England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		24th July 2002

Mr Justice Moore-Bick:

1. In this action the claimants are seeking to recover damages from the hull underwriters of the vessel Aegeon which became a total loss following a fire on board on 19^th February 1996. The first claimant, Mr. Konstantinos Agapitos, is the successor in title of his father, Mr. Ioannis Agapitos, who was the owner of the vessel at the time of the casualty. The second claimant is the mortgagee of the vessel, but it has played no independent part in the action and it is unnecessary for me to make any further reference to it.
2. The circumstances of the casualty itself are not controversial and can be summarised briefly. In February 1996 the vessel was moored at Neo Molo, Drapetsona undergoing conversion from a roll-on roll-off car ferry to a passenger cruise ship. A quantity of upholstered seating was stored in the forward part of the garage deck. On 19^th February sparks from hot work being carried out nearby set fire to the furniture. The Port Authority ordered the vessel to be towed from the berth and beached at Atalanta Islet. In the course of that manoeuvre the vessel struck a wreck which ruptured her plating. She subsequently capsized and sank.
3. It is common ground that the vessel was lost by an insured peril, but underwriters have declined liability on the grounds that the owners were in breach of one or more of the policy warranties.
4. The vessel was originally insured for 6 months from 9^th August 1995 under a marine open cover issued by Lloyd’s and ILU underwriters to the brokers Gibbs Hartley Cooper Ltd. The terms of cover included the following:

“ Warranted London Salvage Association approval of location, fire fighting and mooring arrangements and all recommendations complied with.

Warranted no hot work”.

5. The vessel’s previous underwriters had also imposed a warranty of approval by the Salvage Association of the vessel’s lay-up arrangements and compliance with its recommendations. For this purpose a local surveyor, Mr. Panayotis Costouros, had been appointed by the Piraeus office of the Salvage Association to survey the vessel on a number of occasions for the purposes of issuing a survey certificate.
6. The vessel’s existing survey certificate expired on 30^th August 1995. Following the owners’ request to the Salvage Association for a new certificate, Mr. Costouros attended the vessel at Drapetsona on 30^th August to carry out a further survey. After he had completed his inspection Mr. Costouros advised the Salvage Association by fax that the mooring arrangements were satisfactory but that in order to complete his survey the emergency fire pump and emergency generator had to be tested in operation. There was a difference of recollection between Mr. Agapitos and Mr. Costouros as to whether the latter had visited the vessel again during September 1995 in order to complete the survey.
7. At all events, on 10^th October 1995 the vessel moved under tow from Drapetsona to the lay-up anchorage at Eleusis. Underwriters were informed of this change of location and by an indorsement agreed to maintain cover for the period of the tow and while at Eleusis. The indorsement contained the following term:

“Warranted London Salvage Association or London Salvage Association appointed surveyor to approve mooring and fire fighting arrangements within 14 days”.

8. Mr. Costouros did not attend the vessel at Eleusis until 14^th December following a request from the owners to the Salvage Association made on 4^th December. This is a matter to which I shall have to return at a later stage. On 20^th December he issued a survey report in which he expressed himself satisfied with the mooring and fire-fighting arrangements. The Salvage Association issued a new certificate valid for 6 months from 14^th December which contained 13 on-going recommendations including the following:

“ 2. Any alterations in the lay up and mooring arrangements, arrival or removal of vessels in the group or any other alteration to be notified to The Salvage Association and other interests concerned so that, if necessary, a further survey may be held

. . . . . . . . . . . . . . . . . . . . .

11. No hot work to be carried out and no open flame devices to be used on board.”

9. On 9^th January 1996 the vessel was towed back to Drapetsona. Underwriters agreed to maintain cover and on 12^th January they scratched an indorsement containing the following terms:

“ Hot Works on decks is due to commence soon.

Underwriters agree to cover such work hereunder.

Warranted L.S.A. certificate updated & all recommendations complied with prior commencement of hot work.

All other terms, clauses and conditions remain unaltered”.

10. On 29^th January 1996 the owners sent a fax to the Salvage Association asking for Mr. Costouros to be appointed to carry out a survey in order to give them a new mooring approval and survey certificate for the vessel at Drapetsona. On 30^th January he was instructed to make the necessary arrangements with the owners for that purpose. It is common ground that there was a telephone conversation between Mr. Agapitos and Mr. Costouros shortly afterwards in which Mr. Costouros was told that it was the owners’ intention to carry out hot work. It is also common ground that Mr. Costouros told Mr. Agapitos on that occasion that it would be necessary for bilge alarms to be fitted and for the vessel’s fire extinguishers to be refilled, serviced and tested before he could give his approval for hot work.
11. On 6^th February underwriters agreed to extend cover for two months. The indorsement scratched on that occasion contained the following provision:

“ Warranted L.S.A. certificate updated ”.

12. By about 10^th February bilge alarms had been fitted and all the fire extinguishers had been filled, tested and returned to the vessel. However, Mr. Costouros did not visit the vessel again prior to the casualty. What passed between Mr. Costouros and the owners during this period was the subject of much debate and I shall return to consider it in more detail at a later stage.
13. The underwriters maintain that the owners were in breach of warranty on many occasions between August 1995 and 19^th February 1996 when the casualty occurred and that none of those breaches was waived. They rely principally on a breach of the warranty imposed on 6^th February 1996, but also, if necessary, on breaches of the warranties imposed on 12^th January 1996 and 10^th October 1995 as well as a breach of the warranty imposed by the original policy.

