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QUEEN'S BENCH DIVISION (COMMERCIAL COURT) Nov. 15, 16, 20, 22, 23, 27, 28, 29, 30, Dec. 4, 5, 6, 7, 11, 12, 13, 14, 20 and 21, 2000; Apr. 30, 2001 ____________________ AQUARIUS FINANCIAL ENTERPRISES INC. AND ANOTHER v. CERTAIN UNDERWRITERS AT LLOYD'S Subscribing to Contract KD970212 Certificate: No S/006633/97/L2 (THE "DELPHINE") Before Mr. Justice TOULSON Insurance (Marine) - Indemnity - Loss of yacht - Fire broke out on yacht while in harbour at Ventotene, Italy - Yacht sank - Insurers alleged fire deliberately caused by insured - Whether insured could show loss accidental. The insured Aquarius was incorporated in Panama and was set up and controlled by the second claimant Mr. Bernard Delettrez. The insured vessel Delphine was registered in Panama in Aquarius' name but Mr. Delettrez regarded the yacht as his own and he was the skipper of the yacht. He was the only person who had any financial interest in the yacht. The yacht was insured with the defendant insurers against all risks of physical loss or damage to the vessel by any accidental or fortuitous cause. Cover was not provided in respect of . . .any loss. . .caused by the malicious acts of the Assured their servants or agents. . .or any person on board the vessel with the consent of the Assured. Delphine was insured for U.S.$2,100,000 and the policy also covered two dinghies, two liferafts, personal effects and special equipment for which the sum insured was U.S.$42,000. On the evening of Saturday Sept. 28, 1998 a fire broke out on the yacht while she was in harbour at Ventotene, Italy. The fire spread rapidly and the vessel sank. The claimants claimed under the policy but the insurers denied liability contending that the loss was not accidental and asserting that the fire was deliberately caused by Mr. Delettrez. On investigation it was discovered that one of the high pressure diesel fuel supply pipes serving one of the Northern Lights generator's three cylinders had become completely separate from the injector threads. Mr. Delettrez submitted that the disconnection must have been caused by vibration and provided a possible explanation for the fire. The underwriters' case was that those propositions were not credible and that the pipe was deliberately disconnected in order to provide false evidence to support a supposedly innocent explanation for the fire.

542

-Held, by Q.B. (Com. Ct.) (TOULSON, J.), that (1) on the claimants' account of events there was no explanation for a fire which spread rapidly and fiercely forward, aft and in the bilges other than late and improbable theories; Mr. Delettrez' factual account of how the fire broke out and the theory of the causation of the fire put forward on his behalf was not credible; he must have disconnected the nut connecting the fuel injector pipe to cylinder No. 3 in advance in order to provide a false explanation for what was in truth a deliberate fire (see p. 561, col. 2); (2) the version of events suggested by the defendants was likely to be as near to the truth as it was possible to get; that was that after the crew had gone ashore Mr. Delettrez disconnected the fuel pipe from the day tank and poured the diesel from the day tank into the bilges; this would have run forward into the saloon bilge through the lumber holes which would have been clear as a result of the bilges being cleaned; he disconnected the No. 3 injector pipe to provide an apparently innocent explanation for the fire (see p. 561, col. 2); (3) Mr. Delettrez claimed that he was in a financially comfortable position but there was only his word for that; his actions in failing to pay his crew their wages on time would suggest otherwise; with the end of the season in sight Delphine was not going to be a source of income over the next few months but rather a source of expenditure; she would have been difficult to sell on the open market and was substantially over insured; from these factors there was circumstantial evidence of motive (see p. 562, col. 2).

____________________ The following cases were referred to in the judgment: Betty v. Liverpool & London & Globe Insurance Co. Ltd., 310 F.2d. 308; Litsion Pride, The (C.A.) [1985] 1 Lloyd's Rep. 437; Olympia, The (1924) 19 Ll.L.Rep. 255; Popi M, The (H.L.) [1985] 2 Lloyd's Rep. 1; Star Sea, The (H.L.) [2001] 1 Lloyd's Rep. 389; Zinovia, The [1984] 2 Lloyd's Rep. 264. ____________________ This was an action brought by the claimants Aquarius Financial Enterprises Inc. and Mr. Bernard Delettrez, the owners of the insured yacht Delphine against the defendants certain underwriters at Lloyd's subscribing to contract KD 970212 certificate No. 5/006633/97/L2 claiming under the insurance policy issued by the defendants in respect of the loss of the yacht caused when fire broke out on the yacht while she was in harbour at Ventotene, Italy. Mr. Graham Charkham (instructed by Messrs. Grant & Horton) for the claimants; Miss Belinda

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Bucknall Q.C. and Mr. John Russell (instructed by Messrs. Hill Dickinson) for the defendants. The further facts are stated in the judgment of Mr. Justice Toulson. Judgment was reserved. Monday Apr. 30, 2001 ____________________ JUDGMENT Mr. Justice TOULSON: The claim 1. On the evening of Saturday Sept. 26, 1998 a fire broke out on the yacht Delphine while she was in harbour at Ventotene, Italy. The fire spread rapidly and the vessel sank. 2. Delphine was insured by the defendant underwriters for U.S.$2,100,000. The policy also covered two dinghies, two liferafts, personal effects and special equipment, for which the sum insured was U.S.$42,000. 3. The insured was named in the policy as Aquarius Financial Enterprises Corporation a misnomer for the first claimant, Aquarius Financial Enterprises Inc. ("Aquarius"). Aquarius was incorporated in Panama and Delphine was registered in Panama in the company's name. The company was set up and controlled by the second claimant, Mr. Bernard Delettrez. Mr. Delettrez regarded the yacht as his own and he was the only person who had any financial interest in her at the time of the fire. He was also the skipper and on board when the incident occurred. 4. This action was begun by writ issued by the company on Jan. 25, 1999 claiming payment under the policy. In September, 1999 Aquarius formally assigned its interest in the claim to Mr. Delettrez, and the action has continued as a claim by him. The defences 5. The defences advanced in the amended points of defence are: (i) a non-admission that Aquarius had an insurable interest in Delphine; (ii) a denial that the loss was accidental and assertion that the fire was deliberately caused by Mr. Delettrez; (iii) an assertion that the claim was fraudulently exaggerated by including items of property which were not on board at the time of the fire or were not lost; and

(iv) various allegations misrepresentation.

543 TOULSON, J. of

non-disclosure

and

The scope of the trial 6. The allegation of non-disclosure and misrepresentation led to Aquarius and Mr. Delettrez bringing a separate action against the brokers concerned in the placement of the policy. 7. In September, 1999 an order was made in this action that the issues other than non-disclosure and misrepresentation should be tried as preliminary issues. That has had the advantage of avoiding the cost of the brokers being involved in the present trial, but with hindsight it can be seen that there were potential disadvantages. The allegations of arson and the allegations of misrepresentation involve connected issues of credibility and fact, for example in relation to the value of Delphine. Whether or not the yacht was deliberately over insured is relevant both to the existence of a motive for arson and to the honesty of the particulars given in the proposal form. I considered at one stage whether it would be right to postpone judgment on the preliminary issues until after a trial of the other issues, but that would have led to unacceptable delay and greatly increased costs. After discussion it was the view of all parties, with which I agreed, that the better course was not to defer judgment on the present issues. The policy 8. The policy provided cover against "All Risks of physical loss or damage to the vessel caused by any accidental or fortuitous cause". 9. The exceptions included "any loss or damage caused by the malicious act of the Assured, their servants, agents, and members of the Assured's family, or any person on board the vessel with the consent of the Assured". The burden and standard of proof 10. Counsel debated the familiar question where the burden of proof lies in such a case. 11. Under a policy which provides cover against accidental damage, an insured undoubtedly bears a burden to show on the balance of probability that the relevant loss was accidental so far as he was concerned. To give a far-fetched example, it would not be sufficient for an insured to state that loss had occurred to the insured property but that he declined to give any information as to the circumstances. But in order to show that the loss was accidental so far as he was concerned, the insured does not necessarily have to be able to explain what caused it. "Indeed, it would appear that all risks insurance arose for the very purpose of protecting

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the insured in those cases where difficulties of logical explanation or some mystery surrounded the disappearance of property": Betty v. Liverpool & London & Globe Insurance Co. Ltd. 310 F.2d. 308 at p. 311 (cited in Clarke on Insurance Contracts, 3rd ed. (1997) par. 17-3B). 12. In the present case Mr. Delettrez sought to discharge the insured's burden by his description of the circumstances in which the fire broke out. He denied that he caused it, and, if he is truthful in that denial, the fire was accidental so far as he was concerned. 13. The underwriters say that he is not to be believed and that he caused the fire. 14. As Mr. Justice Bingham. said in The Zinovia, [1984] 2 Lloyd's Rep. 264 at p. 271: Whether it is correct to speak of a presumption of innocence when dealing with a plaintiff in a civil action, I rather doubt. But as Mr. Justice Pearson said in The Tropaioforos, [1960] 2 Lloyd's Rep. 469 at p. 473: In assessing the balance of probabilities, due weight must be given to the consideration that scuttling a ship would be fraudulent and criminal behaviour . . . and no Court would suspect an owner of having behaved in such a way without good cause for doing so. 15. It is for the underwriters, who make the allegation of arson, to establish that the accusation is true; and this requires a degree of proof proportionate to the seriousness of the allegation. The effect, therefore, is that the underwriters have to provide cogent proof of the allegation if the Court is not to accept the claimants' evidence that this fire was accidental. 16. Miss Bucknall, Q.C., relying on The Popi M, [1985] 2 Lloyd's Rep. 1, submitted that there was a third possibility, namely that the Court might not be persuaded either by the defendants that the fire was deliberate or by the claimants that it was accidental, in which case the claim would fail. 17. In The Popi M the policy wording and, more particularly, the range of factual possibilities were different. The policy provided cover against perils of the sea. The vessel was sailing in calm seas and fair weather when there was a large and sudden entry of water into her engineroom through her shell plating. She sank. The cause was a mystery. The shipowners argued that the casualty was probably caused by collision with a submerged submarine; the underwriters that it was caused by wear and tear. The trial Judge thought both theories inherently improbable but decided the case in favour of the shipowners on the basis that their theory was nevertheless the most probable explana-

