1 Friday, 27 October 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. Mr Mackenzie? 4 MR MACKENZIE: Good morning, my Lord. The next witness is 5 Gill Lindsay. 6 MS GILL LINDSAY (sworn) 7 CHAIR OF THE INQUIRY: You are going to be asked some 8 questions initially at least by Mr Mackenzie who is one 9 of the Counsel to the Inquiry. 10 If you just listen to the question and answer it as 11 directly as possible, and speak clearly into the 12 microphone, and at a measured pace so the shorthand 13 writers can keep up with you. 14 A. Certainly. 15 CHAIR OF THE INQUIRY: Mr Mackenzie? 16 MR MACKENZIE: Thank you. 17 Examination by MR MACKENZIE 18 MR MACKENZIE: Good morning. 19 A. Good morning. 20 Q. Could you state your full name please? 21 A. Certainly. It's Gillian Lindsay. 22 Q. And your current occupation? 23 A. I'm semi-retired. 24 Q. Can we first of all go to your statement, please, to 25 check we have got that correct version. It will come up 1 1 on the screen. It's TRI00000160_001. I think you may 2 have a hard copy on the desk as well. 3 If we can go to the first page, please, we can see 4 that it says: 5 "I certify that the attached statement is true to 6 the best of my knowledge and belief." 7 There's then a date of 17 November 2016. 8 You then say: 9 "I certify that an addition has been added by me to 10 the Preface of my Statement at page 3 on 7 August 2017." 11 Now, I think the Inquiry numbering in the bottom 12 right-hand corner is a little different. So if we could 13 bring up Inquiry number page 5, please, just to check 14 that addition to the preface. 15 I think we can then see about two thirds of the way 16 down, a sentence saying: 17 "Addition to Preface added to Statement on 18 7 August 2017." 19 So that's the addition to the preface; is that 20 correct? 21 A. Yes. 22 Q. Thank you. Back to page 1, please. Then towards the 23 bottom, we see at the very bottom: 24 "I certify that an addition named 25 'Appendix 4: Addendum dated 2 October 2017' has been 2 1 added by me to the end of my Statement at pages 93- 2 106 on 2 October 2017." 3 We then see your signature and date. Just to 4 clarify, the Inquiry page numbering, if we can go, 5 please, to page 95 of the Inquiry numbering. 6 I think we can see there that's the Appendix 4: 7 ADDENDUM TO WITNESS STATEMENT dated 2 October 2017; is 8 that correct? 9 A. Yes, it is. 10 Q. Thank you. Let's go back to page 1 of the statement, 11 please. Can I just formally ask you to confirm that is 12 your signature and this is the written statement you 13 have provided to the Inquiry? 14 A. Yes, it is. 15 Q. Thank you. There's one further matter I should go to. 16 There is an appendix to allow for cross-referencing of 17 documents. If we could bring that up please on the 18 screen, it's TRI00000159_0001. I think you can see the 19 top of that page, "Appendix 2: Reference Documentation". 20 If we look then in the left-hand column, I think we can 21 see two document references. For example, the first one 22 is GL/206/1, which I think is your document reference 23 that may appear in your statement, and we then see the 24 Inquiry document reference as well. So I think anybody 25 reading your statement, if they go to this appendix, 3 1 they can find the documents you refer to. So in short, 2 are you satisfied this is the document reference that 3 should be read with your statement? 4 A. Yes, thank you. 5 Q. Thank you. 6 So in short, Ms Lindsay, your evidence to the 7 Inquiry will comprise your written statement in its 8 entirety, together with the evidence you give at the 9 hearings. 10 A. Thank you. 11 Q. If we then please go to page 95 of your statement by way 12 of introduction. We can see under "Appointment as 13 Council Solicitor", you explain that you were appointed 14 as Depute Council Solicitor in 2001 and as 15 Council Solicitor in February 2004. That of course is 16 for the City of Edinburgh Council? 17 A. Yes. 18 Q. Could I check, please, had all of your career before 19 then been in local government? 20 A. Yes. 21 Q. You also then, if we can look a little down the page, 22 you set out the role of Council Solicitor, and you 23 explain: 24 "In the period to 1 December 2009, I undertook all 25 the functions and responsibilities of Council Solicitor, 4 1 including managing the legal teams of ..." 2 We can see what is set out in the bullet points for 3 ourselves. 4 You then say: 5 "I can confirm that I was not at any time seconded 6 to or embedded within a Council team to work on 7 Edinburgh Trams. At no point did my title include any 8 reference to Edinburgh Trams." 9 Could I just then, please, ask you by way of 10 overview to set out what were your duties and 11 responsibilities in relation to the Edinburgh Tram 12 Project? 13 A. Yes, certainly. I was given some particular duties by 14 the Council in terms of Edinburgh Trams. In particular, 15 I was required to secure that there were operating 16 agreements in place between the two companies, tie and 17 TEL. I was required to secure that there was 18 a guarantee in place, and I was also required by Council 19 in December to support the Chief Executive as he 20 prepared to agree to conclusion of contracts between tie 21 and the consortium. 22 I also had additional duties provided by the 23 Chief Executive's Internal Planning Group. The duties 24 which I had there was to be a support member to the 25 Chief Executive and his Directors in terms of that 5 1 group, and I had particular duties delegated to me to do 2 that. 3 And these were in relation to a number of matters in 4 terms of some of the land acquisitions, some of the 5 third party agreements, in terms of some of the general 6 vesting declaration matters. 7 I was also required to attend the Legal Affairs 8 Group, and I did that in terms of securing a number of 9 those matters. 10 And generally also as Council Solicitor, I was 11 required to support the two full-time legal members of 12 staff who were working, undertaking legal activities as 13 part of a wider project team, who also appeared at and 14 supported the Internal Planning Group. 15 I would say that in terms of my overall role of 16 Council Solicitor, it was also my responsibilities to 17 secure that there was always legality in everything 18 which the Council did and that included the project of 19 Edinburgh Trams. 20 Q. Thank you. Just a point of detail. You mentioned two 21 full-time legal members of staff who were working on the 22 project. Is that a reference to Nick Smith and 23 Colin MacKenzie? 24 A. Yes, it is. 25 Q. I think Mr MacKenzie explained yesterday that throughout 6 1 his involvement in the tram project, he was also Head of 2 Litigation; is that correct? 3 A. That wasn't my understanding, no. My understanding was 4 that Colin MacKenzie had his full-time availability to 5 Edinburgh Trams. I think there were some individual 6 pieces of legal work which Mr MacKenzie chose to still 7 keep. No, it's not my understanding that he was 8 managing any team at that time. I believe he had his 9 full time available for this. 10 I think there may have been one piece of legal work 11 in terms of equal pay which he wished to retain, and we 12 had a number of discussions about that, and I was 13 encouraging him to hand that last piece of work over to 14 another member of staff in order that he could have his 15 complete availability, and it isn't my recollection 16 whether he did that, whether he retained that one piece 17 of work or not. 18 CHAIR OF THE INQUIRY: Could I just ask, over what period of 19 time -- 20 A. Excuse me? 21 CHAIR OF THE INQUIRY: Over what period of time do you say 22 Mr MacKenzie had -- Mr MacKenzie's duties were 23 exclusively related to the tram? 24 A. I think from possibly around the same time as -- 25 Nick Smith was exclusively on trams from February 2007, 7 1 and I think Mr MacKenzie from probably shortly after 2 that period. 3 CHAIR OF THE INQUIRY: Thank you. 4 MR MACKENZIE: Yes. Just on this point, I think 5 Mr MacKenzie's evidence was that from approximately 6 May 2007, he had a greater involvement in the trams, and 7 I think he accepted that the majority of his time was 8 tram related from May 2007 on. But equally I think he 9 was clear that he still had some significant duties in 10 litigation, but you say that's not correct. 11 A. It's not my understanding. My understanding at that 12 time was that it was Mr Duncan Ross who was managing the 13 Litigation Team. Colin MacKenzie was available 14 exclusively for trams. 15 My recollection is that he still wished to retain 16 some involvement in equal pay, where the Council had 17 instructed Senior Counsel. So there may have been one 18 additional piece of work that he had a role in as far as 19 I can recall. 20 Q. Now, did you have any experience of major construction 21 projects or contracts before the Edinburgh Tram Project? 22 A. I would have said none in respect of light rail as this 23 one was. I had -- I had responsibilities also in terms 24 of the Forth Road Bridge. So I had some awareness of 25 the -- of some engineering contracts in -- perhaps in 8 1 a more maintenance capacity. 2 So I would say nothing of this particular nature. 3 Q. This on any view was quite an unusual and complex 4 project, given -- I can't remember the last time a tram 5 was built through a city centre in Scotland at least; 6 you agree with that? 7 A. Yes. 8 Q. Now, can I move on, please, to a document that will come 9 up on the screen. CEC01660091. 10 Now, we can see from the top this is a minute of 11 a CEC/tie Legal Affairs Group meeting on 25 July 2007. 12 We can see for ourselves who was present. I think you 13 were present among the CEC representatives, and also 14 three representatives from tie. 15 Could we then go over the page to page 2. Under the 16 heading, 3, "Legal Agreements Work Plan - INFRACO", the 17 second paragraph down states: 18 "GL noted that CEC require a clear understanding of 19 the proposed contractual arrangements/structure in 20 relation to the CEC exposure to risk, liabilities, 21 guarantees/obligations, etc and that a greater 22 visibility to the detail of the contracts would assist 23 the sign off process." 24 Now, I wonder, was there any significance to the 25 words, "the proposed contractual arrangements/structure 9 1 in relation to the CEC exposure ...", in that on one 2 view what was important was that the Council required 3 a clear understanding of the Council's exposure to risk, 4 liabilities, guarantees, et cetera. Was there anything 5 significant of the words, "the proposed contractual 6 arrangements/structure"? 7 A. I think my understanding of that is that I think we had 8 been briefed on what seemed quite a complex suite of 9 contract documents, and I think I was endeavouring to 10 understand the particular contract documents, who were 11 the contracting parties, what were the liabilities, and 12 I was also advised that there were a number of Novation 13 Agreements also. 14 So I was looking to understand the parties and the 15 contracts, as well as, I believe, the actual structures 16 of both tie, TEL and TPB. 17 Q. To paraphrase it, would you agree that in short it was 18 important that the Council had a clear understanding of 19 the Council's exposure to risk, liabilities, et cetera? 20 A. Yes. 21 Q. Is that a matter you would have required a clear 22 understanding of as Council Solicitor? 23 A. Yes. 24 Q. Could we then please leave that document to one side. 25 I would like to come on to an issue we've heard about, 10 1 the question of the Council discussion of obtaining 2 independent legal advice, and also the question of the 3 role of DLA. 4 Before we go to some documents, could I ask you 5 perhaps by way of overview what your views were at the 6 time on whether the Council should instruct independent 7 legal advice on the risks arising from the Infraco 8 contract? 9 A. Yes, certainly. 10 I was conscious, first of all, of the Council's role 11 in terms of the project. The Council had taken 12 a decision in September 2007 that the entire procurement 13 and delivery and function of Edinburgh Trams was to be 14 wholly with its own wholly-owned companies, which were 15 tie and TEL, and to be managed through them, and there 16 was at that time, I suppose almost like a tripartite 17 arrangement in terms of the Scottish Executive's 18 position. 19 In terms of that report to Council, all functions in 20 relation to the entire delivery were provided to those 21 companies with a few exceptions, and these exceptions 22 were what was called reserved matters. 23 These reserved matters were shown in an appendix to 24 that report in September 2007. 25 My recollection is that there were parallel reserved 11 1 matters reserved to, I understand, the Scottish -- the 2 Transport Authority, to the Scottish Executive and the 3 City of Edinburgh Council. 4 The relevant parts of those reserved matters here 5 were that the Council's two full-time Directors who were 6 both members of the TPB, there were some matters which 7 they could not decide on without the words which the 8 minutes state, "without further consultation with the 9 Council". 10 And one of those reserved matters was tie entering 11 into both Infraco and Tramco contracts. So the 12 Council's role and its decision was that those 13 representatives of the two Directors who were on TPB may 14 not agree to enter into those contracts without further 15 consultation with the Council. 16 Q. So what were your views, in short, at the time on 17 whether the Council should instruct independent legal 18 advice on the risks arising from Infraco contract? 19 A. Yes. I considered that with the legal team. I received 20 a short briefing note from Nick Smith, who was the 21 solicitor dealing with it. He provided that to me, 22 I understand, in August 2007, and we had a brief meeting 23 regarding what the Council's options were at that time. 24 One overriding factor at that time was that as 25 a Council, and certainly as a Legal Division, we had 12 1 been given exposure and brought into this project at 2 a time where there were only a matter of weeks, 3 I understand four weeks, before we were required to 4 advise that all matters were ready to be closed. 5 So we had an extremely short time between August, 6 and we were advised 21 September, to ensure that we were 7 then in a position to agree that those two full-time 8 members may take that decision. 9 I think my view at the time was that I'd had some 10 exposure at that point from DLA who had been legal 11 adviser to the tram projects for a long period of time. 12 My understanding was that they had themselves been 13 involved in determining the procurement, the procurement 14 structure and strategy. They had worked with 15 Partnerships UK to do so. They were absolute experts in 16 terms of light rail systems, and that they were involved 17 at that point in what I would call a live procurement in 18 terms of an EU Negotiated Procurement Exercise. 19 I considered with my team what were the options for 20 the Council to be familiar, and to be able to take the 21 role which the Council had provided to the Council at 22 that point. 23 In terms of -- in terms of considering whether there 24 was any need and ability to source from another separate 25 firm, I think my clear considerations were the ability 13 1 of DLA to properly advise the project, and I think, as 2 I say in my statement, it would have avoided a damaging, 3 if not impossible delay. 4 My view was that to consider another firm of 5 solicitors to come in to a live procurement, my view is 6 it would have been virtually impossible as they wouldn't 7 have known the original contract documents. They 8 wouldn't have understood the contract suite. They 9 wouldn't have known on which way the preferred bidders 10 were being chosen or had been chosen. 11 I think my view was that there was really no 12 possibility of bringing in another firm of solicitors 13 into a live procurement exercise. 14 At that time we had -- we didn't have a clear 15 understanding really of the contract suite. The experts 16 were DLA. 17 I think the other factor which I considered was the 18 possibility of conflict of interest, and who exactly 19 these bodies were. 20 I think it's important to recognise that the bodies 21 of tie and TEL, they weren't considered by the Council 22 as being the same as any other arm's length 23 organisation. They were the Council's delivery agent, 24 and they were regarded as such within the organisation. 25 In terms of briefing elected members, it was 14 1 actually the Chief Executive and members of TEL and TPB 2 who, with the Council officers, would actually brief the 3 elected members. 4 CHAIR OF THE INQUIRY: I think, Ms Lindsay, the question 5 really is: did you ultimately decide to seek independent 6 legal advice or not? You have given a long explanation 7 of what you thought and everything else. If you could 8 possibly just concentrate on the question. 9 Did you decide that you should have legal -- 10 independent legal advice? 11 A. I decided that -- I agreed with my team that it was not 12 consistent with the current timetable, and -- 13 CHAIR OF THE INQUIRY: Is that a no? You decided not to get 14 independent legal advice. 15 A. Yes, but only because of the impracticability. 16 CHAIR OF THE INQUIRY: I appreciate that. But it would be 17 helpful if you could answer questions directly first, 18 and then give some explanation if you think it's 19 absolutely necessary. 20 A. Certainly. 21 MR MACKENZIE: Thank you. 22 So was your position at the time in short that 23 independent legal advice was unnecessary, or that there 24 wasn't sufficient time, or both? 25 A. I would say was not necessary, and in the context of 15 1 there being insufficient time. 2 Q. Thank you. I would like to go to a document from the 3 time, please. It's CEC00013273. 4 If we can go, please, to page 3, we will see it's an 5 email from Graeme Bissett. We can probably blow up the 6 top of it, thank you. 7 From Graeme Bissett at tie, sent on 7 August 2007, 8 to various people in the Council, including yourself. 9 Mr Bissett starts by saying: 10 "The document I referred to this morning is 11 attached ... 12 Please give me a call if you want to discuss. 13 I thought it might also be useful to summarise the main 14 actions we agreed." 15 So it sounds as though there's been a meeting, 16 perhaps that morning. Go over the page, please, to see 17 item 6. If we blow up item 6, please, Mr Bissett says: 18 "I will contact DLA about the legal relationship 19 between DLA and the Council and set up a meeting to 20 discuss how this can be concluded to the Council's 21 satisfaction." 22 If we then go back to your statement, please, at 23 page 16. Towards the very bottom, about five lines from 24 the bottom, we can perhaps blow up: 25 "A meeting was held with Mr Inch, Monitoring 16 1 Officer, relevant Directors and Tie around 2 10 August 2007 and it was agreed that DLA would regard 3 the Council as joint client. CMcK [Colin MacKenzie] attended 4 that meeting. The IPG noted that the Council was 5 benefiting from DLA advice." 6 I just wondered in short whether the meeting 7 referenced in Mr Bissett's email we just looked at is 8 perhaps the same meeting you refer to in your statement 9 here? 10 A. Yes. 11 Q. Thank you. If we could then go back, please, to the 12 email chain which was CEC00013273. 13 Now, I think if we look again at the distribution 14 list, there's no reference to DLA being present or 15 represented at that meeting. Does that accord with your 16 recollection? 17 A. I -- they may not have been present at that particular 18 meeting. I don't have a clear recollection, I'm afraid. 19 Q. Certainly if DLA were not present or represented at that 20 meeting, then clearly the terms on which they were 21 prepared to act would require to be clarified and 22 agreed? 23 A. Yes. 24 Q. Then, please, if we could look at page 2 of this email 25 chain, the very bottom, we'll see an email from yourself 17 1 dated 10 August 2007, back to Graeme Bissett and others, 2 including Mr MacKenzie. You say: 3 "Graeme, thank you. It was good to see you. Moving 4 forward on your point 6, as discussed, what is needed 5 here is a legal acceptance that DLA regard this Council 6 as a joint client with Tie or the ultimate client ie 7 a direct client/legal adviser relationship and not 8 merely a duty of care, to reflect the new relationship 9 and positioning. I see no difficulties in achieving 10 this as we will be seeking this now at point of 11 preferred bidder and recommending terms to the parties." 12 We can also see for ourselves what you then say in 13 the following paragraph in terms of what you would wish 14 to receive from DLA. 15 Could I ask you about one matter. You say: 16 "As early notification and receipt of the above as 17 possible is needed as this will determine the extent and 18 type of additional diligence the Council may wish to 19 undertake." 20 Can you remember what you had in mind at that time 21 in terms of any possible additional diligence the 22 Council may wish to undertake? 23 A. I think my view then was that when we had that 24 information, we could consider whether there was 25 anything else that was required or whether what we had 18 1 was satisfactory. 2 Q. Thank you. 3 If we then please, to complete this chain, can go to 4 page 1 of this document, and we can see, in the second 5 half of the page, an email from Colin MacKenzie, to 6 yourself, dated 15 August. 7 Now, it's quite a long email. It goes on to the 8 second page as well. I'm not going to read it out. 9 What I would like, I think, to do is to try and 10 summarise the position of Mr MacKenzie and Nick Smith as 11 I understand it, and then ask you for your comments on 12 there. 13 So as I understand it, in short, Mr MacKenzie and 14 Nick Smith took the view at the time that they were 15 unable to properly review and provide advice on the 16 Infraco and Tramco contracts, mainly because firstly, 17 they didn't have sufficient expertise or experience to 18 do so, but also secondly because they had not previously 19 been involved in the contractual negotiations. That's 20 my understanding of their position. Does that seem 21 a fair summary of how you remember their position? 22 A. It certainly, I think -- it certainly summarises this 23 email. But it wasn't their position as advised to me at 24 an earlier meeting. 25 Q. It's the position as set out in this email, and I think 19 1 other emails. And did you understand at the time that 2 to be their position? 3 A. Yes. I certainly understood that that was the terms of 4 Colin MacKenzie's position by that email, yes. 5 Q. What were your views on their position? 6 A. I -- my view was that we had -- we'd had quite 7 a detailed meeting. We'd considered a paper which Nick 8 had previously prepared which had four different options 9 on it. And Nick had recognised that in terms of 10 a wholly independent -- having an alternative agent, 11 Nick's view, as I recall, was that it wasn't practical 12 in the circumstances and in the timeline. 13 I recall Nick's suggestion being that the Council 14 would require to accept what tie had done so far, and to 15 accept the positioning of tie and DLA. 16 I personally thought that we wanted to have a closer 17 and clearer relationship with DLA in order that the 18 Council could rely on their advice, and I think in terms 19 of my evidence, I recollect a number of meetings at 20 which that was discussed with the Director, in fact with 21 all three relevant Directors, and it was also discussed 22 and agreed at the IPG. 23 I did recognise that after that meeting, I was 24 receiving a number of emails from Colin that was 25 advising of a different position to the one that we had 20 1 agreed at the earlier meeting, to the one which we had 2 agreed with tie, and the Director, and the direction 3 which the IPG had agreed to go, yes. 4 Q. I suppose the point in short is that Mr MacKenzie and 5 Mr Smith considered that they didn't have sufficient 6 experience or expertise to properly review and advise on 7 these contracts. Did you consider they had sufficient 8 expertise and experience to do so? 9 A. I considered that they did in terms of the tasks which 10 they were required to do. It was quite clear that the 11 Council weren't a party to these contracts. The Council 12 was not being asked to draft them, to negotiate, to 13 revise or even to finally agree the terms. 14 The role for us here was to become familiar with the 15 terms of those documents in order that we could act 16 as -- I suppose as a sort of support and challenge to 17 tie, and to align ourselves with DLA, the legal advisers 18 to the project. 19 That was the role, and yes, I considered that they 20 were both well able to do that. 21 Q. So is that perhaps different to expecting them to review 22 and advise on the contracts by themselves? What you're 23 saying is that they had a slightly different role you 24 expected of them, to play a part in the Council 25 reviewing the contracts; is that correct? 21 1 A. That's correct in the circumstances of this particular 2 project and the Council's role in it, yes. 3 Q. So you didn't expect them to undertake that role by 4 themselves. It was with some assistance? 5 A. Yes. 6 Q. Assistance from whom? 7 A. Excuse me? 8 Q. Assistance from whom? 9 A. From -- from DLA, from working with their colleagues. 10 Q. Although their non-legal colleagues presumably couldn't 11 help them with the legal aspects? 12 A. I think my view was that with aligning themselves with 13 DLA and also tie, they would be able to have a good 14 understanding of the project, and in terms of the 15 Council's role, I considered that they were both well 16 able to read the documents, to understand them, in the 17 context of becoming familiar with them in order that we 18 could, I suppose, really become familiar and work as 19 a support and challenge. 20 There's no question that the Council themselves were 21 not going to be agreeing. We weren't drafting, 22 revising, negotiating or agreeing those terms. That was 23 being done by the project's lawyers. 24 Q. Does it come back to then you anticipated their role was 25 to help the Council understand the contract and risks? 22 1 A. Yes, exactly. 2 Q. Were you essentially in a similar position to them in 3 that -- let me ask you. Do you consider you had 4 sufficient experience and expertise to review and advise 5 on the contracts? 6 A. I would have considered myself to be well able to do the 7 role which was asked of them and to help them in that 8 role with whatever way they would like. 9 I certainly wouldn't have considered myself able to 10 undertake the role of the legal adviser to the project. 11 And I was -- obviously my time here was a couple of 12 hours a week, to the project, which was very different 13 from them or the legal advisers. 14 Q. Thank you. I would like to move on to another document, 15 please. CEC01711054. 16 We see from the top this is an email from 17 Andrew Fitchie dated 16 August 2007, subject, "CEC 18 Mandate". 19 In the second paragraph we see: 20 "As discussed, I attach a draft of the letter 21 I would propose to send to the Council to affirm our 22 duty of care and the joint client status. It is based 23 on the letter I mentioned we had provided to tie (and 24 intended to have been provided to the Council) in 25 June 2005. Please let me know if there is anything you 23 1 would wish to add or alter." 2 Then Mr Fitchie says: 3 "I do not envisage any conflict of interest here; to 4 the contrary - in closing the required supply contracts 5 as part of the procurement process, there needs to be 6 complete commonality of interests and objectives among 7 the Council, tie and TEL." 8 We can see what's then said for ourselves. 9 I would like to go to the attached draft letter, 10 please. It's CEC01711055. 11 We can see, I think, towards the end of the second 12 paragraph, if we can expand upon that, please, we see 13 a reference to, the second last sentence: 14 "We affirmed that duty of care in our letter of 15 23 June 2005 to tie Limited copied to yourselves. We 16 heard no further at that time." 17 Now, to pause there, we've heard evidence that there 18 appears to have been an intention both in 2003 and again 19 in 2005 that a letter would be agreed between tie, DLA 20 and the Council in relation to the basis on which DLA 21 would act on behalf of the Council and provide advice to 22 the Council, but that as a matter of fact no such 23 agreements were confirmed in 2003 or 2005. 24 Does that accord with your understanding? 25 A. My understanding is that when DLA were appointed as 24 1 advisers in terms of the contract which they entered 2 into with tie, my understanding is that that contract 3 contained a requirement that a duty of care would be 4 owed to the Council. I think it was clear in those 5 appointment documents. 6 Q. Could we go perhaps to the second page of this document. 7 CHAIR OF THE INQUIRY: Before doing that, would the duty of 8 care be dependent upon tie giving identical instructions 9 to DLA as would have emanated from the Council? 10 A. My recollection of those tender documents was that the 11 Council's position was clearly stated in them as being 12 the ultimate person and the owner of the infrastructure. 13 So when DLA were appointed, they knew that at all 14 times they owed a duty of care to the Council in terms 15 of the quantity of work which they had accepted. 16 My view was that I understand that they had been 17 receiving instructions from tie, and that we would need 18 some clarity on that, but in my view that did not 19 prevent them becoming a joint -- the Council becoming 20 formally a joint client, and in terms of whether or 21 not -- my view is whether or not they were having -- 22 they were regarding these as joint instructions, my view 23 is that that most certainly didn't preclude. It 24 required still full and fair advice when they were 25 giving advice to CEC and to advise of any conflict which 25 1 may arise during that. 2 CHAIR OF THE INQUIRY: So they had to decide on any issue of 3 conflict between tie and CEC? 4 A. Yes. I think my view is that as project lawyers, that 5 they were well able to do that. 6 CHAIR OF THE INQUIRY: Did you recognise that the Council's 7 exposure was different from that of tie? 8 A. Excuse me? 9 CHAIR OF THE INQUIRY: Did you recognise that the Council's 10 exposure was different from that of tie in that the 11 Council was ultimate funder or guarantor, however you 12 want to put it? 13 A. Yes. I recognised that the position of the 14 Scottish Executive who was the principal funder -- 15 CHAIR OF THE INQUIRY: I'm asking: did you recognise that 16 the -- and the answer is yes, you did -- that there was 17 a different interest? 18 A. I said yes. I could qualify that, please, because the 19 answer is yes, but the Council were the ultimate owner 20 of tie. 21 CHAIR OF THE INQUIRY: I appreciate that. But even then, 22 even if they are the ultimate owner of -- tie is 23 a separate legal entity, isn't it, in law? 24 A. Yes, I'm trying not to give a complicated explanation. 