The warranty of 6^th February 1996

14. The first matter to be considered is the construction of this warranty. Mr. Popplewell Q.C. submitted that it is to be construed as a warranty that the Salvage Association certificate has been updated. Miss Andrews Q.C. submitted that it looks forward, that is, it is a warranty that the certificate will have been updated, either by 9^th February when the extension was to become effective, or within a reasonable time after that.
15. It is convenient at this point to say something about the Salvage Association and its procedures for issuing survey certificates. The description that follows is based on the evidence of Mr. Costouros and Mr. Bache, a staff surveyor in the Piraeus office of the Salvage Association.
16. The Salvage Association is a body of marine surveyors established by royal charter in 1867. It has a long history of association with the London marine insurance market which places particular confidence in its independence and expertise. When, as in the present case, underwriters are asked to insure a vessel while laid up or undergoing conversion or repairs they often require as a condition of cover that the Salvage Association approve the vessel’s mooring and fire-fighting arrangements and that the owners comply with any recommendations which the Association may make as to the precautions to be taken to guard against particular hazards. It is the practice of the Salvage Association to provide the vessel’s owners with a formal document described as an Insurance Survey Certificate, sometimes known as an “approval certificate”, to certify compliance with the warranty imposed by underwriters. Survey certificates are given for a limited period – normally six months for a lay-up certificate and three months for a repair certificate – and identify both the project and the location in respect of which they are given. Since any change of location or project has a direct bearing on the vessel’s mooring and fire-fighting arrangements, certificates are valid only in respect of the particular location and the particular project to which they refer. Any change of location or project requires a new certificate.
17. In carrying out a warranty survey the Salvage Association acts on the instructions of the vessel’s owners, not of the underwriters. The practice of the Association when instructed to carry out a mooring and fire-fighting survey is to instruct a surveyor to attend on board the vessel to carry out an inspection of the mooring arrangements and fire-fighting equipment, to make recommendations for their improvement, if necessary, and to consider what, if any, day to day precautions should be taken to ensure the safety of the vessel. The latter are usually known as “on-going recommendations”.
18. Under Greek law certain types of vessel, of which the Aegeon was one, must be surveyed by a Greek national. In such cases the Salvage Association appoints a local consultant surveyor to carry out the inspection on its behalf, but any certificate of approval is issued by the Salvage Association in its own name. Following a satisfactory inspection the surveyor normally informs the local office of the Salvage Association straight away that he is satisfied with the vessel’s condition subject to the observance of any on-going recommendations. That enables an approval certificate to be issued without delay. In due course the surveyor produces a written survey report which is sent to the Salvage Association and provides the formal basis for the certificate. It may take some time for that report to be completed, but the approval certificate itself bears the date on which the survey itself was carried out.
19. I am satisfied from the evidence of Mr. Costouros and Mr. Bache that on completion of a satisfactory inspection it is usual for the surveyor to inform the owners’ representative that he is satisfied with the vessel’s arrangements. That is an important matter for the owners because it means that they can be confident that the Salvage Association will shortly issue an approval certificate bearing the date of the survey. Since the certificate is that of the Salvage Association rather than that of the surveyor personally, the Association could in theory decline to issue a certificate despite the fact that the surveyor had expressed his satisfaction. However, it is clear from Mr. Bache’s evidence that in practice that does not happen and that the issue of a certificate will ordinarily follow automatically once the surveyor has expressed his approval.
20. Staff surveyors employed by the Salvage Association and those who are appointed as consultant surveyors to act on its behalf are provided with guidelines to assist them in carrying out their inspections. The whole point of obtaining Salvage Association approval is to provide the owners, and if necessary the vessel’s underwriters, with independent confirmation that the warranty has been complied with and it is therefore essential that the surveyor should have satisfied himself of that fact by personal inspection. This was emphasised by both Mr. Bache and Mr. Costouros and I am satisfied it is well understood by surveyors carrying out this work for the Salvage Association that it is an essential prerequisite of an approval certificate that the surveyor should have attended the vessel in person to carry out an inspection. It follows that a surveyor should not give his approval to the vessel’s arrangements, even informally, until he has seen her for himself. No doubt different surveyors carry out their duties in different ways and the manner in which any particular inspection is carried out may depend to some extent on how well the surveyor knows the vessel. In the present case, for example, by February 1996 Mr. Costouros knew the vessel well, having inspected her on several occasions. However, the Salvage Association only appoints as consultant surveyors those in whom it has confidence and I have no reason to think that the standards adopted by consultant surveyors were generally any less rigorous than those of staff surveyors.
