Mouton v Selb Pacific Ltd (Judgment 3) [1998] VUCA 8; Civil Appeal Case 02 of 1995 (26 June 1998)

IN THE COURT OF APPEAL OF
THE REPUBLIC OF VANUATU

CIVIL JURISDICTION

Civil Appeal Case No. 2 of 1995

TER">BETWEEN:

DANIEL MOUTON
Appellant

AND:

SELB PACIFIC LIMITED
Respondent

Coram: Hon. Justice John von Doussa
Hon. Justice Daniel Fatiaki
Hon. Justice Reggett Marum

Counsel: Mr. Juris Ozols for the Appellant
Mr. Roger de Robillard for the Respondent.

Hearing dates: 16, 17 and 18 June 1998.
Judgment: 26^th June 1998.

Employment Act [CAP. 160].

Selb alleged that Mr. Mouton had been dismissed on the ground of serious misconduct which justified his instant dismissal. The Chief Justice held that serious misconduct had been established in respect of Mr. Mouton’s superintendence of four construction projects, namely the Mitride house, Le Clos d’Ellouk, Santo Road and Santo Boat Shed. Many other particulars of alleged serious misconduct were either rejected by the Chief Justice, found to be not proved, or were not addressed in the reasons for Judgment.

The Chief Justice went on to hold that Mr. Mouton had not been given an adequate opportunity to answer the allegations of serious misconduct as require by S. 50 (4) of the Employment Act, and concluded that his dismissal was therefore unjustified. The Chief Justice held that Mr. Mouton was therefore entitled to a severance payment under S. 54 (1) of the Employment Act. The Chief Justice provisionally assessed the severance payment at VT2.304.167 but said that this figure was subject to adjustment for any earnings that Mr. Mouton may have received after his dismissal. The Chief Justice did not address Mr. Mouton’s possible additional entitlements to pay in lieu of notice under S. 49 of the Employment Act.

Selb by its amended defence and counterclaim sought to recover from Mr. Mouton the following alleged losses:

a) Cost of additional works to be
carried out and compensation
paid in respect of the Stevens’
house 376,447VT

b) Damages paid and profit foregone
in respect of the Langlois’ house 251,465VT

c) Profit foregone as a result of
unfinished work and penalties
for late completion of the
Yamaishi house 180,422VT

d) Costs of making good the defects
on the access road to Lot No. 5 at
"Le Clos d’Elluk" carried out
under Mr. Mouton’s supervision 1,478,900VT

e) Loss estimated on Mitride house 350,000VT

f) Additional unrecoverable costs
incurred on the Santo Boat Shed 341,855VT

g) Additional unrecoverable costs
incurred on the Santo Road 4,370,549VT

h) Loss of reputation and goodwill
as a result of the Plaintiff’s wrongful
actions 100,000,000VT

-----------------------

TOTAL = 107,034,638VT

The Chief Justice held that the serious misconduct of Mr. Mouton entitled Selb to recover its losses in respect of the Mitride house, Le Clos d’Ellouk, Santo Boat Shed and the Santo Road under the principle in Lister –v-Romford Ice and Cold Storage Co. Ltd [1956] UKHL 6; (1957) AC 555. Selb’s losses on these projects were assessed as follows:

Mitride house 333,779VT

Le Clos d’Ellouk 1,338,900VT

Santo Boat Shed 341,855VT

Santo Road 3,939,300VT

----------------

5,953,834VT

Judgment was entered for this amount against Mr. Mouton. The other items in the counterclaim were dismissed as not sufficiently proved. In respect of the counterclaim for loss of reputation and goodwill, the Chief Justice described it as "outlandish" and "clearly it is not been established at all".

After further hearing the parties the Chief Justice ordered that Mr. Mouton pay to Selb the costs of the proceedings, and those costs were fixed at approximately VT6 million. This Order was made notwithstanding that Mr. Mouton was successful on his claim in significant respects, and that the largest component of the counterclaim was dismissed as outlandish.

Mr. Mouton now appeals contending that the findings against him of serious misconduct were erroneous, and that in any event he is entitled to a greater verdict under the Employment Act. Further, he contends that the awards against him on the counterclaim should not have been made. Selb cross-appeals alleging that the dismissal of Mr. Mouton was justified under the Employment Act and that his claims, apart from the admitted entitlement to holiday pay, should have been dismissed.

