Supreme Court: Widow’s Contractual Claim Against BP Upheld

20 03 2015

Braganza (Appellant) v BP Shipping Limited and another (Respondents) [2015] UKSC 17 (18 March 2015) 

This case was heard on appeal from a decision of Longmore, Rimer and Tomlinson LJJ, see [2013] EWCA Civ 230, and it threw up two connected questions of principle: first of all, the meaning of the general requirement that the decision of a contractual fact-finder must be a reasonable one; and secondly, the proper approach of a contractual fact-finder who is considering whether a person may have committed suicide. On 11 May 2009, Braganza disappeared between 1am and 7am, while on duty as the chief engineer on the British Unity (an oil tanker in the mid-North Atlantic managed by BP). The Court of Appeal was of the view that Braganza, an Indian national, had thrown himself overboard to commit suicide. Consequently, his widow, Mrs Niloufer Braganza, was precluded from receiving death benefits under her husband’s contract of employment, which contained a clause that compensation would not be payable if “in the opinion of the Company or its insurers, the death … resulted from … the Officer’s wilful act, default or misconduct”.

The question for Lord Neuberger PSC, Lady Hale DPSC and Lord Kerr, Lord Wilson and Lord Hodge JJSC concerned the proper test for the court to apply when deciding whether BP was entitled to reach the opinion that it did. Geared towards improving its systems, BP’s own inquiry about the disappearance identified six factors supportive of suicide and concluded that the most likely scenario was that Braganza deliberately jumped overboard. The six points related to (i) his behaviour being notably different on the voyage involving his disappearance than on previous voyages; (ii) the shoes and sandals he usually wore on board were found in his cabin after his disappearance; (iii) e-mail messages received from his immediate family suggested that he had some family and/or financial difficulties that were causing him concern; (iv) he was not aware, before joining the ship, of its status and reputation and was reported to be unhappy about this; (v) he considered himself eligible for the 2008 bonus which had been paid to him, but the employer had later advised him that it would be withdrawn; and (vi) there were indications that the watertight door from the accommodation block that opened onto the upper deck on the starboard side may have been opened during the hours of darkness on the morning of 11 May 2009 (the day he disappeared and died).

The General Manager of BP, who made no further inquiries of his own, concluded on the basis of the report that Braganza had willfully defaulted within the meaning his employment contract so that death in service benefits were not payable to Mrs Braganza.

Aggrieved, she took legal action. Mrs Braganza’s claim in contract against the employer for death benefits amounted to US$230,265. Moreover, she contended that her husband’s death was caused by the employer’s negligence and mounted a claim in tort under the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934 for damages quantified as US$1,325,945.

Headquartered in London, BP is one of the largest oil companies in the world. It is best known for the Deepwater Horizon disaster: the largest oil spill in history for which the company managed to wriggle its way out of trouble by paying record fines and pleading guilty to charges of eleven counts of manslaughter, two misdemeanors and a felony count of lying to Congress. The company has paid dearly for its wrongdoing but it is fair to say that BP’s corporate reputation, an important value creating intangible asset and a yardstick for measuring overall trustworthiness, is nonetheless rather poor indeed. This case readily demonstrates that BP lacks corporate social responsibility towards its employees and their family members.

The court held that on the factual matrix of Braganza’s case, the decision-maker should not simply have accepted the view of the inquiry, which was conducted for a different purpose, that suicide was the most likely explanation for Braganza’s disappearance. Lady Hale found no positive indications of suicide and she even made the slippery Durkheimian point that Braganza was a Roman Catholic and for him suicide was a “mortal sin”.

Her Ladyship took the view that “employment law is complicated and demanding in many legal systems, but employers are expected to know it.” In the round, the court held that a decision taken by an employer that an employee had committed suicide (an event precluding entitlement to death in service benefits under his contract of employment) was not a rational or reasonable decision unless the employer had had it clearly in mind that suicide was such an improbability that cogent evidence was required to form the positive opinion that it had taken place.

