1 Thursday, 9 November 2017 2 (9.30 am) 3 MR RICHARD JEFFREY (continued) 4 Examination by MR LAKE (continued) 5 CHAIR OF THE INQUIRY: Good morning. You're still under 6 oath. 7 MR LAKE: Good morning, Mr Jeffrey. Yesterday afternoon 8 when we left off we were looking at the advice that had 9 been given by McGrigors in 2010. What I would like to 10 do is carry on by looking at things in broadly 11 chronological order. If I can turn to another document 12 from March 2010, it's CEC00475671. 13 Do you recognise this document? 14 A. Not specifically. I don't recall it. 15 Q. If we just look at the contents and see if it jogs your 16 memory at all. 17 It's headed "Minute of Tram Meeting 16 March 2010", 18 and of the people at the meeting, we can see, I think 19 it's yourself, and four representatives from the 20 Council; is that correct? 21 A. That's when it says, yes. 22 Q. Under the heading, "Pitchfork Report", it notes that 23 it's ready to be circulated. Then the second point is 24 that tie will not challenge adjudications. I take it 25 from that that by this time, a decision had been taken 1 1 not to challenge the Gogarburn and Carrick Knowe and 2 Russell Road adjudications? 3 A. That's certainly what it says, yes. 4 Q. Do you recall that decision? 5 A. Not specifically, no. 6 Q. Were you involved in taking that decision? 7 A. Well, I don't recall it. So I don't recall whether I 8 was involved in taking it or not. 9 Q. So presumably you also have no idea what factors 10 informed that decision? 11 A. No, I would imagine it was to do with the same issues 12 that we discussed yesterday. 13 Q. Could we look then please at the pack of papers for the 14 April Tram Project Board meeting. It's reference 15 CEC00420346. 16 We can see from the cover page here that we have got 17 the pack of papers for the meeting in April 2010. 18 Could we look, please, at page 5 of this. Do we see 19 there the minutes of the meeting that took place on 20 10 March 2010? 21 A. Yes. 22 Q. Could we go, please, to page 7 of this. You say this is 23 all under the heading, "Chief Executive's Update". We 24 can see a sub-heading of "Contractual Mechanisms". You 25 report there: 2 1 "Since the New Year tie has worked more assertively 2 within the framework set by the Infraco Contract to 3 resolve the issues around contractor performance and 4 progress." 5 That's what you indicated in your evidence 6 yesterday, that the approach that was going to be taken 7 was one of contractual assertiveness and Mr Rush was 8 brought in to assist with that? 9 A. Yes. 10 Q. "The messages being relayed in this correspondence to 11 BSC have been indicative of tie's desire to robustly 12 operate the existing contract mechanisms, and have 13 expressed concerns about BSC's approach to fulfilling 14 certain obligations and interpretation of particular 15 clauses in the contract. RJ confirmed that independent 16 legal and Counsels' advice has been analysed and this 17 has affirmed tie's approach to these matters." 18 I don't know if you can remember saying that, but 19 when you talked about affirming tie's approach, is that 20 affirming the assertive contractual approach or the 21 substantive arguments in relation to the various 22 disputes? 23 A. I don't specifically recall from the reading of those 24 minutes. I would imagine it applies to the former 25 rather than the latter. 3 1 Q. Are you able to recall which of the various pieces of 2 advice that we looked at yesterday were the ones on 3 which you placed reliance for the purposes of planning 4 the strategy? 5 A. No, not specifically. 6 Q. Can we look at page 13, please. Could we enlarge the 7 upper half of the page, please. You will see 8 a sub-heading there, "Dispute Resolution (Infraco)". 9 I should say this is in the Project Directors' report. 10 It notes: 11 "No new DRP matters were launched in the Period, but 12 Section 7 drainage and Tower Place Bridge have been 13 referred to adjudication by tie. A mediation process 14 was completed on MUDFA Revision 8 during the period 15 without resolution, and this item may now head into 16 adjudication. Agreement on an acceptable On Street 17 Supplemental Agreement with BSC has not been reached." 18 That was the various discussions in relation to the 19 on-street agreement that you noted yesterday, had 20 possibly started in the mediation in June 2009; is that 21 correct? 22 A. Yes. 23 Q. When it notes that no new dispute resolution matters 24 were launched in the period, was that a deliberate 25 decision on the part of tie not to do this, on the Tram 4 1 Project Board not to do this, or was it simply that 2 nothing had arisen? 3 A. I don't recall, I'm afraid. 4 Q. If we look, please, at page 32 of this. Could we 5 enlarge the upper half of the page. We can see the 6 table that we've seen before, and in relation to the 7 first three entries which are for Gogarburn, 8 Carrick Knowe and Russell Road, it still says that the 9 decision is under review, although as we have seen by 10 that time it had actually been -- from the minute with 11 the Council, the decision had actually been taken that 12 there would be no challenge. Do you see that? 13 A. I see it, yes. 14 Q. In relation to the three entries 5e -- I think it's 5l 15 and 5i, Tower Bridge, Section 7 Drainage and 16 Baird Drive, we can see these are all BDDI to IFC 17 issues. 18 Do you recall why in particular those disputes had 19 been chosen to put through the Dispute Resolution 20 Procedure? 21 A. No, I'm afraid I don't. 22 Q. You note towards the foot of the page, if we can scroll 23 down, two matters. In the third last paragraph on the 24 page: 25 "tie instructs work to commence using Clause 80.15 5 1 when it has been put into dispute. During the period 2 instructions have been issued under Clause 80.15 to 3 commence work at Tower Bridge, Section 7 drainage and 4 Depot Access Bridge is under production." 5 Does that assist in jogging your memory? Were these 6 matters put into dispute resolution because there was 7 a matter to be determined, you wanted a decision, or 8 simply you wanted to be able to use the Clause 80.15 9 mechanism? 10 A. That does ring a bell, and it is possible that it was -- 11 they were put into dispute purely to bring Clause 80.15 12 into play. 13 Q. Again, there was provision, if you just take it short, 14 within the contract that where there was a dispute, tie 15 could instruct works to proceed? 16 A. I'm afraid I don't recall the specifics of how Clause 80 17 in total worked, but certainly there was some element of 18 allowing tie to instruct works once an issue was in 19 dispute, because this then later became an issue of 20 a further adjudication by Lord Dervaird. 21 Q. The Murrayfield Dispute? 22 A. Possibly, I don't recall. 23 Q. We will come to that. 24 If we look at the second last paragraph, we see it 25 notes that: 6 1 "A strategic review of commercial and contractual 2 options is under way and will be reported to the Tram 3 Project Board in March." 4 In fact these were already the April papers, but was 5 the point that that strategic review was still ongoing? 6 A. Well, I presume that that refers to the issues that were 7 referred to yesterday, that were, I think, requested in 8 the January Tram Project Board for reporting at the 9 March Project Board. 10 Q. These are the papers for the April Project Board and it 11 is still noting that it is outstanding; is that that the 12 review took longer or that it was kept going? 13 A. I don't know. 14 Q. Going then from the papers for the April meeting, could 15 we go to the papers for the May meeting. The reference 16 is CEC00245907. 17 We can see here the papers for the May meeting, and 18 if we could look, please, firstly at page 5, we will see 19 as per usual, we've got the minutes of the previous 20 meeting. In those minutes, if we go and look at page 8, 21 we can see that Steven Bell summarised the position in 22 relation to the DRPs that had been carried out. And 23 notes that four have gone in. 24 And that four decisions had been made by 25 adjudication. I think that's the fifth bullet point. 7 1 A. Yes. 2 Q. Now, taking stock of those, at that stage you'd had -- 3 of those decisions, Russell Road, Gogarburn and 4 Carrick Knowe had all been given decisions unfavourable 5 to tie in relation to the question of BDDI to IFC. 6 Would you agree? 7 A. Well, I thought about this after we discussed it 8 yesterday, and that isn't my recollection. Clearly 9 Carrick Knowe and Gogarburn were unfavourable, but my 10 recollection of the Russell Road, although the 11 adjudicator found that they were Notified Departures, 12 I don't think that that was a particularly damaging 13 adjudication for tie. That was my recollection. 14 I know as you took me through it yesterday, I formed 15 a different impression. But I think that was partly 16 because you were asking me to look at individual 17 paragraphs in a random order -- not random, but in 18 a non-sequential order, and certainly my recollection 19 didn't accord with the summary that you provided of it 20 yesterday. 21 Q. Can you remember what you did take from that decision 22 that was favourable? 23 A. It was particularly around the view of the adjudicator 24 that where something had gone wrong with the language, 25 he preferred tie's interpretation of the language. 8 1 I also had another look at that adjudication last 2 night, and this apparent -- I think he talks about it, 3 a tautological conflict. He attempted to resolve by 4 giving some definition to design development. 5 Now, notwithstanding that, he found that those 6 issues were Notified Departures, but the issue of the 7 principle of how -- what this was supposed to mean, we 8 took some comfort from. We may have been wrong to do 9 so, but my recollection is that we took comfort from 10 that. 11 Q. I don't -- I appreciate the point you made yesterday, 12 that you're looking at a document on screen and being 13 asked questions about it, which is not the easiest way. 14 A. And it's not how I would have assessed the document at 15 the time. 16 Q. But just so I can be sure and the Inquiry can be sure 17 which passages you are referring to, so that we know 18 what passages carried weight in your view, we will just 19 take another brief look at that document, if we can. 20 It's reference CEC00034842. 21 You see there the cover sheet of it? 22 A. Yes. 23 Q. In relation to the question of something going wrong 24 with the language, what I took you to yesterday was 25 paragraph 100, which you will see on page 20. If you 9 1 could enlarge the lower part of the screen. Just to 2 provide some context for this, we can see paragraph 100 3 notes that: 4 "It appears that something has gone wrong with the 5 language ..." 6 Then inset in italics, Mr Wilson sets out what he 7 thinks it should have meant. 8 We did note yesterday the terms of paragraph 101, 9 where there's really a two-part test set out. I took 10 you through that. 11 If we go over the page, and enlarge the upper half, 12 the point made in paragraph 102 is also that he agrees 13 with tie that the word "amendment" can only apply to 14 something shown on the BDDI drawings, not an addition to 15 achieve compliance with the Employer's Requirements 16 being the overriding obligation. 17 There's a qualification. Paragraph 103, we looked 18 at a little bit yesterday, where he says: 19 "On any of the definitions of design principle, 20 shape, form and/or specification discussed, Infraco took 21 the 'narrow' view ..." 22 He also says that tie took a broad view, and he 23 doesn't concur with either of those. 24 What he says in the fourth line: 25 "This is a subjective test and if such were 10 1 intended, I think the parties would have said so and 2 expressed the criterion such as the 'reasonable design 3 and build contractor'." 4 That's in relation to Infraco. He says: 5 "Equally, I do not accept the 'broad' proposition by 6 tie that a very wide range of matters that are 7 amendments would be 'expected' by a design and build 8 contractor and so included in the Price." 9 He then goes on to draw that together in 10 paragraph 104, where he says: 11 "I think the correct interpretation lies in the 12 proper application of the definitions to the facts; to 13 which I return under the relevant issues." 14 Then what he does in a number of subparagraphs is to 15 say what he thinks is meant by each of the terms, design 16 principle, shape, form and specification. You see all 17 that? 18 A. Mm-hm. 19 Q. Now, are the passages that you're referring to -- you 20 had a chance to look at it last night -- in this 21 section, or are there other sections of this decision 22 that we could usefully look at? 23 A. It was that and I think there was a section where he 24 talked about the tautological conflict. 25 Q. If we look at page 19. Could we enlarge the lower half 11 1 of the screen. There's reference to "tautological" in 2 paragraph 94i). Is that what you were looking at? 3 A. Yes. That was it. 4 Q. What he says there is: 5 "On the face of it on a literal reading, this 6 provision is tautological since the first and last parts 7 provide that there shall be no amendments in terms of 'A' 8 other than amendments due to evolution of design 9 excluding 'A'." 10 That's the point that we looked at yesterday in your 11 evidence -- 12 A. Yes. 13 Q. -- that it is rather circular? 14 A. Yes. So in -- taken as a whole, this document did at 15 the time give us some comfort that the Infraco's 16 argument that effectively we only priced BDDI, which was 17 the essence of their argument, was not supported by this 18 adjudicator. 19 Q. On the basis he noted that the wording, if given 20 a literal interpretation, was tautological, and the 21 passages then from paragraphs 100 through to 104? 22 A. Yes. 23 Q. Thank you. 24 What we were doing then is looking at the 25 May papers. That was reference CEC00245907. 12 1 Could we look, please, at page 30 of this. We can 2 see that the table there, similar to the one we've 3 already seen in relation to the adjudication decisions 4 and it's still noting that the decisions for Gogarburn, 5 Carrick Knowe and Russell Road are under review. Do you 6 see that? 7 A. Yes. 8 Q. If you go over the page we can see in the second 9 paragraph, if you look at the upper half, it's noted 10 that -- it now says: 11 "A strategic review of commercial and contractual 12 options is under way and will be reported to the Tram 13 Project Board at the end of May 2010." 14 Which seems to bear out that the review has in fact 15 been going on longer than was originally planned. 16 A. It would appear so. 17 Q. Does that accord with your recollection? 18 A. I'm afraid I don't have specific recollections as to the 19 exact timing of these items. 20 Q. Could we look, please, back at page 29 of this. If we 21 look at the upper half, the report notes: 22 "Overall the relationship with BSC is suffering in 23 the following key areas: the refusal of BSC to progress 24 works whilst Clause 80 Changes being agreed; work unable 25 to start on-street where sites are available as 13 1 contractual obligations are not satisfied; resolution of 2 the contractual interpretation on BDDI-IFC." 3 What was the issue with works being unable to start 4 on site -- on-street because of contractual obligations 5 not being satisfied? 6 A. There's a couple of elements to that. The purely 7 contractual position, if you like, is that prior to 8 starting work on site, the contractor was supposed to 9 provide signed subcontracts, method statements for 10 approval, and an integrated design for that section of 11 the works. 12 So contractually those were the obligations that 13 they had not met. 14 Practically, they had also said they were still 15 working on the basis that this contract allows us to 16 hold you to ransom, and I didn't want a repeat of the 17 Princes Street situation, where the streets were closed 18 and dug up, and then works stopped because there was a 19 dispute over a change. 20 So it actually suited me and suited, I believe, tie 21 and the city for them not to start any further on-street 22 works, but the contractual reason was that they hadn't 23 satisfied those obligations that I mentioned earlier. 24 There was one other element that's just gone out of 25 my mind for a moment, if you just give me a second. 14 1 It's because they'd also written to us saying: we're 2 not going to do any more work on-street without 3 a supplemental agreement. 4 Q. Which is what you referred to yesterday. 5 A. Yes. So -- yes. It's again slightly odd that on the 6 one hand they are saying: we are not going to do any 7 further work on-street unless you amend the agreement; 8 and then on the other side saying that they can't start 9 because we won't let them. 10 Q. Perhaps just for completeness, I could refer you to the 11 PowerPoint presentation for this meeting, which was 12 CEC00373764. 13 If we could look firstly at page 4, we can see 14 a heading, "Workstreams". Workstream A and Work 15 stream B. One is contractually assertive leading to 16 compliance or termination, and the other is the mature 17 divorce where BSC complete part of the project and tie 18 reprocure the remainder. 19 Had the various options resolved broadly into those 20 two by that time? 21 A. No, I think we were still effectively working on the 22 three or four options that I identified yesterday within 23 Project Pitchfork, because they were not mutually 24 exclusive. You were able to work on all of them at the 25 same time. 15 1 So there was also work ongoing on what became known 2 as Project Carlisle. I can't remember if that had 3 specifically started by this time, but I think it had. 4 This is May we were talking about. So I'm pretty 5 certain Project Carlisle had started by this time, and 6 what we called Project Notice, I think, had also started 7 by this time. So I think we were working on all four 8 strands simultaneously. 9 Q. If we look again through to page 17 of the 10 presentation -- 11 A. Sorry, could I just check, there isn't a next page, Work 12 stream C and D, is there? 13 Q. I don't think so, but we will check. Could we look at 14 page 5. 15 A. No, okay. That's fine. 16 Q. It is the programme. Could we look at page 17. We come 17 here to the various issues. Would this have been you 18 providing this report or Steve Bell? 19 A. That looks more like Steven Bell's wording. 20 Q. We note in the third bullet point the BSC position 21 remaining they failed to commence on-street works and 22 refusing to progress works whilst Clause 80 changes are 23 being agreed: 24 "Commencement of on-street works are also being 25 frustrated by the fact that although sites are 16 1 available, BSC have failed to satisfy their contractual 2 obligations to enable a permit to be issued." 3 The second point there is the one that you have just 4 been explaining to us this morning. 5 A. Yes. 6 Q. The first one is really the rather more fundamental 7 dispute that had been existing for some time, that 8 Clause 80 was being relied upon to bring works to 9 a halt? 10 A. Yes. And my fear here was that they would start the 11 on-street works, and then immediately stop using their 12 argument under Clause 80 exactly as they'd done 13 on Princes Street, and we would be back in exactly the 14 same position that the project was in at the start of 15 the Princes Street works, which is why I didn't 16 particularly want these on-street works to start until 17 we had a resolution to the broader issues. 18 Q. I understand. Could you look at page 31, please. This 19 is dealing with a different issue. It's background to 20 the May report, obviously not yet there. 21 But you note: 22 "Commitment to provide the Council with an update on 23 progress. 24 Continuing cost and programme uncertainty. 25 Commercial dispute involving substantial sums of 17 1 public money." 2 But then the point of particular interest: 3 "Tricky balance to strike between: full and fair 4 disclosure of position to Councillors and the public; 5 maintenance of commercial confidentiality." 6 Could you just elaborate on what was the balance you 7 considered had to be struck at the time and how you 8 tried to strike it? 9 A. I think that is one of the fundamental dilemmas that 10 I faced, and the team faced, on this project. 11 I can understand the desire and need for full and 12 fair disclosure, particularly when there's such a large 13 amount of money involved, but on the other hand it 14 wouldn't necessarily strengthen tie's negotiating 15 position for everything to be in the public domain. 16 One of the great frustrations was that discussions 17 within -- between tie and the City Council and 18 discussions with city councillors would quite often find 19 their way into the press, and yet we didn't have the 20 luxury of seeing what discussions were going on within 21 the Infraco Board. To make this a level playing field, 22 then perhaps they should have been required to disclose 23 the minutes of their meetings as well; which is clearly 24 a nonsense, but my point is it illustrates the dilemma 25 that we were in a very substantial commercial situation 18 1 and the need to maintain transparency was not 2 necessarily consistent with negotiating the best 3 financial outcome. 4 Q. In your view, is that a problem that's likely to arise 5 in all situations where major projects are undertaken by 6 a public body? 7 A. In one form or another, yes. This was not something 8 that I had come across in my career before, because I'd 9 already worked in the private sector. It's possible 10 that somebody who had more experience of exactly this 11 dilemma might have taken a different view. 12 To elaborate on that though, this is where I think, 13 having the councillors on the Board, it's partly -- this 14 is exactly the area they could have advised on, but it's 15 also exactly the dilemma they faced because in a lot of 16 cases they didn't want to be the last person to know. 17 Q. So who didn't want to be the last person to know? 18 A. The councillors did not want to be in a position where 19 they knew something that they then didn't further 20 disclose. 21 Q. That's the councillors on the Board would know something 22 but they wouldn't tell their fellow councillors? 23 A. Yes, because they felt that that would expose them. 24 Q. Did they raise that with you, that that was a problem 25 for them? 19 1 A. Yes, it was discussed. 2 Q. Were you under pressure to make disclosure, either from 3 the councillors who sat on the Board, or from any other 4 source? 5 A. I never felt that there was anybody uncomfortable with 6 the balance that we struck. Well, uncomfortable, there 7 was a degree of discomfort for everybody, but I don't 8 think anybody particularly expressed to me a view that 9 says: actually we've got this balance wrong. 10 Q. But you found it a difficult balance to strike because 11 it was a new consideration? 12 A. I did. But I also shared very fully with the 13 City Council officers, because again this must be 14 a situation that City Council officers come up against 15 all the time. So I think I have said in my initial 16 written statement: actually, clarity, in terms of 17 lessons going forwards, some very clear guidelines as to 18 what should and should not be disclosed and when would 19 be helpful for whoever runs a similar project in the 20 future. 21 Q. Can I take you back to the pack for the May meeting, 22 please. That was reference CEC00245907. Just one thing 23 I should have looked at when we were looking at the 24 minutes of the March meeting on page -- could we go to 25 page 6. 20 1 If we look at the lower part of that page, under the 2 heading "Commercial Matters" and progress since 10 March 3 Tram Project Board, we can see that there's a note that 4 you reminded the Board of the key issues, and then 5 they're set out there in bullet point fashion. 6 If we go over the page, perhaps without me reading 7 through the whole of it, we can see that there's notes 8 of a fairly detailed discussion of these various issues 9 that arise. And were debated by the Tram Project Board 10 at that time. 11 A. Yes. 12 Q. If we scroll down to the foot of that particular box, we 13 have got: 14 "RJ summarised the next steps in terms of 15 activities, governance and timescale. A full and 16 participative discussion followed, and it was agreed 17 that the current engagement within the available 18 contractual mechanisms should continue, in parallel with 19 the strategy presented by the Executive Team. A full 20 report back to the Board/CEC will be made at the end of 21 May 2010. This was endorsed by the Board and the 22 instruction was issued for RJ to proceed on this basis." 23 So is that affirmation of the proceeding to take the 24 contractually assertive approach, whilst exploring the 25 various other lines within the Pitchfork plan? 21 1 A. Yes, and the contractually assertive approach in effect 2 was the only option available to us in the absence of 3 doing something else, if that makes sense. 4 So that was the default position, whilst we explored 5 the other options being Project Notice, 6 Project Separation, and Project Carlisle. 7 Q. I want to look at a number of the adjudication decisions 8 which comes up at this time, please. Could we look at 9 production TIE00231893. 10 The quality of this scan is not excellent, but 11 I think we can see a date there of 24 May 2010, and this 12 is a decision of Gordon Coutts QC. 13 The subject matter of it in the heading of the 14 letter is Adjudication Section 7A - Track Drainage. Do 15 you see all that? 16 A. I do. 17 Q. Do you recall the adjudication that took place in 18 respect of track drainage? 19 A. This is not one of the ones that's foremost in my mind, 20 although possibly I do. I think this may have related 21 to some drainage that was shown on one drawing but not 22 on another, and the debate was whether something could 23 be amended if it didn't previously exist. 24 Q. Indeed, precisely. 25 A. Yes, I do remember. 22 1 Q. If we look then at what Mr Coutts has to say about the 2 matters, if we just start briefly on page 6 of his 3 reasoning. Under the heading, "Notified Capital 4 Departures 4 and 5", we can see that in relation to 5 these ones, he says: 6 "The parties agreed that there had been notified 7 departures." 8 The only question was valuation. If we go over the 9 page to alleged Notified Departure 7. 10 If we look at the upper half of the page, under the 11 heading of the words that I have just mentioned, if we 12 look in the first paragraph, halfway through -- in fact 13 it would be easier to read the whole of that paragraph 14 for context. It says: 15 "This part of the dispute was concerned with a part 16 of the length of track in Section 7. Parties agreed 17 that Section 7 drainage was a reference to drainage from 18 chainage 710000 to 712579. That is a length of 19 2,579 metres. Alleged Notified Departure 7 related to 20 the drainage between chainage 710900 to 712579, a length 21 of 1,679 metres, which can be contrasted with the 22 900 metres agreed to be covered by BDDI drawings. This 23 disputed length is thus 1.87 times larger than the 24 undisputed length." 25 That's the point you were making about the 23 1 difference in drawings showing the different lengths of 2 drainage? 3 A. Mm-hm. 4 Q. "That fact had to be one of the surrounding 5 circumstances when considering problems in construing 6 the contract in relation to this dispute; also whether 7 the IFC drawings can give rise to a Notified Departure 8 for this portion of the track drainage in the absence of 9 a specific BDDI drawing. It is a substantial length to 10 be encompassed in a natural extension of existing 11 designs, but there may be no alternative between that 12 and no design at all." 13 So we see here the point that was arising was that 14 there was no BDDI drawing against which the new drawing 15 could be compared; is that your understanding of the 16 position? 17 A. Yes. 18 Q. If we can look at the arguments for tie that are set out 19 in the following two paragraphs, it says: 20 "The Referring Parties' approach was in essence to 21 pose the question, from what are the IFC drawings 22 a Notified Departure? They founded upon the absence of 23 any BDDI drawings actually depicting this part of the 24 section. They contended that since there were no such 25 drawings there was nothing to be departed from. The 24 1 matters described in the Infraco notification of tie 2 change do not show in any BDDI drawing and accordingly 3 there could be no Notified Departure. 