1 Wednesday, 8 November 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Apologies. Mr Lake? 4 MR LAKE: My Lord, the first witness this morning is 5 Richard Jeffrey. 6 MR RICHARD JEFFREY (affirmed) 7 CHAIR OF THE INQUIRY: You are going to be asked some 8 questions initially by Counsel to the Inquiry, Mr Lake. 9 If you just listen to the question and answer it as 10 directly and concisely as possible. 11 If you also keep your voice up and speak at a steady 12 pace so that the shorthand writers can keep up with you. 13 A. Okay. 14 Examination by MR LAKE 15 MR LAKE: Mr Jeffrey, could you state your full name, 16 please. 17 A. Richard Benjamin Jeffrey. 18 Q. The Inquiry has details of your address. You were the 19 Chief Executive of tie sometime between 2008 up to, I 20 think, 2011; is that correct? 21 A. 2009 to 2011, I think. 22 Q. Pardon me. 23 Could we look please at a document on the screen. 24 It's TRI00000097_C. 25 A. Yes. 1 1 Q. I think you should also have a hard copy of that in 2 front of you? 3 A. Yes. 4 Q. Is that the witness statement that you prepared for the 5 purposes of this Inquiry? 6 A. It is. 7 Q. I think you also prepared, having considered your 8 statement later on, there were a number of corrections 9 or errata you wished to correct, and you provided 10 a separate document with a list of those. Do you have 11 that available in front of you? 12 A. I do, yes. 13 Q. Once those corrections are made to the statement, are 14 you happy that that statement be accepted as your 15 evidence for the purposes of this Inquiry? 16 A. Yes. 17 Q. A few additional questions that I would like to ask you. 18 I think you started as Chief Executive of tie in 19 2009, as you say, and then you went on to become 20 a Director of the company; is that correct? 21 A. Yes. 22 Q. You also sat on the Tram Project Board? 23 A. Yes. 24 Q. As time went on, I think to early 2010, you also 25 attended meetings of Transport Edinburgh Limited, TEL? 2 1 A. Yes. 2 Q. I think if we turn to your statement, page 4, and we 3 look at -- two versions are paginated slightly 4 differently. Look at page 2, please. And paragraph 8? 5 A. Mm-hm. 6 Q. You commented there: 7 "A further problem was that the governance and 8 structure with the various parties involved (for example 9 tie, TEL and CEC) created "too many cooks" and a lack of 10 clarity." 11 Could you explain what you mean by that? 12 A. My understanding is that the original concept was that 13 there would be slightly different roles for tie, for 14 TEL, and for the Tram Project Board. 15 In practice, as tie's role became exclusively 16 focused on the tram, the -- there was a great deal of 17 effectively repetition between the Tram Project Board, 18 the tie Board and the TEL Board, and in my view the 19 three layers didn't add any value. They just added 20 layers really. 21 There may have been a rationale for them originally, 22 but certainly during my time there, there didn't seem to 23 be any rationale for having the three layers. 24 In addition, the role of CEC as shareholder and 25 having representatives, both councillors and Council 3 1 officers on the different Boards, again, I felt it 2 confused matters between the role of CEC as shareholder 3 and as funder and with representatives on the Board. 4 Q. What did you understand was the role of the councillors 5 sitting on these -- the Boards of the two companies and 6 the Tram Project Board? 7 A. I believed they were there as non-executive directors, 8 to represent the interests of the shareholders. 9 Q. So they were representing the Council in essence? 10 A. Yes, in essence. 11 Q. Do you think they were effective in that role? 12 A. I think by and large, yes, accepting that they weren't 13 technical experts, but that isn't necessarily their role 14 as non-executive directors. 15 I didn't feel at any point that they were 16 ineffective. That would almost be a better question for 17 the shareholders to ask whether they felt their 18 interests were properly represented. 19 Q. But just in terms of how the Board acted as 20 non-executive directors, it would be appropriate they 21 would have a challenge function? 22 A. Yes. 23 Q. Do you think they were in a position to perform 24 a challenge function? 25 A. Yes, to the extent that a non-executive director is not 4 1 necessarily there as a technical or a legal expert, but 2 as an independent mind, then yes, I think they were in 3 a position to make those challenges. 4 Q. You said the -- having the three different bodies, tie, 5 TEL and the Tram Project Board, you don't think added 6 anything. Do you think it created confusion in the lack 7 of clarity as to where decisions were being taken? 8 A. Not at a practical level, no. The only time it really 9 became an issue of concern was towards the end of the 10 project where the funding constraints were becoming 11 relevant and we needed to be absolutely clear which 12 Board was acting with which authority, and where was it 13 getting its authority from, so that we weren't in 14 a position where, for example, the Tram Project Board 15 might sanction expenditure that was not within its 16 approved funding. And my recollection, which may be 17 slightly vague after these years, is that the Tram 18 Project Board needed to get its authorisation from the 19 tie Board, which in turn needed to get its authorisation 20 from the TEL Board. 21 At a practical level, that didn't particularly 22 create confusion because it was effectively all the same 23 people. But towards the end of the project, as I say, 24 where the limit of the funding was becoming 25 a consideration, then it did start to cause me a little 5 1 bit more concern. 2 Q. The Inquiry has seen reports or -- reports to the Boards 3 in relation to governance which describe that the Tram 4 Project Board was to be ultimately established as 5 a sub-committee of the TEL Board. Do you recall that? 6 A. I don't specifically recall it, but it doesn't come as 7 a surprise or a shock to me. 8 Q. And it was the Tram Project Board was the one ultimately 9 charged with the delivery of the tram project and then 10 the running of the integrated tram and buses; is that 11 your understanding? 12 A. My understanding is that the Tram Project Board was 13 charged with the delivery of the tram project, that in 14 the longer term, the ultimate responsibility for running 15 the combined operation was a TEL function. But 16 certainly the Tram Project Board was the principal 17 vehicle for the delivery of the tram project. 18 Q. If the Tram Project Board was the principal delivery 19 vehicle and that was a sub-committee of the TEL Board, 20 that effectively put TEL in the position of being the 21 company responsible for delivery of the tram; is that 22 correct? 23 A. If that's as you say it is, then yes. 24 Q. What I'm really -- if that was what the governance 25 arrangements were, was that apparent on the ground when 6 1 you were the Chief Executive of tie, that it was in 2 fact -- TEL was delivering the project? 3 A. No, to all intents and purposes it was the Tram Project 4 Board where the major decisions were taken as to the 5 strategy and direction of the project delivery. 6 Q. Although the Tram Project Board were taking those 7 decisions, tie was the entity that had entered into the 8 contracts for delivery of the tram project. We have 9 heard that. I take it you would agree with that? 10 A. Yes, yes. 11 Q. If the Tram Project Board were taking decisions as to 12 what was to be done in relation to those contracts, what 13 happened in practice for the Tram Project Board or the 14 TEL Board to give instructions to tie as to what it 15 should do in the contracts? 16 A. I don't specifically recall. I mean, in practice what 17 happened was decisions were made at the Tram Project 18 Board, and those then decisions were then enacted. 19 Q. By tie? 20 A. Yes. 21 Q. In a sense the Tram Project Board had to decide what tie 22 was going to do? 23 A. In practice, yes. 24 Q. Did that cause any difficulties? 25 A. No, not at a practical level. 7 1 Q. Were the distinctions that I'm describing of various 2 corporate responsibilities and where decisions were 3 taken actually observed at all in practice, or was it 4 just the Tram Project Board met and made decisions and 5 then the various employees of tie implemented them? 6 A. It's not fair to say that there was no cognisance of it. 7 In practice the Tram Project Board met, made decisions, 8 and then those decisions were enacted by tie. 9 There were, however, also tie Board meetings and 10 TEL Board meetings, but there was effectively only one 11 item on the agenda, and that was the tram project, and 12 because it was the same people, the tie Board -- largely 13 the same people, the tie Board and the TEL Board 14 effectively endorsed or approved or whatever the right 15 language is, the decisions of the Tram Project Board. 16 But the functioning body, the body that in practice 17 was making the decisions was the Tram Project Board. 18 Q. The point you have just made, if you look at page 21 of 19 your statement, paragraph 116 -- sorry, page 19 of the 20 PowerPoint version. 21 If you just start from the second line, you can see: 22 "There was no dispute between tie, TEL or the TPB [Tram 23 Project Board], or the various sub-committees of the TPB [Tram 24 Project Board], as they were all largely composed of the 25 same people." 8 1 I think that's the point you were just making? 2 A. Yes, I think that's consistent with what I was just 3 saying. 4 Q. If they're all composed of the same people, I take it 5 there could not be any real oversight function being 6 conducted by any of these bodies of the other if it's 7 all the same people? 8 A. Yes, I think that's correct. As I said earlier, there 9 were different layers, but those layers didn't 10 particularly add anything because in effect it was -- it 11 was hard at the time, and it's even harder now, to 12 distinguish between the different roles that those 13 different bodies played. 14 Q. The role of Transport Scotland. You have commented in 15 your statement it was unhelpful to have them disengaged 16 from the project. Why did you consider that was 17 unhelpful? 18 A. Frankly, I find it a little bizarre that somebody -- 19 a body that is putting up 80 per cent of the cost of the 20 project would not be represented on at least one of 21 those Boards. 22 Q. You would be aware that Transport Scotland were 23 represented up until mid-2007? 24 A. Yes, and that was before my time. 25 Q. Did you -- while you were there, express your view that 9 1 it was bizarre that Transport Scotland were not part of 2 the -- 3 A. I don't think I specifically recall expressing that 4 view, and certainly not publicly. I don't think 5 I criticised that decision publicly. 6 Q. You will be aware in early 2011, an Audit Scotland 7 report recommended the Government should think again 8 about the role that Transport Scotland were to play in 9 the project? 10 A. I'm aware of the Audit Scotland report. I don't 11 specifically recall that recommendation. 12 Q. I take it you would be supportive of the recommendation 13 that the role of Transport Scotland be reconsidered? 14 A. I think it means -- depends on what you mean 15 by reviewing the role that they played. 16 Transport Scotland did play a role in the project, 17 particularly towards the latter stages, and I have to 18 say the individuals I dealt with were largely helpful. 19 I think that's playing a role is very different to 20 being formally represented on the Board, and my view at 21 the time, although I may not have expressed it, and now, 22 is that they should have been formally on the Board. 23 I am aware that there was some criticism and some 24 confusion perhaps over the extent to which 25 Transport Scotland were being briefed, which I'm sure if 10 1 you want to come on to, you will, but my view is that 2 that could have all been resolved by having 3 a representative on the Board. 4 Q. That was something I was going to come to. If they had 5 a representative on the Board, they would have been 6 fully appraised of everything that happened by way of 7 discussion? 8 A. They would have had exactly the same information as 9 every other Board member at the same time as every other 10 Board member. So there could have been no accusation 11 that different parties were getting different 12 information. 13 Q. That deals with one aspect of their formal involvement 14 in governance, flow of information. Do you think 15 there's anything that Transport Scotland could have 16 contributed in the other direction, flowing in the other 17 direction, if they were formally part of the governance 18 structure? 19 A. There were a couple of occasions where -- my experience 20 and my previous career was that when things were getting 21 difficult with a contractor or a supplier, that there -- 22 you would escalate this up, for example, to a head 23 office function, where you could have a conversation at 24 a different level. 25 I felt there were times when Transport Scotland 11 1 could have fulfilled that role, and had the sort of 2 conversation outside of the contract at a much higher 3 level and said to the contractor: look, there's bigger 4 issues at stake here, can we not sit down and sort this 5 out in a more productive way than is currently 6 occurring? 7 To my understanding, those conversations never took 8 place. Transport Scotland certainly did have 9 conversations with the contractor, but my understanding 10 is that those conversations were very much in 11 a listening and neutral capacity. 12 Q. At what sort of stage do you think those conversations 13 might have been useful to securing the development of 14 the tram project? 15 A. I think throughout the project actually. Even before 16 I started with the Princes Street dispute, it might have 17 been helpful. And there were various occasions 18 subsequent to that where again it might have been 19 helpful. 20 Q. You said you contrasted earlier the formal involvement 21 in governance on the one hand with them actually having 22 a role more loosely on the other, and you said they did 23 have a role towards the end of the project. 24 A. Yes. I felt I had a good relationship with 25 Ainslie McLaughlin, and had a number of conversations 12 1 with him, discussed a number of issues with him, largely 2 all informally and unrecorded. 3 I -- prior to that I'd also had a reasonably good 4 relationship with Bill Reeve, where there is some 5 correspondence around what we discussed. 6 So they did play a -- an interested role, but 7 I think they could have played a more interventionist 8 role. 9 Q. The role that you are describing there sounds like 10 a very passive role, largely listening and perhaps 11 engaging in general conversation with you about what was 12 happening. Did it go further than that? 13 A. Not to my knowledge. As I said a moment ago, I think 14 they could have played a more interventionist role. 15 Q. At what stage? 16 A. Throughout the project. 17 Q. What about the role that they started to play later on? 18 You describe them as having a role later on. When are 19 we talking about in the timeline? 20 A. I'm afraid I can't remember dates, but it was around the 21 time that Ainslie McLaughlin got involved. As I say, 22 I thought his input was helpful. I guess that would 23 have been around the second half of 2010 onwards. 24 Q. Can you remember any -- how it tied in with any of the 25 stages of the contract or the dispute which would anchor 13 1 it to that? 2 A. Not specifically, no. 3 Q. In what way did their role step up or develop at that 4 time? Was that just the listening and discussing things 5 with you? 6 A. Yes, and I think also a sense I got from Ainslie that 7 actually he was trying to help. 8 Q. How? 9 A. In the conversations that I had with him around -- 10 just -- I don't think there were specific examples. It 11 was just a more generally supportive and encouraging 12 approach, as opposed to a sort of what I'd had in the 13 past, which was perhaps a more standing on the side-lines 14 and criticising type approach. 15 Q. That was a role you'd had from Transport Scotland prior 16 to that date? 17 A. That was certainly the impression I got, yes. 18 Q. Who was undertaking that role, the side-lines and 19 criticising? 20 A. The principal conduit for that was John Ramsay. 21 Q. You say conduit. You obviously think it was coming from 22 somewhere else? 23 A. That would be speculation. 24 Q. Do you think it was coming from the Minister? 25 A. No, I don't think that. 14 1 Q. Okay. In terms of the problems that developed with the 2 tram project as it went on, I just want to try and see 3 if I can draw together what the problems were as they 4 developed. 5 One of them would be that the contractors, the 6 Infraco contractors took the position that when there 7 was a Notified Departure, they were not entitled even to 8 start work until an estimate for the works was agreed. 9 A. There were a range of issues. There is a document, 10 which I'm afraid I don't have the reference for, which 11 I produced as an internal document which I thought 12 summarised the key issues; and if I could summarise that 13 from memory, it was around the principles of the design 14 and the extent to which design changes were or were not 15 part of the contract price. So the whole issue of BDDI 16 to IFC. 17 And the second principal issue was this issue around 18 Clause 65, I think, and Clause 80, which was this 19 obligation or not to progress the works. 20 And the third issue was around the incomplete design 21 and the time it took for the design to be completed. 22 The fourth issue was around the delays to the MUDFA 23 works. 24 So off the top of my head, you know, I think it was 25 a seven or eight-page document that I produced. It 15 1 summarises down to those four key issues. 2 Q. Just to see if I can identify that document, do you know 3 roughly when it was produced? 4 A. No, but I have a copy of it next door. 5 Q. We might take a look at it later on? 6 A. It's on the database. 7 Q. Just to get into the transcript what document you are 8 referring to. 9 Dealing with those four issues, the first one was 10 which designs were included in the price; you described 11 it as the BDDI to IFC issue? 12 A. Yes. 13 Q. That's one that related in the first place to cost; 14 that's correct? 15 A. Yes. 16 Q. But the second aspect of that is that where it was 17 claimed that there was a change from BDDI to IFC and 18 there was a cost implication, that's when the contractor 19 said they could not start work until they had the cost 20 of that agreed, an estimate agreed? 21 A. That's -- that was their argument, yes. 22 Q. The second aspect when you refer to the Clause 65 and 23 Clause 80 question about starting, that is also one that 24 when they considered there was any change, which might 25 be BDDI to IFC or could be other things, the works would 16 1 not start, could not start, they said, until once again 2 the price was agreed? 3 A. That's correct. 4 Q. Just taking those two in isolation, there was one 5 dispute which was going to affect the cost, and the 6 other one was affecting how long the works were going to 7 take? 8 A. Yes, although clearly the first one affects cost and 9 programme. 10 Q. Yes. 11 A. And the second one affects programme and therefore cost. 12 Q. Indeed, because the longer the programme takes, then 13 there would be preliminary costs and things, so the cost 14 would escalate there? 15 A. Indeed. Yes. 16 Q. In terms of the designs, that was an ongoing process 17 throughout the time you were there, wasn't it? 18 A. When you say the designs were an ongoing process, the 19 designs were not complete until, my understanding, early 20 2011. So some four years after the contract was signed. 21 Q. During the period you were there, from after the 22 Princes Street dispute to the mediation, the Mar Hall 23 mediation, what were the factors impeding completion of 24 designs? Why were they still outstanding? 25 A. There were a number of reasons given, all of which 17 1 I thought were slightly secondary. My view is that the 2 principal issue was the failure by the Infraco to manage 3 the design provider, and again a bit of speculation on 4 my part here -- the extent to which the design provider 5 had effectively spent all their fees already and hadn't 6 finished the design, and therefore were trying to finish 7 the design on a shoestring. 8 I also believe to a certain extent that's what this 9 side agreement between Bilfinger Berger and SDS was 10 about trying to resolve. 11 The Infraco's argument was: we can't finish the 12 design because we haven't had this approval or we 13 haven't had that approval; but if I can give one 14 specific example of which I have some background 15 knowledge, the airport tram stop. 16 The original agreement between tie and the airport 17 gave the airport the right to approve the tram stop at 18 the airport. 19 In order to approve the tram stop, the airport needed 20 certain information, and one particular example of that 21 was it needed the information relating to the impact on 22 flooding. 23 Because the designer wasn't able or didn't produce 24 that information, the airport wasn't able to provide its 25 approval. And because it didn't provide its approval, 18 1 the design was delayed. So it's true to say the design 2 was delayed by the lack of approval, but the lack of 3 approval was caused by the lack of a design. 4 There was another example on the land owned by 5 what's now known as International Business Gateway, the 6 land adjacent to the airport, where there was a level 7 crossing and again the landowner reserved the right to 8 approve the design of this level crossing, but because 9 the design wasn't forthcoming, there was nothing for 10 them to approve. 11 Q. The fourth of the factors you mentioned was the 12 completion of utilities works under the MUDFA contract. 13 Again, I think they were ongoing throughout much of 14 the time that you were in post at tie? 15 A. Yes. 16 Q. And remained outstanding after the Mar Hall mediation? 17 A. Certain elements of them, yes. 18 Q. Again, what was your understanding of causing the 19 blockage there? 20 A. Again, I think it's a multifaceted thing. To a certain 21 extent the change in the ownership structures of the 22 utility contractor caused an issue. I stand to be 23 corrected here, so I will -- I may be wrong on this, but 24 my understanding is the original contract was let to 25 Alfred McAlpine, and Alfred McAlpine's utilities 19 1 division was then purchased by Carillion, and the 2 feedback we got from the guys on site was that -- and 3 these are sort of the Carillion supervisors who had been 4 Alfred McAlpine supervisors, were saying that they felt 5 that they had been abandoned, that this wasn't 6 a contract that Carillion particularly wanted. They 7 wanted Alfred McAlpine's business, but they didn't 8 particularly want this contract. They didn't have 9 a great deal of interest in this contract, and as 10 a result it became a bit of an orphan. 11 That's why I took the decision, with the team, we 12 took the decision to remove any remaining works from 13 Carillion, and we didn't get a great deal of push back 14 from them. Actually we were able to conclude the final 15 account with Carillion reasonably trouble free, because 16 I think they were pretty keen to go. 17 So that was one cause. The other cause was the 18 extent of the unmapped utilities and the complexity of 19 them. 20 There were some photographs taken at the time, which 21 I think -- I don't know whether they are available to 22 the Inquiry or not, but they would be very illuminating. 23 Particularly I remember some photographs in York Place, 24 which show a phenomenal tangle of utilities. So there 25 were a great deal of unmapped utilities and I think the 20 1 final amount of utilities relocated was perhaps 2 70 per cent, I think, 67 per cent rings a bell -- 3 greater than the mapped utilities. 4 What I would say on all of that, though, is that had 5 everything else been on the Infraco contract been 6 running smoothly, the delays to the utilities were 7 a manageable problem. There were provisions within the 8 Infraco contract to deal with that, and yes, that would 9 have entitled the Infraco to an extension of time, which 10 I believe tie did give them. So it would have caused 11 a delay, but it was manageable within what you would 12 imagine under a normal construction programme. 13 Q. You described two issues arising in relation to MUDFA. 14 The first of them related to the contractor. 15 A. Mm-hm. 16 Q. You said you terminated by agreement that contract 17 moving forward. 18 A. Yes. 19 Q. The people you said you spoke to on site who felt that 20 the company had lost interest in the project, who were 21 they or can you remember what level of seniority they 22 were? 23 A. I didn't have those conversations personally. These 24 were conversations that were relayed to me by my staff. 25 And they were at -- so I don't know names, I'm afraid, 21 1 but they were at sort of site supervisor type level. 2 Q. The second issue you have described in relation to MUDFA 3 is essentially a technical one to do with the complexity 4 of the work that they were doing. Do you think that 5 could have been resolved if everything else was working? 6 A. Yes. And certainly in terms of learning for the 7 extension of the tram, if that ever happens, I think 8 there are most definitely lessons that can be learned 9 from that as to how that is approached, the time allowed 10 for it, the engagement of some of the statutory 11 utilities providers around trying to resolve issues. 12 If I could give an example perhaps just to 13 illustrate, you might find a situation where a BT 14 manhole needs relocating and a Scottish Water manhole 15 needs relocating. They both have standard designs for 16 manholes, but they are -- both standard designs won't 17 fit in the same place. So it requires both parties to 18 compromise on the design of their manhole. If one party 19 is not prepared to compromise, you physically could not 20 fit both standard manholes in the same place. 21 So a little bit more co-ordination and a collective 22 will to resolve the issues would help. 23 Q. The issues on the other hand that were arising with the 24 Bilfinger Siemens CAF consortium, that you described the 25 change of designs from BDDI to IFC and also the 22 1 Clause 65 and Clause 80 issues, they were, is it fair to 2 say, rather more fundamental legal issues, where 3 positions were taken and there was little ultimately 4 that could be done to get past those positions? 5 A. Yes, I would say they were fundamentally legal rather 6 than technical. 7 Q. I want to look at a question -- when you first joined, 8 you said that the Princes Street Agreement was 9 already -- the Princes Street Agreement was already in 10 place? 11 A. Yes. 12 Q. That dispute had been resolved. What was the state of 13 the project then when you came into it? 14 A. That's -- it depends on how you want to tackle that 15 question. 16 Generally, I thought the work sites across the city 17 were very untidy and poorly managed. And I did raise 18 this with Bilfinger Berger senior management the first 19 time I met them. 20 There was a distinct lack of progress across the 21 whole site, across all the sites. There was no clear 22 way forward on the legal issues. There was no completed 23 design. None of the subcontractors had contracts. They 24 were all working on letters of intent. 25 Yes, so it wasn't a great picture. 23 1 Q. It was apparent that the problems already existed by the 2 time of the Princes Street Agreement? 3 A. Yes. 4 Q. In terms of the progress, this was approximately one 5 year after the Infraco contract had been let. It's 6 clear that obviously very little progress had been 7 taken, and I think no on-street works had been 8 undertaken by that time? 9 A. Other than the Princes Street. 10 Q. Well, nothing had happened by the time you arrived. The 11 agreement had only just been put into place? 12 A. By the time I arrived, Princes Street had already been 13 closed to traffic and converted into a building site. 14 I don't know if any physical works had already happened. 15 I think some had. 16 Q. Was that a concern, that no on-street works had taken 17 place a year after the contract was let? 18 A. Yes, it was. It was indicative of the overall concern 19 around the lack of progress. 20 Q. I want to ask you some questions then about progress and 21 how that was considered by the Tram Project Board. If 22 we could look at a document, please. It's reference 23 CEC00848256. This is just the cover sheet. I take it 24 you'll recognise this document being the papers for the 25 Tram Project Board meeting taking place on 24 1 23 September 2009, which is after you'd been there for 2 a few months. Do you recognise that? 3 A. Yes. 4 Q. Could we look, please, at page 39 of this document. If 5 you could enlarge the table, the lower table. 6 We can see here there's a table which is the Infraco 7 progress report, and it gives figures both for the 8 period and cumulative, what was planned and what had 9 actually been achieved. 10 A. Yes. 11 Q. I take it you're familiar with this table, having seen 12 it. 13 A. I recognise it. It's not something I studied in detail 14 at the time. 15 Q. If we just look at the three right-hand columns and look 16 at the total line, the last row, we can see that the 17 plan was by this stage that 60 per cent of the works had 18 been done? 19 A. Yes. 20 Q. And in fact only 8.3 per cent of the works had been 21 done? 22 A. Yes. 23 Q. That must have been quite a drastic concern? 24 A. Yes, I mean, the lack of progress generally across the 25 project was easy to see. You didn't need to see a table 25 1 to tell you that there wasn't adequate progress being 2 made. 3 Q. If you could look forward in the same document to 4 page 56, we see here -- I think there's been a colour 5 copy of this loaded. Is it possible to find a colour 6 version? 7 We will leave that for the moment. We can't see 8 what it's saying in black and white. 9 Could we look then at another document, just to look 10 forward to the time roughly a year after you'd been 11 there, to May 2010. 12 If we look at CEC00245907. We are looking at the 13 Tram Project Board papers for the meeting that was to 14 take place on 5 May 2010. 15 Could we look, please, at page 35. It's probably 16 easier if we look back to 34, just to orientate 17 ourselves first of all. 18 This is looking once again at the table which draws 19 together the position in relation to the Infraco 20 contract. We can see this time it's referring to period 21 01 progress because it's into the New Year. 22 If you look over the page, you will see the totals. 23 You can see by May 2010, it had been intended that 24 82 per cent of the works had been done. In fact only 25 16 per cent had, and it's therefore 66 per cent behind 26 1 schedule. Do you see that? 2 A. Yes. 3 Q. You would have been aware of these figures at the time? 4 A. Yes. I mean, I may not have been aware of these 5 specific figures. I don't -- I'm not disputing they're 6 in the papers, but whether I would have paid a great 7 deal of attention to them. At the time I had already 8 said that we could not predict the opening -- the 9 completion of the project because we had no agreed 10 programme, and because we'd had no agreed programme for 11 such a long time, progress reporting against a programme 12 became slightly arbitrary, because there wasn't an 13 agreed programme, in the same way that there wasn't an 14 agreed final cost. 15 So I'm not disputing the figures, but what I'm 16 saying is that -- the degree to which a great deal of 17 weight was put on them other than to say, you know, we 18 knew there were -- the progress to date and the progress 19 rates were way behind what they needed to be. 20 Q. In a situation where you don't have a programme against 21 which you can judge performance and you don't have 22 a final cost against which you can judge what is 23 happening, is that -- is it possible to have effective 24 management of the project once you get into that sort of 25 situation? 27 1 A. It's certainly a lot more difficult. I think it depends 2 what you mean by effective management. You can of 3 course still manage the situation as it -- as it 4 evolves. But what you can't do is measure it against an 5 agreed programme because we didn't have an agreed 6 programme. 7 Q. So is it the point you make, it was late? 8 A. Yes. And it was very late. It wasn't a bit late. It 9 was very late. 10 Q. So was it apparent by this time really that it wasn't 11 going to be possible to finish the tram on anything like 12 the appropriate -- the planned timescale? 13 A. Yes. 14 Q. As we'll come to look at, because of the costs, the 15 legal disputes outstanding, it wasn't possible to 16 estimate what the final cost was going to be? 17 A. No. At some point, and I suspect it was around this 18 time, I don't recall exactly -- I produced a document 19 which I shared with councillors and with 20 Transport Scotland that said that the cost of the 21 project was effectively the cost of the things we knew 22 about, plus the cost of the imponderables, and this 23 became known as the 524 million plus X. 24 X was the cost of resolving the disputes, and we 25 didn't know what that was because we didn't have 28 1 a resolution to the disputes. 