Indigo International Holdings Ltd & Anor v Brave Challenger, Owners and/or demise charterers of

The defendant first called Warren Briggs. Mr Briggs was a long time friend and business associate of Mr Stuart. His enthusiasm for giving his time and effort in the refurbishment of Brave Challenger was somewhat surprising: even more so his desire expressed from the outset to raise £1.1m to purchase the vessel and charter her out.

He struck me as a man who was very ready to overstate matters if the cause required it, and in that respect was representative of the Indigo/Urbane camp. Examples of his attitude include the following: -

Furthermore, I confess that I never fully understood the financial base of Mr Brigg’s involvement in the vessel (or for that matter his interest in the litigation). He claimed to have agreed terms for the purchase of the entire vessel as early as the end of 1998 at a price of £1.1 million. This figure, he explained, was based on the initial cost together with the anticipated cost of refurbishment (including MCA certification). In due course, he managed to raise £550,000 for a half share. As already noted he says that this sum was paid out in two tranches in the autumn. Thus it would appear that no adjustment was sought to reflect the fact, for instance, that, quite apart from the general uncertainty as to how much had been spent on refurbishment work, some of the work had been postponed (e.g. MCA certification and the teak deck), some of the work was achieved at unexpectedly low cost (e.g. the main engines) and some of the work had led to a substantial refund (e.g. the painting). This disparity, for which Mr Briggs had no explanation, also caught the eye of Messrs Deloitte & Touche.

But even more bizarre was the outcome of the later resale to WHB. Mr Stuart retained both his half share and an additional £350,000 of the purchase price for VAT. Thus whilst the Stuart interests had more than recouped their outlay, Mr Briggs was left in the position where, on the face of it, he was out of pocket to the tune of nearly £400,000. Despite this, he says that he transferred his shares in Urbane back to the Stuart interests shortly after the mortgage claim was instituted for a price of £75,000. Whilst Mr Stuart’s evidence that a reconciliation of the retained VAT monies would be effected once the litigation was “successfully” completed may make sense, if it be true it flies in the face of Mr Briggs’ own evidence that he had no interest in the litigation.

Mrs Stuart is someone of substantial independent means. She was the major shareholder in Mundial Invest SA. Yet Mrs Stuart claimed only the most modest involvement in the purchase, refurbishment and resale of Brave Challenger despite the fact that it was her own personal funds that had been provided for the purchase price. I confess I was not persuaded that her interest and enthusiasm for the project was as restricted as she claimed. Nonetheless, I came to the firm conclusion that the driving force in the venture in which she had invested was her husband. In the event her credibility stood or fell with him.

Mr Stuart had a business background in the field of carpet retail and property development although he had been involved in a few speculative purchases of yachts and other craft on earlier occasions. He had moved on a permanent basis to Andorra in 1985, and by the time of the events with which the court is concerned, had taken Andorran nationality. First impressions of Mr Stuart were that his apparent plausibility was undermined by a lack of straightforwardness. These impressions were fortified during the course of his evidence. He expended considerable energy in the witness box on the strange proposition that the truth would be revealed in the event that the content of his solicitors’ files were revealed, offering to exchange them for the buyers’ solicitor’s files. More importantly as will emerge there was a striking inconsistency between his account about what he told WHB and the pleaded case. Overall I was left with the impression of a man who would be only too adept at gaining the confidence of a somewhat vulnerable and gullible figure such as WHB. Furthermore, there was a tendency for his evidence to be more argumentative than direct. This feature was particularly striking in the context of his evidence relating to the alleged visit by WHB and Mr Barrett to the vessel in March 2000, a topic I deal with in some detail hereafter.

Captain Allan struck me as a frank and largely reliable witness although I was unable to accept the accuracy of all his evidence. Indeed, he recognised for instance that his statement, in suggesting that the engine parts purchased by Hoverspeed were replaced by brand new parts from a foreign navy was misconceived in all respects.

Some of the leading characters were neither called nor asked to provide a witness statement. In particular, there were some notable absentees so far as the sellers were concerned.

He worked for WHB in the 80’s. He acted on behalf of the owners in the sale of the vessel to Indigo in 1998. He was immediately taken on by the Stuarts to take charge of the refurbishment work. He was thus particularly well placed to assist on all matters relating to the engines, including their identity and condition on sale, the availability of log books, the selection of HW Turbines, the nature of the dispute over their invoices, the work effected on engines 10070 and 12009 and so on. He left the project in August 1999 and moved to France. It was surprising at the very least that no statement was taken from him.

The contractor chosen by the sellers to undertake maintenance work on two of the engines was HW Turbines. As already described, they were responsible for any work conducted on engine 10170 which was returned direct to the vessel. The firm also conducted a bulk strip of 12009 although it remains unclear what if any work was undertaken prior to the separate parts being shipped to Hoverspeed. No documentation was available in relation to this work nor was there any statement from those who carried it out.

