JUDGMENT

Egonda-Ntende CJ
 

[1]    The defendant Mr Kozhaev, who is Russian, purchased a villa and an apartment in the Eden Island development.  

        The plaintiff (hereinafter referred to as Eden Island) is the developer that sold the properties.  Title to the villa was

        transferred to Mr Kozhaev in July 2008.  Eden Island claims that almost USD 400,000 of the purchase price for the

        villa was never paid.  Mr Kozhaev claims that he did pay this amount.  He also counterclaims for defective 

        construction.

[2]   It is common ground that a reconciliation produced by Eden Island’s bank, Barclays Bank (Seychelles) Ltd, in January

       2010 shows receipts from Mr Kozhaev covering the full amount of the purchase price.  It is also common ground

       that Eden Island’s lawyers in South Africa wrote to Mr Kozhaev on the strength of this reconciliation to confirm that

       payment had been made in full.  Eden Island now says that the reconciliation is mistaken and reflects a bank error

       which was promptly corrected (though never explained to Mr Kozhaev).  Mr Kozhaev denies any mistake.

[3]  Eden Island is seeking judgment for USD 387,321.12 (plus interest and costs) or, in the alternative, the cancellation

      of the sale agreement and re-transfer of the villa.  Mr Kozhaev is seeking unpaid interest on amounts held on his 

      behalf in Eden Island’s escrow account (which he wishes the Court to “audit”), damages of USD 450,000 for “non-

      completion” of the villa, and moral damages of USD 250,000, plus interest and costs.
The sale agreement

[4]  The sale agreement for the villa was concluded on 13 November 2007.    The purchase price was USD 1,295,000. 

      This figure is slightly higher than the figure stated in the reservation agreement which had been signed in May 2007, 

      but nothing turns on that.  A deposit of USD 129,500 was payable on the date of signature and the balance of  

      USD 1,165,500 was payable in accordance with clause 4 of Eden Island’s standard conditions of sale.  An amount

      was also payable for fixtures and fittings to be selected by Mr Kozhaev.  Eden Island pleaded that amount as USD

      14,750 but failed to produce the “schedule of finishes” referred to in the sale agreement or any other evidence to

      support the pleaded amount.  Mr Kozhaev pleaded that the relevant amount was USD 12,900.  There is support for

      both figures in letters sent to Mr Kozhaev by Eden Island’s lawyers, in 2011 and 2010 respectively, both of which

      were produced by Mr Kozhaev.   In those circumstances I decline to accept Eden Island’s claim to the higher amount

      and adopt the USD 12,900 figure accepted by Mr Kozhaev.  That brings the total payable under the agreement to

      USD 1,307,900.

[5]  Clause 4 of the conditions of sale is lengthy but its effect can be summarised as follows.

        a. The 10% deposit was to be paid into one of Eden Island’s two escrow accounts with Barclays and released to   

            Eden Island from escrow on the date of transfer of title.

        b. The balance was to be paid into escrow on the date of transfer of title and released to Eden Island in tranches,

            reflecting the completion of each stage of construction.  The first tranche, of 20% of the purchase price, was to 

            be released from escrow to Eden Island on the transfer date itself, so that Eden Island received an aggregate

            amount of 30% of the purchase price on that date.

        c. Despite the requirement for payment of the balance on the date of transfer, Mr Kozhaev was obliged by clause 

           4.3 to give a bank guarantee for that amount, or to pay the full amount in cash, as “security” 90 days prior to the

           anticipated date of transfer, unless Eden Island agreed to defer this “security” to a later date.  Eden Island has

           not relied on that sub-clause for the purpose of this proceeding.

        d.Clause 4.5 provided that all amounts paid into escrow and “all interest (if any) on such amounts” were to be held  

           on Mr Kozhaev’s behalf.  Mr Kozhaev pleaded that “all monies held in escrow should according to the contract

           earn interest at the rate of 6% per annum”, but Mr Bonte, his counsel, was unable to point to any provision to

           this effect.  Eden Island’s defence to the counterclaim does however concede that clause 4.5 required the escrow

           account to be interest-bearing.

        e. All amounts due and outstanding from Mr Kozhaev to Eden Island were to bear interest at LIBOR plus 7.5% from

           the due date.