In arguing the appeal Mr. de Robillard offered much criticism of Mr. Mouton, and took Court to aspects of the evidence which was said to establish that he had acted contrarntrary to the interest of Selb, and at times dishonestly in his dealings as an employee with Selb. These were matters argued at trial. Most of them were not dealt by the Chief Justice in his reasons for Judgment. Certain of the criticisms were however expressly rejected by the Chief Justice, and while the Chief Justice was very critical of Mr. Mouton in some respect, he did not reject his evidence entirely. Moreover it should be noted that he did not accept the evidence of Selb’s principal witness in its entirety either. It is extremely difficult, if not impossible, for a Court of Appeal to form opinions as to the credit and character of witnesses merely from a consideration of recorded evidence and exhibits. It is for this reason that Appeal Courts rely heavily on the findings on issues of credit made by the trial Judge. In this case the trial Judge apparently thought it was not necessary to address many of these issues, nor have we founded it necessary to do so on the appeal.

It is sufficiently plain that relations between Mr. Mouton and Mr. Francois had become considerably strained by the time of the trial and perhaps since Mr. Mouton’s letter of 27^th October 1993 which made many complaints to Mr. Francois about his management of Selb.

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The Claim

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It is convenient to deal first with Mr. Mouton’s claim. It is no longer disputed that Mr. Mouton was employed under a contract for an unspecifieiod of time. Section 4 49 (1) of the Employment Act provides that a contract of employment for an unspecified period of time shall be terminated on the expiry of notice given by either party. The length of the required notice is specified in S. 49(3). Where the employee has been in continuous employment with the same employer for not less than three years, the period of notice shall be not less than three months. Section 50 then provides:

"50. (1) In the case of a serious misconduct by an employee it shall be lawful for the employer to dismiss the employee without notice and without compensation in lieu of notice.

(2) None of the following acts shall be deemed to constitute misconduct by an employee –

(a) trade union membership or participation in trade union activities outside working hours, or with the employer’s consent, during the working hours;

(b) seeking office as, or acting in the capacity of, an employees’ representative;

(c) the making in good faith of a complaint or taking part in any proceedings against an employer.

(3) Dismissal for serious misconduct may take place only in cases where the employer cannot in good faith be expected to take any other course.

(4) No Employer shall dismiss an employee on the ground of serious misconduct unless he has given the employee an adequate opportunity to answer any charges made against him and any dismissal in contravention of this subsection shall be deemed to be an unjustified dismissal.

(5) An employer shall be deemed to have waived his right to dismiss an employee for serious misconduct if such action has not been taken within a reasonable time after he has become aware of the serious misconduct."

The finding that Mr. Mouton was not given an adequate opportunity to answer the charges of serious misconduct before he was dismissed was plainly correct on the evidence, and is not now disputed. However Mr. de Robillard complains that the requirements of S. 50 (4) were fulfilled because particulars of the serious misconduct were given to Mr. Mouton soon after the dismissal, and Mr. Mouton then had an opportunity to answer the allegations. This argument involves a construction of S. 50 (4) that is contrary to the clear language of the subsection. The subsection states, in the present tense, that the employer "shall" not dismiss an employee on the ground of serious misconduct unless, in the past tense, the employee "has been given" an adequate opportunity to answer any charges. To suggest that the opportunity can be given after dismissal also makes nonsense of the purpose of the subsection. We uphold the conclusion of the Chief Justice that the requirements of S. 50 (4) were not fulfilled.

It follows, in our opinion, that the dismissal without notice was unjustified and that Mr. Mouton is entitled to 13 weeks salary in lieu of notice under S. 49, namely VT2,100,000. The question of interest on this sum is dealt with later in these reasons.

Sections 49 and 50 of the Employment Act fall under part X of the Employment Act headed: "Termination of Contract". Sections 54 to 57 of the Employment Act which deal with "Severance Allowance" fall under part XI. Section 54 (1) (a) gives an entitlement, subject to Section 55, to an employee whose employment is terminated by his employer to receive a severance payment. In our opinion the entitlement given by Section 54 is in addition to any payment in lieu of notice that any employee might receive under S. 49.

