Shipping – Reckless Breaches Of Duty.

 

5 April, 2018

 

 

Glencore Energy UK Ltd v Freeport Holdings Ltd [2017] EWHC 3348.

 

Barratry, an act of gross misconduct by a master or crew resulting in damage to a vessel or cargo, has been relied on by owners to defend claims from cargo interests for many years.  However, the legal definition has been narrow and barratry was difficult to prove.  In this interesting case, the English court revisits and refines the definition of barratry.

 

 

Facts

 

The chief engineer of the vessel “Lady M” (the “Vessel”) started a fire intentionally on the Vessel.  The owners of the cargo on board claimed against the owners of the Vessel (“Owners”) for the breach of contract(s) of carriage in the bills of lading, alternatively in bailment.  The contracts of carriage were subject to the Hague-Visby Rules.

 

The Owners denied liability claiming the chief engineer acted barratrously, and relied upon the defences set out in Article IV Rules 2(b) and (q) of the Hague-Visby Rules as the barratrous acts were without the “fault or privity” of the Owners:

 

“2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:

…

(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…”

 

 

Issues

 

The Court determined on three preliminary issues, being:-

 

1. Did the conduct of the chief engineer constitute barratry?
2. Could Rule 2(b) exempt the Owners from liability if the fire was barratrously caused?
3. Could Rule 2(q) exempt the Owners from liability under the “any other cause” exception?

 

The Court assumed that at the time the chief engineer started the fire, he might have been under extreme emotional stress or suffering from an undiagnosed mental illness.

 

Judgment

 

 

On the first preliminary issue, the Court held that a wrongdoing needs not be a crime to constitute barratry.  A “fraud” is sufficient.  However, such wrongdoing must be a knowing (or at least reckless) breach of the duty owed to the shipowners. 

 

The Court noted that although there was no need to decide whether recklessness would be sufficient, there was no good reason why it should not.  Recklessness is essentially concerned with unjustified risk taking.  Reckless breaches of duty should properly be regarded as frauds on the shipowner in the same way as knowing breaches.  The vice lies in failing to comply with the duty owed to the shipowner in circumstances where the duty has been identified and ignored, not caring whether it is fulfilled.  In reaching this decision, the Court followed the New Zealand decision in The Tasman Pioneer [2010] 2 Lloyd’s Rep 13.  The Court also considered Channell J’s dictum in Briscoe & Co v Powell & Co (1905) 21 TLR 128, i.e. that reckless damage to cargo did not amount to barratry for no intention to cause damage was found, and found it to be wrong.   

 

Whether the chief engineer acted barratrously would depend upon further facts as to his state of mind at the time, which had not been agreed or assumed.

 

For the second issue, the Court considered the natural meaning of the words used and compared the wordings of Rules 2(b) and (q), and held that the language supported the interpretation that “fire” simply means fire without any qualification about how it started.  Therefore even if the fire was started barratrously, the Owners were entitled to rely on this defence.

 

For the final issue, the chief engineer was found to be a “servant” of the Owners.  He therefore came within the proviso of Rule 2(q) by applying either the English law principles of vicarious liability or an agency analysis.  Although he might have been acting barratrously, that was not sufficient to absolve the Owners of their vicarious liability.  The Owners were therefore not entitled to rely on the Rule 2(q) exception.

 

Conclusion

 

In this case, the English Court clarified the definition of barratry as to include not just recognised crimes or knowing breaches of duty by the master, crew or other servant of the owners, but also reckless breaches of duty.

 

 

 

For further information, please contact:

 

Andrew Rigden Green , Partner, Stephenson Harwood

andrew.rigdengreen@shlegal.com