England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMIRALTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th December 2003

Mr Justice David Steel:

1. These two actions arise out of a sale contract made on the 14^th April 2000. The sale related to a vessel called "Brave Challenger". The sellers were Indigo International Holdings Limited ("Indigo") and Urbane Limited ("Urbane"). The sellers are claimants in Folio 411, an action in rem, and defendants in Folio 518, an action in personam.
2. The buyers were Ronastone Limited ("Ronastone"), a company wholly owned by a trust called the Succession Trust. The trustees of the Succession Trust were Mr Wensley Haydon-Baillie ("WHB") and Dr Derek Layton ("Dr Layton"). Ronastone is the defendant and counter claimant in Folio 411 as the registered owner of Brave Challenger. The buyers and the trustees are Claimants in Folio 518.
3. The Brave class of vessel was designed and built as a fast naval attack vessel by way of evolvement from wartime MTBs. Brave Challenger was a unique member of the class having been built by Vosper Thorneycroft ("Vospers") for the shipping magnate Stavros Niarchos in 1962 as a one-off luxury yacht capable of 60 knots.
4. WHB acquired the vessel in October 1978 and, over a period of some 10 years, put the vessel through a hugely expensive and elaborate rebuild. Following re-launch and sea trials, the vessel was put on display at Southampton in a museum created by him which celebrated Rolls Royce Engineering. At that time the museum was its registered owner.
5. The vessel is some 102ft in length and 25ft in beam. She is powered by 3 Rolls Royce Proteus gas turbines developing 12,750 h.p. She is also fitted with twin GM diesels for harbour manoeuvring. There is accommodation for the owner and eight guests, together with a captain and four crew.
6. By the early 1990's, WHB was both suffering from poor health and in financial difficulties. His affairs were taken over by an accountant. At some stage the accountant had arranged to transfer the ownership of Brave Challenger to a company called Victory Marine Ventures Ltd. The vessel was then mortgaged to United Overseas Bank to secure a loan, the proceeds of which, WHB asserts, were embezzled by the accountant
7. In due course WHB entered into a voluntary arrangement with his creditors. As part of the subsequent realisation of his assets, the vessel was moved to Lymington in early 1997 and marketed by the mortgagee bank at an asking price of US $3,500,000. No sale was achieved for a very considerable time. Eventually, Indigo, an investment company owned by Mrs Nuria Planella, a national and resident of Andora, offered $750,000 for the vessel in the autumn of 1998. This was accepted by the bank and the sale took place on the 7^th October 1998.
8. The bank appears to have granted power of attorney to the then chief engineer of the vessel, Mr Ian McDougall, to act for the owners in executing the Bill of Sale in favour of Indigo. WHB was unaware of this transaction since by this time, as from September 1998, he had once again been admitted to the Churchill Priory hospital. This reflected an excessive dependence on benzodiazepams and other sedatives. He remained as an in-patient until the 12^th December 1998.
9. Much earlier, sometime in the 1980's, WHB had purchased Wentworth Woodhouse, a vast 300 roomed 18^th century property in South Yorkshire. By November 1998, this too was on the market at the instance of mortgagees. That month, shortly after the sale of the vessel, Mr Ian Stuart ("Mr Stuart"), the husband of Mrs Nuria Planella ("Mrs Stuart"), made telephone contact with WHB in hospital. Mr Stuart was at that time a co-director of Indigo. The primary topic of the conversation was the impending sale of Wentworth Woodhouse. Whether the topic of the Brave Challenger was also discussed at the time (and in particular whether Mr Stuart encouraged WHB to buy back his former yacht and, with that in mind, indicated that he was contemplating that WHB should be given a form of preferential opportunity to do so) was a matter of some controversy.
10. In the meantime, the new owners had embarked on a programme of refurbishment, repair and maintenance of Brave Challenger which by now had lain idle and untended for a very considerable period. To this end Mr Stuart engaged a team to assist him. It included:

a) Mr McDougall, the former chief engineer.

b) Mr Warren Briggs, a close friend with extensive experience in automotive mechanics.

c) Captain Nicholas Allen an experienced yacht master who was also a qualified shipwright.

11. This team carried out a considerable amount of work on the vessel between January and August 1999, including the installation of a new generator, the inspection of the tailshafts and propellers, the fitting of water tanks and pumps, the provision of new electronics equipment, the replacement of anodes, the installation of new carpeting and other general refurbishment work.

The painting

12. Some of the major items were, however, contracted out, including the paintwork and the main engines. As regards to the paintwork, quotations were sought from various yards. In the event a quote from Vospers dated 5^th November 1998 was accepted. This covered both the painting of the topsides, superstructure and hull and the laying of a teak deck on the existing structure. The agreed price was £100,000. A part payment of £33,000 was made.
13. Initially Vospers embarked on the construction of a tent under which to carry out the painting work. This proved to be unworkable. Consequential delays led to the postponement of the installation of a teak deck (constituting some £58,000 of the total contract price) until the winter of 1999/2000. In "compensation", Vospers agreed to undertake all external varnish work for their own account.
14. The vessel was eventually moved into a shed at Vospers in April 1999 and the painting undertaken there. The painting work proved highly unsatisfactory. Mr Stuart instructed a surveyor to comment on the quality of the work. He eventually reported in July 1999. The surveyor drew attention to four major problems, namely shrinkage and movement of timber owing to change of moisture content, poor colour matching, suspect filling and faring associated with the incompatibility between the existing paint scheme and the new coatings and poor application. In short, extensive repainting was required.
15. The problems must have been manifest much earlier since the publication of the report led to an immediate settlement agreement whereby the contract was terminated upon payment by Vospers of £125,000. This settlement was expressly stated to be confidential. The money appears to have been paid, not to Indigo, but to Mundial Investment SA, another company controlled by Mr Stuart and his wife, under the umbrella of which the work was being conducted.
16. Neither the repainting nor the installation of the teak deck was accomplished before the vessel was delivered to the buyers in April 2000. Accordingly the net cost of the work effected by Vospers was a credit of £92,000.

