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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Decorum Investments Ltd v Atkin [2001] EWHC 496 (Comm) (26 January 2001 ) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2001/496.html Cite as: [2001] EWHC 496 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT

		26/01/2001

Pursuant to the Practice Statement issued by the Master of the Rolls on 9^th July 1990 I hereby certify that the attached text records my judgment in this matter and direct that no further record of the same need be made.

The Hon. Mr. Justice David Steel

Dated

1. January 2001

Introduction

2. The Claimant seeks an indemnity under a policy of marine insurance in respect of the total loss, by fire and consequent sinking, of the motor yacht “Elena G”. The defendant has purported to have avoided the contract of insurance on the basis of alleged material non-disclosures in relation to the connection to the vessel of a Mr Goussinsky, a Russian magnate of some notoriety, and the enhanced risk to the vessel which this allegedly entailed. The fire and sinking took place at the vessel’s berth at Sotogrande, Spain.
3. The claim, the quantum of which is not in dispute, is for the defendant’s 75% share of the insured value of US$ 2.5 million together with other minor items of insured loss.

The principal characters

4. The claimant was the registered owner of the vessel. It is a company registered in Jersey. The shares are held by nominee companies, which in turn are owned by Most Invest Limited. Its directors are David Shortt (who is also a director of Most Invest Limited), Domingo Plazas (a Spanish lawyer) and Miguel Megias (a Spanish accountant).
5. Most Invest Limited is a subsidiary of Most Group and is the holding company for the investments of Most Group outside Russia. Most Group itself is a Russian joint stock company, which owns over fifty companies. Mr Goussinsky owns a 90% stake in Most Group. One of the other companies owned by Most Group is Most Bank, currently the fifth largest bank in Russia. Mr Goussinsky was the Chief Executive Officer of Most Group and Chairman of Most Bank until 1997.
6. Since that time, Mr Goussinsky has devoted his time and attention to the second wing of the Most empire, headed by Media Most which is another Russian joint stock company. This is the largest private media group in Russia. Mr Goussinsky owns approximately 47% of Media Most. Amongst other broadcasting and publishing activities, Media Most owns NTV, Russia’s largest privately owned television network. Mr Goussinsky is the Chairman of the Board of the Directors of Media Most.
7. The defendant is the representative underwriter of Lloyds Syndicate 1183, which underwrote 75% of the yacht consortium 9029, managed by Venton Underwriting Agencies Limited. Yachtsure Ltd is the authorised underwriting agent to the consortium under a binding authority. At the material time, Mr Paul Miller was the active underwrite of Yachtsure; Mrs Ann Oakley was his assistant.
8. The vessel “Elena G” was a Mochi 22.5 axis motor yacht, of 78.63 gross registered tonnes, some 21.79 metres in length and 6.29 metres in beam. The Claimant purchased the vessel from Interyacht Trading as a new building in 1997.

The home port

9. Sotogrande is a purpose built resort in Spain, developed around three golf courses, tennis courts, a polo park and a marina. The facilities provided include security arrangements for the benefit of all residents. All roads into the resort have manned or electronic barriers. Securitas, a private security company, provides security guards. These guards man access points and a control tower above the marina and carry out patrols. There is extensive CCTV coverage of both the marina and the resort generally.
10. Brigadier Parritt, the defendant’s security expert, summarised the security arrangements as follows:-

“It was my conclusion that the security arrangements in the resort area of Sotogrande were a sensible balance of real and perceivable security, which blended easily with the requirement to have visible security but not be too obtrusive or inhibiting and thus spoil the image of a relaxed country estate. Given the terrorist threat from ETA and the fact that a number of houses in the resort are owned by senior Spanish government officials and businessmen, security provided by governmental law enforcement agents is higher than in other tourist resorts along the Costa del Sol.” That summary was not in issue.

11. Mr Goussinsky had been introduced to Sotogrande as a holiday resort by

Mr Shortt in 1994. As a result of events in Russia, which I will refer to hereafter, Mr Goussinsky’s wife and three children have had their main residence there since 1995. Mr Goussinsky himself regularly spends weekends at the resort, together with about five weeks in the summer. His own parents and his mother-in-law also live in Sotogrande.

12. In addition, several senior executives of either Most Group or Media Most have rented properties at Sotogrande on a permanent basis since 1994, although Mr Goussinsky’s house is the only one that is permanently occupied. In the resort there are currently 15 properties occupied from time to time by individuals associated with Most. These properties are managed by Mont, the service company run by Mr Jacobs and his wife.
13. Mont also managed the vessel and the berth at which she was moored. The services that Mont provided included the provision of staff, as well as property management and maintenance services. In addition, since May 1998, Mont has employed Mr Carmelo Herranz as head of security. As will appear, this in turn led to the engagement of additional security personnel.

The insurance

14. In October 1997, brokers sought quotations for insurance of the yacht. Mr Miller appears to have given the most competitive quote of .55% with an excess of $5,000. In due course a proposal form was faxed to and completed by Mr Crossley the skipper on the 18^th February 1998. Mr Crossley named himself as “the proposer”. Having given his address he described his occupation as “captain” with 30 years experience. He answered the question “Do you own the craft for which insurance is being proposed?”, “No” and in answer to the question “If no, please advise who is/are the owners and why the insurance is to be in your name”, “I am captain for Decorum Investments Limited.”
15. The proposal form also contained the following declaration:

“To the best of my knowledge and belief the information provided in connection with this proposal whether in my own hand or not is true and I have not withheld any material facts. I understand nondisclosure or misrepresentation of a material fact may entitle underwriters to void the insurance. …”.

16. On the following day, the 19^th February, Mrs Oakley wrote to Mr Crossley, referring to the faxed proposal form and a subsequent telephone conversation, confirming that “all in order”. In the event because of problems with the propellers, the risk did not attach until the 25^th March 1998, a certificate in respect of which was duly issued on the 13^th Mary. Immediately thereafter the brokers sought amendments both to the name of the vessel and the name of the assured and an endorsement to the certificate of insurance was issued on the 2^nd June correcting those matters and also increasing the third party liability limit.
17. Renewal was quoted for on the 26^th January 1999 and effected as from the 25^th March 1999 by virtue of a certificate of insurance issued on the 1^st March 1999. The quotation contained the following notice:

NB. Any material alteration in the facts previously disclosed in connection with this insurance which could affect the insurer’s decision on the terms and conditions quoted must be notified to the insurers or the insurance may be voided by reason of non-disclosure. If there are any material changes of which the insurers should be aware, please give details below.

18. The detailed terms of the cover are set out in a set of standard terms known as “Yachtsure 10/95”. They provided as follows:-

“3 Physical damage.