Section 55 sets out a number of situations where a severance allowance is not due by an employer. In particular subsections (1) and (2) provide:

"55. (1) Severance allowance shall not be payable to an employee who has been recruited outside Vanuatu and is not ordinarily resident in Vanuatu.

(2) An employee shall not be entitled to severance allowance if he is dismissed for serious misconduct as provided in section 50."

Mr. de Robillard contends that S. 55 (1) applies in the present case. Mr. Mouton was recruited by Selb outside Vanuatu. The Chief Justice held, and it is not now disputed, that Mr. Mouton was ordinarily resident in Vanuatu on the day of his dismissal. However Mr. de Robillard argues that the two limbs of S. 55 (1) are to be understood as applying at the time of recruitment. In other words, if a person is recruited outside of Vanuatu and is not at the time of his recruitment ordinarily resident in Vanuatu, an entitlement to a severance allowance could never arise under the Employment Act. This submission is also contrary to the clear words of the subsection. The first limb of the subsection is expressed in the past tense in speaking of an employee "who has been recruited outside Vanuatu". The second limb is expressed in the present tense in speaking of an employee who "is not ordinarily resident in Vanuatu". The evident purpose of the severance allowance provisions is to offer a measure of security to residents of Vanuatu who lose their employment at the initiative of the employer or because of injury or ill health. The Act is concerned with the situation of residents at the time of their dismissal. The interpretation for which Mr. De Robillard contends is also contrary to the purpose of the Act. We reject his submissions.

Moreover, Mr. Mouton is not excluded from a severance allowance by S. 55(2) as he was not dismissed "as provided in section 50". On the contrary, he was dismissed in contravention S. 50(4). It follows that Mr. Mouton is entitled to a severance payment.

An assessment of the severance payment in accordance with the formula provided in S. 56(2) was made by the Chief Justice. He calculated the entitlement at VT2.304.167. The calculation itself has not been disputed, but counsel for Mr. Mouton argues that the rate of remuneration adopted by the Chief Justice in his calculation is too low. The Chief Justice worked on the base salary received by Mr. Mouton, disregarding the value of additional employment benefits such as the provision of a house and a motor vehicle. The approach of the Chief Justice was in accordance with the decision of the Court of Appeal in Banque Indosuez Vanuatu Limited –v- Ferrieux (1992) 2 Vanuatu Law Reports 496. Counsel for Mr. Mouton invited the Court to revisit the construction of S. 56, and to depart from the decision in the Ferrieux case. We decline that invitation. On a matter of statutory construction we do not think that this Court should depart from one of its earlier decisions, except perhaps in an exceptional case where it is quite clear that the earlier decision is wrong. This is not such a case. On the contrary we agree with the decision.

Section 56 (4) provides:

"56. (4) The Court shall, where it finds that the termination of the employment of an employee was unjustified, order that he be paid a sum up to 6 times the amount of severance allowance specified in subsection (2)."

In the Ferrieux case the Court of Appeal said at 496 that "shall" means "must" so that where a Court finds that the dismissal was "unjustified" it is obliged to make an award under this subsection, subject to the maximum figure. The Court of Appeal noted that the Act gives no guidance as to how the award is to be assessed. After considering the intention of Part XI of the Act the Court of Appeal said at 496-497:

"In our view Section 56(4) does not give the Court power to award a sum akin to aggravate or punitive damages, or for loss of career prospects. It merely enables the Court to compensate an employee for any special damage that he has suffered by reason of an unjustified dismissal if the basic severance allowances is insufficient for that purpose. The Law presumes that the person should not be compensated twice for the same wrong so that any award under this statutory head must set off against any award of damages at common law."

The Chief Justice appears to have awarded damages under this head by reason of the manner of the dismissal. In our view that is not permissible and only the basis severance allowance should be paid.

It was not necessary for the Court of Appeal to further consider how S. 56(4) was to be applied to fulfil its compensatory purposes, because the common damages that had been awarded for breach of contract exceeded any amount that could allowed under S. 56(4).

