ICC Awards

V. Brief summary of the dispute

Claimant's position

98. Claimant is entitled to damages incurred as a result of the repudiation and cancellation of the Contract.

99. Claimant is claiming damages in relation to lost profits and costs actually incurred in furtherance of the Contract. In addition, it is claiming interest on those amounts at a rate of 15.5% p.a.

100. The quantum of the damages claimed has been established. The damages flow naturally and generally from the repudiation and cancellation of the Contract, or were within the contemplation of the Parties at the time of contracting.

101. Respondent has failed to prove that Claimant did not fulfil its duty to mitigate its damages.

Respondent's position

102. The damages claimed by Claimant are exaggerated and do not flow naturally and directly from Respondent's repudiation of the Contract. Furthermore, those damages were not foreseeable and not contemplated by the Parties when concluding the Contract.

103. Claimant seeks to be placed in a better position than it would have been had the Contract been performed. In addition, Claimant failed to mitigate its losses, as it continued to incur costs after it became clear that Respondent no longer intended to be bound by the Contract.

Findings of the Arbitral Tribunal

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III. General Principles

A. Damages and interest

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B. Causation

1) Common position of the Parties

104. In order to determine whether damages claimed were caused by a breach of contract, a two-stage enquiry is required:

• To establish factual causation, it must be shown that the breach was the causa sine qua non of the loss, meaning that the loss would not have occurred but for the wrongful conduct of the party in breach (so-called "but for" test). A claimant is not required to establish the causal link with certainty, but only to establish that the breach of contract was probably a cause of the loss, according to what can be expected to occur in the ordinary course of human affairs.
• The second enquiry is whether the breach of contract is linked sufficiently closely or directly to the loss for legal liability to ensue or whether the loss is "too remote" (sometimes referred to as "legal causation"). In other words, the damages must flow naturally and generally from the breach of contract, i.e. have been foreseeable as a realistic possibility (general or intrinsic damages), or must have been in the contemplation of the parties in the special circumstances attending the conclusion of the contract (special or extrinsic damages). Unlike general damages, special damages must be specifically pleaded.

2) Claimant's position

105. Claimant is entitled to:

• General damages consisting of profits calculated as the difference between contract price and contract costs (whether actually incurred or saved by non-performance);
• General damages constituting recovery of costs actually incurred;
• Special damages "in the contemplation" of the Parties.

106. Since Respondent concluded the Contract for the contract price shown in the costing summary, all claims for actual costs incurred and lost profits actually included in this summary are general damages flowing directly from Respondent's breach.

107. Since neither the bona fides nor the accuracy of this schedule has been questioned by Respondent, the schedule is a valid basis for awarding damages for amounts included in the schedule.

108. Rather than contesting the accuracy of the schedule, Respondent attacked it on the basis that it was never given to Respondent. This is irrelevant, since the items and amounts shown in the schedule constitute part of the agreed contract price, and there can therefore be no dispute that Claimant would have recovered these amounts had Respondent not breached the Contract.

3) Respondent's position

109. Claimant sets out different headings of damages, some of which are not causally connected with the alleged breach/repudiation by Respondent. A claimant who has caused his own loss or on whom the loss has not fallen will fail to establish factual causation.

110. In addition, some of Claimant's claims are not sufficiently and/or directly linked to the repudiation of the Contract by Respondent, i.e. they were not foreseeable at the time of contracting and/or are too remote.

4) Findings of the Arbitral Tribunal

111. Claimant bears the onus of proving that it suffered the damages claimed as a result of Respondent’s repudiation of the Contract and the cancellation thereof by Claimant. In addition, it must show either (i) that those damages flow naturally and generally from the breach/repudiation, i.e. that they were foreseeable, or (ii) that they were in the contemplation of the parties in the special circumstances attending the conclusion of the contract.

112. Damages consisting of costs or profit which a party would have recovered had a contract been performed and the contract price paid flow generally and naturally from the repudiation and consequent cancellation of that contract. Claimant is therefore entitled to such damages – subject to the mitigation rule – where it can show that it would have received full compensation for the claimed amounts had the Contract been performed.

