Case No: 1996 Folio No 1764
[2002] EWHC 203 (Comm)
 
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25 March 2002

B e f o r e :

THE HONOURABLE MR JUSTICE COLMAN 

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	(1)  STRIVE SHIPPING CORPORATION
(2)  ROYAL BANK OF SCOTLAND PLC	Claimant	
	- and -		
	HELLENIC MUTUAL WAR RISKS ASSOCIATION

“GRECIA EXPRESS”	Defendant	

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MR N HAMBLEN QC AND MR M COBURN 
(instructed by Clyde & Co for the Claimants)
MR A BOSWOOD QC, MR S MORIARTY QC AND MR D DALE
(instructed by Richards Butler for the Defendant)

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JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO  EDITORIAL CORRECTIONS)
INDEX

TITLE									PAGE

Index										   2
Introduction								  	   3
Scope of Cover								   8
Burden of Proof							  	  10
Standard of Proof								  14
The Claimant’s Case on the Circumstances of the Loss			  20 
Defendants’ Evidence and Criticisms of the Claimant’s Case on the 	
Circumstances	of the Loss							  34
Expert and other Evidence on the Circumstances of the Loss		  42
Access to the Sea Valve							  43
Use of the Drencher Valve as a Method of Sinking		 		  44
Uncertainty of successfully achieving a Total Loss				  45
Motive:  the Claimant’s Case							  49
Motive:  the Defendants’ Case  						  52
Motive:  Discussion								  59
Overview of the Evidence							  68
The Defendants’ Case on Non-Disclosure					  71
The Expert Evidence on Materiality						  74
The Claimant’s Case on Non-Disclosure					  78
Non-Disclosure:  Analysis of the relevant Principles				  83
The Materiality of Allegations against the Assured and 
Suspicious Circumstances							  88
The Connection of Mr Ventouris with the Italia Express			  97
The Loss of the Star One							100
The St Nicholas and other Losses in Combination				104
The Coha II:  Introduction							106
The Coha II:  the Claimants’ Case						111
The Coha II:  Expert Evidence						129
The Coha II:  the Possibility of Survival					136
The Coha II:  total Disappearance						141
The Coha II:  the overall Picture						142
Value of the Grecia Express							148
Non-disclosure in respect of the Value of the Grecia Express		155
The Claimants’ Duty to avert or minimise the Loss				158
Waiver										165
Summary of Conclusion							169

Mr Justice Colman : 

Introduction

This claim has given rise to a trial which has quite unique features in the history of marine insurance litigation in the English courts.  It has involved allegations by the war risks insurers that the person controlling the shipowner company, Mr. George Ventouris, not only caused the company’s vessel to be fraudulently cast away but also failed to disclose to the defendant Association, amongst other matters, that, two months before the risk was placed, he had fraudulently cast away his own luxury power boat, the Coha II.  Both allegations are very strongly challenged. This court has therefore had to determine two allegations of scuttling in one trial.  The circumstances of  both losses have been extraordinary, to say the least.

In order to resolve these major issues this court has had before it, not only the evidence given in this trial, but also in no less than three other sets of proceedings.  

First, in relation to the Grecia Express, there has been the evidence given to the Greek Maritime Enquiry conducted by ASNA.  This includes the transcript or record of numerous interviews of many witnesses, particularly of those directly involved with the vessel when it was observed to be cast off from the moorings and sinking.  

There is also before this court evidence given to the Greek criminal courts in which the owner, Mr. Ventouris, and the crew member and watchman on board Grecia Express, Mr. Vangelis,  were prosecuted at the instigation of the defendant insurers.  

Thirdly, there has been the evidence given in 1998 before Mr. Justice Langley in this court in a  claim by Mr. Ventouris’s company, Esperance Co. Ltd, against the insurers of the Coha II in respect of the total loss of that vessel.  That claim was abandoned by Mr. Ventouris after 12 days of the trial in circumstances which I shall  explain later in this judgment.  

This vast quarry of evidence has been fully exploited by both sides. In this court the oral factual and expert evidence relating both to the Grecia Express and the Coha II has extended over a period of 16 days.  The trial was conducted by counsel on both sides with commendable efficiency.

The issues may be summarised as follows.

It is alleged by the claimant owners of the car ferry, the Grecia Express, that during the night of 4th/5th March 1994, when the vessel was moored for the winter closed season at Aegion on the southern shore of the Gulf of Corinth, it was sunk by unknown persons acting maliciously, one of the risks insured by the war risks cover provided by the defendant Association.  The sinking occurred because somebody cut each of the vessel’s eight mooring ropes by which she was attached to two shoreside bollards.  Somebody also opened one of four seawater drencher valves located in the vessel’s auxiliary engine room.  It is common ground that the consequence of these two acts was that the vessel, being still restrained by her anchors, drifted round in an arc, moving from a distance of about 30 metres from the shore at the stern to about 150 metres broadside to the shore.  Water entering the auxiliary engine room through the open valve caused her to develop a trim by the stern in consequence of which her stern vehicle ramp, which had been left open throughout her time at the mooring, sank below the surface, thereby admitting the sea to the garage deck.  By calculations by the expert witnesses it is estimated that water entry through the valves began at 0100/0200 on 5 March.  At between 10.30 and 10.50 the same day the vessel capsized and sank in the shallow water 150 metres off shore.  The first of two tugs only arrived from Patras over two hours later.  It is common ground that in consequence of that sinking she became a constructive total loss.

Mr. Vangelis, the sole watchman, is said by the claimants not to have been on board during that night, but, in dereliction of his duty, to have spent the night in his car with a woman friend and only to have discovered that the mooring ropes had broken at about 0715 the following morning and only to have discovered that the vessel was developing a trim by the stern, and therefore admitting water, at about 0900.

The claimants contend that the vessel sank in spite of efforts on the part of  Mr. Kouratolos, their port captain, to get crew members from Drapetsona, near Piraeus, to Aegion to help with re-mooring her and to procure two tugs from Patras to manoeuvre the vessel back to the shore.

The defendant’s case is that Mr. Vangelis assisted in sinking the Grecia Express and that Mr. Ventouris was complicit.  It is contended that Vangelis was not a witness of truth.  He had admittedly lied to the Greek maritime enquiry about his movements on the night in question.  Only he would have been sufficiently acquainted with the vessel’s valve system to have admitted just the right amount of water, by opening just one valve, to allow the vessel to drift into deeper water before it was so substantially trimmed by the stern that it capsized and was substantially submerged sufficiently to become a constructive total loss.  

It is alleged that Mr. Ventouris had strong motives for disposing of the vessel.  It was 28 years old, relatively slow and of limited passenger and vehicle capacity.  It would also require structural modifications to enable it to comply with SOLAS requirements in the following October.  The owners’ accounts were completely unreliable in as much as they showed that the vessel was trading profitably.  The vessel was insured for US$8 million, whereas its true market value was about US$2 million.  Mr. Ventouris was not a witness of truth.  He had made a fraudulent claim in respect of the loss of the 
Coha II.

The defendants advanced an alternative case, namely that the claimant assured was in breach of the duty to take reasonable steps to avert or minimise the loss under the Association’s rules (Rule 3.14) and/or under section 78(4) of the Marine Insurance Act 1906.  In particular Vangelis ought to have re-boarded the vessel at about 0900-0915 on 5th March and to have closed the watertight doors, thereby sealing off the auxiliary engine room, and/or the claimants by Captain Kouratolos and/or their agents at Patras ought to have taken steps to get tugs from Patras earlier than they did or ought to have arranged to put a crew on board and so for the vessel’s mooring ropes to have been attached to a shore-based winch so that the vessel could have been winched ashore.

The defendants advance a further alternative case based on their right to avoid cover for non-disclosure of material facts up to the time of renewal of the vessel’s entry in the defendant Association.  There is no issue as to whether any of the facts relied upon were disclosed: none of them were.  There are, however, major issues as to whether some of the facts alleged to be material did indeed exist and, if so, whether they were material.  All the facts are said to be material because they go to moral hazard or to the magnitude of the risk of sabotage.

The facts relied upon as material are:
(i) the connection which Mr. Ventouris had previously had with a passenger ferry called the Italia Express which, some six years before the loss of the Grecia Express, sank at its moorings at Drapetsona, following an explosion caused by limpet mines attached to its hull;

(ii) the circumstances of the sinking on 23/24 May 1992 of the Star One, a passenger ferry, which had been bareboat chartered by Mr. Ventouris’s company a week earlier for use as a floating casino off the Italian coast and which sank due to its engine room having been flooded when the sea valves were opened;

(iii) the circumstances of the disappearance of Mr Ventouris’s luxury power boat, the Coha II, which I shall outline below;

(iv) the fact that the vessel was very substantially over-valued for the purpose of the insurance.

(v) the circumstances of the sinking of the St. Nicholas, a power boat which Mr. Ventouris had sold to his brother in law, who was also a business associate, some two months before it was stolen from a marina near Piraeus and which was later found in a seriously damaged condition, although this loss was not relied upon as a separate fact disclosable in its own right but one which, taken together with the other four allegedly material facts, ought to have been  disclosed as a part of a pattern of losses of vessels with which Mr. Ventouris had been associated.

In relation to the loss of the Coha II the claimant’s case is that this was an unfortunate accident which very nearly cost Mr. Ventouris and his crew and employee, Mr. Architectonides, their lives.  They are both said to have fallen overboard in the course of a voyage from Piraeus to Tinos, in the Aegean, in October 1993.  The power boat continued on automatic pilot and was never seen or heard of again and no wreckage was ever found.  Mr.Ventouris, having fallen overboard, managed to grab hold of a balloon fender which had broken loose.  Mr. Architectonides joined him, both of them hanging on to the fender and keeping themselves afloat by swimming or treading water for 10 hours in deteriorating sea conditions until, following a substantial air-sea rescue operation, they were pulled out of the sea with some difficulty by the crew of a passenger ferry which had joined the rescue search.

The defendants allege that the disappearance of Coha II was a fabricated loss organised by Mr. Ventouris, which involved a rendezvous between the power boat and a fishing boat, the transfer of Mr. Ventouris and Mr. Architectonides to the fishing boat and their subsequently being set down into the sea off the coast of Siros to make it look as if they had fallen overboard.  It is alleged that something went wrong with the plan and they were left in the water longer than had been planned, with the result that, although they had not spent anything like as much time in the sea as the 10 hours they claimed to have spent, they were on the point of drowning when they were rescued .

The defendants say that the circumstances of this loss were disclosable whether or not Mr. Ventouris procured the Coha II to be fraudulently cast away: if he did so, the fraud went to moral hazard ( and that is common ground) and, if it was in truth an accident, the circumstances were nonetheless disclosable because they were highly suspicious in as much as they suggested dishonesty and would have influenced a prudent insurer in deciding whether to renew the cover for Grecia Express,

In view of the defendants’ reliance on two of the other losses individually and in combination with the loss of the St. Nicholas as material because they cast a suspicious light on the integrity of Mr. Ventouris and/or because they suggested an enhanced risk of sabotage of vessels with which he had some connection, it has been necessary to investigate to what extent circumstances that are suspicious are, by reason of that fact alone, capable of being material to be disclosed even where, on the underlying facts before the court, the suspicion proves to have been in truth unfounded.

Finally, the claimants challenge the defendants’ entitlement to avoid the cover solely on the grounds of non-disclosure of the loss of the Star One.  They contend that in respect of that loss the defendants elected to affirm the contract of insurance by invoking their rights to call for further information and disclosure of documents and to interview witnesses under an express term of the Association’s Rules, notwithstanding that by the time they did so they knew all facts relevant to their entitlement to avoid for non-disclosure of that particular loss.

The Scope of Cover

The vessel was insured under a war risks policy in respect of the period of 12 months from 1st January 1994.  The insured value was US$8 million.  The cover was on the terms of the Rules 1994 and By-laws of the defendant Association.

The Rules provided as follows.

	“Part A - HULL MACHINERY AND FREIGHT	
2A.1	RISKS INSURED
2A.1.1	Unless the Terms of Entry provide otherwise, every Owner of the Entered Ship is insured against loss of or damage to its Hull and Machinery when caused as specified in Rule 2A.2.

2A.2	CAUSES OF LOSS
The Owner of an Entered Ship is insured as provided in Rule 2A.1 if the loss, damage or expense as the case may be is caused by:
2A.2.1	war, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power;
2A.2.2	capture, seizure, arrest, restraint or detainment, and the consequences thereof or any attempt thereat;
2A.2.3	mines, torpedoes, bombs or other weapons of war (whether any of the aforesaid are derelict or otherwise);
2A.2.4	strikers, locked-out workman, or persons taking part in labour disturbances, riots or civil commotions;
2A.2.5	any terrorist or any person acting maliciously, or from a political motive;
2A.2.6	piracy and violent theft by persons from outside the ship;
2A.2.7	confiscation or expropriation;
2A.2.8	save in cases where the Entered Ship is insured for marine risks on the terms of the Standard Form of American Hull Policy with the American Institute Hull Clauses attached, the risks excluded from the Standard Form of English Marine Policy (Hulls) by Clauses 23 (the War Exclusion Clause), 24 (the Strikes Exclusion Clause) and 25 (the Malicious Acts Exclusion Clause) of the Institute Time Clauses - Hulls;

2A.4.2	Exclusion of risks insurable under Marine (non-war) Policies
2A.4.2.1  Subject to Rules 2A.4.2.2 and 2A.4.2.3, the Association shall not be liable to the Owner of an Entered Ship for any loss, damage, or expense wholly or partially covered by the Standard Form of English Marine Policy (Hulls), or which would have been wholly or partially covered thereby if, at the time of the incident giving rise to such loss, damage or expense, the Entered Ship had been insured under such a policy.”

The vessel was also insured by the defendants in respect of Protection and Indemnity risks in the event of the liability having been incurred or the cost or expense caused by war risks perils also including at Rule 2C.2.5.  “Terrorists or any person acting maliciously or from a political motive”.  P& I risks included wreck removal and pollution risks.  The “standard form of English Marine Policy (Hulls)” is defined in Appendix A as follows:

“The form of Lloyd’s Marine Policy (Code MAR) and/or the Institute of London Underwriters’ Companies Marine Policy issued as from 1st October 1991, with the Institute Time Clauses - Hulls (edition of 1st October, 1983, or any subsequent edition thereof) attached.”

The Institute Time Clauses (Hulls) 1983 include amongst the insured perils “barratry of Master Officers or Crew”

It is common ground that
(1)	the vessel was deliberately sunk by somebody;

(2)	if it was deliberately sunk with the complicity of the owner, including in particular Mr Ventouris, the person in control of the owning company, the claim fails;

(3)	if the vessel was deliberately sunk by the master, officers or any member of the crew so as to amount to barratry, the claim fails, because that is an excluded peril.

The Burden of Proof

It is submitted by Mr Anthony Boswood QC, on behalf of the defendants, that in order to establish a claim for loss or damage caused within Rule 2A.2.5 it is necessary for the claimant owner to prove not only that the vessel was deliberately sunk but also that this was done without the complicity of the owner.  One possible basis for this argument is that the words “acting maliciously” mean “for the purpose of harming the owner”.  In other words, it is necessary for the owner to prove that the motive for the sinking was directed at him and not by him.

In Nishina Trading Co Ltd v Chiyoda Fire and Marine Insurance Co Ltd [1969] 2 QB 449 there was a claim under a marine cargo policy incorporating the old Institute Strikes, Riots and Civil Commotions clauses.  The insured cargo owners claimed against underwriters in respect of the loss of cargo commandeered by the master of the carrying vessel on the owners’ instructions in purported exercise of a lien for charter hire.  It was held by the Court of Appeal that this was a “taking at sea” within the wording of the SG form and not “loss of or damage to the property .... insured caused by .... persons acting maliciously”.  Lord Denning MR held, at page 462, that “maliciously” meant “spite or ill will or the like”.  Edmund Davies LJ. held at page 463 that the “persons acting maliciously” peril was inapplicable on the facts, as did Phillimore LJ. at page 467, observing that the clause was “obviously intended to deal with damage effected in the course of some civil disturbance”.

In Shell Petroleum Ltd v. Gibbs [1982] 1 QB 946 there was a claim for loss of cargo arising out of a complex fraud aimed at evasion of the oil embargo on South Africa.  One consequence of the fraud was the destruction of part of the cargo when the carrying vessel was scuttled by conspirators as part of the overall fraudulent adventure.  Mustill J. held, at page 966, that this was not loss caused by “persons acting maliciously”.  Having referred to the judgment of Lord Denning MR in Nishina Trading, supra, that the words connoted “spite or ill will or the like”, he observed:

“Giving the words this meaning, they are plainly not appropriate to the present loss.  The conspirators were not inspired by personal malice against Pontoil; they simply wished to steal the cargo, the identity of the owner being immaterial.  The same is the case as regards the destruction of the cargo remaining on board when the vessel sank.  Perhaps there may, consistently with the decision in The Mandarin Star, be a right to recover where the insured property is damaged by an act of wanton violence, the malice being directed, so to speak, at the goods rather than their owner.  But it is unnecessary to decide this here, for the cargo was not lost because the conspirators desired to harm either the goods or their owner.  The loss was simply a by-product of an operation carried out for the purposes of gain.  On the reasoning of the Court of Appeal this is not within the scope of the peril.”

In the Court of Appeal Lord Denning MR referred to the decision of Mustill J. on this point, which was not challenged in the Court of Appeal, and did not suggest that the suggested wider application of this part of the cover might be wrong.

Since the factual basis upon which the Court of Appeal reached its conclusion in both cases was such that the “persons acting maliciously” cover was inapplicable whether it had either of the meanings considered by Mustill J. in Shell Petroleum the point is at large in this court.

The insured perils covered by the Causes of Loss clause are essentially war risks eventualities, the purpose being to protect the insured owner from loss or damage to the vessel caused otherwise than by the ordinary marine perils.  Most of these war risks perils are necessarily wholly unrelated to the identity of the insured, for example civil war, revolution, mines, torpedoes, bombs, riots of civil commotions, terrorist attacks, piracy and so on.  There are included, however, other perils which could be directed at the assured:  for example arrest, restraint or detainment or the activities of strikers or persons taking part in labour disturbances or, possibly, confiscation or expropriation.  In none of these cases would it necessarily be required to establish that the peril was aimed at or directed against the owners personally as distinct from the vessel itself.  Indeed, there would seem to be no overall indication that the identity of the assured or the purposeful causing of loss or damage to such person is a relevant characteristic of war risks perils.

Accordingly, when considering the meaning of “persons acting maliciously” it is necessary to ask whether it is necessary to adopt a meaning which is so limited that it will cover loss or damage caused for the purpose of injuring the particular insured but will not cover random vandalism.  That the word “maliciously” is quite capable of covering wanton damage is clear from its use and the meaning accorded to it under the Malicious Damage Act 1861.  Section 58 provides that where malice is an ingredient of an offence under that Act it is immaterial whether the offence was committed “from malice conceived against the owner of the property in respect of which it shall be committed or otherwise”.  That opens up the meaning to cover any conduct whereby the property in question is intentionally caused to be lost or damaged or is lost or damaged in circumstances amounting to recklessness on the part of the same person.

In my judgment, there is no reason why the meaning of  “person acting maliciously” should be more narrowly confined than the meaning which would be given to the word “maliciously” under The Malicious Damage Act 1861.  Provided that the evidence establishes that the vessel was lost or damaged due to the conduct of someone who was intending to cause it to be lost or damaged or was reckless as to whether such loss or damage would be caused, that is enough to engage the liability of war risks underwriters.  The words therefore cover casual or random vandalism and do not require proof that the person concerned had the purpose of injuring the assured or even knew the identity of the assured.

The argument advanced by Mr Boswood, on behalf of underwriters that, because “person acting maliciously” cannot include the assured or anyone acting on the instructions of the owner, it is for the assured to disprove his own complicity is, in my judgment, unsound.

It is said that the phrase must implicitly require that the person said to have acted maliciously must be someone other than the assured or anyone acting on his instructions.  In other words, proof of the peril involves proof of non-complicity in addition to proof of the intentional or reckless causing of loss or damage to the vessel.  This in substance would require the assured to disprove a fraud on the underwriters because, were he complicit in the conduct concerned, no honest claim could be advanced.  Yet this in substance is precisely the point which, in the context of barratry, has long been the subject of decisions of the Court of Appeal binding on this court.

The point arises in relation to barratry because of the statutory definition of barratry to be found in the Marine Insurance Act 1906, Schedule 1 rule 11, - “every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer”.  In Elfie A Issaias v. Marine Insurance Co Ltd (1923) 15 Lloyd’s  Rep 186, where the vessel was scuttled by the master and engineer, it was argued that it was for the owner to prove his non-complicity.  The Court of Appeal rejected this argument.  Atkin LJ. discussed the point most fully at pages 191-192.  In outline his reasoning was that, if  the assured were complicit with the scuttling, that would be a criminal offence and as a matter of principle it was for the party who alleged criminality, namely the underwriters, to prove it.  Lord Sterndale MR and Warrington LJ. expressly agreed.  The wording of the definition of barratry was thus held not to require proof of non-complicity by the owner.

This approach to the burden of proof in barratry cases was referred to without disapproval, for indeed it was binding, by Roskill LJ. in The Michael [1979] 2 Lloyd’s Rep 1 at page 13.  He drew attention to the distinction between cases such as Compania Martiatu v. Royal Exchange Assurance [1924] AC 650 where a fortuitous loss is relied upon by the assured and where the burden of proving the fortuity rests on him and cases such as Elfie A Issaias, supra, where the vessel was found to have been deliberately sunk and the issue of complicity was raised by the underwriters who had the burden of proof on that issue.  This distinction is clearly one which is binding in this court and in the Court of Appeal and can only be reconsidered by the House of Lords.  And so, as the law now stands, where it is proved that there has been a deliberate sinking by the master or crew, the hull and machinery underwriters will be liable for a loss by barratry, since it is presumed that the sinking was both wrongful and to the prejudice of the owner or charterer, unless the underwriters prove that the loss was “attributable to the wilful misconduct” of the assured “within section 55(2)(a) of the Marine Insurance Act.

It would be strange indeed if there were a distinction between the incidence of the burden of proof of complicity in cases where the vessel was proved to have been intentionally sunk by the crew and in cases where it was proved to have been intentionally sunk by vandals.  Such an inconsistency cannot be justified by the wording of the Act and would be inconsistent in principle with the reasoning in those decisions of the Court of Appeal to which I have referred.  It has been held that where the vessel is lost by fire deliberately commenced, the burden of proof of complicity rests upon the underwriters.  That was the decision of Evans J. in The Captain Panagos DP [1986] 2 Lloyd’s Rep 470 at page 510.  There is, in my judgment, no material distinction for this purpose between a case where the vessel is lost by fire deliberately caused and a case where it is lost by a sinking caused by the conduct of a person acting maliciously.  In both cases the assured is presumed not to have been complicit until the underwriters prove that he was.  The practical effect of this conclusion is that if, at the end of the trial, it is not shown to the requisite standard of proof that the assured was complicit, the underwriters will be liable.

In the present case, it is necessary for the assured to establish that the admittedly deliberate sinking fell within the scope of cover which did not include barratry, for this was a war risks policy and barratry was a peril insured under the hull and machinery policy.  For this purpose the assured must prove on the balance of probabilities that the sinking was not caused or procured by the master or crew and in particular by the watchman, Vangelis.

Standard of Proof

Where, as in the present case, underwriters allege that the vessel was lost due to the wilful misconduct of the assured the burden of proof of that allegation lies upon them.  The standard of proof is not expressed by the more modern authorities to be equivalent to that in a criminal trial, although the earlier cases contain several judgments supporting the criminal standard: see for example Atkin LJ. in Elfie A Issaias v. Marine Insurance Co [1923] 15 LIL Rep 186 at page 192 L.  The modern view is that expressed by Bingham J. in The Zinovia [1984] 2 Lloyd’s Rep 264 at P272:

The insurers’ positive defence of wilful casting away raises no problem of principle for a Judge at first instance.  It should not be upheld unless established 
on a balance of probabilities appropriate to the seriousness of a charge, a standard falling not far short of the rigorous criminal standard.”

In The Ikarian Reefer [1995] 1 Lloyd’s Rep 455 the Court of Appeal, while preserving the civil as distinct from the criminal law standard of proof in scuttling cases, identified the higher standard applicable by reference to the insurers being obliged to exclude “a substantial as opposed to a fanciful or remote possibility that the loss was accidental”: see Stuart-Smith LJ. at page 459 R.  Putting it another way, which I believe to reflect the earlier authorities, the court must be satisfied on the whole of the evidence that it is highly improbable that the vessel was lost accidentally.

Since the conclusion of the argument and the completion of this judgment I have encountered the speech of Lord Nichols in In re H [1996] AC 563, with which Lord Goff and Lord Mustill agreed.  That was a case which was decided after The Ikarian Reefer, was concerned with the standard of proof that a child was likely to suffer significant harm within section 31(2)(a) of the Children Act 1989.  The issue was whether there could be a standard of proof of  fact in a civil case (the likelihood of suffering significant harm) that was greater than the balance of probabilities but less than the criminal standard.  Lord Nichols observed at page 586:

“Where the matters in issue are facts the standard of proof required in non-criminal proceedings is the preponderance of probability, usually referred to as the balance of probability.  This is the established general principle.  There are exceptions such as contempt of court applications, but I can see no reason for thinking that family proceedings are, or should be, an exception.

The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not.  When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.  Fraud is usually less likely than negligence.  Deliberate physical injury is usually less likely than accidental physical injury.  A step-father is usually less likely to have repeatedly raped and had non-consensual oral sex with his under age stepdaughter than on some occasion to have lost his temper and slapped her.  Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.

Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher.  It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred.  The more improbable the event, the stronger must be the evidence that it did occur before on the balance of probability, its occurrence will be established.  Ungoed-Thomas J. expressed this neatly in In re Dellow’s Will Trusts [1964] 1 WLR 451, 455:  ‘The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.’

This substantially accords with the approach adopted in authorities such as the well known judgment of Morris LJ. in Hornal v. Neuberger Products Ltd [1957] 1 QB 247, 266.  This approach also provides a means by which the balance of probability standard can accommodate one’s instinctive feeling that even in civil proceedings a court should be more sure before finding serious allegations proved than when deciding less serious or trivial matters.

No doubt it is this feeling which prompts judicial comment from time to time that grave issues call for proof to a standard higher than the preponderance of probability.  Similar suggestions have been made recently regarding proof of allegations of sexual abuse of children: see In re G (A Minor) (child Abuse: Standard of Proof) [1987] 1 WLR 146, 1466, and In re W (Minors) (Sexual Abuse:  Standard of Proof) [1994] 1 FLR 419, 429.  So I must pursue this a little further.  The law looks for probability, not certainty.  Certainty is seldom attainable.  But probability is an unsatisfactorily vague criterion because there are degrees of probability.  In establishing principles regarding the standard of proof, therefore the law seeks to define the degree of probability appropriate for different types of proceedings.  Proof beyond reasonable doubt, in whatever form of words expressed, is one standard.  Proof on a preponderance of probability is another, lower standard having the in-built flexibility already mentioned.  If the balance of probability standard were departed from, and a third standard were substituted in some civil cases, it would be necessary to identify what the standard is and when it applies.  Herein lies a difficulty.  If the standard were to be higher than the balance of probability but lower than the criminal standard of proof beyond reasonable doubt what would it be?  The only alternative which suggests itself is that the standard should be commensurate with the gravity of the allegation and the seriousness of the consequences.  A formula to this effect has its attraction.  But I doubt whether in practice it would add much to the present test in civil cases, and it would risk causing confusion and uncertainty.  As at present advised I think it is better to stick to the existing, established law on this subject.  I can see no compelling need for a change.”

I have set out this long passage because I consider it appropriate to investigate the applicability of its reasoning to allegations of scuttling in marine insurance cases.  The reasoning proceeds upon the basis that the more serious an allegation is the more intrinsically unlikely it is to be true and therefore the stronger the evidence that is required to establish that it is more probable than not that the allegation is true.  This approach finds no expression in any of the cases on the scuttling of ships, for those cases invite a higher standard of proof than the balance of probabilities because the allegation connotes criminal conduct and a ship owner against whom that conduct is alleged should not be held to have committed a crime and thereby be subjected to potential ruin unless the court feels a higher degree of confidence of his guilt than, if, for example, he were accused of negligence.  In this context it is worth remembering that in a criminal trial the jury is to be satisfied so that it feels sure, but that has never meant that its level of confidence of guilt has to be 100 per cent, but merely that it should be close to that level.  

Indeed, the standard of proof in any trial is nothing more than an identification of the level of confidence which the tribunal is required to hold in relation to the truth of the relevant allegation.  Thus where in a criminal trial there is an allegation of criminal activity a significantly higher level of confidence is required than in relation to an allegation of non-criminal activity.  That is not because of the intrinsic improbability of the allegation being true but because of the extremely serious consequences of a conviction.

Where in a civil trial, such as one involving an allegation of scuttling, there is an allegation of criminal conduct, if there is to be a principle that the truth of the allegation must be proved by stronger evidence than if it were an allegation of non-criminal conduct, albeit on a balance of probabilities, one is in substance really doing no more than requiring that the evidence should be of sufficient strength to increase the tribunal’s relative level of confidence in its conclusion, derived from that evidence, that the allegation is true beyond the level of confidence which it would have derived from such weaker evidence as might have sufficed in a civil case to prove the conduct had it not been criminal.  The assertion that the defendant insurers can discharge the burden of proof in a scuttling case only by adducing evidence which is strong in the sense that it strongly connotes complicity and the requirement derived from the authorities in this field that, as I have already indicated, the court must at least conclude on the whole of the evidence that it is highly improbable that the loss was caused without such complicity will, in my judgment, amount in both cases to the necessity that there be derived from the evidence of complicity a high level of confidence that the allegation is true.  I therefore approach the evidence in this case on the basis that it must be strong and in particular of sufficient strength to induce a high level of confidence that the allegation of scuttling is true.  Having reviewed the rest of this judgment in the light of that approach, I have not found it necessary to change the conclusions which I had already reached.

The burden of proof of the facts necessary to support a defence of non-disclosure clearly rests on the insurers who rely on this defence.  In most cases this defence does not involve an allegation that the assured has failed to disclose that he has committed a fraud on a third party.  Indeed, in so far as I am aware, this is the first case to come before the English courts in which the facts alleged not to have been disclosed are the scuttling of another vessel by the assured or by the personal owner of the vessel in respect of which the claim arises.

Where the assured challenges the allegation of a previous scuttling, the question arises whether the strength of the evidence or the standard of proof on the part of the defendants should be that applicable to the existence of other facts alleged not to have been disclosed - or should be the greater weight of evidence or higher standard of proof appropriate to the seriousness of the allegation, as in a direct section 55(2)(a) defence of scuttling the vessel in respect of which the claim arises.

In my judgment, there can be no justification for differentiating between the weight of evidence or the standard of proof required in a case where scuttling of another vessel is alleged as part of a defence of non-disclosure and that required in a case where the underwriters rely on section 55(2)(a) as a defence.  In both cases the underwriters are deploying by way of defence an allegation that the assured has committed a fraud for the purposes of extracting money from insurers.  This is a criminal offence.  Accordingly, the assured is entitled to be protected against such a serious allegation by evidence of greater weight or by a higher standard of proof than would otherwise be required in an ordinary civil case.

Accordingly, in relation both to the allegation that Mr Ventouris procured the sinking and loss of the Grecia Express and to the allegation that he procured the casting away of the Coha II, I proceed on the basis that the underwriters must satisfy this court that on the whole of the evidence it is highly unlikely that the vessels were lost accidentally or, putting it another way, that the evidence of complicity is strong enough to justify such a serious conclusion.

The Claimants’ Case on the Circumstances of the Loss

The Grecia Express was built in 1966 at Bremerhaven as a roll-on roll-off passenger ferry.  She had a hinged bow door and a stern ramp.  She was 108.82 metres long.  She had 286 passenger cabins and had accommodation for 875 day passengers.  She also had 540 lane metres for the accommodation of vehicles.  She had main and auxiliary engine rooms below the car-deck.  Strive Shipping purchased the vessel in 1989.  She was registered at Piraeus and classed with the Hellenic Register.  In the period July to December 1993 the vessel was trading on the Patras-Bari-Igoumenitsa route.  

On 20 January 1994 the vessel was taken from Piraeus to the small port of Aegion on the southern shore of the Gulf of Corinth so that she could be laid up for the winter.  Having dropped anchor off the port she was manoeuvred stern on to the beach and a total of 8 lines were run from her stern to two bollards on the shore, 4 on either side.

The stern ramp was deliberately left open for access, but all external hull doors were secured closed.

It was planned that Ioannis Vangelis, the third engineer, should remain on board throughout the period of lay-up as sole watchman.  He was 50 on the day of the loss.  He had first worked on board the vessel in 1989.  At first he had been employed as a motorman, but from the summer of 1992 he had been engaged as 3rd engineer.  He had no professional licence or watchkeeping certificate.

He had been employed as a watchman on board vessels at Aegion during the winter of 1990 and 1991, but on that occasion another watchman shared the duties with him.   He was not given any written instructions for the routine of watch-keeping.  If there were any problems he would telephone the owners’ agents in Patras.

According to Constantine Kouratolos, a port captain employed by Ventouris, Vangelis was aware that he was to make regular inspections of the vessel to make sure that there were no leakages.  He was also expected to check the moorings and to prevent unauthorised persons getting on board.  He was at liberty to go ashore for his meals and was supposed to make a telephone report each day to the owners’ office in Piraeus.  He was supposed to remain in the port area and to keep the vessel in sight at all times.  The owners would send money or messages by means of a runner provided by their agent at Patras.

The stern ramp of Grecia Express was separated from the shore by a narrow stretch of sea and access to the vessel from the shore was by means of a small fibre-glass tender, 2 to 2.5 metres long.  The tender was attached to the vessel’s ramp by means of a rope, the other end of which was secured to the end of the tender.  Another rope was fastened to the tender and across to one of the bollards on the shore.  Vangelis travelled ashore by pulling on the rope attached to the shore bollard and returned by pulling on the rope attached to the ferry.  The distance from the ramp to the shore was about 30 metres.

Vangelis was supposed to sleep each night on board the vessel.

The vessel underwent a condition inspection by a P&I Club surveyor on Wednesday 2nd March 1994.  For that purpose, the master, second engineer, electrician and various crew members went aboard on the previous day.  According to Mr Kouratolos, this was the first part of an inspection which was intended to be completed in Piraeus during the following week since the vessel was to be “re-activated” the following week in order to resume trading.

The inspection covered the bridge equipment, lifeboat equipment and firefighting equipment.  The drencher system was not tested.  The inspection extended to the main engine room.  For this purpose it was necessary to run the vessel’s main generator.  To do so, Vangelis and the second engineer opened the main seawater inlet and outlet valves.  These valves were all closed when the inspection had been completed.  Vangelis stated that he personally made sure that all the main sea valves were closed and that they were checked by the second engineer.  I accept that evidence.

Vangelis stated that on 3 March he inspected the auxiliary engine room and found everything to be in order. 

On the following day - 4 March - Vangelis stated that he left Aegion at about noon to visit the Ventouris Group Enterprises agent in Patras, Express Shipping Agency.  This trip appears to have been contrary to his instructions not to leave Aegion.  He said in his statement that it was only about a 25 minutes drive to the Patras office and, as it was the eve of his 50 birthday, he was planning to go out that evening and therefore wanted his wages.

Vangelis stated that on arrival at the agency’s “old” office he met Mr Londos, an employee, and he also met a wiper who was apparently looking for work.  Vangelis suggested to Londos that there might be a job available on the vessel when it re-entered service.  Londos then telephoned the Ventouris office in Piraeus and apparently someone agreed to sign on the wiper whereupon Londos made an appointment with the wiper to meet on the following Monday when he would be taken on board the vessel.  Vangelis stated that he then went next door to the “new” office of the agent where he collected about GDR 60,000 for which he signed a receipt.  He then drove back to Aegion where he arrived between 2pm and 3pm, went on board the vessel and lay down and was asleep until 7pm.

I interpose that on 3 June 1994 Mr Londos made a statement to the insurers’ Greek lawyers, Timagenis, in which he said that he did not see Vangelis on Friday, 4th March and did not see Karakassis, a temporary replacement watchman, or Vangelis at Patras in order to pay their wages.  However, in his witness statement in this trial, he confirmed that Vangelis did visit the Patras office on the Friday in order to collect his wages.  He stated that he told Vangelis not to do it again and not to abandon the vessel in future.  In the past a driver had taken Vangelis’s wages to Aegion.  I accept that this evidence is true and that at the June 1994 interview Londos had covered up this lapse in the company’s normal procedures, perhaps to protect Vangelis or both of them.  I also accept Vangelis’s evidence about the arrangements between Mr Londos and the wiper.

Vangelis stated that at about 7.30 pm he went ashore.  He went to the home of a woman friend, Mrs Karababa, with whom he had a close relationship.  He explained that she had been divorced for 15 years and lived in her father’s home with her daughter and parents.  He stated that he had also been divorced several years earlier.  He collected some underwear which Mrs Karababa had washed for him and returned almost at once to the vessel.  He then inspected the engine room, using the emergency generator to provide light and found everything in order.  He then washed and went ashore at about 8.30 pm.  He had a coffee at the Cafe Myrtias.  He left there in his car, a 15 year old red BMW, at about 9pm and drove to a restaurant where he had supper.  He left there at about 9.45 pm and drove back to the Cafe Myrtias from where he telephoned Mrs Karababa.  He asked her to come and join him, but she said there might be problems because her father and daughter were at the house.  However, she told him that she would try to get to the Grecia Express between midnight and 1.00 am.