21. A number of the witnesses, including Mr. Agapitos and Mr. Costouros, expressed doubts about the meaning of the word “updated” in a warranty of this kind, but having regard to the context in which this particular warranty was imposed I do not think that there is any difficulty in understanding its meaning. On 9^th January 1996 the vessel had returned to Drapetsona from Eleusis where she had been laid up. The survey certificate issued on 14^th December while the vessel was still at Eleusis had been provided for lay-up purposes and included an on-going recommendation prohibiting hot work and the use of open flame devices on board. On 12^th January underwriters were informed that hot work on decks was due to begin “soon” and were asked to cover the vessel while undergoing such work. This involved a significant change in the vessel’s condition and the owners must have been aware that underwriters would be likely to increase the premium to reflect the increase in risk, as indeed they did. They must also have appreciated that additional precautions would have to be taken to guard against those risks and that the underwriters would be likely to require confirmation from the Salvage Association that those precautions had been taken. “Soon” is not a word of any precision, but it does imply that the work was likely to begin within a matter of days rather than weeks.
22. The first reference to an “updated” certificate is to be found in the indorsement of 12^th January. I do not think there can be any real doubt that it was used to mean that the certificate had to be brought up to date to reflect the new situation arising from the imminent commencement of hot work. In practice that would require a new survey and a new certificate because the surveyor would have to inspect the vessel’s arrangements with hot work in mind. It is not the practice of the Salvage Association to make recommendations without seeing the vessel for the simple reason that approval requires more than just having the appropriate equipment on board. The surveyor must satisfy himself that the equipment is working properly and must also consider what on-going precautions are required having regard to the particular location and nature of the work. Nor is it the practice of the Salvage Association to amend an existing certificate covering lay-up arrangements to cover hot work. A new survey to approve arrangements for hot work invariably leads to the issue of a new certificate. I am therefore unable to accept any suggestion that the updating contemplated by the warranty imposed on 12^th January could be satisfied simply by the Salvage Association’s surveyor informing the owner that certain equipment would have to be fitted before hot work could begin. What it required was the Salvage Association’s approval of the vessel’s arrangements with a view to hot work in the ordinary way.
23. On 25^th January the producing brokers, P. P. Caramanos & Son Co. Ltd (“Caramanos”) informed the placing brokers, HSBC Gibbs Ltd (“Gibbs”), by fax that hot work had been carried out on the vessel as from the previous day. That fax was shown to the underwriter for the Agnew syndicate, Mr. Tomlin, by the London broker, Mr. Petropoulos, on 26^th January. It seems likely that something was said about the warranty because later that day Gibbs sent a fax to Caramanos stressing that that cover was subject to a warranty that the certificate had been updated and asking them to confirm that that had been done. Mr. Tomlin had little or no specific recollection of his conversation with Mr. Petropoulos, but the terms of Gibbs’ fax to Caramanos make it likely that Mr. Petropoulos is right in saying that Mr. Tomlin raised the matter with him. In the ordinary way an underwriter would not see a copy of the survey certificate; he would assume, unless he had some reason not to, that the warranty had been complied with. There is no reason to think that Mr. Tomlin had any reason in the present case to think that the warranty had not been complied with, but it is clear that neither Mr. Tomlin nor Mr. Petropoulos knew for certain at that stage whether it had or not. I infer from the absence of any notation on the indorsement that his enquiry was not of a formal kind.
24. When the matter was brought back to the underwriters on 6^th February it was for an extension to the period of cover. Apart from that, no alterations were being sought and the indorsement expressly provided for all the terms, clauses and conditions of the policy to remain unaltered. That, of course, included the warranty imposed on 12^th January. I should expect an underwriter in Mr. Tomlin’s position who had been told that hot work had begun on the vessel nearly two weeks earlier to be very concerned indeed if he had any grounds for thinking that a warranty of that kind had not been complied with because it might well have a considerable bearing on his willingness to extend cover. In the present case, however, there is no evidence to suggest that Mr. Tomlin did think that the owners had failed to comply with the warranty, nor is there any evidence of the sort of discussion with the broker that one would expect to have taken place had that been the case.
25. Miss Andrews submitted that this warranty must be construed in one of two ways: either as a promise that Salvage Association approval for hot work would be obtained by the time of inception of cover on 9^th February, or as a promise that it would be obtained within a reasonable time thereafter.
26. The second of these suggested constructions can be disposed of quite quickly. The underwriters had been told some days earlier that hot work was going on and had made Salvage Association approval a pre-condition of cover. In those circumstances it is unrealistic to suppose that the underwriters would have been willing to cover the vessel for hot work, even for a few days, without such approval and certainly not without stipulating precisely the date by which it had to be obtained. I therefore reject the second of Miss Andrews’ submissions.
27. Miss Andrews’ first submission is more plausible, however, in that there could well be good commercial sense in underwriters’ imposing a warranty to take effect in respect of the extended period of cover. Had the existing cover not already been subject to a warranty of this kind, therefore, I think that is how the present warranty would be construed. The fact is, however, that underwriters were being asked to extend cover that was already subject to a warranty in relation to hot work which, as far as they were aware, had already begun. A failure on the part of the owners to comply with that warranty would demonstrate a cavalier attitude to underwriters’ requirements and could well have led to a refusal to extend cover altogether. In these circumstances I think that it makes obvious sense for underwriters to impose a warranty that the Salvage Association certificate had been updated, as indeed it should have been. The practical effect of so doing is to render the period of the extension an integral part of the existing cover, which I am quite satisfied is what both parties intended. If the certificate had been updated, the extension would take effect on existing terms. If it had not, the cover had already been discharged and would be ineffective in relation to the period of the extension as well as in relation to the remainder of the original period. In the circumstances I am satisfied that the warranty is to be construed as a warranty of an existing state of affairs, not as an undertaking as to the state of affairs existing on 9^th February.