4 They then posed the question whether the matter 5 which was shown on the only available BDDI drawings had 6 been amended. They asserted that if the work had not 7 been specified in the BDDI drawings then possession of 8 design information for other areas of Section 7 could 9 not constitute or form the basis of an amendment of the 10 design. A thing cannot be amended it was said 'if it is 11 not firstly showing' and, further, that an amendment 12 does not and cannot include additions to or additional 13 detail within a drawing or any development of it." 14 Now, that argument seems to be foreshadowed slightly 15 in the opinion of Richard Keen QC that we looked at 16 yesterday. Did you understand that? 17 A. Correct me if I am wrong, but I think his argument was 18 something can't be different if it didn't first exist. 19 Q. Yes. 20 A. Yes. 21 Q. Is this a development of that argument being presented 22 in an adjudication? 23 A. Possibly. I'm not sure of the chronology here, which 24 came first, this adjudication -- 25 Q. Mr Keen's opinion was first? 25 1 A. In which case -- I mean, I wasn't personally involved in 2 formulating these arguments for the adjudicators. But 3 it would seem to make sense that if we've had an opinion 4 from Richard Keen on the one hand that says something 5 can't be amended if it didn't first exist and then we 6 see that same argument being repeated in this 7 adjudication subsequently, it would seem to be logical 8 that that's what is in fact happening. 9 Q. I appreciate you weren't -- you say you weren't involved 10 in formulating arguments for the adjudications. Were 11 you involved in deciding what arguments should be 12 presented to adjudication? 13 A. I was involved in the discussions, but it wasn't at my 14 direction. I would rely on the legal and the 15 engineering experts within the team to decide which 16 items were the most relevant ones, and that would be 17 a combination of value, principle and chance of success. 18 Q. This is part of -- I think it's fair to say -- the BDDI 19 to IFC issue? 20 A. It's a variation on that theme, yes. 21 Q. What I want to -- can you tell me who within tie or the 22 Tram Project Board would decide which adjudications to 23 run and what arguments should be run in those 24 adjudications? 25 A. I think if we go back to the start of yesterday, we 26 1 talked about the Financial, Commercial and Legal 2 sub-committee. 3 Q. Mm-hm. 4 A. And my recollection is that was effectively 5 a sub-committee of the Tram Project Board consisting 6 primarily of tie management and advisers, and I think it 7 was that group that decided which adjudications would go 8 forward, which I chaired, but the details of the 9 arguments were really left to the legal and technical 10 experts. And how to present them. 11 Q. We can then see that the -- if we scroll down the 12 screen, please, if we can skip the next two paragraphs, 13 we come to the position of the responding party, the 14 consortium, at the final paragraph on the page, where 15 Mr Coutts notes: 16 "The responding party argued in the first place and 17 in general that a comparison can be made between the 18 drawings at BDDI stage (taking account of normal design 19 development and completion) and the IFC drawings in 20 respect of the features of the whole of Section 7A. 21 When that is done Notified Departures through the 22 whole of Section 7A are identified, as asserted in the 23 notification of tie change number 315." 24 Then if we can go to the foot of this page, and see 25 the conclusions of Mr Coutts, he says: 27 1 "Having considered these arguments as set out in 2 written form and amplified in oral submissions, it 3 appeared to me that a critical matter was how 4 'amendment' had to be construed. While the context may 5 be of some relevance, it is clear to me, that the word 6 is apt as a matter of interpretation to include 7 additions to a document or to an inferred design 8 document. There is no reason to attempt to find 9 a restricted meaning although that might appeal to 10 a legalistic approach as opposed to a practical one. 11 The dictionary definition of 'amendment' gives the 12 definition 'a change or addition to a document' and the 13 word 'amend' is widely defined as 'better', 'improve', 14 'surpass', 'rectify' and does not exclude additions. 15 A good example of the use of the word in common language 16 may be found I consider in the Constitution of the 17 United States. For example, it is difficult to argue 18 that, say, the Fifth Amendment is not an addition 19 providing something which was not previously showing." 20 You can see there that he rejected the argument. 21 Having had that -- I'll start again. 22 When you and the Tram Project Board were informed 23 that that argument had been rejected, did that have an 24 impact on the future strategy to be followed in relation 25 to disputes on the BDDI-IFC issue? 28 1 A. I don't specifically recall, but I think by this point 2 in the process, having started on Project Pitchfork, 3 this -- the DRP process only applied to one prong of 4 that, which was the continuing administration of the 5 contract as best we could. 6 I think by this stage, it's fair to say that we were 7 losing confidence in our ability to achieve the outcomes 8 we required or desired using the existing contract. 9 So this one of -- this adjudication on its own 10 didn't cause a change in direction. But I guess it 11 re-affirmed the fact that we needed to be looking for 12 alternatives. 13 Q. If we could just jump to look at a different 14 adjudication, the one in respect of Tower bridge. 15 That's CEC00373726. 16 A. Sorry, can I just -- 17 Q. Of course. 18 A. -- close off on this one. 19 To a certain extent the extent to which it would 20 have affected our opinion and strategy would partly 21 depend on the analysis post adjudication that we got 22 from the legal teams. 23 Q. I understand. 24 This is the decision, again it's back to Mr Hunter. 25 This is dated 18 May 2010. Just a little bit before 29 1 Mr Coutts' decision. 2 It's -- we see the last line of the title to the 3 letter. It's the adjudication in respect of 4 Tower Bridge; do you see that? 5 A. Yes. 6 Q. I just want to ask you, if we look at page 8 of this 7 document, and paragraph 6.1, it says: 8 "It is accepted by the Referring Party ..." 9 I should say that tie were the Referring Party: 10 "... that a Notified Departure has occurred on the 11 basis of Pricing Assumption 3.4.19 of Schedule Part 4 to 12 the Infraco Contract in respect of the structure known 13 as Tower Place Bridge." 14 We saw in earlier pages for the Tram Project Board 15 report this was being presented as a BDDI to IFC issue 16 to the Board. Was the acceptance that this was 17 a Notified Departure in any way related to the various 18 decisions and what you described as the loss of 19 confidence? 20 A. I don't recall. It may have been. It also may have 21 been the particular circumstances here were -- and 22 I don't recall, but if the change in the design -- 23 I don't know what -- I can't recall what 3.4.19 was, I'm 24 afraid. 25 tie's position was never that there is no such thing 30 1 as a Notified Departure. In some cases Notified 2 Departures did occur. So without looking at the Pricing 3 Assumption 3.4.19 and understanding the basis of the 4 argument, I can't say. 5 It's also possible that tie's initial interpretation 6 of the contract, particularly the Pricing Assumption 7 around normal design development, was now -- there was 8 less confidence in that than there was at the start. 9 Q. Can we look at the papers for the June Tram Project 10 Board, CEC00261936. 11 We can see from the title sheet these are the papers 12 for the meeting on 2 June 2010. 13 If you could look at page 30 and enlarge the lower 14 half, under the heading "Dispute Resolution", it notes 15 the Baird Drive dispute was resolved during the period 16 without having to resort to formal adjudication. We can 17 see in the table below that that was a BDDI to IFC 18 dispute issue as well. Do you see that? 19 A. Mm-hm. 20 Q. I appreciate it's a long time, but can you recall the 21 basis on which that was resolved? 22 A. No, I don't actually recall what the dispute was either. 23 Q. The text above continues: 24 "The Adjudicator's decision was provided on the 25 Tower Bridge DRP. Both of these have been useful in 31 1 reducing costs. In period 3 a decision is due on 2 Section 7 drainage and the first hearing is being held 3 on the MUDFA Revision 8 DRP." 4 We can see looking at the table for the first time, 5 it's now noted that for Gogarburn, Carrick Knowe and 6 Russell Road, those decisions are regarded as complete. 7 So there's no longer any suggestion that it's under 8 further review. Do you see that? 9 A. Yes. 10 Q. Over the page, on 31, we can see the upper part of the 11 page. A strategic review is now noted to be underway 12 and reported to the Tram Project Board each period. 13 So a decision had been taken that that was now a 14 constant process, of keeping all matters under review. 15 A. Yes. 16 Q. Was the intention of that to adjust or refine where 17 necessary the strategy as things unfolded month by 18 month? 19 A. The -- in practice, we were running all four strategies 20 in parallel because they were not mutually exclusive. 21 Q. But in terms of developing the review each month, what 22 was the purpose of having a report of that each month? 23 Was that just a report of where you'd got to? 24 A. I imagine, yes, it was just a progress report. 25 Q. Can we look at the July papers, please, which are 32 1 CEC00223543. 2 I called them July papers. They are the second of 3 the two meetings in June, on the last day of June, 4 30 June. Do you see that? 5 A. Yes. 6 Q. Can we look at page 25. You can see we are looking at 7 the section now with the Transport Scotland report, and 8 then turn to page 27. The lower half of the page. We 9 can see that in the second paragraph under the heading 10 "Dispute Resolution", it notes: 11 "In the period we received one adjudicator decision, 12 had hearings on MUDFA Revision 8 adjudication, one item 13 was referred to adjudication and a new item referred to 14 DRP by Infraco." 15 We can see the first bullet point notes that the 16 Depot Access Bridge dispute had been referred to 17 adjudication -- and this would be heard by the financial 18 panel. 19 I think that was described as a BDDI to IFC issue, 20 but the fact it's being heard by the financial panel, 21 does that indicate it is simply a matter of valuing the 22 change, rather than contesting the principle? 23 A. Possibly. 24 Q. If we look at the second one, we note that the new item 25 has gone into dispute, the Murrayfield underpass. 33 1 I think that was the one that was ultimately determined 2 by Lord Dervaird; is that correct? 3 A. I don't recall. I recall that the Lord Dervaird 4 decision related to progress. So if that was the 5 Murrayfield underpass, then that would be it. 6 Q. The third bullet point notes: 7 "Adjudicator decision on Section 7 drainage was 8 received on 24 May 2010 and supports Infraco as to the 9 existence of change in one section." 10 That's the decision of Mr Coutts we have just looked 11 at. There's no record here that it was a rejection of 12 the argument that if it was not on the BDDI, it can't be 13 a Notified Departure. Do you know was that explained to 14 the Tram Project Board? 15 A. I don't recall. I mean, what it does say is it supports 16 the Infraco. So ... which is what it did, is it not? 17 Q. We've made reference to the Murrayfield decision there. 18 If we just look at the outcome of that, please, it's 19 document reference BFB00053462. 20 We see the heading of this is simply "Adjudication 21 in dispute between Bilfinger Berger Civil UK Limited, 22 Siemens plc and CAF and tie Ltd". If we look at the 23 final page, page 13, we see that Lord Dervaird was the 24 adjudicator and this was dated 7 August 2010? 25 A. Yes. 34 1 Q. Just to identify clearly the disputes so we're aware 2 what we're talking about, if we look at page 3. The 3 upper half of the page, we see paragraph 8, where Lord 4 Dervaird noted that on 19 March 2010, tie wrote to 5 Infraco in the following terms: Edinburgh Tram Network- 6 Infraco Contract Clause 80.13 Instruction. 7 "You are instructed to commence, carry on and 8 complete the following works with due expedition. In 9 the event that any item of the said works is, becomes or 10 is alleged to be the subject of a tie Notice of Change, 11 an Infraco Notice of tie Change, a tie Change Order or 12 a Mandatory tie Change Order, at any time, this 13 instruction will be deemed to have been given and shall 14 operate for such works pursuant to Clause 80.13. 15 "We remind you that pursuant to Clause 108, this 16 Agreement constitutes an entire Agreement and in 17 particular refer you to the terms of Clause 34.1 18 regarding your compliance with instructions from tie's 19 Representative. The works referred to include the 20 subject matter of INTC number 109." 21 Then Lord Dervaird notes: 22 "The issue for this adjudication is whether or not 23 Infraco is obliged to comply with tie's instruction 24 contained in the above letter dated 19 March 2010 to 25 carry out the works identified in INTC number 109." 35 1 Was this intended to get a ruling upon this 2 fundamental issue of whether or not tie could require 3 Infraco to carry out works using Clause 80.13? 4 A. Yes. 5 Q. It was intended to unblock the logjam that was arising 6 whereby Infraco were saying they didn't have to carry 7 out works, or in fact they were not even entitled to 8 carry out works, until the estimates for those works 9 were agreed? 10 A. Yes, that was the principle of it. 11 Q. If we turn to the decision in relation to this matter, 12 and go to page 10, I'm not going to read through all the 13 analysis of the submissions and the clauses, but do we 14 see in paragraph 21, Lord Dervaird, the results of his 15 reasoning: 16 "Analysis of Clause 80.13 leads to the following 17 conclusions: 18 It is made clear that any provisions in this Clause 19 are to be taken as subject to the provisions of 20 Clause 80.15. This applies both to the initial 21 provisions and (expressly) to the final sentence. 22 The Clause expressly empowers tie to act after the 23 contents of the estimate have been agreed. 24 The final sentence 'for the avoidance of doubt' 25 provides that Infraco shall not commence work in respect 36 1 of a tie Change until instructed through receipt of 2 a tie Change Order 'unless otherwise directed by tie'. 3 That last phrase 'otherwise directed' clearly 4 indicates that tie may issue some form of instruction to 5 carry out work which is to be commenced notwithstanding 6 the non-receipt by Infraco of a tie Change Order. 7 It does not follow that tie is empowered to issue 8 instructions under this Clause except where the contents 9 of an estimate have been agreed. Clause 80.13 is to be 10 contrasted with Clause 80.15 which does in appropriate 11 circumstances empower tie to instruct the carrying out 12 of work prior to an Estimate, which has been referred to 13 the Dispute Resolution Procedure for determination, 14 having been determined or agreed." 15 Now, essentially that was Lord Dervaird deciding 16 against tie's argument, wasn't it? 17 A. Yes. 18 Q. He goes out to have some further reasoning in the 19 following paragraphs, beginning: 20 "It may be argued that this is an unduly restrictive 21 view." 22 But nonetheless it is the view that he came to, that 23 tie couldn't instruct works under this clause. Is that 24 your understanding of the decision? 25 A. Yes. 37 1 Q. I presume that was at the very least a disappointment to 2 tie, to get this decision, the Tram Project Board? 3 A. It was, but my recollection of the analysis of that 4 decision by our legal and technical team was that this 5 actually didn't properly address the issue unless 6 otherwise directed by tie. And that it didn't address 7 the issue under Clause 34.1. So although the 8 adjudicator has made his decision and it's against tie, 9 the advice was that that's not the end of this matter. 10 Q. Yes, I think that was advice that he hadn't addressed 11 relevant provisions within the Clause 80.13, that one 12 clause within the agreement hadn't been considered at 13 all, Clause 34. And that I think you had advice from 14 Mr Keen who put it that this was not a knockout blow? 15 A. That's right. 16 Q. Nonetheless, was any further step taken to obtain 17 a ruling on the Clause 80 issue? 18 A. No, I don't believe it was. 19 Q. Why was that, after you'd had advice which described it 20 as not a knockout blow? 21 A. I think at this stage, it was effectively overtaken by 22 events. I mentioned that we were working in parallel on 23 these other strategies. 24 Was this the last DRP, this one? I can't recall. 25 It was certainly one of the last. 38 1 Q. It was one of the last, yes. 2 A. I think by this point in the process, we had felt that 3 our confidence in the strength of the contract to 4 achieve the results that we were seeking was 5 sufficiently weakened that there was not much point in 6 going further. 7 So even if we'd had a strong legal argument that 8 Lord Dervaird was wrong, which I think is the advice 9 that we had from McGrigors and from Richard Keen, that 10 even if we took that forward and got it overturned or 11 got a different adjudicator to come to a different view, 12 it would be somewhat of a hollow victory, given that 13 there were so many other weaknesses in this contract 14 that it was -- following this commercially assertive 15 strategy, as we called it, was not going to produce the 16 results that we were looking for. 17 So at this point, this was simply a holding strategy 18 until we could develop one of the other three strategies 19 to a point where we could implement it. 20 Q. I understand. I want to come again to return to the 21 Pitchfork report that was produced at this time. 22 First of all, I want to ask you about something else 23 in your statement. If we could have that back up, 24 please. And go to page 26 of this, please. Sorry, 25 page 24. 39 1 If we can look at paragraph 148. It's probably 2 easiest if I read from the start: 3 "There were some important things said at the 6 July 4 meeting which became recurring themes during my time on 5 the project." 6 If I pause there, we looked at an email exchange 7 which had a narrative of what had happened at that 8 meeting? 9 A. Yes. 10 Q. "I cannot specifically recall everything that was said 11 at each meeting. However I do recall that Dr Keysberg 12 said to me that "if you want to get to America you don't 13 buy a bicycle". He also said "This contract will never 14 get a tram built" and "This is a great contract for us. 15 It allows us to hold you to ransom". He also said "You 16 are behaving dishonourably". I asked what he meant by 17 that, and he said it was about "The gentleman's agreement 18 they had between themselves and Willie Gallagher"." 19 I want to ask you about this gentleman's agreement. 20 Did you ever get to the bottom of what this gentleman's 21 agreement was alleged to have said? 22 A. I never got to the bottom of the gentleman's agreement. 23 I know what it is alleged to have said. 24 Q. What was it alleged to have said? 25 A. It was alleged by, I believe, Richard Walker, and 40 1 I think this is in my statement somewhere, or else it's 2 in some of the documents that I have seen, that tie knew 3 that this was never a price for the whole contract. In 4 fact, the phrase he used was: this was only ever a price 5 for a three-wheeled car, and that the agreement -- the 6 exclusions from the price, Pricing Assumptions and the 7 other various exclusions, were there simply to get the 8 headline price down to be added back in after the 9 contract was signed. 10 So that's the -- there's definitely more detail on 11 that somewhere in documents that I've seen. But that 12 was the gist of it. 13 Q. And that was an agreement that was said to have been 14 between Mr Walker and Mr Gallagher? 15 A. That was the allegation -- whether it was with Mr Walker 16 and Mr Gallagher, I don't know, but there's certainly an 17 accusation -- the allegation from Dr Keysberg was that 18 the party -- from tie's side was Willie Gallagher. 19 Q. I think when you investigated that for completeness, it 20 was said that it was strenuously denied? 21 A. It was. I only had one conversation with 22 Willie Gallagher in my time at tie, and it was about 23 this, and he denied it. I also discussed it with other 24 members of the team who were around at the time, who 25 were not alleged to have been present at the meeting, 41 1 but they all thought it was nonsense. 2 CHAIR OF THE INQUIRY: Was this part of the Wiesbaden 3 meeting or was it some other time? 4 A. I think it relates to the Wiesbaden Agreement. I can't 5 be certain. I don't know if there are other occasions 6 when meetings took place, but I think it relates to the 7 Wiesbaden Agreement. 8 MR LAKE: Referring to it as an agreement, it might be 9 understood that the parties -- accepting it's denied, 10 but just looking at the concept of an agreement for the 11 moment, it might be understood that each party was 12 giving something, they were exchanging something. 13 What you're describing, would it be fair, it might 14 also be described as simply a common understanding that 15 the parties were going to conclude a contract on one 16 price in the knowledge it was going to go up? 17 A. You are asking me to speculate about what may or may not 18 have been agreed between two other parties, one of whom 19 denies such a conversation took place. 20 So -- 21 Q. It's not so much about the contents of the agreement. 22 It's just that what you're describing as being the 23 content of the agreement -- 24 A. Well, what I'm relating was described to me as the 25 content of the agreement. I have no opinion as to what 42 1 the content of the agreement was or wasn't. 2 Q. I understand that, but just looking at what you are 3 telling us was relayed to you about the agreement seems 4 to be more of an understanding than necessarily an 5 agreement. 6 A. I don't know if I know the difference between an 7 understanding and an agreement, I'm afraid. 8 Q. I'll not press that further. 9 I would like to go back to the question of 10 a Pitchfork report. Could we look at a document, 11 CEC00088220. 12 You see here a document with the title, "PROJECT 13 PITCHFORK - PHASE 2 Incorporating PROJECT CARLISLE AND 14 PROJECT NOTICE", and a table at the foot of the page 15 giving the various different versions of it, and this is 16 looking at the tenth draft, said to be 1 October 2010. 17 Do you recognise this document? 18 A. Yes. 19 Q. I think we can say for completeness that there was an 20 earlier version of this document dating from March which 21 set out the state of the Project Pitchfork plans then. 22 Do you recall that also? 23 A. Yes, in general terms I do. I don't specifically recall 24 it, but I certainly recall seeing a document. Whether 25 it was the first draft or the second draft or both, 43 1 I don't know. 2 Q. Perhaps for completeness I'll just show you that very 3 briefly. If you could look at CEC00142766. And see it 4 hasn't got the phase 2, and it doesn't say it's 5 incorporating Carlisle and Notice, but here we have 6 a report titled "Project Pitchfork", and if we enlarge 7 the table to make it readable, we can see that this one 8 is described as a final review dated 17 March 2010. 9 Is this something you think you would have seen at 10 the time as part of Project Pitchfork? 11 A. Yes. 12 Q. Was this a document then that was essentially updated 13 throughout the year as part of the strategic review that 14 we saw? 15 A. I don't know how often this document was updated. So 16 I don't recall whether or not that was updated regularly 17 or at all. I don't recall, I'm afraid. 18 Q. Was this a document that was used simply internally 19 within tie and Tram Project Board or was it intended for 20 external consumption also? 21 A. I think it was primarily intended as an internal control 22 document. It may have been shared with City Council 23 officers. I have a vague recollection that I saw in the 24 papers that there were comments back from the 25 City Council, but whether it was relating to this 44 1 document or not, I'm not sure. So I don't know, I'm 2 afraid. 3 Q. We can move on from that then. 4 In relation to the Project Carlisle that was taking 5 place, that was one that was seeking to renegotiate or 6 vary the contract, with a view to completing only at -- 7 the line over a shorter length. 8 A. Yes. That's right, and actually there's possibly 9 a correction I need to make from yesterday. 10 You asked me yesterday whether or not Tony Rush led 11 any of the workstreams, and I said he didn't, he 12 advised on them. But actually he did lead the Project 13 Carlisle workstream and he had a reasonably free hand 14 in leading that. 15 That was partly because we felt the best chance of 16 success for that project was to try and take out some of 17 the existing personalities. So Tony dealt directly with 18 a gentleman called Ed Kitzman. So this was taken -- so 19 Steven Bell from tie's side and Martin Foerder from 20 Bilfinger Berger had little input into Project Carlisle, 21 or at least that's my understanding. Certainly it was 22 true for Steven. 23 By leaving that to Tony to lead, we felt it had the 24 greatest chance of success. So he did lead one of the 25 workstreams. 45 1 Q. Thank you for that. 2 We know that the Project Carlisle didn't come to 3 fruition. At least not before the Mar Hall mediation. 4 A. Correct. 5 Q. What in your view were the sticking points? Why could 6 that not be brought into fruition? 7 A. My recollection is that there were two cycles of offers 8 and counter-offers on Project Carlisle. So there was an 9 offer, a counter-offer, and a second offer, and 10 a counter-offer. 11 There were two principal issues. The headline 12 number was that the price I felt -- well, not just me, 13 the tie team felt was unjustifiable. And that was 14 reported, our rationale for that was reported back to 15 the Board and the City Council. 16 But actually, although it was less of a headline 17 issue, the bigger concern was that hidden within the 18 clauses of Project Carlisle were effectively a bunch of 19 Pricing Assumptions rewritten. So it still wasn't 20 a project that was going to -- it wasn't a deal that was 21 going to give cost or programme certainty. 22 It was written differently, but when you read 23 between the lines, it still said: and by the way, we've 24 only priced what's on the drawings and the design is not 25 finished yet. 46 1 Q. So to do that would have been to repeat all the same 2 mistakes? 3 A. Yes, exactly, we would have ended up with exactly the 4 same issues but starting from a higher baseline. 5 Q. If you couldn't get agreement on Carlisle, there was 6 then some focus on the terminating the contract by means 7 of a Remediable Termination Notice and underperformance 8 warning notices; do you recall that? 9 A. Yes. 10 Q. What was your involvement in the process of serving 11 those notices and moving towards termination? 12 A. I was in agreement with the overall strategy, but those 13 notices were drafted through a combination of Steven, 14 Tony Rush, and, I believe, DLA, but it might have been 15 McGrigors, I'm not sure. 16 Q. So when we're considering the advice that was obtained 17 in relation to those Remediable Termination Notices, was 18 that dealt with people other than yourself? 19 A. Yes. I'm not saying I had no involvement, but I wasn't 20 involved in taking that advice, drafting those -- it was 21 done with my approval, but it wasn't me that did it. 22 Q. I won't go into advice about the contents of the notices 23 then, but I want to say if it was suggested that your 24 approach to termination could be described as you were 25 hurtling towards it -- 47 1 A. I'm aware of that accusation. 2 Q. What is your response to it? 3 A. It was one of the strategies that we were actively 4 pursuing, but it was a strategy being pursued in 5 parallel with the other strategies, and I've looked at 6 written correspondence from the time, in fact from the 7 very same day that I believe that accusation was made, 8 and the written correspondence doesn't support that. 9 Q. Doesn't support it in what sense? 