[6]  The escrow account into which payments were to be made after the date of the agreement is defined as “Eden  

      Island  Sales Escrow, account number: 9603341” or such other account as specified by Eden Island from time to 

      time.  Eden Island did subsequently specify a new account with Nuovobanq (Seychelles International Mercantile Bank

      Co Ltd), as recorded in a letter from Webber Wentzel dated 10 January 2011.

 
        [7]  The conditions of sale set out the various stages of construction and provide for the progressive issue of three     completion certificates (all of which were duly produced).  Significantly for Mr Kozhaev’s counterclaim, clause 14 specifies the  means by which construction defects are identified and rectified.  Mr Kozhaev was obliged to provide a “comprehensive and final” list of defects within 90 days of receiving the “practical completion” certificate.  Eden Island was obliged to rectify these, but no others.   Clause 14.2 provides that any dispute “as to whether a defect exists or whether the defect has been duly rectified” shall be finally determined by a nominated firm of architects in Cape Town.   Clause 15 provides limited further protection to the purchaser in the event of major structural defects and roof leaks, provided that written notice of those defects is given within 5 years and 12 months respectively from the date of practical completion.    In those circumstances Eden Island would have 90 days to begin the rectification or repair works.  These provisions aside, clause 15.5 purports to disclaim liability on the part of Eden Island for “any damage or loss suffered by the purchaser, by reason of any fault, defect, or deficiency existing or arising in the parcel or the works, whether patent or latent”.

[8]  Finally I observe that the sale agreement contained a comprehensive arbitration clause (clause 25), which was not

      referred to by either party in the course of this proceeding.   The agreement to arbitrate is expressed to cover “any

      dispute of any nature whatsoever arising between the parties on any matter provided for in, or arising out of this

      agreement”.  It is unclear to me why this clause was not invoked by Mr Bonte on his client’s behalf.  It would have

      provided a clear basis for dismissing Eden Island’s plaint and, importantly for Mr Kozhaev, may have provided a more

      suitable and cost-effective forum for the investigation of the concerns raised in his counterclaim.  Be that as it may,

      since neither party wishes to invoke the arbitration clause I will not consider it further.
Events after the agreement was signed

[9]  As I have said the sale agreement was concluded on 13 November 2007.  Mr Bonte originally sought to dispute his

      client’s consent to the agreement produced by Eden Island, but abandoned that attempt, which was as well since the

      relevant pleading had been admitted.

 
       [10] The parties agree that the land in issue was transferred into Mr Kozhaev’s name on 24 July 2008.  Mr Karl Operman,  financial manager for Eden Island, testified that this followed the receipt from Mr Kozhaev of a total of USD 388,500, amounting to 30% of the purchase price.  Mr Bonte again sought to dispute his client’s consent to the transfer document produced by Eden Island, but abandoned that attempt after a power of attorney was produced.  

[11] Eden Island pleads that the full balance of the purchase price became payable by Mr Kozhaev into the sales escrow

       account on the date of transfer (24 July 2008).  This outstanding balance amounted to USD 906,500 (70% of the

       purchase price) plus USD 12,900 (as I have found) for the “extras”, a total of USD 919,400.  The plaint is not

       specific as to the date and amount of all payments made by Mr Kozhaev but it is pleaded that payment of a total of

       USD 919,400 was received in “tranches” between 25 May 2007 and 31 December 2009.  So the “missing” amount is

       exactly equivalent to the pre-transfer payments of USD 388,500.

[12] Under the sale agreement, the USD 388,500 paid by Mr Kozhaev into escrow prior to transfer became payable to

       Eden Island from escrow on the date of transfer.  This payment is the origin of the alleged bank error.

[13]  It is common ground that Eden Island’s two escrow accounts at Barclays were under the independent direction of

       Webber Wentzel, a South African law firm.  Mr Operman testified that when the property was ready for transfer to

       Mr Kozhaev, Webber Wentzel was supposed to instruct Barclays to transfer USD 388,500 from escrow into

       Eden Island’s (non-escrow) collections account.  For some reason that amount was instead transferred from sales 

       escrow into reservation escrow.  This mistaken transfer took place on 4 July 2008.  Mr Operman was not clear as to

       whether the mistake originated with Barclays or Webber Wentzel.  Be that as it may, according to Mr Operman the

       error was “picked up” on 8 July and the transfer to the reservation escrow account reversed. The same amount was

       then immediately re-transferred to Eden Island’s collections account.   As Mr Operman put it, the initial transfer on 4

       July 2008 “showed us an inflow which is not really inflow”.

