Glencore were the owners of the cargo onboard The “LADY M”. This cargo was damaged in a fire started intentionally by the Chief Engineer. Glencore incurred large losses and claimed damages against the Owner under the bill of lading and in bailment. The Owners had a counterclaim for General Average expenditure resulting from the fire.
Owners’ defence to Glencore’s claim was based on the Hague-Visby Article IV rules 2(b) and/or (q), i.e. the fire defence and/or no actual fault or privity of the carrier.
The Court ordered determination of a number of preliminary issues. For these issues, it was assumed by the Court that the fire was started deliberately with the intention of causing damage, but that the Chief Engineer was: a) under extreme emotional stress due to the illness of his mother; or b) suffering from a mental illness; or c) neither a) nor b).
The preliminary issues were:
- Did the conduct of the Chief Engineer constitute barratry?
- Could Rule 2(b) exempt owners from liability if the fire was started intentionally/barratrously?
- Were owners exempt from liability under Rule 2(q)?
In relation to preliminary issue 1, the Court found that in order for the act to amount to a crime, it had to be a knowing breach of duty to owners. If the Chief Engineer did not realise he was acting in breach of duty, he was not committing a fraud on the owner. In essence it was said that the Chief Engineer’s actions could have constituted barratry, but whether it was or not depended on his mental state at the time.
On preliminary issue 2, the Court held that owners could rely on the fire defence under Rule 2(b) regardless of whether the fire was caused by barratry. In the Court’s judgment, fire under the Rule simply meant fire, without qualification as to how it was caused.
On preliminary issue 3, the Court decided Owners could not rely on Rule 2(q) as the Chief Engineer was acting within the course of his employment on the assumed facts. When setting fire to the control room, the Chief Engineer was judged as acting as a servant of the owners.
This case is useful to ship owners in the fact that it confirms there is no qualification to “fire” when seeking to rely on the fire defence under the Hague-Visby Rules. Absent fire, it confirms that ship owners can’t escape liability for barratrous acts even if there is no actual fault or privity on their part.
We understand that permission to appeal has been granted so we will have to see what the Court of Appeal make of Mr Justice Popplewell’s findings.
The full case citation is: Glencore Energy UK Ltd and Another v Freeport Holdings Ltd (The “Lady M”) – QBD (Comm Ct) (Popplewell J)  EWHC 3348 (Comm) – 21 December 2017