10 A. Well, I don't get any -- first of all, we weren't 11 hurtling towards. We were actively pursuing it as one 12 of the options. 13 The phrase "hurtling" suggests something that's out 14 of control, which was not the case. It suggests 15 somehow, you know, a rushing without thinking, which was 16 not the case. And as I say, the documentation at the 17 time doesn't support that. 18 Q. I want to ask you, though, about some advice that was 19 received on the termination process. Could you look at 20 document CEC00101459. If we look at the upper half of 21 the page, please, you can see it's headed, "Summary of 22 discussions with Richard Keen QC on 4 November 2010 in 23 relation to Project Resolution". 24 There's a list of people in attendance and you were 25 not in attendance at this consultation. You will see 48 1 that? 2 A. Yes. 3 Q. Were the results of this consultation relayed to you, do 4 you recall? 5 A. What were the results of it? 6 Q. Perhaps if we could look in particular at page 3, and 7 enlarge section 5. Under the heading, "Establishing 8 Infraco Default", 5.1 says: 9 "There was some discussion in relation to the issues 10 which require to be investigated in order to establish 11 the strength of tie's position in relation to the 12 various Infraco Defaults that have formed the subject 13 matter of the RTNs." 14 A. Was this after the RTNs had been issued? 15 Q. Yes. So the RTNs were issued earlier in the year. This 16 was November, and there's discussion there at the 17 consultation as to what would have to be investigated to 18 establish the strength of the position in relation to 19 those defaults? 20 A. I am aware of this because my recollection was that -- 21 of the Remediable Termination Notices that had been 22 issued, I think two were identified as having the 23 greatest chance of success, they being failure to manage 24 the design and failure to progress the works, and that 25 the advice from -- that came out around this time, 49 1 perhaps from Richard Keen, perhaps from McGrigors or 2 both, was that we needed to build a more robust factual 3 matrix to support the alleged breaches. 4 Q. You said the notices had already been served. The 5 Carlisle option had stripped away and the contractually 6 assertive approach wasn't yielding fruit. What was your 7 response to being told in November by the people who 8 were carrying this out that you now had to investigate 9 the strengths of the case on termination? 10 A. I think I said in my initial statement to the Inquiry 11 that this was a very frustrating period. 12 Q. Was your understanding that this work to investigate the 13 merits had already been carried out? 14 A. Not specifically in so much as -- nobody had said to 15 me: we've already done this work. I think I was 16 disappointed and frustrated to find that having issued 17 the RTNs, we were now in a position where questions were 18 being asked as to whether we actually had sufficient 19 supporting -- supportive information, sufficient 20 supporting information to back up those RTNs. 21 So I guess the frustration is perhaps that it had 22 been premature to have issued these RTNs prior to having 23 established a robust factual matrix. 24 Q. Was there one person within tie who had the 25 responsibility for taking forward the RTN in this work 50 1 stream? 2 A. That would primarily have been Tony actually. I mean, 3 I think they were issued by Steven and Steven signed 4 them, and I don't imagine he would deny having a role 5 there. But the -- heavy lifting, if you like, was done 6 by Tony and DLA or McGrigors. 7 Q. I want to ask you then about two further bits of legal 8 advice in relation to termination and the notices. 9 Could we look, please, at document CEC00013537. You 10 will see the first thing in here, at the end of the 11 email chain, is an email from you dated 30 November. 12 But I would like to start taking it in chronological 13 order. So if you go down to the foot of the page, you 14 will see there's an email that has been sent from or on 15 behalf of Alastair Maclean to you on 26 November 2010. 16 Do you see that? 17 A. Mm-hm. 18 Q. We will see the content if we go over the page. If we 19 enlarge the upper half. He says: 20 "As requested, I set out below the advice which CEC 21 received in London on Tuesday from Nicholas Dennys QC 22 and which we discussed on Wednesday afternoon. 23 We also discussed what Nicholas Dennys QC felt was 24 the most appropriate way forward in order to achieve an 25 operational tram from Edinburgh Airport to at least 51 1 St Andrew Square for the best price possible and as soon 2 as possible. 3 You asked me to clarify what I thought CEC needed 4 from tie in this regard and I have indicated that in 5 this email, although I am aware that you, 6 Bob McCafferty, Andy Conway and Nick Smith have since 7 discussed this." 8 Were you aware that the City Council were seeking 9 advice from Nicholas Dennys QC in London? 10 A. No. 11 Q. So you were first made aware of it once they had the 12 results of that? 13 A. Yes. 14 Q. If we go, then we can see a sub-heading, "CEC's QC's 15 comments", and if we go down the page to termination, 16 heading 1.2, we can see that after the indented 17 paragraphs, the text says: 18 "To put this more clearly, termination on the basis 19 of the present RTNs would not be advisable. However on 20 any view, given progress to date by the consortium on 21 the delivery of the works, it would appear probable that 22 if properly investigated and formulated, valid grounds 23 of breach could be articulated effectively in due 24 course." 25 Then if we go over the page, this is under the 52 1 heading "Mediation", we see paragraph 1.3.3: 2 "Mediation at this stage is legally premature and 3 may lead parties to a further entrenched position." 4 That of course being part of the advice being given 5 by Nicholas Dennys QC. 6 I think you -- firstly, that's what we can see you 7 were told about what had come out of the meeting in 8 London. 9 If we go to page 1 of this, we can see your comments 10 made in response. You thank Alastair Maclean for his 11 note and notice that you'd had a productive discussion 12 with Tom on Monday morning. 13 "Much of what is covered in your note was also 14 covered in my email of the 24th." 15 We will come it that. You say: 16 "Firstly let me emphasise that I agree on most of 17 the points raised in your email, they are consistent 18 with the points raised in my email of 24th." 19 But you do not share CEC/Nicholas Dennys' view on 20 credibility, on the state of mind of Infraco or on the 21 timing of mediation. 22 Now, the comment that we saw on mediation was to the 23 effect that it was legally premature and might lead the 24 parties to a further entrenched position. What was your 25 view on the timing of mediation? 53 1 A. My understanding of Alastair's view on the timing of the 2 mediation was that there were further contractual levers 3 under the existing contract that could be used to, for 4 want of a better word, weaken Infraco's belief in their 5 contract and therefore weaken their negotiating position 6 or reduce its strength prior to a mediation. 7 My view on the timing of the mediation -- I can't 8 remember if at this point there had been a public call 9 for mediation. 10 Q. By 30 November, yes, the Council resolution had taken 11 place. 12 A. Right, okay. And what was happening now was that the 13 concept of mediation was gathering a momentum of its 14 own, and to delay that further would have actually -- 15 wouldn't have created any advantage, and would have 16 added more pressure upon tie and the City Council from 17 the political calls for mediation, and the more pressure 18 they were under -- CEC and tie were under on the way in 19 to mediation, the less likely they were to get as good 20 a result. 21 Q. If you didn't think it was premature, what was your view 22 on the timescale for mediation, that it should be as 23 soon as possible? 24 A. As soon as practicable, perhaps, yes. I don't recall if 25 there was -- at this point there was a timing set out 54 1 for mediation or whether it was just general phrases 2 like "as soon as possible". 3 There was an increasing frustration from everybody 4 about the lack of progress, both physical progress and 5 contractual progress, the lack of positive results that 6 had been -- the lack of positive progress produced by 7 the other strategies that we were following, and 8 therefore there was a sense of, well, let's try 9 mediation, and if we're going to try it, let's do it as 10 quickly as possible. 11 Q. We can see from this that, as well as considering 12 mediation, the possibility of termination is also being 13 considered. 14 What was your view on the advice that had been given 15 from Nicholas Dennys that it would not be advisable to 16 terminate on the basis of the RTNs then outstanding? 17 A. It's fair to say that I was a little irritated at the 18 time, that I had been completely open with the 19 City Council, particularly with the legal department, 20 and shared all the legal advice with them. They had 21 gone off and sought their own legal advice, which they 22 hadn't discussed with me and hadn't shared with me. So 23 I was somewhat irritated by what I considered to be 24 a breach of -- a breakdown of trust. 25 I never saw Nicholas Dennys' advice, so all I was 55 1 relying on was Alastair's interpretation of 2 Nicholas Dennys' advice. 3 Q. Just looking at that interpretation, which was to the 4 extent that it would not be advisable to terminate on 5 the basis of the work done by tie to date, what was your 6 reaction to that? 7 A. That was consistent with the opinion from Richard Keen. 8 Q. Just for completeness, looking at the -- it comes 9 slightly later, but the advice given by McGrigors and 10 Richard Keen, could we look at TIE00080959. We can see 11 this is a report for tie by McGrigors. It's dated 12 14 December 2010. Do you see all that? 13 A. Mm-hm. 14 Q. Could we go to page 4 of this document, please. If we 15 just go to the foot of the page, paragraph 1.5, you can 16 see the advice is: 17 "To the extent that Remediable Termination Notices 18 have already been issued, it would be unsafe to rely on 19 them: (a) without the benefit of the outcomes of the 20 forensic exercise referred to above; and (b) because 21 there is a material risk associated with the formulation 22 of the Remediable Termination Notices (based on the 23 sample that has been considered by McGrigors and 24 Richard Keen QC)." 25 So there seemed to be a problem then both with the 56 1 substantive content which needed a forensic exercise and 2 the form of the notices themselves. 3 A. Yes. 4 Q. Were you surprised to get that result in that this was 5 something that people had been working on for months? 6 A. I think -- I don't know whether the -- this document was 7 the first time I was made aware of this or whether I'd 8 already been briefed on this, but as I said earlier, it 9 was very frustrating to find that, having gone down this 10 route, we were now being told that we didn't have the 11 factual background, and the -- the formulation of them 12 was not reliable as well. So that was very frustrating. 13 Q. We've already mentioned there that the decision of the 14 Council to seek mediation had been made in mid-November, 15 and you've explained you thought that that would be 16 better sooner rather than later. 17 Were you aware at the same time also there was a new 18 Chief Executive coming into the Council, Sue Bruce? 19 A. Yes. 20 Q. I think you were involved in briefing her? 21 A. I was. 22 Q. Could we look, please, at production CEC00040807. We 23 see this is headed "Edinburgh Trams Update for Sue Bruce 24 5 November 1010", it's obviously intended to be 2010. 25 A. Yes. 57 1 Q. You say in your statement that this was used to brief 2 Sue Bruce? 3 A. Yes. 4 Q. She has denied ever having seen this document? 5 A. I am aware of that. 6 Q. Are you aware whether there was any other document or 7 a different version of this document, or can you explain 8 why she might feel she'd never seen it? 9 A. No. I have looked at an email chain around the time of 10 this document, and my recollection was that I actually 11 didn't circulate this document to anybody because it's 12 a pretty sensitive document, and I took a hard copy of 13 it with me to the meeting with Sue, and at the end of 14 the meeting she kept a copy and I was tempted to ask for 15 it back because of the sensitivity of it, but I decided 16 that would be an impertinent thing to do. 17 However, having looked at the documentation, I see 18 this document is actually attached to an email, I think 19 from me to Dave Anderson, dated 26 November. So there's 20 clearly some confusion over the date here because -- 21 because I think the email from me to Dave Anderson 22 says: attached is the briefing for Sue for next Monday. 23 Now, if that was sent on 26 November, then it can't have 24 been on 5 November that the briefing took place. 25 So there may be some confusion over the date and I'm 58 1 afraid I can't get to the bottom of that. 2 I do, though, specifically recall briefing Sue, 3 using this document. I'm fairly certain that the 4 meeting was attended by Brian Cox, who was the interim 5 chair of tie at the time, because by this time 6 David Mackay had resigned, and the meeting took place in 7 Sue's office late in the evening. Well, late, 5.30, 8 6 o'clock in the evening. 9 Q. Can we take it that all the things that you've put into 10 this document are your views of the project and the 11 organisations and where you stood at that time, the 12 difficulties faced? 13 A. Yes. I think some of them are my reflections on the 14 organisation that I inherited and some of them are my 15 reflections on the organisation as it stood at the time. 16 So they're not necessarily all contemporaneous with 17 that date, whatever the date was. 18 Q. Yes. 19 I would like to look at an email from you. It's 20 reference TIE00304261. 21 We can see this is from you. It's dated 22 22 November, and it was addressed to 23 Mandy Haeburn-Little and Tony Rush. Essentially within 24 tie? 25 A. Yes. 59 1 Q. You say it's a draft letter to CEO of CEC, and perhaps 2 fair to note that the subject matter is "Angry draft for 3 discussion". 4 The second paragraph says: 5 "As you know, when I took on this role the project 6 was already mired in controversy and disputes. As you 7 also know I believe that many of the issues we are 8 dealing with have been baked into this project from the 9 very beginning, the bulk of which were explained in my 10 presentation to Sue Bruce (attended by Dave Anderson and 11 Donald McGougan) on 5 November." 12 There you can see you're expressly referring to the 13 presentation given to Sue Bruce on that date? 14 A. And this is where I think there's some confusion, 15 because I believe Sue in her evidence talked about 16 a different presentation or a presentation on 5 November 17 that wasn't the presentation that we had up on the 18 screen a moment ago. 19 I don't specifically recall the presentation to Sue 20 attended by Dave and Donald. And that's where I think 21 there's some confusion over the dates. 22 CHAIR OF THE INQUIRY: You mentioned Dame Sue Bruce's 23 evidence. What are you talking about? 24 A. Written statement. 25 CHAIR OF THE INQUIRY: You have seen her statement? 60 1 A. Yes. 2 CHAIR OF THE INQUIRY: How did you get it? 3 A. Through the -- my legal team. 4 CHAIR OF THE INQUIRY: From Beltrami? 5 A. Yes. 6 MR LAKE: If you look at the second paragraph, you say: 7 "I have adopted a strategy (which has evolved over 8 time) guided by the board (which is well attended by 9 both CEC officials and councillors), and where possible 10 tried to take into account the views of CEC officials 11 and councillors expressed to me outside of the formal 12 board meetings. I accept that this strategy has not 13 produced the desired breakthrough on the project, but 14 still believe it was right that we adopted the approach 15 that we did as the alternatives would, in my view and 16 that of the board, have produced even less desirable 17 outcomes." 18 I think that's something you were referring to in 19 your evidence yesterday? 20 A. Yes. 21 Q. If we go towards the question of the timing for 22 mediation in the following paragraph: 23 "Last week things moved very quickly ..." 24 I should say as a matter of timing, I think it was 25 the previous week that the Council had voted in favour 61 1 of the mediation, by way of context: 2 "Last week things moved very quickly, with the 3 public call for mediation, then mounting political 4 pressure to enter mediation followed by our board 5 meeting on Wednesday and the Council meeting on 6 Thursday. I have always believed that an agreed way 7 forward (rather than litigation) between tie and BSC 8 offers the best hope for the project. Indeed I have 9 discussed the concept of a "mature divorce" with the 10 Chairman of the consortium and others on many occasions 11 in the past. I also believe that any final agreement 12 within determined in part by the relative strengths of 13 the parties on entering any process to reach that 14 agreement. It is my view that, because of the strategy 15 we have adopted, we are in a much stronger contractual 16 position now than we have been at any time in the last 17 12 months. I also accept that we are not in a stronger 18 political position. Personally I am not certain that we 19 are in a stronger contractual position now than we would 20 be in a few weeks time, however I can see there is now 21 a momentum behind entering a mediation process now, and 22 this was what persuaded the board to reach the 23 conclusion it did on Wednesday." 24 Several things there. Just dealing with that last 25 point, the impression that you give there is that you 62 1 feel that now is not the right time for the mediation, 2 and I'm just trying to square that with the earlier 3 email we looked at to Alastair Maclean which seemed to 4 be suggesting that you didn't think it was a good idea 5 to wait. 6 A. I'm confused, I'm afraid, because what I read here is: 7 "Personally I am not certain that we are in 8 a stronger contractual position now than we would be in 9 a few weeks time ..." 10 Q. Does that not suggest that you think it would be better 11 waiting a while -- 12 A. No, I think that suggests there would be no benefit in 13 waiting. 14 Q. Right, okay. In terms of -- because before that, you 15 say, the strategy, "we are in a much stronger 16 contractual position now than we have been at any time 17 in the last 12 months". 18 What factors do you rely on to say that you 19 considered you were in a stronger contractual position? 20 A. Notwithstanding the concerns over the Remediable 21 Termination Notices, I did feel that the factual 22 background behind the failure to manage the design and 23 failure to progress the works would produce a factual 24 basis which would give us sufficiently robust terms to 25 put forward a credible termination threat. 63 1 Q. Right. Because would you accept that as far as the 2 Clause 80 dispute was concerned, and the BDDI to IFC 3 disputes were concerned, things in the previous 4 12 months had rather moved against tie, with the 5 adjudication outcomes? 6 A. I'm not sure that we were necessarily in a weaker 7 position than when we started the DRP process. All that 8 had happened is that it had confirmed or it had failed 9 to confirm that we were in a stronger position. If you 10 think right back to July 2009, the Infraco's position 11 was you've only got two options, agree with us or 12 litigate. That was their position then, and here we 13 were 12 months later. We were in no -- we had failed to 14 put ourselves into a stronger position, but I don't 15 think that necessarily means we were in a weaker 16 position. 17 Q. Can we scroll down to the foot of the page here. The 18 final paragraph on the page says: 19 "I am also very concerned by the last paragraph of 20 Nick Smith's email 'I am not aware that Tom and the 21 other senior officers have decided what strategy to 22 adopt re both the mediation and/or the BSC/CEC 23 meeting'." 24 That's the end of the quote. You say: 25 "This would seem to imply that CEC expect to direct 64 1 the strategy for any mediation." 2 I take it from that comment that as far as you were 3 concerned at that time, if there was to be a mediation, 4 tie should be representing tie's interests at that 5 mediation? 6 A. There were a whole host of things going on around this 7 time, and I think tie's roles was beginning to become 8 much more blurred and much diminished at this time, and 9 the City Council was starting to adopt a much more 10 direct involvement. 11 I believe, I'm not certain, that by this time the 12 City Council had had several meetings with the 13 contractor, which were unknown to me, or at least the 14 content of which were unknown to me. I knew of the 15 existence of at least one of them, but there may have 16 been more. 17 And that I thought we were in serious danger here of 18 CEC effectively taking control of the project without 19 officially doing so. 20 There would be a genuine concern that there would be 21 too many -- too many chiefs. We also had a board which 22 had certain governance procedures, and of course it was 23 always within CEC's prerogative to say to tie: thanks 24 very much, we don't want you to run this anymore; 25 and I gave them several opportunities to do that 65 1 throughout my time there, but if we were going to do 2 that, it needed to be done clearly and cleanly, and my 3 concern here was that issues were becoming very blurred. 4 Q. Just that question about whether or not the Council 5 could say they didn't want tie to do it, could we look 6 at an email two days later from you. It's reference 7 CEC00013441. 8 If we enlarge the upper part of the page, we can see 9 that this is from you. It's dated 24 November 2010, and 10 it goes to Alastair Maclean, Tom Aitchison and 11 Donald McGougan; do you see that? 12 A. Yes. 13 Q. Is this intended -- I'll read on first of all: 14 "I thought I would capture my thoughts following 15 this afternoon's meeting. 16 My apologies again to Alastair for the speed and 17 nature of my departure, but I was already late for 18 another meeting and our conversation was becoming 19 unproductive." 20 There's obviously reference to a meeting having 21 taken place there. Was this just to follow up the 22 meeting, or was this also dealing with the letters we 23 saw in the draft angry email that we've just been 24 looking at? 25 A. First of all, the draft email, I don't actually know 66 1 whether that was ever sent. I have to say, reading it, 2 I think it should have been sent, but if I didn't send 3 it, I regret that. 4 The sequence of events, the previous emails you 5 showed me from Alistair and then my reply, were they 6 prior -- were they 23 November, were they? 7 Q. Yes. 8 A. Right. 9 Q. 22nd. 10 A. There was a -- clearly there was a meeting on the 11 afternoon of the 24th because my email here talks about 12 this morning's meeting, and it's timed 19.34. So 13 I obviously sent it that evening. So this email follows 14 up the meeting that happened that afternoon. 15 Q. In relation to the question of the Council and the 16 relationship with tie, could we look at page 2. 17 We see the first paragraph on the page is: 18 "In the spirit of openness, we are in danger of man- 19 marking here, and I think the real question is, if the 20 Council have lost confidence in tie, then exercise your 21 prerogative and remove tie from the equation. I am not 22 defensive about this, indeed I first suggested it in my 23 email to you several weeks ago, and that is a real 24 option for CEC to consider, but please do not keep 25 re-opening it. I expressed my views to you today on the 67 1 potential implications of such a course of action." 2 Now, the impression there is of someone who is very 3 unhappy with what is being said by the Council about 4 whether or not tie are going to be removed. Is that a 5 fair impression? 6 A. Not about whether tie are going to be removed or not, 7 but by the fact that they wouldn't make a decision. So 8 my point here was: if you don't want tie to run this, 9 just say so, that's fine, that is your prerogative. But 10 don't, as they say, don't buy a dog and bark yourself. 11 Either do it or let us do it, but don't try and do both. 12 Q. When it came to the mediation at Mar Hall itself, 13 I think that Council took the leading role and tie 14 a lesser role. Would you agree? 15 A. That's an understatement. tie was effectively to all 16 intents and purposes excluded from the mediation. Well, 17 tie with the exception of Vic Emery who was the then 18 chairman. 19 Q. At what time did the Council indicate to you that would 20 be their approach, and they eventually were going to be 21 taking it back from tie for that purpose? 22 A. They never formally indicated that approach. It just -- 23 that's how it happened. 24 Q. My Lord, I'm now turning to ask a few final questions -- 25 probably they won't take a great deal of time -- about 68 1 the mediation, but if there was to be a break, this 2 would be a suitable time. 3 CHAIR OF THE INQUIRY: Before the break, can I just clarify 4 about Sue Bruce's statement. Did you receive other 5 witness statements from Beltrami? 6 A. No, and I didn't receive a copy of Sue's statement. 7 I was informed by Beltrami that within Sue's statement 8 was a denial -- sorry, a non-recollection of this 9 presentation. I didn't physically -- I haven't seen her 10 statement. 11 CHAIR OF THE INQUIRY: And did you get similar information 12 about other witness statements? 13 A. Not that I recall. 14 CHAIR OF THE INQUIRY: Thank you. We'll adjourn and resume 15 again at 11.25. 16 (11.09 am) 17 (A short break) 18 (11.25 am) 19 MR LAKE: Mr Jeffrey, I would now like to turn to the 20 mediation that took place at Mar Hall. 21 You've indicated -- I put it neutrally -- you had 22 little role to play in the discussions which took place 23 at the mediation itself. 24 Who conducted those discussions? 25 A. They were conducted by Sue Bruce and Vic Emery and 69 1 Ainslie McLaughlin, were the three who went into the 2 negotiations, discussions with the Infraco. 3 Q. Sue Bruce, I understand her role obviously is the then 4 Chief Executive of the Council. 5 What role was played by Vic Emery, as far as you're 6 aware? 7 A. I don't know. He was there in his capacity as the 8 chairman of tie, but I don't know what role he played. 9 Q. I ask the same question for Ainslie McLaughlin. What 10 role did he play? 11 A. I don't know, I'm afraid. I wasn't involved in any of 12 the meetings to see how they panned out. 13 Q. So you didn't see what the contribution of those parties 14 was? 15 A. No. 16 Q. It may be then you're not able to assist me with this 17 next question. Do you have any idea how the settlement 18 figures were actually reached? 19 A. Not directly. I was involved in -- there were 20 effectively two rooms. There was a CEC/tie room at 21 which there was many people present, myself, Tony Rush, 22 the lawyers, Dave Anderson, Alastair Maclean, 23 Steven Bell and others. And that was the room that Sue, 24 Vic and Ainslie would come back to. There would be 25 a discussion and then they would go off again. So I 70 1 don't know anything that happened in the discussions 2 directly with the Infraco. 3 Within the room where we all met, there were 4 discussions around values and price and cost of 5 alternatives and so on. 6 Q. So coming back to my earlier questions then, were you 7 able to see what role Vic Emery and Ainslie McLaughlin 8 played in those discussions when they weren't in the 9 Infraco, it was the sort of -- 10 A. Yes, I would describe their roles as passive. 11 Q. Both Vic Emery and Ainslie McLaughlin? 12 A. Yes. 13 Q. What about the availability of information to inform the 14 discussions that were taking place? Who was providing 15 that? 16 A. Well, the members of the senior tie team, myself, 17 Steven Bell, I can't remember if Susan Clark was there, 18 but there were a few members of the senior tie team. 19 There was Tony Rush, Nigel Robson, Brandon Nolan, 20 I don't recall if DLA had anybody there. And whatever 21 information was requested, if it was available and could 22 be provided, was provided. 