Braganza v BP Shipping Ltd

Factual and Procedural Background

Between 01:00 and 07:00 on 11 May 2009 the Chief Engineer (“the Employee”) on Company A’s oil tanker disappeared in the North Atlantic. Company A concluded that the disappearance was due to suicide, which would trigger an exclusion in clause 7.6.3 of the Employee’s contract and deny his widow (“the Plaintiff”) a contractual death-in-service benefit of US $230,265.

The Plaintiff sued in negligence and in contract. After an eight-day trial, Judge A (High Court) dismissed the negligence claim but held that Company A’s “suicide” opinion was unreasonable in the Wednesbury sense and awarded the contractual benefit. The Court of Appeal (three-judge panel led by Judge B) reversed, declaring the opinion reasonable. The Supreme Court (majority: Judge C, Judge D, Judge E; dissent: Judge F, Judge G) restored the High Court’s decision, allowing the Plaintiff’s appeal.

Legal Issues Presented

1. What implied standard governs a contractual discretion/opinion bestowed on one party—does it incorporate both limbs of Wednesbury “reasonableness,” i.e., proper decision-making process and rational outcome?
2. In the specific context of suspected suicide, must the contractual decision-maker require cogent evidence commensurate with the inherent improbability of suicide before denying contractual benefits?
3. Applying that standard, was Company A’s conclusion that the Employee committed suicide irrational or otherwise in breach of the implied term?

Arguments of the Parties

Plaintiff's Arguments

• Company A’s investigation ignored relevant alternatives, notably an accidental fall while inspecting weather conditions.
• The decision-maker failed to recognise that suicide is inherently improbable and therefore requires especially cogent evidence.
• The six “bullet-point” indicators relied on were speculative and in several respects factually inaccurate.
• An employer acting under the duty of trust and confidence must observe both limbs of Wednesbury reasonableness; that duty was breached.

Defendant's Arguments

• The contractual test is limited to whether no reasonable employer could have reached the conclusion; detailed “legal directions” are not required of a lay decision-maker.
• The investigation was thorough and ruled out competing hypotheses; a mechanism for accidental death was lacking.
• Even if minor factual errors existed, they were immaterial and could not vitiate the conclusion.

Table of Precedents Cited

Court's Reasoning and Analysis

Majority (Judge C, joined by Judge D and Judge E)

• Implied term: a contractual decision must be made in good faith, for proper purpose, and rationally; “rationally” imports both limbs of Wednesbury.
• Because suicide is inherently unlikely, a rational decision-maker must require cogent evidence before forming that conclusion; Company A’s investigator and General Manager did not apply that standard.
• The investigation overlooked a clearly relevant alternative explanation—an accidental fall while checking weather—thereby breaching the first Wednesbury limb (failure to consider relevant matters).
• Positive indicators of suicide (“bullet points”) were weak; no suicide note, no psychiatric history, religious prohibition on suicide, and normal behaviour shortly before disappearance. Collectively these were insufficiently cogent.
• Employment context and the implied duty of trust and confidence justify an intensity of review comparable to public-law rationality.
• Consequently, Company A’s decision was Wednesbury unreasonable and the contractual benefit is payable.

Concurring (Judge D)

• Employment is a “relational contract”; duty of trust and confidence survives death and heightens scrutiny.
• Evidence of suicide was “paucity and insubstantial”; inherent improbability not overcome.

Dissent (Judge F, joined by Judge G)

• Court’s role is appellate/review only; must respect primary fact-finding by Company A’s investigation.
• Reports were thorough; alternative accident theory highly improbable given safety features and weather.
• Employer’s conclusion not arbitrary, capricious or irrational; majority sets review threshold unrealistically high.

Holding and Implications

HELD: Appeal allowed; contractual death-in-service benefit payable to the Plaintiff.

Direct effect: Company A must pay US $230,265 plus interest. Broader implications: The decision confirms that contractual discretions, especially in employment contexts, are subject to review akin to public-law rationality, including scrutiny of both the decision-making process and outcome. Employers must have cogent evidence before attributing death to suicide under exclusionary clauses. The judgment clarifies but does not create new precedent; it aligns contractual review standards with established administrative-law principles.