[14] Palm Golding Seychelles Ltd are the sales and marketing consultants for Eden Island.  Their representative, Mrs Lyn

       Marie, gave evidence of her first meeting with Mr Kozhaev, at Eden Island, on Friday 15 January 2010.  She produced

       an email from herself to Eden Island employees, dated 18 January 2010, describing this meeting.  That email states

       that Mr Kozhaev “wants to apply for a 30% mortgage as he had already paid 70%”, and goes on to discuss potential

       banking arrangements.  Mrs Marie confirmed in evidence that Mr Kozhaev told her in person (in French) that he still

       owed 30% of the purchase price.   The immediately preceding email in the same chain, which is in French, is from

       Mr Jean?Luc Quilindo at Barclays to Mr Kozhaev, also dated 18 January 2010, regarding a possible loan by that

       institution. 

[15] I note that Mr Kozhaev, who gave evidence in person, denies ever having seen Mrs Marie before the hearing of this

       case.

[16] Mrs Marie’s email of 18 January 2010 was forwarded to Ms Haniyyah Salie at Webber Wentzel, who replied, the same

       morning, stating that “according to our records, Mr. Kozhaev has paid the full purchase price and optional extras to

       date.  I’m therefore not sure why he is applying for a bond?”

[17] Mr Kozhaev pleads, and Eden Island accepts, that a letter dated 20 January 2010 from Webber Wentzel (signed by

       Ms Salie) confirmed to him that both the purchase price (of USD 1,295,000.00) and the optional extras (of USD

       12,900) had been paid in full.  That confirmation is supported by an enclosed reconciliation produced by Barclays and

       dated 18 January 2010.

[18] Mr Operman testified that this reconciliation is false because it includes the 4 July 2008 “inflow which is not really

       inflow”.   Mr Operman’s testimony was supported by Mr Arthur James, a partner at Webber Wentzel, who went

       through the reconciliation in more detail.  He pointed out that the individual amounts received into escrow from

       Mr Kozhaev are shown as totalling USD 388,500 as at 11 June 2008.  That amount is recorded as having been

       debited from escrow on 3 July 2008.  Then a credit of exactly the same amount is recorded as reappearing on 4 July

       2008.  Mr James testified that Webber Wentzel gave correct instructions to Barclays and that, accordingly, it was

       Barclays staff who made the mistake by transferring the funds into the wrong account.  While that mistake was

       quickly identified and reversed at the individual account level, “unfortunately whoever was responsible for the

       reconciliation account continued to reflect the incorrect 388,500 credit”.

[19] Mr James did not produce any correspondence relating to the alleged mistake, either internally or with Barclays or

       Eden Island, in either 2008 or subsequently.

[20] The only Barclays employee called was Mr Egbert Lawrence, head of corporate offshore business.  Mr Lawrence

       testified that Mr Jean-Luc Quilindo, who was looking after Eden Island’s escrow accounts and producing the

       reconciliations at the relevant time, has passed away.  Mr Lawrence has been the relationship manager for Eden

       Island for some time, but “was not directly involved” with the transactions in issue and was not directly supervising

       Mr Quilindo at the time.  He was however able to confirm that money is not normally transferred from sales to

       reservation escrow, “so clearly there was an error in how this transfer was done”.

[21] Mr Lawrence’s explanation of the error was based on two interim bank statements (each dated 9 July 2008 and

       covering transactions on the two escrow accounts between 4 and 8 July).  Mr Bonte did not object to the production

       of these statements.    Mr Lawrence explained that there are five relevant transactions on the statements.  The

       reservation escrow account shows a credit of USD 388,500 on 4 July 2008, with the identifier “Kozhaev”, and a debit

       on 8 July of the same amount, identified as “R/E DD 04JUL08”.  Mr Lawrence stated that this is a reference back to

       the 4 July credit.  So there is no net inflow to that account.  The sales escrow account statement records a debit on

