CA-2024-000950 - [2025] EWCA Civ 1019

The judge said that while one would normally expect a director to be part of a company’s senior management, there was no hard and fast rule to this effect. Although Delos’s constitutional documents gave Mr Bairactaris very extensive powers as sole director, President, Secretary and Treasurer, that was a matter of form rather than substance. In reality, Mr Bairactaris was contractually obliged to act and did act only on the instructions of members of the Moundreas family. He exercised no independent judgement and made no decisions. He was simply a vehicle, as a matter of administrative convenience, for carrying out decisions made by NGM and the Moundreas family, by signing documents (typically documents drafted by his law firm in its capacity as the NGM Group’s external lawyers) in accordance with their instructions.

The judge said that the use of special purpose vehicles with nominee directors was a common arrangement in the shipping industry and that, in any transaction involving Delos, the participants would have regarded themselves as dealing with the NGM Group rather than focusing on the specific company or its directors. Accordingly Mr Bairactaris could not in any way be regarded as the visible or public face of Delos.

In these circumstances the judge concluded that Mr Bairactaris played no role at all, let alone a significant one, in the making of decisions about how the activities of Delos were to be managed. She described Ms Hopkins’ submission that Mr Bairactaris nevertheless played a significant role in deciding how Delos’s activities were to be organised on the basis that the company’s only activities were of a financial and legal nature as smacking somewhat of desperation. It was inappropriate to take such a narrow view of Delos’s activities, which included operating the vessel which it owned for profit, an activity in which Mr Bairactaris played no role at all. But even if its activities were confined in this narrow way, the fact remained that Mr Bairactaris made no decisions at all, but simply acted on someone else’s instructions. Accordingly the insurers’ case on actual knowledge failed.

The judge appears to have understood that this conclusion meant that Delos did not have any senior management at all, but said that she saw nothing odd about this.

Turning to what the insureds ought to have known, the judge said that what would constitute a reasonable search would depend on the context and the type of business which the insured was conducting, in this case a family owned and run Greek shipping group. The first way in which the insurers put their case was that regular enquiries should have been made of Mr Bairactaris to ensure that he continued to be a fit and proper person to hold a nominee directorship, and that this would have included a specific enquiry whether he was the subject of any criminal proceedings. The judge did not accept that a reasonable search required the NGM Group to make those enquiries of a respected practising lawyer with whom it had a long-standing relationship of trust and confidence, particularly in view of the extremely limited role which Mr Bairactaris was in fact performing. There was no evidence that other similar shipping groups made such enquiries of their nominee directors.

The second way in which the insurers put their case was that Mr Bairactaris should have been asked prior to placement whether he knew of any circumstances which might affect the risk. The judge regarded this as unrealistic in view of the fact that Mr Bairactaris had no operational role or function regarding the trading of the vessel or her insurance and would not have known anything about the risk to be insured. Asking this question would therefore have been (reasonably regarded as) a pointless exercise.

The judge went on to say that if Mr Bairactaris had been asked a direct question whether he was the subject of criminal proceedings, he would have disclosed the charges against him. However, it was much less clear whether he would have done so in response to a general and routine question whether he knew of any circumstances which might affect the risk, as he did not regard the charges as relevant to the performance of his functions.

These conclusions – that the insureds did not know and that the insurers had failed to prove that they ought to have known about the criminal charges – were sufficient to dispose of the defence that the insureds were in breach of the duty of fair presentation. However, the judge went on to indicate what her conclusions would have been on other issues raised under this heading. These were, in outline, as follows: