1 Thursday, 9 November 2017 2 (9.30 am) 3 MR RICHARD JEFFREY (continued) 4 Examination by MR LAKE (continued) 5 CHAIR OF THE INQUIRY: Good morning. You're still under 6 oath. 7 MR LAKE: Good morning, Mr Jeffrey. Yesterday afternoon 8 when we left off we were looking at the advice that had 9 been given by McGrigors in 2010. What I would like to 10 do is carry on by looking at things in broadly 11 chronological order. If I can turn to another document 12 from March 2010, it's CEC00475671. 13 Do you recognise this document? 14 A. Not specifically. I don't recall it. 15 Q. If we just look at the contents and see if it jogs your 16 memory at all. 17 It's headed "Minute of Tram Meeting 16 March 2010", 18 and of the people at the meeting, we can see, I think 19 it's yourself, and four representatives from the 20 Council; is that correct? 21 A. That's when it says, yes. 22 Q. Under the heading, "Pitchfork Report", it notes that 23 it's ready to be circulated. Then the second point is 24 that tie will not challenge adjudications. I take it 25 from that that by this time, a decision had been taken 1 1 not to challenge the Gogarburn and Carrick Knowe and 2 Russell Road adjudications? 3 A. That's certainly what it says, yes. 4 Q. Do you recall that decision? 5 A. Not specifically, no. 6 Q. Were you involved in taking that decision? 7 A. Well, I don't recall it. So I don't recall whether I 8 was involved in taking it or not. 9 Q. So presumably you also have no idea what factors 10 informed that decision? 11 A. No, I would imagine it was to do with the same issues 12 that we discussed yesterday. 13 Q. Could we look then please at the pack of papers for the 14 April Tram Project Board meeting. It's reference 15 CEC00420346. 16 We can see from the cover page here that we have got 17 the pack of papers for the meeting in April 2010. 18 Could we look, please, at page 5 of this. Do we see 19 there the minutes of the meeting that took place on 20 10 March 2010? 21 A. Yes. 22 Q. Could we go, please, to page 7 of this. You say this is 23 all under the heading, "Chief Executive's Update". We 24 can see a sub-heading of "Contractual Mechanisms". You 25 report there: 2 1 "Since the New Year tie has worked more assertively 2 within the framework set by the Infraco Contract to 3 resolve the issues around contractor performance and 4 progress." 5 That's what you indicated in your evidence 6 yesterday, that the approach that was going to be taken 7 was one of contractual assertiveness and Mr Rush was 8 brought in to assist with that? 9 A. Yes. 10 Q. "The messages being relayed in this correspondence to 11 BSC have been indicative of tie's desire to robustly 12 operate the existing contract mechanisms, and have 13 expressed concerns about BSC's approach to fulfilling 14 certain obligations and interpretation of particular 15 clauses in the contract. RJ confirmed that independent 16 legal and Counsels' advice has been analysed and this 17 has affirmed tie's approach to these matters." 18 I don't know if you can remember saying that, but 19 when you talked about affirming tie's approach, is that 20 affirming the assertive contractual approach or the 21 substantive arguments in relation to the various 22 disputes? 23 A. I don't specifically recall from the reading of those 24 minutes. I would imagine it applies to the former 25 rather than the latter. 3 1 Q. Are you able to recall which of the various pieces of 2 advice that we looked at yesterday were the ones on 3 which you placed reliance for the purposes of planning 4 the strategy? 5 A. No, not specifically. 6 Q. Can we look at page 13, please. Could we enlarge the 7 upper half of the page, please. You will see 8 a sub-heading there, "Dispute Resolution (Infraco)". 9 I should say this is in the Project Directors' report. 10 It notes: 11 "No new DRP matters were launched in the Period, but 12 Section 7 drainage and Tower Place Bridge have been 13 referred to adjudication by tie. A mediation process 14 was completed on MUDFA Revision 8 during the period 15 without resolution, and this item may now head into 16 adjudication. Agreement on an acceptable On Street 17 Supplemental Agreement with BSC has not been reached." 18 That was the various discussions in relation to the 19 on-street agreement that you noted yesterday, had 20 possibly started in the mediation in June 2009; is that 21 correct? 22 A. Yes. 23 Q. When it notes that no new dispute resolution matters 24 were launched in the period, was that a deliberate 25 decision on the part of tie not to do this, on the Tram 4 1 Project Board not to do this, or was it simply that 2 nothing had arisen? 3 A. I don't recall, I'm afraid. 4 Q. If we look, please, at page 32 of this. Could we 5 enlarge the upper half of the page. We can see the 6 table that we've seen before, and in relation to the 7 first three entries which are for Gogarburn, 8 Carrick Knowe and Russell Road, it still says that the 9 decision is under review, although as we have seen by 10 that time it had actually been -- from the minute with 11 the Council, the decision had actually been taken that 12 there would be no challenge. Do you see that? 13 A. I see it, yes. 14 Q. In relation to the three entries 5e -- I think it's 5l 15 and 5i, Tower Bridge, Section 7 Drainage and 16 Baird Drive, we can see these are all BDDI to IFC 17 issues. 18 Do you recall why in particular those disputes had 19 been chosen to put through the Dispute Resolution 20 Procedure? 21 A. No, I'm afraid I don't. 22 Q. You note towards the foot of the page, if we can scroll 23 down, two matters. In the third last paragraph on the 24 page: 25 "tie instructs work to commence using Clause 80.15 5 1 when it has been put into dispute. During the period 2 instructions have been issued under Clause 80.15 to 3 commence work at Tower Bridge, Section 7 drainage and 4 Depot Access Bridge is under production." 5 Does that assist in jogging your memory? Were these 6 matters put into dispute resolution because there was 7 a matter to be determined, you wanted a decision, or 8 simply you wanted to be able to use the Clause 80.15 9 mechanism? 10 A. That does ring a bell, and it is possible that it was -- 11 they were put into dispute purely to bring Clause 80.15 12 into play. 13 Q. Again, there was provision, if you just take it short, 14 within the contract that where there was a dispute, tie 15 could instruct works to proceed? 16 A. I'm afraid I don't recall the specifics of how Clause 80 17 in total worked, but certainly there was some element of 18 allowing tie to instruct works once an issue was in 19 dispute, because this then later became an issue of 20 a further adjudication by Lord Dervaird. 21 Q. The Murrayfield Dispute? 22 A. Possibly, I don't recall. 23 Q. We will come to that. 24 If we look at the second last paragraph, we see it 25 notes that: 6 1 "A strategic review of commercial and contractual 2 options is under way and will be reported to the Tram 3 Project Board in March." 4 In fact these were already the April papers, but was 5 the point that that strategic review was still ongoing? 6 A. Well, I presume that that refers to the issues that were 7 referred to yesterday, that were, I think, requested in 8 the January Tram Project Board for reporting at the 9 March Project Board. 10 Q. These are the papers for the April Project Board and it 11 is still noting that it is outstanding; is that that the 12 review took longer or that it was kept going? 13 A. I don't know. 14 Q. Going then from the papers for the April meeting, could 15 we go to the papers for the May meeting. The reference 16 is CEC00245907. 17 We can see here the papers for the May meeting, and 18 if we could look, please, firstly at page 5, we will see 19 as per usual, we've got the minutes of the previous 20 meeting. In those minutes, if we go and look at page 8, 21 we can see that Steven Bell summarised the position in 22 relation to the DRPs that had been carried out. And 23 notes that four have gone in. 24 And that four decisions had been made by 25 adjudication. I think that's the fifth bullet point. 