Lazulis Castle: Count's Chamber
Immediately starting the scene, with talking to Therius, look down at the sword he gives Zael. When the option to swear loyalty to Count Arganan comes up, choose 'No'. Choosing the right option just leads to Zael staying at a deadlock.
This leads to another cut-scene with Zael leaving the office. Therius will keep the others from chasing him. Zael now must go and find Calista. So head towards the living area and go to Calista's room. On the way there, Zael will be stopped for a moment by Dagran.
Upon reaching the living area, the rest of the party is hanging around in the hallway. A long cut-scene occurs. Zael and Calista run away, while the remaining four party members hold off the knights.
Run back to the Castle and head for the Courtyard, then the Military building. From there take the lift to the Castle's Control Room. You will be automatically taken there, and another cut-scene starts once Zael examines the control mechanism.
The Gurak are now attacking Lazulis Island and all hell has broke loose as THEIR island has started to move toward Lazulis Island.
The game automatically moves on to Chapter 33.