Apart from one or two documents, the position as regards Hoverspeed was similar until the trial commenced. The sellers then produced a bundle of documents obtained by subpoena from Hoverspeed. They were furnished under cover of a letter from Mr Clive Hunt their Senior Technical Operation Manager dated the 17^th June 2003 (about 2 weeks before the trial). This letter confirmed that no work was performed by Hoverspeed on 12009 save the provision of a replacement turbine and re-assembly. But the principal thrust of the letter was to challenge the assertion by WHB that he had been informed in February 2002 by former employees of Hoverspeed that the replacement turbine was a time expired part. The replacement turbine had been certified for 1000 hours. Whilst the letter was put in evidence, Mr Hunt was not tendered as an oral witness.

There was no statement from Ian Kirkwood of Messrs. Archibald Reid the brokers who had been retained by the Stuarts to seek purchasers for Brave Challenger. These brokers produced the advertisement referred to earlier and also passed on the charter inquiry of March 2000.

The sellers did seek to call an additional witness namely Mr David Hatch of D & J Marine. A statement from him was produced towards the end of the trial, the focus of which was Mr Hatch’s understanding of the certification of Brave Challenger at the time he wrote his letter on the 28^th April 2000 and the extent to which he assisted thereafter in investigating the electrical control equipment of the vessel. I was never persuaded there was any good reason for failing to adduce this statement at the appropriate time. In any event it had proved impossible even over the extended timetable for the court to furnish time for Mr Hatch to be called, albeit leave to adduce this statement in evidence was given.

By any standards, this was an unusual case involving an unusual craft. But the most striking feature from the case management point of view was that WHB appeared in person on behalf of both Ronastone and the Succession Trust. Legal aid was unfortunately not available for this “business” dispute. But as explained in the Admiralty and Commercial Court Guide, the complexity of most cases in this court makes representation of a corporate entity by an employee unsuitable and thus leave for such representation is only given in unusual circumstances.

However, the reality was that either WHB appeared on behalf of Ronastone (the substantive party on the buyers side) or there would have been no effective representation at all. On the other hand it is a substantial piece of litigation even by the standards of this court. The sum at stake was £1.3m plus interest. There was a range of difficult issues to resolve. There were 14 lever arch files of documents. The hearing lasted 17 days.

Mr Wood, of counsel, who appeared on behalf of the sellers and his instructing solicitors, Messrs Ince and Co, fully met their responsibilities under Section M of the Guide to ensure that WHB had a fair opportunity to prepare and put his case at the oral hearings. Nonetheless there is an obvious limit to the extent to which they could be expected to assist in this regard. WHB in turn exhibited striking skill as an advocate. I hope that he will not find it as condescending if I say that he clearly put a lot of work into the preparation of this case and cross-examined the seller’s witnesses fluently and thoroughly.

But the fact remains that the nature of the representation made the task of the court in ensuring a fair trial for both parties and resolving the issues between them immeasurably more difficult. These problems were enhanced by the fact that, despite the apparent wealth of documentation in the bundles before the court, the degree of disclosure of contemporary documentation was in fact far from satisfactory.

As regards WHB, a great mass of contemporary notes for the period between December 1999 and the sale were disclosed. WHB was an inveterate note taker, although they were in the main too discursive to afford much assistance in resolving the issues. In contrast, the sellers’ pre-trial disclosure contained little by way of contemporary notes or correspondence. In this respect, the focus of concern from the court’s perspective was the almost total absence of any documents relating to the “refit” of Brave Challenger.

The sellers disclosed the quote of Vospers with regard to painting, the survey report on that work and the resulting settlement agreement (despite the pleaded case on confidentiality), together with part of the correspondence with the MCA. In addition, various work lists of Mr Ian MacDonald, Captain Allen’s diary and WHB’s covering letter to his business plan (quoted above) were also disclosed, together with the brochure and the video. But notably the only document produced relating to the main engines was the final invoice of Hoverspeed with its accompanying letter increasing the allowance for an impeller by £3,000.

As already mentioned, some of the documents relating to the exchanges with the MCA had been dispatched to WHB after the sale. (These were duly disclosed by him.) But the sellers contended that all other documents relating to the refit had been left on board Brave Challenger at the time of the sale. In contrast, WHB claimed that he had frequently asked for these documents after the sale. Mr Stuart, he claimed, had promised to produce them but none had been forthcoming. WHB said that the only document unearthed on board after the sale was not discovered until a very late stage and was the report by MGTS on the flame tubes attached to engine No. 10170 quoted above. This he had found stuck inside a road map in the crew quarters.

At various times during the course of the trial itself, the sellers produced a small number of additional documents:

I confess that I was somewhat concerned that the production of these documents was dependent more on the exigencies of the litigation than the obligations of disclosure. Be that as it may, the documentation relating to the refit work was still sparse and intermittent. It cannot be doubted that, for instance, there must have been a number of documents dealing with the work at HWT and Hoverspeed on the main engines, work on the Detroit diesels, the generators, the gearboxes, and so on. But it strikes me as wholly improbable that these documents were left on board at the time of sale but either destroyed or suppressed by WHB: -

Against this background, I conclude that the documents were simply retained by the sellers. Indeed, if all relevant documents had indeed been left on board, it is surprising that Mr Stuart was able to forward the MCA documents from the Fort after the sale. Thus I accept the evidence of Dr Layton who by late 2000 was pressing WHB to obtain the records of the refit. He described WHB’s response as follows:

“He said he was frequently asking when he could get in touch with Mr Stuart. He was asking for this documentation and I said: what was the response? And the answer was that Mr Stuart believes the documents are with other people, whether it was accountants or VAT people or whatever, but he knew that they existed, that was Mr Stuart, and he would provide them to us. I said: you have to keep on pressing.”