       4 July 2008 with the same identifier, “Kozhaev”, supporting Mr Lawrence’s claim that the funds were transferred

       directly from sales to reservation escrow.  Then there is a credit on 8 July, again with the matching identifier “R/E DD

       04 JUL 08”.  Then another debit, on the same day, this time with the identifier “A Kozhaev”.  So there is a net   

       outflow of USD 388,500 from the sales escrow account.  That is consistent with the release of USD 388,500 from

       escrow into the collections account in accordance with the sale agreement.  It is not consistent with the receipt of an

       additional amount of USD 388,500 directly from Mr Kozhaev.  Mr Lawrence insisted that “there was only one amount

       of 388,500 that was being paid.  It is only one”.  So the additional 4 July inflow recorded on the reconciliation is a

       mistake.

[22] Mr Lawrence did not produce any correspondence relating to the alleged mistake.  Nor did he produce a corrected

       reconciliation.

[23] The three progress certificates required by the sale agreement were issued on 21 September 2010 (practical

       completion), 15 November 2011 (works completion), and 2 May 2012 (final completion).  Under clause 4.2.2.2.4 of

       the conditions of sale, the full purchase price, save for USD 100,000, should have been released to Eden Island on

       the date of practical completion (September 2010).  The final USD 100,000 should have been released on the date of

       final completion (May 2012).

[24] On 10 January 2011, Webber Wentzel wrote to Mr Kozhaev advising him that Eden Island’s escrow accounts had

       been shifted from Barclays to Nuovobanq.  Enclosed with this letter was a statement received from Barclays,

       reflecting a credit in escrow of USD 105,111.54 as at 6 November 2010.  That statement is consistent with the

       January 2010 reconciliation in showing a credit of USD 388,500 on 4 July 2008.

[25] Eden Island pleads that it demanded payment of the alleged shortfall and interest thereon by letter dated 24 January

       2012 and sent to Mr Kozhaev via email on 8 February 2012.  Mr Operman described this letter as the one which

      “advised” Mr Kozhaev of the bank error.  However the letter contains no such advice.  It simply states that Mr

      Kozhaev has “failed to make payment” of USD 387,321.12.   Mr Operman acknowledged that “from my side”, ie Eden

      Island, he never sent any document which explained to Mr Kozhaev why Eden Island’s position had changed.

[26] Mr James testified that Webber Wentzel had “picked up towards the end 2011, beginning of 2012 there was an issue

       on the balancing of the escrow account”, and that he was the one who directed the drafting of the letter of demand

       dated 24 January 2012.  Until that point both Webber Wentzel and Eden Island had relied on the correctness of the

       Barclays reconciliations.  When asked why the letter of demand did not explain the alleged bank error to Mr Kozhaev,

       Mr James said that he had thought this had already been done by Eden Island.

[27] The figure of USD 387,321.12 demanded in January 2012 is slightly lower than USD 388,500.  Eden Island accepts

       that USD 3,028.88 in interest had accrued to the benefit of Mr Kozhaev on the sums paid into escrow as at 24

       January 2012, and pleads that this amount was set off against the alleged shortfall before demand for payment was

       made.  However Eden Island was proceeding on the assumption that the amount payable for “extras” was USD

       14,750, not USD 12,900. So the claim is overstated by USD 1,850.   It should have been for USD 385,471.12.  I will

       proceed on that basis.

[28] On 19 February 2012 Mr Kozhaev responded to Eden Island’s letter by email.  A “rough translation” of his email,

       which was in Russian, was prepared by (or for) Mr Matthew Peter of Webber Wentzel and forwarded to his

       colleagues on 23 February 2012.  The translation, which was not disputed by Mr Kozhaev’s counsel, describes the

       villa as “paid in full, as you are well aware, as proof of payment received from the [sic] Webber Wentzel”.

[29] Counsel for Mr Kozhaev did not invite him to produce any evidence to support his position. However, under cross-

       examination by Mr Chang-Sam, Mr Kozhaev sought to rely on documents from a Russian bank which, he says, are

       signed by a manager there and provide proof of payment.   Having extensively cross-examined Mr Kozhaev on these

       documents, Mr Chang-Sam objected to their admission, submitting that they had not been produced by a bank

       representative and could “come from anywhere”.  I overruled that objection.