Admiralty Court, Queen’s Bench Division

The High Court, [2012] EWHC 1423 (Comm), tried the action over 8 days in 2012. Teare J could not make a finding as to the cause of Braganza’s death on the evidence. The court, however, upheld the contractual claim, and took the view that BP’s opinion was unreasonable because its official (General Manager, one Mr Sullivan) failed to direct himself that cogent evidence commensurate with the seriousness of a finding of suicide was necessary and he had buried the real possibility that Braganza had suffered an accident. However, Teare J did not accept the claim for negligence and Mrs Braganza did not appeal against this finding.

The Court of Appeal

Longmore LJ (with whom Rimer and Tomlinson LJJ concurred) allowed BP’s appeal in relation to the contractual claim and held that the employer did not have to approach the matter the way required by the judge, and that in all the circumstances the conclusion of suicide was a reasonable one for BP to reach.

The Supreme Court

Lady Hale (with whom Lord Kerr concurred) allowed Mrs Braganza’s appeal with the result that her claim in contract, for the sum of US$230,265 with interest, succeeded.

Whilst the court is not the primary decision-maker, in circumstances where there is a conflict of interest for the party in-charge of making a decision under the contract, which is heightened where there is a significant imbalance of power between the contracting parties, the court will seek to ensure that such contractual powers are not abused. The Supreme Court held that:

19. There is an obvious parallel between cases where a contract assigns a decision-making function to one of the parties and cases where a statute (or the royal prerogative) assigns a decision-making function to a public authority. In neither case is the court the primary decision-maker. The primary decision-maker is the contracting party or the public authority. It is right, therefore, that the standard of review generally adopted by the courts to the decisions of a contracting party should be no more demanding than the standard of review adopted in the judicial review of administrative action. The question is whether it should be any less demanding.

In a contractual context, the authorities revealed an understandable reluctance to embrace the fully developed rigour of the principles of judicial review of administrative action. Although Lord Sumption’s approach in Hayes v Willoughby [2013] UKSC 17 echoed Lord Diplock’s famous rationale in CCSU v Minister for the Civil Service [1985] AC 374, it was not a precise rendition of the test of the reasonableness of an administrative decision which was espoused by Lord Greene MR in Associated Provincial Pictures Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. The test in the latter case involves two limbs: the first limit focuses on the decision-making process and the second limb focuses on its outcome. In the Supreme Court, explaining that much depends on the context of the particular contract involved, Lady Hale held at para 30 that:

It is clear, however, that unless the court can imply a term that the outcome be objectively reasonable – for example, a reasonable price or a reasonable term – the court will only imply a term that the decision-making process be lawful and rational in the public law sense, that the decision is made rationally (as well as in good faith) and consistently with its contractual purpose. For my part, I would include both limbs of the Wednesbury formulation in the rationality test.

It was unnecessary to reach a final conclusion on the precise extent to which an implied contractual term may differ from the principles applicable to judicial review of administrative action. Given that the question may arise in so many different contractual contexts, it may well be that no precise answer can be given. The particular context of this case was an employment contract, which, as Lord Hodge explained in his judgment is of a different character from an ordinary commercial contract. Any decision-making function entrusted to the employer has to be exercised in accordance with the implied obligation of trust and confidence. This must be borne in mind in considering how the contractual decision-maker should approach the question of whether a person has committed suicide.

The instant case involved an employment contract, one that had an implied obligation of trust and confidence. Pursuant to that obligation, at para 32 the Supreme Court explained that any fact-finding function entrusted to the employer concerning whether the concerned employee has committed suicide must be exercised. Lady Hale held at para 33 (and at para 100 Lord Neuberger concurred) that it would have been open to BP to conclude that it was unable to form an opinion as to the cause of Braganza’s death but instead the company made a positive finding as regards suicide.