2 Q. But does that not make it very difficult to evaluate 3 decisions that have been taken, steps that have been 4 attempted, to say whether or not they're having any 5 ultimately beneficial effect, when you've got nothing to 6 measure them against? 7 A. It makes it more difficult. It doesn't make it 8 impossible. 9 Q. In this document, could we look at page 50, please. 10 This one has come out in colour. 11 We can see firstly, if we go over the page to look 12 at the colour key, if we enlarge the very small text in 13 the centre, just to understand, when it says pink, it 14 means that there is significant slippage but expect 15 recovery can be achieved. Red was that there's 16 notable/significant slippage, it would be difficult to 17 recover even with action. 18 For that, if we go back to the previous page, we can 19 see entries, if we enlarge the table to make it a little 20 more readable, the first two entries which are pink in 21 relation to which recovery is thought to be achieved are 22 relating to the commencement of viaducts where things 23 are supposed to be -- the baseline programme date for 24 them was May and August 2008, which was clearly very 25 much passed by this time. 29 1 A. Yes. 2 Q. Why was it being represented in this report to the Board 3 members and Transport Scotland that recovery was 4 possible? 5 A. I don't know, I'm afraid. That would be a question for 6 the -- whoever authored that table. 7 Q. Who did author this table? Would that be Steve Bell? 8 A. I don't know if it would have been Steven in person, but 9 it would certainly have been his team. 10 Q. We will leave that for the moment. 11 You say in your statement that information was 12 conveyed to the Board members not only by the packs of 13 papers we've just been looking at, but also by means of 14 a PowerPoint presentation given by various directors at 15 the meeting. 16 That would mean -- was there a concern that in 17 essence you knew that many of the directors wouldn't 18 wade through in excess of 100 pages of papers for each 19 meeting? 20 A. Yes. I mean, the way I saw -- this was a very extensive 21 Board report that was produced every month. And I don't 22 think it would be reasonable to expect a Board member, 23 particularly a non-executive member, to wade through 24 documents of that complexity and length and pull out the 25 key issues. 30 1 I saw those papers more as a background reference, 2 if you like, and I saw it as my role, as the 3 Chief Executive, to pull out the key messages and 4 present those to the Directors in a way that was clear. 5 And we did that by means of a PowerPoint 6 presentation that we produced every month for the Board. 7 And actually that -- what happened was the PowerPoint 8 presentation went up on the Board and that served as 9 both the agenda and the principal means by which the key 10 points were communicated. 11 Q. The effect of that would be that the Board members were 12 not informed of the issues in advance of the meeting. 13 They were essentially getting them as the meeting went 14 on, particularly the non-execs. 15 A. In some cases, yes, but if there were particularly 16 contentious issues, I would generally take the view that 17 I would speak to Board members in advance. You know, my 18 experience has been that it's never a good idea to 19 surprise Board members, and therefore if there is 20 contentious stuff or stuff that I'm going to need them 21 to make a decision on, I would have briefed them in 22 advance. 23 Q. Would that just be the Executive Board members or would 24 you include the non-executive? 25 A. I would include the non-execs in that. In fact in many 31 1 cases, it was more important for the non-execs because 2 they weren't immersed in it on a day-to-day basis. 3 Q. What advantage do you think there is of such an informal 4 briefing being given to the non-executives rather than 5 a paper for the Board which focuses on precisely what 6 the issue is going to be, precisely what the 7 considerations are which will affect their decision, and 8 telling them what the decision has to be? 9 A. I think it depends on the nature of the issue. I think 10 where there is a specific decision that needs to be made 11 and you're asking, for example, does the Board approve 12 X, Y, Z, then it's entirely right that there should be 13 a specific paper on that. If it's more by means of 14 a general update, then producing papers for that would 15 seem to be an unnecessarily bureaucratic way of doing 16 it. 17 Q. The issues as you have described them, with us this 18 morning, the four issues that were facing the project, 19 they're not really set out in that level of clarity in 20 any of either the presentations to the Board or the 21 papers to the Board. 22 Did that not put the Board at a disadvantage in 23 really understanding the problems faced by the project? 24 A. I don't think so. I think the -- the Board were 25 sufficiently immersed in the project. All of the Board 32 1 members had been there longer than I had. I think 2 through conversations, through the presentations, 3 I would be amazed if they didn't have an understanding 4 of the key issues. 5 Q. The issues we've described, some of them, in particular 6 the legal ones of BDDI to IFC changes, and what's 7 included in the contract, and the other one about 8 Clause 65 and Clause 80, they're quite technical and 9 legal issues. 10 A. They are, yes. 11 Q. And they're not something that necessarily would be 12 easily picked up by a lay person on the Board? 13 A. I think it was very easy for the non-execs to pick up 14 the two principles which were there was a dispute over 15 what was included in the price and there was a dispute 16 over progress. 17 Q. But in terms of -- 18 A. The detailed legal -- complexities of the legal 19 arguments, I would agree with you that you couldn't pick 20 those up from the -- by general briefings. But the fact 21 that they -- there was a dispute over what was included 22 in the price and there was a dispute over progress was 23 obvious to everybody. 24 Q. You said -- it was in your statement -- that the Council 25 and Transport Scotland were briefed through other means. 33 1 Transport Scotland had four-weekly reports going? 2 A. Yes. 3 Q. But what were these other means by which the Council and 4 Transport Scotland were briefed? 5 A. Well, if we start with Transport Scotland, I had regular 6 conversations with, firstly, Bill Reeve and then 7 subsequently with Ainslie McLaughlin. 8 There were a couple of dinners I had with 9 David Middleton and Ainslie McLaughlin. And there was 10 also a quarterly meeting that took place which was 11 technically between the City Council and 12 Transport Scotland, but which I or senior members of my 13 team attended. 14 In terms of the City Council, I would think I was at 15 the City Council offices or City Council officers were 16 in tie's offices probably twice a day. So there was 17 a constant dialogue, as well as the huge quantity of 18 emails. 19 Q. Would you accept the difficulty with such a constant 20 dialogue is actually focusing on what really matters and 21 ensuring that there's a record so that people properly 22 appreciate and understand what they have to consider? 23 A. I would only partially agree with that. I don't believe 24 it was difficult for people to focus on the issues at 25 hand because they were constantly being discussed. 34 1 I think the second point you make there, which is 2 that some eight years after the event, is there a single 3 document that clearly lays out the key issues in 4 a manner that you could -- somebody not involved with 5 the project could look at and say: ah, yes, there are 6 the key issues; then yes, I agree with you. 7 Q. If we go back to the document I was unable to find the 8 colour page of, there's another version of the same 9 document. Could we have production CEC00680386. 10 Just to recap, what we were looking at was the Tram 11 Project Board papers for the meeting to take place on 12 23 September 2009. I have made the point it was a few 13 months after you started. What we went on to look at 14 was what was on page 39, if you take a look at that. 15 This is where we had the -- if we enlarge the table 16 for a moment. We can enlarge the table showing the 17 progress on the Infraco works at that stage, where it 18 was intended they be 60 per cent complete, but only 19 8.3 per cent had been done. We looked at all that 20 before, I think? 21 A. Mm-hm. 22 Q. Could we then go on and look at page 56. This time we 23 see a table similar to the one we previously looked at, 24 and the key on it, you can take it from me, is the same. 25 Things that are in pink are where recovery is said to be 35 1 possible. Things that are in red is where recovery is 2 thought not to be possible. 3 Just looking at some of the things that are here, 4 the -- once again, if we look at the first two pink 5 matters, pinky-purple colour, it's Haymarket viaduct 6 commences and Edinburgh Park viaduct commences. The 7 date by which it is said it's supposed to happen has 8 already passed, and yet it's been said that recovery is 9 going to be possible. 10 That is, to put it at its lowest, confusing, isn't 11 it? 12 A. Yes. As I said, I don't know what the A afterwards 13 means, whether there's a key in there. But I accept 14 your point. 15 Q. I think if we go over the page, and once again look at 16 the small text out of fairness to you, if you could 17 enlarge the very small text towards the centre of the 18 page. 19 On the left-hand side, although it doesn't provide 20 the letter A, it does say: 21 "Legend for colouring of Actual/forecast date text." 22 Then it gives a colour. So it's possible that the A 23 stands for actual, rather than forecast. 24 A. Right. So I guess if you go back -- 25 Q. Or I should ask you, is that your understanding what it 36 1 was at the time, A is actual rather than forecast? 2 A. No. I was simply -- I saw the A there and I thought it 3 must mean something. I didn't know what it meant. 4 I'm not sure, if you go back to the previous slide, 5 does that mean that it has actually started? So if you 6 pick on that particular one that you were talking about, 7 the Haymarket viaduct commencement, so it says: 8 "Haymarket viaduct commences." 9 And it should have commenced on 8 May 2008. Does 10 "actual" mean it did actually start on 1 September 2008? 11 Q. To make it simpler, if we can look down at ones that 12 don't have an A on them, the next group of three, where 13 the first thing we have got is the demolition of the 14 Wanderers clubhouse. 15 A. Yes. 16 Q. It was due to be August 2008. This says it is scheduled 17 to be 28 September 2009, but it is coloured as if to say 18 that recovery is possible. 19 In that August 2008 is clearly passed, recovery is 20 just not going to be possible, is it? 21 A. No, but I'm not sure -- you would need to speak to the 22 reports' author. I'm not sure that that is how this 23 document is intended to be read. 24 I would read that as saying it should have started 25 on 25 August, and the latest forecast is that it's going 37 1 to start on 28 September. 2 Q. But it's coloured pink as if to say that recovery is 3 possible. 4 A. Well, it may be that completion -- I'm speculating here, 5 but it may be that completion of the demolition is still 6 recoverable by the planned completion date. 7 Q. Then if we look down -- if we see there's one red one 8 and we look at the entry after it, where it's Haymarket 9 viaduct complete? 10 A. Where is this, sorry? 11 Q. There is a cursor wobbling on the screen just to the 12 left of the entry. That was due to be complete in 13 December 2008. It's now got a forecast date of 14 19 April 2010. But it's still coded pink as if to say 15 recovery is complete, even though we're nine months past 16 the anticipated completion date. 17 A. Yes. I can't explain that. It may be that the colour 18 coding is -- the key for the colour coding is what's 19 misleading here. 20 Q. What it comes to is the way this has been colour coded 21 gives an impression that recovery is possible, where 22 it's clearly not going to be possible in certain 23 circumstances. 24 A. Yes, that is the impression it gives. 25 Q. It's been pointed out to me for completeness, if we go 38 1 to the next page, which is the one we looked at before, 2 we saw that -- we can see there's actually another 3 heading, "Key issues affecting schedule", and another 4 table where we can see there's various letters to the 5 right-hand side. If we go over to the next page yet, 6 there's a key afterwards. 7 It may be that the various things, A, S and F are 8 intended just for the table above it, but if they're 9 also intended to cover the table we have already been 10 looking at, A would refer to actual? 11 A. Yes. 12 Q. Thank you. I have finished with that document. 13 So you said in your statement that you think all the 14 documents were explicit about the challenges facing tie. 15 Things like that we have just seen that don't give 16 a very clear impression of the ability to achieve 17 completion dates really aren't very clear about that 18 challenge, are they? 19 A. Well, I think, you know, you've got to take -- the tram 20 project papers, I don't believe, were ever intended to 21 give a complete picture in the absence of looking at all 22 the other documentation. And certainly I would not base 23 a decision or a conclusion solely on the reading of the 24 Tram Project Board papers. 25 Q. But what would the people on the -- sitting on the Tram 39 1 Project Board base their decisions on? 2 A. It would depend on what the issue was. If there was an 3 issue on which they were required to make an important 4 decision, they would have been properly briefed on it. 5 Q. But why is that briefing not contained in the papers for 6 the meeting, so that it's quite clear? 7 A. Because those papers are background papers. They're not 8 the papers specific to any specific issue. 9 Q. But there are -- bear with me. If we go back -- if we 10 could have that same production back up. We'll stick 11 with that one just because we've been looking at it. It 12 was CEC00848256. 13 Just to understand the layout of these packs, if we 14 go over to page 4, we can see there the agenda for the 15 September meeting is set out, and an indicator as to who 16 the people attending will be. 17 That was something that featured in most of the 18 packs of papers? 19 A. Yes. 20 Q. Then the next thing, if you go to page 5, is the minutes 21 of the previous meeting, and again, that's something you 22 would expect to see in every project pack? 23 A. Yes. 24 Q. If we go to page 11, there was the Project Directors 25 Report. Once again, was that something that would be 40 1 a feature of each of the packs sent out to the Tram 2 Project Board members, so they knew where matters stood? 3 A. Yes. 4 Q. That was intended to be something they would look at and 5 rely upon to inform them of the background and where 6 things were? 7 A. I think -- yes. I mean, the -- as you said earlier, 8 there was a vast pack of papers. My view is that -- 9 I mean, I don't know which of the papers they read and 10 which they didn't. Certainly if they had asked 11 questions on any of the particular papers, you know, 12 they would have been answered at the Board meeting. 13 My view is that it was the PowerPoint presentation 14 that was given at the Board meetings that was the key 15 issues for that meeting, and from page 11 effectively 16 onwards was background reference information. 17 Q. Well, you say that in relation to the Project Directors 18 report. That is quite an important matter, isn't it, 19 giving information about where matters stand at the 20 project, what the progress is and what the issues are? 21 A. Yes. 22 Q. So really would it not be reasonable to expect that the 23 people making decisions would read that? 24 A. I don't think you could rely on people having read 25 those. That's why if there was something that I felt 41 1 the Board needed to be particularly aware of, it was put 2 in the PowerPoint presentations. 3 I wouldn't have assumed that everybody would have 4 read all of these papers. 5 Q. I take it that's an assumption you make on the basis of 6 your experience of years in business or was there 7 something about this -- the Tram Project Board and its 8 constitution that caused you particular concern that 9 papers wouldn't be read? 10 A. It wasn't particularly about the constitution. It was 11 about the format of this particular -- of this 12 presentation of these Board papers. 13 Q. What was the thing about the format of these papers? 14 A. They're quite technical papers and they're quite long, 15 and that's why I thought it was important to pull the 16 key issues out into a PowerPoint presentation. 17 Q. We will come to look at some of the presentations but 18 for the moment if you could -- the Project Directors 19 report continues all the way up to page 21 of this. We 20 won't look at all of that, but if you could look at 21 page 22. 22 You then see there's a divider or heading sheet with 23 papers for consideration? 24 A. Mm-hm. 25 Q. If we look at the next page, you can see an example of 42 1 such a paper. It's headed up, "Paper to TPB", 2 September 2009. The subject is given, the change 3 control update, and the person who has authored the 4 paper. 5 The summary of the position is given, and if we go 6 to the next page, and the lower half of the page, there 7 is an indication given of what decision or support is 8 required. 9 In this case the author, Mark Hamill, has indicated 10 that the Board is requested to note the change control 11 status at period 6? 12 A. Mm-hm. 13 Q. This is a feature of the Project Board facts, that there 14 would be one or more of these papers in relation to 15 particular issues that required to be decided by the 16 Board. So there was some advance notice given where 17 there were particular issues for decision? 18 A. Yes, although I don't think that's a particularly -- the 19 example you've given there is not a particularly core 20 issue. 21 Q. No, it's one that happens to be in this pack. There 22 were core issues such as governance and the approach to 23 be taken in relation to managing the Infraco contract, 24 which were far weightier? 25 A. Yes. 43 1 Q. Also, if we look at page 25 of this, we can see that 2 there's again a divider sheet, Primary Risk Register for 3 period 6, and if we look at the following page, you'll 4 recognise that as an extract from the risk register that 5 was provided to the Tram Project Board? 6 A. Yes, I do. 7 Q. What was done in relation to these extracts of the risk 8 register at the Tram Project Board? 9 A. I think it would depend on the particular Board meeting. 10 There wasn't necessarily a great deal of discussion 11 unless people were directed towards a particular point, 12 either by a member of the Executive or by one of the 13 non-execs who had a particular question. 14 Q. Bearing in mind what you've said about the nature of 15 these papers, and the likelihood of them being read, 16 unless these were specifically drawn to the Board 17 members' attention, it must have been your understanding 18 that these really were not being considered by the Board 19 members, these registers? 20 A. Not in detail, no. 21 Q. Okay. 22 That goes on through to page 30. If we can then 23 look at page 31, you can see another divider sheet that 24 says now "Transport Scotland report Sections 2 to 7" 25 "On following pages are Sections 2 to 7 of the 44 1 Transport Scotland report (Section 1 is the Project 2 Directors report)." 3 Which of course we've already seen. 4 If we go to the following page, just to see what 5 we're looking at, you can see the text there once again 6 describing the progress. This is quite a lengthy 7 document, this part, which runs all the way through to 8 the final page, which is page 73 of this pack of papers. 9 Now, the information that we've been looking at in 10 these sections, for example the coloured timetable, the 11 schedule completion, that's information that was being 12 included in the material being provided to 13 Transport Scotland? 14 A. Yes. 15 Q. Now, would you expect Transport Scotland to be 16 considering that material? 17 A. I don't know, is the short answer to that. I don't know 18 what they did or they didn't consider. 19 These reports, from my understanding, and again 20 I believe there's an email chain on this, these reports 21 are set out in a format requested by Transport Scotland. 22 Whether they read them or not, I have no idea. 23 Q. Just dealing with report, if we look at what was 24 required by Transport Scotland, could we go to the 25 document, please, CEC00021547. 45 1 Now, I can say to you that we've heard evidence to 2 the Inquiry from Transport Scotland witnesses that this 3 was the schedule to the grant letter that was provided 4 early in 2008 which enabled the project to go ahead. Do 5 you recognise this? 6 A. Not sure that I do actually. I mean, I can see what it 7 is, and I may have seen it in the past, but I don't 8 think -- it doesn't feature highly in my memory. 9 Q. Could we look at page 46 of this, please. You see again 10 we have got a header here, Part 4 of this Schedule and 11 it's what's required in the four-week period reporting 12 pack. Did you ever consider this? 13 A. No, I don't think I did. 14 Q. If we go over the page we can just see what the title 15 sheet is to be for the four-week reporting pack. Then 16 if we go to page 48, you can see -- could we enlarge 17 that table, the heading? Thank you. 18 You can see that what Transport Scotland suggest 19 they require is something called headlines, with -- set 20 out in table form, but it's in essence bullet points of 21 a description of the issue, and a bullet point 22 description of the action that's to be taken of it, or 23 in relation to it. 24 So that wasn't provided with the reports to 25 Transport Scotland, was it? 46 1 A. Not in that format. 2 Q. If you go forward to page 52 -- 3 A. Can I just check, was this -- this was the agreement 4 between Transport Scotland and the City Council, was it? 5 Q. Yes. 6 Sorry, I said 52. I should have said page 50, my 7 apologies. 8 Could we enlarge the upper half of that. 9 We can see the schedule milestones, and here we do 10 recognise something that we've seen in the project 11 reports we've looked at, because these were the tables 12 that were coloured in the way that we've looked at? 13 A. Yes. 14 Q. So that information -- I should say, if we go down to 15 the foot of the screen, we can even see down to the 16 guidance for completion in relation to what's online, 17 what's got slight slippage with recovery and what's 18 going to be difficult to recover, is a format that 19 Transport Scotland ask for it to be done like that, 20 albeit that the colours are slightly different and that 21 there's no pink or purple in the Transport Scotland one. 22 So this does indicate that it was something that 23 Transport Scotland wanted, and therefore it might be 24 thought it was something that Transport Scotland would 25 have regard to. 47 1 A. Possibly, yes. 2 Q. Yet we've seen from the examples we've looked at that it 3 was being presented in an unclear and confusing manner. 4 A. Yes. 5 Q. Okay. 6 If we go back to the report we were looking at, that 7 was -- I think the one we were eventually looking at was 8 reference CEC00680386. 9 Could we go to page 39, please. This is the one 10 which -- just trying to re-orientate us -- gave us the 11 figures for the progress on the Infraco contract. We 12 see that. 13 A. Yes. 14 Q. For completion then, if we go to the presentation, the 15 PowerPoint that would have been given to the Board, that 16 would be reference CEC00849011. We can see this is 17 headed "Joint Tram Project Board and tie Board 18 23 September 2009". Do you recognise this as the 19 PowerPoint presentation? 20 A. Yes. 21 Q. Just going back to something you said earlier, 22 essentially there was a collapse of the roles between 23 the Tram Project Board and the tie Board, so that they 24 could in essence meet together because they were doing 25 the same thing. Is that fair comment? 48 1 A. Yes. 2 Q. Could we look, please, at page 11 of this. If we could 3 enlarge this. Here we see the slide on Infraco progress 4 that would have accompanied that meeting. We get 5 a breakdown there of how we get to the overall figure of 6 8.3 per cent that we saw in the Tram Project Board 7 papers? 8 A. Yes. 9 Q. We get a list of scheduled works due to commence in the 10 next week, and the various dates by which they are done. 11 But there's really no greater information given about 12 the progress and its implications for the delivery of 13 the project as a whole. It doesn't expand very much on 14 what's in the papers. 15 A. I think it would depend on what was said around that 16 slide. 17 Q. So in addition to the papers and the slide itself, there 18 might be further information that's not set down 19 anywhere that was being given verbally? 20 A. Possibly, yes. In this particular case, I don't know. 21 It may be that in this particular meeting, progress 22 wasn't one of the issues that was exercising the Board. 23 But if it was, then it would depend on what was said 24 around the slide. 25 Q. Is there not a danger, if you essentially just resort to 49 1 verbal briefings of the Board members, rather than 2 either putting it in papers or even PowerPoint 3 presentations. 4 A. What danger? 5 Q. Well, if things are in any written form, even 6 a PowerPoint presentation, at least there is a record of 7 it, at least people can go back to it and make sure they 8 understand? 9 A. I think there is a danger that if you were to pull out 10 all these papers eight years after they were written and 11 try to decipher from them exactly what happened, there 12 is a danger that you might not get the full picture, 13 absolutely. 14 Q. However, is the purpose of keeping papers and minutes 15 not precisely so you can tell what was happening and 16 what people did know when they were making their 17 decisions? 18 A. To be honest, this is beyond my experience in that 19 I have never in my career gone back and looked at board 20 papers from eight years previous to discern whether or 21 not they were an accurate record of what was said or 22 discussed at a particular meeting. 23 So, you know, from a month to month basis, I think 24 it was perfectly adequate. I don't believe -- and 25 perhaps I'm wrong in this, but if it was intended at the 50 1 time that these Board papers were to serve as a record 2 of exactly what happened eight years later, they might 3 have been written differently. That isn't my 4 understanding of what they were there for. 5 Q. Once matters started to become increasingly difficult 6 with the tram project, and disputes with the contractors 7 became more entrenched, was that not a time when it 8 might have been even more important to ensure that there 9 was a full record of what was being told -- what 10 information was being given to the Board members and 11 that they were relying on to make their decisions? 12 A. With hindsight, yes. And certainly if I was to advise 13 somebody in the same position that I was in now, I would 14 say to them: make sure that whatever documentation you 15 produce will stand the test of time and will give 16 somebody a full and accurate picture eight years from 17 now. 18 At a practical level I'm not sure you can run 19 a business like that. You can't run a business on the 20 basis that everything you write might one day be 21 dissected eight years from now. You would spend your 22 whole time recording everything and doing nothing. 23 Q. I understand that. But what I'm talking about is not 24 everything to do with running a business, but 25 documenting the monthly meetings or four-weekly meetings 51 1 of the body charged with a project that was costing -- 2 always intended to cost in excess of GBP500 million. 3 In that context, is it not critical to have an 4 understanding of the basis on which decisions were being 5 taken? 6 A. My view is that the principal purpose of these meetings 7 was to inform the decision-making at the time. 8 Q. Okay. 9 CHAIR OF THE INQUIRY: What's your answer to the question by 10 Counsel? 11 A. What was the question? 12 CHAIR OF THE INQUIRY: Is it critical to have an 13 understanding of the basis on which decisions were being 14 made in a contract which exceeded GBP500 million? 15 A. With hindsight, yes. 16 CHAIR OF THE INQUIRY: Of public money. 17 A. Yes, with hindsight, yes. 18 CHAIR OF THE INQUIRY: Did you not even think about that at 19 the time? 20 A. At the time I was more concerned with making the 21 decisions at the time. 22 MR LAKE: Could we look, please, at your statement again and 23 go to page 15 of it. 24 If we can enlarge paragraph 80, please. It will be 25 page 13? 52 1 A. 13? 2 Q. It will be 13 of -- sorry, 15 of the -- it's 13 at the 3 foot of the page. It's 15 in some of the electronic 4 versions. 5 Paragraph 80 says: 6 "The TPB [Tram Project Board] report for June 2010 notes 7 that of the 233 IFC drawings only 155 had been issued. 8 I believe it is correct that there was a new design 9 programme almost every month. This made it impossible 10 to predict cost and programme." 11 Now, this is something you've already touched upon? 12 A. Mm-hm. 13 Q. What was being attempted to try and get rid of the 14 situation where every month you were faced with yet 15 another design programme? 16 A. Well, I think the phrase, a new design programme almost 17 every month, is slightly colloquial. I don't know how 18 often new design programmes were issued. 19 The relevant point, I think, is that there was no 20 agreed programme, and there was no agreed cost, and 21 therefore it did make it impossible to predict. 22 I had said very early on in my role that the project 23 is not on cost and it's not on programme. And I'm not 24 going to make predictions as to what the cost and 25 programme will be until I have some certainty that those 53 1 predictions stand a chance of being accurate. 2 Q. We'll come to the cost -- 3 A. In the absence of an agreed interpretation of the 4 contract, it was not possible to have an agreed 5 programme or an agreed cost. So I used the phrase at 6 the time that the project was at large, by which I meant 7 it was not possible to have a programme or a cost. 8 Q. When you're talking about the absence of an agreed 9 interpretation, that was in relation to the disputes 10 that were going on with the contractors' consortium, the 11 Infraco contractors' consortium? 12 A. Yes. 13 Q. In relation to design, one of the issues would be that 14 the delivery of design to a large extent will dictate 15 what other works can take place? 16 A. Yes. 17 Q. So until you have a design programme, it doesn't matter 18 whether or not you have got agreement with other people 19 or not. You're simply not going to be able properly to 20 programme the project? 21 A. I understand your point, but yes, I would -- in 22 principle, I agree. There are complexities around that 23 because of the interaction of the design with the BDDI 24 to IFC issue. 25 Q. Yes. 54 1 A. But in principle, yes, the first thing you've got to do 2 is get the design finished. 3 Q. Once you came to tie, were there particular measures you 4 had in mind that you wanted to try, to try and bring the 5 design under control? We'll come to the contractors' 6 issue in a moment. But just in relation to design, to 7 try and get control of that problem? 8 A. I'm sorry, was there a question? 9 Q. Yes, what measures did you have in mind? What did you 10 try to bring the design problems under control? 11 A. The -- the main excuse from the Infraco for the late 12 design was poor -- was slow approvals from third parties 13 and City Council. 14 So there was put in place not particularly, I have 15 to say, at my behest, but there was put in place 16 a design management panel, I think it was called, to try 17 to unblock the various approvals. 18 I actually think we never really got a clear answer 19 or a clear understanding from the Infraco as to why the 20 design was so delayed. Again, I heard speculation that 21 some of this was because of the Siemens input to the 22 design, and again I think there's reference to this in 23 some of the documents, that if Siemens were late in 24 providing their element of the design to the consortium, 25 SDS couldn't complete the design. So Bilfinger Berger 55 1 couldn't then complete the construction drawings. 2 So I believe there were internal issues within the 3 consortium as well. 4 But at this point the designer had been novated over 5 to the consortium, and there was actually little that 6 tie could do to force the design -- force the progress 7 of the design any faster. 