Expert: John Dowse - 10/23/2009

Question
QUESTION: Greetings John,

My project in Dubai(under FIDIC 4 ed. 1987) is terminated by the employer as per 69.1 (d). The contractor, in his final account claim, include the cost for repatriation of ALL his staffs employed for the project. But in actual case most of them are not repatriated (some of them are still with the contractor). The contractor send only few staffs. Sub clause 65.8 (f) reads "the reasonable cost of repatriation of all the Contractor's staff...".

The Contractor insisted to get repatriation cost for all the staffs as stated in the above sub clause. However the client want the engineer to certify only for those staffs actually left the country.

Can you please enlighten me on this issue as usual?

Kind regards

ANSWER: Thank you for your question. Please accept my apologies if there has been a delay in responding. For some reason the question arrived in my junk mail, rather than my e-mail inbox and I have only just seen it.

I will assume that following the Employer's notice under sub-clause 69.1(d), the Contractor has given notice of his intention to terminate and a period of 14 days has subsequently elapsed.

With regard to the interpretation of sub-clause 65.8(f) it is difficult to understand why the clause was drafted in this manner. As in your situation, there will be situations where the Contractor does not send home all his staff or employees. I do not think that the authors intended that the Contractor would be paid for costs he did not incur. Indeed there is, in many legal jurisdictions, an obligation for the innocent Party (here, the Contractor) to mitigate the costs for which the other Party is liable.

Looking further at the specific wording of sub-clause 65.8, it refers to "cost", which is a defined term under sub-clause 1.1g(i) of the Contract, meaning all expenditure incurred or to be incurred including overhead allowances but not including profit. My suggestion is then that you write to the contractor asking for evidence of the cost having been incurred and indicate that you are aware that he has elected to retain some employees/staff. In those circumstances costs have not been incurred and it is unreasonable to consider that the cost of repatriation at a later date is a cost properly to be incurred in relation to this project.

I hope that this guides you. If I can assist further, I will be pleased to do so


Kind regards,
John Dowse

John dowse can be contacted by e-mail to courtroom@hotmail.co.uk

---------- FOLLOW-UP ----------

QUESTION: Dear John, I thank you for your time and valuable advice.

Let me elaborate/expand my question a little bit. The project is terminated after a long suspension of the whole of the works. Finally, following Employer's notice under sub-clause 69.1(d), the Contractor has given notice of his intention to terminate and a period of 14 days has subsequently elapsed.

I made a little bit of research to understand what “REASONABLE” & "ALL" means under sub clause 65.8 (f). I refer a similar clause under FIDIC 1999 which is sub clause 19.6 (e). Unlike the 4th edition, it is written clearly and doesn't mention the word "all" and "reasonable" which leads me to believe that the draftsman of FIDIC 4th edition include the word "reasonable" & “all” to indicate that even if the contractor didn't repatriate all his staff (that means if there is no actual cost incurred), a reasonable cost should be paid to him for all his staffs(forgive me if my understanding is wrong).

As you suggested, I will write to the contractor asking for evidence of the cost having been incurred and indicate that I’m aware that he has elected to retain some employees/staff.

My follow up question is:

When we give the instruction to suspend, we inform the contractor to demobilize all his resources (including labor) and keep skeleton staff during suspension period (like security, safety, cleaning...). Accordingly the contractor repatriates some of his staffs following our instruction to suspend the whole work. When we finally terminate the contract, only these few staff was remaining at the site. My client argue that as per sub clause 65.8 (f), the contractor is entitled only for the repatriation cost of those staffs available at site at the time of termination. Do you think his argument is correct? What about those staffs repatriated during suspension?

Finally I would like to express my heartfelt appreciation for you and other voluntary experts for sharing your valuable advice especially for those us young professional.

Answer
Thank you for the additional information and your further question.

Your assessment of the provision in the FIDIC 1999 form of contract is correct; however an alternate view of the differences between the 1987 and 1999 forms might be that the authors, in reviewing the forms, realised that the original wording was open to misinterpretation. Both explanations could have merit.

I suggest that you proceed as you have indicated, in accordance with my earlier advice; let matters develop further.

If the Contractor repatriated some of his staff/employees before the suspension, that could be argued as being at his risk, for purposes other than the suspension.

If the Contractor repatriated some of his staff/employees after the suspension but before the termination that can also be argued as being at his risk. During the period of suspension the Contractor would have been entitled to payment for those staff that he could not redeploy. It is possible that the Contractor had other reasons for repatriating those persons at that time. However, if the Employer/Engineer/Contractor had been in negotiations about the future of the project and repatriation had been discussed, that might change the position.

Your Client's interpretation that only the costs attaching to repatriation of those staff remaining at the date of termination may be correct in the circumstances.

Where the Contractor elected to send home only a few of those remaining staff, the question that arises is "why did he retain the others?". Again the Contractor may have had reasons which are entirely separate from the termination of the project. If he repatriates those staff/employees at a later date, why should your Employer carry the cost?

On that last point, is repatriation of those remaining staff/employees at a later date to be considered as reasonably in connection with this project?

I suspect that the Contractor will challenge this interpretation; the wording of the clause invites that action. I will be interested to hear of the response that you receive.

Kind regards,
John Dowse

John Dowse can be contacted by e-mail to courtroom@hotmail.co.uk