544 TOULSON, J.

tion on the known facts. The House of Lords held that he was wrong to find for the shipowners, because there might have been some other unknown cause of the casualty, not due to perils of the sea. 18. The case is a reminder that where parties advance rival factual theories the Court is not bound to accept either; and that if the Court finds itself unable to make a positive finding either way on some vital question of fact, the verdict will go against the party on whom the burden of proof lay. 19. However, a Court will obviously be reluctant to arrive at such a conclusion and in practice it very rarely happens. Indeed, it is noteworthy that even in such an unusual case as The Popi M distinguished Judges were divided as to the correct result and the decision of the House of Lords has itself been criticized. 20. Lord Brandon's dictum, at p. 5, that the shipowners could not rely on ritual incantation of the generic expression "perils of the sea", but were bound, if they were to discharge successfully the burden of proof, to condescend to particularity in the matter, must in my view be read in the context of the unusual facts of the case. There may be many cases in which the owner of property insured under an all risks policy is not able to establish the precise chain of causation resulting in loss or damage to the property, but is able to establish enough to succeed under the policy by a process of inference. 21. In this case the fire was either accidental so far as Mr. Delettrez was concerned or it was deliberate. There is no third possibility. In reality, the question is whether the evidence of arson is sufficiently strong for Mr. Delettrez's assertion that the fire was accidental to be disbelieved. 22. The underwriters rely on expert evidence and also on circumstantial evidence, invoking the following passage from the speech of Lord Birkenhead, L.C. in The Olympia, (1924) 19 Ll.L.Rep. 255 at p. 257: It may be a difficult matter to define precisely in a case of this kind what it is that defendants must show in order to discharge the onus (making the assumption for the moment - which I only accept for this purpose - that it is for them to discharge the onus) of establishing that the ship was fraudulently stranded. It is not possible to point to any one single circumstance and say that that single circumstance makes it plain that the ship was scuttled. It must never be forgotten that in this class of case almost every source of evidence is available to the plaintiffs, almost every source of evidence can be closed by the plaintiffs, and almost every source of evidence can be influenced by the plaintiffs. It would be,

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therefore, unreasonable in such a matter for the defendants to be confronted with the demand that they must establish by definite, positive and non-circumstantial proof that the vessel was criminally scuttled. As I conceive it, the duty of a Court of law, investigating such matters, is that it must examine the story taken as a whole. It may be that the result of such an examination will make it plain that there exist six or seven or eight circumstances of cumulative suspicion, any one of which, taken alone, would not justify the Court in fixing so grave and criminal a stigma upon the plaintiff as that of fraudulently stranding a vessel. We have, therefore, to enquire in this, as in other cases of the same kind: Do circumstances exist individually, perhaps, not of decisive consequence, but in their cumulative effect establishing beyond reasonable doubt that the vessel was dishonestly stranded? 23. During the course of the trial there was therefore a detailed and wide-ranging investigation on the underwriters' behalf into the history of Delphine from her construction onwards. But I will begin with the events of the evening of the fire as described by Mr. Delettrez and the investigations which followed.

545 TOULSON, J.

would use the pre-heat switch for 20 seconds before after starting the generator and about 10 to 15 seconds afterwards. 27. At that stage the generator would be running but it would not be providing electrical power until the appropriate circuit was switched on. Part of the electrical system was a 220 volt AC system. This operated, among other things, a battery charger, fridge, coffee machine and lighting. 28. In his oral evidence, Mr. Delettrez said that after starting the generator he would ordinarily wait for a couple of minutes before switching on any part of the electrical system. 29. In his interview on Oct. 2, 1998 Mr. Delettrez described what had happened as follows: I started it. I continued with the pre-heating. . .I then switch on the AC socket. At this time Sab was in the saloon and the port saloon light was on. I don't know how many minutes went by but I instinctively felt that something was wrong. I don't know why. I opened up the forward engine hatch which opens up the starboard, looked into the engine room and could see what appeared to be light, sparks, fire I don't know, coming from the area of the starboard side of the engine room where Mr. Delettrez' account of the fire the number one generator is. I closed the hatch. I felt Sab was near me. I think I told him there was a possibility of fire. He 24. Delphine was being used for chartering to small parties of said he was going to get a bucket of water. I told him not to. I private guests who wanted to cruise in the Mediterranean. There switched off the generator immediately, in reverse sequence of was a crew of four in addition to Mr. Delettrez. Mr. Martin starting. Brems was first mate; Mr. Jan Roux was employed as a deck 30. He went on to describe how he attempted to block all hand/steward; Mr. Martin Schoenig (known as Sab) was sources of ventilation to the engineroom and hoped that an employed as a steward; and Miss Katerina Rempt (Mr. Brems' automatic fire extinguisher in the engineroom would work. He girl friend) was employed as cook. then saw smoke in the saloon coming from the centre forward. 25. Delphine arrived in Ventotene on the morning of Friday He went to the forward part of the saloon, took up a floorboard Sept. 25, 1998. The last charter had ended in Rhodes. On the and saw fire in the bilge along the sides of the starboard fuel Saturday evening there was a fiesta in the town. Miss Rempt tank. He attempted to fight it with fire extinguishers. While Sab had returned to her home in Germany. The rest of the crew, was fetching more extinguishers from the guest quarters (aft of other than Mr. Delettrez, went ashore to go to the fiesta. The the engine room), Mr. Delettrez took up some port floorboards vessel was moored against a quay. Later Mr. Schoenig returned in the saloon and there was no fire in that area. to the yacht with a bag which he wanted to leave on board. By 32. He then told Sab to go to the crew quarters to get the last this time Mr. Delettrez was himself planning to go ashore. extinguisher in order to try and extinguish the fire in the saloon According to Mr. Delettrez, he suggested that they go together. bilge. Sab tried to go through the saloon to get the extinguisher Before doing so, Mr. Delettrez went to make some coffee. but was not able to do so, because during the two or three 26. Delphine had two generators, an Onan generator and a minutes since Mr. Delettrez had left the saloon the fire there Northern Lights generator. To make the coffee Mr. Delettrez had increased and spread to the port side. He went on to decided to use the Northern Lights generator, because it had not describe how the fire became worse and they were unable to been used for several days. To start the generator there was a control it. pre-heat switch and a start switch. In an interview with the 33. In his oral evidence Mr. Delettrez said that he realized that underwriters' appointed investigator, Mr. Ashton, on Oct. 2, something was wrong with the generator as soon as he switched 1998 Mr. Delettrez explained that he on the 220 volt system:

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As soon as I switched the 220 on, I had battery charger, fridge. . .coffee machine, light in the galley which go automatically on. . .I understood even by the cycles something was wrong because the cycles were very, very low. Normally the Northern Lights never had a problem with cycles, then first I opened the engine room to try to see something and then I understood something was wrong but not a fire, because it was maybe a couple of minutes to [understand I] was looking at a fire. It was not immediate. Investigations 34. On the day after the fire the underwriters instructed Mr. Ashton to investigate the matter. Mr. Ashton is a marine surveyor and investigator. He was also for 10 years a CID officer attached to the anti-terrorist squad. 35. On Oct. 5, 1998 Mr. Ashton instructed Mr. Matt Bullen, a consulting engineer specializing in the investigation of fires, explosions and mechanical failures, to carry out a scientific investigation. Mr. Bullen reported to solicitors who were instructed by the underwriters around the same time. 36. Mr. Bullen travelled to Italy on Oct. 8, 1998 and carried out underwater investigations over the next few days. He found that one of the high pressure diesel fuel supply pipes serving one of the Northern Lights generator's three cylinders had become completely separated from the injector threads. After this discovery the generator was removed from the wreck by salvage divers and placed in storage in Ventotene. 37. A key issue in the case is how this pipe came to be disconnected. Mr. Delettrez' case is that the disconnection (a) must have been caused by vibration and (b) provides a possible explanation for the fire. The underwriters' case is that those propositions are not credible and that the pipe was deliberately disconnected in order to provide false evidence to support a supposedly innocent explanation for the fire. I will come back to this issue. 38. In the course of his investigation Mr. Ashton interviewed various witnesses and took or attempted to take witness statements from them. Mr. Ashton gave evidence at the trial. There is no doubt that at an early stage he formed a genuine and strongly held belief that the fire had been caused deliberately. I have also no doubt that in attempting to take witness statements he was trying to elicit what he believed to be the truth. However, that does not justify the methods which he adopted. Mr. Schoenig was obviously a most important potential witness as the only person other than Mr. Delettrez who was on board at the time of the outbreak of the fire.

546 TOULSON, J.

39. In a report to underwriters dated Oct. 5, 1998 Mr. Ashton described his first interview with Mr. Schoenig as follows: Schoenig does not have a good command of the English language and is of very low intelligence and uneducated. He has very little knowledge of marine matters and we found him to be an evasive type of character and extremely nervous when questioned throughout this incident. Although it is obvious that he understood the majority of the questions well, he would whenever a difficult question was posed, pretend to not understand. He gave the impression that he had no idea of time or sequence of events and therefore it was extremely difficult interviewing this person, due to this problem and his lack of knowledge of vessels. Schoenig was the only witness present at the commencement of the fire and yet almost useless in describing the events in any detail. 40. Mr. Ashton interviewed Mr. Schoenig again on Apr. 7, 1999. Mr. Schoenig must have had with him a device enabling the conversation to be listened into by Mr. Delettrez and recorded. This follows from the fact that Mr. Delettrez subsequently certified a transcript as being "a faithful transcription of the conversation between Ray Ashton and Martin Schoenig recorded in my presence on 7th April 1999". 41. During the interview Mr. Ashton repeatedly tried to persuade Mr. Schoenig to change his evidence; he shouted at Mr. Schoenig when he would not agree; he held out the possibility of an ex gratia payment by underwriters for Mr. Schoenig's losses in the fire if he co-operated, and he threatened him with arrest by the Italian police for conspiracy. 42. In cross-examination Mr. Ashton explained his behaviour as follows: Q. You resorted to intimidation to obtain the evidence you wanted? A. I don't call it intimidation, I was forceful. I was dealing with a person that I thought was lying to me; I was not going to pussyfoot around. I knew the type of person I was dealing with. This was a very street-wise person. Q. You had formed the conclusion that this man was not going to give you the evidence that you needed unless you bullied him, so you set about bullying him? A. I had not formed that conclusion. I formed that conclusion at the end when he didn't give me the evidence that he could have given me. I didn't set out to bully him, I set out to talk to him in a nice manner and to deal with the matter as I would with any other witness. It was his attitude

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that made me become forceful and angry at times. 43. In English litigation, civil or criminal, there can be no proper place for trying to persuade a potential fact witness what he should say, let alone by bullying, threats or inducements. Such methods are totally unacceptable. Mr. Ashton's conviction that Mr. Schoenig was lying is no conceivable justification. If Mr. Ashton had succeeded, and if Mr. Delettrez had not been recording the conversation, the result would have been a statement from Mr. Schoenig which could have been put in evidence under the Civil Evidence Act without either the Court or the opposing party knowing how it had been obtained. 44. The procedure by which witness statements ordinarily stand as witnesses' evidence in chief has been an integral part of practice in the Commercial Court for some years and now applies generally under the Civil Procedure Rules: see r. 32.5(2). 45. Part H1.3 of the Commercial Court Guide provides that: . . .whilst it is recognised that in commercial cases, a witness statement will usually be prepared by legal representatives, the witness statements must, so far as practicable, be in the witness's own words. 46. It cannot be too strongly emphasized that this means the words which the witness wants to use and not the words which the person taking the statements would like him to use. 47. Part H1.4 of the Commercial Court Guide provides that the rulers of any professional body regarding the drafting of witness statements must also be observed. 48. The Law Society's Guide to the Professional Conduct of Solicitors provides guidance on the taking of witness statements. It requires a high degree of skill and professional integrity. The object is to elicit that which the witness is truthfully able to say about relevant matters from his or her own knowledge or recollection, uninfluenced by what the statement taker would like him or her to say. 49. Counsel on both sides expressed anxiety that this is in practice not what generally happens even when statements are taken by solicitors. If it is not, the situation is worrying. In the U.S.A. pre-trial depositions of witnesses are a standard feature of civil litigation. The process is costly and time-consuming. Our system is quicker and cheaper, but it depends for its proper working on witness statements being properly taken. Bad practices, like bad money, tend to drive out good. If bad practices in the taking of witness statements come to be seen as normal, so that witness statements become lawyers' artefacts rather than the witnesses' words, their use