8 Q. That's really what I was coming to. By the time you 9 arrived at the company, there was no longer any 10 contractual link between tie on the one hand and the 11 designers on the other? 12 A. I think there was a contractual link through the Infraco 13 contract, but there wasn't a direct contractual link. 14 Q. So if you wanted to progress design, presumably that was 15 a matter that had to be taken up with the contractors' 16 consortium? 17 A. Correct. 18 Q. There were other issues with the contractors' 19 consortium? 20 A. Correct. 21 Q. So in your view was novating the design into the 22 consortium something which caused problems for the 23 delivery of the project? Would it have been better not 24 to do that? 25 A. It was undoubtedly one of the causes of the problems. 56 1 It was in particular a cause of the problem because of 2 the state of the design at the point of novation. 3 That's not to say that it would always be a bad idea 4 to novate the design over to the consortium, because, as 5 I mentioned a moment ago, where you have system specific 6 requirements, so, for example, some of the Siemens 7 systems that only they can design, then they need to be 8 incorporated into the base design, and therefore there 9 is logic in novating the design over to the contractor 10 at some point. 11 But not at the point where it was so incomplete as 12 it was. 13 Q. When you first arrived, were you aware how incomplete 14 the design had been at the time it was novated? 15 A. No. 16 Q. When did you become aware of that? 17 A. I don't think there was a particular light bulb moment 18 where suddenly I realised. It slowly dawned because 19 there was a lot of other disputes and confusing messages 20 around. So it slowly dawned that actually the 21 underlying issue here was the late delivery of the 22 design. 23 And it was when, for example, I remember talking to 24 one of the subcontractors who happened to be working 25 outside my office, and they stopped work, 57 1 and I said: why have you now stopped work? And they 2 said: because there are no more drawings; we've built 3 everything that we've been issued with, and there are no 4 more drawings; we are waiting for the design. 5 So at that point, you know, there's -- if you like, 6 it's another -- another brush stroke in the overall 7 picture that starts to paint the picture that actually 8 there's a very serious issue with the design here. 9 You've got this point still up on screen about 155 of 10 the 233 drawings having been issued. But I don't think 11 there was great visibility, certainly not for me, on 12 just how late and how slow the design was. 13 Q. I want to ask a question, and go back then to the time 14 that you were arriving into the project in 2009. Just 15 looking at the state of things. 16 What I would like to do is look at a PowerPoint 17 presentation that was given to the Tram Project Board 18 back in February 2009, accepting that's before you got 19 there. 20 Could we look, please, at CEC00988036. 21 You'll recognise the format of that, even if you 22 don't recognise the presentation as being one of the 23 PowerPoint presentations to the Board? 24 A. Yes. 25 Q. If we could look, please, at the third page of this, and 58 1 the lower part of the screen, we can see, just by way of 2 background, there was a note in relation to utilities 3 work, that they were 67 per cent complete and progress 4 was being described as poor. Do you see that? 5 A. Yes. 6 Q. If you go over to the following page, and again look at 7 the lower half of the screen. Actually, we'll start 8 with the upper half first of all. It notes that the 9 Tramco progress is disappointing, and the various 10 factors noted are: 11 "Delayed appointment and mobilisation of 12 pack/sub contractors; Design slippage and design changes 13 (including instructions); Incomplete/delayed utilities 14 diversions; Submission of Estimate and agreement of 15 change orders (Holding work); Consortium integrated 16 programme." 17 These were things that continued to be issues at the 18 time that you were Chief Executive of the company, is 19 that correct? 20 A. Yes. 21 Q. If we look at the lower half of the screen, under the 22 heading, "Project Delivery Infraco Issues Resolution" 23 it's noted: 24 "There is a significant risk of a major dispute with 25 Infraco. This is drawn by the following issues." 59 1 The first is: 2 "BSC ..." 3 That was the initials given to the consortium, 4 Bilfinger Siemens CAF; was that your understanding? 5 A. Yes. 6 Q. "BSC's refusal to progress works which may be affected 7 by a change which has not been subject to issue of an 8 agreed tie Change Order. 9 BSC's failure to provide timely and/or competent 10 Estimates to allow a change to be assessed and if 11 appropriate a Change Order agreed and issued. 12 Specific areas of disagreement eg responsibility 13 for changes in design from Base Date Design Information 14 to Issued for Construction (IFC) drawing." 15 Were you briefed on these matters when you very 16 first arrived at the company? 17 A. I don't recall specifically, certainly, you know, as 18 succinctly as that, but I was aware that there were 19 various disputes. I think at the time I joined there 20 was a degree of optimism that the Princes Street 21 Supplemental Agreement had somehow unblocked some of 22 these issues. 23 So I'm not claiming that I was in the dark on these 24 things, but I don't remember specifically being briefed 25 either. But, as an incoming Chief Executive, it's to 60 1 a certain extent my job to find these things out. 2 Q. Did you find these things out? 3 A. Yes. Very early on I remember a conversation with 4 Dennis Murray, the senior quantity surveyor, where I sat 5 down with him and I said -- I remember the conversation 6 very clearly. I said to him: what form of contract is 7 this contract based on? And he looked at me and he 8 laughed or smiled, and I said: why the smile? He 9 said: because in 30 years in this industry, I have never 10 seen a contract like this. 11 So immediately you think, we are dealing with 12 something a bit unusual here. 13 Q. Did he expand upon what he meant by saying: I have never 14 seen a contract like this. 15 A. He did. I don't remember specifically what he said, but 16 it was along the lines of it was so bespoke and so 17 heavily negotiated as to be -- well, I cannot remember 18 what he said then, but what I took from it to be 19 confusing and complex. 20 Q. I think there was a mediation held not long after you'd 21 arrived at the company -- 22 A. There was. 23 Q. -- in 2009, and you were involved in that? 24 A. Yes. I didn't directly take part in it, but I was 25 involved in setting it up. 61 1 Q. Who did take part in it, can you recall? 2 A. It was led on tie's side by Steven Bell. 3 Q. I think one of the things that came out of that was the 4 possibility of having a supplemental agreement to cover 5 all on-street works. Do you recall that? 6 A. I do. I'm somewhat confused as to where this originated 7 from, because I do remember later on there were various 8 accusations and counter-accusations of: well, it was 9 your idea, no, it was your idea. So I don't remember 10 where it first came from. It may have come from that 11 mediation. It certainly emerged around that time, 12 because it was the subject of a discussion at a meeting 13 I had with Dr Keysberg and Dr Scheppendahl from 14 Bilfinger Berger and Siemens, which I think happened 15 around that same time. 16 Q. Just in relation to that discussion, could I ask you to 17 look at another document, please. It's CEC00335390. 18 This is an email from you to Andrew Fitchie, dated 19 23 April 2010. 20 A. Yes. 21 Q. Just to provide some context -- 22 A. Yes, this was the meeting. 23 Q. This is the meeting. The email starts by saying: 24 "At the last meeting with BSC Richard Walker ..." 25 Who I think was one of the principals at the 62 1 consortium? 2 A. Yes. 3 Q. "... was questioning my continued use of the phrase 4 'holding the city to ransom'. He has clearly discussed 5 this with Dr Keysberg, who, Richard says, claims he did 6 not say this. I said that if he wished to take issue 7 with this, that I would be prepared to sign an affidavit 8 to the effect and that I would also seek 9 Dr Scheppendahl's input. 10 I have checked back through my notes, and find that 11 I did not make a file note after the meeting, and that 12 there was no follow up correspondence between myself and 13 Dr Keysberg. I did take notes in my notebook during the 14 meeting, which I still have, and using these and my 15 recollections I now make the following note. My 16 question is how best to ensure the recording of this 17 important meeting so as to be able to rely on it in 18 future. I would be happy to state that the below record, 19 is to the best of my recollection." 20 Presumably, from reading that context, some query 21 had arisen in relation to the meeting, and that's why 22 you sought legal advice from Mr Fitchie? 23 A. Well, it wasn't specifically in relation to the meeting, 24 and I think this is some time afterwards. This is 25 April 2010. The meeting actually took place, I think, 63 1 in July 2009. 2 What -- that meeting in -- was, I think, significant 3 for a number of reasons. It was during that meeting 4 that Dr Keysberg first used the phrase "this contract 5 allows us to hold you to ransom", and that for me 6 explained a great deal about their strategy. And it 7 came up not, I have to say, in their language, but the 8 subject came up on numerous occasions subsequent to that 9 first meeting, and it was around this time, April 2010, 10 that Richard Walker approached me in a different 11 conversation. I used the phrase and he said: you have 12 to stop saying that. You know, Dr Keysberg didn't say 13 that, and if you continue to say that he did say that, 14 then we may have to take action, or words to that 15 effect. 16 So that for me was what triggered me to make a more 17 formal record of this meeting. 18 Q. We can see further down the page you say: 19 "The meeting took place in my office at 11.30 on 20 6/7/09." 21 You say there it was Dr Keysberg, Dr Scheppendahl 22 and yourself that were at the meeting. 23 A. Yes. 24 Q. Looking at the various bullet points, we can see the 25 sixth bullet down: 64 1 "He said that this is a great contract for them as 2 it allows them to hold us to ransom." 3 A. Yes. 4 Q. That's the point you have just been making. That's that 5 context. 6 A. Yes. 7 Q. Beneath that you note: 8 "We discussed the use of clause 80 in preference to 9 clause 65. He stated that they did not need to use 10 clause 65 and that the contract meant they did not need 11 to progress the works." 12 This was one of the other sticking points that was 13 becoming apparent, that they would not progress things 14 where they considered there had been a change? 15 A. Yes. 16 Q. From the way things are expressed there in that meeting, 17 it appears that there was a degree of intransigence over 18 the issue? 19 A. Yes. Having relooked at this when I was giving my 20 statement for the Inquiry, it's clear that I'm two 21 months into the role. This is my first meeting with the 22 principals and they are basically setting out their 23 position in no uncertain terms, saying: we're right, 24 you're wrong, you don't have a leg to stand on. "Agree 25 with us or litigate", I think was their final phrase. 65 1 But at the time I took it as simply a statement of their 2 negotiating position. 3 Q. But in terms of the Supplemental Agreement, the idea of 4 that for all on-street works, that's not mentioned here, 5 but was that something that had already arisen out of 6 the mediation and was live by that time? 7 A. This is where I don't quite recall where it first came 8 from. I think -- is there a reference in here to cost 9 plus? I don't see it. There certainly is in one of 10 these documents somewhere, where the -- their proposal 11 was to effectively extend the Supplemental Agreement on 12 Princes Street across the whole of the contract, and 13 that would effectively convert the contract into a cost 14 plus type contract. 15 There is somewhere else later on a document which 16 I think is called something along the lines of "The 17 evolution of the OSSA", the On-Street Supplemental 18 Agreement, because somebody had asked how did this come 19 about. So I set out what I thought was the history of 20 the evolution of that document at the time. And it's on 21 the database. I just don't have the reference for it, 22 I'm afraid. 23 But I don't -- because I think at some point 24 Richard Walker was then saying, well, it wasn't us that 25 asked for the On-Street Supplemental Agreement, it was 66 1 you, and my point was: no, I was simply responding to 2 your proposal, BSC's proposal, to extend the 3 Princes Street Supplemental Agreement across the rest of 4 the on-street works. 5 Q. But whoever first had the idea, it didn't come to 6 fruition? 7 A. Correct. 8 Q. I think part of the concern on tie's part was that it 9 would lead to procurement law issues? 10 A. I am aware of the documentation on that. I have to say 11 I think that is possibly overstated at the time. It may 12 have been a genuinely held view, although my 13 recollection is that it was a bit of a side issue. 14 Q. Was the real issue -- 15 A. The real issue was that it was a cost plus contract with 16 no agreed programme, no agreed cost, no certainty and, 17 more importantly, at this point the consortium had the 18 control of the design. So they could design whatever 19 they wanted and say, "Here is the bill" at the end of 20 it, and there would be no way of managing or predicting 21 what the outcome would be. 22 Q. The Princes Street Supplemental Agreement had been 23 concluded on a demonstrable cost basis? 24 A. Yes. 25 Q. I think you say in your statement that the outcome of 67 1 that was not a happy one from tie's point of view? 2 A. No, I think I used stronger language than that. I can't 3 remember exactly what I said, but it was certainly 4 I don't believe it led to a good outcome. 5 Q. The cost was very much more than had been anticipated? 6 A. Yes. 7 Q. When statements were made at the time that the Agreement 8 was concluded that it shouldn't result in additional 9 risk to tie, was that something you thought was 10 a reasonable description of that Agreement? 11 A. Well, I'm sure it was the view that the people who made 12 the statement held at the time. It just didn't 13 transpire to be the case. 14 MR LAKE: My Lord, that would be an appropriate time to take 15 a break. 16 CHAIR OF THE INQUIRY: We normally have a break in the 17 morning for the benefit of the shorthand writers. So 18 we'll break for 15 minutes and we'll resume at 11.30. 19 You can get a tea or a coffee if you wish. 20 A. Thank you. 21 (11.10 am) 22 (A short break) 23 (11.30 am) 24 CHAIR OF THE INQUIRY: You are still under oath, Mr Jeffrey. 25 MR LAKE: I just want to pick up on something you said this 68 1 morning, Mr Jeffrey. That's also mentioned in your 2 statement, and it was a side agreement said to have been 3 concluded between the contractors' consortium and the 4 designers. 5 If we look -- just identify this in your statement. 6 If we look at page 15 of your statement. Page 13 of 7 your statement. Paragraph 82: 8 "tie discovered that there was a separate "side 9 agreement" between SDS and one or more members of the 10 consortium. We only became aware of this by accident 11 from an email sent in error by Simon Nesbitt of BB 12 [Bilfinger] to Colin Neill of tie. I understand that the 13 effect of this agreement was for BB [Bilfinger] or BSC to pay 14 SDS for changes provided that those changes could be 15 attributed to the client. I have not seen this 16 agreement." 17 Were requests made to obtain a copy of that 18 agreement? 19 A. Yes, on numerous occasions. 20 Q. I take it from the fact that we have not seen it that it 21 was never provided to you? 22 A. Correct. In fact for a significant period of the time, 23 there was even a denial that it existed, and it was only 24 in one particularly heated meeting which David Mackay 25 and I were present with a representative from Bilfinger 69 1 and a representative from Siemens. The Bilfinger 2 representative was David Darcy, the Siemens chap I can't 3 remember. It might have been -- no, I can't remember. 4 When we pushed and pushed and eventually Siemens 5 said: it wasn't us, we didn't sign it; at which point we 6 knew such an agreement existed. But despite repeated 7 requests it was never produced. 8 Q. Although you set out in your statement your concern 9 about what it says, was it ever apparent to you what the 10 effect of it was in practice? 11 A. No. My concern was that if it was an entirely 12 legitimate and above board thing, then there was no 13 reason it shouldn't be disclosed. And nor was there any 14 reason why such changes could not be effected under the 15 existing Infraco contract. 16 So the fact that they denied that it existed and 17 then they refused to give it to us, and even the fact 18 that they needed a side agreement, made me suspicious. 19 But I never saw the Agreement and I don't know what the 20 practical effect of it was. 21 Q. We also had some discussion this morning about the 22 papers for particular issues that would go up to the 23 Board, the Tram Project Board? 24 A. Mm-hm. 25 Q. Now, in the Tram Project Board the Chairman was in fact 70 1 David Mackay; was that correct? 2 A. Yes. 3 Q. Your role was as the Chairman -- as the Chief Executive 4 of tie. David Mackay was also the Chairman there? 5 A. Yes. 6 Q. Who determined what would be included in the pack that 7 went out to all the Board members? 8 A. I think it was by discussion, really. It would have -- 9 certainly I would have had an input. David would have 10 had an input. Mandy Haeburn-Little would have had an 11 input as she was the Communications Director. The 12 City Council officers would have had an input. I mean, 13 ultimately the decision would have been David's, but it 14 was not done in an authoritarian way. It was done in 15 a consensual way. 16 Q. If you were unhappy about the volume and nature of 17 material going out to Board members, could it not have 18 been dealt with in that way as a result of these 19 discussions to make sure more focused papers were 20 presented? 21 A. Yes, and with hindsight, it was a mistake on my part 22 that I didn't address that issue at the time. It was -- 23 those -- the format of those papers was -- pre-dated me, 24 and what I should have done is said: hold on a minute, 25 let's have a look at all of this, this is not a clear 71 1 and concise pack of papers, and let's do it differently. 2 There were so many other issues to resolve that 3 didn't seem like a high priority. But as we sit here 4 today, would it have been better if those papers had 5 been more focused, yes, it would. 6 Q. I now want to turn to matters as they developed in 7 July 2009 onwards, once the Princes Street Agreement was 8 out of the way. And you were taking matters forward. 9 What I would like to do is look at a PowerPoint 10 presentation for the July 2009 Board meeting. It's 11 reference CEC00376412. 12 We can see here the title sheet noting that this was 13 once again a joint meeting of the Tram Project Board and 14 the tie Board -- 15 A. Yes. 16 Q. -- on 29 July 2009. 17 Could I just ask, who provided the information or 18 the slides that went into these presentations? 19 A. My recollection is that these were circulated around -- 20 so there was a basic blank format which was circulated 21 around the executive team and people filled in various 22 bits. I would say that ultimately I probably had 23 editorial control of these. 24 Q. Then in terms of presenting it to the people at the 25 Project Board, presumably you would do part of it; did 72 1 other people present and talk about particular slides? 2 A. Yes, the way I would describe it, is I would compere the 3 presentation and would draw in or call in members of the 4 management team as and when I felt they could better 5 explain an issue than me. 6 Q. If we could go to page 15, slide 15, it's headed with 7 a recap of mediation and the 8 July Tram Project Board. 8 You note that: 9 "Mediation held week covered eight individual items 10 and whilst useful discussions were held and additional 11 information provided, no overall movement or agreements 12 were reached." 13 That simply summarises the lack of progress in that 14 mediation that took place you referred to before the 15 break. Is that right? 16 A. Yes. 17 Q. You then note there were four options presented to the 18 Tram Project Board in July. That's the 8 July meeting. 19 The first being: 20 "Negotiate settlement of all issues." 21 Secondly: 22 "Formal contractual approach." 23 Thirdly: 24 "Reduce/rephase BSC scope." 25 And finally, to end the BSC contract. 73 1 It was option (b), the formal contractual approach, 2 that was approved at that meeting. 3 A. That accords with my recollection. 4 Q. Why was it that the decision was taken to go for the 5 formal contractual approach rather than any of the other 6 options? Can you recall? 7 A. No specifically, but I can talk a little bit in general 8 terms. 9 I think option (a), we had tried and had proved 10 unsuccessful. 11 Option (d) was rather a sort of nuclear type option 12 and was therefore not something that we would want to 13 jump to until we'd tried options (b) and (c). 14 Option (b) -- well, sorry, option (c) was really 15 again, it's a fairly dramatic approach to sit down with 16 the contractor and say: actually we want to completely 17 renegotiate or re-scope this project. 18 So those three were unattractive for those reasons. 19 Option (b), there was a legal advice that we were 20 getting that the contract did provide us with levers to 21 force Infraco performance and that whilst the contract 22 was unusual and bespoke, and in some places ambiguous, 23 there were nevertheless remedies or clauses under the 24 contract which we could use to try and enforce 25 performance. 74 1 I think the other thing is if -- we would have been 2 rightly criticised, had we gone to any of the other 3 three options without actually trying to use the 4 contract that was in front of us, particularly given the 5 fact that we were getting legal advice that says: there 6 are levers under this contract that you can use to 7 enforce performance. 8 Q. I want to come to look at the legal advice in just 9 a moment. 10 As that is referring to a discussion on the 8 July 11 meeting, I wonder if we could look at the minutes of 12 that, please. If we go to production CEC00843272. 13 We can see this is the papers for the 29 July 14 meeting, and if we go to page 5 of it, we see the usual 15 pattern of minutes for the previous meeting on 8 July at 16 which this was discussed? 17 A. Yes, that's right. 18 Q. Then if we go to page 7, at the foot of that page, at 19 3.6, you can see once again under the heading, "The Next 20 Steps", a reference to the meeting that you had had with 21 Dr Keysberg and Dr Scheppendahl on 6 July 2009. We 22 considered that before the break? 23 A. Yes. 24 Q. If you go over the page and enlarge the upper half of 25 the screen, it notes that you outlined the four options 75 1 which are the four that we've already seen, and then it 2 notes that the recommendation for the Board to consider 3 was to follow option 2 route and to enter formal dispute 4 resolution under the terms of the contract. 5 "The Board agreed to the principle of Option (2), but 6 would require more information before the formal notices 7 are issued to BSC [the consortium]." 8 How much advance consideration, advance notice was 9 given to the Board members that these would be the four 10 options and that you would be recommending -- I assume 11 it was you that was recommending option 2? 12 A. Yes. I don't recall. The previous -- these are the 13 minutes from the 8th. Aren't they? 14 Q. Yes, they are. 15 A. And the previous slide you showed me was from the 20th, 16 recapping the 8th. 17 Q. From the 29th, yes, recapping. 18 A. Do you have the slides from the 8th? 19 Q. If we go to production CEC0102 -- sorry, that's not the 20 right reference, my apologies. 21 There's no record of a presentation for that? 22 A. Okay. The short answer is I don't know. My style would 23 suggest to me that I would be unlikely to have simply 24 landed this on the Board with no prior warning, but 25 I don't specifically recall what conversations I had 76 1 prior to the Board meeting to tee this particular item 2 up. 3 Q. If you go back to the slides from -- from the 4 presentation for 29 July, it's document CEC00376412. If 5 you go to page 16 of that, this is the slide after the 6 one we looked at, and it's elaborating upon the formal 7 contractual approach, that it involves progressing 8 selected issues through formal DRP process to 9 adjudication, prioritised to the high value, risk and 10 delay items, and keeping a focus on the detail. 11 When you're talking about the priorities there, is 12 that to identify the ones which were key matters of 13 principle which might, it was hoped, unlock the dispute? 14 A. Yes. There were a number though, from memory it was 15 Gogarburn Bridge, Carrick Knowe, Hilton car park. There 16 were four, I think, initially identified as touching on 17 a range of issues. 18 My recollection is these first four didn't address 19 the issue of progress. These were primarily around what 20 was or was not deemed to be included in the contract 21 price. 22 Q. I think in particular the Gogarburn and Carrick Knowe 23 touched upon the BDDI to IFC issue? 24 A. Yes. And there was another one as well which I think 25 was -- I forget what it was, but it was Mr Hunter, the 77 1 following -- 2 Q. I think Mr Hunter decided both Gogarburn and 3 Carrick Knowe. There was then one, Mr -- there was an 4 Russell Road one decided by Mr Wilson? 5 A. That's right, because I think the Gogarburn and 6 Carrick Knowe were decided by the same adjudicator and 7 they found largely to agree with the Infraco's 8 interpretation of the contract. And then the subsequent 9 one that you just mentioned, he effectively overturned 10 or came to a different conclusion because he's not -- 11 not bound by the decision of the previous adjudicator. 12 So although we'd had three adjudications, it was 13 only two adjudicators and we'd got conflicting results. 14 Q. I want to come to look at those results in a bit more 15 detail in due course. 16 What I would like to look at now is the advice that 17 you had available to you at the time of the June 18 meeting. And I would like to look at a document 19 CEC00962649. 20 You can see from the heading, this is a brief for 21 Senior Counsel? 22 A. Was this produced by DLA? 23 Q. It's a document produced by DLA. Do you recognise this 24 document? 25 A. Not specifically. 78 1 Q. Were you involved in considering or approving the terms 2 of the instructions given to Counsel? 3 A. Not directly, no. I left that to the team. So I didn't 4 get personally involved in the presentation of the 5 arguments for these adjudications. 6 Q. Who was in the team that would have been involved in 7 determining the instructions to Counsel? 8 A. That would primarily have been Steven Bell. And DLA. 9 Q. We could look nonetheless at page 8 of this. If we look 10 at the upper half of the page, please, under the 11 heading, "Part B - Base Date Design Information to Issued 12 for Construction". It notes that: 13 "The dispute surrounding Base Date Design 14 Information revolves around the Infraco assertion that 15 anything beyond very minor changes to the BDDI after 16 contract signature on 14 May 2008 will constitute 17 a Notified Departure under the agreement and therefore 18 give rise to an entitlement on the part of the Infraco 19 to additional time and money." 20 That was the essence of the dispute in relation to 21 BDDI to IFC, wasn't it? 22 A. Yes. 23 Q. The third paragraph there is: 24 "Instructing solicitors are of the view that the 25 changes in design from BDDI to IFC stages may not, of 79 1 themselves, give rise to an entitlement on the part of 2 the Infraco to additional time and/or payment. tie is 3 unable to assess the validity of many of the claims 4 because no information explaining it has been supplied 5 to tie by the Infraco. The Infraco has not provided any 6 Estimates for these Notified Departures." 7 Did that accurately reflect the advice you had been 8 given by DLA up to this time? 9 A. Yes, but not the totality of the advice. That seems to 10 me to be talking about the inadequacy of the supporting 11 documentation for the claims. In addition, a strong 12 part of the advice was that it can't possibly be true 13 that the Infraco's interpretation of the contract is 14 correct, because if it is, there would only be need for 15 one Pricing Assumption, not 42, because the Pricing 16 Assumption would be: we only priced what was on the 17 drawings. 18 Secondly, there would be no need for Employer's 19 Requirements, and that in any event, if there was 20 a change in the Employer's Requirements, that would not 21 automatically lead to a change in the price, because the 22 only thing that would change the price would be a change 23 to BDDI. So for various reasons, DLA's advice was that 24 the Infraco's interpretation and contract cannot be 25 right, and indeed that was -- that was supported by the 80 1 second adjudicator. I'm sorry, I have forgotten his 2 name again. 3 Q. Mr Wilson? 4 A. Mr Wilson. 5 Q. Who gave you that advice, can you recall? 6 A. I don't recall specifically, but it would almost 7 certainly have been Andrew Fitchie, because 8 Andrew Fitchie was pretty much the only person I dealt 9 with at DLA. 10 But the advice wasn't given to me personally. The 11 advice was given to tie. 12 Q. But you were, I take it, made aware of it when it was 13 given? 14 A. Yes, I was certainly aware of tie's arguments based on 15 the advice of DLA of tie's -- well, and to be fair, 16 based on some of the opinions of Calum MacNeill QC and 17 Richard Keen, the Dean of the Faculty, that the 18 Infraco's -- in fact, the phrase I remember, the 19 Infraco's interpretation of the contract, whilst 20 superficially attractive, is in fact wrong. I think 21 that was the advice from Richard Keen. 22 Q. We will come to that in due course. I'm just looking at 23 the moment at the item from DLA. We have heard that 24 round about this time, going to get the Counsel's advice 25 and DRP, Andrew Fitchie also brought in one of his 81 1 partners, Bruce Bentley. Did you have dealings with him 2 at all? 3 A. No, I recognise the name and I'll certainly have spoken 4 to Bruce on occasion, but I didn't have very -- if 5 I spoke to him, it was on no more than one or two 6 occasions, I wouldn't think. 7 Q. Did Andrew Fitchie ever tell you that he was concerned 8 that the way the contract was worded, particularly Part 9 4 of the Schedule and the Pricing Assumptions, was such 10 that the consortium would have good claims against tie 11 and the Council -- 12 A. No. 13 Q. -- for all these changes? 14 A. No. In fact, I would say the opposite. I don't know if 15 there's a written record of this, but I did sit down 16 with Andrew relatively early on and say: you know, tell 17 me, what is our exposure here? And his view was very 18 much in line -- this was an off-the record conversation, 19 but his view was very much in line with the written 20 opinions we'd been getting. 21 Q. He never said to you that at the time of contract 22 conclusion, he had warned that the way the contract was 23 made up would pass all the risk of changes back to tie? 24 A. No. 25 Q. Are you sure about that? 82 1 A. As sure as I can be of anything that -- yes. I would 2 not have pursued the arguments that we pursued with such 3 vigour if I had had more reason to doubt them. 4 Q. You've made reference there to the advice from 5 Calum MacNeill. It's document reference CEC00901460. 6 We can see this is headed up, "NOTE BY SENIOR 7 COUNSEL for tie LIMITED". If we look at page 7 we can see 8 the date. You can see that's 2 June 2009. Do you see 9 that? 10 A. Yes. 11 Q. Do you recall -- were you given a copy of this at the 12 time? 13 A. I don't recall actually. It's difficult to be precise 14 now. I have certainly seen this in the preparation of 15 my statement and perusing the database documents. 16 I don't specifically recall seeing it at the time. 17 Q. If you didn't see it at the time, would you have been 18 informed of its contents at the time? 19 A. Yes, I believe I would have been. And certainly I would 20 have been informed of the general thrust of it. 21 Q. By whom? 22 A. I would imagine by Steven Bell or Andrew Fitchie. But 23 I don't have specific recollection of it. 24 Q. How much contact did you have with Andrew Fitchie around 25 about this time? 83 1 A. I would say quite a lot. Two or three times a week 2 I would have spoken to him, maybe more. 3 Often he would have been in meetings that I was also 4 at. It wouldn't necessarily have been one -- I didn't 5 have very many one-to-one discussions with Andrew, but 6 he was in a lot of the meetings where things like the 7 DRP strategy and approach were being discussed 8 and I would be in some of those meetings and not others. 