A fire on board the Lady M immobilised the ship. The fire was started by the chief engineer, allegedly deliberately with intent to cause damage, but it was unclear what his exact state of mind was at the time. The vessel’s owner, Freeport Holdings Ltd (defendant), engaged salvors to tow the vessel to Las Palmas. The defendant declared general average, which was disputed. The cargo owners, Glencore (claimants), incurred costs aggregating to USD 3.8 m for salvage operations and defending arbitration proceedings, and claimed against the defendant under the bills of lading to recover these costs and for a declaration that the claimants were not liable for a general average contribution. The defendant denied liability and counterclaimed for a contribution of approximately USD 560,000 in general average.

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, relevantly the carrier’s obligation to care for the goods carried in art 3.2, subject to the exemptions in art 4.2, and in particular the fire exemption in art 4.2.b and/or the 'any other cause' exception in art 4.2.q. There was no material distinction between these provisions and the Hague Rules for the purposes of the issues the judge had to decide. He therefore referred to the Hague Rules and their origin and background in his judgment.

There were three preliminary issues for the court to decide on the basis of the agreed and assumed facts:
(1) Did the conduct of the chief engineer constitute barratry?
(2) Is art 4.2.b capable of exempting the defendant from liability if the fire was deliberately or barratrously caused?
(3) Is the defendant exempt from liability under the 'any other cause' exception in art 4.2.q?

Held:

(1) The conduct of the chief engineer in starting the fire may or may not have constituted barratry, depending upon further facts as to his state of mind which had not been agreed or assumed.

The judge considered various sources of law, including the travaux préparatoires to the Hague Rules and the Marine Insurance Act 1906 (UK), and settled on a definition of barratry as a deliberate act or omission by the master, crew or other servant of the owners which is a wrongful act or omission to the prejudice of the interests of the owner of the ship or goods (whether or not such prejudice is intended) without the privity of the owner. In order for the act or omission to qualify as wrongful, it must be what is generally recognised as a crime, including the mental element necessary to make the conduct criminal or a serious breach of duty owed by the person in question to the shipowner, committed by him knowing it to be a breach of duty or reckless whether that be so.

(2) Article 4.2.b of the Hague Rules was capable of exempting the defendant from liability if the fire was deliberately or barratrously caused.

The context in which the Hague Rules fell to be interpreted was one of trade-off and compromise. If a word or expression had acquired a universally accepted meaning, there was a reasonable presumption that it was used in the Hague Rules with that meaning; but beyond that, the language used must be taken to speak for itself.

The court had a duty 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. It was in the interests of uniformity that they should be construed on broad principles of interpretation which were generally accepted rather than rules of construction particular to English law. There might be recourse to the travaux préparatoires 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 would only be determinative in a case in which they clearly and indisputably lead to a definite legal intention.

The Hague Rules was a compromise whereby shipowners accepted statutory restrictions on their freedom to contract out of their strict liability as common carriers, 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. Shipowners generally continued to insert the exculpatory clauses. However, many of them, perhaps a majority, did not fully rely upon them. In giving up the right to freedom of contract and a number of their contractual protections, it was not to be assumed that shipowners and cargo interests should have intended others to be circumscribed by the precedents which had sought to construe them restrictively in an environment of total exclusions of liability. Hence, there was reason for caution in construing the Hague Rules by reference to decided cases.

The natural meaning of the word ‘fire’ in art 4.2.b simply meant fire, without any qualification implicit in that word about how the fire started, whether intentionally, negligently or accidentally, or any qualification as to who might have been responsible for it. The wording ‘unless caused by the actual fault or privity of the carrier’ which followed ‘fire’ imported a limited qualification to the exception by reference to some identified causes of the fire; the natural inference being that the word fire was otherwise unqualified, and that unless the cause fell within the proviso, it did not remove fire from the class of exempting perils. In addition, the wording in art 4.2.b contrasted with that in art 4.2.q which expressly carved out of the protection afforded to the carrier losses contributed to by the neglect or default of servants or agents of the carrier. In policies of insurance, fire was interpreted as an insured peril which meant fire however caused, whether through the deliberate acts of servants, agents or third parties (provided of course it was without the connivance of the owners which precludes recovery on general principles of insurance law). In the travaux préparatoires, ‘fire’ simpliciter in the draft r 2.c was understood to mean fire however caused, including in particular fires deliberately or negligently started by servants or agents of the carrier. Most of the leading textbook writers also take the view of supporting the plain meaning of the text as covering fire however caused unless with the actual fault or privity of the carrier itself. Accordingly, fault on the part of servants or agents was not sufficient to prevent shipowners’ reliance on loss caused by fire, however caused, unless the fault was within the specific proviso in art 4.2.b involving actual fault or privity of the carrier himself.

There was no policy reason for reading the word ‘fire’ in a restrictive way. It was of the essence of barratry that the shipowner’s servants were acting contrary to the shipowner's interests and in breach of the trust reposed in them by the shipowner. There was nothing unjust in shipowners being entitled to exclude their liability from the consequences. The hallmark of barratry was wrongdoing by the crew against, rather than on behalf of the shipowner, and it was in such a situation that the rationale for the existence of the exclusion of liability might on one view appear most applicable. Whilst shipowners were unable to bargain for a blanket exculpation for barratry in the Hague Rules, it was nevertheless consistent with principle that the other exempted perils for which they successfully bargained should extend to those perils when barratrously caused.

(3) The defendant was not exempt from liability for the fire under art 4.2.q of the Hague Rules.

The chief engineer was acting as a servant of the defendant when setting fire to the engine control room. He was put on board the Lady M by the defendant to be responsible for management of the main engines, including the engine control room, for the purposes of carrying and caring for the claimants’ cargo and caring for the ship within his field of responsibility which included the engine control room. He was performing the functions of the defendant to look after the Lady M, and carry and care for the cargo, within his field of responsibility on the Lady M, and whether or not he was on duty on the night in question, misperforming those functions in setting fire to the control room. Accordingly, the act of the chief engineer was properly to be regarded as the act of a servant of the defendant so as to come within the proviso of fault or neglect of the agents or servants of the carrier which contributed to the loss or damage under art 4.2.q.