As we have said, we consider the evident purpose of Part XI is to provide security for the residents of Vanuatu where their employment relationship is severed by the employer. Security will be needed where the prospect of the employee receiving remuneration from other employment in the future is uncertain or improbable. The extent of the need will vary according to the circumstances of the case. The need is likely to depend on such thing as the age and health of the employee, his or her skills, the demand for those skills in the community at the time, his re-employment prospects, and the employment situation generally. In the present case, Mr. Mouton is a relatively young man, apparently in good health, and with a range of qualifications and experience which well equip him for work in the building and construction industry. His prospects for other employment, viewed at the time of dismissal, would be consider to have been reasonably good. Subsequent events have borne out that forecast. In the circumstances, we do not think this is a case where there should be a substantial loading to the basic severance allowance. However, recognising that S. 56(4) requires that there must be some increase, we allow an additional VT500.000, bringing the total severance entitlement to VT2.804.167.

Whilst we agree with the decision of the Court of Appeal in the Ferrieux Case that S. 56(4) does not allow for an award of aggravated or punitive damages, the notion of compensation is a wide one. It may be that Section 56(4) is wide enough to allow the Court to have regard to distress, and even ill health, caused by the manner and circumstances of a dismissal. Such an approach was taken by the Full Court of the Industrial Relations Court of Australia in Burazin –v- Blacktown City Guardian Newspaper [1996] IRCA 371; (1996) 142 ALR 144. However the circumstances of this case do not warrant compensation on this score. Mr. Mouton was entitled to be angry at his treatment, but that alone is not enough. Almost every employee is likely to suffer anger and disappointment if their employment is abruptly and prematurely terminated. Something more is required to attract compensation.

Mr. de Robillard argued that the award of severance allowance should he reduced under S. 57(6) which provides that an employer may deduct –

(i) any gratuity granted by the employer;

(ii) any contribution made to any fund or scheme mentioned in paragraph (a)(i) above by The Employer."

A scheme mentioned in paragraph (a)(i) is a provident or pension scheme "approved by the Commissioner".

In our opinion only gratuities granted by the employer at the time of dismissal may be deducted under S. 57(b)(i). Selb paid no such gratuity to Mr. Mouton.

Although Selb apparently paid contributions as a pension fund in France for Mr. Mouton, there is no evidence that the scheme was approved by the Commissioner of Labour. The Chief Justice was therefore correct not to order any deduction under S. 57.

The Chief Justice considered that the provisional assessment of severance allowance should be reduced by Mr. Mouton’s earnings after his dismissal. Section 57 does not provide for such a deduction, and none should be made.

It is not disputed that Mr. Mouton is entitled to VT834.615 holiday pay. No other claims are now pressed on Mr. Mouton’s behalf. He is therefore entitled to a Judgment on his claim for VT5.738.782 plus interests. The question of interests is dealt with below.

The Counter

We turn now to the counterclaim. The award made against Mr. Mouton was based on the decision in Lister -v- Romford Ice and Cold Se Co. where the House of Lords was unanimous in hoin holding that it is an implied term of a contract of employment that the employee will exercise reasonable care in the performance of his duties. If the employee commits a breach of this implied duty of care and the employer thereby suffers damage, the employer is entitled to recover damages from the employee, subject to the usual rules of remoteness and causation.

In the present case the Chief Justice held that the serious misconduct of Mr. Mouton was negligent for the purposes of applying the Lister -v- Romford Ice principle. It is not material whether the conduct amounted to serious misconduct, or was merely negligent conduct. In these circumstances it is not necessary for us to further consider the arguments addressed to us as to whether the conduct of Mr. Mouton amounts to "serious misconduct" within the meaning of the Employment Act.

Although the duty of care owed by an employee to his employer is contractual in nature, it encompasses negligent conduct. As Viscount Simonds observed in Lister -v- Romford Ice at 573 "it is trite law that a single act of negligence may give rise to a claim either in tort or for breach of a term express or implied in a contract. Of this the negligence of a servant in the performance of his duty is a clear example."