Vangelis said that he left Cafe Myrtias at some time between 10.20 pm and 11pm and drove back to the quay close to where the vessel was moored.  He parked alongside some piles of pallets stacked on the quayside which were very close to the bollards to which the starboard mooring lines were secured.  He sat in his car either listening to the radio or watching a small portable television until about 11.30 pm when he boarded the vessel to await Mrs Karababa.  After about one hour a car approached along the quayside, flashed its headlights and sounded its horn.  Mrs Karababa had been given a lift in a friend’s car.  He then left the vessel and she and Vangelis then got into his car.  He drove a short distance along the quayside away from the vessel and towards the town and then drove a few metres off the road and parked amongst some trees.  He stated that this was about 150 metres from the vessel and in a position from which only the funnel could be seen from inside the car.  He remained in the car with Mrs Karababa until about 5 am.  During that time he fell asleep for a short period.  At about 5am he drove with Mrs Karababa back to her home, about a 5 minute journey and she then left the car.  He explained that he did not take Mrs Karababa on board the vessel that night or on any other night because she was a rather large lady weighing about 120 kilos (nearly 19 stone) and, because the tender was small and light, it would have been difficult for her to get into and out of it on the beach and at the stern ramp and difficult for him to pull the tender between the shore and the vessel with both of them in it.

Vangelis stated that he then returned to the quayside and parked his car by the pallets.  From that position he could only see the upper part of the vessel, but not the stern ramp.  Having arrived there at about 5.15 am, he stayed in the car and slept until about 7.30 am.  In cross-examination he said that he stayed in his car because it was raining heavily.  A northerly wind had got up during the night.

He said that when he left his car he noticed that the vessel had drifted from the position in which she was moored and that the mooring ropes were broken and floating in the sea.  The tender had been carried along some distance behind the vessel.  He said that he then rushed back to his car and drove to Mrs Karababa’s house to telephone Captain Kouratolos of the vessel’s owners.  He had gone first to the Cafe Myrtias and Katsimbiri Cafe to find a telephone, but the cafes were closed and he had then gone on to Mrs Karababa’s house.  The Katsibiri Cafe is but 15 metres from the Aegion customs office.

Vangelis said in cross-examination that he had not first gone to the Harbour Master’s Office to telephone because they did not allow people to phone from their office and he did not know whether the Office would be prepared to telephone for him.  He did not have a phone card so he could not use any public telephone.  They do not take cash in Greece.  He therefore needed either a cafe or shop which had a phone with a meter for which he could pay in cash or a private phone.  I interpose that the distance between the Harbour Master’s Office and Mrs Karababa’s house at 6 Soliou Street was relatively small and in the circumstances the decision to use the phone in her house presents itself to me as wholly plausible.  However, because the coast road was blocked with roadworks, he had to make a detour of 3.9 kms to reach her house.

On the day of the loss - 5th March 1994 - Vangelis was interviewed as part of the Greek maritime enquiry by an officer of the Aegion Harbour Authority.  He said in that interview that, after he had finished supper the previous evening, he went to the Cafe Myrtias where he remained until 11.30 pm when he returned to the vessel, going on board by 11.50 pm.  He went to sleep and was awakened at about 5.45 am by the noise of valves in the engine room.  He then smoked two cigarettes and went ashore to drink some coffee.  He entered the tender and noticed that the mooring ropes were floating on the sea.  However, this did not concern him because it had happened before and he thought he would be able to tighten up the ropes by drawing in the anchor chains when he returned from having coffee.  He did not return until 7.15 am even though he had failed to find a cafe that was open and he then noticed that the stern had drifted to port.  He also saw that the mooring ropes had been cut and that the tender’s rope had also been cut and it was off shore near the vessel.  He then telephoned Mr Londos at Patras to tell him.  That was at about 8.10 am.

In the course of a further interview by the same Port Authority officer on the following day Vangelis was asked if he communicated with Mrs Karababa on the night of 4/5 March.  He said that on that night after 11pm he had seen her for approximately one hour in his car.  He had again seen her the next morning when he went to her house to telephone the owners’ office.  This was at 0905.  He said that the next morning she told him that a man had called at the house looking for him.

On 6 March 1994 Mrs Karababa was also interviewed by the maritime enquiry.  Whereas she admitted that she had friendly relations with Vangelis, in answer to the question where he was on the night of 4/5 March 1994 she answered that she had not seen him for four days.  She described how at 7 am on 5 March a Mr Gatsoulis of the Port Authority had called at her house and asked her where Vangelis was.  She told him she did not know.  He told her that the ropes had been cut.

On 18 May 1994 Vangelis was further interviewed as part of the maritime enquiry into the loss of the vessel.  It was then put to him that, according to the expert opinion the vessel was sabotaged at 2.20 to 2.40 am while, as he claimed, he was asleep.  He was asked how he could have been able to use the tender to get ashore at 5.40 - as he also claimed.  He answered that he must have been watched and the tender rope cut after he left the vessel.

It was only in the course of an interview in June 1994 in the presence of Mr Ventouris that for the first time Vangelis gave the account of his 5 hour meeting with Mrs Karababa that appears in his witness statement and which he confirmed in this trial.  He said that this was after he had discussed the matter with her and had insisted that he should tell the whole truth.

In the course of his interview by the Greek maritime enquiry on 18 October 1994 Vangelis stated that he had spent 5 hours in his car with Mrs Karababa and that it was not the first time he and Mrs Karababa had been together in his car at night.  He also denied that he had asked her to testify to the Port Authority that she had not seen him for four days before the loss of the vessel.

On the same date - 18 October 1994 - Mrs Karababa appeared again before the maritime enquiry and admitted that her previous evidence was untrue.  She had spent from 0030 to 0530 on 5 March 1994 in Vangelis’s car.  She had not previously disclosed this because she had not wanted her relationship with him to become known in Aegion.  She described the place where the car was parked as on a piece of land with a few trees a little further from the boat, below the road and towards the sea.

Vangelis maintained that he had originally lied about his meeting with Mrs Karababa in order to protect her reputation with her father and daughter and in the small local community and because she had asked him not to divulge this in the course of a telephone conversation in which they had spoken about it on 5 March.

As I have said, in the course of his interview by the Port Authority officer on 6 March he had already disclosed that he had spent an hour with Mrs Karababa.  He maintained in cross-examination that he had been detained by the Port Authority and while being questioned he was struck on the face by the harbour master and was thereby put under pressure and was scared.  He also stated in his witness statement that he had initially lied because he was worried that he would lose his job because he had left the vessel.  In the course of answering questions by the court he said that the person who slapped or struck him was called Alafakis.  Additionally, he was told that his seaman’s papers would be removed and that he would be prosecuted in a criminal court and get a sentence of over 10 years imprisonment.  Vangelis engaged a local lawyer (Mitrelis) to protect him.  In a statement given to the defendants’ Greek lawyers on 17 March 1994 Vangelis described how Mr Kouratolos advised the local lawyer to oversee his welfare as he had been maltreated by the authorities.  He further said that what had caused him to lie about his whereabouts was firstly his determination not to embarrass Mrs Karababa and secondly his fear that he might lose his seaman’s papers and therefore his career.

Vangelis said in evidence that he spoke to Mr Kouratolos from Mrs Karababa’s house.  In cross-examination he said that he made this call at about 8.15 am.  He said that he told him that the moorings had parted one metre from the bollards but not that they had been cut, and asked him to send a team of men to re-secure the vessel.  When he got back to the vessel from making this telephone call, he found Mr Moutopoulos, the engineer from the Coast Guard patrol boat, and two officials from the Harbour Authority on the quayside and it then became clear to him that the ropes had been deliberately cut as distinct from having broken.  He also saw that the tender had been used after he had gone ashore because a rope from it which he had coiled round the quayside bollard had been unknotted and had been cut close to the bollard.  He then returned to Katsimbiris Cafe and again telephoned Captain Kouratolos and told him that the ropes had been cut.  Kouratolos told him that he was already arranging to send a crew to the vessel.

When he returned to the quayside from the cafe he noticed that the vessel was starting to turn in the wind and tide and was trimmed by the stern.  He returned to the cafe, with the Coast Guard engineer and again telephoned Captain Kouratolos to tell him that the vessel appeared to be taking in water.  He stated that Captain Kouratolos would not believe that it could be since it had been moored.  Vangelis then handed the phone to Moutopoulos who, in Vangelis’s hearing, told Captain Kouratolos that the vessel was taking in water and that tugs were needed.  Kouratolos instructed Vangelis to take a launch to the vessel and board her if he could and then report back.  This was at 9am to 9.15 am.  He then took a call from Londos in Patras enquiring what was happening.

Vangelis then went out to the vessel on a launch operated by Mr Binardopoulos.  Moutopoulos accompanied them.

In a statement which he made in the defendants’ Greek lawyers’ office on 13 April 1994 Binardopoulos stated that, when he met Vangelis that morning Vengelis was wearing a jacket and trousers, that was “clothing for going out” and not overalls which he wore when he had to do a job.  In answer to questions by the court, Vangelis stated that he could not remember whether when he left the vessel to meet Mrs Karababa he was wearing his overalls over his jacket and trousers.  This was something he sometimes did so as to protect his clothes from splashing by seawater as he used the tender to get ashore.  He would then take off his overalls and keep them in the boot of his car.  I infer that if, as he claims, he left the vessel to visit Mrs Karababa he would have been wearing his going out clothes, perhaps under his overalls.  However, his being found wearing those clothes early the following morning is not necessarily inconsistent with his having been involved in the casting off and flooding of the vessel.

Vangelis saw from the launch that the vessel was trimmed by the stern and had a noticeable list to starboard.  It was suggested by Binardopoulos to Vangelis that he should get aboard the vessel, but he declined to do so unless someone went with him.  He stated that he was afraid to board her alone.  But nobody was prepared to go with him.  According to Moutopoulos it was dangerous to go aboard.  Moutopoulos stated that half the length of the stern ramp was already submerged and there was only 20-30cm freeboard at the hinge end of the ramp.  He considered that the vessel was likely to sink within a brief space of time.  

Vangelis then went back ashore and reported by telephone to Kouratolos from the cafe.  He was told that tugs had been organised.

No tugs had arrived by the time the vessel sank .  That was at about 10.50 am in a depth of about 10 metres with its starboard side about 150 metres offshore.

He denied that he let water into the vessel by removing the vehicle deck drencher pump sea suction strainer or by any other means and he also denied cutting the mooring ropes.  He also denied in cross-examination that on the morning of 5 March he was not, as he claimed, in his car at the quayside, but at Mrs Karababa’s house.

In the course of his cross-examination it was put to him that he did nothing to save the vessel between early morning when he discovered that it was loose from its moorings and the time when it sank.  He explained that when he and Moutopoulos, the Coast Guard engineer, inspected the vessel in Binardopoulos’s launch, he was afraid to board the vessel alone because of the danger of sinking and neither Moutopoulos or Binardopoulos was prepared to accompany him.  The evidence of both was that it was dangerous to go aboard because they expected the vessel to sink quite soon.  Binardopoulos said that the stern ramp was about 30 cm lower in the water than it had been less than one hour earlier when he had first gone alongside her.  Vangelis said that, even if he had boarded the vessel alone, he alone could not have got a line out from on board the vessel so as to enable her to be pulled back to her mooring position.  That was why he had asked Captain Kouratopoulos to send a crew to re-moor her.

It was also put to him that, if he had gone on board, he could easily have closed the watertight doors manually from the stern.  He explained that he did not know how long it would take to close the doors manually as he had never before done it and he was not prepared to risk getting on to the vessel.

The claimants also relied on the evidence of Captain Kouratolos who had the responsibility in Ventouris Group Enterprises for organising the recovery of the vessel.  As port captain he was based at the Piraeus office.  He was responsible for organising ship repairs, particularly relating to deck requirements, the periodic inspection of vessels to monitor their general condition, the supervision of annual surveys and supervision of the crew.

However, before coming to the details of his evidence, it is to be noted that, in common with that of other witnesses involved in the efforts to save the vessel, there are two areas of materiality of such evidence.  First, it is capable of casting light on the question whether Mr Ventouris was complicit in the casting away of the vessel.  If, for example, there was evidence that he had obstructed their efforts to save the vessel, that would count strongly in support of the defendants’ case.  There is, however, no such evidence.  If their conduct were such as to suggest that they were deliberately dragging their feet, there would be the basis for drawing the inference that they were personally involved in a conspiracy to achieve the loss.  No such allegation was pleaded.  The nearest the defendants got to that is to be found in paragraphs 11 (ii) (g) and 12(ii) of the Amended Points of Defence in which, amongst the facts relied on as inviting the inference that the loss was caused by the wilful misconduct of the claimants, is the allegation that, even after the occurrence of the casting off and opening of the valve, it would have been possible to save the vessel if men had been sent to Aegion earlier than they were.  The pleading reads: (paragraph 12(ii)):

“However, instead of sending men to Aegion as soon as possible from Patras (where an agent was specifically maintained, and which was only about half an hour at most from Aegion by road), they were actually sent from Piraeus, some two and a half hours away from Aegion.”

In the defendants’ opening submission it was simply said (paragraph 18) that there had been a “signal lack of urgency shown by Vangelis, amongst others, in taking steps to save the vessel” which was said to bear “on the question of who was responsible for the sinking of the vessel in the first place”.

Nor was it ever put in cross-examination to Mr Kouratolos or to any other management witness that he had been personally complicit in the fraudulent casting away of the vessel or that anyone from the owners had suggested to him that he should be in no hurry to take steps to prevent the sinking.

The second material aspect of this evidence is its relevance to the allegation that the claimants were in breach of their sue and labour obligations under Rule 3.14 of the Association’s Rules and/or section 78(4) of the Marine Insurance Act.

In these circumstances, to permit the defendants to introduce into their final submissions allegations of personal complicity on the part of Mr Kouratolos or the other management witnesses would be inconsistent with the fair trial component of the Overriding Objective under the CPR.  If it is to be alleged that those taking decisions on behalf of a corporate party accused of fraud have been complicit in a conspiracy to defraud through the medium of the corporate party it is axiomatic not only that the allegations should be specifically pleaded, with express reference to the individuals concerned, but that those representing the party raising the allegation should put explicitly to any of the witnesses against whom such serious allegations are made that they were acting dishonestly.

In these circumstances, had I reached the conclusion that there might be substance in the submission that an inference of dishonest complicity could be drawn from the conduct of any of the management staff in relation to efforts to save the vessel, I should have excluded that submission from consideration.  As I have concluded that this submission is totally without substance, this procedural defect has no effect on the outcome of this trial.

Indeed, Mr Kouratolos appeared to me to be an honest witness who was doing his best to give accurate evidence and trying to recollect the details of events which had taken place over seven years previously.

He stated that he was unaware that Vangelis had gone to Patras on 4 March to obtain money from the agent.  This was totally contrary to his instructions.  This was the second or third year that he had been watchman on that vessel and he knew his duties.  

On 5 March he was telephoned at home by Vangelis at about 8.30 am, just as he was about to leave for work.  Vangelis told him that the lines had “parted” and that the vessel had drifted from her moored position.  Nothing was said about the ropes having been cut.  Kouratolos assumed that the ropes had broken in bad weather.  Nor was anything said about water ingress.  Nor was there any discussion about tugs.  When Kouratolos asked him if the vessel was in danger, Vangelis said that it was not and that all that was needed was some crew to re-moor her.

This evidence is broadly consistent with that of Vangelis in relation to his first call to Kouratolos.

The situation described by Vangelis appeared to Kouratolos as one which required immediate action.  He therefore at once telephoned at home Christoforos Kotsambas, another Ventouris port captain, and Nicolaos Lemonis, a Ventouris port engineer, and instructed them to round up crew members from the Ventouris vessel Saturnus, which was then being repaired at Drapetsona, near Piraeus, and then get them over to Aegion.  This, I interpose, would involve a journey of at least one hour, and possibly 2 hours at rush hour, depending on the traffic.  There were, however, no Ventouris vessels at Patras which would have been much closer at hand, from which crew could be transported.

Mr Kouratolos then left home for his office.  After his arrival at the Ventouris office he received a call from Lemonis and Kotsambas who informed him that they had collected the crew from the Saturnus and planned to have them driven to Aegion.  That call is said by Mr Kouratolos to have been about 9 to 9.15 am.  He then received a call from Vangelis which he put at about 9.30 am.  Vangelis then told him that the moorings had been deliberately cut and that the vessel was probably taking in water.  He then told Vangelis to take a launch and go on board and advise him as to the vessel’s condition.  He did not tell Vangelis not to approach the vessel.

I interpose that the substance of this telephone call corresponds at least in part with the description of a call given by Vangelis which he said be made from Katsimbiris cafe after meeting Moutopoulos on the quayside and forming the view that the ropes had been cut, but before he departed in Binardopoulos’s launch.  It also corresponds in part with a second call that he made to Kouratolos from the cafe, again before going off to the launch, but after he had formed the view that the vessel might be trimmed by the stern.  I consider that, assuming these calls to have been made, Mr Kouratolos has elided the two and has placed the time rather later than was in fact the case, that is about 9 am.

On receiving the information that the vessel was taking in water Kouratolos said that he telephoned Mr Ventouris.  He was, according to Kouratolos, incredulous and had to be convinced that the information was correct.  Ventouris said he would come straight to the office.  Kouratolos told him that they ought to send tugs.  He told Kouratolos that he should do whatever was necessary to assist the vessel and suggested that as there was a ferry, called Panagia, which operated out of Aegion, Kouratolos should contact the owners to see if they would help.  Kouratolos then telephoned Express Shipping in Patras, and spoke to Dimitri Mitrellis whom he requested to order two tugs since he knew that there were tugs based at Patras.  That call was, according to Kouratolos’s witness statement, at 9.30 to 9.45 am.

Kouratolos then spoke to the duty officer at Patras Harbour Authority, one Papazaphiropoulos, and asked if he could organise tugs to go to Aegion quickly.

He also called Aegion Port Authority to try to get the telephone number of the local agents of the Panagia.  He then telephoned the agency but they were not sure where the master was.  It was by then about 10 am.

Kouratolos had a number of telephone conversations with Vangelis, including one after the launch had returned from the vessel.  Kouratolos put this call at between 10 am and 10.15 am, which is much later than Vangelis’s timing.  Vangelis reported that the vessel was trimmed by the stern with a list to starboard and that he had been unable to get abroad.

Kouratolos telephoned Mitrellis on two or three more occasions to enquire whether tugs had been sent.  First he was told that one tug had been sent and in a later call, about half an hour later, that a second tug had been sent.

He also said that Vangelis was an absolutely trustworthy man, having been employed by Ventouris for four or five years and that it was out of the question that he should be involved in any fraudulent or deliberate act of sinking the vessel.

Mr Ventouris stated that Mr Kouratolos telephoned him at home some time after 9 am on 5 March and informed him that the mooring ropes had been cut and that the vessel was taking in water.  He told Mr Ventouris that he had already sent men from Drapetsona and they had a discussion about engaging tugs.  Mr Ventouris stated that he agreed to the sending of tugs.  Mr Ventouris said that he advised Kouratolos to try to get help from the owner of the small ferry, Panagia, which operated out of Aegion.  He said that he was shocked by the news.  He went to the office, but there was nothing he could do.

Mr Londos of Express Shipping Agency, Patras, the local Ventouris agents, stated that on 5 March at about 7.30 am to 7.45 am he was contacted at home by the Patras Harbour Authority who told him that the vessel’s moorings had parted.

The caller did not tell him that the ropes had been deliberately cut and he therefore assumed that they had parted in bad weather.  He had previous experience of mooring ropes being severed in bad weather but never previously of that happening to all the mooring ropes.  The Patras Harbour Office asked him to inform the vessel’s owners.  Londos stated that he could not telephone from home because all his work telephone numbers were in the office.  He said in evidence that he was not worried by the information because the vessel remained held by her anchors.  He then had a bath before going to the office.  He then went to the office where he arrived between about 8 am and 8.30 am.  However, he telephoned or was telephoned by Mr Papadopoulos of the Aegion Harbour Master’s Office at 7.55 am, which must have been before he left for his office in Patras.  There is a conflict of evidence as to what passed in that conversation.  Mr Londos stated that he did not remember being told that the vessel was in danger, and that he was not then asked to send men.  He made no mention of tugs being asked for by Papadopoulos.  He recalled that at some stage, while he was in the Patras office, there was mention of sending tugs but he could not remember who had raised this: it might have been a Patras Harbour Authority officer.  In his statement to the maritime enquiry on 6 March 1994 he stated that a Patras Harbour officer called Koutelos had informed him by telephone at about 8.10 am that the ropes had been cut and that the ship was in danger and that he then immediately went to the Patras office.  However, Mr Papadoulous told the Greek maritime enquiry on 6 March that at 7.55 the previous day he had telephoned Londos and told him that all the ropes had been cut and the boat was at risk and to see that personnel and a tug were sent to Aegion to re-moor it.  He stated that Londos said that he would do so.

I interpose that in the course of the trial it emerged from the court interpreter that the Greek word used for “cut” and broken in the sense of “parted” or “severed” is the same.  Accordingly, translations into English of that word when used in the course of evidence given to the Greek maritime enquiry as “cut” could be misleading and have to be treated with caution.  However, it is to be noted that by 7.45 am according to their evidence Aegion Harbour Authority personnel first formed the view that the ropes had been cut as distinct from broken.

Londos stated that he had never previously arranged for tugs to be hired for passenger vessels, although he had ordered tugs to bring in cargo vessels.  He had no authority to engage a tug to deal with a casualty situation.  This is understandable.  A tug engaged for salvage purposes has a fundamentally different contractual status from one engaged for shifting purposes.  An employee in Londos’s position could not normally be expected to have authority in respect of the former.  Nor would I expect an agency such as Express Shipping necessarily to have any such authority.  Its function was essentially one of marketing and general husbandry.  It would be most unusual for an agency in that position to have taken upon itself to engage a tug to deal with an endangered vessel without the express authority of the owners or their managers.

It was therefore not surprising that when he arrived at the office he telephoned the owner of the agency, Mr Stellatos, who was in Piraeus.  This was said by Londos to be at about 8.20 am to 8.30 am.  Mr Stellatos instructed him to go to Aegion.  He also telephoned Mr Kouratolos at about 8.55 am.  Kouratolos also asked Londos to go to Aegion and then telephone him from there.  In his evidence to the Greek maritime enquiry given on 31 May 1994 Londos said that Kouratolos told him that he had already made arrangements for tugs to be sent.  Londos said that accordingly he did not concern himself with tugs.

He stated that it was only after he had arrived at Aegion at about 10 am that he learned that the ropes had been deliberately cut.  By then the ship was sinking.

It is to be observed that Londos stated in the course of his interview by the defendants’ Greek lawyers in June 1994 that on Friday 4 March 1994, in the course of a telephone conversation with Kouratolos, the latter told him that the vessel would sail on the following Wednesday and that certain members of the crew who lived in Patras should be informed and asked to report to Aegion on the Monday morning (7 March).  He was also informed that the vessel’s Articles would be opened on Wednesday 9 March.  These facts are hardly consistent with Kouratolos being complicit in any plan to sink the vessel.

Defendants’ Evidence and Criticisms of the Claimant’s Case on the Circumstances of the Loss

The defendants emphasise that, in view of his lies about his movements on the night in question, Vangelis is not a credible witness.  They submit that he has fabricated his account of his five hours in the car with Mrs Karababa in order to hide his activity in opening the sea valves and cutting the mooring lines at the request of the owners, and in particular of Mr Ventouris.  It is argued that his excuse for hiding his assignation in the car that he wanted to save Mrs Karababa embarrassment with her family and in the local community is unconvincing because, as early as 6 March, the day after the telephone conversation in which, according to his evidence, she had asked him not to mention their meeting, he had already said in interview that they had been together in his car for an hour.  Further, the evidence given to the maritime enquiry by Gatsoulis of the Port Authority that he went to find Vangelis at Mrs Karababa’s house when on the morning of 5 March he discovered that the moorings were severed suggested that local people were already aware of the relationship.

In the course of his re-examination Vangelis said that, whereas a mere hour’s meeting could be seen as reflecting an innocent relationship, five hours in a car overnight would be regarded as an amorous encounter.

The claimants rely on the likely attitudes and local mores of a small town Greek community and contend that there is nothing inherently improbable in the explanation advanced by Vangelis.

The defendants draw attention to Vangelis having changed his story only after he had a meeting with Mr Ventouris in June 1994, as he stated to the Greek maritime enquiry on 18 October of that year.  The suggestion is that, in view of the maritime enquiry expert’s opinion, of which Vangelis was informed during his 18 May interview, that the sea valves had been opened by 2.20 to 2.40 am, it was necessary for Vangelis to put forward an account of his movements which was consistent with his absence from the vessel at that time.  

I interpose that Vangelis denied in cross-examination that he had knowledge of the expert’s opinion or that he had co-operated with Mr Ventouris to fabricate the evidence.

Further, according to the evidence of one Vgenis, an officer of the Harbour Authority at Aegion who was on duty at 6.45 am on 5 March, he noticed that the mooring ropes of the vessel had been severed and that it had swung round to starboard held only by its anchors.  He telephoned the coast guard duty officer, as there was a risk of damage, and asked for the vessel’s agents or owners to be informed.  He stated that, during the time when he was looking at the vessel, the watchman, whom he knew, was nowhere to be found, although he “looked for him everywhere”.  He had spotted Vangelis at 5.10 pm the previous day in his red BMW in the Myrtia area going towards Aegion where the vessel was moored.

The defendants draw attention to the fact that, according to Vangelis, he was then asleep in his car which was parked just behind the piles of pallets on the quayside, very close to where the vessel was moored, and with a view confined to the upper part of the vessel and therefore partly visible from the quayside.  Vangelis suggested in cross-examination that the car might have been hidden from Vgenis’s view by the pallets or that, at the time when Vgenis was looking for him, he was trying to find a telephone to inform the owners that the ropes had been severed.

I observe that at 5.10 pm the previous day, according to his statement, Vangelis was asleep on board the vessel having returned from Patras at 2-3pm, and did not leave it until 7.30 pm when he went to Mrs Karababa to pick up the clean washing.  There is therefore a clear inconsistency in the evidence on this point.  However, it is not an inconsistency which, in my judgment, could give rise to any relevant inference adverse to Vangelis or the claimants.

An area of evidence which has been explored in some depth in the course of this trial is that put forward by Vangelis as to when he first saw that the vessel’s ropes had parted.  He said in his statement that he first saw the mooring ropes to be “broken” and floating in the sea and that it was only when he subsequently inspected the ropes in the company of the Coast Guard engineer, Moutopoulos, that it became clear that they had been cut and not just broken.  He spoke of one previous occasion when he had experienced all the ropes mooring a vessel to have broken.  That was on a vessel called the Saturnus in the course of a thunderstorm.  It is to be observed that there had been no such storm at Aegion that night.  The defendants further draw attention to the evidence that other witnesses, such as Moutopoulos, the Coast Guard engineer, Binardopoulos, the launch operator, and Chryssanthakopoulos of the Harbour Master’s Office appear to have realised at once that the ropes had been cut and not broken.  They also draw attention to Vangelis’s evidence to the Greek maritime enquiry that he told Captain Kouratolos during their first telephone conversation that the ropes appeared to have been cut with an axe.  Further, in his evidence to the maritime enquiry on 6 March 1994, Moutopoulos gave an account of his conversation the previous morning with Vangelis in which Moutopoulos had drawn attention to the orange coloured rope which had attached the fender to the shore bollard having been cut.  Vangelis did not accept that it had been cut.  He suggested that it might have parted due to over-stretching by the vessel.  Moutopoulos challenged this by showing him the severed end of the rope.  According to Moutopoulos, Vangelis then started to unravel the fibres of the rope evidently trying to demonstrate that it had broke and not been cut.  That made Moutopoulos suspicious.

The defendants further rely on Vangelis’s apparent change in his evidence in the course of which he had first stated that Moutopoulos had only had one telephone conversation with Mr Kouratolos and then in cross-examination had said that there were two such conversations.  I am bound to say that I am not able to attach any great weight to this submission because I have considerable reservations about the accuracy with which the interpreter dealt with Vangelis’s evidence on this point.  The substance of all the evidence, except for this one reference is that there was but one such conversation and that it took place from the Cafe before they went out on the launch to inspect the vessel.

The defendants draw attention to the evidence of Vangelis as to his personal possessions.  In the course of his evidence to the maritime enquiry on 22 November 1994 he stated that a Mr Fotis, a pensioner who was a friend of his, helped him to take on board some of his personal belongings 15 to 20 days before the vessel sank.  According to his own evidence Vangelis occupied two cabins while the vessel was laid up, one down below by the engine and the other on the upper deck next to the emergency generator where he slept.  He kept in the lower cabin a suitcase with personal clothes and in the upper cabin two or three shirts, a small radio cassette player, shaving kit, a toothbrush and soap.  However, following the raising of the vessel, in November 1994, and her beaching in December 1994, Mr Salters the defendants’ marine consultant entered the upper cabin but found no personal possessions except for an empty coffee jar.  When this was put to Vangelis and it was suggested that he had removed all his personal possessions before the sinking because he knew it was going to be sunk, he strongly denied this, saying that nobody who was going to sabotage the vessel would take with him his cheap shaving kit.  He said in cross-examination that he became short of clothes after the sinking and had to go out to buy some more.

On the face of it, this evidence could suggest that the Vangelis had indeed removed his belongings before he left the vessel for the last time.  However, there is no evidence as to whether the contents of the vessel were sealed or secured between the time when it was raised and beached and the time when Mr Salters went into the upper cabin on D deck.  Accordingly, it is impossible to be confident that if Vangelis’s possessions in that cabin were on board when the vessel sank and still on board when the vessel was raised they must necessarily have been left undisturbed until the cabin was entered by Mr Salters.  Further, Mr Salters refers to having inspected only one cabin - not the cabin next to the engine room where Vangelis said he kept a suitcase full of clothes.  All these possessions might have been removed between the date of raising the vessel and the time of Mr Salters’ inspection.

As to the evidence of Mr Kouratolos, the defendants draw attention to his failure to refer in his witness statement or his Greek maritime enquiry evidence to a telephone conversation on the morning of 5 March earlier than 9.30 am with Moutopoulos, the Coast Guard engineer to whom Vangelis said he had handed the telephone during the call which he made from the cafe in which Moutopoulos had told Kouratolos that tugs were urgently needed.  When under cross-examination, however, Mr Kouratolos did say that when he had his second conversation with Vangelis, he recalled talking to someone whose name he could not remember from the Aegion Harbour Authority who confirmed to him that the vessel was at risk.

Since there is no contemporary written log of the time of the second Vangelis telephone call, the evidence of all concerned depends on recollection.  It is unclear how, seven years later, any of them could be giving more than an estimate of the time of these calls.  Since the interviews of Moutopoulos and Vangelis by the maritime enquiry took place on 5 and 6 March more weight should be attached to the timings given by them.  Moutopoulos said that he found Vangelis in the cafe talking on the phone to the port captain, Costas, at about 8.40 am and then he himself spoke to the port captain.  Vangelis put the time of the call in which Moutopoulos spoke to Kouratolos at 9.10 am, but after they had returned from the launch inspection.  In subsequent statements Vangelis put the time at between 8.30 and 9 am.  Binardopoulos told the maritime enquiry that it was between 8.30 am and 8.40 am that he, Vangelis and Moutopoulos standing on the quayside noticed that the vessel was down by the stern.

On the whole of this evidence, I consider it probable that Kouratolos was informed of the probable entry of seawater not later than about 9 am and that it was then that the question of tug assistance was first raised in the course of the conversation with Moutopoulos.  It is relevant to note that when interviewed by the defendants’ lawyers in June 1994 he put the time of the call at 9 am to 9.30 am.  Even three months after the events he could therefore only give a 30 minute range.

The defendants further point to Kouratolos’s evidence in his witness statement that he spoke about tug assistance to Mitrellis at Patras at 9.30 am to 9.45 am.  This would be at least 30 to 45 minutes after he was first told that the vessel might be taking in water, but this is inconsistent with the whole substance of the rest of his evidence.

I have therefore no doubt that Kouratolos’s recollection of the time, order and content of the telephone calls that morning, although honestly given, is unreliable.  I conclude that Kouratolos probably arranged with Mitrellis for tug assistance between 9am and 9.30 am.  This would be consistent with the evidence of Binardopoulos that the first of two tugs sailing from Patras arrived at Aegion just before noon and another one later, although he was not sure of the time.  However, the Aegion Port Authority record shows that the Patreus, the first of the tugs to arrive, got to Aegion at 1300 and the second tug, the Starlet, got there are 13.30.  The master of the latter tug stated that it was about 10.55 am that he was notified of the need to go to Aegion and that the tug left at about 11.05 arriving at 13.20.  Mr Lemonis, the Ventouris engineer, who had arrived at Aegion that morning, told the maritime enquiry that the Patreus arrived at about 12.30.  Since it would have taken the Patreus about two and a half hours to make the voyage to Patras, assuming her to be capable of 9 knots, she must have departed between 10.00 am and 10.30 am.  Although this does not demonstrate a particularly urgent response to Mr Kouratolos’s efforts to procure tug assistance, it goes nowhere near suggesting that Mr Kouratolos was deliberately delaying his response to the information received from Aegion.

As to Mr Londos, the defendants draw attention to his failure to react to the advice given by Papadopoulos at 7.55 am that the vessel was in danger and that tugs and men were required.  They further criticise his evidence that he was not worried about the vessel because he assumed that the ropes had broken in a storm but yet, when asked in cross-examination for the basis on which he believed there to have been a sufficient storm to cause them to break, he replied that the main motorway to Aegion was reported to have subsided.  It is also submitted that his evidence that he did not have authority to engage tugs was inconsistent with his evidence that once Kouratolos told him that tugs had already been organised he did not “occupy myself about despatching of tugs”.

I am bound to say that I found Londos to be an unreliable witness.  I attribute this to a combination of want of intelligence and lack of recollection, rather than to any intention to mislead the court.  His evidence conflicts in a number of respects with that of the Patras and Aegion Port Authorities witnesses.  He was, however, clearly unwilling to take any initiative in relation to the engagement of tugs until he had received specific instructions from the owners or their managers.  His evidence of inactivity in relation to the tugs from the time he arrived in his office until he spoke to Kouratolos at about 8.55 am is, in my judgment, not surprising for the reasons already given: he would naturally only take steps after he had obtained the owners’ consent.  It is true that Kouratolos stated in this witness statement that he first spoke to Mitrellis of the agency about tugs at about 9.30 am.  However, in view of the information available to Kouratolos at 8.55 am it is more probable than not that he, as manager of the vessel, told Londos that he had the question of engaging tugs already in hand, albeit it was not until later that he actually contacted Mitrellis for this purpose.  In the meantime, he was discussing the situation with Mr Ventouris and with Vangelis, which must have taken up part of the time.

On the whole of the evidence of the witnesses Vangelis, Kouratolos, Londos, Mr Ventouris and the Port Authority witnesses on the circumstances of the loss, I do not find any features which suggest that the owners personnel were participating in any planned delay in organising tug or crew assistance.

In the event, Mitrellis did not apparently effectively arrange the departure of the first tug until between 10 am and 10.30 am.  The reason for this delay after Kouratolos requested assistance is unclear.  Mitrellis was not called to give evidence and it is therefore impossible to explain the delay with any great confidence.  However, like Mr Sinclair, the expert marine engineer called by the claimants, I am inclined to attribute this to typical Greek lack of organisational skills rather than to deliberate obstruction on the part of any of those concerned.

Expert and other Evidence on the Circumstances of the Loss

This divides into two distinct areas:
(1)	the likelihood of a stranger to the vessel being able to flood it without assistance from a person familiar with it, such as Vangelis;
(2)	the likelihood of someone whose purpose was to cause a total loss of the vessel having chosen to accomplish that purpose in the manner adopted in this case.

As to (1) the defendants’ case is that without the assistance of someone who was extremely familiar with the layout of the vessel and its auxiliary engine room it would not be possible to gain access to the position of the valve or identify the relevant value.  As to (2) the claimants’ case is that this method of sinking the vessel was so uncertain to accomplish a total loss that no one whose purpose that was would have tried to do it that way.  I now consider these issues.

Access to the Sea Valve

It is common ground that the initial admission of water into the vessel and therefore its ultimate sinking was accomplished by means of the removal of the cover of the vehicle deck seawater fire-fighting drencher pump sea suction valve strainer.  That item was located on the starboard side in the Auxiliary Engine Room which was on the Tank Top level.  When the vessel was raised, that cover was found to be detached from the strainer and lying on the floor in good condition about 1 metre away.  The securing dogs and lugs were also found to be in good condition.  It was concluded by the surveyors that the cover could not have been dislodged accidentally and must therefore have been deliberately removed.

Access to the Auxiliary Engine Room from the Garage Deck, which could be entered by anyone getting abroad up the stern ramp, could be gained by different routes.  The Auxiliary Engine Room was immediately aft of the main Engine Room.  The Tank Top, on which both were located, was two floors down from the Garage Deck (F Deck).  Upon entering the Garage Deck from the ramp there were on either side of the deck flights of steps down to G Deck.  Following those steps down on the starboard side one would be confronted with a bulkhead at about Frame 19 and a door to the right which opened on to a narrow corridor.  If one followed the corridor round and then turned left towards the centre line one would come in a few metres to a wider open corridor space in between the crew accommodation.  On the centre line a door opened on to a downward staircase which led directly into the Auxiliary Engine Room.  It would be obvious from the door that the steps led down to an engine room.  From the bottom of the flight of steps one could see the drencher valve and filter casing.  According to Vangelis, it was painted green and its name was written on to it.

The alternative approach route from the Garage Deck involved walking from the ramp until reaching the entrance, one on either side, to the main flights of steps up and down to all the other levels, including the Main Engine Room at the tank top level.  If one went down two flights of steps, either side, one then would have to go across to the centre line passing alongside the Main Engine Room sea chest inlet valves and then walk aft through the Main Engine Room, through the door in the bulkhead at frame 37 between that and the Auxiliary Engine Room, then going across towards the starboard side where the drencher pump sea suction filter was located.

The defendants acknowledge that, whereas it is possible that someone unfamiliar with the vessel could have found their way with the aid of a torch down by way of the aft crew accommodation into the Auxiliary Engine Room, it is more likely that this route would have been used to get to the drencher valve only by someone who knew the vessel and accordingly reliance on that valve is more consistent with complicity on the part of Vangelis or others involved with the owners than with casual vandalism.

