UK Supreme Court Blog

EDITORS: Dan Tench, Emma Cross, Zainab Hodgson, Francesca Knight, James Warshaw and Natalie Haefner (CMS)
Hugh Tomlinson KC, Matthew Ryder KC, Dévante Gravesande-Smith and Rebecca Khan (Matrix)

This case deals with an important and interesting contractual question regarding whether the reasonableness of the exercise of a contractual discretion should be based on the decision-maker’s reasoning process, or only the result reached.

Background

The appellant, Mrs Braganza, is the widow of a chief engineer who disappeared from on board a ship whilst it was in the middle of the North Atlantic in the early hours of 11 May 2009. The ship was owned by the first defendant BP Shipping Ltd and Mr Bragazna was employed by BP Maritime Services (Singapore) Pte Ltd. Tragically, Mr Braganza has not been found.

Following Mr Braganza’s disappearance BP conducted an investigation which concluded that he had likely committed suicide. BP argued that, under Mr Braganza’s employment contract, his wife was not entitled to death in service benefits in the event that the death was a “wilful act”. Mrs Braganza brought claims in tort (for negligence) and a contract claim seeking payment of the benefit (on the basis that BP’s investigation findings were wrong).

At first instance ([2012] EWHC 1423 (Comm)), Teare J held that BP did not have enough “cogent evidence” to justify the finding of suicide in its report or for BP’s General Manager, Mr Sullivan, to form the opinion that Mr Braganza had committed a “wilful act” for the purposes of the employment contract (see Teare J at paras 94 and 95). Furthermore, it was held that BP had failed to take into account the possibility that Mr Braganza could have gone out on deck for work reasons and fallen overboard accidentally. Teare J held that there was a real uncertainty as to what had actually happened to Mr Braganza. Therefore, BP’s finding was not reasonable. The contract claim succeeded and Teare J held that the death in service benefits were payable to the claimant (amounting to $230,265 plus interest).

Court of Appeal judgment

BP appealed the decision to the Court of Appeal and submitted that the trial judge was wrong to hold that BP:

1. misdirected themselves by failing to have cogent evidence commensurate or proportionate to the seriousness of a finding of suicide; and

2. had failed to take into account that Mr Braganza had good reason to be on deck and therefore could have fallen overboard accidentally.

In the Court of Appeal ([2013] EWCA Civ 230) the leading judgment was given by Longmore LJ, with which Rimer and Tomlinson LLJ unanimously agreed. On the first issue, the Court disagreed with the trial judge that Mr Sullivan should have given himself legal directions before forming his opinion that Mr Braganza probably committed suicide. It would have been impossible for Mr Sullivan to do that “without taking legal advice of a kind that cannot have been contemplated by the requirements of the death benefit clause“. The inquiry team decided suicide was the most likely scenario in the ordinary language of probability and Mr Sullivan based his view on that conclusion (see paras 14 and 20 of the judgment).

On the second issue, the Court of Appeal found that the inquiry team had been careful not to discount the possibility of an accident from their report, so had taken into account the fact Mr Braganza could have been on deck for work reasons. Even if the team had failed to appreciate work-related reasons for Mr Braganza being out on deck, in the absence of a mechanism which explained how he could have accidentally fallen overboard, the Court held that it was not a failure which could have made BP’s opinion unreasonable (see para 22 of the judgment).

The Court of Appeal concluded that BP’s investigation conclusions were reasonable and accordingly allowed the appeal. Mrs Braganza has appealed the Court of Appeal’s decision to the Supreme Court.

Appeal to the Supreme Court

The appeal was heard by the Supreme Court on 10 November 2014 by Lord Neuberger, Lady Hale, Lord Kerr, Lord Wilson and Lord Hodge. The issues for the Court were:

1. whether the Court of Appeal was justified in overturning the trial judge’s assessment of the facts;

2. whether an employer considering whether an employee has committed suicide must direct himself as to the need for cogent evidence to justify such a finding;

3. whether the reasonableness of the exercise of a contractual discretion should be decided by reference to the decision-maker’s reasoning process, or only to the result reached;

4. whether the Court of Appeal was wrong to dismiss the appellant’s notice; and

5. whether the Court of Appeal was wrong to dismiss Mrs Braganza’s submission that the trial judge should have found that BP’s report was irrational due to a lack of evidence.