9 Q. If we look at page 4 of this opinion, we can see at 10 the -- if we enlarge the lower half of the page, we can 11 see a heading, "BDDI to IFC stage and 'normal 12 development and completion of design'". 13 It says: 14 "Pricing Assumption 1 in Schedule Part 4 is that the 15 SDS Provider will not change certain things from the 16 BDDI, other than the amendment arising from the normal 17 development and completion of designs. The Infraco, 18 therefore, is assumed to have taken into account, when 19 pricing, all the amendments to the design as at the 20 design freeze date which would result from the normal 21 development and completion of the designs. 22 I understand that the Infraco has maintained that 23 every change from the BDDI constitutes a Notified 24 Departure. However, such a claim ignores this important 25 qualification. 84 1 What constitutes 'normal development and completion 2 of design' as opposed to alterations in 'design 3 principle, shape, form and/or specification' which do 4 not arise from the normal development and completion of 5 design would require to be a matter of professional 6 opinion and, inevitably, judgement." 7 Then he goes on to say he's been asked particularly 8 whether the phraseology would be appropriate for an 9 expert, but declines to respond to that. 10 What did you take from this opinion, or what you 11 were told about this opinion? 12 A. At this point in the process, and I don't know if my 13 opinion was formed specifically on the basis of this, 14 but it is certainly consistent with this, and it would 15 have been formed, I suspect, on the basis of other 16 advice that I was getting and conversations, was that 17 the normal design development risk was at the 18 contractors' risk; and in fact a lot of the tie team 19 often referred to some of the pre-contract negotiations 20 whereby they say that the consortium was paid additional 21 money specifically to take this risk. 22 It seemed to me that it was a reasonably equitable 23 solution that should the client require or instruct 24 changes, that the Infraco would be protected against 25 those, but where the changes arose from normal design 85 1 development, or where those changes arose to improve 2 buildability, for example, that those would be the 3 responsibility of the Infraco. 4 So if the Infraco, for example, can think of 5 a better -- a cheaper way or a better way of building 6 the same outcome, and that requires a change, then they 7 should be absolutely at liberty to do that, but that 8 would not be a cost to the client. If you take the 9 Infraco's interpretation of the contract at this point, 10 they would be at liberty to change the design to suit 11 their buildability, and then charge the client for the 12 privilege of doing so. 13 Q. What you're describing there are two things. Number 1, 14 when you finish off saying that they would be at liberty 15 to change the design and charge the client for doing so, 16 that's really an argument that if the agreement was as 17 the Infraco contended, it would be a very bad deal for 18 tie? 19 A. Indeed. 20 Q. The other point you were saying that people were 21 advising you that from the pre-contractual discussions 22 that they believed or understood that the consortium had 23 been paid to take this risk? 24 A. Yes. 25 Q. Of course you appreciate there's a slightly different 86 1 question of whether or not the contract actually gives 2 effect to that? 3 A. Absolutely. 4 Q. Did you yourself go back and look at the terms of 5 Schedule Part 4 and Pricing Assumption number 1? 6 A. Not specifically. I didn't go away and put a cold towel 7 around my head and say: right, all these guys must have 8 it wrong, I am going to sit down and read Schedule Part 9 4 because I can determine it better than anyone else. 10 I'm not a lawyer. 11 I -- clearly I looked at it, but I relied on the 12 advice that I was getting from the team and from the 13 legal experts that we -- that we were employing, to give 14 me an overall picture. 15 Q. I understand taking legal advice, and that's why 16 I wanted to look at that, but if we could just look at 17 the terms of Schedule Part 4 itself, the document 18 reference is USB00000032. We have got the title page 19 saying: 20 "THIS IS SCHEDULE PART 4 REFERRED TO IN THE 21 FOREGOING AGREEMENT BETWEEN TIE AND THE INFRACO." 22 Then if we look to page 5, I think at the foot of 23 the screen there, clause 3.4, we can see the start of 24 the Pricing Assumptions? 25 A. Yes. 87 1 Q. The first one with which we are concerned is: 2 "Pricing Assumptions are: 1. The Design prepared by 3 the SDS Provider will not (other than amendments arising 4 from the normal development and completion of designs): 5 1.1 in terms of design principle, shape, form and/or 6 specification be amended from the drawings forming the 7 Base Date Design Information." 8 That's the core of that clause there? 9 A. Yes. 10 Q. So from reading that, it would appear that you've got 11 a prohibition on changes in design principle, et cetera, 12 unless it's normal development and completion of 13 designs? 14 A. Yes. 15 Q. Reading -- if you go over the page, enlarge the upper 16 half, we can see after clause 1.3, there's the 17 additional wording: 18 "For the avoidance of doubt normal development and 19 completion of designs means the evolution of design 20 through the stages of preliminary to construction stage 21 and excludes changes of design principle, shape, and 22 form and outline specification." 23 A. Yes. 24 Q. So if you try applying the proviso, if you decide you've 25 got a change of design principle, shape, form and/or 88 1 specification, you might then try and apply the proviso 2 as to whether or not it's normal development and 3 completion of designs, but what this wording tells you 4 is that normal development of designs will always 5 exclude such changes? 6 A. Yes, and there's two comments I would make on this. 7 Clearly this is a particularly harmful sentence for tie. 8 I can -- with an engineering hat on, say, well, actually 9 there is no change that is not a change in design 10 principle, shape, form and outline specification. 11 So what -- taken literally, what this says is 12 everything is included except for everything. 13 On the Russell Road retaining wall, we got into the 14 argument over the -- there was a cylindrical pile, and 15 the cylindrical pile, for point of argument, the pile 16 had a diameter of 1 metre and a length of 9 metres, so 17 it was a cylinder of diameter 1 metre, length 9 metres. 18 It changed to a cylindrical pile of diameter 1 metre, 19 length 14 metres. The Infraco's argument was that's 20 a change of shape because it was a cylinder of aspect 21 ratio 1 to 9. It's now a cylinder of aspect ratio 1 to 22 14. So it's a change in shape. I actually think -- 23 Q. Just to be clear, the outcome of that, the Russell Road 24 adjudication, was that there was a Notified Departure? 25 A. Yes. 89 1 Q. They were successful in that? 2 A. Yes. And this is where I think I preferred or agreed 3 with Mr Hunter, was it, the second one -- 4 Q. Mr Wilson? 5 A. Mr Wilson, sorry, who said something has clearly gone 6 wrong with the language. And it was at that point that 7 McGrigors then picked up on this idea that actually 8 there's something commercially absurd about this 9 contract, and therefore went off down the route of 10 trying to explore the Chartbrook v Persimmon argument 11 that the contract in fact needs to be rewritten because 12 as written, its literal interpretation is absurd. 13 Q. I will come to all that advice. I want to look at it 14 stage by stage as the dispute resolution unfolded. 15 Just looking at this very early stage, you said that 16 even from as engineer, an engineering perspective, 17 reading that contract, you can see there's something 18 strange about it? 19 A. If you take an extreme view of it, yes. If you take it 20 literally and you could argue that even a change from 21 a cylinder of 9 metres long to a cylinder of 14 metres 22 long is a change of shape. So you get into a debate 23 about, you know, when is a rectangle not an rectangle. 24 Q. How important to you was the legal advice that you'd 25 obtained and the opinion from Calum MacNeill? 90 1 A. There's a general point I would make, I think, about the 2 legal advice. I can't sit here and say that particular 3 bit of legal advice led me to do this or led tie to do 4 this. 5 We took a whole lot of legal advice on a whole range 6 of issues. Sometimes that legal advice was 7 contradictory. Sometimes it changed over time. 8 I would not have taken one single piece of legal 9 advice in isolation and said: right, here is the answer, 10 let's go down that route. I would have taken that legal 11 advice. I would have discussed it with my team, 12 discussed with the legal advisers, considered in the 13 light of all the other bits of legal advice that we had, 14 and then formed a course of action on that basis. 15 So with that general proviso, clearly some of the 16 planks of that legal advice upon which we were basing 17 the arguments was the opinion from Calum MacNeill and 18 later, around the same time and later, the opinion of 19 Richard Keen. 20 Q. Now, we looked at the presentation where this was going 21 to be considered and it looked at the -- it was prepared 22 for the 29 July meeting at the Tram Project Board. 23 I just want to establish who was there. If we can 24 look at the minutes. It's in document CEC00739552. 25 This is the pack of papers for the meeting on 91 1 26 August. If we look at page 5 of this, we find the 2 minutes of the meeting for 29 July at which that 3 presentation was made; is that correct? 4 A. Yes. 5 Q. If we look -- sorry, the first page of this, first of 6 all, at who was in attendance. We can see that 7 Andrew Fitchie was there. He's about halfway down the 8 left-hand column? 9 A. Yes. 10 Q. While these things were being discussed -- 11 A. And Stuart Jordan was also from DLA. 12 Q. While this was being discussed, I have to ask you once 13 again, did Andrew Fitchie offer any view that his view 14 of the contract had always been that it put the risk of 15 these changes on tie, and they were in a very weak 16 position? 17 A. No. 18 Q. Could we look further on at page 9, please. You talk 19 there about the -- have a look at the lower half of the 20 screen, please, point 3.7. It records that you provided 21 a recap of the mediation week to the Board and 22 re-affirmed the recommendation to the Board to progress 23 matters by employing the formal contractual approach 24 using DRP and other remedies: 25 "He stressed that this route is not risk free, and 92 1 outlined the pros and cons of this approach, dwelling on 2 BSC behaviours to date and setting out the elements that 3 can be dealt with through the formal process, all within 4 the framework of the contract that both parties signed 5 on 14 May." 6 You notice there that it's not risk-free. You made 7 the Project Board aware that decisions might go against 8 them? 9 A. Yes, and I think there's elsewhere actually, I can't 10 remember if it's in other minutes or in documentation, 11 where there was phrases used that we should not expect 12 to win every adjudication. 13 Q. You were putting forward quite deliberately 14 adjudications on major points of principle? 15 A. Yes. 16 Q. Was there consideration of what was going to happen if 17 one of those decisions went against you? 18 A. I believe there was. And I believe that the view was 19 that it -- the situation would not be any worse than it 20 was prior to going to adjudication in so much as the 21 Infraco were unwavering in their view of the contract 22 and were using the BDDI to IFC issue and the combination 23 of that and the lack of progress issue to effectively 24 stall the work. 25 So there was an element here of: at least by going 93 1 down this route, we will get greater clarity one way or 2 the other. 3 Q. But it could be a clarity which indicated that the 4 consortium were correct and they were going to be 5 entitled to a lot of additional money? 6 A. It could have been, and that's why it wasn't a risk-free 7 route to follow. 8 Q. So was there discussion of what we might call plan B, 9 what would happen if things went against you? 10 A. No, I don't know that there was, to be honest. I think 11 that was probably more a case of: let's just take one 12 step at a time and then re-evaluate when we've taken 13 that step. 14 Q. If we look at the foot of page, there's a bullet point. 15 You do note there that the DRP process need not play out 16 to conclusion of adjudication, and that the parties have 17 the option of reaching agreement at any stage. 18 While it is true that the parties could reach an 19 agreement at any stage, is it really feasible to assume 20 that once the adjudication started, tie would be able to 21 get out if they didn't like the way it was going? 22 A. Well, the DRP process was more than just the 23 adjudication. There were several steps that led up to 24 the adjudication, and there were indeed some disputes 25 that were launched into the DRP process that never 94 1 reached adjudication because they were resolved 2 beforehand. 3 I think once the adjudicator was -- that the 4 adjudication was the final step in the whole DRP 5 process, and my recollection is there were five or six 6 steps. 7 I do not know for certain, but I suspect once the 8 adjudicator had been appointed, then you couldn't stop 9 the process, but at any point prior to the adjudicator 10 being appointed, you could, and indeed in some cases we 11 did. 12 Q. When you reached an agreement? 13 A. Yes. 14 Q. But if you had started the DRP process, not an 15 adjudication, but the DRP process, and then suddenly 16 pulled out of it, that was going to put tie in an 17 extremely difficult position? 18 A. Not necessarily, because during the DRP process, both 19 sides could amend their position, and if there was 20 movement from one side and movement from the other, you 21 might then get to the position where the parties were 22 sufficiently close that we would take the view that 23 says: actually the difference between us on this 24 particular item is not so significant as to warrant 25 going through to an adjudication. So we can resolve it 95 1 by agreement. 2 Q. But again, that was dependent on reaching an agreement 3 out of the process, rather than a unilateral withdrawal 4 by tie? 5 A. Yes. I think if one party unilaterally withdrew from 6 the process, they would effectively be conceding the 7 point. 8 Q. If we go over to the following page, just to see what 9 the conclusion of this discussion was that's recorded, 10 and in the upper half of the screen, it notes: 11 "The board was asked to approve the recommendation 12 that RJ as CEO be given the authority to activate the 13 items to be brought forward into the formal notice 14 process to BSC, with the Finance, Commercial and Legal 15 Sub-Committee acting as a steering group. This group 16 will be meeting on a weekly basis for the duration of 17 the process. The recommendation was approved by the 18 Board." 19 So that was matters sent off to DRP -- put in 20 process to be sent off to the Dispute Resolution 21 Procedure? 22 A. My recollection here is that each item that was being 23 put into the DRP process would go through a challenge 24 process, and the final decision as to launch it was 25 effectively now delegated to the Financial, Commercial 96 1 and Legal Sub-Committee of the Board, rather than having 2 to go back to the main board for each individual DRP 3 process. 4 Q. Now, I want us, before turning to the results of the 5 adjudications, and the further legal advice obtained, 6 I want to just look at what was happening -- 7 CHAIR OF THE INQUIRY: Sorry, you say it was delegated to 8 the Finance, Commercial and Legal Sub-Committee, but was 9 it not in fact delegated to you with the support of that 10 sub-committee as a steering group? 11 A. Yes, that's -- yes, that is a more accurate reading of 12 that minute. In practice, I would -- I didn't sit on -- 13 in my office on my own and make -- and decide, right, 14 that's the way we are going to go. I sat with the -- my 15 colleagues on the Financial, Commercial and Legal 16 Sub-Committee, and we made the decision as a group. But 17 ultimately I was -- I was charged by the Board with 18 activating them. 19 MR LAKE: I want to look now just for a moment away from the 20 Dispute Resolution Process and to see what's happening 21 on the ground. 22 Could we look back at your statement, please, at 23 page 31, paragraph 188. You note here: 24 "On 3 December 2009 I emailed principals within tie 25 advising that BB [Bilfinger] were refusing to work on 97 1 Shandwick Place without an amendment to the contract. 2 This is a significant email. I had been in post nine 3 months and although Princes Street was nearing 4 completion, it had been at considerable expense. We had 5 a commercially aggressive contractor and a weak 6 contract. There was no certainty on cost, programme or 7 effectiveness of the contract and the shareholders were 8 'wobbly' and impatient. There were several occasions 9 where it might have been better to stop and change 10 direction. This was the first such occasion on my watch 11 and I could not let it pass without exploring the 12 options. Those options were to carry on as we were or 13 negotiate an exit. This ultimately all led to the 14 formation of Project Pitchfork." 15 Now, you say there was a number of times when it 16 might have been better to stop and change direction and 17 this was the first. What were the other principal times 18 when you thought it might have been time to stop and 19 change direction? 20 A. Well, to a degree I'm speculating here because it was 21 before my time, but I think that what I had been used to 22 from my previous career was the point at which the 23 decision was made to go out to tender would have been 24 a good time to have -- to stop and take stock. And at 25 that point decide if you've got a delay in the project 98 1 through delay in the design or whatever, now is the time 2 to stop because if you keep going, it's only going to 3 get worse. 4 So I would say that was one occasion. 5 And don't -- I may have said stop here. I didn't 6 mean abandon. I meant stop, pause, take stock. 7 I didn't mean abandon. 8 The second would have been at the point of contract 9 signature, and although there had been considerable time 10 and effort and expense by the bidders in getting to the 11 point of contract signature, it still would have been 12 better to have not signed the contract, rather than 13 signed it. So that would have been another significant 14 moment where we -- the project could have stopped and 15 taken stock. 16 When I started, Princes Street was closed to 17 traffic, and the city was disrupted, and I didn't 18 believe that that was a prospect worthy of 19 consideration, of stopping the project or pausing the 20 project at a point when the city centre was disrupted 21 because of the closure of Princes Street. 22 What I believed we had here was, with Princes Street 23 nearing completion and no new on-street works starting, 24 there was an opportunity here where actually the cost to 25 the city, not the financial cost, but the disruption 99 1 cost, of a further delay in the project was relatively 2 small. The off-street works weren't really affecting 3 the life of the city in the same way that the on-street 4 works were, and therefore I -- there was more to it than 5 this, but I was not keen on allowing the contractor to 6 start on Shandwick Place until he'd resolved all these 7 issues. It was never going to be easier to resolve 8 these arguments with Shandwick Place shut to traffic and 9 the good residents of Shandwick Place disrupted. It was 10 not going to make it an easier situation for tie to 11 resolve than it would be with the works all kept to the 12 off-street area. 13 Q. Were there other times that you considered, times when 14 you might have had a stop and consider about change of 15 direction -- 16 A. Prior to this. 17 Q. -- later in your watch? 18 A. I think almost at any time subsequent to that, because 19 whilst the -- whilst the works were not disrupting the 20 city, it did actually provide a slightly calmer -- I use 21 my words carefully, only slightly calmer environment in 22 which to make those sorts of decisions. 23 You know, I guess the other time would have been at 24 the Mar Hall time. 25 There is always a risk with -- there were many 100 1 risks. One of the big concerns was if we were to pause 2 at a point before we had a completed design, there was 3 always going to be a messy situation where, you know, 4 the design wasn't complete, and therefore any break at 5 that point would be difficult. 6 Q. But that remained a problem throughout the time -- 7 A. Yes, it did. 8 Q. In terms of the refusal to work on Shandwick Place 9 without a supplementary agreement, I think 10 Shandwick Place was the next bit of on-street works that 11 the consortium were to do after Princes Street; is that 12 correct? 13 A. That's correct. 14 Q. So while you were there, did the consortium ever do any 15 works on-street under the original contract? In the 16 absence of a specific construction? 17 A. I don't think they did. There might be an example 18 somewhere, but I can't think of it. The closest would 19 be the Haymarket viaduct, but I don't consider that to 20 be on-street works. 21 Q. So in terms of the actual things involved putting tracks 22 on existing streets, no works were done under the 23 contract that had been signed. 24 A. No, I don't think there were. 25 Q. You say in this paragraph this all ultimately led to the 101 1 formation of Project Pitchfork. That was something that 2 picked up in the early part of 2010. 3 A. Yes. 4 Q. This is one that considered, I think, both the options 5 of terminating the Agreement -- there were three 6 possible strands: terminating the Agreement, modifying 7 it to truncate the scope of the tram to be delivered, or 8 just continuing with assertive enforcement of the 9 contract. Is that a correct understanding? 10 A. Yes. I think this particular Pitchfork varied sometimes 11 between having three prongs and four. The subtlety 12 would be terminating the Agreement by -- the contract by 13 mutual agreement, which later became Project Separation, 14 and terminating the contract by unilateral action -- 15 well, I say unilateral. For breach of contract by the 16 Infraco, which was Project Notice. So Project Notice 17 and Project Separation were two different strands, but 18 they were sometimes combined into one, and sometimes 19 two. 20 The next one was a modified scope and a modified 21 agreement, which was ultimately what happened at 22 Mar Hall, but that had its genesis in Project Carlisle. 23 And the fourth option, which I don't think had a name, 24 was just continuing to administer the contract as best 25 we could. 102 1 So when I first re-read all of this stuff, even 2 I was confused. So I do understand that it was -- it 3 was confusing, but I think I've got it clear in my head 4 now that there were effectively the four strands. 5 Termination by mutual agreement, termination for breach 6 of contract, carrying on as we were, or a modified 7 agreement and scope which started life as Project 8 Carlisle and ultimately became the deal done at 9 Mar Hall. 10 Q. Is Project Pitchfork essentially an umbrella name for 11 all these things? 12 A. Yes. Project Pitchfork of itself wasn't a project. 13 That was almost, if you like, a strategy, that was the 14 overarching term. The reason it came about, if it's of 15 any interest, is we drew up all the options on 16 a flipchart, and by the time we'd finished drawing them 17 up, it looked like a pitchfork, and that's where the 18 name came from. 19 Q. In terms of responsibility for these areas within 20 Project Pitchfork, obviously the option of simply -- the 21 option of terminating for breach, was that assigned to 22 any one approximate person in particular, to oversee and 23 pursue that? 24 A. I can't remember. There is a document that sets out 25 fairly clearly, I think, the roles and responsibilities 103 1 for each of my team under each of the headings. 2 Q. We can come back to that. I think it's something we'll 3 come to later in any event. 4 What I want to do now is continue to look through 5 the other matters in relation to DRP as they continued 6 from December onwards. What I would like to do is look 7 at the -- one of the two decisions that came out at the 8 same time from Mr Hunter. If you look at document 9 CEC00479431. 10 You can see that this is the decision letter of 11 16 November 2009. It's addressed to Keith Kilburn at 12 tie, and Fraser McMillan at Pinsent Masons for the 13 consortium, and it comes from John Hunter; do you see 14 that? 15 A. Yes. 16 Q. The subject matter on this one is the Carrick Knowe 17 Bridge. But I think it's correct that a decision was 18 issued the very same day in the same terms in relation 19 to the Gogarburn Bridge. Is that your recollection? 20 A. I'm afraid I get a little confused here. These were the 21 two that were launched at the same time on the same 22 issue and decided by the same person; is that correct? 23 Q. Yes. 24 A. Yes. 25 Q. If we just look briefly at page 4 and look at 104 1 paragraph 4.1, just to identify the dispute that we're 2 looking at, it's on or about 19 September 2008. The 3 responding party, which is the consortium: 4 "... served on the Referring Party [tie] 5 a notification of tie change number 115 dated 6 18 September 2008 ... in terms of which the responding party 7 advised the referring party of its opinion that: 8 "Schedule Part 4, Pricing Assumption, 9 paragraph 3.4.1.1, assumes that the Issued for 10 Construction Drawings do not differ from the base date 11 assumption drawings of 25 November 2007 other than 12 design development as the ..." 13 Then it gives reference to particular drawings: 14 "Differ to a greater extent and complexity than 15 design development, the foregoing results in a Notified 16 Departure." 17 That was a crystallisation of the issue that was 18 there; it was claimed that there was a change. 19 A. Yes. 20 Q. If we look then to page 9, to understand what tie were 21 seeking by way of redress, paragraph 6.17 and 6.18: 22 "The Referring Party requests a declaration that the 23 only fact or circumstances notified in the Infraco 24 Notification of tie Change which constitute a Notified 25 Departure are those which relate to the Galleries 105 1 pursuant to Pricing Assumption 3.4.1.1.3. 2 The Referring Party requests a declaration that the 3 estimate is to contain only those items of work which 4 relate to the Galleries." 5 So tie did accept there's one notified change but 6 disputed the remaining part of it. 7 A. I'm afraid I don't recall the technical details of what 8 the galleries were, but yes, that -- the principle of 9 the argument was the extent to which the design had 10 changed and whether or not that constituted a tie 11 change. 12 Q. If we go to page 26, the final page of this, we can see 13 this paragraph -- if we look at the upper half of the 14 page, we can see in paragraph 8.2 that the adjudicator 15 refuses the redress sought in paragraph 7.1. That was 16 the limitation? 17 A. Yes. 18 Q. 8.3: 19 "Having answered the first redress sought in the 20 negative I refuse the redress sought at paragraph 7.2." 21 So ultimately tie didn't get what they were asking 22 for? 23 A. Correct. 24 Q. Now, without going through the whole of the reasoning 25 and the terms of this at the hearing just now, what did 106 1 you take from this? What were you advised you should 2 take from this at the time? 3 A. Well, first of all, it was clearly a very disappointing 4 and, I have to say, surprising result. I wasn't 5 expecting this. And nor were the team expecting this. 6 Even after the event, nobody said: yes, I thought 7 that might have happened. There was genuine shock that 8 the adjudicator should find this, and that was clearly 9 quite a major confidence blow to our legal arguments. 10 Q. Having had the legal arguments which were arguments 11 intended to determine a matter of principle rejected in 12 this way, just even amongst the management, what 13 reaction was there to that? 14 A. There was a degree of disappointment. And as I say, 15 shock. I don't think anybody had expected -- and in 16 reasonably clear terms, Mr Hunter had preferred the 17 Infraco's interpretation of the contract. 18 After the dust had settled, there was an opportunity 19 then to say: right, let's look at the reasoning here, is 20 this something that should be challenged? And in fact 21 we kept the opportunity -- the option of challenging the 22 Hunter adjudications open for quite some time, and there 23 were various opinions and I believe legal written 24 opinions from DLA as to why the Hunter decision was 25 wrong. 107 1 I think I asked at the time to say: well, okay, we 2 have got lots of reasons why we think Hunter got it 3 wrong, can somebody produce for me a paper in support of 4 Hunter's decision, so that we can get a better 5 understanding of both sides of the argument. 6 Yes, whilst it was a -- it was a blow, I think we 7 convinced ourselves it wasn't a fatal blow, and that 8 there were still arguments to be had, and indeed the 9 subsequent adjudication gave us much more hope. 10 One of the reasons we didn't challenge it, 11 and I believe it was McGrigors' advice, from 12 Brandon Nolan, was that getting another adjudicator to 13 overturn an adjudicator's decision is a very tall order 14 because you would have to show -- to simply show that 15 he'd got it wrong isn't enough. You've got to show that 16 he didn't follow some due process or that his conclusion 17 was absurd. Just because -- as long as his 18 interpretation is credible, doesn't matter whether it's 19 right or wrong. You've asked him to make a decision. 20 He's made a decision. He hasn't done anything obviously 21 wrong. Therefore you don't really have grounds to 22 challenge it. But it doesn't make it right. 23 Q. I want to look at two questions. One would be how to 24 challenge that particular adjudicator's decision to say 25 that that decision shouldn't stand? 108 1 A. Yes. 2 Q. I think you were given advice that there are limited 3 grounds of challenge available there? 4 A. Yes. 5 Q. Were you given advice on the possibility of simply 6 putting the matter into court and litigating it from 7 scratch there? 8 A. That item or the whole -- 9 Q. This particular issue, and what effect that would have 10 on the adjudicator's decision? 11 A. Yes, and I think again my recollection is slightly 12 patchier here, but I think the same arguments applied, 13 which is that you would have to show that somehow the 14 adjudicator had done something absurd or had completely 15 ignored one argument or that -- simply the fact that you 16 don't like the decision isn't the issue. You've got to 17 show that somehow the decision is fundamentally flawed, 18 and Hunter's logic was credible. 19 Q. I would like to look at the -- we have just seen that 20 decision letter was dated 16 November. I would like to 21 look at the Tram Project Board meeting that took place 22 at about that time. It's got document reference 23 CEC00681328. 24 We can see this is the pack of papers for the 25 meeting that took place on 18 November, which is just 109 1 two days after the date of the decision. 2 Could we look, please, firstly at page 12. We can 3 see what we're looking at in this section is the Project 4 Director Report. You are familiar with that again. 5 A. Yes. 6 Q. Can we look at the following page. We can see the text 7 on the lower half of the page, under "Dispute Resolution 8 (Infraco)" is that: 9 "At the end of Period 8, only three items remained in 10 dispute with BSC. The first decision in relation to 11 DRP3 was reached by adjudication and found in tie's 12 favour." 13 I think that was the one in relation to the Hilton 14 car park? 15 A. Right. 16 Q. Do you recall that? 17 A. Possibly. 18 Q. "Agreement was reached without furthering the DRP 19 process on Haymarket Viaduct and MUDFA revision 8 and 20 agreement was reached on EOT1 at mediation. The 21 agreement on the way forward on MUDFA Revision 8 is 22 significant as with it comes a commitment from BSC to 23 produce a mitigated programme and commence work in 24 a number of additional locations." 25 Obviously there's no reference there to the 110 1 Carrick Knowe and Gogarburn Bridge decisions because 2 presumably they only came out two days before. There 3 wasn't time to get them into this report? 4 A. Yes, these papers were typically circulated about a week 5 in advance of the Board meeting. 6 Q. Could we look over the page, please, at page 14. We can 7 see there Gogarburn and Carrick Knowe in the table. It 8 gives the decision date which was in the past, but that 9 no details could be given because these papers had 10 already gone out; is that correct? 