25 tie is -- 26 1 CHAIR OF THE INQUIRY: It is a company which -- the Council 2 owns all the shares in it. 3 A. That's correct, it's a company. However, my view is at 4 that point, its objectives were not in any way divergent 5 from the Council's in terms of closing those contracts. 6 CHAIR OF THE INQUIRY: Except that at the end of the day, it 7 was the Council who was paying the bill, and they may 8 have a different interest from tie, if tie gave DLA an 9 instruction which was contrary to the Council's 10 interest. 11 A. I recognise that that's a possibility. But my position 12 is that they should not have done so, because there was 13 a common objective of securing adherence to the Business 14 Case. 15 CHAIR OF THE INQUIRY: Ms Lindsay, I appreciate they 16 shouldn't have done that, but how was the Council to be 17 protected, because you have the situation where the 18 Chief Executive has to authorise tie to sign the 19 contract, and that can only be done if the 20 Chief Executive is satisfied that the Council's 21 requirements are being met. 22 If that is the position, were you relying solely on 23 DLA for that assurance? 24 A. I would say yes, bearing in mind the position of the 25 Council in 2007 was the words "without further 27 1 consultation". Yes, we were relying on DLA, who were 2 the project's advisers, and also supported by our own 3 internal team. 4 CHAIR OF THE INQUIRY: Thank you. 5 MR MACKENZIE: If we can in fact go back to page 1, please. 6 The paragraph in the middle of the page, if we could 7 blow it up, please, says: 8 "This letter reconfirms that as from 5 December 2003 9 onwards, DLA Piper Scotland LLP has owed and owes the 10 same contractual duty of care to CEC as owed to 11 tie Limited ... 12 We acknowledge CEC as joint client with tie Limited on 13 the basis that ..." 14 Certain conditions are then set out. I'm just going 15 to paraphrase condition 1, but the actual wording is 16 more important, of course, but my paraphrasing is that 17 in short, in condition 1, DLA were entitled to assume 18 that tie's instructions are and have been identical to 19 CEC's instructions; and then in the second condition, to 20 paraphrase, DLA were entitled to receive and seek on 21 instructions from tie as project manager and agent for 22 the Council. 23 Now, again, what I would like to try and do is 24 summarise my understanding of the concerns of 25 Colin MacKenzie and Nick Smith as to why any duty with 28 1 these qualifications of conditions was inadequate. 2 As I understand it, in short, their position was 3 that a duty of care or joint client status on these 4 terms did not adequately protect the Council's interests 5 because it could not safely be assumed, firstly, that 6 tie's and the Council's interests had been and would 7 continue to be exactly the same, and secondly, that 8 instructions issued by tie had been and would continue 9 to be identical to instructions issued by the Council. 10 What were your views on these concerns? 11 A. I think, first of all, I would say that I understood 12 that to be Mr MacKenzie's position. I didn't understand 13 that to be Mr Smith's position. 14 We did have further discussions about it, and I did 15 seek to try and understand, were there any particular 16 concerns or particular matters which Mr MacKenzie 17 envisaged being a difficulty, and he advised that he did 18 not; and that his only concern was that he didn't want 19 personally himself in it to be blamed if there was 20 anything which went wrong. 21 So having had further discussion, there was nothing 22 that was pointed out to me. 23 I understood the issue that there was a possibility 24 of that, but I had been advised by a partner of DLA that 25 in his view there was no conflict of interest, and that 29 1 there was commonality of interest. 2 The commonality was my understanding from the very 3 distinct and bespoke arrangement the Council had with 4 these two bodies. And also I would say that I think 5 that is reinforced by the parliamentary agents, both 6 Bircham Dyson Bell and Rees & Freres also recognised the 7 very bespoke nature of tie and TEL as not being in olio 8 in the regular sense. 9 Q. So addressing those concerns head on, was it your view 10 that it could be assumed that tie's and the Council's 11 interests had been and would continue to be exactly the 12 same? 13 A. Yes. 14 Q. In relation to the other matter, was it your view that 15 you could assume that instructions issued by tie had 16 been and would continue to be identical to instructions 17 issued by the Council? 18 A. Yes. 19 Q. And Mr MacKenzie and Mr Smith, I think, had also given 20 evidence that given these concerns, and also having 21 regard to the size and complexity of the project, and 22 the fact that the Council would be liable for any cost 23 overrun, the only safe or prudent course of action was 24 for the Council to take its own independent legal advice 25 on the Infraco contract, including in particular the 30 1 risks arising under that contract. 2 Did you disagree with that position? 3 A. Yes. If I can just explain why I disagreed with it as 4 well, please. 5 Q. Please. 6 A. I disagreed because we -- we were coming in at a very, 7 very late stage to the project. I knew that the Council 8 would be determining this matter in October, and there 9 was no question politically that the matter would be 10 delayed. 11 We had taken a number of steps to agree this 12 position with a range of senior officers. We had put 13 the arrangement in place. And there was no other 14 alternative arrangement at that time. 15 I also -- I also disagreed with it as there was no 16 practical example which Colin could even himself 17 consider, and Colin's wish was that effectively the 18 Council disengage from DLA and brought in another firm 19 of solicitors who would have no knowledge of any of the 20 procurement, of the history, of the complex -- 21 complexity of contract suite, and I did not consider 22 that disengaging DLA and bringing in an entirely new 23 firm who knew nothing about it was in any way consistent 24 with the timetable. 25 I also think their advice would have been so heavily 31 1 caveated, it would simply been a range of information, 2 and I considered that if DLA were required to consider 3 more formally the Council's interests as they were 4 drafting and negotiating, then that was the best way to 5 protect the Council's interests. 6 Q. Thank you. 7 Can I just be quite clear, on the question of the 8 extent to which there would be insufficient time for an 9 independent review to take place was a factor. 10 If you had come to the view that an independent 11 review was necessary to adequately protect the Council's 12 interests, then I assume you would have given advice to 13 that effect, even if that meant that the procurement had 14 to be delayed a little? 15 A. Yes. If I had considered that that was the requirement 16 for the Council, then yes, I would have done so. 17 Q. Thank you. 18 Now, go on to page 2 of this letter, please. We can 19 see, I think, that there is space, if we scroll down, 20 please, for someone on behalf of the Council to sign and 21 thereby agree the terms of the letter. So presumably at 22 this stage, there was an intention that a letter along 23 these lines would be agreed and signed on behalf of the 24 Council; is that correct? 25 A. Yes. 32 1 Q. I think we've heard evidence that that didn't happen; is 2 that correct? 3 A. I appreciate that that appears to be the position 4 through the Inquiry. I have to say, it's not my 5 knowledge that that didn't happen. But I appreciate 6 that, you know, I don't -- I can't -- I don't see that 7 letter now in the papers. 8 Q. Presumably you have no recollection of seeing a signed 9 and agreed letter at the time? 10 A. I don't. I have a recollection of asking and requiring 11 it to be closed a number of times, but I don't have any 12 recollection of seeing a signed copy, no. 13 Q. We'll come on to that in a second. 14 Do you accept that as Council Solicitor it was 15 ultimately your responsibility for ensuring that this 16 letter or at least a revised version of it was agreed 17 and signed? 18 A. I accept it was my responsibility to either do it 19 personally or delegate it to others. 20 Q. We'll come back to some emails in that regard. 21 Could I then please go to another document. It's 22 TIE00897231. 23 CHAIR OF THE INQUIRY: You said it's not your knowledge that 24 that didn't happen in relation to the signing of the 25 letter. Could I just be quite clear. Are you saying 33 1 that it did happen or it didn't happen? Was the letter 2 signed? 3 A. I -- I'm finding out through the Inquiry that apparently 4 it didn't, but it wasn't my understanding or 5 recollection that it had not. 6 CHAIR OF THE INQUIRY: What does that mean? It wasn't your 7 understanding or recollection that it had not; does that 8 mean that your recollection was that it had been signed? 9 A. Yes. 10 CHAIR OF THE INQUIRY: Who signed? 11 A. Excuse me? 12 Q. Who? 13 CHAIR OF THE INQUIRY: Who signed it? 14 A. I -- I would have imagined that either myself or 15 Colin MacKenzie would have done that. 16 MR DUNLOP QC: My Lord, I don't know whether it assists or 17 not, but lest there be any doubt about it, the position 18 of DLA is very clearly that they are bound by that 19 letter, whether or not it was actually signed by the 20 Council. Just for clarification. 21 CHAIR OF THE INQUIRY: Thank you. 22 MR MACKENZIE: Thank you. 23 Now, the document that appears on the screen, we see 24 is a letter dated 17 August 2007. It's a memorandum 25 dated 17 August 2007 from yourself to Colin MacKenzie. 34 1 In the first paragraph you say: 2 "At this stage and after my numerous attempts to 3 secure discussion with you I am extremely concerned at 4 the content of your recent email re the position which 5 appears to have been reached as regards this Division's 6 input to the project." 7 What is that a reference to? 8 A. I think really that our team still seem to be discussing 9 who they were going to be getting advice from and 10 liaising with, and I was very conscious of each day of 11 the timetable moving towards 21 September, and that we 12 had a lot of activities and actions to be progressing 13 with. 14 Q. So you -- in short you were saying to them: the decision 15 has been made to involve DLA, get on with it? 16 A. Yes. 17 Q. Thank you. 18 Towards the bottom of the page we see a paragraph, 19 and about the third line down, you say: 20 "Circumstances have dictated the current position 21 and though far from ideal we are required to advise and 22 proceed in that context." 23 Why were circumstances far from ideal or what was 24 far from ideal? 25 A. I think -- I understood the views of staff that the 35 1 Council were coming into this arrangement at a very late 2 stage. It would have been preferable had we had an 3 understanding when the contract documents were prepared, 4 when they were sent out, perhaps be briefed at key 5 stages. 6 So I could understand that it was certainly far from 7 ideal that we were coming in at such a late stage. And 8 it was certainly far from ideal that only a matter of 9 weeks before we were advised that terms required to 10 close. 11 Q. Why was it that the Council were coming in at such 12 a late stage? Was that simply because of the stage the 13 procurement process had reached and things were hotting 14 up or was that anything to do with there having been a 15 change in the Council's involvement as a result of the 16 Transport Scotland cap on the grant? 17 A. I -- personally, I think the Council were coming in at 18 such a late stage because -- I think the whole structure 19 and arrangement was that tie, TEL and TPB were running 20 this project. And I think there was a recognition that 21 there would have to be consultation in terms of that 22 before the final contracts were signed, and I think that 23 this was an attempt to say, you know: we are now going 24 to have to have this consultation. 25 For whatever reason, it was decided and brought to 36 1 our attention at a very late stage. 2 Q. So why hadn't the Council had a greater involvement at 3 an earlier stage to avoid any feeling of being rushed at 4 the last minute? 5 A. My recollection at that time was that this was regarded 6 within the Council as being largely a City Development 7 project, which was itself undertaken by tie, TEL and 8 TPB, which were almost run as if it was yet another 9 Department of the Council, or another Department of City 10 Development. 11 I myself had raised some issues because I had been 12 put under immense pressure to sign one or two individual 13 agreements during the parliamentary stage, which 14 I considered was inappropriate as I didn't know the 15 terms of those agreements or the liabilities with them. 16 And I had raised those concerns to the Director, and 17 I think with a number of things, I think that the -- the 18 Directors and Chief Executive decided that the Council 19 required to have more corporate understanding and 20 control of this project. 21 Before that happened, I think the view of the 22 Council was that this was a matter for the Department of 23 City Development, that it was run by those companies, 24 and there was two external firms involved in that, both 25 Dundas & Wilson and DLA. 37 1 Q. Thank you. 2 If we can go, please, to another document, 3 CEC01567522. I'll try not to take too long over this. 4 If we go to the back page, to page 4, please, it's 5 back to the question of whether the Council should 6 obtain independent legal advice. We can see at the top 7 it's an email from Duncan Fraser of 23 August 2007. We 8 can see the subject: 9 "Recommendation to the Council to accept FBC and the 10 Infraco Contract". 11 Then at the very bottom is set out recommendation: 12 "A team familiar with contract law and related 13 financial risks to this form of contract be appointed to 14 work with CEC and tie to inform the Council as to what 15 risk it is exposed to and how best to cover these risks 16 both legally and financially." 17 Then over to page 3, please, we will see that 18 Mr MacKenzie forwards this email to you in a second. 19 Bottom half of the page, an email from 20 Colin MacKenzie dated 23 August 2007 to yourself. In 21 short, I think Mr MacKenzie is saying the Client 22 Department has requested an independent legal review. 23 If we scroll a little bit up, we'll see your response. 24 You say: 25 "We can discuss next week. Meantime please action 38 1 to completion as agreed DLA letter. Target was to 2 complete this week." 3 If we then go to page 2, please, we see a lengthy 4 email from Mr MacKenzie dated 24 August 2007, but in 5 short he's repeating his concerns, both in relation to 6 the proposed instruction of DLA and his view for an 7 independent legal review. 8 I just wondered if short, given this appears to have 9 been a client request or instruction from the Client 10 Department for an independent legal review, did that 11 change your mind at all? 12 A. No. I saw this really as a way of Colin continuing to 13 pressure in terms of changing the agreed course of 14 action. I had spoken to Mr Holmes at the IPG meetings. 15 I knew that this was not a client instruction to 16 disengage DLA and to engage an alternative firm. 17 Mr Holmes had agreed that at the IPG, and at separate 18 meetings. 19 I think -- what I think Duncan Fraser may have been 20 asking here is what later I know came to be called 21 a costed risk review, but that's maybe a matter for 22 further consideration. 23 So my view is that there was not an instruction by 24 the Department of City Development to disengage DLA and 25 if the Director of Corporate Services had -- if the 39 1 Director of City Development had wished to do that, he 2 would simply have done it. He would have perhaps asked 3 me to do it. He would have done it himself. He would 4 have gone to the Director. There's no question that if 5 he wanted that, he would not have achieved it. 6 Q. Thank you. 7 So presumably you as Council Solicitor must have 8 taken a view at this time that it would adequately 9 protect the Council's position for DLA to provide advice 10 to the Council on the terms and conditions as set out in 11 the draft letter? 12 A. My view was that it would best provide it in the 13 circumstances that we were in, yes. 14 Q. Did you consider that any revisions required to be made 15 to the draft letter, or were you content to accept the 16 main conditions set out? 17 A. My recollection is that I had a telephone call with 18 Mr Fitchie, and that we agreed that those words relating 19 to joint client would be inserted, that it would be 20 clear that the Council was able to receive information 21 and advice from DLA directly. 22 My recollection is that through discussions with 23 Colin MacKenzie, I think I did have some further matters 24 of clarity. 25 I think probably in respect of some of the matters 40 1 we've talked about in terms of interest, et cetera, of 2 the client. 3 And perhaps also bringing matters to the attention 4 in terms of any conflict. 5 But I think they were probably relatively minor in 6 comparison to the terms of the letter as it stood. 7 The two principal points had certainly been 8 included. 9 Q. So just going back to the draft letter, please, 10 CEC01711055. If we can perhaps blow up the paragraph 11 with the bold text: 12 "We acknowledge CEC as joint client with tie Limited 13 on the basis that ..." 14 I'm not going to put you on the spot and ask you to 15 redraft it in the witness box, essentially, but in 16 general could you indicate what were the main items that 17 at the time you thought required revision? 18 I think you mentioned perhaps bringing matters to 19 the attention in terms of any conflict. So would you 20 have wished there to be some provision for that in the 21 draft letter? 22 A. Yes. My view was that it was certainly applied, but 23 I have a recollection that that's what Colin MacKenzie 24 and I discussed, yes. 25 Q. Also I think another thing you mentioned was in terms of 41 1 interest, et cetera, of the client. Can you expand upon 2 that a little? 3 A. Yes. My recollection is that we had a discussion, and 4 that there would be more express provision of acting and 5 taking into account the best interests of both parties. 6 I think if I can recollect, when Mr Fitchie sent 7 that, he did offer to consider any further revisals that 8 we had. And the recollection of my -- of the meeting 9 that I have is that we considered whether there was 10 anything else in addition, and that was really why. 11 Q. Would these intended revisions have improved things from 12 the Council's perspective? 13 A. I think yes, I must have been considering them because 14 I wanted further clarity. 15 Whether -- I don't consider that we're excluded, but 16 I think that there were a couple of matters which 17 I would have liked to have seen perhaps more expressly, 18 yes. 19 Q. Thank you. 20 Now, sticking with the question of DLA, I may be 21 corrected, but I think Mr Fitchie has given evidence 22 that he conducted a workshop on Infraco procurement on 23 or about 30 August 2007, attended by CEC Legal and 24 Finance staff. Do you recall that workshop? 25 A. I recall attending a workshop fairly early with my 42 1 knowledge of this, which both Mr Fitchie and 2 Sharon Fitzgerald both participated in. 3 I don't recall the exact date. It might have been 4 that workshop. I think that would have been around that 5 time. 6 Q. Yes. I think in Mr Fitchie's statement, he says that: 7 "Following the workshop I agreed with tie that 8 I would offer Gill Lindsay informal updates on an ad hoc 9 basis. I gave Gill information, not advice, and I was 10 completely clear about this." 11 I think again in Mr Fitchie's statement, he said 12 that: 13 "Gill Lindsay asked me who would advise the Council 14 after I went on secondment and I replied that DLA were 15 not advising the CEC. I explained that DLA had been and 16 was advising tie and there was no requirement for us to 17 advise CEC separately, nor would we do so unless 18 expressly told to by tie." 19 Does that accord with your understanding? 20 A. No. That is wholly incorrect. 21 Q. So what was your understanding? 22 A. There is no question that Mr Fitchie advised me as such. 23 Through looking at my own papers, it's quite clear that 24 there's a constant reference to advice, providing 25 advice, and there is correspondence just after contract 43 1 close which I think is also -- is already in Inquiry 2 process, which confirms that the final sign-off letter, 3 and indeed all letters, have been legal advice provided 4 to both tie and to CEC. 5 It talks about solicitor/client privilege, and my 6 evidence is that that is wholly inconsistent with what 7 happened. It's inconsistent with the evidence, and 8 there was no such conversation. 9 Q. I will come back to that email when we look at the 10 sign-off letter. But just to be quite clear, was your 11 understanding that DLA and Mr Fitchie were providing the 12 Council with information or advice or both? 13 A. Most certainly advice, and as part of that advice, it 14 would have included, I'm sure, information. 15 Q. Thank you. 16 Could I put one final document to you, please, in 17 relation to the question of the DLA letter not being 18 agreed and signed. 19 It's a document in January 2008. It's CEC01400601. 20 If we see from the top, that is an email from 21 Mr MacKenzie dated 18 January 2008 to yourself. 22 In the second paragraph, Mr MacKenzie says: 23 "I have gone back through the file to consider the 24 correspondence with Andrew Fitchie in the run-up to the 25 Council meeting on 20 December 2007. Early in that 44 1 dialogue, I queried whether the appointment of DLA had 2 been put in place. I also wrote to you on 7 December. 3 Can you please confirm the nature of the appointment of 4 DLA: is there either a Duty of Care or full agency in 5 place? Clearly that is part of our internal due 6 diligence. It would be helpful to have a copy of the 7 formal arrangements for the file." 8 So on receipt of this email, you would have been 9 aware that the terms and conditions in respect of which 10 DLA had agreed to act on behalf of the Council had not 11 been agreed and signed? 12 A. I think -- I think when I received this -- I don't think 13 that actually was my view. I think that I thought that 14 Colin knew quite clearly the arrangements which were in 15 place which were in terms of the letter that we had 16 seen, we had revised, and I think I thought that it was 17 another, you know, attempt to open up discussions about 18 advice at that time. 19 Q. But that can't be true because that's not consistent 20 with what he expressly says. He very plainly says: 21 "Can you please confirm the nature of the 22 appointment of DLA: is there either a Duty of Care or 23 full agency in place ... It would be helpful to have 24 a copy of the formal arrangements for the file." 25 So what he's clearly saying is he doesn't know if 45 1 there are formal arrangements in place and can you 2 confirm that, please. Isn't that what he's saying? 3 A. No, I think my view is that -- my view is that Colin was 4 very aware of the arrangement that had been made, of the 5 letter that we'd looked at and revised and agreed on, 6 and I did just see this, I'm afraid, as another lengthy 7 email that was seeking to open matters up. And at this 8 point on 18 January, that really wasn't what I thought 9 would have been -- was the correct thing to do. 10 I suspect I looked quickly at that, and then just 11 read the rest of his letter. 12 CHAIR OF THE INQUIRY: Was there a system of internal due 13 diligence within the Department? 14 A. In terms of ...? 15 CHAIR OF THE INQUIRY: In terms of keeping records of -- 16 such as appointments of DLA. I think what he's saying 17 here is that: as part of our internal due diligence, it 18 would be helpful to have a copy of the formal 19 arrangements for the file. So was there -- was that 20 a requirement? 21 A. No. In terms -- at that time, I think we were still 22 largely paper based. We didn't, you know, have a full 23 sort of, you know, IT sharing. 24 So no, there was nothing -- no sort of internal due 25 diligence in terms of that. No. 46 1 I think maybe it's just a formality that Colin has 2 maybe put on those words, but there was certainly 3 a requirement to keep files. 4 CHAIR OF THE INQUIRY: And to keep copies of signed 5 documents, presumably. 6 A. Yes, of course. Of course. And we also had provision 7 with the archivist as well, that if there was documents 8 which we didn't consider we would keep on files, we 9 could provide to the archivist for retention. 10 MR MACKENZIE: Thank you. 11 Another document, please, that we can go to. 12 CEC01567527. This really is in the context I just want 13 to have a clear understanding of your understanding of 14 the time of the role the legal team were playing. 15 If we can please go to the second email here in the 16 page, the one on the bottom half, we will see it's an 17 email from Jonathan More of tie dated 23 August 2007 to 18 Colin MacKenzie. We can see: 19 "Lesley is not in the office today but has passed me 20 a message to forward some contractual information to 21 you. Please find attached to this email the draft 22 Infraco contract which is currently in the process of 23 fairly intensive negotiations." 24 May we look at the email at the top of the page. We 25 see an email from Colin MacKenzie dated 27 August 2007 47 1 to Nick Smith, copied into yourself, and it states: 2 "Nick, I have been directed by the Council Solicitor 3 to instruct you to read through the attached documents 4 received from tie. This is top priority, and I would 5 like to hear from you by Wednesday afternoon, with your 6 views on the implications for the Council on risks, 7 liabilities, step in rights, etc." 8 Do you have any recollection of directing 9 Mr MacKenzie to instruct Mr Smith to do this? 10 A. Yes. I have a clear recollection that for a period of 11 months before this my -- my understanding was that that 12 was exactly what Nick Smith was doing. 13 We had received a copy of the draft contract many 14 months before this, and I have a clear recollection 15 of -- I would have one-to-one meetings with all the 16 principals, including Colin MacKenzie, and in the months 17 leading up to August, I have a clear recollection of 18 asking Mr MacKenzie how this piece of work is going, and 19 when there would be a product from this piece of work; 20 and the view which Mr MacKenzie gave me back was that he 21 was having some difficulty in getting progress from 22 Nick Smith. He didn't give me any particular reasons 23 for that. He said he was having some difficulty getting 24 progress and he was continuing to ask him when he would 25 have that product. 48 1 And Colin and I had had this conversation in 2 a number of one-to-ones leading up to that time, and 3 I think perhaps at a one-to-one before this, I had been 4 saying to Colin: you know, we really do have to have 5 this quite quickly, can we try and have it quickly, 6 please; and Colin again, you know, advised me that he 7 was having difficulty really, I think, getting -- 8 I would stress at that time getting Nick to do any work 9 and to get this product from him. 10 At one of these conversations, I do recall I said to 11 Colin, you know: please can you make clear to Nick that 12 we really do need to have this pretty quickly now; 13 and I suspect that that's perhaps what's prompted this 14 email. 15 Q. Thank you. If we then look at Mr Smith's response, 16 please, it's CEC01564795. We can see an email from 17 Nick Smith dated 28 August 2007 to Colin MacKenzie, 18 copied into Alan Squair, but not copied in to yourself. 19 We will see the first paragraph, Mr Smith states: 20 "Given the nature of our recent discussions and the 21 content of your recent emails to Gill, I was somewhat 22 surprised to receive your email this morning." 23 The second paragraph, about four lines down, states: 24 "You have now forwarded nearly 1,000 pages of 25 agreements to me and requested comments in less than 49 1 36 hours. Even ignoring the issues which have been 2 identified by you to Gill over the past two weeks, this 3 would be an impossible task." 4 Then in the next paragraph he says: 5 "As discussed with you at length, anything less than 6 a comprehensive review of risks and obligations would 7 not in my view be in the Council's best interests 8 and I would be failing in my professional obligations if 9 I did not raise this issue with you. Unfortunately, 10 given the circumstances, it will not be possible for me 11 to respond as requested." 12 Then: 13 "As discussed, I look forward to being able to 14 assist yourself and Alan with other more appropriate 15 matters in relation to the Tram project." 16 Were you made aware of Mr Smith's position in this 17 matter? 18 A. No, not at all. 19 Q. So did this essentially come as news to you when I think 20 you may have been sent a copy of this by the Inquiry at 21 some point? 22 A. Yes. I was very surprised. 23 Q. Now, do you remember in the previous email we looked at, 24 Mr MacKenzie had said to Mr Smith: I would like to hear 25 from you by Wednesday afternoon with your views on the 50 1 implications, et cetera, this report is for internal 2 consumption only. 3 So it sounds as though Mr MacKenzie was expecting 4 Mr Smith to produce a report on these matters. Were you 5 expecting a report on these matters? 6 A. Yes. By this time Mr Smith had been working full time 7 on the project from February 2007, which was now almost 8 four to five months, and yes, I was certainly expecting 9 a product. 10 Q. So when the product -- let me put it this way. Did 11 a product arrive? 12 A. No. To my surprise, when -- when I met with Colin and 13 Nick, I was very surprised just to be given this 14 one-page piece of paper which had the four options on 15 it, and not what I had been understanding Mr Smith had 16 been working on for a period of months up to that time. 17 Q. Now, the bit of paper with the four options, I think we 18 have perhaps explored with Mr Smith in his evidence, 19 that he would produce a one or two-page note on the 20 question of the Council instructing independent legal 21 advice. 22 There were various options set out there. 23 But I'm pretty sure that note was before these two 24 emails we've looked at. So -- and it seems quite clear 25 from the -- can we just go back to it. CEC01567527. 51 1 We can see again an email in the top half of the 2 page. What seems to be expected here is a report on the 3 draft Infraco contract setting out the implications for 4 the Council on risks, liabilities, step in rights, 5 et cetera. 6 Did a report of that nature ever come to you? 7 A. No, it was not. 8 Q. So was that not a trigger for you to go back to 9 Mr MacKenzie and say: where is the report? 