23 Q. In terms of financial information, that was -- that 24 would be provided by tie, would it? 25 A. Some was and some was provided by Tony Rush. 71 1 Q. What was your involvement in providing information for 2 or producing the terms of the opening statement given by 3 Dame Sue at the start of the mediation? 4 A. I don't think I had any involvement in that. I think 5 that was done between Sue's office and McGrigors. 6 Q. I think it's fair to say you expressed some unhappiness 7 or dissatisfaction with the amount of money that was 8 ultimately paid to the consortium by way of the 9 settlement? 10 A. I did. 11 Q. What was in essence your dissatisfaction? 12 A. Well, I thought it was too much. 13 Q. What -- apart from just looking at the number, what in 14 your view indicated that it was too much? By what 15 measure? 16 A. It's a difficult one, and I fully accept that there was 17 a judgement call to be made because the alternative -- 18 one of the alternatives to not reaching an arrangement 19 at Mar Hall, an agreement at Mar Hall, was effectively 20 back to where you started from, which was trying to 21 enforce a weak contract, with all the attendant 22 uncertainty. Ultimately the possibility of some form of 23 termination and what that might lead to. 24 So there was a cost to not reaching an agreement at 25 Mar Hall. So let's put that to one side for a moment. 72 1 If you come back and say: where did we start 2 Mar Hall from? There was the value of the work done to 3 date, and there was the quantum of the work done to 4 date. So, for example, the -- most of the tram vehicles 5 were constructed and purchased, and there was a very 6 high degree of certainty that the cost of the tram 7 vehicles was going to be what it was going to be. So 8 I think that was about GBP60 million, but let's say 9 there's GBP60 million that you can put aside there and 10 say there's a degree of certainty to that. 11 There was a whole section of works already done, the 12 depot was largely complete. The bulk of the 13 infrastructure for the section west of Edinburgh was 14 largely complete. 15 So there were a number of things you could have 16 a high degree of certainty on, and therefore again sort 17 of take out of the equation, if you like. 18 So what you're left with is two things that you 19 don't know. One is the value of the works still to be 20 completed and the second is the cost of buying that 21 certainty. If you like, buying your way out of the 22 contract that had caused so many problems. 23 There's a reasonable degree of certainty that can be 24 placed upon the value of the works still to be done. 25 There would always be some dispute on that, but that's 73 1 something a quantity surveyor could look at and say it 2 should cost this much. 3 What you're left with then is effectively the value 4 of buying out the uncertainty, or put another way, 5 that's the value of settling the contractor's claim. 6 If you take the view that litigation would be 7 a catastrophic outcome, and could cost an unknown amount 8 of money, then you could use that justification for 9 almost any price you liked on the basis that, well, it's 10 better than litigation. 11 I don't think sufficient consideration was given to 12 the option of Project Separation, as it was called, or 13 the mutual divorce, and saying: right, let's strip out 14 even the cost of the work still to be done; and 15 say: just what is the value for buying out of this 16 contract? 17 I'd had indications from Richard Walker, the 18 chairman of the consortium, prior to the mediation as to 19 the sorts of quantums that they would be looking at and 20 he was talking about GBP30 million or GBP40 million for 21 Bilfinger. He'd said that he thought Siemens would be 22 happy as long as they were paid for the value of the 23 work done and the materials on site, and that CAF, as 24 I say, was a reasonably uncontentious issue. 25 I think if you added that to the cost of reprocuring 74 1 the works, you would have come up with a number less 2 than the number that was settled at, at Mar Hall. 3 Now, I am aware that there were alternative views 4 provided by, I think, Gordon Harris Partnership, via 5 Tony -- Gordon Harris Partnership were a quantity 6 surveying firm that were engaged, and I think their 7 information was fed in through Tony. And I'm not 8 holding myself up as a quantity surveyor to say: well, 9 I think they're wrong and I'm right. This is as much 10 a feeling as it is a precise science, but my sense was 11 it was a pretty high price to pay for certainty. 12 Q. You say that the advice from Gordon Harris Partnership, 13 that was advice on what a replacement contract might 14 cost if you brought in a different contractor, what they 15 might price -- do the remainder of the works? 16 A. Yes. And there were added to that things like a bad 17 project premium, which seemed to me to be 18 a reasonably -- I'm not sure if that was added in by 19 Gordon Harris Partnership or somebody else, but that 20 seemed to me to be a somewhat arbitrary figure. 21 Again, from the documents that I have seen from the 22 database, some of that appears to me to be 23 rationalisation that appeared after Mar Hall, not prior 24 to Mar Hall. 25 Q. What you're describing there is taking a completely 75 1 different approach to what was obtained by the 2 mediation, that you would have been looking to obtain 3 a clean break, with no further works being done by the 4 consortium. If I have understood you correctly. 5 A. Emotionally that was my preferred option, but 6 practically I think that option should have at least 7 been on the table so that there was something to compare 8 the deal to. Because by only having the prospect of 9 litigation as the other comparator, you could justify 10 pretty much any number you wanted. 11 Q. Right. In terms of the price that was ultimately 12 agreed, are you aware -- you may not be -- whether or 13 not that was arrived at by essentially an analysis of 14 costs, be it the costs of works, the cost of litigation 15 and other things, or was it what could be called rather 16 colloquially a horse trade? 17 A. I'm not aware how it was arrived at. 18 Q. There's one last thing I would like to ask you. I asked 19 you a question yesterday about Infraco's willingness to 20 do on-street works, and do you remember you gave me an 21 answer about that. 22 I take it you're answering that from your knowledge 23 of the time that you were on the project? 24 A. Can you repeat the question and I'll tell you why 25 I answered as I did. 76 1 Q. The question is -- I think what I'd intended to ask 2 was: while you were in position as Chief Executive of 3 tie, were you aware whether or not the consortium 4 carried out any on-street works under the original 5 contract? 6 A. And I think -- that's right, my answer was that I'm not 7 aware that they were, and I don't think they did. There 8 was the -- the only works that were undertaken were the 9 Princes Street -- on-street works were the 10 Princes Street works and they were done under the 11 Princes Street Supplemental Agreement. 12 The only possible grey area would be the works at 13 Haymarket Yards, but I don't think they were classified 14 as on-street works, although technically they were on 15 a road, but it wasn't -- they weren't classified as 16 on-street works. 17 Q. Is that the viaduct works? 18 A. Yes. 19 Q. But in terms of things that were carried out before you 20 were in post, that's something that we would be better 21 putting to other people within tie? 22 A. Indeed. 23 MR LAKE: Thank you very much, Mr Jeffrey. 24 CHAIR OF THE INQUIRY: I have received notice of possible 25 questions from two sources. One, Ms Forster on behalf 77 1 of Bilfinger Berger and the other by Beltrami on behalf 2 of Mr Jeffrey. 3 So before looking at these, I would like to -- 4 I think some of the attached emails or letters referred 5 to cross-examination. Can I just remind parties that 6 this is not a court. It's an investigation process 7 which does not involve cross-examination. 8 So could I, first of all, ascertain whether and to 9 what extent the written notices still exist? If I could 10 ask Ms Forster, first of all, to what extent have the 11 issues that you mentioned been covered already or are 12 there matters that you want to deal with? 13 MS FORSTER: My Lord, I have no further questions. I think 14 all the matters have been adequately dealt with, thank 15 you. 16 CHAIR OF THE INQUIRY: That leaves Mr Fairley. I wonder, 17 Mr Fairley, if you could indicate to -- whether the 18 issues in your written notice, first of all, are -- 19 I appreciate you may have other matters to raise, but 20 have they been covered and if so, to what extent? 21 MR FAIRLEY: My Lord, the issues in the written notice on 22 this occasion were relatively general and were intended 23 really to be an indication of lines. Broadly speaking, 24 all of those lines have been addressed by Inquiry 25 Counsel, but what I would say is that in relation to 78 1 those lines and within those lines, there are some 2 matters on which I would welcome the opportunity to ask 3 some further questions by way of clarification. 4 I say that because there are some issues -- I don't 5 know whether my Lord wishes me to deal with these issues 6 in front of the witness. I can see that there would be 7 disadvantages to doing so, because it may be said in 8 a sense to be telegraphing where I want to go with the 9 witness, and I don't want there to be any suggestion 10 that I'm trying to lead the witness. 11 But I can give my Lord a general indication of what 12 these points were. 13 For example, he was asked yesterday some questions 14 by Inquiry Counsel about the absence of reference in the 15 Tram Project Board minutes to the specifics of legal 16 advice obtained. I would like in light of some of the 17 evidence he gave this morning simply to explore, I hope 18 relatively briefly, what the reasons for that may have 19 been. 20 There were a couple of points yesterday where I'm 21 sure inadvertently points were put to him which don't, 22 respectfully, seem to me to be factually correct on the 23 documents. Again, I would welcome the opportunity just, 24 I hope, very briefly, to go to those. 25 CHAIR OF THE INQUIRY: Could you indicate from the written 79 1 notice which bullet points you wish to seek 2 clarification about? 3 MR FAIRLEY: Sorry, my Lord, from -- 4 CHAIR OF THE INQUIRY: From the written notice. The bullet 5 points. 6 MR FAIRLEY: The points to which I wish to seek 7 clarification largely relate to the reporting in the 8 Tram Project Board meetings relating to DRPs. He was 9 taken yesterday to certain passages from Gogarburn and 10 Carrick Knowe, and so it's -- I don't have -- 11 CHAIR OF THE INQUIRY: So this is discussion of the DRP 12 outcomes at the Tram Project Board from late 2009? 13 MR FAIRLEY: Yes. It would be that. It would be 14 discussions of DRP outcomes at the Tram Project Board, 15 and that really encompasses a great deal of what I want 16 to ask him about, in particular in relation to the 17 questions put to him yesterday about Gogarburn and 18 Carrick Knowe. 19 I would also wish to ask about advice received from 20 Richard Keen in relation to the Remediable Termination 21 Notices which he wasn't taken to by Inquiry Counsel, and 22 that features in my next, sixth bullet point, the advice 23 received by Richard Keen during 2010. 24 I would welcome the opportunity to clarify with him 25 more generally the discussions about DRP strategy and 80 1 the evidence he gave about that, because it seems to me 2 that there may be an issue arising from the evidence he 3 gave about the Dervaird decision which bears upon that, 4 and there's a fairly obvious question which arises from 5 that that has not been put to him so far about timing. 6 Finally, he has mentioned a couple of documents but 7 he has not been able to give references for them. 8 I think I may be able to help with that by putting the 9 documents and asking him if those are the ones he was 10 referring to. So those are the areas that I would seek 11 to explore. 12 CHAIR OF THE INQUIRY: Does anyone else wish to raise 13 matters? 14 MR MARTIN: My Lord, I have one matter to raise, if I may, 15 with the witness arising out of the evidence he gave 16 very recently about his comments on the Mar Hall 17 settlement figure. It's really to put a single 18 proposition to him, and it may take two or three 19 questions. But I think in fairness, because it may be 20 raised later, I should put it to the witness. 21 I can explain to my Lord, again not wishing to 22 telegraph what the point is, if my Lord wishes me to do 23 so. 24 MR DUNLOP QC: My Lord, such concerns as I vocalised 25 yesterday are almost certainly going to be clarified by 81 1 my learned friend Mr Fairley with whom I have had 2 a chance of discussing. Assuming that to be the case, 3 I won't require to ask leave to ask any questions. 4 CHAIR OF THE INQUIRY: I think, Mr Fairley, if we can just 5 start with the discussions of DRP outcomes. 6 Examination by MR FAIRLEY 7 MR FAIRLEY: A proposition was put to you yesterday, 8 Mr Jeffrey, by Inquiry Counsel that a representation in 9 the January Tram Project Board papers at page 47 was 10 inaccurate, and what was put to you was that the 11 description of the Gogarburn and Carrick Knowe decisions 12 being largely in favour of Infraco, which was the word 13 used in the January minutes, was inaccurate. Do you 14 recall being asked about that yesterday? 15 A. I do, yes. 16 Q. I think you were pressed on it by Inquiry Counsel, who 17 put to you the proposition that in fact the Gogarburn 18 and Carrick Knowe decisions were wholly in favour of 19 Infraco, and so the use of the word "largely" was 20 a sugar coating. I don't think that was the expression 21 he used, but that was certainly the implication of what 22 was being put to you? 23 A. Yes, I remember. 24 Q. I just wonder, could we look at the Carrick Knowe 25 decision, please, which is document reference 82 1 CEC00479431. 2 This was a document you were referred to -- I think 3 you were referred to parts of this yesterday. If you 4 take it from me that the referring party here is tie and 5 the responding party, as it's described, is Infraco. 6 Could we look, first, at page 25, and in particular 7 could you blow up paragraph 7.76 at the foot of the 8 page. 9 Now, this is a passage dealing with the question of 10 the adjudicator's fees, but it's more the content of the 11 paragraph that I'm interested in. What is recorded 12 there is: 13 "As the Responding Party [that is to say Infraco] 14 have only been partially successful in defending the 15 Notified Departure when considered from perspective of 16 each of the Notified Departures ..." 17 He then makes a certain allocation of fees. 18 Was that reflective of your understanding of the 19 partial nature of Infraco's success at Carrick Knowe? 20 A. Yes, it was, and that would be entirely consistent with 21 the description in the Board minutes of it being largely 22 successful for Infraco as opposed to wholly successful 23 for Infraco. 24 Q. Simply for completeness, I think if we look into this 25 document at page 22, at the foot of that page at 7.62, 83 1 if you can blow up the whole of that and the heading, 2 I think I'm right in saying that we see there, in the 3 final sentence of that, a finding by the adjudicator 4 that he was not prepared to allow the matter of 5 temporary sheet piling to adjust abutment bases as 6 a Notified Departure. The way he expresses it is 7 slightly opaque, but I think if one reads the content of 8 it, what he's saying is he's not minded to allow this 9 item as an extra, which would effectively mean he was 10 not allowing it as a Notified Departure. 11 A. I think that's right, and if you look at the first line, 12 in fact, it says he doesn't agree with the responding 13 party. 14 Q. Well, I think in fairness, Mr Hunt was the person who 15 made representations at this adjudication on behalf of 16 tie? 17 A. I beg your pardon. 18 Q. What he's recording there is Mr Hunt does not agree with 19 Infraco's contention for a Notified Departure, but I'm 20 really more interested in what the adjudicator does with 21 this. He says: 22 "I therefore dismiss this item as an extra." 23 Am I right in reading that as being a refusal by the 24 adjudicator to allow it as a Notified Departure? 25 A. Yes. 84 1 Q. If you look forward now at page 24, at paragraph 7.70, 2 the question of deck expansion joints, the final 3 sentence simply reads: 4 "I therefore find that this is not a Notified 5 Departure." 6 Is that right? 7 A. Yes. 8 Q. So again, not supporting the position that was put 9 forward by Infraco? 10 A. Correct. 11 Q. If we go forward again to page 25, at paragraph 7.74, if 12 you expand the whole of that, please, freestanding wing 13 walls and soil embankments and abutments, the 14 penultimate sentence beginning with the words 15 "I therefore dismiss" on the third-last line: 16 "I therefore dismiss the freestanding wing walls and 17 soil embankments and abutments on the basis that 18 I consider them to be normal design development." 19 Again, he is not finding in favour of Infraco, but 20 is finding that these are not Notified Departures? 21 A. That's correct, yes. 22 Q. Does that then give some colour to the use in the 23 January Tram Project Board papers to the phrase 24 "largely", in the context of these decisions being 25 largely in favour of Infraco? 85 1 A. Yes, it does. 2 Q. Thank you. 3 Now, can I come back now and ask you about the 4 question of Tram Project Board papers and what they 5 record in relation to legal advice. 6 You were asked some questions about that yesterday 7 by Inquiry Counsel, and as I understood the line of 8 questioning which I think you accepted, it was that 9 there was no mention within the Tram Project Board 10 papers of the detail, or even a summary of the legal 11 advice that tie had been receiving from its legal 12 advisers; do you recall that passage of questioning? 13 A. I do, yes. 14 Q. It's that that I want to ask you about now. 15 In taking legal advice, should we understand that 16 what you wanted to be informed about or the reason that 17 you wanted to be informed was to instruct your strategy 18 going forward into the adjudication process, and whilst 19 adjudications were up and running? 20 A. That's correct, yes. 21 Q. You mentioned yesterday in your evidence, and again 22 today in your evidence, concerns that existed over the 23 leaking of information into a wider domain that may have 24 emanated from within the Tram Project Board. 25 Have I understood that correctly? 86 1 A. Yes. The concern was one of a general nature. 2 Q. Yes? 3 A. But it included potential leaks from the Tram Project 4 Board. 5 Q. Yes. Now, to be quite clear here, I'm not suggesting 6 that anybody was sitting within the Tram Project Board 7 deliberately leaking materials to the outside world. 8 But I would imagine that when you have a circulation 9 list for Tram Project Board papers which is as long as 10 the circulation list was for the Tram Project Board, 11 that enhances the risk that the contents of those papers 12 may find their way by some means into a wider audience? 13 A. That's correct. 14 Q. And doesn't necessarily mean that that is malign or 15 malevolent. It's simply a fact that when you put 16 something in written papers, you enhance the chances of 17 them finding their way beyond their original intended 18 audience? 19 A. That's correct, and in fact, although it didn't occur to 20 my knowledge during my time, I believe it had occurred 21 prior to my time at tie. 22 Q. Yes. 23 Now, we've also heard evidence from another witness 24 about at one stage, and it is prior to your involvement, 25 at one stage there being a concern that legal advice in 87 1 the pre-contract phase might be the subject of a Freedom 2 of Information request, and it was therefore presented 3 as being a DLA paper when in fact it was something that 4 was being communicated by tie to the Council. 5 Was there any concern about -- in your time as CEO 6 of tie about the use of Freedom of Information requests, 7 possibly to recover information within Tram Project 8 Board papers? 9 A. There was. In fact, I'm sure it will be a matter of 10 record somewhere. There were a very large number of 11 Freedom of Information requests, and they did include 12 requests for legal advice and items that were meant 13 parts of the Tram Project Board papers. Wherever we 14 could, we resisted those, and I actually had at two 15 meetings to my recollection with the Information 16 Commissioner in St Andrews to discuss how we might deal 17 with these. 18 Q. The background to this is this is all taking place 19 within what might be described as quite a highly charged 20 political environment in that there was mixed support 21 for the tram project; is that fair? 22 A. That's correct. 23 Q. It was also taking place in an atmosphere of fairly 24 intense media scrutiny in that there was at least one 25 newspaper which was writing regularly about the tram 88 1 project? 2 A. Yes. I think that's potentially an understatement. 3 There was one particular month, I recall, where there 4 were 180 separate media articles in a month. 5 Q. Another unusual feature, I think a unique feature, of 6 this particular project was of course that the former 7 Council Leader, Councillor Anderson, had assumed 8 a position with Bilfingers, apparently as a consultant 9 to that organisation. Am I right about that? 10 A. Yes. 11 Q. Against that background, how damaging would it have been 12 to tie's commercial strategy with Bilfingers if the 13 legal advice tie was receiving, and the advice it was 14 receiving from its lawyers on strategy, had leaked into 15 the public domain and become known to Bilfingers? 16 A. It would have made a very difficult position impossible. 17 Q. May we take it that it was not the practice of tie, when 18 it received legal advice, to forward copies of that 19 legal advice to Bilfingers? 20 A. Indeed. 21 Q. For very obvious reasons? 22 A. Yes. 23 Q. That when you're involved in a commercial dispute with 24 another side which is looking as if it's going towards 25 or is already entering litigation, the last thing you do 89 1 is tell the other side what legal advice you are 2 receiving? 3 A. Correct. 4 Q. Was it, however, the case that everybody on the Tram 5 Project Board was well aware that legal advice was being 6 taken about the early adjudication decisions? I'm 7 talking here in particular about Gogarburn and 8 Carrick Knowe. 9 A. Yes, that's my recollection. 10 Q. I ask that because there was a question put to you 11 yesterday by Inquiry Counsel about the PowerPoint 12 display that you presented for the December Tram Project 13 Board minute, and the way the question was put was: your 14 PowerPoint display doesn't even say that legal advice is 15 being taken. But by that stage am I right in saying 16 that there had already been, at the November Tram 17 Project Board, a lengthy discussion about a full review 18 of the Gogarburn and Carrick Knowe decisions? 19 A. Without the papers in front of me, I couldn't say 20 specifically which meeting it was, but yes, it was 21 certainly one of those meetings, possibly September, 22 October or November. 23 Q. Well, can I perhaps help you. Could we have document 24 number CEC00416111, please, and this is the papers for 25 the Tram Project Board meeting of 16 December 2009. 90 1 Can we go within that first of all to the minutes of 2 the November meeting which we find -- the start of those 3 is at page 5. If you simply take it from me that these 4 are the minutes of the November meeting, the passage 5 I want to refer you to is on page 7. 6 If we can enlarge the box at the top of that page, 7 please. 8 What we see noted there is that the adjudicator has 9 decided on Carrick Knowe and Gogarburn, and a full 10 review of this determination is under way. So can we 11 take it that the Board was advised that a full review of 12 these decisions was under way? 13 CHAIR OF THE INQUIRY: Mr Fairley, I think this was referred 14 to yesterday by Mr Lake. So the witness has seen this. 15 MR FAIRLEY: It was, my Lord, but Mr Lake then followed it 16 up with a question about the December Board meeting, 17 which was a month later, which said that the PowerPoint 18 slide didn't even indicate that a legal review was under 19 way. What I'm anxious to ascertain from the witness is 20 whether the expression "a full review" here is intended 21 simply to mean an internal tie full review, or whether 22 that is something that was intended and was intimated to 23 the board as having involved lawyers. 24 CHAIR OF THE INQUIRY: Well, how is this taking me any 25 further? I have seen this passage yesterday. 91 1 MR FAIRLEY: I'm about to link it, my Lord, to a passage 2 further in these papers, and that will be the last thing 3 I will ask about. 4 CHAIR OF THE INQUIRY: That might be the quickest way of 5 doing it then. 6 MR FAIRLEY: The reference there to full review, Mr Jeffrey, 7 can we pick that up by going to page 23 of these papers. 8 Can you enlarge the section headed "Period 9 9 Update". Do we see there in the first bullet point 10 a reference to the adjudicator preferring Infraco's case 11 on 5a and 5b, which is Gogarburn and Carrick Knowe, and 12 a reference to this currently being under review by tie 13 and by tie's legal advisers? 14 A. Yes. 15 Q. Do you see that? 16 A. That's correct. 17 Q. So as at December -- in fact, as at November 2009, would 18 anyone on the Tram Project Board not -- who had read 19 these papers not have been aware that there was a review 20 being undertaken by tie's legal advisers, and that 21 advice was being sought? 22 A. No, I don't believe they could have been under the 23 impression that there was no -- sorry, there's too many 24 negatives there. 25 I do believe that they had -- that they were aware 92 1 that there was a review undertaken, including legal -- 2 a legal review. 3 Q. What we don't see in the papers is the output of that 4 review. 5 A. Correct. 6 Q. Could you scroll down the table, please, there because 7 before I leave this, I want to look at the -- in fact, 8 I think we may need to go over the page. 9 Before we go over the page, do you see that 10 Russell Road is highlighted in that table in green? 11 A. Yes. 12 Q. If we go over the page, please, I think we'll see what 13 that means. If you enlarge the -- thank you. 14 The green annotation suggests that the DRP in 15 question was launched by BSC, as opposed to being 16 launched by tie, which is the blue annotation; do you 17 see that? 18 A. Correct, yes. 19 Q. So should we understand that the Russell Road 20 adjudication was not one that formed part of tie's 21 strategy of taking matters to DRP, but in fact had been 22 launched, as it is recorded here, by the Infraco, by the 23 consortium? 24 A. That's correct. 25 Q. Can I leave that document now and can I come on to ask 93 1 you a couple of questions, please, about Russell Road. 2 CHAIR OF THE INQUIRY: Which point is this? 3 MR FAIRLEY: This is the DRP reporting question, my Lord. 4 Could you have in front of you, please, document 5 CEC00034842. 6 Now, when this document appears, there will be two 7 passages that I want just to ask you very briefly about, 8 but while we're finding the document, if I've understood 9 your evidence correctly, there were essentially two 10 reasons for taking disputes to the Dispute Resolution 11 Procedure that you have certainly referred to in your 12 evidence. 13 If I just identify what my understanding is of these 14 first, I can then ask you questions. 15 If I have understood you correctly, the first reason 16 for taking disputes to DRP was to try and secure 17 clarity, or at least some form of understanding of what 18 the contract meant, particularly in relation to price 19 and particularly in relation to this question of BDDI to 20 IFC drawings. 21 A. That's correct. 22 Q. But the other reason that I think you referred to this 23 morning was that at least until Lord Dervaird issued his 24 decision in early October of 2010, another reason for 25 taking disputes to Dispute Resolution was tie's 94 1 understanding that by so doing, it could issue formal 2 instructions to Infraco to get on with the work. 3 Have I understood that correctly? 4 A. That's correct. 