11 A. Yes. These papers would have been produced prior to the 12 16th. 13 Q. Yes. Then looking under the table, we see the text is: 14 "We continue in this report to reflect an outturn 15 estimate of GBP527.1 million. However, given the 16 commercial uncertainties with BSC and continuing delays 17 to the project, it is now considered unlikely that the 18 full scope of Phase 1a will be completed within the 19 available funding envelope of GBP545 million. Until the 20 key issues are resolved through contractual and legal 21 process, it will not be possible to forecast accurately 22 a revised budget outturn. It is also not possible at 23 the present time to predict the conclusions of reviews 24 of contingency option programme delivery options, 25 including additional sources of funding." 111 1 Just pausing there, this comes to something you've 2 said already. You weren't going to predict outturn cost 3 until you had a better idea of the issues? 4 A. Correct. 5 Q. You had now at least some better idea of the issues in 6 that you had two decisions by a single adjudicator which 7 gave you a decision, albeit not the one that was wanted? 8 A. I don't think that would give me better understanding of 9 the outturn cost. What it gave me was a -- an insight 10 into the fact that the contract may not say what we 11 thought it said. That of itself did not give the -- did 12 not allow any more accurate prediction because if the 13 Infraco's interpretation of the contract was correct, 14 then it would be even harder to predict a final outturn 15 cost, because if you haven't got a completed design, and 16 if you're liable for everything that's going to be 17 changed in that design, until you know how much is going 18 to change, you have no way of knowing how much it's 19 going to cost. 20 So if you had taken Hunter adjudication at face 21 value and assumed that was the end of the argument, what 22 that would have said would be: actually now it's going 23 to be impossible to ever predict a final cost for this 24 project until it's finished. 25 Q. Now, that is a fairly catastrophic scenario, isn't it? 112 1 A. It is. If you take the Hunter adjudication as being the 2 only and final interpretation of the contract. 3 Q. But it was the only one you had at the time? 4 A. It was, but one of the reasons we didn't challenge the 5 Hunter adjudication was because we had the opportunity 6 to launch further DRPs on the same issue to different 7 adjudicators. 8 Q. In the hope that you would get a different result that 9 time? 10 A. Yes. Which is in fact what happened. 11 Q. Well, we will come and look at the results in a moment. 12 In essence, even if you got a different result, nothing 13 was going to get rid of altogether the Hunter decision, 14 which was just going to sit there and present you with 15 what we've discussed could be quite a catastrophic 16 position for tie? 17 A. No, nothing would get rid of it, but you might be able 18 to dilute it. 19 Q. Was there any consideration amongst the management team, 20 if not the Tram Project Board, about the possible extent 21 of financial exposure if that decision held? 22 A. I would say there was consideration of it, but it wasn't 23 quantified because I think it was impossible to 24 quantify. 25 Q. Can you recall who you had that discussion with? 113 1 A. I don't recall specific discussions, no. 2 Q. Perhaps it's -- we are talking about this meeting. We 3 have talked about PowerPoints. Look at the PowerPoint 4 for this meeting. It's CEC00835831. 5 We see this is the heading for the joint Tram 6 Project Board and tie Board meeting on 18 November 2009. 7 Do you recognise this? 8 A. Yes. 9 Q. What I want you to do, in terms of looking at what is 10 said about the adjudication outcome, could we go first 11 to page 6, please. There's a strategic summary. Would 12 you have been involved in the preparation of this or 13 approval of this? 14 A. Yes. 15 Q. We can note there it says: 16 "No sign of change from BSC." 17 You've got five key outcomes you want, and then you 18 note: 19 "Slow, grinding progress. Work started under 80.15, 20 but no change in attitude, behaviour, certainty or 21 commitment." 22 That was recording, I think 80.15 is to do with 23 compelling the contractors to commence works in certain 24 circumstances? 25 A. That's right. 114 1 Q. But despite the fact that had happened, you note that it 2 had brought about no change overall? 3 A. Mm-hm. 4 Q. If you go to the following page, and enlarge that, you 5 notice: 6 "Progress as part of the DRP and David Darcy 7 effect." 8 The fourth bullet point is: 9 "First two BDDI - IFC Design Development Adjudication 10 decision." 11 And that's all that's said about them? 12 A. Mm-hm. 13 Q. Was it not -- would it not have been useful, do you 14 think, to take the Board members through a PowerPoint to 15 explain exactly what had been decided, how it had been 16 decided, and what the consequences would be for all the 17 other arguments? 18 A. But can you pull up the minutes of that meeting? 19 Q. Yes, I was going to go to them in just a minute. Just 20 in terms of briefing them by looking at the information 21 provided in a PowerPoint. 22 A. As I've said before, these documents were not designed 23 to be read in isolation. 24 Q. Okay. Let's look at the minutes then. It's document 25 CEC00416111. We have now got the papers for the meeting 115 1 that's due to take place on 16 December. 2 If you go to page 5, it's clear we're now looking at 3 the minutes for the earlier meeting on 18 November? 4 A. Yes. 5 Q. If you go through to page 6 and look at the very bottom 6 of the page, you can see under the heading "Strategic 7 Summary", it says: 8 "RJ provided the Board with a report on the outcome 9 of the decisions from the Adjudicator on the 10 Carrick Knowe and Gogarburn Bridge (BDDI to IFC Design 11 Development) matters." 12 Just pausing there, that's really all we're told 13 about the information that you gave them? 14 A. Well, not really, because if you read on, it says 15 Kenneth Hogg asked if tie's interpretation of the 16 contract has changed through the evolution, blah blah, 17 and the Board discussed at length a number of matters, 18 including the interpretation of the contract. So there 19 was clearly a lengthy discussion that happened at that 20 Board meeting about those adjudication decisions. 21 Q. I will come back and ask my question. That first 22 sentence that I have read is all we are told about what 23 you told the Board members about those decisions? 24 A. That's all the minutes record, yes. 25 Q. So can you remember what you told them about the 116 1 decision? 2 A. No, not specifically. 3 Q. Whatever took place in the discussions which are 4 recorded there, would turn to a very large extent on 5 what information the Board members had been given, 6 wouldn't it? 7 A. Yes. 8 Q. If we continue looking at the third line on this page, 9 it does say: 10 "A full review of this determination is under way 11 and it is noted that a decision on the Russell Road DRP 12 item is scheduled for 17 December, and that papers are 13 due to be submitted to a new adjudicator on 14 19 November 2009." 15 Which was the day after the meeting took place. 16 When you said a full review of this determination is 17 under way, does that mean management or legal advice? 18 A. Both. 19 Q. Then there's the point that you drew my attention to: 20 "KH [Kenneth Hogg] asked if tie's interpretation of 21 the contract has changed through the evolution of this 22 process, and queried whether a review of the strategic 23 direction of the DRP is necessary. The Board discussed 24 at length a number of matters including interpretation 25 of the contract, both from a legal and technical 117 1 perspective as well as the strategic direction of 2 further submissions to the formal process. It was 3 reiterated that it is too early in the process (for 4 either party) to establish precedence at this stage in 5 the process, and it was agreed that the current 6 strategic direction should continue." 7 In terms of the query that was made by Mr Hogg, he 8 said: had the interpretation changed through the 9 evolution of this process. I take it that means the 10 Dispute Resolution Process? 11 A. I take it that's what he means as well. 12 Q. Really reading your response, you say it's too early for 13 either party to establish precedence. Was that advice 14 you had received? 15 A. Yes, and I think there was also an internal email 16 produced at the time by Graeme Bissett, who also said 17 that -- confirmed the view that said this is one 18 decision, what we shouldn't be doing now is throwing the 19 whole contract out and saying: right, well, clearly this 20 one decision says this whole contract is, you know -- is 21 going to not provide us with the outcomes that we want. 22 Q. Presumably if you'd had one decision in your favour, you 23 might have taken a rather more positive view of the 24 single decision? 25 A. Yes. 118 1 Q. So what you're doing here is making a virtue of 2 a necessity and saying perhaps we can run more of them 3 and see where we end up? 4 A. Yes. Well, I think it's too -- I would think those 5 words say it's too early in the process. 6 Q. But on any view it was plain that no matter how many 7 more decisions were sought, how many more adjudications 8 were run, you were only at best going to get an 9 ambiguous outcome in that there was always going to be 10 these two decisions against you? 11 A. Yes. 12 Q. So how much was going to be achieved by trying to get 13 other decisions? 14 A. I think that there's no question that our position had 15 been weakened by the Hunter decision. And therefore if 16 we could obtain further decisions that went in our 17 favour, that would strengthen our position, at least to 18 neutralise the Hunter decision and perhaps even improve 19 upon it. 20 Ultimately if we go back to the four prongs of the 21 strategy, the idea of a negotiated settlement, either 22 a negotiated scope as finally happened at Mar Hall, or 23 a negotiated ending of the Agreement, that would come 24 down to the relative strengths of the two parties as 25 they entered into those negotiations. 119 1 So for us, if you like, to have this setback in 2 round 1, if we just gave up at that point, we would have 3 actually been worse off than had we not started the DRP 4 process at all. 5 Q. That's why I asked earlier, was there any consideration 6 of what would have happened if you lost this 7 adjudication? Was there a plan B? 8 A. I think it was to take it one step at a time, which is 9 what we did, which is why we launched the Wilson 10 adjudication. 11 Q. But even if you got then a favourable decision in 12 a future adjudication, you would essentially be left 13 with tie saying we've got a decision in our favour, the 14 consortium saying we've got a decision in our favour. 15 Would that have taken you any further forward? 16 A. Yes, I think it would in so much as I think it would 17 have caused the Infraco to question their interpretation 18 of the contract in the same way that the first decision 19 caused tie to question its interpretation of the 20 contract. 21 Q. I want to look at the legal advice that you got in 22 relation to and following this decision. 23 The first piece is reference CEC00479430. 24 We can see this document is titled "DLA PIPER 25 SCOTLAND LLP OVERVIEW OF ADJUDICATOR'S DECISIONS 120 1 relating to ..." 2 Reading short, it's the decisions in relation to 3 Gogarburn Bridge and Carrick Knowe Bridge that we've 4 just seen? 5 A. Yes. 6 Q. This advice itself is dated 18 November 2009. If we 7 look at the first page of it, just looking at that -- if 8 we look at the following page, do you recall seeing this 9 advice at the time? 10 A. I don't know if I saw it on the 18th, but I certainly 11 saw it at some point in the proceedings. 12 Q. If we go to page 7 of this, and enlarge paragraph 4.2 13 and its subparagraphs, the advice that's given there is: 14 "Setting aside possible future application of the 15 Adjudicator's decisions, the decisions of Adjudicator can 16 be challenged in certain circumstances. Two routes are 17 generally available to a party who wishes to challenge 18 an Adjudicator's decision: 19 "4.2.1. a petition for judicial review (in the 20 Court of Session); or 21 "4.2.2. defending an action for enforcement of an 22 Adjudicator's decision. Note here that, as the 23 Adjudicator has not made any declaration as to 24 valuation, it is thought likely that Infraco would only 25 seek to enforce the Adjudicator's Decision if tie 121 1 subsequently refused to acknowledge and accept a value 2 for those matters which the Adjudicator declared were 3 Notified Departures. That might be an application for 4 evaluation of the Estimate through DRP." 5 Did you recall that advice at the time? 6 A. Not specifically, but it -- but it vaguely or roughly 7 accords with my recollection. 8 Q. If we look at paragraph 4.5 over the page, we can see 9 that: 10 "In the circumstances here we are of the view that 11 there are the following potential grounds of challenge, 12 which should be considered." 13 Then there's heading setting out the challenge for 14 breach of natural justice, and over the page, a heading 15 setting out a basis for challenge in relation to 16 jurisdiction. 17 Then the conclusion after that is: 18 "In light of the foregoing we strongly recommend as 19 a first step that the potential grounds for challenge of 20 each of the Adjudicator's decisions identified above be 21 explored with senior counsel in order to ascertain the 22 relative merits and strengths of any grounds for 23 challenge. An opinion of counsel on those issues would 24 then form the basis for any future steps which may be 25 taken." 122 1 Did you consider this legal advice at or about this 2 time? 3 A. Yes. And I do remember that DLA were more keen that we 4 should challenge this -- these adjudications than the 5 general mood within tie. I think the mood within tie 6 was to say: well, look, this hasn't gone as we had 7 expected. Our confidence in the advice that we were 8 getting was somewhat dented. And there was an element 9 of DLA were saying this because -- I'm sure because they 10 believed it, but also because it was in effect their 11 contract that had been found to be wanting. 12 That doesn't mean the advice was wrong. I mean, 13 there was -- you know, and I don't recall if we took 14 counsel opinion on it and made the decision after that, 15 or whether we just made the decision at this point not 16 to challenge. 17 We certainly made the decision at this point not to 18 challenge, but not to rule out the possibility of 19 challenge at some future date, but I think we thought 20 launching the next adjudication was actually a quicker 21 and easier way of going forward, knowing that if we 22 needed to, we could come back and challenge this. 23 But you may be about to tell me, I can't remember if 24 we took counsel opinion on this as recommended by DLA. 25 Q. We will come on and look at other counsel's opinion. 123 1 I'm interested in what you say about the decision not to 2 challenge. 3 Had you essentially at the time, by this time, 4 already decided that you would not progress a challenge 5 of these two decisions? 6 A. No, we decided at that time that that -- it wasn't 7 necessarily the best course of action at that time. It 8 wasn't to say it -- it wasn't to say never. 9 Q. While this discusses the basis on which you would 10 actually attack the Adjudicator's decision as such, were 11 you given any advice on simply raising the matter in 12 a court afresh? 13 A. That subject did come up from time to time. I can't 14 remember if it was specifically in relation to these 15 adjudications. But the general view was that that was 16 quite a lengthy process to take -- effectively to put 17 the whole contract into a court and say: what does the 18 court think this contract says. And I guess there was 19 always the risk that, having had this adjudication, if 20 we were doing that, and lose, then we would be in an 21 even weaker position. 22 With hindsight, perhaps we should have challenged -- 23 I mean, I guess the short answer is: if we'd challenged 24 and won, it would have been a good decision. If we'd 25 challenged and lost, it would have been a bad decision. 124 1 Q. If we just scroll down the page, there's one thing 2 I don't think I took you to. I might have taken it by 3 the first page, but the date of this advice was 4 18 November 2009? 5 A. Yes. 6 Q. I want to look forward to the next piece of advice 7 that's apparent that you received and look at a document 8 CEC00651408. 9 What we have got here is a document which I think 10 we'll see the later pages is produced by DLA. It's 11 dated 9 December 2009, it's headed "SUMMARY OF LEGAL 12 INTERPRETATION OF SECTIONS 1.0 TO 3.0 OF SCHEDULE PART 4 13 (PRICING)". Do you see that? 14 If I ask you to look at the next page of this, 15 second page of the scan, do you recall having seen this 16 advice at the time? 17 A. I don't know. I may have done. I may not. I don't 18 specifically recall it. There was a huge amount of 19 legal advice and it's all -- superficially looks very 20 similar. So whether I specifically saw this one at this 21 time or not. But I will have certainly read it at some 22 point. 23 Q. We will look at the content of the advice, please. If 24 you go to the next page, page 3 of the scan, you can see 25 in the lower half of the page, the question posed at 2.3 125 1 is: 2 "Does the addition of items into the Design of the 3 works, which were not showing in the Base Date Design 4 Information, trigger a Notified Departure?" 5 We've got a table with two columns, with tie's 6 position on the left-hand side as to the effect of: 7 "No. Pricing Assumption 1 requires the matter to 8 show on the drawings as it is only concerned with 9 'amendment' to the drawings forming the Base Date Design 10 Information." 11 Whereas the Infraco position on the right is: 12 "Yes. Infraco in adopting the reasoning of 13 Mr Hunter (in adjudication 5a/5b) says that matters that 14 will become Notified Departures are matters that fall 15 outwith normal design development which could be 16 construed from the information available to Infraco 17 contained within the Base Date Design Information." 18 Then finally, after the text, there's another box, 19 paragraph 2.3 in it, where it says: 20 "Validation - DLA and Richard Keen QC agree the 21 position. McGrigors agree the Hunter restriction of 22 design development to that which shows on Base Date 23 Design Information." 24 So we have a summary here of both parties' views and 25 the view of various legal representatives? 126 1 A. Mm-hm. 2 Q. What did you take from this in terms of guidance to take 3 you forward? 4 A. I took some comfort from the DLA/Richard Keen position. 5 And some discomfort from the McGrigors position. 6 To a certain extent it hadn't really taken us very 7 much further forward, other than to confirm that what we 8 had here was a contract that was capable of different 9 credible interpretations, but both of which cannot be 10 correct. 11 Q. If we then look forward to page 5, on the lower half of 12 the page, the question at 2.5 poses something we've seen 13 asked before: 14 "Does Pricing Assumption 1 apply to any difference 15 whatsoever from what is depicted on the Base Date Design 16 Information when compared against what is depicted on 17 the Issued For Construction?" 18 Once again we see the position of both of the 19 parties set out before, tie's position being no, and 20 Infraco's position being yes. Do you see that? 21 A. Yes. 22 Q. In terms of the tie position, looking at the fourth 23 bullet point, one of the arguments that's put forward 24 is: 25 "The 'amendment' does not arise from the normal 127 1 development of completion of designs." 2 That would be a factor to be considered in deciding 3 how to answer that question? 4 A. Yes. 5 Q. Then if we look at the validation of this on the 6 following page, in the box at 2.5, we've got: 7 "DLA and McGrigors agree the tie position, as does 8 Richard Keen QC, but see limitations on this in 2.6 9 below." 10 He's got a qualification to it. 11 We'll look at 2.6 and then I'll ask you what you 12 take from this. 2.6 is: 13 "What meaning is to be given to the words 'normal 14 development and completion of designs' referred to in 15 Pricing Assumption 1?" 16 Once again, we can see the table gives the position 17 of both parties. Do you see that? 18 A. Yes. 19 Q. If you go over the page to clause 2.6.3, we can see 20 what's said there is: 21 "the interpretation proposed by Infraco leads to 22 a commercially absurd result. That is on Infraco's 23 interpretation, changes introduced by Infraco for its 24 own purposes, as opposed to being necessary to meet the 25 Employer's Requirements, would constitute a Notified 128 1 Departure." 2 I think that's one of the things you referred to us 3 in your evidence this morning? 4 A. Yes. 5 Q. But when we see what happens in relation to this by way 6 of validation, if we could enlarge 2.6 in the box, we've 7 got that DLA and McGrigors agree the tie position, but 8 significantly that Richard Keen QC disagrees with this, 9 as to what is meant by normal development and completion 10 of design. So you've got quite a qualified position 11 that is emerging here. 12 What did you take from this, if anything? 13 A. At risk of being slightly flippant, the bit that most 14 accords with my recollection is this concept of it being 15 commercially absurd. What we had here was a contract 16 that was capable of generating a whole range of 17 opinions, and to a non-lawyer clearly capable of 18 different interpretations. So what it left me with as 19 the Chief Executive was a very unclear position going 20 forward. 21 What I didn't have here was a contract which 22 clarified roles and risks and responsibilities. I had 23 a contract which I think Tony Rush often described as 24 being capricious. 25 Q. If nothing else, it indicates the ambiguity of the 129 1 meaning of the contract; is that fair to say? 2 A. Yes. 3 Q. You were in a situation where you were running Dispute 4 Resolution Procedures and going to adjudication on these 5 issues of interpretation of the contract; correct? 6 A. Yes. 7 Q. Standing the fact it's recognised here that there is 8 quite a substantial ambiguity, was there any 9 consideration arising from this risk -- from this advice 10 that you would be at substantial risk in pursuing that 11 strategy, that you would ultimately establish an 12 interpretation adverse to tie? 13 A. I don't recall specifically that. I think -- and this 14 is again a dangerous thing to say -- I think it's one of 15 those things that everybody knew. I don't know that 16 I could point to a document that points it out. You 17 know, we knew we were in a very difficult position here. 18 Just as we knew progress on the ground was not 19 happening, and these disputes were not getting resolved 20 one way or the other. Well, some -- individual disputes 21 were, but the overall disagreement about what is the 22 price for was not getting resolved. 23 Ultimately we pursued the DRP strategy for 24 approximately 12 months, and after that -- during that 25 time concluded that actually it wasn't taking us any 130 1 further forward. 2 But I think not to have pursued the DRP strategy 3 would have opened us up to criticism for not having 4 tried to use the contract, and for abandoning it too 5 soon would have opened us up to criticism for not having 6 fully explored it, given the range of legal opinions 7 that we were getting. I think eventually what we 8 concluded here was having run -- I forget how many it 9 was, eight or nine or ten DRPs, we weren't getting any 10 clarity, any direction one way or the other, either to 11 say: no, tie, you're fundamentally wrong; or: tie, 12 you're fundamentally right. 13 We were still getting a range of conflicting and 14 confusing legal opinions. 15 Q. But any view would you agree that this advice in this 16 note is less overall positive for tie than the earlier 17 advice you had from Mr MacNeill? 18 A. This whole note in total? 19 Q. Yes. 20 A. Yes. I mean, that's a very subjective thing, but 21 I could see why people might take that view. 22 I think I took the view that the absence of it 23 giving us positive reinforcement of our position was bad 24 enough. 25 MR LAKE: My Lord, I'm going to be moving on to other 131 1 documents. So if we were to take a break, that would be 2 a suitable moment. 3 CHAIR OF THE INQUIRY: We will adjourn for lunch and resume 4 again at 2.10. 5 (1.05 pm) 6 (The short adjournment) 7 (2.10 pm) 8 CHAIR OF THE INQUIRY: You're still under oath. 9 MR LAKE: Thank you, my Lord. 10 Mr Jeffrey, before lunch we were looking at a piece 11 of advice from DLA dated 9 December. I want to go 12 a little bit further and look at other advice that was 13 given to you later in December. It's document reference 14 CEC00578621. 15 We can see this is headed up "TIE LIMITED report on 16 Four Key Questions with Recommendations". It's dated 17 13 December 2009. Do you see all that? 18 A. Yes. 19 Q. Does this ring any bells to you? Do you recall having 20 seen this? 21 A. It does, yes. 22 Q. The introduction says: 23 "This paper addresses a series of four questions 24 posed by tie project management ..." 25 The footnote records that was from Steven Bell to 132 1 Andrew Fitchie: 2 "... concerning tie's best legal and contractual 3 arguments on key aspects of the range of disputes which 4 have arisen with the Infraco. Some of these issues are 5 subject to recent adverse Adjudication findings have 6 been made. Many of the analyses and conclusions in this 7 paper draw directly from our earlier advice notes. We 8 do not examine extensively here the Infraco's 9 counter arguments as presented in the Gogarburn and 10 Carrick Knowe Bridge adjudications and also Russell Road 11 Retaining Wall. In reporting our opinion on the 12 strengths and weaknesses of tie's contractual arguments 13 and factual/technical positions, we take account of what 14 we know to be the Infraco's position and, where 15 relevant, how particular points did or did not find 16 favour with Adjudicator Hunter." 17 Although this records that the request came from 18 Steve Bell, were you also involved in formulating these 19 questions and putting them to DLA for further advice? 20 A. I don't specifically recall, but I imagine I was. 21 Certainly I would have been involved in the overall 22 thrust of saying, you know, what is our best arguments, 23 but I wouldn't necessarily have phrased the exact 24 questions. 25 Q. If you just look -- there's a passage on page 2 of this, 133 1 but to provide context, could we look at the next page, 2 which is page 1 of the opinion. 3 Sorry, could we go to the previous page, page 2 of 4 the scan. 5 Just look at the very top of the page for the 6 question to give context. Question 1 is: 7 "How do the various terms of the Infraco Contract 8 combine to establish that pricing of design changes 9 should be by reference to the Employers 10 Requirements/Infraco Proposals and amended if 11 appropriate by the permitted variation mechanisms within 12 Schedule Part 4 and clause 80?" 13 It's a rather all-encompassing question regarding 14 how does the contract operate in this regard? 15 A. And actually on seeing that question, if I had to make 16 guess, that looks to me like it would be something that 17 Tony Rush had drafted. It will have come from Steven, 18 but those look more like Tony's words rather than 19 Steven's. 20 Q. I want to ask you about Tony Rush in just a minute, but 21 we will follow this through at the moment. 22 Look to the next page. If you could look at the 23 upper half of the page, please. We can see the third 24 paragraph, what's noted is: 25 "PA 3 [Pricing Assumption] affirms that the SDS Provider 134 1 Deliverables prepared by the SDS Provider comply with 2 the Infraco Proposals and Employers' Requirements. In 3 PA 1 [Pricing Assumption], a price adjustment may arise where 4 the BDDI is amended and this comprises a change in 5 design principle, shape, form or specification but this 6 must not have arisen from 'normal development and 7 completion of design'." 8 Just pausing there, when we looked at the wording of 9 the contract itself, we can see that normal development 10 and completion of design is given a very specific 11 meaning which excludes changes of design principle, 12 et cetera, et cetera? 13 A. Mm-hm. 14 Q. So were you of the view that the question of what 15 constituted normal design development was still relevant 16 to the issue that had to be answered? 17 A. I think we come back to the idea here that somewhere the 18 wording of this contract has gone wrong in so much as if 19 you were to take a literal definition of the exclusions, 20 then the concept of normal design development becomes 21 a meaningless concept because everything is excluded 22 from it. 23 Q. Were you aware of that at the time, that is 24 December 2009? 25 A. It's difficult to say, as I said earlier, it's not such 135 1 that, you know, you wake up one morning and suddenly a 2 light bulb goes off and you see clearly. 3 My understanding of the intricacies of this contract 4 evolved over time. Documents like this would be part of 5 that evolution, but I can't say with any certainty that, 6 you know, one day I thought this and the next day I woke 7 up and I thought that. 8 Q. After this advice was given, we then had the meeting of 9 December 2009, the Tram Project Board meeting. We have 10 already looked at that to see the minutes from November. 11 But if we just look at this, it's production number 12 CEC00416111. You can see the title page identifying 13 this as the papers for the meeting on 16 December. 14 In relation to the adjudications, could you look 15 please at page 47. 16 This is from the part of the papers which indicates 17 it's the report that goes to Transport Scotland. What 18 we see is the heading "Dispute Resolution" and it notes 19 that: 20 "At the end of Period 9 only one item remained in 21 dispute with BSC. This relates to Russell Road and 22 a decision is due on 18 December 2009." 23 In the table we can now see that in relation to both 24 Gogarburn and Carrick Knowe, it's noted the decision has 25 been made and is under review. 136 1 A. Yes. 2 Q. There's absolutely nothing indicated there as to the 3 legal advice that's been taken, the various discussions 4 regarding challenges that have been taking place, or any 5 reconsideration of positions that have taken place since 6 the November meeting where it was discussed. Would you 7 agree? 8 A. I would. 9 Q. Was there really nothing that could have been usefully 10 reported to the Board, the Tram Project Board or 11 Transport Scotland regarding everything that had been 12 taking place by way of legal advice? 13 A. Well, I don't know that you can -- from that table, you 14 can draw the conclusion that nothing was reported. All 15 you can conclude is that nothing is reported on that 16 table. 17 Q. Or even -- are you aware of anything being contained 18 within the papers at all for this meeting, that's the 19 meeting in December 2009, which would have outlined what 20 the legal advice was in relation to these matters? 21 A. No, I'm not, because I don't have the intimate knowledge 22 of those papers. 23 But as I said earlier, even if it's not recorded in 24 the papers doesn't mean it wasn't discussed at the Board 25 meeting. 137 1 It's also possible that it wasn't discussed. It's 2 possible that whilst we were digesting the various 3 implications and the legal opinions, that there wasn't 4 felt to be any need to discuss it at the Board, because 5 there were no conclusions to be drawn and no decisions 6 to be made. 7 Q. We have already indicated it was a matter of the most 8 fundamental importance to the deliverability of this 9 contract; is that not fair to say? 10 A. One of them, yes. 11 Q. Does that not indicate that it would be appropriate to 12 give some indication of how matters were progressing? 13 A. I think it might be an issue of timing. It might be 14 that the timing of the advice and the discussions had 15 not reached a conclusion, and therefore it wasn't felt 16 appropriate -- well, first of all, I don't know that it 17 wasn't discussed at the Board meeting. It may have 18 been. 19 So, you know, I think we're slightly jumping to 20 a conclusion here based on the fact that it's not in 21 this table. 22 But even if it wasn't discussed, there may be other 23 reasons why it wasn't discussed and it may be that there 24 was no settled view at that time. 25 Q. If you take it from me that there's nothing anywhere in 138 1 this -- in the papers for this meeting, which reflects 2 or discusses the legal advice that has been obtained, 3 and neither is there anything in the PowerPoint 4 presentation recording even that advice has been taken, 5 far less the content of that advice; do you not think 6 those would be not just useful, but necessary and 7 appropriate things for the Tram Project Board members to 8 know? 9 A. I think it may again come back to a timing issue. It 10 may be that there wasn't any particular issue that 11 needed a decision at that Board meeting. I'm 12 speculating here because I don't recall. 