28. By section 33 of the Marine Insurance Act 1906, subject to any express provision in the policy, a breach of warranty operates to discharge the insurer from liability as from the date of the breach. That is because fulfilment of the warranty is a condition precedent to the liability of the insurer: see per Lord Goff in Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (The “Good Luck”) [1992] 1 A.C. 233 at pages 262E-263D. This was common ground in the present case.
29. A breach of warranty may be waived by the insurer: see section 34(3) of the Marine Insurance Act. I shall return to the principles underlying waiver in this context at a later stage, but it was common ground that the owners had not obtained an updated Salvage Association certificate by 6^th February, however generously one construes the expression “updated”, and it was not suggested by the owners that any breach of warranty in this respect had been waived by the underwriters in this case.
30. It follows, therefore, that the claim must fail on this ground alone.
31. However, even if I am wrong in my construction of the warranty, I am satisfied that the owners did not obtain an updated Salvage Association certificate prior to 12^th February, which is the date upon which they themselves admit that they commenced hot work, or indeed at any time prior to the casualty.
32. Miss Andrews submitted that because the Salvage Association would not normally question the judgment of its surveyors it was sufficient in order to comply with the warranty for the owners to have obtained the oral approval of the surveyor instructed to inspect the vessel for the purposes of issuing the necessary certificate. She submitted that Mr. Costouros had indeed given his approval for hot work when in the course of telephone conversations with Mr. Agapitos and Mr. Petratos, one of the owners’ managers, he had said that the owners could go ahead with hot work on the vessel as soon as bilge alarms had been fitted and the vessel’s fire extinguishers had all been serviced and replaced on board. Mr. Popplewell submitted, however, that nothing short of approval by the Salvage Association itself in the form of a new certificate would suffice to satisfy the warranty and that in any event Mr. Costouros never did give his approval to the vessel’s arrangements, nor did he tell the owners that hot work could begin.
33. The vessel returned to Drapetsona from Eleusis on 9^th January 1996. On 29^th January the owners asked the Salvage Association to instruct Mr. Costouros to carry out a survey for the purposes of obtaining a new approval certificate and his appointment was confirmed by fax on 30^th January. It is common ground that later that day Mr. Costouros spoke to Mr. Agapitos by telephone to discuss the survey and that in the course of that conversation Mr. Agapitos mentioned for the first time that the owners were intending to carry out hot work. At this point their accounts of the conversation and of what followed diverge.
34. Mr. Agapitos, Mr. Petratos and Mr. Costouros all gave evidence of the various conversations and events which occurred between that first telephone call on 30^th January and the casualty on 19^th February. It is necessary to summarise their accounts as a whole before making any findings.
35. In his witness statement Mr. Agapitos said that in the course of his conversation with Mr. Costouros on 30^th January Mr. Costouros had said that he was very familiar with the Aegeon and the way in which she was managed and that he had only two requirements that had to be satisfied before hot work could begin, namely, that the fire extinguishers should all be checked and refilled and that bilge alarms should be fitted in the main and auxiliary engine rooms. He did not need to inspect the vessel again but could give his approval, together with any recommendations, over the telephone. Hot work could begin as soon as these recommendations had been complied with and he would visit the vessel at some convenient time for the sake of formalities.
36. Mr. Agapitos said that after he had spoken to Mr. Costouros he had instructed Mr. Petratos to have the work done on the fire extinguishers and bilge alarms and to inform Mr. Costouros when that had been done. Later on Mr. Petratos told him that he had spoken to Mr. Costouros on 8^th February to inform him that the work would be completed later that day and that Mr. Costouros had told him that the hot work could proceed. Mr. Petratos had arranged to contact Mr. Costouros again to make an appointment for him to attend the vessel for an inspection at a convenient date. Hot work began on 12^th February. Mr. Agapitos tried to speak to Mr. Costouros by telephone that day and the next, but without success. On 14^th February he sent Mr. Costouros a fax asking him to attend the vessel as a matter of urgency, but nothing further was heard from him prior to the casualty. Mr. Agapitos stuck to that account in cross-examination.
37. Mr. Petratos gave evidence to a broadly similar effect. He said that he had spoken to Mr. Costouros on 1^st February and had told him that the owners had given urgent instructions for the fire extinguishers to be refilled and the bilge alarms to be fitted. They had a discussion about when Mr. Costouros might inspect the vessel, but Mr. Costouros had said that it was not necessary for him to attend for a survey before hot work could begin and that he would come along at some convenient time. Mr. Petratos said that he spoke to Mr. Costouros again on 8^th February. By that time the bilge alarms had been fitted and the refilling of the fire extinguishers was due to be completed later that afternoon. Mr. Costouros, he said, told him that in that case hot work could begin. They discussed a further visit to the vessel, but in the event no firm arrangement was made.