7 1 A. Yes. 2 Q. Now, taking stock of those, at that stage you'd had -- 3 of those decisions, Russell Road, Gogarburn and 4 Carrick Knowe had all been given decisions unfavourable 5 to tie in relation to the question of BDDI to IFC. 6 Would you agree? 7 A. Well, I thought about this after we discussed it 8 yesterday, and that isn't my recollection. Clearly 9 Carrick Knowe and Gogarburn were unfavourable, but my 10 recollection of the Russell Road, although the 11 adjudicator found that they were Notified Departures, 12 I don't think that that was a particularly damaging 13 adjudication for tie. That was my recollection. 14 I know as you took me through it yesterday, I formed 15 a different impression. But I think that was partly 16 because you were asking me to look at individual 17 paragraphs in a random order -- not random, but in 18 a non-sequential order, and certainly my recollection 19 didn't accord with the summary that you provided of it 20 yesterday. 21 Q. Can you remember what you did take from that decision 22 that was favourable? 23 A. It was particularly around the view of the adjudicator 24 that where something had gone wrong with the language, 25 he preferred tie's interpretation of the language. 8 1 I also had another look at that adjudication last 2 night, and this apparent -- I think he talks about it, 3 a tautological conflict. He attempted to resolve by 4 giving some definition to design development. 5 Now, notwithstanding that, he found that those 6 issues were Notified Departures, but the issue of the 7 principle of how -- what this was supposed to mean, we 8 took some comfort from. We may have been wrong to do 9 so, but my recollection is that we took comfort from 10 that. 11 Q. I don't -- I appreciate the point you made yesterday, 12 that you're looking at a document on screen and being 13 asked questions about it, which is not the easiest way. 14 A. And it's not how I would have assessed the document at 15 the time. 16 Q. But just so I can be sure and the Inquiry can be sure 17 which passages you are referring to, so that we know 18 what passages carried weight in your view, we will just 19 take another brief look at that document, if we can. 20 It's reference CEC00034842. 21 You see there the cover sheet of it? 22 A. Yes. 23 Q. In relation to the question of something going wrong 24 with the language, what I took you to yesterday was 25 paragraph 100, which you will see on page 20. If you 9 1 could enlarge the lower part of the screen. Just to 2 provide some context for this, we can see paragraph 100 3 notes that: 4 "It appears that something has gone wrong with the 5 language ..." 6 Then inset in italics, Mr Wilson sets out what he 7 thinks it should have meant. 8 We did note yesterday the terms of paragraph 101, 9 where there's really a two-part test set out. I took 10 you through that. 11 If we go over the page, and enlarge the upper half, 12 the point made in paragraph 102 is also that he agrees 13 with tie that the word "amendment" can only apply to 14 something shown on the BDDI drawings, not an addition to 15 achieve compliance with the Employer's Requirements 16 being the overriding obligation. 17 There's a qualification. Paragraph 103, we looked 18 at a little bit yesterday, where he says: 19 "On any of the definitions of design principle, 20 shape, form and/or specification discussed, Infraco took 21 the 'narrow' view ..." 22 He also says that tie took a broad view, and he 23 doesn't concur with either of those. 24 What he says in the fourth line: 25 "This is a subjective test and if such were 10 1 intended, I think the parties would have said so and 2 expressed the criterion such as the 'reasonable design 3 and build contractor'." 4 That's in relation to Infraco. He says: 5 "Equally, I do not accept the 'broad' proposition by 6 tie that a very wide range of matters that are 7 amendments would be 'expected' by a design and build 8 contractor and so included in the Price." 9 He then goes on to draw that together in 10 paragraph 104, where he says: 11 "I think the correct interpretation lies in the 12 proper application of the definitions to the facts; to 13 which I return under the relevant issues." 14 Then what he does in a number of subparagraphs is to 15 say what he thinks is meant by each of the terms, design 16 principle, shape, form and specification. You see all 17 that? 18 A. Mm-hm. 19 Q. Now, are the passages that you're referring to -- you 20 had a chance to look at it last night -- in this 21 section, or are there other sections of this decision 22 that we could usefully look at? 23 A. It was that and I think there was a section where he 24 talked about the tautological conflict. 25 Q. If we look at page 19. Could we enlarge the lower half 11 1 of the screen. There's reference to "tautological" in 2 paragraph 94i). Is that what you were looking at? 3 A. Yes. That was it. 4 Q. What he says there is: 5 "On the face of it on a literal reading, this 6 provision is tautological since the first and last parts 7 provide that there shall be no amendments in terms of 'A' 8 other than amendments due to evolution of design 9 excluding 'A'." 10 That's the point that we looked at yesterday in your 11 evidence -- 12 A. Yes. 13 Q. -- that it is rather circular? 14 A. Yes. So in -- taken as a whole, this document did at 15 the time give us some comfort that the Infraco's 16 argument that effectively we only priced BDDI, which was 17 the essence of their argument, was not supported by this 18 adjudicator. 19 Q. On the basis he noted that the wording, if given 20 a literal interpretation, was tautological, and the 21 passages then from paragraphs 100 through to 104? 22 A. Yes. 23 Q. Thank you. 24 What we were doing then is looking at the 25 May papers. That was reference CEC00245907. 12 1 Could we look, please, at page 30 of this. We can 2 see that the table there, similar to the one we've 3 already seen in relation to the adjudication decisions 4 and it's still noting that the decisions for Gogarburn, 5 Carrick Knowe and Russell Road are under review. Do you 6 see that? 7 A. Yes. 8 Q. If you go over the page we can see in the second 9 paragraph, if you look at the upper half, it's noted 10 that -- it now says: 11 "A strategic review of commercial and contractual 12 options is under way and will be reported to the Tram 13 Project Board at the end of May 2010." 14 Which seems to bear out that the review has in fact 15 been going on longer than was originally planned. 16 A. It would appear so. 17 Q. Does that accord with your recollection? 18 A. I'm afraid I don't have specific recollections as to the 19 exact timing of these items. 20 Q. Could we look, please, back at page 29 of this. If we 21 look at the upper half, the report notes: 22 "Overall the relationship with BSC is suffering in 23 the following key areas: the refusal of BSC to progress 24 works whilst Clause 80 Changes being agreed; work unable 25 to start on-street where sites are available as 13 1 contractual obligations are not satisfied; resolution of 2 the contractual interpretation on BDDI-IFC." 3 What was the issue with works being unable to start 4 on site -- on-street because of contractual obligations 5 not being satisfied? 6 A. There's a couple of elements to that. The purely 7 contractual position, if you like, is that prior to 8 starting work on site, the contractor was supposed to 9 provide signed subcontracts, method statements for 10 approval, and an integrated design for that section of 11 the works. 12 So contractually those were the obligations that 13 they had not met. 14 Practically, they had also said they were still 15 working on the basis that this contract allows us to 16 hold you to ransom, and I didn't want a repeat of the 17 Princes Street situation, where the streets were closed 18 and dug up, and then works stopped because there was a 19 dispute over a change. 