547 TOULSON, J.

will have to be reconsidered. Central to the problem is the ignorance of the Court and the other party about how any witness statement has in fact been taken. It might therefore be thought salutary that, where a witness statement is prepared by somebody other than the witness, there should be a written declaration by the person who prepared the statement giving information about how, when and where it was prepared and certifying compliance with any appropriate code of practice. 50. Moreover where parties are represented in litigation by solicitors (as is almost invariably the case in the Commercial Court), I would regard it as part of their duty to ensure, so far as lies within their power, that any witness statements taken after they have been instructed are taken either by themselves or, if for some reason that is not practicable, by somebody who can be relied upon to exercise the same standard as should apply if the statements were taken by the solicitors themselves. So far as Counsel may be involved in the preparation of witness statements for use in civil proceedings, there are rules and guidance in the Code of Conduct for the Bar and in the Bar Council's supplementary guidance note dated Jan. 16, 2001. Witnesses 51. Apart from Mr. Delettrez, oral evidence was given by two members of the crew, Mr. Brems and Miss Rempt, who were both called by the underwriters. Written statements by Mr. Roux and Mr. Schoenig were put in under the Civil Evidence Act. 52. Mr. Delettrez was in the witness box for seven days. This would have been an endurance test for anyone, especially when giving evidence in a foreign language. Mr. Delettrez is a person of exceptional intelligence and speed of thought. He found the persistent nature of the cross-examination exasperating at times, and this produced periodic flashpoints to which I attach no significance. Of greater concern was his habit of making allegations about the integrity of anyone whose evidence was adverse. Up to a point this might have been ignored as a temperamental response to the underwriters' attack on his own integrity, inflamed by feelings of outrage over Mr. Ashton. But it went beyond that. 53. Miss Rempt said in her original witness statement that Mr. Delettrez was nearly always behind with her wages; that she and Mr. Brems were still owed DM10,000; and that she spoken to Mr. Deletrez several times about it, but he always came up with excuses or with promises which did not materialize. 54. Mr. Delettrez responded in a supplemental witness statement with a detailed rebuttal. In it he said as follows:

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At the time of the fire the total sum equivalent to DM10,000 was owed to Martin and Katerina. In September 1998 Katerina was returning to Germany and had requested that I not pay the outstanding DM10,000 in cash as it would be unsafe to carry such a large amount of money whilst travelling. It is therefore correct that there was money owed to Martin and Katerina at this point in time and for a period of three months after the fire. During November I forgot to send the money to Katerina. I was so busy trying to sort out the loss of Delphine and admit it slipped my memory. In December Katerina contacted me and forwarded her bank details requesting that I pay the money owed to her and Martin in her bank account. I made arrangements for the transfer, however the money was returned by the bank. The details she had forwarded to me were incorrect. In January 1999 she again contacted me and asked that I not make the transfer to her account, but instead told me that a friend of hers would come to my flat in Rome and collect the money owed in cash. I asked her details about this friend. His name was, I believe, Karl Hauth. He visited my flat in February and I paid him 10,000,000 lira in cash (the equivalent of DM10,000). I insisted on a receipt which I have kept and a copy of which is exhibited hereto. Therefore I do not know why Martin is stating that I continue to owe him and Katerina money. The outstanding wages owed to Martin and Katerina in the sum of 10,000DM (10,000,000 lira) have been paid in full on the terms requested by Katerina. 55. In his oral evidence Mr. Delettrez enlarged on this account. He said: I was in Austria skiing. . .I had a letter from Miss Rempt saying "You forgot to pay this money". I said "You are perfectly right". I was leaving Austria to go back to Italy. I said "Don't worry, within one week I will send this money to you by the bank". I said "Only one problem, we had the problem with the money transfer, can you send me a fax to my house to send exactly your bank account. . ." She said she will send me a fax immediately. Two days later she called me and said "Instead of having this money by bank transfer, I prefer if you can organise the cash I will send you a friend of mine and he will collect the cash". She gave me his name. This gentleman called me. He came to my house and he wanted the money without receipt. I said "Sorry, I never give any money without receipt". I said "If you want to give me receipt, I give you the money; if not, you go back to Germany and I send the money through the bank". He gave me the receipt. . .After a while the arrangement between Miss Rempt and Mr. Brems, this is their

548 TOULSON, J.

problem. This one does not want to show to the other they have the money, that is not my problem. 56. The implication behind the last comment was that one of Miss Rempt and Mr. Brems was possibly double-crossing the other. Miss Rempt used to handle the wages paid to Mr. Brems and herself. She said that the account given by Mr. Delettrez was untrue. First, it was untrue that she did not want to take cash to Germany when she left the vessel in Ventotene. On the contrary, one of her reasons for going to Germany was to transfer some of her money to a particular account and she would have liked to have taken the money owed with her. Secondly, she had previously given Mr. Delettrez her correct bank account details, and she could not understand his reported difficulty in paying the outstanding wages into her account. Thirdly, while it was true that at one stage after the fire she suggested arranging for someone to pick up the money from him this was a passing suggestion in a telephone conversation and it was never taken any further. She never arranged for anybody to collect the money; she had never heard of Karl Hauth; and she never gave that name (or any name) to Mr. Delettrez as he claimed. 57. Miss Rempt was in my judgment a conspicuously honest witness and her evidence had a complete ring of truth to it. Having seen Mr. Brems and Miss Rempt I do not believe that either was double-crossing the other. 58. I am left in no doubt that Mr. Delettrez' evidence on this topic was untrue. Cynically, he was prepared several months before the trial to invent an elaborate lie supported by what must have been a fabricated document (the purported receipt) in order to discredit opposing witnesses and rebut the suggestion that he was in any financial difficulties at the time of the fire. 59. There were also other aspects of Mr. Delettrez's evidence which I found unsatisfactory and to which I will refer. 60. I have already expressed my view about the truthfulness of Miss Rempt as a witness. Mr. Delettrez attacked the credibility of Mr. Brems as an alcoholic whose drinking habits, on and off duty, were such that shortly before the fire Mr. Delettrez told him that he would not be needing his services after the end of the season. He also accused Mr. Brems of having told him in October, 1998 that he would do everything he could to damage Mr. Delettrez and of having threatened him more than once with blackmail demands of U.S.$200,000. 61. Mr. Brems denied making such threats and, having heard him, I do not believe that he did make them. As to his drinking habits, Miss Rempt said that she could only remember one specific occasion

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when Mr. Delettrez complained that Mr. Brems was drinking too much, and that he was off-duty at the time, but she said that there might have been other occasions. Mr. Brems denied that Mr. Delettrez ever complained that he was under the influence of alcohol while he was working, but he said that Mr. Delettrez did on occasions accuse him of drinking too much when he was on shore, and that on one occasion Mr. Delettrez had a serious conversation with him when he returned to the vessel, suggesting that he should not drink so much because it was bad for his health. Mr. Brems also denied that Mr. Delettrez refused to continue to employ him. Mr. Brems said that he was approached before the fire by the owner of another yacht who was wanting a competent first mate to sail to Thailand, Australia and on to America. Mr. Brems decided to take the offer because it would give him the opportunity of going to places which he had never previously visited, but he promised Mr. Delettrez he would stay until the end of the 1998 season. Mr. Delettrez expressed regret but understanding. As a result of the fire Mr. Brems was able to join the other yacht sooner than he had expected. Until then he had been intending to complete Mr. Delettrez' two remaining charters for the season and then fly from Rome to Egypt to join the other vessel on its journey east. 62. If Mr. Delettrez had told Mr. Brems that he was going to dispense with his services, I do not believe that Mr. Brems would have felt under any obligation to Mr. Delettrez to postpone the start of his new employment. Having listened to the evidence from Mr. Delettrez, Mr. Brems and Miss Rempt, I believe Mr. Brems and Miss Rempt on these matters. I do not believe that Miss Rempt smuggled alcohol on board for Mr. Brems (as Mr. Delettrez alleged and Miss Rempt denied); or that Mr. Brems gave cause to Mr. Delettrez to dismiss him for being drunk while he was supposed to be working; or that Mr. Delettrez told Mr. Brems that he was going to put ashore at the end of the season; or that Mr. Brems subsequently threatened Mr. Delettrez. I conclude that those allegations were also manufactured in order to portray Mr. Brems as a man with a grudge against Mr. Delettrez. 63. I accept that Mr. Brems came to harbour feelings against Mr. Delettrez after the fire, because he came to believe that it had been deliberately started and he resented the loss of his own belongings. I also accept that his willingness to become involved in the litigation by giving evidence for the underwriters may have been influenced by the hope of payment of his losses by the underwriters after the case. Although Mr. Ashton was reluctant to accept that any crew member was led to imagine that there might be any possible connection between helping the underwriters in their case and

549 TOULSON, J.

having their losses paid, Mr. Brems made no attempt to deny that he hopes to receive payment from the underwriters for his losses after the case is over. They also paid him for his time and expenses in connection with being interviewed and providing witness statements. 64. Mr. Brems' evidence contained inconsistencies and inaccuracies. For example, it is common ground that he was wrong in his evidence about the position of the alternator on the Northern Lights generator. However, I do not believe that at any stage he consciously attempted to mislead the Court. On the contrary, I think that he tried to answer the questions put to him as best he could. 65. I derive little help from the written statements of Mr. Roux and Mr. Schoenig, because they were not called as witnesses. Although parties have a right to put in written evidence of witnesses who are overseas, they cannot expect much weight to be attached to such statements on controversial matters when the Court has no opportunity of evaluating their evidence under cross-examination. Technical investigations and history of the action 66. On Sept. 30, 1998 the harbour master at Ventotene told Mr. Delettrez that the wreck had to be removed. 67. On Oct. 10, 1998 Mr. Delettrez gave written authority to Mr. Fausto Pattacini, who was an associate of Mr. Ashton, to recover and tow away the wreck. As I have earlier described, Mr. Ashton was investigating the matter on behalf of the underwriters and had by this stage instructed Mr. Bullen, who inspected the vessel under water between Oct. 9 and 11, 1998. 68. On Oct. 16, 1998 the underwriters were told that Mr. Bernard Sivell-Muller, a yacht surveyor, had been instructed on behalf of Mr. Delettrez. 69. On about Oct. 18, 1998 the wreckage was towed to a nearby beach. 70. During the next few days Mr. Sivell-Muller and Mr. Delettrez visited Ventotene, obtained copies of the crews' statements and inspected the wreck, fuel quay, port and items removed from the wreck by Mr. Bullen. Mr. Sivell-Muller also took photographs. 71. On Oct. 22, 1998 Mr. Sivell-Muller complained to the underwriters: However, it is in my opinion appropriate to record that I am somewhat concerned that Mr. Delettrez was not given notice of when the wreck was to be hauled to the beach and consequently had no representation when items were removed. The manner in which the claim is being investigated is somewhat alarming as it can only lead to suspicion and confrontation. The normal manner