38. Mr. Costouros gave a very different account of his conversations with Mr. Agapitos and Mr. Petratos. He said that he had called Mr. Agapitos on 30^th January to discuss arrangements for a survey and that Mr. Agapitos had told him for the first time that hot work was to be carried out on the vessel. He regarded that as having significant implications for the recommendations he was likely to impose. He recalled, in particular, mentioning that the fire extinguishers would have to be checked and that Mr. Agapitos had said that that would be put in hand. He also recalled a discussion about bilge alarms and the external fire pump. He said he did not tell Mr. Agapitos that hot work could begin as soon as the bilge alarms had been fitted and the fire extinguishers refilled. What he had said was that these were things that had to be attended to before he surveyed the vessel. They made a tentative arrangement for a survey to take place on 1^st February. When he called Mr. Agapitos again on 1^st February he was told that the vessel was not ready. His visit was put off for a day and Mr. Agapitos said he would call him next day to confirm that the vessel was ready. However, he heard nothing and eventually on 8^th February he rang the owners’ office and spoke to Mr. Petratos. Mr. Petratos told him that the fire extinguishers would be completed later that day and that he would call him to make arrangements for an inspection. He was adamant that he did not tell Mr. Petratos that hot work could start straight way. According to Mr. Costouros, he heard no more from the owners until after the fire. He did not receive any of the telephone messages that Mr. Agapitos said he had left, nor did he receive the fax that Mr. Agapitos said had been sent on 14^th February.
39. Faced with this conflict of testimony I have no hesitation in preferring the evidence of Mr. Costouros. Mr. Costouros has acted regularly as a consultant surveyor for the Salvage Association since 1988 and had a good knowledge of the Association’s procedures and practices in relation to warranty surveys. He was an excellent witness who listened carefully to the questions, answered them fairly and intelligently and was quite willing to give ground where it was appropriate to do so. He was well-informed about the requirements of his job as a consultant surveyor and conscious of the responsibilities it entailed. I regard him as a far more reliable witness than Mr. Agapitos, who on occasions was evasive and often failed to recognise the force of the contemporary documents, and more reliable too than Mr. Petratos. Although I consider Mr. Petratos as a more reliable witness in general than Mr. Agapitos, I found his account of his conversation with Mr. Costouros on 8^th February unconvincing.
40. Two aspects of the evidence strike me as particularly important. The first is that it would be very unusual, and, I am satisfied, quite out of character, for Mr. Costouros to have given any kind of approval to hot work without having first visited the vessel to satisfy himself that everything was in order and to consider what on-going recommendations were required. He was an experienced surveyor for the Salvage Association and was well aware of the procedures that had to be followed. It is true that by February 1998 he had become very familiar with the Aegeon which inevitably meant that he did not need to spend a lot of time finding his way around. However, I am left in no doubt that he was aware of the importance of satisfying himself personally that all was well on board before confirming that the owners had complied with any warranty. He is a conscientious surveyor and there is no obvious reason why he should have been willing to ignore the rules on this occasion. This of itself makes it unlikely that he told Mr. Agapitos that hot work could start without waiting for him to inspect the vessel and he was quite firm in cross-examination that he had not done so. However, if he had for some reason given approval for hot work in the way suggested, it is difficult to see why he should have discussed arrangements for visiting the vessel, as everyone agrees he did. Equally, if Mr. Agapitos’ evidence is to be accepted on this point, it is difficult to see why the owners should have been so anxious to arrange a visit during the week of 12^th February. Miss Andrews suggested that although an inspection of the vessel was a pure formality, it was one to which both the owners and Mr. Costouros attached some importance, but that makes little sense. If Mr. Costouros had been willing to give his approval over the telephone, knowing and intending that it be acted on, I can see no reason why he should have been concerned to visit the vessel or why the owners should have wanted him to do so. There is plenty of evidence that the one thing these owners wished to avoid was the cost of what they regarded as unnecessary attendances by the surveyor.
41. The matter does not end there, however. It is not surprising that the casualty, in the course of which one man unfortunately lost his life, was the subject of detailed enquiries. These included a formal investigation by the Greek authorities in the course of which statements were taken from all those, including Mr. Agapitos, who had had anything to do with the matter. An investigation was also carried out on behalf of the underwriters by the Salvage Association whose representative, Mr. Venetsanos, interviewed many of those involved. The owners themselves instructed a surveyor, Mr. Antippas, to prepare a report for submission to the underwriters in support of their claim under the policy. That report was clearly based, at least in part, on interviews with the owners’ staff. As a result it is possible to compare the evidence given by Mr. Agapitos and Mr. Petratos at trial with the accounts they gave shortly after the casualty.
42. Underwriters were informed of the casualty on 20^th February. They responded the same day by asking for confirmation that the Salvage Association’s requirements had been complied with and that the certificate had been updated. It must have been clear to the owners from the outset, therefore, that the existence of Salvage Association approval for hot work was likely to be a matter of some importance. Mr. Agapitos said it did not pass through his mind, but I find it impossible to accept that.