20 So it actually suited me and suited, I believe, tie 21 and the city for them not to start any further on-street 22 works, but the contractual reason was that they hadn't 23 satisfied those obligations that I mentioned earlier. 24 There was one other element that's just gone out of 25 my mind for a moment, if you just give me a second. 14 1 It's because they'd also written to us saying: we're 2 not going to do any more work on-street without 3 a supplemental agreement. 4 Q. Which is what you referred to yesterday. 5 A. Yes. So -- yes. It's again slightly odd that on the 6 one hand they are saying: we are not going to do any 7 further work on-street unless you amend the agreement; 8 and then on the other side saying that they can't start 9 because we won't let them. 10 Q. Perhaps just for completeness, I could refer you to the 11 PowerPoint presentation for this meeting, which was 12 CEC00373764. 13 If we could look firstly at page 4, we can see 14 a heading, "Workstreams". Workstream A and Work 15 stream B. One is contractually assertive leading to 16 compliance or termination, and the other is the mature 17 divorce where BSC complete part of the project and tie 18 reprocure the remainder. 19 Had the various options resolved broadly into those 20 two by that time? 21 A. No, I think we were still effectively working on the 22 three or four options that I identified yesterday within 23 Project Pitchfork, because they were not mutually 24 exclusive. You were able to work on all of them at the 25 same time. 15 1 So there was also work ongoing on what became known 2 as Project Carlisle. I can't remember if that had 3 specifically started by this time, but I think it had. 4 This is May we were talking about. So I'm pretty 5 certain Project Carlisle had started by this time, and 6 what we called Project Notice, I think, had also started 7 by this time. So I think we were working on all four 8 strands simultaneously. 9 Q. If we look again through to page 17 of the 10 presentation -- 11 A. Sorry, could I just check, there isn't a next page, Work 12 stream C and D, is there? 13 Q. I don't think so, but we will check. Could we look at 14 page 5. 15 A. No, okay. That's fine. 16 Q. It is the programme. Could we look at page 17. We come 17 here to the various issues. Would this have been you 18 providing this report or Steve Bell? 19 A. That looks more like Steven Bell's wording. 20 Q. We note in the third bullet point the BSC position 21 remaining they failed to commence on-street works and 22 refusing to progress works whilst Clause 80 changes are 23 being agreed: 24 "Commencement of on-street works are also being 25 frustrated by the fact that although sites are 16 1 available, BSC have failed to satisfy their contractual 2 obligations to enable a permit to be issued." 3 The second point there is the one that you have just 4 been explaining to us this morning. 5 A. Yes. 6 Q. The first one is really the rather more fundamental 7 dispute that had been existing for some time, that 8 Clause 80 was being relied upon to bring works to 9 a halt? 10 A. Yes. And my fear here was that they would start the 11 on-street works, and then immediately stop using their 12 argument under Clause 80 exactly as they'd done 13 on Princes Street, and we would be back in exactly the 14 same position that the project was in at the start of 15 the Princes Street works, which is why I didn't 16 particularly want these on-street works to start until 17 we had a resolution to the broader issues. 18 Q. I understand. Could you look at page 31, please. This 19 is dealing with a different issue. It's background to 20 the May report, obviously not yet there. 21 But you note: 22 "Commitment to provide the Council with an update on 23 progress. 24 Continuing cost and programme uncertainty. 25 Commercial dispute involving substantial sums of 17 1 public money." 2 But then the point of particular interest: 3 "Tricky balance to strike between: full and fair 4 disclosure of position to Councillors and the public; 5 maintenance of commercial confidentiality." 6 Could you just elaborate on what was the balance you 7 considered had to be struck at the time and how you 8 tried to strike it? 9 A. I think that is one of the fundamental dilemmas that 10 I faced, and the team faced, on this project. 11 I can understand the desire and need for full and 12 fair disclosure, particularly when there's such a large 13 amount of money involved, but on the other hand it 14 wouldn't necessarily strengthen tie's negotiating 15 position for everything to be in the public domain. 16 One of the great frustrations was that discussions 17 within -- between tie and the City Council and 18 discussions with city councillors would quite often find 19 their way into the press, and yet we didn't have the 20 luxury of seeing what discussions were going on within 21 the Infraco Board. To make this a level playing field, 22 then perhaps they should have been required to disclose 23 the minutes of their meetings as well; which is clearly 24 a nonsense, but my point is it illustrates the dilemma 25 that we were in a very substantial commercial situation 18 1 and the need to maintain transparency was not 2 necessarily consistent with negotiating the best 3 financial outcome. 4 Q. In your view, is that a problem that's likely to arise 5 in all situations where major projects are undertaken by 6 a public body? 7 A. In one form or another, yes. This was not something 8 that I had come across in my career before, because I'd 9 already worked in the private sector. It's possible 10 that somebody who had more experience of exactly this 11 dilemma might have taken a different view. 12 To elaborate on that though, this is where I think, 13 having the councillors on the Board, it's partly -- this 14 is exactly the area they could have advised on, but it's 15 also exactly the dilemma they faced because in a lot of 16 cases they didn't want to be the last person to know. 17 Q. So who didn't want to be the last person to know? 18 A. The councillors did not want to be in a position where 19 they knew something that they then didn't further 20 disclose. 21 Q. That's the councillors on the Board would know something 22 but they wouldn't tell their fellow councillors? 23 A. Yes, because they felt that that would expose them. 24 Q. Did they raise that with you, that that was a problem 25 for them? 19 1 A. Yes, it was discussed. 2 Q. Were you under pressure to make disclosure, either from 3 the councillors who sat on the Board, or from any other 4 source? 5 A. I never felt that there was anybody uncomfortable with 6 the balance that we struck. Well, uncomfortable, there 7 was a degree of discomfort for everybody, but I don't 8 think anybody particularly expressed to me a view that 9 says: actually we've got this balance wrong. 10 Q. But you found it a difficult balance to strike because 11 it was a new consideration? 12 A. I did. But I also shared very fully with the 13 City Council officers, because again this must be 14 a situation that City Council officers come up against 15 all the time. So I think I have said in my initial 16 written statement: actually, clarity, in terms of 17 lessons going forwards, some very clear guidelines as to 18 what should and should not be disclosed and when would 19 be helpful for whoever runs a similar project in the 20 future. 21 Q. Can I take you back to the pack for the May meeting, 22 please. That was reference CEC00245907. Just one thing 23 I should have looked at when we were looking at the 24 minutes of the March meeting on page -- could we go to 25 page 6. 20 1 If we look at the lower part of that page, under the 2 heading "Commercial Matters" and progress since 10 March 3 Tram Project Board, we can see that there's a note that 4 you reminded the Board of the key issues, and then 5 they're set out there in bullet point fashion. 