The wording can be taken either way, but I get your point.
The horrors of that war are hard to comprehend.
Indeed, the wording is quite ambiguous. Better:
The sinking of the Lancastria resulted in the largest loss of human life from a single military engagement during WW II...
[I am supposing that the taking of Iwo Jima and the bombings of Hamburg - or of Hiroshima or of Nagasaki - are not considered "engagements" by the author - maybe he means "naval engagement".]
...Further, it resulted in the largest loss of life ever in the whole of British maritime history.
I suspect that that is what the author meant to say.
In any event, any sentence that - even after three re-readings - still leaves room for doubt is an example of poor writing.
Regards,