43. Mr. Agapitos was interviewed by the port authority on 22^nd February, only three days after the casualty. He was not asked about Salvage Association approval for hot work and said nothing about his dealings with Mr. Costouros, but in the circumstances I do not find that surprising. He was interviewed by Mr. Venetsanos on 2^nd April, some six weeks after the casualty by which time things had settled down somewhat. In that interview Mr. Agapitos gave an account of his conversation with Mr. Costouros on 30^th January. He said that Mr. Costouros had told him to have the fire extinguishers checked and to notify him as soon as that had been done so that he could go on board for an inspection. He said that on 8^th February Mr. Costouros had called Mr. Petratos asking whether he could visit the vessel for the survey and that Mr. Petratos had told him that the work on the fire extinguishers would be finished later that day. Nowhere did he suggest that Mr. Costouros had said that hot work could begin without waiting for an inspection of the vessel.
44. Mr. Petratos was interviewed by Mr. Venetsanos in the presence of Mr. Antippas on 8^th April 1996. He referred in general terms to Mr. Costouros’ requirement for the fire extinguishers to be overhauled and for the fitting of bilge alarms and in rather more detail to the conversation he had had with Mr. Costouros on 8^th February. He concluded his account by saying that they had agreed to speak to each other again to make arrangements to go to the vessel to complete the survey.
45. A similar picture emerges from the report of Mr. Antippas which was sent to underwriters at the end of April 1996. Mr. Agapitos somewhat grudgingly accepted that Mr. Antippas had spoken to him about the contents of the report before it had been put into its final form, as I am sure was the case. The report itself contains a lengthy passage dealing with the position in relation to Salvage Association approval. It records that Mr. Costouros spoke to Mr. Agapitos on 1^st February (I do not attach any significance to the discrepancy in the date) and told him that in view of the fact that he had last surveyed the vessel only two months earlier the only additional recommendations for certifying the vessel as fit for hot work were the re-charging of the fire extinguishers and the installation of bilge alarms in the engine room and generator room. Mr. Costouros therefore proposed to visit the vessel after that work had been carried out. Having referred to the conversation between Mr. Costouros and Mr. Petratos on 8^th February during which Mr. Costouros was told that the work on the fire extinguishers would be completed that afternoon, Mr. Antippas recorded that Mr. Costouros had requested that delivery of the remaining extinguishers be confirmed so that he could carry out his intended visit.
46. These are the nearest one gets to contemporaneous accounts from the owners’ representatives and it is striking that one finds in them no hint that anything was said by Mr. Costouros to suggest that hot work could begin before he had inspected the vessel. Indeed, the thrust of them is quite to the contrary. The first time one sees any reference to the account put forward by Mr. Agapitos and Mr. Petratos at the trial is in affidavits they swore in July 1998 in response to an application on the part of the underwriters to strike out the claim. Prior to that the owners’ case had been that they had done all they could to obtain the Salvage Association’s approval to the vessel’s arrangements, but the underwriters were now contending that that provided no answer to a breach of warranty and it seems likely that the owners had been advised that they were right. If, as they now say, the owners believed that Mr. Costouros had given approval for hot work on the telephone on 8^th February, that would surely have been reflected both in the accounts given by Mr. Agapitos and Mr. Petratos to Mr. Venetsanos and in the report of Mr. Antippas. Not only is there nothing in any of those documents to support their evidence, the account one finds there tends to support Mr. Costouros’ evidence. I find it unnecessary in these circumstances to reach any final conclusion about the disputed telephone messages or the fax that Mr. Agapitos said was sent on 14^th February. If they were false, they must have been fabricated to support a case which has since been abandoned. If they were genuine, that would only tend to reinforce the conclusion that the owners were aware of the importance of having a survey.
47. It was said by Miss Andrews that it would have been madness for the owners to begin hot work on the vessel without obtaining the approval of Mr. Costouros, but I am satisfied that that is what they did. Mr. Costouros rather charitably suggested at one point in his evidence that he and Mr. Agapitos may have been at cross-purposes as to the need for a survey, but there is really no basis for reaching that conclusion. Neither of them could recall with any accuracy what had been said, but I am far from persuaded that Mr. Costouros said anything that might reasonably have given Mr. Agapitos to understand that he did not need to carry out another survey before approving the arrangements for hot work.
48. Although it may seem surprising at first sight that the owners should have been willing to ignore the need to obtain Salvage Association approval before beginning hot work, there is other evidence that they were willing to disregard the need to comply with warranties. That may have been partly due to a failure on their part to appreciate the full significance of a failure to comply, but the manner in which they acted during the earlier part of the policy period shows that to be the case. I shall return to this a little later. Another factor which may have played a part was the need to keep the conversion work up to schedule.
49. At all events, I am satisfied that that Mr. Costouros did not tell Mr. Agapitos or Mr. Petratos that hot work could begin before he had inspected the vessel, either on 30^th January or 8^th February or at any other time. It follows that the owners did not obtain Salvage Association approval of the vessel’s arrangements in any form before beginning hot work, the existing certificate was not updated, and the warranty was broken. The claim must therefore fail on this ground as well. It is unnecessary in these circumstances to decide whether the warranty in this case would have been broken if the casualty had occurred between the completion of a satisfactory survey and the issue of a formal certificate.