10 A. Well, in terms of the months up until August when Colin 11 said he'd been having trouble getting anything from 12 Nick, he was continuing to ask him for it. At the 13 meeting when I received this one-page piece of paper, 14 I realised obviously that then there wasn't, you know, 15 any more structured report, you know, which I -- I was 16 disappointed in, but I accepted the fact that if there 17 wasn't a more structured report at that point, then we 18 would just have to work from the knowledge that we had. 19 But at no time was I aware that Nick Smith's 20 position was that he wasn't going to be looking at the 21 contract and dealing with it in the future in terms of 22 an awareness and support and challenge, no. 23 Q. Because just for the avoidance of doubt, I think the 24 position of both Mr MacKenzie and Mr Smith to the 25 Inquiry is that they took a principled stance of 52 1 refusing to review or advise on the Infraco contract 2 because they did not have the experience or expertise to 3 do so, and indeed by reviewing or advising on the 4 contract, they may have given the false reassurance that 5 the contract had been properly reviewed by Council Legal 6 staff. Were you aware of that position on their part at 7 the time? 8 A. No. It certainly -- it wasn't communicated to me in any 9 way, and it certainly is not consistent with the further 10 discussions that we had in respect of the project. 11 Q. What were those further discussions and when did they 12 take place? 13 A. We -- we had a number of meetings, and at that stage, 14 I had hoped to be quite fully briefed at those meetings. 15 I had put in place, you know, just some sort of plans, 16 some standard -- standard agenda, standard plan, so 17 I could understand what documents were being produced, 18 where were they, any matters of exception reporting. 19 I think that Colin's position was that he -- he said 20 it would be -- it was a waste of his time to do dual 21 reporting as we were reporting to the -- as he was 22 reporting to IPG through the project team and I accepted 23 that, but Nick, Colin and I had a number of meetings 24 regarding individual risks and liabilities and issues in 25 terms of the contract, both in terms of writing, in 53 1 terms of meeting, and there were times when all three of 2 us would intend -- would attend the Legal Affairs Group. 3 So no, I would say I was wholly unaware that there 4 was any decision that they weren't going to get involved 5 in the contract. 6 And I can't see how the contribution which they made 7 with their colleagues, they could have made that without 8 having any relevance to the contract. 9 Q. Now, it may be suggested that as Council Solicitor it 10 was your job to know what members of your team were 11 doing or not doing. 12 A. Yes. As Council Solicitor, I accept that there's 13 obviously a very wide team of around 85 staff, and 14 there's a manage arrangement for that. And my direct 15 report, Colin MacKenzie, didn't advise at any point that 16 there was any such principled stand had been taken. 17 Q. What was the procedure or practice within the Legal 18 Department at the time for you being kept updated on 19 what members of your team were doing? Was there any 20 sort of reporting from your staff saying to you what 21 they were doing? Did you have regular legal team 22 meetings or what? 23 A. Yes. In terms of the entirety of legal work, there's 24 obviously hundreds of files which will be throughput in 25 each of the six or seven individual teams. There would 54 1 be -- we had in place a number of managed systems. Some 2 were fairly new and had been brought in by myself 3 probably before -- a couple of years before then. 4 We had a number of divisional management team 5 meetings, probably every couple of weeks. We would look 6 at a number of general matters of work in the Division. 7 The arrangements for managers to meet with staff 8 were also to have one-to-ones with individual direct 9 reports, which I think I had about seven. And at those 10 meetings, we would look at general throughput of work. 11 We might look at statistics about files coming in, files 12 being closed, (inaudible) statistics, and particular 13 legal issues that were arising. 14 Q. In relation to the tram project, presumably from the 15 outputs of Mr MacKenzie and Mr Smith, you could have 16 been aware of what they were or weren't doing. So, for 17 example, if you were not receiving a report from them in 18 relation to the Infraco contract and their views on the 19 risks arising to the Council, then the absence of such 20 a report may be a clue as to what they were or weren't 21 doing. 22 A. I think that I accepted that there wasn't going to be 23 any further report on it. But both being allocated full 24 time to the project, I -- I didn't have any concerns 25 that they were engaging with the project, and 55 1 undertaking the various activities that we were doing at 2 that time. 3 Q. Yes. To be fair to both you and them, while we may not 4 have seen a report from them specifically on the Infraco 5 contract, we will come on to see that they did regularly 6 raise issues and concerns in relation to the project. 7 That's correct, isn't it? 8 A. Yes, that's correct. In terms of the support and 9 challenge role which we were undertaking, that role 10 continued, yes. 11 Q. I would like to briefly move on to a separate matter. 12 It concerns the period when Mr Fitchie was seconded to 13 tie in late 2007. 14 I would like to go to two documents, please. 15 Firstly, CEC01500853. This is a minute of the 16 Council/tie Legal Affairs Group meeting on 17 26 November 2007. We can see in attendance various 18 individuals from the Council and from tie. But we can 19 see apologies received both by yourself and from 20 Andrew Fitchie, and we can see also that from those in 21 attendance, there was no representative of DLA at this 22 meeting. 23 If we now please go to page 6, and just to note that 24 at the top of the page: 25 "DLA Duty of Care. CM [Colin MacKenzie] asked about the 56 1 status of AF [Andrew Fitchie] in relation to signing off the 2 INFRACO contract. It was noted that DLA would report to 3 the Council independently of AF [Andrew Fitchie] who would be 4 acting in his tie Contracts Director role." 5 Could we also please go to another document before 6 asking you some questions. The next document is 7 CEC01399996. 8 At the bottom half of the page we can see an email 9 from Mr MacKenzie, dated 23 November 2007 to yourself. 10 Subject, "TRAM: DLA INPUT". 11 Mr MacKenzie, in the second paragraph, states: 12 "It appears clear to us that following 13 Andrew Fitchie's move to tie, there has been little or 14 nothing in the way of discussions between 15 Sharon Fitzgerald and Council officials as to ongoing 16 contractual negotiations with BBS. On the face of it, 17 no instructions have been sought from the Council in 18 respect of the Council's interests in the outcome of the 19 negotiations. Since Andrew's appointment as a Director 20 of tie, it is fair to say that he can only act in that 21 company's best interests." 22 Then we see for ourselves what's set out in the next 23 paragraph. Then Mr MacKenzie, and we can see it's also 24 from Alan Squair, state: 25 "Can we please have your guidance on this matter." 57 1 Just to pause for a point of detail, what I don't 2 understand is why at the bottom of that email we have 3 Colin MacKenzie and Alan Squair for Council Solicitor, 4 sending an email to the Council Solicitor. 5 A. Your question mark is the "for"? 6 Q. Sorry, yes. My question mark relates to why are they 7 saying at the bottom of that email "for 8 Council Solicitor". I could understand if you were on 9 absence or leave or whatever, you weren't there, and 10 they were acting on behalf of you. But when you are 11 there, is it just some standard thing that appears on 12 the bottom of their emails or what? 13 A. I think it was actually just a practice probably of 14 Colin MacKenzie. It might have been in some -- maybe 15 a more sort of legacy practice in the Department or 16 Division. I think it was just the way that Colin liked 17 to design himself. It didn't have any meaning. 18 Q. I see. 19 Then if we can scroll, please, to the top of the 20 page, we can see your response on 23 November 2007 to 21 Mr MacKenzie: 22 "Colin, please write to Sharon F ..." 23 I think that's Sharon Fitzgerald? 24 A. Yes. 25 Q. "... as agreed and meet as agreed. She can advise us 58 1 directly of DLA's position and we will update LAG on 2 Monday." 3 What was your understanding, if any, at around this 4 time of the nature of Mr Fitchie's secondment to tie? 5 A. Yes. I'm just seeing that these emails are obviously on 6 the same date. And when I have said "as agreed", 7 I think I must have met with Colin here. And my 8 preference is usually to meet because then you know what 9 you've discussed and you have done an action. I know 10 Mr MacKenzie prefers to write emails, but I think 11 sometimes it's not clear what the agreed action is if 12 that's the case. 13 That -- I was expecting that Mr MacKenzie would go 14 back to DLA and clarify what the position was. I think 15 on receiving that, I was clearly concerned if that was 16 the case, and wanted to have an understanding of what 17 exactly the position was. 18 Q. So in due course what was your understanding, if any, of 19 the nature of Mr Fitchie's secondment to tie? 20 A. My understanding was that Mr Fitchie was never 21 a Director of tie, and I do recall doing a search. 22 I thought it was surprising. I thought I would have -- 23 being associated, I would have seen the appointment of 24 Director. Usually that will have been passed to Legal 25 team in respect of the company. 59 1 I did a company search to make sure that Mr Fitchie 2 was and had never been a Director of tie. My 3 understanding is that Colin MacKenzie came back to me 4 and advised that DLA were continuing to act. I did go 5 back again to say, again to ask Colin to confirm 6 Mr Fitchie's exact position, and I don't think I did 7 receive a final sort of view from Colin again on what 8 that was. 9 I did -- I did speak to Mr Fitchie about it, and he 10 reassured me that he was working closely with tie, as 11 I knew because I presumed that that was close to 12 a full-time appointment for him, but he reassured me 13 that he was not and had never been a Director of tie, 14 and he was working closely. 15 He didn't advise me that he was on what's now called 16 a secondment. And my understanding of that was that, 17 you know, for some reason Colin had information about 18 being a Director that was not correct. 19 Q. Thank you. 20 Now, what happened as a matter of fact around this 21 time? Did you seek and receive advice and information 22 from Mr Fitchie, or as a matter of fact was it only 23 Sharon Fitzgerald who was providing any advice and 24 information? 25 A. At that time it was from both. 60 1 MR MACKENZIE: My Lord, I'm moving on to another document. 2 It may be a suitable moment to break. 3 CHAIR OF THE INQUIRY: Yes. We normally have a break for 4 the shorthand writers at this time. So we'll have 5 a 15-minute break and you will be able to have a coffee 6 or whatever in the meantime. We will resume at 11.20. 7 A. Thank you. 8 (11.05 am) 9 (A short break) 10 (11.20 am) 11 CHAIR OF THE INQUIRY: You're still under oath, Ms Lindsay. 12 A. Yes. 13 MR MACKENZIE: My apologies, my Lord. 14 CHAIR OF THE INQUIRY: Mr MacKenzie? 15 MR MACKENZIE: Could we then please look at another 16 document, CEC01398245. 17 We can see this is a highlight report to the 18 Chief Executive's Internal Planning Group on 19 11 December 2007. 20 If we can go, please, to page 91. 21 I think in short what this is is a briefing paper 22 produced by members of the B Team for the purposes of 23 this meeting. 24 I think in fact slightly earlier in December, 25 Mr MacKenzie had sent you a copy of this note, or at 61 1 least a previous version of it. Is that correct? 2 A. Yes. I was actually on annual leave until 11 December, 3 and I recollect my flight was delayed. I think I 4 arrived back actually on the day of the IPG. So yes, 5 I see now from Inquiry evidence it was in my mailbox 6 before, but I didn't have sight of it prior to the IPG 7 meeting. 8 Q. I think you attended this meeting of the IPG; is that 9 correct? 10 A. Yes. 11 Q. Clearly it was an important meeting, but I think it was 12 just before the Council were going to be asked to 13 approve the Final Business Case and ideally to authorise 14 tie to enter into the relevant contracts; is that 15 correct? 16 A. Yes. And I had been liaising with the Director, 17 I think, perhaps just the day before, I had been 18 emailing him on the matter. 19 Q. I think in short the purpose of the note was for the B 20 Team to bring together in one document and report on 21 their concerns in relation to the project, and various 22 matters that they considered required to be addressed 23 and resolved. 24 We'll go through the note just in a second, but do 25 you remember around this time, did you have any concerns 62 1 in relation to the tram project? 2 A. Yes. In terms of my own views, I was watching closely 3 whether I thought that there was sufficient in place for 4 that meeting. From my own evidence that I have 5 submitted, I know that I spoke to both the Director of 6 Corporate Services and Director of City Development 7 prior to my leave, and I was watching matters closely to 8 see exactly what would have been achieved by that time 9 before the meeting in December. 10 So I said yes, I had some concerns, and a heightened 11 awareness of whether in fact matters would be suitable 12 to proceed in that December Council. 13 Q. When you say, "I was watching closely whether I thought 14 that there was sufficient in place for that meeting", 15 sufficient what? 16 A. Really in terms of the legal matters that we were 17 dealing with, I recall at that time one particular 18 matter that as a legal team we were concerned about. We 19 had to secure that the project would have access to all 20 the required land that it required, and I think there 21 were around eight or nine agreements with the various 22 Network Rail, ScotRail and others that required to be 23 concluded. 24 The one overriding contract was called the APA which 25 was a critical document to ensure that the project could 63 1 actually receive -- could actually go into the land in 2 terms of Network Rail. 3 I think that some of my concerns were surrounding 4 that. The others were surrounding we were told that 5 there was still an unsettled position regarding the 6 novation with SDS. We were advised that there were some 7 issues with MUDFA, and I was aware there were a number 8 of issues with -- still with the utility companies. 9 So although I think that there had been progress 10 made, my view was that there hadn't been the progress 11 that was expected at that time, and there were some key 12 matters which we would require to be satisfied on. 13 Q. And required to be satisfied on before the Council had 14 authorised tie to enter into the contracts? 15 A. Yes. 16 Q. If we perhaps then look at this briefing note, just 17 perhaps remind ourselves of the main headings without 18 going into the detail. 19 We see: item 2, "Grant Award Letter"; item 3, 20 "Potential Additional Project Costs"; and over the page, 21 please, 4, "Quantified Risk Allowance". 22 Just to pause there, we see that the current risk 23 allowance -- can we blow it up, please, in 4.1: 24 "The current risk allowance stands at GBP49 million. 25 This figure drops to GBP34 million following financial 64 1 close due to a number of risks being closed out at that 2 point. This reduction is subject to a number of 3 caveats, not least a 100% fixed price and 100% 4 fixed time for the contract being in place at 5 contract close. CEC have now been supplied with the 6 latest QRA for investigation." 7 Was that consistent with your understanding that for 8 there to be a reduction in the QRA at contract close, 9 there required to be 100 per cent fixed price and 10 100 per cent fixed time for the contract being in place? 11 A. We were -- we were always advised there would be 12 a significant reduction in the QRA at that time, and -- 13 CHAIR OF THE INQUIRY: I think the question, Ms Lindsay, 14 was: 15 "Was that consistent with your understanding that 16 for there to be a reduction in the QRA at contract 17 close, there required to be 100 per cent fixed price and 18 100 per cent fixed time for the contract being in 19 place?" 20 A. My understanding was that the fixed price was made up of 21 the price plus the QRA. So my understanding was that 22 the -- those combined would make up the project cost. 23 I'm not sure if my understanding, would it have to 24 be 100 per cent fixed price and fixed time as I think we 25 knew that there were some provisional items, but 65 1 certainly that the price plus the QRA would require to 2 be the project sum total of which we were expecting. 3 MR MACKENZIE: Presumably the logic behind this is that if 4 a contract is 100 per cent fixed price, then a number of 5 risks that may have existed during the procurement 6 process have been essentially closed out, accepted and 7 costed by the contractor in their price? 8 A. Yes. I recollect that we were advised that one reason 9 for that drop was in terms of price certainty, but that 10 there were other reasons such as the deliverability now 11 being more certain. 12 Q. So if I'm right as a matter of logic, it must also 13 follow that if there are risks at contract close which 14 haven't been closed out, accepted and costed by the 15 contractor in their price, then there's not 16 a 100 per cent fixed price contract and the risks should 17 remain reflected in the QRA? 18 A. Yes. If I can just state again that my understanding 19 was that the sum required to be contained either in -- 20 the sum which would be paid to the contractor and the 21 QRA, the total, and that that was what was seen as being 22 the 100 per cent fixed, the price plus the QRA. 23 Q. Could I just continue back with the briefing note, 24 please. Just to continue looking at the headings, 5, 25 "First Scotrail", 6, "Utilities". You have mentioned that 66 1 yourself earlier. 7, "Consents/Prior 2 Approvals/Incomplete Design". You had mentioned the SDS 3 novation. 4 Over the page, please, we see: 8, "Third Party 5 Agreements"; 9, "Governance"; 10, "PI Cover/Guarantee". 6 Over the page, please: 11, "Operating Agreements"; 12 7 "Further Issues"; 13, "Contract Risk". 8 Over the page, please, to page 96, if we could pause 9 at 13.4, it states: 10 "There is also the issue that Council officials do 11 not understand the contract nor have had any independent 12 review of the contract document." 13 Would you have agreed with that statement at the 14 time? 15 A. I would have agreed that the Council official wouldn't 16 have had a full understanding of the contract. But 17 there was a dedicated full-time project team. There 18 will have been very detailed consultation between the 19 Council and the contractor. And my understanding is in 20 terms of the funding agreement, the OGC Reviews which 21 are independent will have been carried out as required 22 at that stage. 23 So I would say broadly, but with those caveats. 24 Q. Yes. So in short, I think your position would be that 25 you would accept the Council officials at this time had 67 1 not fully understood the contract, but you were trying 2 to gain that understanding? 3 A. Yes. 4 Q. Then paragraph 14.2, just check if this is right, the 5 statement that: 6 "The Council members are committing to the biggest 7 project it has ever undertaken ..." 8 Was that correct? 9 A. Yes, I think -- yes. 10 Q. Then over the page, please, to page 97. We see in the 11 final two paragraphs: 12 "Guidance is being sought from Council Officers from 13 the Directors of Finance and City Development on how the 14 issues detailed above should be reported in the Council 15 report ..." 16 Now, to pause there, is it of any significance that 17 guidance is being sought from those Directors rather 18 than yourself? 19 A. Yes. This was regarded as being a joint City 20 Development and Finance project. All reporting to 21 members was by these two officers. They were in effect 22 the client. And I think it probably also reflects that 23 they are the officers who are on the TPB, who are 24 required to have this consultation before at TPB they 25 can consent to that act. 68 1 Q. Then in the final paragraph we see: 2 "Guidance is being sought from Council Officers 3 providing input to the Council report on 4 20 December 2007 on the issues detailed above whether 5 the Council is well informed enough at this stage in 6 proceedings whether a report on 20 December 2007 is 7 appropriate given the outstanding issues." 8 What were your views at the time on whether a report 9 to Council on that date was appropriate given the 10 outstanding issues? 11 A. I think there is an email in process to my own Director 12 which is perhaps the day before this -- this discussion. 13 My view -- I think I said on that that I thought we 14 were perhaps close, but not yet at that stage for the 15 reasons I mentioned previously regarding the land 16 consents, the MUDFA utilities, securing that we knew 17 exactly what was in the QRA, and that we had more 18 certainty on matters. I think I said that we're 19 close -- we're not at that point, and we require to get 20 some more information. And consider various actions. 21 And I did participate in the meeting. I was 22 appreciated that Colin largely led the discussion from 23 Legal as I had just arrived, and I was obviously trying 24 to read the report and liaise and be brought up to speed 25 with it. 69 1 But yes, my view at that meeting was that 2 I understood entirely those concerns, and that my view 3 was that we -- we weren't at the position to go forward 4 with the report at that stage, providing, you know, full 5 consent. 6 I think it was myself who suggested that we would 7 have to consider some sort of staged approval. 8 Q. Thank you. Is that what -- the approach that was 9 decided upon? 10 A. Yes. That obviously was the decision of the 11 Chief Executive and his Directors. And I recall from 12 seeing the minute of that meeting that the 13 Chief Executive considered that he could only delay that 14 report if he could advise members there would be 15 a better negotiated outcome. 16 Q. Thank you. 17 A. And -- and officers at that time, you know, nobody could 18 confirm that there would be a better outcome. 19 What we were saying was that there was -- there were 20 too many uncertainties at the present time. And it was 21 agreed that the way to balance that was by not delaying 22 it, but by having the report, but securing that the full 23 consent would not yet be given until a number of matters 24 were -- we had additional certainty on. 25 Q. If we then, please, go to the report to Council on 70 1 20 December 2007. It should be CEC02083448. If we can 2 go to page 9, please, to check the authors. We can see 3 the signatures of Donald McGougan on 17 December 2007 4 and also Andrew Holmes, signed on the same date. 5 If we then please go back to page 1. We can see 6 under the purpose of the report, 1.1: 7 "Recommending approval of the Final Business Case 8 version 2 prepared by tie for the Edinburgh Tram 9 Network." 10 1.2: 11 "Recommending staged approval for the award by tie 12 of the contracts for the supply and maintenance of the 13 infrastructure works (Infraco) and tram vehicles 14 (Tramco) subject to price and terms being consistent 15 with the Final Business Case, and subject to the 16 Chief Executive being satisfied that all remaining due 17 diligence is resolved to his satisfaction." 18 So in short, there are two main conditions before 19 approval can be given to tie to award the contracts. 20 The first main condition is that the price and terms 21 have to remain consistent with the Final Business Case, 22 and secondly, the Chief Executive has to be satisfied 23 that all remaining due diligence is resolved to his 24 satisfaction. 25 Is that a correct interpretation? 71 1 A. Yes. 2 Q. Then if we can please go just to look at recommendations 3 at page 8. We can see 10.1, recommendation: 4 "To approve the Final Business Case version 2." 5 And 10.2: 6 "To authorise the Chief Executive to instruct tie to 7 enter into contracts ... providing the remaining issues 8 are resolved to the satisfaction of the Chief Executive 9 as detailed in this report." 10 I think the Council duly agreed with those 11 recommendations and gave approval on that basis. 12 I would like now please to move into 2008, to an 13 email. If we bring it up, CEC01400439. 14 We can see at the top of the page, it's an email 15 sent on your behalf on 3 January 2008 to Mr MacKenzie, 16 copied into Alan Squair and Nick Smith. The heading is, 17 "REPORT OF 20 DECEMBER". You say in the second 18 paragraph: 19 "As you know, Council approved a series of 20 recommendations on 20 December which require a range of 21 significant work and progress to be in place prior to 22 financial close. 23 It is imperative that we fully support work and 24 progress towards delivery. Can you please ensure that 25 all possible resources relating to this project are 72 1 utilised on a full-time basis as agreed to support the 2 legal work which requires to be undertaken as a matter 3 of the utmost urgency during January and leading to 4 financial close." 5 So what matters did you anticipate that 6 Mr MacKenzie, Mr Smith and Mr Squair would attend to, 7 and what matters did you anticipate you would attend to? 8 A. I think if we just look at the second last paragraph of 9 that mail, it's saying: 10 "Can you please ensure you have constant interface 11 with Sharon Fitzgerald of DLA in respect of 12 understanding and recognising and providing instructions 13 as appropriate in respect of progress towards financial 14 close and risk assessment on the principal contracts." 15 I was conscious that at that time we were told we 16 were required to have a financial close by, I think it 17 was 28 January. So I was conscious that yet again, we 18 only had a small number of weeks to do that. 19 In terms of the role which Mr MacKenzie and Nick 20 would take, it's really as I have explained there. 21 I would expect to be having on a strategic level 22 a knowledge of what that was, to see how I could assist, 23 was there anything else that I could do, and in terms of 24 my own role, I always wanted to understand what the 25 price was and what the QRA was. 73 1 I didn't really have any particular sort of 2 technical knowledge of the technical and the financial 3 matters, but I always looked to make sure that these 4 things were balanced in terms of authority, and legal 5 issues in terms of, you know, bonds, guarantees, and 6 also the legal issue of procurement to ensure that the 7 contract was legal when it was let. 8 And that there hadn't been any deviation from the 9 terms that were agreed. 10 Q. Presumably you mentioned you always wanted to understand 11 what the price was and the QRA. Presumably an 12 understanding of these matters would be fundamental to 13 understanding the risks to the Council arising from the 14 contract? 15 A. Yes. Absolutely. And ensuring that even though 16 I didn't have an understanding of what the particular 17 risks were, that they were logged in the QRA. 18 Q. Thank you. 19 Now, it may be a point of detail, but you've said in 20 the paragraph there: 21 "Can you please ensure you have constant interface 22 with Sharon Fitzgerald ..." 23 Was it the case that you were dealing more with 24 Andrew Fitchie and you expected Mr MacKenzie to deal 25 more with Sharon Fitzgerald? Is that how it worked? 74 1 A. No. I think the reference to Sharon Fitzgerald there 2 was because I think I was realising that perhaps Colin 3 still had a reluctance to deal with Mr Fitchie of DLA, 4 and I think I was really just trying to say: have 5 constant interface with DLA. 6 I think I looked through my own papers and I think 7 that Sharon Fitzgerald may have had some more 8 involvement towards the late part of that year, and 9 that's perhaps why I've used Sharon Fitzgerald as 10 opposed to Mr Fitchie, but I certainly wasn't asking for 11 that. It really was with DLA is what I was asking. 12 Q. Thank you. I would like to move on to another document, 13 please. CEC01406011. 14 Now, we can see -- move on to another document, 15 please. CEC01400919. It's an email at the top of the 16 page from Colin MacKenzie, dated 19 February 2008, to 17 yourself, copied into Nick Smith. Mr MacKenzie says: 18 "A couple of matters to bring to your attention 19 following the LAC meeting last night and today's PLIG 20 meeting." 21 Then the second last paragraph: 22 "The position regarding novation of the SDS contract 23 to BBS was given next to no clarification last night, 24 with a contradictory explanation from tie." 25 You mentioned that was a SDS novation was a matter 75 1 of concern to you before -- 2 A. Yes. 3 Q. -- at the end of the previous year. 4 Mr MacKenzie goes on to say: 5 "I regret to have to record with you my concern 6 about tie's lack of transparency and co-operation with 7 Council officers. I do not take this personally, but 8 I find it unacceptable that the Council is constantly 9 having to press tie for relevant information and face an 10 evasive response." 11 Did you ever have any concerns in respect of these 12 matters? 13 A. I would say not at that time. I recognised the issue in 14 that, you know, sometimes officers will not be given the 15 information that they require. 16 I recall that I was asked by tie to also go along to 17 the LAG, and I think the explanation they gave me was 18 that they felt that essentially they weren't getting the 19 traction they required through Colin MacKenzie's 20 presence at some of the LAG meetings, but again, 21 I recognise that that's a different perspective. It can 22 be for all different things. So I myself went along to 23 more of those meetings, and my own view is that whilst 24 I could understand what Colin was saying here, when 25 I was at those meetings, I felt personally that there 76 1 wasn't really the element of joint working that was 2 required. 3 I could see Council staff who had what could maybe 4 be described as a knowledge is power position, 5 and I could see tie staff who were trying to proceed 6 with matters, and it was obvious that what was required 7 is for the staff who had the knowledge of what was 8 needed to be done to actually make sure they gave that 9 to tie in order that matters could proceed. 10 So my kind of experience is that I think there 11 was -- there was on some officers a little bit of 12 knowledge is power, perhaps wasn't as good sharing 13 information as there could have been, and there was 14 nothing personally from my perspective, there was 15 nothing that I asked for at that time that I wasn't 16 given. 17 Q. Your own experience when you say that perhaps there 18 wasn't as good sharing of information as there could 19 have been, did that relate to the period late 2007 up to 20 contract close? 21 A. No, I was actually talking about a different project 22 actually, when I was perhaps taking a more operational 23 role in it and I maybe experienced similar matters to 24 that which Mr MacKenzie is talking about. 25 Q. So which project are you referring to? 77 1 A. I was referring to when I had an operational in 2 Edinburgh's waterfront. 