The case concerned a fire in the engine room of “LADY M” while she was carrying a cargo of 62,250 mt of fuel oil from Russia to the US. The fire did not take hold but was said to have been sufficient to immobilise the vessel such that salvage services were required and cargo interests incurred a substantial liability to the salvors. In these proceedings, cargo interests sought to claim that sum (together with associated costs and expenses) from Owners, together with a declaration of non-liability for general average. Owners counterclaimed a general average contribution.
The High Court, firstly, decided that the words of the Hague-Visby Rule exceptions should be given their plain and ordinary meaning.
In doing so the Court held that the Article IV Rule 2(b) exception -the carrier’s liability to be excluded for “Fire, unless caused by the actual fault or privity of the carrier- applied to incidents of fire without any qualification as to how they were started, whether deliberately or accidentally.
Leave to appeal was granted to the cargo owner on the following grounds:
- That the conduct of the crew member in starting the fire constituted barratry, and this conclusion did not depend on a close analysis of his state of mind; and
- That the defence under rule 2(b) of the Hague-Visby Rules was not available where the Master or crew caused the fire by a barratrous act.
In addition, Glencore supported that further interpretation of the word “fire” was required, by considering common law and the “travaux preparatoires” (the discussions by the delegates who drafted the original Hague Rules).
In the meantime, the Owners argued that the words of Rule 2(b) exception were clear: all loss arising from fire ought to be excluded (except where fire is caused with the actual fault or privity of the carrier).
The added that Glencore were seeking to imply a further qualification to the exception, unless caused by barratry of the crew, when there was no basis to do so.
Thus, the Court saw eye to eye with the Owner's arguments. There was no policy reason in isolation or in context to interpret the word “fire” in a way that excludes fires deliberately caused by the crew.
The words in Rule 2(b), and in particular the word “fire”, were clear and should be given their natural and ordinary meaning, so it was not appropriate to refer to case law or the travaux preparatoires, which in any case did not provide any alternative interpretations to ‘fire’.
The Court of Appeal allowed Glencore’s appeal on the mental element for barratry. The Owners noted that the crewmember was suffering from insanity so lacked the necessary mental state to commit an act of barratry, but the Court of Appeal considered that the Owners had failed to plead this argument adequately, or bring evidence to support it, and commented that the Owner’s arguments on this point should not have been considered in the first instance decision.
As Chloe Townley, Syndicate Executive, European Syndicate commented the Court reassured the previous decision of the High Court, and owners were still capable of relying on the fire exception to exclude their liability.