The “LADY M” – The Court of Appeal considers the meaning of the ‘fire’ exception - Robert Thomas QC and Benjamin Coffer

Thu, 14 March, 2019

A copy of the judgment can be found here.

The Court of Appeal’s judgment in the “LADY M”, handed down today, provides definitive guidance on the scope of the ‘fire’ defence in Article IV Rule 2(b) of the Hague Rules, and the proper approach to the construction of the Article IV defences more generally. Robert Thomas QC and Benjamin Coffer appeared for the cargo interests, instructed by Andrew Nicholas and Cameron Boyd of Clyde & Co LLP.

The Court has held that the carrier can rely on the fire defence even where the fire is caused intentionally by the crew, unless the vessel was causatively unseaworthy in breach of Article III.1, or the fire was caused with the actual fault or privity of the carrier. In construing the fire defence, the Court took a restrictive view of the relevance of the pre-existing common law prior to the Hague Rules, and the relevance of thetravaux preparatoires, instead concentrating on the literal wording of the Rules.

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 cargo interests relied on the fire as a breach of Article III Rule 1. In Owners’ defence, it was admitted that the fire had been started deliberately by a member of the crew with the intent to cause damage. Owners’ case was that the culprit was the Chief Engineer and that at the time that he set the fire he was under extreme emotional stress and/or anxiety due to the illness of his mother, alternatively suffering from an unknown and undiagnosed personality order and/or mental illness.

Cargo interests argued that the fire defence was not applicable to fires caused by acts of barratry. They relied principally on pre-existing common law cases in which it had been held that contractual defences in bills of lading (even when apparently clearly worded) were inapplicable when the excluded peril was caused by deliberate conduct on the part of the crew.

At first instance, Popplewell J determined as a preliminary issue that the fire defence was capable of applying even if the fire was caused by barratry on the part of the crew, but rejected the owners reliance on Article IV Rule 2(q). He also held that there could be no barratry if the Chief Engineer was insane: for an act to constitute barratry, it required the mental element necessary to make the conduct criminal, which would not be present in a case of insanity.

The Judge’s decision that the carrier could rely on Article IV.2(b) was upheld on appeal. The Court of Appeal held that it was not permissible to refer to the pre-existing case law, because the words of Article IV.2(b) were clear. The Court endorsed the Judge’s view that it was only permissible to make reference to prior authorities where they established that a particular word or phrase already had a judicially settled meaning. It held that there was no settled meaning of ‘fire’ prior to the enactment of the Rules. In reaching that view, the Court declined to follow the decision of the New Zealand Supreme Court inThe Tasman Pioneer [2010] 2 Lloyd’s Rep 13 that the Article IV defences are not applicable to acts of barratry.

The Court of Appeal went on to consider the Judge’s analysis of the requirements for an act to constitute ‘barratry’. The Court held that the Judge should not have determined whether the assumed insanity of the Chief Engineer would prevent his conduct constituting barratry, because insanity had not been pleaded by the shipowners. All three judges were critical of the shipowners for asking the Court to determine the preliminary issue on the basis of a hypothetical and unpleaded assumption (“the Owners were acting as if they were conducting a tutorial group”).

Robert Thomas QC

Robert's practice has moved from strength to strength since taking silk in 2011. He retains a strong presence in the traditional areas of his practice and has recently complemented this with substantial experience in commercial fraud and related relief. He is ranked as a Leading Silk in the latest editions of both directories, and has been praised in previous editions for having a "fantastically effective and intellectual style", for "consistently deliver[ing] a first-class service" and for his ability to handle "difficult cases on a tight timetable". He is a registered practitioner in the DIFC and is also receiving an increasing number of appointments as an arbitrator.

Robert is frequently ranked as a leading barrister in the Chambers & Partners as well as the Legal 500 directories for Shipping & Commodities.

To view Robert's full profile, please click here.

Benjamin Coffer

Ben is described by the directories as  "a rising star" (Legal 500, 2019); “a standout shipping and commodities junior" (Chambers & Partners, 2018) and “a star of the future” (Chambers & Partners, 2017). He is also recognised as a leading junior in the Legal 500 Asia Pacific Guide. His significant recent cases include: 

  • Volcafe v. CSAV [2018] UKSC 61, the first authoritative analysis of the inherent vice defence and the burden of proof in cargo claims;
  • The Aqasia [2018] 1 Lloyd's Rep 530, settling a 90-year dispute as to whether Article IV.5 applies to bulk cargoes; 
  • Al Khattiya c/w Jag Laadki [2018] 2 Lloyd's Rep. 243, which concerns the significance of the place of a collision in a forum non conveniens application;
  • The Maersk Tangier [2018] 2 Lloyd’s Rep 59, the leading English case on package limitation for containerised cargoes under the Hague-Visby Rules; and,
  • The Lady M [2018] Lloyd's Rep Plus 22, the first modern decision on the meaning of 'barratry' and its effect on the defences available under the Hague Rules. 

Ben's broad international commercial practice has a particular emphasis on commodities, insurance / reinsurance and shipping. He appears as sole and junior counsel in the Court of Appeal, the Commercial Court and the London Mercantile Court, and before arbitral tribunals under the rules of many different international organisations including the LMAA, the LCIA, the ICC, the SIAC, the HKIAC, the Swiss Chambers' Arbitration Institution, FOSFA and GAFTA. 

To view Ben's full profile, please click here.