This argument is, in my judgment, unconvincing.  If strangers boarded with the intention of opening a valve they would quite likely make for the first flight of downward steps and then in a few seconds the entrance to the Auxiliary Engine Room would easily become apparent.  The drencher valves were the first group of valves one would see and were clearly marked. It is more probable, or at least as probable, that they would take this route than that which involved doubling back through the Main Engine Room to the Auxiliary Engine Room.

Use of the Drencher Valve as a Method of Sinking

The defendants argue that if the purpose of sinking the vessel was to interfere with Mr. Ventouris’s plans to set up a service linking Greece, Italy and Albania, as he suggested might have been the motive, the most likely way of achieving this would not be to cause the vessel to become a total loss but to cause her sufficient damage so that she would be out of action for a long time while under repair.  In order to achieve this result those concerned would try to ground her at her moorings rather than allow her to be carried away from the shore into deeper water where she could become a total loss or a constructive total loss.  To accomplish a shore-side sinking one would therefore not have to spend time, perhaps 15 or 20 minutes, in public view on the quayside cutting the 8 mooring lines.  The defendants rely on the evidence of their expert marine architect, Mr. Bowman, given in answers to questions by the court to the following effect.  In order to achieve the complete capsize of the vessel, as distinct from its grounding at an angle of 40 to 50 degrees, one would want to get her into deeper water before the car deck flooding through the stern opening had been achieved.  However, it would be necessary to allow enough time for the vessel to move into deeper water and this would depend on one’s knowledge of the wind and current, if any.  Mr. Salter, the defendant’s marine engineer expert, expressed the opinion in his report that the fact that only one of the four sea suction filters in the Auxiliary Engine Room had been opened suggested that the purpose was to achieve flooding at a slow enough rate to ensure that after the moorings had been cut the vessel would drift into deeper water.  It is argued that this would indicate a planned total loss by people closely conversant with the configuration of the vessel and with the likely consequences of admission of water.

Whereas those who cut the moorings after having opened the seawater valve must have envisaged the certainty of flooding aft, which would have progressively produced a trim by the stern and therefore loss of freeboard in way of the open stern ramp, as well as the possibility of the vessel drifting away from her moored position, the suggested inference that this was pre-planned to achieve a total loss as distinct from a mere particular average grounding, is one which is, in my judgment, distinctly far-fetched, to say the least.

Uncertainty of successfully achieving a total loss

Clearly, if Mr. Ventouris wanted to achieve a total loss of the vessel, he could be expected to adopt a method of sinking her in which he could have a relatively high level of confidence.  Yet the suggested method adopted would have appeared to anybody to be extremely uncertain in outcome.

In particular, the most obvious uncertainties would be the rate of inflow of seawater and the extent from hour to hour of the impact of wind and sea state on the vessel.  In addition there would be an element of uncertainty in the configuration of the sea bed, the depth of water and therefore the extent of drift that would be needed to cause the vessel to capsize as distinct from grounding.  There would also be the risk of a rescue attempt from the shore before the vessel admitted enough seawater and drifted far enough to capsize.

As to the rate of seawater inflow and the effect of wind and waves, there would be immense problems of prediction.  The expert appointed by the Greek maritime enquiry, Mr. Antonis Mattheou, issued a preliminary report on 13 April 1994.  In it he calculated that it would have taken 7 hours 40 minutes for seawater entering via the drencher valve to have created a trim by the stern sufficient to admit seawater over the ramp and on to the Garage Deck.  Working backwards from the aft freeboard observed at 0730 on 5 March he calculated that water started to enter the Auxiliary Engine Room at about 0220.  However, in his final report to the enquiry issued on 3 February 1995, he calculated that, working backwards from the observed freeboard at 0820, the valve was first opened about 3 hours 20 minutes earlier, that is at 0500.  The calculations, by which he reached that conclusion appear in Appendix A and occupy over two closely written pages.  Mr. Sinclair, the claimant’s marine engineering expert calculated in his report that it would take 9.1 hours from first inflow through the valve to water entering the Garage Deck.  

Another element of uncertainty is the extent to which the strainer itself was blocked and would therefore impede the flow of seawater.  I do not propose to investigate the detailed expert evidence on this point.  It was inconclusive and therefore reinforces the difficulty of embarking on a sinking exercise aimed at capsizing the vessel.  Thus there are widely divergent views from the experts working backwards.  The calculation of the required time working forwards would seem to pose similar difficulties.

A further aspect of the deliberate capsize hypothesis is that until 0500 the sea appears to have been calm with little or no wind, as noted by Mr. Mattheou in his main report.  Accordingly, whoever cast off the vessel would have had to anticipate the arrival later of enough wind to take it out from the shore and keep it in deeper water.  This led Mr. Mattheou to conclude that “the probable aim of the criminal was not the capsizing and sinking of the vessel but her vertical sinking on site because of the small sea draughts in the area”.

Further, in order to achieve a total loss, capsizing, rather than grounding was required.  However, capsizing as distinct from vertical sinking would not be an obvious consequence, even if the vessel got into deeper water. Relatively complicated calculations are necessary to point to this conclusion.  Whereas, in order to appreciate that to detach the strainer cover would cause flooding and would require some fairly rudimentary tools, the persons concerned would have had to know something of engine room parts and how to use the tools, no great sophistication would be needed.  It could have been the work of someone of fairly low level experience, such as an oiler.

It is right to add that the fact that only one out of four valves was opened, relied upon by the defendants as indicating a well thought out plan to limit water inflows to give time for drifting into deeper water, would appear to be more likely the consequence of the perpetrator avoiding being soaked by the powerful jet of water which the opening of one valve and the removal of just one cover would cause.  Mr. Sinclair calculated the rate of entry to be 420 m.t. per hour or 7 m.t. per minute.  Indeed, the valve in question was only 85 per cent open which points, if anything, to an incomplete interference rather than a finely calculated flooding.

The risk of intervention from the shore must have been obviously relatively high.  After all, the vessel as moored was only about 30 metres offshore and was very close to the Customs House.  If there was a calculated attempt to cause the vessel to get into deeper water that would involve her detachment from her mooring becoming very visible from first light, at about 0645, if not earlier.  Accordingly, the perceived risk of the progress towards capsizing being arrested by intervention by the Harbour Authority must have been present, particularly if flooding commenced as late as Mr. Mattheou  estimated it to have done.

Accordingly, the method of sinking adopted involved so many uncertainties that taken alone, it cannot, in my judgment, give rise to the inference that it was more probably the consequence of a concerted attempt by the owner to create a total or constructive total loss than the consequence of random vandalism or sabotage purposely directed at this particular vessel.  On the contrary the greater probability attaches to the latter explanation.  If an owner in Mr Ventouris’s position wanted to achieve the constructive total loss of a vessel such as this he would be most unlikely to have adopted the method used in this case.  After all, the vessel was not out of service and could have been subject to all manner of contrived “accidents” over the course of the next few days which could have provided far more reliable methods of achieving a total loss.

There is, however, another feature of the sinking which is relevant and that is the very substantial danger of discovery of the plan by reason of the presence of Mr. Vangelis and the failure to provide him with any kind of plausible alibi.  An owner in the position of Mr. Ventouris who set out to go through with a pre-organised plan of the kind postulated and whose watchman was lodged on the vessel would as a first priority attempt to create an alibi which would insulate the watchman from suspicion.. Nothing of that sort happened in this case.  Vangelis initially put forward an account of his movements which was so obviously improbable that nobody would ever have believed him.  He said he left the vessel at about 0545 which would involve the valve being opened and the ropes cut after that time, that is to say within an hour of first light.  Yet anyone planning this loss would realise that if Vangelis left the vessel as late as that he would be the prime suspect.  To insulate him from suspicion it would be necessary to have him off the vessel much earlier in the night than that.  Yet his account of his night in the car with Mrs. Karababa did not emerge until months later in circumstances in which its veracity was bound to be attacked.  To make matters worse, he described to the Greek maritime enquiry driving round the town of Aegion trying unsuccessfully to find a cafe open between 5.45 am and 7.30 am, a total of 1 and three quarter hours during which he covered 5-6 kilometres. This was so implausible a story that he could not have been advised to rely on it.  Making all due allowance for Greek organisational shortcomings, this represents an incredible lack of attention to detail.  It is much more likely to have been the inept invention of a man frightened that he would lose his job and deeply worried about his relationship with the woman who had required him to keep their liaison secret.

Sinking a large vessel close inshore involves an obvious exposure of its owners to anti-pollution and wreck removal expenses.  If the sinking were accidental, these would normally be recoverable from the P&I insurers.  However, should it be discovered that the sinking was deliberate and fraudulent, those expenses would fall on the owners.  Accordingly, anyone calculating the possible downside of discovery of the fraud would be aware of the very substantial financial risk involved.  In the present case the owners’ anti-pollution expenses reached US$1.577 million and their wreck  removal expenses were US$1.4 million, in total nearly 38 per cent of the insured value of the vessel.  Yet the opening of the drencher valve was a method of sinking the vessel which obviously had a very high risk of being discovered.

It is right to add that there is no evidence to suggest that the sinking was brought about by those concerned to interfere with the projected service between Greece, Italy and Albania. The suspicion that this might be an explanation for the attack was first voiced by Mr. Ventouris some time after the event and developed in his statement in the Greek criminal proceedings.  It was wholly without factual basis and rested on mere speculation.  Whereas failure to identify a motive for the attack based on factual evidence makes it more difficult for the claimants to rebut the charge of complicity, it is by no means fatal to the defence that this was an entirely extraneous attack with which they were in no way associated.  It is simply one of the many considerations to be taken into account.

Motive:  the Claimants’ Case

The claimants’ case is that they were anticipating using the vessel on a new profitable service between Igoumenitsa, Bari and Durres in Albania.  For this purpose they had obtained a licence from the Albanian authorities.  It was anticipated by Mr Ventouris that the service would be exceptionally profitable because the civil war in Yugoslavia and the reconstruction of Albania was thought likely to produce substantial movement of lorry traffic between Bari and Durres.  The fighting in Yugoslavia had also closed off routes for commercial and other vehicles from Continental Europe to Greece and the routes through Italy to Adriatic ports and across to Greece by ferry were therefore heavily used and profitable.  That this was so is very clearly established by internal documents of the claimants’ bankers, Royal Bank of Scotland.  Ventouris ferries had been operating between Igoumenitsa, Patras and Bari since 1984 and by 1994 had come to dominate that route with 80 per cent of the traffic.  It was the intention of Mr Ventouris that the new service would be operated from shortly after the date of the loss.  The sinking of the vessel would therefore seriously disrupt, if not prevent, the commencement of the planned service.  Further, the port of Bari had significant advantages over Ancona and Brindisi as departure ports for Greece.  It was a much shorter distance from Igoumenitsa than Ancona and the port facilities were superior to those at Brindisi.

Financial considerations also presented a major disincentive to the sinking of the vessel; notably cashflow.  The sinking of the vessel in the circumstances by such an overtly deliberate method as that adopted would inevitably give rise to extensive investigations, in particular by the insurers.  They could not be expected to pay the claim until they were satisfied that the vessel had sunk without the involvement of the owners or, in the case of the war risks underwriters, of Vangelis and that it was indeed a constructive total loss.  Accordingly, there would inevitably be a substantial delay before the loss was paid, if indeed it ever was paid.  That there was indeed a serious cash flow impact is shown by the internal report of the Ventouris Group’s bankers dated 10 May 1995.  

The claimants further rely for lack of motive on the profitability of the vessel at the relevant time.  In particular they rely on the evidence of Mr Stefanos Tzanakis, an independent chartered accountant and a member of the Greek Society of Chartered Accountants.  He had investigated the statements of Income and Retained Earnings of the vessel for the years 1991, 1992 and 1993 and of the Athens Express for 1993 and in a report dated 31 July 1995 he confirmed their accuracy by reference to the books of the company, Ventouris Group Enterprises SA.  Mr Ventouris was asked about the status of Mr Tzanakis and he explained that this accountant was independent of the company and was a member of  a body of sworn accountants, like public servants, under the supervision of the state.

The net profits before depreciation which Mr Tzanakis confirmed were in the years to 31 December 1991: US$300,174, to 31 December 1992: US$648,029, and to 31 December 1993: US$1,740,745.  The vessel was earning a net profit, before depreciation, of US$10,424 per operating day in 1993 compared with US$4056 in 1991, an increase of 257 per cent.  The claimants draw attention to the fact that in 1993 the vessel was out of operation following a grounding at Patras from 25 February to 11 July and that she therefore lost 4.5 months of operation.  That meant that, had she not grounded, her aggregate number of operating days would have been over 300 instead of 167, that is to say some 44 per cent greater.  So in 1993, but for the grounding, by extrapolation she could have been expected to earn a net profit, before depreciation of about $2.5 million.  

In proceedings in the Norwegian courts in which the owners claimed against underwriters for loss of earnings caused by the grounding at Patras it was held that the contractual rate of US$20,000 per day was a justifiable pre-estimate of the earning capacity of the vessel in the first half of 1993.  The owners therefore recovered US$1.8 million.  Accordingly, the total of the actual net profit for that year and the insurance recovery was US$3,540,745.

The claimants therefore rely on the fact that the vessel was an actual and potential substantial profit earner, a matter directly relevant to the insured value of the vessel.

The claimants further rely on the financial profitability of the other vessels in the Ventouris Group as a whole.  The audited accounts for 1992 and 1993 each showed increases in net profits before depreciation, rising from US$12,181,640 in 1991 to $14,282,070 in 1992 and to $25,105,681 in 1993.

According to the audited accounts the Ventouris Group as a whole was flourishing.  In the year ending 31 December 1992 it made a net profit after depreciation of  US$14,749,095 and in 1993 the figure was US$24,488,169, an increase of 66 per cent.  With the loss of the Grecia Express and the acquisition of the Pegasus and the Pollux in 1994, the turnover fell and so did the Group net profit after depreciation - to US$18,785,996.  Thus in terms of turnover and profit-earning capacity, there would seem to be little incentive for destroying the Grecia Express.

The claimants also rely on the acquisition in March 1994 of the Pegasus and the Pollux as demonstrating that the Group had access to substantial funds.  The prices were respectively US$4 million and US$17 million.  Although the Group sometimes failed to maintain the minimum level of liquidity required by its bankers, Royal Bank of Scotland, namely US$ 2million, it did not fail to satisfy any loan repayment or loan servicing obligation.  Thus, an internal bank report in respect of a credit application for US$10 million in 1992 described Mr Ventouris as “a successful ferry operator who has met all his obligations very satisfactorily”.

On 21 March 1994 an internal report of the Royal Bank of Scotland in respect of an application for a loan of $3.5 million to be used towards the purchase of the Pegasus to replace the Grecia Express stated that during the 5 years for which the Group had been a borrowing client “repayments have always been received on time and the operation of the accounts has been satisfactory”.

As to the vessel itself, the claimants submit and I accept that she was very economical to operate.  Her fuel oil consumption was low at 0.85 metre of IFO 30 per hour.  Her speed was on the low side at 15/16 knots, but this was not of great importance if, as was anticipated, she was to travel between Greece and Italy overnight.  The vessel was, as I also find, in a reasonably well-maintained and tradeable condition.  In particular, having undergone a substantial refit and refurbishment in 1988, she had been fully and effectively repaired, following the grounding at Patras, between February and July 1993.  Some general  maintenance work had been carried out during that period, particularly to the starboard main engine and diesel generators.

From July 1993 until the vessel was brought to Aegion for the winter lay-up in January 1994 she had traded without incident and, until her sinking, she had suffered no problem which would interfere with her being brought back into service in March 1994.  Indeed, the incomplete survey conducted at Aegion by her P&I Club surveyor, Mr Marinakis, on 2 March 1994 had thrown up nothing untoward except a few trivial routine maintenance items.  The vessel was to be dry-docked during the week after the loss and the survey was to be completed on that occasion and all the necessary maintenance work was then to be carried out immediately before she went into service.

The claimants also rely on the fact that, if the owner’s purpose was in effect to get rid of the vessel and replace it with another, more attractive one, in particular the Pegasus, the latter would not be available to trade at the earliest until well into the 1994 season, and at worst, it might never be purchased at all.  Thus, at the time of the loss of the Grecia Express, the purchase contract for the Pegasus had not yet been entered into.  Negotiations were still in progress.  Even if they were ultimately successful, there would have to be an Italian export licence and the sale contract ultimately entered into provided for a possible delay until May 1994 for obtaining this.  Further, because the vessel had been laid up for some time, she was going to have to be towed from Palermo in Sicily to Piraeus and there undergo the repairs and maintenance required to bring her into service.  What actually happened to her shows what must have been contemplated at least as a distinct possibility immediately before the loss.  She was in the event delivered at the end of May 1994 and her repairs were not completed until the end of July 1994.  Accordingly, any plan to sink the Grecia Express in March would have had to be on the assumption that she might not be replaced for many months.

Motive:  the Defendants’ Case

Firstly, the defendants allege that the lucrative purpose for which Mr Ventouris says that he required the Grecia Express, namely the Italy-Albania-Greece service, could not be brought into effect because the Albanian authorities had not yet granted a licence at the date of the sinking.  It is alleged that the whole concept of the service involving Albania has been created in order to provide a motive for the attack on the vessel by commercial competitors.  Further, and very relevant to the credibility of Mr Ventouris, the defendants allege that a copy of an Albanian Licence put in evidence by the claimant is a forgery.  The essential points are as follows.

(i)	In the Greek criminal proceedings in written evidence to the Patras court Mr Ventouris had stated that in February 1994 “we had requested from the Albanian authorities” a licence, which was granted on 28 February 1994.  He had also stated that, because a service between Italy and Albania would be likely to give rise to discord between Greek and Italian shipping interests, “the entire business move ..... was carried out with secrecy and exclusively by myself”.  Nothing had been leaked and sailing schedules had been published.

(ii)	The copy of the licence relied on, which bears the date 28.02.1994, appears to have been a copy of a licence granted by the Albanian Ministry of Transport and Communications to a company called Liburnia in relation to a vessel called Afrodite II and subsequently altered to show the licencee as “Ventouris Ferries” and the name of the vessel as Grecia Express.  The claimants did not challenge the expert report of Mr Dimitrios K. Kalantzis, a forensic scientist, retained by the defendants who was asked to compare the licence apparently issued by the Albanian authorities for the Grecia Express with that originally issued for the Afrodite II in order to determine whether the Grecia Express document was derived from that for the Afrodite II and to specify which was the original document.  He concluded that the date, name of shipowner and of the vessel in the Grecia Express licence had been inserted by photocopying over the date and names in the Liburnia document and that the document was therefore forged in that sense.  He also concluded that the signature of the minister on the Afrodite licence was genuine, whereas that on the Grecia Express licence was forged.  The report refers to letters from the Albanian Ministry of Industry, Transport and Commerce in 1995 and 1997 confirming that a licence bearing the number shown on the Grecia Express licence related to the Afrodite.

(iii)	The licence for the Grecia Express referred to a request made on 13 November 1993, and submitted to the Albanian authorities on 21 December 1993, whereas Mr Ventouris stated that the application had been made in February 1994.

(iv)	The licence for the Grecia Express limits the number of passengers to 200, whereas the carrying capacity of the vessel was 962.

(v)	Mr Ventouris altered his evidence about who applied for the licence.  Whereas, he had stated in the Greek criminal proceedings that he personally had applied, he said in cross-examination that what he intended to convey was that he personally for his company had conducted all contracts with Mr De Leonardo of Pan Travel Srl, the agent in Bari who was setting up the arrangements, but that it had not issued to the public any information about the forthcoming service.

(vi)	The original of the Albanian licence has never been produced in the course of disclosure, although according to an affidavit sworn by Mr Ventouris on 8 June 2001 it was at all times held by Mr De Leonardo who had died in 1999 following the termination of the agency in 1998.  However, the Greek lawyer who produced the photocopy in evidence in the Greek criminal proceedings certified that she had been shown the original and the copy was accurate.

(vii)	There were inconsistencies in the sailing schedules put forward by Mr De Leonardo in a telex of 28 February 1994 and the days of the week referred to in the Albanian Licence for the sailing schedule.

(viii)	The licence photocopy was first produced by the claimants’ solicitors on 8 February 1995 as having just come to light, just over 2 months after Mr Ventouris had first referred to negotiations with the Albanian authorities in his evidence to the Greek maritime enquiry.

(ix)	The evidence of Mr Ventouris in this court and to the Greek maritime enquiry, as well as in the criminal proceedings, was that the service to Albania was to start in mid-March 1994.  Yet no printed sailing schedules or brochures had been prepared.  Further, in as much as the vessel was to call at Igoumenitsa, schedules would have to be prepared for the Greek authorities but none had been disclosed and Mr Ventouris did not know whether such schedules had been provided.

(x)	Little or nothing had been done to ready the vessel for a return to service as early as mid-March.  Whereas Mr Ventouris said that they had arranged to dry-dock the vessel during the week after the sinking, Mr Lemonis, the Ventouris superintendent engineer, said in cross-examination that no booking had been made by the time the vessel sank which was inconsistent with his interview by the defendants’ Greek lawyers that the vessel had already been booked in at the Scaramanga yard.  In truth, a telex had been sent to the yard at 1754 on Friday 4 March 1994 under the heading “URGENT” requesting dry docking for the Saturnus on Wednesday 9 March and for Grecia Express on 9 or 10 March.  Mr Lemonis said in evidence that the last-minute attempt to make a booking was most probably because the dry docks operated by Vassiliadis did not have a vacancy.  He said the necessary work, including drawing the tailshaft, would have been completed in 5 to 6 days in the ordinary way.  The expert witness, Mr Sinclair, said the work would take 2 weeks.  The defendants say that it is incredible that it was intended to start the vessel in service as early as 17/18 March if they had left the dry-docking as late as they had.  It is suggested that Mr Ventouris appreciated the improbabilities of the dates by giving evidence in cross-examination inconsistent with that in the maritime enquiry in as much as he said that the vessel was, he thought, to begin the service at the end of March or beginning of April 1994.

(xi)	In 1994 Mr Lemonis, in the course of his evidence to the maritime enquiry, had referred to the proposed service as one between Igoumenitsa and Bari, but had not mentioned Durres until a statement made in 1995.  The same was true with the evidence of Mr Kouratolos.  The defendants question why only in 1995 was Durres mentioned for the first time, if not to bolster a motive for an attack on the vessel by Italian competitors.  It is to be noted that when Lemonis was asked about this in cross-examination he could not explain the omission of Durres except by saying that he did know about it in 1994 before the loss, that he thought he had mentioned it to the enquiry but it must have been omitted from the record.  The first mention of Durres being included in any of the statements appears to have been in Ventouris’s memorandum to the maritime enquiry in November 1994.

The defendants further attack the alleged existence of a lucrative trade on the route to Albania by reference to the claimants’ evidence about the acquisition of the Pegasus.  Thus, Ventouris told the Greek criminal court (March 1996 Memorandum) that the Pegasus was purchased, after the Grecia Express sank, for US$12 million as a replacement for the Durres route.  But for the loss of the vessel, they would probably not have purchased the Pegasus.  He told the maritime enquiry that in the event its operation on that route was very beneficial.  However, the defendants submit that the Pegasus only cost Mr Ventouris $4 million and, as he accepted, the conversion costs did not exceed $1.5 million to $ 2 million.  The explanation put forward by him in cross-examination was that he had not meant that the purchase price was $12 million but that the “commercial value” was that amount.  He explained that this meant the value of a fully operating ferry in Greek waters with a Greek passenger route licence.  However, in an internal Ventouris document the “commercial value” of the Pegasus is given as US$7 million.  Mr Ventouris said in evidence that this simply covered the purchase price, conversion costs and initial costs of bringing into operation.

In relation to the Pegasus, the defendants further submit that, on the evidence, Mr Ventouris had decided to buy the vessel before the loss of the Grecia Express.  He had put in an offer on 13 February 1994.

That gave rise to a counter-offer at US$4.1 million, which was accepted by Ventouris on 16 February 1994, but that was subject to approval by the sellers’ board of directors.  That approval was qualified by a condition restricting the purchaser from trading the vessel between Greece and Italy.  This proved to be a sticking point in the negotiations and on 3 March the sellers put the vessel back on the market.  On the following day - the day before the Grecia Express was lost - Ventouris’s brokers re-opened negotiations at $3.6 million on the basis of the exclusion only of the Brindisi - Greece route.  Finally, on 10 March this offer was increased to $4 million, subject to the Brindisi - Greece exclusion, and that offer was then accepted.  Mr Ventouris said in re-examination that the loss of the Grecia Express led him to raise the offered price for Pegasus.  He had originally intended to purchase the Pegasus to expand his fleet and specifically to replace the Grecia Express on other routes when it went into service between Bari, Durres and Igoumenitsa.  The defendants say that this evidence suggests that the loss of the Grecia Express had no bearing on the purchase of the Pegasus.

Further, the Pegasus was only operated on the Durres service for three months, from 18 November 1994 to 21 January 1995, at which point she was taken off the service because it was making a loss.  The defendants draw attention to the sale by Mr Ventouris to Mr De Leonardo’s company of 25 per cent of the shares in Bengal Enterprises, a company which owned the Cypriot company Rebox Shipping Co Ltd which in turn owned the Pegasus.  The original price, struck in October 1994, was $5 million, which valued the company at $20 million.  However, on 2 February 1995 the price was agreed to be reduced to $1.25 million which valued the company at $5 million.  Mr Ventouris could not remember why this had been done.  The defendants submit that this suggests that the Albanian trade was by no means as profitable as had been suggested by Ventouris for, if the shipowning company was worth no more than $5 million in February 1995, the vessel itself was worth less than its purchase price and conversion costs.

The defendants submit that the effect of all this evidence is that in reality the claimants never had any intention to put the Grecia Express on to the Bari - Durres - Igoumenitsa route and that such intention has been introduced simply to provide an explanation for the sinking - by Italian competitors - so as to provide the owners with an explanation inconsistent with their own involvement.

As to the true motive of the claimants for sinking the vessel, the defendants make the following submissions.

The vessel was 28 years old and the oldest and slowest in the Ventouris fleet and, save for the Bari Express, had the smallest truck capacity.

The vessel would need significant expenditure on her by October 1994 to enable her to comply with the requirements of SOLAS.  The vessel was below the so-called minimum A/Amax level of 70 per cent required by the IMO to provide enhanced stability in case of hull damage.  This would require the fitting of a transverse bulkhead, which, having regard to the IMO permissible phased implementation regime, would be all that was required to achieve compliance up to 1 October 1998.  This, according to the evidence of the defendants’ expert, Mr Bowman, would cost in the range $150,000 to $250,000.

In the course of the trial Mr Kopoukis, the owners’ independent naval architect, put forward an alternative method of achieving compliance and that was by reducing the vessel’s deadweight.  However, the defendants say that this would be seriously unattractive commercially because it would involve achieving a reduction of at least 75 m.t. which, according to Mr Boyd, would be the equivalent of 3 lorries at 25 m.t. each or 62 cars, depending on weight, and that would only achieve an A/Amax rating of 69 per cent.  That would satisfy IMO requirements until October 1996.  In order to continue trading after that date there would have to be a further 75 m.t. deadweight reduction.

The defendants also draw attention to certain unsatisfactory features of the evidence of  Mr Lemonis, the claimants’ chief engineer.  He had stated in his witness statement that in March 1994 he did not consider that any SOLAS work would have to be carried out until 1998 at the earliest.  He explained this by reference to certain A/Amax calculations carried out before the loss of the vessel by Mr Kopoukis.  On the other hand, Mr Kopoukis said in evidence that he had done no calculations before or after the loss and that he had expressed no general opinion on the matter until after the sinking when he expressed the opinion, without calculations, that the vessel could have complied with the regulations for the existing draft or for a smaller draft without the need for “small or wide-scale conversions”.

The defendants criticise in a number of respects the evidence of Mr Ventouris as to the financial condition of the Ventouris Group.

They refer to the absence of documents relating to loans to the Group from two out of its three banks, that is National Bank of Greece ($2,694,000) and SURZUR Overseas Ltd ($20,235,000).  When he was asked why no documents had been produced, he was unable to say what had happened to the documents.  He had asked his staff to look out any such documents and he could not say why none had been found.

Further, because there were no consolidated Group accounts it is impossible to tell how sound the Group’s financial position was overall.  However, between December 1992 and December 1994 the Group’s financial position vis-a-vis its constituent shipowning companies changed from being owed $2.9 million to owing the companies $45.1 million.

The defendants also draw attention to discrepancies in information given in June 1993 to Royal Bank of Scotland in order to refinance the loans made by SURZUR in respect of the Saturnus.  The operating profit of the Grecia Express for 1992 was put at $3.2 million when it was in truth $648,029 and the operating profits of three other vessels were also exaggerated.  The only explanation advanced by Mr Ventouris was that the figures emanated from an internal accountant called Ananiadis who had subsequently been dismissed for theft.

Further, the defendants rely on the Group’s breaches of the liquidity requirements of Royal Bank of Scotland, imposed in relation to the refinancing in July 1993 of the Saturnus loan ($10 million).  A minimum cash deposit of $2 million had to be left with the Bank.  However, that requirement had been broken by October 1993 by when cash had dropped to $800,000.  By 31 December 1993 the level had dropped slightly further to $771,156.

Finally, the defendants submit that the vessel was substantially over-insured at $8 million and that her market value in March 1994 was no more than about $2 million.  I consider this allegation later in this judgment in the section dealing with non-disclosure.  The conclusion at which I have arrived on the whole of the evidence is that US$ 8 million is not outside the range for which a reasonable shipowner intending to trade the vessel in or around Greek waters would have insured her.

Motive:  Discussion

There are two distinct aspects to this area of the case:

(i)	whether there was a motive for Mr Ventouris to procure the sinking;
(ii)	whether the prospective Albanian service was fact or a fiction introduced by Mr Ventouris to attempt to provide an explanation for the attack on the vessel by a trade competitor.

Both (i) and (ii) are closely related in as much as, if there really was an Albanian service in serious prospect, the probability of Mr Ventouris having procured the sinking would be diminished.

I shall first consider whether the prospective Bari-Durres-Igoumenitsa service was a reality or a mere cosmetic fiction.

In September 1992 Mr De Leonardo, the Ventouris agent at Bari, reported by fax to Mr Ventouris on a fact-finding visit which he had just made to Albania, in the course of which he had conducted discussions with officials from the Albanian Ministry of Transport, including the Minister himself, Mr Fatos Bitinka.  He reported that other Greek and Italian operators had already applied to provide services to Albania and it was important to move without delay.  Amongst the various options for a service considered in this very detailed report is the case of the port of “Durazzo”, that is Durres.  However, this port is identified as presenting a problem by reason of having only one ferry berth.  The report also contains an extremely detailed analysis of the cost likely to be incurred in operating a ferry to Albania.

This was followed on 19 October 1992 by a fax message sent by Mr Ventouris to the Albanian Minister of Transport setting out proposals for the setting up of a ferry service in co-operation with the Albanian Ministry of Transport and proposing a meeting in Tirane in November 1992.  That meeting appears to have taken place by 17 November 1992.  A telex from Mr De Leonardo to Mr Ventouris bearing that date set out detailed proposals for a service between Bari and Durres, two days a week during January to April 1993 and three days a week during May to September 1993.  A detailed structure is set out.  The capacity put forward is for 300 passengers, 100 cars and 6 camions.  The telex included proposals for providing finance ($200,000) for the expansion of port facilities at Durres.  The expressed intention was to begin the service as soon as possible.  On 20 November 1992 Mr Ventouris sent a fax to the Albanian minister briefly setting out proposals for the service, but only in outline, following the meeting which he had attended the previous week.

There is then no further correspondence before this court until 28 February 1994.  According to Mr Ventouris, the detailed organisation of the service was left to Mr De Leonardo.  No service had commenced by the end of 1993 and the evidence includes no explanation for that.  However, in a telex sent by Mr De Leonardo to Mr Ventouris on 28 February 1994 he set out three alternative proposals for the schedule of the Grecia Express between Bari, Durres and Igoumenitsa and recommended that the third proposal be adopted.  There is no evidence as to whether Mr Ventouris had indicated a decision on scheduling prior to the sinking of the vessel.

The Albanian “licence” was, according to Mr Ventouris’s evidence held by Mr De Leonardo.  A document certified by a Greek lawyer to be an exact copy of an original shown to her includes a fax notation at the top that it was sent by Pan Travel, Bari, on 28 February 1994 at 1835.  It is also dated 28.2.1994.  Obviously the document certified by the Greek lawyer was a true photocopy of the fax.  The reference to the “original” is thus clearly to the fax and not the document of which a fax image was shown to her.   Mr Ventouris said that he had only ever seen the faxed copy of the licence.

There is no evidence from Mr Leonardo as to the circumstances in which he came into possession of the document of which a copy was sent to Ventouris by fax.  That document has clearly been altered by the insertion of the vessel’s name and the owners name.  The minister’s signature may have been forged.  It also curiously states the number of passengers at 200, whereas the vessel’s carrying capacity was 960.  However, this feature is not so remarkable in view of the fact that Mr De Leonardo’s fax of 17 November 1992 contemplated only 300 passengers on average.  Also the sailing schedule bears no relation to any of the suggested schedules in Mr De Leonardo’s 28 February 1994 fax.  If one compares this document with the unaltered licence for the Afrodite II issued to Liburnia, it is clear that the dates of the licence application and the sailing schedule times have not been changed.  There are therefore on the face of the original vessels arriving at and departing from Durres at identical times on three days a week.  Further, the Liburnia licence is signed but not stamped with the Albanian Ministry stamp.  This suggests that the document of which a copy was faxed to Mr Ventouris by Mr De Leonardo must have emanated, perhaps also by fax, from Albania.  It is to be inferred that the copy introducing the alterations must have been created in Albania and could not have been manufactured in Italy unless, improbably, someone in Italy had access to an Albanian official stamp.

Further, the licence for the Pegasus to operate on the Bari-Durres route dated 18 October 1994 bears an identical stamp to that for the Grecia Express and, importantly, was sent by fax on that same date to Mr De Leonardo who again on the same date sent it on by fax to Mr Ventouris.

I infer that someone in the Albanian Ministry of Transport probably faxed the Grecia Express “licence” to De Leonardo on 28 February 1994 and that neither Mr De Leonardo nor Mr Ventouris were privy to the creation of this peculiar document.  It may be that this was done because the Albanian Ministry at that time had no pro forma wording for licences and had to re-type the document each time.  Precisely why they produced such a primitive and inaccurate document is entirely unclear.  However, it is to be observed that in 1994 the administration of public services in Albania was extremely chaotic and unreliable.  I further infer that the fax of the same date in which Mr De Leonardo set out sailing schedules was genuine and was created in consequence of the receipt by him of the licence by fax from Tirane.  It is quite possible, given that the licence was in Albanian, that, before he sent his fax of schedules, Mr De Leonardo had not spotted the required sailing days or indeed the passenger limit.

The licence does not therefore give rise to an inference adverse to Mr Ventouris.  Indeed, I consider that, if anything, it supports his case on lack of motive for the loss.

The absence of published sailing schedules by the time of the loss is, in my judgment, quite unsurprising.  The 28 February 1994 was the Monday before the Saturday on which the vessel sank.  There is nothing remotely suspicious about the omission to finalise or publish sailing schedules during such a short period.

Nor do I consider that the fact that the licence was first produced by the claimants’ solicitors as having just come to light shortly after Mr Ventouris had first referred to negotiations with the Albanian authorities in the course of his evidence to the Greek maritime enquiry gives rise to any adverse inference.  This is just as likely to have been the result of the state of documentary disorganisation normally to be found in the offices of a Greek ship operator as of any other cause.

Little or no weight can be attached to the fact that it was only late on Friday 4 March 1994 that an attempt was made to book the vessel into dry dock on 9 or 10 March if it was going to commence service on 17/18 March, as previously stated by Mr Ventouris.  Even if Mr Lemonis’s evidence that the outstanding work at Piraeus would have taken 5 to 6 days was realistic and not unduly optimistic, this was apparently leaving things almost beyond the last minute.  However, not only were Ventouris endeavouring to book a dry dock for the Grecia Express as a matter of great urgency, but they were also by the same message trying to book in the Saturnus on 9 March.  As appears from the sailing schedules, that vessel was out of service from 5 to 25 March, presumably including some time in dry dock.  Accordingly, the Grecia Express would not have been available until the last week in March.  For Mr Ventouris to have stated that it was intended to introduce the service on 17/18 March, there having been no attempt to book the dry dock until 4 March, suggests a combination of typical disfunctional Greek optimism combined with imperfect recollection rather than a fictitious scenario designed to mask a plan to sink the vessel.

Mr Lemonis was not an impressive witness.  Given that he was giving evidence about events which had taken place several years earlier, he gave the distinct impression of not being prepared to make much effort to give an accurate recollection of the matters about which he was asked.  His explanation for the omission of  all mention of the service to Durres in the record of his evidence to the Greek maritime enquiry is unconvincing.  It is much more likely that because the service had never previously existed he simply forgot to mention it when his evidence was taken, even though he had learned about the planned service before the loss of the vessel.  It may be that it was only after Mr Ventouris had voiced his suspicions that the sinking was by persons determined to prevent the start of the new service that Lemonis tuned up his evidence in the subsequent statement.  However, that does not necessarily mean that the later introduction of the reference to the Durres service was untrue.  The same could be said of the evidence of Mr Kouratolos in relation to the Durres service.

However, I am satisfied that, unless there is something seriously wrong with the translation, the evidence which Mr Ventouris is recorded as having given to the Greek criminal court about the purchase of the Pegasus was untrue.  He purchased it on 10 March 1994 after the loss of the Grecia Express for US$ 4 million and he stated that he had purchased it for $12 million and that, but for the loss of the vessel, he probably would not have purchased the Pegasus.  Whereas, the loss of the Grecia Express probably influenced Ventouris to increase the offer for Pegasus above $3.6 million, neither the price nor the commercial value was $12 million or anything like that.  The cost of purchasing and converting the Pegasus was of the order of $6 million at the most and the internal documents record a value of $7 million.

