1 Thursday, 24 May 2018 2 (10.16 am) 3 CHAIR OF THE INQUIRY: The next submission is by Mr Dunlop. 4 Closing submissions by MR DUNLOP 5 MR DUNLOP QC: My Lord, I'm obliged. 6 My Lord, I welcome the opportunity to supplement the 7 written submissions to which I adhere in full. 8 Your Lordship's remit shapes the questions which he 9 asked of the core participants: what were the causes and 10 who was responsible for the delay, increase in cost and 11 other failures of the project? 12 My Lord, I start out by pointing out that the way 13 that that is framed, while doubtless understandable 14 given the remit, might be taken as including 15 an assumption, which is not borne out, namely that the 16 project was a failure. 17 It had difficulties, certainly. It overran. And it 18 cost more than was anticipated. But it hasn't been 19 a failure. The evidence taken as a whole shows that 20 Edinburgh has been left with a valuable asset, hence, no 21 doubt, why the line is to be extended. 22 Your Lordship should not start in my submission with 23 any assumption that the project itself has failed. It 24 has not. Edinburgh itself is enhanced by the existence 25 of the tram system. 22 1 Turning then to the core of the remit, my Lord, 2 your Lordship is asked to explore causes and to explore 3 blame. If I could take these in turn. 4 Causes. Why did it take longer and why did it cost 5 more? The Council will of course submit to 6 your Lordship that it was mainly DLA's fault. Such 7 a submission, in my submission, parts company with 8 reality. It is important, as your Lordship will 9 doubtless appreciate, as he pens his report, to 10 understand the limits of what DLA, like any legal firm, 11 engaged in a similar project, were there to do. 12 Some core truths should be borne in mind. DLA had 13 been stood down for a period of several months. DLA 14 were not present at Wiesbaden. DLA were not asked and 15 did not have the expertise to allow them to opine on 16 technical or commercial matters. 17 The decision to take SDS, MUDFA and Infraco 18 separately was nothing to do with DLA. That immediately 19 entailed the risk that delays in one would impact on the 20 other. 21 The decision to withdraw the expertise of 22 Transport Scotland from the tram initiative was not one 23 in which DLA had any say. The decision of who should be 24 put in charge of crucial decisions at tie was nothing to 25 do with DLA, and governance was a matter wholly outwith 23 1 DLA's reach. 2 Now, doubtless the Council will parrot my learned 3 friend, Mr Fairley, in his paraphrasing of 4 President Trump in blaming the contract. Doing so, 5 however, exposes a major flaw in reasoning. The proper 6 analysis is, I suggest, quite straightforward. 7 Wiesbaden was not the responsibility of DLA. Wiesbaden 8 set the tone for what followed. The evidence shows, and 9 your Lordship heard it again in words of one syllable 10 from my learned friend Mr Borland yesterday, that the 11 deal as struck, which on material risk barely moved from 12 Wiesbaden, represented the only show in town. Infraco 13 were quite simply and quite clearly not prepared to hold 14 any more risk than they actually undertook. 15 It was for the deal-makers, Mr Gilbert and others, 16 to decide if that was acceptable to tie or not. 17 DLA were not and cannot be said to have been 18 responsible for any delay in the contract being 19 executed. There is no realistic suggestion that 20 anything they did post contract close caused a delay or 21 an increase in cost. So that brings us back to the 22 contract itself. 23 Whatever criticisms your Lordship or anyone else 24 might have of that contract, that again returns one to 25 the point that is crystal clear on the evidence. This 24 1 contract, or at least the essentials of it so far as 2 pricing is concerned, was the only deal available. 3 So no matter how much DLA advised of the risks 4 inherent in it, no matter how much they had railed 5 against those, and I will come back to that, Infraco 6 were not going to assume any more of those risks than 7 they already had. 8 So what could have been done? tie could have 9 refused to sign. Well, that would just have delayed 10 matters further and given rise to ever increasing 11 inflationary increases and tie running costs. We know 12 from Infraco that further negotiation wasn't going to 13 lead anywhere material, or such delays could have 14 torpedoed the whole deal, potentially meaning the end of 15 the project and the Government funding of it. 16 Your Lordship will recall the amount already 17 expended by the time of contract close. 