Decision-maker’s discretion. Last updated 12-Jun-2015

Employment is a personal relationship. Its dynamics differ significantly from those of business deals and of state treatment of its citizens. In general there is an implied mutual duty of trust and confidence between employer and employee. Thus it is the duty on the part of an employer to preserve the trust and confidence which an employee should have in him. This affects, or should affect, the way in which an employer normally treats his employee.
In Keen v Commerzbank AG [2007] ICR 623, per Mummery LJ at para 43.

The Supreme Court in Braganza v BP Shipping Ltd [2015] UKSC 17 evaluated the borders of test of irrationality or perversity, namely, that no reasonable employer would have exercised his discretion in this way, in case of alleged employee's wilful act caused his death.

The case concerned the disappearance of chief engineer in May of 2009 from one of BP tankers in the middle of the Atlantic ocean. The reason of his disappearance was never positively established. Investigation by BP team found several points, which led them to consider that suicide was a possibility.

– he was quiet and withdrawn,

– there were no clean officer’s uniforms in his cabin,

– his attention to detail in record keeping had slipped,

– the shoes and sandals he usually wore on board were found in his cabin after his disappearance,

– several e-mail messages received from his immediate family suggest he had some family and/or financial difficulties that were causing him concern,

– bonus for 2008 year paid to him was advised to him to be withdrawn and he was upset about this.

BP investigation team provided report which went through several drafts. The first version did not mention suicide. After exchanges with BP Legal, the final version concluded that "Having regard for all the evidence the investigation team considers the most likely scenario to be that the C/E jumped overboard intentionally and therefore took his own life". Such conclusion meant that his widow was not entitled to the death benefits provided for in his contract of employment. Clause 7.6.3 of that contract provided relevantly as follows:

For the avoidance of doubt compensation for death, accidental injury or illness shall not be payable if, in the opinion of the Company or its insurers, the death, accidental injury or illness resulted from amongst other things, the Officer's wilful act, default or misconduct whether at sea or ashore …

On the basis of the team’s report General Manager of BP Maritime Services (Singapore) Pte Ltd, a Singapore Company which provides management services to the shipping company and employed the officers on board the vessel concluded that there had been "wilful default" within the meaning of Clause 7.6.3 of the contract of employment and thus that death in service benefits were not payable to his widow.

The Supreme Court was to decide whether General Manager, properly exercised his right as a decision maker and was correct in arriving to conclusion that chief engineer committed suicide.

Employment contract in question has a common provision that one party to the contract is given the power to exercise a discretion - opinion of the Company. Such power, admittedly, leads to situation where the party who is charged with making decisions which affect the rights of both parties to the contract has a clear conflict of interest. To ensure that such contractual powers are not abused the courts imply a term as to the manner in which such powers may be exercised.

In simple words the courts examine the decision-making process by way of two test questions:
i) whether the right matters have been taken into account in reaching the decision
ii) whether even though the right things have been taken into account, the result is so outrageous that no reasonable decision-maker could have reached it.

Decision-maker’s discretion is considered to be exercised properly when both questions answered in the positive. BP, in its turn, contended that decision made by General Manager must only be not irrational, where irrational means: " … so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it."

The court underlined that act of suicide is considered as one which is inherently improbable and therefore "before a finding of suicide is made there must be evidence of sufficient cogency commensurate with or proportionate to the seriousness of the finding". Thus for conclusion that person committed suicide it was not sufficient to base such decision only on the inference that it was the most logical and not-irrational explanation of chief engineer’s disappearance from the vessel in the middle of the ocean.

The Supreme Court decided in favor of the widow (Mrs Braganza) holding that General Manager of BP Maritime Services (Singapore) Pte Ltd. had to consider whether he was in a position to make a positive finding that Mr Braganza had committed suicide. He should have asked himself whether the evidence was sufficiently cogent to overcome the inherent improbability of such a drastic action as suicide. It was further stated that such attitude can be expected of any employer making a decision under a provision such as this and it could certainly be expected of BP, which clearly had access to in-house legal expertise to guide it in the decision-making process.

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