In these circumstances the correct approach to this evidence is analogous to the approach to lies in criminal trials as identified in R v. Lucas [1981] 1 QB 720 at p724.  The conclusion that the person against whom the allegation of criminality is made has lied about a matter other than, but relevant to, the allegation in issue does not necessarily corroborate the allegation.  To do so it must have been motivated by a “realisation of guilt and a fear of the truth”.  In this connection it is necessary to remind oneself that people do give untruthful evidence for other reasons, including for example, an attempt to bolster up the truth or to conceal something out of shame.  In arriving at the answer to the question whether the lie was motivated by a realisation of guilt and a fear of the truth it is, however, essential to look at the whole of the rest of the evidence and to consider whether the lie was intended to mask guilt or fortify innocence.

It is important to bear in mind that, like many Greek shipowners, Mr Ventouris is a risk-taker driven by an optimistic belief in his ability to deploy more and more vessels in profitable trade.  I accept his evidence that he purchased the Pegasus to expand his fleet.  I further find that the loss of the Grecia Express influenced his decision.  He also purchased the Pollux at the same time.  He was obviously in an expansive mood.  It took until July 1994 to get the Pegasus into service and, once the Grecia Express had been lost, it must have been apparent to him that he was not going to be able to absorb the Durres service until after the Pegasus had been acquired and brought into operation.  It is unclear why it then took until 18 November to start that service.  Perhaps there was a delay in obtaining a licence from the Albanian Ministry of Transport.  The fact is, however, that such a service did start and was run for two months, after which it ceased because it was making a loss.  It is improbable that Mr Ventouris was being entirely open with the court when he said he could not remember why the price of 25 per cent of the shares in Bengal Enterprises, previously sold to Mr De Leonardo, had been reduced from US$5 million to US$1.25 million.  What is reasonably clear, however, is that this reduction in the price of a 25 per cent share in the Pegasus is consistent with a failure to achieve the profits which had been anticipated from the Durres service.  That, however, goes nowhere near supporting the inference that in March 1994 the Grecia Express was never intended to be used on that service or indeed that the prospect in March 1994 of earning substantial profits on that service, if commenced within a few weeks, was so slight as to be fictitious.

The correspondence with Mr De Leonardo and the Albanian Ministry of Transport prior to the date of the loss of the Grecia Express and the eventual commencement of the Durres service with the Pegasus suggests that Mr Ventouris had indeed intended to bring the Grecia Express into operation on that service.  The urgent messages to the Scaramanga shipyard and the recruitment of the wiper by Mr Londos are also consistent with this intention .

Looking at the whole of the evidence relating to the Durres service and to the purchase of the Pegasus, I therefore conclude that, taken alone, it does not suggest that on 4 March 1994 there was no true intention on the part of Mr Ventouris to commence the Grecia Express on the Bari-Durres-Igoumenitsa service in the very near future.

I now turn to financial and related considerations.

The vessel was 28 years old.  That was by no means unusual for Greek passenger ferries in 1994.  Ventouris acquired a vessel called Pollux in the year 2000 for US$2.4 million.  It was 35 years old and was at the date of the trial one year later in operation on the Bari-Durres route.  It had similar characteristics to the Grecia Express, particularly with regard to passenger capacity, although it had a lower lane meterage and was slightly faster.  However, its fuel consumption was greater and it relied on gas oil and not fuel oil which is cheaper.  

The possibility of the advent of fast monohulls or fast ferries in Greek passenger services in the immediate future cannot, in my judgment, be regarded as a major influence on Mr Ventouris’s perception of the usefulness of older generation ferries in the immediately foreseeable future.  The first fast ferries were introduced into service on the Ancona-Patras route in 1995.  However, although they were much faster than the older ferries and had significantly larger capacity, they required a huge capital investment: US$73 million each, and their fuel consumption cost nearly four times that of the Grecia Express.  The economics of operation were therefore of a wholly different order of magnitude from the economics of operation of the slower, smaller but basically efficient older ferries.  That ferries of this latter kind can still be profitably operated to this day is well demonstrated by the vessels making up the Ventouris fleet in 2001 and in particular by the purchase of the Pollux in 2000.

As to the need to comply with the SOLAS 90 regime, according to Mr Ventouris, he was not concerned in 1994 about such compliance.  Mr Lemonis had not thought about it either.  This is not surprising.  Precise foresight of the implications of such a requirement as much as 6 months in advance by a Greek management company such as Ventouris could hardly be expected.  Moreover, the calculations of the modifications needed for compliance were quite difficult.  Mr Kopoukis made no such calculations prior to the loss.  Nor did anybody else.

Having regard to the expert evidence, even if anybody had done the necessary calculations and Ventouris had had the modifications costed, the expenditure necessary could not have exceeded $150,000.  The way to achieve compliance would probably be by fitting a new transverse bulkhead and reducing the deadweight by reducing the number of trucks by two.  This would achieve compliance up to 1 October 2000 or the equivalent of 7 seasons trading.  The cost would therefore be relatively small relative to the market price of a vessel or to the profit of US$1.7 million achieved in the year to 31 December 1993.  However, the destruction of the vessel before the commencement of the season appears to be entirely inconsistent with the materiality of the SOLAS requirements to the purpose of sinking her.  Nobody would have sacrificed a whole season’s trading profits when they could have waited until October before disposing of her.

It is also impossible, in my judgment, to draw any adverse inferences from Ventouris’s failure to disclose many documents relating to credit facilities provided by National Bank of Greece and SURZUR.  This is just as likely as not to be due to a badly organised office.  In any event those documents that have been disclosed and which relate to SURZUR are not relied on as suggesting anything untoward in respect of the facility.

The presentation in June 1993 to Royal Bank of Scotland of seriously inaccurate information about the level of operating profits of four of the vessels in the Ventouris fleet is on the face of it that conduct which gives rise to the most serious adverse inference in respect of the honesty of Mr Ventouris.  It may be that these inaccurate figures were all the fault of the in-house accountant, Ananiadis.  I am bound to say, however, that I found Mr Ventouris’s evidence on this point somewhat unconvincing.

Finally, the submission that there is something sinister or relevant to motive in the inter-company movement of funds or balances, is to be rejected.  The transfer of funds to the companies was identified in 1995 as a payment of dividends by the shipowning companies to Ventouris Group Enterprises.  The transfer of US$45.1 million is much less relevant than the fact that this level of funds was there to be transferred and had been the result of trading profits.  Nor was the failure to retain the full liquidity level required by Royal Bank of Scotland a matter which suggests an acute need to defraud insurers.  Certainly it did not evoke any kind of crisis between Mr Ventouris and the Bank.  Indeed, to have sunk the vessel at the beginning of March was inevitably going to have an immediately detrimental effect on the Group’s cash flow.

For these reasons and taking fully into account those aspects of the evidence which raise question marks about the honesty and openness of the owners, I have come to the conclusion that the indicia of a fraudulent motive on the part of Mr Ventouris are very weak.  Indeed, I would go further.  The detrimental effects of destruction of the vessel would not only be obvious to a hypothetical shipowner; but would obviously exceed any possible benefit, at least in the short term.

However, if Mr Ventouris had no motive for sinking the vessel, who did?  It is not for the assured owner to do more than sufficiently negate the allegation of scuttling.  He does not have to assign a motive to an identifiable third party, although, if he effectively does so, that can only assist him in challenging the allegation of fraud.  It may be that in the present case trade competitors would be prepared to go to this length, but the evidence establishing that, either directly or by inference, is simply not before this court.  There is no basis for anything more than mere speculation and Mr Ventouris has never suggested anything more than that.  There is anecdotal evidence of vessels having their mooring ropes deliberately cut at Aegion prior to this loss.  There is also the attack on and the sinking of the Star One described later in this judgment in the section on non-disclosure.  This shows that violent sabotage is by no means unknown in the Greek passenger ferry industry.  There is, however, no evidence on the basis of which it can be inferred that the attack on the Grecia Express was directed against Mr Ventouris personally or his business activities.

Nor is there any evidence to suggest that Mr Vangelis had any independent motive for sinking the vessel.  He continued in the employment of the Ventouris Group long after the event, which is inconsistent both with any belief on the part of Ventouris that he had taken an independent role in the sinking and with any attempt by Ventouris to cast the blame on a possible, if not the most obvious perpetrator, in order to mask Mr Ventouris’s own complicity.

Overview of the Evidence

In the sections of this judgment dealing with the circumstances of the loss and motive, as well as that of the value of the vessel which appears later in this judgment I have separately considered whether the different aspects of the loss give rise to inferences adverse to the claimant’s case that Mr Ventouris was not complicit in the sinking of the vessel.  This exercise has necessarily involved a piecemeal analysis of the factual and expert evidence.  It has also involved consideration of the reliability of the evidence of many of the witnesses, but particularly of Mr Ventouris and Mr Vangelis, as to specific aspects of the case.  This in turn has involved detailed comparisons between their evidence in this court and that before the Greek maritime enquiry, in the Greek criminal trial and in the interviews conducted in the defendants’ Greek lawyers’ offices in 1994.

Whereas the defendants’ case on the loss of the Coha II is primarily relevant to their case on non-disclosure, the dishonest casting away of that vessel at the instigation of Mr Ventouris would give rise to the conclusion that Mr Ventouris was a dishonest man and would be a factor of considerable weight in assessing his credibility as a witness in respect of matters relating to the Grecia Express and therefore as to this court’s view as to whether aspects of the loss of that vessel give rise to adverse inferences.  For these reasons and since the loss of the Coha II occurred little more than four months before the loss of the Grecia Express, the section of this judgment which deals with the loss of the Coha II was prepared before that relating to the Grecia Express.  As will appear, I have concluded that Mr Ventouris did not fraudulently dispose of the Coha II and that the circumstances of its loss were accidental and very nearly caused the death of Mr Ventouris and Mr Architectonides.  I therefore approach the evidence relating to the loss of the Grecia Express against the background that at the time when it occurred Mr Ventouris had hardly recovered from his exceptionally traumatic experience with Coha II and that the claim for the loss of Coha II in highly unusual circumstances had not yet been accepted by its insurers.  Accordingly, it is necessary when testing the credibility of the evidence of Mr Ventouris as to Grecia Express to bear in mind that any conspiracy by him to sink that vessel must have been entered into when there was a still outstanding claim against the insurers of Coha II.  It would be obvious to him that if it were discovered that he was responsible for the sinking of the Grecia Express, that would be likely to be extremely detrimental to his claim in respect of Coha II.  Accordingly, unless Mr Ventouris was afflicted by a condition of extreme irrationality not supported by the evidence, it is distinctly improbable that, having survived the appalling experience of the Coha II, he would almost immediately have set his mind to sinking the Grecia Express by a method which necessarily exposed a deliberate casting away of that vessel.

It is right to add that, even had I first concluded that, independently of the Coha II, Mr Ventouris had procured the sinking of the Grecia Express, I should have regarded the evidence as to the loss of the Coha II as pointing so compellingly to an accidental loss that I should have arrived at the same conclusion as to the loss of that vessel as I have reached in this judgment.

That said, it is not enough to analyse each of the relevant aspects of the loss of the Grecia Express, including motive, separately to see whether, taken in isolation, the evidence as to that aspect gives rise to an adverse inference.  Only by standing back and viewing the evidence as a whole can one properly reach a conclusion one way or the other as to the overall level of probability of complicity on the part of Mr Ventouris.  A combination of circumstances each of which when taken in isolation raises but a weak and improbable suggestion of guilt may when taken in aggregate give rise to a sufficiently high level of probability to support the defendant insurers’ case.

The overview which presents itself to me includes somewhat unsatisfactory evidence given by Mr Ventouris, Mr Lemonis and Mr Kouratolos to the Greek maritime enquiry and in the Greek criminal proceedings in the case of Mr Ventouris, including in particular the latter’s unjustifiable exaggeration of the purchase price of the Pegasus.  It also includes the admittedly untruthful evidence to the Greek maritime enquiry given by Mr Vangelis and subsequently changed.  Even the “corrected” version of his evidence does not tie up in a number of respects with that of the Aegion port authority witnesses.  Amongst those matters which I must also take into account are the inflated 1992 profits of four of the vessels in the Ventouris fleet represented to the Royal Bank of Scotland in June 1993 and Mr Ventouris’s inability to provide any convincing explanation to this court for that misleading dealing with the claimants’ bankers.

Nevertheless, taking the factual and expert evidence as to the circumstances of the loss and the lack of any realistic motive for the sinking into account, I have come to the conclusion that, even in aggregate, the unsatisfactory features of some parts of the claimants’ witnesses’ evidence identified by the defendants do not give rise to an inference that the Grecia Express was sunk in execution of a plan promoted by Mr Ventouris or of which he had knowledge.  Indeed, in my judgment, this is not a case where the evidence is finely balanced with the result that the court can go no further than concluding that the defendant insurers have not established wilful misconduct with a sufficiently high level of probability.  On the contrary, I have no hesitation in concluding that the claimant owners have proved affirmatively on the balance of probabilities that the loss was caused by unknown persons acting maliciously without any wilful misconduct on the part of the owner.  They have also proved affirmatively that on the balance of probabilities the loss was not caused by barratry on the part of Mr Vangelis.

The Defendants’ Case on Non-Disclosure

Underwriters rely on four main areas of fact which, as is common ground, were not disclosed to the Association, either at the time of the original entry of this vessel or of renewal of cover.  Three of those areas of fact involve a vessel other than Grecia Express with which Mr Ventouris had some previous connection.  The materiality of each is said by the underwriters and by their expert witness, Mr Hunt, to go to what is known as “moral hazard”.  This particular aspect of materiality differs fundamentally from all others in as much as it has nothing directly to do with the prospective incidence of an insured peril.  Instead, it is relevant only to whether the proposer for cover will be an honest assured.  As stated in MacGillivray on Insurance Law:

“All facts are material which suggest that the business integrity of the proposer for insurance is open to doubt, or that his motive in seeking cover is not merely the prudent one of covering himself against losses which might occur in the ordinary course of events.”

In the present case the following are the areas of fact alleged by the underwriters to have been material and to have been disclosed neither on the occasion of the original entry of the vessel nor subsequently on renewal for the period in the course of which the loss was sustained.

1.	The Italia Express.  On the night of 23/24 March 1988, some 6 years before the loss of the Grecia Express, this vessel, which was a sister ship of the latter, sank at its moorings some 30 metres from the quay at Drapetsona near Piraeus, following an explosion caused by several limpet mines which had been attached to its hull.  At the time of the loss, Italia Express was owned by Mr Ventouris’s brother, Apostolos Ventouris.  Up to December 1987, some 3-4 months before the explosion, the vessel had been owned and operated by a company called Gitanic Shipping Co SA which had, up to then, been jointly owned by the two brothers, and which, until September 1989, was also owner of the Grecia Express.  From December 1987, Apostolos took over sole ownership and operation of the vessel and Mr Ventouris ceased to have an interest.

2.	Star One.  On the night of 23/24 May 1992 this passenger vessel sank whilst moored at the port of Trokantero, near Piraeus.  The cause of the sinking was the deliberate opening of all four sea valves in the engine room and the consequent flooding of the vessel.  Two masked men boarded the vessel at night, tied up and gagged the nightwatchman and then opened the valves.  On 15 May 1992 the vessel had been bareboat chartered by Mr Ventouris or one of his companies for use as a floating casino off the Italian coast based in Bari.  The owner of the vessel was a Mr Alevizos.  It was he who claimed on insurers for the loss and not Mr Ventouris or his company.  In addition to the moral hazard as the basis of materiality the defendant underwriters also rely on this fact as material to the incidence of the risk of sabotage of vessels with which Mr Ventouris had a connection.  

3.	The Coha II.  On 29 October 1993 this luxury motor yacht, which was beneficially owned by Mr Ventouris through an Isle of Man company (Esperance Co. Ltd) and insured for US$2 million, disappeared on a voyage from Piraeus to Tinos in the Aegean while under the control of Mr Ventouris as skipper and one of his employees, a Mr Architectonides.  The vessel is said to have been intentionally cast away by Mr Ventouris for the purpose of making a fraudulent claim on its insurers.  I interpose that the circumstances said to have given rise to the loss of this vessel are extremely unusual.  I shall have to consider them in some detail later in this judgment because Mr Ventouris strenuously denies that this vessel was deliberately cast away or that there was anything fraudulent about the claim in respect of its loss which he ultimately made against its insurers in the Commercial Court and then abandoned in the course of the trial.  This allegation of non-disclosure therefore differs from those relating to the Italia Express and the Star One in as much as the underlying facts are substantially disputed.  It is common ground that if the Coha II was deliberately cast away by Mr Ventouris, this was a fact material to be disclosed to the insurers of Grecia Express prior to renewal .

4.	Overvaluation.  The vessel was insured for US$8 million, whereas its true market value was about US$2-3 million.  This allegation of over valuation is also strongly challenged.  In substance the claimants’ case is that, even if the market value was not as high as US$8 million, it was near enough to that figure to make it reasonable to value the vessel at US$8 million for insurance purposes, taking into account loss of use and the risk of delay in finding and commissioning a replacement vessel, should it be lost.

The defendants had also relied on non-disclosure of the loss on 8 October 1990 of a yacht, the St Nicholas.  Mr Ventouris had been the registered owner until July 1990 when he had sold it to a company controlled by a Mr Stellatos, Mr Ventouris’s brother in law who became the registered skipper.  Mr Stellatos owned a company used by Mr Ventouris as his agent at Patras.  The yacht was stolen and later found capsized and submerged with its valves open and seawater cooling pipes cut.  At the stage of final submissions the defendants abandoned reliance on this as a fact material to be disclosed “in isolation”, but appeared to continue to rely on it as part of a group of facts including those relating to the Italia Express, the Star One, the Coha II and Valuation which, taken together, were said to be material to be disclosed.

In relation to materiality there are also issues as to whether, if material, the circumstances relating to the loss of the Star One and the Coha II and the connection of Mr Ventouris with each of these incidents can be said to be matters either of common knowledge or notoriety and/or which would have been known by a marine insurer in the ordinary course of business within S.18(3)(b) of the Marine Insurance Act 1906 and therefore not necessary to be disclosed.

The Expert Evidence on Materiality

The defendant underwriters relied on the evidence of Mr Paul Hunt.  He had substantial experience as a marine underwriter at Lloyd’s, writing both hull and machinery and war risks business.  In his expert report he explained that war risks insurance is very inexpensive by comparison with hull and machinery insurance because war risks claims are relatively rare.  Thus, the Grecia Express war risks premium was only US$2000, some 0.25 per cent of the stated US$8 million value.  The relative rarity of such claims called for the disclosure of any such claims going back beyond the 4 to 6 years which would be relevant for hull and machinery cover and in particular those claims which could have a bearing on the risk proposed.  War risks claims or losses which had occurred in suspicious circumstances would be particularly material and a history of 2 or 3 war risks claims would be so inherently suspicious as to cause him to decline the risk.  He more specifically stated:

“Marine insurers are, for obvious reasons, particularly concerned about obtaining any information which connects the assured with the loss of a vessel in suspicious circumstances such as the scuttling of a vessel.  In general terms a prudent insurer would expect to have disclosed to him or her:

(1)	whether the assured has ever made a claim or stood to benefit from a claim arising out of the sinking of a vessel in suspicious circumstances;

(2)	whether the assured has or has had close business connections with a person known to have made a claim or stood to benefit from a claim arising out of the sinking of a vessel in suspicious circumstances or was suspected to have been involved in the sinking of a vessel.

These concerns go to the moral hazard involved in the insurance.  If there is a shadow hanging over the probity of the assured the insurer would want to know about it.

As to the sinking of the Italia Express, given that the defendants already knew about the circumstances of that sinking when in 1990 Mr Ventouris sought to insure the Venus, the first of his vessels to be insured by the defendants, and when subsequently the Grecia Express was entered and when later its entry was renewed, the disclosure of the relationship between him and his brother Apostolos Ventouris at the time of the loss of the Italia Express was inadequate.  The relevant disclosure by the claimants’ brokers in response in 1990 to concerns expressed by Mr Ballantyne of the defendants as to whether Mr Ventouris might be connected with the sinking of the Italia Express was to the effect that Mr Ventouris, the principal of the owner company, was related to the Ventouris family “but split a number of years ago” and that he “was totally unconnected with the Italia Express incident as the latter vessel was owned by his brother Mr Apostolos Ventouris who was a ferry operator in his own right”.  Mr Hunt’s criticism of this disclosure is that underwriters were never told that, until December 1987, some three months before the loss, the vessel had been owned by Gitanic Shipping Co. which, until December 1987, was jointly owned by Mr Ventouris and Apostolos.  This was so close a relationship between Mr Ventouris and the owner of the Italia Express and so close in time to the loss of that vessel that it ought to have been disclosed and, had it been disclosed to him, as prospective underwriter, he would have declined the risk.

In the course of his cross-examination Mr Hunt stated that the fact of the business association between the two brothers had existed such a short time before the loss of the Italia Express made it material to be disclosed even though the claim of the owner of that vessel had been paid in full by its insurers.  It was the association with a person, on board whose vessel an explosion had occurred, that gave rise to the moral hazard which rendered the fact material.

I observe firstly that it was not part of Mr Hunt’s evidence that the previous business relationship in relation to the Italia Express was material because it might suggest an enhanced risk of a war risk event such as loss caused by persons acting maliciously and directed at Mr Ventouris personally.

Secondly, the claim by Apostolos against the war risks underwriters in the Commercial Court succeeded when an allegation that he scuttled her was withdrawn, the judge indicating that Apostolos was “totally vindicated ...... without a stain on his character”.  See The Italia Express [1992] 2 Lloyd’s Rep 281@284.

As to the loss of the Star One, Mr Hunt stated in his report that, given that the sinking was a war risk event, it ought to have been disclosed by the claimant as part of the vessel’s loss record, even though no claim had ever been made by Mr Ventouris or his company on the vessel’s insurers and even though he did not stand to gain from any insurance proceeds. Further, the loss of that vessel occurred in suspicious circumstances and, given that Mr Ventouris was connected with and managed the vessel as bareboat charterer, it ought to have been disclosed.

The loss was reported in Lloyd’s List and Lloyd’s Weekly Casualty Reports but those would not be systematically read or noted or filed by war risks underwriters.  Such reports therefore might have been noticed when they were published but equally might not.  And had they been noticed, they would not necessarily have been remembered.  For these reasons the loss was not a matter of common knowledge or notoriety or something about which an insurer ought to have known in the ordinary course of business.

Mr Hunt, in the course of his evidence in answer to questions put by the court and in cross examination by counsel, emphasised the moral hazard aspect of materiality in relation to Star One.  He accepted that the basis of the materiality was the opportunity which disclosure would offer to the underwriters to investigate the loss to ascertain whether the vessel had in truth been scuttled by Mr Ventouris.  He laid much less emphasis on disclosure being relevant to the magnitude of the risk attributable to war risks perils than on its relevance to moral hazard and accepted in terms that it did not go to that aspect.  In re-examination he stated that, if he had been given the information that the Star One had been sunk by commercial rivals of Mr Ventouris, he would have declined to accept the Grecia Express risk.

The loss of the Coha II, as already explained, gives rise to a major issue of fact.  However, Mr Hunt’s evidence was that, even if it were concluded that the vessel was not fraudulently cast away, the loss ought to have been disclosed to underwriters because it occurred in intrinsically suspicious circumstances.

In paragraph 46 of his report Mr Hunt stated:

“The fact that Mr Ventouris’ motor boat had disappeared without trace in such extraordinary, not to say suspicious, circumstances is plainly something that a prudent underwriter would have wanted to take into account when deciding whether to give cover to GRECIA EXPRESS.  To have two apparently experienced people on a boat which is never seen again supposedly fall overboard - as a result of one of them falling overboard as he seeks to secure a fender, and the other one trying to get him back aboard without thinking to stop the boat first or turn the boat around - raises the eyebrows (and that is without going into the details of all that is odd about the circumstances of the loss).  I think it is just the kind of thing a prudent insurer would want to know about, and it does not in the least matter that it concerns a leisure vessel.  It is the doubt it may be seen as casting upon the probity of the owner that would influence me in wanting to know about the circumstances of the loss; and even if one could be persuaded to overcome one’s concerns (and, if it were me, I do not think I would have been), it would not alter the fact that one would still want to know.”

He further stated that he would not expect Greek press reports of the loss to have been read by insurers or, if read, remembered even if much of their business derived from the Greek market.  Consequently, the incident was not a matter of notoriety or common knowledge.

As to the allegation that Grecia Express was heavily over-valued, which has been strongly contested, Mr Hunt’s evidence was that, if a vessel were sought to be insured for more than 25% to 50% above its bona fide value, he would expect the insured to provide an explanation for that level of cover, because significant over-insurance would raise suspicions on the part of the underwriter in as much as it would give the assured an incentive to profit from the loss of the vessel.

Finally, it was submitted by Mr Anthony Boswood QC, on behalf of the defendants that, even if none of the above events or the destruction of the St Nicholas were material when taken alone, the totality of certain combinations of losses was material.  Mr Hunt said this:

“if there was any doubt as to whether the St NICHOLAS incident should have been disclosed in and of itself as an isolated incident, once one takes into account any of the other incidents one can see that any particular incident is relevant in considering a series of events which the assured could be said to have been connected with (even though the connection at the time of the casualty is denied) and which should be disclosed.  In other words the combination of these incidents makes each of them even more material than they are in isolation.

For the record, I should add that I have never heard of any owner with a war loss record remotely comparable to that which I have been shown in this case.  If I had been shown any combination of two of the above incidents, there is no question of my being prepared even to consider writing the risk for the Grecia Express or any other vessel connected with Mr G Ventouris.”

The Claimant’s Case on Non-Disclosure

The claimant relied on the evidence of Mr Richard Outhwaite.  He has over 30 years experience of underwriting marine war risks, both as a leading underwriter, a member of the following market and as reinsurer of the defendant Association.  His report sought to identify certain respects in which marine war risks insurance differed from other forms of marine cover.  In particular, war risks underwriters were not interested in justification of the insured value of the vessel.  He could recall no instance in his career of war risks insurers raising any questions regarding the proposed insured value of a vessel.  They invariably accepted the valuation put forward by the insured.  They did not ask for and were not given any justification for the value.

Further, the incidence of war risk claims was very small and for that reason the premium was very low.  But also, because war risks losses were caused by external events unrelated to the management of the vessel, it was not the practice of underwriters to expect the presentation of claims records either in respect of war risks or ordinary marine losses.  Premium was calculated on a tariff basis by reference to the insured value but was unrelated to past losses or claims of a particular owner except to the extent that they might influence the underwriters’ tariff for all vessels in his portfolio.  He also considered that war risks underwriters would ordinarily be expected to monitor reports of war risks losses - and the defendant Association would be particularly concerned about Greek vessels.

I interpose that in cross-examination Mr Outhwaite stated that previous losses might be relevant, although less important than under a hull and machinery policy.  War risks losses would in practice tend to be known to underwriters and so would not be disclosed.  However, he accepted that there might be exceptional cases where individual war risks losses were material to be disclosed.  He also accepted that circumstances going to moral hazard, such as the presentation of a false claim on a marine hull policy, could be facts material to the writing of the war risks policy.  Equally, it would be necessary to disclose that another vessel in the ownership or control of the potential assured had been scuttled.  He did not accept that it was necessary to disclose underwriters’ allegation that the vessel had been scuttled if that were not the case:

“But it seems to me that the question is not what the underwriters allege; the question is, “what are the facts”?  And if it is correct that the vessel has been scuttled, then the owner has an obligation to tell me because that reflects on moral hazard.

If it has not been scuttled, then he has no obligation to tell me because there is nothing to tell.  Whatever the underwriters’ opinion is, he has nothing to tell.  So how can it be a material fact?”

This issue raises some fundamental questions as to the law of non-disclosure which I consider later in this judgment.

Mr Outhwaite did however, accept that a series of previous losses due to certain war risk events, such as piracy and violent theft or to persons acting maliciously, ought, at least in theory, to be disclosed because, at least in the last case, that loss might suggest that the assured was prone to attack by people out to get him.  He accepted that to be so but had no practical experience of any disclosure of facts of that kind.  Equally, he accepted that an attack on a vessel of the assured by a commercial rival which amounted to a war risk event ought to be disclosed to war risks underwriters, provided it was not a matter of which they could be expected to have knowledge in the ordinary course of their business.  If the loss were not a total loss, it might not be widely reported and therefore war risks underwriters would want to be informed of it.  A loss which was uninsured but caused by a war risks peril such as persons acting maliciously ought to be reported.  

As to the Italia Express and the business connection between Mr Ventouris and his brother Apostolos through Gitanic, Mr Outhwaite would not accept that a war risk loss sustained by a vessel no longer owned or operated by the potential assured could be a fact material to be disclosed.  However, he accepted in cross-examination that if the circumstances of a malicious attack on the vessel, formerly jointly owned by Mr Ventouris and his brother, but owned at the time of the attack only by his brother, suggested that the attack was or might be aimed at Mr Ventouris personally and his vessels, it would be material to disclose it.

As to the Star One, Mr Outhwaite in his report did not consider that the loss of a vessel under bareboat charter by war risks was material if the owner and not the bareboat charterer claimed on and recovered under his war risks policy.  What mattered was whether the potential assured had suffered an insured loss, not whether a vessel of which he was charterer had suffered such a loss.  The general practice in the London marine market was that losses did not have to be reported both by the owners of the bareboat-chartered vessel and by the bareboat charterer: it was down to the owner who claimed on his insurers to declare the loss and not the charterer.  Mr Hunt agreed that this was generally true.

In relation to the Coha II, Mr Outhwaite, while agreeing that, if the vessel had been fraudulently cast away by Mr Ventouris, that fact would have been material to be disclosed to war risks underwriters, as going to moral hazard, strongly challenged the position taken by Mr Hunt that, even if the yacht had in truth not been deliberately cast away, the fact that the circumstances of the loss were “suspicious” rendered that loss material to be disclosed.  In cross-examination Mr Outhwaite emphasised, that, even though the circumstances of the loss were extraordinary and even though at the time of the war risks entry renewal in December 1993 the hull underwriters of the Coha II had not yet agreed to pay the loss, it would not be a material fact for war risks underwriters.

As to the argument that facts not material in themselves and when considered alone might become material in aggregate, Mr Outhwaite was prepared to accept that in principle that could be a possible situation, but was firmly of the view that the losses in the present case were of such a disparate nature that in aggregate they were not material.  Three out of four were possibly war risks losses and one (Coha II) was not.  Also they were spread out over a long period of time and, except in the case of Coha II, were not of vessels owned by Mr Ventouris or his companies.  He also attached great importance to what he regarded as an impracticable obligation on the part of the assured.  In the course of his cross-examination he said this:

“Well, there are circumstances in which I can think there is some force to the argument that there is a cumulative effect, that is if you are looking at a particular risk and there are a number of facts, all of which may be interesting but not in themselves material, you can add them all together, as it were, and form an impression overall about the risk, which influences you.

But of course, we are not talking about that sort of thing here.  Here we are talking about something which happened one year, something which happened two years later, to a different vessel and not even owned by the same man and so on; in other words, remote things occurring over widely spread periods of time, and what I am pointing out is that it is quite impractical to put an obligation on an insured that something which happened, say in 1988 should now be - did not have to be reported for a 1989 risk or during 1988, but now has to be reported in 1993 because together with something that happened in 1990, and something that happened in 1992, you might add them all together and it might influence the underwriter’s mind.

I mean, this is far too high a practical barrier to cross, it seems to me.”

Finally, on the issue of over-valuation, Mr Outhwaite’s position was that war risks underwriters were not concerned with whether the required insured value was realistic or with the relationship which it bore to market value.  In his experience, going back over many years, although hull underwriters might occasionally query the value put forward by the insured, it was unknown for war risks underwriters to raise any such question, for they would assume that the vessel would be insured against war risks for the same value as under the hull policy.  He emphasised that there was a difference between the objectively-assessed market value of a commercial vessel and the value which the owner placed upon it subjectively having regard to the loss of use of the vessel during the time that would be taken up in replacing it if it were lost and the loss of trading profits to that particular owner should the vessel be lost.  However, he accepted that, if the excess of the insured value over the market value were so great that it suggested a moral hazard, the underwriter would not insure the vessel.  He gave an example of a vessel sought to be valued at 10 times its market value.

Mr Outhwaite considered that the loss of the Star One was a fact notorious to war risks underwriters, such as the Association.  His evidence was that, because the Association specialised in the provision of war risks cover to Greek shipowners and because war risks claims on Greek vessels were few and far between and because the incidence of such risks would therefore be taken into account in fixing the tariff premium which was minute, “any moderately competent underwriter” in the position of the Association would know “about all Greek war risks claims of any significance whatever”.  They would be most interested in losses sustained by vessels insured by them, they would want to know about other Greek losses and could be expected to have a reporting system from which they would know from press reports of such war risks losses.  That would be something to be taken into account when fixing their own premiums.  He did, however, accept in cross-examination that, even if they did originally take such losses into account, they might not carry the information in their minds for an extended period of time, in particular from May 1992, when the Star One was lost, to January 1994 when the Grecia Express cover was renewed.

Non-Disclosure:  Analysis of the relevant Principles

In the present case the basis of materiality relied upon is twofold:
(i)	facts going to the magnitude of the risk and 
(ii) 	facts going to moral hazard.

In category (i) the defendants rely on the events relating to the Star One (23/24 May 1992) and, in aggregate, that event together with the events relating to the St Nicholas (September 1990).

In category (ii) the defendants rely on each of Mr Ventouris’s connections with the Italia Express, the events relating to Star One, the loss of the Coha II (29 October 1993) and in aggregate those three losses with the loss of the St Nicholas, as well as over-valuation of the Grecia Express.

In each case, save for the Coha II, the defendants do not set out to prove positively that Mr Ventouris was implicated in the loss or that the loss had a particular or specific relationship with the loss of the Grecia Express but rather that the circumstances were intrinsically suspicious such as to suggest either that Mr Ventouris might not be honest or that vessels with which he was associated might be vulnerable to sabotage by persons acting maliciously.

Before turning to consider the issues of materiality of the specific facts relied upon, it is necessary to investigate the basis upon which contracts of marine insurance can be avoided for non-disclosure of material facts and whether the suspicious nature of a particular fact can render it material so as to entitle the insurer to avoid the policy regardless of the true state of facts. 

Although the starting point for the principle that a contract of insurance is a contract uberrimae fidei is usually taken to be the judgment of Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905, there had been several earlier cases in which the courts had concluded that, in the event of non-disclosure by the assured, he should for one reason or another be disentitled to enforce the contract of insurance.  Thus, in De Costa v. Scandret (1723) 2 P Wm 169 Lord Macclesfield LC in the Court of Chancery ordered that the policy be delivered up and the premium be repaid.  In Seaman v. Fonereau (1723) 1 Str 1183, tried at the Guildhall, the jury was directed in effect that the insurers could be discharged from liability if they accepted the evidence of materiality.  The head note describes the policy as “void”.

Whatever the conceptual explanation for the entitlement of the insurers to treat the contract as wholly unenforceable against them, the position had been arrived at by 1872 that it was open to the party to whom disclosure ought to have been made to elect to avoid the contract or to affirm it:  see the decision of the Courts of Exchequer and Exchequer Chamber in Morrison v. The Universal Marine Insurance Company (1872) LR 8 Ex 40 and 187.  In Chalmers & Owen, Digest of the Law of Marine Insurance, (1901) p.22 it is stated:

“The contract is often said to be rendered void by concealment or misrepresentation, but it is clear that it is only voidable at the option of the party prejudiced, and that the ordinary rules of law as to voidable contracts apply to insurance.”

In Blackburn, Low & Co v. Vigors (1886) 17 QBD 553 at 562 Lord Esher MR observed:

“This seems to me to be the true doctrine.  The freedom from mis-representation or concealment is a condition precedent to the right of the assured to insist on the performance of the contract, so that on a failure of the performance of the condition the assured cannot enforce the contract.”

Lindley LJ put the principle in similar terms at p.578.

“It is a condition of the contract that there is no misrepresentation or concealment either by the assured or by anyone who ought as a matter of business and fair dealing to have stated or disclosed the facts to him or to the underwriter for him.”

That there was a condition precedent of full disclosure of material facts was also accepted by Lord Watson in the House of Lords at (1887) 12 App 535 and 539.  Lord Fitzgerald said at page 542 that he was prepared to accept substantially the judgment of Lord Esher.

It was against this background that Sir Mackenzie Chalmers drafted clause 17 of the Marine Insurance Bill in 1894, which became section 17 of the Marine Insurance Act 1906, in these terms:

“A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party”.

In a note at page 24 of the First Edition of his Digest of the Law of Marine Insurance (1901) Chalmers stated:

“The duty of the assured to disclose material facts is a positive, not a negative, duty.  Mere silence, and even innocent silence, as to a material fact may entitle the insurer to avoid the contract.”

It is to be observed that section 17 refers not to a condition precedent to enforceability but to the contract being “based upon the utmost good faith”.  Quite clearly the concepts of what the contract is “based upon”, the “condition precedent” and the concomitant “positive duty” reflect the fact that it is the policy of the law in relation to such contracts that, absent such disclosure, they may not be enforced at the suit of the party failing to disclose if the opposite party elects that they should not be.

In Bell v. Lever Brothers [1932] AC 161 Lord Atkin said at p227:

“Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract.  The principle of caveat emptor applies outside contracts of sale.  There are certain contracts expressed by the law to be contracts of the utmost good faith, where material facts must be disclosed; if not, the contract is voidable.  Apart from special fiduciary relationships, contracts for partnership and contracts of insurance are the leading instances.  In such cases the duty does not arise out of  contract; the duty of a person proposing an insurance arises before a contract is made, so of an intending partner.”

In March Cabaret Club & Casino v. The London Assurance [1975] 1 Lloyd’s Rep 169 May J. observed at 175:

“Bearing in mind the basis of the rule, however, which is, as Lord Justice Scrutton pointed out, the fact that there is a disparity in negotiating position between the intending assured and insurers, in my judgment the duty to disclose is not based upon an implied term in the contract of insurance at all; it arises out the contract; it applies to all contracts uberrimae fidei and is not limited to insurance contracts; it also applies, for instance, to contracts of partnership, contracts of surety, certain family settlement contracts and other similar types of contractual relationship.”