Whilst the existence of a duty of care is not in doubt, the application of the principle of Lister -v- Romford Ice in a particular case requires careful consideration and some limitation. The act or acts of negligence relied upon must be clearly identified and proved in the ordinary way. In this case, in some instances there was evidence adduced by Selb of specific acts of negligence by Mr. Mouton. However the main thrust of the Selb case was on a more general basis. Selb contended that because Mr. Mouton had "responsibility" for certain projects in his capacity as the "Conducteur de Travaux" or work superintendent, he incurred a legal liability for any short-fall in the result. It was argued in the case of the Clos d’Ellouk and Santo Road projects that the particular losses claimed should not have occurred had there been adequate supervision. The fact that losses happened meant that Mr. Mouton was legally liable to make the losses good. As a matter of law this proposition is not correct. It may be that the loss was due, not to the lack of overall superintendence, but to specific acts of negligence on the part of others, for example because employees did not carry out instructions that were given to them.

With these general comments regarding the Lister -v- Romford Ice principle, we turn to the specific cases where Mr. Mouton was held liable.

The Mitride House. use.

Mr. Mouton was the Selb officer responsible for supervising this job. The house was not positioned according to the original plans. Subsequentl. Mitride complained that hhat her outlook from the house was impaired. Mr. Francois gave evidence that he took over the superintendence of the job part way through, and it was necessary for him to offer compensation to Mr. and Mrs. Mitride. He did so by substituting a wooden ceiling in lieu of a plaster ceiling in the living-room, and sealing an area of pavement around the house at half cost.

Mr. Mouton did not dispute that the house was not positioned in accordance with the original plan. He said however that he had altered the position of the house with the agreement of Mr. Mitride, after they had discussed access to the house. Mr. Mitride did not give evidence. Notwithstanding this omission, the Chief Justice said that he rejected Mr. Mouton’s evidence that he had received the consent of Mr. Mitride, and held that the house had been incorrectly positioned due to a lack of care by Mr. Mouton in overseeing the layout of the foundations. The rejection of Mr. Mouton’s evidence is perhaps surprising in the absence of Mr. Mitride as a witness. However it was open to the Chief Justice to reject Mr. Mouton’s evidence, and we have reach the conclusion that we should not disturb that finding. It follows that a specific act of negligence was established in relation to the Mitride house.

We agree with the Chief Justice that it was reasonable for Mr. Francois to settle any potential claim by agreeing to the compensatory measures which he did for Mr. and Mrs. Mitride. Mr. Francois gave several different estimates for the ceiling costs but seems finally to have settled on figures that led the Chief Justice to record in his notes a cost of VT139.940. One half the costs of the paving was VT152.500, giving a total of VT292.440. In the circumstances we think that evidence only justifies an award of this sum, not the slightly higher sum awarded at trial.

Ls d’Ello;Ellouk.

Again Mr. Mouton was overseeing this project. It involved preparing land for subdivisnto nine allotments, including the installation of access roads. The access road to alto allotment 5 was constructed in such a way that it was far too steep, and was unusable for that reason. The driveway as constructed was approximately twenty meters in length. It was necessary to take up the concrete, and to carry out additional excavation. Once rectified, the access road was approximately twice the length, thereby reducing the gradient. Mr. Francois gave evidence about the costs of the remedial work. It was necessary to excavate a further one hundred cubic meters of soil at the cost of VT1 million, and then to re-lay the concrete surface at a costs of VT338.900. This two items comprise the amount awarded by the Chief Justice on this project.

In argument, the Court pointed out if the work had been performed correctly in the first place, the additional excavation would have been necessary, and it would also been necessary to lay concrete over the full length of the driveway. On this basis the loss, it was suggested, might only be the costs of laying concrete on the original drive, and then removing it to enable additional work to be performed. This suggestion was countered by counsel for Selb who said that the fault would then lie with Mr. Mouton on the ground that he misquoted for the costs of the job in the first place, as it should be assumed that he did not allow for anything more than the excavation which was in fact made.

Mr. Mouton did not deny that the driveway as originally constructed was inadequate. He denied that it was entirely his fault. His evidence was to the effect that the foreman on site should have realised that the driveway was too steep, and not have completed it in its original form. He also gave evidence about the circumstances in which the original quotation was given. No levels or design plans were provided. As the work progressed, he notified the owner that there would be difficulty with the proposed location of the access road. He was told that it was too late to change its position. When a complaint was made by the owner about the steepness of the access road, Mr. Mouton wrote to the owner outlining the circumstances under which the quotation was given.

