Pacific European Investment Company Ltd v Santa Cruz Timber Ltd [2004] VUCA 3; Civil Appeal Case 29 of 2003 (8 June 2004)

IN THE COURT OF APPEAL
OF THE REPUBLIC OF VANUATU
(Civil Appellate Jurisdiction)

Civil Appeal Case No. 29 of 2003.

BETWEEN:

PACIFIC EUROPEAN INVESTMENT COMPANY LIMITED
First Appellant

AND:

JIMMY GIOVANNI
Second Appellant

AND:

SANTA CRUZ TIMBER LIMITED
First Respondent

AND:

LOUIS & LUTE BARBOU
Second Respondent

Coram: Hon. Chief Justice Vincent Lunabek
Hon. Justice Bruce Robertson
Hon. Justice John W. von Doussa
Hon. Justice Daniel Fatiaki
Hon. Justice Patrick I. Treston
Hon. Justice Hamlison Bulu

Counsel: Mr. Ronald Warsal for the Appellants
Mr. Saling Stephens for the Respondents

Hearing Date: 2 June 2004
Judgment Date: 8 June 2004

JUDGMENT

On the 1^st of November 2002 this Court delivered judgment in Civil Appeal No. 10 of 2002 in Luganville, Santo in an appeal involving these parties and allowed the appeal of the present respondents and remitted the case to the trial judge to assess damages on the respondents’ claim and to deal with the appellants’ counterclaim. The trial judge was also directed to determine the appellants’ claim for damages allegedly sustained as a result of the seizure of its equipment pursuant to a Mareva order obtained by the respondents on 6^th July 2001 and extended further by order of the trial judge on 12^th May 2002 (hereafter ‘the first appeal’).

In its original claim the respondent sought damages under various heads in the total sum VT29,174,411. At the assessment hearing on 6^th June 2003 the claim was reduced and particularized as follows:-

Item Description Amount

(a) Freight from Honiara to Santo VT5,507,315

(b) Freight from Honiara to Santo to Noumea VT1,000,000

(c) Time of waiting – 10 months @ CFP1,000,000 VT15,000,000

(d) House rent VT527,000

(e) Niscol handling fees for machineries VT565,357

(f) Customs Department for duty and VAT VT2,062,924

Total VT24,667,096

The appellants counterclaimed for various items quantified as follows:-

Item Description Amount

(1) Airline tickets VT252,000

(2) Moneys advanced to the respondents VT1,500,000

(3) Loss of business for Tutuba and Malekula VT43,000,000

(4) Moneys advanced for release of machinery VT300,000

(5) Vacation of the mareva order of 6^th July 2001

Total VT45,052,000

At the assessment hearing on 6^th June 2003 the respondents called Mrs. Lute Barbou a director of Santa Cruz Timber Limited and Ms. Leisande Robertson a secretary in the respondents’ solicitors firm. For the appellants, Jimmy Giovanni a director of Pacific European Investment Company & Infunturmolmol testified along with Peter Japhetti. Various affidavits and annexures were adopted and exhibited by both parties. All witnesses were examined and cross-examined.

The learned trial judge delivered his assessment judgment on 3^rd September 2003 allowing in part the respondents’ claim and the appellants’ counterclaim. The appellants were awarded VT1,100,000 and the respondents VT16,439,596.

For present purposes it is necessary to refer only to the respondents claim where the trial judge allowed items (e) and (f) above on the basis that both claims were properly covered by Clause 5 (a) of the Agreement entered into between Santa Cruz Timber Ltd. and Pacific European Investment Company & Infunturmolmol on 30^th June 2000. (hereafter ‘the Agreement’)

Likewise in relation to the appellants’ counterclaim, the trial judge dismissed the claims in items (3), (4) and (5) above in the following terms:-

“(3) Loss of Business for Tutuba and Malekula VT43,000,000.

The defendants (appellants)claim damages for loss of business on Tutuba at VT3,000,000 and Malekula for VT40,000,000. These claims are baseless and are accordingly dismissed.