13 Q. Again, you can take it from me for completeness that 14 when one looks at the minutes of the December meeting 15 that appear in the January pack, there's no record of 16 any discussion having taken place on the matter? 17 A. Well, in which case I'm happy to accept that. I still 18 come back to the issue of timing which is it may be that 19 there was nothing that needed to be discussed at that 20 meeting, or the advice hadn't been fully digested or 21 there were other issues in play that meant there was no 22 need for it to be discussed at that meeting. 23 Q. I think I'm correct to say that you didn't provide 24 copies of the adjudication decisions themselves to 25 members of the Tram Project Board. 139 1 A. I don't recall. I have seen that in the papers. So 2 that may be the case. 3 Q. Why did you not provide the decisions themselves so that 4 members could reach their own views? 5 A. A couple of reasons. One is that we weren't entirely 6 certain that documents wouldn't leak. And the other is 7 that the adjudication decisions themselves required 8 a degree of interpretation and understanding of the 9 background, and therefore the summaries that were 10 produced by the team and by the legal advisers were more 11 appropriate. 12 Q. Who did get to see the decision? 13 A. I don't recall. I would think the tie senior team, the 14 legal advisers, City Council legal team. I don't know 15 off the top of my head, but I would imagine that group 16 of people. 17 Q. But not the councillors who were on the Tram Project 18 Board or other non-Executive Directors on the Tram 19 Project Board? 20 A. I'll take your word for that. I don't know whether they 21 did or didn't. 22 Q. A number of councillors -- and I'm talking here, 23 I should say, about not people who sat on the Board, but 24 councillors in the Council -- complained that they 25 wished to have access to these decisions and were denied 140 1 it on the basis that you considered they were 2 confidential. Did you tell people they couldn't have 3 them because they were confidential? 4 A. I don't recall that, but I think that would have been 5 a wise move not to disclose them to councillors who were 6 not on the Tram Project Board. 7 Q. Why? 8 A. Because there was a history of sensitive information on 9 this project leaking into the press and into the hands 10 of the contractor. 11 Now, I understand in this case the contractor 12 already had the adjudication decisions. So in that 13 sense it wasn't commercially confidential from the 14 contractor. 15 But these were documents that were defined as 16 confidential under the contract, and I think it's 17 dangerous to then start deciding which confidential 18 documents it's okay to release and which ones it's not. 19 But secondly, my fear was that these things would 20 leak out into the press, and then we would spend a great 21 deal of time and energy dealing with press enquiries 22 around these issues, which would have been better 23 dealt -- time and energy which would have been better 24 dealing with the dispute at hand. 25 I would point out that there was a summary provided 141 1 that I know of to Councillor MacKenzie, who then asked 2 Nick Smith of CEC Legal: is this a fair and accurate 3 summary of the adjudications? And Nick Smith confirmed 4 that it was. 5 Q. Just dealing with the point that you say the contractors 6 already knew about the decisions. So there's no need to 7 keep them secret from them? 8 A. Mm-hm. 9 Q. By trying to avoid leaks, essentially it was trying to 10 avoid the matters coming to the attention of the press, 11 and the press scrutiny or enquiry that would follow? 12 A. To a certain extent, yes. And I think, you know, if you 13 have weaknesses in your argument, you don't necessarily 14 want to be exploring those in a public environment. 15 Q. By public environment, you mean the newspapers asking 16 questions? 17 A. Yes. I don't see how that would have necessarily helped 18 our negotiating position. 19 Q. And in terms of you said they were confidential, the 20 decisions were confidential in terms of the contract, 21 had you had advice to that effect? 22 A. I don't recall specifically. 23 Q. What made you think they were confidential in terms of 24 the parties' contract? 25 A. Because I think that's what the contract says. 142 1 Q. Is that just on your own reading of the contract? 2 A. Well, it may be or it may be that that -- I was told 3 that at some point. I just don't remember the specific 4 circumstances. I can't point to a specific document. 5 Q. The advice that we've been looking at and the minutes 6 all relate to 2009. You have already referred to 7 Tony Rush. I think it was round about this time that he 8 was engaged? 9 A. That's right. 10 Q. Did you suggest that he be brought in? 11 A. It wasn't my idea originally. What happened was that 12 there was a group -- and I knew them as the Peer Review 13 Group. I can't remember their exact title, but they 14 were four people who had periodically reviewed the 15 project. I only met with them once, which is mid to 16 late 2009, and they came up with a series of 17 recommendations, and one of which was that this is now 18 what they called an old-fashioned construction dispute, 19 and what tie lacked in its skills base and experience 20 base was somebody who had the sorts of skills associated 21 with an old-fashioned construction dispute. 22 By old-fashioned, they often talked about the sorts 23 of disputes that went on in the construction industry in 24 the 1970s. 25 What we needed was somebody who had been through 143 1 that, and I think it was Brandon Nolan of McGrigors who 2 found Tony, or who knew of Tony and recommended him, and 3 he seemed to fit the bill very well. 4 Q. So what was he to do when he was brought on board? 5 A. He was effectively a consultant to tie, there to advise 6 on the strategy and tactics of managing the dispute. 7 Q. Was he responsible in particular for any of the work 8 streams within Project Pitchfork? 9 A. He wasn't directly responsible, but he was advising on 10 all of them. 11 Q. In terms of the desire to enforce -- assertive 12 enforcement of the contract against the contractors, was 13 that something he got involved in? 14 A. Yes, very heavily. 15 Q. I want to move on and see what else was happening by way 16 of decisions. What I would like to look now is the 17 outcome of the Wilson adjudication at that we've already 18 referred to. It's document reference CEC00034842. 19 This we can see is in the matter of an adjudication 20 in respect of a dispute between Infraco and tie Ltd, 21 headed up, only this time Infraco are the referring 22 party and tie are the responding party. 23 Do you see that? 24 A. Yes. 25 Q. If we look to the final page, page 43, we can see the 144 1 date on which the decision is given is 4 January 2010? 2 A. Yes. 3 Q. If we go back to page 7, just to identify the dispute 4 between the parties, enlarge the upper half of the page, 5 paragraph 23 is: 6 "Arising from these facts, the issues referred to 7 adjudication comprise i) Whether the change to the 8 Russell Road Retaining Wall Two sections W4A and W4C, 9 namely from 'L' shaped gravity structure to a cantilever 10 wall on piles, constitutes a Notified Departure in terms 11 of section 3.4.1.1, being changed defined above as 12 Foundations. 13 (ii) Whether the Changes to the design of the 14 Russell Road Retaining Wall two of a) sections W4A and 15 W4C, namely from 'L' shaped gravity structure to 16 a cantilever wall on piles; being changed defined above 17 as foundations; and b) sections W4B and W4D, namely 18 changes in the number, size and length of piles, being 19 changes defined above as Piling; constitute Notified 20 Departures and deemed Mandatory tie Changes." 21 Now, this relates to the piling issue you noted 22 earlier in our discussions? 23 A. Yes. 24 Q. Essentially, what the consortium are asking is to have 25 it established that these things are -- these things 145 1 qualify as Notified Departures which would give them an 2 entitlement to additional payment? 3 A. Yes. 4 Q. If we could look then at page 43, the final page of 5 this. The decision. The adjudicator notes: 6 "In reaching my Decision, I have taken account of 7 all other matters in the submissions made by the parties 8 and for the reasons set out above, I declare. 9 "Issue 1. 10 The Change to the Russell Road Retaining Wall Two 11 sections W4A and W4C, namely from 'L' shaped gravity 12 structure to a cantilever wall on piles, constitutes 13 a Notified Departure in terms of Schedule Part 4, 14 section 3.4.1.1. 15 Issue 2. 16 The Changes to the Russell Road Retaining Wall 17 Two ... constitute Notified Departures and deemed 18 Mandatory tie Changes." 19 In other words, the referring party here, the 20 consortium, got all that they asked for? 21 A. That's -- yes, that's how it appears. 22 Q. Well, it's not just a matter of it appears. They were 23 entirely successful in having it found that these 24 various structures qualified as Notified Departures? 25 A. Okay. 146 1 Q. Would you disagree with that? 2 A. No. I mean, I'm reading this for the first time in 3 a long time, but I'll accept your view of it. 4 Q. Now, in that this found entirely in favour of the 5 consortium, what did you take from this? 6 A. I think on this one -- I can't recall precisely, but 7 I think we had already accepted the principle that they 8 were Notified Departures, had we not? 9 Q. Not on this one. It was contested. Perhaps it's easier 10 to give you background by way of the parties' 11 contentions? 12 A. There was one where we accepted that it was a Notified 13 Departure, but then reduced our estimate to zero on the 14 entrance to the adjudication. Was that not this one? 15 Q. I think that was Tower Bridge? 16 A. Okay. Well, again, looking at this cold, it would 17 appear to be that this is another example of the 18 adjudicator preferring the Infraco's interpretation of 19 the contract to tie's, although I don't -- from looking 20 at that, I'm not quite sure what was our argument that 21 it wasn't a Notified Departure. 22 Q. Perhaps we should look in a little bit more detail at 23 the contents of the letter. If you go, first of all, to 24 page 12, look at the upper half to start with, 25 paragraph 45: 147 1 "The parties disagree about how the Contract terms 2 should be construed and how they should be applied to 3 the facts to determine whether there has been a Notified 4 Departure or Mandatory tie Change. As the essence of 5 the dispute concerns the construction of the Contract, 6 I deal with this first." 7 So you can see he is quite clear there was a dispute 8 about whether or not there was a Notified Departure? 9 A. Yes. 10 Q. Then we see the Infraco case in the next paragraph: 11 "Infraco accepts that it is responsible for 12 delivering the Infraco Works in accordance with the 13 Employer's Requirements and Infraco Proposals. It says 14 at issue is how much it is paid and any consequential 15 time effects. It says that this is not a normal design 16 and construct contract where the contractor accepts all 17 of the risk of changes. The Pricing Assumptions were 18 not unilateral statements in the nature of tender 19 qualifications but agreed terms of the Contract to 20 provide a mechanism whereby Infraco was paid for matters 21 that were uncertain. The alternative would have been 22 for Infraco to include for that risk at the time of 23 Contract resulting in a higher Contract Price. Infraco 24 says that it relies on the Contract and that does not 25 place it at risk for matters expressly excluded or for 148 1 imputed knowledge. It says that Clause 80 concerns 2 valuation and does not determine whether a Notified 3 Departure arises. Infraco accepts that tie is not 4 responsible for every change between the BDDI and IFC 5 drawings." 6 So that last sentence is perhaps important. Even 7 Infraco weren't saying that tie were responsible for 8 absolutely every BDDI to IFC change. Do you see that? 9 A. I think that was a change in their position from 10 earlier. 11 Q. Then we look at the tie position: 12 "tie says that the basic proposition is that Infraco 13 is to deliver the whole of the works specified in the 14 Employer's Requirements and Infraco Proposals for a lump 15 sum, fixed and firm price. The provisions for the 16 possibility of change are not intended to place the risk 17 or consequences of any and all changes on tie. This 18 applies in particular to the normal development and 19 completion of design. tie says Infraco misinterprets 20 these provisions such that they are bereft of any 21 meaning. tie says that Infraco has failed to prove that 22 the changes in dispute are not normal development and 23 completion of design or shown that different facts or 24 circumstances pertain to those prior to the date of 25 Contract." 149 1 If I just pause there, that point about if they're 2 interpreted as Infraco seek, that means the terms are 3 bereft of any meaning. Is that in essence the absurdity 4 point you have already outlined to us? 5 A. Yes. From read this now, and as I say, this is not 6 something that's in the forefront of my mind, it would 7 appear that tie's argument is that this change, although 8 it is a change in shape and form, is normal design 9 development, and the Infraco's argument is, yes, but 10 normal design development is defined as excluding 11 a change in shape amongst other things. And therefore, 12 because this is a change in shape, it can't be normal 13 design development and therefore is excluded. 14 Q. So you can understand there the issue between the 15 parties is one which goes to this fundamental principle 16 as to how Pricing Assumption 1 is to be construed? 17 A. Yes. 18 Q. If we then turn to how the adjudicator addressed that on 19 page 20, and look at the lower half of the page in 20 paragraph 100. Under the heading "Conclusions", the 21 adjudicator states: 22 "It appears that something has gone wrong with the 23 language of Section 3.4.1.1 as, on the face of it, on 24 a literal reading some part must be redundant to give it 25 meaning. I consider that the formulation advanced by 150 1 tie most nearly expresses the true intention of the 2 parties as can be discerned; namely that Pricing 3 Assumption Section 3.4.1.1 should read that the 'Design 4 prepared by the SDS Provider will undergo the normal 5 development and completion of design and will not in 6 terms of design principle, shape, form and/or 7 specification be amended from the drawings forming the 8 BDDI (except in relation to Value Engineering)'. 9 As to 'normal' development, I consider that this is 10 the progression towards the Employer's Requirement as 11 would be expected by an experienced contractor and his 12 designer. If this results in amendment of the design 13 principle, shape, form, and or specification shown on 14 the BDDI drawings then it becomes a Notified Departure, 15 subject to the following paragraphs." 16 Now, just to pause there about what has happened, we 17 see Mr Wilson has essentially rephrased what is 18 contained in Pricing Assumption number 1 to give effect 19 to what he sees as being the parties' intention. 20 A. Mm-hm. 21 Q. I think that is what he's been asked to do by tie. Do 22 you recall? 23 A. I do not know he was asked to rephrase the contract. 24 Q. You have made reference to the arguments in Chartbrook v 25 Persimmon, which you're obviously familiar with? 151 1 A. Yes, but my understanding is not that that was what the 2 adjudicator was asked to do. This was a line of 3 approach that McGrigors took up on our behalf, possibly 4 subsequent to this adjudication. But I don't -- again, 5 I stand to be corrected here, but I don't believe the 6 adjudicator was asked to rewrite the contract. 7 Q. Just to emphasise what's on paragraph 101, and it's 8 difficult because it does span between the two pages, 9 but what the adjudicator is saying there is that normal 10 design development is the progression of works towards 11 the Employer's Requirements as would be expected from an 12 experienced contractor and a designer, and that might be 13 regarded as fairly unexceptional; would you agree? 14 A. Yes. 15 Q. But he does go on to say: 16 "If this [that's the normal design development] 17 results in amendment of the design principle, shape, 18 form and/or specification shown on the BDDI drawings, 19 then it becomes a Notified Departure, subject to the 20 following paragraphs." 21 A. And I'm not sure his redrafting actually makes it any 22 clearer because if you apply literal meanings to the 23 changes in design, shape, form, et cetera, then you 24 still end up with any change is a change. 25 Q. That's the point. Even on Mr Wilson's interpretation, 152 1 you still come to the fact that any -- if normal design 2 development results in any change to specification, the 3 effect of that is going to be it's a Notified Departure. 4 A. Yes. And that seems to -- that is at the heart of 5 this -- the contentious point in this contract, and 6 that's what seems to me to be absurd. 7 Q. So you have given answers this morning whereby, as 8 I understood you, you regarded this adjudication outcome 9 as something favourable to tie, substantially favourable 10 to tie. But it still says that any change in any of 11 these matters will create a Notified Departure, doesn't 12 it? 13 A. Yes, it does. 14 Q. So it's not really very much more favourable to tie at 15 all? 16 A. No. When you put it like that, no, it's not. My 17 reading of it at the time was that this adjudication was 18 more sympathetic to tie's interpretation of the contract 19 because it -- it talked about the development of the 20 design and any experienced contractor would expect to be 21 included in the price. 22 But no, as you say, when you read it now, actually 23 it doesn't clarify. 24 Q. Do you recall legal advisers at the time of the decision 25 telling you it was more favourable to tie? 153 1 A. I don't recall the specifics, but I'm sure the 2 documents -- I'm sure they will have done an analysis. 3 Q. We will come and look at some of them in due course. 4 If we just look at page 24, we can see the 5 adjudicator drawing matters together. 6 Sorry, I have gone on too fast. I meant to look at 7 paragraph 102 also on page 21. It's right after the 8 paragraph we were looking at previously. What the 9 adjudicator said is: 10 "I agree with tie that the word 'amendment' can only 11 apply to something shown to the BDDI drawings not an 12 addition to achieve compliance with the Employer's 13 Requirements being the overriding obligation. The 14 amendment must be to one of the characteristics of 15 design principle, shape, form and/or specification as 16 discussed below." 17 So that seems to be saying you've got to have 18 something on the drawings to start with. 19 A. Yes. 20 Q. You are going to have a Notified Departure? 21 A. There was an adjudication, and I can't remember which 22 one it was, where the Infraco's argument was that 23 something that wasn't originally on the drawings that 24 now was on the drawings was a change because it was 25 a change from BDDI to IFC, and this adjudication, 154 1 I think, was saying -- was this the one where they talk 2 about 14 tram stops versus 21 tram stops? 3 Q. I don't think so. 4 A. Was that this one? Well, one of the adjudicators asked 5 the Infraco's lawyer, I think it was Fraser McMillan, if 6 there are only 14 tram stops shown on the BDDI, but there 7 are 21 tram stops shown in the -- called for in the 8 Employer's Requirements, who pays for the seven, and 9 Fraser McMillan's answer was: tie pay for it because we 10 only priced the BDDI. 11 So I think there was a point here that says if 12 you've got something that is changed, and that can be an 13 amendment, but if you have nothing, and then something 14 appears on the drawing, that isn't an amendment. 15 It seems to me a slightly technical argument. 16 Q. We will see that argument picked up again in future. 17 If we could turn now to page 24. If we look at the 18 heading, "Summary of Main Conclusions". If we look down 19 at paragraph 127, we can see there the drawing together 20 of what has already been said in terms of the proper 21 construction to be placed upon Pricing Assumption 22 3.4.1.1. That's just drawing together what we've 23 already seen. 24 A. Yes. Is it -- could you possibly go back a little 25 because I just saw something flash by which was around 155 1 the -- the adjudicator made a point about Infraco's 2 narrow definition of a change. It may have been 103. 3 MR FAIRLEY: It's 103, my Lord. 4 MR LAKE: We can see there what the adjudicator said: 5 "On any of the definitions of design principle, 6 shape, form and/or specification discussed, Infraco took 7 the 'narrow' view that almost any detailed change was an 8 amendment. It will be seen that I do not agree with the 9 concept advanced by Infraco of 'reasonable' changes 10 being excluded from the Pricing Assumption in order to 11 give it meaning. That is a subjective test and if such 12 were intended, I think the parties would have said so and 13 expressed some criterion such as the 'reasonable design 14 and build contractor'. Equally, I do not accept the 15 'broad' proposition by tie that a very wide range of 16 matters that are amendments would be 'expected' by 17 a design and build contractor and so included in the 18 Price. This applies equally to matters known to Infraco 19 after the BDDI date." 20 Is that what you're referring to? 21 A. Yes. So, I mean, again, there's another element of the 22 dilemma here, which is do you take these words at their 23 literal meaning that says -- that would lead you to the 24 conclusion that says any change is a Notified Departure, 25 or do you take a broader view, clearly this adjudicator 156 1 didn't take a view as broad as tie, but he also felt 2 there was perhaps some mid ground. 3 Q. We can see from that paragraph 103, that what the 4 adjudicator is referring to is using the criterion, as 5 he puts it, of the reasonable design and build 6 contractor. Do you see that? 7 A. Yes. 8 Q. But if we come back to see the context where the view of 9 the contractor comes in, if we go back to paragraph 101 10 on the previous page, and the two part test which 11 Mr Wilson seems to posit: 12 "As to 'normal' development, I consider that this is 13 the progression towards the Employer's Requirement’s as 14 would be expected by an experienced contractor and his 15 designer." 16 So that seems to be the bit that's modified by 103; 17 is that right? He's requiring it must be a reasonable 18 design and build contractor? 19 A. Yes. 20 Q. But that's still subject to what's in the sentence that 21 follows? 22 A. Yes. No, I accept that. 23 Q. So drawing that together and moving towards the 24 conclusion, if we go to page 28 I'm going to need to go 25 to page 26 first of all for the context. 157 1 If we look at the upper part of 26, we can see that 2 he's now dealing with the specific issues, and the first 3 one is whether the change to the foundations is 4 a Notified Departure under -- he specifies the section. 5 Then if we go to page 28, we can see his conclusion 6 in respect of that matter, which is to the effect that 7 he concludes that the change to the foundation be 8 outwith the Pricing Assumption are not being the subject 9 of any of the saving provisions is a Notified Departure 10 properly notified by INTC number 146. Do you see that? 11 A. Yes. 12 Q. And over the page, the second issue is contended in the 13 heading as to whether the changes to the foundations and 14 piling are Notified Departures and mandatory tie 15 changes. 16 We can see in paragraph 143 he notes: 17 "For the reasons already set out under Issue 1 18 ... concludes that the foundations comprise a Notified 19 Departure." 20 Do you see that? 21 A. Sorry, you lost me. 22 Q. Paragraph 153 there. 23 A. Yes. 24 Q. For the reasons he's already given, he concludes that 25 the foundations are Notified Departure? 158 1 A. Yes. 2 Q. Then if you go to the foot of this page, he also says: 3 "The shape and form have been amended significantly 4 from the BDDI drawings and I conclude that the Piling 5 constitutes a Notified Departure." 6 So that's dealt with both the foundation and piling, 7 and found that both constitute a Notified Departure? 8 A. Yes. 9 Q. So really when one examines this adjudication, one could 10 either just take it at the simple level that the 11 decision was entirely against tie, or looking at the 12 reasoning, one can see that the interpretation that's 13 placed on the contract is still one that's going to put 14 tie in an extremely difficult position. Do you agree? 15 A. Yes. I have to say that isn't my recollection of it at 16 the time, but on reading it now, that would appear to be 17 the case. 18 Q. From what you say, do I take it that this wasn't 19 something that was discussed at the time, that this was 20 going to put tie in a very, very difficult situation? 21 A. I don't recall. Do you have an analysis of this 22 documentation -- of this result done by DLA or 23 McGrigors? 24 Q. We will probably come to that in due course. I just 25 wondered if you happen to recall whether or not anything 159 1 had been done in that regard. 2 You are saying that it was a different -- you had 3 a different impression of it? 4 A. I think I did, yes. Unless I'm confusing it with 5 a different one. 6 Q. I wonder -- I'll come in just a moment to look at advice 7 that was obtained from Richard Keen, although it 8 proceeded largely on the basis of the earlier 9 adjudications and there is further advice from 10 McGrigors. What I want to do is follow this in 11 a chronological way, to look at an email which you sent 12 on 13 January, which is reference CEC00623955. I'm 13 interested in the lower part of the -- this page at the 14 moment. We can see, as I have said, it's an email from 15 you dated 13 January to Steven Bell, Stewart McGarrity, 16 Mandy Haeburn-Little, Graeme Bissett, Claire Logan, 17 Dennis Murray, Frank McFadden and Alastair Richards, 18 copied to Tony Rush and David Mackay; do you see that? 19 A. Mm-hm. 20 Q. You start by asking why is there an emergency tie 21 executive tomorrow at 8 o'clock. 22 "The great thing about this project that you don't 23 have to wait long for another critical moment in the 24 life of the project to come along. A time, or a set of 25 circumstances where the whole future of the project 160 1 hangs in the balance. I know some of with you have been 2 here many times before, and all of us were here in 3 November with Princes Street, but here we are again 4 facing a situation where the very future of the project, 5 not to mention the future of tie and all our own 6 personal, emotional and professional investments in this 7 project are at stake." 8 What had happened to trigger this email? 9 A. I don't recall. 10 Q. Your tone is such that it sounds as if something 11 dramatic has taken place? 12 A. It does, and I don't understand why there would be an 13 emergency exec meeting at 8 o'clock in the morning that 14 I didn't know about. 15 Q. That was my next question? 16 A. So ... 17 Q. In that passage that I read, it's on the third line of 18 the paragraph, there's a problem in November with 19 Princes Street. We have heard about the difficulties 20 that arose in Princes Street before you arrived at the 21 project, earlier in 2009. What was the problem in later 22 2009, in November, with Princes Street that was so 23 dramatic? 24 A. There was a very intense pressure to get Princes Street 25 finished and open in time for the pre-Christmas period. 161 1 And there was -- I can't remember specifically what, but 2 there was at this point a real doubt as to whether that 3 was going to be achievable or not. 4 There was some -- perhaps ongoing or new dispute 5 with the contractor over progress and works on 6 Princes Street, and I think there was a distinct 7 possibility that it wasn't going to be finished by the 8 deadline which had been set, which may have been at the 9 end of November or the beginning of December. 10 It looks -- when was this email? Could you scroll 11 down slightly, please? 12 Q. I think it was 13 January. 13 A. Right. So at this point we'd obviously resolved the 14 situation on Princes Street, but I do remember that 15 being very much a high pressure situation which was only 16 just resolved. 17 Reading on, it looks -- it says we've been given 18 a very clear steer and deadline by the Board. So was 19 this just after a Board meeting? 20 Q. It's perhaps easier if I take you to the Board meeting 21 to try and provide some context. 22 There was a Board meeting on 13 January, the minutes 23 of it are in the February papers, and they are 24 CEC00474418. 25 We can see, first of all, the title page indicating 162 1 that these are the papers for February 2010? 2 A. Yes. 3 Q. Could we look at page 5 for the minutes of the January 4 meeting. We can see it starts with the formalities, and 5 then you give the Chief Executive summary which notes 6 limited progress in commercial discussions. But little 7 more than that. Nothing that would seem to lead to the 8 email we've just seen. 9 A. What was the date of this meeting? 10 Q. 13 January. 11 A. Same day as that email? 12 Q. Your email was for the afternoon of 13 January. This 13 Board meeting seems to have taken place on the morning 14 of 13 January. 15 A. And there's nothing further down in these minutes that 16 suggests the crisis? 17 Q. What we do see, if we look at page 7 of this document, 18 we can see, lower half of the page, please, relationship 19 with BSC. It notes: 20 "RJ updated the Board on ongoing commercial 21 negotiations with BSC, and provided a position overview 22 under the following general areas: Design Changes; 23 On Street Works; Off Street Works, Programme. 24 "A detailed discussion on the DRP/adjudication 25 process was undertaken, and it was noted that it is too 163 1 early in the process to establish a clear precedence on 2 some of the points of principle disagreement. It was 3 noted that adjudication determinations are not legally 4 binding. 5 RJ reported that discussions are ongoing with BSC 6 regarding an alternative On Street Supplemental 7 Agreement, and as things currently stand, BSC have 8 indicated that they will not commence on street works 9 without this in place, which in turn imports risk into 10 concluding an agreed programme. 11 RJ then went on to detail the proposed commercial 12 strategy going forward together with the timetable to 13 prepare detailed options for the March TPB. This was 14 supported by the Board." 15 Now, that's got you outlining something to the Board 16 that is going to happen? 17 A. Mm-hm. 18 Q. Whereas your email says we've been given a very clear 19 steer and a very clear deadline by the Board. It sounds 20 like it was being imposed to some extent by the Board 21 upon the Executive. 22 Can you elaborate? 23 A. I'm afraid I can't. I don't recall -- it's possible 24 that what was being imposed was not the strategy, but 25 the timetable. So it may be that having presented the 164 1 strategy, the Board then decided that they wanted that 2 reported for March when in fact I had wanted longer. So 3 it may be the crisis was -- or the apparent crisis was 4 one of timing rather than content. 5 But I'm afraid -- I accept that clearly my email was 6 prompted by something important, but I don't remember 7 what, I'm afraid. 8 Q. We will go back to the email in a moment, but if we just 9 stay with this while we have it on screen, we can notice 10 once again there was -- described as a detailed 11 discussion on the DRP adjudication process. We here see 12 the same wording that it's too early in the process to 13 establish a clear precedence on some of the points of 14 principle disagreement. 15 Now, tie, if I put it colloquially, tie were now 16 down 3 nil, the two Hunter decisions and the Russell 17 decision. Was there not some sort of precedence 18 building up there? 19 A. Well, that -- my recollection is that isn't what was 20 coming through from the legal analysis of the decisions. 21 Q. If you could jump back to the email, please. It was 22 reference CEC00623955. Again, if we look at the lower 23 half of your message. You've got a paragraph which says 24 simply: 25 "So what do we have to do now!" 165 1 Then you note we have been given a very clear steer 2 and a very clear deadline by the Board. The deadline is 3 easy to see. That is just timing. But what's the very 4 clear steer that we have been given by the Board; what 5 did you have to do? 6 A. I'm afraid I don't recall. It may be that the -- it was 7 to bring matters to a head. It may be that the -- at 8 this point it was clear that the DRP strategy was not 9 producing the results that were required, and we were 10 asked to therefore come up with alternative strategies. 11 But I'm afraid I'm speculating here. I genuinely don't 12 recall this. 13 Q. We will come -- if we look further down the same page, 14 in bold you will see: 15 "Our objective is to report to the board on 10 March 16 with our recommendations as to the best way forward for 17 the project." 