3.1 We will insure the vessel up to the vessel value as set out in the certificate against all risks of physical loss or damage arising from any accidental cause including theft, latent defect or the negligent or malicious act of any person provided that such negligent or malicious act and the loss or damage resulting therefrom shall both occur during the period covered by this insurance…

4 War and associated risks.

4.1 subject to the London market exclusions which may from time to time be in force…… we will insure the vessel up the vessel value as set out in the certificate against physical loss or damage caused by: ……

4.1.5 Any terrorist or any person acting from a political motive……

6 Liability

6.1 Subject to the exceptions and qualifications set out in section 10 and 11 of these clauses we will insure you and anyone in control of the vessel with your permission against liabilities incurred to third parties as a result of the ownership or control of the vessel up to the amount of the third party liability limit in the certificate…

7 Personal accident…

7.1 This section 7 insures you and any other person while on board the vessel with your permission but only when the vessel is being used for the purposes of private pleasure.

7.2 We will pay you or your executors or administrators, the sum set out in the schedule of compensation during the period covered by this insurance if you sustain accidental bodily injury while on board the vessel on while embarking or disembarking therefrom from the shore or via a tender … which solely and independently of any other cause results in your death or in disablement of a kind specified in the schedule of compensation within twelve calendar months of the accident causing the injury…

8. Exclusions relating to section 3 physical damage…

8.2 For any loss or damage caused by malicious act or that of anyone on board the vessel with your permission.”

The casualty

19. It is common ground that a fire broke out on board the vessel in the early hours of the 18^th April 1999 whilst she was moored at the marina at Sotogrande. The local fire brigade was called and in due course they sank the vessel in order to put out the fire. Although she was subsequently raised, the damage was so extensive that she had been rendered a constructive total loss.
20. The Spanish police commenced an investigation into the incident. Mr Crossley and Mr Shortt made statements. These describe how the fire was in fact first sighted by a crewman on board a nearby yacht and by a Securitas officer. They alerted both Mr Crossley and Mr Shortt and called the fire brigade. Mr Crossley first saw the fire at about 2am by which time there were flames coming from the bridge area. Shortly afterwards just as he was going to board the vessel, the whole bridge deck caught alight. In the circumstances he concluded it was too dangerous to seek to go on board to put out the fire.
21. Subsequently both underwriters and the claimant appointed fire experts. The wreck was not disposed of until they had concluded their investigations. In addition, solicitors acting for underwriters were afforded permission to interview Mr Crossley, his wife, Mrs Crossley (who acted as a member of the crew), Mr Jacobs and Mr Harranz.
22. Albeit not relevant to the issues in the action, the precise cause of the fire remains unknown. The underwriters were suspicious about the loss but it is now common ground that the vessel can be regarded as having been lost by an accidental cause within the meaning of clause 3.1 of Yachtsure 10/95.

There was in fact no evidence of malicious attack by any third party, let alone the claimant. Indeed, the investigation conducted by the Spanish courts found no evidence of a criminal offence and accordingly their files were closed. This decision was taken to appeal by underwriters but the appellate court concluded on the 13^th December 1999 that it was appropriate to endorse unreservedly the decision handed down by the court below that there were no indications of a criminal offence.

The non-disclosure plea

23. The defendant’s non-disclosure case is set out primarily in paragraph 11 of the re-amended points of defence which reads as follows;

“At the time of the conclusion of the contract of insurance and/or the time of the renewal, the claimants failed to disclose the fact and/or circumstances that:-

i. The or an alter ego and/or a beneficial owner of the Claimants was Most Group or Mr Goussinsky and/or

ii. Mr Goussinsky and his family were users of the vessel and/or

iii. The vessel was closely connected or generally associated with Mr Goussinsky

iv. Mr Goussinsky and/or his family constituted a security risk. Mr Goussinsky and/or his family were at all material times targets and at risk from attack and/or assassination and/or property closely connected or generally associated with Mr Goussinsky and/or in his or in Most Group’s beneficial ownership and/or the usage of Mr Goussinsky and his family was also at risk of attack

v. Mr Goussinsky or his family made extensive personal security arrangements for their own protection and the protection of property which was in their and/or in Most Group’s beneficial ownership and/or Mr Goussinsky and his family’s usage.

24. In summary form, the following matter were pleaded by way of particularisation of these facts and circumstances:-

a. Mr Goussinsky was famous, controversial, rich, anti-Communist, Jewish, outspoken in his opposition to anti-Semitism and proprietor of a television channel that furnished objective coverage of the war in Chechnya.

b. Mr Goussinsky was reported to have many enemies having been in conflict with the authorities and in competition with another media mogul Mr Boris Berezovsky.

c. In 1994 heavily armed officers of the presidential security service had besieged the Most offices in Moscow, in 1998 Mr Goussinsky had reported that the authorities had threatened to kill him over his television station’s coverage of the war and in 1999 Mr Goussinsky was reported to have been the subject of a blackmail threat.

d. In Sotogrande Mr Herranz, as head of security employed by Mont, had arranged static and dynamic security, including armed guards both at Mr Goussinsky’s house and elsewhere.

e. So far as the vessel was concerned, there were highly unusual security arrangements including external checks twice daily, internal checks prior to use and protection by mobile armed guards whilst at sea.

The law

25. There was of course no dispute about the applicable law which can be summarised as follows:-

i. A contract of marine insurance is a contract of the utmost good faith and the duty of disclosure is an integral part of the duty of good faith.

ii. Compliance with the duty of disclosure requires the assured to disclose to the insurer all circumstances known or deemed to be known to the assured which is material to any insurer’s appraisal of the risk.

iii. Circumstances are material if they would have had an effect on the mind of the prudent insurer in estimating risk.

iv. Circumstances which diminish the risk need not be disclosed.

v. If a fair presentation of the circumstances material to the risks has not been made and if the failure to do so has induced the actual insurer to enter into the particular contract when he would not otherwise have done so, at all or on the same terms, then the insurer is entitled to void the contract: see Pan Atlantic v. Pine Top [1995] 1 AC 501.

26. One of the features of the present action was the need to bear in mind the distinction between the respective roles of assured and underwriter. The task of the assured is to disclose facts or circumstances material to the risk. It is the underwriter’s task to appraise the risk against that fair presentation. The point is accurately and fairly summarised in MacGillivray on Insurance Law 9^th Ed. paragraph 17-75:-

“The assured is not bound to disclose what is merely a matter of inference or judgment from the facts known to the insurers. He is bound to supply the insurers with the facts but he is not bound to estimate the risk for them. If the insurers are unfamiliar with the natural inferences to be drawn from what they are told, they should ask, only counting upon the assured to disclose unusual attributes of the risk which could not ordinarily be appreciated from the facts given”.

The relevant risk

27. The claimants in the present case asserted, in my judgment with some force, that the defendant underwriter was strikingly coy in both his pleaded case and the oral submissions made on his behalf about identifying the risk to which the alleged non-disclosure was said to be material. The failure to articulate the relevant risk did not simply result in eliding the role of assured in terms of disclosure with that of the underwriter in terms of assessment of the risk but also in detracting from a focus on the risks that might give rise to fortuitous damage to a yacht in the Western Mediterranean as compared with risks of physical injury to or unlawful restraint of the beneficial owner of the yacht or his family.
28. The point was bluntly and, in my judgment, well made by the claimant that it was for the underwriters to demonstrate that there were facts or circumstances known to the assured (other than mere speculations, vague rumours or unreasoned fears: see Carter v. Boehm (1766) 3 Burr. 1905) which went to establish a real risk that a Russian enemy of Mr Goussinsky would seek to damage or destroy his yacht within its trading limits or that it would be destroyed or damaged in the course of an attempt to kill or attack Mr Goussinsky or his family.