In Container Transport International Inc v. Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, Stephenson LJ. explained the underlying policy of the law in these words:

“In considering questions of waiver and affirmation it seems to me essential to bear in mind two things, each of which stems from the need for equality between those bargaining in the marine insurance market, as was stressed by Lord Justice Scrutton in adopting the statements of Mr Justice Park in his Marine Insurances in Greenhill’s case (1927) 24 L1 L Rep. 383; [1927] 1 KB at pp 388 and 76-77.  The first is that the insured is the one who knows most of what the underwriter needs to know but does not know; the second that, though the underwriter must trust the insured to give it him, he in his turn must be trusted not to abuse the help and protection given him by the duty the law imposes on the insured to disclose and represent truly all that a prudent underwriter needs to know, and so turn the duty into a means of avoiding a contractual liability which he ought in fairness to honour.  This the statute recognises by making the duty to observe the utmost good faith mutual in s.17 and by providing the exceptions of circumstances which need not be disclosed that are to be found particularly in s.18(3)(b) and (c).

The matter was taken further by the Court of Appeal in Banque Keyser Ullmann SA v. Skandia (UK) Insurance Co Ltd [1990] 1 QB 665.  This complex litigation primarily raised at Court of Appeal level the issue whether damages could be recovered for breach of the so-called duty of the utmost good faith.  In concluding that there was no right to recover damages, Slade LJ. in giving the judgment of the Court said with reference to Lord Esher’s judgment in Blackburn Low v. Vigors, supra:  

“In our judgment it is clear that Lord Esher, in using the phrase ‘condition precedent,’ was using it in the sense of a contingent, rather than a promissory, condition and was rejecting Duer’s suggestion that in the case of a contract of insurance uberrimae fidei the parties are to be treated as having promised that full disclosure has been or will be made.

In our judgment, support for this view may also be derived from a consideration of the origin of the powers of the court to give relief in the cases of innocent pre-contractual misrepresentation by a party to a contract uberrimae fidi.  In Merchants and Manufacturers Insurance Co. Ltd v. Hunt [1941] 1 KB 295, 318, Luxmore LJ. (with whom Scott LJ. agreed on this point, at p312) said:

‘Whatever may be the position with regard to non-disclosure, as to which I say nothing, I am satisfied that in a case of positive misrepresentation the right to avoid a contact, whether of insurance or not, depends not on any implied term of the contract but arises by reason of the jurisdiction originally exercised by the courts of equity to prevent imposition’.

Through Luxmore and Scott LJ. found it unnecessary to decide this further point, we think that the right to avoid a contract uberrimae fidei in the case of non-disclosure must be founded on the same jurisdiction.  Scott LJ. pointed out, at p313:

“Even the common law duty of disclosure I find difficult to explain fully on the theory of its resting only on an implied term of the contract.  If it did, it would not arise until the contract had been made; and then its sole operation would be to unmake the contract.”

When that case went to the House of Lords under the name Banque Financiere de la Cite SA, the decision of the Court of Appeal was upheld on other grounds.  However, although not necessary for the decision of the House of Lords, Lord Templeman, with whom a majority of the other members agreed, referred at [1991] 2 AC p280 with approval  to the analysis of the legal basis for avoidance for non-disclosure referred to by Slade LJ. in the passage cited.

Finally, in Pan Atlantic Insurance Ltd v. Pine Top Ltd [1995] 1 AC 501 Lord Mustill (at page 544) treated as unresolved the controversy over the source of the power to avoid a contact of insurance for non-disclosure.

In my judgment, it can confidently be concluded that, whatever the conceptual origins of the substantive requirements of section 17 of the Marine Insurance Act, the remedy for non-compliance with the requirement of the utmost good faith is one derived from the equitable jurisdiction of the court to avoid contracts for misrepresentation in cases where it could not be said that the contract had been rendered void ab initio as distinct from voidable.  Accordingly, that jurisdiction is to be exercised consistently with the policy of the law as regards the insured which underlies section 17, but it has to be exercised in such a way as to take into consideration countervailing policies.  Thus, if it would be unconscionable for there to be avoidance because, for example, the insurer had affirmed the contract, the contract will be enforced.  The policy of permitting the underwriter to rely on non-compliance with the duty of the utmost good faith would be superseded by the unconscionability of doing so after he had represented to the insured that the contract was continuing in force.  The court’s jurisdiction to avoid for misrepresentation or non-disclosure therefore cannot be exercised without regard to whether the insurer has acted consistently with his duty of the utmost good faith.  If he has failed to do so, the court must decide whether such failure should disentitle him to avoidance of the policy.

The Materiality of Allegations against the Assured and Suspicious Circumstances

Against that background I turn to consider the disclosability of allegations of wrong-doing and of suspicious circumstances.  In the present proceedings the case advanced by the defendants deploys the suspicious nature of the relevant events primarily to support the assertion by underwriters that disclosure would have raised such doubts as to the integrity of the assured that they would either have declined the risk or at least made further enquiries.  The most prominent events relied upon are the circumstances in which the Coha II disappeared.  However, the same submission is made in relation to the association of Mr Ventouris with the Italia Express and the Star One.  The circumstances surrounding the loss of those vessels and additionally of the St Nicholas are also relied upon in aggregate.

Further, the suspicion argument is also advanced in relation to the magnitude of the risk.  That is to say it is suggested that one possible explanation for the circumstances of the loss of the Italia Express and Star One as well as the St Nicholas is that someone was aiming to damage or destroy vessels in which Mr Ventouris had an interest.

In each case, at the time when the renewal of the entry with the defendant Association was effected at the beginning of 1994, the motive for the destruction of those vessels was a matter of speculation, Mr Ventouris having consistently denied his involvement.

There is little authority on this specific point.

In March Cabaret Club & Casino Ltd v. The London Assurance [1975] 1 Lloyd’s Rep 169, a claim under a fire policy, one of two directors and sole owners of the claimant company had been arrested and charged and committed for trial in relation to receiving stolen property to the value of over £20,000.  Although he had initially admitted his guilt to the police, he subsequently pleaded not guilty.  In the meantime, between his committal for trial and the trial taking place, the policy was renewed.  The insurers sought to avoid for non-disclosure of the commission of the offence.  Before May J. the plaintiff assured alleged that the owner was wrongly convicted and sought to establish his innocence, May J. found on the evidence that he had committed the offence and been rightly convicted - and the commission of the offence was a material fact non-disclosure of which entitled the insurers to avoid the policy.  However, at page 177R of the report May J. went on consider obiter the position that would have arisen if the owner, Mr Skoulding, having been arrested, charged with the offence and committed for trial, which was still pending at the date of renewal, was in truth innocent, but, presumably had not yet been tried when the matter was before the court.  May J. held that the facts of the arrest, charge and committal ought to be disclosed.  May J. also expressed the view that if the owner had been acquitted before renewal he would not have to disclose those facts unless he had in truth been guilty, if the insurers were prepared so to allege and to prove it.  He stated:

“There is one thing, however, which I would like to add.  Had it been material I would have been prepared to hold in this case that in any event Mr Skoulding ought to have disclosed the fact of his arrest, charge and committal for trial at the date of renewal, even though in truth he was innocent.  What I do not agree with and would not be prepared to accept, although Mr Edmunds in his evidence sought to say to the contrary, is that if, prior to renewal, Mr Skoulding had been acquitted, there would then have been any duty on him to disclose his arrest, committal and acquittal - unless that acquittal was unjustified because he had in fact committed the offence and insurers were prepared so to allege and to prove it.  To suggest that a proposer should disclose an acquittal when insurers do not propose to challenge it is in my judgment erroneous and seeks to point a path which, as at present advised, I firmly decline to tread.”

I observe that whereas the second proposition is clearly right, the first proposition is hardly consistent with it: viz step 1 there is no duty to disclose that the proposer for insurance has been charged with, tried and correctly acquitted of a criminal offence;  step 2 there is a duty to disclose that he has been charged with and committed for trial on a criminal offence of which he is in truth innocent.  Given that the acquittal does not operate as an estoppel against the insurers, it would appear that withholding from underwriters the information as to the trial would be to deny them the opportunity to investigate the allegation and acquittal in the same way as if the trial were still outstanding and the facts of the arrest charge and committal had not been disclosed.  The judge’s emphasis in the last two sentences on the necessity for the insurers to prove that the acquittal was wrong strongly suggests that it would not be open to them to avoid the policy on the basis of mere suspicion of the correctness of the acquittal of the proposer unless they could prove that the offence had indeed been committed.  Assuming that the fact of the acquittal had the effect of shifting the burden of proof of guilt to the insurers, absent the acquittal, one would have expected that, faced with a conviction, it would be open to the assured to disprove his guilt and thereby to disentitle the insurers to avoidance of the policy.  Indeed, but for the step 1 comment, that appears to have been the basis on which the trial proceeded.

The only judgment which decides conclusively whether an assumed has a duty to disclose an allegation of criminal activity of which he claims to be innocent is that of Forbes J. in Reynolds and Anderson v. Phoenix Assurance Co Ltd [1978] 2 Lloyds’ Rep 440.  That also was a fire claim and amongst other defences the insurers claimed to avoid the policy for non-disclosure of a fraud said to have been perpetrated by Reynolds.  The allegation (“the Colne allegation”) had been made in civil proceedings against Reynolds and another which had not been pursued and had then been the subject of a criminal trial which had resulted in Reynolds’s acquittal.  Forbes J. rejected the proposition that ....... “any allegation of fraud made against a proposer must be disclosed even though it had no foundation; the reason being that it must be for the insurer to investigate such allegations and decide on their truth .....”

His reasons appear at page 460L.  Having cited the passage from the judgment of May J. in March Cabaret Club, supra, which is cited above, he continued:

“With the greatest respect to Mr Justice May I must decline to follow him in this suggestion.  The object of requiring disclosure of circumstances which affect the moral risk is, to borrow Mr Deyes’ words, to discover whether the proposer is a person likely to be an additional risk from the point of view of insurance.  The most relevant circumstance for disclosure is therefore that he has actually committed an offence of a character which would in fact influence the insurer’s judgment.  The proposer is bound to disclose the commission of that offence even though he has been acquitted or even if no one other than he has the slightest idea that he committed it: the material circumstance is the commission of the offence.  A conviction of a criminal offence is itself, it seems to me, also material (if the commission of the offence is itself material) even though the proposer may protest his innocence or in fact has not committed the offence; for a responsible insurer is himself entitled to assume that prima facie the proposer was rightly convicted and has therefore in fact committed the offence.  If therefore an allegation of a relevant criminal offence is made and the allegation is true the proposer must disclose it not because the allegation has been made but because the offence has in fact been committed; it is not then the allegation which must be disclosed but the underlying fact that a crime has been committed.  This seems to me to be trite law.  It follows, if Mr Wilmers is right, that the only occasion on which the allegation, as an allegation, must be disclosed is when it is not true.  This appears to me to be a conclusion so devoid of any merit that I do not consider that a responsible insurer would adopt it and nor do I.  In my view the Colne alleagtion, which the defendants made no attempt to suggest had any basis in fact, was not a material fact to be disclosed.”

The last decided case in this series is The Dora [1989] 1 Lloyd’s Rep 69.  That was a claim for the total loss of a yacht by fire at sea.  Amongst the defences raised was failure to disclose that at the time of the placing of the risk there were pending charges of smuggling against members of the crew.  Amongst the submissions advanced on behalf of the assured were that the charges were ill-founded and therefore of no materiality.  Phillips J. found that the charges were well-founded but went on to consider, obiter, what would have been the position had they been ill-founded.  Having referred to the judgments in March Cabaret Club, supra, and Reynolds v. Phoenix Assurance, supra he observed at page 93R:

“I prefer the reasoning of Mr Justice May.  When accepting a risk underwriters are properly influenced not merely by facts which, with hindsight, can be shown to have actually affected the risk but with facts that raise doubts as to the risk.  A number of proposal forms were adduced in evidence to indicate the areas of concern to yacht insurers.  Some sought disclosure of charges of dishonesty, others simply of convictions.  Mr Price was quite firm that the existence of pending charges for smuggling at the time of placing of the risk was material.  I accept this evidence.  Subject to the points that remain to be considered, the charges should have been disclosed, whether or not they were well founded.”

In my judgment, it is quite clear from section 18 of the Marine Insurance Act 1906 that the attribute of materiality of a given circumstance has to be tested at the time of the placing of the risk and by reference to the impact which it would then have on the mind of a prudent insurer.  

In this connection it is for present purposes necessary to distinguish between three types of circumstances:

(1)	allegations of criminality or misconduct going to moral hazard which had been made by the authorities or third persons against the proposer and are known to him to be groundless;
(2)	circumstances involving the proposer or his property or affairs which may to all outward appearances raise a suspicion that he has been involved in criminal activity or misconduct going to moral hazard but which he knows not to be the case;
(3)	circumstances involving him or his business or his property which reasonably suggest that the magnitude of the proposed risk may be greater than what it would have been without such circumstances.

As to case (1), if an allegation of criminal conduct has been made against an assured but is as yet unresolved at the time of placing the risk and the evidence is that the allegation would have influenced the judgment of a prudent insurer, the fact the allegation is unfounded cannot divest the circumstance of the allegation of the attribute of materiality.  For example, if the proposer had told the insurer of the allegation and also that it was unfounded, the insurer might well have preferred not to trust the word of the assured or might have preferred to conduct his own investigation before agreeing to underwrite the risk.

As to the case (2), it is, in my judgment, quite unrealistic for underwriters to require disclosure of facts, which the proposer knows to have no bearing on his honesty or integrity, on the basis that a suspicious person when told of those facts might believe that it did have such a bearing.  Unlike case 1 where a third party has made a specific allegation against the proposed assured, case 2 involves that the assured should evaluate for himself perfectly innocent facts to see whether they might be misconstrued by an underwriter as indicating his dishonesty.  I do not consider that the duty of the utmost good faith involves as rigorous an approach as this.  Nor, indeed, did the defendants’ expert, Mr Hunt.  When he was asked in cross-examination, if a claim had been made on the underwriters of the Coha II which had been paid by them, without their suggesting that it was a suspicious or fraudulent loss, how the proposer was to know that it was suspicious and therefore disclosable, he said that if the claim had been paid, there was no reason for him to raise the suspicion.  This is clearly correct.  Provided that there has been no outward allegation material to the proposer’s integrity and that he is in truth innocent, the mere suspiciousness of the facts does not render them disclosable.

As to case (3) by parity of reasoning, if the assured knows of facts which, when viewed objectively, suggest on the face of it that facts might exist (“the suggested facts”) which would increase the magnitude of the risk and the known facts would have influenced the judgment of a prudent insurer, the known facts do not cease to be material because it may ultimately be demonstrated that the suggested facts did not exist.  That which invests the circumstances with materiality is emphatically not the existence of the suggested facts, but the existence of the known facts, for the underwriter is entitled to take into account the risk that the suggested facts may be true and the proposer is not entitled to deprive the underwriter of that opportunity because he personally believes albeit he does not know for certain that the suggested facts are untrue.

An analogous point which supports this conclusion and is not discussed in the other authorities to which I have referred is the materiality which can attach to a mere rumour prevalent when the risk was placed on the existence of a fact, notwithstanding that the rumour later turns out to have been untrue:  see Morrison v. Universal Marine Insurance Co (1872) Lloyd’s Rep 8 Ex at p197 and Arnould, Law of Marine Insurance 16th Edn para 645 and 646 and the older cases there cited.

However, the authorities suggest that the rumours have to have at least some real substance and reliability when objectively viewed.  Thus, in Durrell v. Bederley (1816) Holt NP 283 in the Court of Common Pleas at Nisi Prius insurers sought to avoid a time policy on a privateer which they had underwritten several days after she had sailed from Jersey.  It was alleged that there had been non-disclosure of reports in Jersey that French frigates were off the coast and that a capture had been made the day after the insured vessel sailed and that a ship’s binnacle had been afloat at sea.  Gibbs LJ. concluded that the reports ought to have been disclosed.  At page 285 he observed:

“The question is, did the plaintiff know any facts injurious to the adventure, which ought, in common honesty, to have been communicated to the underwriters; I mean substantial facts, which were likely to change their opinion as to the magnitude of the risk.

Loose rumours which have gathered together, no one knows how, need not be communicated.  Intelligence, properly so called, and as it is understood by mercantile men, ought to be disclosed when known.  The materiality of the facts known and suppressed are for the decision of the jury.  If the concealment be of a material fact, whether a rumour, report or an article of intelligence, it ought to be communicated; if immaterial, it may be withholden.”

And at page 286 be continued:

“In the present case, the reports cannot be called loose; the plaintiff knew the frigates had been off the island; a capture was reported to have been made; a binnacle had actually been seen floating with a compass upon it: this latter circumstance was a fact; it was intelligence in its proper mercantile sense.”

As it is stated in Arnould, para 653:

“Loose rumours, indeed, which have gathered together, no one knows how, need not be communicated and intelligence may be so general, and its application to the subject insured so doubtful and remote, that the assured need not communicate it, though it may possibly turn out to have related to the subject insured.”

That, however, is far from being the end of the matter.  I refer at the outset to the judgment of Staughton LJ. in Kausar v. Eagle Star Insurance Co Ltd [2000] Lloyd’s Rep 154 at page 157:

“Avoidance for non-disclosure is a drastic remedy.  It enables the insurer to disclaim liability after, and not before, he has discovered that the risk turns out to be a bad one; it leaves the insured without the protection which he thought he had contracted and paid for.  Of course there are occasions where a dishonest insured meets his just deserts if his insurance is avoided; and the insurer is justly relieved of liability.  I do not say that non-disclosure operates only in cases of dishonesty.  But I do consider that there should be some restraint in the operation of the doctrine.  Avoidance for honest non-disclosure should be confined to plain cases.”

However, one should not lose sight of the fact that were the evidence before the court, upon which underwriters rely to avoid the policy, to establish that, although the known facts were not disclosed, the suggested facts did not in truth exist, underwriters would be seeking to avoid liability in respect of a risk which, had they been in possession of the true facts, as distinct from the allegations of suggested facts, they would have written without hesitation.  In so doing they would, in effect, be utilising loss of the opportunity of forming an unfounded suspicion of non-existent facts in order to avoid paying a loss under a policy which, had the truth been made known to them when they wrote the risk, they would not have hesitated to underwrite.  To persist in such a course in the face of evidence before the court that the suggested facts never existed would, in my judgment, be quite contrary to their duty of the utmost good faith.  Such a course would be so starkly unjust that I would hold that in such a case it would be unconscionable for the court to permit the insurers to avoid the policy on the grounds of non-disclosure.  Having regard to the equitable origin of the jurisdiction to avoid a policy for breach by the assured of the duty of the utmost good faith, the court should not be inhibited from giving effect by appropriate orders to the insurers’ countervailing duty of the utmost good faith to the assured.  The breach of that duty by the insurers would be so unconscionable as to disentitle the insurers from invoking the equitable jurisdiction of the court to avoid the contract on the grounds of non-disclosure by the assured.

The procedural and evidential consequences which flow from this conclusion are, in my judgment, as follows:

(1)	In the field of moral hazard, a failure by the assured to disclose an existing allegation against him of dishonesty or relevant criminal conduct or a criminal charge will normally be non-disclosure of a material fact which prima facie entitles the insurer to avoid the policy.

(2)	If, in proceedings in which the insurer seeks to avoid the policy for such non-disclosure, the assured proves that the allegation or charge was unfounded and that there has been no dishonesty or criminal conduct on his part, the insurers will not normally be entitled to avoid the policy.  For example, where the assured has been charged with a criminal offence and subsequently acquitted at a trial, he can deploy his acquittal as some evidence, but not conclusive evidence, of his innocence.  Similarly, if he has been charged but not yet convicted, he can prove his innocence in order to displace the entitlement of the insurers to avoid for his failure to disclose the charge against him.

(3)	If I am wrong in concluding that an assured is under no duty to disclose facts merely because they are objectively suspicious as to his own wrong-doing when he knows that the suggested facts do not exist, it must by parity of reasoning be open to the assured to displace the underwriters’ entitlement to avoid for non-disclosure of circumstances because they are objectively suspicious by proving that the suspicion was misplaced and that the facts of the existence of which there was suspicion never in truth existed.

(4)	If the facts objectively raise suspicions going to the magnitude of the risk, the assured is under a duty to disclose them but if at the trial he establishes that there was in truth no basis for those suspicions it is not open to the insurers to invoke the court’s equitable jurisdiction to avoid the policy.

I therefore agree with the conclusion as to the duty to disclose allegations of misconduct going to moral hazard arrived at by Phillips J. in The Dora, supra, and I am unable to accept the analysis of Forbes J. in Reynolds, supra.  However, for reasons which were not argued or considered in either case, I do not consider that failure to disclose allegations which on the evidence before the court are proved to have been false entitles the underwriters to avoid the policy.

I must now consider how the application of this approach works out in the present case with regard to the various suspicious circumstances relied upon as material to be disclosed.

In approaching the issues on materiality it is important to bear in mind two matters which emerge in relation to the evidence.  First, the fact that an experienced underwriter may not have encountered disclosure of a particular kind of fact by proposers for a particular kind of insurance does not necessarily justify the conclusion that the particular kind of fact is not material.  One only has to state the obvious proposition that disclosure of the commission of a crime undetected by the police would be highly unlikely to occur notwithstanding the obvious materiality of that fact.  Mr Outhwaite’s evidence often proceeded on the basis that if he had never experienced disclosure of certain matters they could not be material.  Second, whatever an expert witness may say about a particular fact being or not being material must be logically justifiable.  Thus, the court need attach no weight to evidence that a particular fact would influence the mind of a prudent insurer if there is no logical justification for that influence and vice versa.

The Connection of Mr Ventouris with the Italia Express

There is no issue as to the fact that by December 1987 all business partnership or co-ownership between Mr Ventouris and his brother had terminated.  This was three months before the loss of the vessel. Thereafter Apostolos owned the vessel and Mr Ventouris had no remaining interest in it or in Gitanic Shipping Co SA, the corporate vehicle by means of which both brothers had owned the vessel.

The defendants' expert, Mr Hunt, confined the basis upon which he said that the recent business connection ought to have been disclosed to moral hazard.  He did not refer in his report to materiality to the magnitude of the risk.  That suggestion was first advanced in the course of the trial and developed by Mr Boswood QC in his final submissions on the basis of questions put to and answers given by Mr Outhwaite in cross-examination.

The claim by the owners of the Italia Express against their insurers in the English court was successful, the defendants having abandoned their allegation that the vessel was fraudulently cast away.

In my judgment the assertion that disclosure ought to have been made of the precise time when the co-ownership of the Italia Express ended because the short period before the loss would influence the judgment of a prudent insurer cannot be accepted.  The suggestion that the violent sinking of a vessel - in this case by causing limpet mines to be attached to it - three months after the end of co-ownership in ordinary circumstances not suggesting animosity could indicate to a prudent insurer that the former co-owner might be dishonest is extremely far-fetched.  By very reason of his business interest having terminated Mr Ventouris could not ordinarily be expected to obtain any financial advantage.  Further, Apostolos, whose company successfully sued the underwriters, was described by Hirst J. as an honest man.  Indeed, the mere suggestion that an owner (or former owner) wanting to perpetrate a fraud on insurers would do so by arranging for the vessel to be blown up at its mooring by means of limpet mines is completely unconvincing.  It would involve a quite incredible level of stupidity.

I find as a fact that Mr Ventouris had nothing whatever to do with the loss of the Italia Express and, having regard to the fact that he had not owned it for three months prior to the loss, that the casualty was not aimed at him.  There is nothing in the facts relating to this vessel which begins to suggest any realistic likelihood that he was a target for the loss.

In this connection it is right to add that the defendants' underwriter, Mr Ballantyne, when he gave his statement, had been under the impression that it was not until May 1988 - two months after the loss - that Mr Ventouris had ceased to be in business with his brother as co-owner of the vessel.  When asked in cross-examination to assume that at the time of the loss Mr Ventouris had no remaining interest in the vessel he accepted that he would not have declined the risk.

There is therefore no basis, whether by reference to moral hazard or to the magnitude of the risk, upon which these circumstances can be said to be material.

The Loss of the Star One

I accept Mr Outhwaite's evidence that war risks underwriters do not generally regard as material the war risks loss record of a shipowner who seeks to insure or renew war risks cover.  This being in effect a tariff rate premium market, the underwriter is not concerned to rate each proposal.  However, as a matter of logic, characteristics of the war risks loss record which suggested that the shipowner in question or his vessels were peculiarly exposed to, for example, persons causing malicious damage would be capable of being material circumstances.  Further, circumstances going to the honesty of the shipowner, as distinct from the magnitude of the risks, would also be material.

The suggestion that the sinking of this vessel, some two days after the commencement and eight days after signature of the bareboat charter to Mr Ventouris's company, was or might have been brought about by Mr Ventouris is not only totally unsupported by any evidence, but is, in my judgment, wholly unrealistic.  Mr Ventouris must be presumed to have entered into a bareboat charter one week for a particular purpose - use as a floating casino - and to have changed his mind and decided to sink the vessel the next week, notwithstanding that the work of converting it to a casino was already under way and staff had been recruited and that it was the shipowner and not the Charterer who claimed on the underwriters.  Mr Ventouris rejected this suggestion and I accept his evidence that he had nothing to do with the loss.  Moreover, underwriters paid the shipowner's claim in respect of the loss and it was accepted by Mr Hunt in cross-examination that it was unnecessary for a loss accepted and paid by underwriters to be disclosed, notwithstanding suspicion might attach to it.  He was of course assuming an honest claim on the policy.

The evidence suggests that it is very unlikely that the attack was aimed at Mr Ventouris or his company.  First, there had been an earlier attack on the Star One on 11 March 1992, some two months before it was chartered to Mr Ventouris.  On that occasion the watchman was told by the attackers that their differences were with the watchman's employer.  Mr Ventouris said that he was aware of this attack before the time when he started the negotiations for the bareboat charter.  It is therefore probable that the subsequent successful attack on the vessel was also likely to have been directed against Mr Alevizos, the vessel’s owner, and not against Mr Ventouris.

In the course of the Coha II trial, Mr Caramanos, who was a broker who acted for Mr Ventouris, made a statement to the effect that Mr Ventouris had, many months after the sinking, conjectured that it might have been perpetrated by Italians trying to prevent Greek vessels trading to Italian waters.  Mr Ventouris said in evidence at the Coha II trial that this explanation occurred to him after the loss of the Grecia Express.  I therefore conclude that at the time when the war risks cover for Grecia Express was renewed by the defendant Association of the beginning of 1994, Mr Ventouris did not consider that the Star One attack might have been directed at him personally and that up to that time nobody had expressed that view.

There was therefore, in my judgment, nothing about the Star One attack and sinking that could reasonably have suggested to an underwriter that Mr Ventouris was dishonest or the personal target of persons acting maliciously.  They might possibly have believed that the attack could have been directed at Mr Ventouris's projected casino operation, but that would not be relevant to the renewal of the entry of the Grecia Express which was at no time intended to be used for that or any similar purpose.  The only similarity of the projected trading of the Grecia Express was that it was to call at Italian ports.  Given the numerous Greek vessels, which during the tourist season, then called at Italian Adriatic ports, it is, in my judgment, wholly unreasonable to perceive any enhanced risk of malicious damage affecting the renewed entry.

The claimant submitted in the alternative that, even if the circumstances relating to the Star One were material, the underwriters already knew all about that loss or could be "presumed" to have had knowledge of them because they were "matters of common notoriety or knowledge (or) matters which an insurer in the ordinary course of his business as such ought to know" within section 18(3)(b) of the Marine Insurance Act 1906.  

The evidence of Mr Ballantyne, Mr Gould and Mr Wright of the defendant Association was that none of them were aware of the loss of the Star One, notwithstanding its having been given substantial publicity in press reports, including Lloyd's List, which mentioned that the vessel had been on charter to Mr Ventouris, and notwithstanding that the events occurred a few days before the international shipping industry fair known as Posidonia which is held in Piraeus, very close to where the Star One sank.  The only mention of the loss of that vessel to anyone at the Association of which there is any evidence took place in two conversations between Mr Wright and Mr Rooth of Clyde & Co in the course of the Posidonia period.  According to Mr Wright, Mr Rooth questioned him about whether Ventouris vessels were entered with the Association and subsequently went on to describe events relating to the sinking of the Star One, but, according to Mr Wright, without naming the vessel.

In view of the wide publicity which attached to the sinking it is surprising that Mr Ballantyne and Mr Gould did not hear of it.  In view of the very concentrated and amply catered social activities at Posidonia they may have heard it mentioned, but in view of the fact that the vessel was not entered with the Association, then forgotten about the mention of it.  However, I accept their evidence and that of Mr Wright that they did not hear it specifically discussed or read of it in the press.

If, as I find, the Association had no actual knowledge of the Star One incident, did it have presumed knowledge?

The relevant aspect of the Star One loss, so far as it concerns the defendant Association is not the loss as such but the fact that the vessel was chartered to Mr Ventouris's company at the time of the loss.  In the course of his cross-examination Mr Outhwaite said that although it was "inconceivable that the Hellenic Mutual would not know about the Star One loss, as a war loss" he was "not saying at all from that, they would know that Ventouris was the bareboat charterer".  In other words, in the course of monitoring war risks losses to Greek vessels - even those not registered with the Association, although they could be expected to find out about the loss, they would not be concerned for that purpose with the identity of the charterer.  Accordingly, I am not persuaded that the relevant character of the loss - the Ventouris charter - was a matter which ought to have been known in the ordinary course of the business of the defendant Association.  

As to whether the salient facts were matters of common notoriety or knowledge, it is pertinent to refer to the judgment of Bramwell B in the Court of Exchequer in Morrison v. Universal Marine Insurance Co (1872) LR 8 Ex 40 and of Honeyman J. on appeal to the Court of Exchequer Chamber at (1873) LR 8 Ex197.  Bramwell J. observed at page 54.

“Then the question arises as to the concealment by the broker.  And I am of the opinion that there was a concealment of what it was material that the underwriter should know, and which he did not know.  Upon this point, the argument of the plaintiff was that it was not a concealment, on the ground that the underwriter was bound to take notice of the contents of Lloyd’s List, or, in another way of putting it, that the broker was entitled to assume that the underwriter knew it.  I do not agree with that argument.  It is impossible to say that there is any rule of law, or any principle or authority, which affects the underwriter with knowledge of what is contained in Lloyd’s List.  No doubt some knowledge may be assumed in the underwriter; what, I will not attempt exactly to define or describe, though I agree with what was thrown out by my Brother Cleasby in the course of the argument, that the matters he must take notice of are matters of general knowledge, not matters relating to any particular ship.  But to hold that the underwriter is bound to carry in his head all that is contained in Lloyd’s List relating to a ship in which he has no interest, rather than to hold the owner of the ship bound to disclose it, would be to put a difficult and needless burden on the underwriter, while the opposite view puts no difficulty at all in the way of the owner.  There was, therefore, a material concealment.”

The proposer for insurance is thus not entitled to assume that the underwriter will carry in his mind previous casualties of vessels not insured by him and be in a position to relate that information to the new risk proposed.  In the present case there was, in my judgment, no reason for the Association to have retained any record about Mr Ventouris's charter of the Star One or to have any continuing recollection of that circumstance, if they had any recollection of the loss at all.  Moreover, the passage of over 18 months since the loss of the Star One makes it impossible to characterise the relevant circumstances as matters of common notoriety in the marine insurance industry - even in Piraeus.

Accordingly, if the circumstances of the Star One loss were material to be disclosed, the actual or presumed knowledge of the circumstances on the part of the Association when the entry of Grecia Express was renewed has not been established.

The St Nicholas and other Losses in Combination

Although this casualty is not relied upon in isolation as a fact material to be disclosed, it is necessary that I should consider it in the context of the Italia Express and Star One losses both of which involved sinkings by reason of outside interference with the vessel, for it is said by the defendant Association that, taken in combination with other losses of vessels with which Mr Ventouris had been connected, the loss of the St Nicholas demonstrated a suspicious pattern which suggested that Mr Ventouris represented a moral hazard risk or that his vessels were unduly vulnerable to sabotage.

Mr Ventouris owned this private yacht under the name Swordfish until 10 July 1990 when he sold and delivered it to his brother in law, Mr Gerassimos Stellatos.  The latter was also the owner of Express Shipping Agencies, Mr Ventouris's exclusive main agent in Patras.  Mr Stellatos became registered master and changed the name to St Nicholas.  In September 1990 the yacht was stolen from Zea Marina in Athens.  It then disappeared until 8 October 1990 when it was found badly damaged.  It was not suggested at the trial or put in cross-examination that either Mr Ventouris or Mr Stellatos was implicated in the loss or that anybody had accused either of them of being implicated in it or suggested that Mr Ventouris stood to gain from the insurance claim.

In these circumstances Mr Hunt, the defendant Associations expert was clearly right to accept that the loss of the St Nicholas was not a material fact when taken in isolation, although he mentioned that in combination with the earlier loss of the Italia Express it should have been disclosed.  He pointed to the comparatively short period of time between Mr Ventouris's cessation of ownership and the occurrence of the loss in both cases.

There is no doubt that in combination facts which, taken in isolation might not be material, can become material.  Thus, in CTI v. Oceanus [1984] 1 Lloyd's Rep 476 Parker LJ. stated at p516R:

“although I have considered each matter of complaint separately it does not follow that a plea of non-disclosure must fail if no single undisclosed fact can be shown to be such as would influence a prudent underwriter.

If a number of undisclosed facts taken together are such that they would influence the judgment of a prudent underwriter that is in my view sufficient even if no single one of them taken alone would do so.”

Mr Outhwaite accepted that there might be circumstances where that was the position, but not the present case.  Mr Hunt was strongly of the view that if there had been disclosed to him the combination of any two of the matters of non-disclosure relied upon, including the loss of the St Nicholas and the loss of the Coha II, he would have declined the risk.

The period of time between 10 July 1990 and the time in October 1990 when the St Nicholas was stolen, in my judgment, gives rise to no adverse inference whatever against Mr Ventouris's honesty.  Nor is there any realistic basis for drawing any such inference from the combination of the circumstances relating to that loss and those relating to the earlier loss of the Italia Express and the subsequent loss of the Star One.  Nor, in my judgment, does the deployment of the facts relating to the St Nicholas in combination with either or both of the other two losses lead to the inference that either of those other two losses went to the integrity of Mr Ventouris.  Each loss was the result of a dissimilar chain of events.  Moreover, the circumstances relating to the loss of the Coha II are so unusual and so different from those relating to any of the other three losses that, if that vessel were not dishonestly cast away, its loss when aggregated with the other losses does not give rise to an inference adverse to Mr Ventouris's integrity on any rational basis.

It is also pertinent to consider whether the St Nicholas loss in combination with the other losses give rise to any inference that vessels with which Mr Ventouris was or recently had been associated were unduly vulnerable to sabotage so as to render the combination of losses material to the magnitude of the risk underwritten.  Again, the circumstances of each loss are so different and therefore the possible purposes of those responsible for the losses capable of being so diverse that I do not consider that the possibility of a connection between the combination of circumstances and the magnitude of the risk underwritten in respect of the renewal of the entry of the Grecia Express could be regarded as higher than extremely doubtful, remote or merely conjectural.  For this reason the combination of these losses or any of them did not, in my judgment, render them material.

The Coha II:  Introduction

Before considering the evidence relevant to the issue whether Mr Ventouris dishonestly caused the loss of the Coha II, it is necessary to refer to the nature of the case advanced by the defendant Association.

The case pleaded in respect of that loss, as it appears in the Amended Points of Defence served on 10 August 2000, some ten months before the start of the trial, was that the Coha II had disappeared without trace following an incident in which Mr Ventouris and a passenger were both said to have fallen out of the boat at night.  Paragraph 3(iv) of the pleading continued:

“In fact, however, the vessel was cast away by Mr Ventouris for the purpose of making a fraudulent claim on the insurance of the vessel.  The Association will rely in this regard on the proceedings which were commenced against the vessel’s insurers by Esperance (Action 1995 Folio No. 34), in which the insurers defended the proceedings, inter alia on the grounds that the claim was fraudulent one, and which Esperance discontinued in the course of the trial.”

Further in paragraph 11(h) of the same pleading the facts and matters referred to in paragraph 3(iv) are described as "acts of casting away".

In the proceedings against the hull insurers of the Coha II the case advanced by Mr Ventouris's company, Experance Co Ltd, was that the vessel had been lost by perils of the sea.  The basis of that case was substantially the same as that put forward in the present trial, namely that first Mr Ventouris and then his crew, Mr Architectonides, had fallen overboard during the evening of 27 October 1993 so causing the Coha II to proceed unmanned and out of control, except for the automatic pilot, and so to disappear without trace.  The defendant insurers in their Re-Amended Points of Defence pleaded a denial of the loss by perils of the sea supported by other specific points why on the evidence the cause of the loss put forward by the shipowner was said to be unsustainable.  Those other points said in effect that the account of the circumstances of the loss advanced by Mr Ventouris was so improbable as to be incredible and untrue.  The pleading (paragraph 8(2)) then relied on the untruth of that account in support of the allegation that the claim under the policy was made fraudulently.  In the course of her cross examination of Mr Ventouris, Miss Belinda Bucknall QC, on behalf of the defendant underwriters, put to him the underwriters' positive case in the following words:

“you took the boat out of the marina and you hung around off Cape Sounion until it was dark.  You and Mr Architectonides then joined up with Mr Psarras, who was waiting off Yaros, and you transferred on to his boat and Coha II was taken about out of Greek waters under cover of darkness.

Mr Psarras, having waited a reasonable time to let Coha II get out of the way then raised the alarm with the Ministry of Mercantile Marine, and triggered a massive search.  And you and Mr Architectonides waited on board Mr Psarras’s vessel until something like near first light, and you then went into the water with the fender, which would make a nice object to be seen by a searching vessel, and you waited until you were picked up. “

I emphasise that this scenario involved the preservation of the Coha II and not its being sunk or caused to be a total loss by physical damage immediately attributable to the crew losing control over it.