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of a continental enquiry is for all parties to be present at crucial moments, so that any queries may be answered at the time. 72. I have sympathy with that complaint. Even though Mr. Delettrez had given authority to Mr. Ashton's associate to remove the wreck, if the underwriters were going to carry out expert investigations in situ and remove items from the wreck, it would have been better to have given advance notice to Mr. Delettrez. It is plain from Mr. Ashton's evidence that his decision not to give such notice to Mr. Delettrez was deliberate, because he did not want Mr. Delettrez in Ventotene at a time when he was carrying out an early inspection and removing any vital evidence into safe custody, but in my view it would have been more satisfactory for Mr. Delettrez to have been told so that he could have an expert present at the same time. 73. However, although that did not happen, Mr. Sivell-Muller did have an early opportunity of examining the remains of the wreckage and the items removed and of taking photographs (none of which have been disclosed), and he was able to form his view as to the cause of the fire. On Nov. 17, 1998 he wrote to the brokers: 1. In order that you may mention my comments to Lloyds Claim Office, I hereby record that after inspecting the wreck and interviewing Bernard Delettrez it was my conclusion that the number one generator. . .and the fact that the yacht had an open bilge over its entire length was the cause of the fire . . . 2. It is the Assured's contention that the generator, which was purchased new during March this year - invoice dated 3.4.98 and installed in the engine compartment, became troublesome on the 1.8.98 following the foul bunkering at Athens. It was examined, as was the number two generator and the yacht's propulsion engine. All fuel pipes, pumps, filters, etc. were cleaned by a local Greek mechanic at Hydra on 2.8.98 and he recommended an injector/injector pump specialist to make final adjustments. The specialist came aboard on 4.8.98 at Avrion. The injector pump of all the diesel engines were adjusted although a minor problem remained with the number two generator which would only make 48 cycles and not 50 cycles. Consequently, it was necessary to run the new number one generator almost every day until 19.9.98. Every day it was also necessary to remove water from the contaminated fuel, to drain the fuel/water separation filters using a red plastic container, presumably the one removed by Ashton and associates and to occasionally bleed the fuel pipes by detaching one or more from their injectors.

550 TOULSON, J.

4. En route to Ventotene for my inspection, the Captain described the events leading up to the fire. I am certain that he did not know during my questioning that the generator had been removed from the wreck and that the fuel pipe of one injector was disconnected. Ray Ashton had mentioned it to me by telephone, but I did not mention it to the Captain until we were on the island examining the wreck. . . . 6. Given the circumstances I can see nothing sinister about the disconnected fuel injector pipe. After the bleeding the nut is initially made finger tight and it is not difficult to envisage the individual concerned being distracted and forgetting to firmly tighten the nut . . . 10. It is the Assured's argument that the fire was caused by the fuel pipe vibrating free, that one of the crew may have left it only finger tight, after bleeding, or perhaps the buffeting by bad weather, or use, caused it to vibrate free. As mentioned by the Captain in answer to Ray Ashton's questions, the number one generator was noisy and vibrated when in use. It should also be mentioned that both generators have their own starting battery which is only charged when the individual generator is running. 11. At Ventotene on 26.9.98 the Captain started the number one generator to make a cup of coffee and to charge its starting battery. As mentioned above the generator had not had much use for several days and he did not want the battery to go flat. It was already dark and lights were on abroad, any spark from a light, switch, or the generator exciter, battery charger or electric ventilator fans could have ignited the fuel spray coming from the detached injector pipe. Simply he was not aware the pipe was detached. But on hearing the noise of the generator running badly, i.e. on two cylinders not three although he did not realise it at the time - the Captain opened the engine room door to check and saw the beginning of the fire. He turned the generator off, closed up the engine room and waited for the automatic fire extinguisher to operatecorrect procedure. 74. On Nov. 30, 1998 the underwriters responded by disclosing a copy of Mr Bullen's preliminary report dated Nov. 13, 1998, in which he concluded that the fire had been deliberately set. So within approximately two months from the date of the fire there had been an exchange in detail of the parties' rival contentions, as they then were, regarding the cause of the fire. 75. Points of claim in short form were served on Mar. 5, 1999. Points of defence (and a counterclaim for reimbursement of the underwriters' wreck removal expenses) were served on Mar. 31, 1999,

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alleging that the fire was caused deliberately by Mr. Delettrez for the purpose of making a fraudulent claim. Points of reply and defence to counterclaim were served on Apr. 28, 1999 and amended on Nov. 30, 1999 to plead the claimants' positive case as to the cause of the fire. This was pleaded as follows: The Defendants are well aware of the plaintiffs' cases as to the cause of the fire, having interviewed Mr. Delettrez, the second plaintiff, in connection therewith, and having also received a copy of a letter from surveyors Bernard Sivell-Muller to Dashwood Brewer and Phipps Limited dated 17th November 1998. In summary, Mr. Delettrez switched on the No. 1 generator (the Northern Lights generator) in order to make a cup of coffee. Shortly afterwards, fire was seen coming from the vicinity of the No. 1 generator which thereafter spread throughout the vessel, despite the efforts of Mr. Delettrez and others to fight the fire. It is surmised that the fuel injector pipe to the No. 1 generator had sprung free as a result of vibration, and that a contributory cause of the pipe springing free could well have been insufficient tightening by repairers in Greece who disconnected the injector pipe during the course of work done in August 1998 at Hydra and/or Avrion. The springing free of the injector pipe permitted diesel fuel to spray over the engines and other hot parts of the engine room, including the electrical system, to enter the bilges and to ignite, leading to the fire and loss of the vessel, her equipment and personal effects, which are the subject of this claim. 76. Experts' reports were exchanged in September, 2000. The claimants' reports were by Dr. Robert Goudsmit and Dr. I. Wadsworth (and not Mr. Sivell-Muller). The defendants' reports were by Mr. Matt Bullen and Mr. Peter Savage. 77. On Nov. 7, 2000 the claimants' points of reply were re-amended to put forward the following case as to the cause of the fire: While the claimants can not identify the exact concatenation of events which caused the fire with certainty, the most likely sequence is that the nut connecting the fuel injector pipe to cylinder number 3 of the No. 1 generator worked loose as a result of vibrations or other unforeseen and unintended events. This allowed the injector pipe to become free from the generator. In the process of working free there would have been a gradual loss of integrity causing diesel to spray from the failing connection. The spray of diesel within the enclosure around the generator ignited the diesel spray at the alternator to cause the fire to start. This initial fire could then have involved the plastic foam liming of the generator enclosure as well as the diesel oil continuing to spray

551 TOULSON, J.

from the failed connector at the injector. The fire could then have destroyed the integrity of the copper fuel oil supply pipe connecting the fuel lift pump to the fuel fine filter thereby allowing a continuing gravity feed of diesel oil from the day tank to provide further fuel for the fire. The developing fire would also have involved the in-situ sprayed polyurethane foam and the timber structure of the vessel giving rise quickly to a severe fire. 78. The major difference between this theory and Mr. Sivell-Muller's theory is that this theory involved ignition as diesel spraying from a loose (but not disconnected) injector pipe came into contact with the alternator, whereas Mr. Sivell-Muller's theory was that fuel spray coming from the already detached injector pipe was ignited by a spark or by engine heat. The experts 79. Mr. Bullen is a highly experienced fire investigator and was a good witness. There were some significant differences in his preliminary and final reports, but there were rational grounds for the differences. For example, in his preliminary report he attached significance to the discovery, near to the apparent seat of the fire, of the remains of a plastic container which to him gave a smell of petrol; but from what Mr. Brems and others told Mr. Ashton there was an innocent explanation for the presence of that container and laboratory analysis was equivocal whether it had contained petrol; so Mr. Bullen attached no further significance to it. 80. Mr. Savage was a marine surveyor. In March, 1999 he carried out tests on the fuel injection system of a Northern Lights generator at the manufacturer's premises in Seattle. He died between the date of his report and the date of the trial, so his report was put in evidence under the Civil Evidence Act. 81. Dr. Goudsmit is a partner in the firm of Burgoynes and has been mainly concerned with the investigation of fires and explosives in the last 15 years. His expertise and experience are undoubted, but I am not sure that he has appreciated what is now expected of expert witnesses by the Courts. 82. In his main report, dated Sept. 8, 2000, Dr. Goudsmit recorded that he had been instructed by the claimants' solicitors on Sept. 22, 1999 to investigate the cause and circumstances of the fire. His report should have stated clearly whether or not he had been able to form any theory on the evidence available to him about the cause of the ignition and the subsequent spread of the fire and, if so, what it was. 83. Dr. Goudsmit quite properly asked his colleague, Dr. Wadsworth, to investigate the mode of

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separation of the securing nut from the injector pipe on the Northern Lights generator, because he felt that this lay outside his particular field of expertise. The nearest that he came to putting forward a theory as to the cause and spread of the fire was in pars. 7.1.4 to 7.1.5 of his report, where he said: If the pipe had become discontinuous fortuitously it would initially have been only partly loosened and the release would have probably been in the form of a jet, spray or atomised mist. In my experience such release can be ignited readily, for example, by a hot surface or an electrical spark, to cause a rapidly developing fire. As such, and in the absence of further details of the engine room layout and equipment and of Mr. Bullen's evidence, there is, in my opinion, no fundamental difficulty in the ignition process. 84. Dr. Goudsmit omitted to say that he had been unable to identify any potential ignition point. He was asked about this in cross-examination (day 15, p. 38): Q. So at the time you wrote paragraph 7.1.5, you were unable to support the original pleaded case, because you told us it was due to your input that the originally pleaded case on ignition was deleted, so is the position this, that at the time you wrote 7.1.5, and you say there is no fundamental difficulty in the ignition process, if you had been absolutely candid about your opinion at this time, you could and I submit should have added, "However at the moment I am unable to identify any such potential ignition point"? A. Yes, I think that is correct. 85. That should not have had to be extracted in cross-examination. It also became clear from Dr. Goudsmit's evidence, but was not apparent from his report, that he did not regard Mr. Sivell-Muller's attempt to explain the fire as technically credible, although that was the basis of the claimants' pleaded case at the time when Dr. Goudsmit wrote his report. His report was largely negative in character in that it consisted mainly of an attack on the preliminary report of Mr. Bullen rather than setting out any exposition of his own as to the fire. Dr. Goudsmit gave his reasons for this in par. 1.4 of his report: As I did not examine the remains of the vessel I have had to rely to a significant extent on the findings of Mr. Bullen as set out in his preliminary report of 13/11/98 and as illustrated by his photographs. Accordingly a significant part of this report is inevitably a review of Mr. Bullen's preliminary report. 86. Dr. Goudsmit was obviously at a disadvantage in not having seen the remains of the vessel. But there were, or should have been, sources of information available to him other than the report

