril you cover in everything.
    The CHAIRMAN: I understand this is a mere matter of definition for the purpose of insurance, and perhaps I may venture to suggest to the Committee that these causes of liability were closely debated between the interests of shipowners and cargo owners who represented not only England but other countries, and where there is a standing exception from liability at present I do not assume that the Committee will go back to examine its basis in the law of one country or another. Is "fire" to stand? (Agreed.)"
  74. There was at that time a "standing exception from liability at present" in English law in relation to British Ships, contained in s. 502 Merchant Shipping Act 1894, which excluded liability on the part of the shipowner for loss or damage by reason of fire on board happening without the actual fault or privity of the owner.
  75. This discussion makes clear, in my view, that "fire" simpliciter in the draft Rule 2(c) under consideration was understood to mean fire however caused, including in particular fires deliberately or negligently started by servants or agents of the carrier. There was discussion as to whether to add wording carving out fires caused with the fault of servants or agents in the specific context of a proposed amendment covering fires wilfully started. The amendment was rejected. The understanding was that fire caused with the privity of the owners could not be exempted even if the language were left simply as "fire"; but later the words were expressly included to reflect that understanding which was already the basis of shipowners' exception under s. 502 Merchant Shipping Act 1894. In other words, all were proceeding on the basis that fire meant fire even if deliberately caused by the shipowner's servants or agents, or resulting from their negligence; not that it only contemplated fires which were caused accidentally or without negligence.
  76. Mr Thomas contended that because at some stage between day 2 and day 4 barratry as a separate exempted peril under what was then Rule 2(b) in the draft was removed, the intention was that any excepted perils which remained are to be construed as not including barratrously caused perils. In my view that is a non-sequitur. The intention in removing the barratry exception from the draft was to prevent a blanket exception for all barratry. Nevertheless the scheme of having a series of enumerated perils necessarily involved some overlap, such that in any given case the loss might be caused by more than one excepted peril. They were each to operate separately within their own scope. Removal of barratry from the list does not carry with it the implication that where it would have overlapped with a retained peril, the retained peril was to be reduced in scope. There is no necessary implication that because barratry was not to be a permitted exception as a blanket class, barratrous fires which would fall within the retained fire exception were intended to be removed from it.
  77. The travaux préparatoires therefore support the plain meaning of the text as covering fire however caused unless with the actual fault or privity of the carrier himself.
  78. This is the view of most of the leading textbook writers: see Aikens, Lord & Bools on Bills of Lading 2nd edn. at paragraphs 10.231 and 10.237; Carver on Bills of Lading 4th edn. at paragraph 9-215; Cooke on Voyage Charters 4th edn. at paragraphs 85.283; Tetley on Responsibility for Fire in the Carriage of Goods by Sea (2002) 37 Eur. Trans. Law 1 at pp. 15 and 17. There is nothing to the contrary in any of the textbooks drawn to my attention. Mr Thomas relied upon paragraph 11-098 of Scrutton on Charterparties and Bills of Lading 23rd edn. (and the approval of the equivalent passage in the 17th edn. in The Chyebassa by McNair J at p. 458) that ""Barratry" appears to be an exception that is null and void under the Carriage of Goods by Sea Act 1971". This means no more than that a blanket exception of all barratry would fall foul of Article III Rule 8; it is not directed to barratrous forms of causing the other exempted perils. Art IV Rule 2(b) is addressed by the authors at paragraph 14-076 without expressing any views on the issue currently under debate.
  79. There is no policy reason for reading the word fire in a restrictive way. It is of the essence of barratry that the shipowner's servants are acting contrary to his interests and in breach of the trust reposed in them by him. There is nothing unjust in shipowners being entitled to exclude their liability from the consequences. Indeed as the learned authors of Aikens Lord & Bools on Bills of Lading 2nd edn. observe at p. 360 fn 464: "The hallmark of barratry is wrongdoing by the crew against, rather than on behalf of the shipowner…and it is in such a situation that the rationale for the existence of the exclusion of liability might on one view appear most applicable." Whilst shipowners were unable to bargain for a blanket exculpation for barratry in the Hague Rules, it is nevertheless consistent with principle that the other exempted perils for which they successfully bargained should extend to those perils when barratrously caused.
