Glencore Energy UK Ltd & Anor v Freeport Holdings Ltd, Court of Appeal - Commercial Court, December 21, 2017, [2017] EWHC 3348 (Comm)

Resolution Date:December 21, 2017
Issuing Organization:Commercial Court
Actores:Glencore Energy UK Ltd & Anor v Freeport Holdings Ltd
 
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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

Date: 21/12/2017

Before :

THE HON. MR JUSTICE POPPLEWELL

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Between :

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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

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Judgment Approved

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:

    ``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

  3. 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.''

  4. 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.

  5. 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:

    ``Agreed Facts...

  6. 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 030 56' N, 030 46' W and in water said to have been 4,20m deep.

  7. It is reported that the fire was put out by 1:36hrs (lt) on 14th May 2015.

  8. 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.

  9. 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'').

  10. 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.

  11. Salvage services were eventually terminated on 12th June 2015 and the Vessel was thereafter redelivered to the Defendant.

  12. 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.

  13. 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.

  14. The Defendant settled the Salvors' claim on terms that are unknown to the Claimant.

  15. 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.

  16. 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.

  17. 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):

  18. The perpetrator was the Chief Engineer.

  19. He acted alone.

  20. At the time of starting the fire deliberately and with intent to cause damage he was:

    1. under extreme emotional stress and/or anxiety due to the illness of his mother;

    2. alternatively, suffering from an unknown and undiagnosed personality disorder and/or mental illness;

    3. alternatively, neither a nor b above.''

  21. The two preliminary issues ordered by Sara Cockerill QC were in the following terms:

    ``(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.''

  22. 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:

    (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).

  23. The Owners contend that:

    (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).

  24. In the light of these rival submissions, it is convenient to define and address the preliminary issues in the following order:

    (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?

  25. 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.

  26. 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...

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