113. To the extent that the claimed profit or costs were expressly and directly foreseen in Claimant's pre-contract costing and formed the basis for the Contract price … the accuracy and reasonableness of which Respondent has not disputed, Claimant is considered to have discharged its onus.

114. The fact that Respondent was not aware of the contents of Claimant's costing schedule before signing the Contract is irrelevant. The criterion of foreseeability does not mean that Respondent needed to know the specific components making up the Contract price. Rather, it is sufficient that the costs or profit claimed are not unusual for this type of contract.

115. In relation to costs which are not expressly shown in Claimant's pre-contract costing, Claimant must demonstrate with sufficient clarity either (i) that those costs were in fact (indirectly) covered by the Contract price under one of the headings listed in the cost schedule, or (ii) that those costs were in the contemplation of the Parties in the special circumstances attending the conclusion of the Contract and would have been borne by Respondent had the Contract been duly performed.

116. Each of Claimant's individual damages claims in Section IV will be examined in light of the above findings.

C) Mitigation

1) Claimant's position

117. The onus rests on Respondent to allege and prove that Claimant neglected to do what a reasonable person would have done to mitigate damages, i.e. that Claimant could reasonably have resorted to some type of conduct which would have reduced its damages to an amount below that produced by the normal measure or the alternative measure which was shown by the plaintiff to be prima facie applicable.

118. The mitigation rule requires no more of a plaintiff than to act reasonably in all circumstances. The standard of reasonableness is not high in view of the fact that the defendant is an admitted wrongdoer.

119. The date of cancellation of the Contract is not a factor relevant to the issue of mitigation. The proposition that the timing of an election to lawfully cancel a contract in response to an ongoing repudiation exposes the innocent party to a defence of failure to mitigate loss for cancelling later rather than earlier is without merit.

120. If Claimant had, in fact, unreasonably delayed the cancellation of the Contract, the adverse consequence would be that Claimant would be considered to have waived the right to cancel for repudiation and would be held to the Contract. Once the Arbitral Tribunal found that the Claimant was entitled to cancel, it is not competent for the Respondent to argue that the cancellation is upheld but the damages reduced.

121. Prior to cancellation, Claimant was legally obliged to remain in a state of readiness to perform its contractual obligations. Had Claimant prematurely abandoned its contractual obligations before the cancellation, it would have been in unlawful breach of the Contract and rendered itself liable to cancellation by Respondent. If Respondent had paid the down-payment and required Claimant to perform its contractual obligations, it remained in a position to do so, albeit with some delay.

122. On the evidence, Claimant did not delay unreasonably before cancelling.

123. Respondent has not discharged its onus of proving that, prior to the cancellation, Claimant incurred expenses which were wasteful, unnecessary or unreasonable.

2) Respondent's position

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3) Findings of the Arbitral Tribunal

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Date relevant for the issue of mitigation

141. Claimant is correct in stating that the date of cancellation of the Contract is not per se a factor relevant for the issue of mitigation.

142. The duty to mitigate damages centres around the concept of reasonableness. As expressed by Stratford CJ in Hazis v Transvaal and Delagoa Bay Investment Co Ltd:

This rule about mitigating damages relates not to what the claimant in fact did, but to what he should have done. It is in essence a claim based on negligence – neglect to do what a reasonable man would do if placed in the position of the person claiming damages. The defendant in such claim says ‘admitting that in fact you suffered those damages, you have only yourself to blame for having suffered so much, or at all, because you did not take reasonable steps to protect yourself and, therefore, me’.

143. With regard to the issue of mitigation, the question is therefore:

Was there a point in time prior to cancellation of the Contract at which Claimant ought reasonably to have stopped incurring certain costs and, if so, when?

Contrary to what has been argued by both Parties, ¹ that point in time is not necessarily in direct correlation with the date of repudiation or the date of cancellation of the Contract.