6 If we go over the page, perhaps without me reading 7 through the whole of it, we can see that there's notes 8 of a fairly detailed discussion of these various issues 9 that arise. And were debated by the Tram Project Board 10 at that time. 11 A. Yes. 12 Q. If we scroll down to the foot of that particular box, we 13 have got: 14 "RJ summarised the next steps in terms of 15 activities, governance and timescale. A full and 16 participative discussion followed, and it was agreed 17 that the current engagement within the available 18 contractual mechanisms should continue, in parallel with 19 the strategy presented by the Executive Team. A full 20 report back to the Board/CEC will be made at the end of 21 May 2010. This was endorsed by the Board and the 22 instruction was issued for RJ to proceed on this basis." 23 So is that affirmation of the proceeding to take the 24 contractually assertive approach, whilst exploring the 25 various other lines within the Pitchfork plan? 21 1 A. Yes, and the contractually assertive approach in effect 2 was the only option available to us in the absence of 3 doing something else, if that makes sense. 4 So that was the default position, whilst we explored 5 the other options being Project Notice, 6 Project Separation, and Project Carlisle. 7 Q. I want to look at a number of the adjudication decisions 8 which comes up at this time, please. Could we look at 9 production TIE00231893. 10 The quality of this scan is not excellent, but 11 I think we can see a date there of 24 May 2010, and this 12 is a decision of Gordon Coutts QC. 13 The subject matter of it in the heading of the 14 letter is Adjudication Section 7A - Track Drainage. Do 15 you see all that? 16 A. I do. 17 Q. Do you recall the adjudication that took place in 18 respect of track drainage? 19 A. This is not one of the ones that's foremost in my mind, 20 although possibly I do. I think this may have related 21 to some drainage that was shown on one drawing but not 22 on another, and the debate was whether something could 23 be amended if it didn't previously exist. 24 Q. Indeed, precisely. 25 A. Yes, I do remember. 22 1 Q. If we look then at what Mr Coutts has to say about the 2 matters, if we just start briefly on page 6 of his 3 reasoning. Under the heading, "Notified Capital 4 Departures 4 and 5", we can see that in relation to 5 these ones, he says: 6 "The parties agreed that there had been notified 7 departures." 8 The only question was valuation. If we go over the 9 page to alleged Notified Departure 7. 10 If we look at the upper half of the page, under the 11 heading of the words that I have just mentioned, if we 12 look in the first paragraph, halfway through -- in fact 13 it would be easier to read the whole of that paragraph 14 for context. It says: 15 "This part of the dispute was concerned with a part 16 of the length of track in Section 7. Parties agreed 17 that Section 7 drainage was a reference to drainage from 18 chainage 710000 to 712579. That is a length of 19 2,579 metres. Alleged Notified Departure 7 related to 20 the drainage between chainage 710900 to 712579, a length 21 of 1,679 metres, which can be contrasted with the 22 900 metres agreed to be covered by BDDI drawings. This 23 disputed length is thus 1.87 times larger than the 24 undisputed length." 25 That's the point you were making about the 23 1 difference in drawings showing the different lengths of 2 drainage? 3 A. Mm-hm. 4 Q. "That fact had to be one of the surrounding 5 circumstances when considering problems in construing 6 the contract in relation to this dispute; also whether 7 the IFC drawings can give rise to a Notified Departure 8 for this portion of the track drainage in the absence of 9 a specific BDDI drawing. It is a substantial length to 10 be encompassed in a natural extension of existing 11 designs, but there may be no alternative between that 12 and no design at all." 13 So we see here the point that was arising was that 14 there was no BDDI drawing against which the new drawing 15 could be compared; is that your understanding of the 16 position? 17 A. Yes. 18 Q. If we can look at the arguments for tie that are set out 19 in the following two paragraphs, it says: 20 "The Referring Parties' approach was in essence to 21 pose the question, from what are the IFC drawings 22 a Notified Departure? They founded upon the absence of 23 any BDDI drawings actually depicting this part of the 24 section. They contended that since there were no such 25 drawings there was nothing to be departed from. The 24 1 matters described in the Infraco notification of tie 2 change do not show in any BDDI drawing and accordingly 3 there could be no Notified Departure. 4 They then posed the question whether the matter 5 which was shown on the only available BDDI drawings had 6 been amended. They asserted that if the work had not 7 been specified in the BDDI drawings then possession of 8 design information for other areas of Section 7 could 9 not constitute or form the basis of an amendment of the 10 design. A thing cannot be amended it was said 'if it is 11 not firstly showing' and, further, that an amendment 12 does not and cannot include additions to or additional 13 detail within a drawing or any development of it." 14 Now, that argument seems to be foreshadowed slightly 15 in the opinion of Richard Keen QC that we looked at 16 yesterday. Did you understand that? 17 A. Correct me if I am wrong, but I think his argument was 18 something can't be different if it didn't first exist. 19 Q. Yes. 20 A. Yes. 21 Q. Is this a development of that argument being presented 22 in an adjudication? 23 A. Possibly. I'm not sure of the chronology here, which 24 came first, this adjudication -- 25 Q. Mr Keen's opinion was first? 25 1 A. In which case -- I mean, I wasn't personally involved in 2 formulating these arguments for the adjudicators. But 3 it would seem to make sense that if we've had an opinion 4 from Richard Keen on the one hand that says something 5 can't be amended if it didn't first exist and then we 6 see that same argument being repeated in this 7 adjudication subsequently, it would seem to be logical 8 that that's what is in fact happening. 9 Q. I appreciate you weren't -- you say you weren't involved 10 in formulating arguments for the adjudications. Were 11 you involved in deciding what arguments should be 12 presented to adjudication? 13 A. I was involved in the discussions, but it wasn't at my 14 direction. I would rely on the legal and the 15 engineering experts within the team to decide which 16 items were the most relevant ones, and that would be 17 a combination of value, principle and chance of success. 18 Q. This is part of -- I think it's fair to say -- the BDDI 19 to IFC issue? 20 A. It's a variation on that theme, yes. 21 Q. What I want to -- can you tell me who within tie or the 22 Tram Project Board would decide which adjudications to 23 run and what arguments should be run in those 24 adjudications? 25 A. I think if we go back to the start of yesterday, we 26 1 talked about the Financial, Commercial and Legal 2 sub-committee. 3 Q. Mm-hm. 4 A. And my recollection is that was effectively 5 a sub-committee of the Tram Project Board consisting 6 primarily of tie management and advisers, and I think it 7 was that group that decided which adjudications would go 8 forward, which I chaired, but the details of the 9 arguments were really left to the legal and technical 10 experts. And how to present them. 11 Q. We can then see that the -- if we scroll down the 12 screen, please, if we can skip the next two paragraphs, 13 we come to the position of the responding party, the 14 consortium, at the final paragraph on the page, where 15 Mr Coutts notes: 16 "The responding party argued in the first place and 17 in general that a comparison can be made between the 18 drawings at BDDI stage (taking account of normal design 19 development and completion) and the IFC drawings in 20 respect of the features of the whole of Section 7A. 21 When that is done Notified Departures through the 22 whole of Section 7A are identified, as asserted in the 23 notification of tie change number 315." 