Braganza v BP Shipping Ltd [2015] UKSC 17

Mr Braganza, BP's Chief Engineer, disappeared at sea. BP concluded he had committed suicide, denying his widow death-in-service benefits. The Supreme Court held that BP's contractual discretion required a rational decision-making process, and the evidence was insufficient to overcome the inherent improbability of suicide.

Facts

Mr Renford Braganza, Chief Engineer aboard BP’s oil tanker the MV British Unity, disappeared in the mid-North Atlantic between 01.00 and 07.00 on 11 May 2009. No body was recovered and no one witnessed his disappearance. His employment contract, at clause 7.6.3, provided that death benefits would not be payable if, in BP’s opinion, the death resulted from the officer’s wilful act, default or misconduct.

BP appointed a five-person investigation team which produced a Fatal Incident Report concluding that the most likely scenario was that Mr Braganza had jumped overboard intentionally. The team relied on six ‘bullet points’, including changes in his behaviour during the voyage, emails from his wife suggesting financial and emotional worries, criticism received about repair work at Ferrol, and the withdrawal of a bonus. Mr Sullivan, BP’s General Manager, adopted the team’s conclusion and refused to pay the death benefits. Mrs Braganza, his widow and a devout Roman Catholic (as was her husband), brought a claim in contract for the death benefits of US$230,265.

Issues

The appeal raised two interlinked issues:

• The general issue: what is the proper test for the court when reviewing a decision made by a contractual fact-finder exercising a contractual discretion or forming an opinion as to relevant facts?
• The particular issue: what approach must a contractual decision-maker take when considering whether a person has committed suicide, given its inherent improbability?

Arguments

Appellant (Mrs Braganza)

It was argued that BP’s opinion was unreasonable in the Wednesbury sense, having failed to take into account relevant matters – particularly the real possibility that Mr Braganza had gone on deck for work-related reasons to check the weather. It was also argued that BP failed to direct itself that cogent evidence was required before a finding of suicide could be made.

Respondents (BP)

BP argued that it could not be expected of a non-lawyer such as Mr Sullivan to direct himself in legal terms regarding the cogency of evidence. The team had carried out a thorough investigation and the conclusion of suicide was reasonable in all the circumstances. BP conceded that the opinion had to be reasonable and that if it was not, the contractual claim should succeed.

Judgment

The Supreme Court allowed the appeal by a majority of 3 to 2 (Lady Hale, Lord Kerr and Lord Hodge; Lord Neuberger and Lord Wilson dissenting).

Lady Hale’s reasoning

Lady Hale reviewed the authorities on contractual discretion, including Abu Dhabi National Tanker Co v Product Star Shipping Ltd, Paragon Finance plc v Nash, and Socimer International Bank Ltd v Standard Bank London Ltd. She noted the parallel with judicial review of administrative action, recognising that where a contract assigns a decision-making function to one party, the court is not the primary decision-maker. She concluded that the implied term restricting the exercise of such discretion should include both limbs of the Wednesbury test – namely, that the decision-maker must take into account relevant matters and not take into account irrelevant matters, and that the outcome must not be one that no reasonable decision-maker could reach.

On the particular issue, Lady Hale held that, although civil cases involve a single standard of proof (balance of probabilities), the inherent improbability of an event affects the cogency of evidence required. Suicide is inherently improbable and therefore requires cogent evidence. Mr Sullivan should not simply have accepted the team’s view; the team had investigated for a different purpose (improving BP’s safety systems). The evidence relied upon was no more than ‘straws in the wind’. The failure to interview Mrs Braganza about her emails, and the failure to give proper weight to Mr Braganza’s Roman Catholic faith (for which suicide was a mortal sin), undermined the decision. The decision was unreasonable in the Wednesbury sense, having been formed without taking relevant matters into account.

Lord Hodge’s reasoning

Lord Hodge agreed and emphasised the special nature of employment contracts as ‘relational contracts’, citing Johnson v Unisys Ltd and Keen v Commerzbank AG. The implied duty of trust and confidence justified a more intense scrutiny of the employer’s decision-making process. The investigation team and Mr Sullivan failed to consider properly the possibility of accident and there was insufficient cogent evidence to overcome the inherent improbability of suicide.

Lord Neuberger’s dissent

Lord Neuberger (with Lord Wilson agreeing) considered the team’s reports thorough and carefully reasoned. He held there were only two realistic possibilities (accident or suicide), accident being very unlikely given the calm weather, the protective railings and Mr Braganza’s safety-consciousness. The combination of the wife’s emails suggesting depression, his uncharacteristic moodiness, the bonus withdrawal and criticism at Ferrol provided a sufficient evidential basis. He doubted whether the duty of trust and confidence added anything to the standard test and would have dismissed the appeal.

Implications

The case is important for clarifying the scope of judicial review of contractual discretions. The majority confirmed that where one contracting party is given a power to make decisions or form opinions affecting the rights of the other, the law will imply a term that the discretion be exercised honestly, in good faith, and not arbitrarily, capriciously or irrationally. The court endorsed the application of both limbs of the Wednesbury test – both the rationality of the decision-making process (relevant and irrelevant considerations) and the rationality of the outcome.

The decision has particular significance for employment contracts, recognising them as relational contracts subject to the implied obligation of trust and confidence, which may justify more intense scrutiny of employer decision-making than would apply in ordinary commercial contexts. Employers exercising contractual discretions must inform themselves of the relevant principles and apply rigorous reasoning, particularly where the decision has serious consequences for an employee or their family.

The case also clarifies the relationship between the standard of proof and inherent improbability. Whilst the civil standard remains the balance of probabilities, the more inherently improbable an event, the more cogent the evidence required to demonstrate it occurred. This is not a separate standard but a function of common sense in applying the single civil standard.

The judgment leaves open the precise extent to which contractual implied terms may differ from administrative law principles in different contexts. Lady Hale acknowledged that the same high standards expected of the modern state may not be appropriate for all contractual decision-makers, and the precise standard will depend on the terms and context of the particular contract.

Verdict: Appeal allowed (by a majority of 3 to 2). The Supreme Court restored the order of Teare J, holding that BP’s opinion that Mr Braganza had committed suicide was unreasonable in the Wednesbury sense. Mrs Braganza’s contractual claim for death-in-service benefits of US$230,265 (with interest) succeeded.

Source: Braganza v BP Shipping Ltd [2015] UKSC 17