Reasoning
51 The parties are in dispute as to whether the evidence adduced at trial is sufficient to support the sums claimed by the appellants in respect of the salaries attributable to the six positions, should the appellants succeed on Ground 1. They are also in dispute as to whether there is any evidence supporting the quantum of travel and accommodation expenses claimed by the appellants. However, the parties seem to agree that if the appellants succeed on Ground 1, the matter should be remitted to the primary Judge to determine:
(a) the quantum of damages; and
(b) whether accounts should be ordered and, if so, what other orders should be made.
52 His Honour's reasoning on the question of the Management Fee is not entirely free from difficulty. First, it is doubtful whether the letter of 7 July 1999 is of significant assistance in construing the Management Agreement. The terms of the interim arrangement were different from those ultimately incorporated into the Management Agreement. The latter, for example, drew no distinction between 'offshore support costs' and 'direct project related costs'. In any event, these were not expressions defined in the letter of 7 July 1999. Moreover, the definition of 'Management Fee' in the Management Agreement had no counterpart in the letter. Further, the letter was framed on the assumption that the project would become self-financing within sixty to ninety days, an assumption that was not incorporated into the Management Agreement.
53 Secondly, the answers given by Mr Kroeger in re-examination are of little or no assistance in determining the intended operation of the compensation provisions of the Catering Contract. Mr Kroeger was engaged by Eurest and his responses in re-examination doubtless reflected Eurest's view of the operation of contractual provisions.
54 Thirdly, even if Fubilan was to be reimbursed by OTML for the salaries and expenses relating to the six positions occupied by expatriates, that would not necessarily rule out the possibility that the Management Agreement contemplated that Eurest would ultimately bear the cost of those salaries and expenses. While the Catering Contract and the Management Agreement were closely related, it was open to the parties to negotiate arrangements that would result in Fubilan, on one view, being reimbursed twice for the same expenses. The lump sum payment by Fubilan to Eurest, for example, might have been negotiated having regard to what otherwise might have been regarded as a 'windfall' gain to Fubilan.
55 The issue presented by Ground 1 of the Notice of Appeal must be resolved by reference to the language used in the Management Agreement although, as his Honour noted, the construction of the Management Agreement is to be informed by the surrounding circumstances, including the terms of the Catering Contract. Indeed, the Catering Contract (section 2, cl 6.1) specifically obliged Fubilan to employ and keep employed Eurest:
'to manage, control and supervise the whole of the Services on behalf of [Fubilan]'.
Moreover, Fubilan was obliged to enter into a Management Contract with Eurest on the terms specified in Schedule 2-11 to the Catering Contract.
56 The starting point under the Management Agreement, as the appellants contend, is that Eurest was appointed by Fubilan to manage, 'supervise and conduct the Operations' (cl 2.2). Since the term 'Operations' was defined very broadly to include all activities and operations engaged in by Fubilan in providing the Services under the Catering Contract, the language of cl 2.2, if read in isolation, suggests that Eurest was actually to provide all the Services on Fubilan's behalf. Further, given that the 'Management Fee' was to:
'[cover] all of the expenses that [Eurest] incurs in the performance or discharge of its obligations under [the] Agreement',
a literal reading of the two provisions might suggest that Eurest was to meet all the expenses incurred in providing catering services to OTML pursuant to the Catering Contract.
57 This would be a very surprising result. Indeed, there was no dispute that this could not be the proper construction of the Management Agreement. It could hardly have been intended that Eurest, which was to receive an annual fee initially in a flat amount of $225,000, was to bear all the very substantial costs of conducting the Operations. It is true that the Management Agreement provided for Eurest to receive an 'Incentive Fee' equivalent to 50 per cent of net profit in excess of K1.2 million per annum (cll 1.1 (definition of 'Incentive Fee'), 11.2), but this hardly warrants giving cl 2.2 a literal construction that would require Eurest to meet the entire expenses of the Operations.
58 This view is reinforced by other provisions of the Management Agreement. The specific duties of Eurest were set out in cl 4.2, the relevant parts of which have been reproduced earlier ([31] above). Clause 4.2 was expressed not to restrict 'the generality of clause 2', but was also said to be 'subject always to the requirements of the [Catering] Contract'. Clause 4.2(a)(ii), in particular, suggests that Eurest's duties in relation to staff providing the Services to OTML, leaving aside issues such as occupational health and safety, were limited to employing and training staff and localisation of positions.
59 Furthermore, although Eurest was to conduct the Operations, it was to do so in accordance with a Program and Budget (cl 5.1). Eurest was not to incur any expenditure unless the expenditure was included in a Program and Budget or was otherwise approved by Fubilan (cl 5.2(a)). Eurest was to operate a bank account and pay into accounts all moneys received by it pursuant to the Management Agreement and was to make all disbursements of Company Expenses in connection with the Operation from the account (cl 5.11(a), (b)).