3 Q. Now, in this email in February -- 4 CHAIR OF THE INQUIRY: Sorry, Ms Lindsay. We're concerned 5 about the tram project here. And I think you were asked 6 questions about Mr MacKenzie's concerns, and you were 7 asked about your concerns in relation to the matters 8 raised by him which involved the tram project. 9 What was your position then in relation to the tram 10 project? Did you have similar experiences to 11 Mr MacKenzie? In the tram project, not the waterfront 12 or any other project? 13 A. No. I don't recall that at that stage there was 14 anything which I asked for that I didn't receive. 15 CHAIR OF THE INQUIRY: And when you were speaking about some 16 officials having the attitude of knowledge is power, did 17 that apply in the tram project? Is that what you're 18 saying? 19 A. Yes. 20 CHAIR OF THE INQUIRY: That was your experience, was it, in 21 the tram project? 22 A. Yes, in the tram project, when I went along to some -- 23 there was a bit of a division in the room is what 24 I would say. 25 MR MACKENZIE: When you say among Council officials 78 1 knowledge was power, by that do you mean they wanted 2 knowledge about the tram project? 3 A. No, I'm afraid not. What I meant by that is that I did 4 see behaviour in Council officers that there was 5 a reluctance to share information, and I saw behaviours 6 in tie when they were -- they were sort of driving very 7 hard a timetable. It appeared that, you know, people 8 weren't best merging together. 9 Q. So when you say you saw behaviour in Council officers 10 that there was a reluctance to share information, what 11 information were they reluctant to share? 12 A. I remember one particular meeting, and tie were trying 13 to drive hard a timetable which would require issues to 14 do with bridges and structures, and the -- they had 15 explained this in some detail and we had actions and 16 timescales, and towards the end of, you know, quite 17 a detailed explanation, one of the officers then said: 18 well, you know, you can't do that. You know, and they 19 were sort of retaining the information that they had 20 built up over a long period of time about actually the 21 type of consents and the type of matters that tie would 22 require to take into account. 23 I felt the information didn't flow as freely or as 24 helpfully as it could. 25 Q. Is what you are saying that in relation to consents and 79 1 approvals, you felt Council officers could have been 2 more helpful in explaining to tie or perhaps the 3 designer what they were looking for? 4 A. Yes. I felt that we were advised that we were on one 5 team, and from some of the early meetings I went to, 6 that didn't appear to be the case. 7 Q. You also mentioned tie were trying to drive hard 8 a timetable. Did you at any time before contract close 9 have any concerns as to whether tie were trying to drive 10 that timetable too hard? 11 A. I think my view, as I expressed to Mr MacKenzie, was 12 I thought it was highly aggressive. I didn't have any 13 concern that it would be -- there was anything improper 14 about it or that there would be anything which couldn't 15 be dealt with. But I was aware that it was -- the 16 timetable was being driven very hard. 17 Q. Because it may be suggested that in driving the 18 procurement timetable very hard, one ran the risk of 19 departing from the procurement strategy which, as we 20 know, was originally intended to complete design and 21 utility diversion works before the Infraco contract. Do 22 you have any comments on that suggestion? 23 A. I think it's not my memory from that time. My memory 24 from that time is that there was, for example, a very 25 large number of third party agreements. There were 80 1 a very large number of agreements in this contract. And 2 my memory at that time was that it was some of those 3 things which were being driven very hard. And it was 4 those things which Council officers, I think, would have 5 very particular information on, and the type of -- the 6 type of matters that tie would require to take into 7 account as they were dealing with matters. 8 Q. Before we leave this email, Mr MacKenzie set out his 9 concern about tie's lack of transparency and 10 co-operation with Council officers. Were you ever aware 11 of any other officer or officers in the Council having 12 similar concerns? 13 A. I would say not at that time, no. 14 Q. Did there come -- 15 CHAIR OF THE INQUIRY: I think the question was ever. Did 16 you ever have concerns? 17 A. Yes, when I've looked back at some of the IPG meetings, 18 I see that I've raised matters in 2008 just to ask: are 19 we having -- do we have a correct and accurate flow of 20 information? I wasn't suggesting that there was a lack 21 of transparency, but I think I had concerns that there 22 may be information that we weren't getting and we 23 weren't getting it quickly enough. 24 Q. Was that before or after contract close in May 2008? 25 A. That was after contract close. 81 1 Q. Can you remember the sort of information you felt you 2 weren't getting or weren't getting quickly enough? 3 A. I think, as we were going into some of the IPG meetings, 4 we were aware that there were a number of issues, and 5 what I think we were constantly told is there were slow 6 mobilisation and other issues. I think I was concerned 7 that I had heard this phrase at about three meetings 8 now, and, you know, I think I was just, you know, 9 I wanted to make sure that we had all the information, 10 or the TMO, the Tram Monitoring Officer had all the 11 information that they required. 12 Q. I would like to move on to another document now, please, 13 in relation to design risk. CEC01406011. 14 We can see in the second half of the page, this is 15 an email from yourself dated 11 February 2008 to 16 Jim Inch, subject, "Agenda for tomorrow's meeting". 17 You then go on: 18 "Brief update for info. We have the LAG meeting 19 tonight to review progress. WG [Willie Gallagher] 20 called on Friday to advise that BBS had required 21 considerable additional contract sums as part of current 22 negotiations but that this had now been negotiated down 23 to an additional GBP5 million on the project cost. He 24 had advised Andrew Holmes and had discussed in general 25 terms and had been trying to contact Donald to update 82 1 again. WG advised no specific reasons/material in 2 support of additional cost, but that this was expected 3 and could be contained in the overall project budget." 4 To pause there, did it give you any concerns that 5 tie appeared to be agreeing to a price increase despite 6 no specific reasons or material in support of that 7 having been given? 8 A. I think that personally I didn't really have any 9 information about the price and what was being 10 negotiated. 11 I think I was probably reassured by the fact that 12 this was being dealt with, with Andrew Holmes and 13 Donald McGougan who, you know, were the signatories. 14 But I've obviously been concerned enough to want to 15 bring it to the attention of my own Director, as I would 16 do if I thought there was anything that was of 17 significance, but I wouldn't have thought it was 18 appropriate for me to be considering what that price was 19 for. 20 Q. Reading on: 21 "He also advised that the novation of SDS to BBS, 22 the principal contractor would now be subject to a cap 23 on BBS's liability ie they would not take all liability 24 for delays/costs to the project caused by SDS. WG 25 advises the level of cap is not yet agreed but it would 83 1 seem material to me when agreeing costs." 2 Now, was this a change in the position relating to 3 design risk? 4 A. Yes. This was the first exposure that certainly I had 5 had to being advised that the design risk really was not 6 going to be passed off at novation to BBS, but there 7 would be retention by tie. 8 Q. Thank you. I would like to clarify one matter in your 9 statement, please. If we can go to page 35. 10 Now, about halfway down the main paragraph, and 11 perhaps ten lines down, roughly: 12 "Until February 2008 SDS were expected to take the 13 risk in respect of quality of design and design delay 14 risk excepting where the Council were specifically 15 responsible in respect of its approval and consents 16 role, for the delay. The emails above detail my 17 reporting and actions from the changed position of BBS 18 in February 2008. BBS were then to continue to accept 19 the risk on quality of design but the costs of delay to 20 the project would be met by a provision of liquidate and 21 ascertained damages from SDS to BBS at the rates 22 detailed in the advice note from DLA and the residual 23 risk and cost of delay in excess of those sums would 24 remain with the Council, essentially as a Compensation 25 Event, excepting the fully approved design packages at 84 1 Financial close where the risk remained as at December." 2 Pause there. I will come back to the DLA letter you 3 referred to. I just wanted to clarify whether the 4 reference in your statement to the change in design risk 5 was a reference back to what is set out in your email 6 we've just looked at of 11 February 2008 to Mr Inch? 7 A. Yes, that's exactly it. That email, I understand, 8 was my first understanding that there was to be that 9 change. 10 Q. Thank you. Now, we see a reference to liquidate and 11 ascertained damages. How did you understand that would 12 work in practice? 13 A. My understanding was that if there was a delay in 14 obtaining consents and there was a cost of that, then 15 the contractor BBS would require to claim liquidated and 16 ascertained damages from SDS in terms of the novated 17 contract, but only up to a particular cap, and that 18 following that cap, the exposure would be with tie. 19 Other than in respect of the -- effectively the PI of 20 the actual design. 21 Q. Now, was any consideration given to whether tie could 22 force the contractor to claim the damages from SDS, 23 rather than simply treating all delay in obtaining 24 consents and approvals as changes to tie's account? 25 A. My understanding was that there was a general concern 85 1 obviously about the exposure that this would provide for 2 tie. There were a range of discussions about that, and 3 that tie advised that the position that they had 4 achieved with the cap, with the liquidated damages, was 5 the very best they could achieve in terms of the 6 negotiated position to achieve a novation, and that they 7 advised that there would be an additional and separate 8 risk area within the QRA to deal with that. 9 And I think perhaps at that time or shortly after, 10 we were then told what the cap would be, which did 11 appear to be small, and the particular risk in the QRA 12 did seem to be relatively modest for what that might be. 13 Q. To repeat the question: do you recall whether any 14 consideration was given at the time to whether tie could 15 force BSC to claim damages from SDS, rather than simply 16 treating all delay in obtaining consents and approvals 17 as changes to tie's account? 18 A. I think when you're mentioning damages, what my 19 understanding was that there would be -- the additional 20 costs would be met by tie. I'm not sure if there's 21 a difference between your use of the word "damages" and 22 changes. My understanding was that the additional costs 23 would be paid. 24 Q. Yes. It's just that in the statement and also the 25 email, my understanding -- I may be wrong -- is that the 86 1 first instance, the consortium could look to SDS for 2 damages or costs if there was delay up to a certain cap. 3 Beyond that the consortium would look to tie; is that 4 correct? 5 A. Yes. 6 Q. I'm just wondering whether any consideration was given 7 at the time to whether tie could force the consortium to 8 look to SDS in the first instance in relation to any 9 delay, rather than simply treating all delay as being at 10 the door of tie? 11 A. Only -- my understanding was that only in respect of 12 that first initial cap, which we were told initially was 13 0.5 million and would be 1 million. 14 Q. Did these provisions then find their way into the 15 Infraco contract? 16 A. That -- that's the matters which we were advised of, and 17 yes, I would assume that that is the instructions which 18 the project lawyers had, and that those are the 19 conditions which would have pertained. 20 Q. So your assumption certainly was that provisions of 21 these nature would be in the Infraco contract? 22 A. Yes. 23 Q. I would like to move on to another matter now, please, 24 document CEC01400987. Go, please, to page 2. We see an 25 email in the second half of the page from 87 1 Colin MacKenzie dated 28 February 2008 to yourself and 2 copied to others. 3 We see in the first paragraph: 4 "Following our discussion earlier this week, I have 5 considered whether the Chief Executive is still able to 6 validly exercise the powers delegated to him by Council 7 on 20 December 2007, given the developments since then." 8 The third paragraph, we can see: 9 "You will recall that the report in December 2007 10 was intentionally crafted ..." 11 The paragraph after that: 12 "The question that now falls to be answered is 13 whether there has been any material change in what was 14 reported to Council on 20 December 2007. My view is 15 that there has been material change in a number of 16 aspects, which I set out below for your consideration." 17 Just to pause there, if Mr MacKenzie was correct, 18 that there had been a material change in the Final 19 Business Case, then the Chief Executive wouldn't have 20 had the power to award -- to authorise tie to award the 21 contract, the Chief Executive would have required to go 22 back to Council and explain those changes and seek fresh 23 approvals; is that correct? 24 A. Yes, if the Chief Executive considered that there was 25 a material change, yes. 88 1 Q. But that was a question he would have to either ask 2 himself or receive advice on? 3 A. Yes. 4 Q. Over the page, please, at page 3, in the third paragraph 5 down: 6 "The LAC has received a number of update reports 7 from tie since the turn of the year which have caused, 8 and continue to cause, concern for Council officers. 9 I think it is fair to say that the number one risk for 10 the Council now is the SDS novation, and the costs of 11 dealing with that. It is still not clear (because the 12 Council is not kept fully advised of ongoing discussions 13 between tie, SDS and BBS) what the implications are for 14 the Council legally and financially." 15 To pause there, Mr MacKenzie considers at least he 16 wasn't being kept fully advised of ongoing discussions 17 between tie, SDS and BBS. Were you being kept fully 18 advised of those discussions? 19 A. I would say no. I don't think we were -- we certainly 20 weren't close at all to the negotiations that were 21 ongoing. 22 Q. Did that cause you any concerns? 23 A. I think -- I appreciated that, you know, when we have 24 one set of project lawyers negotiating with a range of 25 different lawyers for a consortium, that we couldn't 89 1 expect to be too close to that. 2 We were getting updates at the Legal Affairs Group. 3 So I wouldn't have expected a detailed discussion on 4 that, but I would certainly want to know what -- where 5 that had got to and what the changes were and why. 6 Q. Would you have preferred to have received more 7 information and updates on these discussions? 8 A. I think it's difficult to say in hindsight. If there 9 was anything particularly more that I wanted, 10 I recognise that I could have asked for that. 11 I think in hindsight, now, I think it would have 12 been better to have had more understanding of exactly 13 what was going on at that time. 14 Q. Do you remember having that view at the time? 15 A. No. I remember being confident in terms of what -- what 16 tie were doing, the task had been delegated to them. 17 And, you know, I remember it did seem to be an issue 18 which was going on for a particularly -- particular 19 length of time. And I was aware obviously that that 20 was, you know, causing the close to -- to keep slipping. 21 Q. So when you say in hindsight you think it would have 22 been better to have had more understanding of exactly 23 what was going on at that time, what was it that 24 happened to change your view in that regard? 25 A. I would say hearing the evidence in this Inquiry. 90 1 Q. So in short, in this email, Mr MacKenzie setting out his 2 concern, there has been a number of material changes to 3 the position reported to Council on 20 December 2007, 4 and I think his main concern he explained was in 5 relation to SDS novation and achieving clarity on that. 6 Could I also then, please, go to page 1. The very 7 bottom of the page, we see an email from yourself dated 8 29 February 2008 to Mr MacKenzie. If we go back to 9 page 2, please, we see a reference about three lines 10 down: 11 "On the positive side, I understand Tie are 12 presenting an update to Finance colleagues on Monday on 13 QRA which we are all agreed is an essential in 14 determining whether or not we are within the Business 15 Case." 16 But then the third paragraph, you say: 17 "My concerns are around the robustness of risk and 18 contingency as although I accept there are movements 19 from risk to price and closing off of some risks, 20 I believe that the residual risk re SDS may be very 21 significant and I understand we still have no figures to 22 assess this ... The previous level of around 23 GBP3 million is appearing to me grossly undervalued 24 depending on final position. I agree fully with Donald 25 that we need the best contract and if more money is 91 1 required for the contract sum that is more easily dealt 2 with as it is a defined figure." 3 So we can see the concerns you have there. I'll 4 come back to that. 5 I would like to move on to another document, please, 6 CEC01546728. 7 Now, we can see from the top this is an email from 8 Graeme Bissett. Just to pause, can you recollect what 9 Graeme Bissett's job title and role in tie was? 10 A. I can't, I'm afraid. I understood that he worked 11 with -- that his role was, I suppose, 12 finance/commercial. 13 Q. Thank you. 14 A. I'm not aware of what his title was. I think he was 15 a consultant. 16 Q. We can see an email dated 28 February 2008. It's sent 17 to various individuals within tie. We can see subject, 18 "Update for CEC". 19 He refers: 20 "We had a meeting tonight with Gill, 21 Donald McGougan, Andrew Holmes and Alan Coyle to bring 22 them up to date. We discussed the current state of play 23 and our planned way forward, all in line with our 24 discussions this week." 25 Further down the page he says: 92 1 "On budget, I explained that: we expect BBS to table 2 cost increases (justified or more likely not) ..." 3 In the second bullet point: 4 "there are areas which are not capable of fixity, 5 but we would know where these were and would have a good 6 view of the risk level and how to manage the subsequent 7 process." 8 The third point: 9 "we are reviewing the risk contingency on a rolling 10 basis to support the need for the negotiating team to 11 have some cost headroom; the current signs are that we 12 have a reducing need for contingency, offsetting any 13 negotiated cost increase." 14 The last bullet: 15 "overall we believe that the existing GBP498 million 16 budget remains within reach if it is accepted that the 17 balance between calculated cost and risk contingency 18 will change and that some areas will be controlled post- 19 Close rather than negotiated into the ground now." 20 To pause there, do you have any recollection of this 21 meeting? 22 A. I have to say I don't have a particular recollection of 23 it. But at that time there may well have been that 24 meeting. 25 Q. Now, I'm interested in particular in the fourth bullet 93 1 point and the reference to "some areas will be 2 controlled post close rather than negotiated into the 3 ground now". 4 What do you understand Mr Bissett to mean by that? 5 A. I don't understand that, I'm afraid. I don't know what 6 he would be referring to. 7 Q. One interpretation of those words is that some matters 8 will be deliberately dealt with after contract close 9 rather than negotiated and agreed before contract close; 10 is that fair? 11 A. Yes, I think it's a strange wording, "will be controlled 12 post-Close". But yes, as you say, it looks as if there 13 is -- that's what he's saying. Can I just ask 14 actually -- can you just remind me who this was 15 circulated to, please? 16 Q. Yes. It's within tie. At the top of the page, we will 17 see Steven Bell, Jim McEwan, Susan Clark, et cetera. 18 So what Mr Bissett is doing, we see from the first 19 paragraph, he appears to be reporting on a meeting he 20 had that night with yourself, Donald McGougan, 21 Andrew Holmes and Alan Coyle, to bring CEC up to date. 22 We will see the top of the bullet points, he has said: 23 "On budget I explained that ..." 24 So in short he appears to be reporting back within 25 tie on what he says he discussed at a meeting with 94 1 yourself and others in the Council. 2 A. I would say no. I would have had no understanding of 3 anything being controlled post-Close rather than 4 negotiated. But also, I wouldn't understand why there's 5 a reducing need for contingency when the risk was 6 increasing. 7 Q. Now, when you say the risk was increasing, was that your 8 view at the time? 9 A. I think because -- because we'd known about the change 10 earlier in February. So my own view is that that would 11 not have been an accurate description of what we were 12 advised at the meeting. 13 Q. But I think you said you've no recollection of this 14 meeting. 15 A. Yes. I think it's -- it's -- when you look at 16 something, you may not actually remember specifically 17 what did happen, but you can sometimes be pretty certain 18 of what did not happen, and personally, I was always 19 entirely focused on the price and the QRA and the price. 20 And, you know, if I'd been told there was a reducing 21 need for contingency, I think I wouldn't have accepted 22 that. I would have certainly wanted an explanation. 23 And I wouldn't have understood or even know why 24 things would be controlled post-Close. 25 Q. Yes. 95 1 A. So I can be certain that that was not discussed with me. 2 Q. Do you say that particularly having regard to the email 3 we looked at recently on 29 February 2008, where you set 4 out your concerns about the robustness of risk and 5 contingency, et cetera? 6 A. Yes. I think my own view was that I was expecting the 7 cap to be higher than it was. And I was expecting the 8 risk to be -- the risk pot to be larger than it was. 9 Q. Just to be quite clear, was that your view, say, around 10 the time of your email of 29 February 2008? 11 A. I recollect that Mr Bissett sent a paper out widely in 12 the organisation around that time, and I think it was 13 very wide in the organisation, and I recall I went back 14 and I was trying to understand if the flow of liquidated 15 and ascertained damages would equal the additional cost 16 that would fall on tie, whether there was effectively 17 a pass through of those costs from the paper we were 18 circulated; and Mr Bissett came back and said that the 19 cap wasn't yet set, but there had been a risk pot. 20 Q. Yes. Just be quite clear. In your email to 21 Mr MacKenzie of 29 February, we saw you had explained: 22 "My concerns are around the robustness of risk and 23 contingency ... I believe that the residual risk re SDS 24 may be very significant. I understand we still have no 25 figures to assess this. The previous level of around 96 1 GBP3 million is appearing to me grossly undervalued 2 depending on final position." 3 That is what you said in the email. You've said now 4 to us that I think you were expecting the risk pot to be 5 higher than it was. So is that a view you held around 6 the time of the email on 29 February 2008, that you were 7 expecting the risk pot to be higher than it was? 8 A. Yes. I didn't have anything to base what the risk 9 should be on. You know, obviously it's a financial 10 matter, but in terms of a general view, I think, you 11 know, you can see my view in the email was I did think 12 that that was low, yes. 13 Q. So that was your view at that time, the end of 14 February 2008. Did your view change in any way before 15 contract close in May 2008? 16 A. I think I still held a general view that it seemed low 17 to me. It did have quite a lot of exposure and 18 discussion. The Council was also advised that there was 19 a general risk pot for general delay of 6.6 million. 20 And so that although -- the separate pot, there was also 21 this additional pot. 22 From my own point of view, I think I was expressing 23 just a view to Colin MacKenzie, but I had to accept 24 that, you know, I really didn't know anything about this 25 project in terms of detail. I had absolutely nothing to 97 1 base that view on, and I wasn't involved in the 2 financial or technical at all. 3 It just seemed light to me from a general view. 4 Q. Did that remain your view right up until contract close? 5 A. I think I would say it did. But I didn't -- I didn't 6 have any view that it was insufficient or incorrect. It 7 just seemed light to me. 8 Q. Was it partly based on instinct? 9 A. I think -- I think so. It just -- you know, I didn't 10 really have an understanding of the full contract or the 11 costs, but instinctively, yes, I would say it seemed 12 light to me. 13 Q. Thank you. 14 Could we put that document to one side. 15 Go to another document, please. CEC01399016. Go on 16 to page 2, please. This is an email from Alan Coyle to 17 yourself, dated 7 March 2008, and in the second 18 paragraph he says: 19 "It is Donald's view that you should start drafting 20 the letter to Tom noting the changes from the Final 21 Business Case to the current position are in tolerable 22 limits. Estimation of the quantum related to the 23 critical path on consents will be provided by Duncan." 24 Over the page to page 1, please. About the third of 25 the way down, we see an email from Colin MacKenzie to 98 1 Alan Coyle, copying in yourself, and others. 2 Mr MacKenzie says: 3 "Alan, I will assist with this exercise from 4 a factual perspective. As you are aware, I have already 5 given an anticipatory view of the Chief Executive's 6 authority in my emails of 28 and 29 February to the 7 Council Solicitor. The facts and figures are now much 8 clearer, and actually reinforce my view that the 9 Chief Executive should report to Council again on the 10 various material changes. For that reason I will not be 11 able to support a letter intimating that the changes are 12 within tolerable limits." 13 I will come back to this question, but just to 14 continue the chronology, if I could then please look at 15 another document, CEC01399076. This is a letter dated 16 12 March 2008. If we scroll down a little more, we can 17 see it's from Willie Gallagher, Chief Executive of tie. 18 We can see this is to Tom Aitchison, the 19 Chief Executive of the Council. About halfway through 20 the paragraph, we see: 21 "The Tram Project Board earlier today was given 22 a thorough review of the key contracts and issues. The 23 TPB concluded that the final terms negotiated were 24 consistent with the terms set out in the Final Business 25 Case approved in December 2007 and confirm the value for 99 1 money proposition demonstrated by the Final Business 2 Case. 3 Accordingly we confirm tie's view that it is now 4 appropriate to issue the Intention to Award letters." 5 Could I now ask: was it your view at the time that 6 the terms at that stage were consistent with the terms 7 set out in the Final Business Case? 8 A. Yes. I was just trying to recall the email that you 9 showed previously what my response to both Alan and 10 Colin had been. 11 I think I'd asked to be advised. Clearly, obviously 12 they were closer to the project than I was, and before 13 drafting that, I'd asked to be advised of what were the 14 numbers and risks and what were the differences. 15 Q. Yes. We should in fairness go back to that, please. 16 It's CEC01399016. We see the top of the page, email 17 from yourself, dated 10 March 2008, to Colin MacKenzie 18 and others. You say: 19 "Can you please let me know if this is now in place 20 showing FBC 2 and final position to identify the 21 difference in cost price, risk and principal risk issues 22 and programme please." 23 Paragraph 2: 24 "Can I please also be updated on all close out of 25 diligence and contract close issues and progress from 100 1 LAG today, please." 2 So that's what you say at that time. 3 If we could then, please, go to another email around 4 this time from Mr MacKenzie. It is CEC01401032. 5 Email from Colin MacKenzie, dated 13 March 2008 to 6 yourself and copied into others: 7 "Gill, I have received from Duncan Fraser a copy of 8 the DLA letter dated 12 March." 9 I'll come back to that: 10 "Having considered this letter I am of the view that 11 it does not offer the degree of comfort which the 12 Council might have expected ..." 13 We can read for ourselves what is said. In the 14 final sentence Mr MacKenzie states: 15 "The Council is being expected to rely on a report 16 for the purposes of permissions for issue of Contract 17 Award Notice and thereafter Financial Close founded on 18 matters which are still under discussion." 19 What seems a little odd, perhaps, is on the one hand 20 we've just seen Willie Gallagher's letter of 12 March 21 where he talks about the Tram Project Board concluding 22 that the final terms negotiated were consistent with the 23 terms set out in the Final Business Case, et cetera. 24 But here, a day afterwards, Mr MacKenzie is saying that 25 matters are still under discussion. 101 1 Do you have any clear recollection as to matters 2 were still under discussion at this time? 3 A. Yes. My understanding is that matters were still under 4 discussion, and that they remained so until, I believe, 5 about 18 March. 6 Q. If it was the case that matters were still under 7 discussion and in particular that the terms hadn't been 8 finalised, would it follow from that that one couldn't 9 come to a view on whether or not the terms were 10 consistent with the Final Business Case? 11 A. Yes. I believe -- yes, I believe that. 12 Q. We've looked at -- seen reference to the letter from DLA 13 of 12 March. If we could now go to that, it's 14 CEC01347797. We can see a letter, 12 March 2008, sent 15 to yourself. We can see the heading, "DRAFT CONTRACT 16 SUITE AS AT 12 MARCH 2008". 17 If we can go to page 2, please, halfway down, 18 picking up the paragraph: 19 "In our view the draft agreements in their current 20 state adequately capture the commercial positions which 21 tie has achieved. In our opinion, in order for tie to 22 issue a notification of intent to award, the following 23 tasks need to be urgently attended to tomorrow, 24 resulting in BBS's agreement on:" 25 Firstly: 102 1 "removal of all remaining major issues on Infraco 2 and Tramco Contracts (these are all known items)." 3 Secondly: 4 "completion of pricing negotiation." 5 Thirdly: 6 "production of the agreed Master Programme." 7 Fourthly: 8 "finalisation of Employer's Requirements." 