The Russian connection

29. The emphasis on a Russian enemy in the preceding paragraph reflects what became common ground during the course of the trial, namely that the only conceivable realistic threat to the vessel by reason of its association with Mr Goussinsky and his family would have arisen from his business and political associations in Russia and it is to that topic that it is convenient to turn first.
30. The starting point here is that it was conceded during the trial that Mr. Goussinsky was the alter ego of the claimant company. Accordingly the burden was on the defendants to establish that he was aware or at least was of the opinion, either at the time of the original cover or at the time of renewal, that there was a real risk of physical attack on himself and/or his property in Russia. For it is accepted that, if there was no such real risk in Russia, such risks elsewhere can be discounted.
31. Mr Goussinsky came to give oral evidence. He is clearly intelligent and articulate. Impressions can of course be deceiving, particularly when evidence is given through an interpreter, but his evidence struck me as frank, consistent with the known facts and the probabilities. I was certainly not left with any impression that he dissembled as to his relationship with the Russian entities, whether political or otherwise. Whilst he is clearly a man of courage with conviction, he did not appear to be under some misconception as to his exposure to physical risks.
32. Mr Goussinsky’s statement, confirmed in his oral evidence, was to the effect that in the early 1990s, with Russia emerging from many years of strict authoritarian rule, there was indeed a degree of lawlessness which had led to a rapid rise in organised crime. In consequence, leading business figures were exposed to the threat of physical violence and in some cases were murdered. Indeed, Mr Goussinsky considered himself at that time under a degree of physical risk in Russia, particularly because of his involvement with Most Bank. Thus he had security guards stationed in the vicinity of his office and, on going out, would have a personal bodyguard in his car, with an escort car both to the front and to the rear.
33. In his opinion the security situation in Russia had much improved over the latter half of the 1990s. Albeit there are criminal elements at large, their focus was no longer on big business. The retention of his security apparatus was more by way of a status symbol facilitating his movement around Moscow. Whilst the generality of this evidence was not seriously challenged in cross-examination, it was suggested to him that he was gravely underestimating the physical risk arising from his great unpopularity with a succession of Russian governments. Various incidents from 1994 onwards was suggested as evidencing “a dangerous physical edge” to the political controversies in which he was involved. It follows that I must turn to the particular events which are relied upon by the underwriter, particularly in the political arena, as not being known or apparent to them and thus requiring disclosure.

The 1994 incident

34. The primary focus was on an event in December 1994. Mr Goussinsky’s description of this incident in his oral evidence was consistent with contemporary press reports and was largely unchallenged. One morning, when Mr Goussinsky’s motorcade left his house at about 9am, it was pursued by armed personnel of the Presidential security service. This was perceived by Mr Goussinsky as “a demonstration of force”. On arrival at the offices of Most Media, which building was shared with both Most Bank and the Mayor of Moscow, the members of the Presidential security service appeared to establish some form of blockade. Mr Goussinsky made enquiries by telephone with both the head of the organisation for the fight against organised crime and also with the foreign intelligence service (the successors to the KGB). Both these bodies sent personnel to the building. The group involved in the fight against organised crime reported that they were unable to interfere because it was an operation established by the Presidential security service. With the later arrival of the foreign intelligence service personnel, there ensued a fracas which, according to one report, led to some of the tyres of the cars of the Presidential security service being shot out.
35. The whole of this bizarre incident appears to have been conducted under the glare of the media, including live coverage on CNN. The motivation behind the blockade, which lasted some five hours, appeared obscure. Subsequently President Yeltsin seems to have instituted an enquiry into what was categorised as “an incompetent lack of co-ordination between the special services and law-enforcement bodies”. Whilst it appears that some of the Most Group bodyguards had been made to lie in the snow while a form of search was carried out inside the building, I do not detect any threat of physical violence to Mr Goussinsky or his property being associated with the incident. The exercise seems to have been an enthusiastic effort on the part of the Presidential security service to discourage critical coverage of the war in Chechnya, something which may well have had the approval of the President himself.
36. It is true that within a few days Mr Goussinsky had arranged for his wife and children to leave Moscow. They established residence at Sotogrande. Shortly thereafter, Mr Goussinsky himself left Russia for a period of six months. This was no doubt sensible given that, in his view, his continued presence in Moscow was likely to be provocative and give rise to the risk of his life being made uncomfortable by organs of the state in competition with each other. But aggressive invasion of privacy and threats of interference with business activity are one thing: physical violence quite another. Furthermore, I did not understand it to have been suggested in terms to Mr Goussinsky that his reason for leaving Russia together with his family in late 1994 was attributable to his fear of physical violence.
37. That Mr Goussinsky’s perception of the implications of this incident, which is now of some antiquity, was not only bona fide but sound is confirmed by the expert evidence. I will revert to deal with that evidence when I have introduced the second incident relied upon by the defendants, the details of which only emerged during the course of the trial.

The 1995 interview

38. It was not until the end of the summer 1995 that Mr Goussinsky returned to Russia following the December 1994 incident. On his return he was invited to meet with the Director of the Federal Security Service Mr Barsukov. Mr Goussinsky described the interview in this way:

“I had a very long and very serious conversation with him in his office where he attempted to pressure me. When he said that if we do not stop our actions, and the way he called them anti-Government or anti-State, or our TV company and also if we do not stop laughing at the President in our satirical programmes then for sure something’s going to happen to me. Then I said “What do you mean?”. He said “Something will definitely happen to you”. And then I said “Are you going to kill me?”. And he said “The President is very frustrated with what you are doing”. After that I lost my temper because in my point of view it is terrible when the President or some representative of the country’s authorities can threaten media. And I said they can do anything they want and I left his office.”

39. It was this interview which led to the quote from Mr Goussinsky contained in the Moscow Times of May 29^th, 1998 and referred to in the points of defence. The press report was in reference to a meeting between President Yeltsin and the heads of the leading television companies, including MTV. Mr Yeltsin was reported to have made a plea, if not a demand, that the TV stations should support the Government position (the particular bone of contention at that stage being a series of strikes). The relevant press cutting contained the following section

“Authorities used to blame journalists for the war in Chechnya, today they blame them for the miners strikes said media magnate Vladimir Goussinsky owner of MTV recounting how the authorities threatened to kill him when MTV pioneered fair coverage of the 1994-96 war in Chechnya.