This account accords with the evidence of WHB. I find it that it accurately records Mr Stuart’s attempts to palm WHB off, a tactic which succeeded because of WHB’s misplaced faith in him. I reject the assertion that WHB never asked for the documents. Whether they were destroyed or had been suppressed remains unknown. I suspect the former but in either event it may be appropriate to resolve doubts in favour of WHB in respect of documentation that would have resolved matters.

It is convenient to start with the issues raised in the claim brought by the sellers as mortgagees. It is common ground, of course, that the balance of purchase price amounting to £1.3m had not been paid as at the 13^th April 2002 (or since). It is not suggested that Ronastone has any assets other than the vessel. Thus, absent any relevant amendment to the terms of the deed of covenant, the sellers would in principle be entitled to enforce the mortgage by recovering possession of the vessel and reselling it.

In the Defence, Ronastone allege that a variation contract was entered into “on or around the 4^th June 2001”, whereby the outstanding balance was reduced to £900,000, the time for payment was extended indefinitely (subject to the payment of interest) and the mortgage was “voluntarily rescinded”.

The case for such a variation has not remotely been made out. Indeed, it was not supported by the evidence of Dr Layton and I did not understand WHB to press the contrary in the course of his submissions. It is particularly to be noted:

In the result, I find that no variation to the mortgage, other than an extension to April 2002, was entered into. The implications of this finding must be subject to the outcome of the second action Folio 518 relating to the allegations of misrepresentation.

The buyers pleaded case, as already mentioned, largely repeated the allegations contained in WHB’s letter of the 19^th April. The principal complaints with regard to misrepresentations centred on three allegations:

The pleaded case went on to assert that the sellers had informed the buyers that they were intending to charter Brave Challenger and to that end had produced a video and a brochure, copies of which were supplied to the trustees.

The pleaded case for the sellers in direct response was:

“5.

…(d) £2 million was agreed as the purchase price for the vessel acceptable to both sides in or around February 2000, taking into account (so far as the First and Second Defendants were concerned) the works as had in the event been undertaken by Vospers, H&W, Hoverspeed and Mr McDougall, although there were no discussions with any of the Claimants concerning the nature or extent of those works.”

It has to be said that this pleaded position, presumably based on instructions from the sellers, was on any view somewhat improbable. The sellers were anxious to sell an expensive and unusual vessel on which they claimed to have spent a considerable amount of money. In the event the suggestion that no affirmative description of the work being effected on the vessel was ever given by the sellers was expressly contradicted by those witnesses called by the sellers and, in particular, Mr Stuart himself. To the contrary, he claims to have kept WHB fully informed of all his plans and the progress of the work throughout.

As regards the video and the brochure, the particulars of defence, again presumably on instructions, contended that the video had simply been left on board at the time of the sale and the brochure given to WHB after the sale. In the event it was conceded, if only because they are referred to in his business plans, that both had been furnished to WHB much earlier.

As identified above, the buyers rely upon alleged representations made in late 1999 and/or early 2000. It is not suggested that earlier statements about the condition of the vessel were relied upon in entering into the purchase agreement but nonetheless it is necessary to consider the earlier discussions as they add colour and emphasis to the later exchanges.

In late 1998, even when WHB was still in hospital, Mr Stuart clearly saw opportunities for profit in the purchase and re-sale of various parts of the WHB empire. Thus there were, I find, discussions between them over the telephone as regards a possible sale of the yacht. Those telephone discussions gave rise to the disclosure of an obvious enthusiasm for, bordering on an obsession with, the vessel on WHB’s part. I find that this made Mr Stuart hopeful that WHB might be persuaded to become a potential purchaser and that accordingly, in pursuit of this aim, Mr Stuart, anxious to obtain WHB’s trust and confidence, sought to befriend him. As an opening gambit, Mr Stuart gave him some kind of assurance that he would be given first call on the vessel.

It is common ground that WHB, Mr Barratt and Ian Stuart met at the London officers of Mr Barratt’s firm McIntyres on the 26^th January 1999. What is in issue is the length of the meeting and, more importantly, the content of the discussions.

The underlying theme of the seller’s case was that Mr Stuart had come to London simply out of interest in meeting WHB and that the meeting lasted 5 or 10 minutes. The buyers contended that the meeting lasted an hour or more and focused primarily on the Brave Challenger. The precise length of the meeting is probably of little consequence. I have not forgotten Captain Allen’s recollection that Mr Stuart told him that the meeting had been brief on his return. But I have no hesitation in preferring the buyer’s version that meeting occupied more in the region of an hour than five or ten minutes. Mr Barratt was caught up in another meeting when both WHB (who had brought a wealth of documents with him) and, later, Ian Stuart arrived. If the meeting that followed was only perfunctory, then both Mr Barrett and Ian Stuart would have had cause to remember that their time had been wasted. In any event the concept of a brief meeting does not do justice to the volubility and pomposity of WHB.