144. In this case, there was an initial breach of contract when Respondent failed to pay the [advance] within the time provided for in the Contract. Repudiation occurred when it became clear that Respondent was not simply in default, but definitively no longer intended to be bound by the Contract. The relevant test is whether it was reasonable for Claimant to continue incurring costs for the entire period between the initial breach and the date of repudiation, or whether, in the specific circumstances which will be examined below, it ought not to have taken measures to reduce those costs at an earlier stage.

145. In order to determine this issue, it is necessary to examine the duties of both Parties under the Contract, their conduct and the overall chronology of events, starting from the signature of the Contract.

146. According to the Contract, the Parties were to perform their respective delivery/payment obligations according to specific schedules (Annexes 3 and 5 to the Contract), calculated by taking the date Tø as a starting point.

147. It is undisputed that the conditions set out in clause 3.2 of the Contract, and in particular those requiring the active involvement of Respondent (conclusion of an escrow agreement [3.2(d)] and transfer of the advance payment [3.2(e)]), were not, in fact, fulfilled. Claimant nevertheless started work on the project, retaining existing staff and taking on new employees, as well as commissioning the services of external contractors (for example the architect … who prepared the building designs).

148. Given the volume of work to be completed under the Contract and the time schedule originally agreed between the Parties, it appears reasonable for Claimant to have started work on the project immediately. Respondent has in any event not pleaded or submitted otherwise.

149. Furthermore, in the specific circumstances of the case, it was not unreasonable for Claimant to continue working on the project for a few months, even though Respondent was in default. Indeed, the evidence on record shows that there were assurances made by officials of Respondent … despite delays caused by budgeting issues, Respondent would "soon" fulfil its contractual obligations (in particular make the down-payment …). Most importantly, however, there was never any communication from Respondent in that time – official or otherwise – that Claimant should not start or continue working on the project. On the contrary, it appears that Claimant was specifically asked to prepare the building designs ahead of schedule for approval by the town planning authorities of the [region of Respondent], where the facility was to be built.

150. Claimant sent a set of building drawings to [Official of Respondent] ... Again, there was no communication by Respondent that Claimant ought not to have carried out this work or that it ought to suspend any further activities in relation to the project. At the same time, however, there was still no sign that the advance payment was forthcoming or that Respondent was about to fulfil its further obligations under the Contract. This appears to be the reason why Claimant, in its letter … formally requested information on the status of the project and asked when it could expect resolution of the pending issues.

151. Having received no response to its letter … Claimant wrote to Respondent again … indicating that it had been informed that the project was "on hold". There is no evidence that Claimant had any indication as to when Respondent intended to resume the project and, consequently, when Respondent would fulfil its preliminary obligations under the Contract. In the circumstances, Claimant could no longer reasonably assume that the project was suffering only a minor delay.

152. Once it realised that the project was "on hold", possibly for an indefinite period of time, Claimant should have started taking measures to minimise its losses. That Claimant chose to continue working on the project after Respondent had been in default for eight months and had given no concrete or formal assurance that performance was imminent, cannot be termed reasonable.

153. It is, however, understood that Claimant could not cease all activity on the project from one day to the next, i.e. that it needed a certain "winding-down" period. With regard to ongoing activities, the Arbitral Tribunal considers that such a winding-down could have been achieved by [the end of the “winding-down” period]. Therefore, while it appears reasonable for Claimant to have incurred costs up to and including … (which includes a "winding-down" period of 2 months from the point at which Claimant found out that Respondent had put the project on hold), it does not appear reasonable for Claimant to have continued incurring certain costs after that date. ²

154. Claimant argues that, prior to cancellation, it was "obliged to remain ready, willing and able to perform if called on to do so". However, when asked in re-direct examination whether, if Claimant had laid off its staff and stopped working on the project, it would still have been in a position to perform, had Respondent finally fulfilled its obligations, [Claimant’s witness 1] answered: "Yes, with some delay".