[30] The alleged Russian bank documents consist of 11 individual pages in identical form, principally in Russian but with

       some details in English, and three additional bound pages, the first of which is in similar but not identical form,

       followed by a two-page certified English translation.  The 11 identical pages are signed in the bottom right-hand

       corner, apparently by the same person, but the signature details are in Russian.   The signature pane in the bottom

       left-hand corner is blank (again, the signature details are in Russian).  There is no official stamp or other

       authentication.

[31] Each of the 11 pages contains amounts and dates which appear to match all but two of the credits shown in the

       Barclays reconciliation dated 18 January 2010.  The date in each case is several days prior to the date on which 

       receipt of that amount was recorded by Barclays.  Each page identifies Mr Kozhaev as the “ordering customer” and

       Eden Island’s sales escrow account as the “beneficiary customer” (except for the earliest, which refers to the

       reservation escrow account).  Each also includes a specific reference to the 13 November 2007 sale agreement

      (except for the earliest, which cites the reservation agreement).  There are only two credits recorded in the Barclays

       reconciliation which are not reflected in these 11 documents.  One is a credit of USD 8,500 (the smallest of all the

       individual amounts) received back in May 2007, just after the reservation agreement was signed.  Mr Kozhaev was

       not asked to explain this omission.  The other is the 4 July 2008 credit of USD 388.500.  That is the transaction in

       issue.  It is dealt with in the three bound pages.

[32] The first of the three bound pages is in similar but not identical form to the preceding 11.  Some of the Russian text

       is missing.  The “ordering customer” is not Mr Kozhaev but a Victor Momatuk, and the “ordering institution” (the

       Russian bank) is different.  The signatory is also different.   Mr Kozhaev was not cross-examined about these

       discrepancies (which may not have been immediately obvious to Mr Chang-Sam).  The English translation describes

       the document as a “transfer order”, dated 2 July 2008, requesting that USD 388,500 be transferred from

       Mr Momatuk’s Moscow account into the Eden Island sales escrow account.  The ostensible purpose of payment is

       identical to that on the other 11 pages: “Partial payment of contract at 13.11.2007 Alexander Kozhaev Basin 2

       Parcel 207 Villa Type 6 Eden Island”.  The translation clarifies that the blank signatory pane is for the client.  The

       signature is on behalf of the bank.

[33] Mr Kozhaev says that he went to “the bank” to obtain these documents after being served with the plaint in this

       case.  He was not cross-examined about the fact that the documents describe orders given to two Russian banks,

       not one.  He was however asked why he had not produced the documents before the case started.  Mr Kozhaev

       responded that it was extremely expensive for him to go to Russia, and that he had told Eden Island’s only French-

       speaking employee (Ms Sandra Colas) that Webber Wentzel would have to pay if they wanted him to go.

[34] After Mr Kozhaev’s evidence was complete, Mr Chang-Sam applied to recall Mr Lawrence, from Barclays Bank, to

       “come back and confirm whether these payments have been received or not”.  He properly accepted that, should this

       confirmation be forthcoming, “that would be the end of the matter”.  Having considered the authority ofPomeroy v

       Ross (1976) SLR 68, I declined Mr Chang-Sam’s application on the basis that there were no special circumstances

       warranting the exercise of my discretion to recall the witness.  The issue of the extent of payments made to Barclays

       by Mr Kozhaev was always at the heart of the case and should have been fully dealt with in examination in chief.

[35] In closing argument Mr Chang-Sam maintained his objection to the Russian bank documents on three grounds: they

       were partly in Russian and only one had been translated; there are no apostilles; and the documents are on their

       face only instructions for transfer, which in the case of the crucial USD 388,500 payment were made by someone

       other than Mr Kozhaev to a different Russian bank.
Analysis

[36] Mr James, one of Eden Island’s lawyers, testified that “Mr Kozhaev has never ever come to us and simply said I paid

       $388,500.  He has proof of transfer.  A transfer from xyz bank.  I wish he would.  It would be a lot simpler and we

       would not be spending money and time on this matter.”  Mr Kozhaev responded that “[i]t is not me who is 

       supposed to show it”.  Mr Kozhaev is correct, in the general sense that he who alleges must prove.  This is Eden 

       Island’s case.  However Mr Chang-Sam relied on article 1315 of the Civil Code of Seychelles to support the

       submission that the burden of proof has shifted back to Mr Kozhaev:
A person who demands the performance of an obligation shall be bound to prove it.
Conversely, a person who claims to have been released shall be bound to prove the payment or the performance which has extinguished his obligation.

