Glencore Energy UK Ltd v Freeport Holdings Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Simon,Lord Justice Coulson
Judgment Date14 March 2019
Neutral Citation[2019] EWCA Civ 388
Date14 March 2019
Docket NumberCase No: A4/2018/0223

[2019] EWCA Civ 388

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

The Hon Mr Justice Popplewell

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT

Lord Justice Simon

and

Lord Justice Coulson

Case No: A4/2018/0223

Between:
(1) Glencore Energy UK Ltd
(2) Glencore Ltd
Appellants
and
Freeport Holdings Ltd
The ‘Lady M’
Respondent

Robert Thomas QC and Benjamin Coffer (instructed by Clyde & Co LLP) for the Appellant

Timothy Hill QC and Andrew Feld (instructed by Norton Rose Fulbright LLP) for the Respondent

Hearing dates: 11–12 December (with further written submissions on 18 December) 2018

Approved Judgment

Lord Justice Simon

Introduction

1

The primary issue raised on this appeal is whether article IV rule 2(b) of the Hague-Visby Rules is capable of exempting the carrier from liability to the cargo owner for damage caused by fire if that fire were caused deliberately or barratrously. The appeal also raised a potential issue as to the mental element for an act of barratry 1.

The preliminary issues

2

In the early hours of 14 May 2015, while the ‘Lady M’ (‘the vessel’) was in the course of a voyage from Taman in Russia to Houston in the USA, a fire started in the engine room. As a result, the owners of the vessel (‘the Owners’) engaged salvors and the vessel was towed to Las Palmas, where general average was declared.

3

The appellants (‘Glencore’) brought proceedings in the Commercial Court claiming (as owners of a cargo of approximately 62,250 m.t. of fuel oil carried on board the vessel) such sums as it had incurred to the salvors, as well as the costs of defending the salvage arbitration proceedings. Its claim was founded on alleged breaches of contracts of carriage contained in or evidenced by four bills of lading dated 28 April 2015, alternatively in bailment.

4

The contracts of carriage were subject to the Hague-Visby Rules which, so far as material, provide as follows:

Article III

1. The carrier shall be bound before and the beginning of the voyage to exercise due diligence to:

(a) make the vessel seaworthy;

(b) properly man, equip, and supply the ship;

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.

8. Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with goods arising from negligence, fault, or

failure in the duties and obligations provided in this article … shall be null and void and of no effect …

Article IV

1. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy and to secure that the ship is properly manned, equipped, and supplied … in accordance with the provisions of paragraph 1 of Article 3 …

2. 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 navigation or management of the ship.

(b) Fire, unless caused by the actual fault or privity of the carrier.

(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 of the carrier contributed to the loss or damage.

5

Glencore pleaded its claim against the Owners in conventional form, relying on article III rules 1 and 2. It also contended, without prejudice to the burden of proof, that:

… the fire (and all the consequences thereof) was the result of an act or omission of the Master and/or crew done with intent to cause damage or recklessly and with knowledge that damage would probably result.

6

Its pleading went on to set out facts supportive of the case that the fire had been deliberately started, although Glencore was unable to say which individuals among master and crew had set the fire. At §20(4) the pleading contained the following:

c. the deliberate starting of the fire can, however, have had no innocent purpose and must therefore have been done with intent to cause damage or recklessly and with knowledge that damage would probably result;

d. the aforesaid constitutes barratry;

e. barratry constitutes a breach of the above-mentioned duties and obligations and, for the avoidance of doubt, provides no defence for the [Owners], whether pursuant to any of the exceptions set out in article IV rule 2 of the Hague-Visby Rules or otherwise …

7

By their Defence the Owners took issue with the Particulars of Claim in a number of respects but pleaded a positive case on the cause of the fire:

13. The fire was caused by the deliberate act of one of the crew members. No crew member has admitted that he started the fire. However, the [Owners] shall contend that the fire was started by one crew member only and the crew member was Jesus S Pajarillo, the Chief Engineer. As to this:

a. [the Owners do] not know the Chief Engineer's motive for starting the fire deliberately.

b. It is averred that, on the balance of probabilities, the Chief Engineer was either (i) under extreme emotional stress and/or anxiety due to the illness of his mother, or alternatively (ii) suffering from an unknown and undiagnosed personality disorder and/or mental illness.

c. As set out below, the [Owners] did not know, and could not have known, about either cause at the time the Chief Engineer was employed and before and at the beginning of the voyage. The [Owners] exercised due diligence in the manning of the vessel and making her seaworthy as particularised below.

8

There were further averments in support of the contentions set out in §13c, but for present purposes one can pick up the Defence at §16.

The [Owners'] primary case is that the real or effective and proximate cause of [Glencore's] alleged loss and damage was the fire. By reason of the facts and matters set out above, [the Owners are] entitled to rely upon, and [do] rely upon, the exception in article IV rule 2(b) whether the acts of the Chief Engineer were acts of barratry or not … Without prejudice to the burden of proof, the fire was not caused by the actual fault or privity of [the Owners] as carrier. The fire was caused by the Chief Engineer.

The Owners also relied on a defence under article IV.2(q) of the Hague-Visby Rules.

9

It is unnecessary to say anything further about the pleadings other than to note that in its Amended Reply Glencore reiterated that a defence under article IV.2(b) was not available to the Owners because it did not apply where a fire was caused by barratry.

10

On 16 June 2017, Sara Cockerill QC (as then she was), sitting as a Deputy High Court Judge of the Commercial Court, ordered the hearing of two preliminary issues on the basis of agreed and assumed facts. So far as relevant to this appeal, these agreed and assumed facts were as follows:

12. The fire was started deliberately by a member of the crew with the intent to cause damage.

13. The perpetrator was the Chief Engineer.

14. He acted alone.

15. 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.

11

On the basis of these facts, and against the general background of the casualty, two preliminary issues were identified: (1) whether, on the basis of the agreed and assumed facts, the conduct of the Chief Engineer constituted barratry; and (2) if so, whether the Owners were precluded from relying upon article IV.2(b) and/or 2(q) of the Hague-Visby Rules.

12

In the course of argument at the trial of the preliminary issues, Mr Justice Popplewell (‘the Judge’) agreed to a slight expansion and refinement of the issues, which he set out by reference to each party's case.

13

Glencore contended, on the basis of the agreed and assumed facts, that:

i) the conduct of the Chief Engineer constituted barratry;

ii) the Owners were not exempt from liability under article IV.2(b) of the Hague Rules because a fire caused by the barratrous act of the Chief Engineer did not come within article IV.2(b); and

iii) the Owners were not exempt from liability under article IV.2(q) either because: (i) barratrous acts of servants of the carrier fall outside the exception in article IV.2(q); or alternatively, (ii) the conduct of the Chief Engineer was neglect or default of a servant of the carrier so as to fall within the proviso in article IV.2(q).

14

On the same basis, the Owners contended that:

i) the conduct of the Chief Engineer did not, or did not necessarily, amount to barratry;

ii) article IV.2(b) exempted the carrier from liability for loss caused by fire, whether or not the fire was barratrous; and

iii) article IV.2(q) exempted 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 setting the fire was not, or was not necessarily, within the scope of his employment; and accordingly the Owners were not, or were not necessarily, precluded from relying upon the defence in article IV.2(q).

15

In the course of a full and careful analysis, the Judge concluded on the first question that whether the conduct of the Chief Engineer constituted barratry depended on further...

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