18 GBP136.5 million. Given that amount, given the amount 19 of inconvenience already caused to the residents of 20 Edinburgh by the MUDFA works, which had commenced in 21 July of the previous year, shelving the project in the 22 middle of 2008 is something that would truly have 23 warranted the description of failure. 24 Imagine it had been shelved. Imagine that what 25 Edinburgh was left with at the end of 2008 was a few 25 1 holes in the road and a GBP136 million hole in its 2 budget. That really would have warranted the villagers 3 gathering their torches and their pitchforks. That did 4 not happen. And Edinburgh now has a profitable tram 5 network. 6 All that being so, my Lord, how is it, when 7 your Lordship answers the questions in the remit, that 8 DLA are said to have caused the delays, caused the 9 increases in cost, or caused the failure of the project? 10 The answer is that they haven't. The delays and the 11 extra costs sprang from a contract which others agreed 12 and which was not in its essentials regarding price and 13 risk up for negotiation. 14 DLA couldn't change that contract. They could only 15 have delayed its execution. How on the evidence would 16 that have helped? 17 It's very easy to be critical of Mr Fitchie. Lawyer 18 bashing is very much in vogue these days. But this was 19 a man doing the best he could in a difficult situation 20 that was not of his making. And I return to the 21 question of how is it that he caused the delay? How is 22 it that he increased the cost? Nothing he could have 23 done would have made the slightest difference to what 24 later occurred. 25 Taking the view that further delays or indeed 26 1 shelving the project would in some way have avoided 2 delays or costs or failure runs contrary to the evidence 3 and it runs contrary to common sense. 4 But if your Lordship were minded to go down that 5 route, then where is it that DLA are said to have fallen 6 down? The primary thrust of that criticism is failure 7 to apprise tie and CEC of risks. So obviously, my Lord, 8 I'm now moving from the question of the cause and I'm 9 tackling the question of blame. 10 As a starting point, the Council's fundamental 11 complaint, one of not themselves being advised directly 12 by DLA, asks your Lordship to ignore the very duty of 13 care deed upon which they found. It is axiomatic that a 14 contractual relationship draws the parameters within 15 which the parties thereto should act and should be 16 bound. 17 Here the Council expressly agreed more than once 18 that DLA reporting to tie was to equate to DLA reporting 19 to the Council. It does not lie, with respect, in their 20 collective mouth to approbate and to reprobate, to found 21 on the duty of care deed, and at the same time to 22 disavow its core stipulations. 23 Thereafter, on the question of risk, when 24 your Lordship looks at the evidence in that regard, he 25 will swiftly realise, I submit, that much of the 27 1 criticism of Mr Fitchie was for not. He was questioned 2 robustly over a long period of time. We have made our 3 own criticisms of the way in which he was treated and 4 I don't depart from those, but equally, I don't spend 5 time repeating them because whatever concerns gave rise 6 to such questioning, they surely dissolve when one 7 considers the later evidence. 8 I say that, my Lord, because it is, I submit, 9 incontrovertible that major players in both tie and the 10 Council were fully sighted on the question of risk. 11 If we start with the notion that this was a fixed 12 price contract, it doesn't take long to read Schedule 13 Part 4. It's a few pages. Whatever drafting criticisms 14 one might have regarding Schedule Part 4, and it wasn't 15 Mr Fitchie that drafted it, the document is pellucidly 16 clear in one regard at least. It's not a fixed price 17 contract. 18 Rather, there are clear risks obviously left with 19 the public sector. Risks which were unquantified and in 20 truth unquantifiable. Those risks were certainly not 21 quantified by DLA, nor could they have been. As the 22 evidence shows, without contradiction, and all witnesses 23 were unanimous on this, quantification of the known 24 risks was a technical and commercial matter upon which 25 lawyers, DLA or otherwise, simply were not qualified to 28 1 advise. 2 Such risks were objectively clear. They were also 3 subjectively known by key players. Mr Bell's Counsel 4 yesterday asserted that Mr Bell knew of the risks but 5 not their size. But surely that is the whole point. 6 These risks were unquantified, but it was not for DLA to 7 quantify. 