In the course of Mr Boswood's opening skeleton argument in this trial, paragraph 94, he put forward a very similar scenario.  Then, at the very end of his cross-examination of Mr Ventouris, Mr Boswood put to him the following and Mr Ventouris answered as follows:

“Q. What truly happened, Mr Ventouris - I had better just put this to you - is that you and Mr Architectonides took the vessel out of Zea Marina, and waited until it was dark, probably somewhere around Cape Sounion, and joined up with Mr Psarras.

The vessel was taken away quietly, probably sold somewhere, kept under wraps for a bit, with maybe some steps to change her identity, for example by changing her engine numbers and so forth.  Just follow what I am saying, then you will have the opportunity to respond to it.

A. (In English) I follow.

Q. You then went on board with Mr Psarras, and Mr Psarras started the search some time around midnight by making a call on his radio.  As dawn was breaking, Mr Psarras let you down in the water with Mr Architectonides, together with the fender, being a large object which was likely to be seen by any rescuing boat, and by the use of another message, saying that a boat was in difficulties at the south of Siros, Mr Psarras ensured that the Superferry II or some other rescuing vessel would be proceeding up the west coast of Siros, where you and Mr Architectonides were.

The only thing that went wrong with this plan was that the sea was rougher than you expected and for the limited amount of time you were in it with Mr Architectonides, you had a bad time of it.

That is what I have to put to you is the true account of the Coha II, and you have the opportunity to respond to it now.

A.  All of what you have just said are entirely untrue and wrong.  What I personally know is what I went through - 
THE INTERPRETER:  Sorry, I am correcting myself, my Lord.  Not “what I went through”, but “the fact that I have survived”.
A.  That is the most important thing for me.  Even for myself, from my point of view, the fact that I survived is unbelievable.  It is true that I find it unbelievable.  But I am here and I am giving evidence to you.  That shows that it can happen.  The account you have given is very impossible and for me, a ridiculous story.”

In their final written submissions para 153(1) counsel for the defendants asserted that what really happened was:

“Having left Zea Marina, GCV and AA waited at Cape Sounion (where the filters are alleged to have been changed) until they had the cover of darkness.  They then met up with Mr Psarras, who was waiting for them off Yiaros, and transferred to his boat whilst Coha II was taken away.”

In the course of his oral final submissions Mr Hamblen QC on behalf of the owners objected to the defendants advancing a case that Mr Ventouris's motive in leaving the Coha II when they met Mr Psarras off Yaros was to cause Coha II to be taken away and resold - that is to say the case which had been put at the end of Mr Ventouris's cross-examination.  Mr Hamblen submitted that this was a new case which was unheralded in the pleadings and the opening.  He submitted that it could only now be advanced if the pleadings were amended.  It was unjust that this case should now be advanced because had the claimant known from the outset that such a case was to be run, he would have sought to call evidence from the motor yacht market to make good the points that Coha II was at the time of the sinking one of very few vessels afloat of such advanced and eye-catching design which would easily have been recognisable in the hands of a buyer or transferee and that it was therefore very improbable that Mr Ventouris would have believed that it could readily be disguised to enable it to be secretly disposed of.

Mr Boswood drew attention to the fact that when he ended his cross-examination of Mr Ventouris in the passage I have set out above, Mr Hamblen made no objection.  Mr Hamblen's explanation was that if the defendant Association wished to rely on that case on motive, they could do so only if permission were applied for to amend the defence and, if no such permission were applied for or given, the claimant was entitled to ignore that suggested explanation for the loss.

I thereupon disallowed the defendant's submission and refused their formal application for permission to amend the defence for the following reasons.

It is axiomatic that in cases of alleged marine insurance fraud the assured is entitled to be informed at the outset of any positive case that is relied on by underwriters.  There are obvious reasons for this.  He is being accused of a crime and he must be given a fair opportunity fully to investigate the evidence and, if necessary, adduce additional evidence to enable him to rebut the allegations.  If the allegation of fraud is put in the pleadings in one way, it should not normally be open to the defendant insurers to put it in a substantially different way in the course of the trial. To permit that would not only normally be unfair, but also potentially disruptive of the trial and therefore at least for two reasons contrary to the overriding objective under the CPR.

In the present case, the phraseology used in the amended points of defence - "the vessel was cast away by Mr Ventouris for the purpose of making a fraudulent claim on the insurance of the vessel" - unambiguously means that Mr Ventouris caused the Coha II to be sunk or destroyed.  The words "cast away" have been used in scuttling cases as having that meaning for over a century.  That has been the settled practice in pleadings in the Commercial Court : see in particular the discussion in The Gold Sky [1972] 1 Lloyd's Rep 331 per Lord Denning MR at 333 to 335 and Edmund Davies LJ. at 336 to 337.  Indeed, the words "cast away" meaning sinking or destruction of a vessel were even used in the statutory offence under section 43 of the Malicious Damage Act, 1861 of unlawfully and maliciously casting away a ship with intent to prejudice an underwriter.  Certainly in my personal experience during the last 40 years the standard way of pleading that a vessel had been scuttled for the purposes of a defence under section 55(2)(a) has been to say that the vessel had been "cast away" with the privity of or by the wilful misconduct of the assured.  I have never encountered these words being used to plead a fraudulent high-jacking of the vessel of the kind prevalent in South East Asia where destruction or sinking are not contemplated and I do not believe that they would be understood as having that meaning by anybody conversant with the law of marine insurance or the way in which such cases are pleaded.

For these reasons, I have no doubt that the only case which those advising Mr Ventouris could reasonably understand they had to meet at the start of this trial was one based on the allegation that Mr Ventouris arranged to get off the vessel with the connivance and assistance of Mr Psarras so that it would be taken away and scuttled.  It was therefore far too late for it to be alleged in the course of the trial that the purpose was to preserve the vessel so that it could be fraudulently disguised and sold or otherwise transferred.  That would not be fair to the claimant who would have been deprived of the opportunity of adducing evidence going to the probability of the vessel being subsequently discovered because of its almost unique features.

The Coha II:  the Claimants’ Case

The account of the relevant events leading to the disappearance of the Coha II given by Mr Ventouris may be summarised as follows.

Mr Ventouris was 37 at the time of the loss.  He had owned and sailed high speed boats since 1983.  Previously to this boat he had owned a Pershing 57 purchased in July 1992, also called Coha II, but he had disposed of it in 1993 because it kept breaking down.  He then purchased the Coha II with which this case is concerned.  It was a Pershing 70 and cost Italian Lira 2.8 billion (US$1.86 million).  It was of eye-catching and unusual configuration and very powerful, being nominally rated at 40 knots top speed.  There were only two other vessels of the same design afloat.  It was delivered from Italy on 18 June 1993.  However, a propeller blade broke in the course of the delivery voyage and replacement propellers were sent from Italy, arriving about three weeks later.  These propellers when fitted were not a success.  The vessel could not attain more than 12 to 14 knots.  Further replacement propellers were sent from Italy and fitted but, when Mr Ventouris tested them on a weekend trip to the island of Zakythos in the Aegean, he found the boat was too slow to reach planing speed and when it did so, the maximum speed was only 30 to 32 knots.  Further, on the voyage back to Zea Marina, where Coha II was to be moored, the port engine overheated and broke down and the vessel could only make 8 knots.

Mr Ventouris was understandably extremely angry and complained to Mr Antonelli the Italian seller.  Engine repairs had to be carried out and it was not until mid-August 1993 that the vessel was ready for sea trials.  Mr Ventouris tested the boat with Mr Architectonides and a representative of the engine manufacturers on board, but the vessel was unable to achieve more than 33 knots.  Mr Ventouris then discussed the matter with Mr Antonelli who persuaded him that the builders should send out yet another set of propellers at their expense.  Mr Ventouris was convinced that, once the appropriate propellers were fitted, the vessel would reach its rated speed.  The new propellers were delivered and fitting completed by 14 October 1993.  The vessel was not tested or indeed used at all between them and her last voyage on 27 October.

Mr Ventouris’s wife was expecting their third child.  However, by 27 October she was in hospital and the baby, which was at full term, was at considerable risk because the placenta was haemorrhaging.  The doctors had told Mr Ventouris that they had done what they could to save the child and that matters were “now in God’s hands”.  Mr Ventouris said that he decided very much “on the spur of the moment” to go in the Coha II to the church of St Mary on the island of Tinos in the Aegean “to make a devotion”.  It is well-known that the church on Tinos is credited in the Greek Orthodox church with miraculous curative powers, rather like Lourdes in the Catholic Church.  Many thousands of people go there every year to pray for the cure of their own and other people’s medical conditions.  Mr Ventouris said that he had been there on other occasions in times of trouble, including when his father was very ill.

The voyage to Tinos commenced at about 16.30.  Mr Architectonides, who was employed by Mr Ventouris’s company, Ventouris Group Enterprises SA, accompanied Mr Ventouris.  He had obtained a weather forecast for the area which indicated winds north to north east force 5-6, sea conditions slightly rough to rough.  The forecast indicated deteriorating conditions with force seven seas rough and rapidly very rough.  Mr Ventouris said that he anticipated that the voyage of about 90 miles to Tinos would take two and a half hours or three hours at the most so that, by the time they arrived, the weather would not have deteriorated to the extent forecast.  The route would take them from Cape Sounion past the southern tip of Makronisos, then to the sourthern tip of the island of Kea, then along the east coast of Kea until due east of the island of Yiaros and then across to Tinos.  Mr Ventouris explained in the course of cross-examination that, although the distance from Piraeus to Tinos was about 90 miles, it could be expected that, with the wind in the north to north east, the forecast rough conditions would be experienced only across a distance of 8 to 10 miles between Makronisos and Kea and across a similar distance between Kea and Yiaros, that is to say for less than 25 per cent of the total voyage.

I interpose that, from my personal knowledge of sea conditions in the western Cyclades, I find this not an unreasonable prediction.  When the wind is from that direction the surface conditions are usually influenced by the distribution and height of the islands to the north and north east which create substantial lee areas of calmer water quite some distance to the south and south west, but in between the lee of the islands there are often stretches of significantly rougher sea.  Mr Ventouris described his having taken a zig-zag course between Makronisos and Kea in order to maximise the wind and sea from aft.

It was Mr Ventouris’s evidence that the church at Tinos would be shut at 1930, only some two and a half hours after their departure from Piraeus, but that it was not important if they arrived later because he could get hold of the priest to open it up and the bishop was a personal friend.  He planned to return to Piraeus that night, weather permitting.

However, according to Mr Ventouris, in the course of the passage from Piraeus to Cape Sounion the Coha II was travelling well below top speed.  It took one and a half hours to reach Sounion and then Mr Architectonides found that the fuel filters were blocked and it took him about one and a quarter hours to change them.  By the time he had finished it was about 1900, after nightfall and the church would inevitably be closed by the time of their arrival.  Shortly afterwards Mr Ventouris appreciated that he would probably have to stay overnight at Tinos, but he did not attempt to inform his office or his wife at that time: he intended to do so after arriving on the island.

The vessel proceeded as planned to the southern tip of Kea, then up the east coast and then across to Yiaros.  In spite of the north easterly wind force 6 to 7, the voyage at 23 to 25 knots was, not uncomfortable.  They kept the sea aft or alongside and although it was rough the vessel behaved well.  Mr Ventouris said that the wave height was 2 to 2.5 metres.  At about 2100 when they had got to a point just over midway between Yiaros and the west coast of Tinos Mr Ventouris said that he set the automatic pilot on a course of 113 which was on a direct line to the harbour at Tinos, the vessel then making about 25 knots.

Shortly after setting the auto pilot Mr Ventouris attempted to contact by VHF one of his ferries - the Bari Express - which operated on the route Rafina - Andros - Tinos - Mykonos - and which he anticipated might have got to Mykonos where it would stay overnight.  Mr Ventouris explained that his reason for trying to contact the Bari Express at this time was that, as it was getting late, he contemplated going straight to Mykonos where he could stay on the Bari Express overnight if it had arrived, discuss shipping operations with the master whom he had known for 10 years and then go on to the church at Tinos the next morning.

However, Mr Ventouris could not get an answer.  He was identifying himself as “Coha”.  He said that in the course of these efforts he was interrupted by an incoming call from one Dimitrios Psarras.  According to Mr Ventouris, Psarras was a fisherman from Kithnos who had once worked for the Ventouris family, although not for Mr Ventouris’s company, as a ticket agent for ferries at Kithnos.  Some five years previously Mr Ventouris had come to the assistance of Mr Psarras whose uncle, a fisherman, had been missing at sea and for whom Mr Ventouris had mounted a search in violent weather in his own vessel, but in vain.  In the meantime, Mr Ventouris had met Psarros about once a year.  When he broke into the radio call Mr Psarras told Mr Ventouris that he was fishing about 10 miles south of Yiaros and suggested that he should get closer into Yiaros and that they should meet and have a fish meal on board his boat that evening.  Mr Ventouris said in evidence that he declined, saying that they were en route to Tinos.  He then said that he handed the radio over to Mr Architectonides for reasons which he could not precisely remember and Mr Architectonides went on talking to Psarras.  For this purpose, Mr Ventouris gave up his seat by the radio to Mr Architectonides and Mr Ventouris moved a few feet over to his left to where Mr Architectonides had been by the wheel.

When Mr Ventouris moved into the higher sea, aft of the wheel, he said that he noticed that the large balloon-type fender, which ought to have been secured to the aft centre cleat on a small platform aft, was hanging down attached to the cleat on the starboard side aft so that it was bouncing up and down on the sea.  Mr Ventouris explained that, before they commenced the voyage, Mr Architectonides ought to have moved the fender from that position to its cruising position on the aft centre platform.  Once the vessel started planing with a lower freeboard aft the fender would be low enough to bounce on the sea surface.  The noise of the engine would have prevented him hearing the noise of the fender as it made impact with the sea and he had not noticed that it was out of position at the time when they were repairing the fuel filter off Sounion.

Mr Ventouris’s evidence was that, having noticed that the fender was wrongly positioned, he moved to shift it to a position where it no longer bounced.  Before describing his movements it is pertinent to observe that in the course of his evidence he was extremely concerned to describe and demonstrate in very specific detail precisely how he had moved and how he had come to fall overboard.  He explained that in the Coha II trial he had tried to use words to describe what had happened but had been unable to do so sufficiently clearly to make people understand.

Mr Ventouris demonstrated how with one foot probably behind the starboard aft superstructure and one foot probably on board he attempted to pull in the rope attached to the fender so as to have enough slack to tie it to the cleat at a higher level.  The vessel was not bouncing very much as the sea was not rough, the vessel being very close to the west coast of Tinos.  As he was pulling on the rope he slipped and over-balanced with a twisting motion which caused him to fall overboard leaving him facing inboard with his left elbow crooked round the cleat.  However, he was unable to maintain his arm in that position and was left clinging with his left hand to the cleat.  His left wrist was in a weakened condition due to an injury sustained three years earlier.  In order to try to get back on board he stood or kneeled on the fender but, when he did so, the rope which attached the fender to the cleat parted at the fender end.  Thereupon Mr Ventouris fell feet first into the sea.

Seconds earlier Mr Architectonides had also fallen into the sea.  I therefore now consider his evidence.  He was called as a witness in the Coha II trial but not before me.  His evidence is therefore derived from his statement and from the transcript of his evidence in that trial.

Mr. Architectonides, who was 31 at the time of the loss, worked in the Booking and Sales Department of Ventouris Group Enterprises S.A. and for some five years he also had the part-time job of looking after Mr. Ventouris’s motor yachts. He was responsible for minor maintenance and cleaning and ensuring that there was enough fuel on board.  He would check before Mr. Ventouris set out on a trip that everything was in order and normally accompanied Mr.Ventouris on trips.  Although he was able to steer the yachts on a prescribed course, Mr. Ventouris himself would also manoeuvre and carry out all navigational duties.  Mr. Architectonides would never navigate or take the helm alone.  He was responsible for securing the fenders and stowing mooring ropes when the vessel left berth.  He knew how to start the engines and he also knew the electric panel and could operate the throttles.  He also knew how to carry out routine maintenance, such as changing fuel filters.

On 27 October Mr. Architectonides  was informed  by Mr. Ventouris by telephone that he intended to take the Coha II out at 15.30 to 16.00.  He thought that Mr.Ventouris did not say where they were going, which was not unusual.

Mr. Architectonides arrived on board at 15.30 and checked the fuel and oil levels.  He also checked the weather forecast and heard that there was to be a force 5 North North East wind.  He had sailed in such conditions with Mr. Ventouris on many previous occasions.

As the vessel was departing from the marina with Mr. Ventouris at the controls Mr. Architectonides was pulling in and securing the fenders.  There were seven smaller fenders and the large balloon fender.  Soon after departure and while Mr. Architectonides was still getting in the fenders Mr. Ventouris found that he could not get the vessel’s speed up to more than 17-18 knots, and the vessel could not be made to plane.  Mr Architectonides went to the controls to help ascertain why the speed could not be increased. It was only after more than an hour that the main engine displays showed low fuel pressure and Mr. Ventouris and Mr. Architectonides deduced that the problem must be caused by the fuel oil filters.  They therefore dropped anchor off Sounion and Mr Architectonides changed the filters.  However, according to his statement he had by that time forgotten about taking in the balloon fender - having been concentrating on the engine problem.  Mr. Architectonides said in evidence that as soon as the filters had been changed, the vessel attained 22-24 knots and was planing normally.

At some stage during that part of the voyage Mr. Ventouris told him that they were going to Tinos.  However, according to Mr. Architectonides, there was no mention by Mr. Ventouris of going to visit the church, although Mr. Architectonides stated that he thought that might be the destination.

Mr. Architectonides said that some time after leaving Sounion the weather deteriorated from force 5 with a moderate sea to force 6 and the boat was “buffeted” but maintained 25-26 knots.

Mr. Architectonides described how Mr. Psarras called the yacht on the VHF and spoke first with Mr. Ventouris.  He had only met Psarras on one very brief occasion before, in the summer of 1992 when he and Mr. Ventouris had called at Kithnos in the Pershing 57.  Mr. Ventouris handed the VHF handset to Mr. Architectonides, telling Mr. Architectonides to “say hello to him”.  He then started a light - hearted conversation with Psarras.  As they were talking, Mr. Architectonides was conscious of Mr. Ventouris moving aft.  He looked round and in the moonlight saw Mr Ventouris leaning over the starboard quarter and then disappear.  In a second he realised that Mr. Ventouris had fallen overboard and according to his statements he thought that he instinctively exclaimed over the VHF something to the effect that Mr. Ventouris had fallen overboard, or was in the sea, but he could not be sure whether he had said anything.  He then rushed aft.  To get back to where Mr. Ventouris had been Mr. Architectonides had to go aft along the portside of the vessel and then across to the starboard after cleat.  According to his evidence, he did not think to put the engine into neutral.  He instinctively rushed aft to see what had happened to Mr. Ventouris, and, as far as he could remember as he started to bend over towards Mr. Ventouris, whom he could see was hanging on, in order to grab hold of his arm, he could not stop his movement “lost my footing and instead of stooping over Mr. Ventouris I kept on going and fell into the sea passing over the top of him”.  In his evidence at the Coha II trial Mr. Architectonides said in cross-examination that he fell into the sea sideways, right side first.  His attention was drawn to an article in a magazine which included a report of an interview with him and published later in 1993 in which he was recorded as saying that he hurt his knee in falling and that his leg was hurting terribly.  He was asked how it was that, as he claimed, he  was then able to swim after the Coha II. He said that he could not remember telling the reporter that but that he was driven to swim in his agitation and panic to save his life.  In swimming after the white light  of  the boat he was following safety advice which Mr. Ventouris had given him in the past that if he ever fell overboard he should follow the vessel in case it turned round to look for him.  He hoped that Mr. Ventouris might have been able to get back on board and turn the boat to look for him.  However, after swimming for a period of time the extent of which he was unable to remember he saw the balloon fender in the sea and Mr. Ventouris clinging to it.

I now turn to the evidence of Mr. Psarras.

He described in his statement and his evidence the assistance which in 1988 Mr. Ventouris had given in the search for his missing uncle and to which I have already referred.  He described how he had last seen Mr. Ventouris in the summer of 1992 when Mr. Ventouris visited  Kithnos.  On that occasion he had met Mr.Architectonides and he said in his evidence that he had joined the Ventouris family while they were having a meal and had sat drinking with them and  Mr. Architectonides.

Mr. Psarras described how on 27 October 1993 he had left Kithnos in his 16.5 metre fishing boat Thiramnia II to take it to Siros to be dry-docked for bottom cleaning and painting.  It is commonplace for owners of wooden vessels of this size which are based in the Cyclades to take them each winter to Siros for this purpose.  In his statement Mr. Psarras said that he left Kithnos between 1100 and 1200 on 27 October, but in his cross-examination he said he left Kithnos at 1400.  He explained his movements in the following way.  He intended to go fishing for swordfish about 4 miles off Yiarros.  However, it was the closed season for swordfish and he therefore had to do this under cover of darkness in order not  to be detected by the port police.  He quite openly volunteered in cross-examination that what he proposed to do was illegal.  The reason that he left Kithnos so early on 27 October was so that people would not know that he was going off for illegal fishing.  He spent the time on board proceeding very slowly with various stops and preparing his equipment.  He conceded that the time of departure from Kithnos given in his statement should have been 2 o’clock but that he had deliberately left it unaltered before signing.

He planned to complete laying two long fishing lines by 2000 and then to fish until 0200 the next morning, after which he would proceed to Siros.

He had on board two VHF radios which were, he stated, always switched onto channels 8 and 12 with a facility on both sets to pick up distress calls on channel 16.  He also had radar, mainly set to a 12 miles radius and a GPS system.  He had heard a weather forecast before leaving Kithnos which predicted north easterly winds force 6 soon force 7, rough seas and soon high seas, but although pressed on this in cross-examination and as to the likelihood of going fishing in the face of that, he was adamant that what he experienced was force 4 or 5 where he was fishing, although, after 8 or 9 in the evening, the wind reached force 7, but not where he was fishing.

Mr. Psarras said that just after he had finished putting down the second fishing line in the region of 2000 ( his statement), between 2000 and 2100 (in cross-examination) either on channel 12 or 16, he heard Coha II calling Bari Express.  He knew that Coha II was owned by Mr. Ventouris, presumably from his encounter with the Pershing 57 of that name in Kithnos earlier that year.  When he heard that Bari Express was not responding, he called Coha II and  spoke first to Mr. Ventouris and then to Mr. Architectonides. He confirmed that Mr. Ventouris had declined his invitation to have a meal on board his boat.  Mr. Ventouris had said he was in a hurry to get to Tinos because he wanted to pray at the church.  The conversation with Mr. Architectonides ended when he heard Mr. Architectonides say something which he recalled involved the words “sea” and something like “fell” or “falling”.  The transmissions from Coha II then suddenly ceased  and Mr. Psarras said he felt something was wrong.  He stated that Mr. Architectonides’s voice had “sounded stressed and far from the microphone”.

Mr. Psarras stated that he kept calling Coha II for at least 30 minutes without receiving an answer.  He stated that he concluded that something had gone very wrong and at some time between 2100 and 21.30 he called Hellas Radio ( the Greek National Radio Station) and told them what had happened and asked them to make contact with Coha II.  He also called the Bari Express.  

It was put to Mr. Psarras in cross-examination that this evidence was fabricated, that he had not had any such conversation with Coha II and that the call to Hellas Radio by him was a hoax.  This was strongly denied by Mr. Psarras.  Of course I have not had the advantage of observing him in the witness box.  The transcript of the Coha II trial shows his evidence to be substantially self-consistent, albeit there are variations in detail, particularly with regard to the points of time at which things happened.  I note also the fact that Mr. Psarras volunteered his fishing expedition was illegal, not the most obvious cosmetic embellishment by a witness setting out to give fabricated evidence.

I must now return to the evidence of Mr. Ventouris.

Having described how, immediately after Mr. Architectonides had fallen overboard into the sea and he, Mr. Ventouris, had struggled to climb back into the boat, he said that he swam alongside the fender until he could get hold of it after swimming for a distance approximately the length of the court.  He was an athletic swimmer.  He held on to the fender with his fingers, holding it upside down, by the eye.  While holding it thus he took off his belt and threaded it through the eye.  It was put to him that his evidence before this court differed from that apparently given at the Coha II trial in as much as he had previously said that when he started swimming to catch hold of the fender it was already 30 feet away from him and he then caught up with it.  Mr. Ventouris said that he was in a bad psychological condition at the previous trial and could not have comprehensively explained the process of catching the fender.  What he meant to convey was that he had to swim alongside the fender for a distance equivalent to the length of the court.

Mr. Ventouris described how Mr. Architectonides caught up with the fender and how both of them then attached themselves to the fender by means of a belt which Mr. Ventouris had been wearing but which he took off and threaded through the eye.  Indeed, Mr. Ventouris said that he removed his clothes while in the sea: first his T-shirt, then his trousers.  He did this by pulling or tearing the clothing with his free hand.  He demonstrated the method of doing so, explaining that, once the clothing was wet, it was easier to do it.  It was put to him that a demonstration recorded on video and organised for the purposes of the Coha II trial by the defendant’s expert, Dr. Oakley, which involved two fit and qualified life savers trying to remove their clothes in an experimental pool at Aberdeen in surface conditions which were said to be similar to, but somewhat more benign than, those actually prevailing that night, showed that it was impossible to carry out that exercise while treading water.  Unfortunately Mr. Ventouris had never seen the video, but he said that he had asked his previous solicitors to carry out tests replicating the sea conditions. the solicitors had told him that it was unnecessary.  However, he maintained that he had done as he described.

It was put to Mr. Ventouris that in order for him and Mr. Architectonides to stay afloat, it was not enough simply to hang on to the fender: they would have to swim or tread water all the time because the fender provided only 7 per cent of the buoyancy of a lifejacket.  Mr. Ventouris said that the fender was helping them stay afloat, but they did have to make movements, slow movements.  They kept their backs to the direction of the sea so that waves were breaking over their heads from behind.  One in every 3 to 5 waves had a white breaking crest which would break over them from behind, and they drew breath in between those waves.  They could tell when such a wave was approaching by the sound it made.

Mr. Ventouris claimed that at about 0330 after they had been in the water for six or six and a half hours he recognised the passenger ferry, Superferry II, moving towards Siros.  That vessel on the evidence of its master was proceeding from Mykonos towards Siros to join the search for the missing men which had begun between midnight and 0100. It is estimated that the Superferry II must have arrived off Siros by 0230 whereupon she proceeded down the east coast.  Mr. Ventouris claimed to have recognised that vessel by the rig of her lights, with which he was very familiar, notwithstanding that the vessel’s course was some distance from that apparently followed by the fender.  Although it is improbable that by 0330 the distance between them would have been such as to enable Mr. Ventouris to recognise lighting with sufficient accuracy, it is not all improbable that at about 0230 or probably soon after when the Superferry II first arrived off Siros the distance was close enough to permit recognition of her relatively elevated lighting rig from the position of  Mr. Ventouris, even at surface level.  If the dire physical circumstances which Mr. Ventouris claimed that he was experiencing were indeed true, his evidence on timing could not be treated as even broadly accurate and I am not therefore prepared to treat this disparity as materially weighing against his overall account of what happened.

Mr. Ventouris explained that when they reached an area off the northern tip of Siros they tried to swim away from the shore because he knew from previous visits to the island that it was rocky and inhospitable with difficult inshore currents.  It was put to him that Mr. Psarras had taken them in his boat to a point close to the west coast and dropped them in the sea so as to enable them to get ashore at one of the west coast beaches.  Mr. Ventouris strongly denied this.

Mr. Ventouris then described their rescue by the Superferry II.  This, as is common ground, took place about half an hour after dawn between 0700 and 0715 on 28 October in a position less than a mile off the west coast of Siros and little more than a mile south west of Cape Tremessos. By that time, according to his evidence, Mr. Ventouris was shaking so much that he started  swallowing water. He could not keep his mouth closed and had to ask Mr. Architectonides to hold his head up when the waves came.  He described having spasms from about 0700 and no longer being able to keep afloat by swimming. He felt that he could no longer survive and told Mr. Architectonides who seemed to be in a better physical condition, that if he fainted  Mr. Architectonides should hold his head up, hoping that Mr. Architectonides would not realise that he had died which would have caused him to lose heart.  When the Superferry II arrived close to them Mr. Ventouris described how he and Mr. Architectonides were dragged up out of the water on to the stern car ramp.  He could not remember with any confidence whether this was by means of a lifebelt or a rope.  He had tried to restrain Mr Architectonides from trying to swim away from the ferry by getting his fingers into Mr Architectonides’s watch strap.  He did not know how the fender came to be salvaged and, indeed, there is no evidence as to this.

Mr. Ventouris said that when he was pulled aboard he could not walk without assistance, was very cold indeed, had no control over his bowels and was coughing and shaking constantly.  He could not speak at first and was carried to a cabin where he was put to bed and rubbed by members of the crew to revive his circulation.

The account given by Mr. Architectonides of their time in the sea is substantially the 
same as that given by Mr. Ventouris. There are some disparities, but they are of relatively little weight. Mr. Architectonides appears to have had better physical reserves but was psychologically less able to cope than Mr. Ventouris.

After some time Mr. Ventouris learned that he was being taken to Siros for hospital treatment, but he felt compelled to go to the church at Tinos to give thanks for his survival and it was therefore decided that the Superferry II would make for Tinos and that Mr. Ventouris and Mr. Architectonides would then be taken over by the Bari Express and carried back to Piraeus.  Mr. Ventouris described how on arrival at Tinos he was unable to walk and had to be helped along by two crew members.  He was put into a car inside the ferry and then driven in it to the church where he prayed and from where he was conveyed by car to the Bari Express.

At this point it is necessary to return to the evidence of Mr. Psarras, the fisherman.

After he had first alerted Hellas Radio he again contacted them and suggested they ascertain from the Tinos Port Authority whether Coha II had arrived.  He heard after about one hour that it had not.  He was called on the VHF by a port captain at Ventouris’s office.  Psarras expressed concern at what had happened.  The weather was deteriorating and he thought the boat might have capsized.  He could tell from the radio transmissions that a full sea search operation was being launched at this time.  I infer that this was between about 2300 and 2400.  He then decided to move from his fishing position to the eastern side of  Yiarros in order to search for the Coha II.  He estimated that once he moved out of the lee of Yiarros the wind was force 6 - 7.  By 2400 - 0100 he could see aircraft and large vessels in the general area and could hear instructions being given on the VHF by the Search Control Centre.  He stated that he made contact with that Centre and was instructed to remain and search in that area east of Yiarros.  The Centre was co-ordinating the search operation with other vessels.  Mr. Psarras continued to search there until the following morning when he heard that Mr.Ventouris and Mr.Architectonides had been found.

According to Mr. Psarras, “ some days” after the rescue, Mr. Ventouris called him to his office to thank him for his involvement in the rescue.  Mr. Ventouris tried to give Psarras a present but he would not accept it.  I am bound to say that I consider it extremely unlikely that Mr. Psarras would have put this in his statement if he had been employed by Mr. Ventouris to facilitate the casting away of the boat.

In the course of his cross-examination he was asked whether, early on 28 October, he had made a  radio call purporting to have come from Coha II and stating that it was sinking with a damaged rudder, the message apparently having been sent from the south west corner of Siros. This he strongly denied, but he did say that, although he had not heard it, he overheard conversations about it and people swearing at it because it had been “a joke”.  He said that he and other vessels continued the search east of Siros.

I now turn to the evidence of the master of Superferry II, Capt. Tzortzis.  He was a very experienced master.  That ferry had no connection with Mr Ventouris.  He had held a master’s certificate since 1977 and had captained vessels for 16 years.  His vessel was spending the night at Mykonos.  While there he heard that the Bari Express was putting to sea to search for the missing boat which was said to have been lost at sea between Yiarros, Tinos and Siros.  After consulting his owner, Capt. Tortzis took his own decision to take Superferry II to sea to search for those missing.  He explained that he had on many previous occasions put to sea to help in a search for people lost in the Aegean.  Owners often diverted ferries from set routes.  “Owners never complain as they know that the Aegean is a dangerous place and this is part and parcel of life in the islands”.  I infer that both Mr. Ventouris and Mr. Psarras would have been well aware of this and that, once an alarm was raised, an air sea rescue operation would be set off involving a large number of vessels, including passenger ferries currently in the Cyclades.

Capt. Tortzis calculated that, given the effect of the current and the prevailing north easterly winds, he ought to search down the  east coast of Siros as far as Ak. Trimaison. His ferry proceeded  in a zig-zag course.  They found no trace of Coha II. At about 0230 to 0300 they picked up a print radio message which stated that Coha II had damage to her rudder and was sinking.  The message appeared to come from Ak. Velostasi on the south west corner of Siros, but Capt. Tortzis and the other vessels involved in the search “were very doubtful as to the validity of this call as it was so far from the point where Coha II was last reported  to be located”.  Nevertheless, the master considered it too important to ignore and proceeded at full speed to the bottom end of Siros where they consulted with local fishing vessels which had seen nothing.  The master proceeded with the search in a zig-zag course up the west coast of Siros until shortly after daybreak when Superferry II spotted the fender and the two men hanging on to it. The position  of the rescue was no less than about 9 miles from the  point from which the radio message appeared to come.  

It follows that, if that radio message was part of a plan which involved Mr. Psarras deliberately dropping Mr. Ventouris and Mr. Architectonides into the sea in order to suggest that the Coha II had been accidentally lost when in truth it had been cast away, the execution of the plan would involve that, having started the air sea rescue operation in the area east of Yiarros and Siros and west of Tinos before midnight, then having dropped the two men off into the sea in the face of a force 5 - 6 north easterly wind and worsening sea conditions, the rescue exercise was diverted after at least three and a half hours and some three hours before dawn, to a place which was no less than 9 miles from the position where the two men were rescued and from which they could not possibly have swum to the ultimate rescue position in the prevailing conditions.

The rescue of the two men involved an exceptionally difficult exercise described in the evidence of Capt. Tortzis.  The details do not matter.  Suffice to say that the condition of the men as observed from the ferry by Capt. Tortzis was seen to be so serious and they were so close to drowning that he instructed his crew that unless they were taken out of the water within two minutes they would be finished.  The vessel could be manoeuvred with its bow thrusters to bring the stern ramp very close to the two men to whom life belts and/or ropes were thrown.  Both of them managed to get sufficiently into the life belt or ropes to enable them to be pulled to the edge of the ramp so that the crew could manually lift them aboard.  Capt. Tortzis described how the heavy seas were rolling the fender and causing the men’s heads to be submerged, there being little or no effort to keep their heads above water.  He had experience of 3 or 4 previous rescue operations, including one in which he himself had been rescued.  He therefore knew the symptoms of people who had been in the water for a long time.  In his view Mr. Ventouris and Mr. Architectonides were in the worst physical conditions he had ever seen in a sea rescue. His account of the rescue and the men’s condition is thus substantially consistent with that given by them.  He also expressed the opinion that he did not find inconsistent the position and time at which the men were said to have fallen overboard and the position and time at which they were rescued taking into account the current and the north easterly wind force 5 - 6 varying to north north easterly force 7 - 8.  This is obviously evidence of opinion and not of fact but it was neither challenged in cross-examination nor apparently objected to in the Coha II trial nor was it objected to in this trial. I therefore give it some weight, having regard to Capt. Tortzis’s experience of the Aegean.

According to the evidence of Mr. Ventouris, he refused to go to hospital when he had been taken back to the mainland.  He said in cross-examination that the reason for this was his worry that the baby would be lost.  It was put to him that the true reason that he had refused to go to hospital either in Siros or in Athens was that he knew that any doctor examining him in hospital would appreciate that he could not have spent 10 hours in the sea.  He denied that suggestion.

After arriving back at his home, according to Mr. Ventouris, he visited his doctor, Dr. Melas, in the late afternoon or early evening of 28 October - the same day as the rescue.  His doctor advised him to go to hospital, but he refused.  He said  that he wanted the security and privacy of his home to overcome his ordeal and to be present if and when his baby was born.  He stated that he had great determination and stamina and felt he would be safer at home than in hospital.  He was given medication for his cough and pneumonia.  He went home and stayed in bed.  His baby was born on 30 October and he was fit enough to visit his wife in hospital on that day.  He got rid of the pneumonia within about two weeks.  He still had a severe cough and was seeing spots in front of his eyes.  His chest felt very weak and he was unable to visit the office after an attempt to do so a couple of days after the accident.  He then stayed at home for two weeks.  He lost his powers of concentration for many months.  He remained very ill, lost his voice and contracted a chest infection which lasted for some weeks.  He described the mental effects of the accident as worse six months later, in as much as his feelings of fear and anxiety were at their most acute.

Mr. Ventouris stated that on 29 October 1993 he gave instructions for a helicopter search for the Coha II to be carried out at his own expense covering the area of 100 miles from the estimated position where he had fallen overboard.  This area appears to have included the west coast of Tinos. No trace of the vessel or its equipment could be found.  When that was unsuccessful Mr. Ventouris arranged for a diving company to search for the Coha II during the period 3 - 30 November 1993.  The search covered the north west coast of Tinos, the southern and western coasts of Mikonos and the southern and western coasts of Rinia.  Again nothing was found.  Mr. Ventouris then extended the search to the south west, west and south coasts of Patmos.  Given that, at the time when he fell overboard, the vessel was carrying enough fuel for about four hours running at 25 Knots, it is hard to see where else it could have made a land fall.  This unproductive exercise cost US$170,000.

Mr. Ventouris stated that in the course of the months following the loss he decided to make a donation for the benefit of safety at sea. He therefore made a public announcement of his intention in an interview with Efoplistis Magazine, December 1994 edition, and on 17 January 1995 he wrote a letter to the Ministry of Mercantile Marine offering to contribute GRD220 million towards the purchase of a helicopter for that purpose.  This is equivalent to about US$1 million which was about half the value of the Coha II.  Since the Ministry was unable to find the balance of the cost of a helicopter, it was not able to accept this offer.  It is to be observed that, although the insurers of the Coha II had not then accepted the claim for its loss, they had certainly not raised any question as to the honesty of the claim or done anything to suggest that they might. When the Ministry had indicated that it could not pay the balance of the cost of a helicopter Mr. Ventouris offered by letter of  28 February 1995 that the amount of his donation should be used for the purchase of nine fast rescue motorboats.  This offer was accepted on 17 March 1995.  Mr. Ventouris’s company procured the construction of the boats at a cost of GRD220 million.  That money was paid  and delivery to the Ministry was completed over the period September 1995 to September 1997.