The real question was how the decision-maker should go about making a positive finding of suicide. In this regard, as explained by Lord Nicholls in In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, it is not the consequences of a finding of suicide which demand that there be cogent evidence to support it but its inherent improbability. Moreover, the Supreme Court held at para 36 that:

… a decision that an employee has committed suicide is not a rational or reasonable decision unless the employer has had it clearly in mind that suicide is such an improbability that cogent evidence is required to form a positive opinion that it has taken place.

On the factual matrix of the instant case, the decision-maker should not simply have accepted the view of the inquiry, conducted for a different purpose, that suicide was the most likely explanation for Braganza’s disappearance. In order to make a positive finding of suicide the decision-maker had to direct himself that cogent evidence was required sufficient to overcome its inherent improbability and Lady Hale held at para 40 that in the present case there were no positive indications of suicide and the six factors relied on in the report were “straws in the wind”. Her Ladyship explained that:

Against those straws in the wind is the evidence that Mr Braganza’s behaviour had appeared entirely normal to the Master and the other officers with whom he was in contact the night before. There was also a good deal of evidence of his concern about the weather, which would have constituted a good work-related reason for him to go on deck that morning. A further relevant factor which ought to have been in the mind of this employer is that Mr Braganza was a Roman Catholic. There are cultures in which suicide is an acceptable, even an honourable, solution to certain problems or dilemmas. But his was not one of them. For him, suicide was a mortal sin. This increases its inherent improbability in his case and the corresponding need for cogent evidence to support a positive finding.

Lord Hodge, who like Lady Hale would have allowed the appeal, held at para 59 that the lack of evidence supporting the hypothesis of an accident was still consistent with Braganza having sustained an accident through carelessness. Therefore, Teare J had been right to find that the decision was unreasonable in the public law sense of having been formed without taking relevant matters into account.

Lord Neuberger concurred, at para 103, with the majority’s view that in circumstances where a contract allocates power to a party to make decisions which have an effect on both parties, the court should review the decision in the same way as it reviews administrative decisions. BP owed the duty to conduct the investigation with honesty, good faith and genuineness. Equally, it had to avoid arbitrariness, capriciousness, perversity and irrationality. According to Lord Neuberger (with whom Lord Wilson concurred), the court’s approach when reviewing this decision should be along similar lines to that of an appellate court reviewing a trial judge’s decision.

On the other hand, Mrs Braganza gave evidence in proceedings before Teare J that her husband “was not happy because their money was running out”, “[t]hey had sold everything”, that “life [was] tough in Toronto”, and that Braganza “was frightened”. As far as Lord Neuberger, who would have dismissed the appeal, could see there was a combination of reasons which could fairly be said to be sufficiently cogent to justify the finding that Braganza had taken the unusual and tragic course of committing suicide.

Comment

Suicide or not, it is quite mind boggling that a company as large and powerful as BP should try to exclude payments to a widow for death benefits under her husband’s contract of employment. The full text of clause 7.6.3 of the contract read:

For the avoidance of doubt compensation for death, accidental injury or illness shall not be payable if, in the opinion of the Company or its insurers, the death, accidental injury or illness resulted from amongst other things, the Officer’s wilful act, default or misconduct whether at sea or ashore.

Overall Lady Hale’s approach at para 40, that in the present case there were no positive indications of suicide and the six factors relied on in the report were “straws in the wind”, is less stringent in comparison to Lord Neuberger’s minority view on the issue. (She was also heard correcting Lord Neuberger – on the recent decision of the Strasbourg court in Jeunesse v Netherlands [2014] ECHR 1036 – in the hearing on the controversial pre-entry English language tests case.) Mrs Braganza must have been delighted to learn that her claim in contract, for the sum of US$230,265 with interest, succeeded.