60 Eurest was to co-operate with the board of Fubilan in arranging each proposed Program and Budget and with MRSM to determine the preferred method of funding Fubilan's working capital (cl 8.1(a)). Each proposed Program and Budget was to specify in reasonable detail the Operations to be carried out and provide an estimate of the Company Expenses required (cl 8.2(c)). Fubilan's requirements for working capital were to be as provided for in the Programs and Budgets and were to be funded principally by MRSM providing debt and equity finance to Fubilan up to K3 million. Additional funding was to be provided by loans from MRSM or MRDC, third party borrowings or profits from Operations (cl 7.1). Within the framework of an approved Program and Budget, Eurest was to submit periodically to the boards of Fubilan, MRSM and MRDC an estimate of Company Expenses for the ensuing period (cl 8.5(a)). Eurest was to give notice to MRSM and MRDC of the contributions to Company Expenses each was to make to Fubilan by way of contributions to share capital in loans (cl 8.5(b)). MRSM and MRDC were bound to pay to Fubilan the amounts so specified (cl 8.5(c)-(e)).
61 This elaborate structure makes it clear that Eurest was not to conduct all Operations at its own expense. The finance required for the Operations was to be provided by Fubilan which, in turn, was to receive funds from MRSM and MRDC. Eurest was to meet the expenses incurred in the performance of its obligations under the Management Agreement, specifically those set out in cl 4.2.
62 It may not be an easy task in any given instance to determine precisely which expenses are to be borne by Eurest and which by Fubilan. It is possible, for example, that one person, whether formally employed by Eurest or by Fubilan, could discharge Eurest's obligations under the Management Agreement and also perform functions that are not Eurest's contractual responsibility. Nonetheless, whatever difficulties there may be in drawing a line in particular cases, the present claim relates to expenses which, clearly enough, were not intended to be borne by Eurest.
63 Under the Catering Contract, Fubilan was to receive lump sum payments in accordance with Schedule 3-1 as 'full compensation' for its operating and fixed costs including 'management, supervision and all staff costs' (section 3, cl 1.4.1). The full compensation was to exclude 'all Contractor profit for all of the Services'. Fubilan was to derive all of its profit for the Services from the unit rates payable to it on a per plate basis, as set out in Item 3 of Schedule 3-1.
64 Any doubt as to whether the costs associated with the six positions were to be the subject of the lump sum compensatory payments is dispelled by Schedule 3-4 to the Catering Contract. This provided that, upon the localisation of each of the six positions, specified adjustments were to be made to Item 2.1 of Schedule 3-1 which provided for the lump sum compensatory payments pursuant to cl 1.4 of Section 3 of the Catering Contract. It is quite clear that Schedule 3-4 assumed that the costs incurred by Fubilan by way of salaries and related expenses for the six positions would be fully compensated by OTML's monthly lump sum payment.
65 The Catering Contract was structured on the basis that Fubilan would provide all the Services to OTML. The role of Eurest was to manage, control and supervise the Services (section 2, cl 6.1). OTML was to compensate Fubilan for its operating costs, including staff, but on a basis that excluded a profit component. The six positions occupied by expatriates at the date the Catering Contract and Management Agreement came into force, were included in 'the staff' for which Fubilan was to be fully compensated by OTML. The structure of the Catering Contract strongly suggests that the occupants of the six positions from time to time (whether expatriate or local) were to be regarded as staff delivering the Services Fubilan was obliged to provide to OTML. Eurest's role was to manage, control and supervise the staff, including the occupants of those six positions.
66 Clause 2.2 and the definition of 'Management Fee' in the Management Agreement must be construed within this framework. The Management Fee was not intended to cover the salary and associated costs of the occupants of the six positions. They were part of the staff Eurest was to manage, control and supervise. Eurest was to bear the expenses of managing, controlling and supervising the staff, but the Management Agreement did not require Eurest to meet the salaries and associated costs of the holders of the six positions. In short, the expenses incurred in performing or discharging the duties of these positions were not:
'expenses that the Manager incurs in the performance or discharge of its obligations under [the Management Agreement]',
within the meaning of the definition of Management Fee.
67 We do not rule out the possibility that the holders of one or more of the six positions might have performed additional duties from time to time, over and above those contemplated by the Catering Contract. If the additional duties were the responsibility of Eurest under the Management Agreement, it might have been liable to bear the proportion of expenses associated with the performance of the additional duties. However, the appellants did not and do not seek to make out a case of this nature.
68 Ground 1 of the Amended Notice of Appeal therefore fails.