  80. At the heart of Mr Thomas' submissions was the contention that at the time of the Hague Rules, English case law had established that as between cargo interests and shipowners, a clause excluding liability for fire simpliciter was insufficient to exclude liability for negligently caused fires, relying on In Re Polemis and Furnis Withy & Company Limited [1921] 3 KB 560. If an exception for fire simpliciter did not cover negligently caused fires, then a fortiori, it was argued, it cannot have been intended to include deliberately started fires.
  81. There are a number of difficulties with this submission. First, its point of departure is unsound. There was no established principle in English law at the time of the Hague Rules that in a bill of lading or other contract of carriage between shipowner and cargo interests, an exclusion of liability by the shipowners for fire simpliciter would be construed as not extending to negligently caused fires. The Polemis case involved an exception clause in favour of charterers in a time charter, which is not a contract of carriage. It does not follow that the same principles of construction would have applied as between shipowners and cargo interests in relation to shipowners' liability for loss or damage to cargo, and there are two reasons for thinking the contrary. The first is that it was well established already that (a) in the context of a policy of marine insurance, fire as an insured peril did include negligently started fire (Busk v Royal Exchange Assurance Company (1818) 2 B. & Ald. 73; Trinder Anderson & Co v Thames and Mersey Insurance Co [1898] 2 QB 114, 124), and (b) excepted perils in a bill of lading should be given the same meaning as insured perils in marine policies of insurance unless authority conclusively established otherwise (Wilson Sons & Co v Owners of the cargo per "The Xantho" (1887) 12 AC 503 per Lord Herschell at p. 510). Secondly, s. 502 Merchant Shipping Act 1894 dealt specifically with shipowners' liability for loss or damage to goods by fire and used materially equivalent language to that subsequently adopted in Rule 2(b). The language of Rule 2(b) covers fires negligently caused, as is common ground, and it is reasonable to suppose that s. 502, or a bill of lading clause replicating s. 502, would have been construed in the same way. That view is supported by what Viscount Haldane said Lennard's Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] AC 705 at p. 714. The case involved loss by fire of a cargo of benzene as a result of it leaking into the ship's furnaces consequent upon grounding due to the unseaworthiness of the ship's boilers. The issue was whether the owners had discharged the onus of establishing that the fire happened without their own fault or privity. When Viscount Haldane said that "It is not enough that the fault should be the fault of the servant in order to exonerate the owner, the fault must also be one which is not the fault of the owner, or a fault to which the owner was privy" he was recognising that if this latter burden was discharged by the owner proving absence of personal fault or privity, the section exonerated the owner notwithstanding that the fire was the result of the fault of his servant. In other words fires started negligently or deliberately by the crew, without the fault or privity of the owner, were within the definition of "fire" in the section.
  82. Mr Thomas' reliance in this context on The Chasca (1875) 4 LR A& E 446 for a supposed rule of construction that in a bill of lading, a "perils of the seas" exception does not include negligently caused perils, and therefore a fortiori barratrously caused perils of the seas, is misplaced. The true rationale has nothing to do with construction of the words "perils of the seas". "Perils of the seas" did include negligently caused perils, but the exception was defeated in a bill of lading contract (but not a policy of insurance) by the cross claim against owners for negligence: see The Xantho per Lord Herschell at pp. 510-511 and the analysis and review of the authorities by Collins LJ in Trinder Anderson at pp. 125-7 (which is consistent with the analysis of Lord Esher MR in The Glendarroch [1894] P. 226 at pp. 230-232, the judgment of Lopes LJ in that case at pp. 234-5, and the recent decision of the Court of Appeal in Volcafe Ltd v Cia Sud Americana de Vapores SA (The "Volcafe") [2017] QB 915). It remains the well-established position that "perils of the seas" includes negligently caused perils of the seas: see for example Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd [1941] AC 55, 67-68 and Cohen and Sons & Co v National Benefit Assurance Ltd [1924] 18 Lloyd's Rep 199, 202. The only reason why barratrously caused perils of the seas may not come within the exception as a matter of construction is that there may be no fortuity, which is an essential characteristic of a peril of the seas: see P. Samuel v Dumas (1924) 18 Ll. L. Rep. 211 per Viscount Cave at p. 217 col 1. That was the position in The Chasca where the crew deliberately bored holes in the vessel to allow the ingress of seawater. None of this suggests that either before or after the Hague Rules the appropriate construction of "fire" simpliciter would be to exclude from its scope negligently or deliberately started fires.