(4) VT300,000 paid by Mr. Giovanni to Mr. Stephens (to) secure release of machines

This claim was not pleaded in the defendants’ counterclaim dated 14^th August 2001. This issue arose only during the examination of Mr. Giovanni in the witness box. The claim has not been properly pleaded and is therefore dismissed.

(5) Vacation of Orders of 6^th July 2001

This claim is dismissed.”

The appellants filed a Notice of Appeal dated 23^rd September 2003 in which they appeal first, against the trial judge’s allowance of items (e) and (f) of the respondents’ claim on the basis that firstly there was no or insufficient evidence to support the claims; and secondly, against the trial judge’s disallowance of the appellants’ counterclaim namely items (3), (4) and (5) set out above. There was no cross-appeal by the respondents.

At the hearing of the appeal it became clear that the sole basis for the appellants’ complaint in relation to items (e) and (f) of the respondents’ claim was that neither item was mentioned in the Agreement and as the machinery, the subject matter of the two items, belonged to the respondents, it should bear the liability for the charges.

Before turning to the substantive grounds of appeal it is possible to dispose briefly of the appellants’ complaint that judgment had been wrongly entered against Jimmy Giovanni the second named appellant who was a director of the appellant company at all material times and had acted as such in executing the Agreement for and on behalf of the appellant company.

At the hearing of the first appeal the Court made clear during exchanges with counsel its view that the directors of both companies were improperly joined in the action. We understood at the time that steps would be taken to effect the removal of the second named parties who were directors of the respective companies. Unfortunately this was not done.

It is trite that a director acting as such within his powers for and on behalf of a company incurs no personal liability for company debts in the absence of negligence or fraud. The respondents’ counsel conceded as much in the present appeal.

Accordingly this ground of complaint is upheld and Jimmy Giovanni is removed as a party to the proceedings. For completeness we also order that any judgment entered against him be set aside.

It is common ground that items (e) and (f) of the respondents’ claim relate to stevedoring and customs duty charges incurred by the respondents in the process of transporting its machinery from Honiara to Santo wharf and then to the site of the appellants logging operations in Luganville.

Clause 5 (a) of the Agreement provides:-

“5. The Pacific European Investment Company & Infunturmolmol Company shall also be responsible for the following:-

(a) Meet the cost of transporting Santa Cruz Timber Ltd’s equipment and machinery to the operation site by way of freight charges and insurance inclusive of costs relating to transport of spare parts to and from Port Vila.”

Whilst we accept that Clause 5 (a) nowhere expressly mentions ‘stevedoring charges’ or ‘customs duty’, nevertheless, we are satisfied, having regard to the commercial nature of the Agreement and the practical realities of transporting goods across borders, that such charges would have been within the contemplation of the parties at the time of its execution.

We are also mindful of the specific requirement in the Agreement that the respondents’ equipment and machinery be transported ‘to the (appellants’) operation site’, and therefore all necessary fees and charges incurred in undertaking that process are properly included within the transportation costs for which the appellant is liable in terms of Clause 5 (a) of the Agreement. As the trial judge correctly observed:-

“Unless these taxes were paid, the plaintiffs (respondents’) equipment could not go to the operation site as anticipated by Clause 5 (a).”

The appeal against the allowance of stevedoring and customs duty charges is dismissed.

In respect of the trial judge’s disallowance of item (3), the ‘loss of business’ claim, counsels’ complaint is that the appellant was unable to fulfil or complete two roading contracts that it had successfully tendered for in Tutuba (VT3,000,000) and Malekula (VT40,000,000) because of the Mareva order which was obtained by the respondents on 6^th July 2001 and which effectively tied up the appellant’s machinery and equipment.

