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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Glencore Energy UK Ltd & Anor v Freeport Holdings Ltd  EWHC 3348 (Comm) (21 December 2017)
Cite as:  EWHC 3348 (Comm),  Bus LR 294
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BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
| (1) GLENCORE ENERGY UK LTD
(2) GLENCORE LTD
- and –
|FREEPORT HOLDINGS LTD
Timothy Hill QC and Andrew Feld (instructed by Norton Rose Fulbright LLP) for the Defendants
Hearing dates: 29 & 30 November, 4 December 2017
Crown Copyright ©
The Hon. Mr Justice Popplewell :
[…] 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.
- Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:-
(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."
- 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.
- It is reported that the fire was put out by 1:36hrs (lt) on 14th May 2015.
- 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.
- 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").
- 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.
- Salvage services were eventually terminated on 12th June 2015 and the Vessel was thereafter redelivered to the Defendant.
- 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.
- 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.
- The Defendant settled the Salvors' claim on terms that are unknown to the Claimant.
- 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.
- 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.
- The fire was started deliberately by a member of the crew with the intent to cause damage.
Assumed Facts for Purposes of Preliminary Issues (only):
- The perpetrator was the Chief Engineer.
- He acted alone.
- At the time of starting the fire deliberately and with intent to cause damage he was:
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."
"(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."
(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).
(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).
(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?
"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."
"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."
"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."
"…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."
"The authorities prior to the [Marine Insurance] Act  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."
Issue 2: Is Article IV Rule 2(b) capable of exempting the Owners from liability if the fire was deliberately or barratrously caused?
(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
"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."
The ordinary meaning of the words used
"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.)
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.)"
"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….)."
Issue 3: Are the Owners exempt from liability under Article IV Rule 2(q)?
(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).