40. It is common ground that this was a reference back to the interview with Mr Barsukov. Mr Goussinsky in his evidence made it plain that he had not taken the incipient threat (which in any event had been provoked by his own question) seriously. This was because the conflict between him and the Government was too public and open and, in any event, if such an idea had ever occurred to a member of the Government, he would not speak about it. I accept that this truly represented his attitude. It was only faintly suggested to Mr Goussinsky that his judgment on this matter was misconceived.
41. No other incident was put to Mr Goussinsky as the basis for any genuine concern that he was exposed to physical risk in the political context in the period leading up to the insurance or indeed its renewal. That Mr Goussinsky’s unchallenged judgment on the matter was justified was in any event confirmed in my view by two further considerations.
42. First, we have the benefit of hindsight. It is clear that Mr Goussinsky has continued to be a thorn in the side of the Government, even following the departure of President Yeltsin and the arrival of President Putin in 1999. The Government’s renewed efforts to silence Mr Goussinsky and his media empire, however illegal, do not even now contain any element of physical violence directed either at him and his family or his assets.
43. During the later part of 1999 in the course of MTV’s coverage of the second Chechen war, Mr Goussinsky came into conflict with President Putin. Mr Goussinsky described to the court how pressure was exerted upon him to sell his shares in Media Most to a minority shareholder, Gazprom, and leave Russia. Pressure was then applied in the form of the institution of a series of criminal proceedings against Mr Goussinsky, leading to his arrest and incarceration in May 2000 for a period of three days in a prison in Moscow.
44. He was released following representations from all quarters both in Russia and outside, including a public intervention on his behalf by President Clinton. Following his release he was however not allowed to leave Moscow and a proposal was accordingly made to him whereby he would sell his shareholding against a guarantee that all criminal proceedings would be dropped so long as he gave an undertaking to cease making any public criticisms of both the agreement and of Mr Putin’s government.
45. It appeared to me to be common ground between the parties that the charges were politically inspired and that his execution of the agreement to sell shares (which he has apparently reneged upon) was as a result of pressure imposed by Government which could be fairly categorised as a form of blackmail. Since the completion of the hearing there have been further press reports relating to the arrest of Mr Goussinsky on criminal charges instituted in Moscow which has led to his imprisonment in Spain. But the relevant lesson to be learned from all this history is that Mr Goussinsky’s assessment that he was not exposed to risk of physical attack by his political enemies was well founded.
46. Secondly, this conclusion is further fortified by the expert evidence. The defendant instructed Dr Mark Galleotti, currently the Director of the Organised Russian & Eurasion Crime Research Unit at Keele University. As his title suggests, there is no-one better qualified to speak on the implications and impact of Russian organised crime. He was perhaps on less assured ground when considering political affairs. Furthermore, his evidence, both oral and written, was prone to a degree of excitability which required the exercise of caution before taking his evidence fully at face value.
47. That said, Dr Galeotti regarded both incidents as both obvious and clumsy attempts to intimidate Mr Goussinsky. Dr Galeotti was minded to accept the proposition that the risks of physical injury were entirely theoretical and whilst asserting that physical attack on the assets of Mr Goussinsky were “more likely” this as I understood his evidence was no more than a speculation based on the unpredictability of the behaviour of the “Kremlin”. His own example was restricted to what even he categorised as the trivial but symbolic potential for Mr Goussinsky’s car having its tyres punctured on a regular basis so as to emphasise that the authorities were “watching” him.
48. The claimant instructed Mr Oleg Babinov, the Director of the Moscow Office of the Risk Advisory Group. As a Russian national he was perhaps better placed than Dr Galleotti to absorb materials in the Russian language. In any event, I felt confident in placing reliance on his evidence which was impressed with intellectual rigour and practical realism.
49. As a pertinent example, I regard Mr Babinov’s evidence by way of comment on the interview of Mr Goussinsky by Mr Barsukov as entirely sound. In response to the proposition that Mr Barsukov was not “playing games” in his interview of Mr Goussinsky, he said this:-

“He’s not playing games but it is not the Soviet Union. In the Russian federation in the 1990s with all the negative things that can be said about Russian politics and Russian businesslife etc it is not the totalitarian Soviet Union where the KGB could have done anything they wanted to anybody. This is a country in which you know there are independent media in the sense of independent from the Government. At that time there was this President who was I should say authoritarian but there were interested groups surrounding him constantly competing for their influence on him. He was not a dictator. It was a reciprocal process. It’s just more complex than that.”

50. It is true that, at one stage in his evidence, Mr Babinov was minded to agree that the December 1994 incident involved “a physical threat”. This meant no more to me than that the incident involved a physical blockade rather than some form of economic obstruction. Furthermore, the earlier incidents are very remote from the political atmosphere at the time of renewal. In my judgment, the events of December 1994 and the summer of 1995 to not establish any material or real risk of physical attack.
51. No event between the summer of 1995 and the renewal of the insurance in March 1999 is relied upon by the defendants (let alone pleaded) as indicative of such a risk. All in all, allowing for the fact that Mr Goussinsky is a controversial figure with a high political profile exhibiting a courageous willingness to challenge powerful political institutions, nonetheless he is not in my judgment exposed to any sensible risk to his personal well-being or to physical damage to his property from political sources.

The criminal dimension

52. It became clear during the trial that various other sources of threat to Mr Goussinsky were no longer relied upon by underwriters. In particular it was not suggested that he was exposed to any risk by virtue of his prominent membership of the Jewish community and the rising tide of anti-Semitic violence. Nor was it suggested that his membership of the distinctive “club” of Russian oligarchs exposed him to anything other than low level vandalism. By the same token, any reliance upon risks associated with acrimonious relationships with other oligarchs was also abandoned.
53. Three remained a submission to the effect that Mr Goussinsky faced a threat of physical attack from Russian organised crime. The only relevant pleaded case in this regard was the assertion that Mr Goussinsky was “reported” to have many enemies and the suggestion that this situation was illustrated by the fact that seven heads of Russian banks had been attacked or killed in recent years. It is somewhat telling that this “illustration” was not referred to in the defendant’s opening or closing submissions nor was it put in the course of Mr Goussinsky’s cross-examination.
54. The pleading appears to emanate from a paragraph in the first report of Dr Galeotti which was prepared for the purpose of opposing an application by claimant for summary judgment. His report contained this passage:-

“Organised crime is a powerful force in modern Russian business and politics and no organisation is entirely immune from its influence. The Russian Ministry of Internal Affairs believes that it controls fully forty percent of the Russian economy. Similarly it is often difficult to distinguish the activities of the Mafya from those of notionally legitimate businesses. Contract killings are a staple of Russian business life and victims have ranged from the US hotelier Paul Tatum gunned down in November 1996 to numerous Chairs of Russian banks”.

55. In his second report Dr Galeotti added this observation

“It is also worth noting that banking and the media – two mainstays of Goussinsky’s business empire – have proved particularly dangerous fields. This is not in any way to suggest that Goussinsky or Most have been involved in dubious activities – quite the opposite in fact – but they operate in fields organised crime has often sought to intimidate, extort from or influence.”