The main engines

17. As regards the main engines, the company that was selected to undertake the work on them was HW Turbines. This company was apparently chosen on the recommendation of Ian McDougall. Given his long association with the vessel, it was unquestionably a surprising choice given that the evidence clearly demonstrates that H.W. Turbines have an unsatisfactory record with regard to repair and maintenance of gas turbine engines in general and those formerly owned by WHB in particular.
18. As already indicated, the vessel was equipped with three such engines, nos: 10168, 12009 and 10170. It would appear that engines 10170 and 12009 were sent to H.W. Turbines in November 1999. The instruction was for a "bulk strip". A bulk strip consists of separating an engine into its separate large sections for inspection. No details are available as to the defects found as a result of the bulk strip on these two engines or the work (if any) carried out as a result.
19. According to the diary of Captain Allen, engine 10170 was in due course returned to the vessel in mid January. As regards engine 12009, this was apparently dismantled by H.W. Turbines but not re-assembled. The sellers asserted that this was attributable to their termination of the contract by reason of their concern about an invoice from H.W. Turbines which contained a claim for wholly improbable hours allegedly worked over the Christmas period. Despite this apparent fraud, HWT's account, said to have been in the sum of £24,000, was apparently settled in full.
20. Six months later, in July 1999, Midland Gas Turbines were called in to inspect one of the engines and in particular the flame tubes. The identity of the engine remains somewhat obscure but it was almost certainly 10170, the only engine which had been purportedly worked on by HW Turbines. The conclusion of Midland Gas Turbines (MGTS) is clear enough: -

"The condition of the flame tube was in line with that expected in 4000/5000 hours aero running time, assuming that burner condition was normal. There is no possibility that with burners in reasonable condition that this type and extent of damage would have been incurred in any 10 hours running time from the second engine overhaul and only 60 hours from the first overhaul as defined by the engine manufacturer.

….

It would appear that a fraudulent claim has been made for overhaul of the engine as the definition of overhaul on two occasions as specified by the engine manufacturer precludes the use of parts exhibiting the extent of damage as seen. Doubt must therefore exist about the other parts/engines are in the condition charged for including the remaining flame tubes."

21. The report concluded with this remarkable coda: -

"Should Mundial Invest SA decide to take legal action against HWT, MGTS are prepared to assist in the matter.

NB. The writer has 40 years Proteus experience on Proteus engines both within and outside of Rolls Royce at technical and practical levels and has previous experience of the unsatisfactory quality of work carried out by HWT leading in some cases to catastrophic failure of engines owned by several operators."

22. The transfer of the other two engines to Hoverspeed was probably prompted, not so much by reason of concern for the workmanship of HW Turbines or even the legitimacy of their invoices, but because Hoverspeed had expressed a considerable interest in the three engines that were installed in Brave Challenger. Indeed, Hoverspeed had contacted Mr Stuart within hours of hearing that Indigo had purchased the vessel with a view to buying any engine parts with an appropriate pedigree. This was because gas turbines of this class were obsolescent and it was proving difficult to operate Hoverspeed's passenger hovercraft to the rigorous requirements of Rolls Royce.
23. The three engines on Brave Challenger were potentially attractive to Hoverspeed since they had been repeatedly completely overhauled by WHB during the course of his ownership in the 1980s. However, there was a problem. Almost none of the individual engine maintenance logs had been handed over at the time of the sale. It appears nonetheless that there was one log available (or at least a duplicate) but solely in respect of the turbine attached to 12009. Hoverspeed accordingly agreed to buy this turbine. This purchase is confirmed by a fax dated the 23^rd December 1999 from Hoverspeed to Mr MacDougall:-

"Proteus

7068 is on to purchase at 40k. Replacement turbine will be available in Dover 29.01.99. Please arrange invoices and date of pick-up of 7068 (in bits). We will pick up 7068 from HWT early next month if convenient."

24. Its considerable value to Hoverspeed is reflected in the agreed price of £40,000. Notably this figure contained a debit of only £5,000 for the provision of the substitute turbine. Indeed, according to documents produced by the sellers during the trial, this replacement seems to have been built up from: "overhauled discs ex turbine 10001 and parts sourced from Hoverspeed RTP stock and parts from "new" stores as required plus parts from Mundial Invest."
25. Engine 12009 was brought to Hoverspeed from HW Turbines on or shortly after the 28 January 1999. In the meantime, 10168 had been transported from Brave Challenger to Hoverspeed on the 26 January 1999, again for the purposes of a bulk strip. 10168 were stripped down and a report prepared by Hoverspeed on the 2^nd February. The recommended work was duly undertaken and invoiced in the sum of £10,278 plus vat. This included an allowance of £5,000 for the impeller which was exchanged, being another part of the engine of sufficiently certificated provenance to attract Hoverspeed. In fact there was a later correction to increase that allowance yet further to £8,000.
26. The only work done to 12009 was to re-assemble the sections brought down from HW Turbines (other than the old turbine section). It was treated in the contemporary documents as having been repaired "by someone else". Some additional remedial work was performed on the replacement turbine, invoiced in the sum £1991. In the result, even allowing for the cost incurred at HW Turbines of £24,000, the net cost to the sellers of all the work undertaken on the main engines amounted, on my reckoning, to a credit of £5,459.
27. Following reinstallation of all three engines into Brave Challenger, various engine trials were conducted in August, with very mixed results as recorded in Captain Allen's diary: -.

i) August 5. "Flashup P and S jets. Sparks and smoke – centre brake not holding. CO2 discharge! Finally up to 25 knots.

ii) August 11. Centre jet run-up. No output on control. Port and starboard run-up and away. 27 knots… Headback P and S on. 30.7 knots in Solent.

iii) August 13. Run-up centre Proteus lots of smoke.

iv) August 16. Out – bumpy – east of Ireland. … All 3 on. 49 knots."

28. These trips were in due course categorised as "successful sea trials" by the sellers. It was notable that, although mentioned in a personal diary in passages quoted above, no entries whatsoever were made in the engineer's log kept on board and scarcely any in the deck log.

Video and brochure

29. Reverting again to late 1998, shortly after Indigo had purchased the yacht Mr Warren Briggs, a friend of Mr and Mrs Stuart, who, as earlier noted, had been recruited to help with remedial work and who had adopted a remarkably enthusiastic interest in the yacht, almost immediately produced a video about the yacht. This was apparently prepared with a view to being shown to those who might be willing to finance a purchase of the yacht by Mr Briggs and to those who might be interested in effecting and arranging charter work thereafter. It was edited in January 1999 shortly before two of the engines had even been delivered to Hoverspeed. In its final form (and probably in the initial version as well), the video contained the following startling observation in the course of its commentary: -

"Over the past year, the vessel's mighty power units have been carefully restored to their prime condition."

30. Some time later, in August 1999, shortly after the trial trips referred to above, Mr Briggs assisted Mrs Stuart in preparing a brochure on the vessel. Given the history of the repair work outlined above (particularly as regards the engines) and the outcome of the trials, it is somewhat surprising to find the following statements in the brochure: -

"Three mighty Rolls Royce jet engines developing 12,750 hp propel a 103ft long craft at an awe inspiring 60 knots… A complete refit has just been completed to the highest standards ensuring the entire craft is in pristine condition."

During the trial, it became common ground that WHB was provided with copies of both the video and the brochure at some stage prior to January 2000.