The case was not presented at trial by Selb on the basis that there had been an error in the original quotation. Evidence was not directed to the question of whether, on the information that was available at that time the quotation was given, there was any negligence on the part of Mr. Mouton in fixing the price that he did. Selb now seeks to change the basis upon which the claim is made, but the evidence does not support a finding against Mr. Mouton on the basis that he gave a negligent quotation.

In so far as the evidence establishes that Mr. Mouton was negligent in allowing the access road to be constructed as it was, that negligence did not cause a loss of VT1.338.900. As already pointed out, had he directed the installation of a longer driveway in the first instance, that would have involved the costs of the additional excavation and the costs of the additional concrete. In our opinion the loss which flows from the established negligence is the costs of laying, and then removing, approximately twenty meters of concrete. The evidence of Selb does not include a calculation of the loss on this basis. We propose therefore to take half the costs of the concrete and reinforcing mesh used to complete the full length of the driveway, and to make a further allowance for the costs of taking up the first roadway and removing it. Although there is no evidence to this effect, we make an additional allowance for the possibility that the reworking of the access driveway involved taking machinery back to the site. We allow VT250.000. In our opinion the costs of the additional excavation and removal of additional soil should not be allowed.

>Santo Road.

Mr. Mouton had the responsibility of supervising the construction of approximately 28.5 kilometres of roadway through the jungle in Santo. He was not on during the performancrmance of the work. He attended approximately once each fortnight to oversee work, and left the performance of the work itself to the foremen and gangs that were working there. The claim made by Selb has three components:

1. Interest to compensate for delayed payment on Progress Claim 16.

2. Interest to compensate for the failure to claim for a bridge.

3. Cyclone damage.

Evidence was directed specifically to each of the first two topics to establish in a precise way the want of care on the part of Mr. Mouton. In relation to Progress Claim 16 there was delay in payment brought about because Mr. Mouton had not lodged claims with the supervising engineers for variations which would have had the effect of increasing the contract price. In the absence of the variation claims, Progress Claim 16 sought an amount which exceeded the contract price. For this reason the engineers rejected the claim. At about this time Mr. Mouton went on annual leave. It was necessary for Mr. Francois to negotiate with the engineers to have late variations processed. Belatedly Progress Claim 16 was paid, but Selb alleges there was a delay of four months, and seeks four months interest at the rate 14% on VT13.662.261, being the amount for which payment was initially withheld.

Mr. Mouton does not seem to dispute that there was an unwarranted delay on his part in respect of the variations, and in turn in ensuring the Progress Claim 16 could be processed without delay.

We are satisfied that the evidence establishes an entitlement by Selb to recover loss caused by the delay in receiving Progress Claim 16. However the evidence leaves us in doubt whether the delay was as long as four months. Further, the evidence of Mr. Francois suggests payment on Progress Claim 17 was accelerated by the engineer to assist Selb’s cash flow because the earlier progress claim was being delayed. In the circumstances we think that the loss should be calculated on three months interest at 14% on VT13.662.261, namely VT478.180.

The outstanding bridge claim came to the attention of Mr. Francois in early 1994. It appears that a bridge had been constructed at one point in the roadway which entitled Selb to a variation in the contract price to cover its costs. Mr. Mouton should have lodged the claim. He did not do so. The failure to do so, and the absence of records in relation to the bridge, are each indicative of specific acts of negligence on the part of Mr. Mouton. We consider that Selb has established its entitlement to recover the loss arising from the delay in payment of the claim. Fortunately, Mr. Francois was able to successfully negotiate a belated claim for the bridge, and the claim was paid in May 1994. There is some dispute as to when the bridge was completed. The evidence of Mr. Moodie, the supervising engineer, is that it was completed in the latter part of 1993 but Mr. Francois said it was completed in April 1993. Mr. Francois has good reasons for fixing that date, and accordingly we think this loss should be assessed on the assumption that the bridge was completed during the month of April. In the ordinary course of work, it would have been reasonable for Mr. Mouton to claim the variation in the month of May 1993. Allowing for the time necessary to process the claim, it could well have been the end of July 1993 before the claim was paid.