56. In his report Mr Babinov took issue with the suggestion that the assassination of a number of Russian bankers afforded some form of illustration of the risks to which Mr Goussinsky was exposed. It was his view that all the victims identified were in fact involved in modest levels of business as compared with Mr Goussinsky and, more importantly, were operating in a highly criminalised environment. In order to make good this hypothesis Mr Babinov set out the detailed circumstances in which, as he understood it, each individual banker had been killed in Appendix 2 to his report.
57. In the event it was accepted by the Defendants, and even by Dr Galeotti himself, that the material taken as a whole demonstrated no more than there was a widespread practice of Russian organised criminal groups using violence to settle accounts with business people involved in organised criminal activities. Moreover, Dr Galeotti conceded that Mr Goussinsky was not involved in this form of activity:

“There is no evidence contained in Russian and foreign public sources to suggest that Vladimir Goussinsky has any business or personal associations with organised criminal groups or that he himself or via Most bank has been involved in any financial fraud schemes (most of which were designed and implemented by or undertaken with the involvement of organised criminal groups). In fact he is possibly the only Russian oligarch who can claim this”.

58. The claimant emphasises, properly in my view, that it was not (and could not be) part of the defendant’s case that there was any moral hazard or impropriety or criminality whatsoever attaching to the claimant, Most, or Mr Goussinsky in particular. The need for this emphasis followed not so much from hints from time to time, both before and during the trial, that such did not present the full picture but more by the response of Dr Galeotti to the report of Mr Babinov. His supplementary expert’s report included a significant amount of material which sought to suggest that there were rumours of Mr Goussinsky’s involvement in crime albeit unsubstantiated.
59. On an application by the claimants during the course of day 5 of the trial (Mr Goussinsky having given evidence on day 3), I excluded that part of Dr Galeotti’s supplementary report in which these matters were raised from being used in evidence. In consequence it was not (and indeed it could not) have been part of the defendant’s case that Mr Goussinsky had made dangerous enemies by reason of his connection with criminal elements in Russian society. All that could be said was said was that Russian business was susceptible to infiltration by organised crime.
60. But this was a hopeless platform for asserting non-disclosure and seeking to avoid the contract. It has to be emphasised that the fact per se that Mr Goussinsky was a Russian businessman was not relied upon as a ground for alleging nondisclosure. This position was maintained throughout the trial despite inconsistent observations on the topic from both Mr Miller and from the defendant’s underwriting expert. Moreover, if in fact Russian organised crime had penetrated the Most Group or Most Media it was not contended that Mr Goussinsky was aware of the fact. Accordingly, by definition, he could not be expected to disclose it.
61. In these circumstances, it is perhaps not surprising that no case was ever put to Mr Goussinsky that his business affairs had been unwittingly involved in organised crime or even a case that there was a sensible risk of such a happening. The only material that could be prayed in aid by the defendants was the acceptance by Mr Babinov that one could not exclude the risk of his business groups “crossing the path of Russian organised crime”. But this infers that the threshold for disclosure is the existence of an immaterial or unreal risk.
62. When the experts came to summarise their perception of the physical risks faced by Mr Goussinsky and his property in Russia (bearing in mind that they would have if anything a broader knowledge and understanding than he), they in fact agreed that the risks were very low and stemmed from features endemic in Russian business life rather than circumstances peculiar to Mr Goussinsky.

Risks in Spain

63. This has important implications when one turns to the situation in Spain. First, it was common ground between the parties that, if there was any threat to the life, limb or property of Mr Goussinsky in Spain, it would have a Russian origin and not be associated with any Spanish political or criminal elements. Secondly, it was also common ground that whatever the level of risk in Russia, it would be far less in Spain.
64. There had been no incident in Spain such as could be characterised as a threat or show of force to Mr Goussinsky or his property. The underwriter’s case, as summarised in the written closing submission, was that the claimant should have disclosed that he “as a prominent and controversial Russian figure” was the alter ego of the owning company and/or that he and his family “required extensive security arrangements” in Spain.
65. The first part of this summary was inconsistent with the concession, already referred to, that the mere fact that Mr Goussinsky was both a well-known and a Russian businessman (and the alter ego of the claimant) was not a circumstance requiring disclosure.
66. As regards the second part of the summary, it was, as I understood the underwriter’s case, accepted that, whatever the level or risk associated with Mr Goussinsky’s position as a Russian businessman, any failure to take security arrangements was not discloseable. But it should be remembered that the security arrangements were only implemented after the insurance of the yacht first incepted. It followed that the underwriter accepted that, since it did not constitute material non-disclosure to keep the underwriters in ignorance of Mr Goussinsky’s status, the underwriter would not have been in a position to avoid a first policy year. But he contended that he was nonetheless able to avoid in respect of a second policy year solely by virtue of the introduction of security arrangements which, it might be thought, tended to minimise such risk as existed.
67. This topsy-turvy state of affairs was not improved by what appeared to be the underwriter’s alternative case that, even if the security arrangements as such did not call for disclosure, they were evidence of the existence of the assured’s perception of significant risk and thus fortified the requirement to disclose his status which was said to have invoked that risk. Whilst avoiding the pitfall of distinguishing between year one and year two of the insurance, this proposition introduced in its train, in stark form, an entirely circular argument by the underwriter that there was an obligation to disclose an assessment of risk unsupported by any factual circumstance other than those expressly disclaimed as discloseable, namely the nationality and occupation of Mr Goussinsky.

Security in Spain

68. As already recorded Mr Goussinsky first came to Sotogrande in 1994 and neither he nor his family had any form of personal security in Sotogrande (other than that furnished automatically by the mere fact of being within the confines of the development) until 1998. He also has property in London which he visited regularly with his wife and neither of them had any personal security in London since purchasing an apartment in 1993 to date. His witness statement asserted “This was because I do not and never did feel threatened or in any degree of personal risk when in either of those places.”
69. The only contrary case advanced to Mr Goussinsky was that his assertion to the effect that there was no risk to him or his family in Spain was belied by the security arrangements that he introduced in 1998 and was inconsistent with the assessment of his own appointed director of security Mr Herranz.
70. Mr Goussinsky’s rationale for introducing security was spelt out in his written statement in paragraph 25:-

“My family has since 1998 had a degree of personal protection in Sotogrande. The background to this was during negotiations for the purchase by a consortium of investors including Media Most and Telefonica (the Spanish telephone monopoly) of a 25% stake in Svyaz Invest the Russian telephone company, I met Juan Villalonga the Chairman and CEO of Telefonica. He was surprised that I had no personal security and offered to help me acquire such protection and led me to believe it was necessary for people in my position (and his) because of the potential threat of kidnap. I followed his recommendation as he presumably had knowledge of the situation, although I personally did not see the need. The security put in place is primarily not for my protection but for my children, it being provided, under the supervision of Senor Carmelo Herranz throughout the year whether I am in Sotogrande or not. While I do not believe that the children are actually under any great threat of kidnap when in Spain, it gives me comfort to know that when I am not there that they are safe and I think it also gives my wife a degree of comfort she spending the greater part of the year in Sotogrande without me. It is also fair to say that when relaxing with my family at weekends and holiday times, I value my privacy. Having personal security in place helps to ensure this.”