5 Q. So putting those two together, the first is primarily 6 related to cost, the BDDI to IFC is primarily related to 7 the cost of works. I appreciate it may have programme 8 implications, but you're principally looking there at 9 what you're paying for; is that right? 10 A. Yes, cost and the principle of what was or was not 11 included in the price. 12 Q. Of course. Yes. 13 The second is primarily to do with just keeping the 14 works moving? 15 A. That's correct. There was also a third motivation, 16 which is in some cases it was purely an issue of 17 valuation, in that there were some instances where 18 the -- there was no dispute in principle, but the 19 valuation was unacceptable to tie. 20 Q. Yes. 21 So even if it might be said that there came a point 22 in the summer of 2010 or by the summer of 2010 when it 23 was clear that tie was not winning points of principle 24 on BDDI to IFC adjudications, there would still be an 25 incentive to put those into Dispute Resolution because 95 1 it would allow you to try to keep the contract moving, 2 to instruct Infraco to do the work, even though 3 an estimate had not been produced for the cost of those 4 works; is that correct? 5 A. That's correct, yes. 6 Q. So even though you were losing on the principles, there 7 was still a benefit to be gained because Infraco were 8 saying: we're not doing any of these disputed works 9 until there is a completed estimate, and in some cases 10 they were refusing or failing to give you estimates? 11 A. That's correct. 12 Q. And tie needed to try and get the works moving and to 13 keep -- to keep the momentum in the programme going; is 14 that right? 15 A. That is correct, yes. 16 Q. Because one impact of a programme which is delayed is 17 significant additional cost; am I right about that? 18 A. That's correct, yes. 19 Q. We'll see a document that we'll look at in a moment -- 20 that the tie strategy of referring disputes to DRP 21 really came to an end round about August of 2010. Do 22 you recall that? If you don't, I can take to you 23 a document that shows that. 24 A. No, I couldn't be exactly precise, but it certainly was 25 around that time, would be my recollection. 96 1 Q. If you take it from me that in the September Tram 2 Project Board meeting papers there is a reference to 3 tie's strategy of referring matters to DRP having ended 4 in the previous period, which would be August 2010. 5 Does that roughly accord with your recollection? 6 A. Yes. 7 Q. What we know of course is that Lord Dervaird's decision 8 in relation to Clause 80, which was the second of my two 9 reasons for referring disputes to DRP, to keep the 10 programme going, that was dated 7 August 2010; is that 11 right? 12 A. That's -- yes. 13 MR LAKE: Can I just interject for a point of clarity. The 14 point that was put to Lord Dervaird -- taken in evidence 15 this morning, Clause 80.13, which is not the one that 16 depends on having put matters to DRP. That's 80.15. 17 And these questions are leading the witness into 18 confusion by conflating the two. It may be quite 19 important for the witness to know that they're two 20 separate things. 21 MR FAIRLEY: I'll put it this simply. Did there come 22 a point when tie realised that its strategy of 23 putting -- its belief that by putting matters into DRP, 24 it could compel Infraco to carry out the works, did 25 there come a point when tie realised that was not going 97 1 to work either in terms of the contract? 2 A. Yes, as I think I have already said in evidence, these 3 things didn't occur overnight. It wasn't that one day 4 you thought something and the next day you thought 5 something else. 6 What happened was that over time, your opinion and 7 your belief evolves to the point where, by around this 8 time, we took the view that continuing to pursue the DRP 9 strategy for anything other than tactical reasons was 10 not going to produce the results that we wanted. 11 Q. So there came a point, did there, where tie realised 12 that neither of the two objectives of getting the 13 clarity it wanted in the terms it wanted about the cost 14 aspect and about the keeping matters moving under 15 Clause 80 aspect was actually working? 16 A. That's correct, and that was around the sort of late 17 summer/autumn of 2010. 18 Q. Around about the same time that tie discontinued its 19 strategy of referring matters to DRP? 20 A. Yes. 21 Q. Coming back to the Russell Road decision, can I just 22 look briefly at two aspects of that that you weren't 23 referred to. 24 Can you look firstly at Clause 65, please -- 25 CHAIR OF THE INQUIRY: Is this back to the first point? 98 1 MR FAIRLEY: This is the DRP reporting, yes. I'm sorry, 2 I went off at a tangent because I thought it was 3 important to clarify with the witness. 4 CHAIR OF THE INQUIRY: It would help if you could finish a 5 point and then move on. The whole point about core 6 participants having -- being allowed to ask questions is 7 to give prior notice of issues that they think they want 8 the Inquiry Counsel to cover, and if they're not being 9 covered, then to pursue them. But to pursue them as 10 concisely as possible, without repetition, and without 11 jumping back and forward. 12 MR FAIRLEY: I apologise, my Lord. 13 CHAIR OF THE INQUIRY: So can we just finish that point. 14 MR FAIRLEY: That was what I was trying to do. I was trying 15 to use the time usefully to ask a point about the DRP 16 strategy that I was going to ask anyway, while we found 17 the document on Russell Road. But I'm now returning to 18 Russell Road and I'm now returning to the question of 19 the accuracy of the DRP reporting. 20 Could we look at paragraph 65 at page 14. 21 Now, this is one of many conclusions that the 22 adjudicator reached in relation to Russell Road, but his 23 conclusion here is recorded as: 24 "I conclude that the Contract provides that Infraco 25 delivers the Infraco Works comprised in the Employer's 99 1 Requirements for the Contract Price, including the 2 Construction Works Price, being expressly a fixed lump 3 sum save adjustment in accordance with the Contract. I do 4 not agree that on a proper construction, 5 the Construction Works Price can be construed as 6 being solely for the Works shown on the BDDI or any similar 7 alternative construction." 8 Just looking at that second sentence there, was it 9 the contention of Infraco that on a proper construction, 10 the Construction Works Price should be construed as 11 being solely for the works shown on the BDDI? 12 A. Yes, it was, and I believe -- I don't know if it was 13 this adjudication, but there was one very specifically 14 where the Infraco's lawyer was asked about the number of 15 tram stops and the answer was: we only priced BDDI. 16 Q. How important to tie was that as a point of principle of 17 contractual construction? 18 A. Very important. 19 Q. Why? 20 A. Because if it was true that the Infraco only priced 21 BDDI, then effectively this became a re-measurement 22 contract, and effectively a cost plus contract. So the 23 Infraco could design whatever they wanted because they 24 had control of the designer, and all they had to 25 demonstrate was that the IFC drawings were different to 100 1 the BDDI, and they would automatically trigger 2 a Notified Departure. And that was their contention up 3 to this point. 4 They then modified their argument and took it in 5 a slightly different direction, but this was the -- this 6 was a fundamental issue in terms of the difference of 7 interpretation of the contracts. 8 Q. That was really my next question. 9 Up until this point was Infraco's contention that it 10 had priced only for works shown on the Base Date Design 11 Information really at the very heart of the dispute 12 between Infraco and tie about price? 13 A. Yes, it was. 14 Q. So would it therefore be fair to categorise this as 15 a conclusion of principle that went to the very heart of 16 the issue between Infraco and tie as at this point, 17 certainly, before Infraco developed its argument later 18 on? 19 A. Yes, and this more closely accords with my recollection 20 at the time. I know Counsel to the Inquiry took me 21 through this yesterday, and led me to a conclusion that 22 in fact this wasn't a good outcome for tie. That didn't 23 accord with my recollection at the time, and actually, 24 reading this section now, that does more closely accord 25 with my recollection at the time, which was that this 101 1 was not a -- that this was actually, at least in part, 2 helpful adjudication for tie. 3 Q. Just before leaving this point then, you were referred 4 to a passage yesterday in the January Tram Project Board 5 minutes. Can we look at CEC00473005. Can we go to 6 page 47, please, and blow up the two paragraphs 7 immediately above the table at the foot of that page. 8 In particular, in the passage beginning "BSC have so 9 far referred". Do you see that paragraph? 10 A. Yes. 11 Q. You were referred yesterday by Inquiry Counsel to the 12 final sentence of that paragraph. We could maybe take 13 that in the two parts that I think it falls into. 14 "A significant saving resulted (in excess of 15 400,000) on the estimate presented by BSC ..." 16 This is in relation to Russell Road retaining wall. 17 That is accurate, it's an accurate statement of what the 18 adjudicator decided? 19 A. Yes. 20 Q. Necessarily implicit in that of course is that Infraco 21 had been paid some money for Russell Road retaining 22 wall? 23 A. Yes. 24 Q. It's a saving. It's not a complete victory. 25 A. Correct. 102 1 Q. So anyone reading this would understand that there had 2 been monies paid to Infraco? 3 A. Yes. 4 Q. It's just that they didn't get paid as much as they'd 5 asked for? 6 A. That's correct. 7 CHAIR OF THE INQUIRY: Mr Fairley, that sounds like 8 a closing submission which you can no doubt make. 9 MR FAIRLEY: Thank you, my Lord. 10 What is then said is that the adjudicator agreed 11 with tie on many of the principles in dispute. 12 Now, having now had the opportunity overnight and in 13 Inquiry Counsel's further questions to you today, and in 14 light of the passage I referred you to a moment ago at 15 paragraph 65, what is your position on whether that 16 statement is an accurate or inaccurate summary of the 17 Russell Road decision? 18 A. I believe it's an accurate summary. 19 CHAIR OF THE INQUIRY: Do you consider it's a frank and full 20 disclosure of the outcome of that decision to 21 communicate to Transport Scotland in that way? 22 A. No, within the limits of what -- what can be conveyed in 23 a single sentence, it's not a full and complete summary, 24 but, as has already been pointed out, these notes were 25 not -- in my view, were not designed to be that full and 103 1 complete summary. 2 CHAIR OF THE INQUIRY: But did it not form part of the 3 report to Transport Scotland. 4 A. They formed part of the report to Transport Scotland, 5 which in turn formed part of the overall reporting to 6 Transport Scotland, which was not solely confined to 7 this report. 8 CHAIR OF THE INQUIRY: I appreciate that. Mr Fairley? 9 MR FAIRLEY: Picking up on his Lordship's point, we saw 10 yesterday that the report that went to 11 Transport Scotland was pretty much in identical terms to 12 this passage that I'm referring you to here, including 13 the table; is that right? 14 A. Yes. 15 Q. So anyone at Transport Scotland who saw this would know 16 that the Russell Road adjudication was about BDDI to 17 IFC? 18 A. Yes. 19 Q. Even if they didn't know what BDDI to IFC meant, 20 presumably they could have asked somebody in tie if they 21 were in any doubt about what that meant? 22 A. Yes, but I can't imagine that anybody in 23 Transport Scotland who had an interest in this project 24 would not know about the BDDI to IFC issue. 25 Q. The reason I ask you that question is we heard evidence 104 1 from Mr Ramsay, who was asked if he understood what BDDI 2 to IFC meant, and he said he didn't. Is it possible 3 that he didn't understand that? 4 A. It's hard to believe, given that it was such a dominant 5 issue for so long, that anyone with a knowledge of the 6 project would not know what BDDI to IFC was about. 7 Q. So anyone reading this would understand that there was 8 a Notified Departure issue in that dispute, and also 9 that Infraco had been paid money as a result of that; is 10 that fair? 11 A. Yes. 12 Q. Leaving this then and moving on to another point about 13 advice from Richard Keen, were you aware -- sorry, 14 before I ask you this question, can I maybe ask you to 15 look at a document. 16 CEC00207814. 17 We see this is an email from Joanne Glover, who 18 I think was a solicitor at DLA, and it's dated 19 23 September 2010, and it's addressed to you and others. 20 Do you see that? 21 A. I do. 22 Q. What is recorded there is that comments have been 23 received from Richard Keen on the RTN. Do you recall 24 what this is a reference to? 25 A. I don't recall this particular email, but I can deduce 105 1 from looking at it that it would appear that 2 Joanne Glover had consulted Richard Keen on the RTNs. 3 Q. Is it a fair reading of this email that it appears, at 4 least, that Mr Keen has had some involvement in the 5 drafting of the RTNs? 6 A. Yes. 7 Q. Was that your understanding at the time? 8 A. I can't be certain that -- I couldn't say specifically 9 I knew who was consulted over which RTNs. I was of the 10 impression, and it was my understanding, that the RTNs 11 had been produced with suitable legal input. 12 Now, exactly where that legal input had come from, 13 I couldn't specifically say. 14 Q. What's recorded there after the various bullet points 15 noting changes or amendments to the draft RTN is: 16 "Keen appeared comfortable with the approach taken 17 in the RTN and raised no concerns (other than the 18 amendments above). For the second time, Keen appears 19 extremely engaged on this." 20 Do you recall what that was about? 21 A. Not specifically, I'm afraid. 22 Q. This email came to you at the time though on 23 23 September 2010, didn't it? 24 A. It did. 25 Q. Should we take it that at the time you would have been 106 1 aware that Richard Keen was involved in the process of 2 drafting and revising RTNs, or at least an RTN? 3 A. Yes, certainly on reading that email, I couldn't be 4 under any other impression. 5 Q. Did it come as a surprise to you later on, after 6 Nicholas Dennys had given his opinion, that Richard Keen 7 expressed the views that the RTNs would not do the job 8 for which they had been intended? 9 A. Yes, as I've said earlier, it was surprising and 10 frustrating. 11 Q. Finally then, Mr Jeffrey, there are just a couple of 12 documents I want to ask you if I've correctly 13 identified. 14 You referred in your evidence yesterday to believing 15 that at some stage shortly after you joined tie, you had 16 produced a sort of summary of where matters had got to 17 and how they had got to that position, and I wonder if 18 I can refer you to a document, and ask you if this is 19 the document you are referring to. It's TRS00010706. 20 Sorry, do you need that reference again? It's 21 TRS00010706. 22 Thank you. 23 If we go to the foot of that page there, we see an 24 email from you to the various political party leaders 25 within the City of Edinburgh Council, dated 19 April. 107 1 Do you see that? 2 A. I do. 3 Q. What you record there is: 4 "I have been at tie for very nearly a year now, and 5 as such this provides me with a natural point to review 6 progress over the last 12 months." 7 If we then go over the next page, you give -- 8 I won't go through it all, but you appear to give quite 9 a lengthy explanation of what you have done over the 10 course of the preceding 12 months and an explanation of 11 some of the problems that have been encountered in that 12 regard; is that right? 13 A. That's right. 14 Q. If we scroll down that page, in the first bullet there 15 you're talking about DRPs. And you describe in the 16 third line there being a clear and conventional process 17 under the contract for reaching a conclusion on the 18 issue of what Infraco priced for. Do you see that? 19 A. I do. 20 Q. You then go on to say that there have been claims from 21 Bilfinger Berger that tie have lost, and you say: 22 "It is true that we did not get all the results at 23 adjudication that we would have liked, however it is 24 also true that the results do not support 25 Bilfinger Berger's extreme view of their entitlements 108 1 either." 2 Is that perhaps a reference to Russell Road? 3 A. Yes, and I think it's a summary of the -- it's 4 attempting to summarise all of the adjudication results 5 up to that point. 6 Q. Yes. 7 A. In -- within the limitations of this type of 8 correspondence. 9 Q. Is it also perhaps a reference to the fact that some of 10 the quotations put in by Bilfinger Berger were 11 significantly cut back as a result of the DRP process? 12 A. Yes. 13 Q. If I can leave that document, thank you. 14 The last document I want you to look at, please, is 15 CEC00012737. 16 I think there may be more than one page to this. 17 Could you go forward on to the second page, please. 18 What I'm looking for is -- I'm sorry. I think I've got 19 the wrong -- no, I've got the right document number, 20 yes. 21 On page 2 of this, there is an email from you to 22 various people, Council officials, Council employees, 23 and also individuals within tie. Do you see that? 24 A. I do. 25 Q. You begin with the paragraph that reads: 109 1 "Dear all, there is much to be done over the next 2 few weeks if we are to be in a position to recommend 3 termination of the contract ... Of course no decision 4 has yet been taken that this will be our recommendation, 5 but it is prudent that we plan for such an eventuality." 6 Do you see that? 7 A. I do. 8 Q. Was this the email that you were referring to earlier 9 when, in response to Inquiry Counsel's question about 10 a suggestion of hurtling, you said that you recalled 11 seeing an email timed at around the same time as that 12 allegation against you was made? 13 A. That's correct. 14 Q. Is this the email that you were talking about? 15 A. It is. 16 MR FAIRLEY: Thank you. I have no further questions, 17 my Lord. I'm grateful for the opportunity to be able to 18 ask those questions. 19 CHAIR OF THE INQUIRY: Mr Martin? 20 Examination by MR MARTIN 21 MR MARTIN: Thank you, my Lord. Just one matter arising out 22 of your evidence at the end of questions from my learned 23 friend Mr Lake. 24 Mr Jeffrey, you said in the context of the sum 25 agreed as a result of the Mar Hall mediation that, as 110 1 far as you were concerned, the so-called potential 2 amicable divorce bill of GBP40 million, together with 3 the cost which would be incurred in a re-tendering and 4 carrying out of the remainder of the contract by another 5 party, would have been less, in your judgment, or might 6 have been less in your judgment, than the sum agreed at 7 Mar Hall; is that a correct understanding of your 8 evidence? 9 A. Yes, that's what I said. 10 Q. Now, is it reasonable also to bear in mind that at that 11 point, if that procedure had been adopted, first, there 12 would be uncertainty about the actual cost for the 13 carrying out of the balance of the work, and secondly, 14 there would be delay in the carrying out of the balance 15 of the work by such new contractor as was appointed. 16 A. That is correct, yes. 17 Q. Do you agree that that delay would mean that the works, 18 in the state that they were, at the point of the 19 so-called amicable divorce, would remain as not being 20 worked upon? 21 A. Yes, during the period -- if -- it would depend entirely 22 on what was included within the amicable divorce, but 23 there would clearly be a point where no work was 24 happening whilst the work was retendered. Depending on 25 how it was retendered and the nature of the amicable 111 1 divorce, that could have been kept to a minimum, but 2 there's certainly the possibility it would have caused 3 some additional delay. 4 Q. Yes, but in the event of that delay, the works would 5 have remained in the state that they were at the point 6 of the amicable divorce. Physically speaking, what 7 state were the works in at about the point in March 2010 8 when agreement was -- 2011 when agreement was reached? 9 A. My recollection is that because there hadn't been any 10 additional on-street works, that there would have been 11 relatively little disruption to the city at that point, 12 and that there would clearly be an element in certain 13 areas of making safe and making -- mothballing, if you 14 like. But that in my view could all have been included 15 either in an amicable divorce or in some form of interim 16 contract that could have been let very quickly. 17 Q. Well, as I understood your position to be, you simply 18 took the GBP40 million amicable divorce figure, and your 19 expectation of what a re-tendering exercise would result 20 in, totalled those together and said they were less than 21 the total that was agreed at Mar Hall. Can we now 22 agree, Mr Jeffrey, that in fact you would have to take 23 into account both the financial consequences of delay 24 and/or dealing with disruption and also the physical 25 consequences within the city of uncompleted works 112 1 perhaps for a period of months, if not longer? 2 A. In my evidence I was -- I was summarising. There is 3 a document within -- on the database that sets out 4 a full list of all those works that would have been 5 required if we had gone down the amicable divorce route, 6 including the cost of re-tendering, including the 7 overhead costs that would have been carried on and so on 8 and so forth. 9 So all of that was included in my assessment. For 10 simplicity and shorthand purposes, I only picked on two 11 of the items in my evidence today. But my opinion was 12 based on a full list of what would have been required. 13 Q. In financial terms? 14 A. Yes. 15 Q. What additionally is to be taken into account is the 16 fact that the works would simply have been in their 17 pre-existing state -- that's to say at the point of 18 amicable divorce -- until a point at that stage 19 undetermined that these works could be completed by 20 someone else? 21 A. That is correct. 22 MR MARTIN: Thank you very much. 23 Thank you, my Lord. 24 Questions by CHAIR OF THE INQUIRY 25 CHAIR OF THE INQUIRY: Mr Jeffrey, at the beginning of your 113 1 evidence today, you referred to -- you were referred to 2 a minute of a meeting between you and, I think, four 3 Council officials, dated 16 March of 2010. I don't know 4 if you remember -- 5 A. I recall, yes. 6 CHAIR OF THE INQUIRY: In that minute it's disclosed that 7 tie had not challenged any of the adjudication 8 decisions. So that was a decision which had been taken 9 by 16 March, but it appears that the first time that's 10 recorded in the Tram Project Board minutes is 25 June. 11 If that's right -- it may not be, but if that is 12 right, are you able to explain the delay? 13 A. I think the -- the decision to not take any -- not to 14 challenge any of the adjudications was a decision that 15 evolved over time, and to a certain extent it was -- it 16 was not a decision that once made could never be unmade. 17 I think there was some time limitation on it, so 18 eventually, if you didn't challenge them, you would lose 19 the right to challenge them. 20 So I think it was an interim decision, perhaps. 21 It's also possible that it simply didn't get recorded 22 through an oversight. 23 CHAIR OF THE INQUIRY: Thank you very much. 24 That concludes your evidence. You're still subject 25 to the citation, so you can be recalled if anything 114 1 arises. Hopefully that won't be necessary. 2 In the meantime, you're free to go. Thank you for 3 your attendance today and yesterday. 4 A. Thank you. 5 (The witness withdrew) 6 MR LAKE: My Lord, the next witness is Tony Rush. 7 MR TONY RUSH (sworn) 8 CHAIR OF THE INQUIRY: You will be asked some questions by, 9 first of all, Inquiry Counsel, Mr Lake. If you just 10 listen to the question and answer it as directly as 11 possible, and if you speak clearly into the microphone, 12 and at a measured pace so that the shorthand writers can 13 keep up with you. Do you understand? 14 A. I shall do my best, my Lord. 15 Examination by MR LAKE 16 MR LAKE: Mr Rush, could you state your full name, please. 17 A. Anthony John Rush. 18 Q. The Inquiry has details of your address. I think you 19 were engaged as a consultant by tie from a period 20 towards the end of 2009 and continued working with them 21 until 2011; is that correct? 22 A. I think the appointment started in 2010 in actual fact. 23 Q. It actually took effect in 2010? 24 A. Yes. 25 Q. What I would like to do is ask you to take a look at 115 1 a document, please. You should have a hard copy in 2 front of you, but it will also be shown on the screen. 3 It's TRI00000141_C? 4 A. Yes. 5 Q. That should be the same document in both places. Is 6 that a copy of a statement that you provided to the 7 Inquiry and which you have signed at the end of it? 8 A. It is, my Lord. 9 Q. Are you content that we take that as your evidence for 10 the purposes of this Inquiry? 11 A. I do. 12 Q. I've got a few additional questions to ask you. I would 13 like to start by looking at page 13 of this statement 14 that you have provided. And the paragraph, the fourth 15 paragraph on that page, beginning "I have no doubt". 16 What you said there is: 17 "I have no doubt that the individuals in the project 18 management team TIE put together were competent in their 19 disciplines. But for such a unique and complex" -- 20 A. I'm old-fashioned enough to have to look at the hard 21 copy, my Lord. 22 CHAIR OF THE INQUIRY: It's all right. 23 A. Sorry, Mr Lake. 24 MR LAKE: "I have no doubt that the individuals in the 25 project management team TIE put together were competent 116 1 in their disciplines. But for such a unique and complex 2 contract they lacked the experience and cohesion that 3 was required, even without the peculiar circumstances 4 surrounding the project. I found TIE's team 5 under resourced for the task facing them. It was 6 necessary to bring "people" in to supplement TIE's staff 7 on a reactionary basis rather than planned from the 8 outset." 9 I just want to take out some of the detail from 10 this, if I can. 11 When you refer there in the second half of that 12 paragraph to tie's team being under resourced, are we 13 talking about manpower or particular skills that were 14 lacking? 15 A. I think, Mr Lake, after this point in time, my memory is 16 not that clear. But I would suggest it was probably 17 both. The contractor was -- as I think you have heard 18 other evidence, was an exceptionally unusual form of 19 contract. And the way the contract was being managed by 20 the contractor required more skills and probably more 21 people than tie had. 22 Q. What skills do you consider were missing that tie 23 required? 24 A. I think -- I think skills and general experience. 25 I think the people that were employed by tie would have 117 1 been generally competent on a normal contract, a normal 2 design and build contract. 3 I think this contract was so exceptional that you 4 need -- you needed a higher level of skill and 5 experience. That's my recollection of it. It's eight 6 years ago. 7 Q. What was it about this contract that meant the 8 additional skill or experience were required? 9 A. The contract form itself. 10 Q. What about it? 11 A. It was highly unusual, to say the least. 12 Q. Why? 13 A. Well, I think it's been reported that the contractor 14 felt that it was unsuitable. I think at one point in 15 time one -- I think Mr Walker said that, and I think 16 that Mr Keysberg said it was a contract that we can hold 17 the -- I'm told that it was a contract where they could 18 hold the client to ransom. 19 The design -- the transfer of design responsibility 20 and risk was not well undertaken, shall I put it that 21 way. That the risk -- that the risk came back to the 22 client and virtually the contract terms were open to 23 abuse. 24 I just felt at the time that the -- that the tie 25 staff were not skilled and experienced enough to take 118 1 that on. 2 Q. Experience is perhaps easy to understand as a matter 3 of -- it's self-explanatory. 4 But what skills did you think were missing? What 5 skills -- which skills would have helped, had they been 6 brought in in addition? 