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Company director personally responsible for giving wrongful instructions

The First Hall of the Civil Courts on 16 May 2014 held that a company director was still personally responsible for damages after it was found that he had given instructions which were not according to law. 

malcolm_mifsud
Malcolm Mifsud
30 May 2014, 8:00am
In Anthony Mifsud -v- Lino and Angele Stafrace, Perit Philip Azzopardi, Carmel Raymond Micallef in his name and on behalf of RC Construction Ltd and Raymond Calleja, the plaintiff held that on 12 April 2000, his residence at 24, Cathedral Street, Sliema collapsed after next door was carrying out excavation works.

His sister died a few days later and as a direct consequence of this accident, Mifsud had to live elsewhere and had to throw away the furniture and other belongings. He asked the Court to condemn the defendants to pay him damages for their actions.

Each of the defendants presented a separate statement of defence. The Stafraces held that the plaintiff had to prove that the accident took place because of their construction works and this is because at the time, similar work was being carried out on other surrounding property.

They also held that they were not responsible because the contracted suitable persons to carry out the works on their property. Architect Azzopardi held that the contractor did not abide by his instructions. Raymond Calleja held that Mifsud did not live in the property at the time of the accident.

Micallef argued that he should be not be held personally responsible because he was acting on behalf of his company RC Construction Limited. Furthermore, he acted according to instructions given to him.

Mr Justice Anthony Ellul, upon delivering his judgment, examined the cause of the accident. From the evidence produced the excavation works took place two-and-a-half feet from the dividing wall and one floor under street level. This weakened the foundation on number 25 and it was exposed. The accident took place because of extensive excavation.

Mr Justice Ellul then examined whether there was any responsibility on the part of any of the defendants. The court started off with the Strafraces, the owners of the property where the excavation was taking place.

They contracted RC Construction Limited to carry out the demolition and construction of a block of apartments. From the evidence produced, it does not result that they issued instructions different from that of the architect.

Their architect confirmed under oath that they did not give any instructions, especially on the depth of the excavation. Article 1037 of the Civil Code holds persons responsible for damages if they engage persons who are not capable of carrying out the works. This was not the case and therefore the court did not hold them responsible.

"Their architect confirmed under oath that they did not give any instructions, especially on the depth of the excavation"
Then the Court moved on the architect, who was not aware that the excavation works had commenced and that the contractors did not respect the obligatory distance between one property and another.

The contractor, Micallef explained that in his experience he would leave a distance of two and half feet from the boundary wall. However, the other defendant, Perit Azzopardi explained that he was informed by a colleague that the foundation was not rock and therefore the excavation works needed to start from a distance of 2'6" from the boundary wall.

Micallef was informed of this and therefore the Court did not believe his version. Micallef also testified that he had followed the plans with regard to the depth of the excavation. This clearly was not the case. When Azzopardi visited the site, he confronted the contractor about this and showed his disapproval. The courts exonerated architect Azzopardi.

This was different for Carmel Raymond Micallef and RC Construction Limited. Micallef argued that he was acting on behalf of the company. The Court held that he was the majority shareholder and the sole director. Evidence showed that Micallef took the decision not to respect the distance and depth of the excavation. The Court quoted for an English 1921 judgment Rainham Chemical Works Ltd v Belvedere Fish Guan Co Ltd:

"If a company is formed for the express purpose of doing a wrongful act or if, when formed, those in control expressly direct that a wrongful act be done, the individuals as well as the company are responsible for the consequences."

This is in line with Article 1031 of the Civil Code.

Raymond Calleja, who actually carried out the excavation, argued that he was prudent because he had not used heavy equipment. He received instructions from Micallef, but was equally responsible because he knew he was not keeping to the distance laid down in Article 439 of the Civil Code of 76 cm.

Mr Justice Ellul then considered the liquidation of damages. Mifsud had explained that he lived for 16 days after accident in a property he owned in G'Mangia.

The Court allowed that he be paid €559 for the accommodation expenses for 16 days, however he was not allowed to include to include works he carried out in his G'Mangia property in order to make it habitable because this was not a direct consequence of the accident nor loss of earning of rent, because this property was not being rented prior to the accident.

The Court awarded €1000 for the damages he sustained to his furniture. The Court ordered Micallef, Calleja and the company to pay Mifsud  €1559.

Dr Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates.

malcolm_mifsud
Malcolm Mifsud is a partner at Mifsud & Associates.
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