Braganza v BP Shipping Ltd & Anor

Where a contract makes payment depend on one party’s opinion, that opinion must be honestly formed on reasonable grounds, consistently with fairness, bona fides and the absence of legal misdirection. A lay decision-maker need not give itself a lawyer’s direction or conduct the microscopic investigation expected in litigation. The ordinary civil standard remains the balance of probabilities. The seriousness of a suicide finding does not impose a heightened standard on the contractual opinion-maker. Reasonableness is assessed by considering the opinion overall, rather than by testing every evidential step. An opinion may remain reasonable where an alternative explanation cannot be discounted, if a careful inquiry provides positive evidence for the conclusion and no plausible mechanism supports the alternative.

A chief engineer disappeared overboard from a vessel during a voyage. His widow brought a negligence claim under the Fatal Accident Acts and a contractual claim for death-in-service benefits. The High Court dismissed the negligence claim but awarded the contractual benefits, holding that the employer’s opinion that the death resulted from a wilful act was unreasonable.

The employer appealed on the contractual issue. The central question was whether the employer’s opinion had been reasonably formed under the contractual exclusion clause, including whether the decision-maker had to apply a heightened evidential standard or take account of a possible work-related reason for the deceased being on deck.

The Court of Appeal unanimously allowed the appeal and set aside the order of Teare J. Lord Justice Longmore gave the substantive judgment, with Lord Justices Rimer and Tomlinson agreeing.

1. Where a contract makes liability depend on one party’s opinion, the opinion must be formed honestly and on reasonable grounds. The common-law requirements include fairness, bona fides and absence of misdirection in law. The Court followed Mocatta J in The Vainqueur José, [1979] 1 Lloyds Rep 557, in recognising that a lay decision-maker is not expected to conduct the expert, professional and microscopic investigation required in litigation.
2. A non-lawyer exercising the contractual function need not give himself a legal direction before forming the opinion. A positive misdirection in law might make the opinion unreasonable, but failure to formulate the heightened cogency direction used by the trial judge did not do so. The civil standard remained the balance of probabilities, as emphasised in Re H, [1996] AC 562, and Re B, [2009] AC 11. The coroner-related discussion in R v West London Coroner ex parte Gray, [1988] QB 467, did not require satisfaction beyond reasonable doubt in this contractual context.
3. The issue was whether the opinion was reasonable overall, not whether every step in the investigation was correctly reasoned. The investigation team had conducted a detailed inquiry and identified positive evidence supporting suicide. The possibility of an accident could not be discounted, but there was no convincing mechanism by which the deceased could have fallen overboard. The criticisms concerning his behaviour, clothing, family difficulties, vessel reputation, bonus and a door on the vessel did not invalidate the overall opinion.
4. The employer’s decision-maker had to form his own view, but was entitled to be influenced by the investigation team’s careful assessment. His conclusion that suicide was the most likely explanation was reasonably based on the evidence. The contractual exclusion therefore applied, and the death-benefit claim failed.

• Court of Appeal (Civil Division), [2013] EWCA Civ 230: appeal allowed and the order of Teare J set aside.
• High Court of Justice, Queen’s Bench Division, Admiralty Court: negligence claim dismissed; contractual death-benefit claim succeeded in the sum of $230,265.00.