552 TOULSON, J.

and photographs of Mr. Bullen. There were, for example, the photographs taken by Mr. Sivell-Muller, but it appeared from Dr. Goudsmit's evidence that he did not see them (day 15, p. 16); and Dr. Goudsmit should have been able to obtain from Mr. Delettrez a more detailed understanding of the vessel's construction and pre-fire layout than was available to Mr. Bullen. 87. Dr. Wadsworth's evidence was in narrow compass and concerned the ability of the fuel line nut to have worked itself free through vibration. I will come to that evidence later. 88. I will also refer later to the expert evidence about the value of Delphine at the time of the fire. Before doing so, it is necessary to refer to her construction and condition. Construction 89. Delphine was one of three sister vessels. The other two were Lady Barbara and Annette, later renamed Airflow. They were built at a shipyard in Brazil. The shipyard owner was a Mr. R. E. Nicholson. He allowed Mr. Delettrez in effect to take over the yard for the building of the vessels. The vessels were designed by an Italian naval architect, Mr. Luca Brenta. According to Mr. Delettrez, Lady Barbara was completed in September, 1990, Delphine in April, 1991 and Annette in August, 1991. Annette was sold without mast, rigging or sails, and with a lesser degree of interior outfit. 90. There is no reliable evidence of the total cost of construction of Delphine. In his first witness statement, dated Apr. 17, 2000, Mr. Delettrez said that in total he paid more than U.S.$5.6 m., of which at least U.S.$2.2 m was attributable to each of Delphine and Lady Barbara, both of which were completed to identical standards. He gave further details of the construction costs in a supplemental statement dated Sept. 29, 2000. In it he said that during the construction of the three vessels the shipyard employed an average of 150 salaried workers, and that they were employed for over 160 weeks. There were no accounts to support these figures. Mr. Delettrez said in his evidence that he gave the money for their wages to Mr. Nicholson, who paid the workers. Mr. Delettrez produced some invoices for materials, but he said that all invoices for purchases in Italy were understated by 30 per cent. so as not to appear to exceed Brazilian importation quotas. Of the total cost Mr. Delettrez said that he paid around U.S.$3 m. through his Swiss bank account and the rest in cash. His Swiss bank account details were produced, but he was not able to say how the debit entries corresponded to invoices. His evidence about the cash payments in excess of U.S.$2 m. and their source was equally

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unspecific. I am left unable to form even an approximate idea of the true cost of construction of Delphine. 91. Delphine was a 28.3-metre two-masted auxiliary sailing schooner. The hull was of laminated timber frame construction with five-layer laminated timber hull planking, sheathed with glass reinforced plastic. 92. The guest accommodation comprised three cabins, located aft of the engineroom and wheelhouse. Access to the guest area was via a central corridor leading aft from steps down from the wheelhouse. A lazarette storage space was located aft of the guest accommodation. Steps forward of the wheelhouse led down into the main saloon. The galley, skipper's cabin and crew accommodation were located forward of the saloon. 93. The vessel had a single diesel engine and two independent diesel generators. The Onan generator was part of the vessel's original equipment and was located to port of the main engine. The Northern Lights generator was installed on the starboard side of the main engine at the beginning of the 1998 season. Diesel for the main engine and generators was stored in four tanks located below the forward accommodation. Fuel could be pumped from the main tanks to a day tank located in the wheelhouse under the seat on the starboard side. The engineroom was below the wheelhouse and the day tank was directly above the Northern Lights generator. 94. There is not a complete set of construction drawings, but some were produced prior to the trial and additional drawings were obtained in the course of the trial from Bureau Veritas. The policy proposal form stated "Bureau Veritas followed construction". Mr. Delettrez in his evidence said that a Bureau Veritas surveyor attended every stage of the construction of the vessel and that Bureau Veritas stamped all the construction drawings as approved. 95. There were a number of issues about construction matters to which it is necessary to refer. Relationship of bulkheads to hull 96. The vessel had an inner and outer keel. The inner keel, known as the keelson, was a line of wood running the length of the vessel along the centre line above the keel. There is an issue whether the bulkheads stopped at the keelson or were notched around it and went down to the bottom planking. 97. All the drawings which have been produced show the bulkheads continuing down to the bottom planking. They include, in particular, a drawing approved by Bureau Veritas on Feb. 13, 1990 showing the bulkhead to hull connection (B6).

553 TOULSON, J.

98. In his evidence in chief (on day 2) Mr. Delettrez said that the bulkheads stopped at the top of the keelson. In cross-examination (on day 4) he modified that evidence by saying that two of the bulkheads went round the keelson. He also said that the hull construction of the three vessels was identical. It was after this certain drawings were obtained from Bureau Veritas, including B6, and Mr. Delettrez was cross-examined about that drawing (on day 8). He said that it was a purely provisional drawing and that it was subsequently modified with Bureau Veritas' approval. But it cannot have been provisional in relation to Lady Barbara which was completed in September, 1990. On the same day Mr. Delettrez also introduced the possibility that the construction of Delphine differed in this regard from Lady Barbara and Annette. In re-examination he said that he was not absolutely sure about the construction of Annette and Lady Barbara, but he was sure that he did not want to have the bulkheads continue to the bottom of the boat on Delphine. I do not believe that the construction of the bulkheads and their connection with the hull differed on Delphine from her sister vessels, because that was a late introduction to Mr. Delettrez' evidence and I am not persuaded that there is any good reason why they should have differed. I do not accept his explanation for drawing B6 that it was merely provisional, for that does not fit with the timing of the construction of Lady Barbara. Moreover, if there had been a subsequent modification which Bureau Veritas had approved, it would be surprising that Bureau Veritas should have produced B6 but not the later approved drawing. 99. I accept the evidence of the defendants' valuation expert, Mr. Ian Nicholson, that the architect's object in designing the bulkheads to be carried right to the bottom of the vessel would have been to contain engine noise, smells and fumes, and that to have carried bulkheads at each end of the engineroom right down to the bottom of the hull would have been normal practice. There does not appear to me to be any good reason why Mr. Delettrez should have wanted Delphine to differ in this regard from Lady Barbara and Annette. 100. I conclude as a matter of probability that the bulkheads were carried down to the bottom of the vessel. Gaps in the engineroom bulkheads 101. Mr. Delettrez said in his evidence in chief that there was a hole, about 1 m high by 1.5 m wide, in the bulkhead immediately forward of the engineroom (between the engineroom and the saloon), corresponding to the saloon stairs. Mr. Brems

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agreed that there was an opening under the staircase, about 1 m wide and 30 cm high. He said that access to it was difficult but he had to go there on occasions for changing lights or electrics. It was suggested on Mr. Delettrez's behalf that this may have provided an aperture for fire spread. For this purpose it would have to have been a through gap. I am not persuaded on the evidence that it was. It certainly did not penetrate the stairs. Mr. Delettrez referred in his evidence to photograph 88, which show a large opening in the forward engineroom bulkhead (No. 23) corresponding to the size of the stairs from the doghouse to the saloon. He added that the bulkhead was interrupted for about 1 m to 1.5 m or maybe more in height to permit access to the nuts of the keel. I do not see how there could have been a through aperture of such dimensions without penetrating the stairs. 102. In the bulkhead at the aft end of the engineroom (bulkhead 14) there was a gap for the propeller shaft. Mr. Brems said that he could not recollect the size of the gap, but he said that it was a tight and difficult space in which to operate and would naturally be sound-proofed to prevent unwanted noise from reaching the guest quarters. That evidence accords with natural probabilities and I accept it. Limber holes 103. The bilges on both the port and starboard side were through bilges and there were square cut holes on both the port and starboard side of the saloon bilge which provided access. There were limber holes just above the bottom planking which enabled water to flow from one section of the bilges into the next. Mr. Brems said in his witness statement that the limber holes were approximately 3 to 4 cm in width and Mr. Delettrez gave the same dimensions in his evidence in chief (day 2, p. 7). It is unclear how many limber holes there were; but, as long as they were unobstructed, they would allow water to flow to the lowest point, which was in the central bilges under the saloon. There were bilge pumps in the saloon bilge and in the engineroom bilge. 104. Mr. Brems said that the limber holes would be cleaned out when necessary, typically about once every two months, but it was difficult to reach and clean the limber holes at the stern area of the saloon. 105. After the vessel's arrival in Ventotene the crew washed out the bilges. Mr. Delettrez also told them to leave some water in the bilges overnight to soak and dissolve any dirt and salt residues. In a supplemental statement Mr. Delettrez explained that the difficulty of obtaining access to all parts of the bilges meant that the only way to ensure that

554 TOULSON, J.

they were properly cleaned was to leave sufficient water for a period of time to enable the dirt and salt to dissolve, and then flush out the dirty water. He would do that at the beginning and end of each season, and he decided to do it at Ventotene. Mr. Delettrez told Mr. Ashton in his initial interview that one of the tasks he did on the evening of the fire, after the crew had left the vessel to go to the fiesta, was to pump most of the water out of the bilges. 106. It is likely that at the time of the fire the limber holes were as clean as they could be. Drip trays 107. Mr. Delettrez said in evidence that Delphine's generators and main engine did not have drip trays under them. This was from choice, because oil spillage would have been more easily and quickly detected without drip trays than with them. Without drip trays, the oil would have dropped straight into the bilges, where it could be smelt and seen immediately. With drip trays, spillage would have been more difficult to detect, because the generators and engine were enclosed in acoustic boxes. 108. A letter from Bureau Veritas dated Dec. 19, 1989 stipulated in relation to the fuel oil system that save-all trays with appropriate discharge were to be provided under pumps, filters, engines and accessories. Mr. Delettrez said that this was an early Bureau Veritas requirement and that it was subsequently agreed that there was no need for such trays. 109. The invoices produced in relation to the construction of the vessel included one for six identical Onan generators (two each for the three sister vessels), and photographs of Annette showed that her generators were fitted over drip trays. When this was put to Mr. Delettrez, he said that he remembered that on Delphine the generators were originally fitted with drip trays, but he had a problem with loss of fuel in one of them, and he removed the drip tray so that he could check quickly the quantity of fuel being lost without having to open the acoustic box. When the Northern Lights generator was subsequently fitted, he took the opportunity to see that it was not fitted with a drip tray. 110. This explanation was not consistent with his previous assertion that Bureau Veritas had agreed at the time of construction to drop the requirement of drip trays under the generators and main engine. 111. Because of the damage caused by the fire, it is impossible to tell from the photographs of Delphine whether there was a drip tray under either generator.