As regards the content of the meeting, the sellers contended that no mention whatsoever of Brave Challenger was made save an abrupt repulse by Mr Stuart of WHB’s briefly expressed interest in the vessel on the grounds of his lack of funds. In fact the probabilities overwhelmingly favour the conclusion that Brave Challenger was the primary, if not sole, topic of conversation. The meeting was taking place against a background of an advanced state of the “refit” on Brave Challenger. Indeed, the very same day Captain Allan records in his diary the transfer of the third engine 10168 to Hoverspeed. Inquiries about certification had been raised with the MCA only 10 days earlier. Captain Allan’s diary for the 26^th January records a proposal by Mr Stuart to WHB for a three-month winter charter: this must have been made at the meeting.

In this respect, the sellers pleaded case is very odd:

Contact by telephone between Mr Stuart and WHB probably continued through the year. Quite how often is unknown but it is clear that WHB was almost an addict to telephone calls and is unlikely to have left Mr Stuart in peace for long. During these calls, I apprehend that Mr Stuart would have informed WHB that all was proceeding to plan. I specifically reject his evidence that he informed WHB at this or any stage about HW Turbines’ involvement or about the replacement of the turbine by Hoverspeed.

By the end of August 1999, the bulk of the work undertaken by the sellers had been completed, culminating in the outing where all three engines worked for the first time and a speed of 49 knots was achieved. Despite the limitations of the work undertaken and the problems encountered, I find that Mr Stuart assured WHB by way of continuation of the earlier assurances that: -

The evidence relating to the timing of this lunch meeting is somewhat uncertain. I have come to the conclusion that, in accord with the evidence of WHB, it was sometime after the “sea trial” trips in August 1999 (being the time of an eclipse) and not shortly after the meeting in January as suggested by the Stuarts. Whilst it is at least agreed that the lunch meeting took place, there is an enormous disparity between the accounts of what was discussed during it. The material does not enable me to make any detailed findings. Suffice it to say that, against the background of the work on the engines having then been completed (and allegedly satisfactory sea trials having been conducted) it is probable that the Stuarts did repeat the assurances set out above and did assert (as by then already expressed in the video, the brochure and the advertisement) that the vessel, and her engines, had been restored to prime/pristine/as new condition giving her a speed of 60 knots. I also accept the evidence of WHB that the Stuarts exhorted him to try and buy the vessel, with the added carrot of MCA certification being put forward, in accord with the views of Mr Briggs, as “nearly complete”.

During the autumn and winter, the attention of WHB and the Trust were of course focussed on the sale of Wentworth Woodhouse and the issues arising from the settled property. He almost certainly indicated to Mr Stuart that, if the outcome of the claim against the bank was successful, he was minded to try and get the trust to purchase the yacht. The terms of the settlement by the Succession Trust with the bank were eventually reached in late 1999.

This was probably the occasion for the provision of the video and the brochure by Mr Stuart to WHB. They were duly referred to in WHB’s “Project Business Plan” copied to Mr Stuart on the 25^th January 2000. The content of the plan already quoted above gives some clue to the ambitious plans of WHB but, more significantly for present purposes, as to his state of mind with regard to the condition of the vessel, something which could only have been derived from the Stuarts

Payment of the £936,000 to the trust was not effected until the 28^th February 2000. The very next day, Ian Stuart approached WHB with a proposal for sale at a price of £2m, with payment of £1.2 or £1.3m of the purchase price to be postponed on the security of a mortgage. Quite when this offer was accepted remains obscure but it was of course subject to contract. It was also subject to appropriate approval by the trustees of the Succession Trust, which was to fund the purchase and become owner of the vessel, either directly or through a wholly controlled corporate entity.

It was in this context that both WHB and Mr Barratt gave evidence that they arranged to and did meet Ian Stuart on board Brave Challenger on Friday the 10^th March 2000. This was vigorously denied by Mr Stuart who gave evidence, supported by his wife, to the effect that he was in Andorra that day. This rather unexpected issue came, with some justification, to be treated as a touchstone of credibility. I have come to the conclusion that the evidence of WHB and Mr Barratt must be preferred. There was indeed a tripartite meeting that day. Mr and Mrs Stuart’s evidence that Mr Stuart was in Andorra that day is, at best, mistaken.

Mr Barrett initially gave evidence on the morning of Day 2 of the trial. He was interposed during the cross-examination of WHB. His statement contained the following passage: -

“Mr Stuart arranged for Wensley Haydon-Baillie and myself to visit the Brave Challenger and meet him on board and for me to see and hear first hand the status of Brave Challenger before we made a final decision. In early March 2000 this meeting took place and Wensley Haydon Baillie was keen to take a back seat at this meeting, thereby allowing Mr Stuart to brief me fully on behalf of the vendor as to the condition, status and charter potential of Brave Challenger.”

In his oral evidence he explained that his purpose in visiting the vessel was first of all to confirm that the vessel existed and ‘was similar to the brochures and videos that I had seen’. He was unable to identify the precise date but referred to the fact that he did keep a diary.