Mr. Ventouris was pressed in cross-examination in the present trial to suggest an explanation for the fact that no wreckage of the Coha II or its floatable contents were ever found.  He suggested various explanations indicating that the vessel might have been damaged off Tinos, but only finally sunk some way off the coast.  He said that the floatable cushions could not have come to the surface because they were closed in to the accommodation areas at the time when he went overboard.

In this trial it was put to him in cross-examination and he strongly denied that the entire account of the loss of the Coha II was a fabrication and that there had been a conspiracy which involved meeting Mr. Psarras off Cape Sounion, then Mr. Ventouris and Mr. Architectonides transferring on to Psarras’s boat while the Coha II was taken away for resale and that Mr. Psarras then took them to a position south of Siros where he let them into the sea and then gave out the alarm about the Coha II being in a sinking condition off the south of Siros.  It was suggested that the plan went wrong when the sea turned out to be rougher than expected.

Mr. Architectonides stated that he recalled that several people suggested that he should go to hospital, but he also refused to do so, preferring to be at home.  He saw his doctor on 29 October 1993.  He thought it was the doctor who visited him because he was too weak to get to the surgery. He felt physically and mentally exhausted. His wrists and ankles were swollen and he was vomiting and he had heart palpitations. He also had nightmares for a long time afterwards.  He was advised by his doctor to stay in bed for 20 days.

The Coha II:  Expert Evidence

There is expert evidence relating to the Coha II.

As to the assertion that neither Mr. Ventouris nor Mr. Architectonides noticed that the fender was lashed to the starboard side aft until the Coha II had only 20 minutes to go before arriving at Tinos, Mr. Pike a marine consultant and surveyor and an experienced investigator of power boats called on behalf of the defendants and who gave evidence in the Coha II trial, had conducted fender tests on a Pershing 70. The tests had been conducted in “fairly flat” sea conditions with the fender attached by a rope one metre long.  The fender had been thrown up in the air as it bounced periodically on the quarter waves, at the rate of once every three or four waves.  For that reason, if the conditions were rougher, it would become periodically visible from the wheel house driving seat.  The defendants submit that during the four and a half hours voyage from Piraeus either of Mr. Ventouris or Mr. Architectonides was bound to notice that the fender was in the wrong position.  In the circumstances, even if it were assumed that the fender remained unnoticed, not only was it impossible that anyone would have bothered to correct its position, which posed no danger to the vessel, when only twenty minutes from arrival at Tinos, but it was an exercise so dangerous in the rough conditions experienced with the vessel pitching unpredictably that no experienced crew would have attempted it without at least slowing down the boat.  The physical risk of Mr. Ventouris overbalancing was so great as to make his account of what he had attempted incredible.

The failure to notice that the fender was wrongly stowed is not, in my judgment, entirely surprising.  Between the Marina and Sounion, although it was still light, both men were directly concerned with the problem of underperformance by the engines. Further, Mr. Ventouris was sitting at the wheel in a position from which, according to his evidence, it was at least not easy to see the starboard side aft.  This was a very large boat.  He would be less likely to see it when the vessel was hove to at Sounion because it would not be bounced up into view and the attention of  both men would be distracted by the exercise of changing the oil filters.  Further, by the time they left Sounion it was dark and the fender would be less noticeable throughout the voyage.  The noise of the engine inside the cabin would smother the noise of the fender bouncing about.  When Mr. Ventouris relinquished his seat so that Mr. Architectonides could speak by VHF to Mr. Psarras, it was not surprising that he should glance aft and from his new position further to the portside his line of vision to the starboard aft quarter would be unobstructed.  It was therefore more likely that he would notice the fender when he did.  Nonetheless his apparently impulsive move aft to get in the fender appears to be extremely foolhardy in the prevailing conditions and with a deck wet from spray.  The question is whether it is on the face of it so foolhardy that it is intrinsically incredible, particularly when one takes into account the fact that he does not seem to have been hanging on to any handhold; he needed both hands to get in the very large fender.

The defendants’ experts expressed the view that it was difficult to see how Mr. Ventouris could have fallen from the Coha II in the way described, having commenced in the position where he was bending over the cleat and fender rope and then pivotting round so that he was hanging on to the cleat and subsequently being able to get himself on to the fender so as to cause its rope to break at the eye of the fender.  Dr. Oakley, who had researched for several years into survivability in the course of falls from high speed boats, drew particular attention to the shortness of the length of  rope (about 1 metre) relative to the height of the cleat above the surface (about 2.0 metres) and the fact that the vessel would have been doing 25 knots in reasonably rough conditions.  He found it hard “to put (Mr. Ventouris’s account) ....  together into a smooth series of events”.  Mr. Pike described what Mr. Ventouris had described as “a feat of considerable dexterity” and something which sounded a very difficult feat to achieve.  The defendants also drew attention to the weakened condition of Mr. Ventouris’s left forearm, as indicated in a medical report provided by the consultant surgeon who had treated Mr. Ventouris following the accident which he described having occurred in 1990.  It was stated in the report that for a period of  four years most of “the forearm functions - grasping holding - etc. were absent or severely impaired”.  Mr. Ventouris explained in the course of his cross-examination that the report was referring to his left wrist and the palm of his left hand being weakened and not to his forearm.  Since Mr. Ventouris did not suggest in his evidence that he was using his hand to hang on to the cleat, little or nothing can be made of this point.  I would add that one would hardly expect a very precise or accurate account of the details of this type of accident where it all happened in a matter of seconds and was then followed by the prolonged traumatic experience leading almost to death described by Mr. Ventouris and Mr. Architectonides.

The defendants rely heavily on evidence given by the claimant’s expert on survival at sea, Dr. Golden, in the course of the Coha II trial.  In particular he said that he did not find it credible that Mr. Ventouris had hung on to the cleat by his left arm. However, in this trial he stated that if it were assumed that he was also trying to pull himself up with his right hand while his left arm was crooked round the cleat he did not find that incredible.  I observe that, given the evidence of Mr. Ventouris that he tried to get on “like a monkey” and his demonstration in court in which his whole lower body, including his legs and knees were brought into play, it does not appear to me to be surprising that he got into a position in which he had some arm grip on the cleat and yet was pressing down forcefully with his legs and/or feet on the top of the fender.  It is suggested that Mr. Ventouris tailored his evidence in this trial to attempt to accommodate Dr. Golden’s evidence in the Coha II trial by saying in re-examination that he also used his right hand in the movement which ended in hanging on to the cleat with his left arm.  I find it improbable both that Mr. Ventouris at either trial had any very accurate recollection of precisely what he did with either hands or arms or legs and further that, if, as he demonstrated in this trial, he did manage to crook his left arm round the cleat, it is difficult to envisage that he did not also attempt to grasp hold of the boat with his right hand.

As to Mr. Architectonides’s account of how he came to be in the sea, the defendants rely on Mr. Pike’s evidence that a rational and experienced seaman would not have rushed aft towards Mr. Ventouris’s position but would first have slowed or stopped the engine in order that, if he had to be rescued from the sea, the boat’s distance from him would be minimised.  No doubt with hindsight, this was the obvious thing to have done, but, I am bound to say that, having read the whole of  Mr. Architectonides’s evidence in the Coha II trial, I do not form the impression of a particularly intelligent person.  It could well be that, given that his job did not normally include operating the engines when he was on board with Mr. Ventouris, he did not think to touch the controls in the terrifying split second as he left his position to find Mr. Ventouris. Once he had ascertained Mr. Ventouris’s precarious position, his natural reaction would be to attempt to get to him so as to pull him aboard.

Considerable evidential problems arise over Mr. Ventouris’s claim that, following the fender becoming detached from the boat, and his own fall into the sea, he was able to swim in such a way as to catch up with the fender.  In this trial Mr. Ventouris gave evidence the effect of which was that it was necessary for him to swim alongside or close to the fender for a distance of about 35 feet before he was able to catch hold of it.  In the Coha II trial his evidence on this was capable of being understood to mean that when he started to swim to the fender it was about 35 feet distant.  On the basis of that evidence the defendants suggested that it would not be possible for even a very fit and trained swimmer to have caught up with the buoy which was estimated to be drifting away from Mr. Ventouris at about 1 knot (109 feet per minute). The transcript of the Coha II trial evidence was, in my view, distinctly obscure in meaning and I therefore called for the original tape to be exhumed and for the translation of the evidence to be re-considered by the interpreter in this case.  Perhaps not surprisingly this proved to be a difficult exercise.  However, taking into account what appears in the original transcript and also words which do not appear to have been fully translated into the original transcript, it seems that, although Mr. Ventouris was obviously in a pretty agitated state when he gave his evidence, what he was trying to say was that the fender was very close to him when he first saw it after surfacing and that before he could get hold of it he had to chase after it but caught up with and grasped it quickly.

 His words “This is the fender.  Here it is.  I was chasing after the fender.  Here it is.” suggest not that the fender was distant from him to the extent of the distance of the opposite corner of the court room, but that it was close at hand.  I would also consider it extremely unlikely that he would have recalled with any reliable accuracy, given the sea conditions and the shock of sudden immersion, how far away from him the fender was located if he were not almost alongside it and further how far he had to swim alongside or close to it in order to grab hold of it.  Accordingly, not a great deal of weight can be attached to the suggestion advanced by the defendants that, given the sea conditions, the speed at which the fender would have been drifting and the fact that Mr. Ventouris was wearing his clothes, he could never have caught up if the starting distance were 35 feet.

Indeed, that assertion rested on the premise that the Advanced Safety Award of the Royal Life Saving Society required 300 feet to be swum in 4 minutes (that is to say a rate of 75 feet per minute) and that Mr. Ventouris could not have generated a high enough speed above that to overtake the fender starting with a 35 feet separation.  However, Mr. Pike did not profess to be an expert on swimming speeds and I therefore declined to permit his evidence on this to be tested in cross-examination and I attach no weight to his opinions.  The only admissible expert evidence on the possibilities was given by Dr. Golden.  He considered that, given the high state of fitness and training as swimmers of the two men, they could probably swim at a maximum speed in the relevant sea conditions which was in excess of the fender’s drift speed and for a period of time long enough to overtake it, even if it were at a starting distance of 35 feet.

I therefore do not consider it improbable that Mr. Ventouris managed to overtake and broadly in the manner he described.

Further, there were inconsistencies between the evidence given in this trial and that in the Coha II trial as to the exercise, which is crucial to the two men’s survival, of  Mr. Ventouris taking off his belt and threading it through the eye of the fender and thereby being able to “moor” himself and Mr. Architectonides to the fender.  In the Coha II trial Mr. Ventouris, having stated in his witness statement that he had threaded the belt after he had met Mr. Architectonides, in the course of his cross-examination in that trial he said that he could not remember whether it was before or after he had met Mr. Architectonides, whereas Mr. Architectonides said in evidence that the threading was done before he met Mr. Ventouris.  In this trial Mr. Ventouris also said that it occurred before he met Mr. Architectonides.

If Mr. Architectonides had seen Mr. Ventouris carrying out this operation he would obviously have remembered what was, as Mr. Ventouris accepted, a relatively difficult exercise.  If it happened at all, it is not perhaps very surprising that Mr. Ventouris should be unclear as to precisely when it occurred in relation to Mr. Architectonides’s arrival. After all, the matter of real importance to him would be his own survival and what he did with the belt clearly would more likely be retained in his mind than the exact moment of Mr. Architectonides’s arrival.  It is, in my view, more probable that Mr. Architectonides’s recollection is correct.

More important is the question whether the exercise of threading the belt would have been so difficult in the prevailing conditions as to be incredible.  Mr. Ventouris went to great lengths to demonstrate before this court how, by holding down the eye of  the fender with one hand, he was able to get the belt through the eye. There is no doubt that, as Dr. Golden said in the trial, threading the belt was not easy, and that, as he said in the Coha II trial, Mr. Ventouris was lucky to have done it.  Nevertheless it did not, according to Dr. Golden, involve a high degree of improbability and certainly I do not consider that the exercise could be regarded as so difficult as to be incredible or to suggest that the account was fabricated.

The defendants rely on the evidence of Mr. Pike that, on the basis of the account of events given by the two men, they would never have taken convergent courses once both of them were in the sea.  This analysis is based on Mr. Architectonides’s evidence in the Coha II trial that when he fell into the sea, he came to the surface and swam after the aft light of the boat which would have been proceeding at 25 knots on automatic pilot set to a course of 113 degrees.  If one assumes, as Mr. Pike suggested in this trial, that Mr. Ventouris lost his grip on the boat and fell into the sea 10 seconds after Mr. Architectonides entered the water and that the north north easterly wind blew the fender directly down wind, at about half a knot, he would be swimming alongside it on a course almost at right angles to that of Mr. Architectonides following the after light and he would have started to swim at a distance of about 420 feet from where Mr. Architectonides fell in.

This conclusion necessarily rests crucially on assumptions which are intrinsically uncertain, for example the period of time between Mr. Architectonides falling into the sea and beginning to swim and Mr. Ventouris falling in when the fender broke loose. In this trial Mr. Ventouris said that it was only “less than a second or a second” while he just did one pull, pressing down on the fender. At the Coha II trial Mr. Pike agreed that it could have taken only 4 or 5 seconds. Mr. Pike referred to the period of time it would have taken for Mr. Ventouris to co-ordinate his instinctive thought processes.  This is by its nature an extremely inexact estimate.  Precision is implausible whereas relatively small differences in the time parameters have a relatively substantial effect on the estimate of the distance between the two men.  If one also takes into account the further consideration that Mr. Architectonides would not necessarily be swimming on exactly the same course as the Coha II.  He might well have the after light in view, but he might well not have been able to judge whether he was closely following its course, in view of the darkness and the sea conditions, particularly the uneven surface in the wake of the boat.  Further, given that there was a north, north easterly wind and that the sea must therefore have been expected to be moving in the same direction, his swimming course could well have been deflected to the south east.

Dr. Golden considered that the two men were lucky to have met.  That may well be, but, when one takes into account the uncertain factual foundations for Mr. Pike’s conclusion, it does not appear to be so unlikely as to be incredible.  For example, if one assumes that Coha II at 25 knots would cover 169 feet in 4 seconds, that was a distance which Mr. Architectonides could have swum in about one minute, whereas Mr. Ventouris, alongside or grasping the fender, would be moving with the wind at about half a knot or, about 50 feet in one minute.  In that event, the two men could have been very close together by the time Mr. Ventouris had finished threading his belt through the eye of the fender.

Dr. Oakley accepted that Mr. Ventouris would have been able to remove his trousers , as he said he had done, while in the sea if he had been prepared to put his head under water.

The Coha II:  the Possibility of Survival

I must now consider the important issue as to the ability of the two men to survive for ten hours in the sea conditions which appear to have prevailed.

Mr. Ventouris’s evidence as to the sea conditions experienced was not the same in this trial as in the Coha II trial.  In particular , in that trial he said that the waves came over his head every two seconds, whereas in this trial, after its having been demonstrated to him by me how long two seconds lasted, he maintained that this frequency was impossible.

Secondly, he maintained in that trial that Mr. Architectonides was singing over and over again a phrase from a song about cigarettes, drinks and night birds in the sea all night and this Mr. Ventouris found so extremely irritating that he asked Mr. Architectonides to stop it.  In cross-examination in this trial Mr. Ventouris said that it drove him mad, and that looking back his recollection was that Mr. Architectonides went on singing for hours, but that maybe it was not more than one hour.  In cross-examination Dr. Golden accepted that Mr. Archiechnides could not have been singing all night, for that would not have been compatible with his condition at the time of rescue.

As to the song, I interpose that its evidential significance is, in my view, less material to Mr. Ventouris’s veracity or accuracy of  recollection than to what can be inferred about the condition of the sea.  It is to be inferred that at least for a substantial period of time the sea was not too rough and Mr. Architectonides’s condition was not too weakened to go on singing.  I would also add that it is hard to envisage Mr Ventouris making up this evidence if there were not substantial truth in it.

There can be no doubt that in the prevailing sea conditions the two men were at very considerable risk of drowning through inhaling or swallowing seawater.  This is clear from the evidence of Dr. Oakley.  He considered that for such a long time they could not have kept up the physical output to keep their backs to the waves, keeping themselves afloat by sufficient swimming movements and avoiding accidentally inhaling or swallowing enough water to initiate the sequence of drowning.  Keeping their backs to the waves, although an advantage, would not ensure that their airways would be protected.  He made the point that only between one half and two litres of water would be enough to cause a person to drown.  He calculated that, assuming them to have been in the water for nine and half hours, they would have had their airways submerged no less than 5000 times, their noses and mouths having been splashed 3000 to 5000 times, causing them to spit out water on about 1000 occasions.  Mr. Ventouris’s evidence was that he would close his mouth and breathe through his nose when waves  - about one in 3 to 5 - broke over his head and that they would try to conserve their strength by making only slow swimming movements.  Dr. Oakley expressed the view that to have attempted to propel themselves by swimming, as well as making constant swimming movements to keep afloat would have been rapidly exhausting and would not have been maintained, even intermittently for a period of 6 hours.

It was common ground between Dr. Oakley and Dr. Golden that the fender would have provided only 7 per cent of the bouyancy of a life jacket if the fender were used as they used it, both hanging on to the belt through the eye which would be beneath the surface.  Therefore it would be necessary, as Dr. Golden agreed, to expend 93 per cent of the energy to keep afloat that one would need if the fender were not there.  If they had not had any fender there was no better than a 1 per cent chance of survival in the prevailing conditions.  However, Dr. Golden pointed out that the important contribution of the fender was that it would tend to pull them downwind keeping their backs to the sea.

Dr. Oakley said in cross-examination that the two men would be using most of their effort to keep themselves clear of the water and to allow them to breathe rather than to swimming in a particular direction, although in his report he had expressly assumed that they were swimming with the purpose of getting to Siros.  If they were not doing that but, as Mr. Ventouris had said, attempting to conserve their energy and only swimming slowly, that would be relevant to his assessment of how much energy they required. Further his report appeared to assume that the predominant waves would be 3 metres, whereas the relevant Greek National Meteorological Office report stated that in the course of the evening wave heights would increase to 2 metres and “locally” to 3 metres “in the channels”. 

Further, Dr. Oakley had based part of his conclusions on experimental tank tests at Aberdeen which had been filmed on video and shown in court and which are described in his second report.  These were carried out by two experienced survival instructors who were said to be very familiar with immersion and with the conditions which could be created in that experimental tank.  They used the Coha II fender for this purpose.  From those tests Dr. Oakley concluded that they had to swim practically the whole time in order to keep the fender up and to minimise the occasions when thay were hit by the fender and splashed by it.  There also appeared to be a substantial risk that they would collide with each other in the waves.

Dr. Oakley’s calculations of the incidence of submersions of their air passages to which I have already referred were based on observations from these tests.

Dr. Golden considered that the tank conditions were “totally unrepresentative” of the actual sea conditions likely to have been encountered.  They were conducted in fresh water and not salt water.  The wind conditions were about one third of those reputed to have been experienced by the two men.  The wave-making machine was located so as to create waves running at right angles to the wind direction.  In consequence there was insufficient fetch to give a decent-sized wave.  The surface condition produced  was a claptopic sea with sharp, spiky waves running in different directions which was “not representative of the type of sea one would expect to get in open water”. Certainly, the tank surface conditions shown on that part of the video seen by me were totally unlike anything I have ever seen in Force 6-7 conditions in the Cyclades.

Dr. Golden also drew attention to the fact that in the tank tests the fender was behind the heads of the swimmers whereas in open water conditions the fender would have been ahead of the swimmers, pulling them along as it was blown by the north north easterly wind.  He considered that the experimental tank conditions were more awkward for survival than the actual conditions would have been because they had to work harder to stay afloat in fresh water than they would have done in the salty seawater of the Aegean.  Further, the frequency of the little spiky waves made it difficult to breath so as to meet the oxygen requirements to enable them to stay afloat, thereby creating quite a stressful environment for survival.  No meaningful conclusions could be drawn from the tests.

In my judgment Dr. Golden’s criticisms of the tests are substantially unanswerable.  Indeed, when it was put to Dr. Oakley in cross-examination that one could not draw scientific conclusions from the experiments, he agreed.  I am therefore not prepared to attach much weight to Dr. Oakley’s estimates as to incidence of submergence of the men’s airways or of splashing of their noses and mouths, or the number of times they would have had to spit out water in the course of nine and a half hours.

One of the important aspects of the evidence of survivability is the amount of effort which the two men would require to keep themselves sufficently afloat to avoid substantial intake of  seawater. Dr. Golden put this at fifty per cent of maximum oxygen intake (VO2 max) and Dr. Oakley accepted this, on the assumption that they were being dragged downwind by the fender.  This is less than the amount of energy needed for running and equivalent  to that required for a steady brisk walking pace, something that could be kept up for 9 or 10 hours.  Dr. Oakley made the point that the more important determinant of survival would be the morale and mental reserves of the two men.

Dr Golden considered that, although it would be difficult for them to keep up all night the control of their breathing necessary to avoid taking in water from one cresting wave in 3 to 5 waves which would or might submerge their heads, it was “very realistic” that they had succeeded in doing so.  Overall, he was of the view that it was entirely plausible for them to have survived for the period which they claimed to have done.

The condition of the two men when rescued provides further evidence by reference to which it is possible to test the credibility of their account of events.  Dr Golden considered that their condition was symptomatic of mild hypothermia, in particular their uncontrollable shivering, that they were confused and had difficulty in talking.  That condition was consistent with a loss of body temperature of 2-3 and prolonged immersion at the estimated sea temperature.  Mr Oakley said in evidence that if they began to shiver at about 0600, that would suggest that they had been in the water for several hours before that.  Other symptoms consistent with immersion for several hours identified by one or other of the experts were osmotic diarrhoea, Mr Ventouris’s watery cough and Mr Architectonides’s swollen hands and feet.  I interpose that if, as the defendants suggest, they entered the sea deliberately, this evidence suggests that they did so many hours before dawn.

Matters of detail in the account of the rescue were relied on by the defendants as being inconsistent with the account of prolonged immersion.  These were firstly Mr Ventouris’s account of trying to prevent Mr Architectonides swimming away from the Superferry II by putting his fingers through Mr Architectonides’s watchstrap.  The second is the ability of both men somehow to get lifebelts or ropes around them.

One of the problems about this part of their evidence is that their recollections are unlikely to be particularly accurate given their rapidly deteriorating condition described by Capt Tortzis.  Further, it is difficult to tell from the evidence how effective their actions were, in particular whether Mr Ventouris’s efforts did exert any significant restraining effect on Mr Architectonides and whether their manipulation of the lifebelts or ropes involved more than grasping or getting an arm round them sufficiently for the crew to drag them to the edge of the car ramp.  The fact is that they were rescued but on the limited evidence available it is impossible to make any reasonably accurate assumptions as to the amount of energy either man would need sufficiently to co-operate in the rescue operation.  In particular there is no evidence from any of members of the crew of Superferry II as to how they managed to pull the two men on to the ramp.

Taking the evidence of survival as a whole and giving due consideration to the immensely demanding problems of keeping their airways free of water and keeping up morale as identified by Dr Oakley and Mr Pike, I am not persuaded that the account of their time in the sea given by Mr Ventouris and Mr Architectonides is so improbable as to suggest fabrication.

The Coha II:  total Disappearance

The loss of the Coha II has many remarkable aspects, but one of the more unusual is the fact that the vessel disappeared without trace, not a single item from it having been found floating or washed up on any of the adjacent islands.  The problems of the total lack of any trace of wreckage were referred to by Mr Pike in the course of his evidence.  Given that, according to Mr Ventouris, the vessel was set on a course of 113 on automatic pilot, even having regard to an uncontrollable tendency to deviate up to 5 from the set course in rough sea conditions, the boat would have hit Mikonos if it had by-passed Tinos.

As I see it, there is a stark choice between the Coha II having been deliberately cast away in deep water or having become damaged but yet subsequently continuing under its own power into deep water where it eventually sank without trace.  In this connection, when one considers the relative possibilities of the vessel hitting land and leaving wreckage on the one hand and becoming damaged, but yet continuing under its own power into deeper water where it sank on the other hand, the latter is somewhat less likely than the former.  The area searched by the diving team on the instructions of Mr Ventouris, albeit starting on 3 November 1993 six days after the loss, was very extensive.  It covered the whole of the west coast of Tinos, the west and south coast of Mikonos, the west coast of Rinia as well as part of the coasts of Patmos and Ikaria.  Yet nothing was found.  The helicopter search ordered by Mr Ventouris on 29 October - only 36 hours after the loss - was no more productive.  The Coha II could, however, have covered a substantial distance before she ran out of fuel: she was on a set speed of 25 knots and had enough fuel for 4 hours.  However, unless she suffered a quite substantial change of course, she could not have avoided a landfall on Tinos, Rinia, Delos or Mikonos.  If she sank, as distinct from drifting without power, that would be because she was flooded due to hull damage.  Whether, if she had sunk following damage she would have yielded up floating wreckage, is quite impossible to say, in spite of Mr Pike’s evidence, which was based on his extremely limited experience of helicopter searches.

The Coha II:  the overall Picture

I now turn to consider the overall picture.  There is absolutely no doubt that Mr Ventouris and Mr Architectonides spent a long period in the sea at night in conditions which were extremely difficult in terms of survivability and which were forecast to deteriorate.  Accordingly, any plan which involved their deliberately entering the sea in order to fabricate the casting away of the Coha II must also have involved the two men deliberately exposing themselves to a physical risk of immense magnitude.

The plan must also have involved Mr Ventouris exposing himself to this risk when his wife was about to produce their third child.  It must also have involved the persuasion of Mr Architectonides to risk his life alongside his employer.

Further, the plan would only work if there were a high level of confidence that the two men would either be rescued by some vessel searching for them or would make it to a beach from where they could be picked up.  Mr Psarras was obviously not involved in a rescue attempt even if, as postulated, it was from his vessel or the vicinity of his vessel that they entered the sea.  If it were not Mr Psarras, that left the rescue operation to find them.  But there is no record of any call to the rescue control which suggested that the men were to be found at or near the place where they were eventually rescued.  As I have already indicated, the unexplained VHF message transmitted during the night which reported a sighting of Coha II off the south-west tip of Siros would have had the effect of directing the rescue operation to a position 9 miles from where the two men were eventually rescued.  If this were part of any plan it involved exposing Mr Ventouris and Mr Architectonides for many hours in heavy seas during darkness.  This presents itself to me as virtually inconceivable.  Nor were there any beaches anywhere near the rescue position.  Moreover, when the rescue did take place it was the result of an apparently random encounter with Superferry II which was not even a Ventouris vessel.

However, perhaps the most remarkable aspect of the suggested plan is one which even the most minimal knowledge of Greek human nature would immediately identify.  Mr Ventouris had always owned fast boats.  As he got older, his boats became faster and probably more expensive and luxurious.  According to Mr Architectonides’s statement, Mr Ventouris made up his mind to purchase Coha II when Mr Architectonides, having been sent out to Italy to collect Mr Ventouris’s Pershing 57, which was undergoing engine repairs, told Mr Ventouris, presumably by telephone, that the Pershing 70, which Mr Architectonides had seen, was much bigger and more luxurious than the Pershing 57.  Mr Ventouris then looked at some photographs of a Pershing 70, without even going to Italy to inspect it, and agreed immediately to purchase one instead of his Pershing 57.  He thereby acquired an extremely eye-catching vessel which people would be bound to notice.  They would want to know who the owner was.  It was at the time one of two or three such Pershing 70s afloat in the Mediterranean.  By owning such a vessel Mr Ventouris’s self-esteem as a member of the Greek shipowning community would be much enhanced.  The defendant’s case involves his disposal of the vessel within a few months of acquiring it because he was dissatisfied with its performance in view of the problems with the propellers which had the main effect of preventing the boat from achieving more than the considerable speed of 32 knots.

I am bound to say that I find this hypothesis to be so contrary to human nature as to be utterly incredible.  If the vessel were prevented by its propellers from reaching its advertised top speed, Mr Ventouris would appear to have had an absolutely clear right to insist that the builders or sellers put things right or took back the boat and repaid the purchase price.  Indeed, the new propellers which were fitted two weeks before the loss had not been tested when the last voyage commenced.  It would therefore appear that when he set out on that voyage he had no way of knowing whether the vessel could make full speed.  So, if he had pre-planned the disposal of the vessel that could not have been influenced by the vessel’s maximum speed.

Moreover, there is no suggestion that, having been purchased for the equivalent of US$1.86 million, Coha II was over-insured at US$2 million.  Indeed, Mr Ventouris’s conduct immediately after the loss strongly suggests that he had immediate access to substantial funds.  I refer in particular to his considerable expenditure on the helicopter search and on the seach by the diving team.  He also publicly committed himself to a donation of half the value of the Coha II to the Ministry of Mercantile Marine for the purchase of a helicopter.  Then he purchased the fast rescue boats for the Ministry as described earlier in this judgment.  If the loss of the Coha II were pre-planned, as alleged, this expenditure could only have been for cosmetic purposes.  Yet it represented more than half the insured value of the vessel and Mr Ventouris committed himself to it long before his claim on insurers had been rejected and even longer before there was any suggestion that the claim was fraudulent.  

As already explained, I refused to permit the defendants to introduce into this trial the unpleaded allegation that the boat had not been sunk but had been spirited away for the purpose of  being secretly disposed of.  It is right to add, however, that although this explanation of its disappearance would have provided the defendants’ case against Mr Ventouris with a motive of financial gain which it otherwise wholly lacked, it would have been almost as implausible as the suggestion that it was deliberately cast away.  The reason for this conclusion is that the chances of this particular boat not being recognised must be regarded as negligible.  Mr Pike, the defendant’s expert, expressed the view that “nobody would attempt to steal such a readily identifiable boat”.  He said that it would have “stood out from the crowd”.  Nor would anybody have set in motion an air-sea rescue exercise over the Aegean within hours of having spirited it away.  The boat would almost certainly have been spotted anywhere in Greek waters.  Indeed, which is particularly in point, it could not safely put into any Greek harbour for re-fuelling.  That would mean that, with its limited fuel supply, the only place where it could possibly refuel might be a Turkish port.  That presents itself to me as an exceptionally improbable destination.  Mr Ventouris’s ferries did not go to Turkey and there is no evidence whatever to suggest any linkage between Mr Ventouris and any Turkish agency.

Further, I have already commented on Mr Ventouris’s demeanor while giving evidence.  He gave his evidence on the dreadful events of that night like a man telling the truth.  There are certainly some discrepancies between the account of events which he gave in the Coha II trial and that which he gave in this trial.  It is, however, necessary not to overlook the fact that in the first trial nearly 5 years had elapsed since the loss and in this trial 8 years had elapsed.  It could hardly be expected, in view of the traumatic circumstances which he described, that his memory of events would be very accurate at the time of the first trial let alone when he gave evidence before me.  I therefore do not attach great weight to these discrepancies in the unusual circumstances of this case.

Finally, it must not be overlooked that Mr. Ventouris abandoned his claim against underwriters in the Coha II trial and agreed to pay all their costs.   Had the allegation of fraudulently casting away the vessel been the only defence raised in those proceedings, this would have been extremely telling conduct on the part of Mr. Ventouris which, absent an innocent explanation, would have raised a very strong inference that he was complicit in the casting away of the vessel.  However, the underwriters raised a cluster of non-disclosure and misrepresentation defences, including, in paragraph 11 of the re-amended points of defence, the fact that in the proposal form it had been stated that the designed maximum speed of the Coha II was 34 knots.  It was pleaded, in paragraph 14a, that such representation was untrue and that the designed maximum speed was “in excess of 40 knots”.  It was also pleaded that the plaintiffs had failed to disclose that the vessel was capable of  achieving that speed.  These allegations were supported by very strong evidence.  Mr. Ventouris himself said in his statement that he had been assured by Mr. Antonelli, who sold him the boat, that when the propellers were replaced, it would achieve 46 knots.  Mr. Pike, the underwriters’ expert, stated in his report that he would have expected that, with propellers of the correct pitch, the boat would have reached that speed or higher.  Mr. Pike had not given evidence by the time the trial was abandoned, but Mr. Mostrodimos, the Greek representative of the manufacturers of the Coha II, was called by the plaintiffs and stated in the course of cross-examination that the Pershing 70 could achieve 45 to 46 knots.  I have not seen any evidence in the Coha II trial relating to the materiality of what on the face of it was a misrepresentation to the underwriters as to the vessel’s designed maximum speed.

The Coha II trial was adjourned in December 1998 to be continued in February 1999.  In his statement in this trial Mr. Ventouris said:

“I confirm that I withdrew the claim against underwriters and agreed to pay their costs because it appeared inevitable that we would lose on the issue of the speed warranty of the vessel.  I would like to think that the trial judge, Mr. Justice Langley, would have believed my testimony that the yacht was lost when I and my crewman fell off the vessel.  However, I accept that I did not do myself justice in oral evidence at the trial.  I became over excited during cross-examination and I believe this damaged my case.  In view of the conclusion I had reached concerning the warranted speed of the vessel there appeared to be no point in continuing with the trial and risking an adverse finding by the Judge”.

It is clear that Mr. Ventouris’s reference to the “speed warranty” must refer to the reference to 34 knots in the proposal form.  The suggestion that this misrepresentation was not material and would not have influenced the judgment of a prudent insurer would, at least on the face of it, seem to have little or no prospect of being accepted. That being so, the defence of avoidance would almost certainly succeed even if Mr. Ventouris’s evidence as to the circumstances of the loss were accepted.  Mr. Ventouris was therefore in the position of fighting a virtually hopeless case which would involve a judgment which would necessarily have to consider whether his account of the loss was true.  If, as he says, he was dissatisfied with the “over-excited” way in which he gave his evidence, his only sensible course was to withdraw his claim, for fighting a losing case even to clear his name made no sense.

I therefore accept Mr Ventouris’s explanation of his abandonment of the Coha II trial and draw no adverse inferences from that decision.

In the event, I have no doubt that on the whole of the evidence it is more probable than not that Mr Ventouris’s account of what happened to him and to Mr Architectonides and to the Coha II is true.  Although those events were indeed quite remarkable and although the meeting of the two men in the sea and their subsequent survival in rough seas for such a long period of time could only be a matter of extreme good fortune, I am quite sure that their evidence has not been fabricated.

The claim which Mr Ventouris caused his company to bring against underwriters for the loss of the Coha II was therefore an honest claim in so far as it alleged that the vessel had been accidentally lost at sea.

Accordingly, having regard to the fact that at the time of the renewal of the entry of Grecia Express with the defendant Association, there had been no dishonest casting away of the Coha II, the claimant owners were under no duty to disclose the circumstances of that loss.  

Further, there had been no allegation at that time that the Coha II had been dishonestly cast away and there was therefore no allegation of dishonesty to disclose.  If there had been any such allegation, it ought to have been disclosed.  However, if it had not been disclosed, since it is now established in this court that any such allegation would be entirely unfounded, it would not be open to the defendant Association to justify their avoidance of the contract of insurance because, for reasons given earlier in this judgment, a claim to avoid would in the circumstances be impermissible as contrary to underwriters’ duty of the utmost good faith.

Finally, if contrary to my conclusion on the law, the claimant was under a duty to disclose the facts of the loss, even in the absence of any allegation of dishonesty on the basis that they were objectively suspicious, it has been proved in this trial that any such suspicion would have been unfounded and it would therefore be contrary to their duty of the utmost good faith and therefore unconscionable and therefore impermissible for underwriters to rely on non-disclosure to justify avoidance of the contract.

The circumstances of the loss of the Coha II, although widely reported at the time, cannot be regarded as a matter of which the underwriters were deemed to have knowledge within section 18(3)(b) of the Marine Insurance Act.  Whereas the disappearance of that vessel was widely reported in general terms, what would make the circumstances material to be disclosed on the defendants’ case is the unusual chain of events involving both men falling into the sea, supposedly remaining there for an exceptionally long time and surviving to be rescued.  It is unrealistic to suppose that those aspects of the loss giving rise to suspicion would have been fully covered in press reports or, if covered, remembered or recorded by the underwriters at the defendant Association.  Moreover, this was not a war risks loss.  I have already referred to limitations on the scope of Section 18(3)(b)  in relation to the loss of the Star One.  Given that the Association were not the insurers of Coha II, I do not consider that they could be expected to ascertain or retain the detailed information which rendered the loss of Coha II suspicious or to relate it in terms of materiality to any moral hazard aspect of the proposed renewal of war risks cover for the Grecia Express.

Value of the Grecia Express

It is first necessary to consider the true value of the Grecia Express.  If the vessel were insured for more than its true value, it is at least common ground between Mr Outhwaite (claimants’ expert) and Mr Hunt (defendants’ expert) that this would not necessarily have to be disclosed.  Both considered that it was the extent of over-valuation that mattered, for, if the over-valuation were so great that it raised questions as to moral hazard, it ought to be disclosed.

The vessel was first insured by the defendants in 1992.  Before then it had been insured in 1988, when it was still owned by Gitanic and while laid up for conversion work at Perama, with a value of US$4 million.  The cover was for hull and machinery as well as war risks.  However, it appears that, with effect from 6 June 1988, the insured value was reduced to $3 million but underwriters were to pay US$2 million stated to be 50% of the value if there were a total or constructive total loss.  With effect from 1 April 1989 both hull and machinery and war risks insurance were written on the basis of an insured value of $4 million.  However, with effect from 6 June 1989 this insured value under the hull and machinery policy appears to have been increased to $5 million, but only to pay $3.75 million in the event of total and/or constructive total loss.  The war risks cover value remained at $4 million.  The value was stated to be $5 million.  However, on 3 July 1989, RBS recorded valuations which it had obtained from Anderson Hughes for $3.75 million and from DLP for $3 to 3.2 million.  On 11 August 1989 Anderson Hughes provided a written market valuation to Royal Bank of Scotland, who were about to become the vessel’s mortgagees, in the amount of US$3.6 million.