31. August 1999 also saw the production of an advertisement for the yacht published by the sellers' brokers, Messrs Archibald Reid: -

"THE WORLD'S FASTEST SUPERYACHT

For Sale

60 KNOTS

BRAVE CHALLENGER She has just completed a total rebuild leaving her in "as new" condition Triple Rolls Royce Proteus Gas Turbines give her 60 knots"
32. It was not suggested that the advertisement was provided to or seen by WHB but it is another clear indication of the alleged condition and performance of the yacht which the sellers were anxious to disseminate at the time

MCA certification

33. From the outset, following the purchase by Indigo, Warren Briggs saw opportunities for charter of Brave Challenger, albeit the Stuarts assert that they had made their investment with a view to profit on resale. In accord with his perception, Mr Briggs (with Captain Allen as a junior partner) sought to raise finance to purchase the vessel. There was an understanding if not an agreement, which Mr Briggs spoke of in the course of his evidence, that they would be able to purchase the vessel for £1.1 million from Indigo.
34. In order to obtain charter income, it was appreciated that it was necessary for the vessel to satisfy the MCA Code of Practice for Safety of Large Commercial Sailing and Motor Vessels. This Code of Practice applied to yachts of 24 metres or more which were to be engaged in commercial use with 12 or less passengers.
35. Mr Allen approached the MCA in Southampton in January 1999 and was supplied with a copy of the Code. On the 14^th January, Captain Allen made enquiries about the possibility of certification for up to 20 passengers with a range of 60 miles from a safe haven. The MCA responded on the 5^th February. Their reply emphasised that the Code applied for vessels up to 12 passengers. Carrying more than 12 passengers would make Brave Challenger both a passenger ship (and thus requiring compliance with Solas regulations outside territorial waters) and a high-speed craft (thus requiring compliance with a further regulatory regime).
36. On the 10^th February, Captain Allen completed a request for an MCA survey. The initial survey took place on the 3^rd March and a list of items requiring attention in order to achieve compliance was sent out by the MCA on the 13^th April. The covering letter said: -

"Although we considered this vessel as suitable, in principle, for operation under the Code, the risks of damage to the vessel and injury to passengers and crew when operating at high speed and the potential fire hazard associated with a gas turbine propulsion cause some concern. We will limit high-speed operations to daylight only, with a sea state of restriction to be agreed. Your proposals are invited"

37. In the annex to the letter a number of matters were identified as requiring work in order to achieve compliance of the Code. They included the following: -

"Survey of turbines and diesels.

I will ask one of my engineer surveyor colleagues to visit the vessel in order to assess and discuss the machinery installation and the operation with your engineer. The following items will be considered:

History, service and maintenance records of the turbines and diesels;

……

Guard rails

The height of the rail around the perimeter of the weather deck is to be increased to no less than 1 metre with two intermediate wires/rails at approximately equal vertical spacing.

……

Manning

In addition to satisfy the Code requirements we consider it necessary for the captain to have had training and experience in high speed craft navigation…

The engineers should be trained and experienced in the operation of propulsion and generator turbines.

…"

38. These matters had obviously been mentioned during the course of the survey as Mr Allen had already written to the MCA on the 9^th April informing them that he had got a place on the high-speed navigation course at Warsash in June. This letter went on to question the requirement of the guardrail height since raising that height would be "a major job". No mention was made about the engines or their service records (although it fair to say that Mr Allen left engineering matters to Mr McDougal).
39. By May, Warren Biggs reported on progress to Messrs Deloitte & Touche who had been instructed by him to prepare a report with a view to seeking finance for the purchase of Brave Challenger. In a letter to Messrs. Deloitte & Touche dated the 28^th May, Mr Briggs assessed the cost of meeting the MCA requirements as only some £10,000 and asserted that the requirements were approximately one third complete, with completion expected at the end of June.
40. July saw the production of Messrs Deloitte & Touche's report. MCA approval has still not been given. The report, which had been expressly approved by Mr Briggs, went on to say: -

"They [i.e. the purchasers Mr Allen and Mr Briggs] also understand that the MCA will not prevent them from commencing chartering pending final approval as long as they are satisfied that their main requirements have been satisfied and that progress is being made on the remainder."

In the event a number of the items were dealt with but by the end of August the work was still materially incomplete. The MCA were notified by a letter dated 24^th August that, since the season had effectively been missed, the work would continue through the winter with a view to reverting to the question of certification in the New Year.

41. In fact it is by no means clear that any such work was undertaken during the winter. In any event, by the time of the sale in April 2000, the necessary work had still not been completed (let alone certification granted). Despite all this, even back in August, the sellers made arrangements with a firm called Something Different Leisure for advertising charters of Brave Challenger. The brochure produced by that firm referred to the vessel as being "available for hire and charter" although it is not suggested that this brochure was provided to or seen by WHB.
42. It may well be that the vessel's availability for charter was also promulgated through Messrs Archibald Reid. Indeed, on the 6^th March 2000, those brokers wrote to the Stuarts reporting on an interest that had been expressed for a two-week charter at the end June/early July for which they had quoted a figure of £84,000 plus delivery. This was passed on to WHB.
43. These instances manifest at the lowest a propensity on the part of the sellers to exaggerate the vessel's readiness for charter. Indeed, in this connection, it is difficult to forget Mr Stuart's reaction to the postponement of the installation of the teak deck until the winter of 1999/2000 as suiting "our charter commitments".

Meetings between buyers and sellers

44. Following the initial telephone contact between Mr Stuart and WHB in November 1998, and WHB's emergence from hospital in December, a meeting took place on the 26^th January 1999 at the city offices of MacIntyres. A Mr Eric Barrett was the predecessor to Dr Layton as co-trustee with WHB of the Succession Trust. He was a partner at MacIntyres. Whilst it is common ground that the meeting was attended by Mr Barrett, WHB and Mr Stuart, the purpose, length and content of the meeting were all controversial.
45. The only other agreed personal contact between the parties was when WHB lunched with Mr and Mrs Stuart at Blake's Hotel in Chelsea. The date was obscure. The Stuarts considered that it was in early 1999. WHB thought it was in late 1999 or even early 2000. Be that as it may, once again the scope and content of the conversation over the lunch was controversial.

Raising of funds by Succession Trust

46. Reverting to early 1999, there had been significant developments in regard to Wentworth Woodhouse (and in particular its contents). Mr Stuart had expressed an interest in the house. Indeed, Mundial Investments made an offer for the amount of the mortgage debt (about £2 million) plus £1. The bank concerned, Julius Baer, nonetheless embarked on a sale to a third party for about £3 million.
47. Mr Stuart had formed the view that the bank, despite the fact that they were owed other sums, was not entitled to retain the sums in excess of the mortgage debt and thus his bid was to be preferred. He so advised WHB. Mr Stuart offered the services of his lawyers Messrs Howard Kennedy to assist in challenging the bank's position. However, proceedings seeking an injunction against the bank restraining the proposed sale failed.
48. WHB himself then reviewed the position and formed the view that the sale had improperly included some "Protected Fittings" of the house, which had been committed to the Succession Trust. WHB accordingly pursued a claim for the surplus generated from the sale acting as litigant in person on behalf of the Succession Trust and recovered the sum of £936,000. This was eventually paid to the Succession Trust in February 2000 although the likely outcome was probably known to WHB in late 1999.