He explained that his driver had taken him by car to Portsmouth harbour where he had been picked up by a tender and taken to Brave Challenger. WHB had come down separately by train. When Mr Barratt boarded Brave Challenger he found WHB and Mr Stuart. He spent about an hour on board in the company of Mr Stuart. He visited the whole vessel including the engine room.

It was not suggested to him at that stage that he had not visited the vessel merely that, if he had done so, it was without Mr Stuart in attendance. Indeed it was put to him that the documents indicated that the visit occurred on 4^th April at which time (and this at least was common ground) Mr Stuart was in Thailand.

When WHB returned to the witness box, he confirmed, as set out in his statement that he and Mr Barratt had done a tour of Brave Challenger together, guided by Mr Stuart. In his statement, he said that the visit was ‘organised for February 2000 immediately following the receipt by the trustees of the £936,000’. When his cross examination resumed on 3^rd July (Day 3) WHB told the court that Mr Barratt had checked his diary in the meantime and found an entry for 10^th March as the date for visiting Brave Challenger. Later that day it was put to him that Mr Stuart recalled being en-route from Andorra to Thailand that day. Notably, however, no suggestion was made to him that, whilst such a meeting had been arranged, it had been cancelled by WHB.

Immediately following WHB’s evidence, Dr Layton gave evidence. He recalled a meeting with Mr Barratt on 16^th March 2000 when Mr Barratt reported that he had recently been down to visit the vessel at the marina.

During Day 5, following the end of Mr Westbrook’s evidence, the sellers handed in certain ‘travel documents’ relating to the Stuarts for inclusion in the bundle. Their significance became apparent during Day 8 when Mrs Stuart was called. A copy of her passport was put to her, which showed an entry stamp into Thailand on 12^th March. Mrs Stuart explained that she and her husband had left Andorra together at about mid-day on 10^th March by minibus and caught a flight from Barcelona to Madrid that evening. They had then flown via Rome to Bangkok arriving in the early hours of 12^th March (local time).

Mr Stuart gave his evidence in chief on the topic on Day 9. At that time no copy of Mr Barratt’s diary was yet available. Mr Stuart told the court (by reference to a document that he had apparently seen in the file of Messrs Howard Kennedy, his former solicitors) that a meeting with WHB (but not with Mr Barratt) had been in fact been arranged but had never taken place because it had been cancelled by WHB. The principle passage of his evidence in chief ran as follows:-

Mr Stuart went on to say in common with Mrs Stuart that on Friday 10^th March he had been in Andorra and then en route to Thailand via Barcelona. However, his own passport was not available. Mr Stuart’s explanation was that it had been a provisional one and had been surrendered.

On Day 10, during his cross-examination, the letter from the file of Howard Kennedy was disclosed. It was dated 7^th March 2000 and addressed to Mr Stuart. It may be of significance that it had been faxed to his residence at No Mans Land Fort. It opened as follows:-

“Further to our telephone conversation on Monday, I know that you are planning to meet Wensley and his co-trustee on Brave Challenger on Friday [10^th March] when hopefully outstanding issues with regard to the sale and mortgage might be resolved.

I also appreciate that you are about to depart for the Far East and we therefore need to make arrangements to enable us to deal with the sale on behalf of Indigo in your absence.”

In cross-examination, the topic of the meeting and the boat was raised in the following terms:-

Mr Barratt’s diary was then put to him. It contained the following entry for Friday 10^th March:-

Mr Barratt was recalled on Day 13. He confirmed that his diary entry for 10^th March was a note of the appropriate route, together with Mr Stuart’s telephone number. He explained that in the event of cancellation of a meeting it was his practice to tippex out the entry in his diary. Mr Barratt had checked with his chauffeur that the visit to Portsmouth had duly taken place. In addition, certain features of the design of the saloon in Brave Challenger had stuck in Mr Barratt’s memory.

The challenge to all this was on two fronts. First it was suggested that Mr Barratt had suppressed his diary so as to be evasive about the date of the meeting:-

Secondly it was suggested that he had given false evidence, to the effect that he had met Mr Stuart, under pressure from WHB: -

“Mr Wood: I suggest that your evidence is untrue. You did not meet Mr Stuart on that or any other day and I have to suggest that you are here because Mr Haydon Baillie has in some way coerced you to be here again and some form of pressure or coercion he can exercise over you.

A. I have never heard such a fantastic theme. Whatever decision his Lordship comes to in the end I have nothing to gain or nothing to lose by his decision. How could Mr Haydon Baillie have any pressure to coerce me to come here? I was definitely there on that day. There is no doubt about it in my mind and to say otherwise is quite wrong.”

I have come to the firm conclusion that the buyers’ case that there was a tri-partite type meeting on board on 10^th March has been fully made out: -

In short, contrary to the evidence of Mr and Mrs Stuart, that meeting took place. Their assertion that they were both in Andorra on the relevant day was in my judgment a bogus reconstruction, based on such documents as were available or at least produced.