155. It is therefore assumed that, if Respondent had ultimately fulfilled its obligations under the Contract, the project would have proceeded on a delayed schedule. ³

156. Claimant is therefore wrong in asserting that it would have been in "unlawful breach of the contract and rendered itself liable to cancellation by the respondent" if it had ceased its activities prior to cancellation of the Contract. It appears, rather, that it could have ceased its activities as long as it believed the project to be on hold, and resumed them if Respondent had in the end decided to perform its contractual obligations. In that scenario, Respondent would clearly have had to bear the consequences of any delays caused by its own late performance.

157. In view of the above, it appears that Claimant failed to fulfil its duty to mitigate its losses by continuing to accumulate costs in circumstances where prudence would have dictated that it cease its activities on the project pending fulfilment by Respondent of its obligations.

158. Claimant is not entitled to claim for losses which could reasonably have been avoided after [the end of the “winding-down” period]. In Section IV below, each of Claimant's individual claims for damages will be examined in light of the above findings, to determine whether and, if so, how and from what time those damages could and ought to have been avoided.

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IV. Individual damage claim

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C) Expenses for advance payment guarantee

1) Claimant's position

213. In compliance with its obligations in terms of clause 3.2(f) of the Contract, Claimant procured a bank guarantee …

214. Claimant's pre-contract costing included … bank charges. This cost component covers the bank charges for the advance payment guarantee over the term of the Contract and would have been recovered had Respondent complied with its payment obligations. Although Claimant would still have had to pay its bank, it would have recovered these payments as part of the Contract price.

215. Respondent failed to return the original advance payment guarantee to Claimant, despite being requested to do so. Respondent claims to have lost the original advance payment guarantee.

216. Claimant was obliged to maintain and did in fact maintain the advance payment guarantee … until its cancellation ... As a result, it incurred costs... Owing to Respondent's repudiation, the cancellation of the Contract and Respondent's failure to return the original advance payment guarantee, these payments constitute wasted expenses which would not have been wasted if Respondent had complied with the terms of the Contract.

217. Claimant was not in a position to terminate the bank guarantee before cancellation of the Contract, as this would have constituted a breach of Claimant's contractual obligations. Claimant requested the return of the original bank guarantee within a week of cancelling the Contract. The evidence shows that Claimant acted reasonably by promptly requesting the bank guarantee after cancellation of the Contract and by promptly terminating the bank guarantee after receiving the letter from Respondent allowing it do so.

218. In the premises, Respondent is obliged to pay Claimant … plus interest on each of the amounts set out in Exhibit … at 15.5% per annum from the date when each payment was made by Claimant to its bank.

2) Respondent's position

219. Claimant procured the bank guarantee … despite being aware that Respondent exhibited an intention to no longer be bound by the Contract.

220. Claimant failed to mitigate its losses despite Respondent not having fulfilled the conditions set out in clause 3.2 of the Contract and is not entitled to recover those damages or losses from Respondent.

221. Claimant also failed to call for the guarantee from Respondent within a reasonable time. It took Claimant almost two years from the date of the signing of the Contract to the time when it ultimately called for the guarantee from Respondent. Claimant has furnished no reason as to why it did not call for the guarantee after four months and/or six months after signing the Contract when it was clear, on Claimant's own version, that Respondent exhibited an intention to no longer be bound by the Contract.

3) Findings of the Arbitral Tribunal

222. Respondent's statement that Claimant procured the guarantee despite being aware that Respondent exhibited an intention to no longer be bound by the Contract is flawed. Respondent has failed to adduce any evidence that such an intention was exhibited on or before [the date when the bank guarantee was sent to Respondent]. Moreover, according to clause 6.3 of the Contract, [the advance payment] was to be made by Respondent upon presentation by Claimant of an invoice and of the bank guarantee. Claimant therefore had a preliminary duty to procure the bank guarantee, which it did on [the date when the bank guarantee was sent to Respondent]. Respondent had no obligation to make the advance payment before it received the bank guarantee and Claimant consequently had no reason to doubt Respondent's intention to fulfil the Contract at that time.

223. Respondent provided no specific comments on Claimant's allegation that it effected payment to [the bank] in the amount of … and does not appear to dispute that a payment was made in that amount. The evidence on record is in any event sufficient to establish the quantum of this claim.

