Widow Vabdas' Deed Quest *Minor spoilers*

I've just started the Imperial Legion quest line, with this quest.

I've encountered a problem: the Broken Axe I'm supposed to find is nowhere to be found. I've searched the area extensively, and cannot seem to be able to find it. I've spoken to the ghost, searched his body, but cannot find the axe.

Is this a bug? Or am I not looking in the right place?

I know I've done this one before (in the real Morrowind) but I can't seem to remember where it was.