As for content of the meeting, I accept Mr Barratt’s evidence that Mr Stuart reiterated all the assurances that WHB had told Mr Barrett had already been made earlier. Indeed, Mr Stuart’s determination to deny that the trustees’ visit took place goes some way to fortify that conclusion. Those assurances went at least this far: -

As regards the main engines, it may well be that by now the assurances included a reference to zero time. This was not by any means a term which was foreign to the seller’s camp (see for instance a letter from Mr Briggs dated October 1999 to a potential Belgian buyer). Equally, as regards the chartering, it may well be that the assurance included an assertion that the vessel was indeed MCA certificated. As I already indicated the sellers took a pretty cavalier attitude to the proposition that MCA approval was available (see for instance Mr Briggs’ assurances to Nat West). In this latter context, the charter enquiry made to Messrs Archibald Reid is significant. I accept WHB’s evidence that this was volunteered to him by Mr Stuart at about the same time as the visit. It was a reasonable if not necessary inference that the appropriate licences had been obtained (or were at least readily available).

In my judgment, the recollection of Dr Layton as to what he was told by Mr Barrett at the meeting on the 16^th March was accurate:

“He had seen the boat, that it had been refitted properly to the highest standards and all ready to go. It was ready to charter and chartering agents had already been contacted. He provided me with an example of a charter offer and it was very much: here is a going business; you do not have to do a lot; it is ready to go.”

I have not forgotten that it was a major feature of the seller’s case that none of the assurances could conceivably have been made, given that no complaint was made by WHB to the sellers until the expiry of the extended loan period. This is a significant argument (to which it is necessary to revert in the context of reliance). But the answer as I see it is as follows:-

The feature of Brave Challenger which made it, as WHB put it, “the Concorde” of the seas was its set of three Proteus gas turbines capable of driving the vessel at a remarkable 60 knots. Any chartering prospects (other than as a promotional rendezvous alongside the quay) would be dependent on the availability and reliability of her engines. It is accordingly convenient to consider first the question whether the engines had indeed been overhauled by Hoverspeed as the part of the refit of the Brave Challenger.

There was much debate as to what was involved in the word “refit”. It is a concept that has significant nautical associations and means in its ordinary sense something much more substantial than routine maintenance. As a matter of general language I agree with the evidence of Mr Bridges, the consultant engineer called by the buyers, that it means a thorough overhaul restoring it to a condition by necessary renewals and repairs fit for prolonged service. (In that respect, Captain Allan’s observation in his witness statement, adopted in the particulars of defence, that “we carried out various repairs and maintenance work on the yacht for nearly a year” is rather revealing.) Of course, the yacht had been rebuilt whilst in the ownership of WHB and had only been used for a few hours. But the vessel had in effect been laid up, without proper preparation and without any maintenance, for many years and thus the condition of the machinery in particular should properly have been regarded as highly suspect.

Any refit would of course include the engines and the other machinery. The defendants did not shy away from this. In their pleaded case, albeit denying that any representation as regards the engines had been made, went on:

“10…(a)…If relevant, the first and Second Defendants believe and aver that the engines had been carefully restored to prime condition bearing in mind their age and that this was confirmed by successful sea trials in August 1999.”

But, the representation that the engines had undergone a proper refit, let alone at Hoverspeed, was untrue in almost every respect:-

In any event, none of the engines taken as a whole could be certificated for further operation in the absence of any engine logs. This remains the case despite the further service available from the turbine installed by Hoverspeed. In this respect, the buyers relied upon the evidence of Mr Bridges, an engineer with particular experience with gas turbines. (The sellers chose not to call their own expert Mr Alan Robinson.) In his report, Mr Bridges emphasised it was necessary to have a complete record of service to enable “engine state and life expectancy to be defined”. This was of particular importance with regard to time-limited parts such as blades and discs. In his view it was unsafe to start the engines. In order to operate Brave Challenger at its designed high speed it would be necessary to install replacement engines with a known service history (at a cost of about £500,000 per engine).

Mr Bridges was also asked during his oral evidence to elaborate on the concept of “zero time” which he described as a common piece of terminology in gas turbine propulsion. But, as I have indicated, I have not quite been persuaded on the balance of probabilities that the representation as regards the engines included any express reference to “zero time” (although I think it likely). But they were as I have found described as in prime or pristine condition. Mr Bridges was asked whether that would connote zero time. His answer, which I accept, was as follows:

“It would mean to me that it had a substantial number of hours – at least – a substantial number of hours left available to it and I would then try and find out, ascertain, what those hours were and whether I considered it be in “prime condition”.”

By way of summary, I put a number of questions to Mr Bridges and I have no hesitation in accepting his answers:

“Mr Justice Steel: … Assume for the purposes of my question that a Proteus engine has been sent to [Hoverspeed] with a request that it be overhauled, and assume for the purposes of my question that the owner says that he does not have, because they have been lost, the log for that engine and its turbine and so on. What would be done?

A. I do not think that you can do very much at all to certify that engine at that point. With lost documentation, you do not know the state of that engine.

Q. Assuming it was hoped that the certification for – to pluck a figure at random – a further 1000 hours was sought; could that be achieved?

A I would think it unlikely. Not – to be absolutely sure that the engine was safe. If you do not know how long the engine had been operated for and particularly how long the power turbine had been running for and what sort of conditions it had been operating in, unless you replaced it with a zero time unit which had certification, you would not be in a position to release that engine with a timed life on it.