7 A. Well, in actual fact, Mr Lake, I think, as I have said 8 later in my statement, I think it would have been wiser 9 to have a professional project management team, 10 a project management team. I'm not trying to avoid the 11 question. But it's the whole -- it was the whole 12 concept of having this -- this project management team 13 put together when it would have been better to have 14 a professional project management team that had the 15 skills and the experience to run that sort of contract. 16 Q. If I turn that round, what do you consider the advantage 17 would be of bringing in a pre-established external 18 project management team rather than seeking to establish 19 that project management team within tie? 20 A. I think I'm trying to indicate that in the last 21 sentence. This was quite a hurriedly put together 22 document. I may have phrased things differently if 23 I had been given more time. So excuse me for that. 24 But the -- tie were not able to react by building 25 the team that was required to manage the circumstances. 119 1 By this point in time, remember, the contract had been 2 going for some years or two or three years when I got 3 involved. But by this point in time, it would be 4 difficult to have recruited on a short notice more 5 experienced and skilled staff than they had, whereas 6 a project management team, particularly a project 7 management team that had been initially involved in the 8 contract, would have had those people in-house and ready 9 to get involved in the job. 10 Q. Just understanding what I said there -- what you said, 11 you said "particularly a project management team that 12 had been initially involved in the contract, would have 13 had those people in-house". 14 Is that the position if they had used external 15 consultants to come in and do project management? 16 A. I think so, yes, Mr Lake. 17 CHAIR OF THE INQUIRY: When you referred to the original 18 project management team, are you referring to 19 Turner & Townsend? 20 A. I think so, my Lord. I'm pretty sure that's the case. 21 MR LAKE: I want to turn just to the question of costs. 22 It's apparent from your CV you have had lots of 23 experience in relation to construction. How important 24 is it to have a clear idea of your anticipated final 25 cost? 120 1 A. Well, it's obviously essential. But in this particular 2 case, tie were a limited liability company that was 3 specifically put together for this project, as 4 I understand it. 5 I think, as I say elsewhere in my evidence, that one 6 of the big issues on this job was the cap on funding. 7 And there was, I think, GBP550 million to GBP600 million 8 at a stretch available. So I would say on this 9 particular job, there was greater necessity for prudent 10 cost estimating going forward because you have -- in 11 a private -- in a registered company you have the 12 question of solvency, and the directors, I think, should 13 have addressed that. 14 In my experience, as you say, I mean, it's 40-odd 15 years' experience, in my experience a cost consultant 16 would have dealt with that. 17 Q. Is that again a service that might have been available 18 if external -- project management had been through 19 external consultants? 20 A. I think so. To be cynical about it, if I may, my Lord, 21 a cost consultant would be more likely to be prudent 22 because of his PI insurance trying to make the costs 23 suit the budget. 24 Q. Obviously one aspect -- 25 A. Excuse me. 121 1 Q. One aspect of the costs is simply knowing, as you say, 2 that you have got enough money available ultimately to 3 pay. But in terms of managing the project, managing the 4 contractors and the construction, does having a clear 5 view of your anticipated final cost assist in that 6 regard also? 7 A. I mean, I don't -- it wouldn't be injurious to managing 8 the contract. But not having the funds available -- 9 I have to say, until Sue Bruce got involved, I never 10 heard anybody, although the reality was that they were 11 going to -- I mean, even when I got involved, I think it 12 was recognised that the 600 million at a stretch was 13 going to be exceeded. 14 I honestly -- I have thought about this over these 15 last few days. I can't remember anybody talking about 16 how do we get additional funding. Quite the opposite. 17 I mean, I heard a lot about the Scottish Government 18 saying there isn't any additional funding. 19 If you put yourself in the position of the 20 contractor, who -- for whatever reason knew that the 21 budget was going to be overrun, then I have to ask 22 myself the question: what would I have done in terms of 23 progressing the contract, if I thought I wasn't going to 24 get paid? 25 I would like to think that I would have done it on 122 1 trust. 2 Q. That's what you would like to think. What do you think 3 in reality would have happened? 4 A. I think that would be speculation, my Lord. I can't 5 speculate on that. 6 But I certainly think a UK contractor probably would 7 have done more on trust. 8 Q. Sorry, I didn't catch that? 9 A. A UK -- major UK contractor -- UK contractors I had 10 worked for would have done more on trust than these 11 contractors were prepared to do. That's speculation. 12 Q. Returning to the time when you first were engaged in the 13 project, you were presumably given an explanation of how 14 things stood at that time and what the principal 15 problems were facing tie. What were the main points 16 that you were told were to be addressed? 17 A. At that moment in time, my Lord, the whole contract was 18 bedevilled by Pricing Assumption 1 Schedule 4. And 19 this, as I remember it, was the sole -- was the major 20 issue, what did pricing -- Pricing Assumption 1 21 Schedule 4 mean? And I think my initial meeting with 22 the Chief Executive and the Chairman touched on that. 23 At that point in time I remember that the Chairman 24 would not sit in the same room as, I think, the 25 Chief Executive of Bilfinger Berger UK because of that 123 1 gentleman's attitude. 2 So what I was being faced with was a specific 3 contractual issue which was seen to be the principal 4 reason for failure to perform the contract, and a clear 5 breakdown in relationships between the contractor and 6 the -- and the employer. 7 I was thinking about that the other way. The best 8 I can put it, there was no feeling of win/win on this 9 job. It was win and you lose and you surrender, on both 10 sides. 11 Q. I was going to ask you. That was on both sides when you 12 arrived? 13 A. I think so. 14 Q. Did that change during your period with tie? 15 A. Well, you have to go into the process. But from a site 16 point of view, no. I mean, if we get on to Project 17 Carlisle, one of the things that I -- principles I set 18 down in the scope was that it would have to be clean 19 teams, because at that point in time, probably even 20 before that, Mr Lake, I recognised that the teams on 21 site were never going to come together. 22 Q. Just to be clear, when you say clean teams, that meant 23 that new personnel would be brought in by each party to 24 administer the contracts running forward? 25 A. Well, to carry out the scope of Project Carlisle. 124 1 Q. Negotiate it as well? 2 A. Yes. The changes in terms to bring the terms back to 3 terms that could, shall we say, operate properly. 4 So it was necessary to do that, and I recognised at 5 the time, and indeed, I think in -- you no doubt remind 6 me whether this is true or not, Mr Lake, but I think in 7 the revised terms that we agreed with the Infraco's 8 clean team, it required a change in culture on site, and 9 indeed I think that -- I'm certain that got pushed into 10 the final mediated agreement, that there was an 11 agreement to change culture. 12 Q. I would like to look at a document that's referred to in 13 your statement. It's reference CEC00541334. 14 A. Is that going to come up? 15 Q. It will come up on the screen just to your right. 16 We can see this has got the heading "Project 17 Pitchfork", and the date which is just about readable on 18 it is 1 March 2010; do you see that? 19 A. Yes, I do. 20 Q. We've heard that project Pitchfork was something 21 produced within tie to consider the various options 22 going forward, running from about the end of 2009 into 23 the start of 2010. 24 Were you made aware of Project Pitchfork and the 25 various options when you arrived at tie? 125 1 A. This document has some resonance with me because when 2 I got your questions at the end of June, 3 I thought: Project Pitchfork; what is Project Pitchfork? 4 It had gone out of my mind altogether. 5 Q. Has seeing these documents acted to refresh your memory? 6 A. When I started to read through them, I thought: you must 7 be getting too old. 8 I became aware of Project Pitchfork, I think, 9 shortly after I -- after I got involved, and I was asked 10 to give some specific advice on contractual mechanism. 11 I'm not certain when I -- when I actually became 12 involved -- aware of Project Pitchfork, or indeed its 13 reasons. 14 Q. Look within this document, in this report, at page 56. 15 I should say, you will see that this is a draft, and 16 there are many other drafts in existence. But we can 17 look at this one for the time being. 18 If you could enlarge the text towards the centre of 19 the page, and perhaps for ease of reading, could we 20 enlarge further, isolate the paragraph beginning "As 21 a result of the position". 22 You can see what it says there is: 23 "As a result of the position now emerging, tie 24 reported to the Tram Project Board in December 2009 that 25 it had secured the services of Tony Rush, a specialist 126 1 in disputes and claims to work with tie to assist 2 enforcing the full range of commercial mechanisms 3 contained within the contract. This work has resulted 4 in a number of significantly important contractual 5 letters being sent to BSC in the period from mid-January 6 covering the following topics." 7 They are all set out. 8 Now, do you agree that that was one of your roles 9 that you were given at the outset, which was really to 10 assist tie in enforcing the full range of contract 11 mechanisms that were available to it? 12 A. Yes, I think we can get into semantics about enforcing. 13 I have seen elsewhere it referred to -- somebody 14 referred to it is -- not contractual enforcing, but -- 15 my view on what needed to be done at that point in time 16 was to be contractually pedantic. 17 Q. So that was your view? 18 A. That was my view. My impression of what had gone 19 beyond -- before was that there was a whole plethora of 20 correspondence which didn't get down to the contractual 21 basis. And -- so what I was suggesting was that we got 22 pedantic about the -- not just the payment terms, but 23 also the performance terms, because I felt -- I'm 24 speaking from memory here, and I hope I have not got 25 a reconstructive memory, my Lord. But I felt that 127 1 the -- they had to make the contractor aware that you 2 read the contract as a whole, and not just take the 3 payment term and say: that is the term, that lets us 4 hold you to ransom. 5 There were a lot of terms in that contract in terms 6 of programme, design management, best value, that needed 7 to be brought home to the contractor to make them aware 8 that it wasn't just Pricing Assumption 1 Schedule 4. 9 Q. In that connection, if we can look at an earlier page in 10 the same report, can we go to page 20, please, and 11 enlarge. 12 Perhaps enlarge from the -- yes, that will do. 13 We see that what's noted here is: 14 "As described in section 1, a range of fundamental 15 options were addressed by the Tram Project Board in 16 December 2009 and January 2010. It was agreed that an 17 intensive series of eight inter-related workstreams 18 would be instigated to provide a robust basis for 19 decisions of the Tram Project Board meeting on 20 10 March 2010." 21 If we look at the table underneath, we see that item 22 number 4 is noted as -- the work stream is use of 23 contractual mechanisms, and you are the person leading 24 that work stream. 25 Now, that refers to things being done for a Tram 128 1 Project Board meeting particularly on 10 March, but was 2 your responsibility to engage with and ensure the use of 3 contractual mechanism as something that was more 4 general? 5 A. I don't think so, Mr Lake. I think at that point in 6 time -- I think I tried to explain my position at that 7 point in time was contractual pendency, to try and -- I'm 8 talking from memory now, but a lot of the letters pre 9 then had been quite emotive and pointless, and you may 10 say even after then, sadly. But the -- but what I was 11 trying to do was to bring it back to -- to be clearly -- 12 to be -- clearly state the performance requirements in 13 the contract. 14 Q. Is that something you continued to do for tie through 15 your time with them? That's being adhering to or 16 asserting the contract? 17 A. Well, my time with tie, I think, was split into four 18 different periods, wasn't it? There was this period up 19 to March, and then we went into Project Carlisle, and 20 negotiating terms with that. And then we had a term of 21 probably purgatory when there was -- when the contractor 22 appeared to get impatient and put in an offer, and there 23 was a counter-offer and then there's lots of discussions 24 at that time about -- about the rights and wrongs and 25 certainty. We did a lot of work on getting Richard Keen 129 1 QC's opinion and legal opinion. We did a lot of work. 2 We employed Robin Blois-Brooke to look at the design. 3 So I think the -- that period, the third period, was 4 probably important to CEC that they knew that the 5 information that they were going to go forward on was 6 the best they could obtain, and then the fourth period 7 of my involvement was effectively managing the 8 mediation. 9 So this was into those four periods. 10 Now, another part of the scope of Project Carlisle 11 was that the -- that the parties continued, whilst we 12 were discussing Project Carlisle, they continued with 13 their contractual exchanges. So to that extent I would 14 have drafted -- taken a look at some of the letters that 15 were being bandied backwards and forwards. 16 Q. Just understanding the roles you played from time to 17 time, you described there how the continuation of the 18 adherence to the contract role. 19 In relation to the Project Carlisle, that's 20 something that was particularly your responsibility to 21 take forward? 22 A. Yes. I mean, I think, again, I need to be careful not 23 to be reconstructive memory, but my memory of my 24 strategy then was I saw what was happening. I'd 25 listened to Richard Jeffrey about his meeting with the 130 1 two German chiefs, Dr Keysberg and Scheppendahl of 2 Siemens, and I'd been told that Siemens -- that the 3 department that was set up to run this contract was new. 4 It was a new adventure for them. 5 So the view I took -- I tried to put myself in 6 a position that -- of being a Director of those 7 companies in a role that I'd fortunately played in 8 reality. 9 The view I took was I didn't think that Siemens, 10 with wanting to supply their products to trams, 11 railways, wind farms, et cetera, would want to be 12 associated with a contract in Edinburgh that was 13 allegedly holding the city is to ransom. 14 So I took the view that the more we pressurised the 15 pendency on the contract, at some point in time we would 16 see a change in their attitude. 17 Then I think in March, when I think I had had my 18 first meeting with Infraco, that's when I got the 19 telephone call after the meeting from the Siemens 20 Director, suggesting he wanted a private meeting, 21 and I suggested Carlisle. That's where I had secret 22 meetings with the English habitually, at a hotel in 23 Carlisle. 24 So I met him in Carlisle, and that's why it became 25 known as Project Carlisle. 131 1 From there, we developed the idea of Project 2 Carlisle to see if we could -- see how best we could 3 amend the contract to give the CEC or the Council or the 4 client or tie price certainty going forward. 5 Q. In relation to the third stage, which is the one you 6 gave the title "purgatory", I think also involved 7 getting information and legal advice? 8 A. Yes. 9 Q. Were you involved then in the preparation of 10 finalisation of Remediable Termination Notices and 11 under-performance warning notices that were to be served 12 on the contractors? 13 A. I was, Mr Lake, yes. 14 Q. And in getting legal advice in relation to those? 15 A. Yes, Mr Lake. 16 Q. And the fourth stage you said was managing the 17 mediation. When you say managing the mediation, was 18 that producing information to assist? 19 A. Yes. It's a complex mediation in so much that -- 20 I think I have touched on this in my evidence about 21 Nigel Robson. It was a complex mediation in so much as 22 there was several parties to both sides, and at that 23 point in time initially my perception was that there was 24 differences between the Council and tie about the way 25 forward, and the Government, Scottish Government. 132 1 So we almost -- we were facing a situation where we 2 almost had to mediate between ourselves before we 3 mediated with another party, who was presumably also 4 mediating between itself. So it was a complex 5 situation. 6 MR LAKE: My Lord, this would be a good time to take 7 a break, if that's convenient. 8 CHAIR OF THE INQUIRY: How are we placed for finishing this 9 witness? 10 MR LAKE: I'm going to look at matters over lunch to see if 11 I can draw in certain of my questioning with a view to 12 ensure it fits in the afternoon. But if it was possible 13 to start earlier than normal after the lunch break, that 14 would assist. 15 CHAIR OF THE INQUIRY: 45 minutes? Yes. We will have 16 a break now for lunch and we'll restrict it to 17 45 minutes. 18 A. Thank you, my Lord. 19 CHAIR OF THE INQUIRY: And we will resume again at 1.45. 20 (1.00 pm) 21 (The short adjournment) 22 (1.45 pm) 23 CHAIR OF THE INQUIRY: Good afternoon, Mr Rush. You're 24 still under oath. 25 MR LAKE: Mr Rush, could I ask you to look at your 133 1 statement, please, at a passage beginning at the foot of 2 page 4. In the last two lines it begins: 3 "Two alleged circumstances stand out to me which 4 indicate there could have been an unusual level of 5 desperation on the part of TIE's purchasing team." 6 If we look over the page: 7 "1. Legal advice from DLA Piper was set aside. 8 2. There was an alleged private understanding - 9 a "gentleman's" agreement - that there were substantive 10 issues unresolved at the time of Financial Close." 11 I want to ask you a few questions about that. 12 First, when you refer to a level of desperation on 13 the part of tie's purchasing team, when do you think -- 14 when in your view was there evidence of such 15 desperation? 16 A. I obviously wasn't involved at that time, Mr Lake, and 17 it would be very difficult for me to hazard a guess on 18 that. 19 It is certainly not unusual in my experience where 20 contract prices are in excess of budgets, and you've 21 appointed -- a preferred bidder has been appointed, and 22 there's time limits on letting the contract that people 23 get desperate. 24 Q. You referred here to -- I'll come back to that in 25 a moment. 134 1 If we look at the circumstances that you put at the 2 top of page 5, the first is legal advice from DLA Piper 3 was set aside. What advice did you have in mind that 4 you thought was set aside? 5 A. I understood from Mr Fitchie that he'd been asked to 6 stand aside whilst they negotiated the terms of things 7 like Pricing Assumption 4 and the final deal. 8 Q. To be clear, it wasn't a specific piece of advice that 9 was set aside. It was the fact that he was stood down 10 as adviser for the period? 11 A. That's what Mr Fitchie told me, my Lord. 12 Q. I understand that. The second item you refer to here is 13 the alleged private understanding, the gentleman's 14 agreement. 15 What was your involvement in relation to that 16 alleged gentleman's agreement? 17 A. I wasn't involved in that, Mr Lake. This came up -- 18 I think I first became aware of that when Mr Walker had 19 a meeting with the -- with the City Council quite late 20 on, and in that meeting he claimed that there had been 21 some sort of gentleman's agreement that -- that things 22 would be all right on the night, so to speak. New 23 monies would be forthcoming, and the problems that were 24 known about in terms of the contract would be -- would 25 be sorted out. 135 1 Q. The way you put it in this point which we can see on 2 screen or in your hard copy is you describe it perhaps 3 as a private understanding? 4 A. That's -- that's as I understand what Mr Walker was 5 saying to the City Council at that time. 6 Q. It's something that he can be asked about in due course. 7 Could I ask you, please -- I'm going to go slightly 8 back and forward in your statement. 9 If you could look here for a moment -- if we go to 10 page 10, please? 11 CHAIR OF THE INQUIRY: While we are waiting for that, 12 Mr Rush, you said it wasn't unusual for desperation to 13 set in, as it were, when you've appointed a preferred 14 bidder and you're up against it in terms of time. 15 Does that mean that you consider, or do you consider 16 that the preferred bidder decision was taken too soon? 17 A. I don't think the preferred bidder decision was taken 18 too soon, my Lord. That's not my point. 19 I don't think preferred bidder is a sensible way 20 forward in a competitive tender because you remove the 21 element of competition. And so it then becomes 22 a negotiation -- a negotiation. In my experience that's 23 when things get really nasty and tough between the 24 contractor and the -- and the client. My advice has 25 always been, when I've been asked about this in terms of 136 1 advice, is that you should avoid preferred bidder stage 2 in letting a competitive contract. 3 CHAIR OF THE INQUIRY: Thank you. 4 A. Is that clear? 5 CHAIR OF THE INQUIRY: Yes. 6 MR LAKE: If you could look at page 10 on screen. If you 7 could look at the top of this page, please. You say 8 there: 9 "On top of which TIE certified Preliminaries on 10 a basis of monthly tranches without reference to 11 milestones. In effect, I think Bilfinger Berger could 12 get GBP1 million a month even if they did nothing. This 13 could well explain, at least in part, their 14 unwillingness to progress the Works. I instigated 15 a change and TIE stopped paying Preliminaries until what 16 had been paid reflected what had been done. I think 17 this hit Siemens more than Bilfinger Berger." 18 Now, are you aware that the matter of payment of 19 preliminaries was ultimately a matter referred to 20 adjudication and was determined by Lord Dervaird? 21 A. I probably was, Mr Lake. I mean, at this moment in 22 time, I can't recall it. 23 Q. I don't know if you recall then that Lord Dervaird 24 determined that the preliminaries were in fact payable 25 monthly, irrespective of what work was being done, and 137 1 that the consortium were entitled to claim these monies 2 that you had stopped. Were you aware of that? 3 A. I must have been at the time, Mr Lake, but honestly, 4 sitting here, I don't recall that. 5 Q. Okay. I'll move on to a different matter, please. If 6 you could look at page 18 of your statement. This is in 7 response to question 32 within the list of questions 8 that were sent to you. I'll just read that question. I 9 can put the document up on screen, if you prefer, but if 10 you take it from me, it gives a document reference: 11 "... is a written record of a meeting of the two 12 parties on 2 March 2010. Can you comment on this 13 meeting? Its purpose, the issues discussed and what if 14 anything was achieved?" 15 Now, what you said there on page 18 of your 16 statement is that Clause 6.5.1(a) is a step in the 17 contract for parties to review any matter which 18 adversely affected the completion of Infraco works: 19 "The meeting was held on 2 March, as both versions 20 record, in accordance with that requirement. I cannot 21 speculate as to what it achieved, but it was a step in 22 the process which eventually led to settlement a year 23 later." 24 So did you find that at the foot of page 18? 25 A. I've got it. 138 1 Q. I want to ask you about both aspects of it, whether or 2 not you say you can't speculate as to what was achieved, 3 but it was a step in the process. 4 Could we look at the meeting in question, please. 5 It's document reference CEC00574841. You can see here 6 the title page reads: 7 "MEETING NOTES IN RELATION TO A MEETING HELD AT 8 CITYPOINT BETWEEN TIE AND THE INFRACO ON 2 MARCH 2010". 9 The meeting notes have been prepared by 10 Torquil Murray, who I think was someone who formed part 11 of your team. You brought him on board? 12 A. Torquil acted as my assistant initially. 13 Q. If you look at the second page of this, we can see that 14 in attendance were Richard Jeffrey, Stewart McGarrity 15 and yourself from tie, and representatives -- one 16 representative from each member of the consortium. Do 17 you see that also? 18 A. Yes. 19 Q. Now, because you were actually at the meeting, it's not 20 so much asking you -- I'm not asking you to speculate as 21 to what it achieved; can you not form a view as a result 22 of your attendance as to whether or not this meeting 23 achieved anything? 24 A. The -- the reference to Clause 6.5.1 goes back to my 25 point about being pedantic about the terms of the 139 1 contract. There's mechanisms in 6.5.1 to call special 2 meetings for special circumstances. I can't remember, 3 Mr Lake, the exact wording, but it had never been used 4 before. So part of the -- part of following that 5 strategy of applying the contract terms, I felt it wise 6 to -- to operate under that contract and have this 7 meeting to address where we were going with the 8 contract. 9 Q. Presumably, if you were calling the meeting and using 10 the contract terms, you must have had in mind something 11 that you hoped to achieve by that meeting? 12 A. I hoped -- hope beyond hope, probably, but I hoped it 13 would -- it would -- that we would be able to put each 14 party's views to each other in a formal way, rather than 15 through correspondence and other meetings that -- which 16 were not structured. So it was a structured meeting to 17 exchange views about where the contract was going and 18 why it wasn't progressing. 19 Q. Do you think you achieved that objective? 20 A. At that meeting, I don't think we did because I think, 21 if I remember the whole minute correctly, I think 22 I probably got quite frustrated in the end that we were 23 not making any progress. I think I did actually say at 24 some point in time that we were going round in circles. 25 Whether it was part of building up the -- the 140 1 pressure, if you like, on Infraco members to negotiate 2 a settlement of the contract, I can't be certain, but 3 I think not long after this meeting, one senior -- I'm 4 just struggling for his name now -- Kenneth Reid, 5 I think the top Director in Bilfinger had a meeting with 6 David Mackay, the Chairman of tie at that point in time. 7 I can't speculate whether that would have happened 8 or not, but it's all part of -- it was all part of the 9 chain of circumstances that was taking place at the 10 time. 11 Q. If we just look at some of the exchanges in the meeting, 12 if we go to page 3 of the document. If we read from 13 four entries up, at the foot of the page is your name. 14 We can look at more of this if you prefer. I'm just 15 trying to identify things that are particularly 16 relevant. 17 We see you said: 18 "Made comment that it is stated that the proposed 19 agreement that they won't start until the agreement is 20 signed." 21 They being Infraco: 22 "Richard Walker: Responded by saying that the 23 contract states they cannot start." 24 "Anthony Rush: Restated his point that the Infraco 25 won't start work until the agreement is signed. " 141 1 "Richard Walker: Restated his point that the 2 contract states they cannot start." 3 "Michael Flynn [Siemens]: commented that the 4 statement was clear and will not be withdrawn. He noted 5 that they (Infraco) were there to discuss the matter." 6 You: 7 "Stated that it was a clear position (on the part of 8 Infraco). Stated that he was not there to be in 9 a position of hassle but to get the contract on the 10 road. He stated that this was not going to be achieved 11 under threat of duress. Stated that a reply was due to 12 the statement. Restated is the statement correct (no 13 work started until agreement signed) or is it due to the 14 work availability?" 