Interest is claimed by Selb up to and including the month May 1994. It is not clear from the reasons of the Chief Justice whether he accepted the precise calculation put forward by Selb, but if he did, there is a distinct possibility that he has allowed interests twice for some two and a half months as he directed that the interest run on the Judgment sums at the rate of 10% from the date of the original pleadings in the case. The statement of claim was filed 18^th March 1994. We propose to allow interest for the period of 8 months, effectively from August 1993 to March 1994. Interests after the commencement of the proceedings in March 1994 is dealt with separately at the end of these reasons. The bridge claim was for VT3.080.349. Interest at 14% for 8 months gives a loss VT287.500.

The final item in the Santo Road claim is in respect to the cyclone damage. There was a cyclone in January 1994. The heavy rain caused wash-aways and damage to both formed and unformed sections of the works. In his evidence, Mr. Moodie said that he thought 60-70% of the damage could be attributed to aspects of poor supervision, and the balance of the loss would have occurred in any event. His evidence shows that the roadway, to a degree, involved an experimental design whereby it was hoped to achieve road construction at a cheap rate. The cyclone established that some of the design shortcuts were not appropriate. So far as the supervision was concerned, Mr. Moodie’s evidence is to effect that there may have been preferable ways in which aspects of the work could have been performed. This is being wise after the event. The evidence does not descend to detail. There was evidence that 21 km of the road had been formed with a coral base, and that the remaining 7.5 km had been cleared of jungle. It was suggested that the clearing works had proceeded too far ahead of the formation stage, with the result that more of the unformed section of the road was damaged than otherwise would have been the case.

In our opinion it is not possible to support a judgment for any part of the cyclone damage on the broad basis upon which Selb seeks to justify the claim. That broad basis is simply that Mr. Mouton was the supervisor "responsible" for the project, and because damage occurred there must have been a want of care amounting to negligence on his part. It must be remembered that he was only at Santo about twice per month for relatively short site inspections. His main role as a supervisor was in respect of processing the paper work involved in the administration from Port Vila. It is quite possible that he gave instruction for the appropriate formation of drainage channels at the locations where damage occurred to the formed section of the road and that his instructions were then not properly carried out by those who performed the work. Such a failure does not constitute actionable negligence on his part. The evidence does not show that in respect of particular areas of damage he had the opportunity to detect the errors by inspections.

It is notable that both Mr. Moodie and Mr. Francois inspected the road works in the late December 1993 and there is no note or evidence from them to suggest that there was any discernible shortcoming in the works worthy of comment. If they did not observe any short coming worthy of comment, then it is difficult to see how Mr. Mouton can be blamed for having not appreciated that work had been performed by the onsite gangs in an insufficient or improper way. As for the alleged damage to the unformed parts of the road, even if the clearing gangs had not been so far ahead of the formation gang, there would still have been damage. The evidence does not give any basis for holding that there was particular damage at the far end of the section which might have been avoided had the clearing been delayed. The claim therefore fails for want of sufficient proof.

However there is an additional reason why we consider that the claim for the cyclone damage should fail. It is common ground that insurance over the works was required. Unfortunately the evidence does not indicate the particular types of insurance that was required, nor have the insurance policies been discovered. In relation to the question of insurance, Mr. Moodie said in evidence that if Selb had claimed for the costs of repairing the cyclone damage, the claim would not have been paid. He said the "contractors are bound to carry insurance for this type of damage including damages as a result of natural disasters".

In the course of hearing this appeal in 1996 the Court of Appeal expressed the view that there had been inadequate discovery by Selb and the proceedings were adjourned to enable discovery to occur. Since then there have been many applications between the parties over the question of discovery. In our opinion the discovery by Selb is still substantially deficient, but the relevance of that deficiency is not as widespread and profound as the Court of Appeal in October 1996 considered possible. In those instances where we uphold findings against Mr. Mouton, there is adequate evidence, notwithstanding the deficiency in discovery, to support those findings. However in relation to this aspect of the Santo Road claim now under discussion, and in relation to the Santo Boat Shed next discussed, deficiencies in the discovery leave many unanswered questions. It is surprising, to say the least, that comprehensive files in relation to the projects have not been discovered by Selb. This is particularly surprising in the case of the Santo Road Project which was still under way when these proceedings were progressing towards trial.