Events leading up to sale

49. By that time Mr Warren Briggs, through the vehicle of Urbane, had bought a half share in Brave Challenger. He had been unable to persuade a bank to give a loan of sufficient size to purchase all the shares in the ship, but with a combination of funds from his directors' loan account, funds from the Nat West and his personal resources, he says that he paid £550,000 (half of £1.1 million) for a half share. The sale agreement, which was in the barest of terms was dated the 9^th September. £400,000 was apparently paid to Indigo on the 10^th September and the balance sometime in October. The Bill of Sale was executed on the 29^th October, the transferee simply being identified as Urbane Ltd.
50. In the New Year, WHB produced a business plan for Brave Challenger. The final draft was no doubt written in anticipation of the receipt of funds by the Succession Trust. The plan was accompanied by the brochure and the video, which had by now been furnished to WHB. The primary concept of the business plan was the use of Brave Challenger as a venue for corporate meetings and so on in London. The author's understanding of the recent work on the vessel is set out in section IV:

"Brave Challenger was sold some years ago and was acquired in 1998 by Indigo Holdings which restored and refitted the Brave Challenger to 1999 standards and equipment at Vospers Ltd, the ship's original builders."

The purchase price contemplated by him was £2 million.

51. A copy was forwarded to Ian Stuart at his property in the Solent known as No-Man's Land Fort. In his covering letter, WHB said this:-

"I have sent [this letter] to the 9 people who are helping me ensure that I raise the finance and acquire Brave Challenger in the first quarter 2000 as I promised.

…Don't let anyone else near it and don't let anyone see my plan and copy my ideas.

Thank you very much for all your help and encouragement – it has meant a lot to me and been a tremendous help in the darker days last year.

You gave me such help that I now have the full confidence that we shall win the claim for the surplus, get Brave Challenger back and slaughter BJB and the purchaser of Wentworth Woodhouse on the contents and get Wentworth Woodhouse back as well.

By the way I shall make another billion pounds as well out of my science and technology – I calculated I need about £2.6 billion (4.0 billion dollars) to have fun with all my plans"

52. Preparations for the sale of Brave Challenger by Indigo and Urbane to the Succession Trust got underway in earnest in March 2000 following the recovery of monies by the trust. The price was duly agreed at £2 million. At some stage it was also agreed that payment of £1.3 million of the price be postponed and secured by a mortgage.
53. The issue of VAT then arose. At the time of the original purchase in 1998 the Customs and Excise had certified the supply as zero rated subject to the following conditions: -

"The vessel is not a pleasure craft. No structural changes to the vessel have been made. Any work done to the vessel had been of a repair and maintenance nature."

54. That ruling was accepted. In March 2000 the new sellers obtained advice from the Customs and Excise. In a letter dated 6^th March, they stated as follows: -

"The supply in the UK of a qualifying ship may be zero rated as per Item 1 of Group 8 of Schedule 8 of the VAT Act 1994. If therefore the vessel in question remains unchanged since the ruling given in our letter of the 6 October 1998, then its supply when made in the UK may be zero rated."

The very same day the Stuarts had received an enquiry about a charter of Brave Challenger as already referred to

55. In the meantime, WHB had made arrangements to visit the yacht. Mr Stuart mentioned the planned meeting in a telephone conversation with his solicitors on the 6^th March 2000. The meeting was fixed for the 10^th March. His co-trustee, Mr Barrett, was due to accompany WHB. All this was to occur shortly before Mr Stuart departed to the Far East. Whether this meeting ever took place, let alone what was said during it if it did, is a matter of the greatest controversy.
56. On the 7^th April WHB's solicitors sent a list of completion requirements to their opposite numbers. The list recorded that one of the items to be furnished by the sellers was: "Bundle of documents confirming compliance with MCA code of practice". The response of the sellers was to enquire what it was proposed should be provided in that regard. There does not appear to have been any response.

The sale

57. The MOA was executed on the 14 April it provided as follows: -

"1. The seller has today sold and the buyer has today bought the vessel, details of which are set out in Schedule 1 (the vessel) together with the assets referred to in Clause 2 for the sum of £2 million…

4. Value added Tax

The seller has requested on the 2 March from HM Customs and Excise a ruling on VAT status of the supply of Brave Challenger and received the ruling dated the 6 March in reply, a copy of which is annexed to this memorandum of agreement.

5. Completion

Completion of the sale shall take place on 14 April 2000 at the offices of the seller's solicitors when the following shall take place.

5.1 The seller shall deliver to the buyer

5.1.1 a Bill of Sale in the agreed form

5.1.2 Radio Operator's Licence

5.1.3 Certificate of Registration

5.1.4 Facility later relating to a loan to the buyer of £1.3 million plus legal fees (the facility letter)

5.1.5 Letter from Warren Briggs confirming the availability and access to spares in the agreed form …

6. Passing of risk

The vessel with everything belonging to her shall be at the seller's risk and expense until she is delivered to the buyer but subject to the conditions of this contract she shall be delivered and taken over as she is at Hasler Marina Portsmouth.

…"

58. At the closing, various documents were exchanged including resolutions of the buyer Ronastone Limited which had been set up as a subsidiary of the Succession Trust (and of which Dr Layton had been persuaded by WHB to act as sole director): -

"1. It is noted that the company proposes to purchase m/v "Brave Challenger" for the sum of £2 million. The company is proposing to finance the purchase by means of:

1.1 a loan from Indigo International Limited and Urbane Limited the sellers of the vessel (the sellers) for 1.3 million repayable in 364 days at an interest rate of 10%, the first quarter being interest free. Interest does not become due until the date for repayment of the loan. The loan is secured by first fixed charge of the m/v "Brave Challenger" by way of a ship mortgage and deed of covenant.

1.2 A loan from the trustees of the Succession Trust of £600,000, repayable after 5 years with interest payable at the trustees discretion but at a rate not exceeding 2% above base rate… Such loan is to be secured by all monies and mortgage debenture contained in fixed charges over land, goodwill and uncalled capital.

1.3 Cash of £100,000 from the company's own resources. It is intended that the vessel be let out on charter through a sister company and that the loan from the sellers be refinanced at the end of the 364 day period on the basis of trading in the period and future bookings. It is estimated that revenue from chartering will be substantial "

59. Rather surprisingly the part payment of the purchase price was not shared equally between the sellers. Mr Stuart appears to have formed the view that, despite the correspondence with the Customs & Excise, there was residual risk that VAT would be payable and decided to retain £350,000 out of the purchase price to that end.

Events after the sale

60. Prior to the sale WHB had been in contact with D & J Marine with a view to sounding out charter possibilities in the Solent. D & J Marine responded on the 28^th April some two weeks after the sale. They contemplated day charters carrying up to 20-50 people. At the end of their letter they made this observation: -

"It is very difficult to be accurate as to how many days we would be able to charter Brave Challenger this season. I have already have enquiries I could put onto Brave Challenger depending on how quickly we can licence the ship."