  83. Secondly, Mr Thomas' argument offends the approach to construction identified by Lords Atkin and MacMillan in Stag Line v Foscolo, that the meaning of the Rules is not to be found by excessive reliance on English law precedent at the expense of the ordinary meaning of words. Lord Atkin said at p. 342: "In approaching the construction of these rules it appears to me important to bear in mind that one has to give the words as used their plain meaning, and not to colour one's interpretation by considering whether a meaning otherwise plain should be avoided if it alters the previous law." The Hague Rules were a trade-off between cargo interests and shipowners' interests, not an exercise in codification, and it does not follow that even if it be assumed that shipowners had not successfully excluded negligently caused fire under their bill of lading clauses referring to fire simpliciter, they were not doing so by using the word in its natural meaning in the newly negotiated regime. Fire is a simple word not naturally to be treated as a term of art (unlike, perhaps, barratry), and does not come within the category identified by Lord Atkin at page 343 of a word which can be presumed to be used in a sense already judicially imputed to it.
  84. Thirdly, Mr Thomas' argument is inconsistent with the discussions on day 2 of the Hague Conference when the fire exception was being discussed, which plainly did not proceed on the basis that "fire" was limited to non-negligent and accidentally caused fires.
  85. Fourthly the argument proves too much. It is generally accepted that in Rule 2(b) negligently commenced fires (without actual fault or privity of the carrier himself) are covered by the exclusion. Mr Thomas accepted that this was so, at least for the purposes of the current hearing. It follows that in Rule 2(b) the word fire is being used in a different sense from that which Mr Thomas contends it bore under established case law prior to the Rules. If so, nothing in that case law assists in interpreting the expression when used in the Rule.
  86. Mr Thomas also relied on two authorities from other jurisdictions and urged me to give effect to the desideratum of international uniformity in interpretation by following their approach. The first is a decision of the US Court of Appeals for the Fourth Circuit in In the matter of Intercontinental Properties Management S.A. as owner of the Motor vessel "MIMI" (1979) 604 F 2d 254, in which there was a claim by cargo interests for loss caused by the deliberate scuttling of the vessel by the crew. The issue in the case was identified on the appeal as being simply whether the shipowners could bring themselves within the exception in Rule 2(q) in a case of barratry by a crew member, Mr Supardi. The court concluded, having considered The Chyebassa, that the acts were within the scope of Supardi's employment and as a matter of construction fell within the proviso in Rule 2(q) ("without the fault of a servant") so that the shipowners could not bring themselves within that exception. The relevance of the decision to the current issue is the supportive reasoning of the Court at p. 265-266, which was not part of the ratio:
  87. "Finally the construction is suggested by considering Supardi's act as one of classic barratry…. Before cargo damage law was codified, barratry was one of the exceptions to liability traditionally listed by the carrier in bills of lading. Many of these were carried into the specific exceptions in §4(2) of COGSA. Barratry was not; and as perhaps the most obvious conceivable example of "fault" of a seaman servant, its intended inclusion within the general [Rule 2(q)] clause reference to servant fault seems a construction compelled by any common sense reading. From this it would appear that barratry was simply not intended to be an exculpating cause of loss under COGSA. See Scrutton on Charter parties art. 113 at 239 (18th ed….)."
  88. This passage is of no assistance on the current question. The reasoning is specific to Rule 2(q) and does not directly apply to a construction of Rule 2(b), which does not have the relevant proviso for the fault of servants. Nor is the reasoning necessary for the decision. I would not, however, treat the reasoning as sound even in relation to Rule 2(q). As I have already explained, it gains no support from the passage in Scrutton (which in the 18th ed. was in the same terms as I have set out above), which is concerned with a blanket exclusion of barratry, not with any question of the application of the enumerated excepted perils when caused by barratry. Nor does the exclusion of barratry tell one any more about the remaining excepted perils than their language warrants. The absence of barratry from the enumerated list of perils does not carry with it the implication that they cannot be wide enough to embrace barratrous methods of those perils coming about.