Q. Supposing you added: the owner told you that he had recently bought the vessel and that the previous owner, so far as he knew, had embarked upon a very careful and thorough overhaul of the engines and so far as he knew, very little running time had been consumed since then, what would be your answer then?

A. Without the documentation, you cannot certify that engine as being safe from a legal point of view. Without that documentation, without the release certificate setting the safety of that engine, it is unlikely that you would get insurance or that insurance would be valid for that craft if you operated the engines.

Q Does it follow that without the logs the engines have to be scrapped?

A. To a large extent yes. I have spoken to ex-employees of Rolls Royce this week, engineers who at the moment are consultants in cost analysis of gas turbine systems and they confirmed to me that if the documentation was not with the engines, in effect the engines were scrap. ….Because it is really to do with the safety aspect. You just do not know what you have. And they are dangerous pieces of equipment. They could if the disc blew if either the compressor disc or the power turbine disc blew, it would burst through the casing, would go through the side of the ship and could sink the ship and could cause serious damage to anything else in the vicinity… ”

It is no answer, as pleaded, to refer to the “successful sea trials”. Quite apart from the risk associated with starting the engines, there was only one occasion when all three engines operated and even then the speed achieved was only 49 knots (perhaps not surprising given the power limitations of some of the gearboxes which were equally uncertificated). In any event, the trips in August could at best be described as a test, not a trial, and a fairly unsuccessful one at that. The absence of any record in the engine log book speaks volumes in that respect: I reject Mr Briggs suggestion that the relevant pages had been removed.

I am unable to accept that the engines had been subjected to a refit or even an overhaul other than in the most limited respects, let alone at Hoverspeed. I also accept the buyer’s case that the gearboxes were not in a condition reflecting “a complete refit”. It was common ground that at least one of the gearboxes had previously been insufficiently rated for its companion engine (although the identity of the relevant gearbox or boxes was somewhat obscure). It was suggested by the sellers that the starboard one had been up rated from 3,500 hp to 4,250 hp by the expenditure of £1,800. I accept the evidence of the buyer’s expert that such an upgrade could not be achieved save by way of expenditure of sums of several orders of magnitude greater.

The most visible features of the “refit” that remained undone or incomplete were the painting, the varnishing and the laying of a teak deck. But it was accepted by the buyers that they were aware of the deficiencies in the first item and could see for themselves that the latter two items had been postponed. As regards the other matters, the sellers relied on their Consultant Marine Engineer Mr Bridges. In his report he identified a range of items apparent from his inspection of Brave Challenger in 2003 which led him to the conclusion that the vessel had not “undergone a complete refit to the highest standards” etcetera. I quote from his report: -

Even assuming that all these criticisms could fairly be directed at the sellers (bearing in mind that Mr Bridges’ inspection was taking place over 3 years after the sale,) I was not persuaded that the failure to conduct complete refit was thereby demonstrated. It merely demonstrated how WHB’s eye came off the ball in the initial stages of his ownership. Some items were simply de minimis (e.g. the missing ice maker, the missing panelling near the Satcom and the want of a replacement heater in the owners’ accommodation). Other items were premised on a failure to adopt developments introduced years after the vessel was originally built (e.g. the high rotational radar, CO2 or FM200 fire fighting gas, and facilities for shore discharge of sewage). The remaining items were principally examples of unfinished work associated with the installation of replacement parts (e.g. the failure to connect the forward fire hydrant, the failure to replace the membrane in the water system and the failure to secure the sewage holding tank) or relatively minor aspects of design associated with the refit work (e.g. the fitting of water pumps low in the bilges, inadequate power in replacement batteries, the seawater suction for the diesel generator too far aft).

Far from establishing that there had been no full refit, these complaints if any identify the scale of work undertaken and the absence of any substantial shortfall from a complete refit

There is no issue that the vessel was not MCA certificated. Although at the time of the postponement of further work to achieve such certification, the sellers were of the view (transmitted to the buyers) that achievement of MCA status could be obtained at little additional cost, it is clear the compliance was dependant on a large range of additional work.

Again Mr Bridges supplied a list of requirements to achieve certification. The list included: -

The sellers were of the view that these sort of matters could be achieved at relatively modest cost. They were probably right save as regards the rail height. Thus, in my judgment, the sellers did indeed represent that Brave Challenger was in a condition fit for immediate charter. In this connection I quote from the evidence of WHB:

“Q. Mr Stuart will say that on the contrary when the Archibald Reid enquiry came in for a possible £80,000 charter that July, he handed it to you and said: we are not interested in this but you might be.

A.

No, that is not the case…..My memory serves me correctly, it was the 6^th March and we were provided that at the time, some six weeks before the purchase, and we were strongly encouraged to commit to it on the basis that we acquired the vessel because if we left it too long we would lose the charter and it was a very attractive one and Archibald Reid were their sale and charter agents who were well equipped to assist with it.”