9 And other matters set out, and finally: 10 "receipt of final Infraco Proposals." 11 It's then noted: 12 "Clearly this is a full and ambitious day's effort." 13 Just pausing there, and going back to Mr Gallagher's 14 letter of 12 March, where he ended by saying: 15 "... we confirm tie's view that it is now 16 appropriate to issue the Intention to Award letters." 17 That statement was clearly premature, given the 18 matters we see in DLA's letter that were still 19 outstanding; do you agree? 20 A. Yes. 21 Q. Now, we can -- sorry. Before we move on from this, 22 these all seem fairly fundamental matters that would 23 require to be agreed before the Notice of Intention to 24 Award can be issued. Is that a fair ... 25 A. Yes. 103 1 Q. Now, are you aware whether agreement was in fact reached 2 on each of these points before the Notice of Intention 3 to Award was issued? 4 A. My understanding was that between that period of the 5 13th and the 18th, then in terms of the legal issues, 6 they were certainly close on the Network Rail APA. 7 I understand there was -- there was the receipt of the 8 final Infraco proposals, and that there was more 9 satisfaction with the completion of pricing, programme 10 and Employer's Requirements, and I believe I was advised 11 that there were no major remaining issues which would 12 then prevent a close. 13 So I say some legal issues were definitely closed at 14 that point. Some of the technical points we were being 15 advised were at a sufficient stage to proceed to that 16 stage of intention to award. 17 Q. DLA's letter refers to one of the tasks that need to be 18 urgently attended tomorrow, resulting in BBS's agreement 19 on completion of pricing negotiation. Now, that should 20 be agreed and completed before one issues a Notice of 21 Intention to Award; is that correct? 22 A. Yes. That's my understanding. But it's probably also 23 my understanding that at that point in a negotiated 24 procurement, there would still perhaps be some matters 25 which would be negotiated after the intention to award, 104 1 but you would hope that they would be minor. 2 Q. I think DLA then issued a further letter, we should go 3 to, dated 18 March 2008. The reference is CEC01347796. 4 We can see the heading in the letter. Perhaps we 5 can blow it up a little: 6 "DRAFT CONTRACT SUITE AS AT 13 MARCH 2008." 7 Over the page to page 2, please. We can see about 8 halfway down the first paragraph, it states: 9 "We understand that tie will confirm settled pricing 10 for all major fixed price elements of the Infraco 11 Contract. If tie has achieved these objections and BBS 12 has been able to confirm its commitment to abide by 13 these positions, tie should have every confidence in 14 closing the contract suite efficiently, commencing with 15 the issue of notification of intention to award today. 16 We would stress that full co-operation of the BBS 17 Consortium on this objective is essential." 18 So what DLA are saying here is that tie required to 19 confirm settled pricing for all major fixed price 20 elements of Infraco contract. 21 Did that happen before issue of the NIA? 22 A. I -- I will have received no further confirmation from 23 DLA in terms of those legal risks after 18 March. I did 24 receive a further letter of 20 March, but that's 25 unconnected with this. 105 1 I'm not aware of what further assurances the 2 Director of Finance had on that, but I know he must have 3 been satisfied, because I see from my records that 4 13 March was the date of the -- a Full Council meeting, 5 and I was asked to attend by the Chief Executive 6 a meeting with himself, the Director of Finance, the 7 Director of City Development and the leader on 13 March. 8 And that was in regard to providing authority to 9 permit tie to lodge the intention of notice to award. 10 One matter I would just say is that the lodging of 11 that intention to award was not actually a reserved 12 matter. The Council actually had no particular right to 13 have a view and tie didn't require the Council's consent 14 to lodge that intention to award. 15 Q. You've referred to a meeting of Full Council on 16 13 March 2008. 17 From recollection of other evidence, I don't think 18 the tram project was put before the Council on that 19 date. Does that accord with your recollection? 20 A. Yes, that's correct. Had matters reached that stage, 21 that again was the intention. 22 Q. Coming back to the DLA letter, it's addressed to 23 you: that's correct, is it? 24 A. I can't see the top here, but some of the letters are 25 addressed to tie and myself. Some appear just to be 106 1 addressed to myself. 2 Q. Sorry. So we could go back to page 1, please, just to 3 confirm that. 4 A. Yes. 5 Q. So this is one of the letters that's just to you, and 6 not to tie as well. 7 A. Yes. 8 Q. Back to page 2, please. The reference to: 9 "tie will confirm settled pricing for all major 10 fixed price elements for the Infraco Contract. If tie 11 has achieved these objections ..." 12 I wonder if that should be "objectives". Does that 13 seem correct? 14 A. Yes. 15 Q. "... and BBS has been able to confirm its commitment to 16 abide by these positions, tie should have every 17 confidence in closing the contract suite efficiently." 18 What DLA are saying is that tie require to confirm 19 settled pricing for all major fixed price elements of 20 the Infraco contract. 21 Now, did you check whether that confirmation had 22 been received before you signed a note we'll come to 23 shortly, recommending that it was appropriate for the 24 Chief Executive of the Council to authorise tie to issue 25 the NIA? 107 1 A. No. I don't recall dealing with any of those commercial 2 or financial matters, no. 3 Q. So is it your position you considered somebody else in 4 the Council required to check that pricing had been 5 settled or fixed before the NIA could be issued? 6 A. Yes. I think it's clearly a matter for the Director of 7 Finance to determine if he's satisfied on that. 8 CHAIR OF THE INQUIRY: Did you ask him? Did you ask the 9 Director of Finance if he was satisfied that these 10 conditions had been met? 11 A. I'm afraid I can't recollect exactly. I know that there 12 was at least three meetings around that time involving 13 myself, the Director of Finance and the Chief Executive, 14 and I recall conversations that the Director of Finance 15 was satisfied, but I don't remember personally asking 16 him the question. 17 MR MACKENZIE: Were you in fact aware at the time that the 18 Infraco Pricing Schedule was still under discussion and 19 negotiation? 20 A. No, I was not. 21 Q. Again, did you check? 22 A. I would say no. But I would say that I wouldn't have 23 regarded it as being my role in any way when the 24 Director of Finance was a member of the TPB, the 25 Director of Finance and two of his senior staff. 108 1 I should just say I wasn't involved in any way in 2 the commercial, technical and financial. My input here 3 was around half a day a week. 4 Q. You told us earlier this morning: 5 "I always wanted to understand what the price and 6 the QRA was." 7 So that seems a little inconsistent with what you've 8 just said, when you say: 9 "I wasn't involved in any way in the commercial, 10 technical and financial." 11 A. Yes. I think what I meant is that I wasn't involved in 12 any way in how -- how those discussions were going, how 13 the numbers were made up. But I certainly would always 14 want to know in terms of Council authority the figure 15 and the -- the main figure and the figure for risk and 16 to know that that was within the authority of the 17 Council, yes. 18 Q. Can we then go to another document, please. 19 CEC02086755. 20 If we go to page 3, please. The paragraph at the 21 top says: 22 "Having considered all of the above, we consider 23 that it is appropriate to accept tie's recommendation to 24 you to authorise and permit them to immediately lodge 25 the Notice of Intention to Award." 109 1 We can see it's signed by Andrew Holmes, 2 Donald McGougan and yourself, on 18 March 2008. Then we 3 can see what is said by Mr Aitchison, who also signs on 4 that date. 5 Could we also then please go back to page 1 of the 6 letter. 7 Going to this point, for the avoidance of doubt, to 8 be absolutely clear, is it your position that when you 9 signed this note or report, you personally hadn't 10 checked whether the price was fixed? 11 A. From reading this, it seems clear that my understanding 12 is that -- that we do have a fix on both the price and 13 the QRA. 14 Q. Why do you say that? Do you want the text blown up? 15 Would that help a little? 16 A. Yes, thank you. 17 Q. Perhaps the middle paragraph. Might that help? (Pause) 18 A. Yes. I see from these words that there's an 19 understanding that there is a change and an adjustment 20 in price and risk. 21 Q. So are you saying that at this point the price was 22 agreed? 23 A. That would certainly be my understanding, subject to 24 perhaps minor matters, yes. 25 Q. Albeit from what you have told us, your position is that 110 1 wasn't a matter you specifically checked. You assumed 2 perhaps Mr McGougan would be dealing with that? 3 A. I think it wouldn't be so much as an assumption, that 4 the Director of Finance being the Statutory Finance 5 Officer, I think, you know, it's clearly a matter for 6 him. And my role here was understanding that it's not 7 a reserved matter, but the Council do still want to 8 have, you know, a focus, and to be having a say in when 9 this intention to award was lodged. 10 But what I would say is my recollection of this is 11 that there was a particular -- particular drive by, 12 I would say, Council Directors and tie to secure this 13 intention to award quickly, because of the time of 14 the -- of a standstill period and seeking to try and 15 still have the funding dates which had been set. 16 I understand it had been 31 March. 17 Q. I understand that. But you required to satisfy yourself 18 as Council Solicitor that it was appropriate to accept 19 tie's recommendation to the Chief Executive to authorise 20 and permit them to immediately lodge the Notice of 21 Intention to Award. That must be correct? 22 A. I don't agree with you, I'm afraid. I think that if it 23 had been a reserved matter, and there was a requirement 24 for the Council to do that, here there was no 25 requirement for the Council to do that. It was 111 1 something which the Council were choosing to do and tie 2 were choosing to allow the Council to do. But tie were 3 permitted at Council simply to lodge that notice 4 whenever they wanted. 5 Q. Can we go back to page 3, please. At the top of the 6 page, I'm simply reading out what's said: 7 "Having considered all of the above, we consider 8 that it is appropriate to accept tie's recommendation to 9 you to authorise and permit them to immediately lodge 10 the Notice of Intention to Award." 11 So what I suggest is that having signed this 12 document, you must have been satisfied that it was 13 appropriate to do what's set out there? 14 A. Yes. Certainly in respect of the legal matters. 15 I think there was sufficient certainty then that would 16 not be in respect of the financial matters. 17 Q. Go back to page 1, please, and look at another matter in 18 the letter. In the paragraph at the bottom, can we see 19 about halfway through it says -- three lines down: 20 "… a range of adjustments to the risk allocations. 21 Many of these adjustments to risk allocation are 22 positive, reflecting the reduced risk contingency. 23 There are some which do pass additional risk to the 24 public sector. Of these, the most important is 25 considered to be SDS. As you are aware, this has been 112 1 a very difficult point for tie to negotiate and they 2 have provided for the best deal which they advise us is 3 currently available to themselves and the Council. In 4 essence, the contractor BBS will accept the design risk 5 for SDS to a high financial ceiling, whereas the Council 6 and tie must remain financially liable for delay by SDS 7 in relation to the provision by them of information for 8 a range of consents and approvals." 9 Now, is that a reference to the design risk we 10 discussed earlier, where you say the position changed in 11 about February 2008? 12 A. Yes. 13 Q. Now, did you consider that the -- that additional risk 14 to the public sector was consistent with the Final 15 Business Case? 16 A. I would say that I had a very, very general 17 understanding of the Final Business Case, and there was 18 certainly no information that it was inconsistent. 19 Q. But the question of course was: did you consider that 20 that additional risk to the public sector was consistent 21 with the Final Business Case? 22 A. Insofar as the Final Business Case required a price and 23 a QRA to fall within a certain price, then I would have 24 said yes. I wouldn't have been familiar with the actual 25 Business Case to know whether it required that risk to 113 1 be with one certain party. 2 My understanding was -- the Final Business Case was 3 that it wasn't so much to do with individual risks, but 4 it would be that the totality of the price and the QRA 5 and the cost would be the delivery within the Business 6 Case. 7 Q. Before signing this document, did you ask yourself the 8 question whether this additional risk to the public 9 sector was consistent with the Final Business Case? 10 A. I will have considered that, and I will have considered 11 that provided, as we were told, it was in the QRA, then 12 it would not have been inconsistent with it, and would 13 therefore have been consistent. 14 Q. These are two different things, are they not? If the 15 Final Business Case talks of design risk being 16 transferred to the private sector, that's one thing. 17 It's quite another thing as to what may or may not be in 18 the QRA. Are these not two different things? 19 A. From my perspective, in terms of legally -- in terms of 20 the actual numbers, how they work, I think that 21 I wouldn't have considered it was inconsistent in 22 a practical way, provided the costs were fully 23 contained. 24 Q. This is against a background where Colin MacKenzie had 25 drawn to your attention that he considered there had 114 1 been material changes to the Final Business Case and he 2 was only prepared to be involved in the drafting of the 3 document you signed from a factual perspective only. So 4 the issue must have been on your radar at the time; is 5 that fair to say? 6 A. Yes. I would say that the issue was certainly on my 7 radar, but not so much with -- with full Business Case, 8 but actually with considering whether the Council would 9 then -- where the Council would then go to in terms of 10 actually closing the deal and the delegated authority 11 which the Chief Executive had. 12 If I could just summarise here, my clear 13 understanding at the date of the signing that was that 14 legal matters had been closed, and there were sufficient 15 certainties in other matters, and the Chief Executive, 16 the Leader and the two Directors clearly wished the 17 matter to proceed, and I didn't have any information 18 that it was inconsistent with the Business Case. 19 Q. Do you remember we looked earlier at the report to 20 Council on 20 December 2007? 21 A. Yes. 22 Q. I think you agreed with me at that stage that one of the 23 fundamental aspects of the delegation to the 24 Chief Executive was that the pricing terms were 25 consistent with the Final Business Case. So in signing 115 1 the document we're looking at, you clearly have to ask 2 yourself that question, and if you come to the view that 3 the terms are inconsistent, you shouldn't sign the 4 document; is that fair? 5 A. I would say that it's most certainly the case for 6 contract close. But I would again say that this was 7 a stage before contract close, which was not a reserved 8 matter for the Council. 9 Q. So just to be quite clear. Is it your position that you 10 consider you were entitled to sign this document even if 11 it was the case that the pricing terms at that stage 12 were inconsistent with the Final Business Case, the 13 Council had approved? 14 A. No. If I had been advised by the Director of Finance or 15 the Director of City Development that that was 16 inconsistent with the Business Case, then I would have 17 spoken to the Monitoring Officer about it and also 18 spoken to the Chief Executive about it. 19 Q. So again for clarity, is it your position that you 20 considered you didn't have to ask yourself whether the 21 pricing terms at that stage were consistent with the 22 Final Business Case? That was a matter for others? 23 A. In terms of the overall price, I have clearly noted the 24 overall prices which I see as inconsistent. Whether the 25 actual detail of that in the price, I would see as the 116 1 remit of the Director of Finance. 2 CHAIR OF THE INQUIRY: Do you recall if you looked at the 3 Business Case? 4 A. Excuse me? 5 CHAIR OF THE INQUIRY: Do you recall if you looked at the 6 Final Business Case at this time? 7 A. Yes. 8 CHAIR OF THE INQUIRY: Well, did you? 9 A. Excuse me? 10 CHAIR OF THE INQUIRY: Did you look at it? 11 A. Yes. I see email correspondence which I have asked if 12 I could have a copy of the Final Business Case. 13 I think -- I can't recall whether it was pre-contract 14 close or pre this stage. But yes, I did seek a copy of 15 the Final Business Case. 16 CHAIR OF THE INQUIRY: But you can't remember if that was 17 done before this document was signed or if it was before 18 the contract close? 19 A. I will have had a copy of the Business Case which would 20 have been at the December Council, and yes, I will have 21 had regard to it, yes. 22 MR MACKENZIE: When you said in your answer that: 23 "In terms of the overall price, I have clearly noted 24 the overall prices which I see is inconsistent." 25 Is that what you said? 117 1 A. Excuse me? 2 Q. We have you noted in your answer as saying -- I had 3 asked: 4 "So again for clarity, is it your position that you 5 considered you didn't have to ask yourself whether the 6 pricing terms at that stage were consistent with the 7 Final Business Case? That was a matter for others?" 8 You replied: 9 "In terms of the overall price, I have clearly noted 10 the overall prices which I see is inconsistent." 11 So was it your position when you signed this 12 document that you considered the overall price was 13 inconsistent with the Final Business Case and what had 14 been reported to Council on 20 December 2007? 15 A. No, I would have considered it consistent. 16 Q. So that's perhaps an error in our picking up your 17 evidence? When you signed this document, did you 18 consider the overall price was consistent or 19 inconsistent with the Final Business Case and what had 20 been reported to Council in December 2007? 21 A. Consistent. 22 Q. Thank you. 23 We will remember the email of 29 February 2008 when 24 you expressed your concerns about the robustness of risk 25 and contingency. You said that approximately 118 1 GBP3 million for design risk appeared grossly 2 undervalued. 3 I think you then went on earlier to explain that 4 that was a lingering concern perhaps you had. 5 I'm just wondering what changed between then and 6 signing this document, for you to think it was 7 appropriate to sign this document if you had those 8 concerns? 9 A. Yes. My concern -- my role in here was to deal with the 10 legal matters and legal risks. Price and risks and 11 technical and contingency, I had to accept that I had no 12 specialist knowledge of, and that I -- you know, 13 I really only had a very inconsidered view of them. 14 And it wasn't my role or responsibility to do that, 15 and I wouldn't have thought it appropriate to hold up 16 that stage when the two responsible Directors clearly 17 didn't have that concern. 18 Q. Do you recall if you had been provided with any further 19 information from tie in relation to the QRA and risk 20 between your email of late February and signing this 21 document on 18 March 2008? 22 A. I recall I was given a paper by -- paper I mentioned 23 before by Graeme Bissett which was circulated widely, 24 and I can't recall whether my comment on liquidated and 25 ascertained damages and the level and the cap, when 119 1 exactly that was in terms of timing. 2 But I would say that if I -- if I had -- if -- 3 although I had -- say I had a sort of lingering concern 4 and awareness, it was not a concern that I would regard 5 as being a particular concern or anything to stop the 6 project. It was simply just, I suppose, just a personal 7 view. 8 Q. I can quite understand that position. But did you at 9 any time raise that with the Directors along the lines 10 that: I'm a lawyer, I'm under a position to come to 11 a pretty informed view on risk on a detailed and complex 12 project like this, but I have heard all that tie say, 13 I still have this concern; why don't we get our own 14 expert advice on it? 15 A. Again, I think that if the -- if the Client Department 16 had wished -- had thought that appropriate, then I think 17 that they would have done so. 18 I think that there was quite a bit of discussion 19 about these figures with the 3.3 and 6.6, and it seemed 20 that there was no -- no particular sort of challenge or 21 concern held by officers overall. tie were clearly 22 confident about the figures, and the Client Department 23 is, so far as I recollect, didn't express themselves any 24 particular concern about those figures. 25 Q. So you considered that was primarily a matter for them? 120 1 A. Yes, I would see it as being entirely a matter for them. 2 I think, you know, my own view, I was probably just 3 signalling I had expected the cap to be higher. And I'd 4 expected the risk pot to be higher. But I had to accept 5 that it wasn't something that I had any knowledge of, 6 and neither was it my role or responsibility. 7 Q. You mentioned a paper by Graeme Bissett. Can we go, 8 please, to a document CEC01474537. We can see from the 9 top of the page an email from Graeme Bissett dated 10 13 March 2008, sent to yourself, and copied to others 11 within tie and also Mr Fitchie. 12 Various attachments. 13 If we can scroll down the page, please, we see: 14 "Finally, I attach a note explaining the linkage 15 from the DLA letter to the risk contingency contained in 16 the project budget." 17 Then we can read the rest of that for ourselves. 18 If we can then please go to the note that is 19 attached, CEC01474538. Top of the page, we see: 20 "Alignment of QRA and Risk Allowance to DLA Letter 21 and Risk Matrices." 22 I'm not going to read it all out, but we can see 23 under 5.1, Employer's Requirements - Alignment issues. 24 Towards the bottom, third bullet point, at the bottom of 25 that, we can see: 121 1 "Accordingly, possible additional construction costs 2 of GBP2 million have been assessed as a sensible 3 provision and included [it must be "in"] the Risk 4 Allowance over and above the QRA total." 5 The 5.2 is "Project Master Programme". 6 Go over the page, please. Under 7.1, "Consents - 7 Delay on post-close consents" 8 "This is the one significant change in the risk 9 profile retained by the public sector since December." 10 So to pause there, tie seem to be of the basis that 11 this is a significant change in the risk profile, 12 retained by the public sector since December, which is 13 perhaps a little difficult to reconcile with 14 Mr Gallagher's letter of 12 March that the final terms 15 negotiated were consistent with the terms set out in the 16 Final Business Case, et cetera. 17 But just to pause, would you agree with that 18 statement at the time, that that was one significant 19 change in the risk profile retained by the public sector 20 since December? 21 A. Yes, that was my understanding. 22 Q. We can see what is then set out. The next paragraph 23 states: 24 "The total risk allowance provided in the QRA in 25 respect of continuing Consents and Approvals Risk is 122 1 GBP3.3 million. This equates to the cost of some three 2 months of BBS standing time and is considered adequate 3 by tie management in the context of the number and 4 criticality of consents still to be delivered, the 5 liquidated damages available to BBS from SDS in the 6 event the delay is caused by SDS, the responsibility of 7 BBS to mitigate the costs of any delay and the close 8 management of the process beyond Financial Close by 9 tie." 10 So is this the paper you referred to earlier? 11 A. Actually it's actually a different paper, but I think 12 this one was significant. 13 The other paper was a more practical paper which 14 Graeme Bissett circulated widely in the Council, and he 15 was explaining how the consents and approvals were going 16 to be managed, and the role which the Council had in 17 that. 18 And I went back on the paper because I wanted to 19 understand whether the liquidated and ascertained 20 damages were being set at a figure of the expected 21 increased cost to tie, and how was the figure on the cap 22 being set. 23 Q. Presumably you did see this paper we're looking at just 24 now at the time? 25 A. Yes, I did. It was a view of both myself and Alan Coyle 123 1 that it was important that there was a link between the 2 DLA letter and ensuring that any and all risks that were 3 identified there, we -- we had certainty that we knew 4 that these were within the QRA, and where they were, 5 yes. 6 Q. It's quite a brief paper. Part of the paper again in 7 relation to consents runs to two paragraphs, and I think 8 essentially the last paragraph is the main one. 9 Was it the position that what is set out in that 10 paragraph reassured you, given your previous statement 11 and the email of 29 February 2008, that 3 million for 12 design risk appeared grossly undervalued? 13 A. I think it would certainly would have assisted me. What 14 I would say is that there was a range of workshops 15 regarding the risk for the Client Department, a range of 16 workshops regarding risk for finance, and the Finance 17 team and the Finance Director and his staff had a series 18 of meetings regarding the QRA. 19 So those staff will all have been more involved in 20 assessing those matters and satisfying themselves. 21 I wasn't able, I'm afraid, to attend any of these. 22 I think the full-time legal members of the team may have 23 attended some of these. So it really was very much an 24 issue which I was at the side of. 25 Q. Would it also be fair to say that despite this paper and 124 1 the matters you've referred to, you still had a 2 lingering concern in relation to the adequacy of the 3 QRA, in particular for design risk? 4 A. I would say that I probably still was -- yes, I would 5 say that I still, you know, thought that the figure may 6 have been low. However, in the whole totality of things 7 that are happening in this project and other projects, 8 I think, you know, I had to accept that the others had 9 taken a view that the matter was sufficient, and 10 I didn't have any particular doubts that would have 11 caused me to flag it or to require to seek further 12 assurance. 13 I suppose when you're constantly advised that 3.3 is 14 sufficient, and that there's a further, you know, risk 15 pot of 6.6, by people who are dealing with it, then 16 I suppose I must have accepted that that was, you know, 17 adequate. 18 Q. Thank you. My Lord, this may be a suitable time to 19 break. 20 CHAIR OF THE INQUIRY: We will adjourn for lunch, 21 Ms Lindsay. We will resume again at 2.10. 22 A. Thank you. 23 (1.05 pm) 24 (The short adjournment) 25 (2.10 pm) 125 1 CHAIR OF THE INQUIRY: Good afternoon. Unfortunately the 2 witness went somewhere over lunch and hasn't returned. 3 So I thought you should all be aware that that is the 4 situation, rather than wait. 5 What I propose to do is we'll adjourn for another 6 ten minutes. 7 MR DUNLOP QC: My Lord, I saw the witness re-enter the 8 building. So she is somewhere. I saw her coming 9 through the front door downstairs. 10 CHAIR OF THE INQUIRY: We will just wait then. (Pause) 11 A. Sorry. Sincere apologies. I thought it was 20 past. 12 Sincere apologies. 13 CHAIR OF THE INQUIRY: Mr Mackenzie? 14 MR MACKENZIE: Thank you, my Lord. 15 Ms Lindsay, before lunch we were looking at the 16 question of tie giving the Notice of Intention to Award 17 Infraco contract to BBS. I'll give the reference for 18 the record. It took place on 18 March 2008, document 19 reference CEC01314423. 20 I would like then to look at another DLA letter, 21 please, dated 20 March 2008. If we could go, please, to 22 CEC01544970. 23 Now, we can see again it's a letter to yourself of 24 that date, a reference to "DRAFT CONTRACT SUITE AS AT 25 13 MARCH 2008". 126 1 There's a reference to a verbal report on Monday, 2 the 17th. We can read the rest of the first paragraph 3 for ourselves. 4 Then over please to page 2. And the paragraph at 5 the top, we see about four lines down the same wording 6 we saw in the previous letter: 7 "We understand that tie will confirm with BBS 8 settled pricing for all major fixed price elements of 9 the Infraco Contract." 10 Do you remember what was the purpose of this letter 11 dated 20 March 2008, which has been sent after the 12 Notice of Intention to Award has been issued? 13 A. Yes. My understanding was that there was -- the second 14 letter from DLA at the time was 18 March, and I think 15 without any -- any expectation from me, a further letter 16 arrived on 20 March. 17 I think I put into process my response back to DLA, 18 and I was just questioning why there were two changes 19 from the letter which had been issued on 18 March. 20 Q. So in terms of what is set out in the paragraph that 21 we're looking at, what was your understanding as to 22 whether on 20 March there was still ongoing discussion 23 and negotiation in relation to pricing? 24 A. My understanding was that the only difference in these 25 letters was that I think there had been a slight change 127 1 of word from "readiness" to "issue today". I don't have 2 the exact words in front of me, but I went back because 3 it was inconsistent from the letter which had been 4 issued on 18 March. 5 CHAIR OF THE INQUIRY: I think Counsel is asking about this 6 particular sentence in paragraph 3. I think he wants to 7 know what your understanding was of the situation in 8 relation to contract -- the commitment, BBS's ability to 9 confirm its commitment to abide by the positions 10 including programme. 11 A. Yes. I think I regarded that as being the position from 12 18 March. 13 MR MACKENZIE: We will come back to the question of pricing 14 now. 15 If we go to a different document, please, 16 CEC01245223. We can see the bottom half of the page, an 17 email from Stewart McGarrity, dated 15 April 2008 to 18 Alan Coyle, copied into Andy Conway and Rebecca Andrew, 19 subject, "Pricing - COMMERCIALLY CONFIDENTIAL". 20 Then Mr McGarrity says: 21 "Alan, attached are two files:" 22 Firstly: 23 "The cost analysis spreadsheet which you know and 24 love and which I have updated to reflect the very last 25 knockings on Infraco price but which does not change the 128 1 budget. 