A challenge to, or attempt to limit the scope of, the established "fire" defence fails.

The Facts

'Lady M' was on a voyage from Taman, Russia to Houston, carrying a cargo of 62,000 mt of fuel oil, when a fire was deliberately started in the engine room by the chief engineer acting alone. He was suffering from extreme emotional stress due to the death of his mother or (alternatively) from an undiagnosed mental illness or personality disorder. The owners ("Freeport") engaged salvors and the ship was towed to Las Palmas, Spain, where general average was declared.

Bills of lading had been issued incorporating the Hague-Visby rules. Cargo interests ("Glencore") claimed under the bills (and alternatively in bailment) USD3.8 million for salvage and arbitration costs from Freeport.  Freeport counterclaimed USD560,000 in general average contributions. 

The Judgment

Three issues were put before the court at first instance:

• Did the chief engineer's conduct amount to barratry?¹
• Did the "any other cause" exemption at Hague-Visby Article IV.2(q)² apply?
• Did the "fire" exemption at Hague-Visby Article IV.2(b) ³ apply? 

On the point of barratry, the judge said he would have needed more information in order to decide whether the chief engineer would have had a defence of insanity in criminal law.  However, this was not necessary in order to decide on the two Hague-Visby exemptions.  The judge found that Rule 2(q) was not available because the chief engineer was acting within the scope of his employment, and was therefore a "servant" of the carrier, or alternatively (and on an analysis preferred by the judge) he was acting as the carrier's agent.  However, Rule 2(b) was available, regardless of whether the chief engineer's conduct was barratrous. 

Glencore appealed on two grounds:

• Did the chief act barratrously and does barratry depend on a state of mind?
• Was the rule 2(b) fire defence available?

The Court of Appeal dealt with the second question first, approving the reasoning at first instance.  Glencore argued that at English common law a fire defence would not include fires caused by negligence or barratry.  Glencore also attempted to invoke the travaux préparatoires to demonstrate "context" and "purpose" of Hague-Visby. 

These arguments failed on the grounds that "fire" was not a term of art, and there was no existing judicial interpretation, or any other reason, to interpret its clear use in Hague-Visby other than by reference to its universally accepted meaning. It was not appropriate to impose English common law principles on international conventions especially where this would require substantial adjustment to the wording. The wording of Rule 2(b) contained no qualification as to how the fire had started or who had started it, and this was supported by a comparison with the wider wording of Rule 2(q).  In coming to this conclusion the court was guided by the Vienna Convention on the Law of Treaties1969. 

Glencore's attempt to rely on Volcafe³ ,where reference to English law principles of bailment was made to decide the burden of proof under Hague-Visby, was also unsuccessful.  This was mainly because, in contrast to the issues in the present case, Hague-Visby was silent on burden of proof.

In view of the finding on the second ground, it was unnecessary to decide whether the conduct of the chief engineer was barratrous.  (Barratry is, by definition, outside actual fault or privity of the carrier.)  The Court of Appeal however added that the first instance court had erred (and "wasted resources") in allowing Freeport to hypothesise on an assumption of insanity which it had not pleaded.

Comment

This is a welcome decision for carriers, confirming the availability of the Hague-Visby fire exemption (unless of course the ship is found to be unseaworthy).  It is also a reminder that English Courts will seek to give plain meanings to words in international conventions.  There are also lessons to be taken away on the selection of preliminary issues which cannot be resolved on the information made available to the court.

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
 
We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club

¹An act of gross misconduct committed by a master or crew of a ship which damages the ship or its cargo

 ²Any other cause without the actual fault or privity of the carrier or the fault or neglect of the agents or servants of the carrier

³ Fire unless caused by the actual fault or privity of the carrier

⁴Volcafe v CSAV ([2018] UKLSC 61). See also TT Talk on evidences and burdens

GLENCORE ENERGY UK LTD & GLENCORE LTD v FREEPORT HOLDINGS LTD  (THE "LADY M")  [2019] EWCA Civ 388