24 Then if we can go to the foot of this page, and see 25 the conclusions of Mr Coutts, he says: 27 1 "Having considered these arguments as set out in 2 written form and amplified in oral submissions, it 3 appeared to me that a critical matter was how 4 'amendment' had to be construed. While the context may 5 be of some relevance, it is clear to me, that the word 6 is apt as a matter of interpretation to include 7 additions to a document or to an inferred design 8 document. There is no reason to attempt to find 9 a restricted meaning although that might appeal to 10 a legalistic approach as opposed to a practical one. 11 The dictionary definition of 'amendment' gives the 12 definition 'a change or addition to a document' and the 13 word 'amend' is widely defined as 'better', 'improve', 14 'surpass', 'rectify' and does not exclude additions. 15 A good example of the use of the word in common language 16 may be found I consider in the Constitution of the 17 United States. For example, it is difficult to argue 18 that, say, the Fifth Amendment is not an addition 19 providing something which was not previously showing." 20 You can see there that he rejected the argument. 21 Having had that -- I'll start again. 22 When you and the Tram Project Board were informed 23 that that argument had been rejected, did that have an 24 impact on the future strategy to be followed in relation 25 to disputes on the BDDI-IFC issue? 28 1 A. I don't specifically recall, but I think by this point 2 in the process, having started on Project Pitchfork, 3 this -- the DRP process only applied to one prong of 4 that, which was the continuing administration of the 5 contract as best we could. 6 I think by this stage, it's fair to say that we were 7 losing confidence in our ability to achieve the outcomes 8 we required or desired using the existing contract. 9 So this one of -- this adjudication on its own 10 didn't cause a change in direction. But I guess it 11 re-affirmed the fact that we needed to be looking for 12 alternatives. 13 Q. If we could just jump to look at a different 14 adjudication, the one in respect of Tower bridge. 15 That's CEC00373726. 16 A. Sorry, can I just -- 17 Q. Of course. 18 A. -- close off on this one. 19 To a certain extent the extent to which it would 20 have affected our opinion and strategy would partly 21 depend on the analysis post adjudication that we got 22 from the legal teams. 23 Q. I understand. 24 This is the decision, again it's back to Mr Hunter. 25 This is dated 18 May 2010. Just a little bit before 29 1 Mr Coutts' decision. 2 It's -- we see the last line of the title to the 3 letter. It's the adjudication in respect of 4 Tower Bridge; do you see that? 5 A. Yes. 6 Q. I just want to ask you, if we look at page 8 of this 7 document, and paragraph 6.1, it says: 8 "It is accepted by the Referring Party ..." 9 I should say that tie were the Referring Party: 10 "... that a Notified Departure has occurred on the 11 basis of Pricing Assumption 3.4.19 of Schedule Part 4 to 12 the Infraco Contract in respect of the structure known 13 as Tower Place Bridge." 14 We saw in earlier pages for the Tram Project Board 15 report this was being presented as a BDDI to IFC issue 16 to the Board. Was the acceptance that this was 17 a Notified Departure in any way related to the various 18 decisions and what you described as the loss of 19 confidence? 20 A. I don't recall. It may have been. It also may have 21 been the particular circumstances here were -- and 22 I don't recall, but if the change in the design -- 23 I don't know what -- I can't recall what 3.4.19 was, I'm 24 afraid. 25 tie's position was never that there is no such thing 30 1 as a Notified Departure. In some cases Notified 2 Departures did occur. So without looking at the Pricing 3 Assumption 3.4.19 and understanding the basis of the 4 argument, I can't say. 5 It's also possible that tie's initial interpretation 6 of the contract, particularly the Pricing Assumption 7 around normal design development, was now -- there was 8 less confidence in that than there was at the start. 9 Q. Can we look at the papers for the June Tram Project 10 Board, CEC00261936. 11 We can see from the title sheet these are the papers 12 for the meeting on 2 June 2010. 13 If you could look at page 30 and enlarge the lower 14 half, under the heading "Dispute Resolution", it notes 15 the Baird Drive dispute was resolved during the period 16 without having to resort to formal adjudication. We can 17 see in the table below that that was a BDDI to IFC 18 dispute issue as well. Do you see that? 19 A. Mm-hm. 20 Q. I appreciate it's a long time, but can you recall the 21 basis on which that was resolved? 22 A. No, I don't actually recall what the dispute was either. 23 Q. The text above continues: 24 "The Adjudicator's decision was provided on the 25 Tower Bridge DRP. Both of these have been useful in 31 1 reducing costs. In period 3 a decision is due on 2 Section 7 drainage and the first hearing is being held 3 on the MUDFA Revision 8 DRP." 4 We can see looking at the table for the first time, 5 it's now noted that for Gogarburn, Carrick Knowe and 6 Russell Road, those decisions are regarded as complete. 7 So there's no longer any suggestion that it's under 8 further review. Do you see that? 9 A. Yes. 10 Q. Over the page, on 31, we can see the upper part of the 11 page. A strategic review is now noted to be underway 12 and reported to the Tram Project Board each period. 13 So a decision had been taken that that was now a 14 constant process, of keeping all matters under review. 15 A. Yes. 16 Q. Was the intention of that to adjust or refine where 17 necessary the strategy as things unfolded month by 18 month? 19 A. The -- in practice, we were running all four strategies 20 in parallel because they were not mutually exclusive. 21 Q. But in terms of developing the review each month, what 22 was the purpose of having a report of that each month? 23 Was that just a report of where you'd got to? 24 A. I imagine, yes, it was just a progress report. 25 Q. Can we look at the July papers, please, which are 32 1 CEC00223543. 2 I called them July papers. They are the second of 3 the two meetings in June, on the last day of June, 4 30 June. Do you see that? 5 A. Yes. 6 Q. Can we look at page 25. You can see we are looking at 7 the section now with the Transport Scotland report, and 8 then turn to page 27. The lower half of the page. We 9 can see that in the second paragraph under the heading 10 "Dispute Resolution", it notes: 11 "In the period we received one adjudicator decision, 12 had hearings on MUDFA Revision 8 adjudication, one item 13 was referred to adjudication and a new item referred to 14 DRP by Infraco." 15 We can see the first bullet point notes that the 16 Depot Access Bridge dispute had been referred to 17 adjudication -- and this would be heard by the financial 18 panel. 19 I think that was described as a BDDI to IFC issue, 20 but the fact it's being heard by the financial panel, 21 does that indicate it is simply a matter of valuing the 22 change, rather than contesting the principle? 23 A. Possibly. 24 Q. If we look at the second one, we note that the new item 25 has gone into dispute, the Murrayfield underpass. 33 1 I think that was the one that was ultimately determined 2 by Lord Dervaird; is that correct? 3 A. I don't recall. I recall that the Lord Dervaird 4 decision related to progress. So if that was the 5 Murrayfield underpass, then that would be it. 6 Q. The third bullet point notes: 7 "Adjudicator decision on Section 7 drainage was 8 received on 24 May 2010 and supports Infraco as to the 9 existence of change in one section." 