71. It was put to him in cross-examination that part of the purpose of obtaining this security was to protect his property. His answer was as follows:-

“I would not say so. In Sotogrande there is no need for that because the external security in Sotogrande is effective enough. Besides everyone has guard posts etc that is why I would like to come back to this topic. The reason that the security even came to be was that I got advice from my other Spanish friend who said “Look you have to you’re supposed to have security”. This is no secret. This person used to be the Head of Telefonica and we were together with this famous deal with Svyaz Invest. He was the Head of the larger Spanish companies which was also one of the largest in the world and he gave me this idea. Since recently I have always been living with security in Russia, the situation was no hindrance to me. On the other hand it created additional comfort for me.”

72. I accept that, both in his written and in his oral evidence, Mr Goussinsky accurately described the motive for obtaining security. It is notable that if there had been any desire to protect his property (and in particular his yacht Elena G), there would arise the striking inconsistency that he made no arrangements for the protection of the yacht which was his preferred craft for relaxation namely “Fortuna”, on which he spent a considerable amount of time in the course of the summer months in the Mediterranean and which was moored in the Caribbean in winter. This yacht was used exclusively by him and his family in contrast to the “Elena G” which was available for use by all the senior executives of the Most Group with houses in Sotogrande.
73. This conclusion is not remotely undermined by reference to the security arrangements implemented by Senor Herranz or the conclusions that he expressed in a written report prepared on his own initiative on the respects in which the quality of that security could be improved. On being engaged by Mont in 1998, Mr Herranz organised the provision of both dynamic and static security with a view to minimising any possible threat to the personal safety of Mr Goussinsky and his family, a risk which he described in his statement as, in his view, to be “relatively low with any threats to his personal safety being minimal”.
74. The static security, implemented with the engagement of personnel through Securitas, was constituted by a control post to the entrance to Mr Goussinsky’s property manned on a 24 hour basis throughout the year whether or not Mr Goussinsky and his family were present. The guard on duty was able to keep an eye on the perimeter of the property via closed-circuit television and monitored people coming to the house. This arrangement was similar to that established in some 5 or 6 other houses in Sotogrande including one owned by the president of the Santander Bank. No incident threatening to compromise the security of the property has occurred.
75. As regards dynamic security 2 guards were engaged on 12 hour shifts whose primary function was to look after the Goussinsky children. The guard on duty would accompany the children on any occasion they went out and would also accompany Mr Goussinsky himself if he left Sotogrande. In accordance with her express wish, no form of personal protection was afforded to Mrs Goussinsky. Again this system was not dissimilar to that employed by a number of residents of Sotogrande and accordingly (particularly in the summer months), there might be as many as fifteen or more bodyguards on duty in the resort.
76. By way of supplement to their duties in providing dynamic security, the guard would from time to time drive around the other properties managed by Mont Services in Sotogrande. This would include a “drive-by” inspection of the 2 yachts the “Lady Elena” and “Elena G” at their mooring in the marina. This might occur once or twice a day. The relevant guard would not normally leave his vehicle unless the skipper was on board in which case he might enquire whether everything was all right. But in any event they never boarded the vessel.

Armed guards

77. Shortly after the establishment of these security systems, Mr Herranz made an application to the relevant Spanish Government authorities for permission for the guards to carry arms. As regards the static security, the application was made by Mr Herranz himself under cover of letter dated the 2^nd June 1998. Having described Mr Goussinsky as a Russian citizen who has “substantial economic and social relevance in his country” he sought permission for the security guard at the Goussinsky residence to be armed on the basis that it was “set in an isolated housing development” and by reason of the “special characteristics and importance of the persons residing at that address”. Permission was duly granted on the 10^th June simply on the grounds that the circumstances satisfied the relevant provisions of Spanish law.
78. The application with regard to the dynamic security was made by Securitas by reference to a “schedule of risk assessment” which was in its material part prepared by Mr Herranz. Under the heading List of Risks and Risks Analysis the entry was “Since he is well known in Russia, groups of organised delinquents from other countries overseas may attempt to abduct him or his family”.
79. The license that was furnished in response to this application on the 4^th June 1998 was phrased as follows

“WHEREAS in the document submitted it is stated that Mr Vladimir Goussinsky is a person with responsibilities in the field of business, both nationally and internationally, and is, therefore, a possible target for kidnapping, terrorist attack or any other criminal act likely to be committed by groups of organised criminals or members of armed criminal groups, and

HAVING REGARD TO the nature of the risk the fact that it is a serious risk and the probability of the occurrence of an event such as those referred to above, the safety of the subject of protection would not satisfactorily be protected by measures of self protection or any other means by virtue of the foregoing.

I RESOLVE by virtue of the legal power granted to me … to grant AUTHORISATION for the personal protection of Mr Vladimir Goussinsky whilst his physical safety remains in danger."

80. The underwriter placed considerable emphasis upon the apparent assessment of the risk contained in this permit. However it is clear that, despite its phrasing, it does not in fact reflect the risk assessment set out in the application. I accept the evidence of Mr Herranz that it simply mirrors the broad scope of the relevant legislation and thus was probably in standard form.
81. In any event, Mr Herranz’s assessment of the risk is immaterial. He was not remotely qualified to make an assessment of the extent to which Mr Goussinsky was exposed to a risk of attack by political or criminal elements from Russia. Furthermore Mr Goussinsky did not seek his advice as to whether there was such a risk or even as to whether it was necessary to implement security precautions.

Relevance of security precautions

82. The reality is that Mr Herranz established an unobtrusive security system with particular emphasis on Mr Goussinsky’s children. He told the court, and I accept it, that in the event that he had been informed or had taken a view that there was a real risk of an act of aggression against Mr Goussinsky he would have recommend the establishment of a much more elaborate system of direct protection.
83. In short that which was established for Mr Goussinsky and his family was no more than was typical of security arrangements for people of the same economic and social status as Mr Goussinsky in Spain. Mr Herranz put it as follows in his oral evidence:-

“Question: Let me see if I follow. The Spanish Government will not approve armed security if there is a low risk?

Answer: For personal protection you would call it “medium” or “high”, but the Spanish authorities understand that persons of a certain level, such as for instance directors of banks, of important banks, presidents of media companies, presidents of large construction companies, all these people that I think are in the same economic or social bracket level as Mr Goussinsky and some even at a lower level. All of them have at present – or the majority of them – personal protection service both static and dynamic. The risk is included within the person himself, his economic and social level.

Question: You are not saying are you that the Spanish Government will authorise armed, private security for just anyone?

Answer: For anybody who wishes to pay for it and who has a high financial/economic level I’m sure that any application form that arrives and has complied with these two conditions and that arrives at the private security department with the police force’s general direction and that he company is going to carry out these services within the law is authorised to carry out that service I’m sure the police force in general direction will authorise that.”