Earlier breaches of warranty

50. The underwriters also relied on a number of other breaches of warranty which they said had been committed earlier in the period of cover. These were all denied by the owners, but were said to have been waived in any event.
51. In view of the conclusion which I have reached in relation to the warranty contained in the indorsement of 6^th February 1996 I propose to state my conclusions on this part of the case quite shortly.

(i) The original warranty

52. The underwriters alleged that hot work was carried out on the vessel on one or more occasions between 9^th August and 14^th December 1995 in breach of the term “Warranted no hot work” in the original cover.
53. In the summer of 1995 a substantial amount of the vessel’s deck plating was replaced by the Megatechnika workshop. This was part of a programme of work costing US$1.5 million which had originally been scheduled for completion by mid-July. However, there is a good deal of evidence to suggest that it continued beyond that date. In his statement to the port authority following the casualty Mr. Agapitos said that that work had been completed at the end of September and that is supported by the statement of a Mr. Koumiotakis of the Amodex workshop who was on board between June and the beginning of September chipping and painting. Mr. Antippas says in his report that between July and October 1995 the owners spent US$462,500 on various items of work including steelwork and piping renewals, refurbishing the accommodation and maintenance of machinery. It is clear, therefore, that the programme of work as a whole did overrun.
54. The only question that matters for present purposes, however, is whether hot work was going on board after 8^th August. The owners provided a document from Megatechnika stating that they had completed their work by 24^th July, but it stood alone, unsupported by any contemporaneous documents or by a statement from any member of the management. Moreover, it was contradicted by the statements made by Mr. Agapitos and Mr. Koumiotakis to the port authority to which I referred earlier. In the light of that evidence I think it likely that hot work did continue after 8^th August in breach of the warranty.
55. The vessel’s current Salvage Association certificate expired on 30^th August. Mr. Costouros attended the vessel that day in order to carry out an inspection to enable a new certificate to be issued. He required an operational test of the emergency fire pump and emergency generator and made a provisional arrangement to visit the vessel the next day for that purpose. It was common ground, however, that that visit did not take place. Mr. Agapitos said that Mr. Costouros had attended the vessel some days later and had expressed himself to be satisfied, but was persuaded not to issue a certificate until after he had visited the vessel again following her move to Eleusis. Mr. Costouros said that following his visit to the vessel on 30^th August he had heard no further from the owners who had not contacted him to confirm that the equipment was ready for testing.
56. I prefer the evidence of Mr. Costouros on this point. Not only was he generally the more reliable witness, his account was supported by a fax he sent to the Salvage Association on 29^th September saying that the tests were still outstanding and that the owners were to advise him when they could be carried out. If Mr. Costouros had completed his survey, I can see no reason why he should not have reported that fact to the Salvage Association whereupon a certificate would have been issued. Once the vessel had moved to Eleusis there would have to have been another survey, if only to check the new mooring arrangements. It is likely that the owners sought to save the costs of one attendance by deferring the testing of the equipment until after the vessel had moved, but whatever the reason, I am satisfied that Mr. Costouros did not attend the vessel again at Drapetsona before she shifted to Eleusis. It follows that as from 31^st August there was no current Salvage Association approval of the vessel’s fire-fighting arrangements.
57. Miss Andrews submitted that the original terms of cover are to be construed as referring only to the state of affairs existing at the date of the contract and not as requiring the owners to obtain the further approval of the Salvage Association after the current certificate expired on 30^th August. This argument was based in part on the inclusion in the slip for information purposes of a statement that the current certificate expired on 30^th August and a note of owners’ advice that they would arrange for its extension.
58. The difficulty I have with this argument is that it fails to take adequate account of the commercial context in which the insurance was written. It is well known that Salvage Association approval is given for a limited period and there is no obvious reason why underwriters should impose a warranty of this kind at the date of inception but be willing to allow the protection it provides to lapse within a matter of a few weeks. In my view the warranty is to be construed as imposing a continuous requirement for Salvage Association approval and by failing to obtain approval for the vessel’s fire-fighting arrangements after 30^th August the owners were in breach of it.
59. Miss Andrews also submitted that the owners’ decision to move the vessel to Eleusis brought about a change in circumstances as a result of which the warranty ceased to be applicable within the meaning of section 34(1) of the Marine Insurance Act pending her removal from Drapetsona and that any breach of warranty during that period was therefore excused. I cannot accept that. In the first place, it is not clear that the owners’ decision to move the vessel to Eleusis had already been taken by the time the existing approval expired on 30^th August, but even if it had, the circumstances to which the warranty was directed remained unchanged throughout the period during which the vessel remained at Drapetsona. The warranty did not cease to be applicable in any sense.

(ii) The indorsement of 9^th October

60. The indorsement of 9^th October contained a warranty that Salvage Association approval of the vessel’s mooring and fire-fighting arrangements would be obtained within 14 days of 10^th October. It was not. Mr. Costouros did not attend the vessel at Eleusis until 14^th December. Miss Andrews accepted, therefore, that there had been a breach of this warranty.

(iii) The indorsement of 9^th January

61. The indorsement dated 9^th January scratched just before the vessel returned from Eleusis to Drapetsona contained no express warranty requiring Salvage Association approval of the vessel’s mooring and fire-fighting arrangements, but it did provide for all terms, clauses and conditions of the cover other than those relating to the premium and deductible to remain unaltered. Miss Andrews submitted that no warranty of Salvage Association approval applied at that stage. I find it difficult to accept that. A warranty in these terms had formed part of the contract from the outset and the warranty had been expressly included in the indorsement of 9^th October, although it had been modified to take account of the particular circumstances of the vessel’s movements. In my view the purpose of stating that the other terms of the contract remained unaltered was to emphasise that all the original terms, including the requirement for Salvage Association approval, continued to apply. The owners failed to obtain that approval within a reasonable time of the vessel’s return to Drapetsona and were thereby in breach of the warranty.