10 That's the decision of Mr Coutts we have just looked 11 at. There's no record here that it was a rejection of 12 the argument that if it was not on the BDDI, it can't be 13 a Notified Departure. Do you know was that explained to 14 the Tram Project Board? 15 A. I don't recall. I mean, what it does say is it supports 16 the Infraco. So ... which is what it did, is it not? 17 Q. We've made reference to the Murrayfield decision there. 18 If we just look at the outcome of that, please, it's 19 document reference BFB00053462. 20 We see the heading of this is simply "Adjudication 21 in dispute between Bilfinger Berger Civil UK Limited, 22 Siemens plc and CAF and tie Ltd". If we look at the 23 final page, page 13, we see that Lord Dervaird was the 24 adjudicator and this was dated 7 August 2010? 25 A. Yes. 34 1 Q. Just to identify clearly the disputes so we're aware 2 what we're talking about, if we look at page 3. The 3 upper half of the page, we see paragraph 8, where Lord 4 Dervaird noted that on 19 March 2010, tie wrote to 5 Infraco in the following terms: Edinburgh Tram Network- 6 Infraco Contract Clause 80.13 Instruction. 7 "You are instructed to commence, carry on and 8 complete the following works with due expedition. In 9 the event that any item of the said works is, becomes or 10 is alleged to be the subject of a tie Notice of Change, 11 an Infraco Notice of tie Change, a tie Change Order or 12 a Mandatory tie Change Order, at any time, this 13 instruction will be deemed to have been given and shall 14 operate for such works pursuant to Clause 80.13. 15 "We remind you that pursuant to Clause 108, this 16 Agreement constitutes an entire Agreement and in 17 particular refer you to the terms of Clause 34.1 18 regarding your compliance with instructions from tie's 19 Representative. The works referred to include the 20 subject matter of INTC number 109." 21 Then Lord Dervaird notes: 22 "The issue for this adjudication is whether or not 23 Infraco is obliged to comply with tie's instruction 24 contained in the above letter dated 19 March 2010 to 25 carry out the works identified in INTC number 109." 35 1 Was this intended to get a ruling upon this 2 fundamental issue of whether or not tie could require 3 Infraco to carry out works using Clause 80.13? 4 A. Yes. 5 Q. It was intended to unblock the logjam that was arising 6 whereby Infraco were saying they didn't have to carry 7 out works, or in fact they were not even entitled to 8 carry out works, until the estimates for those works 9 were agreed? 10 A. Yes, that was the principle of it. 11 Q. If we turn to the decision in relation to this matter, 12 and go to page 10, I'm not going to read through all the 13 analysis of the submissions and the clauses, but do we 14 see in paragraph 21, Lord Dervaird, the results of his 15 reasoning: 16 "Analysis of Clause 80.13 leads to the following 17 conclusions: 18 It is made clear that any provisions in this Clause 19 are to be taken as subject to the provisions of 20 Clause 80.15. This applies both to the initial 21 provisions and (expressly) to the final sentence. 22 The Clause expressly empowers tie to act after the 23 contents of the estimate have been agreed. 24 The final sentence 'for the avoidance of doubt' 25 provides that Infraco shall not commence work in respect 36 1 of a tie Change until instructed through receipt of 2 a tie Change Order 'unless otherwise directed by tie'. 3 That last phrase 'otherwise directed' clearly 4 indicates that tie may issue some form of instruction to 5 carry out work which is to be commenced notwithstanding 6 the non-receipt by Infraco of a tie Change Order. 7 It does not follow that tie is empowered to issue 8 instructions under this Clause except where the contents 9 of an estimate have been agreed. Clause 80.13 is to be 10 contrasted with Clause 80.15 which does in appropriate 11 circumstances empower tie to instruct the carrying out 12 of work prior to an Estimate, which has been referred to 13 the Dispute Resolution Procedure for determination, 14 having been determined or agreed." 15 Now, essentially that was Lord Dervaird deciding 16 against tie's argument, wasn't it? 17 A. Yes. 18 Q. He goes out to have some further reasoning in the 19 following paragraphs, beginning: 20 "It may be argued that this is an unduly restrictive 21 view." 22 But nonetheless it is the view that he came to, that 23 tie couldn't instruct works under this clause. Is that 24 your understanding of the decision? 25 A. Yes. 37 1 Q. I presume that was at the very least a disappointment to 2 tie, to get this decision, the Tram Project Board? 3 A. It was, but my recollection of the analysis of that 4 decision by our legal and technical team was that this 5 actually didn't properly address the issue unless 6 otherwise directed by tie. And that it didn't address 7 the issue under Clause 34.1. So although the 8 adjudicator has made his decision and it's against tie, 9 the advice was that that's not the end of this matter. 10 Q. Yes, I think that was advice that he hadn't addressed 11 relevant provisions within the Clause 80.13, that one 12 clause within the agreement hadn't been considered at 13 all, Clause 34. And that I think you had advice from 14 Mr Keen who put it that this was not a knockout blow? 15 A. That's right. 16 Q. Nonetheless, was any further step taken to obtain 17 a ruling on the Clause 80 issue? 18 A. No, I don't believe it was. 19 Q. Why was that, after you'd had advice which described it 20 as not a knockout blow? 21 A. I think at this stage, it was effectively overtaken by 22 events. I mentioned that we were working in parallel on 23 these other strategies. 24 Was this the last DRP, this one? I can't recall. 25 It was certainly one of the last. 38 1 Q. It was one of the last, yes. 2 A. I think by this point in the process, we had felt that 3 our confidence in the strength of the contract to 4 achieve the results that we were seeking was 5 sufficiently weakened that there was not much point in 6 going further. 7 So even if we'd had a strong legal argument that 8 Lord Dervaird was wrong, which I think is the advice 9 that we had from McGrigors and from Richard Keen, that 10 even if we took that forward and got it overturned or 11 got a different adjudicator to come to a different view, 12 it would be somewhat of a hollow victory, given that 13 there were so many other weaknesses in this contract 14 that it was -- following this commercially assertive 15 strategy, as we called it, was not going to produce the 16 results that we were looking for. 17 So at this point, this was simply a holding strategy 18 until we could develop one of the other three strategies 19 to a point where we could implement it. 20 Q. I understand. I want to come again to return to the 21 Pitchfork report that was produced at this time. 22 First of all, I want to ask you about something else 23 in your statement. If we could have that back up, 24 please. And go to page 26 of this, please. Sorry, 25 page 24. 39 1 If we can look at paragraph 148. It's probably 2 easiest if I read from the start: 3 "There were some important things said at the 6 July 4 meeting which became recurring themes during my time on 5 the project." 6 If I pause there, we looked at an email exchange 7 which had a narrative of what had happened at that 8 meeting? 9 A. Yes. 10 Q. "I cannot specifically recall everything that was said 11 at each meeting. However I do recall that Dr Keysberg 12 said to me that "if you want to get to America you don't 13 buy a bicycle". He also said "This contract will never 14 get a tram built" and "This is a great contract for us. 15 It allows us to hold you to ransom". He also said "You 16 are behaving dishonourably". I asked what he meant by 17 that, and he said it was about "The gentleman's agreement 18 they had between themselves and Willie Gallagher"." 19 I want to ask you about this gentleman's agreement. 