On 20 February 1990 Anderson Hughes in London provided Royal Bank of Scotland with an assessment of the market value of the Grecia Express in the amount of US$3.5 million.  On 22 February 1990 Simpson Spence & Young, London, provided the Bank with a valuation in the sum of $4.25 million, some 21 per cent higher than that of Anderson Hughes.

On 19 March 1990 the hull and machinery and war risks covers was renewed, for an insured value of $5 million.

On 12 March 1991 the war risks cover was again renewed for 12 months with an insured value of US$5 million.  On 21 June 1991, however, the hull and machinery insurance on Grecia Express was renewed with an insured value of $6 million for 12 months from 6 June 1991.

On 6 March 1992 the claimant’s brokers applied to the defendant Association for entry in respect of war risks cover of the Bari Express and the Grecia Express for 12 months as from 1 April 1992.  They put forward an insured value for the latter vessel of US$6 million which was the same as that under the hull and machinery policy of 21 June 1991.  It was for that value that the defendants agreed to insure the vessel until 31 December 1992.

It is to be observed that although the war risks premium was at the rate of 0.05 per cent of the insured value of $5 million for 1991-2 that is $2,500, the hull and machinery premium on an insured value of $6 million for 1991-2 was at a much higher rate, 2.548 per cent, and amounted to US$152,898.32 as recorded on the brokers’ statement of account of 4 July 1991.

There was then a further increase to US$8 million in the hull and machinery insured value in respect of cover for 12 months from 6 June 1992.  This involved an increased annual premium of US$208,899.96.  That represented an increased rate - 2.611 per cent.

On 19 October 1992 Masters Shipping Co, Piraeus, issued a valuation certificate for the vessel stating that its fair and reasonable market value in sound condition at that time was “around” US$4.5 million.  That was 90 per cent of the insured value as from March 1990, 75 per cent of the insured value from June 1991 and 56 per cent of the insured value from June 1992.

On 7 December 1992 the defendant Association agreed to renew the war risks insurance of the vessel for 1993 in respect of an insured value of US$8 million which brought the war risks value into line with the hull and machinery value.  It is to be observed that in December 1992 the defendants agreed to the renewal of war risks on a fleet entry (No.5386) for no less than seven other vessels managed by Ventouris Group Enterprises for the values provided in the owners’ agents’ fax of 3 December 1992.  That fax ended with the following:

“PS.  For your guidance values mentioned are the present values under the H & M policies”.

The reference to the Hull and Machinery Policy values would be consistent with Mr Outhwaite’s evidence that, as regards value, war risks underwriters rely on the hull and machinery underwriters’ acceptance of the requested insured value.  It is also pertinent to note that the Association’s Rules capped recovery under the war risks cover at 125 per cent of the insured value under the hull and machinery policy or the insured value under the war risks entry, whichever were the lower.

On 26 May 1993, when the claimants’ brokers were in the course of placing the hull and machinery renewal for 1993, they confirmed that they had already placed increased value cover for the Grecia Express in the sum of US$2 million.  This was obviously at the owners’ request to take account of a rise in the vessel’s value over and above that insured under the existing hull and machinery policy (US$8 million).

At the June 1993 renewal the insured value under the hull and machinery policy was again put at US$8 million.

It was against this background that the defendant Association renewed the entry of the Grecia Express with an insured value of US$ 8 million with effect from 1 January 1994.  The defendants also renewed entry for six other vessels managed by Ventouris Group Enterprises.   In effecting that renewal the defendants were proceeding alongside the hull and machinery policy insured value, increasing value for war risks cover as and when the value for hull and machinery cover was increased.  This was the approach adopted in March 1992, December 1992 and December 1993.  The vessel was 26 years old in 1992.

The Grecia Express grounded at Patras early in 1993.  In June 1993 Masters Shipping issued, for the purposes of the mortgagee bank, a valuation certificate stating that the fair and reasonable value of the vessel in sound condition, was around US$4.5 million.

In July of that year, Mr Kopoukis, a Piraeus marine surveyor and valuer, issued a valuation, based on his survey, in the amount of US$7.5 million - US$8 million.  In the same month Allied Shipbroking Inc, Piraeus, issued a “Valuation Certificate for Banking Purposes”, stating that they had not made a physical inspection of the vessel but that they had inspected the vessel’s class records.  They valued the vessel at US$7.8 million.

The defendant Association relied on the evidence of Mr Mikael Lagstrom, a sale and purchase broker who since 1989 had worked for Brax Shipping, an independent broking firm specialising in passenger vessels, car ferries, cruise ships and roll on, roll off ferries.  Basing himself on a schedule of sales of vessels comparable to the Grecia Express between 1992 and 1995 (E1/93), he concluded that, having regard to five factors, the market value of the Grecia Express at the time of her loss was US$2 million, assuming that she was seaworthy at the time and with valid passenger safety and the class survey certificates.  The five factors were age, passenger capacity, the number of berths and cabins, the number of lane metres, the car carrying capacity and the speed.   He considered that, although in the early 1990s ferry prices were rising, by 1994 the introduction into the Adriatic and Greek island trade of much faster passenger vessels, such as the high speed catamarans, adversely affected the market value of older ferries.  In view of the fact that Grecia Express was already 28 years old in 1994 Greek legislation would require its withdrawal from Greek coastal service after a further 7 years, although it could still trade to Italy.  This restriction would tend to reduce the value.  He also referred to the fact that the vessel had not undergone a refit since 1987/8 and therefore might need a further refit in 1994.  The value would also be adversely affected by the fact that the engine manufacturers, Smith & Bolness, no longer built engines or manufactured spare parts by 1994, so that spares would have to be specially manufactured.

The claimants relied on the evidence of Mr English of English White Shipping Ltd, ship sale and purchase brokers.  By reference to a number of comparables which he set out in a schedule, he considered that, assuming the Grecia Express was in seaworthy condition and in average condition for her age and in class, her value was US$5 million to US$5.5 million.  He emphasised in his report that there were few actual sales of such ferries, that the price might be strongly influenced by the needs of a particular buyer, for example, for overnight accommodation.  The price would also be higher if the Greek authorities had issued a licence for a particular route in Greek waters.

Mr English was not a specialist in ferry valuation, which he accepted to be a specialist field.  Moreover, his choice of many of the comparators was not convincing, particularly his reliance on the Funchal which was not a roll on, roll off ferry but a cruise ship and which had simply been valued by his firm and not sold and, as such, accepted by Mr English not to be an appropriate comparable.  Further, he was not sure whether some of his list might not be day ferries.  Moreover, for several of his scheduled vessels there was no more than an asking price, which as he specifically stated in his report, might well not be reliable because of the small number of sales.

Indeed, that the market for conventional ferries with sleeping and commercial vehicle and car accommodation was small in 1992-5 is shown by Mr Langstrom’s schedule.  That includes 15 sales in 4 years which is an average of less than 4 sales a year.  According to the evidence of Mr Kopoukis, a rough estimate of the number of ferries in operation in Greek waters would only be about 40.

Another important factor in ferry valuation is the urgency with which a purchaser may need to acquire a ferry to fill a gap in his fleet.  In answer to hypothetical questions from the court Mr Lagstrom said in evidence that, if a ferry operator lost his vessel at the start of the passenger season and sought to replace it so that a replacement could be brought into operation, he might have to pay double the arms length market valuation of a given vessel.  Similarly, where an owner was forced to sell such a vessel quickly he might only achieve 70 per cent of the market value.  This is illustrated by one of the vessels upon which he placed particular reliance - the Lancut.  That was a prompt sale by a Polish owner in January/February of a vessel that was not to be traded that year being surplus to requirements.  There was therefore plenty of time to prepare it for the ferry season.  It sold for US$2.35 million, having been built one year after Grecia Express, but able to carry 750 as against 892 passengers, but with over 100 more berths but significantly less lane metres and able to carry fewer cars.

Indeed, Mr Langstrom’s schedule does indicate a wide range of prices for ferries which do not appear to differ significantly in age and accommodation for both passengers and cars.  Thus, in December 1993 the Armorique built in 1972 and with a passenger capacity of 1000 (cf 892 for Grecia Express), 412 berths (cf 299), 190 cabins (cf 126), 230 lane metres (cf 432), car capacity of 165 (cf 265) and a speed of 17.5 knots (cf 15) sold for US$6 million, no less than three times Mr Langstrom’s valuation of this vessel.  Further the Kamiros sold in August 1995 for US$5.5 million.  It is to be observed that both these sales took place at or after the end of the passenger season and it is therefore to be inferred that neither sale attracted a premium price because it was just before the start of the season.  However, both vessels had a larger passenger carrying capacity and were faster than the Grecia Express, Mr Langstrom’s schedule suggests that age and speed do have a substantial effect on price.

A vessel called Expresso Malta, and subsequently renamed Pegasus, had been valued by Mr Langstrom at US$2.5 million.  According to Mr English, the vessel had similar characteristics to the Grecia Express.  It was one of a group of Italian vessels sold in 1994 as a distressed sale.  The price in July 1994 was US$4 million, not $2.8 million as shown in Mr Langstrom’s schedule.  Mr Langstrom made the point that the vessel was built in 1977 - eleven years after Grecia Express and was faster.  The fact is, however, that his valuation was only 62 per cent of the actual price achieved.

Mr Langstrom’s valuations of certain other Ventouris vessels are well below valuations by other valuers.  Thus, he valued the Bari Express at March 1994 at US$3.5 million whereas DLP valued her at US$5 million to $5.3 million in 1989 and Masters Shipping valued her at US$6 million in 1994.  Further, he valued the Athens Express in March 1994 at US$7.5 million whereas Simpson Spence & Young valued her at US$10 million in 1990 and Masters Shipping valued her at US$9 million in 1994.

If Mr Langstrom’s valuation of the Grecia Express is correct the owners had since at least 1989 been consistently insuring it for both hull and machinery and war risks cover with an insured value far in excess of its true market value.  By June 1991 the hull and machinery cover insured value was $6 million and a year later - 18 months before the loss - the insured value had increased to US$8 million.  They were therefore paying an annual premium which by 1991-2 was excessive by $100,000 and by 1992 and thereafter was excessive by $150,000.

On the hypothesis, which for this purpose has to be assumed, that the owners were not since 1989 or since 1992 deliberately over-insuring their vessel with a view to making a fraudulent claim, their perception of the possible cost of replacing the vessel and its loss of use must have been of the order of the insured values.  If one assumes, as Mr Langstrom was prepared to accept, that in circumstances where an urgent replacement ferry was required just before the start of the passenger season, a purchaser might have to be prepared to pay up to twice what might otherwise be the market price, it can be inferred that, having regard to valuations of the Grecia Express of which they would be aware at the time, the owners have used a starting point arms length market value about $4 million.  Their own knowledge of the market of which they were a part and of the earning capacity of their vessel is clearly relevant to this issue and some weight must be given to it.

Taking all this evidence into account, I have no doubt that Grecia Express had a greater market value than US$2 million in March 1994.  The true value was, in my judgment, about US$4 million.

Having regard to the fact that a reasonable ferry owner might be expected to take the view that his vessel should be sufficiently insured to take account of the cost of replacement in the least favourable circumstances that might be envisaged as regards price, that is to say as a matter of emergency, I do not consider that to insure this vessel for US$8 million when its market value was roughly US$ 4 million would give rise to any inference adverse to the honesty of the assured. I have already referred to the earning record of this vessel earlier in this judgment.  If one takes an annual rate of US $2.5 million net profit the overall loss attributable to the vessel being lost at the start of a season might well be of the order of $8 million.  I therefore do not consider that the increase in the hull and machinery cover insured value from $6 million to $8 million in June 1992 suggests that a fraudulent claim was then envisaged.  The increased insured value was reasonably justifiable in view of the possible replacement value at the time.

Non-disclosure in respect of the Value of the Grecia Express

In view of the required insured value being put at US$8 million, was it, as the defendants contend, material to the risk that the market value was only about half that amount?

It is accepted that the only possible basis for materiality is that excessive valuation suggests the risk of moral hazard.  That is to say that if the market value had been disclosed to the prudent underwriter it would have influenced his judgment as to whether to accept the risk in as much as it suggested moral hazard.

Although, according to Mr Outhwaite, whose evidence on this particular market practice I accept, it is the practice of war risks underwriters to rely on the insured values agreed to by hull and machinery underwriters and not to probe beyond that, a practice confirmed by Mr Gould of the defendant Association, this does not mean that over-valuation is incapable of being material in the field of war risks insurance.  For example, if the vessel were significantly over-valued for its hull and machinery cover and the true value were not disclosed to war risk underwriters, there is no reason in principle why they should not be able to rely on the true value as a material fact, for the hull and machinery policy value would then be misleading and the true value might as much suggest moral hazard as if that policy had contained no insured value whatsoever.  Although Mr Outhwaite did accept that, even in the field of war risks cover, over-valuation might suggest moral hazzard, he suggested an order of magnitude of 10 times the market value before this would be so. 

Mr Hunt stated in his report:

“Whilst there is a reasonable margin above the actual value of a vessel which could lead to an insurer accepting a vessel insured without being unduly concerned, I would expect to be provided with a bona fide market value of the vessel and to be informed if there is a known disparity between the bona fide market value and the insured value.  In my opinion insurers will inevitably differ in their assessment of what is a reasonable margin and if pressed in my view a reasonable margin would be one between 25-50% of the bona fide market value of the vessel.  In these circumstances I would attribute such a differential down to the fact that the value of vessels can in some circumstances rise or fall over time.”

In the course of his cross-examination Mr Ballantyne, the defendants’ underwriter, was asked whether, if on placing a risk somebody with real integrity had told him that “my assessment of the value is $5.5 million but it is reasonable for the owner to insure it for $8 million, given the potential of this vessel, that would have been acceptable to him.  He agreed that he would have had no problem with that.  Mr English said that if the market value of the vessel was US$5 to 5.5 million it would be prudent to insure it for US$8 million - a level to accommodate replacement and loss of profit.  Mr Hunt was also asked about this in cross-examination.  His evidence was as follows:

“Q.  And the evidence of the underwriters in this case is that: had they been told about an overvaluation, it is not the case that they would simply have refused the risk, they would have asked for an explanation; and I understand that is your approach too.
A.  Yes, I think so.
Q.  And if, for example, you had been told, “Well, yes, the insured value is more than the general open market sale value, willing buyer/willing seller, but if I lose a vessel mid-season, and need a replacement vessel to fulfil my schedules, it may well cost me $8 million to get one”; assume that is what you are told and it is correct, that would satisfy you, would it not?
A.  If I was given an explanation, having raised the question, then yes, I would accept that.
Q.  And if that was the explanation, a true explanation, that would satisfy you?”
A.  If it was feasible at that time, yes.

Clearly, on this evidence the mere fact that the proposed insured value exceeds the true market value does not in itself suggest moral hazard.  Indeed, where the proposed value is consistent with reasonably prudent ship management, the excess over market value cannot be material to the risk, whatever its precise extent.  That which would render the over-valuation material would be the want of any reasonable explanation for the disparity consistent with prudent ship management.  Accordingly, in cases where a reasonable explanation is established the true market value does not have to be disclosed.  This is reflected in the following passage from the minutes of the Association’s Board meeting held on 1 August 1985:

“It is the generally accepted practice of the insurance market with which the Association is in competition that an owner is entitled to put what value he considers appropriate upon his capital asset, namely his ship, and to decide what the monetary loss will be to him should she be lost.  He has to accept that the premium will be enhanced by a higher value and this does, of course, enter into his calculation of the values for which he requires insurance.

Any interference by the Association in what is an accepted right will be resented by the Membership and may reduce the Association’s competitivity in an important field.”

I conclude that where an owner genuinely and reasonably believes that his vessel ought to be insured for a particular value which is in excess of the market value, he does not have to disclose the true market value, for, given his reasonable perception, the disparity is not capable of suggesting moral hazard.  As a matter of logic, it is nothing to the point that the insurer is thereby deprived of the opportunity of investigating why there is a disparity.  It is only where the disparity cannot be justified on reasonable commercial grounds that it ought to be disclosed.  If insurers wish to secure the right to investigate for themselves the justification for any significant disparity, they have the simple remedy of requiring the assured to provide an independent market valuation and to explain any disparity in the insured value.

In the present case, I have already held that the claimant was entitled as a matter of prudent ship management to conclude that Grecia Express ought to be insured with a value of US$8 million.  Accordingly, there was, in my judgment, nothing material to be disclosed in respect of the market value of the vessel.

The Claimants’ Duty to avert or minimise the Loss

Section 78(4) of the Marine Insurance Act 1906 provides:

“It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.”

Rule 3.1.4 of the defendant Association’s Rules is in similar terms.  

It provides as follows:

“In the event of any occurrence which may give rise to a claim by an Owner upon the Association, it shall be the duty of the Owner and his agents to take and to continue to take all such steps as may be reasonable for the purpose of averting or minimising any loss, damage, liability, cost or expense in respect whereof he may be insured by the Association.  In the event that the Owner commits any breach of his obligation, the Directors may reject any claim by the Owner arising out of the occurrence or reduce the sum payable by the Association in respect thereof by such amount as they may determine.”

In National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582, I considered the authorities as to the meaning of section 78 (4) and on which it is based and, having considered remarks made obiter by Mocatta J. in The Gold Sky [1972] 2 Lloyd’s Rep 187, I concluded at page 619L:

“He did not in the course of his judgment analyse what the subsection meant by the word “duty”.  On the construction of this provision which I consider to be correct the assured is certainly under a duty in the sense that in cases where an omission to act as prudent uninsured might be the proximate cause of an insured loss, he fails to act at his peril.  However, the consequence of his omission to act is that no insured loss occurs.  Ex hypothesi no such loss can occur because the proximate cause of any such loss would not be an insured peril but rather the uninsured peril of the assured’s or his agent’s omission to act.  In such a case the insurers would have a defence to the claim, but they would have no set-off or counterclaim unless they had already paid on the assured’s claim and were seeking to recover what they had paid.  I am therefore unable to follow that part of Mr Justice Mocatta’s judgment in which he suggested that a set-off or counterclaim could be brought by insurers for breach of the s.78(4) duty.”

Accordingly, in determining whether there has been a breach of the so-called “duty” under section 78(4) it is necessary to consider (i) whether the claimants, through Ventouris Group Enterprises, in the face of an insured peril which had already occurred, failed to act as a prudent uninsured to avert or minimise the loss and (ii) if so, whether that omission to act was the proximate cause of the loss.

Given that it is alleged that Mr Vangelis ought to have gone aboard to close the watertight doors, it is pertinent to consider whether it is open to the defendants to rely on an allegation of negligence against him in the face of section 55(2)(a) of the Marine Insurance Act 1906.  This provides:

“The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;”

I have considered obiter the effect of this provision in relation to section 78(4) in National Oilwell (UK) Ltd, supra, at page 619 in the following passage:

“On the facts of the present case it is unnecessary to determine how to resolve the apparent conflict between s.78(4) and s.55(2)(a).  I observe only that the latter section expressly operates on the basis that the misconduct or negligence of the master is not the proximate cause of the loss.  Accordingly, in my view, in cases where such misconduct or negligence of the master or crew is the proximate cause, there may well be a breach of s.78(4) where the misconduct or negligence consists of failure to act as a prudent uninsured in the face of an insured peril so as to avert or minimise what would otherwise be an insured loss, thus providing insurers with a defence to the claim, s.55(2)(A) notwithstanding.”

In other words, if the acts of sabotage were, and Mr Vangelis’s omission to act were not, the proximate cause of the loss of the vessel, the insurers would remain liable however negligent that omission to act might be.  Only if the negligence of Mr Vangelis had the effect of breaking the chain of causation so as to become the proximate cause of the loss could the insurer rely on it as a defence.

That would be the position under section 78(4), but Rule 3.14 is not the 1906 Act, but a contractual condition.  As such its construction is at large and does not need to be identical to that of similar words in the statute unless there is some compelling reason for the meanings to coincide.  It is clear from The Gold Sky, supra, that one possible meaning of section 78(4) was that there was a contractual obligation on the assured to take reasonable steps to avert or minimise loss or damage that would or might otherwise be caused by an insured peril.  That being so, I see no reason why the contractual condition should not bear that meaning which is what the words suggest when they are taken out of the intricate context of the 1906 Act.

The defendants put their case on four matters.

1.	There was a winch located in a shipyard operated by one Kontessopoulos which was located close to the shore bollards to which the eight mooring ropes had been attached.  It would have been possible for the several loose ends of the ropes attached to the vessel to have been lifted out of the sea and attached to other ropes which could have been winched in, thereby pulling the vessel stern-first back towards the shore.  The defendants rely on the evidence of the claimants’ expert, Mr Sinclair, to the effect that this was possible using at least two men to pay out rope from the vessel and then to gather the loose ends and connect them to the shore winch.  He would not have expected that the watchman or the Harbour Authority personnel would organise this, but instructions could be expected to have been given by the owners’ superintendent, either when he arrived on the scene or over the telephone pending his arrival.

2.	Mr Vangelis, it is said, could have gone aboard up the stern ramp, climbed the steps to D deck, closed the watertight doors, thereby stopping loss of freeboard, for which purpose he could have used the hydraulic hand pumps.  He could have closed the doors and left the vessel, all in about 4 minutes, an estimate with which Mr Sinclair, the claimants’ expert, agreed, provided that Vangelis knew how the doors were operated.  Mr Sinclair said that he would expect someone charged with the safety of the vessel who was competent and professionally aware to want to undertake this as soon as there was a possibility that the vessel was taking in water.  He would have been able to assess whether the vessel was going to sink in the next 5 to 10 minutes.  At about 0900 it would have been clearer than it later became that the vessel was not going to sink in the next 5 to 10 minutes.

3.	There was unjustifiable delay in organising the tugs.  Vangelis should have realised that there was a need for tugs as soon as he saw that the ropes had been cut and he ought to have called for tugs, even before the Harbour Authority officer Papadopoulos telephoned Londos at 0755.

4.	The owners ought to have sent men from Patras, as well as from Drapetsona, to help in the re-mooring of the vessel.  There was delay in sending the team that had been working on the Saturnus at Drapetsona.  They should have arrived at or shortly after 10.00 even allowing for a 2 hour drive to Aegion.

As to the possibility of saving the vessel by winching her to shore, the following considerations lead to the conclusion that this was hazardous to men and to the vessel.

Firstly, there is no doubt that somebody would have had to board the vessel in order to pay out over 100 metres of line.  This would have been a laborious exercise which would have involved spending no little time on board.  When Vangelis approached the vessel in Binardopoulos’s launch at about 0900, Vangelis, having seen that the vessel was trimmed by the stern, declined to go on board and Moutopoulos considered that it was dangerous to board her and that she was likely to sink within a brief space of time.  Car ferries are, according to Mr Sinclair, notorious for suddenly capsizing.  This vessel may not have actually capsized until 10.30 to 10.50, but there was on this independent evidence a perceived danger in boarding her at 0900.  Since that was the danger perceived at that time not only by Vangelis but also by Mitopoulos, it must be that at any later time the danger would appear to be even greater as the stern ramp dropped progressively lower into the water.  The judgment of Mitopoulos on the risk is significant corroboration of that of Vangelis.

I conclude that at no time from 0900 onwards was it reasonable to expect the owners’ employees to board the vessel in the absence of expert advice that it was safe to do so.  That means that by the earliest time at which a team of men from Patras could reasonably have been expected to be assembled by Capt Kouratolos and conveyed to the vessel, perhaps one hour from the time of the first call from Vangelis (0815 to 0830), it would already appear to be too dangerous for anyone to go aboard, even for a few minutes, let alone for the considerably longer period needed to pay out the mooring ropes.

In these circumstances, steps which involved exposing men to apparent considerable danger in order to save the vessel cannot be regarded as “reasonable” within Rule 3.14.  It is absolutely nothing to the point that if Mr Sinclair, as a marine expert, had been in Mr Binardopoulos’s launch at 0900 he might have expressed the view that the vessel was unlikely to sink in the next 10 minutes.  He said in cross-examination:

“I think I would be able to assess whether it was going to capsize within the next five or ten minutes.  That is not the sort of reaction you normally get from all seamen, particularly given the reputation of RoRo ships, with their inbuilt vices and the propensity to roll over.

It is not difficult for me to understand why someone like Mr Vangelis, knowing the ship is sinking, and obviously it must be sinking because it is taking in a lot of water, and if it is taking a list and a trim, that suddenly it is going to lose stability and roll over, as indeed occurred only an hour or so after we are talking about.  That actually happened.”

Since the team from Drapetsona could not on any view have been brought to Aegion much before 1000, by which time the vessel was about to sink, the omission to get them there until between 11.30 and noon (according to the evidence of Mr. Londos) cannot be regarded as a breach of duty which had any bearing on the loss or one upon which any honourable director of a respectable war risk insurer such as the Association would think it appropriate to rely as justifying rejection of a claim.

As to the delay in arranging the arrival of the tugs, I have already concluded that the first tug must have departed from Patras at about 10. 00 to 10.30 am, Mr. Kouratolos having probably arranged for tug assistance about one hour earlier by means of contacting Mr. Mitrellis at Patras.  I do not conclude that after he had been told for the first time that the vessel was taking in water ( about 9.00am) Mr. Kouratolos unduly delayed informing Mr. Mitrellis of the need for tugs.  There is no evidence as to the reason for the period of about one hour elapsing after the request to Mitrellis before the first tug departed.  However, it is quite impossible to infer that this delay was due to any failure on the part of Mitrellis to take reasonable steps to engage tugs.  Nor can any such inference be drawn in respect of the engagement of the second tug which arrived at Aegion at about 1.30pm.

What is also clear on the expert evidence is that, given the speed of which the two tugs were capable, they would have had to depart from Patras about 3 hours before commencing movement of the sinking vessel.  The expert view was that this movement would have to be started by 10.00am at the very latest, given that the vessel sank at 10.30 or 10.50 at the latest.  Therefore the tugs would have to leave Patras by 7.00am at the latest.  This was half an hour before Vangelis appreciated that the vessel’s ropes had been severed  and about one and a half hours before he realised that it was sinking.  Accordingly, any steps taken to send tugs from Patras at any time after either Mr. Londos or Mr. Kouratolos were first informed of the problem would have been futile.  No steps then taken to procure tugs, however reasonable, would have prevented the loss.  It is therefore not open to the defendant Association to rely on shortcomings in the conduct either of the agents at Patras or of  Mr. Kouratolos with regard to tugs.

There was a technical issue between the experts as to whether if the vessel had been manoeuvred by tugs back to the shore, either stern on or broadside on, it would have capsized as its hull came into contact with the shelving seabed.  The claimants relied on the evidence of Mr. Sinclair that it would have done so.  The defendants relied on the evidence of Mr. Bowman that it would not have capsized because there would be a grounding point on the vessel’s side which would prevent capsize.  This point had never been raised before the trial by the defendants.  Mr. Sinclair then attempted to do various computer programme investigations at the last minute, but he was never given a fair opportunity to consider Mr. Bowman’s theory.  The defendants’ introduction of this highly complex theory at the very last minute was an entirely unsatisfactory approach to expert evidence and completely inconsistent with the requirements of this court for the fair conduct of expert issues.  I decline to consider it.  However, even if it were shown that the vessel probably would not have capsized, the defendants would gain nothing from this point.  It could only arise if the fact that the vessel was likely to capsize was relevant to whether the claimants were in breach of Rule 3.14 of the Association Rules.  For reasons already given in the event it has no bearing on that issue because there were no steps which the claimants or their agents could reasonably have been expected to take in the circumstances for the purpose of averting or minimising the loss.  It is necessary only to add that the lack of certainty as to whether or not the vessel would have capsized, even if winched in from the shore, reduces the justification for expecting any of the claimants’ or their agents employees to risk their lives by boarding the sinking vessel in order to pay out its mooring ropes.

I have so far considered whether if, as I hold, the effect of Rule 3.14 is to impose a positive contractual duty on the part of the claimants to take reasonable steps to avert or minimise the loss, there was a breach of such duty by the claimants and, if there was, whether it had any bearing on the loss.  That, however, as  I have already indicated, is not the effect of  section 78(4) of the 1906 Act.  In that context the relevant question is whether the proximate cause of the loss was the act of sabotage or the claimants’ omission to take the alleged steps to avert or minimise the loss.

On this issue, there can be no doubt whatever that, even if it were established that there had been a negligent failure either of Vangelis to board the vessel and to close the water tight doors or of him or Mr. Kouratolos or Mr. Londos to organise the winching in of  the vessel or of Mr. Kouratolos , Mr. Londos or Mr. Mitrellis to procure tug assistance with greater expedition, such management and administrative negligence could not in my judgment be said to have displaced the sabotage attack as the dominant cause of the loss.  In order for that to be the case the postulated means of saving the vessel would have to have a high probability of success, which has not been established, and it would have to be established that the claimants or their agents had demonstrated a much higher degree of culpability in failing to take such steps than is established in this case.

I therefore conclude that section 78(4) of the 1906 Act does not provide the defendant Association with a defence to this claim.

Waiver

This point does not arise in view of the conclusions on non-disclosure at which I have arrived.  Indeed, it would only arise if I were of the view that the only basis on which the defendants were entitled to avoid the policy for non-disclosure was the failure to disclose the loss of the Star One.

The basis for this point is as follows.  The defendants’ underwriter said in cross-examination that he knew, by the end of March 1994, that the Star One had been sunk at her moorings in May 1992 the day after she had been bareboat chartered to Ventouris, by all four sea valves being opened in the engine room, as pleaded in the defence.  However, it was not until 25 October 1996, two and a half years later that the defendant sought to avoid the cover.  The claimants submit that not only was there this considerable lapse of time but, in the meantime, the defendants continued to treat the contract of insurance as in full effect by requesting additional information about the claim for the loss of the Grecia Express and indicating that it was being considered.  Thus, by a fax of 22 June 1994, the defendants’ solicitors pressed the claimants’ solicitors to disclose further documents and to make available witnesses for interview by the defendants’ English and Greek lawyers.  The defendants’ solicitors relied on Rule 3.15.3 of the Association’s Rules which provides as follows:

“An owner shall
(b)	whenever so requested by the Managers, promptly produce to the Association and/or allow the Association or its agents to inspect, copy or photograph, all relevant documents of whatsoever nature in his or his agents’ possession or power; and

(c)	permit the Association or its agents to interview any servant, agent or other person who may have been employed by the Owner at the material time or at any time thereafter, or whom the Association may consider likely to have any direct or indirect knowledge of such event or matter, or who may have been under a duty at any time to report to the Owner in connection therewith.”

The claimants rely on these matters as amounting to an election to treat the contract as continuing and not to treat it as at an end.  In Iron Trades Mutual Insurance Co Ltd v. Companhia de Segours Imperio [1991] 1 Re Lloyd’s Rep at p225 Hobhouse J. observed:

“The insurer is under no obligation to elect to treat the contract as at an end within any particular length of time and accordingly mere delay, without more, does not deprive him of his right to do so.  However, if he does some act in affirmation of the contract, that is to say, some act which is only consistent with an intention not to treat the contract as at an end, he will thereafter have lost his right to do so provided that he had actual knowledge of the facts which gave rise to the right.  (See, for example, The Kanchenjunga [1990] 1 Lloyd’s Rep 391).  Invoking or asserting a contractual right is a clear example of electing not to treat the contact as at an end (see per Atkin LJ. 6 Lloyd’s Rep p250).  Where the insurer simply delays in exercising his right after he has the relevant knowledge, he will lose his right if the delay is such as to evidence that the insurer had in truth decided to accept liability or has prejudiced the rights of the assured or caused third party rights to intervene.  (Allen v. Robles and Another  [1969] 2 All ER 154; [1969] 1 WLR 1193; Liberian Insurance Agency Inc. v. Mosse [1977] 2 Lloyd’s Rep 560).”

It is important to emphasise the need for there to be an unequivocal representation by words or conduct of an intention not to treat the contract as terminated.  Thus, a continued performance of the substantive terms of the contract or a request for further performance of such provisions, without reserving entitlement to avoid, will normally be sufficiently consistent only with an intention to treat the contract as continuing in effect as to amount to an election to that effect.  In Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co [1992] 1 Lloyd’s Rep 101 Waller J. in a part of his judgment that was obiter assumed at pages 107-108 that the exercise of a contractual right of inspection could amount to an election to treat the contract as subsisting.

The defendant Association relies on the letter written to the claimants and their solicitors on 25 April 1994 in these terms:

“As a result of preliminary investigations into the casualty the MV “GRECIA EXPRESS” on 5 March 1994, circumstances have come to our attention which give cause to question whether proper disclosure was made to Hellenic Mutual War Risks Association (Bermuda) Limited prior to the renewal of 1 January 1994 of cover in respect of the above mentioned ships; or prior to the commencement of cover under any earlier Policy Year.  If these concerns are borne out we believe that Hellenic Mutual War Risks Association (Bermuda) Limited will be entitled to avoid all policies ab initio.  However, the Hellenic Mutual War Risks Association (Bermuda) Limited has no wish to take any precipitous action and at the present moment it merely wishes to reserve its rights in relation to all possible non-disclosure or possible misrepresentation whilst continuing its investigations into both the casualty which occurred on 5 March 1994, and its concern in relation to possible non-disclosures and possible misrepresentations.”

The defendants submit that the request for disclosure and access to witnesses contained in the 22 June 1994 fax, when viewed after that letter, would go no further than an indication that there were on-going investigations of the defendants’ concerns as to non-disclosure and as to the circumstances of the loss.

In my judgment, the impact on a reasonable assured of the fax of 22 June 1994 would not be to suggest unequivocally or at all that the defendants had given up on their reliance on non-disclosure.  It would merely indicate that the defendants wished to investigate further the circumstances of the loss.  That the defendants were availing themselves of their contractual right to obtain further information, documents or evidence which went to liability for the loss would not be inconsistent with reliance in any future litigation both on a denial of substantive liability for the loss and on an alternative entitlement to avoid for non-disclosure.

However, there is a further and stronger reason why no such election was made.  The request for further information, documents and access to witnesses was advanced under a provision of the policy which is of an ancillary nature and not in the nature of a substantive or primary provision, such as the obligation to pay premium.  Thus it has been held that, like arbitration clauses, such investigatory provisions are separate from the contract to which they are ancillary to the effect that they survive avoidance of the contract for repudiatory breach: see Yasuda Fire & Marine Insurance Co of Europe v. Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174.  

This being so, the invocation of the investigatory rights provided for cannot of itself normally give rise to an unequivocal election to keep the substantive contract alive.  In as much as it amounts to a reliance on an ancillary provision and not on a primary provision of the contract, it will be incapable of telling the other party anything about the future performance of the primary provisions of the contract and therefore of amounting to an election to affirm.  It takes the matter no further than would the invocation of an agreement to arbitrate incorporated into a contract.  The statement  in the text of MacGillivray on Insurance Law, 9th Edition, para 33-81 should therefore be understood subject to the qualification that the consequences of reliance on a contractual right to inspect will not normally amount to an election to affirm the contract.

For these reasons I conclude that, if the sinking of the Star One had been a material fact, which the claimants ought to have disclosed, the defendants’ continuing invocation of their contractual entitlement to investigate the loss of the vessel would not preclude their subsequently avoiding the contract on the grounds of that non-disclosure. 

Summary of Conclusions

1.	The Defendant Association has not established that the Claimant or Mr Ventouris personally procured or were complicit in the sinking of the Grecia Express.

2.	The Claimant has established that, on the balance of probabilities, (i) the Grecia Express was sunk by a person or persons acting maliciously and (ii) the loss of the Grecia Express was not caused by barratry.

3.	The connection between Mr Ventouris and the Italia Express was not a material fact to be disclosed to the Defendant.

4.	The bareboat charter of the Star One did not render the scuttling of that vessel a material fact to be disclosed to the Defendant.

5.	The combination of the theft and sinking of the St Nicholas with the loss of other vessels did not render that loss, alone or in combination with other losses, a material fact to be disclosed to the Defendant.

6.	The Defendant Association has not established that Mr Ventouris caused or procured or connived at the casting away of the Coha II.

7.	The Claimant has established on the balance of probabilities that Mr Ventouris did not cause or procure or connive at the casting away of the Coha II.

8.	In view of 7, there was no duty on the Claimants to disclose to the Defendant the circumstances of the loss of the Coha II.

9.	Alternatively, if the circumstances of the loss of the Italia Express, Star One, St Nicholas or the Coha II were material to be disclosed, either individually or in combination, the evidence establishes that any suspicion that they or any of them suggested that Mr Ventouris involved a moral hazard in respect of the insurance of the Grecia Express was ill-founded and the equitable jurisdiction of the court to avoid the contract of insurance on the grounds of non-disclosure could therefore not be invoked by the Defendant Association consistently with its duty of the utmost good faith.

10.	The market value of Grecia Express was about US$4 million.

11.	For the claimant assured to propose an insured value of $8 million did not give rise to a duty to disclose that the market value was US$4 million because the disparity could be justified on reasonable commercial grounds.

12.	If the scuttling of the Star One or the loss of the Coha II were a material fact, neither was a circumstance known or presumed to be known to the Defendant Association for the purposes of section 18(3)(b) of the Marine Insurance Act 1906.

13.	The Claimants were not in breach of Rule 3.1.4 of the Defendant Association’s Rules on the grounds that they had failed to take all such steps as might be reasonable for the purpose of averting or minimising the loss.  

14.	The Claimants were not in breach of their duty under section 78(4) of the Marine Insurance Act 1906: the proximate cause of the loss of the Grecia Express was the cutting of the mooring ropes together with the flooding of the Auxiliary Engine Room and not any omission to act reasonably to avert the loss on the part of the Claimants.

15.	In as much as the misconduct or negligence of Mr Vangelis in failing to attempt to board the vessel early on 5 March 1994 was not the proximate cause of the loss of the vessel, the Defendant is liable for that loss (section 55(2)(a) of the Marine Insurance Act 1906).

16.	If the scuttling of the Star One had been a material fact the Defendant Association would not have waived its right to avoid the contract for non-disclosure of that fact.

17.	Accordingly, the Claimant is entitled to judgment on its claim for the loss of the Grecia Express.