2 "2, Part 4 of the Schedule to the Infraco contract 3 re Pricing - since it is where the numbers go in it's 4 where all the last minute tweaking happens so there are 5 still a couple of things to be incorporated which are 6 being discussed and agreed today." 7 If we could scroll up the page, please, we can see 8 by email on 15 April 2008, Alan Coyle forwarded 9 Mr McGarrity's email and attachments to Colin MacKenzie, 10 yourself, Steve Sladdin and Nick Smith, and also copied 11 in Andy Conway. 12 Now, Mr McGarrity's email attached a copy of Part 4 13 of the Schedule to the Infraco contract re pricing. Did 14 you read that draft at the time? 15 A. No, I didn't. When I saw this email, I saw it was an 16 email from Stewart McGarrity to Alan Coyle which was his 17 finance contact. I think I'll have just read pricing 18 and financial analysis spreadsheet. But I did take note 19 of the issue which was that when it was given to me for 20 my information, it said: 21 "Here please see attached for info ..." 22 And my response to Stewart. 23 So I took a note that there was a question, 24 and I believe that I was then sent the answer to that 25 question the following day, and I replied back quickly 129 1 on. 2 Q. So you're quite clear you didn't read this draft of 3 Schedule 4 at the time? 4 A. I didn't, no. I think the record shows that I don't 5 have response to that. I'm waiting, and then when I saw 6 the response the following day, I went back on the basis 7 of that response. 8 Q. Now, I think towards the beginning of your evidence this 9 morning, I have taken you to the minutes of the first 10 meeting of the Legal Affairs Group on 25 July 2007, and 11 we had looked at the passage which stated that: 12 "CEC require a clear understanding of the proposed 13 contractual arrangements/structure in relation to CEC 14 exposure to risk, liabilities, et cetera." 15 I think you agreed with me that you as 16 Council Solicitor would require a clear understanding of 17 the Council's exposure to risks and liabilities. You 18 also separately said that: I always wanted to 19 understand what the price and the QRA was. 20 I think you agreed with my proposition that these 21 matters were fundamental to understanding the risks to 22 CEC. 23 So essentially all of these matters are tied in 24 together, price and risk. So what I suggest that if you 25 wanted to understand the risks and the price, including 130 1 the extent to which the price was fixed, the best place 2 to look was Schedule 4 of the Infraco contract. 3 A. I'm afraid the position was when I saw that, I noted it 4 was a Stewart McGarrity contact going to Alan Coyle. 5 There was very many mails between them regarding QRA and 6 workshops, and I have simply just seen this as pricing, 7 a financial analysis spreadsheet. 8 I don't think I would have even opened that 9 financial analysis spreadsheet, and I think when I said 10 I would -- I was tracking the price and risk, I was 11 meaning at a global overall level, not where individual 12 parts of the price would be. 13 And I'm afraid I didn't have any indication from 14 seeing that for information that that was an issue to do 15 with risk. 16 I'm afraid I saw it simply as an issue which 17 I wasn't even aware actually of the Tramco contract 18 here, which Alan says has moved from 56 to 58. But 19 I did keep an eye on the question. I'm afraid that's 20 what I thought the purpose of it being given to me for 21 my information was. (Pause) 22 Apologies. I'm afraid when I saw this, I didn't 23 interpret this as a risk matter or issue. It's come in 24 the day before we were going to our IPG to sign off the 25 matter, and I'm afraid I simply just seen it as 131 1 correspondence between Stewart McGarrity and Alan Coyle, 2 and I'm asked to look at it, to note that Alan has got 3 a question about the QRA. 4 I think to evidence what I did say this morning, 5 I did -- I was aware there was a question about the QRA, 6 and I responded to Alan immediately, when he got an 7 answer to that question. 8 And that's really what I meant, as when I was 9 keeping an eye on the global figures. 10 Q. Now, this email had two attachments, perhaps we can 11 scroll back down again to remind ourselves, from 12 Mr McGarrity. The first attachment is the cost analysis 13 spreadsheet, which you were quite quick to say that 14 included the QRA spreadsheet. 15 The second attachment is Part 4 of the Schedule to 16 the Infraco contract re pricing. Presumably I think you 17 accepted you as Council Solicitor required a clear 18 understanding of the Council's exposure to risk. 19 A. Yes. 20 Q. One of the most significant risks to the Council would 21 be that of price increase? 22 A. I -- I would disagree with you there. In terms of the 23 issue about risk, I would be looking at key legal risks. 24 I would be hoping to be advised about commercial risk 25 and understanding what they were. But I genuinely 132 1 had -- I don't even think actually I had the information 2 about the individual Infraco and Tramco contract, how 3 that was split. 4 My information on pricing was at very much the 5 global figure, which was the actual figure of being the 6 price plus the QRA. And if I -- when I said I was 7 interested in that, I certainly -- I couldn't possibly 8 have the time to go to individual risk workshops which 9 finance were having. I could see -- I'd actually -- 10 when I looked at my own records, I had returned from 11 leave on 11 April, and I had seen that Rebecca Andrew 12 had said that the Director of Finance was looking for 13 a pricing schedule. 14 And I -- I have -- I have clearly just thought it's 15 just a pricing issue which is fully dealt with by the 16 Director of Finance and those two key members of staff. 17 So no, I didn't regard this as a risk issue, and 18 I didn't deal with it. I just -- I have done it as it 19 was asked, here is for your information. I have looked 20 at Alan's comments, I'm afraid. 21 CHAIR OF THE INQUIRY: This email was forwarded to you, was 22 it? 23 A. Excuse me? 24 CHAIR OF THE INQUIRY: This was the email that was forwarded 25 to you. 133 1 A. Yes. 2 CHAIR OF THE INQUIRY: And it refers to Part 4 of the 3 Schedule to the Infraco contract. 4 A. Yes. 5 CHAIR OF THE INQUIRY: Now, it also speaks about the -- 6 that's where the numbers go. It's where all the last 7 minute tweaking happens. Did that not seem to you maybe 8 to be something worth looking at? 9 A. I'm afraid not. In terms of the team which we've had, 10 we've got two full-time members of staff here, and 11 I will simply have an overview in probably a couple of 12 hundred emails that are coming into an email box a day, 13 and I understand now the significance that this has, but 14 I'm afraid, you know, it's clear from the record how 15 I've regarded it, and it's clear the comment I have gone 16 back on the next day. 17 CHAIR OF THE INQUIRY: Do you accept then that you made an 18 error of judgment, in not looking at it? 19 A. No. I don't, I'm afraid. In terms of this being 20 a contact of Stewart McGarrity to Alan Coyle, if any 21 particular matter had been flagged to my attention, 22 I would have done anything to deal with it. 23 I think in terms of -- we've seen some of 24 Mr MacKenzie's correspondence, and I could always rely 25 on Colin MacKenzie bringing any risk issues to my 134 1 attention. And I did see that this was going to the 2 entire legal team. And for that reason, I simply have 3 not taken any action on that. 4 Obviously having two full-time members of staff who 5 had nothing else to deal with. 6 MR MACKENZIE: Thank you. 7 Do you agree, Ms Lindsay, that perhaps the biggest 8 risk to the Council in relation to the tram project was 9 the contract going over budget? 10 A. Clearly contract going over budget is a risk. The risk 11 that the Council were concerned about is the 12 circumstances where that would happen. Clearly going 13 over budget is obviously a major issue, yes. 14 Q. To know whether that's going to happen, one would need 15 to know what the price is and how it may change. 16 A. Overall, in terms of the Council team dealing with that, 17 yes. But no, I don't accept or agree that was with me 18 personally, no. 19 Q. But if one did want to know what the price is and how it 20 may change, an obvious place to look is the pricing part 21 or schedule of the Infraco contract? 22 A. I don't agree, I'm afraid. My information on price was 23 coming from the information, the strategic information 24 which I had at the IPG groups. I simply had no ability 25 to delve into this project at a detailed basis. 135 1 CHAIR OF THE INQUIRY: I think that's a different point, 2 Ms Lindsay. I think you were asked if you wanted to 3 know what the price is, and how it might change, an 4 obvious place is the pricing part of the schedule to the 5 contract. I appreciate that you've got other sources of 6 information, but surely the contract itself is a very 7 significant starting point at least to determine what 8 the price is. 9 A. If I had wanted more information on price, I think 10 I would have asked perhaps to -- if I had the time, to 11 attend any of the risk management workshops. 12 But I had simply -- 13 CHAIR OF THE INQUIRY: This is the day before you're going 14 to authorise signature, is it. 15 A. Yes. 16 CHAIR OF THE INQUIRY: So that there wouldn't be any 17 workshops between 1.46 on the day before and the signing 18 of the contract -- authorising the signature. 19 A. Yes. I'm understanding that. But from my own 20 perspective, I was dealing with a whole range of legal 21 matters, and there is nothing, with respect, in here 22 which is flagging an issue. I don't believe it was even 23 flagged at all. And there's no question directed at me. 24 I don't form part of the finance team or indeed the 25 project team. And I'm afraid that's the way I regarded 136 1 it. 2 CHAIR OF THE INQUIRY: Right. 3 MR MACKENZIE: My Lord, as a point of detail, I think this 4 is about a month before contract close. 5 A. Actually, sorry, could I mention there, I think my Lord, 6 you're correct there, because the date of 16 April was 7 the final IPG before we were going -- we were trying to 8 agree matters. 9 MR MACKENZIE: 10 Q. Thank you. 11 Did there come a time when you did read Schedule 12 Part 4 for the first time? 13 A. Yes. I -- I think it was -- I think it was very much 14 later on, I'm afraid, and probably well into the 15 arbitration period. 16 I think I was advised over the period when that was 17 happening by the Tram Monitoring Officer and the other 18 people. But no, again, I accepted the high level of 19 information that I was given. 20 Q. When you did read Schedule 4 for the first time, what 21 were your views on it? 22 A. I think when I read it for the first time, I had -- at 23 that point I clearly knew that there were disputes. 24 I had seen various -- the various arbitrations which had 25 come in. So I was already, when I read it, realising 137 1 that there was issues of interpretation. 2 I think when I looked at it, I obviously realised, 3 you know, how significant a part of the contract it was, 4 and really I suppose, how imprecise it was. 5 Q. Could we please go to the draft of Schedule 4 that was 6 attached to Mr McGarrity's email. It's CEC01245224, if 7 we can go to page 5, please. Clause 3.1, if we can 8 enlarge that, please. It provides: 9 "The Construction Works Price is a lump sum, fixed 10 and firm price for all elements of work required as 11 specified in the Employer's Requirements ... and is not 12 subject to variation except in accordance with the 13 provisions of this Agreement." 14 Paragraph 3.2: 15 "It is accepted by tie that certain Pricing 16 Assumptions have been necessary and these are listed and 17 defined in Section 3.4 below. The Parties acknowledge 18 that certain of these Pricing Assumptions may result in 19 the notification of a Notified Departure immediately 20 following execution of this Agreement. This arises as 21 a consequence of the need to fix the Contract Price 22 against a developing factual background. In order to 23 fix the Contract Price at the date of this Agreement, 24 certain Pricing Assumptions represent factual statements 25 that the Parties acknowledge represent facts and 138 1 circumstances that are not consistent with the actual 2 facts and circumstances that apply. For the avoidance 3 of doubt, the commercial intention of the Parties is 4 that in such circumstances the Notified Departure 5 mechanism will apply." 6 Can you remember what your views were on that 7 section when you first read it? 8 A. Yes. I think clearly what stands out is the words -- 9 well, for me, representing factual statements that the 10 parties acknowledge represent facts that are not 11 consistent with the actual facts. 12 I think my view is that that, you know, is not 13 appropriate in a public contract. I think unless, you 14 know, anybody else had a reason why that was 15 appropriate, my view was that would be inappropriate. 16 Q. Why is it inappropriate? 17 A. Well, I think it's a very difficult start of 18 interpretation, if parties are already agreeing that 19 things are not as they are portrayed to be. And I think 20 it makes any interpretation following on that very 21 difficult. 22 Q. In relation to this contract, it's clear from that 23 paragraph, is it not, that this wasn't a fixed price 24 because there would be Notified Departures and price 25 changes after contract close? 139 1 A. Yes. 2 Q. If you had read this paragraph before contract close, 3 you would have been aware of these matters? 4 A. Yes, I would, and I think with respect, I would like to 5 say as well that, you know, I think in my view is that 6 something as significant should not have been in 7 a document that's provided over to a finance officer on 8 the 15th. There was no visibility of this. 9 Q. Now, if you had read this document at the time, and had 10 been aware of these matters, that this wasn't a fixed 11 price because there would be Notified Departures and 12 price changes after contract close, what, if anything, 13 would you have done as a result? 14 A. I think clearly I would have spoken to my own team about 15 it, to understand what -- what did we know about this 16 and what was the position. 17 I think we would have had pretty much immediate 18 contact with the Director of Finance, to understand what 19 was his understanding. And probably what was the 20 understanding overall in the Council, and also in terms 21 of the TPB. 22 Also, I think, it would have been -- as far as -- 23 I'm not aware that there was any part of the QRA which, 24 you know, I know now -- I'm not aware of any part of the 25 QRA. So even if we had got over these issues, I think 140 1 there would have had to have been a very serious and 2 significant matter about where in the QRA that could 3 have been, and what the value of that would have been. 4 Q. So would you have been sufficiently concerned to have 5 escalated these matters to the highest level? 6 A. Undoubtedly, yes. 7 Q. Why? 8 A. Because I -- I would not have been able to know that the 9 price plus the QRA is giving us a fixed price because 10 really for the reasons we have said. 11 First of all, this says in a public contract that 12 it's facts and circumstances that are not correct. So 13 difficult interpretation point. And there has been no 14 exposure to a risk here. So I wouldn't have been -- 15 although I wasn't aware of the QRA, I would have 16 certainly needed to know where in the QRA that was. 17 Bearing in mind that we're at 15 April. It's a very 18 late day to be at. 19 Q. So if you had been aware of these concerns and risks, 20 you would have regarded it as part of your duty as 21 Council Solicitor to raise these with the senior 22 officers in the Council? 23 A. Yes. 24 Q. Because that would be part of your duties as 25 Council Solicitor, to understand the risks to the 141 1 Council arising from the Infraco contract? 2 A. Yes. 3 Q. But, you see, you can only do that if you read this part 4 of the contract? 5 A. Yes. I don't disagree with you on that, but what I'm 6 saying is that when we are -- this matter has been given 7 entirely to tie to be managed through TPB and TEL. 8 I think that when we're working in that circumstance, 9 I believe fundamentally that this should not simply have 10 been put in an email from Stewart McGarrity to come in 11 the way it did to Alan Coyle. 12 I think that, you know, my own view is that that -- 13 that clearly was an action which, you know, was perhaps 14 meant to, you know, to cause the least exposure to this 15 document. 16 I would have expected to have had a proper 17 discussion at the Legal Affairs Group regarding the 18 matter. I would have expected to see, you know, a paper 19 explaining what this was, how it was to be managed, how 20 it was to be mitigated, and where exactly in the QRA it 21 was to go. 22 I don't believe or accept that it should simply have 23 come in the way it did. 24 Q. In relation to the Legal Affairs Group, was it still 25 meeting at this time or had it been largely stood down, 142 1 perhaps around January or perhaps February 2008? 2 A. No. The Legal Affairs Group continued. I think from 3 checking my records, I think the last meeting before 4 close, I believe was on 14 April. I think the meeting 5 on 21 April was stood down because people were working 6 towards close issues. But they were -- there were very 7 regular meetings before that time. 8 Q. Are you referring there to Legal Affairs Group or the 9 IPG? 10 A. Sorry, the Legal Affairs Group certainly, and the IPG 11 continued. So yes, both were continuing. 12 Q. Could we also please look, going back to the document, 13 draft Schedule 4, towards the bottom of the page, we see 14 the first Pricing Assumption, we could perhaps enlarge 15 that, please -- relates to design. 16 Do you recall reading this Pricing Assumption when 17 you did come to look at Schedule 4? 18 A. Yes. 19 Q. Perhaps then over the page as well to complete that. 20 Did you have any views on that Pricing Assumption 21 when you read it for the first time? 22 A. Yes. I thought it was -- it was unclear, and it appears 23 to be incomplete and quite difficult to interpret. 24 But at this stage then, you know, I'm obviously 25 aware that there are arbitrations and there is, so that 143 1 will obviously have supported a view, because I'm aware 2 that that's the circumstances at that time. 3 Q. If you had read this Pricing Assumption before contract 4 close, are you likely to have taken a view that it 5 lacked clarity and should have been clarified further? 6 A. Yes, I would have expected it to be in the risk matrices 7 very clearly in terms of the risks of Schedule 4, and 8 very clearly explained through DLA and in fact through 9 tie themselves. 10 Q. Put to one side any question of matrices. Presumably 11 you would have come to the view, if you had read it at 12 the time, that the wording was unclear and should be 13 clarified before contract close? 14 A. Yes. I mean, I don't have any particular experience in 15 design, but the schedule to me didn't look like 16 a finished form of schedule. It looked to me as if it 17 was perhaps something which might have been more of 18 a draft schedule, but not complete. 19 Q. Now, could I also please ask, was there any discussion 20 that you can recall among the Council Legal team in 21 relation to Schedule 4 before contract close? 22 A. No. 23 Q. So the other members of the team didn't come to you with 24 any concerns they had, for example? 25 A. No. Unfortunately not. 144 1 Q. Thank you. I would like to move on, please. The next 2 document is CEC01312368. This is a letter dated 3 28 April 2008 from DLA. We can see this is both to 4 yourself and to Mr Gallagher at tie. 5 If we can scroll down a little, please, we can see, 6 second paragraph: 7 "Since we last wrote on 18 March, tie has been 8 engaged largely on negotiations to close the SDS 9 novation and to complete programme and final pricing and 10 commercial discussions with [the parties] ..." 11 Is that another indication that, looking back, the 12 issuing of the Notice of Intention to Award was 13 premature? 14 A. I appreciate that that would appear to be the case. 15 I don't have enough experience to know in a contract of 16 this sort whether you would still anticipate some, and 17 to what extent in a negotiated tender, prices to close. 18 I appreciate that shouldn't be significant. 19 I don't know whether I would have considered that it 20 was inappropriate to close then. Close was based on 21 a whole number of factors. And one of which was the 22 requirement to meet a deadline of 31 March. 23 So I think we would have to look at in terms of the 24 whole prevailing circumstances. 25 Q. Now, could we go then please to page 3. Under 145 1 paragraph 5, "RISK", it provides: 2 "Following on from our letter of 12 March, we would 3 observe that delay caused by SDS design production and 4 CEC consenting process has resulted in BBS requiring 5 contractual protection and a set of assumptions 6 surrounding programme and pricing. 7 tie are prepared for the BBS request for an 8 immediate contractual variation to accommodate a new 9 construction programme needed as a consequence of the 10 SDS Consents Programme which will eventuate, as well as 11 for the management of contractual Notified Departures 12 when (and if) any of the programme related pricing 13 assumptions fall." 14 What was your understanding of these two paragraphs? 15 A. I think my best recollection of my understanding is that 16 I think I was aware of an immediate contractual 17 variation to do with the version of the design 18 programme. 19 Q. So before contract close, what was your understanding as 20 to how many Notified Departures were expected? 21 A. My clear understanding was that the only Notified 22 Departure that would have been expected was the one 23 relating to the version of the design programme. 24 Q. Why was that your clear understanding? 25 A. If I track through the various legal affairs groups and 146 1 the various IPG, I do think I'm aware of an issue about 2 the design programme, whether it was version 26 or 28. 3 I didn't have the detail and I wouldn't know what that 4 meant. But I -- I do -- I do recall that there was an 5 expected variation to take account of that developing 6 programme. 7 Q. Now, there is reference in these paragraphs to the 8 question of contractual Notified Departures when and if 9 any of the programme related Pricing Assumptions fall. 10 So presumably this is telling you there is at least 11 a risk of more than one Notified Departure? 12 A. Yes. I mean, I can see here that with the benefit of 13 hindsight and when we know what the position is, that 14 that's saying that there is a risk. But this is also 15 backed up by a close report which purports to map the 16 risk to the QRA, telling me that it's satisfactory. And 17 also that there has been no change to risk balance. 18 So there's nothing here in these words which are 19 telling me that the price will not still be the price 20 plus the QRA. 21 Q. Would it be fair to say your understanding before 22 contract close was that there was at least a risk of 23 more than one Notified Departure? 24 A. I'm afraid I simply can't say. I'm looking at the words 25 now, but I'm afraid I can't recall if I thought there 147 1 was a risk of more than one or not. I certainly had 2 been advised of one and there was visibility of one, and 3 there certainly was no discussion regarding more than 4 one. 5 Q. Did you ask tie at any time before contract close how 6 many Notified Departures are you expecting in relation 7 to what areas, and the total value of them? 8 A. No. Personally, I -- I didn't. At this point here 9 I would be looking at the various legal issues which 10 we -- we thought we had a close on at the meeting of 11 16 April, and there's been no further visibility through 12 tie, DLA or any of the finance or legal officers that 13 there's any other developing matters. 14 Q. Could we also please go to page 5 of the letter. 15 Paragraph 11.3 states: 16 "The Pricing Schedule (Infraco Contract Schedule 17 Part 4) has been extensively discussed over the past six 18 weeks and is now settled as to its key assumptions, 19 value engineering items, provisional sums and fixed 20 prices. tie has assessed the likely financial impact of 21 the assumptions not holding true and triggering 22 changes." 23 So I emphasise "assumptions", plural, and also 24 "changes", plural. So that must have been a clear 25 indication that there was a risk of more than one 148 1 Notified Departure; is that correct? 2 A. I'd say, reading the words here, I don't disagree with 3 you, but at the time I -- I don't recollect having any 4 knowledge of more than one in respect of the design 5 version change, and that's my honest and best 6 recollection at that time. 7 Q. If you had read the draft Schedule 4 we looked at, might 8 that have coloured or influenced how you had read DLA's 9 letter of 28 April 2008? 10 A. I accept that if I'd been aware of it. I don't accept 11 in my role that I can be expected to, you know, find out 12 issues by them being given in an email to 13 Stewart McGarrity from their own team. If I had 14 received proper information from tie, the way the Legal 15 Affairs Group was set up, if I had received true and 16 fair advice from DLA, then yes, I accept that. Or even 17 any question from any of the finance officers, or even 18 any -- any internal officer. 19 Q. Now, around this time I think we heard evidence from 20 Steven Bell, who was the Tram Project Director at tie; 21 do you remember him? 22 A. Yes, I do. 23 Q. I think he told us that he had a telephone conversation 24 with yourself and, I think, Mr Fitchie was either 25 present with him or at the end of a phone, around early 149 1 May 2008 to discuss -- I think it may have been DLA's 2 letter, but certainly to discuss the risks under the 3 Infraco contract. 4 Do you have any recollection of such a telephone 5 discussion? 6 A. No, I do not. I did read through Mr Bell's evidence and 7 no, my position is that that did not take place. 8 I see from my notes that I did have one conference 9 call. That was a conference call on 8 May, and that 10 conference call involved the two Directors, Director of 11 Finance, Director of City Development, Rebecca Andrew of 12 Finance and myself and the Tram Monitoring Officer. 13 That conference call was to update us on the developing 14 situation after 30 April with increase in price. 15 So the conference call that I had with tie was on 16 8 March, with a range of officers dealing with the 17 increase in price. 18 Q. Is there any possibility at all that you are mistaken in 19 your recollection that Mr Bell didn't discuss these 20 matters with you? 21 A. I think it's -- it's highly unlikely. I can't 22 understand why -- I don't recall in fact any telephone 23 calls. I don't recall any discussion with Steven Bell 24 outside the Legal Affairs Group. He wasn't really 25 a contact of mine. And I don't understand why he 150 1 wouldn't be bringing it to the attention of the Director 2 of Finance. When any matters of finance came, the route 3 which tie was to take, it would be Mr Gallagher would 4 contact the Director of Finance, the Director of City 5 Development, and if not, the Chief Executive, and bring 6 them up to date with developing issues. 7 Q. Now, Mr Bell's evidence was that he, during this 8 telephone call, he speaks of "discussed the risks 9 allocation matrix and there was discussion of the 10 Notified Departure mechanism". 11 So do you say he is either mistaken on these matters 12 or deliberately not telling the truth on these matters? 13 A. Yes, my evidence is it's one of those, yes. 14 Q. On the question of the risk allocation matrix, I don't 15 think we have to go to it, but it's about 30 pages and 16 I think there are ticks and columns. I think I counted 17 up to 400 and stopped counting, but there are many ticks 18 and risks, I think, identified in the document; is that 19 correct? You nod your head. That's a question? 20 A. Sorry, I'm having difficulty hearing. 21 Q. I'm so sorry. I'll speak up. 22 The Risk Allocation Matrix, I think it's about 23 30 pages long as a document? 24 A. Yes. 25 Q. It contains many risks and ticks, about -- over 400, 151 1 I think; is that correct? 2 A. Yes. 3 Q. While that is an overview of the particular risks, and 4 the party or parties which bear the risk, it doesn't 5 tell you anything about the probability of a risk 6 arising or if it does, the value of any risk that 7 arises. 8 A. Yes. That's correct. 9 My understanding is that there were various risk 10 workshops earlier in the period, and I think these 11 matters will have been discussed there. 12 I think they also will have been discussed in terms 13 of the QRA in terms of finance, and there also had is 14 a mapping of risks into the close report, but I accept 15 that in that particular document, it doesn't have any 16 values. 17 I personally don't think it really could. It's 18 really, you know, a categorisation of some clauses in 19 a document. 20 Q. In relation to the QRA, we've heard evidence that the 21 QRA is essentially produced by a computer model, I think 22 numbers are entered into the computer model and then 23 certain numbers are arrived at for items of risk. 24 We also have heard evidence that of the total risk 25 allowance at contract close, about GBP27 million was 152 1 made up of the QRA in the computer model, with about 2 GBP4 million in addition having been added as a result 3 of human judgement that the computer model didn't 4 adequately cover these extra items, totalling about 5 GBP4 million. 6 We've also heard evidence that the QRA computer 7 model which had identified about GBP27 million of the 8 risk allowance had been run on or about 1 March 2008 to 9 arrive at the GBP27 million figure, but it hadn't then 10 been re-run or updated before contract close. 11 Is that something you were aware of? 12 A. No. I have to say it wasn't. 13 In terms of the -- in terms of the IPG which we 14 attended on a monthly basis with the Chief Executive, 15 there was a document entitled "Decisions". There was 16 critical contractual decisions in terms of -- between 17 December and May. 18 And there were a whole range of matters in there, 19 and one of which was -- one of which was programme, one 20 of which was SDS, one of which was the QRA, and pricing. 21 Now, all of these items at the requirement of the 22 Chief Executive had individual risk owners. I do see, 23 looking at the documents now, that the individual risk 24 owners that were in the documents in January, February, 25 seemed not to be in the documents in March and April, 153 1 which I think isn't helpful. 2 But those individuals continued to have that role of 3 being the risk owners for that. 4 When I attended the IPG on 16 April, I would have 5 assumed that there would be a current running of that 6 QRA which the Director of Finance and his staff were 7 satisfied with. 8 Q. So do you consider that updating the QRA was a matter 9 for the Finance team in CEC? 10 A. Well, it wasn't me who would consider that. It's the 11 Chief Executive. Chief Executive running the IPG. He 12 had decided individual risk owners. And the individual 13 risk owner for the pricing and for the QRA was the 14 Department of Finance. 