[37]  Mr Bonte did not offer any substantive submissions on Mr Kozhaev’s behalf.

[38] It is undisputed that Eden Island has proved the existence of the payment obligation.  So the burden would

       ordinarily fall on Mr Kozhaev to prove release through payment: see for example Chetty & Sons (Pty) Ltd v Pillay CS

       257/2000, [2005] SCSC 50, Seychelles Marketing Board v Languilla CS 210/2002, [2007] SCSC 27, and Denis

       Island Development Ltd v Minister for Employment and Social Affairs CS 348/2002, [2007] SCSC 15.  The

       complicating factor in this case is the fact that Eden Island wrote to Mr Kozhaev volunteering its own (allegedly

       mistaken) proof that payment had been made in full.  Does that kind of representation suffice to shift the burden

       back to Eden Island?  Or is Mr Kozhaev still required to provide independent proof of payment?

[39] If the burden of proof remains on Mr Kozhaev I am satisfied that he is well short of discharging it.  I regard the

       Russian bank documents he produced during cross?examination as having little if any independent probative value. 

       I am particularly dubious about giving any weight to the “order of transfer” said to prove the payment in issue.  That

       order would appear to have been issued by a different individual, whose relationship to Mr Kozhaev has not been

       explained, who was not called to give evidence, and who did not even sign the document which has been produced

       to the Court.  Mr Kozhaev’s parol assertion that he made payment in full is directly contradicted by Mrs Marie, whose

       recollection on this point, supported by a contemporaneous email, I have no reason to doubt.  And the January

       2010 Barclays reconciliation, having been expressly disclaimed by the bank which created it, cannot be independently

       relied on to prove the state of the underlying accounts.  No estoppel has been pleaded.

[40] That said, where a creditor has purported to release a debtor and then subsequently alleges mistake, I do consider

       that it is reasonable to require proof of the alleged mistake.  In such a case the creditor is to some extent the

       author of its own misfortune.  Having made the initial mistake, Eden Island has a responsibility to assist the Court by

       providing the necessary information to set the record straight.

[41] In circumstances such as this the result is unlikely to turn solely on the allocation of the burden of proof.  I am

       reminded in this respect of Viscount Dunedin’s speech in Robins v The National Trust Co Ltd & Ors [1927] AC 515:
[I]n conducting any inquiry, the determining tribunal, be it judge or jury, will often find that the onus is sometimes on the side of one contending party, sometimes on the side of the other, or, as it is often expressed, that in certain circumstances the onus shifts.  But onus as a determining factor of the whole cause can only arise if the tribunal finds the evidence pro and con so evenly balanced that it can come to no sure conclusion. Then the onus will determine the matter.  But if the tribunal, after hearing and weighing the evidence, comes to a determinate conclusion, the onus has nothing to do with it, and need not be further considered.

[42] It is however still necessary to decide whether Eden Island has done enough to enable me to reach “a determinate

       conclusion”.  The evidence from Eden Island regarding the alleged bank error in this case is, I must say,

       unsatisfactory.   The flow of funds indicated by the interim bank statements and explained by Mr Lawrence is not

       directly supported by other documents (for example, by other bank documents confirming that the funds flowed

       between reservation and sales escrow, or by any contemporaneous correspondence or notes about the need to

       correct the mistake).  There appears to be a second error on the reconciliation (showing a debit of USD 388,500

       from escrow on 3 July 2008, not 4 or 8 July) which has never been explained.  And most importantly, I have never

       seen a corrected reconciliation.  Mr Kozhaev was certainly not given one.  The January 2012 letter of demand makes

       no reference at all to the fact that earlier reconciliations are wrong.  Eden Island, and its counsel, have thereby

       blurred and confused what should have been a clearcut claim of mistake.