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112. Mr. Brems was confident that there were drip trays under both generators and the main engine, and he said that he had a clear recollection of wiping oil and diesel from the Northern Lights generator drip tray. 113. Mr. Brems' evidence accords with the natural probability, and I accept it as truthful and accurate. Mr. Delettrez' evidence was self-contradictory and I do not believe that he would really have thought it preferable that oil should drop into the bilges than be caught by a drip tray. Condition of Delphine 114. In the summer of 1997 Delphine suffered two incidents of grounding in Greek waters, the first off the island of Paxos and the second in the Corinth Canal. There was a dispute between Mr. Delettrez and Mr. Brems which incident was the more serious, but that is unimportant compared with the question of what damage was caused. At the time Delphine was insured for sailing in the Mediterranean not east of 20 deg. east, but Mr. Delettrez appears to have thought that the limitation was not east of Crete. 115. On Aug. 8, 1997 Mr. Delettrez phoned his broker, Mr. Coventry, to inform him that the yacht had grounded in the Corinth Canal and was taking in water. Mr. Ashton was instructed on behalf on the underwriters to carry out an examination. This he did on the following day, while the vessel was moored in Aegina harbour. On Mr. Delettrez' account she was leaking very badly. There was vertical cracking between the lead and wood parts of the keel with displacement of the keel and some delamination of the materials in the planking of the hull. Mr. Delettrez was critical of Mr. Ashton. He originally alleged in his witness statement that Mr. Ashton did not carry out any inspection of the vessel, but merely had a beer in the cockpit and then said that he had to go into the town for some business. Photographs taken by Mr. Ashton at the time of his visit belied this suggestion and Mr. Delettrez modified it in his oral evidence. 116. I have made critical remarks about Mr. Ashton's evidence gathering after the fire, but I have no reason to doubt the accuracy of his evidence regarding what he saw and was told at the time of his examination of the vessel on Aug. 9, 1997, supported as it is by his notes, photographs and a report to underwriters dated Aug. 11, 1997. I accept that during his examination the tailshaft was operated with the engine in forward and stern gears and that vibration was evident in way. The inner section of the stern tube had been displaced. There was also damage to the first spreaders on the mizzenmast.

555 TOULSON, J.

117. The underwriters refused to pay the cost of repairs since the vessel was outside her navigational limits. Because of the extent of the leakage and the propulsion damage, Mr. Ashton advised Mr. Delettrez (as he noted in his report to the underwriters) that the vessel ought to be taken out of the water for repairs, which he thought might well cost over U.S.$30,000. Mr. Delettrez in his evidence accused Mr. Ashton of having attempted to defraud him by trying to arrange for unnecessarily extensive repairs to be carried out, and he was adamant that the figure suggested by Mr. Ashton was not U.S.$30,000, but U.S.$200,000 to U.S.$250,000. He also suggested that U.S.$30,000 was not the original figure given by Mr. Ashton to the underwriters. I reject those allegations. 118. Mr. Delettrez continued to use Delephine on charter during the remainder of the 1997 season, although she was uninsured. His evidence was that he appreciated that he did not have hull cover while the vessel was outside the navigational limits of the policy, but he did not realize that he was not covered for third party liability, because Mr. Coventry never told him. The contemporaneous documents (including particularly a letter from Mr. Coventry to the London placing brokers dated Aug. 12, 1997) provide strong evidence that Mr. Coventry told Mr. Delettrez that the underwriters were treating the policy as null and void, by reason of the cruising limits having been breached, and that they would not contemplate reinstating any cover until repairs had been carried out to the approval of Mr. Ashton. 119. Under Mr. Delettrez' instructions, repairs were carried out by Mr. Brems at the same time as the end of season refit at a yacht yard at Civitavecchia. The damage to the leading edge of the keel was filled with paper to create a mould and covered with mastic. The cracking between the wood and lead parts of the keel was repaired with filler. Steel plates were also screwed to the hull on either side of the keel to provide strengthening. No repairs were carried out to the mast spreaders or the stern gland, although at some stage after Mr. Ashton's inspection a wrench was fitted to a packing gland surrounding the stern tube, possibly in order to hold the packing gland nut tight so as to prevent leakage. 120. On Nov. 3, 1997 Mr. Coventry reported to the underwriters that at Mr. Delettrez' request he had inspected the vessel out of the water at Civitavecchia, where he understood that Mr. Delettrez had brought her from the Corinth Canal in order to carry out permanent repairs. He said that "evidently this voyage of ca 800 miles was undertaken under power very gently in order not to disturb any stricken area or parts". Mr. Coventry's understanding that the vessel had been taken

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directly from the Corinth Canal to Civitavecchia for repairs was false, and although Mr. Delettrez denied giving that information to Mr. Coventry, it seems to me most likely that he was the source. Mr. Delettrez had an obvious motive for not wanting the underwriters to know that he had been using the vessel uninsured on charter business. 121. Mr. Coventry's report continued: An unusually named Czech-born, Liverpool educated and trained shipwright/skipper/engineer, who joined the yacht after the Corinth canal incident, and worked on the repairs throughout to date and was standing by the yacht until finished, accompanied the writer throughout the inspection, opening up floor boards and panelling as required. 122. This was obviously a reference to Mr. Brems, but Mr. Coventry's understanding that he had been brought in for the purposes of the repairs was false. There was no direct evidence as to who caused Mr. Coventry to have that belief, and Mr. Delettrez denied responsibility for it, but the circumstantial evidence again points to him as the most likely source, as the person in whose interest it was that Mr. Coventry and the underwriters should believe that the repair had been carried out by somebody suitably skilled. 123. Mr. Coventry reported that the repairs completed were all first class, and the underwriters agreed to the reinstatement of insurance cover on the vessel with effect from Nov. 7, 1997, subject to the rigging being professionally inspected and replaced as necessary prior to the vessel being launched. 124. On Apr. 24, 1998 Delphine was examined by an Italian marine surveyor, Mr. Stephano Ruscitti, while she was laying afloat at Port Vauban. He reported that the vessel had been properly maintained and he estimated her market value at about U.S.$2,100,00. 125. Mr. Brems was critical of the condition of the vessel at the time of the fire in a number of respects. The decks 126. Mr. Brems said that the caulking was in quite poor condition and the decks were leaking. Mr. Delettrez rejected this criticism. He accepted that some of the deck rubber caulking required replacement, but he denied that the deck leaked. Mr. Brems' evidence was corroborated by Miss Rempt, who stated that the deck leaked in certain places including over the bed in the master cabin, and also by a photograph (No. 87) showing salt water staining on a hot water boiler. I accept that the deck leaked in places.

556 TOULSON, J.

Propeller shaft 127. Mr. Brems' evidence was that there was leakage from the stern tube. Mr. Delettrez said that this comment revealed Mr. Brems' ignorance and that the "leakage" from the stern tube was part of a cooling system. The shaft between the engine and the propeller ran inside a steel tube which had a gland. The shaft and gland required constant cooling and consequently there was a water cooling pipe which dripped water on to it as part of the mechanism. Mr. Nicholson, the defendants' valuation expert, said that a propeller shaft should not need constant cooling and that the fact that it did was indicative of a misaligned engine and shaft, causing friction and heat during running. I accept that there probably was some misalignment, and this is consistent with Mr. Ashton's findings on his examination in August, 1997 to which I have referred (in par. 116). Electrical wiring 128. Mr. Brems said that the standard of electrical wiring, particularly its insulation was very poor and in some places dangerous; but in cross-examination he agreed that there was nothing about the condition of the boat which caused him concern for the safety of the passengers or crew, and that here general condition was reasonably good. I accept that the electrical wiring in some places was untidy and left a certain amount to be desired, but I do not accept that it was dangerous. Hull 129. Mr. Brems' evidence was that the underwater condition of the vessel was very bad and that delamination was occurring. There is some corroboration of this in a photograph (No. 320) taken after the fire, to which attention was drawn by Mr. Nicholson. It was suggested to him that no conclusion could be drawn from the photograph about the quality of the lamination prior to the fire, but he did not agree. I accept that a careful examination prior to the fire would have revealed evidence of some delamination. Overall condition 130. In outward appearance Delphine was an attractive yacht, as described in a number of statements by people who stayed on her, but I accept that she was far from being in top condition. Apart from general wear and tear, a prudent prospective purchaser would have had cause for concern about the leaks in the deck, the delamination of the hull

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and the damage and repairs following the grounding in August, 1997. Valuation 131. Experts' reports on valuation were exchanged in the usual way, but the expert appointed by the claimants was not called. The only oral expert evidence on valuation therefore came from Mr. Nicholson. He is an experienced naval architecht and surveyor. Without having seen Delphine and without full construction plans and specifications, he found it difficult to place a figure on the value of the yacht with any degree of confidence. 132. He considered that if the vessel had been built to a reasonable level of specification and finish, she would have cost in Europe about U.S.$1.6 m. to U.S.$2 m. to build in 1997 or 1998. He had no first hand knowledge about building costs in Brazil. Although Bureau Veritas had some involvement at the design stage, the vessel did not have classification by Bureau Veritas or any comparable organization. By the time of the fire Delphine was six years old and well past her first phase of financial depreciation, during which yachts can easily lose as much as 30 per cent. of their value. In the absence of detailed records of the repairs carried out after the vessel's grounding in 1997, he found it very difficult to assess the effect on the vessel's condition and value. Charter boats tend to be worked much harder than yachts reserved for private use, and that will affect their value unless there is a high standard of maintenance. Mr. Nicholson would have been concerned about various aspects of the yacht's condition, including delamination of the hull and probable misalignment of the engine and propeller shaft. Mr. Nicholson was not able to find any yacht which he regarded as fairly comparable, but he gave examples of several yachts which in his opinion were of better quality and higher value than Delphine and which, with one exception, were on the market for figures far below U.S.$2 m. 133. Mr. Nicholson thought that Delphine was probably virtually unsaleable at the date of the loss, but that if he had to place a market value on it he would put it at between U.S.$350,000 and U.S.$450,000 excluding any discount for the need to carry out more thorough repairs of the damage caused by the grounding in 1997, which it was too difficult to estimate on the information available to him. 134. There was documentary and oral evidence that Delphine had been advertised for sale by a firm of yacht brokers in Monaco, Fraser Yachts, and by sub-brokers, at an asking price of U.S.$1,950,000 for a period of more than a year prior to the date of