The only documents relating to insurance that have been discovered (after the trial) are the cover pages of an insurance certificate issued on 3^rd June 1992 for the Santo Road project for the expected duration of the contract from 6^th May 1992 to 6^th October 1993. Mr. Francois said in evidence that the policy expired in October 1993 and blamed Mr. Mouton for not renewing it. Without seeing the whole policy is not clear that it did not contain provision for cover if the period of the works exceeded the period originally anticipated. Moreover, without the insurance files from Selb the best evidence about the insurance situation was not before the Court.

The failure to discover the relevant insurance policies, insurance files relating to claims that arose thereunder, and paper work regarding the engineers assessments and directions for cyclone repair, requires, in our view, a finding that Selb has not discharged the onus proving that it suffered any loss that can be claimed from Mr. Mouton in relation to the cyclone damage.

The Santo Road claim is therefore successful only in respect of the two claims for delayed payments which together total VT765.680.

The SBoat Shed Shed.

Mr. Mouton supervised the early stages of the construction project. He ordered certain roofing materials, and gave measurements which were wrong. The measurements he gave were questioned by the supplier but he maintained the order. When the roof structures were delivered, they were unsuitable without modification. Delay occurred whilst the architect approved modifications. Mr. Francois gave evidence that the supervising architect threatened to impose a delay penalty of VT470.267, and in addition Selb incurred extra freight charges of NZ$450. A letter confirming this threat, dated 11^th August 1994 has been produced. The Chief Justice allowed as compensation for VT341.850. The parties are unable to explain this figure.

As a result of the Orders of the Court of Appeal made in October 1997 which directed Selb’s past and present directors to file additional affidavits of discovery, one progress claim relating to the Santo Boat Shed was produced. Again, it is surprising that a complete file of progress certificates and accounts for the job were not discovered by Selb. The one certificate that was produced is dated 31^st March 1995. On its face, it is inconsistent with the assertion that a penalty was imposed by the consulting engineers. In the absence of explanation for this document, and in the absence of proper discovery, the Court cannot be satisfied that a penalty was imposed and paid.

In our opinion the evidence does not justify the award against Mr. Mouton for his negligence in relation to the ordering of the roofing materials of more than NZ$450. We therefore allow, as a broad estimate, VT31.500 in relation to the Santo Boat Shed.

In the result, we consider the Appeal by Mr. Mouton against the award on the counterclaim must be allowed and in lieu of the assessment made by the Chief Justice, Judgment should be entered on the counterclaim for VT1.339.620 made up as follows:

Mitride House - VT 292.440

Le Clos d’Ellouk - VT 250.000

Santo Road (a) Interests on PC 16 - VT 478.180

(b) Interests on the bridge - VT 287.500

Santo Boat Shed - VT 31.500

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VT1.339.620.

We turn now to the question of interest. In our opinion the Judgment on the counterclaim should be set off against the Judgment on the claim. If this is done, it is not necessary to consider the individual claims which have been made for interest on the items of loss alleged by Selb who claim 14% interests on components of compensation due to Mr. Mouton in respect of which 10% has been suggested as the appropriate rate.

The net balance in favour of Mr. Mouton after setting off the Judgment on the counterclaim is VT(5.738.782 – 1.339.620) = VT4.399.162.

Certain payments have already been made to Mr. Mouton pursuant to Orders of the Court. On 2^nd January 1997 he was paid the sum of VT2.834.615 ordered by the Court of Appeal. He is entitled to interest at the rate 10% on the sum of VT4.399.162 from 18^th March 1994 to 2^nd January 1997. Thereafter he is entitled to interest at the rate of 10% on VT1.564.547.

We will receive submissions from the parties on the question of costs.

Dated at Port Vila, this 26^th June 1998.

BY THE COURT

J. W. von Doussa
Daniel Fatiaki J
Reggett Marum J