  89. The issue was touched on in relation to the exception in Rule 2(a) in the New Zealand case of Tasman Orient Line CV v New Zealand China Clays & others ("The Tasman Pioneer") [2009] NZCA 135, [2009] 2 Lloyd's Rep 308 (CA); [2010] NZSC 37, [2010] 2 Lloyd's Rep 13 (Supreme Court). In that case counsel for the cargo interests was arguing that Rule 2(a) should be read down so as not to cover gross negligence. It was conceded by counsel for the shipowners that the Rule had to be read down so as not to cover barratry, but no further. The Supreme Court endorsed as correct the common ground that the Rule 2(a) exception does not extend to barratry but there is little reasoning in the judgment to explain this view, which is not surprising given that it was not in issue. If, as appears from paragraph 23 of the report, it was based on the travaux préparatoires, they do not support the conclusion, for the reasons I have endeavoured to explain. The decision is not concerned with either Rule 2(b) or Rule 2(q), and has been the subject of penetrating academic criticism: see Mybergh "Carriers 2 Common Sense 0" [2010] LMCLQ 569). The concession was not critical to the outcome because barratry had not been pleaded. As a dictum based on a concession and a misreading of the travaux préparatoires, I do not find it persuasive in the face of the other arguments which support the conclusion I have reached.
  90. Mr Thomas also argued that even if "fire" in Rule 2(b) was unqualified, nevertheless the cause of the loss in this case was the barratrous conduct of the chief engineer in starting the fire rather than the fire itself, so that the exception did not bite as a matter of causation. I cannot accept this argument. The French Text is the authoritative text of the Hague Rules and the English and French Texts are equally authoritative in the case of the Hague-Visby Rules. The French text of Rule 2(b) is "Incendie, a moins qu'il ne soit causée par le fait ou la faute du transporteur". In French the word "incendie" connotes setting alight as well as the fire itself. Moreover there is no distinction in marine insurance cases between setting something on fire and the fire itself as the proximate cause of the loss (see Trinder Anderson per AL Smith LJ at p. 124, The Alexion Hope per Lloyd LJ at pp. 316-7) and I can see no justification for any such distinction in the context of Rule 2(b).
  91. Issue 3: Are the Owners exempt from liability under Article IV Rule 2(q)?

  92. Mr Thomas' first submission was that any form of barratry fell outside the scope of Rule 2(q), relying principally on the fact that barratry was deleted as an exempted peril during the drafting of the Rules. I have endeavoured to explain why that affords no grounds for concluding that retained excepted perils were intended to be inapplicable if barratrously caused.
  93. The main question under this issue is whether the act of the chief engineer is properly to be regarded as the act of "a servant" so as to come within the proviso of "fault or neglect of the agents or servants of the carrier [which] contributed to the loss or damage". Although this was not within the scope of the preliminary issue ordered to be tried by Sara Cockerill QC, both sides invited me to address and determine it.
  94. Mr Hill submits that I am bound by the Court of Appeal decision in The Chyebassa to hold that the proviso does not apply if the servant is acting outside the scope of his employment as such concept has been defined in the English law on vicarious liability for tortious wrongs: see the judgment of Salmon LJ at p. 203-4, with which Danckwerts LJ agreed; that the relevant principles are those most recently identified in Lister v Hesley Hall Ltd [2002] 1 AC 215 and Mohamud v Wm Morrison Supermarkets plc [2016] AC 677; and that applying those principles, the agreed and assumed facts are insufficient to give an answer one way or another, because it will be affected by factual issues which will have to be explored at trial such as the precise scope of the chief engineer's duties, and whether he was on watch or on duty when he started the fire in the middle of the night.
  95. Mr Thomas' threshold objection to this stance, namely that it did not allow the preliminary issues to be answered simply yes or no on the agreed and assumed facts, is no more meritorious in this context than in the context of the Rule 2(b) issue. Indeed this issue was not even within those formulated at the time of Sara Cockerill QC's order.
  96. I confess to an instinctive hostility towards interpreting the terms and application of Rule 2(q) by reference to the principles of English law governing vicarious liability in tort, for two reasons. First it seems contrary to the approach to construction of an international treaty required by the Vienna Convention, and to the principles which are applicable to construing the Hague Rules in particular, as articulated above. The framers of the Hague Rules cannot have had in mind the peculiarly domestic principles of English tort law, and especially so when that law was not then the subject matter of international consensus, and has been subject to continual change over the last century or so, especially in the context of deliberate misconduct by an employee, with Lloyd v Grace, Smith & Co [1912] AC 716, Morris v CW Martin & Sons Ltd [1965] 1 QB 716, and Lister v Hesley Hall only three of the more notable twists and turns on the journey. Secondly, in the law of vicarious liability for torts there are policy reasons at work in resolving conflicting social interests (see eg per Lord Steyn in Lister at paragraph [14]); and in applying the current test of a sufficiently close connection between the misconduct and the field of activities in which the employee is employed, notions of social justice are engaged (see per Lord Toulson in Mohamud at paragraph [45]). These considerations are inapposite to the allocation of contractual responsibility in an international contract of carriage by sea.