61. The reference to a "licence" was a source of considerable debate during the trial. This was all tied in with a controversy as to when copies of the correspondence with the MCA referred to above were forwarded to WHB – namely very shortly after the sale in April 2000 according to Mr Stuart, or in 2001 or even early 2002 according to WHB – and in either case how much of it.
62. WHB spent much of the summer of 2000 commuting between London and Brave Challenger, re-familiarising himself with the yacht and its equipment. WHB alleges that the initial difficulties centred on the domestic water and sewage systems and the electrical control system. Sometime in November 2000, after the end of the chartering season, WHB engaged Mr Graham Westbrook, a naval architect who had been involved in the rebuilding work on Brave Challenger in the '80s, to work on the electrical systems and circuits.
63. On the 13^th November there was a meeting between WHB and his insurance brokers to discuss the current and future insurance requirements for Brave Challenger. His impression of the yacht at that stage emerges from a note prepared by the brokers: -

"…

3. Graham Westbrook, who was involved in the original reconstruction, is currently working with WHB checking all systems aboard. The previous owners' refit was very meticulous so no major replacement or refit is envisaged. She is currently in very good order."

64. By early 2001, WHB had turned his mind as to how to re-finance the purchase of Brave Challenger given that the balance of the purchase price was due in mid April. The proposal prepared by WHB contained the wholly optimistic assessment that a sale could be achieved at £3.95 million (with £2.95 million even on a forced sale).
65. The mortgagee sellers were duly informed of the difficulties with regard to repayment of the loan in March. The threat of enforcement proceedings led to an arrangement between Dr Layton and WHB whereby Dr Layton lent £315,944 to the Succession Trust. Agreement was then reached with the sellers on the 10^th April, whereby the loan was to be rolled over until April 2002 on payment of interest both for the immediately preceding year and the year up to maturity plus legal costs. In accord with that arrangement, £264,000 was transferred to Ronastone by the trust and in turn £244,000 was paid to Mundial Investment SA.
66. In May 2001, a draft Facility Letter and a draft Deed of Variation to record the arrangement were prepared which were eventually executed by Dr Layton and WHT in August. During the course of May, proposals for repayment of the loan were discussed. In particular, there is a contemporary note of WHB referring to a proposal whereby the Succession Trust would be released from the loan on payment of £900,000. This was to be made up of £425,000 for the shareholding in Indigo, £450,000 for the shareholding in Urbane and £25,000 for six additional engines which had been obtained by Mr Stuart.
67. It was Mr Stuart's contention that any such proposal was never put to or by him and that, if it existed, it was solely a personal idea of WHB. WHB, in contrast, said that the proposal emanated from Mr Stuart himself and was indeed accepted in June. Further it was contended by WHB that the sellers agreed to extend time for payment of these sums indefinitely (subject to payment of interest) and at the same time "voluntarily rescinded" the mortgage.
68. In the meantime, Mr Westbrook and WHB had unearthed a range of problems with the auxiliary machinery on board. Despite careful preparations, a sea trial in August 2001 using the diesel engines proved to be disastrous. WHB asserted in his evidence that all complaints and requests for help made to the Stuarts were met with assurances that all was well and promises of documentary support.
69. Matters moved on somewhat dramatically in February 2002 when WHB had occasion to meet with representatives of both Vospers and Hoverspeed. He learned that the only work done by Vospers had been painting which had led to a dispute and to what he understood to be a ban. He also learned of the engagement of HW Turbines and of the later replacement of one of the turbines by Hoverspeed, its replacement being, as he understood it, a high time unit.
70. On the 8^th April 2002, the sellers drew attention to what on their case was the imminent date for repayment of the loan. The reaction of WHB in his capacity as director of Ronastone was to inform the sellers' solicitors that he was preparing proceedings against the sellers. It appears that some suggestion must have been made that the sellers would enforce the mortgage by taking possession of Brave Challenger. In a long "Official Notice" issued by WHB on Ronastone's behalf on the 16^th April, various defects which rendered it unsafe to move the vessel were put forward.

The claims

71. On the 17^th April, Messrs Ince & Co now retained by the sellers made a formal demand for the principal sum of the loan. WHB responded on the 19^th April. His letter set out the nature of the dispute as seen by Ronastone. The basis of the case was identified in paragraphs 5 and 6 of his letter: -

"5. In late 1999 and again in early 2000 the Vendors informed the Trustees that; -

5.1 The complete re-fit of Brave Challenger at Vosper Thorneycroft had been completed and

5.2 The 3 Rolls Royce engines on board had been overhauled by Hoverspeed to Rolls Royce approved standards and reinstalled in Brave Challenger; and

5.3 All the work required to meet the requirements for the Brave Challenger to achieve and secure certification by the MCA Rules for Yachts for Commercial Use over 24m had been satisfied, inspected and completed; and

5.4 That the Vendors were intending to charter the Brave Challenger from Portsmouth where the Brave Challenger was moored in Hasler Martina and from No Man's Land Fort in the Solent and that a marketing for Charter Video had been produced by them to promote the chartering activities and also some 3000 colour promotional brochures had been produced for widespread distribution to promote their chartering activities of Brave Challenger. The video and brochures were supplied to the trustees and

5.5 That the chartering activities were being organised by Ian Stuart, Mrs N. Stuart, Warren Briggs and Mundial Investments SA which also owned the No Man's Land Fort and of which Ian Stuart was also a director and that Brave Challenger had been place on the books of Something Different Ltd of Gosport Hants who organised extensive corporate and private functions for No Man's Land Fort on their web site and was also offered in conjunction with No Man's Land Fort, corporate charters and occasions and that many enquiries were being pursued.

6 The Trustees spent many months preparing their own plans and draft business plans on the basis of the information provided which was accepted in good faith as a definitive description and warranty and implied warranty that brave Challenger was completely refitted by Vosper Thorneycroft, engines overhauled by Hoverspeed and certificated as meeting all applicable MCA rules as described above and fully ready and prepared for charter."