15 Q. Just for the avoidance of doubt, where will we find the 16 document or documents that allocate responsibility for 17 these particular deliverables? 18 A. Yes. I -- when I've traced back the IPG documents, 19 I believe the last time that the risk owners are in is 20 in February. So it will be 28 February or 29. I don't 21 know why the risk owners have come out of the document 22 for -- the document given to IPG in April. I have to 23 say, I didn't notice it. You know, I would just be 24 looking at -- everybody knew which were their individual 25 items. 154 1 Q. Thank you. I would like to move on to a different DLA 2 letter, please. I think it was the final one before 3 contract close. CEC01372309. We can see, again sent to 4 both yourself and Willie Gallagher of tie, dated 5 12 May 2008. 6 If we could go, please, to page 3. 7 I think we can see under paragraph 5, "RISK", 8 perhaps we can briefly enlarge it, just to check that 9 appears to be the same two paragraphs we looked at in 10 the previous letter. Is that correct, on the face of 11 it? 12 A. Yes. 13 Q. Thank you. What was the purpose of this letter? 14 A. This letter was because we were advised that there had 15 been a significant increase in price requested by the 16 consortium just at the point of the Council meeting, and 17 there was -- there was particular activity after that 18 time in order for there to be a decision between tie and 19 executive members of Council as to whether -- whether 20 I suppose the deal would still go ahead, whether that 21 sum was going to be paid, and then what import it would 22 have in terms of that. 23 The reason I wanted an update letter was because the 24 legal issues relating to the increase in price for me 25 were about whether the contract that would be let was 155 1 still legally competent or whether it could be 2 challenged on the grounds of procurement, particularly 3 because at such a late stage, what we were advised was 4 that not insignificant price increase. 5 There was -- this document had particular additional 6 paragraphs regarding procurement, and advising that 7 whilst it couldn't ever be free of challenges, we knew 8 it was certainly giving a positive indicator of 9 challenge, and advising us that the next bid of 10 Tramlines would not necessarily be successful. 11 I would say I had done some diligence myself on that 12 because I was particularly concerned, and I had sourced 13 the particular European regulations and -- sorry, and 14 also I'd sourced the debriefing letter from Tramlines to 15 satisfy myself on it. 16 I think there was also updated information on CAF 17 joining the consortium, which was put into this letter, 18 which is another legal matter. 19 Q. Could we also please go to CEC01246482. 20 We can see this is an email from Mr Fitchie, sent on 21 23 May 2008 to Alan Coyle, copied into yourself and 22 others, in relation to DLA report. 23 Is this the email you referred to earlier, 24 Ms Lindsay, in your evidence? 25 A. Yes, it is. There are a wide range, but this was the 156 1 one I referred to in particular, yes. 2 Q. I think in short you explained that you had seen 3 Mr Fitchie's evidence to the Inquiry, and that had led 4 you to bring this email to the attention of the Inquiry; 5 is that correct? 6 A. That's correct, because I had followed the preliminary 7 hearing, and my understanding was that DLA had confirmed 8 at that point they were providing advice to both the 9 Council and tie. 10 When I was following Mr Fitchie's evidence, that 11 seemed that he may have been saying that that wasn't the 12 case, which is I didn't realise that this was actually 13 already in process, and that's why I raised with the 14 Solicitor to the Inquiry, and provided this letter to 15 him. 16 Q. What was your purpose in drawing the Inquiry's attention 17 to this email? 18 A. I'd say for me, for accuracy, and also because, you 19 know, the position was clear throughout the period that 20 there's a range of correspondence which confirms that 21 the Council did receive legal advice, and I felt that 22 this letter was -- was completely contradictory to the 23 part of Mr Fitchie's evidence that I had followed 24 online. 25 Q. Thank you. We can no doubt put that to Mr Fitchie for 157 1 his views in due course. 2 I'm going to put that to one side, please, and look 3 at another matter. 4 Look, please, at document CEC01241689. If we can go 5 to the bottom of the page, please, we'll see an email 6 from Mr MacKenzie dated 30 April 2008 to yourself. 7 Subject matter is BBS price. Over the page, please. 8 Top of the page, Mr MacKenzie states: 9 "You may know this already, but BBS have increased 10 the price by a significant amount. Urgent discussions 11 under way at tie this afternoon. Wonder how this leaves 12 the report to Council tomorrow!!" 13 Over the page, please, to page 1, in short, in this 14 email here, on 1 May, Mr MacKenzie sets out his concern 15 that members would not be advised of the recent price 16 increase when the report was put to Council on 17 1 May 2008. 18 Then please go to that report to Council. It's 19 CEC00906940. 20 Go to page 4, please. We can see it's signed by 21 Tom Aitchison, the Chief Executive. 22 CHAIR OF THE INQUIRY: I think it's signed by Mr Inch on 23 behalf of Tom Aitchison. 24 MR MACKENZIE: Thank you, my Lord, for the clarification, 25 yes. That was the evidence. On 23 April 2008. 158 1 Then please back to page 1. 2 I should ask, Ms Lindsay, did you attend this 3 meeting on 1 May 2008? 4 A. Yes, I did. I was required to attend all meetings of 5 Full Council. 6 Q. Thank you. Did you see this report either before or at 7 the meeting? 8 A. Yes, I did. 9 Q. Did you see it before the meeting? 10 A. Yes, I'm just looking through. Yes, I will have had 11 an opportunity to comment on that report prior to the 12 meeting. 13 Q. So you will have had an opportunity to comment on the 14 report, albeit I take it you weren't responsible for the 15 final version of the report? 16 A. That's correct, yes. I wasn't an author or an approver 17 of it. 18 Q. Can we see, please, in paragraph 1.1, it states the 19 purpose of the report is: 20 "To notify the Council of the progress on the suite 21 of contracts for the Edinburgh Tram Network and to 22 provide an update on financial close and the capital 23 costs." 24 Then please go over the page to page 2. In 25 paragraph 3.5, it states: 159 1 "The increase in baseline aggregate costs is largely 2 due to the firming up of provisional prices to fixed 3 sums, currency fluctuations, and the crystallisation of 4 the risk transfer to the private sector as described in 5 the FBC [Final Business Case]." 6 Did you consider at the time that that sentence was 7 correct? 8 A. Yes, I did. 9 Q. In what way was that consistent with the change in 10 design risk you explained to us earlier? 11 A. I think in terms of any contract such as this, you're 12 going to have a whole number of risks and you've got 13 a QRA of a figure of, you know, still at 32 million. So 14 we know that there are a lot of risks in this contract. 15 We know that these risks have been trailed through the 16 outline Business Case and the full Business Case. And 17 my view is that because we were -- we were advised and 18 accepted that the sums for dealing with that were firmly 19 still within the QRA, that on that basis I accepted that 20 as being correct. 21 Q. I think you described earlier that part of the -- put it 22 this way. 23 In or about February 2008 there was a change in 24 allocation or responsibility for design risk in that the 25 public sector were going to have to take on more of that 160 1 risk than had previously been expected; is that correct? 2 A. Yes. 3 Q. Does that appear anywhere in this report? We'll read 4 on. 5 A. Yes, I'm just seeing, can we go up to 3.10, please? 6 Q. So that's on page 3. (Pause) 7 A. Yes. This -- in terms of 3.10, I think I recall now, in 8 terms of my evidence, I put in when I had an opportunity 9 to comment on this report, my view was that I -- 10 I wasn't clear why the authors hadn't put in the 11 emerging risk on SDS design. The Chief Executive had 12 required this to be written, this report, by both 13 Colin MacKenzie and Alan Coyle. So I was confident that 14 risks would be included. 15 When I saw the report, I was concerned that what 16 I regarded as an emerging risk wasn't in there, 17 and I believe that I provided these or similar words to 18 Alan Coyle, and to ask him to revise these words as 19 appropriate for what was -- appropriate, and to add them 20 into this report so that members would be advised of an 21 emerging risk. 22 Q. So are the words we see in 3.10, were you largely the 23 source of these words? 24 A. I would require to check it with my -- my email, I'm 25 afraid, but I think it certainly looks similar. I'm not 161 1 sure how similar. I would have to check the email but 2 that's in process. 3 Q. What the sentence here says is that: 4 "As a result of the overlapping period of design and 5 construction a new risk area has emerged which has been 6 the subject of extensive and difficult negotiation." 7 But the report is silent on saying what that new 8 risk area is. Are you able to explain that? 9 A. I would need to look back at the -- email, I'm afraid. 10 I do know that I did sort of flag the risk and 11 wished that to be in the report. 12 Q. Would you agree with me at least that to a member of the 13 Council reading that, it wouldn't be clear on the face 14 of it what that new risk area was? 15 A. I think I would agree it could certainly be clearer. 16 I think it does flag a risk, but I agree it could be 17 clearer, yes. 18 Q. In the previous paragraph, 3.9, if we can go to that 19 one, please, can we see the reference to: 20 "The QRA has reduced from 49 million at FBC to 21 GBP32 million. The material change in the QRA relates 22 to procurement risks for Tramco and Infraco closed out 23 at the signing of the contracts offset by allowance to 24 provide for risks and uncertainties to be managed by 25 tie Ltd during construction." 162 1 What was your understanding of the risks and 2 uncertainties that were to be managed by tie during 3 construction? 4 A. I think my understanding would have been the risks which 5 were accepted in the outline and Final Business Case, 6 which were probably largely MUDFA works and whether they 7 would be complete. 8 Q. Anything else? 9 A. Again, probably, the issue of consents and approvals. 10 Q. Anything else? 11 A. I think there was a range of other matters regarding 12 other consents for TROs and the like. 13 Q. So these are all matters which would require to be 14 managed by tie after contract close and presumably if 15 they weren't properly managed, or weren't managed in 16 a way tie expected, they may give rise to changes under 17 the contract and increased costs? 18 A. Yes. I think it's clear from the outline and the Final 19 Business Case that the expectation is that TPB will 20 manage closely costs and closely any matters which may 21 lead to change in costs. 22 Q. If I could ask about one final matter, please, on this. 23 At the bottom of the page, 6.1 refers to bullet point 24 notes: 25 "It is recommended that the Council: note the 163 1 imminent award of the two contracts with a final price 2 for the Edinburgh Tram Network of GBP508 million ..." 3 Do you consider it was accurate to say the price was 4 final, given the substantial price increase that had 5 been sought by the consortium very shortly before this 6 meeting? 7 A. Yes, I wouldn't have seen a disparity between the 8 increase and it being final. 9 This was here -- the reason this was going back is 10 because there was an acceptance at that meeting on the 11 16th, and I think before and after, that the 12 Chief Executive did require to go back to members and we 13 all agreed that, to, as it was called, refresh his 14 delegated powers. 15 And this report here was to do that, and to advise 16 members that there had been a price increase of what 17 there is -- would appear to have been GBP10 million from 18 the figure that they had heard about in December. 19 Q. In this report to Council, 1 May 2008, members are being 20 told the price is final. The day before the consortium 21 have sought an increase of about GBP12 million. How can 22 it possibly be said to members on 1 May the price is 23 final, knowing the price increase the day before? 24 A. My understanding is that this report was prepared by 25 those officers in the Council and other officers 164 1 following the IPG of 16 April, and before I did -- 2 I saw -- this report obviously is progressing on to 3 Council on 1 May. And then my understanding is that the 4 contractor has asked for an additional significant sum. 5 I think at -- in terms of as at 1 May, I think in 6 terms of the dates, I think this may have been the day 7 before it was asked for. And at the meeting on 1 May, 8 I know I'm asked in my evidence what I knew when and 9 what I had a role in, but I'm not aware of what the 10 executive officers knew on the morning of that meeting. 11 But I think I said that, you know, at that time this 12 would have been a request from the contractor, and 13 obviously it was for those officers to make a decision 14 what to do. 15 I hear what you're saying, but I suppose the fact is 16 that there wasn't a contract close, and there was 17 nothing to preclude the contractor from seeking 18 additional money pre close. 19 Q. The chronology is entirely clear. We looked at 20 Colin MacKenzie's email of 30 April 2008, talking about 21 BBS have increased the price by a significant amount. 22 So that is known to those within the Council on 23 30 April. 24 This report goes to Council the next day, on 25 1 May 2008, and talks about a final price of 165 1 GBP508 million. And I'm suggesting that one simply 2 can't say the price is final on 1 May when you know, 3 sitting in the background is a price increase on the 4 part of the consortium of about GBP12 million. 5 A. I have to say, I wasn't aware of any information there. 6 I don't know where Colin got his figures from. I don't 7 know where this information came into his hands from. 8 I do know that the information will have been dealt 9 with at an executive level, but my understanding was 10 that there was a request for an additional sum of money, 11 and I can only presume that those officers made 12 a decision that at the moment there was no reason why 13 the contract couldn't be closed on the current figures. 14 CHAIR OF THE INQUIRY: When you got the email from 15 Colin MacKenzie the day before the Council meeting, he 16 was drawing your attention to the fact that there had 17 been this proposed increase in price and was asking you 18 about the propriety of submitting this report or 19 maintaining this report to Council the following day. 20 What did you do about that? Did you then go to your 21 other Directors and say: what's all this about? 22 A. Yes. I don't -- I don't have an exact clear 23 recollection, but I think I spoke to my own Director. 24 Really to be honest, it would have just been to make him 25 aware of it. I don't know where Colin got his 166 1 information, but I would have made him aware of it, and 2 I am aware that there were executive discussions between 3 the Chief Executive and his Directors and the Monitoring 4 Officer and the Council Secretary. I have to say, you 5 know, I wasn't an author of this report, and it 6 wasn't -- no legal advice was sought on it. 7 CHAIR OF THE INQUIRY: Nevertheless as the 8 Council Solicitor, if you thought that a report might be 9 misleading in the sense that it's suggesting that the 10 contract final price is 508 million, when you know that 11 there's an attempt by the consortium to increase that 12 significantly, did you not have a duty as a solicitor to 13 the Council to take steps to draw that to the attention 14 of the Chief Executive or the councillors themselves? 15 A. No. Clearly the Monitoring Officer was well aware of 16 that and was in discussions with the Chief Executive. 17 These discussions would take place at an executive 18 level. The only information that I had was the 19 contractor was, I suppose, yet again looking for 20 additional funds, and clearly if this report was 21 approved by Council, then the only sum that could be 22 offered to the contractor was the sum in that report. 23 If the Monitoring Officer and Council Secretary 24 hadn't been involved in it, then certainly I would have, 25 but in terms of a report being going to Council, it's 167 1 entirely a matter for the Directors together with the 2 Chief Executive and the Monitoring Officer, supported by 3 the Council Secretary. There really isn't a role for me 4 here. But I would have -- certainly would have brought 5 that to the attention of Mr Inch. 6 But I understand that the officers were aware on the 7 morning that there was a requested price increase, but 8 because I wasn't part of that, I don't know whether 9 there was any agreement to accede to that, or to try and 10 hold to the current price. I don't know. 11 CHAIR OF THE INQUIRY: Is this a convenient point to -- 12 MR MACKENZIE: It is, my Lord, yes. 13 CHAIR OF THE INQUIRY: We will adjourn for ten minutes to 14 have a break and resume again at 3.30 promptly. 15 (3.20 pm) 16 (A short break) 17 (3.30 pm) 18 CHAIR OF THE INQUIRY: You're still under oath, Ms Lindsay. 19 A. Yes, thank you. 20 CHAIR OF THE INQUIRY: Mr Mackenzie. 21 MR MACKENZIE: Thank you, my Lord. Can we go, please, to 22 another document dated 2 May 2008. It's CEC01247791. 23 We can see from the top -- from the bottom we can see 24 a reference to Colin MacKenzie email, 2 May 2008, to 25 yourself saying: 168 1 "Please find attached report prepared by the B Team 2 prior to the hiccup on price. This paper may fall to be 3 reviewed once further details of BBS's changed position 4 becomes known." 5 Above that we see your reply, same day, saying: 6 "Colin, I have considered briefly. My questions are 7 is Tie aware of issues and have resolutions been agreed. 8 Time is of the essence. There are significant issues at 9 present and Tie have briefed Directors and Tom this 10 morning. However Tie wish to be in a position to close 11 with immediate effect if and when resolution is agreed. 12 Any outstanding matters must be resolved with Tie very 13 quickly." 14 Now, to pause there, I think in your statement you 15 refer back to the deliverables spreadsheet and process 16 we have talked about previously, and in short was it 17 your position that when you received this, you were 18 surprised that this wasn't perhaps related to the 19 deliverables process which allocated responsibilities 20 for who was to close matters out? 21 A. Yes, completely. 22 Q. Scroll up again, please. We see an email from yourself, 23 2 May 2008, later on in the afternoon to Nick Smith, and 24 I think we heard from Mr MacKenzie he had then departed 25 on a pre-planned leave. I think the baton is then being 169 1 passed to Mr Smith to deal with these matters in your 2 view; is that correct? 3 A. Yes. 4 Q. If we could then briefly go to the report, please. 5 CEC01222467. Now, I'm not going to go through it in 6 detail. I did go over it with Mr MacKenzie. But in 7 short, it raises various concerns by the B Team. 8 Now, I quite understand your position that you were 9 perhaps surprised to get this in this format, but 10 nonetheless you, having been made aware of these 11 concerns, did you consider you required to satisfy 12 yourself that these matters had been closed out before 13 contract award? 14 A. No, I would consider it appropriate for the appropriate 15 risk owner to have done so or now to do so or to elevate 16 to the appropriate Director if they couldn't do so. 17 Q. Do you remember whether you spoke to anybody within your 18 team or within other teams in relation to agreeing a 19 responsibility for who was to deal with what? 20 A. In terms of all of these items here, in the list of 21 critical contractual decisions, there's a clear risk 22 owner for everything, and there is a clear risk owner 23 for all of these. It just isn't in terms of this table. 24 The risk owner largely will be, as you would expect, 25 the department of City Development, either Duncan Fraser 170 1 or Andy Conway, or it's the Department of Finance, 2 either Alan Coyle or Rebecca Andrew, obviously reporting 3 to the Director of Finance. 4 So all these items had and had at that date still 5 a risk owner. 6 I do recall that I did try to locate Colin MacKenzie 7 that afternoon because I just couldn't -- I was 8 completely unclear as to what this was and why it was 9 coming to me. After I got Mr MacKenzie's out of office, 10 I wasn't able to find him in the department, 11 unfortunately, and -- but he then did come online later 12 in the afternoon, and he said to me -- there was 13 a further email, and he said: I see you have passed this 14 over to Nick Smith; and he said: I have had a full 15 briefing with Nick earlier in the day. I would have 16 preferred to talk to Mr MacKenzie about it, but -- 17 I tried to do that, but wasn't able to locate him. 18 I did make sure I copied my email to Nick to both 19 Rebecca and Duncan Fraser who was the tram co-ordinator, 20 to ensure that matters were co-ordinated. 21 I would say that in the following five working days, 22 I think we had before the policy and strategy, there was 23 a wide range of discussions and meetings between all of 24 these executive officers. 25 Q. Do you know whether in those five working days and 171 1 during those discussions and meetings all of the matters 2 of concern set out in this report were resolved? 3 A. I don't recall having -- receiving any kind of final 4 indication of that. I did go back to Nick Smith again. 5 Nick was still trying to close some operating 6 agreements. He was asking for my support in that. 7 I went back and I said that: the bigger issue for me is 8 to ensure that none of these are existing. 9 He advised me that he had provided them to the 10 appropriate risk owners of City Development and Finance, 11 and that I think he told me that he had chased them up 12 on that. 13 I have to say, I think from looking at it, I think 14 my view was that some of these were probably the type of 15 sort of legacy issues that had been there regarding 16 the -- was the consent for 3.3 and 6.6 enough. But 17 I was personally -- I was satisfied at that point it was 18 with the tram co-ordinator and the various risk owners. 19 But I knew that I would be having further discussions 20 with both the Director of City Development and Director 21 of Finance as we then approached the next formal stage. 22 Q. So in relation to the adequacy of the QRA, you regarded 23 that as a matter for the Finance Department? 24 A. Completely, yes. 25 Q. Go to a separate document, please. CEC01244245. Just 172 1 before we look at this in terms of your last answer, 2 presumably these issues are all interlinked, and that in 3 order to know whether the QRA was adequate, one would 4 have to have a clear understanding of the risks arising 5 from the contract? 6 A. Yes. 7 Q. So I just wonder whether it's possible to say that these 8 various concerns stand alone and are the responsibility 9 of particular Council departments, or in fact whether in 10 relation to all or most of these items, there is an 11 interlinking and sharing of responsibility? 12 A. I would say two things to that. There were, I think, as 13 I have said, there was a conference call which we had on 14 8 May, and the executive officers which were 15 Donald McGougan and Dave Anderson, they were well aware 16 of all of the matters, although the attention was 17 focused clearly on the price increase. 18 I know that there were several meetings, and I met 19 with the Chief Executive and the Director of Finance on 20 12 May. 21 I can't recall that exact conversation, but I am 22 certain that we will have talked about being satisfied 23 on all matters. And I'm certain the Director of Finance 24 would have confirmed he was satisfied on matters within 25 his remit, and I'm certain that Dave Anderson would have 173 1 been satisfied on his matters. 2 I do understand what you're saying regarding the 3 link. However, the way this project was run, Legal were 4 to some extent dealing with legal matters, and all of 5 the technical, commercial and financial risk sat with 6 the risk owners within those two Directors' Divisions. 7 Q. Thank you. 8 The document on screen, we can see has been signed 9 by yourself, Dave Anderson and Donald McGougan, 10 13 May 2008. 11 At the top of the document, we can see that here you 12 are jointly advising and confirming that: 13 "... taking into account all the circumstances, we 14 consider it is appropriate to support and agree with 15 tie's recommendation to you that there is now an 16 imminent financial close to this project." 17 Now, I hear what you say about the meeting with the 18 others, David Anderson and Donald -- Mr Aitchison, 19 perhaps, and Mr McGougan. 20 Before signing this, did you check with Nick Smith 21 whether all of the B Team's issues and concerns had been 22 closed out? 23 A. I'm afraid I just don't have a recollection. I have no 24 file note to say that I did, and I don't have 25 a recollection. 174 1 I know that I continued to push him on it, 2 and I know that he advised it was with those technical 3 officers. But I was certain that -- I think I have seen 4 in process now, I didn't see at the time, the workings 5 of that group, and I know that the Directors and the 6 Tram Monitoring Officer were copied in. So I'm certain 7 that there will not have been any issues which the 8 officers were concerned about. 9 I do remember a number of meetings that week. 10 I think because of the price increase, there was far 11 more meetings, executive officer meetings I was asked to 12 attend, than would have been expected, and I have an 13 absolute view that in all of these meetings, that the 14 only remaining issue that was in the mind of either 15 director or the Chief Executive was in relation to 16 price. 17 Q. When you refer to the Tram Monitoring Officer, who was 18 that? 19 A. At this stage I -- it would either have been the 20 Director of City Development or -- I think it may have 21 been Marshall Poulton at this stage. 22 Q. Can we go to another document, please. CEC01249269. If 23 we could blow up this, please. We see it's sent by 24 Alan Coyle on 21 May 2008, which is after contract 25 close, to Colin MacKenzie and others, but not you. 175 1 But we can see in the text that Mr Coyle says: 2 "Please find attached the latest matrix." 3 So this is back to the deliverables for contract 4 award we referred to earlier. He says: 5 "We have highlighted issues regarding documentary 6 evidence in yellow ..." 7 I'm not going to go to the matrix. We did that 8 yesterday with Mr MacKenzie. But in short, this seems 9 to suggest that there were some outstanding deliverables 10 or at the very least supporting documents in relation to 11 deliverables outstanding at contract award. 12 Was that correct? 13 A. I didn't see this document at the time. My recollection 14 and understanding from the meeting of 16 April was that 15 the only two deliverables that were not expected was one 16 matter relating to SDS claims, which the Chief Executive 17 and his Directors accepted may not be closed, and the 18 only other deliverable that I understand was in relation 19 to the SRU and the third party agreement in relation 20 to -- different issues to do with flooding and the like. 21 It was accepted that that issue would not be finalised 22 by contract close. 23 So no, I'm not aware that there were other issues. 24 Q. Other than those two matters you have referred to, was 25 it your expectation that all deliverables, including all 176 1 supporting documents, should have been obtained before 2 contract close? 3 A. Yes, certainly to a sufficient state of satisfaction. 4 I understand that in some of the third party agreements, 5 for example, there may not have been finalised 6 contracts, but there was sufficient confidence in where 7 they had reached. So I would say yes, subject to that 8 caveat. 9 Q. Thank you. Moving on to the dispute between the 10 consortium and tie, did you at any stage consider 11 obtaining independent legal advice on behalf of the 12 Council on the correct interpretation of the contract 13 and tie's prospects of success in the dispute? 14 A. I think in terms of -- in terms of personally, my role, 15 DLA and a separate DLA, a litigation partner, were 16 originally advising. 17 I was then aware that Calum MacNeill QC was 18 instructed and then I'm aware that McGrigors were 19 instructed. 20 Through the IPG, the decision that the Chief 21 Executive and his Directors took was that the Tram 22 Monitoring Officer was in a position to determine what 23 additional external advice he required, whether that was 24 in terms of external dispute resolution or any other 25 such matter in terms of dispute resolution. 177 1 Q. Thank you. I would like to go to another document, 2 please, CEC00869667. In the middle we can see an email 3 from Colin MacKenzie dated 11 March 2009 to 4 Tom Aitchison, copying in Jim Inch and yourself. 5 In the main paragraph Mr MacKenzie states: 6 "If I may be so bold as to venture a comment, might 7 I say that what the Council officers do not know is 8 whether the Infraco contract is sound and in all 9 respects in the Council's best interests as client and 10 funder." 11 Did you know whether the contract was sound and in 12 the Council's best interests? 13 A. I think I -- I didn't have any information that it was 14 not so. I realised clearly there was a dispute going on 15 which would -- you know, would lead to decisions through 16 arbitration, and when I attended the IPG meetings I -- 17 I was concerned that the Council didn't have sufficient 18 information, largely I think in respect of contract 19 management. And I raised that specifically at the IPG, 20 and I was asked at that time to draft a letter from the 21 Chief Executive to tie and TEL, to secure a dedicated 22 team to be lodged down at CityPoint from finance, 23 technical and legal officers, so there could actually be 24 a further understanding in terms of all of these matters 25 combined. 178 1 Q. I would like to move on, please, to the change in your 2 role which occurred, I think, at the very end of 2009. 3 If we can go to a document, please, CEC00692177. 4 We can see this is a letter of 12 November 2009. We 5 can see at the bottom it's from Jim Inch, Director of 6 Corporate Services. Towards the top again we can see 7 it's sent to you, and he says -- he refers to: 8 "... our recent discussions regarding your working 9 arrangements once Alistair Maclean Head of Legal and 10 Administrative Services commences employment on 11 1 December 2009." 12 Then a couple of paragraphs down, he says: 13 "... I confirm that with effect from 1 December 2009 14 you will be carrying out the following duties: 15 1. Working as part of the Tram Project team 16 representing the Council's interest in the tram project 17 including ..." 