8 The same point is then seen when your Lordship looks 9 to the correspondence, the contemporaneous 10 correspondence, as it flows, 2007 into 2008. By the end 11 of January 2008 -- we reference this at paragraph 76 of 12 the written submissions -- we see an email exchange 13 amongst Nick Smith, Gill Lindsay, Colin MacKenzie, of 14 CEC Legal, talking of the incomplete stage of the SDS 15 design and the potential for serious risks of increased 16 cost to the project which were "unquantified". By 17 February 2008 we have Ms Lindsay aware that the design 18 risk was not being transferred to Infraco. Mr MacKenzie 19 is also by this stage aware that this risk was to be 20 retained by the public sector. 21 At the end of February Ms Lindsay emails 22 Mr MacKenzie saying that she considered the risk 23 associated with SDS design might be very significant and 24 suggesting that she felt that the risk allowance for SDS 25 at GBP3 million was too low. She also accepted, and she 29 1 plainly was correct to accept, that assessment of the 2 risk allowance was a commercial matter for tie and not 3 a matter for DLA. 4 Mr MacKenzie was entirely candid that he had read 5 and fully understood the risks associated with Schedule 6 Part 4 and the Pricing Assumptions. The same cannot be 7 said, regrettably, of Nick Smith. I respectfully 8 suggest that your Lordship may view the evidence of 9 Mr Smith, so keen to distance himself from a contract 10 which he had plainly received and upon which he 11 purported to advise jointly with Mr MacKenzie, with some 12 suspicion. 13 Ultimately, DLA's only reporting line to the Council 14 was via CEC, City of Edinburgh Council legal. DLA 15 reasonably anticipated that the lawyers would read the 16 contract, or at the very least the core clauses, and the 17 obviously crucial pricing schedule. We know that 18 Mr MacKenzie did exactly that. Whether Ms Lindsay did 19 or did not, she should have; and it ought to have been 20 reasonably thought that she would have. 21 At the very least, if delegating that task to 22 Messrs MacKenzie and Smith, she should have ensured that 23 they attended thereto. 24 DLA's letters made clear that they were no 25 substitute for actually reading the contract. Having 30 1 read and having understood the contract alongside DLA's 2 close letters, it was for Edinburgh Council legal, not 3 for DLA then, to report to elected members. 4 If, as certain members claimed, they didn't 5 understand the blindingly obvious fact that this was no 6 fixed price contract, the fault for that lies with 7 Edinburgh Council Legal and the officers within the 8 other Council departments. It certainly cannot lie with 9 DLA whose job was to brief City of Edinburgh Council 10 legal when instructed to do so by tie. 11 So looking then to tie itself, my Lord, by 12 March 2008 Mr Fitchie had met with Mr Gilbert and made 13 it clear that the risk of Base Case Assumptions failing 14 lay entirely with tie, moreover, that tie had no 15 visibility on the state of the design. 16 Mr Bell -- he's already been mentioned. 17 Schedule Part 4 was drafted and controlled by 18 Messrs Gilbert and Bell. Their knowledge of the 19 existence of risk is plain. It's plain on Schedule 20 Part 1 and it's plain on Clause 80, which was drafted by 21 Infraco and agreed to by Mr Gilbert. 22 Any lack of knowledge of the extent of these risks, 23 these known risks, is simply not down to DLA, especially 24 when there is clear contemporaneous evidence that 25 Mr Fitchie warned of the risk, that Infraco's claims for 31 1 notified departures would be all encompassing and 2 conservative. So far as any lawyer could ever quantify 3 the risks that were known, saying that they would be all 4 encompassing and conservative is as good as it can be. 5 In conclusion, my Lord, the point of this Inquiry is 6 to find out why the tram project was late and why it was 7 over budget. There are in truth multiple reasons for 8 that. None lies at DLA's door. The things they are 9 criticised for not doing would not have avoided the 10 delays or the added costs. Of that we can be clear. 11 Those criticisms, the criticisms advanced of 12 Mr Fitchie, in any event involved 20/20 hindsight and 13 a great deal of rewriting history. 14 The contract was ultimately both understandable and 15 understood by key players, at least so far as the 16 incidence of risk was understood. Complaints that the 17 known risk was not properly quantified at the risk of 18 repetition, are simply not validly directed at DLA. 19 My Lord, it is perhaps understandable that when 20 a contract like this does not go exactly to plan, the 21 knee-jerk reaction is a modern version of Shakespeare's 22 "first, let's kill all the lawyers". Your Lordship 23 will, I'm sure, avoid knee-jerk reactions. DLA did not 24 delay this project. DLA did not increase its costs. 