224. In addition, Respondent does not dispute that the bank charges for the advance payment guarantee would have been covered by the Contract price. This appears plausible, as Claimant had included a cost component for "bank charges" in its pre-contractual cost calculation…

225. It stands to reason that, as long as Claimant relied on the Contract – and had good reason to do so – it was obliged to maintain the bank guarantee. If it had withdrawn the bank guarantee, it could not have demanded that Respondent pay the advance of 15% of the Contract price. However, as soon as Claimant elected to cancel the Contract, it should have recalled the bank guarantee, which no longer had any purpose.

226. Claimant alleges that it did ask Respondent to return the bank guarantee "within a week" of cancelling the Contract. [Claimant’s witnesses] made statements to this effect during the Hearing. However, there is no document on record supporting this allegation.

227. The evidence on record suggests, rather, that Claimant only requested the return of the bank guarantee [one year after the cancellation of the Contract]: In his "founding affidavit" submitted in support of Claimant's request for interim measures, [Claimant’s witness 2] set out the steps taken to recover the original advance payment guarantee from Respondent. He referred to letters exchanged between the Parties on this issue, the first being a letter sent by Claimant's counsel to Respondent's representative [one year after the cancellation of the Contract]. That letter, which was attached to the "founding affidavit" as Exhibit … makes no mention of a previous request for the return of the advance payment guarantee. Therefore, it appears that Claimant only requested the return of the advance payment guarantee [one year after the cancellation of the Contract], and not [at the time of the cancellation of the contract], as it now claims.

228. Claimant was under a general duty to mitigate damages, which implies avoiding the accumulation of unnecessary additional costs by promptly requesting the return of the bank guarantee after cancellation of the Contract. Based on the evidence on record, it failed to make such request and effected further payments to [the bank]…

229. It is undisputed that, when Claimant requested the return of the original bank guarantee [one year after the cancellation of the Contract], Respondent indicated that the document was lost. However, it cannot be said whether Respondent would have been in a position to return the document if Claimant had made that request immediately after cancelling the Contract... Even if this had not been the case, Claimant could have requested that Respondent supply a waiver letter in lieu of the original guarantee, as it then did … allowing it to terminate the guarantee. In the circumstances, Claimant must bear the consequences of its failure to request the return of the original advance payment guarantee or the issuance of a waiver letter promptly after the cancellation of the Contract and is therefore only entitled to recover the amounts paid to [the bank] up to the date of cancellation…

230. Claimant is claiming interest at 15.5% per annum from the date each payment was made to [the bank]. However, as set out above, it is only entitled to interest from the date when performance was due. Claimant has not established whether and in what amounts the bank charges would have been covered by the milestone payments. Interest can therefore only be claimed from the date when Claimant quantified its claim and demanded payment of Respondent, on the date the letter of demand was served on Respondent…

231. Claimant's claim for wasted expenses for the advance payment guarantee is admitted in the amount of … plus interest at 15.5% per annum from [the date the letter of demand was served on Respondent] to the date of payment, but rejected in the remainder.

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F. Building design

1) Claimant's position

264. The Parties agreed on a payment schedule. At each milestone, in addition to the relevant milestone payment, Claimant would have received a portion of the advance payment. The Contract clearly envisaged payment by Respondent for the building design and construction.

265. …

266. Claimant completed 80% of the building design and the building engineering drawings, and delivered 33% of the drawings to Respondent via email to [a State Official] ... The uncontested evidence shows that Claimant utilised an independent architect and thereby incurred the external cost arising for preparation of 80% of the building plans.

267. The undelivered designs and drawings are of no commercial value to Claimant or in the market, as the designs and drawings were created specifically for the requirements of Respondent and the specific conditions at Respondent's site at the Innovation Hub.

268. Accordingly, Claimant is entitled to payment of 80% of … made up as follows:

• … constituting 33% thereof for the drawings already delivered;
• … constituting 47% thereof for the designs and drawings prepared but undelivered, which are of no commercial value to Claimant.

