Braganza v BP Shipping Ltd [2015] UKSC 17

Reviewed by the Apex broking team · Last reviewed 2026-08-22 · Position stated as at August 2026

Citation

Braganza v BP Shipping Ltd and another [2015] UKSC 17 — Supreme Court of the United Kingdom, 2015.

Citation, court and year verified against the official judgment text published by The National Archives, Find Case Law (https://caselaw.nationalarchives.gov.uk/uksc/2015/17).

• Full case name: Braganza (Appellant) v BP Shipping Limited and another (Respondents)
• Neutral citation: [2015] UKSC 17
• Court: Supreme Court of the United Kingdom
• Judgment date: 18 March 2015
• Panel: Lord Neuberger, Lady Hale, Lord Kerr, Lord Wilson and Lord Hodge
• Subject: implied terms; the exercise of a contractual discretion; employment contract; death in service benefits

Facts

Mr Renford Braganza was the chief engineer of an oil tanker, the MV British Unity. In May 2009, in the mid-Atlantic, he disappeared from the vessel during the night. His body was never found.

His employment contract provided for compensation on death, but not where, in the opinion of the company or its insurers, the death resulted from the officer’s wilful act, default or misconduct. The employer commissioned an investigation, and on the strength of that report formed the opinion that the most likely explanation was suicide. On that basis it declined to pay death benefits to Mrs Braganza.

Mrs Braganza sued. The issue was not whether the court agreed with the employer’s conclusion, but whether the employer had been entitled to reach it.

Issue

Where a contract makes a benefit depend on the opinion of one of the contracting parties, on what basis may a court review that opinion?

The court had to decide whether the standard was simply honesty and good faith, or whether something closer to the public law standard of rationality applied — and, in a case where the conclusion involved an allegation of serious wrongdoing, whether that affected the evidence needed to support it.

Decision

The Supreme Court allowed the appeal by a majority of three to two. Lady Hale, Lord Kerr and Lord Hodge formed the majority; Lord Neuberger and Lord Wilson dissented.

The majority held that where a contract gives one party a discretion or a decision-making power that affects the interests of both, the law implies a term controlling how that power is exercised. The content of the implied term is drawn by analogy with the Wednesbury principles familiar from judicial review, and has two limbs: the decision-maker must take into account matters that ought to be taken into account and exclude those that ought not; and the outcome must not be so unreasonable that no reasonable decision-maker could have reached it. Lady Hale framed the first limb as a requirement to keep within the four corners of the matters the decision-maker ought to consider.

Applying that standard, the employer’s decision could not stand. The conclusion of suicide involved a finding of serious misconduct and needed cogent evidence to support it; the investigation had not properly grappled with the inherent improbability of what was being alleged, and relevant matters had not been taken into account. Mrs Braganza’s contractual claim succeeded.

Ratio decidendi

A contractual discretion which affects the interests of both parties is not unconstrained. The court will imply a term that it be exercised honestly and in good faith, and not arbitrarily, capriciously or irrationally. Rationality is assessed on both a process limb and an outcome limb. Where the decision involves a finding of serious wrongdoing, the evidence relied on must be commensurately cogent.

The implied term does not entitle the court to substitute its own decision. It polices how the decision was reached and whether the result was within the range open to a rational decision-maker.

Why it matters for insurance

Insurance contracts are full of discretions. The clause in Braganza itself was expressed by reference to the opinion of the company “or its insurers”, which is exactly the drafting pattern found throughout liability and personal accident wordings.

The everyday examples include: whether an insurer consents to the settlement of a claim; whether it exercises a right to take over the conduct of a defence; whether it is satisfied that a condition has been complied with; whether it agrees to a proposed defence counsel or a proposed settlement figure; whether it accepts that a circumstance has been validly notified; and any clause that turns on the insurer being “satisfied”, forming an “opinion”, or acting in its “absolute discretion”.

For brokers it has two practical consequences. First, when a decision goes against a client, ask for the reasoning before accepting the outcome. Second, at placement, treat the width of a discretion as a term to be negotiated. Words such as “absolute discretion” do not put a decision beyond review, but clearer criteria in the wording make the review far easier to run.

Limits of the decision

It also decides nothing about whether the underlying conclusion was right. The employer in Braganza lost because of how it reached its opinion, not because the court found that the death was not suicide.

See also

• Pan Atlantic v Pine Top — materiality and inducement
• The duty of good faith after section 14 — good faith in the modern statutory scheme
• Notification of claim — where insurer discretions bite in practice
• Apex claims support — how we handle a contested decision

References

• Braganza (Appellant) v BP Shipping Limited and another (Respondents) [2015] UKSC 17, judgment of 18 March 2015
• Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (the source of the two-limb rationality test applied by analogy)

Frequently asked questions

What is the Braganza duty?

It is the implied contractual term identified in Braganza v BP Shipping that a party exercising a discretion which affects the interests of both parties must do so honestly, in good faith, and not arbitrarily, capriciously or irrationally. Rationality is tested on two limbs borrowed from Wednesbury: whether the right matters were taken into account, and whether the outcome was one a rational decision-maker could reach.

Does the Braganza duty apply to insurers?

The principle is one of general contract law and applies to contractual discretions wherever they are found, including in insurance contracts. The clause in Braganza itself referred to the opinion of the company or its insurers. How intensively a court will review a particular decision depends on the wording and the relationship, and negotiated commercial contracts are not treated identically to employment contracts.

Can a court substitute its own decision for the insurer's?

No. The implied term controls the process and the range of permissible outcomes; it does not transfer the decision to the court. A successful challenge normally means the decision was not validly made, not that the court has decided the underlying question itself.

Does an 'absolute discretion' clause avoid the duty?

Language of that kind does not by itself put a decision beyond review. The starting point remains that a discretion affecting both parties' interests is subject to the implied limits, though the drafting is part of what the court considers when deciding how the discretion was intended to operate.

This page is insurance information for UK businesses, not legal advice. It summarises a reported judgment and explains why insurance buyers and brokers refer to it; it is not a substitute for reading the judgment or taking advice on your own facts. Position stated as at August 2026.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.