18 Various things set out there. Over the page, 19 please, can we also see then number 2: 20 "Leading the Legal advisory work stream of the 21 Alternative Business Models ..." 22 Now, we've heard certain evidence from Mr Maclean 23 about these matters, and also in your statement I'm 24 conscious that between pages 100 and 104 you fully set 25 out your position. So I'll take that as read. We 179 1 understand what you say. 2 I would just like to ask a few particular questions 3 in relation to this period. 4 Firstly, who do you consider was responsible for 5 providing legal advice to the Council on the tram 6 project between December 2009 and you leaving the 7 Council in, I think, August 2010? 8 A. The only person that could be was Mr Maclean because 9 I effectively was stood down. I didn't attend Council. 10 I attended the first Council to support Mr Maclean in 11 a changeover position. But after that the only legal 12 officer who went to Council was Mr Maclean. 13 Q. When you say "stood down", I think to put that in 14 context, I think there was a re-organisation of the 15 Council -- 16 A. Yes. 17 Q. -- legal division? 18 A. Yes, quite. 19 Q. And you chose not to apply for the new post that was 20 created? 21 A. That's correct. That was my decision, yes. 22 Q. Now, Mr Maclean said that you sat outwith the Legal team 23 and reported to Jim Inch and not to him; is that 24 correct? 25 A. Yes. I was physically located -- I was working largely 180 1 on the alternative business model, and I was located 2 within Jim Inch's area, which was where that Project 3 Director and Jim Inch's other Heads of Services were. 4 Legal, shortly after that, also came to join the 5 Waverley Court team, as it were. 6 Q. Now, I think we also know from the records of meetings 7 that you attended the IPG until May 2010? 8 A. Yes. 9 Q. And that Mr Maclean attended from June 2010 onwards. Is 10 that as good an indication as any as to the transition 11 in responsibility for the tram project? 12 A. No, it's not, actually. The first meeting of the IPG -- 13 Mr Maclean commenced on 1 December, and on the first IPG 14 meeting in January, Mr Maclean was allocated an 15 executive role in trams, and he is allocated a role to 16 have a weekly meeting with the relevant directors and 17 Richard Jeffrey, and to take a strategic role from 18 January in the project. 19 My own role was very much a -- an operational 20 support to Mr Smith. 21 Q. Now, we know that there were a number of adjudication 22 decisions between late 2009 and throughout 2010. During 23 that period when you were still at the Council, of 24 course, did you in general have any views on the 25 adjudication decisions, including in particular which 181 1 way the wind was blowing? 2 A. I have to say, I think I received very little 3 information at that point, and I don't think actually 4 I did receive Richard Keen's opinion. I wasn't certain 5 when I put my evidence in. 6 It was clear, I think, I had been pushing Nick to 7 consider whether there was a requirement to appeal one 8 of the decisions which I had been shown early in 2010, 9 as I was concerned that any period for appeal could be 10 over before a decision had been made. I think, you 11 know, I did push to try and find that out. 12 But clearly I think there obviously was an unclear 13 picture, but I think from myself, I think I am aware now 14 that I probably had less of an overall view than 15 I understood at the time. 16 But I could understand why that was happening. 17 I had different other duties. I think I should -- 18 I think I said in my statement, I had different duties, 19 that this letter really didn't happen the way that was 20 because of other Council priorities in December and 21 January, and Mr Smith's position actually changed in the 22 division also. 23 Mr Smith reported directly to Mr Maclean, from 24 Mr Maclean's first day at work. Mr Smith's manager was 25 moved aside, as it were, and Mr Smith reported to 182 1 Alastair Maclean directly from his first day at work. 2 He was then a Principal Solicitor from a couple of 3 months after that. So I think -- and the reason I'm 4 explaining is just to let you know that Mr Smith had 5 a -- he was effectively a Principal Solicitor in waiting 6 from 1 December, and I think -- it's obviously why he's 7 had a more particular role through that period, 8 supported, as I understood it, by Alastair Maclean who 9 was to have the weekly strategic meeting. 10 Q. You formally left the Council's employment in 11 August 2010. 12 A. Yes. 13 Q. I think we have heard evidence from one of the 14 witnesses -- it may have been Mr Inch, I can't 15 remember -- that you had some accrued leave. Was there 16 a month before August when, as a matter of fact, you 17 just physically weren't going into the office because 18 you had accrued leave? 19 A. I don't remember the period being as long as a month. 20 I don't have an exact date, I'm afraid. It may have 21 been a matter of weeks, but I wouldn't -- I don't think 22 it would be four weeks. But I don't have -- I don't 23 have an exact figure, I'm afraid, exact date. 24 Q. There's one final matter I would like to put to you, 25 relatively briefly. It relates to governance. 183 1 Can we go, please, to CEC01315172. This is an 2 Operating Agreement between the Council and tie. It's 3 dated 12 May 2008. And it's in relation to the tram 4 project. If we can go, please, to page 15. I think we 5 can see that's your signature there; is that correct? 6 A. Yes. 7 Q. Can we go, please, to page 5. Just by illustration, if 8 we can blow up perhaps the first half of the page. We 9 can see a number of occasions, the phrase "tie shall use 10 best endeavours" to do something, rather than an 11 absolute duty or even a strong duty. 12 I think in short we've heard evidence from 13 Mr MacKenzie and Nick Smith that the terms of this 14 Operating Agreement were watered down because of 15 essentially representations made by senior tie staff to 16 senior Council officers that the terms were too onerous, 17 and that Mr MacKenzie and Mr Smith felt that senior 18 officers in the Council didn't support them in holding 19 out for stronger terms, and they felt that the Council 20 officers gave in to tie too easily. 21 Did you have any awareness of or views on these 22 matters? 23 A. Yes, I was aware Nick Smith would, you know, perhaps 24 come to me saying that he was wanting to hold a line 25 with something. I would say that I tried to hold the 184 1 line to have personal liability originally. And that 2 obviously wasn't acceptable to the Board, but that was 3 my original stand. So we would have personal liability. 4 And I know that Nick was concerned that that was 5 moving down to best endeavours. At that point 6 effectively our client was the Director of City 7 Development and Director of Finance, and Nick did 8 obviously take instructions from them, and at some point 9 he will have been instructed that best endeavours was 10 suitable. 11 I did see in my papers there actually is a letter 12 from the Scottish Government to the Chief Executive, 13 actually querying this point, and the Chief Executive 14 confirms that best endeavours are considered to be 15 sufficient in all the circumstances. 16 So I wasn't actually aware that the Scottish 17 Government, you know, was actually aware of this matter, 18 and that there had been correspondence between the 19 Chief Executive and the Scottish Government. 20 Q. In short, did you consider the Agreement was too watered 21 down, to adequately protect the Council's interests? 22 A. I would say I didn't consider that it was too watered 23 down, no. I thought it -- it would have been preferable 24 had it perhaps not been best endeavours, but I think we 25 have to accept that best endeavours is a very high test. 185 1 It's not reasonable endeavours, it's best 2 endeavours, so it's a very high test. But that's not to 3 say it wouldn't have been better being absolute. But 4 that was clearly the decision that was taken by the 5 Chief Executive officers and I didn't think it was 6 inappropriate. 7 Q. So in signing this agreement, is it your position it 8 wasn't your decision to agree to the use of best 9 endeavours. That was essentially a decision that had 10 been taken by others? 11 A. Certainly, and that would be the case for any documents 12 that I'm required -- I was required to sign in my role. 13 Negotiated terms wouldn't be negotiated or agreed by me. 14 I'm simply performing, you know, the execution in 15 accordance with instructions. 16 Q. For the avoidance of doubt, who were the senior officers 17 who you understood had agreed to the use of this 18 terminology? 19 A. The two officers that Nick Smith was taking instructions 20 from was the Director of Finance and Director of City 21 Development. I -- Nick's evidence would be best to 22 determine whether it was both of them or one of them. 23 But I think it will have been both. 24 MR MACKENZIE: Thank you. 25 My Lord, I have no further questions. 186 1 CHAIR OF THE INQUIRY: I think there's only one person, 2 Mr Dunlop, I think you have intimated that you have -- 3 or given notice that you wish to ask a question or 4 questions about Schedule 4. 5 MR DUNLOP QC: Yes. My Lord, it's very brief. There's one 6 additional point actually, just simply arising from the 7 new document that was produced this morning, 23 May. 8 But I'll only be five minutes in total. 9 Examination by MR DUNLOP QC 10 MR DUNLOP QC: Ms Lindsay, looking at the 23 May email that 11 you produced to the Inquiry yesterday, I think it arises 12 out of a concern on your part that Mr Fitchie's position 13 may be he wasn't advising Edinburgh Council. 14 For myself, and it's a matter for his Lordship 15 ultimately, I'm not clear that was Mr Fitchie's 16 position. 17 If Mr Fitchie's position is that yes, he was 18 providing advice to Edinburgh Council as well as to tie, 19 but that he had no separate reporting duty, would that 20 be correct? 21 A. I don't believe so, no, in terms of the letter which did 22 say to report to CEC when asked. 23 Q. Other than when asked, absolutely. If his position 24 is: my primary client is tie, I'll report to tie and 25 engage with tie, but if I'm asked, I will advise CEC; 187 1 that would be correct? 2 A. Yes. I would say that, but I would say that each of 3 these letters was a request by me for advice. 4 Q. I don't think there's any quarrel between us there, 5 Ms Lindsay. 6 As you say, I don't think we need to go back to the 7 letter. In the Duty of Care letter itself, he says: tie 8 is primarily the client; I'm not going to be reporting 9 to CECs, but if CEC ask, or if tie ask me to advise CEC, 10 then I'll advise CEC. 11 A. Yes. 12 Q. That is how matters worked? 13 A. Yes. 14 Q. Yes, thank you. 15 The second point then is Schedule Part 4. So you 16 were sent Schedule Part 4 on 15 April 2008? 17 A. Yes. 18 Q. You've explained to his Lordship that you didn't read it 19 then, and indeed not for several months, I think. 20 Who at Edinburgh Council Legal was reading or did 21 read Schedule Part 4? 22 A. I think that -- I'm not aware of the evidence 23 necessarily that others have given to that. I can only 24 really speak for myself. 25 Q. Indeed, and it's your evidence I'm asking about. 188 1 You must have wanted before financial close, so 2 you've got the pricing mechanism on 15 April. Financial 3 close is less than a month away. You must have been 4 anxious that somebody understand and get a handle on the 5 pricing? 6 A. I wouldn't put it as strongly as that, know. This 7 contract here was being entered into by tie, DLA were 8 the project lawyers advising them. The Director of 9 Finance and his staff were dealing with the pricing 10 risks in that. 11 So I wouldn't have said -- no, I wouldn't have said 12 I was anxious for any legal member of staff to see that 13 price -- to see any pricing schedule. We simply hadn't 14 been involved in that. 15 Q. We know Colin MacKenzie read it and understood it 16 because he told us that yesterday. I'm just wondering 17 from your own evidence, were you aware of no discussions 18 whatsoever between 15 April when you and Smith and 19 MacKenzie are all sent Schedule Part 4, between then and 20 financial close, are you aware of no discussions amongst 21 the legal team? 22 A. I'm not. Unfortunately it didn't come to us via your 23 clients. 24 Q. I'm sorry? 25 A. Unfortunately the Schedule didn't come to us via DLA. 189 1 Q. Well, if you could look, please, at DLA's advice letter, 2 28 April. This is CEC01312368. 3 This is one of several letters that was seen from 4 DLA. This one is addressed to yourself and to 5 Willie Gallagher at tie; is that right? 6 A. Yes. 7 Q. 28 April 2008. You looked at this with my learned 8 friend. This is the one that says, for example, on the 9 third page, we see the chapter on risk, talking about 10 Notified Departures. Do you remember looking at that 11 earlier? 12 A. Yes. 13 Q. If you turn on, please, to the fifth page, I'm sorry, 14 the sixth page, do we see at the end of this letter what 15 Mr Fitchie says is: 16 "We attach the updated Risk Matrix for your use ... 17 this document is not a substitute for study of the 18 Contract Suite and is intended as an aide to the main 19 components of risk allocation. It does not reproduce 20 the commercial detail in the Contract Suite on which tie 21 has reported separately." 22 He then mentions final due diligence on the contract 23 suite: 24 "See annex A to this letter." 25 If we then turn one more page on, please, do we see 190 1 that annex A to this letter is the whole contract, first 2 bullet point: 3 "The Infraco Contract (and Schedule Parts 1 to 44)." 4 Do you see that? 5 A. I see that it's a list of the contract suite, yes. 6 Q. If you think back to the paragraph we've just read, 7 Mr Fitchie has said that the risk matrix is not 8 a substitute for study of the contract suite. 9 A. Yes. I hear that, but I simply don't accept in this 10 case that what we had was sufficient, is my view and my 11 evidence. 12 Q. That's not what I'm asking. What I wanted to know 13 is: Mr Fitchie has -- you are in possession of, by now, 14 the whole contract suite. You've been sent Schedule 15 Part 4 two weeks before this letter. Mr Fitchie says: 16 "... this document is not a substitute for study of 17 the contract suite ..." 18 What I want to know is who was it at CEC Legal that 19 did that? 20 A. I'd say that this is a list here. This -- these 21 contract documents didn't, as far as I know, come to CEC 22 on this date or emerge on that date. The Council were 23 relying on DLA's advice, and I would just add that the 24 risk matrix actually made no mention of Schedule 4, and 25 I think it should have been very explicit in that risk 191 1 matrix. 2 Q. "... this document is not a substitute for study of the 3 contract suite ..." 4 It is said. Who was it at CEC Legal that studied 5 the contract suite? 6 A. I think with respect, I have just answered that 7 question. 8 Q. I'm afraid you haven't because I don't know what your 9 answer is. Who was it at CEC Legal that studied the 10 contract suite? 11 A. Well, I think, with respect, I have answered the 12 question. There was no one particular individual in CEC 13 who was going to be approving that contract suite. We 14 were going to be familiar with it in terms of risks and 15 liabilities, and the Council were relying on the legal 16 advice of DLA. 17 CHAIR OF THE INQUIRY: I think, Ms Lindsay, we'll make 18 progress if you answer the question. 19 I think the question was: who was it who studied the 20 contract suite? And you were then going on to say there 21 was no one particular individual who was going to be 22 approving the contract suite. But who studied the 23 contract suite? Who studied the contract suite in the 24 Council Solicitor's Department? 25 A. The only thing I can add is that I -- I understood that 192 1 both the individuals in the team were having -- were 2 looking at this, having more of a view than would 3 perhaps be their evidence. 4 MR DUNLOP QC: That's what I'm interested in, Ms Lindsay. 5 You went on to say when you were trying to answer my 6 question, you said there was no particular individual 7 who was going to be approving the suite. I'm not asking 8 who approved it. 9 But you said that the duty was to become familiar 10 with it and familiar with risks. 11 So inherent in that answer is an acceptance that 12 somebody was looking at this, and I just want to know 13 who was it. Was it Mr Smith or was it Mr MacKenzie? 14 A. Yes. My understanding would it be -- it would be 15 a combination of them. 16 Q. Yes. So your understanding is that Smith and MacKenzie 17 would have been studying the suite in general, but the 18 Pricing Schedule in particular? 19 A. I am not sure that I would agree with the second part of 20 that question, no, because the Legal team were not 21 briefed or advised in any part of the pricing. 22 Q. You've obviously been following the evidence as it's 23 been going along. Presumably you familiarised yourself 24 with what Mr MacKenzie said yesterday? 25 A. I have seen part of Mr MacKenzie's evidence, but not 193 1 fully, I'm afraid. 2 Q. So we know from Mr MacKenzie, and we discussed this 3 a minute ago, we know from Mr MacKenzie that he read 4 Schedule 4 and understood it. 5 A. Excuse me. 6 Q. We know that he read Schedule Part 4 and understood 7 risks that arose from it; yes? 8 A. Right. 9 Q. What I want to know from you is: was your understanding 10 that Mr Smith would also studying the contract suite? 11 A. I would have thought that's what he was doing. But 12 again, his kind of instructions at that point would be 13 coming from Colin MacKenzie. So I don't know exactly 14 what he was instructed to do. 15 Q. Mr MacKenzie told us about the various risks which he 16 divined from Schedule Part 4. Did he not discuss those 17 with you at any point? 18 A. No, he did not. 19 Q. What discussions were there between you and Mr MacKenzie 20 in between 15 April and financial close about the 21 contract? 22 A. We had a discussion at the IPG on the 16th. I think 23 there will be in process a range of correspondence 24 leading up to the 16th. And there was also some 25 correspondence just prior to 1 May. 194 1 I say thereon -- fairly sort of particular issues, 2 and from -- I have to say, I was relying on DLA, but 3 I accept that I was also partly relying on the internal 4 team also. 5 Q. Yes. Mr MacKenzie was very clear about his 6 understanding of the risks. I'm just wondering how it 7 can be that he didn't make you, as ultimately his boss, 8 aware of the risks which he had divined from 9 a consideration of Schedule Part 4? 10 A. I'm afraid I share your bewilderment at that. What I do 11 know is that Mr MacKenzie was always -- he was very risk 12 aware, but he always used extensive use of email, and 13 I have no idea why there is no email in process advising 14 me of those matters. 15 MR DUNLOP QC: Thank you, Ms Lindsay. I'm obliged, my Lord. 16 Questions by CHAIR OF THE INQUIRY 17 CHAIR OF THE INQUIRY: Ms Lindsay, before we finish off, 18 there's other matters that I want to ask, not in 19 relation to the contract, but really in relation to the 20 Inquiry process. 21 I think you are aware that the Inquiry itself was 22 set up as a non-statutory Inquiry -- 23 A. Yes. Judge. 24 CHAIR OF THE INQUIRY: -- in June of 2014. You may or may 25 not be aware that following that date, early on in the 195 1 proceedings, once the office had been set up, and I had 2 the appointed Inquiry Counsel and Solicitor, we took 3 a decision to try to get some basic information from the 4 City of Edinburgh, and we asked the Edinburgh Legal 5 Department to provide us with the names and details of 6 individuals who might be of interest in that regard. 7 We were then told that a number of individuals -- 8 I would say there were more than one -- would not 9 disclose the information of their personal addresses so 10 that we could make contact. 11 I wonder if you would just look at a number of 12 documents in that regard, please. 13 First of all, TRI00000163. 14 This is a letter that was sent to us by 15 Carol Campbell, who was Head of Legal, Risk and 16 Compliance at that time. It appears to be a copy of 17 a letter sent by recorded delivery to you saying: 18 "As you may know, the Scottish Government has 19 initiated a judge-led Inquiry into the Edinburgh Tram 20 Project. The Inquiry will be chaired by Lord Hardie. 21 The Council has been asked by Lord Hardie's Inquiry 22 team to provide details of individuals who may be able 23 to assist with specific queries in relation to the tram 24 project. The Council has provided your name as one of 25 the Council officers involved in the project. The 196 1 Inquiry team have also asked that we provide them with 2 your contact details. 3 I should be grateful if you would advise whether 4 you are willing to allow us to provide your home address 5 to the Inquiry team. 6 Thank you for your help." 7 Then if we look at TRI00000162, this is a copy of 8 your reply to Carol Campbell, dated 31 August, and it 9 says: 10 "I have received your letter dated 25 August by 11 recorded delivery on 27 August. I would confirm that 12 I do not consent to you providing my personal 13 information of my home address to the Inquiry Team or 14 any party. 15 As you will know, the City of Edinburgh Council 16 will have had my personal information for use when I was 17 an employee of the Council, up to August 2010. I have 18 not provided my consent for the personal information of 19 my address to be provided to you nor used by you for the 20 purpose of your letter of 25 August 2014. This is now 21 a seasonal address. I wish my personal information to 22 be and remain private in respect of my right to privacy 23 and family life. 24 I do not wish to receive any further correspondence 25 whatsoever from you or the Council in respect of this or 197 1 any other matter using the personal information of my 2 home address, which may have been retained by the 3 Council, from and as at 2010." 4 Now, first of all, do you accept that these two 5 letters were sent and received? 6 A. Yes. 7 CHAIR OF THE INQUIRY: Reading that reply, does it give the 8 impression, at least, that you don't want the Inquiry to 9 have your personal address? 10 A. It's no disrespect to the Inquiry. 11 CHAIR OF THE INQUIRY: I'm just asking, looking at the 12 letter, does it give that impression or not? 13 A. I think in terms of the data protection issue, I prefer 14 to keep my own personal address separate. 15 CHAIR OF THE INQUIRY: I understand that, but this letter, 16 is it or is it not an indication that you do not want 17 the Inquiry to have access to your personal address for 18 data protection or whatever other reasons? 19 A. Yes. I think I had hoped that there could have been 20 another way of having information. 21 CHAIR OF THE INQUIRY: How was the Inquiry going to make 22 contact with you? 23 A. I had thought that perhaps the Council could have put in 24 place other arrangements for staff to be notified, maybe 25 on a more sort of professional basis where, you know, 198 1 other sort of places of work or business addresses, 2 rather than use personal address. 3 I'm afraid I'm just very private about my own 4 private address. 5 CHAIR OF THE INQUIRY: So that -- would you look at another 6 document, please. TRI00000169. That's an email from 7 Carol Campbell to the Inquiry Solicitor saying that you 8 have advised her that you don't consent to the contact 9 details being passed to the Inquiry team, and that you 10 don't want the Council to correspond with her again. 11 As a result of that, and other refusals, are you 12 aware that I had to seek statutory powers for the 13 Inquiry to secure the co-operation of people? 14 A. No, I'm not. 15 CHAIR OF THE INQUIRY: Well, did you not become aware that 16 the Inquiry had been converted into a Statutory Inquiry? 17 A. Yes, I was. 18 CHAIR OF THE INQUIRY: Following that conversion, would you 19 look at another document. TRI00000164, please. Do you 20 see that's a Statutory Notice in terms of Section 21 of 21 the Inquiries Act, served upon the City of Edinburgh 22 Council, requiring them -- this is to get round the data 23 protection issues -- requiring them to give a written 24 statement listing the names, addresses and other contact 25 details of all former employees of the Council and tie 199 1 who were involved in the tram project, and all 2 correspondence between the Council and any of the 3 persons mentioned in (a) above in relation to requests 4 by the Inquiry team for the voluntary co-operation. 5 That's how we recovered the first two documents. 6 Then following that Notice being served, we received 7 details of the various employees, including yourself, as 8 a result of which the Solicitor to the Inquiry wrote to 9 you, and if you look at TRI00000166, this to the effect 10 that the Inquiry has been set up. There are terms of 11 reference, and then his role, and then he refers at the 12 bottom of that page and on the next page to the 13 correspondence from Carol Campbell. 14 Then he's really asking you for co-operation and 15 that the Deputy Solicitor could speak with you and then, 16 on -- the response to that letter is TRI00000170, which 17 is an email to the effect that you were currently 18 overseas and you would be pleased to liaise with 19 Mr McNicoll on your return. You say: 20 "Please note that I was not reluctant to assist the 21 Inquiry at any time. My response to Ms Campbell ... 22 related to providing my personal information being my 23 personal home address to any person and to proper data 24 protection issues of that personal information, which 25 I have always retained as personal and confidential and 200 1 as that address is a seasonal address." 2 That's really what you were saying a few minutes 3 ago, but thinking about that now, the correspondence and 4 the requirement of the -- of me to get statutory powers, 5 do you accept that it might appear to some people that 6 your initial reaction was that you weren't prepared to 7 co-operate? 8 A. It certainly wasn't the case. And I apologise now -- 9 CHAIR OF THE INQUIRY: I'm not seeking an apology. You say 10 that it wasn't the case. That's what you say, but I'm 11 saying do you accept that the appearance might be that 12 you did not want to co-operate with the Inquiry? 13 A. I appreciate obviously you're forming an opinion of 14 that. When I look closely at the email there, all 15 I have asked is that my own personal address be and 16 remain confidential. I have not said to anybody I'm not 17 prepared or happy to co-operate with the Inquiry. 18 CHAIR OF THE INQUIRY: Well, if you go back to the first 19 letter, it was to the -- or your reply, it was to the 20 effect to Carol Campbell: don't disclose the address, 21 and don't write to me again about this or any other 22 matter. 23 A. I think I had hoped that there could be a facility to 24 actually receive mail the same as anybody else would in 25 terms of a work setting. 201 1 CHAIR OF THE INQUIRY: Then you were asked for a statement, 2 an informal statement, and that was checked as to when 3 you were back in the United Kingdom, and then you sent 4 an email saying you were currently preparing the 5 statement. 6 Would you look, please, at TRI00000167. 7 That's an email attaching the statement as 8 requested; is that right? 9 A. Yes. 10 CHAIR OF THE INQUIRY: Then the attachment is the same 11 numbers, but with an 8 instead of a 7 at the end. 12 This is the statement that you gave to the Inquiry: 13 "I wish to assist the Inquiry and I have accordingly 14 prepared a statement of my understanding and 15 recollection of the Project to the best of my knowledge 16 and belief without access to relevant records." 17 That's fair enough because at that time we hadn't 18 managed to recover any documents. 19 "The timescales of some of these matters now exceeds 20 10 years." 21 You speak about when you were last employed. You've 22 not had access to Council records. It's prepared 23 without access to these records. The Council should 24 have the relevant documentation. You've not had access 25 to Scottish Government records, and then you say: 202 1 "To the best of my recollection, knowledge and 2 belief: My understanding and recollection is that the 3 Scottish Government required and mandated that this 4 Project would not be carried out by the Council and 5 required that it be carried out by a separate company, 6 with its own structure and staff. My recollection is 7 that this was as a consequence of an undelivered earlier 8 transport project. As a consequence of the above 9 structure, the Project was not directly a Council 10 Project and the role of the legal services division was 11 unlike any other piece of legal activity for the 12 Council. In summary: 13 I was not involved at any time or in any way with 14 making decisions on the procurement/contract or project 15 structure, I was not party to any contract or commercial 16 negotiations, I was not involved in drafting or revising 17 any of the contract or project documents. 18 In terms of timescales, budget and oversight, I had 19 no role in the Project Management nor in the budget or 20 approving any sums to any party or contractor, within or 21 outwith any budget. I had no role in the business case. 22 I was not a Member of Tie Ltd nor a member of the 23 Tram Project Group. 24 The contract structure, procurement and its 25 constituent parts and commercial input was undertaken by 203 1 and determined by Tie. 2 The role of Tie was the delivery of the Edinburgh 3 Tram Project. Tie had a range of internal staff and 4 a range of external consultants to secure delivery. Tie 5 external consultants included external legal Agents for 6 the Project. 7 The Council's legal division had some role in 8 associated Council legal activity including road traffic 9 issues, the Parliamentary Inquiry relating to The Tram 10 Acts, the planning issues relating to developer 11 contributions, securing consents for the overhead lines, 12 operating agreements and a number of discrete areas in 13 liaison with Council officers and external Agents. 14 Should any information which I consider to be 15 inconsistent with the above be made or on any matter of 16 concern to me, I reserve the right to respond or add to 17 this Statement." 18 So this was a statement given by you without access 19 to any documents and to the best of your recollection? 20 A. It was, yes. 21 CHAIR OF THE INQUIRY: I think I have to -- felt that I had 22 to put that to you, as I will to other witnesses, 23 because in the report there will be reference to the 24 need to change the Inquiry into a Statutory Inquiry and 25 the reasons for that. 204 1 Thank you very much. We will adjourn until Tuesday 2 at 9.30. 3 (4.30 pm) 4 (The hearing adjourned until Tuesday, 31 October 2017 at 5 9.30 am) 6 7 205 1 INDEX 2 PAGE 3 MS GILL LINDSAY (sworn) ..............................1 4 5 Examination by MR MACKENZIE ...................1 6 7 Examination by MR DUNLOP QC .................187 8 9 Questions by CHAIR OF THE INQUIRY ...........195 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 206