269. …

2) Respondent's position

270. A month after the Contract was concluded between the Parties, Claimant was aware of an unequivocal conduct on the part of Respondent which exhibited an intention to no longer be bound by the Contract.

271. Claimant failed to mitigate its losses and performed on a Contract to which, on its own version, Respondent did not intend to be bound.

272. Claimant seeks damages for the building design, which in fact still constitutes its intellectual property and expertise.

273. Claimant alleges that it completed 80% of the building design. However, Claimant, on its own version, concedes that it only delivered 33% of the drawing to Respondent. There is no basis, in fact and/or in law, as to why Claimant would be entitled to payment of 80% of the alleged completed drawings when, in fact, those drawings were never delivered to Respondent. Claimant is asking that Respondent be liable to pay for goods which were not received.

274. At best, Claimant should only be allowed the value of 33% of the drawings which it alleges it delivered to Respondent.

3) Findings of the Arbitral Tribunal

275. Claimant alleges that, while it only delivered one third of the designs and engineering drawings for the buildings required under the Contract to Respondent, it actually completed 80% of the drawings and designs. It is therefore claiming 80% of the "contract value" of the designs/drawings, net of profit.

276. Respondent argues that Claimant is only entitled to claim payment for the designs and drawings actually delivered. That is wrong. Claimant is entitled to recover damages suffered due to the repudiation of the Contract, which includes expenditure incurred for work actually performed in furtherance of the Contract – irrespective of whether or not the results were delivered to Respondent.

277. Claimant alleges that it "incurred the external cost arising from preparation of 80% of the building plans". The quantum of its claim in relation to the building design was calculated as follows:

• As a first step, Claimant took the milestone payments and the portions of the advance payment which it alleges were earmarked for the building design deliverable(s) …
• Claimant estimated that 80% of the building design deliverables had been completed. According to the witness statement of … the architect employed by Claimant, "the plans were complete, but it is architectural practice to assess them as 80% complete pending final discussions with the end user"…
• Claimant then deducted the profit margin … which would have been included in the milestone payments, arriving at the amount of …

278. The milestone payments represented percentages of the Contract price assigned to specific cost components as per Claimant's pre-contract costing schedule and Annex 1 to the Contract. For example, as can be seen from clause 6.4 of the Contract, 10% of the value of the component "construction services turn key" was due upon delivery of the preliminary site lay-out plans. According to clause 6.10 of the Contract, 40% of the value of the component "construction services turn key" was due upon delivery of the preliminary architectural design concept and engineering drawings for all the buildings. The cost component "construction services turn key" was made up of costs for material, travel, engineering and external services/others, plus overheads or margins for materials, administration, sales costs, warranty contingency, special sales charges, bank charges, pre-finance costs, the commission of [Claimant’s consultant] and "ordinary" profit.

279. Although the milestone payments would undoubtedly have served to cover direct costs, overheads and profit, this does not mean that they necessarily represent the exact counter-value of the delivered work.

280. In a case like this one, where the contract is cancelled at a time when one of the parties has already performed part of its contractual obligations, i.e. has produced certain items for a turn-key project, that party is, as a rule, entitled to the expenses incurred in relation to the produced items, plus a corresponding proportion of overheads and profit (all of which would have been covered by the contract price). That is the extent of its damages. The question is whether Claimant's use of the milestone payments as a basis to calculate those damages is valid in this case.

281. Claimant is claiming 80% of the milestone payments due pursuant to clause 6.4 and clause 6.10 and of the corresponding portions of the advance payment. Although it has deducted the "ordinary" profit margin (which is already being claimed under a separate heading), it has not made any further deductions for cost components that are being claimed under other headings in this arbitration, such as the commission for [Claimant’s consultant]. and the bank charges, both of which would have been covered by the milestone payments. Thus, if Claimant's claim for payment of 80% of the milestone payments (and corresponding portions of the advance payment) were admitted, there would be a risk that Claimant would be placed in a better position than it would have been in had the Contract been fulfilled. For this reason and the further reasons listed below, the method applied by Claimant – i.e. using the milestone payments as a basis for its damages claim – cannot be allowed.