[43] Be that as it may, I have reached the conclusion on the available evidence that Eden Island’s version of events is

       significantly more likely than not to be true.  The evidence cannot be said to be “evenly balanced” to the point where

       shifting the burden of proof back to Eden Island could alter the outcome.  As Lord Hoffman put it in In re B

       (Children) [2008] UKHL 35 at [2], there is “no room for a finding that [something] might have happened.  The law

       operates a binary system in which the only values are 0 and 1.”   I am satisfied that the probability of non?payment

       in this case is closer to 1 than to 0 and, on that basis, Eden Island’s claim succeeds.

 
The counter-claim: defective construction

[44] In the February 2012 email which asserted that his villa had been “paid in full”, Mr Kozhaev also raised the issue of

       defective construction (again in rough translation):
Villa B2 207 was put into operation with severe disabilities (38 positions), to eliminate that nobody is going, despite my repeated requests (Mr Peter Smith thinks it beneath their dignity to respond to my written request.)  Because of the continuing work on my site as well as in the immediate vicinity of the normal life of my family has become impossible (to me live an elderly woman and 85-years and the child – school student).

[45] The substance of the pleaded counterclaim is as follows:
The Defendant/Counterclaimant avers that the Plaintiff was supposed to construct a mooring for the Defendant’s yacht at the cost of USD105,236.86 which sum was placed in Escrow with Nuovobanq and they have failed to do the construction of the said mooring.
The house is of bad workmanship, foundation breaking up, floor rotting, locks and hinges rusting and the Defendant/Counterclaimant is praying this Honourable Court to appoint a valuer to assess the cost of completion of the house, the mooring and renovation of the house.

[46] Mr Chang-Sam filed a detailed defence to the counterclaim, relying on clauses 14 and 15 of the sale agreement (list

       of defects, final completion and warranty in respect of works):
[T]he matters complained of fall to be dealt with under clauses 14 and 15 of the SPA each of which clauses sets out a procedure and time frame for notification by the Defendant to the Plaintiff and for rectification, where required, by the Plaintiff.  The Defendant has failed to comply with the said clauses and is therefore estopped and/or contractually debarred from making a claim in respect of the alleged defects.

[47] Eden Island also relies on clause 13.9 of the sale agreement, regarding practical completion, which provides that:
Should there be any dispute between the parties as to whether practical completion has been achieved, the matter shall be referred to an independent architect nominated and agreed to by the parties, or failing such agreement, as appointed by the quantity surveyor, whose decision in this regard shall be final and binding on both parties.

[48] Mr Kozhaev testified that he has been living on site for more than two years (since January 2011) and that “I have

       made a list of 38 things that is not in the villa”.  Mr Kozhaev did not attempt to produce that list, and gave

       conflicting answers under cross?examination about whether he had ever put his concerns in writing.  He did however

       explain the alleged problems (through the Court interpreter):
The swimming [pool] is not working, the handle of the door is rusty and some of doors, some does not open some does not want to close.  And then at times there is the air condition with too much noise and [I] cannot sleep.  And also every time it is raining the foundation subside and then it cracks around the house and [I have] taken pictures of it also]. … Seychelles is a paradise but having living next to work site.  A building, 15 metres [away].  And every day there is construction and there is lots of noise, pollution … Because Seychelles is a paradise but it is like hell there.
… They did not complete the house, they did not put the telecommunication, I have to go to Cable & wireless, DSTV.  The system of the swimming pool is not functioning well.  I was unable to use the air conditioning because there was a lot of noise.

[49] Under cross-examination Mr Kozhaev also raised an issue about the plumbing system and a shortage of hot water. 

       Mr Chang-Sam pointed out that this was not pleaded in the counterclaim.  Mr Kozhaev’s response was that his

       lawyer had told him that “if I have anything against Eden Island and I should put them also [sic]”.

[50] Mr Chang-Sam challenged Mr Kozhaev on why he had not followed the procedure set out in the sale agreement for

       identifying and rectifying defects.  Mr Kozhaev stated that the agreement was written in English and that, although

       he signed it, he could not read it.  He said he has never had it translated because he “did not have the time”.  

[51] Eden Island called its client services manager, Mr Kevin Walton, to produce a list of defects allegedly submitted by Mr

       Kozhaev in November 2010.  I declined to admit this document as it was an informally translated copy.  Mr Walton

       did however testify that he had seen a (translated) list of defects, which he described as a “regular thing” in the

       course of his work, and had been personally involved in the verification and rectification work.  He said that he had

       personally checked before signing off the defects as corrected, but that he had not spoken with Mr Kozhaev to

       ensure that he was satisfied, as they do not speak a common language.