The evidence in support of these two contracts is at best sketchy. In respect of the Tutuba contract, the evidence is from two letters from the Sanma Provincial Council dated 27^th March 2000 and 22^nd March 2001. In respect of the Malekula contract, the uncontested testimony of Jimmy Giovanni a director of the appellant company is that the company had won a tender to construct road works at Malekula in the sum of VT40,000,000 on or about August 2000 but was not able to construct the road as a consequence of the seizure of its machines. It is noteworthy that all dates mentioned predate by a year and several months the date when the Mareva order was granted to the respondents.

Be that as it may, no attempt was made in the appellants’ evidence to quantify the estimated profits that would have been earned from the roading projects by the appellant company nor is it clear that the Malekula roading project remained extant in July 2001 almost a year after it had been awarded to the appellant company.

Such details as establishment costs, transportation costs, workers wages, fuel costs and repair and maintenance costs for the machines would have been readily available to the first appellant from its already partly completed Tutuba road project. None was presented to the trial judge to assist in assessing the profit figure or margin that might be achieved by the first appellant under the Malekula contract.

The lack of any form of documentation or correspondence evidencing the award of the Malekula roading contract which was valued at five times more than the Tutuba project also speaks volumes about the first appellant’s claim and reflects its inability to discharge the onus that lay on it to establish the claim to the requisite standard of proof.

The appellant’s machines were first restrained to provide security for the respondent company’s claim. Although the respondents’ claim was ultimately dismissed in a reserved judgment delivered on 14^th May 2002, the injunction was nevertheless extended until the final determination of an appeal to this Court that had been lodged by the respondents at the time and which appeal was subsequently determined in the respondents’ favour in November 2002.

The Court of Appeal in allowing the respondents’ appeal in November 2002 did not specifically deal with the injunction other than to direct the trial judge to determine the first appellant’s claim for damages on the respondents’ undertaking for loss of use of its machinery and equipment as a result of the injunction which had been obtained by the respondent. The trial judge has determined the issue.

A final judgment having now been given on the claim the injunction should be discharged with immediate effect.

Counsel for the appellant also submitted that the trial judge failed to address the issue of the ownership of the machinery covered by the Mareva order. The appellant had consistently maintained throughout the proceedings that the machines were owned by Noumea Rentals a company in New Caledonia and that the appellant was merely the hirer.

It is sufficiently clear from the papers that a previous attempt to lead the evidence as to the ownership of the machines was rejected by the trial judge as being hearsay of some sort. We do not see why it could not be covered by the business record exception but in any event are satisfied that no question of ‘res judicata’ arises from that earlier ruling.

We were informed from the bar table that of the 3 machines seized under the Mareva order, two have been shipped out of the country. The remaining excavator is held in a storage facility in Santo and unlikely to be released unless storage charges are paid to a third party.

The parties need to resolve this in a commercial way to avoid ongoing charges which are to no one’s advantage.

As to item (4) of the appellant’s counterclaim the clear evidence is that subsequent to this Court's judgment in the first appeal two remittances totalling VT300,000 were made directly to the respondents’ solicitors trust account by Jimmy Giovanni ostensibly for the release of the appellant’s machines.

Counsel acknowledges receipt of the remittances which are retained in his firm’s trust account. Counsel accepted that the remittances should be applied in part satisfaction of the respondent's judgment. We agree and accordingly reduce the judgment sum awarded to the respondents by that amount. Also there should be a further set-off against the judgment of the sum awarded to the appellant at the assessment hearing.

The formal orders of the Court are:

1. Appeal dismissed.
   
2. Judgment is entered for the respondent company in the sum of VT15,039,596.
   
3. The mareva order of 6^th July 2001 is discharged with immediate effect but without prejudice to claims under the undertaking, if any, by Third parties arising during currency of the said order.
   
4. The respondents are to receive costs restricted to this appeal.
   

DATED at Port Vila, this 8^th day of June 2004.

Hon. Vincent Lunabek C.J.
Hon. Bruce Robertson J.
Hon. John Von Doussa J.
Hon. Daniel Fatiaki J.
Hon. Patrick Treston J.
Hon. Hamlison Bulu J.