282. Based on Claimant's version of the facts, the only costs it incurred in relation to the building design were for external services provided by the architect …. Claimant has provided no indication in its briefs as to the amounts paid to [the architect] for his services. This information would presumably have been in Claimant's possession.

283. Indeed, in its letter to Respondent … Claimant wrote that "as at status of [date]", it had incurred costs in the amount of … for the preliminary lay-out plans for the buildings. The letter lists further costs incurred by Claimant, none of which, however, appear to relate to the building design. On the facts, it is clear that no further work was carried out on the building design after [that date]. ⁴ It would therefore appear that the amount indicated by Claimant in that letter constitutes the actual expenditure incurred for the preparation of the preliminary lay-out plans. Claimant has provided no evidence that it incurred any further costs in relation to the building design.

284. If Claimant were to be paid for work not carried out or for costs not actually incurred, it would be over-compensated. The amount that Claimant is claiming in this arbitration as "value of the work performed on the building design" … appears to cover far more than its actual expenditure (plus overheads) ⁵. This cannot be allowed.

285. Consequently, Claimant is entitled to recover only the amount of … (presumed actual expenditure), plus an additional fixed overhead of 19.5% for general administrative costs and general sales costs …⁶ Respondent's argument that Claimant failed to mitigate the damages is rejected. As set out above, ⁷ it was reasonable for Claimant to start work in furtherance of the Contract immediately after signature. In addition, it appears, based on the testimony of [Claimant’s witness 1] and [the architect] (which is credible and remained undisputed on this point) that there were several meetings with representatives … to discuss the requirements of the buildings … and that Claimant was urged to make progress on the building design. In the circumstances, it was reasonable for Claimant to continue working on the building design until [date when drawings were sent to State Official] and to incur the related costs.

286. In any event, Respondent is precluded from arguing that, a month after the Contract was concluded, it displayed an intent to no longer be bound by the Contract and that Claimant should consequently never even have begun work on the building design, or should at least have stopped much earlier. Indeed, it is established that Respondent never expressly indicated its intention not to be bound by the Contract, nor did such unequivocal intention become evident until shortly before Claimant cancelled the Contract ... Respondent even took delivery of a portion of the building lay-out plans and designs on [date when drawings were sent to State Official], without giving any indication that the work should not have been carried out. It also failed to react to Claimant's [subsequent] letter … in which the costs incurred for the production of those drawings were expressly mentioned.

287. … Claimant is entitled to interest on the awarded damages from the date of performance according to the Contract. Had the Contract been duly performed, it is assumed that Claimant would have received payments … which would (at least partially) have covered the costs incurred in preparing the building design and drawings. Claimant is therefore entitled to interest …

288. Claimant's claim for damages relating to the building design is admitted in the amount of … plus interest at 15.5% per annum…. to date of payment but is rejected in the remainder.

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H. Employee/staff costs

1) Claimant's position

306. As a consequence of the conclusion of the Contract, Claimant entered into employment contracts with 13 additional employees and retained the services of 9 existing employees whose contracts Claimant would have terminated but for the conclusion of the Contract with Respondent.

307. The employment of these 22 employees was necessary for Claimant to fulfil its contractual obligations in terms of the Contract. There can be no dispute that these costs were both necessary and reasonable, and would have been recovered by Claimant as part of its costs and overheads had Respondent honoured the Contract.

308. The salaries paid by Claimant to these employees constitute wasted expenses as a consequence of Respondent's repudiation of the Contract, which made their employment unnecessary. Accordingly, Claimant is entitled to payment of … plus interest thereon at 15.5% per annum from the date of Claimant's letter of demand … until the date of payment.

309. Respondent has not challenged specific amounts. Rather, its defence is that Claimant is not entitled to recover all its wasted staff costs because it did not cancel the Contract earlier. This defence is unsustainable. On the evidence, Claimant not only acted reasonably in retaining these staff members, but was obliged to do so prior to cancellation in order to be prepared to perform if required to do so.