20 Did you ever get to the bottom of what this gentleman's 21 agreement was alleged to have said? 22 A. I never got to the bottom of the gentleman's agreement. 23 I know what it is alleged to have said. 24 Q. What was it alleged to have said? 25 A. It was alleged by, I believe, Richard Walker, and 40 1 I think this is in my statement somewhere, or else it's 2 in some of the documents that I have seen, that tie knew 3 that this was never a price for the whole contract. In 4 fact, the phrase he used was: this was only ever a price 5 for a three-wheeled car, and that the agreement -- the 6 exclusions from the price, Pricing Assumptions and the 7 other various exclusions, were there simply to get the 8 headline price down to be added back in after the 9 contract was signed. 10 So that's the -- there's definitely more detail on 11 that somewhere in documents that I've seen. But that 12 was the gist of it. 13 Q. And that was an agreement that was said to have been 14 between Mr Walker and Mr Gallagher? 15 A. That was the allegation -- whether it was with Mr Walker 16 and Mr Gallagher, I don't know, but there's certainly an 17 accusation -- the allegation from Dr Keysberg was that 18 the party -- from tie's side was Willie Gallagher. 19 Q. I think when you investigated that for completeness, it 20 was said that it was strenuously denied? 21 A. It was. I only had one conversation with 22 Willie Gallagher in my time at tie, and it was about 23 this, and he denied it. I also discussed it with other 24 members of the team who were around at the time, who 25 were not alleged to have been present at the meeting, 41 1 but they all thought it was nonsense. 2 CHAIR OF THE INQUIRY: Was this part of the Wiesbaden 3 meeting or was it some other time? 4 A. I think it relates to the Wiesbaden Agreement. I can't 5 be certain. I don't know if there are other occasions 6 when meetings took place, but I think it relates to the 7 Wiesbaden Agreement. 8 MR LAKE: Referring to it as an agreement, it might be 9 understood that the parties -- accepting it's denied, 10 but just looking at the concept of an agreement for the 11 moment, it might be understood that each party was 12 giving something, they were exchanging something. 13 What you're describing, would it be fair, it might 14 also be described as simply a common understanding that 15 the parties were going to conclude a contract on one 16 price in the knowledge it was going to go up? 17 A. You are asking me to speculate about what may or may not 18 have been agreed between two other parties, one of whom 19 denies such a conversation took place. 20 So -- 21 Q. It's not so much about the contents of the agreement. 22 It's just that what you're describing as being the 23 content of the agreement -- 24 A. Well, what I'm relating was described to me as the 25 content of the agreement. I have no opinion as to what 42 1 the content of the agreement was or wasn't. 2 Q. I understand that, but just looking at what you are 3 telling us was relayed to you about the agreement seems 4 to be more of an understanding than necessarily an 5 agreement. 6 A. I don't know if I know the difference between an 7 understanding and an agreement, I'm afraid. 8 Q. I'll not press that further. 9 I would like to go back to the question of 10 a Pitchfork report. Could we look at a document, 11 CEC00088220. 12 You see here a document with the title, "PROJECT 13 PITCHFORK - PHASE 2 Incorporating PROJECT CARLISLE AND 14 PROJECT NOTICE", and a table at the foot of the page 15 giving the various different versions of it, and this is 16 looking at the tenth draft, said to be 1 October 2010. 17 Do you recognise this document? 18 A. Yes. 19 Q. I think we can say for completeness that there was an 20 earlier version of this document dating from March which 21 set out the state of the Project Pitchfork plans then. 22 Do you recall that also? 23 A. Yes, in general terms I do. I don't specifically recall 24 it, but I certainly recall seeing a document. Whether 25 it was the first draft or the second draft or both, 43 1 I don't know. 2 Q. Perhaps for completeness I'll just show you that very 3 briefly. If you could look at CEC00142766. And see it 4 hasn't got the phase 2, and it doesn't say it's 5 incorporating Carlisle and Notice, but here we have 6 a report titled "Project Pitchfork", and if we enlarge 7 the table to make it readable, we can see that this one 8 is described as a final review dated 17 March 2010. 9 Is this something you think you would have seen at 10 the time as part of Project Pitchfork? 11 A. Yes. 12 Q. Was this a document then that was essentially updated 13 throughout the year as part of the strategic review that 14 we saw? 15 A. I don't know how often this document was updated. So 16 I don't recall whether or not that was updated regularly 17 or at all. I don't recall, I'm afraid. 18 Q. Was this a document that was used simply internally 19 within tie and Tram Project Board or was it intended for 20 external consumption also? 21 A. I think it was primarily intended as an internal control 22 document. It may have been shared with City Council 23 officers. I have a vague recollection that I saw in the 24 papers that there were comments back from the 25 City Council, but whether it was relating to this 44 1 document or not, I'm not sure. So I don't know, I'm 2 afraid. 3 Q. We can move on from that then. 4 In relation to the Project Carlisle that was taking 5 place, that was one that was seeking to renegotiate or 6 vary the contract, with a view to completing only at -- 7 the line over a shorter length. 8 A. Yes. That's right, and actually there's possibly 9 a correction I need to make from yesterday. 10 You asked me yesterday whether or not Tony Rush led 11 any of the workstreams, and I said he didn't, he 12 advised on them. But actually he did lead the Project 13 Carlisle workstream and he had a reasonably free hand 14 in leading that. 15 That was partly because we felt the best chance of 16 success for that project was to try and take out some of 17 the existing personalities. So Tony dealt directly with 18 a gentleman called Ed Kitzman. So this was taken -- so 19 Steven Bell from tie's side and Martin Foerder from 20 Bilfinger Berger had little input into Project Carlisle, 21 or at least that's my understanding. Certainly it was 22 true for Steven. 23 By leaving that to Tony to lead, we felt it had the 24 greatest chance of success. So he did lead one of the 25 workstreams. 45 1 Q. Thank you for that. 2 We know that the Project Carlisle didn't come to 3 fruition. At least not before the Mar Hall mediation. 4 A. Correct. 5 Q. What in your view were the sticking points? Why could 6 that not be brought into fruition? 7 A. My recollection is that there were two cycles of offers 8 and counter-offers on Project Carlisle. So there was an 9 offer, a counter-offer, and a second offer, and 10 a counter-offer. 11 There were two principal issues. The headline 12 number was that the price I felt -- well, not just me, 13 the tie team felt was unjustifiable. And that was 14 reported, our rationale for that was reported back to 15 the Board and the City Council. 16 But actually, although it was less of a headline 17 issue, the bigger concern was that hidden within the 18 clauses of Project Carlisle were effectively a bunch of 19 Pricing Assumptions rewritten. So it still wasn't 20 a project that was going to -- it wasn't a deal that was 21 going to give cost or programme certainty. 22 It was written differently, but when you read 23 between the lines, it still said: and by the way, we've 24 only priced what's on the drawings and the design is not 25 finished yet. 46 1 Q. So to do that would have been to repeat all the same 2 mistakes? 3 A. Yes, exactly, we would have ended up with exactly the 4 same issues but starting from a higher baseline. 