557 TOULSON, J.

the loss. Mr. Horsely, a broker, gave evidence to that effect, but he had no direct dealing with Mr. Delettrez at the relevant time. Mr. Delettrez denied all knowledge of the vessel being advertised for sale. He said that Fraser Yachts must have been acting speculatively, since they did not have his authority. I refused a late application to admit written evidence from the proprietor of Fraser Yachts. I gave permission for him to be called to give oral evidence, but he was not. In the circumstances I make no finding that Mr. Delettrez knew that the vessel was being advertised for sale. It is, however, an inescapable conclusion that the vessel was known by brokers in the yachting world to be on the market at U.S.$1,950,000 for more than a year and that no offer of purchase resulted. For if any offer, or indeed request for inspection, had been made, it is reasonable to infer that Mr. Delettrez would have been informed. 135. There was some other evidence about whether Mr. Delettrez was wanting to sell the vessel, but its quality was limited. 136. Mr. Brems said in his witness statement that he knew through general conversations with Mr. Delettrez that the vessel was up for sale and for this reason he introduced Mr. Delettrez to Mr. Berndt Gundel, whose employer was looking to buy a new boat. In cross-examination Mr. Brems' recollection was imprecise. He said that there had been some very informal conversation between Mr. Delettrez and himself, probably in the cockpit of Delphine when they were sailing, to the effect that Mr. Delettrez was thinking of selling the yacht and might invite Mr. Brems to help him rebuild a larger vessel or with a new sailing vessel. My impression was that Mr. Brems was trying genuinely to recall some distant conversation which he had had with Mr. Delettrez, but about which his memory was unclear because the conversation itself had been casual. I accept also that Mr. Brems introduced Mr. Gundel to Mr. Delettrez as a prospective purchaser, but there are conflicting versions of what took place between Mr. Gundel and Mr. Delettrez. 137. The defendants put in evidence a written statement from Mr. Gundel. According to him, in April, 1998 his employer instructed him to look for a classic yacht for purchase. His friend Mr. Brems introduced him to Mr. Delettrez, who offered to sell Delphine for the equivalent to U.S.$1,150,000. Mr. Gundel reported the matter to his employer, but he wanted a larger vessel. According to Mr. Gundel, soon afterwards he was again approached by Mr. Delettrez, who on this occasion asked him to request a letter from his employer offering U.S.$1,600,000 to purchase Delphine and promised a payment to Mr. Gundel of the equivalent of U.S.$1,200 if he did so. Mr. Gundel said that he was puzzled by the request, but he avoided it by

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telling Mr. Delettrez that his employer had already bought another vessel. 138. According to Mr. Delettrez, Mr. Gundel approached him through Mr. Brems in April, 1998 and offered to pay between U.S.$2.5 m. and U.S.$3 m. for Delphine on condition that the boat was for immediate sale. Mr. Delettrez told him that Delphine was not for sale and that in any event he had a full season of charter work to carry out. Mr. Delettrez said that the story of him subsequently approaching Mr. Gundel for a letter of offer of U.S.$1,600,000 was a complete fabrication. 139. Mr. Delettrez also put in evidence a written statement by an Italian lawyer, Mr. Luigi Ferrari, who stated: I have chartered the S/Y Delphine several times in these recent years and was always very impressed with the condition of the boat which was invariably impeccable. During a charter in 1997 I offered Mr. Delettrez the sum of U.S.$2 m. for the purchase of his boat, to which he replied that it was not for sale. During the summer of 1998 I was aboard Delphine as a guest of the charterer and again asked to buy the boat offering $2,200,000. Again, Mr. Delettrez replied that the boat was not for sale. 140. Neither Mr. Gundel nor Mr. Ferrari was called to give oral evidence, and it is impossible to determine what value to attach to their written statements without having heard them. Mr. Delettrez denied that he would have been interested in selling the vessel but I do not consider him a reliable witness. 141. On Mr. Delettrez' behalf reliance was placed on the survey report and valuation of Mr. Ruscitti, dated May 6, 1998, in which he estimated the vessel's market value at about U.S.$2,100,000. The defendants put in evidence a written statement from Mr. Ruscitti, in which he said that he had initially valued the vessel in the region of U.S.$1,700,000, but was persuaded by Mr. Delettrez to increase his valuation to U.S.$2,100,000 because he was told that the hull and interior construction had been very special and expensive. Mr. Ruscitti also said that during his inspection he did not operate any of the machinery or equipment. He did not inspect the hull below the waterline, and he assumed that nothing was untoward. He was unable to examine the condition of the mast and fittings above deck level. During his examination of the vessel he inspected the electrical wiring and in his draft report he recommended that there should be an insulation test, because he had seen modifications and additions to the system which seemed to him not to be professional, but that recommenda-

558 TOULSON, J.

tion was deleted in the final report at the request of Mr. Delettrez. 142. It was submitted on behalf of Mr. Delettrez that Mr. Ruscitti's valuation of May, 1998 should be preferred to the evidence of Mr. Nicholson. It is a bold submission in circumstances where directions had been given for calling expert evidence on valuation but neither the expert appointed by the claimants nor Mr. Ruscitti was called. If Mr. Ruscitti had been called as a witness, he would no doubt have been cross-examined on the various matters set out in the written statement served by the defendants. 143. To my mind the most cogent evidence on valuation is, first, that of Mr. Nicholson, whose views were tested in cross-examination and who was a careful and cautious witness; and secondly, the fact that advertisement of the vessel by brokers to the open market at the figure of U.S.$1,950,000 for over a year prior to the date of loss apparently failed to elicit any interest in her. 144. I conclude that Delphine would have been a difficult vessel to sell on the open market for the reasons identified by Mr. Nicholson, and that her true open market value is difficult to assess but would have been very considerably below her insured figure of U.S.$2,100,000. Shore power 145. There was an issue what shore power facility was available at Ventotene and whether Delphine was connected to shore power after her arrival. It is common ground that a 220 volt cable ran from the office of the manager of the fuelling station, Mr. Salvatore Gargiulo, and could be used by visiting vessels during the daytime. There is conflicting evidence whether the facility was available when the office was closed. 146. Mr. Brems made no reference to shore power in his initial interview with Mr. Ashton. He said that in the morning he would put on a generator to make coffee. In his second interview with Mr. Ashton, in February, 1999, Mr. Brems said that the vessel was connected to shore power, so that Mr. Delettrez would have had no reason to start the Northern Lights generator to make a cup of coffee, but that after the fire Mr. Delettrez had told the crew not to mention that they were connected to shore power so as not to get Mr. Garguilo into trouble, because he was not supposed to supply them with shore power. Mr. Brems maintained that version in his witness statement and oral evidence. 147. Mr. Delettrez said in a supplemental witness statement: It is correct that when we were receiving electricity from the domestic cable plugged into a

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socket in Salvatore's office, there was little reason to start the generators to make a cup of coffee. The domestic power supply is sufficient to run the kettle. However Martin forgets that by 7 p.m. or 8 p.m. at night we can no longer use the domestic supply. When Salvatore leaves the fuelling station in the evening he locks his office and in the course of doing so he also shuts the window. As the extention cable to the domestic supply has to pass through the window of the office, the supply is cut off once Salvatore leaves in the evening. 148. Mr. Brems said in cross-examination that on their arrival at Ventotene on the day before the fire, at around 7 a.m., they immediately connected to an available socket, although Salvatore Gargulio's office would have been closed at the time, and that power was available at all times because the power line leading to the sockets went through a hole in the wall of his office and not through a window. 149. Miss Rempt said in her oral evidence that she had become confused in her own mind whether or not there was shore power supply during the night and that she was no longer sure about it. In her witness statement she had said that they had been to Ventotene several times earlier in the season and that they always moored to the quay beside the fuel station and connected up to shore power. 150. Mr. Brems' evidence that the power line from the office went through a hole in the wall is supported by photographs taken in summer and in winter (G2, p. 266 and B3, p. 60). In the winter photographs the power line can be seen to pass through a hole in the wall. In the summer photographs the hole is obscured by greenery, as it would have been at the date of the loss. I accept Mr. Brems' evidence that power supply was provided in the way he described and that it would have been available day and night. It would not have been sufficient to meet all the power requirements of the vessel, particularly if there were also other vessels calling on the same supply, but it would have been sufficient for making coffee, as Mr. Delettrez acknowledged in his witness statement to which I have referred. Cause of the fire 151. It is common ground that the physical evidence was consistent with a fire having started in the engineroom in the vicinity of the Northern Lights generator. Mr. Bullen considered, and I accept, that the physical evidence was consistent also with a fire having started in the saloon, but not solely in the saloon. 152. A central question in the case is how the high pressure diesel fuel supply pipe serving the

559 TOULSON, J.

number three cylinder on the Northern Lights generator came to be completely disconnected. Realistically there are only two possibilities: either it worked loose or it was undone by Mr. Delettrez. 153. Once the injector pipe nut had become disconnected, any escape of diesel would have been a small dribble and could not have caused ignition. (This was the flaw in Mr. Sivell-Muller's causation theory.) 154. The claimants' case is that it must have worked loose and therefore cannot have been tightened as fully as it should have been on some previous occasion, probably when work was done at Hydra and/or Avrion in early August, 1998 after there had been problems resulting from foul bunkering. It is suggested that on the evening of the fire (a) the injector pipe nut was or became sufficiently loose to permit diesel to escape in a spray, which ignited on contact with the alternator; (b) the nut continued to undo itself through vibration until it became disconnected; (c) the fire which had begun by the ignition of the escaping spray continued to be fuelled by diesel escaping from the generator, consumed the foam lining of the generator's acoustic cover, burned through the hose supplying fuel from the day tank to the generator and/or the copper pipe or pipe connections between the lift pump and the injector pump, and spread rapidly via the bilges and the vessel's timber and other combustible materials. 155. The defendants submit that the claimants' theory of the causation of the fire is far fetched and untenable on various grounds; and that Mr. Delettrez' factual account is to be disbelieved. Work at Hydra and Avrion 156. I am not concerned with the details of the work done at Hydra and Avrion. I am concerned only with the condition of the Northern Lights generator when the vessel left Avrion. Mr. Savage's experiments on a test engine showed that finger tightening of the injector nut did not produce fuel tightness, but resulted in the entire fuel transmitted to the injector escaping outward from the nut. Mr. Delettrez' evidence (day 7, p. 136) was that the engineers who carried out work at Avrion ran the Northern Lights generator before leaving the vessel, and it was working perfectly. Moreover if diesel had been leaking from the nut between the vessel leaving Avrion and the date of the fire, Mr. Brems would have discovered the evidence of leaking fuel during maintenance inspections. I conclude that whatever works were done in either place, the relevant nut was tightened with a spanner before the vessel left Avrion.