15 If I read past the next few, if you scroll down a 16 little, there's one that starts with you: 17 "Stated that he understood the problems and both 18 parties' positions. Restated the question to the 19 Infraco is the statement withdrawn." 20 "Michael Flynn: Statement won't be withdrawn." 21 "Anthony Rush: Stated if you don't we may have to 22 withdraw from the meeting. Commented that the statement 23 (in the proposed agreement) read as 'Sign up or we don't 24 start work'. Asked the Infraco to withdraw the 25 statement. Noted that this matter had to be addressed." 142 1 "Michael Flynn: Commented that the statement (could 2 be redrafted to) 'so as not to state that we won't start 3 work'." 4 "Richard Walker: Noted problems could arise in 5 starting the works. " 6 "Anthony Rush: Commented that the Infraco could 7 start but not unless TIE agreed to the Supplemental 8 Agreement." 9 Now, we could read through more of it if we wanted, 10 but the impression given, reading that, is that it was 11 something that was quite ill tempered and 12 confrontational. Would that be reasonable reading of 13 it? 14 A. I hope I'm never ill tempered, Mr Lake. 15 Confrontational, probably. 16 I'm just trying to -- actually trying to remember 17 the -- the circumstances here about -- I mean, 18 basically, they were saying the -- they were not 19 permitted under Clause 80 to start work until the whole 20 change order was agreed. And it was our contention that 21 as a solicitor early in the contract had put it, there 22 were savers in the contract, in Clauses 80.13 and 80.15, 23 that permitted tie to instruct work to start even if the 24 change order hadn't been fully agreed. 25 Q. That's what was being discussed at the meeting? 143 1 A. I can't be certain, Mr Lake. That was one circumstance 2 that they were putting forward why they couldn't start 3 work. 4 Another circumstance, and I really am struggling now 5 with my memory on this. Another circumstance was 6 something to do with -- the job was split into, I think, 7 seven sections. And they were saying that they needed 8 access to the whole of the seven sections. 9 Q. The whole of one section of the seven? 10 A. The whole of one section, and we said no, you can start 11 work in part of that section. And I think that was 12 a matter that was upheld, our view on that was either -- 13 was upheld at adjudication. 14 Q. Yes. 15 A. That we were right in that. 16 So it would be one of those two circumstances that 17 we were addressing or even both. I can't be precise. 18 Q. It is not so much the substance of the discussion I was 19 concerned with at the moment, but the characterisation 20 of it as it appears. I think you said not ill tempered, 21 but confrontational in approach. No one appears to be 22 looking for a solution. They appear to be concerned 23 with stating positions? 24 A. Sorry, can you repeat that? 25 Q. Rather than trying to find solutions, the parties appear 144 1 to be wanting to state positions and demand that the 2 other party withdraw statements; is that a reasonable 3 reading? 4 A. I think that probably is a reasonable reading, yes. 5 Although I think I do say we're trying to get the work 6 started. 7 Q. Taking that approach -- 8 A. I don't think -- I'm offering opinion now. I don't 9 think that the minute reads that we were in a position 10 to compromise on something that would get them to start 11 in that minute. Is that fair? 12 Q. No, I don't read it as any compromise is offered. 13 A. It wasn't a compromise we could make. If they were 14 saying we are not starting unless you agree. 15 Q. So that was the position essentially, that there were 16 quite entrenched positions -- 17 A. I'm saying that, reading the minute now, that appears to 18 me to be the case. 19 Q. In taking a confrontational approach, did you have in 20 mind something that you hoped to achieve by means of 21 that approach? 22 A. I didn't say I had taken a confrontational approach. 23 I said meetings were confrontational. I didn't set out 24 to take a confrontational approach. 25 Q. Do you consider that you were asked by management within 145 1 tie to take a -- either one might say firm, assertive, 2 aggressive or confrontational approach with the 3 contractors? 4 A. I have seen that term contractually aggressive, and 5 quite frankly, I do not know what it means. As 6 I explained, I think -- I think you can be contractually 7 pedantic, contractually aggressive, enforce, these are 8 terms. 9 From what I read in the press last night, Mr Jeffrey 10 seems to think that we were -- we were wanting to be 11 aggressive. I don't recollect being instructed to be 12 aggressive. 13 Q. Do you recall being given -- being instructed to take 14 any particular tone or approach in discussions with the 15 consortium? 16 A. I don't, frankly, Mr Lake. I think they probably relied 17 upon me being my natural self. 18 Q. Once the dust had settled after Mar Hall, did you even 19 go so far as to apologise to one of the contractors for 20 the approach that you had taken with them during 21 discussions? 22 A. Did I? 23 Q. I'm asking you? 24 A. I don't remember doing that. No doubt -- I can be 25 a very polite individual at times. 146 1 Q. I want to -- 2 A. I certainly don't remember that. I remember Mr Keysberg 3 in particular coming up and thanking me. 4 Q. In relation to Project Carlisle, what was the -- you 5 have explained what the genesis of that was, and I think 6 it's known that prior to the Mar Hall mediation, that 7 had not borne fruit. 8 What was the block on getting an agreement on 9 Project Carlisle? 10 A. Well, it depends what you call bearing fruit, Mr Lake. 11 Certainly it is set out how the contract could be -- the 12 contract terms could be revised to give the employer 13 price certainty going forward. So from that point of 14 view I would argue that it had borne fruit, and indeed 15 it was the basis on which the mediation went forward, 16 and I think in particular Fraser McMillan made that 17 point clear at the early solicitor's meeting. So from 18 that point of view it had borne fruit. I think you'll 19 also see in my evidence that I deliberately didn't get 20 involved in negotiations on value because I was unaware 21 of how and whether more funding would come forward. 22 I think it was sad that Infraco on site seemed to 23 get impatient and make an offer, and this we talked 24 about earlier, about experience. 25 I mean, I saw any offer from Infraco as being their 147 1 first offer. Indeed, took some comfort from the fact 2 that all their other offers in terms of -- I'm sure we 3 are coming on to the adjudications later -- had been 4 reduced by 40 per cent, that we were somewhere between 5 what we thought was fair value and what they were 6 offering. 7 As I remember, the -- there was general panic in 8 CEC, I think that's not too strong a term, general panic 9 in CEC and tie that they couldn't afford the offer that 10 was being made. 11 Q. In terms of the -- 12 A. So from that point of view, if I may finish, it didn't 13 bear fruit, but at that same time, as we were talking 14 about this, the Infraco went to see John Swinney and 15 I think probably Alex Salmond, and out of that came 16 mediation, and mediation led to a settlement. 17 So it did bear fruit. But there were -- there 18 was -- there was unripe fruit that fell off the 19 branches, as we went along the way. 20 Q. Just dealing with some of the elements of that, I think 21 we know that an agreement was ultimately reached at 22 mediation? 23 A. Mm-hm. 24 Q. At mediation it was referred to as Project Phoenix, but 25 it did in fact take as its starting point some of the 148 1 Project Carlisle discussions or principles that had been 2 agreed; is that correct? 3 A. I think so, yes, sir. 4 Q. But prior to -- prior to the mediation, had a position 5 been reached -- start that again. 6 Prior to mediation, clearly there hadn't been 7 agreement reached on the sum that was going to have to 8 be paid in order to get the works done? 9 A. No, that's the point of mediation. 10 Q. In terms of other matters under the contract, the new 11 contract that would have to be put into the parties, 12 under this project, is your view that there were 13 agreement on all the necessary contract terms? 14 A. There was agreement between Mr Kitzman and ourselves on 15 those terms, and indeed Fraser McMillan, I remember, 16 asked for that to form the basis on which the mediation 17 was -- was run. 18 Q. So when was -- 19 A. But there wasn't any contractual agreement because that 20 was the point of the mediation. 21 Q. You mean there wasn't something written down? 22 A. No, they didn't say: we agree to these terms. At least 23 I don't think they did. 24 Q. But prior to the mediation, was it nonetheless that all 25 those terms were actually settled even if they weren't 149 1 recorded in writing? The parties knew what they were 2 going to be signing up for? 3 A. If they signed up to Project Carlisle terms, yes, 4 I believe so. 5 Q. Do you know when those terms were settled, to use 6 a neutral term, between the parties? 7 A. They were settled with Mr Kitzman sometime in September, 8 I think even in October. 9 Q. September 2010? 10 A. Yes. That's a matter of record. I think we settled 11 them on a Sunday. If I remember rightly. I don't 12 remember which Sunday, but it was a Sunday. 13 Q. Now, in relation to Transport Scotland, you note within 14 your statement that they became more engaged at the end 15 of 2010. Were you involved in engagement with 16 Transport Scotland or was that just being relayed to you 17 by others? 18 A. Above my pay grade, Mr Lake. 19 Q. I'll leave that then. 20 A. No, I wasn't. 21 Q. You've mentioned there, in terms of what ultimately 22 happened out of Project Carlisle, that there was 23 a meeting that took place between representatives from 24 the consortium and Scottish Ministers? 25 A. Yes. 150 1 Q. Had the consortium indicated to you in advance that they 2 were going to do that, and why they were going to do 3 that? 4 A. I honestly don't remember that. They wouldn't indicate 5 it to me personally. But I honestly don't remember 6 whether they had -- I don't even -- I'm not certain that 7 they would. I'm not even certain that the Scottish 8 Government had informed tie, but Richard Jeffrey would 9 know better than me. 10 Q. If we look then, please, within your statement at -- 11 it's answer 28. I'll just get the page reference. 12 A. Answer to -- 13 Q. Sorry, it's page 28 of your statement. It's at the 14 centre of the page, the paragraph beginning "In response 15 to question 70". So to provide some context, I'll just 16 indicate what question 70 says. It said: 17 "The report which is a report on project resolution, 18 was provided to the Tram Project Board. On page 6 there 19 is a statement that the decisions relating to design 20 development had not been clear cut, and also that they 21 had not provided a clear interpretation which gives 22 certainty going forward." 23 You were asked: 24 "Do you agree with this? Do you think it accurately 25 reflects the adjudication decisions in relation to 151 1 Gogarburn Bridge and Carrick Knowe Bridge?" 2 We turn to your response on page 28. You say: 3 "In response to question 70. The question refers to 4 decisions arrived at by various Adjudicators on design 5 development. Defining the meaning of Pricing Assumption 6 3.4.1.1 expended a substantial amount of thought by 7 many, not just Adjudicators, including solicitors and 8 Counsel. I think it is true to say that there was far 9 from unanimous agreement as to its meaning. However, 10 each Adjudicator had to decide upon its meaning." 11 Now, when you say that there was far from unanimous 12 agreement as to its meaning, we've seen the various 13 decisions and the various rationales. Were you aware of 14 any adjudication decision in which tie had achieved the 15 outcome they wanted in relation to Pricing Assumption 16 3.4.1.1? 17 A. I can't say that I was, Mr Lake. I wasn't involved in 18 the adjudications. I think my impression was that there 19 was -- each adjudicator had a different method of 20 arriving at an answer. That's what I'm saying there, as 21 far as I know. 22 But I wasn't deeply involved in it and so I'm not 23 aware -- I can't answer your question positively that 24 I was aware that they'd all found that the contract was 25 right on that matter. 152 1 But certainly most of them had. 2 Q. Could I ask you to look at a letter -- an email, 3 reference CEC00209592. Look at the lower part of the 4 screen here. And just identify, the email we are 5 looking at here is from you to Andrew Fitchie, 6 Richard Jeffrey and David Mackay, also Steven Bell and 7 copied to others. Do you see that? 8 A. Yes. 9 Q. It was sent in September 2010, 23 September 2010? 10 A. Yes. 11 Q. If we can look right to the foot of the page, we can see 12 there's been an excerpt of a letter that's included in 13 quotation marks, but then you go on to add a comment: 14 "It is difficult to knock down their triumphalism 15 when it can be said we have lost heavily on so many 16 DRPs - we can only ignore their tone by not responding as 17 though it concerns us." 18 In what respects did you consider that tie had been 19 losing heavily at the DRPs? 20 A. Can I just read more of the email, please? 21 Q. Of course. If you need it scrolled up or down -- 22 A. No, it's okay. (Pause) 23 I think it was clear, was it, at that time, that in 24 terms of cause, Bilfinger were, as they put it, winning. 25 And it -- it was difficult to -- it would be difficult 153 1 to knock that down, as I put it, because it was a matter 2 of truth. 3 The only way -- the only way we could ignore their 4 tone is by not responding to it, by not throwing back 5 too heavily this idea -- I imagine that's what I was 6 saying there -- this idea that, while they were winning 7 on the cause, but on the effect the employer was winning 8 because they were reducing the amounts claimed by 9 something on average about 40 per cent. 10 I can only think that it was something like that, 11 Mr Lake. I'm sorry I can't be more precise. 12 Q. You note that in relation to the sums that were to be 13 paid by tie to the contractors, there were reductions 14 made in the claims. But in relation to some of the 15 principles, the position was less advantageous to tie; 16 is that a fair comment? 17 A. Repeat it, please. 18 Q. In relation to the size of the sums that tie would have 19 to pay the contractors, they were being reduced? 20 A. By the -- 21 Q. By the adjudications? 22 A. Yes, absolutely. The amounts claimed. 23 Q. Yes. But in relation to the determination of the 24 principles, things were -- 25 A. That's what I'm saying. It wasn't -- it wasn't -- if 154 1 you like, it was a win/win, but not a very pleasant 2 win/win. 3 Q. How did those -- how did those outcomes affect the 4 negotiations that you were having with the consortium? 5 Did they -- 6 A. On the terms? 7 Q. Yes. Or any negotiations of any aspect? 8 A. I was only negotiating on the terms at that time. No 9 effect at all. 10 I mean, I wouldn't -- I wasn't particularly 11 concerned about the adjudication results because, as 12 I say in my evidence, I saw them as first of all as 13 non-binding, and I say in my evidence that this went 14 further, it would be considered -- they would be 15 considered by higher brains than adjudicators. 16 So I wasn't concerned about that. 17 But the other thing is I felt that it was a message 18 to the contractor. Remember, adjudication doesn't pay 19 your costs. And they'd gone through -- was it seven 20 adjudications? 21 Q. I think ultimately more than that. 22 A. But they had gone through a number of adjudications. 23 They may have won on cause, on principle, as you put it, 24 but they weren't winning on value and they weren't 25 getting paid. Now, they'd got something between 500 and 155 1 700 disputes, disputes pending, and again, putting 2 myself in the position of saying what would I be saying 3 if I was a director of that company and they were 4 reporting to me, I would be saying: well, are we going 5 to go through 500 of these cases; we'd better get it 6 sorted out. 7 Q. You make a point there that they were non-binding. 8 I think if we referred back to your statement and look 9 at page 29, and we look under the paragraph under the 10 heading, "Response to questions 75 to 81", in the first 11 paragraph there, reading from the third line, you say: 12 "With respect to the various Adjudicators, I don't 13 think I was overly influenced by their interpretation of 14 the meaning of the contract terms. I realised that if 15 the meaning of certain terms were to be conclusively 16 decided it would be by a much higher authority than an 17 Adjudicator. Moreover, we had the opinion of the 18 solicitors who played a part in drafting the terms, 19 a leading construction solicitor and Leading Counsel." 20 Now, when you say by a much higher authority than 21 the adjudicator, is that contemplating that the matter 22 would be taken into court? 23 A. If this contract hadn't have been settled at mediation, 24 that's where it was going. 25 Q. Was there a consideration of putting the matter into 156 1 court for an authoritative determination in 2010, before 2 the mediation arose? 3 A. Actually I think there was, Mr Lake, yes. I can't 4 remember the outcome, but I think there was. 5 Q. Were you involved in that discussion? 6 A. No. I was -- I'd very little involvement in 7 adjudications at all. 8 Q. Do you know why it was decided not to put the matter 9 into court? 10 A. I don't recollect, Mr Lake. But I think it would be 11 a matter of evidence. 12 Q. In relation to the next paragraph, we can see it on 13 screen at the moment, there was a decision by 14 Lord Dervaird in relation to the meaning of 15 Clause 80.13. Do you see that? 16 A. Yes, I do, yes. 17 Q. Do you remember what Clause 80.13 concerned? 18 A. 80.13 is this last few -- few words at the end of the 19 paragraph saying they shouldn't start unless -- unless 20 otherwise directed by tie. 21 Q. And it was hoped that tie would be able to give 22 a direction to require them to start -- 23 A. That is -- that was the -- that was the position we were 24 putting forward. That -- that tie could -- I think it's 25 not just 80.13. I think under 80.15 as well, tie were 157 1 permitted to instruct the contractor to get on with the 2 work whether -- whether the change had been agreed or 3 not. 4 I think the terms go on to explain what happened in 5 those circumstances. 6 Q. In 80.16? 7 A. Is it? You've obviously read the contract after I have, 8 Mr Lake. 9 Q. You note in that paragraph we've just looked at, you 10 said you were more annoyed than surprised by 11 Lord Dervaird's decision. You don't think he had taken 12 account of the closing words of 80.13, which are "unless 13 otherwise directed by tie"? 14 A. Yes. 15 Q. Were you involved in discussions about whether or not 16 there should be any challenge to that decision? 17 A. No. I think as I say, I don't -- I can't actually say 18 whether he'd been asked. 19 Q. I want to look now at the third stage of the works you 20 carried out, which involved consideration of the 21 Remediable Termination Notices. 22 A. Mm-hm. 23 Q. In your understanding, was the purpose of these notices 24 merely to create a situation in which the consortium 25 might be more amenable to negotiate, or were you 158 1 carrying them out with an intention that the contract 2 should and would be terminated? 3 A. I think the term Remediable Termination Notice is 4 probably unfortunate, because again it's a step in the 5 contract. If there is a defect, the proper course of 6 action was to issue a notice and ask the contractor what 7 their proposals were. 8 One of the options, if the contractor didn't comply, 9 was termination. But it wasn't -- it wasn't -- it 10 didn't follow that non-compliance would definitely lead 11 to termination. 12 It was just to put further pressure from that point 13 of view on the -- on the contractor, but it was 14 a necessary step. I mean, particularly -- I'm 15 particularly thinking there about Princes Street. It 16 was necessary -- it was necessary step to get them to 17 give us a remediation plan to replace the defective work 18 on Princes Street. 19 Q. If I could, I would like to refer you to a document, 20 I think it will be reference CEC00337188. 21 This is to identify an email from Andrew Fitchie. 22 It's dated 22 June 2010. It's sent to Richard Jeffrey, 23 Steven Bell and David Mackay at tie, but you are amongst 24 the people that it's copied to. Do you see that? 25 A. Mm-hm. 159 1 Q. Andrew Fitchie says: 2 "All, I attach a copy of the set of instructions to 3 Counsel that have gone to Richard Keen, as planned. The 4 documentation delivered will be re-copied and delivered 5 to tie in due course in advance of the consultation - two 6 sets. Please let me know if this is to be shared at 7 this stage with CEC." 8 If I ask you then to go and look at the attachment 9 to this, and say whether or not you've seen it, that's 10 CEC00337189. We can see here a document which has 11 headed at the front, "INSTRUCTIONS TO SENIOR COUNSEL TO 12 ADVISE IN RELATION TO GROUND FOR TERMINATION OF THE 13 INFRACO CONTRACT". Do you recall seeing this document 14 at the time? 15 A. Well, I have certainly seen it because it was addressed 16 to me. 17 Q. You were included as someone to whom the email was 18 copied, but I think you said earlier this getting -- 19 considering termination of the notices was a work stream 20 in relation to which you had a particular involvement. 21 Was that correct? 22 A. Yes. 23 Q. If you look at the first page of the text itself, that's 24 page 2 of the document here, and we look at the upper 25 part and see what the instructions are, we see that: 160 1 "Senior Counsel is instructed by Instructing 2 Solicitors who act on behalf of tie Limited and The City 3 of Edinburgh Council. Senior Counsel is respectfully asked 4 to focus initially on his assessment of the set of 5 questions put to him by these instructions. These are 6 intended to assist in forming the advice sought, but are 7 in no sense restrictive or exclusionary." 8 If we go to the questions, they start on page 10. 9 We start with question A, if you look at the upper half, 10 you can see that the first question is: 11 "Applying the contractual test contained in Infraco 12 Default (a) that a breach of any obligations must be 13 having a material and adverse effect on the carrying out 14 and completion of the Infraco Works for it to be 15 a ground for termination: does Senior Counsel agree 16 with Instructing Solicitors view that the BSC breaches 17 of contract set out at 3 and 4 of these instructions and 18 specified in drafts A and B are sustainable and adequate 19 grounds for tie to issue the 90.1.2 Remediable 20 Termination Notice?" 21 Do you recall this being made as a subject of 22 a request for opinion of Senior Counsel? 23 A. I know -- I remember that we took advice from Senior 24 Counsel on Remediable Termination Notices, yes. 25 Q. Just looking at this idea of the scope of what was 161 1 sought, we can see question B, if you go to the foot of 2 the page, is: 3 "Based on a review of the materials before him****, what 4 level of confidence does Senior Counsel have that 5 a Court would uphold tie's decision to terminate ..." 6 I'll just get a range of them. Question C, on 7 page 14, 15 of the document: 8 "Does Senior Counsel share Instructing Solicitors' 9 view that Infraco Default (a) allows for a legitimate 10 termination as a consequence of the cumulative material 11 adverse effect of many lower order breaches by the 12 Infraco, producing a situation in which tie is entitled 13 to form the reasonable opinion that BSC no longer 14 intends to be bound by the Infraco Contract?" 15 Without reading through them, we also see, if we 16 scroll down, there's a question D and a question E 17 there. 18 I would like to look in particular at question F 19 over the page, on to page 16: 20 "Given the scheme of Clause 90.1, does Senior 21 Counsel agree with the approach adopted in the two draft 22 documents (A: cover letter and B: draft Remediable 23 Termination Notice)? If yes, would Senior Counsel 24 recommend any additions or refinements to the two 25 drafts, bearing in mind tie has absolute discretion over 162 1 the acceptance/rejection of a BSC rectification plan 2 submitted pursuant to Clause 9.02?" 3 And there are other questions thereafter. I don't 4 propose to read through them all, but the point is: do 5 you recall advice being sought on the substance of the 6 termination process and also the procedure that would 7 have to be gone through? 8 A. I do. As I said earlier in my evidence, that at this 9 point in time we were seeking the best advice we could 10 on the various options going forward. And certainly we 11 asked the advice of Richard Keen on a number of matters, 12 including termination. 13 Q. Did you get a response to that request? 14 A. I'm sure we did, Mr Lake. My memory tells me that he -- 15 in simple terms advised caution about Remediable 16 Termination Notices leading to termination, but then 17 made the comment: you only want one to stick. So do 18 them in single ones. 19 But my memory also was that he was -- he was very 20 forthright on the possible adverse -- adverse effect of 21 terminating the contract. I think he almost went as 22 far -- you've obviously read the papers you provide me. 23 He obviously went as far as saying it's almost 24 impossible to terminate the contract. 25 Q. If we could look at another document, CEC00101459. 163 1 Enlarge the upper half of this. We will see it's noted 2 as: 3 "Summary of discussions with Richard Keen QC on 4 4 November 2010 in relation to Project Resolution." 5 I think Project Resolution was the new title for 6 seeking to terminate the agreement; is that correct? 7 A. Probably, yes. 8 Q. We can see of all the people in attendance, you are 9 there, along with Richard Keen QC, but also 10 representatives of DLA and McGrigors, and Steven Bell is 11 there from tie. Do you see that? 12 A. Yes. 13 Q. I should also say for completeness there are two 14 representatives of the Council Legal Department. 15 Now, we saw the email attaching the instructions to 16 Counsel was dated 22 June. This is a meeting that took 17 place on 4 November. Can you recall, was there 18 a meeting or other contact with Mr Keen in relation to 19 this issue between the request for advice and this 20 consultation? 21 A. With certainty -- with certainty I can't say I can, 22 Mr Lake. We had a number of meetings with Richard Keen. 23 So with certainty, I can't say whether we did or we 24 didn't. 25 But I would venture that this would be a record of 164 1 any meeting that we had with him in the documents 2 somewhere. 3 Q. If we just look at what was said in the notes of this 4 meeting, under the heading "Scope of exercise to be 5 carried out", it does note, 2.1: 6 "tie have requested that a report be produced (by 7 McGrigors) by the end of November 2010 which will 8 address certain key failures on the part of Infraco 9 which were the subject matter of RTNs. The aim of the 10 exercise is for tie and CEC to understand the various 11 options available and potential exposure flowing from 12 those options." 13 Had you been involved in the decision to request 14 McGrigors provide a report? 15 A. I can't answer that in the affirmative or the negative. 16 Q. Look at paragraph 2.3. It says: 17 "This exercise will require: (a) The ingathering of 18 information to inform a factual matrix; (b) Analysis and 19 recommendations based on the termination provisions of 20 the Infraco Contract. 21 The starting point for Richard Keen is to arrive at 22 a consensus on the model that is envisaged by the 23 contract in the event of termination." 24 Again, do you recall the discussions around these 25 matters at this time? 165 1 A. I don't recall this meeting at all. 2 Q. At all? 3 A. No. I was obviously there, but it was eight, six, 4 seven, years ago. 5 Q. Could we look on, please, to page 3, in section 5 of 6 this note. Could we enlarge heading 5 and the text 7 underneath it. The heading 5 is "Establishing Infraco 8 Default". What it says is: 9 "There was some discussion in relation to the issues 10 which require to be investigated in order to establish 11 the strength of tie's position in relation to the 12 various Infraco Defaults that have formed the subject 13 matter of the RTNs." 14 It's clear from that, obviously, that RTNs had 15 already been served? 