18 Do you see that? 19 A. Yes. Can I just go back up to the title. Is this 20 Project Pitchfork title? 21 Q. Yes. 22 A. It is. Okay. So maybe this was the -- the 23 crystallisation, if you like, of the Project Pitchfork 24 work which was around the commercially assertive 25 approach using DRPs that was clearly not producing the 166 1 results that we wanted. So at this point -- I don't 2 recall, but maybe the Board was saying: that isn't 3 producing the results we wanted, so what are the 4 alternatives? And as a result of that, the Pitchfork 5 work was crystallised and the two alternatives -- it 6 talks here about three options, one being carrying on 7 as we were, and the other two being the termination 8 route and the renegotiation route. 9 Q. We will come to look at the March Board meeting in 10 a moment. I just wondered if you could remember what 11 was providing the impetus towards the new strategy at 12 the early part of the year. From what you are saying, 13 I don't think you can recall? 14 A. I'm afraid not. As I say, it may be that the 15 adjudications were not producing the results that we 16 wanted or expected, and that the Board were becoming 17 impatient, hence the deadline. 18 Q. What I would like then to do is look at further legal 19 advice you got. We will look firstly at the covering 20 email for it. It's reference CEC00648852. For the 21 purposes of the document display, it was a document that 22 had to be uploaded separately. 23 CHAIR OF THE INQUIRY: Mr Lake, do you want to deal with 24 this now or ... 25 MR LAKE: Sorry, my Lord. This is an appropriate moment to 167 1 take a break. 2 CHAIR OF THE INQUIRY: We will have another break, and we 3 will resume again at 3.15. 4 (3.02 pm) 5 (A short break) 6 (3.15 pm) 7 CHAIR OF THE INQUIRY: You're still under oath, Mr Jeffrey. 8 MR LAKE: Mr Jeffrey, you have just identified to me 9 a document which you think has some bearing upon the 10 issues we've just been describing about your email in 11 January. If you could bring that up on screen, it's 12 CEC00450935. 13 You can see this is an email that you sent the 14 following day, 14 January, to Donald McGougan at the 15 Council. In fact, Donald McGougan, Dave Anderson and 16 Marshall Poulton, and copied to David Mackay, the 17 Chairman of tie. You note there: 18 "My understanding from yesterday's board meeting is 19 that everyone, stakeholders, politicians, board members 20 and management, are increasingly concerned with the 21 ongoing slow progress in both the physical works and the 22 contractual situation. There is also the ongoing and 23 important issue of trust, even if we get the current 24 issues resolved, what confidence can we have that we 25 will not be back here a year from now?" 168 1 A. Do you want me to summarise what I think it says? 2 Q. Perhaps yes, we will take that shortly, if you do that. 3 What do you take from this document? 4 A. I think clearly there was a discussion at the Board 5 meeting on 13 January, which prompted the previous 6 emails that I sent to the internal team on the evening 7 of 13 January. And then I followed up with this email 8 to the City Council officers on 14 January, and having 9 just read this in the break, I take it from this that 10 the urgency was prompted by a discussion at the Board 11 where particularly this issue of everybody's patience is 12 wearing thin, I think is the phrase, and that the 13 Board -- it looks to me as if the Board set a deadline 14 to say: right, we've got -- in two Board meetings' time, 15 on 8 March, you need to come back with some clear 16 recommendations as to where we go from here; the 17 implication being because where we are now is 18 unacceptable. 19 Q. Looking at the third paragraph of that email, you note 20 specifically that: 21 "The board agreed that we need to bring matters to 22 a head ... that we would do this at the board meeting 23 after next in March, eight weeks from now." 24 That's the third paragraph? 25 A. Yes. I think that's -- that would have been the 169 1 10 March deadline that the previous email referred to, 2 I guess. 3 Q. What did you understand was meant by matters would be 4 brought to a head? 5 A. That I would need to come back to the Board with a clear 6 recommendation as to the -- what we were going to do 7 next and the Board would say yes or no to that. 8 Q. Can we look at the second paragraph here, you note that: 9 "In December, the board whole-heartedly endorsed 10 strategy of becoming more commercially aggressive 11 and I updated the board on what we have done in this 12 regard since the last meeting." 13 What was the perceived advantage of being more 14 commercially aggressive? 15 A. It was just basically looking to enforce the contract to 16 the fullest extent possible. 17 Q. Was that one of the things that Tony Rush was to be 18 responsible for? 19 A. It was, yes. 20 Q. Was he -- 21 A. To say he was responsible for it, he was there to advise 22 on it. 23 Q. Was he advised or to provide instructions and draft 24 letters and so on and so forth to take an aggressive 25 stance with the contractors? 170 1 A. All of that is true, yes. He did all of those things. 2 Q. That wasn't a matter of implication. He was expressly 3 there to help foster a more aggressive approach? 4 A. Absolutely, and the recommendation that I mentioned 5 earlier from the peer review group was that we needed to 6 bring in an aggressive -- somebody who had experience of 7 aggressively managing contractual disputes, and that was 8 absolutely one of the skill sets that Tony was brought 9 in for. 10 Q. I was going to go to some legal advice, but I was taking 11 things slightly out of turn. 12 Could we first go to the papers for the January 13 meeting, which are CEC00473005. 14 We can see here, from the title page, that these are 15 the papers for the meeting on 13 January. If we go to 16 page 5, as usual, we can see the commencement of the 17 minutes of the previous meeting which this time is 16 18 December. Do you see that? 19 A. Yes. 20 Q. If you look to the following page, page 6, we can see 21 a sub-heading, "Relationship with BSC"? 22 A. Yes. 23 Q. If we enlarge the upper half, we can see: 24 "It was noted that BSC's recent behaviour reflects 25 a hardening of their tactical commercial position, and 171 1 that despite some previously reported positive 2 indications, the rate of on the ground production 3 remains very poor (at around 0.6 per cent per month) and 4 12.5 per cent completion since May 2008. A significant 5 ramp up in production would be necessary to achieve the 6 desired opening for revenue services date. 7 Agreement has yet to be reached on a set of 8 On Street Supplemental Agreements for the remaining tram 9 construction works between Haymarket and Newhaven, and 10 BSC have indicated that they were not prepared to 11 commence works without these." 12 Can I just pause there. Can you recall what was the 13 basis proffered for the fact that the contractors would 14 simply refuse to conduct any works under the contract 15 and they would insist instead on a different contract 16 being provided to them? 17 A. Well, there are a number of aspects to that. One aspect 18 was that the Infraco's argument was that they were not 19 obliged to carry out the works, and indeed in some cases 20 that they were specifically prevented from carrying out 21 the works where there was a dispute. So this was the 22 Clause 80 -- 23 Q. 80.13? 24 A. Right, well, yes, and Clause 80 in general, which was an 25 argument that tie didn't accept, but that was 172 1 nevertheless their argument. 2 And the other was the -- I guess, harking back to 3 the -- one of the very early meetings I had with the 4 Infraco, where Dr Keysberg said to me: this contract 5 will never get a tram built; and the offer at the time 6 or the proposal at the time was: you've got to switch 7 this on to a cost plus type contract. 8 Q. Just continue with the minute where we left off. Your 9 initials: 10 "RJ discussed a range of strategic options to 11 addressing these concerns, noting that he had undertaken 12 discussions with other client groups who have worked 13 with Bilfinger Berger on projects around the world as 14 part of this exercise. 15 The Board approved the necessary additional and 16 robust steps to be taken in the short term to target and 17 enforce the full range of commercial mechanisms 18 available within the Contract. 19 The Board instructed the CEO to investigate the 20 withdrawal of the offer to BSC approved at the 21 18 November 2009 TPB [Tram Project Board], for an interim 22 award of nine months relief and six months costs." 23 Just pausing there, that was in view of the history, 24 they had sought an extension of time of nine months and 25 additional preliminaries of six months which had 173 1 provisionally been approved by tie? 2 A. Yes. Around this time was what we came to call the 3 David Darcy effect. 4 Q. Yes. 5 A. Now, David was an individual brought in by Bilfinger 6 Berger to be a principal point of contact. I found 7 David to be very positive. It was much more the type of 8 attitude I was used to working with in my previous 9 career, and I took a great deal of comfort from it. 10 I specifically remember a meeting where I briefed 11 the City Council officials, just before Christmas, 12 reporting what David Darcy had said to me, was that work 13 was going to start in the New Year and he used the 14 phrase "with gusto". 15 So I was taking some very positive indications from 16 David about a change in attitude and a change in 17 approach, and that they were actually now going to 18 knuckle down and get on with stuff. 19 After Christmas -- are these the minutes from the 20 January meeting or the December meeting? 21 Q. These are the minutes from December? 22 A. These minutes are reflecting the positive discussions 23 that I'd been having with David, and as part of that 24 relationship building with David, despite the fact that 25 tie felt that the Infraco had not provided adequate 174 1 justification for the extension of time claim, we 2 offered an extension, interim extension of time of nine 3 months and six months costs as a gesture of goodwill, 4 not because we didn't think they were entitled to it, 5 but because they hadn't actually provided sufficient 6 documentation to show their entitlement. 7 So we offered this, and then at some point -- this 8 doesn't quite tie up with this timing. I thought it was 9 after Christmas. There was a distinct shift in 10 David Darcy's approach, where literally over the 11 weekend, on the Friday it was all very positive and on 12 the Monday when I spoke to him he said: we're not going 13 to do that. 14 Now, it may be that was in December. I don't know. 15 I thought it was after Christmas. But that might be 16 what this is connected with. 17 So we felt we had a more positive relationship 18 building up. We'd offered an interim extension of time. 19 Clearly something had now happened that had caused us to 20 think that that wasn't being reciprocated, and therefore 21 the Board were suggesting that we withdraw the offer of 22 the extension of time. 23 Q. In the paragraph before the paragraph involved, it 24 notes: 25 "The Board approved the necessary additional and 175 1 robust steps to be taken in the short term to target and 2 enforce the full range of commercial mechanisms 3 available within the contract." 4 Is that what you were referring when to in your 5 email, you said that in December the Board 6 whole-heartedly endorsed the strategy of becoming more 7 commercially aggressive? 8 A. Yes, that would seem to tie up. 9 Q. The way you have put it in your email sounds very much 10 more robust than the way it's expressed in the minutes. 11 Is it really the same thing? 12 A. I think it is. The reality is we could be as aggressive 13 as we liked, but the contract would only allow us to go 14 so far. 15 Q. Yes. 16 A. So it doesn't matter how aggressively you write the 17 letter, it doesn't change what the contract says and the 18 rebuttals from the Infraco were equally robust. 19 Q. So what was the view, the collective view of the Tram 20 Project Board could be achieved by being commercially 21 aggressive with the contractors? 22 A. I imagine it was that enough pressure might cause them 23 to rethink their approach. Which it didn't. 24 Q. So in light of that, looking at it now, is it reasonable 25 to conclude that this strategy of being commercially 176 1 aggressive did not yield any positive results? 2 A. I don't know if I would make it as blanket as that, but 3 I would certainly say that we adopted a strategy of 4 being commercially aggressive with a view to bringing 5 about either a change in the Infraco's behaviour or 6 strengthening our negotiating position for any 7 subsequent negotiation, and in those two regards it 8 didn't succeed. 9 Q. If you look at the paragraph after the bold paragraph, 10 just for completeness, it records: 11 "RJ reported that he has taken steps to dedicate 12 commercial resources to deploy the agreed strategy, 13 including the services of Tony Rush who has 14 a considerable reputation in the construction industry; 15 specialising in disputes and claims. Further papers 16 will be prepared on the longer term strategic options 17 for the Board to consider." 18 That's recording perhaps in line with this idea of 19 being more robust or aggressive, you had secured the 20 services of Tony Rush? 21 A. Yes. 22 Q. Now, what I would like to do is, you see the Project 23 Director’s Report commences on page 10 -- 24 CHAIR OF THE INQUIRY: Before we do that, could we look at 25 the passage before the section in bold. You have been 177 1 taken to some of it already. But about the middle of 2 that section, it says: 3 "Agreement has yet to be reached on ... OSSA ... for 4 the remaining tram construction works between Haymarket 5 and Newhaven, and BSC have indicated that they are not 6 prepared to commence works without these." 7 You discussed a range of options to addressing these 8 concerns, noting that you'd undertaken discussions with 9 other client groups who have worked with Bilfinger 10 Berger on projects around the world as part of this 11 exercise. 12 Why did you do that? 13 A. I was trying to work out the personality of the 14 organisation that I was dealing with, and I thought one 15 of the ways to do that would be to talk to other clients 16 who had had disputes with them and on what basis those 17 disputes had occurred and how they'd been resolved. 18 CHAIR OF THE INQUIRY: And was that the group, Bilfinger 19 Berger group, rather than the company that you were 20 dealing with? 21 A. I don't think I made that distinction. It was certainly 22 construction projects rather than their other interests, 23 but it may -- it was not necessarily Bilfinger Berger 24 UK. 25 CHAIR OF THE INQUIRY: Did these projects include tram 178 1 projects? 2 A. No, I don't think they did. 3 MR LAKE: My Lord, can we look at page 10, please. This is 4 just to identify, we're now starting to look at Project 5 Director’s Report, and if we go on two pages from that, 6 in the upper half of the page we can see a sub-heading, 7 "Dispute Resolution (Infraco)" where it notes: 8 "At the end of Period 10, there are no matters under 9 formal DRP at present. A decision on the Russell Road 10 retaining walls issue was determined on 4 January 2010. 11 The next series of five DRP items are planned for 12 release week commencing 11 January 2010. 13 The contract with the BSC consortium prescribes 14 a timetable for resolution of contractual disputes and 15 it is expected that the budget and programme 16 implications will become increasingly clear during early 17 2010." 18 What did you mean by saying it was expected that the 19 budget and programme implications will become 20 increasingly clear during early 2010? What was going to 21 happen then? 22 A. Well, we would have expected to have had the results for 23 these additional five DRPs. 24 Q. When you talk about DRPs being released, was that to be 25 the decision or to start the process? 179 1 A. No, to start the process. 2 Q. To start the process? 3 A. Well, I take it from the previous sentence, where it 4 says there are no matters under formal DRP at present, 5 but then the next sentence refers to the starting of the 6 process, rather than the decisions. 7 Q. What you don't give -- perhaps we will read on first of 8 all, and go to the part of the report that goes to 9 Transport Scotland. If we see the first page of it, the 10 title page of it is page 45. That orientates us as to 11 where we are. 12 If we go forward two pages to page 47, and look at 13 the lower half of the page, under the heading "Dispute 14 Resolution", we can see it says: 15 "To date 5nr [number] disputes have been referred to 16 DRP by tie ... Agreement has been reached on Hilton ... 17 and commercial settlement has been reached on 18 Haymarket ... in the period we received, the 19 Adjudicator's response for the DRP’s raised by tie 20 against Gogarburn and Carrick Knowe Bridge, the 21 Adjudicator found largely in favour of the position 22 taken by BSC. tie's response to the Adjudicator's 23 decision remains under review." 24 In fact, having looked at those decisions, that's 25 the Gogarburn and Carrick Knowe, really the adjudicator 180 1 found entirely in favour of the position of BSC, did he 2 not? 3 A. I would have to go back and read and see why we used the 4 word "largely in favour" rather than entirely in favour. 5 But it's -- 6 Q. On the issue of principle, which is why these things 7 were taken to adjudication, tie had been unsuccessful? 8 A. Well, I mean, I don't know how -- you know, why those 9 particular words were chosen, but largely in favour 10 seems to me to be a reasonable description. 11 Q. If we look at the following paragraph: 12 "BSC have so far referred 2nr [two numbered] disputes to 13 DRP (Russell Road Retaining Wall and delays associated 14 with the MUDFA Revision 8 programme). Agreement has 15 been reached with respect to delays associated with the 16 MUDFA Revision 8 programme. The Adjudicator's decision 17 against Russell Road was received on 4 January 2010 and 18 will be reported in Period 11. A significant saving 19 resulted (in excess of GBP400,000) on the estimate 20 presented by BSC and the adjudicator agreed with tie on 21 many of the principles in dispute." 22 Now, we have got an odd situation here. In the one 23 sense it's saying that it will be reported in the 24 following period, but we are nonetheless -- a claim is 25 made that a significant saving resulted on the 181 1 consortium estimate, and that the adjudicator agreed 2 with tie on many of the principles in dispute. 3 I appreciate you didn't draft this part of the 4 papers that would go to Transport Scotland, but were 5 they discussed with you, what was to be said about this 6 decision, what was to be included? 7 A. I don't believe it was, no. 8 Q. If this is, as is intended, sent to Transport Scotland, 9 they're not going to get the correct impression of these 10 decisions from reading this, are they? 11 A. I think -- as I've said before, these papers, this is 12 what, page 47 of the papers? I mean, if 13 Transport Scotland had wanted to know what was going on, 14 they could have attended the Board meetings. There were 15 many briefings that were given to Transport Scotland. 16 I would concede the point that if you were to read these 17 papers in isolation, with no other information flow, 18 then yes, you may not get a fully accurate picture, and 19 I'm happy to concede that point. 20 As I say, I didn't write these papers. I wouldn't 21 have read them at the time because they weren't being 22 written for my benefit. 23 As I say, I concede the point that if you were to 24 purely rely on this, and no other source of information, 25 then you may not get the full picture. 182 1 Q. What other formal source of information did 2 Transport Scotland have open to them? 3 A. Formal or in general? 4 Q. Well, starting with the formal. 5 A. There was a -- I believe, a quarterly meeting between 6 CEC and Transport Scotland which tie attended. 7 Q. Mm-hm. Anything else? 8 A. I think that was the only other formal mechanism. 9 Q. But if we look -- although this bit of the meeting for 10 the papers for the Tram Project Board meeting notes this 11 is to go to Transport Scotland, it may be useful to look 12 at the actual report that went to them, which is 13 reference CEC00472988. 14 We can see this is the -- for the reporting period 15 10, 2009/2010, the reporting pack, and it's got 16 a reporting date under Steven Bell's signature, with 8 17 January 2010. 18 A. Yes. 19 Q. Could we look at page 8, please. We can see in the 20 lower half of the page there, I think what is exactly 21 the same text as the text we've just been looking at 22 within the Tram Project Board pack? 23 A. Yes. 24 Q. Now, if that is going to Transport Scotland, it must be 25 intended that they rely on that to get a flavour of 183 1 what's happening in Dispute Resolution. That's its 2 purpose, isn't it? 3 A. I presume so. 4 Q. It's not achieving that purpose because it's not giving 5 an accurate picture of what has been happening in 6 Dispute Resolution. 7 A. Yes, I would agree with that. 8 Q. Because in relation to the Russell Road dispute, which 9 we've looked at the decision of it, it is certainly true 10 to say that the position, finally, the award in favour 11 of the consortium was less than they asked for by 12 GBP400,000, in excess of. So that part of it is 13 unexceptional. 14 A. Yes. 15 Q. But it's not really accurate to say that the adjudicator 16 agreed with tie on many of the principles in dispute. 17 That's not the gravamen of the decision? 18 A. Well, as I said earlier -- 19 MR FAIRLEY: I'm sorry, I'm not following this line that the 20 Inquiry Counsel is pursuing. We looked at a number of 21 passages, or Inquiry Counsel looked at a number of 22 passages in the Russell Road decision, albeit that they 23 were being flashed in front of the witness at quite 24 a speed, but I had understood that some of the passages 25 particularly round about paragraph 101 and 102 and the 184 1 various qualifications placed on those in the following 2 paragraphs said exactly that the adjudicator had agreed 3 with tie on many of the principles in dispute. 4 So if Inquiry Counsel is going to suggest that this 5 is inaccurate, as opposed to insufficient, I think it's 6 incumbent upon him to put to the witness in what respect 7 it's inaccurate. Because I'm struggling to see how 8 that's an inaccurate summary. It may not be a full 9 summary, but I'm struggling to see how it's inaccurate, 10 and I wonder if Inquiry Counsel can perhaps explain to 11 the witness in his question in what respect he maintains 12 that is inaccurate. 13 MR LAKE: My Lord, I think in a sense it's already been 14 established by the witness, and perhaps also by 15 Mr Fairley's question. The point is this gives an 16 impression which is not the correct impression of that 17 decision, bearing in mind this is all that is said about 18 the decision. 19 MR FAIRLEY: Maybe it could be clarified in which respect it 20 is said that the adjudicator's -- that the suggestion 21 that the adjudicator agreed with tie on many of the 22 principles in dispute is wrong. That's all I'm really 23 asking for. 24 CHAIR OF THE INQUIRY: I think they've already been over the 25 decisions, Mr Fairley, and I think the witness has 185 1 conceded that the position as outlined this morning was 2 not -- didn't appear to coincide with the terms of the 3 decision. 4 No doubt you can deal with this in closing 5 submissions. 6 MR FAIRLEY: The difficulty, with respect, my Lord, that I 7 have with that is the way in which Inquiry Counsel went 8 about that with the witness was essentially a memory 9 test. He didn't accurately -- 10 CHAIR OF THE INQUIRY: Mr Fairley, if you wish at the end to 11 make representations that you wish to ask questions of 12 the witness to clarify this matter, then I'll listen to 13 those. 14 MR FAIRLEY: It may save a great deal of time, my Lord, if 15 the matter can be clarified by Inquiry Counsel now, 16 rather than me having to play catch-up with points that 17 have not been put to the witness from various documents. 18 All I ask is that if Inquiry Counsel is putting 19 a proposition to the witness and asking him to assent to 20 it, which is essentially a form of leading question and 21 a form of cross-examination, that he be clear in 22 precisely what respect it is maintained that the 23 statement that the adjudicator agreed with tie on many 24 principles in dispute is inaccurate. 25 That would seem only fair to the witness. 186 1 CHAIR OF THE INQUIRY: I think that the ground has been 2 covered. So if you want to cover it again at the end of 3 the day, you can make representations. Mr Lake? 4 MR DUNLOP QC: My Lord, can I just indicate, without wanting 5 to delay any matters at all, I associate myself entirely 6 with Mr Fairley's comments. I'm wholly at a loss to 7 understand how it can be said that it's inaccurate to 8 say that the adjudicator agreed with tie on many of the 9 principles in dispute. If that means I also have to ask 10 leave to ask questions, then I simply flag that now. 11 CHAIR OF THE INQUIRY: Very well. Mr Lake? 12 MR LAKE: My Lord. 13 Mr Jeffrey, we looked earlier on whether a decision 14 was taken in July 2009 that matters would be pressed to 15 the Dispute Resolution Procedure and through to 16 adjudication if required. 17 A. Yes. 18 Q. When you were deciding which disputes to refer to 19 adjudication through the Dispute Resolution Procedure, 20 I think there was a reference to the particularly 21 important disputes, of issues of principle, is that 22 correct? 23 A. I think it was a combination -- a combination of those 24 issues of principle and value. 25 Q. And value. 187 1 Now, what was the issue of principle that arose in 2 relation to the Russell Road Retaining Wall dispute? Do 3 you recall it from looking at the decision or can you 4 remember it? 5 A. I don't, I'm afraid. I don't recall whether it was the 6 issue over the fact -- not so much as the shape of the 7 foundation had changed, but more the fact that there had 8 been no explanation as to why it had changed, and this 9 goes to the heart of the matter that says if the 10 Infraco's interpretation of the contract was correct, 11 they were in effect at will, to be able to make changes 12 to the design at will and expect the client to pay for 13 those. 14 I recall that one particular element on the -- the 15 railway section -- I have forgotten what it was called, 16 I'm sorry, where the depot is -- the Haymarket depot 17 area, where the Infraco said: well, we've had to make 18 this change because Network Rail asked for it; and 19 Network Rail said: we never asked for that change. So 20 you have the situation here where the design is 21 changing. There's a separate dispute as to whether that 22 change constitutes a Notified Departure or not, but if 23 tie is not given any information as to why the design 24 has changed, then it would be irresponsible to -- even 25 if you accept the arguments around what constitutes 188 1 a Notified Departure, to simply say: okay, design has 2 changed here, have some more money. That would not be 3 a reasonable position to be in. 4 So it may -- this may not be this particular issue, 5 but maybe the issue behind this one was there had been 6 no justification as why the design had changed. 7 CHAIR OF THE INQUIRY: I think the question you were asked 8 was: what was the issue of principle that arose in 9 relation to the Russell Road Retaining Wall dispute; and 10 do I understand, despite that long answer, that you 11 don't know? 12 A. No, I was speculating. 13 CHAIR OF THE INQUIRY: It would help if we didn't speculate. 14 If you don't know, just say you don't know. 15 MR LAKE: Do you recall when we looked at the decision, 16 there was a question as to whether or not pilings and 17 foundations were or were not Notified Departures. 18 A. I recall that point, yes. 19 Q. And the conclusion was that they were in fact Notified 20 Departures on the interpretation of the Pricing 21 Assumption adopted by Mr Wilson? 22 A. Yes. 23 Q. I think it was clear when we looked at the submissions 24 of the parties that there were disputes as to the proper 25 interpretation of Pricing Assumption 1? 189 1 A. Yes. 2 Q. So on the -- what one might say of the outcome is that 3 the adjudicator interpreted Pricing Assumption number 1, 4 and applied that interpretation to the facts, and found 5 against tie? 6 A. That is -- yes, what the document says or appears to 7 say. 8 Q. Can we have that document back on screen, please, that 9 we were looking at. 10 Looking there what is said about the Russell Road -- 11 if we can enlarge the lower half of the screen. Looking 12 there what is said about the Russell Road Retaining 13 Wall, in the second half of the second paragraph, do you 14 think that accurately reflects the substance of the 15 Russell Road Retaining Wall decision? 16 A. I think that would you need to ask the report's author 17 as to why they put that in. 18 Q. No, that's not what I'm interested, as to why they did 19 it, Mr Jeffrey. You were the Chief Executive of the 20 company, and I'm asking you: do you think this report, 21 which went to Transport Scotland, accurately reflected 22 the substance of the decision? 23 A. From -- from recollection, I believe it did accurately 24 reflect what we believed the adjudication said at the 25 time. 190 1 Q. So what do you -- can you recall, and no doubt you will 2 be taken to it in questions later by my learned 3 friends -- but what do you consider -- do you have any 4 recollection of what were the principles in respect of 5 which the adjudicator agreed with tie? 6 A. No, I don't, and I would need to see the analysis and 7 the legal advice that we received on the back of that 8 adjudication. 9 Q. We are now going to look at the document that I was 10 about to look at before the afternoon break. The email 11 is reference CEC00648852. 12 I'm doing this just to provide a date for what we're 13 looking at. If we look at the lower half of the screen 14 here, we see it runs from Bruce Bentley, who we know is 15 at DLA, to Steven Bell, Tony Rush, Dennis Murray and 16 yourself, with a date of 15 January 2010. Do you see 17 that? 18 A. Yes. 19 Q. It says: 20 "Attached for your information and consideration is 21 a copy of Richard Keen's draft Opinion on the various 22 issues he was instructed by us to consider following on 23 from the Gogarburn Bridge Adjudication Decision. He 24 advised on these issues in conference some weeks ago, 25 and this Opinion is intended to summarise the advice he 191 1 gave then." 2 Do you see that? 3 A. Yes. 4 Q. Because we did see in the DLA advice paper from 5 December, there were representations of Richard Keen's 6 opinions already there. Do you understand this was the 7 formal written record of the advice he was giving? 8 A. Yes. 9 Q. If you could look, please, at the attachment to this 10 email, it has reference CEC00648853. 11 Now, we can see this is headed up, "OPINION OF 12 SENIOR COUNSEL for TIE LIMITED in re EDINBURGH TRAM 13 NETWORK INFRACO CONTRACT and DISPUTE RESOLUTION 14 PROCEDURE". If you scroll down a little bit, do you 15 recall having seen this at the time? We have seen it 16 it was emailed to you, but do you recall it? 17 A. Not specifically, no. 18 Q. Okay. We just look at the introduction: 19 "I have been instructed on behalf of Tie Limited 20 (hereinafter referred to as tie) with respect to 21 a number of issues which have arisen involving the 22 interpretation of the contract for the Infraco Works 23 (which contract is hereinafter referred to as the 24 Infraco Contract) and the dispute resolution procedure 25 which has followed thereon. The principal issues 192 1 concern the Contract Price for which provision is made 2 in terms of Schedule Part 4 of the Infraco Contract. 3 For convenience of reference I set out here the 4 issues which I am expressly instructed to address." 5 The first issue is: 6 "1. Which interpretation of Pricing Assumption 1 7 put forward by the parties in the Adjudication process 8 is to be preferred?" 9 Do you recall that question being put to 10 Richard Keen? Were you involved in that being put to 11 him? 12 A. No, I wasn't involved personally in the briefing or the 13 feedback sessions with Richard Keen. 14 Q. That particular issue we see there whose interpretation 15 is correct, is really going to the heart of the dispute 16 you had with Infraco at the time, isn't it? 17 A. Yes. 18 Q. We can also see other questions: 19 2. What is the relevance of the Employer's 20 Requirements and the Infraco Proposals to the concept of 21 normal development and completion of designs in terms of 22 Pricing Assumption 1? 23 3. What is the relevance of the Employer's 24 Requirements and the Infraco Proposals to what is 25 included in the construction works price? 193 1 4. Is the Construction Works Price limited to only 2 what is depicted on the Base Date Design Information? 