  97. I do not need, however, to determine whether the The Chyebassa compels me to apply that test, seeking to reconcile the different approaches of Sellers and Salmon LLJ, with both of whom Danckwerts LJ agreed whilst adding further views of his own. Assuming, without deciding, that I am bound by Salmon LJ's approach in The Chyebassa and that I must apply English law principles of vicarious liability, either as then understood per Morris v Martin, or now, as summarised by Lord Toulson in paragraphs [44]-[45] of Mohamud, I would have little hesitation in holding that the chief engineer was acting within the scope of his employment on the agreed and assumed facts. He was employed as chief engineer and placed on board the Vessel with the specific functions implicit in that role, which necessarily included responsibility for management of the main engines and, for those purposes, responsibility for, and access to, the engine control room. He was put on board the Vessel by the Owners, and given those responsibilities, for the purposes both of looking after the ship, and of carrying Glencore's cargo expeditiously to its destination and caring for it on the voyage under the contracts of carriage in question. The Owners employed him as a member of the crew to perform on their behalf, amongst other things, the obligation properly and carefully to carry the cargo. The relevant field of activities which fell within the scope of his employment included both the care of the ship and the carriage and care of the cargo. His function as chief engineer would necessarily have carried authority to access the engine control room at any time, whether or not he was on the engineering watch at the time. Whether or not he was on duty on the night in question, his access to the control room arose directly from the field of activities entrusted to him by the Owners. His setting fire to the control room, with intent to cause damage, was a misuse of his position in the field of activities for which he was employed. It is akin to the servant of the furrier burning the furs entrusted to him in Morris v Martin, which would have attracted vicarious liability just as did his stealing them. That is apparent from the agreed and assumed facts, without the need for any additional evidence or fact-finding.
  98. If free to decide for myself the relevant test, I would regard an agency analysis as preferable to any domestic test of scope of employment for the purposes of vicarious liability in tort, for the reasons I have identified. I can see no reason for applying a different test to servants from that which applies to agents, since either may be performing the relevant function on behalf of shipowners, and the apportionment of liability between shipowners and cargo interests should not depend upon which method the shipowner chooses in order to carry out his obligations under the contract of carriage. The test should be whether the conduct in question occurs in the course of the servant or agent performing a function in dealing with the ship or cargo which he is performing on behalf of the shipowners, deriving his authority to perform that function on behalf of the owners directly or indirectly through contracts of agency or employment, i.e. availing himself of that facility derived either directly or indirectly from the shipowners, to adopt the language of Colman J approved by Lord Sumption in NYK Bulkship (Atlantic) NV v Cargill International SA (The "Global Santosh") [2016] 1 WLR 1853AC at [19].
  99. Applying such test the chief engineer was acting as a servant of the Owners when setting fire to the engine control room. He was put on board the Vessel by the Owners to be responsible for management of the main engines, including the engine control room, for the purposes of carrying and caring for Glencore's cargo and caring for the ship within his field of responsibility which included the engine control room. He was performing the functions of the Owners to look after the Vessel, and carry and care for the cargo, within his field of responsibility on the Vessel, and whether or not he was on duty on the night in question, misperforming those functions in setting fire to the control room. It is irrelevant that his conduct was misconduct, just as it is for a stevedore engaged to load or discharge the cargo who steals it in the course of that operation, whether as agent or employee (see Hourani v T & J Harrison (1927) 28 Lloyd's Rep 120 and The Chyebassa per Sellers LJ at p. 200 col 1 and per Salmon LJ at p. 204 col 1).
  100. Conclusion

  101. Accordingly my conclusions on the preliminary issues are that on the agreed and assumed facts:
  102. (1) the conduct of the chief engineer in starting the fire may or may not constitute barratry, depending on further facts which would need to be found about his state of mind; however the issue is not determinative of whether the Owners are exempt from liability for the fire under Article IV Rule 2(b) or Rule 2(q);
    (2) Article IV Rule 2(b) is capable of exempting the Owners from liability if the fire was deliberately or barratrously caused;
    (3) the Owners are not exempt from liability for the fire under Article IV Rule 2(q).


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URL: http://www.bailii.org/ew/cases/EWHC/Comm/2017/3348.html