16 A. Mm-hm. 17 Q. Yet this is some discussion with Mr Keen, saying it will 18 be necessary to investigate issues in order to establish 19 the strength of tie's position. 20 Were you aware as to why that wasn't done before 21 notices were served? 22 A. If I remember rightly, Richard Keen thought that some of 23 our -- some of our notices could have been improved. 24 I make the comment that we're dealing here with 25 a non-standard form of contract, and without any 166 1 precedent of what was required. I think Richard Keen 2 was saying you need to do this -- you need to do 3 something to improve this, to make it stick. 4 Q. What he seems to be saying here is it's not so much 5 a matter of the question of the notices, it's a matter 6 of the substance? 7 A. Yes. 8 Q. Are the facts good enough to support termination? 9 A. That's what I'm saying. You need to improve the content 10 of the notice. I can't remember what it was 11 specifically, but I'm certain that's the case, that he 12 wasn't exactly critical, but he was offering advice that 13 there needed to be more work done on them to make them 14 stick. 15 Q. Could we look please then at another document. It's 16 reference CEC00207814. 17 I have taken things slightly out of chronological 18 order because we can see this is 23 September 2010, an 19 email from Joanne Glover at DLA to Richard Jeffrey, 20 Steven Bell, David Mackay, you, and Susan Clark, and the 21 subject matter is Keen's opinion on the RTN. Do you see 22 that? 23 A. Mm-hm. 24 Q. What Ms Glover says is: 25 "We have received comments from Richard Keen QC on 167 1 the RTN today (by phone call this afternoon). 2 3 sentences/phrases which he suggested are 3 removed and one typo." 4 Then without reading through all the details, he 5 seems to be making quite detailed comments on the 6 particular paragraphs within the drafts that had been 7 provided by tie; is that correct? 8 A. Mm-hm. 9 Q. It's also noted that: 10 "Keen appeared comfortable with the approach taken 11 in the RTN and raised no concerns ... above ... For the 12 second time, Keen appears extremely engaged on this. 13 "Keen would like an electronic copy of the final RTN 14 which was issued (we can send this on to him if you are 15 comfortable with that). 16 Keen recommends that if there are any instances of 17 disputed NDs which are referred to DRP, the adjudication 18 goes before Howie, as Howie is a 'detailed contractual 19 man'." 20 Now, having received this advice with the comments 21 about the RTNs, what did you take from this advice? 22 A. To be fair, Mr Lake, I would have to see the whole 23 chain. I mean, which RTN is this applying to? I mean, 24 on the face of it, he appeared comfortable with the 25 approach taken in the RTN. I don't know which one it 168 1 is. 2 What would I -- what I would take it from it, 3 I would have taken from it some comfort, I expect, on -- 4 on the approach that we were taking on issuing RTNs. 5 Q. Was he sounding any note of caution at this time in 6 relation to the RTN he'd been issued? 7 A. I honestly can't remember. Richard Keen very often 8 sounds notes of caution. I'm sure he was. 9 Q. Could I ask you then to look at another communication, 10 an email reference CEC00013537. 11 At the bottom half of the screen here, the lower 12 half, we can see there's an email which came from 13 Alastair Maclean, City of Edinburgh Council. It's 14 addressed to Richard Jeffrey, copied to other people 15 within the Council? 16 A. Mm-hm. 17 Q. You go over the page, and look at the upper half, we can 18 see that what Mr Maclean says is: 19 "As requested, I set out below the advice which CEC 20 received in London on Tuesday from Nicholas Dennys QC 21 and which we discussed on Wednesday afternoon." 22 Now, were you made -- I see this email isn't 23 addressed to you, but were you made aware of its terms 24 and the nature of the advice that had been obtained from 25 Nicholas Dennys QC by the Council? 169 1 A. I wasn't, Mr Lake, and neither was -- I remember this, 2 because neither was I made aware of exactly how deep 3 a briefing he had about the contract and the contract 4 terms. 5 Q. When you say that he had about the contract terms, is 6 that Mr Dennys? 7 A. Well, I mean, I didn't know what information he'd been 8 given about the history of the contract and the way that 9 it had been -- and the terms that had been managed by 10 the contractor. 11 Q. Another document to look at, please. TIE00080959. 12 You can see this is headed "REPORT FOR tie LTD ON 13 CERTAIN ISSUES CONCERNING EDINBURGH TRAM PROJECT". It's 14 from McGrigors and it has a date on it of 15 14 December 2010; do you see that? 16 A. Mm-hm. 17 Q. Do you recall having seen this at the time? 18 A. I have seen it at the time, yes, Mr Lake. 19 Q. Could we go over to page 4, please, and enlarge 20 paragraph 1.5. You can see it says: 21 "To the extent that Remediable Termination Notices 22 have already been issued, it would be unsafe to rely on 23 them: (a) Without the benefit of the outcomes of the 24 forensic exercise referred to above; and (b) Because 25 there is a material risk associated with the formulation 170 1 of the Remediable Termination Notices (based on the 2 sample which has been considered by McGrigors and 3 Richard Keen QC)." 4 Now, what was your reaction to getting this advice, 5 which doubts both the content and the form of these 6 Remediable Termination Notices? 7 A. I honestly can't remember what my reaction was seven 8 years ago to that. This was a fluid situation that 9 we -- that we were dealing with. 10 Q. It was something you'd been working on for months, 11 hadn't you? 12 A. Yes. Can you just go to the forensic exercise? 13 Q. Certainly. Can we enlarge paragraphs 1.3 and 1.4. We 14 can see 1.3 is: 15 "Establishing that a Infraco Default has occurred 16 requires detailed forensic analysis; the issue will be 17 subject to intense scrutiny in the context of any 18 ensuing dispute, which is ultimately likely to be 19 ventilated before the courts. The key default is 20 Infraco Default (a), which involves proving not only 21 a breach of the Infraco Contract, but also that the 22 breach has materially and adversely affected the 23 carrying out and/or completion of the Infraco Works. 24 The exercise referred to in the foregoing paragraph 25 includes the compilation, review and analysis of all 171 1 relevant written material as well as witness evidence. 2 Expert input is also required in relation to technical 3 and planning issues. That exercise has now been put in 4 train. Its purpose is to enable an informed decision to 5 be taken on whether tie is likely to be able to sustain 6 an argument that an Infraco Default has occurred." 7 Essentially it appears to be saying there, isn't it, 8 that there is no -- nothing by way of that sort of work 9 has been done, and now it's taking the view that without 10 that, it simply would be not safe to rely on the 11 notices? 12 A. I think that undoubtedly is the meaning of that. At 13 that point in time, December 10, we -- we were embarking 14 on the process of mediation, and I may even have been 15 relieved at this point in time at this advice because it 16 underscored that termination was not -- not the best 17 option. 18 Q. You had been working on termination and preparation of 19 the notices for at least five months when we saw the 20 advice going to Mr Keen; is that correct? 21 A. It seems so. I mean, I don't remember it being five 22 months, to be straight with you. But it seems so from 23 those dates, yes. 24 Q. And during that five months, you had prepared or been 25 party to -- the submission of a request for an opinion 172 1 from Mr Keen, addressing both the merits and the 2 procedure of the termination notices. 3 A. Which he'd expressed satisfaction at. 4 Q. Yes. So when you then got in December a report saying 5 that both McGrigors and Richard Keen agreed that it 6 would be unsafe to rely on them, surely there must be 7 some strong reaction to that? 8 A. If you think so, Mr Lake, but I can assure you I don't 9 remember reacting strongly about it. 10 Q. I want to turn now to questions of the mediation. 11 I think in your statement, putting it colloquially, 12 you expressed some dissatisfaction or unhappiness with 13 the outcome. 14 A. Do I? 15 Q. Were you happy with the outcome of the mediation? Did 16 you think it was a good one? 17 A. I was happy with the outcome of the mediation because 18 the client seemed to be happy with the outcome of the 19 mediation. 20 Q. Did you think it was a good outcome? 21 A. In mediation, Mr Lake, as I'm sure you know, rarely is 22 everybody really happy with the outcome. It's 23 a compromise. 24 I was delighted that the parties had come to an 25 agreement whereby Edinburgh would get some working tram 173 1 network at price certainty. 2 If you ask me if -- if the question is directed, 3 would I like the price to have been less, yes, sure 4 I would. But that, I think, is relatively human nature. 5 Q. The price that was ultimately agreed was very much 6 larger than the price that the Council had said they 7 were willing to pay at the opening of the mediation; is 8 that correct? 9 A. The price that was offered initially was based on our 10 assessment of what the fair value of the contract would 11 have been if all those circumstances had been known and 12 they'd been on those terms at May 2008. So that was the 13 price that was offered. 14 And it was offered under -- and internally there was 15 explanation that one would expect that to increase in 16 settlement. So yes, it was higher than that. 17 But I don't think it was as high as they -- as they 18 claimed. 19 Q. What was the basis on which -- are you aware of what the 20 basis was on which the sum to be paid was increased from 21 the original offer to that finally accepted? 22 A. As I remember the process, Mr Lake, the -- we'd been at 23 it for several days, two or three days, and we were in 24 the middle -- middle of the night/early morning, and we 25 reached -- things had reached a position where it looked 174 1 as though there was going to be complete breakdown. And 2 we put together at that time a shape of the deal and 3 a possible price, and I remember asking Sue Bruce 4 whether that is something she felt she could offer, and 5 she -- she did, and she went in and came back, not too 6 long afterwards, delighted with the outcome. 7 Now, as far as how that sum of money was built up, 8 I'm pretty certain that I did a rough calculation. 9 I don't have a copy of that, but I think Mr Smith has 10 probably got a copy of how it was calculated. 11 Q. So the number that was ultimately -- first of all, for 12 clarity, could we look at page 33 of your statement. 13 And paragraph 6 at the foot of the page there. Is the 14 process you have just described what you noted there, 15 that you drafted a skeleton of what would break the 16 deadlock and Sue Bruce was enthusiastic about it, and it 17 got the backing, is that the one that was ultimately 18 carried forward? 19 A. Yes, I remember it well because it was in my 20 handwriting, and Sue Bruce says she was going to frame 21 it. 22 Q. You said in your evidence to me earlier this afternoon 23 that you'd already -- the terms of the agreement had 24 already been settled or concluded between the parties, 25 even if not formally recorded in the agreement? 175 1 A. What I said was Project Carlisle terms was, and the 2 mediation was based on Project Carlisle. I think -- if 3 I remember rightly, I think the Heads of Agreement we 4 agreed on the night incorporated Project Carlisle 5 specifically. You'll remind me if it didn't, but 6 I think that's right. 7 Q. The skeleton you sketched out, was that simply of the 8 finances, the terms? 9 A. No, no. I think -- I think there was -- I sketched out 10 12 terms, and there was one term added, if I remember 11 rightly, in the note that was the Minute of 12 Understanding and Agreement that was signed between the 13 Directors from Germany and Sue Bruce, Vic Emery and 14 Ainslie McLaughlin. And that included the price of 15 329,000 -- 329 million for -- to Haymarket, and 16 provisionally 39 million to St Andrew Square. 17 Q. Where did you get those numbers? How did you arrive at 18 them? 19 A. I wrote the calculation down, I'm pretty certain. 20 I think Mr Smith has got that. But it would be from my 21 knowledge of the make-up of -- of the contract price and 22 the fair price that we'd arrived at, and looking at 23 their claims, an assessment of what -- listening to what 24 had been said and what sum I thought would definitely 25 get an agreement. 176 1 Q. We -- 2 A. In other words, judgement. 3 Q. You described it as a calculation or a fair price 4 arrived at for the works. 5 That gives the impression that there was an 6 objective basis on which you felt it was a right sum, 7 rather than merely being what, quite crudely, could be 8 called a horse trade? 9 A. I think you could probably be crude. 10 Q. Sorry? 11 A. I think you could probably be crude. 12 Q. It would be crude? 13 A. It was our starting position against their starting 14 position. 15 Q. It was accepted at that time by Infraco and a deal was 16 ultimately -- 17 A. No, no, the fair price, which I think we submitted after 18 they'd made their submission, was our starting position. 19 And that, as I say, was the price -- it's an important 20 price because -- important calculation because it showed 21 what the contract price should have been if the terms of 22 the contract had been -- had been as we'd negotiated in 23 Project Carlisle, and the work content from the airport 24 to Haymarket was -- was as was finally designed. 25 CHAIR OF THE INQUIRY: Can I just clarify, when you say it 177 1 was your starting position, what was your starting 2 position? Was it this figure that you calculated early 3 in the morning of the fourth day? 4 A. No, no, that was the -- that was the Mediation 5 Agreement. But, I mean, in a negotiation, it's not 6 unusual -- in fact it's more normal than not -- that the 7 two parties take extreme views. We put forward, 8 I remember, the fair value as being our starting 9 position, and there is an explanatory note where -- said 10 that we would expect a negotiation to increase on that. 11 But not as far as they were asking for. 12 Always remembering that everything they'd asked for 13 in the past was 40 per cent too high. 14 MR LAKE: Everything they asked for? 15 A. In the past had been 40 per cent too high. I think it 16 was fair to assume that what they were asking for was 17 a negotiating position. As I'm talking I'm remembering. 18 I think that Mr Darcy and the gentleman, the senior 19 gentlemen from Siemens had said they were prepared to 20 negotiate on that price. 21 Q. I'm just trying to understand where the 12 point 22 document that you gave Sue Bruce, where that fits into 23 the overall negotiations. 24 My understanding is -- 25 A. Sorry. Shall I explain that? 178 1 Q. Yes. 2 A. Because the negotiation -- the negotiations at 3 mediation, earlier that morning, Wednesday or Thursday 4 morning, appeared to have broken down. So what I did 5 then was go into a dark corner and write down a draft 6 memo of understanding which amounted to 12 points, and 7 that is on record, I'm sure, or should be. 8 And I said -- I remember saying: would you be 9 prepared to accept an agreement based on these terms? 10 And would you be prepared to accept a price of X, which 11 I think was probably the price that came out of 329,000. 12 And Sue Bruce, I remember, said yes, she could go 13 for that, and I think Ainslie McLaughlin rang 14 John Swinney and got his approval, and then they went in 15 to -- into the side meeting with their principals, and 16 came out shortly afterward and said: we've done the 17 deal, and then that 12 point plan was typed up, 18 a 13th point was added, which had been discussed in 19 their meeting, and that was signed. So there was 20 a signed agreement of the basic terms, as we left the 21 room at Mar Hall, and that was then refined later into 22 the more detailed Minute of Agreement. 23 Q. So when you talk about an initial position and offers 24 and counter-offers, that had all gone on before you got 25 to the stage of thinking that everything had broken down 179 1 and you were writing your 12 points? 2 A. Yes, sure. That was -- that happened in 3 September/October. 4 Q. Had that also happened in the course of the mediation, 5 that there had been offers and counter-offers and they 6 had -- 7 A. No, no. Well, I'm sure there was discussion about that, 8 and I -- I'm pretty certain that Sue Bruce in one of the 9 side meetings would have made some sort of offer to 10 the -- to the Infraco people that wasn't acceptable. 11 But I mean, you know, I'm sure you know about mediation. 12 People like me in that position, wasn't involved in 13 those meetings. I can't for certain say what was 14 discussed. 15 Q. But in terms of the number or numbers that you put into 16 your 12 point proposal, it was really trying to get to 17 the idea of whether those numbers were based on 18 a calculation or an assessment of entitlement in some 19 way, or were they quite, as I have used the rather crude 20 expression, horse trading figures? 21 A. No, they would be judgement figures at that time. 22 Q. Judgement figures in what sense? 23 A. Well, I would judge, from what I was told, and what I'd 24 seen happening at the mediation, what figure should 25 settle it. 180 1 Q. So you were trying to choose the figure that would make 2 it go away, rather than the figure that was -- 3 A. I think that's a bit unfair, go away. I was trying to 4 judge a figure that would settle it. 5 Q. Okay. I'm not going to fight about that terminology. 6 CHAIR OF THE INQUIRY: Could I just ask about this piece of 7 paper or pieces of paper that you wrote down these 12 8 points. 9 You say that Sue Bruce commented about the 10 handwriting and that she might frame it. 11 A. I did it in handwriting to start with, and I was just 12 saying, she was so pleased with the outcome, I remember 13 her saying she was going to have it framed on her office 14 wall. 15 CHAIR OF THE INQUIRY: I'm interested to know what happened 16 to that piece of paper. You say Mr Smith had it. 17 A. Mr Smith was appointed by Sue Bruce to look at 18 commercial matters, I think that was his appointment. 19 And he was keeping a track of the documentation. So if 20 the copy still exists, then it will be with Mr Smith. 21 CHAIR OF THE INQUIRY: So that's Nick Smith who was in the 22 Legal Department? 23 A. No, no, Colin Smith. 24 CHAIR OF THE INQUIRY: Oh, Colin Smith. I beg your pardon. 25 So Colin Smith was in charge of the documents -- 181 1 A. Yes. 2 CHAIR OF THE INQUIRY: -- relating to the CEC's position at 3 mediation? 4 A. Yes. But, I mean, I think I have said in my evidence 5 that I have a gap in my information of the meeting at -- 6 on the Saturday, and my memory is that we handed our 7 documents to Colin Smith afterwards, which is not 8 unusual in a mediation, that for privacy's sake, you 9 give your documents up at the end of the mediation. 10 CHAIR OF THE INQUIRY: So that someone has custody -- 11 A. Somebody has custody. 12 CHAIR OF THE INQUIRY: -- of the documents. Thank you. 13 MR LAKE: I would just like to ask you a few questions about 14 the roles played by various other people in the 15 mediation; the role played by Dame Sue Bruce is quite 16 clear, but what role was played by Nigel Robson? 17 A. As I say in my evidence, I recognised that this 18 mediation was going to be a very complex mediation, 19 unusual mediation. I think there's a note about that. 20 I'd worked with Nigel once before on an expert 21 determination involving termination, and I was impressed 22 with the fact -- he's also the President of the 23 Institution of Arbitrators at that time. And I felt 24 that he was the right person to bring in to advise our 25 parties on the mediation. 182 1 And he played quite a pivotal role with Sue Bruce 2 and Vic Emery in terms of how they conducted the 3 mediation and, from memory, he attended a lot of the -- 4 a lot of the side meetings with Infraco's German 5 Directors. 6 I'm sure Ms Bruce will tell you better than I will 7 what his role was, what role he played, but he was 8 another facilitator on what was an incredibly difficult 9 mediation. 10 Q. What role do you consider that Richard Jeffrey played in 11 the course of the mediation? 12 A. Well, I think you've picked out something. I said he 13 was frozen out. 14 Actually, what role did he play? He played -- being 15 a bit unkind, a sort of bit part in so much as he was 16 involved in all of the discussions, the group 17 discussions on our side. He wasn't involved at all with 18 the -- with negotiations with the other side, the side 19 negotiations. 20 But neither were his -- were his oppos from the 21 other side. It very much became a mediation between the 22 two principal Directors from Germany and CAF's Managing 23 Director one side, Sue Bruce, Vic Emery, and 24 Ainslie McLaughlin. 25 Q. I then want to look at the other two you have mentioned 183 1 there; Vic Emery who was by then the Chairman of tie, 2 and Ainslie McLaughlin. If we first take Vic Emery, 3 what was his role in the mediation process? 4 A. He was very much Sue Bruce's right-hand man, I think, is 5 the best way to explain that. But Sue Bruce -- 6 Sue Bruce was -- if you'll excuse me -- was the man with 7 the money. I mean she was -- no doubt about it, she was 8 leading the mediation, and I was grateful for that. For 9 strong leadership, and Vic -- Vic also allowed that to 10 happen. 11 Q. What about Ainslie McLaughlin from Transport Scotland? 12 What role did he play? 13 A. He was extreme -- he was extremely supportive in the -- 14 in the discussions about the strategy and the 15 negotiations. 16 Q. In what sense? 17 A. Well, he contributed to the discussions. I mean, you 18 know, this was not -- this was over two or three days of 19 quite intense hours, and he contributed very -- very 20 objectively and constructively in those discussions. 21 Q. What -- when it came to the decision as to what to do 22 and what to offer and what to say, did he have 23 a practical involvement in that? 24 A. Yes. So did everybody else. You know, it was almost 25 unanimous decision. I think in fairness to 184 1 Richard Jeffrey, I have to say, I don't think he was in 2 full agreement with -- with the settlement. 3 Q. If Vic Emery represented tie, and the contract was with 4 tie, and Sue Bruce was there from the Council, and as 5 you say, the Council were the ones with the money, they 6 were paying for the whole of the overrun, what was 7 Ainslie McLaughlin's role there? What was he 8 representing? 9 A. The Scottish Government, Transport Scotland. 10 Q. With a view to achieving or ensuring what? 11 A. You would have to ask Ainslie McLaughlin, I think. As 12 I said, I think in my file note of the meeting, he did 13 seek approval from John Swinney. 14 CHAIR OF THE INQUIRY: Was that before the agreement was 15 signed off? 16 A. I think it's before we actually -- they went and made 17 the final offer, but I wouldn't be certain about that, 18 my Lord. 19 CHAIR OF THE INQUIRY: Thank you. 20 A. Certainly he sought approval. 21 MR LAKE: One last matter. You do refer in your witness 22 statement to the fact that Siemens had forward bought 23 materials that they were going to use in the contract, 24 and you were concerned also that they had pricing errors 25 or under-priced the work. 185 1 Just in relation to the forward purchasing of 2 materials, is that something that's necessarily unusual 3 in contracts of this size, if a contractor wishes to 4 give themselves a bit of price certainty as to their 5 outputs? 6 A. And contractors do forward buy materials, yes. It's not 7 unusual. 8 MR LAKE: Thank you very much, Mr Rush. Those are all my 9 questions. 10 Questions by CHAIR OF THE INQUIRY 11 CHAIR OF THE INQUIRY: Could I just ask you something about 12 the mediation. 13 You said that this -- you had reached deadlock 14 really by the early hours of the fourth day or 15 something, and then you came up with this settlement. 16 Can you tell me how many days did this mediation 17 actually last? 18 A. We had an in-house meeting on the Monday, and I think it 19 was the Thursday -- I think the German Directors were 20 catching a plane on the Thursday morning. So we'd gone 21 Tuesday, Wednesday, into Thursday morning. 22 Then we all went home and got some sleep, and then 23 on Thursday and Friday there were certain aspects that 24 needed to be -- I can't remember what they were, but 25 there were certain aspects that needed some 186 1 clarification, and we worked on that, and then on the 2 Saturday we met again to -- to sign up the final 3 agreement. 4 CHAIR OF THE INQUIRY: So -- 5 A. So it's a week really. And they were long hours, 6 my Lord. 7 CHAIR OF THE INQUIRY: As far as time spent at Mar Hall was 8 concerned, was the entire team at Mar Hall from Monday 9 to Thursday or -- 10 A. Yes, my Lord. The team started to get pared down after 11 that. On Saturday I think we finished up with a much 12 reduced number. 13 CHAIR OF THE INQUIRY: The meetings on Friday and Saturday, 14 although pared down, were still at Mar Hall? 15 A. After Mar Hall we went to Gleddoch House, because 16 Mar Hall needed the rooms back. 17 I mean, my experience, it was an unusual mediation. 18 There was huge numbers. In the preliminary meeting, 19 I think there was something like 60 people present. 20 CHAIR OF THE INQUIRY: How many of them were on your side, 21 as it were. 22 A. No one was on my side, my Lord. 23 CHAIR OF THE INQUIRY: I'm sure that's not true. 24 A. I think probably about a third of them. 25 CHAIR OF THE INQUIRY: So about 20 people from the -- 187 1 A. I think so, yes. 2 CHAIR OF THE INQUIRY: -- city team at Mar Hall for about 3 a week? 4 A. I know we got criticised for Mar Hall, but it's 5 difficult to find a venue for those sort of numbers that 6 you could have break-out rooms and a room big enough for 7 joint meetings. 8 CHAIR OF THE INQUIRY: Then when Mar Hall wanted the rooms 9 back, you went to Gleddoch House. 10 A. Yes. We only go to the best hotels, my Lord. 11 CHAIR OF THE INQUIRY: I think there are -- this might be 12 a convenient point to break. 13 MR LAKE: I'm not sure if any parties have any questions. 14 CHAIR OF THE INQUIRY: I've got notes of questions from 15 Beltrami & Co, and also some note of questions from 16 Eversheds on behalf of Siemens. 17 First of all, as far as Eversheds are concerned, 18 could I find out, do you still have the points that you 19 want to raise? 20 MR SPICKETT: Eversheds are not here today. I'm solicitor 21 for Siemens, but the questions have already been put by 22 Counsel for the Inquiry. So no further questions. 23 CHAIR OF THE INQUIRY: Thank you. 24 And Mr Fairley, do you -- the notes of possible 25 questions, have they been covered or are there still 188 1 some outstanding? 2 MR FAIRLEY: They haven't been covered, my Lord, but I'm 3 sure if they're not important enough to be raised by 4 Inquiry Counsel, we can maybe pick them up in 5 submissions. 6 CHAIR OF THE INQUIRY: Fair enough. Thank you very much. 7 Well, Mr Rush, I'm pleased to say that that's the 8 end of your evidence. You've still under citation. So 9 technically you could be recalled if other matters 10 arise. Hopefully that won't be necessary, but in the 11 meantime you're excused, and thank you very much. 12 A. Thank you, my Lord. Thank you, Mr Lake. 13 CHAIR OF THE INQUIRY: So we will adjourn until Tuesday at 14 9.30. 15 (3.09 pm) 16 (The hearing adjourned until 14 November 2017 at 9.30 am) 17 18 19 20 21 22 23 24 25 189 1 INDEX 2 PAGE 3 MR RICHARD JEFFREY (continued) .......................1 4 5 Examination by MR LAKE (continued) ............1 6 7 Examination by MR FAIRLEY ....................82 8 9 Examination by MR MARTIN ....................110 10 11 Questions by CHAIR OF THE INQUIRY ...........113 12 13 MR TONY RUSH (sworn) ...............................115 14 15 Examination by MR LAKE ......................115 16 17 Questions by CHAIR OF THE INQUIRY ...........186 18 19 20 21 22 23 24 25 190