Braganza v. BP Shipping Ltd [2015] UKSC 17

Contracts often give you free rein to take a decision about something. English law curbs that freedom - by requiring you to act in good faith and reasonably. Braganza looks again at how you decide what is reasonable. The ruling of the Supreme Court indicates a tougher attitude. 

The background facts

The background is personal – and very sad. Mr Braganza was an able and well-qualified chief engineer. He was an Indian national and a Roman Catholic, married with two children. He was on board the BP tanker British Unity in 2009. She needed repairs and he planned to check the weather with the Master before carrying out a difficult job in risky conditions.

The Master left Mr Braganza’s cabin late one night after discussing this. Nobody saw Mr Braganza again. A search and rescue mission failed to find him. Eventually it was accepted that he was lost overboard, presumed drowned.

Under his contract with BP, Mr Braganza and his family were entitled to compensation for death or accidental injury. Compensation was not, however, payable if, in BP’s opinion, the death resulted from Mr Braganza’s wilful act.

BP set up an enquiry to look at the events leading up to Mr Braganza’s loss – to see if changes were needed to their safety management system. This included how they might support crew experiencing financial or emotional problems. 

The report concluded that suicide was a possibility. The investigation team spoke of evidence that Mr Braganza was quiet and withdrawn on the last voyage; about e-mails with his family suggesting some personal worries; about the withdrawal of a crew bonus; and other matters. Against this, his behaviour had appeared entirely normal to the Master and the other officers who talked with him the night before he disappeared; he was concerned about the weather, so it was understandable that he went out on deck during the night; and he was a Roman Catholic, so technically suicide was a mortal sin. 

The report was not commissioned with the explicit aim of deciding whether he had committed suicide. However, on the basis of the report, the decision-maker at BP (a Mr Sullivan) decided that there was wilful default within the meaning of the contractual exception. So Mrs Braganza's compensation claim was rejected.

The legal proceedings

Mrs Braganza sued. In a long trial before Mr Justice Teare, she succeeded. BP successfully appealed to the Court of Appeal. But Mrs Braganza won in the Supreme Court, by a majority of 3:2, who held that BP had acted unreasonably in reaching their decision.

The principles

The three courts approached the matter in the same basic way. Though, on paper, BP had free rein to decide whether there was wilful default (“…in their opinion…”) and therefore whether compensation was payable, they had to act in good faith and reasonably. Nobody suggested that Mr Sullivan had acted perversely or that he had made his decision irrationally. The question was whether he had acted reasonably - in the legal sense. 

The Supreme Court’s approach

What did reasonable mean? It meant the way in which it was used in the Wednesbury case back in 1948 (Associated Provincial Picture Houses Ltd v. Wednesbury Corporation). That case divided the test into two limbs:

  1. whether the decision-maker took all the right matters into account; and
  2. if so, whether he/she came to a conclusion so unreasonable that no reasonable authority could have made it.

In other words (said Wednesbury), you have to satisfy both limbs of the test. You only get to limb 2 if you pass limb 1.

But note the reference to an authority. Wednesbury dealt with the actions of a public authority. It was a case of judicial review. Braganza involved a private contract – in this case, a contract of employment. It has often been said that public bodies should be subject to more stringent requirements than private companies or individuals in a two-sided contract. That is what BP argued. They said that there was no room for the first limb of Wednesbury. They were entitled to take into account whatever matters they chose. The only issue was the second limb i.e. whether their decision was so unreasonable that it should be overturned.

The Supreme Court disagreed. In private contracts, as in public matters, both limbs of Wednesbury should be looked at in assessing the reasonableness of a decision. And on that basis (said the three majority judges), BP had acted unreasonably. The conclusions of the investigation team did not provide sufficiently cogent evidence to justify Mr Sullivan simply adopting it as the basis for his decision that Mr Braganza had taken his own life. He should have looked at the evidence again in a fresh light. The purpose of the report was to see if BP should improve their systems. It did not focus on the cause of Mr Braganza's death. Suicide (said Lady Hale) was inherently improbable. Mr Sullivan should have asked himself whether the evidence was sufficiently persuasive to tilt the balance the other way. 

There were no positive indications of suicide. There were lots of factors the other way. The process was deficient. So the decision was deficient. It was reached without taking all relevant matters into account.

The minority judges (including Lord Neuberger, the President of the Court) took a different view of the decision process. They felt that it was neither unreasonable nor inappropriate for Mr Sullivan to form the view he did. But they agreed on the basic principles.

So Mrs Braganza got her compensation.

Comment

As we say, this not a new point. But it does suggest that the courts’ review of decisions under contracts is becoming stricter. Many maritime contracts give one side wide powers to take decisions which affect both sides. Sometimes it is an explicit clause, sometimes it is through the incorporation of standard insurance terms like P&I Club rules, which give discretion to the insurer regarding cover and claims. Braganza reminds us that, in exercising that discretion, the law expects high standards to be followed.