310. Use of the employees for other work does not disentitle Claimant from recovering the cost of hiring them, in the absence of evidence discharging Respondent's onus of showing other income generated by them. Respondent did not pursue this line.

2) Respondent's position

311. The damages claimed do not flow naturally and generally from the repudiation of the Contract and were not contemplated by the Parties when concluding the Contract.

312. Claimant failed to mitigate its loss. In cross-examination, [Claimant’s witness 1] was referred to the relevant exhibits in demonstrating that Claimant retained that workforce for more than six months after the Contract was concluded and also in some instances beyond the period of the termination of the Contract.

313. On Claimant's own version, it came to the conclusion that Respondent exhibited an intention to no longer be bound by the Contract within one or, at worst, four months after the Contract was concluded. There is no reason why Claimant could not have terminated the contracts with those non-administrative members and/or any other employee that was engaged specifically to fulfil Claimant's mandate under the Contract at that point.

3) Findings of the Arbitral Tribunal

314. Claimant is claiming as damages the salaries it paid to employees who were either hired or retained to allow Claimant to perform its obligations under the Contract.

315. Respondent's pleadings in relation to the employee costs are limited to the issues of causation and mitigation. ⁸ Respondent has not disputed Claimant's allegation that these employees were hired or retained for this purpose. Nor has it disputed that the salaries set out in [Claimant’s exhibits] were in fact paid to those employees. Those amounts appear plausible and reasonable and are considered sufficiently established.

316. The damages claimed by Claimant flow naturally and generally from the repudiation and cancellation of the Contract:

It stands to reason that Claimant would hire or retain additional personnel to perform its obligations under the Contract, particularly given the volume of work to be completed. It must be assumed that Claimant has sufficient experience of this type of project to know what resources would be required to fulfil its obligations and that it would ensure that the related costs would be covered by the Contract price.

317. Nevertheless, to award Claimant damages for the full employee costs would result in a duplication of damages. Indeed, Claimant has already claimed (and is being awarded):

1. damages for hours worked by its non-administrative employees in furtherance of the Contract (Exhibits …) (i.e. an amount which would have served to cover the salaries of its non-administrative personnel) and
2. overheads for general administrative costs (which would have served to cover the salaries of its administrative personnel).

318. Those amounts must be deducted from Claimant's claims for employee costs, to avoid a duplication of damages. It is not entirely clear whether the hours listed in Exhibits … can all be attributed to the non-administrative employees listed in Claimant's Exhibit … or whether some of them were in fact hours worked by other employees of Claimant not listed in Exhibit ... However, Claimant must bear the consequences of its failure to submit more precise evidence in this regard – i.e. the full value of the damages awarded for those hours must be deducted from the claim for employee costs.

319. Once it realised that the project was "on hold" and that it was unclear when Respondent would start fulfilling its obligations, Claimant ought to have taken reasonable measures to prevent unnecessary costs from accumulating. This includes laying off employees or redeploying them onto other projects. [Claimant’s witness 2] explained that Claimant tried to employ the staff on other contracts … and began laying them off in the [following] quarter... [Claimant’s witness 1] also testified that, even if Claimant had laid off its staff, it would have been able to resume performance "with some delay" if Respondent had decided to make the advance payment.

320. In light of the circumstances set out above, ⁹ Claimant should have laid off or redeployed its "idle" staff … Given that, on Claimant's version (which has remained undisputed), it was required to comply with a minimum severance period of one month under [the law of Claimant’s place of incorporation], it may claim costs for its employees until [the end of minimum severance period].

321. Claimant has submitted a revised Exhibit … showing that the salaries paid to its employees hired/retained for the performance of the Contract until [the end of minimum severance period] amount to …. The amounts awarded … for hours worked by non-administrative employees and for general administrative costs must be deducted…

322. Interest on this amount starts to run from the date of Claimant's letter of demand.

323. Claimant's claim for employee costs is therefore admitted in the amount of … plus interest from [the date the letter of demand was served on Respondent], but rejected in the remainder.

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