I accept WHB’s evidence on this matter. Nonetheless the major impediment to certification and charter business related to the history and the maintenance record of the gas turbines. As already explained the failure to conduct a proper overhaul of the engines is part and parcel of the overarching problem of the absence of any maintenance records and/or logs. This not only rendered it unsafe to start the engines but equally rendered it impossible to comply with MCA requirements. Thus any misrepresentation about MCA certification, even assuming such would have not have been readily apparent from the absence of an appropriate certificate, is no more that another way of putting the complaint about the status of the engines.

The sale was completed on the 14^th April 2000. The background to the offer and acceptance of a price of £2 million remains obscure. I conclude that it is likely that Mr Stuart did, as contended by WHB, suggest to him that the price reflected “cost plus 10%” but I need not make any finding in that regard. Furthermore, quite how Mr Stuart anticipated that WHB (or the Trust) would be able to meet his obligation to pay the balance of the purchase price given his parlous financial position, remains equally unclear.

Nonetheless, having found that the status of the engines had been misrepresented by the sellers, I must go on to consider the further issue as to whether the trustees and/or the buyers had been influenced thereby to purchase the vessel. In this connection I have well in mind that it is not necessary for the buyers to demonstrate that if the misrepresentation had not been made they would not have entered into the contract: it is sufficient to show that the misrepresentation was one of the inducing causes.

I am not sure that the issue is a live one in the present case. But it is also not necessary for the sellers to demonstrate that the misrepresentation was material in the sense that it would have acted as an inducement to a reasonable man: the burden is on the buyer to show that he did rely on the misrepresentation. It is no answer that a reasonable man would not have been so influenced if the representor ought to know that he is likely to rely on it..

The sellers invited the court to have particular regard to WHB’s “long emotional attachment to the vessel” and “his determination to reacquire her as part of the reconstruction of his life”. Thus the sellers asserted that WHB was determined to re-acquire the vessel regardless of its condition. As they put it, he simply wanted somewhere to live, without any need for use of the main engines, so as to bring some sense of security into his troubled life. They rely on three matters in particular that were said to reflect this attitude:

To some extent I have dealt with these matters already: -

I reject the submission that the “as is where is” clause in the contract demonstrates a lack of reliance on any contractual representations. If anything that clause (and the absence of any survey) manifest total reliance on the sellers.

In short, I am not persuaded that WHB’s determination ran to purchasing the vessel regardless of her condition. I also reject the submission that he was simply relying on his own knowledge of the vessel and its engines derived from the period of his ownership. The business plan gives the lie to that. It may well be that he regarded the vessel as a potential home and, as regards income potential, had much in mind the possibility of static charters using the vessel as an unusual corporate conference and entertaining venue. But the reality is that the only feature of the vessel differentiating it from any other luxury yacht was the main propulsion units. Their condition inevitably formed a crucial ingredient in any decision to purchase.

I will also accept that WHB’s approach to the sale was somewhat naïve but this seems to evidence an imprudent trust and confidence in Mr Stuart rather than a disinterest in the vessel’s condition and that of her engines in particular. Given the history of their relationship, Mr Stuart ought to have realised that WHB would rely on the representations. In short, I find that WHB did rely on the representation relating to the engines as one of the material influences in entering into the contract.

In any event, it must be remembered that, whatever had been the degree of uninhibited enthusiasm on the part of WHB to purchase the vessel, his co-trustee Mr Barrett needed to be satisfied that it was an appropriate investment for the trust. The oral and written representations made to WHB can properly be treated as having been made to Mr Barrett as well, being a person that the sellers must have expected them to have been passed on to. But in any event, as I have already found, Mr Stuart repeated them all direct to Mr Barrett during the visit to Brave Challenger in March 2000. I have no doubt whatsoever that Mr Barrett relied them in according his approval to the purchase.

I also accept Dr Layton’s evidence that WHB and Mr Barrett duly passed on details of the representations at a meeting on about the 16^th March, together with copies of the video and the brochure, and that he relied upon them in his capacity as director of Ronastone.

Although the claim was formulated in terms of seeking an order rescinding both the sale and the mortgage contracts, this is of course not a viable outcome and has not been pursued.

So far as concerns the claim in damages, the issues were not fully argued out before me. This is perhaps scarcely surprising given the range of issues that arose on matters of liability and the lay representation of the buyers. Suffice it to say for the moment that I find, at the least, that the sellers have not proved that they had reasonable grounds to believe (and did believe) at the time that the contracts were made that the facts represented with regard to the engines were true and thus the buyers are entitled to claim damages under the Misrepresentation Act 1967. It may that the claim could have been advanced in deceit but I am not sure that such is pleaded (or pursued). It probably does not matter since the measure of damages would be the same.

This conclusion makes it unnecessary to consider the alternative claim advanced by the buyers by reference to the implied terms under Section 14 of the Sale of Goods Act. In any event, the short answer to those claims is that the express term with regard acceptance of the vessel “as is where is” negatives the implication.

On the face of it, the appropriate measure of damage includes the difference between the contract price and the value of Brave Challenger as transferred. In assessing the value of the vessel as at April 2000 the following matters would appear to be material:

Against that background, my conclusion is that the value of Brave Challenger as at the time of the sale was about £750,000 and primary damages should be calculated on that basis. The form of order, including the determination of any consequential loss, may require further argument.