84. It was the decision of Mr Goussinsky himself to obtain his own personal security protection in addition to that already available at Sotogrande and that decision was provoked, not by any concern with regard to political or criminal enemies from Russia, but by virtue of his conversation with the Chief of Telefonica who persuaded him to adopt the same level of protection as that which was commonplace for wealthy Spanish businessmen. To the extent that the defendant sought to suggest Mr Goussinsky was motivated by other considerations, such a challenge was wholly unsuccessful.
85. Considerable emphasis was also placed by the underwriter on the fact that the guards were armed. Quite apart from the fact that this appears to have been a conventional arrangement so far as security arrangements in Spain are concerned, no doubt the natural inclination of the security guards to feed their own self importance, and for that matter their paypacket, played its part.
86. Even then in the context of the actual perceived risk of abduction or kidnapping, there was precious little connection between the use of armed security and Mr Goussinsky himself. As already observed he was not accompanied by any guard whilst within the confines of Sotogrande. On the very few occasions that Mr Goussinsky had actually travelled on the Elena G (probably no more than half a dozen times) on most occasions there was no guard present and, on those occasions on which a guard had travelled, he was not armed, primarily because the trip was to Gibraltar where the authorities do not permit the carrying of guns. The picture thus presented is in my judgment wholly inconsistent with Mr Goussinsky (or indeed Mr Herranz) having any perception that there was a real risk of physical attack emanating from some Russian (or any other) quarter.

The Herranz report

87. The underwriter sought to persuade me that the reality was different, particularly so far as Mr Herranz’s perception was concerned, given the content of a report he prepared in 1998. This report was prepared in September 1998. It was prepared on Mr Herranz’s own initiative. It was written in Spanish and was delivered by Mr Herranz to Mr Domingo Plazas with a view to it being forwarded to Mr Shortt. (In fact Mr Shortt in a statement prepared during the course of the trial stated that he had no recollection of ever seeing it).
88. The feature of the report upon which the underwriters focused was a passage at the beginning of the report which after setting out the scope of the static and dynamic protection service that had been set up in summary form went on “the implementation of this protection system has taken into account risks and threats which at present we consider to be of medium high intensity…”. Furthermore in a later section of the report the author refers to Russian risks under the heading “Comments regarding Russian citizens and others of Eastern European countries in the area of investigation”. In this context, the author stated “As they represent one of the possible threats affecting our security, it is of maximum importance to control Russian citizens or others of Eastern European countries who suddenly appear or settle in the area…”.
89. It was Mr Herranz’s evidence that the reference to “medium high” referred to the intensity of the threat if carried out, not to the likelihood of an attack. In any event, I accept Mr Goussinsky’s suggestion that there will always be a tendency on the part of those responsible for the provision of security services to overestimate the risk to which the subject of the security protection is furnished. Further as already observed it cannot be said that Mr Herranz is or indeed even put himself forward as an expert in risk analysis let alone in Russian affairs. If the views are not shared by those who do have expertise (see below), it is difficult to allocate any credence to the contrary views as far as they are expressed by Mr Herranz.

The expert evidence

90. I accordingly turn to the expert evidence. In his second report Dr Galeotti referred for the first time to the risks that might be faced by Mr Goussinsky outside Russia. He said this:- “It is certainly true that Goussinsky – like other Russian business people – is primarily at risk from criminals or from political threats while within Russia. However, there is ample evidence that the more serious and organised criminals and political interests are willing and able to operate outside Russia’s borders, including killing targets, damaging assets and carrying out campaigns of extortion and intimidation.”
91. So far as what might be categorised as political terrorism is concerned, a later section of his report made it clear that Dr Galeotti regarded it as highly speculative. Under the heading “Do risks travel”?, he said: “The evidence suggests that while the risk to notable Russian political and business figures is far less abroad, it is not eliminated. Threats from low level gangs, individual criminals, terrorists and troublemakers are unlikely to travel across borders. However it is entirely feasible that major organised crime and perhaps even political agents could operate outside Russia.”
92. Dr Galeotti accepted in his oral evidence that he could point to no evidence nor any example of such activity in the political field and simply referred to his “own gut feeling”. The fact that such a scenario was farfetched and speculative is a view shared by Mr Babinov. It was his view that the Russian Government did not practice political terrorism, let alone outside Russia. He amplified that view in his oral evidence by saying:-

“My view is because of the international relations, because of the dependency on first of all the government at issue and secondly on the willingness to keep international trading opportunities open political terrorism by the Russian Government is extremely unlikely and the evidence for it is that there has not been any despite a very significant degree of corruption within the Russian Government in my judgment it can simply be discounted.”

93. As regards organised crime, Mr Babinov’s view as expressed in his written statement was that there was no measurable risk to Mr Goussinsky from the activities of Russian organised crime outside Russia. Dr Galeotti’s view that there was some degree of risk associated with the operations of organised crime outside Russia was based primarily upon a summary of attacks and killings of prominent Russians both inside and outside Russia produced by a team headed by Professor Phil Williams from Pittsburg University. Dr Galeottti accepted that further examination of the database effected by Mr Babinov demonstrated that they presented no analogy with the situation pertaining to Mr Goussinsky.
94. Indeed it was accepted by Dr Galeotti that the summary properly understood did not establish that Russian organised crime would strike at innocent people outside Russia. To this can be added Dr Galeotti’s concession that:- “I find myself in a difficulty that if, on the one hand – and I freely accept that that is the constraints put upon me – I cannot advance in evidence any suggestion that Mr Goussinsky has been involved with organised crime, I find it therefore difficult then to produce convincing examples as to how such ties could develop.
95. In the result given that the risk in Russia was, as I have already recorded, of a low order, the risk in Spain must be regarded as trivial. I again quote from Dr Galleoti’s evidence.

“Question: Small as this risk is Dr Galeotti it is your evidence that it is far less outside Russia is it not?

Answer: Broadly speaking yes. Although that of course is referring to a much broader concept of risk rather than specifically attacks against his assets by who knows whom.

Question: That also actually is far less is it not?

Answer: Yes”

The vessel

96. Up to now I have been considering the risks such as they were to Mr Goussinsky and his family. But the only relevant risk for the purposes of the present proceedings is risk of damage to or loss of the vessel. Even the defendants have not gone so far as to suggest that the vessel was at risk from political or criminal enemies of Mr Goussinsky whilst at sea. The only conceivable site for some form of attack would be at her permanent mooring at Sotogrande. However in this connection I must have regard to the expert in security matters called by the defendants, Brigadier Parritt. It was his unchallenged view that Sotogrande was one of the most secure ports on the Costa del Sol or indeed in Spain generally.
97. Moreover I accept the evidence of Mr Babinov that if any violence was to be meted out by Russian organised crime, it would have been likely to have been exhibited in the form of violence to the person rather than violence to any property. There is nothing in Dr Galeotti’s evidence, either written or oral, which suggests that the risk of attack upon the vessel was anything other than a whole order of magnitude less than such risks as may exist of an attack on Mr Goussinsky or his family.