(iv) The indorsement of 12^th January

62. The indorsement dated 12^th January imposed an additional requirement to obtain Salvage Association approval before hot work began. Mr. Popplewell submitted that the owners were in breach of that warranty because hot work was carried out no later than 24^th January, well before the owners made any application for approval.
63. There is a good deal of evidence to support the underwriters’ case on this issue. On 12^th January the brokers told them on the advice of the managers that hot work on decks would commence “soon” and I doubt whether the owners would have wished to incur the inevitable additional premium any earlier than was necessary. The information must have come from Mr. Agapitos or his father, both of whom would have known about the current progress of the work. On 15^th January the owners applied to the port authority for a permit to enable hot work to be carried out on open decks. On 11^th January the Ikoniou shipbuilding company, also known as the ‘Voudouris’ workshop, had tendered for the work involved in the extension of the bridge deck. That required extensive hot work, much, if not all, of which would have to have been carried out on board. Some of the earliest work involved the removal of seating on deck. It is likely that that would have required some use of heat to free seized bolts, though whether that would have amounted to ‘hot work’ is more debatable.
64. On 24^th January a delegation from the Committee for the Prevention of Professional Hazards (“KEPEK”) visited the vessel to inspect working conditions. Workers from the Voudouris workshop were on board at that time. The delegation recommended that flame traps be fitted to gas bottles and that fans in the garage deck should be sited more effectively. Both of these are consistent with prefabrication work being carried out in the open area of the garage deck. Having seen photographs of the quay at Drapetsona and heard the evidence of the underwriters’ expert, Mr. Lillie, about conditions at Drapetsona, I am very doubtful whether any significant amount of prefabrication could have been carried out there. The vessel’s garage deck, however, provided a convenient and sheltered area for that kind of work.
65. On 25^th January Caramanos informed the underwriters that they had been advised by the vessel’s managers that hot work had started the previous day. In his evidence Mr. Agapitos sought to explain that message by saying that it referred to some isolated work on the main fire line, but that is not what he had told Mr. Antippas who refers in his report to the work of removing the drencher system. The contemporaneous documents make no reference to work being carried out on the fire line; rather they suggest that the fire-fighting system was in good order.
66. Others who gave evidence to the port authority and to Mr. Venetsanos shortly after the casualty refer to the fact that they and others were carrying out hot work on board from the end of January or the beginning of February. Mr. Andreas Kyritsis and Mr. George Kyritsis, both of whom were fitters employed by the Voudouris workshop, refer to work of this kind already going on when they boarded the vessel at about the beginning of February. Mr. Skiaderissis, the prospective chief engineer, said that he visited the vessel on 1^st February and found Voudouris’ workmen carrying out hot work. Mr. Chochlakis, who was supervising the work on behalf of owners, told the port authority that hot work was going on when he went to the vessel at the beginning of February.
67. This is supported by other contemporary documents. On 5^th February Gibbs warned Caramanos that the existing cover would expire on 8^th February and asked whether the owners wished to extend the insurance. On 6^th February when requesting an extension for two months Caramanos said that hot work was still in progress, a piece of information that could only have come from the owners themselves. It is possible that Mr. Polychronopoulos had misunderstood something said to him, but in the light of the other evidence that seems unlikely.
68. Mr. Lillie gave evidence about the amount of time that would have been required to carry out all the work that had apparently been completed by the time of the casualty, but I do not find it necessary to go into that aspect of the matter in any detail. Certainly there is evidence that a significant amount of work had been done, but apart from that the other evidence to which I have already referred points strongly to the conclusion that hot work had been going on since late January or early February. The fact that the owners failed to call witnesses such as Mr. Polychronopoulos and Mr. Chochlakis who were apparently available and who might have provided some contrary explanation does not take the matter any further, but it does mean that the documents are left to speak for themselves.
69. Viewing the evidence as a whole I think it is more likely than not that hot work was being carried out on board from 24^th January as stated in Caramanos’ fax of 25^th January and that the owners were in breach of warranty in this respect also.

(v) Waiver

70. It was common ground that although a breach of warranty, once committed, cannot subsequently be remedied by the insured, it is open to underwriters to waive it and thereby, in effect, reinstate the cover: see section 34(3) of the Marine Insurance Act 1906. It was also common ground that, for the reasons given by Longmore J. in J. Kirkaldy & Sons Ltd v Walker [1999] Lloyd’s Rep. IR 410, waiver in this context means waiver in the form of equitable estoppel.
71. Miss Andrews submitted that by agreeing to the renewal or extension of cover in February 1996 the underwriters waived any breach of warranty that might have occurred during the earlier policy period. It would, she said, be both unfair and unbusinesslike if they could agree to insure the owners for a further period without in fact incurring any liability.
72. If the underwriters had been asked to renew the policy, there would have been a new presentation of the risk and a new contract and the owners for their part would have been obliged to make disclosure in the normal way in accordance with the duty of utmost good faith. No doubt that would have included disclosing prior breaches of warranty of which they were aware. However, that is not what happened in this case. The underwriters were not asked to write a new policy; they were asked to, and did, extend the period of cover provided under the existing policy. The difference may appear slight, but is in my view important because from neither the point of view of the owners nor the underwriters was the risk underwritten again. The effect of the indorsement was simply to turn a six-month policy into an eight-month policy without otherwise affecting its terms. A duty of disclosure does arise on an extension of this kind, but because the nature of the agreement is more limited so is the ambit of the duty.
73. It is important to remember that in order to establish that the underwriters have waived their rights the owners must first be able to satisfy the court that they unequivocally represented that they would not rely on existing breaches of warranty as relieving them from liability. This depends to a very great extent, if not entirely, on the nature and circumstances of the communications passing between the parties. There is nothing in the present case to support the conclusion that the underwriters were actually aware of any of the earlier breaches of warranty, so if the owners are to succeed on this part of their case they must be able to point to an unequivocal representation on the part of the underwriters that they would not rely on any breaches of warranty of any kind, whatever their nature. I am quite unable to find any such representation in their agreement to extend the cover for a relatively short period on existing terms. On the contrary, I would construe the indorsement as an agreement to extend the period of cover without prejudice to the existing position of each party. For these reasons I would reject the submission that any of the breaches of warranty were waived in this case.
74. For these reasons also the owners’ claim must fail.