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Propensity of the nut to loosen through vibration 157. A nut securing a high pressure fuel line is obviously intended not to unloosen spontaneously. Mr. Savage conducted tests with an injector nut both finger tight and also loosely engaged on the threaded section of the injector, to see if the nut would rotate clockwise or anticlockwise as a result of the natural vibration of the engine, but on no occasion during his tests did the nut rotate in either direction. Obviously he was not able to conduct tests on the nut from Delphine's Northern Lights generator or replicate its exact condition. 158. If the nut had been tightened with a spanner, the forces required to undo it would be greater than if it was loose or merely finger tight. That is common sense, but it was explained by Mr. Bullen in his evidence (day 16, p. 118): When the nut is tightened up, for example with a spanner, the tightening process involves stretching the threads, stretching the steel structures, compressing the part that is actually inserted in the injector, and the stresses associated with that, the deformations actually lock the components together, so that force is required to unlock those - the stresses and free the two components. 159. Dr. Wadsworth gave evidence that in his opinion it was possible for the nut to have loosened and become disconnected through vibration. He based that opinion on the general proposition that as a matter of common experience nuts can work loose through vibration and also on some theoretical calculations, but he did not carry out any tests of the propensity of this type of injector pipe nut to work loose through vibration caused by operation of the generator. 160. I accept that there is a theoretical possibility that such a nut could have loosened through vibration from an originally fuel tight position, but I regard the likelihood of it happening as remote and the likelihood of such movement resulting in total disconnection of the nut in no more than a few minutes as very remote indeed. Propensity to emit spray and possible source of ignition 161. The theory of ignition occurring through diesel spray coming into contact with the alternator formed no part of Dr. Goudsmit's initial report. It first occurred to him after exchange of experts' reports on reading Mr. Savage's report. 162. Mr. Savage carried out tests to see the pattern of diesel fuel discharge from a finger tight injector nut during unloaded and loaded operations. Some of the fuel flowed downwards; some was discharged upwards in what Mr. Savage described

560 TOULSON, J.

as "a pulsed injection, not atomized, but broken down into a fine low pressure spray". He also examined the generator at full working temperature for exploration of possible ignition points. These included a battery charging alternator, which was mounted on the opposite side of the cylinder block from the injectors. The alternator was partially open and entry of atomized diesel fuel (if achievable) could lead to ignition, but it was not possible according to his experiments for fuel from the number three injector to travel over the top of the engine, down the other side and then up under the combined heat exchanger/exhaust manifold so as to reach the alternator. The argument that diesel fuel escaping from the number three injector as a result of the nut being loosened could have ignited through contact with the alternator is therefore directly contrary to Mr. Savage's evidence. Dr. Goudsmit and Dr. Wadsworth were critical of Mr. Savage's tests and the way in which he reported them, but they carried out no comparable tests themselves. 163. Dr. Wadsworth suggested that there could have been a point between the nut being fully fuel tight and being only finger tight at which a stronger spray would have been emitted than Mr. Savage reported at the point of finger tightness. That is certainly a logical possibility, but whether atomized particles from such a spray could have come into contact with the alternator is speculative and untested, and no attempt has been made to measure the quantity of fuel which might have been involved. The fatal flaw 164. Mr. Delettrez said in evidence that his reason for using the Northern Lights generator on the evening of the fire was not only to make coffee (for which the generator was unnecessary, if I am correct in my finding about shore power being available), but also to run the battery charger. He said that it was routine practice to switch on the battery charger whenever the generator was used. According to his evidence, as soon as he switched on the battery charger he understood that something was wrong because the cycles were very, very low (day 9, p. 68). Mr. Sivell-Muller in his letter dated Nov. 17, 1998 (to which I have referred in par. 73) said that Mr. Delettrez could hear from the noise of the engine that it was running badly, i.e. on two cylinders not three, although he did not realize that at the time. Mr. Delettrez said in evidence that he did not immediately stop the generator, but that some minutes passed before he did so (day 9, pp. 68-71). He also said that the battery charger imposed a load on the generator of 10 kW or more.

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165. Mr. Savage's tests showed that the maximum sustainable output of the generator running at full speed on two cylinders was 7.68 kw. Additional load caused the engine to stall. We also know from Mr. Savage's evidence that if the nut was finger tight or less than finger tight the generator would be running on two cylinders. 166. Therefore if, when Mr. Delettrez switched on the battery charger, the nut was still connected but was finger tight or less than finger tight, the generator would have stalled. If, when he switched on the battery charger, the nut was still fuel tight or at the point suggested by Dr. Wadsworth at which it was more than finger tight but just starting to leak, it would have stalled by the time it became only finger tight, at which point the nut would have been nowhere near to being fully disconnected. As soon as the generator stalled, vibration would have ceased and there would have been no further unloosening of the nut. So on either of those scenarios the nut would not have become disconnected. But it was. The alternative is that the nut was already disconnected when Mr. Delettrez switched on the battery charger. In that case, the generator would again have stalled. (Moreover the nut could not have become wholly disconnected by some previous usage of the generator, since the battery charger was always switched on when the generator was used and therefore the same logic would have applied on previous occasions.) 167. It follows that Mr. Delettrez' evidence that the engine continued to run after he turned the battery charger on, that he realized that something was wrong, that he went to the engineroom, that he saw fire and that he turned off the generator cannot be true but must have been made up to support a case of accidental ignition. 168. Miss Bucknall referred to this as the fatal flaw in the claimants' case. 169. In his closing submissions Mr. Charkham sought to deal with this point by arguing that it was possible for ignition to have occurred at some point after the nut had begun to leak but before total disconnection. However, that does not meet the point that the generator would not have been able to operate under load with the pipe disconnected and would not have required to be switched off. Spread of fire 170. Dr. Goudsmit accepted that the maximum amount of fuel which would have been available from a leaking injector pipe would have been in the region of 71 ml or about three pub tots. Much more fuel would have been needed to account for a fire of the speed and spread which occurred. The suggestion that the foam liming of the acoustic cover may have been flammable was speculative. It does not

561 TOULSON, J.

seem likely that the manufacturer would have encased the generator with flammable material, but, even if it was, the amount of burning material which might have dropped into the bilges with a drip tray in place would have been small, if it occurred at all. For the fuel from the day tank to become involved, the hose would have to have failed. Mr. Bullen said that fuel tubing on yachts is normally metal, and that where short lengths of flexible tubing are used, the tubing would be expected to have a fire resistant standard. There is no evidence to suggest that the hose from the day tank would have been readily flammable. As to the copper piping, copper has a high melting point and would not have burned quickly. It was suggested by Dr. Goudsmit that the connection of the copper pipe between the lift pump and the injector pump and/or filter may have been of an alloy material with a significantly lower melting point, but that is also speculative. 171. In summary, on the claimants' account of events there is no explanation for a fire which spread rapidly and fiercely forward, aft and in the bilges, other than late and improbable theories. 172. Taking these various matters into account, I do not regard Mr. Delettrez' factual account of how the fire broke out and the theory of the causation of the fire put forward on his behalf as credible. I conclude that he must have disconnected the nut in advance in order to provide a false explanation for what was in truth a deliberate fire. 173. How the fire was started has to be a matter of inference, but I accept that the version of events suggested by the defendants is likely to be as near to the truth as it is possible to get. That was that, after the crew had gone ashore for the fiesta; Mr. Delettrez disconnected the fuel pipe from the day tank and poured the diesel from the day tank into the bilges. This would have run forward into the saloon bilge through the limber holes which would have been clear as a result of bilges being cleaned. He disconnected the number three injector pipe to provide an apparently innocent explanation for the fire. At some stage Mr. Schoenig returned unexpectedly, but Mr. Delettrez was able to turn that to his advantage because it provided him with a witness. It would not have been difficult for him to start a fire, unobserved by Mr. Schoenig, who was in the crew quarters in the forward part of the yacht, by pouring some petrol into the bilges aft of the doghouse and dropping in some lit material. He would then have started the Northern Lights generator in order to give the impression to his accidental witness that the fire was connected with the running of that machine. 174. It was submitted by Mr. Charkham that this was a highly improbable scenario on a number of

[2001] Vol. 2 Q.B. (Com. Ct.)

LLOYD'S LAW REPORTS The "Delphine"

grounds. It was submitted that it was inconsistent with the Northern Lights generator being more badly damaged than the Onan generator. But that would not be surprising if, for example, spillage occurred on the starboard side of the engineroom when the diesel from the day tank was put into the bilges by disconnecting the hose. 175. Mr. Bullen estimated that the amount of petrol needed to start the fire would have been about five litres or a gallon. Mr. Charkham observed that there was no evidence where a can capable of carrying a gallon of petrol came from or went to after the fire. That is so, but I do not regard it as a point of substance. Obtaining a gallon of petrol would hardly have been difficult, and such was the fire that it would easily have been destroyed in it. 176. It was submitted that disconnecting the nut and the hose from the day tank would have been messy operations. That is so, but on Mr. Delettrez' evidence he had a shower shortly before the fire. All that he would have needed to do after that would have been to put petrol in the bilges and light it. It was submitted that he would have been likely to have split some on his clothing. He might or he might not. 177. It was submitted that a petrol fire would have been smoky. Mr. Schoenig spoke of seeing smoke in his initial interview with Mr. Ashton, but since he was not called as a witness the matter could not be explored with him in evidence. 178. It was submitted that if Mr. Delettrez was going to set fire to his vessel, he would have chosen another time and place than when he was moored alongside a fuel station. But the season was approaching its end. Mr. Delettrez may have decided that the opportunities of scuttling the vessel without the connivance of the crew would be few and that the evening of the fiesta presented as good an opportunity as any, when not only would there be no crew on board but there were also unlikely to be other people in the vicinity. In any case, it is not an impressive argument to say that the vessel might have been scuttled in a better way. 179. On the matter of motive, Mr. Delettrez claimed that he was in a financially comfortable position, but there is only his word for that. His actions in failing to pay the crew their wages on time would suggest otherwise. With the end of the season in sight, Delphine was not going to be a source of income for him over the next few months, but rather a source of expenditure. On my findings, she would have been difficult to sell on the open

562 TOULSON, J.

market and was substantially over-insured. From those factors there is circumstantial evidence of motive. 180. In view of my conclusions on the central issue of the case, I can deal with the remaining issues shortly. Title to sue 181. I accept that Aquarius as the registered owner of the vessel had title to sue. The defendants' argument that the company was a sham and had therefore no title to sue was barely developed and was in my view unsound. Inflation of the claim 182. Among the items alleged to have been lost as a result of the fire were a black dinghy and various personal possessions of Mr. Delettrez, including a bronze wave sculpture, a collection of CDs and some antique books. I accept on the evidence of Mr. Brems (supported to a limited extent by Miss Rempt) that there was no black dinghy at the time of the loss. I also accept on Mr. Brems' evidence that Mr. Delettrez removed the personal items to which I have referred after Delphine's arrival at Ventotene and before the fire. He told Mr. Brems that the sculpture was going to be sprayed. Mr. Brems noticed that the books had gone when he went to look for a book himself. He saw the collection of CDs at Mr. Delettrez' flat in Rome after the fire. Mr. Brems pondered these matters and made notes about them approximately four to six weeks after the incident when he was working on another boat. I do not believe that they were malicious inventions. 183. It was argued on behalf of the defendants, in reliance on The Litsion Pride, [1985] 1 Lloyd's Rep. 437, that by making a claim in respect of these items the assured was in breach of the duty of good faith under s. 17 of the Marine Insurance Act, 1906 and that the policy was accordingly void. Since the conclusion of the argument, The Litsion Pride has been disapproved by the House of Lords in The Star Sea, [2001] 1 Lloyd's Rep. 389. The question whether, if the fire had been accidental, the inclusion of these items in the claim would have been sufficient to defeat the entire claim is purely hypothetical in view of my conclusion that the fire was deliberate, and I do not therefore propose to lengthen this judgment further by discussing a question which does not arise.