25 And to deride a profitable tram network, which with the 32 1 grant cost the Council less than its ultimate worth, as 2 a failure, is to prefer hysteria over rational analysis. 3 My Lord, with again, the thanks for being allowed to 4 supplement my submissions, and of course with an 5 indication that I will answer any questions following 6 from your Lordship, those are the further submissions 7 for DLA Piper. 8 CHAIR OF THE INQUIRY: Thank you very much, Mr Dunlop. 9 I think you will be aware that your submission first of 10 all refers to documents which were submitted to the 11 Inquiry at an earlier date but did not appear in 12 Haymarket. 13 MR DUNLOP QC: Yes. 14 CHAIR OF THE INQUIRY: I think at the preliminary hearing, 15 I made clear that we had adopted a strategy to deal with 16 3 million documents which have been reduced from 17 500 million, and that strategy involved selecting what 18 we thought were the critical documents and placing them 19 in Haymarket, but at the same time I recognised that 20 that wasn't foolproof, and that we would probably 21 overlook some documents. In that regard, we expected 22 the core participants to identify documents that they 23 thought should be included and they would have. So it 24 is a matter of some disappointment that the additional 25 documents were produced to us, but not identified. 33 1 I don't propose to dwell on that. 2 But then on Tuesday of this week further documents 3 were tendered and an explanation given. I haven't had 4 time to reflect fully on the documents in the context of 5 the other evidence, but can I just confirm that copies 6 of these documents have been made available to all other 7 core participants so that they can at least have some 8 opportunity of considering if it affects them, and to 9 what extent it does, because clearly it might involve 10 the need for additional evidence or additional 11 submissions or both. 12 MR DUNLOP QC: Indeed so, my Lord. Your Lordship will 13 anticipate, or appreciate, I hope, from the explanation 14 that was tendered by those instructing me, that that 15 very concern was the first concern that I had when I was 16 alerted to the existence of these documents, the 17 provenance of which your Lordship has been advised. 18 Hence the reason why we consulted over the weekend 19 to work out exactly how best to make sure that any 20 further inconvenience was avoided. 21 Your Lordship's question is whether they've been 22 given to core participants. They have. They would most 23 obviously be of potential concern to my learned friend 24 Mr Martin for the Council. I have spoken to him 25 yesterday and today about those documents. 34 1 As I understand it, although he reserves his right 2 to potentially ask to adduce further evidence on that, 3 and of course I could have absolutely no quibble with 4 any such reservation of rights, but yes, my Lord, 5 they've been made available to core participants. I'm 6 not aware of anyone expressing an actual difficulty 7 arising from their late production. 8 I accept of course that if any potential difficulty 9 is raised, your Lordship can reserve the rights of 10 parties in light of that. 11 CHAIR OF THE INQUIRY: I think there was also produced with 12 them a helpful explanation. Has that been given to the 13 parties or is it just a matter for me? 14 MR DUNLOP QC: No, it has, my Lord. Some debate went into 15 that very question, and there was a query as to whether 16 or not that should be made available. Ultimately we 17 took the view that the cards on the table approach was 18 the only proper approach. So what all core participants 19 have been given is, firstly, the document explaining how 20 these documents were missed and why they were 21 subsequently found. Secondly, the schedule of those 22 documents identifying what they are and where they came 23 from. And thirdly, the documents themselves. 24 CHAIR OF THE INQUIRY: Thank you. Thank you very much. 25 I have no further points. 35 1 MR DUNLOP QC: Obliged. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 36 1 INDEX 2 PAGE 3 Closing submissions by MR BARNE ......................1 4 5 Closing submissions by MR DUNLOP ....................22 6 7 Closing submissions by MR MARTIN ....................36 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 69