72. On the 23^rd April the sellers issued an in rem Claim Form (Folio 411) seeking a declaration of entitlement to sell the vessel and payment of £1.3 million, together with interest. An application by the sellers for immediate possession was made on the 24^th April. It was opposed by WHB and was dismissed by this Court.
73. At about the same time, discussions between Mr Warren Briggs and Stuarts must have taken place with regard to Mr Briggs' half share. This appears to have led to an agreement for the sale of the shares in Urbane to Indigo. The position is far from clear. Mr Briggs said in his evidence that a payment of £75,000 was made for this transfer of his half share. He was prepared to accept the apparent loss that would be associated with this payment since he was anxious to avoid the costs of the impending litigation.
74. Mr Stuart's evidence was somewhat different. He told the court that, in addition to the payment of £75000, it was also agreed that Mr Briggs should in due course recover his share of the original purchase price, which had been retained for VAT purposes, if but only if the proceedings were in due course "successfully" determined. A draft agreement seems to have been prepared in late May. Notably neither of these payments is referred to in the draft documentation (even the copy signed by Mrs Stuart) . The transfer of shares appears nonetheless to have been effected in July.
75. The defence in Folio 411 raised the allegation referred to earlier in this judgment that the loan agreement had been replaced with an arrangement for purchase of the shares in Indigo and Urbane for £900,000, together with release of the mortgage. A counterclaim was also raised. This simply asserted that the attempt to enforce the mortgage was solely prompted by the letter from Ronastone quoted above raising allegations of misrepresentation.
76. On 23^rd May 2002, the buyers in their turn also issued proceedings (Folio 518) against Indigo, Urbane, the Stuarts and Mr Briggs and others seeking rescission of the sale contract, repayment of any sums paid and damages for misrepresentation of the description and condition of Brave Challenger. The thrust of the claim was expressed as set out in the earlier letter quoted above save that, in regard to the representations relating to the Proteus engines it was pleaded, in addition, that it had been represented that the engines had been overhauled to "zero time". (At a later stage, the counterclaim in Folio 411 was amended to raise all the same allegations of misrepresentation.)

Buyers Witnesses

77. Before turning to resolve the issues, it is desirable that I should identify the witnesses called on each side and express a few preliminary observations about them.

WHB

78. As regards the buyers, the first witness was WHB himself. He struck me as an intelligent and forceful man, with considerable communication skills. Like many litigants in person, his enthusiasm for his cause was only a little short of an obsession and thus it was understandably difficult for him to differentiate between his role as an advocate and his role as a witness. This necessarily affected his reliability. Having lived with the claims at close quarters for over a year, WHB has in some respects come to believe in the truth of his evidence even when I suspect he is intelligent enough to recognise the weaknesses in it. As will become apparent I have come to the conclusion that whilst much of the detail of WHB's evidence was difficult to reconcile with the contemporary documents and the probabilities, nonetheless the broad thrust of his account was reliable.

Mr Barrett

79. The buyers' second witness was Mr Barratt who had previously been a co-trustee with WHB of the Succession Trust. He retired from that post after the sale. The precise date of his retirement was unclear but it was probably about October 2000. He was replaced by Dr Layton. Accordingly, he was a trustee over the crucial period of a year and a half leading up to the purchase of the yacht in April 2000.
80. By the time he came to give evidence he was in very poor health. He did not claim to have a detailed recollection of events. But throughout his evidence (and he was recalled later in the trial) it was clear to me that he was determined to assist the court as best he could. I have little doubt that his evidence was frank and, within the limitations of his recall, reliable.

Dr Layton

81. Dr Layton was also called. He was an old friend and working colleague of WHB's. As explained, his involvement in the affair commenced with his appointment as sole director of Ronastone at WHB's request in early 2000. He later replaced Mr Barratt as a co-trustee with WHB. Little of his evidence touched on the major issues and much was in any event uncontroversial. Where pertinent, it struck me as credible and reliable.

Graham Westbrook

82. The buyer's last witness was Mr Graham Westbrook. He had played a significant role in the rebuild of Brave Challenger in the 80's. He came back to assist WHB in the autumn of 2000, initially on a part-time voluntary basis, but became fully involved with the vessel in 2001. His evidence was frank but short of detail.

Sellers' witnesses

Mr Briggs

83. 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.
84. 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: -

(a) Almost his first venture was to prepare the video. He claimed that it was solely for his own purposes of raising finance to buy the vessel from the Stuarts and thereafter to charter it out. I rather doubt that the Stuarts were at arms length from the preparation of the video and in any event they came to adopt it. The commentary on the video is only too revealing. It stated in terms that the "vessel had been re-fitted over the previous year". This of course was, to put the best complexion on it, wildly anticipative of the work that had only just begun. Mr Briggs' suggestion both in his statement and in his oral evidence the video commentary was accurate in this respect was absurd and indicative of the spin which he on his own behalf and on behalf of the sellers was disposed to apply to work on the vessel that was only in he planning stage.

(b) As already explained, the report prepared by Deloitte & Touche for presentation to the National Westminster Bank contained the following passage derived from (and approved by) Mr Briggs: -

"The MCA will not prevent them from commencing chartering pending a final approval as long as they are satisfied that their main requirements had been satisfied and that progress is being made on the remainder."

There was no basis for this contention. It was indicative of an attitude that it would be appropriate to describe a vessel as being "available for charter" despite it not being certificated.

(c) When, on his account, he had abandoned any hope of purchasing more than a half share of the vessel and was assisting in efforts to market it, he wrote to Mr Botte, a potential buyer in October 1999 inferring that the vessel was subject to an offer at a price in excess of £2m. He sought to suggest that this was reference to his own attempts at purchase. This suggestion was obviously untenable.

85. 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.
86. 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 Nuria Stuart

87. 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 Ian Stuart

88. 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 Allen

89. 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.

Missing witnesses

90. 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.

Ian MacDougal

91. 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.

HW Turbines

92. 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.

Hoverspeed

93. 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.

Archibald Reid

94. 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.

D & J Marine

95. 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.

Legal representation

96. 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.
97. 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.
98. 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.
99. 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.

Disclosure

100. 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.
101. 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.
102. 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.
103. At various times during the course of the trial itself, the sellers produced a small number of additional documents:

(a) A letter dated the 17^th June 2003 from Hoverspeed produced in response to a subpoena issued by the sellers, with various documents attached relating to work on engines 10168 and 12009 in early 1999.

(b) A clip of documents prepared by Warren Briggs for submission to Deloitte & Touche regarding profit and loss forecasts: these came from Mr Briggs' file together with some invoices for preparation of the videos.

(c) Some additional letters written by Captain Allen and produced by him together with a list of cheques relating to work on Brave Challenger.

(d) A schedule of the engines installed as at April 1986 (a document said to have been found by Mr Stuart during the course of the trial in one of the video boxes kept in the Fort).

104. 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: -

(a) WHB had exhibited a proper regard for his obligations to disclose relevant documents regardless of whether they were supportive of his case or not. For instance, he has disclosed the MCA documentation sent to him after the sale.

(b) WHB has had an unmatched opportunity to unearth relevant documents on the vessel since he has spent a great deal of time on board (indeed he has been living on board for over a year).

(c) He would clearly be anxious to retain and produce documents relating to the engagement of HW Turbines and communications relating to the termination of their involvement.

(d) Such documents as were produced for instance by Hoverspeed were of some value to WHB. Albeit some were internal it is inconceivable that WHB would suppress the rest given his reaction to the account given to him by former Hoverspeed employees in February 2002.

105. 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.

Folio 411

106. 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.
107. 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".
108. 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:

(a) The amendment in the form of the one year extension agreed in 2001 was recorded in a written addendum prepared by solicitors and signed by the parties. Any further amendment would have been similarly recorded.

