The judge concluded that Mr Iliopoulos was the “instigator of the conspiracy” to destroy the vessel in order to commit insurance fraud. He was not “left in any doubt as to [that] conclusion”.
The master, chief engineer and Mr Vergos, the owner of Poseidon, were party to the conspiracy. The original fire caused by the IEID had all but gone out and was deliberately re-ignited with the help of Mr Vergos whilst the vessel was in the control of Poseidon. The judge also found that the master and chief engineer, as well as the owners’ surveyor, gave untrue evidence at trial.
The judge said underwriters established “a powerful and…compelling case, based upon the series of events”. The bank's account of events, in their totality and when “tested in the light of the probabilities and the evidence as a whole" amounted to “an account which I ‘simply cannot swallow’.”
The following are but a few of the factors relied upon by the judge:
- There was no known case of Yemeni piracy, before or after the attack, and there was nothing about the situation in Yemen in July 2011 which was conducive to the commission of this type of unique crime.
- The improbability that the armed men would know that the vessel was drifting and awaiting a security team.
- The master’s “extraordinary” decision to remain in his cabin without seeking to check the identity of the armed men for himself before letting them on board.
- The main engine did not break down, but the chief engineer deliberately stopped it, as shown by the telegraph buzzers recorded on the VDR audio.
- The master failed to activate the SSAS alert until after the attack, despite being only a few metres away from the alarm on the bridge throughout the material time.
- The implausibility that the armed men would bring on board a partially complete IEID (complete in everything but the accelerant required to detonate it), and would then abandon their plan and rapidly set fire to the vessel instead.
- The fact that Poseidon were able to mobilise “with a promptness of which leading international professional salvors would be proud”, if they were genuinely responding to the casualty without prior knowledge.
- The fire re-ignited in the purifier room whilst Poseidon were there, and the only way this could have happened was by human intervention – there was clear evidence that a tap had been broken off from a diesel oil service tank and later reconstructed to conceal its prior removal. Mr Vergos of Poseidon failed to mention the resurgence of the fire in his salvage arbitration statement.
- The VDR recorded the armed men and the master as they played out their charade, including, remarkably, a question by one of the armed men whether the master was “ok”, after the master’s hands had been tied in front of him.
- Mr Iliopoulos sought to make the crew change their evidence as to how the armed men were permitted on board the vessel. (Another witness in the case had to leave Greece and gave evidence whilst in police protection in England - https://www.bailii.org/ew/cases/EWHC/Comm/2018/2929.html).
No insured peril
The judge found that a group of armed men acting on the instructions of the owner and who were permitted to board the vessel by the master in order to set fire to it were not pirates.
The armed men did not intend to steal or ransom the vessel or steal from the crew, but were motivated to assist the owner to commit a fraud upon underwriters. Armed men pretending to be pirates are not pirates in the popular or business sense. Mr Iliopoulos’ insurance fraud was not an act of piracy against the bank’s proprietary interest.
Following the Supreme Court decision in the B Atlantic , “persons acting maliciously” requires an element of “spite, ill will or the like”. The judge found that the vessel was not lost or damaged because the armed men desired to harm the vessel or the owner. The vessel was lost or damaged because the armed men desired to make money from their actions. The bank therefore failed to establish loss by an insured peril.
This decision represents a complete and emphatic victory for underwriters, in demonstrating owners and Mr Iliopoulos destroyed their own vessel in a spectacular and novel way. A further bulletin will follow expanding on the important legal issues in the case – but this represents a significant victory in the ongoing fight against fraud.
Kennedys act for war risks underwriters and the Kennedys team comprises Chris Zavos, Jo Ward, Anna Haigh, Suzy Oakley and Jacob Hooper.
Read more items in London Market Brief - October 2019