Non-disclosure

98. Taking stock therefore of the position in Spain I conclude that there was no real risk of any physical attack upon Mr Goussinsky and his family and an entirely negligible risk of any attack upon his vessel. That conclusion coincides with Mr Goussinsky’s own analysis. If and to the extent there was any obligation upon Mr Goussinsky to disclose his own assessment of the risk it was by definition not material.
99. But as I have already indicated it does not seem to me to be a matter of law that there was any such obligation upon Mr Goussinsky. His obligations were restricted to disclosing facts and circumstances material to the assessment of that risk which would be unknown to the underwriters. Since the underwriters disclaim any reliance upon the failure to disclose his status as a Russian business magnate, there are no facts or circumstances emerging from Mr Goussinsky’s residence in Spain and his use of yachts in and out of the port of Sotogrande in respect of which disclosure could be made.
100. It is against this background that the underwriter asserts nonetheless that there was an obligation on the part of claimant to disclose what were contended to be the unusual security precautions taken by Mr Goussinsky. However I agree with the claimant that this reliance on security precautions is wholly misconceived. The situation is that either the security precautions were directed to a risk to which the vessel was not exposed or alternatively they actually diminished any risk to which the vessel was exposed. In the former case they are irrelevant and in the second case they are not discloseable.
101. I have already dealt with the extent to which the mere existence of the security precautions of itself evidenced the risk. But once that matter is dealt with one way or the other the existence of the security precautions fall out of the picture. In this respect it seems to me that Mr Miller was at cross-purposes with his own case. It was accepted on his behalf that the fact that the scope of the cover included liability risks was not being relied upon as a basis for asserting nondisclosure. Secondly it was accepted on his behalf that failure to take security precautions, whatever might be the level of risk, was not disclosable. Furthermore, Mr Miller was disposed to accept that in the event that Mr Goussinsky had retained unarmed bodyguards that itself would not have been material (and thus disclosable) either. What he was minded to suggest in his oral evidence was that it was because Mr Goussinsky’s bodyguards were armed that made all the difference.
102. I have already dealt with the extent to which in fact Mr Goussinsky himself, or indeed his family, was ever the subject of armed protection, at least in and about the use of their yacht. But when I asked Mr Miller to explain what the difference was between armed and unarmed security the answer came back that it was by reason of his liability exposure under the terms of the insurance wording and his hull exposure. I believe this discourse amply demonstrates the muddle at the centre of the defendant’s thinking on the non-disclosure aspects of this case.
103. In any event when focus is placed on the security measures taken in relation to the vessel, they emerge as wholly insubstantial. In short apart from the irregular twice daily drives past performed by the bodyguards in their spare time, the arrangements are not one iota different from that afforded to the other vessels in the marina. The guards have never boarded the vessel and indeed never got out of their car unless it was apparent that the skipper Mr Crossley was on board in which event they would speak to him from the pontoon.
104. Thus the position was that if Mr Crossley was aboard he would have primary responsibility for the security of the vessel and if he was not on board all the guards would see would be the aft end of the vessel (she was moored stern to the quay) with the gangplank withdrawn. Insofar as the vessel was concerned, it thus could not have been categorised as anything other than a cursory visual inspection as so described by Mr Herranz in his statement.
105. It is not surprising in my judgment that Mr Crossley in his oral evidence described the process as “a waste of time”. So far as the vessel itself was concerned, there was nothing that these guards could usefully see. But in reality it was not anticipated that they were there for the purposes for protecting the vessel but solely (if involved in any task at all) in carrying out what was described as “counter surveillance” in order to detect whether there was somebody who might be “interested” in Mr Goussinsky.
106. In the course of Mr Herranz’s evidence I asked him the following question:-

“Can I just ask you this? You expected these people to carry out what you call counter surveillance what did you expect them to do as they drove past the “Elena G”?

Answer: I want to establish to be clear of the following in relation to the security counter surveillance: counter surveillance in security I think is effective because what they can contribute in relation to the subject of security is what is called prevention. Let me give you an example: once a member of the dynamic protection service carries out counter surveillance on the boat he let us say observes a person who is taking photographs who is showing an interest in that subject on that point if the guard observes that this is an interesting matter in compliance with his task he follows this person discreetly and observes he then goes past Mr Goussinsky’s address it is obvious that this person would like to know Mr Goussinsky has some intention relation to Mr Goussinsky. It need not be an act of aggression but it is someone who has an interest. It would have been an important piece of information to find out who that person was through some data like for instance the licence plates of the car he was driving that was the idea of carrying out counter surveillance.”

107. When taken in the context of the standard security precautions available at the Sotogrande marina in relation to all craft moored there, it is quite impossible to describe this “counter surveillance activity” as being of the slightest substance or significance.

Internal inspections

108. I have not forgotten that one of the features that had caught the eye of the underwriter at a very early stage in their investigation was the implication arising from notes of an interview with Mr Herranz carried out by the defendant’s solicitors shortly after the fire. The note recorded “when used by someone, checked internally and sometimes accompanied the person”. This note was confirmed by a similar note maintained by the defendants’ expert who was present during the course of the interview. This was taken to mean by the underwriter as evidence that, prior to the use of the craft, it was inspected internally by security personnel with a view presumably to unearthing an incendiary or explosive devices, expelling intruders and so on.
109. It does seem to me that, whether or not there was some misunderstanding in the course of translating Mr Herranz’s evidence during the course of this interview, the underwriters in any event accorded far too great a significance to this note. I accept Mr Herranz’s evidence given orally:-

“When the dynamic protection service goes round the boat of course he observes the boat and he sees that everything is all right. On some occasions a person was accompanied on board but internally a verification a detailed checking of the boat in relation to security was never carried out. I insist on this. For instance when somebody was about to use the boat, normally the escort guard or myself accompanied the person on board but did not go inside the boat previously to accompanying that person to verify the security of the boat. We accompanied the person and we went with him…”

The absence of any such detailed verification or security check was confirmed both by the skipper, Mr Crossley, his wife, Mrs Crossley, and Mr Goussinsky himself.”

Conclusion

110. The burden is on the underwriter to establish that the assured failed to disclose material circumstances known to him. As regards what circumstances a prudent underwriter would regard as material, both parties adduced expert evidence, albeit that the authors of the various reports were not called to give oral evidence. This material was of very limited value, not least because the report prepared for the defendant was premised on a whole range of misconceived assumptions of fact.
111. My own assessment is clear:

a. There was no real risk to Mr Goussinsky, his family or his assets, of physical attack by Russian political enemies in Russia.

b. Other than those risk endemic in conducting business in Russia, there was no risk of such attack by Russian organised crime in Russia.

c. There was no sensible risk of attack on Mr Goussinsky or his family by Russian political interests or organised crime in Spain: even less so on his assets.

d. Mr Goussinsky’s motive in establishing armed security protection in Spain was to protect his children from risks of abduction and not to protect his property, such security being typically engaged by Spanish businessmen of his status and financial standing.

e. The security precautions added nothing to the protection otherwise afforded to the vessel in Sotogrande.

112. As regards the summary of the defendant’s case on non-disclosure, as adumbrated in the final written submission on behalf of the defendant (reflecting in turn Mr Miller’s own summary given in his oral evidence):-

a. It was conceded that the fact that Mr Goussinsky was a prominent and controversial Russian businessman was not as such a material circumstance.

b. Taken in that context, the security arrangements in Spain may have been material (at least for the purposes of risks of abduction) but were not discloseable per se as they diminished the risk.

c. These security arrangements did not evidence the existence of any actual or perceived threat to the yacht.

113. It follows that the claimant’s claim must succeed.