(b) Whilst I accept WHB's evidence that a proposal for sale of the shares of Indigo and Urbane to Ronastone was volunteered by Mr Stuart, the contemporary notes appearing to make reference to this proposal notably makes no reference to an indefinite extension of time let alone a rescission of the mortgage. Indeed it would be nothing short of incredible for the sellers to grant the buyers an open ended option and then to release them from the mortgage.

109. 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.

Folio 518

Misrepresentations

110. 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:

3.5 In late 1999 and again in early 2000 the Defendants informed the trustees that:

3.5.1 The complete refit of Brave Challenger at Vosper Thorneycroft had been completed, and

3.5.2 The 3 Rolls Royce Proteus engines on board had been overhauled by Hoverspeed to zero time Rolls Royce approved standards and reinstalled in Brave Challenger and

3.5.3 All the work required to meet the requirements for the Brave Challenger to achieve and secure certification by the MCA Rules for yachts for commercial use over 24m had been satisfied…

111. 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.
112. 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."

113. 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.
114. 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.

Discussions between buyers and sellers

115. 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.
116. 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.

26^th January 1999 meeting

117. 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.
118. 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.
119. 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.
120. In this respect, the sellers pleaded case is very odd:

(g) …certain works had just begun on the Vessel at the time of the meeting, consisting of various repairs and maintenance work. Mr Stuart was not in a position to, and did not say any thing about the future extent or timescale of any works on the Vessel."

Nobody was better placed than Mr Stuart to bring WHB up to speed on progress on the yacht. This was an ideal opportunity to enthuse a potential buyer who was believed to have funds secreted away somewhere. In particular I accept the evidence of WHB at least to the extent that Ian Stuart emphasised (somewhat ambiguously) that the vessel was at Vosper's yard undergoing a refit and that, as regards her engines, they were undergoing an overhaul at Hoverspeed. (Although I rather doubt that Mr Stuart spoke of zero time in regard to the engines, WHB might readily have inferred that any overhaul of the engines would have led to a substantial and certificated running period prior to the next overhaul.) I also accept WHB's and Mr Barrett's evidence that Mr Stuart emphasised the potential for chartering following the obtaining of MCA certification now scheduled for June.

August 1999

121. 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.
122. 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: -

a) the refit had been completed at Vospers,

b) the overhaul of the engines by Hoverspeed had been finished and the engines reinstalled,

c) there had been successful sea trials and

d) the process of MCA certification was on track with a view to chartering out in the 2000 season (indeed that had been the whole basis of Mr Briggs' interest in the vessel).

Lunch at Blake's Hotel

123. 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".

Meeting on the 10^th March 2000

124. 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.
125. 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
126. 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.
127. 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.
128. 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."

129. 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.
130. 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.
131. 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.
132. 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.
133. 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.
134. 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).
135. 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 Wood: You said a meeting was arranged between yourself and Mr Haydon Baillie. Was that to be a meeting on the boat?

A. Yes it was.

Q. When it was arranged, did Mr Haydon Baillie tell you why he wanted to meet on the boat?

A. He had not seen the boat. I have been on to Wensley for ages 'why do you not come and look at the boat'. His excuse was that he did not want to see the boat, he had an ongoing Customs and Excise investigation and he did not want anyone to see him on the boat at that time. I said 'fine'. My hotel booking in Thailand –

Q. We will come to that. What time was that meeting arranged for? Might it have been Friday 10^th?

A. All the letter says – it is dated 7^th or 8^th- - and it says that 'I understand you will be meeting Wensley later this week'. It did not give a date.

Q. When it was cancelled, did Mr Haydon Baillie give any reason for doing so?

A. He just said 'there is no point in seeing the boat now. I will see it when I get it'.

136. 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.
137. 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."

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

Q. Do you still deny that meeting took place?

A. I just cannot see how it could have taken place.

Q. I asked you a question on a strictly yes or no basis. Do you deny that meeting took place?

A. Yes

Q. You do deny it?

A. Yes

Q. Do you realise that by so doing you are accusing Mr Eric Barratt of lying in a High Court and committing perjury?

A. The last thing I want to do is to accuse Eric Barratt of lying in a High Court. I think Eric has tried his best in this courtroom. I think he may be confused. He may well have gone down on the 10^th and met you, I do not know. I am not here to accuse Eric of lying."

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

10.30. Brave Challenger. M3, M27 0830-182214 [this being the telephone number of Mr Stuart's mobile phone].

Nonetheless, Mr Stuart insisted that there had been no meeting on the vessel which he, Mr Stuart, had attended. If Mr Barratt had visited the vessel with WHB on 10^th March or at any other time, it must have been without Mr Stuart. Yet he had no recollection of giving permission for such a visit.

140. 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.
141. 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:-

Q. I suggest the reason you did not give the date of 10^th March in your witness statement, is that you knew that meeting had been cancelled and did not want to volunteer it in case my clients produced travel documents or whatever which showed that it could not have been the date of the 10^th March.

A. That is absolute nonsense because I had no idea that travel documents could show that they were travelling. I knew nothing about that. There was no question of the meeting being cancelled and I went to Brave Challenger on 10^th March.

142. 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."

143. 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: -

a) Having seen Mr Barratt called on two occasions, I am satisfied that he is not confused. He did visit the vessel.

b) This part of his account is indeed supported, not only by WHB, but also by his chauffeur.

c) A visit by the trustees in the immediate aftermath of the receipts of funds is entirely in accord with the probabilities.

d) There was no obvious reason for Mr Barratt (let alone WHB) to cancel the arrangement. Such a suggestion emerged only very late in the day.

e) It is inconceivable that any visit was made without the knowledge and permission of Mr Stuart.

f) If it had been cancelled, some record would be inevitable in the solicitor's correspondence file.

g) The contemporary documents are all consistent with the existence of the appointment and it having been kept: - e.g. Mr Barratt's diary. Indeed the letter of 7^th March was sent by fax to Mr Stuart at his English address and makes express reference to the impending trip.

h) There is nothing in the limited travel documentation available, which is inconsistent with Mr Stuart having been in England on 10^th March and nonetheless having caught a flight to the Far East on the 11^th.

i) It is further supported by the evidence of Dr Layton, which I accept, that at a meeting on about the 16^th March Mr Barrett told him that he had recently been down to Hasler Marina.

144. 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.
145. 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: -

a) that the vessel had undergone a complete refit whilst at Vospers

b) that there had been an overhaul of the gas turbines by Hoverspeed.

c) that in the result the vessel was in pristine condition, had successfully completed her sea trials and was ready for chartering out.

146. 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).
147. 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."

148. 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:-

(a) Mr Stuart had managed to obtain WHB's complete trust. He had befriended WHB at a low point in his life when he was emerging from hospital with the former glories of his life going under the hammer.

(b) Initially WHB spent time re-familiarising himself with his former vessel. The problems that he encountered (in due course with Mr Westbrook's help) were not perceived as significant in the sense that he regarded them as readily resolvable.