It is a bit excessive that a company such as BP, which is best known for its destruction of the environment and “serious bribery and corruption” in its tanker division, should be able to exclude payments to a widow on a summary basis in the form of an internal inquiry. As reasonable bystanders, we can only applaud the majority’s decision to allow the appeal because it is totally unethical that a company such as BP should be able to bully a widow; that too, in the absence of any concrete evidence of suicide.

With the utmost of respect to Lord Neuberger, perhaps his Lordship ought to have made a bit more of Lady Hale’s Durkheimian point!


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7 08 2015
mkp

Read on SSRN:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2617518

Abstract:

Headquartered in London, British Petroleum (BP) is one of the largest oil companies in the world. It is best known for the Deepwater Horizon disaster: the largest oil spill in history for which the company managed to wriggle its way out of trouble by paying record fines and pleading guilty to charges of eleven counts of manslaughter, two misdemeanors and a felony count of lying to Congress. It is fair to say that BP’s corporate reputation, an important value creating intangible asset and a yardstick for measuring overall trustworthiness, is rather poor indeed. The case of Braganza [2015] UKSC 17 is not related to the environmental catastrophe. Nevertheless, turning on whether the corporate giant ought to have paid death benefits to an employee’s widow, it readily demonstrates that BP lacks corporate social responsibility towards its employees and their family members. Braganza threw up two connected questions of principle: first of all, the meaning of the general requirement that the decision of a contractual fact-finder must be a reasonable one; and secondly, the proper approach of a contractual fact-finder who is considering whether a person may have committed suicide. In 2009, Mr Renford Braganza, whose contract of service precluded payment of death in service benefits in the event death resulted from the employee’s “wilful act”, disappeared while on duty as the chief engineer on the MV British Unity (an oil tanker in the mid-North Atlantic managed by BP with an exclusively Indian crew). Mrs Niloufer Braganza’s claim in contract against BP for death benefits amounted to US$230,265. BP’s internal inquiry about the disappearance identified six factors supportive of suicide and concluded that the most likely scenario was that Braganza jumped overboard deliberately.

At first instance, the Admiralty Court upheld the contractual claim but did not make a finding as to the cause of Braganza’s death. However, the Court of Appeal was of the view that Braganza had thrown himself overboard to commit suicide and it overturned the decision and upheld BP’s appeal on the contractual issue. By a majority of 3 to 2 the Supreme Court allowed Mrs Braganza’s appeal with the result that her claim in contract, for the sum of US$230,265 with interest, succeeded. The court held that on the factual matrix of Braganza’s case, the decision-maker should not simply have accepted the view of the inquiry, which was conducted for a different purpose, that suicide was the most likely explanation for Braganza’s disappearance. Lady Hale found no positive indications of suicide and she even made the slippery Durkheimian point that Braganza was a Roman Catholic and for him suicide was a “mortal sin”. Taking the view that “employment law is complicated and demanding in many legal systems, but employers are expected to know it,” her Ladyship dubbed the six factors “straws in the wind”. In the round, the court held that a decision taken by an employer that an employee had committed suicide (an event precluding entitlement to death in service benefits under his contract of employment) was not a rational or reasonable decision unless the employer had had it clearly in mind that suicide was such an improbability that cogent evidence was required to form the positive opinion that it had taken place.

As reasonable bystanders, we can only applaud the majority’s decision to allow the appeal because it is totally unethical that a company such as BP – which is best known for destroying the environment and serious bribery and corruption in its tanker division – should be able to exclude payments to an employee’s widow on a summary basis in the absence of any concrete evidence of suicide. Notably, Lord Neuberger would have dismissed the appeal because a combination of sufficiently cogent reasons justified the finding that Braganza took the unusual and tragic course of committing suicide. With the utmost of respect to Lord Neuberger, perhaps his Lordship ought to have made a bit more of Lady Hale’s Durkheimian point!

BP, Contract, Corporate Reputation, CSR, Death Benefits, Durkheim, Employment, Shipping, Suicide, Tort, UKSC

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