3 5. Can it be said that a Notified Departure has 4 occurred in the circumstances where an item of work is 5 not depicted on the Base Date Design Information, but 6 that item of work is nonetheless called for or required 7 by the Employer's Requirements or referred to in the 8 Infraco Proposals? 9 6. Can it be said that the Infraco is entitled to 10 an increase in the sums due to it under the Infraco 11 Contract in the circumstances where an item of work is 12 not depicted on the Base Date Design Information, but 13 that item of work is nonetheless called for or required 14 by the Employer's Requirements or referred to in the 15 Infraco Proposals? 16 7. Is it the case that tie have the burden of 17 demonstrating that the exceptions apply to defeat what 18 would otherwise be a Notified Departure, and/or 19 entitlement through evaluation of an Estimate?" 20 I acknowledge entirely what you have said, that you 21 didn't frame these questions, but just looking at them 22 there, are questions 2 through to 7 as important as 23 question number 1, or were they important to management 24 of the relations between the parties? 25 A. I think they are all important questions. I wouldn't 194 1 necessarily want to say one was more important than the 2 others. 3 Q. Okay. Could we look then, please, at paragraph 11 of 4 the opinion, please, on page 8. Mr Keen comes back here 5 and says: 6 "The first issue submitted for my opinion is as 7 follows: which interpretation of Pricing Assumption 1 8 put forward by the parties in the Adjudication process 9 is to be preferred? 10 In my opinion the interpretation put forward by 11 Infraco is to be preferred to the interpretation put 12 forward by tie." 13 Was that a surprise to you when you read that at the 14 time? 15 A. Well, I don't know that I did read that at the time. 16 Can you remind me when this was? 17 Q. Certainly. It was emailed to you on 14 January. If you 18 go back, please, to look at the earlier email. 19 A. The 15th. 20 Q. It was 15 January, pardon me. 21 A. I don't recall seeing it at the time, but I do have 22 recollection of the fact that this Pricing Assumption 1 23 was very damaging to tie's argument. I don't quite know 24 when that realisation became a reality. As I said, it 25 wasn't a case of one day it's fine and the next day it's 195 1 not. So this was all part of the legal advice that we 2 took that was adding to the confusion and the difficulty 3 of administering this contract. 4 Q. Were you involved in the decision to take advice from 5 Richard Keen? 6 A. I was aware that it was going on, and I didn't have an 7 issue with it. I don't think -- when you say involved 8 in the decision, I don't think that I particularly 9 instructed it. But if the -- if DLA had said this is 10 what we're going to do, I'm sure I would have said that 11 sounds like the sensible thing to do. 12 Q. But you already had an advice from Calum MacNeill. We 13 have already seen that and we've looked at that. Why 14 did you get a second opinion from Richard Keen? 15 A. Because the adjudications were not going as we had 16 expected. 17 Q. And presumably the hope then was that you would get an 18 opinion from Mr Keen that would favour tie's position? 19 A. Or at least we'd get some clarity. 20 Q. Instead, what you got here was a fairly bald statement 21 that he favours the interpretation to be put forward by 22 Infraco. 23 A. Yes. 24 Q. Was that a concern to you? 25 A. Yes, clearly. 196 1 Q. Was there a consideration of change of strategy at that 2 time on the basis? 3 A. I think if you refer back to the earlier Board meeting 4 in January, I think there was already a change of 5 strategy being considered at that point. 6 Q. That was when the Project Pitchfork was being brought to 7 a head with the idea to getting things ready for the 8 March Tram Project Board meeting? 9 A. Yes. I think it was clear at this point that the DRP 10 strategy was not producing the results that we needed. 11 And therefore in the absence of another strategy, we 12 would continue with it in the meantime, but we needed to 13 bring -- and the Board meeting in January was about 14 saying, well, we need to bring some alternative 15 strategies to the table. 16 Q. There was another aspect of this opinion I want to ask 17 you about. I think you mentioned it earlier. Could we 18 go, please, to page 2, to paragraph 4. 19 The opinion states: 20 "Although the reasons given by the Adjudicator for 21 his decision of 16 November 2009 may not be 22 distinguished by their clarity they are readily to be 23 construed as meaning that in the opinion of the 24 Adjudicator the Construction Works Price is fixed by 25 reference to the work identified in the Base Date Design 197 1 Information with the result that any further work 2 required to meet the Employer's Requirements will 3 constitute a Notified Departure in accordance with 4 Schedule Part 4 of the Infraco Contract. The 5 Adjudicator's reasoning in respect of this issue is to 6 be found at paragraphs 7.17 to 7.23, which I set out 7 below for ease of reference." 8 So this is Mr Keen just starting to consider the 9 reasoning given by Mr Hunter for his decisions on 10 Gogarburn; do you understand that? 11 A. Yes. 12 Q. Over the following page we see the various paragraphs he 13 refers to being set out in full. I won't read through 14 those. But if we go to paragraph 6, which is when 15 Mr Keen's opinion resumes, you can see what he says is: 16 "The Adjudicator's analysis of the issue has at 17 least a superficial attraction when one comes to 18 consider the provisions of Schedule Part 4 and more 19 particularly the definition of terms in that schedule. 20 The analysis would appear to engage the following line 21 of reasoning." 22 We can see then the following paragraph, he sets out 23 reasoning. Perhaps I don't need to read through that in 24 any detail at the moment. If you look at what Mr Keen 25 says in paragraph 8, which I think is what you may have 198 1 referred to earlier: 2 "The result of the foregoing analysis would be that 3 any part of the design of the Edinburgh Tram Network for 4 work required in terms of the Employer's Requirements in 5 Schedule Part 2 which was not incorporated in Design 6 Information Drawings issued to Infraco up to and 7 including 25 November 2007 would constitute a Notified 8 Departure as defined in Schedule Part 4 and would 9 therefore be deemed to be a mandatory tie Change for the 10 purposes of pricing. That conclusion, whatever its 11 superficial attraction, is in my opinion wrong. I shall 12 now endeavour to set out my own reasoning with respect 13 to this issue." 14 Now, I think when we started discussion today about 15 these issues, you referred to this -- I think it was 16 this comment you were referring to that the reasoning 17 was wrong? 18 A. Yes, it was. 19 Q. What did you take from the fact that Mr Keen said here 20 that the Adjudicator's reasoning was wrong? 21 A. Some encouragement. 22 Q. But he says, as you have seen later in the opinion, that 23 notwithstanding that, the Infraco's argument is to be 24 preferred over tie's argument as advanced. 25 A. And I can't quite reconcile those two statements within 199 1 the same opinion. 2 Q. But if we look, we go on to say that Mr Keen says: 3 "I shall now endeavour to set out my own reasoning 4 with respect to this issue." 5 And does so in paragraph 9 as follows: 6 "The Infraco Works are defined by reference to the 7 Employer's Requirements as specified in Schedule Part 4. 8 Paragraph 1.2 of Schedule Part 4 provides that, "the 9 Construction Works Price is on a lump sum basis that is 10 fixed until completion of the Infraco works and not 11 subject to variation except in accordance with the 12 provision of this Agreement. 13 The Construction Works Price is a lump sum, fixed 14 and firm price for all elements of work required as 15 specified in the Employer's Requirements and is not 16 subject to variation except in accordance with the 17 provisions of the Agreement." 18 Reference to paragraph 3.1 of Schedule Part 4: 19 "Paragraph 3.5 of Schedule Part 4 states that the 20 Contract Price has been fixed "on the basis of inter alia 21 the Base Case Assumptions". The words underlined are in 22 my opinion of significance. The Contract Price includes 23 the Construction Works Price. The Construction Works 24 Price is as noted above a lump sum fixed and firm price 25 in respect of the Employer's Requirements. The Base 200 1 Case Assumptions do not embrace all of the Employer's 2 Requirements but only such of those Employer's 3 Requirements as are incorporated in design information 4 drawings issued to Infraco up to 25 November 2007." 5 Then the bit that's perhaps the most important for 6 our purposes: 7 "Paragraph 3.5 identifies a Notified Departure as 8 a situation in which facts or circumstances 'differ' 9 from the Base Case Assumptions. The term 'differ' 10 signifies change ... it is to make unlike, dissimilar or 11 different. If some aspect of the specification in the 12 Employer's Requirements at Schedule Part 2 was not 13 incorporated in the Base Date Design Information and is 14 thereafter the subject of design information, that 15 cannot in my opinion constitute a Notified Departure for 16 the purposes of paragraph 3.5. If some aspect of the 17 Employer's Requirements was the subject of outline 18 design in the Base Date Design Information and is then 19 the subject of a design development which does not 20 render it unlike, dissimilar or different to the outline 21 in the Base Date Design Information, then that again in 22 my opinion would not constitute a Notified Departure. 23 (This is subject to the express provisions of 24 paragraph 3.4.1). 25 In my opinion this view is reinforced by the fact 201 1 that any Notified Departure is deemed to be a Mandatory 2 tie Change 'requiring a change to the Employer's 3 Requirements'. If an element of the work required as 4 specified in the existing Employer's Requirements was 5 now to be made the subject of design information which 6 did not alter the Base Case Assumptions, it would make 7 little if any sense to deem that to be a matter 8 requiring a change to the Employer's Requirements." 9 Then he goes on to say that that conclusion is also 10 consistent with parts -- of the Schedule Part 2, and 11 section 3.6.1. Finally, he makes reference to clear 12 commercial sense. 13 We can see from its context that is all setting out 14 his reasoning, Mr Keen's reasoning, that is, on the 15 matter on which he considers that the adjudicator has 16 gone wrong. Would you agree? 17 A. I find this -- in this environment, trying to discern 18 what that opinion says and what it means, somewhat 19 difficult. So I'll take your word for it. 20 What I would have done at the time would have been 21 to have taken the opinion and discussed it with my legal 22 advisers, and asked them to interpret it for me, because 23 I'm not sure I can sit here and sight read that and tell 24 you what I think it means. 25 Q. I accept that difficulty. So I approach the matter 202 1 differently. 2 Can you recall what you took from this opinion at 3 the time? 4 A. Not specifically. I think that in general we considered 5 Richard Keen's opinions to be helpful. 6 Q. In what way did you consider this opinion to be helpful? 7 A. I don't recall specifically on this one. 8 Q. Going forward looking at the progression of legal 9 advice, could we look at document CEC00444298. We can 10 see here a different strand of advice. It's from 11 DLA Piper, headed "LEGAL ADVICE NOTE". It's headed 12 "INFRACO CONTRACT - TERMINATION". The narrative starts: 13 "We have been asked to produce a very brief note 14 [which they have underlined] on the relevant termination 15 provisions in the Infraco Contract, in terms of both 16 Infraco and tie Default and the requirements of the 17 Infraco security package." 18 Was this part of the project Pitchfork work stream, 19 do you know? 20 A. I would imagine so. 21 Q. Just for completeness, we can see if we look at the 22 third page of it that the date of it was 29 January. 23 If we could go to the Tram Project Board papers for 24 February 2010, it's document reference CEC00474418. We 25 can see from the cover page, these are the papers for 203 1 the February meeting, and indeed we've already looked at 2 page 7 of this to see the minutes from the January 3 meeting. 4 What I would like to do is look at the position as 5 noted here in relation to the Dispute Resolution. Could 6 you go please to page 28, and look at the lower half of 7 the page. We can see that it now notes that in respect 8 of Gogarburn, Carrick Knowe and Russell Road, the 9 decision has been made but is under review. 10 In answer to your -- in answer to the questions 11 I asked earlier regarding the Gogarburn and 12 Carrick Knowe decisions and the advice obtained in 13 December, you said a view had been taken that you might 14 not proceed with the review. This is still noting by 15 February that a review -- that the matter is under 16 review. Was it still under review at that time, whether 17 or not to challenge? 18 A. In so much as we hadn't taken a definitive decision not 19 to. 20 Q. Can you remember by whom the decision was taken 21 definitively not to, that is whether or not it was the 22 Board or whether or not it was a management function? 23 A. I think that was probably a management decision rather 24 than a Board decision. 25 Q. Look over the page to the upper half. We do see that 204 1 there's reference to the same fact that until all key 2 issues are resolved through the contractual legal 3 processes, you cannot forecast accurately a revised 4 budget outturn. That's similar wording that we've seen 5 before; is that correct? 6 A. Sorry, where are we on here? 7 Q. It's the first paragraph on the page, just under the 8 table. The numbers have been updated to reflect the 9 current estimate, but there's no -- 10 A. That is what it says. 11 Q. When we were looking at the January papers, it noted 12 that the Russell Road Retaining Wall decision was just 13 out and it would be reported more fully the following 14 month. We can see looking at the following month, in 15 fact nothing was reported about the Russell Road 16 Retaining Wall. Do you agree? 17 A. Nothing is recorded there. 18 CHAIR OF THE INQUIRY: Do you think it was reported? 19 A. I can't honestly recall. It may have been discussed at 20 the Board meeting, but I don't honestly recall. 21 CHAIR OF THE INQUIRY: If it was, would it be in the 22 minutes? 23 A. It may have been. It may not have been. 24 MR LAKE: Perhaps for clarity, if we can go to the 25 presentation which is reference CEC00376422. That is 205 1 the PowerPoint presentation for the 10 February meeting. 2 Do you see that? 3 A. Yes. 4 Q. You can go through it if you wish, but I don't think 5 you'll find anything in there that would shed any light 6 on the Russell Road? 7 A. I'll take your word for it. 8 Q. Finally, his Lordship has raised the question of the 9 meetings for the February meeting. We can go to the 10 March pack of papers which is referenced TIE00894384. 11 We can see the front page identifies it as the papers 12 for the March meeting. If we look at page 5, as usual 13 we see the minutes for the previous meeting, this time 14 of February. 15 A. Yes. 16 Q. I'm accepting it's not easy to read things as you go 17 through these things in an Inquiry setting, but I'm 18 happy, you can read through them if you want, or would 19 you accept that still there's no mention of discussion 20 regarding the Russell Road decision that took place at 21 the meeting? 22 A. I'm happy to take your word for it if it isn't there. 23 Q. Was there a reason why, having said it would be 24 reported, in fact there is no reporting and there's no 25 discussion of it? 206 1 A. Not that I can recall. 2 Q. I now want to go to -- we have finished with that 3 document -- a different piece of legal advice. It's 4 reference CEC00591754. We see this is a document 5 entitled "REPORT FOR TIE LTD ON CERTAIN CONTRACTUAL 6 ISSUES CONCERNING EDINBURGH TRAM PROJECT". It has the 7 date of 23 March 2010. You can see that it's from 8 McGrigors solicitors. 9 A. Yes. I see that. 10 Q. Do you recognise this document? 11 A. It doesn't leap out at me as one I recognise, actually. 12 It may jog a memory if I see the content. 13 Q. Perhaps we can go to page 5 where an executive summary 14 is, or would you prefer to see the contents page? 15 A. Whatever. I don't mind. 16 Q. If we go to page 5 then, the Executive Summary. 17 Before going into the detail of that, we can see 18 that whereas previous advice had come largely from DLA, 19 and Counsel, there's now an opinion being sought or 20 a note of advice from McGrigors. 21 Why was a decision made to seek advice from a second 22 firm of solicitors at this point? 23 A. I don't specifically recall. It is fair to say that 24 around this time, given the disappointing results on the 25 adjudications, that I was starting to have some concerns 207 1 about the nature of the advice that I was getting from 2 DLA, and the extent to which their advice was prejudiced 3 by the fact it was -- that they had written the 4 contract, and given the seriousness of the situation, 5 felt it was appropriate to get a second opinion from 6 McGrigors. 7 Q. We will look at what this opinion says and see if it 8 jogs your memory. 9 At the moment I'm just going to look at the 10 Executive Summary because it's otherwise a very long 11 report. But if you want to, we can go into the detail, 12 the substance of the report. 13 Could we look at the lower half of the page here. 14 If we start by looking at paragraph 1.3, it notes the 15 point previously made that: 16 "There are two categories of design change where it 17 would produce an irrational or absurd result if Infraco 18 were to be entitled to recover cost and time: (a) Where 19 a change is driven by Infraco, for example to improve the 20 buildability of the project; (b) where something is 21 required by Employer's Requirements, but not shown on the 22 BDDI. 23 Beyond this, could it properly be said that the 24 words should be interpreted, and revised, in such a way as 25 to mean that Infraco bears the risk of all design 208 1 development other than substantial or material changes? 2 It is considered that there are difficulties with such 3 a submission. 4 Whilst there is a stateable argument that something 5 has gone wrong with the wording, this meets only part of 6 the required test. What is also required is to 7 determine the result which must rationally have been 8 intended, and to propose the wording that would achieve 9 that result. Whilst that may appear straightforward, it 10 is an extremely difficult exercise. That exercise is 11 not assisted by the factual background which has 12 presented in relation to the execution of the Wiesbaden 13 Agreement. This issue is still under consideration by 14 McGrigors LLP in conjunction with Richard Keen QC. 15 Richard Keen QC has reviewed the sections of the 16 report which deal with Pricing Assumption number 1, and 17 he concurs with the views expressed." 18 So we see here the summary of the advice is that 19 whilst they accept the point that you have made in your 20 evidence this morning that something has gone wrong with 21 the contract, that's not enough to get you a wording 22 that's going to achieve tie's objective because it would 23 have to be necessary to have to rewrite it. 24 A. Yes. My understanding is this is effectively the 25 Chartbrook v Persimmon argument. 209 1 Q. Yes, it's exactly that. 2 A. And from what I recall, in discussion with 3 Brandon Nolan, there were effectively three tests. One 4 was that -- the first is that the literal meaning of the 5 words must lead to a commercially absurd result. The 6 second is that the words should be capable of relatively 7 simple rewriting to produce a more meaningful result, 8 and the third should be that the words that are causing 9 the difficulty were proffered by the party that is 10 benefiting from them. 11 I think it was that third test that Brandon felt was 12 very weak because there was no evidence that the Infraco 13 had proffered these words directly, or that the tie 14 personnel involved in the drafting of the Wiesbaden 15 Agreement didn't know what they said. 16 So I think it was on that third test that Brandon 17 felt we didn't really have an argument that would 18 succeed. 19 Q. We can see also what is said by Brandon Nolan of 20 McGrigors in paragraph 1.5 here is there are problems 21 with the second test of trying to formulate what the 22 wording should be to achieve the result for which tie 23 contend. He describes it as "an extremely difficult 24 exercise". Do you recall that? 25 A. Yes. I didn't recall that being the major sticking 210 1 point. I thought it was the third test that was the 2 major sticking point. 3 Q. Then if we continue on with the advice that's given, 4 this time in relation to progress, in 1.7 we can see: 5 "Infraco have relied on clause 80 to the effect that 6 where there is a dispute about whether a Notified 7 Departure has occurred (for example because of a change 8 in design between BDDI and IFC), Infraco are entitled to 9 refuse to progress the work in question. Infraco assert 10 that the only circumstances where tie are entitled to 11 instruct Infraco to proceed in this context is where 12 an Estimate in relation to the Notified Departure has 13 been referred to DRP. 14 There is a strong argument available to tie that 15 they are entitled to instruct Infraco to progress work, 16 even when there is a dispute about who should bear the 17 risk of that work. 18 Where tie consider that no Notified Departure has 19 occurred, the provisions of clause 80 ought not to 20 apply. This is because the deeming provisions in 21 clause 3.5 of Schedule Part 4 in relation to the 22 existence of a Mandatory tie Change and the issue of 23 a tie Notice of Change (which lead to clause 80) do not 24 arise where there hasn't been a Notified Departure. 25 In those circumstances, the provisions of clauses 211 1 34.1 and 80.13 taken together demonstrate a clear 2 contractual ability to instruct work to proceed, 3 notwithstanding the existence of a dispute about the 4 existence of a Notified Departure. 5 An interpretation which entitles tie to instruct 6 work to proceed carries the force of avoiding the 7 outcome that Infraco contend for, which is that they are 8 entitled to hold up progress of the work, particularly 9 where the scope and nature of the work is clear, and the 10 only issue between the parties is either who should bear 11 the cost consequences, or what the quantum of those 12 costs consequences should be. 13 Richard Keen QC has reviewed the sections of the 14 report which deal with clauses 80 and 34.1 and he 15 concurs with the views expressed." 16 So there we have got an opinion that is quite 17 favourable to tie in concluding that on a proper 18 interpretation of the contract, tie do have the ability 19 to compel the contractors to proceed to carry out works. 20 Now, what if anything did tie, the Tram Project 21 Board, take from that? 22 A. Well, I believe that we did instruct works under these 23 clauses. And that ultimately that then became a subject 24 of a further dispute that went to adjudication. 25 Q. So you relied upon the advice that you've been given? 212 1 A. Yes. 2 Q. In relation to the earlier part of the advice then about 3 price, where you had been given a rather more negative 4 ability to force a contract, what steps did you take in 5 light of the advice in that regard? 6 A. I don't recall, I'm afraid. 7 Q. For completeness in this opinion, if I could go to 8 page 22. It's clause 10.11 towards the foot of the 9 page, where the advice was: 10 "It remains open to the parties to agree that they 11 should proceed directly to adjudication (without first 12 mediating), or even directly to court proceedings, 13 thereby leap-frogging the other stages of the DRP, that 14 is only possible on a consensual basis. Indeed, with 15 consensus, the parties can agree to resolve disputes by 16 any means that they wish on an extra-contractual basis." 17 This was raising something I have alluded to before, 18 but I don't think you'd had advice on before about the 19 possibility of taking matters into court? 20 A. It had come up in a very early discussion with 21 Richard Walker, I believe. But I think the view at the 22 time, and again, my recollection insofar as I have 23 a recollection of it, was discussions with the legal 24 advisers, is that this would in fact be a very lengthy 25 and time-consuming exercise, and that the project would 213 1 effectively be put on hold whilst such a dispute went 2 through the courts. 3 Q. What would cause the project to go on hold while the 4 dispute went through the courts? 5 A. I don't know. I just recall that was the legal advice 6 that we had. 7 Q. As you have seen, the date of this advice was 23 March. 8 What I would like to do is just step back a couple of 9 weeks in relation to the Tram Project Board on 10 March 10 and look at the presentation that was given by 11 PowerPoint to that meeting. 12 It's reference CEC00575128. That's 00575128. 13 We can see here that PowerPoint presentation with 14 the date of 10 March 2010. Could we look, please, at 15 page 8. The heading, "Legal Context". There's 16 a comment about price, that: 17 "The language in the Contract is open to differing 18 interpretations and whilst there is a strong common 19 sense argument which militates against BSC's 20 interpretation, uncertainty does exist as to how far 21 a court would go in supporting tie's interpretation." 22 Was this a comment that you made, can you remember, 23 to the Tram Project Board? 24 A. I don't recall -- militates is not a word I would 25 necessarily use, but, I mean, ultimately I presented 214 1 these. So I'm -- take responsibility for them. 2 Q. We can see here that what is described there mirrors to 3 a large extent what we saw in the advice note from 4 McGrigors. 5 A. Yes. 6 Q. I think it's a matter of record that ... if we just look 7 for completeness at a document CEC00618945. 8 We can see this is a document that bears a watermark 9 "draft". It's got a date in the bottom right-hand 10 corner of 1 March 2010. I do not know if you can 11 recognise it from sight; this is an earlier draft of 12 advice that had been offered by McGrigors which 13 ultimately found its way into the advice note that we've 14 already looked at. Do you recognise it? 15 A. Not specifically. 16 Q. Okay. I won't press that then. 17 Returning to the presentation to the March Tram 18 Project Board, that's document 00575128, we've already 19 looked at what's on page 8. Sorry, we have looked at 20 price on page 8. If we go down to look at progress, the 21 second bullet point, it notes: 22 "There is a strong argument available to tie that is 23 likely to succeed, that tie is entitled to instruct BSC 24 to progress work, even where there is a dispute about 25 who should bear the risk of that work." 215 1 Once again, that broadly reflects what we saw in the 2 advice note from McGrigors? 3 A. Yes. 4 Q. Looking then at page 10, we saw from our consideration 5 of these matters earlier that part of the Pitchfork and 6 your email early in January, matters were to be brought 7 to a head for the March meeting. We see here a slide 8 with a heading, "Option Identification", with three main 9 categories of option, many sub-options under each. 10 Is this the outcome of the work you'd been doing for 11 the eight weeks? Do you recognise it? 12 A. Yes, I don't know if that's all of it, but that's the 13 gist of it. 14 Q. That's the presentation in relation to it? 15 A. Yes. 16 Q. We can see that the three options that have been brought 17 down to three now are termination with or without just 18 cause, negotiation of a Bilfinger exit, or carrying on 19 with Infraco. 20 Then it's noted there that the selected four 21 sub-options to develop in detail: 22 "We terminate the Infraco contract. 23 Bilfinger Berger complete Airport Haymarket, then 24 we complete the project without them. 25 Carry on exactly as we are now. 216 1 Carry on but with modified arrangements to address 2 the key issues." 3 Now, were these the various possible options or 4 sub-options which have arisen as a result of the 5 consideration that you've been carrying out over the 6 past eight weeks? 7 A. Yes, as far as I can recall. There may have been other 8 sub-options which were not presented at this -- on the 9 basis of this is selected sub-options, and looking at 10 the numbering, there may have been other sub-options 11 which were considered and rejected. 12 Q. If we look, without reading through the whole of each 13 slide, we can see on the following slide at page 11, 14 there's some description of option analysis. And then 15 on page 12, in table format, we have setting out various 16 particulars in relation to one of the options, and on 17 the following page, particulars in relation to another 18 of the options and so on? 19 A. Yes. 20 Q. Once again, is this the result of the work you'd been 21 carrying out to assess the various options and to decide 22 where things should go, from here on? 23 A. That's certainly what it looks like, yes. 24 Q. If you look at page 18, there's a slide with a heading, 25 "Recommendation". It says: 217 1 "What. 2 Option 4." 3 Was this a recommendation that you were making to 4 the Tram Project Board, do you recall? 5 A. It certainly looks like that. I don't specifically 6 recall it, but that's certainly what it looks like. 7 Q. Your recommendation was to keep up the pressure for 8 another two months, and in the meantime to work on 9 off-street section and withdraw from the city centre by 10 negotiation if possible. 11 Nonetheless, to escalate and resolve key issues, 12 which are noted as being Clause 80, Pricing Assumption 13 1, time, design, on-street, and amend contractual 14 arrangements accordingly in due course. 15 Those were all components of the option you were 16 recommending to the board? 17 A. Yes. 18 Q. Now, this involved escalating issues including 19 Clause 80, which is the one as to timing. We can see 20 you'd had a favourable opinion. Was that, I take it, 21 intended to capitalise on that favourable opinion? 22 A. Yes, I believe so. I don't recall the timing of the 23 adjudication on the Clause 80, but I presume it was 24 subsequent to this. 25 Q. Yes, it was. The other thing that's said to escalate 218 1 there was Pricing Assumption 1. 2 Now, in view of the decisions you'd had by then, in 3 relation to Pricing Assumption 1, and the advice from 4 Mr Keen and draft advice from McGrigors, what were you 5 intending to do by way of escalating Pricing Assumption 6 1? What did you hope to achieve? 7 A. The phrase is escalate and resolve. So it may be that 8 some were for escalation and some were for resolution. 9 So it may be that the intention was to try and resolve 10 Pricing Assumption 1 by some form of negotiation. 11 Q. Just for completeness, finishing this off, if we look at 12 page 22, slide 22, we can see there's talk about 13 a detailed project management plan covering various 14 issues, and a report back to the Tram Project Board and 15 Council by the end of May 2010. 16 Do you see that? 17 A. Yes. 18 Q. The following page, one last matter, is slide 23. Under 19 the heading, "What do we do meantime", the fourth aspect 20 is: 21 "Pursue case on PA1." 22 What did you mean, "Pursue case on PA1"? 23 A. I don't know unless that was the Chartbrook v Persimmon 24 argument. I don't know if that had been considered and 25 rejected by this time or whether that was still under 219 1 consideration. 2 Q. Can you recall whether or not it was a question of -- 3 when you say pursue case, was this intended to possibly 4 raise litigation in respect of the matter, or did it 5 still simply mean pursuing the matter in the context of 6 DRP and such? 7 A. I -- pursue, I don't know whether that's the right word, 8 but continued to work on, perhaps would have been 9 better. 10 I can't remember the timing here, but I think the 11 argument that Brandon was putting forward was that if we 12 had an argument, a stateable argument on the Chartbrook v 13 Persimmon argument, then you would effectively take that 14 to a court and ask them to rule on it. So that may be 15 what that's referring to. I don't believe at this 16 stage, the intention was to launch any more DRP disputes 17 on Pricing Assumption 1. 18 MR LAKE: Thank you, Mr Jeffrey. I think that's all -- it's 19 probably time to adjourn today. Obviously I have 20 further questions to ask Mr Jeffrey, and I understand he 21 will be in a position to continue tomorrow, although his 22 evidence was just set down for today. 23 CHAIR OF THE INQUIRY: We will adjourn until tomorrow 24 morning at 9.30. 25 (4.32 pm) 220 1 (The hearing adjourned until Thursday, 9 November 2017 at 2 9.30 am) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 221 1 INDEX 2 PAGE 3 MR RICHARD JEFFREY (affirmed) ........................1 4 5 Examination by MR LAKE ........................1 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 222