(c) I accept WHB's evidence that the request for documentation (e.g. the individual engine logs, the refit details and so on) were fobbed off by Mr Stuart with a variety of excuses. In the result, he took an inordinate time to hoist in the scale of the defective condition of the machinery.

(d) I accept his evidence that the penny only finally dropped when employees of Vospers and Hoverspeed disclosed for the first time the limited work undertaken by them by way of refurbishment and repair, with the major work being restricted to the replacement of the turbine for one of the engines with a heavily used if not time expired substitute.

The truth of the representations

149. 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.
150. 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.
151. 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."

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

(i) Two of the engines were not subjected to any overhaul or other work at Hoverspeed at all. 10170 and 12009 were sent to H.W. Turbines. Leaving aside the reassembly of 12009 (together with a replacement turbine) Hoverspeed conducted no work on these two engines. Indeed 10170 was returned direct to the ship.

(ii) What if any work (other than a bulk strip) was affected on these two engines by HW Turbines is unknown. If there was any renewal or repair, its quality would in any event be questionable: see the report of MGTS quoted above. I accept WHB's evidence that he had had very poor experiences with the firm, and would never have contemplated using them. His concerns as to their past performance received a strong echo in the report.

(iii) As regards 10168, this was at least bulk stripped at Hoverspeed, albeit the major item of overhaul was the replacement of the impeller. Since the sellers received a credit of £8,000, it can properly be inferred the substitute was a lesser quality than that which had been sent.

(iv) Again as regards 12009, the only activity other than reassembly was the exchange of the turbine for a substitute which was no longer usable on a Hoverspeed ferry.

153. 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).
154. 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"."

155. 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… "

156. 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.
157. 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.

Remainder of "refit"

158. 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: -

5.2 The original toilet (black water) system has been replaced although the toilet in the crew accommodation is not fully fitted or connected to the waste system. A holding tank with discharge pump has been installed but can only discharge over the side. This arrangement would not meet the requirements in the USDA, or many areas of Europe. The holding tank must be capable of being discharged ashore though an IMO deck connection and hose to a shore facility. It was noted that there was no sewage treatment plant fitted which would be expected of a vessel of this design and capability and is highly desirable for extended cruising. The sewage holding tank is not secured to the ship structure. At speed in a moderate sea the tank would certainly come loose, shearing off the attached pipes and causing secondary damage.

5.3 The black and grey water pumps fitted during the "refit" were located very low in the bilges under the accommodation resulting in the motors failing as soon as a small quantity of water accumulated in the bilges. They have been replaced by Ronastone with new units fitted in a higher position.

5.4 The original combined fire and bilge pump was replaced during the "refit" with independent units. However, the forward fire hydrant and the anchor wash are not connected to the system – it would appear that work had been started but not completed. The unconnected fire hydrant is of some concern as this could cause confusion in the event of a fire.

5.5 The original 220 volt battery bank was replaced during the "refit" using 12 volt truck batteries which do not give the full required 220v and do not have the original ampere hour capacity. They will have to be replaced.

5.6 The water maker system is missing the reverse osmosis membrane assemblies. The rest of the system is still on board. It would appear that the membranes were removed for overhaul but were not replaced and the system is therefore inoperable.

5.7 The Ebaspacher unit for heating the owner's accommodation and the guest accommodation was removed during the "refit" and not replaced. A suitable unit will have to be installed to bring the vessel up to the standard expected of a vessel of this size and type.

5.8 The ice maker in the saloon was dismantled during the "refit" and has not been reinstated.

5.9 The original Satcom was removed during the "refit" and has been replaced with a Nera Min M Satscom. In the space where the units were installed the panelling has not been made good.

5.10 The freezer units in the galley were inoperative after the "refit". It would appear that the sea water cooling pump has seized and will have to be replaced.

5.11 The machinery space fire fighting gas is halon. It is surprising that this was not replaced during the "refit" with carbon dioxide or one of the replacement gases such as FM200. Halon is not allowed in any new construction and should whenever possible be removed from existing installations.

5.12 The original diesel generator set was replaced during the "refit" with a Beta Marine 32kVA unit. The sea water suction required for cooling has been positioned aft and is unlikely to work at high ship speed due to aeration at the water intake. The intake will have to be moved substantially further forward to the position as used in the original installation before the "refit".

5.13 The radar (display fitted on the drivers console) is original and is of slow rotation speed. Due to the high cruise speed of the vessel, to improve safety, this should have been replaced with a high rotational speed unit in line with those required on vessels built to the IMO High Speed Code. It would be expected for a vessel of this type that an electronic chart system would be fitted to the main console, possibly combined with the radar. No such system is fitted.

159. 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).
160. 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

MCA

161. 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.
162. Again Mr Bridges supplied a list of requirements to achieve certification. The list included: -

1. Modification of fuel tank vents.

2. Storm shutters for the forward hatch.

3. Shut-off valves for air intakes.

4. A second bilge pump.

5. A fire pump outside the engine room.

6. Shut-off valves for fuel line.

7. Emergency lighting.

8. Provision of a stability book.

9. Increased height in the guardrails.

163. 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."

164. 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.

Reliance

165. 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.
166. 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.
167. 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..
168. 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:

i) his acceptance of the poor paint work;

ii) his failure to look over the vessel

iii) his failure to complain about its condition for nearly 2 years.

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

i) He was indeed told that the painting contract had not been satisfactorily performed. But he was not told of the scale of the problem as identified in the survey or the financial recompense that had been made by Vospers. (Indeed in the pleadings this was said to be confidential). By the time WHB did visit the vessel, a considerable amount of cosmetic work in the form of filling and over-painting had been undertaken which disguised some of the otherwise patent deficiencies.

ii) The suggestion that the trustees bought the vessel "unseen" is undermined by my findings about the 10^th March visit

iii) As explained earlier, the prolonged delay in regard to any complaint about the engines is understandable.

170. 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.
171. 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.
172. 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.
173. 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.
174. 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.

Damages

175. 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.
176. 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.
177. 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.
178. 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:

i) The Stuarts purchased the vessel in late 1998 for £500,000: such remedial work as was then undertaken cost something in the region of £100,000 to £200,000.

ii) Mr Duncan Saunders, a consulting Naval Architect, prepared a survey report for Mr Briggs in March 1999 valued the craft with the "current works complete" and "in fair condition" at about£1,750,000 (this was expressly on the basis that the "three Proteus turbines and their close coupled gearboxes are currently at Hoverspeed being overhauled" with two of them in "relatively good condition" and the third requiring "more extensive work").

iii) A half share of the vessel was apparently sold to Mr Briggs in September 1999 for £550,000 without any allowance for a substantial amount of remedial work that was incomplete or postponed.

iv) Mr Verrill, the buyer's expert, assessed the value of the craft at the time of his inspection in June 2003 as about £600,000 (bearing in mind the cost of replacing the 3 Proteus engines in the region of £1.5 million and the cost of other remedial work in the region of £500,000).

179. 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.