[52] Eden Island also called the lead construction project manager on the Eden Island project, Mr Freddy Synicle, an

       employee of Indian Ocean Project Managers.  Mr Synicle testified that his company was responsible for the

       implementation of the design – “to ensure that it is completed at a certain point in time and under certain quality” –

       and for issuing the three completion certificates.  Mr Synicle described the “works completion” process which takes

       place after the practical completion certificate, the first of the three, is issued.  The works completion list “entails the

       consultants, the architect, the engineers and others.  The whole set of professional people … The list is being issued

       back to the contractor, he executes that list, when it is completed … the consultants go back in verifying”.  He stated

       that any “snags” or defects identified by the purchaser would have been incorporated in the evaluation and 

       rectification process.  Mr Synicle confirmed that his company had signed off the final completion certificate and was

       satisfied that “the house is okay, there should not be any problem with it”.  He acknowledged that he had not

       inspected the house since May 2012 (when the final certificate was issued).  He did however state in cross-

       examination that his company has not received any notification of defects independently of this proceeding.

[53] Mr Kozhaev did not produce the photographs he had referred to, or any other evidence of the alleged defects.  I

       declined Mr Bonte’s request for a locus in quo (site visit) but did adjourn the hearing for several months to allow for

       evidence from an expert witness.  When the hearing resumed the proposed witness, Mr Nigel Roucou, was

       indisposed and Mr Bonte requested an adjournment.  Mr Roucou had already prepared a report, which had been

       placed informally on the court file.  This report was however based on a site visit in April 2013, during the period in

       which the case was adjourned part heard.  It had not been listed in the defence (which was filed back in November

       2012) and would therefore not be admissible except by leave.  There was also no medical evidence to support the

       requested adjournment.  In the circumstances I declined to grant the adjournment.  There was no further evidence

       on the counterclaim.
Analysis

[54] No evidence was produced on the mooring issue and I deem it to have been abandoned.  Issues relating to the

       swimming pool, telecommunications installation, and noise pollution/nuisance were not pleaded and are therefore

       beyond the proper scope of the claim.  That leaves the issues of “bad workmanship, foundation breaking up, floor

       rotting, locks and hinges rusting”, the former of which I will treat for argument’s sake as extending to air

       conditioning and plumbing.  In this regard Mr Kozhaev’s evidence, which is unsupported by documentation or expert

       opinion, is contradicted by two professionals who were directly involved in the construction, including the

       representative of the company which signed the completion certificates.  In any event Mr Bonte, as counsel for Mr

       Kozhaev, made no attempt to explain why the contractual dispute procedures had not been followed, except to

       assert that his client did not understand the agreement he had signed.

[55] I have no hesitation in dismissing the counterclaim.  It seems clear that at least some of Mr Kozhaev’s concerns

       came to the attention of Eden Island in the course of the construction and certification process.  If those concerns 

       were not allayed (as apparently they were not) then Mr Kozhaev should have pursued them formally at the time.  If

       he did not understand his rights and obligations under the sales agreement, he should have had that agreement

       translated.  At the least he should have asked for an informal French translation from his Eden Island contact.  

       Private dispute resolution clauses exist for a purpose and cannot simply be ignored.  Mr Kozhaev may well feel that

       he has not had a full opportunity to air his grievances in this forum but that is the result of the approach adopted by

       himself and his counsel.  Even if the defective construction claims were not contractually barred they have simply not

       been proven.
Decision

[56] The claim is allowed to the extent of USD 385,471.12 plus interest, to be calculated at the contractual rate from the

       date of filing of this suit until the date of delivery of this judgment, and thereafter at the legal rate.

[57] The counterclaim is dismissed.

[58] This case would never have arisen if not for a mistake by Eden Island’s advisors and bankers, a mistake which was

       never clearly explained to Mr Kozhaev.  For that reason I direct that the costs of the case are to lie where they fall.
 
Signed, dated and delivered at Ile du Port this 30th day of September 2013
 
FMS Egonda-Ntende
Chief Justice