By late 1917 the British had organised merchant ships into convoys as a defence against U-boats [more to follow on this subject]. Convoys to Scandinavia ran additional risks to those encountered by convoys in the Atlantic and Mediterranean. They sailed through waters where they risked attack by enemy surface ships and were in the danger zone for most of their voyage. Secrecy was harder to maintain as they consisted mostly of neutral ships and assembled at a neutral port for their homeward journey.
On 15 October 1917 the destroyers HMS Mary Rose (Lieutenant-Commander Charles Fox) and HMS Strongbow (Lieutenant-Commander Edward Brooke) and the armed trawlers Elise and P. Fannon left Lerwick with an eastbound convoy.
In the late morning of 16 October Mary Rose sailed ahead of the convoy to collect the westbound one. She appears to have got ahead of it during the afternoon and the two destroyers were unable to contact each other when Strongbow joined the convoy after dark. At 6:00 am on 17 October the convoy, escorted by Strongbow was about 70 miles east of Lerwick. Mary Rose was six to eight miles ahead of it.
Neither Fox nor Brooke had been informed that British cruiser forces had spent the last two days searching the North Sea for a German force that was believed to be at sea. A total of three large cruisers, 27 light cruisers and 53 destroyers were hunting for what was thought to be a minelayer and some destroyers.
Two German minelayers, SMS Bremse and Brummer, were at sea, but their mission was to attack the Scandinavian convoy, not to lay mines. They were chosen because of their high speed, good sea keeping qualities, radius of action and similar appearance to British light cruisers: they were rigged to resemble British C class cruisers.
The German ships were both armed with four 5.9 inch guns, two 3.5 AA guns and two 19.7 inch torpedo tubes versus three 4 inch guns, three 2 pounders and four 21 inch torpedo tubes on the British destroyers. The Germans had a maximum speed of 34 knots, the same as Mary Rose and 2 knots less than Strongbow.
Strongbow spotted the Germans just after 6:00 am. She made three challenges, none of which were answered satisfactorily. Brooke then prepared to open fire, but the opening German salvo severed Strongbow’s steam pipe, leaving her unable to manoeuvre. Brooke, who was badly wounded in the leg, refused to allow anybody to abandon ship until all confidential books and papers had been destroyed. He then ordered that Strongbow should be scuttled. She had been abandoned by 7:30 am. Brooke was carried off his ship and put onto a Carley raft.
Mary Rose headed for the sound of the guns, but Fox initially assumed that the convoy was being attacked by a U-boat. His ship was ill prepared to fight against heavy odds. The British Official History says that ‘[u]nder the existing organisation it was almost impossible to fight the guns and the torpedo tubes simultaneously…and…the range and deflection transmitters were not working.’
Mary Rose opened fire from 6-7,000 yards range at about 6:20 pm. For a little while it seemed that she might draw the enemy, whose fire was initially inaccurate, away from the convoy. However, the Germans began to hit her at a range of 2,000 yards. By 7:00 am she had to be abandoned. Fox was last seen swimming and did not survive. Only 3 steamers and the two trawlers managed to escape. Nine merchantmen with a total tonnage of 10,248 tons, all neutral, were sunk. The other three steamers, two British and one Belgian, and the two trawlers survived. Only four officers and 41 men out of Strongbow’s crew of 82 and two officers and eight men out of 80 on Mary Rose survived. 
The casualties are listed on Naval-History.net. Brooke survived the action but died on 10 February 1919 from pneumonia as a result of the action. Wikipedia says that about 250 Allies and Scandinavians were killed, meaning that about 150 neutral Scandinavians died.
Neither destroyer was able to send any signals about the attack. Strongbow was attacked and hit too quickly to get a message off. Mary Rose tried but her signal was jammed by Brummer. By the time that the Admiralty realised what had happened and ordered cruisers to intercept the Germans on their way home it was too late.
The Courts Martial into the loss of the two ships (the Court of Inquiry into the loss of an RN ship takes the form of a Court Martial of her captain) praised both Brooke and Fox for their courage. However, they argued that Brooke would have been better to have tried to draw the Germans away from the convoy and that Fox should have stayed out of range and called for help. It was not known until the publication of the German Official History after the war that he had tried to do so but that Mary Rose’s signal had been jammed. These criticisms were not considered to be offences under the Naval Discipline Act.
The British Official History claims that the Germans gave the neutral crews no time to abandoned ship and fired on Strongbow’s survivors in the water. The German Official History denies the latter charge, claiming that any hits on them came from shots targeted elsewhere that fell short.
As the British Official History says, despite its ‘brilliantly successful execution, the raid must have been somewhat disappointing to the German Staff…as…it hardly caused a disturbance in the timetable of Scandinavian trade.’
 A. J. Marder, From the Dreadnought to Scapa Flow; the Royal Navy in the Fisher Era, 1904-1919, 5 vols (London: Oxford University Press, 1961-70). vol. iv, pp. 293-94.
 J. S. Corbett, H. Newbolt, Naval Operations, 5 vols (London: HMSO, 1938). vol. v, p. 152
 Ibid., pp. 150-53.
 Ibid., p. 158; Marder, From, pp. 294-95.
 R. Gray, Conway’s All the World’s Fighting Ships, 1906-1921 (London: Conway Maritime Press, 1985), pp. 76, 79, 81, 162.
 Corbett, Newbolt, Naval, p. 154.
 Ibid., pp. 154-55; Marder, From, p. 294.
 Marder, From. pp. 296-97 and footnote 6.
 Ibid. Footnotes 5-6 on pp. 296-97.
 Corbett, Newbolt, Naval. p. 155 and footnote 1.
 Ibid., pp. 157-58.