5 Q. If you couldn't get agreement on Carlisle, there was 6 then some focus on the terminating the contract by means 7 of a Remediable Termination Notice and underperformance 8 warning notices; do you recall that? 9 A. Yes. 10 Q. What was your involvement in the process of serving 11 those notices and moving towards termination? 12 A. I was in agreement with the overall strategy, but those 13 notices were drafted through a combination of Steven, 14 Tony Rush, and, I believe, DLA, but it might have been 15 McGrigors, I'm not sure. 16 Q. So when we're considering the advice that was obtained 17 in relation to those Remediable Termination Notices, was 18 that dealt with people other than yourself? 19 A. Yes. I'm not saying I had no involvement, but I wasn't 20 involved in taking that advice, drafting those -- it was 21 done with my approval, but it wasn't me that did it. 22 Q. I won't go into advice about the contents of the notices 23 then, but I want to say if it was suggested that your 24 approach to termination could be described as you were 25 hurtling towards it -- 47 1 A. I'm aware of that accusation. 2 Q. What is your response to it? 3 A. It was one of the strategies that we were actively 4 pursuing, but it was a strategy being pursued in 5 parallel with the other strategies, and I've looked at 6 written correspondence from the time, in fact from the 7 very same day that I believe that accusation was made, 8 and the written correspondence doesn't support that. 9 Q. Doesn't support it in what sense? 10 A. Well, I don't get any -- first of all, we weren't 11 hurtling towards. We were actively pursuing it as one 12 of the options. 13 The phrase "hurtling" suggests something that's out 14 of control, which was not the case. It suggests 15 somehow, you know, a rushing without thinking, which was 16 not the case. And as I say, the documentation at the 17 time doesn't support that. 18 Q. I want to ask you, though, about some advice that was 19 received on the termination process. Could you look at 20 document CEC00101459. If we look at the upper half of 21 the page, please, you can see it's headed, "Summary of 22 discussions with Richard Keen QC on 4 November 2010 in 23 relation to Project Resolution". 24 There's a list of people in attendance and you were 25 not in attendance at this consultation. You will see 48 1 that? 2 A. Yes. 3 Q. Were the results of this consultation relayed to you, do 4 you recall? 5 A. What were the results of it? 6 Q. Perhaps if we could look in particular at page 3, and 7 enlarge section 5. Under the heading, "Establishing 8 Infraco Default", 5.1 says: 9 "There was some discussion in relation to the issues 10 which require to be investigated in order to establish 11 the strength of tie's position in relation to the 12 various Infraco Defaults that have formed the subject 13 matter of the RTNs." 14 A. Was this after the RTNs had been issued? 15 Q. Yes. So the RTNs were issued earlier in the year. This 16 was November, and there's discussion there at the 17 consultation as to what would have to be investigated to 18 establish the strength of the position in relation to 19 those defaults? 20 A. I am aware of this because my recollection was that -- 21 of the Remediable Termination Notices that had been 22 issued, I think two were identified as having the 23 greatest chance of success, they being failure to manage 24 the design and failure to progress the works, and that 25 the advice from -- that came out around this time, 49 1 perhaps from Richard Keen, perhaps from McGrigors or 2 both, was that we needed to build a more robust factual 3 matrix to support the alleged breaches. 4 Q. You said the notices had already been served. The 5 Carlisle option had stripped away and the contractually 6 assertive approach wasn't yielding fruit. What was your 7 response to being told in November by the people who 8 were carrying this out that you now had to investigate 9 the strengths of the case on termination? 10 A. I think I said in my initial statement to the Inquiry 11 that this was a very frustrating period. 12 Q. Was your understanding that this work to investigate the 13 merits had already been carried out? 14 A. Not specifically in so much as -- nobody had said to 15 me: we've already done this work. I think I was 16 disappointed and frustrated to find that having issued 17 the RTNs, we were now in a position where questions were 18 being asked as to whether we actually had sufficient 19 supporting -- supportive information, sufficient 20 supporting information to back up those RTNs. 21 So I guess the frustration is perhaps that it had 22 been premature to have issued these RTNs prior to having 23 established a robust factual matrix. 24 Q. Was there one person within tie who had the 25 responsibility for taking forward the RTN in this work 50 1 stream? 2 A. That would primarily have been Tony actually. I mean, 3 I think they were issued by Steven and Steven signed 4 them, and I don't imagine he would deny having a role 5 there. But the -- heavy lifting, if you like, was done 6 by Tony and DLA or McGrigors. 7 Q. I want to ask you then about two further bits of legal 8 advice in relation to termination and the notices. 9 Could we look, please, at document CEC00013537. You 10 will see the first thing in here, at the end of the 11 email chain, is an email from you dated 30 November. 12 But I would like to start taking it in chronological 13 order. So if you go down to the foot of the page, you 14 will see there's an email that has been sent from or on 15 behalf of Alastair Maclean to you on 26 November 2010. 16 Do you see that? 17 A. Mm-hm. 18 Q. We will see the content if we go over the page. If we 19 enlarge the upper half. He says: 20 "As requested, I set out below the advice which CEC 21 received in London on Tuesday from Nicholas Dennys QC 22 and which we discussed on Wednesday afternoon. 23 We also discussed what Nicholas Dennys QC felt was 24 the most appropriate way forward in order to achieve an 25 operational tram from Edinburgh Airport to at least 51 1 St Andrew Square for the best price possible and as soon 2 as possible. 3 You asked me to clarify what I thought CEC needed 4 from tie in this regard and I have indicated that in 5 this email, although I am aware that you, 6 Bob McCafferty, Andy Conway and Nick Smith have since 7 discussed this." 8 Were you aware that the City Council were seeking 9 advice from Nicholas Dennys QC in London? 10 A. No. 11 Q. So you were first made aware of it once they had the 12 results of that? 13 A. Yes. 14 Q. If we go, then we can see a sub-heading, "CEC's QC's 15 comments", and if we go down the page to termination, 16 heading 1.2, we can see that after the indented 17 paragraphs, the text says: 18 "To put this more clearly, termination on the basis 19 of the present RTNs would not be advisable. However on 20 any view, given progress to date by the consortium on 21 the delivery of the works, it would appear probable that 22 if properly investigated and formulated, valid grounds 23 of breach could be articulated effectively in due 24 course." 25 Then if we go over the page, this is under the 52 1 heading "Mediation", we see paragraph 1.3.3: 2 "Mediation at this stage is legally premature and 3 may lead parties to a further entrenched position." 4 That of course being part of the advice being given 5 by Nicholas Dennys QC. 6 I think you -- firstly, that's what we can see you 7 were told about what had come out of the meeting in 8 London. 9 If we go to page 1 of this, we can see your comments 10 made in response. You thank Alastair Maclean for his 11 note and notice that you'd had a productive discussion 12 with Tom on Monday morning. 13 "Much of what is covered in your note was also 14 covered in my email of the 24th." 15 We will come it that. You say: 16 "Firstly let me emphasise that I agree on most of 17 the points raised in your email, they are consistent 18 with the points raised in my email of 24th." 19 But you do not share CEC/Nicholas Dennys' view on 20 credibility, on the state of mind of Infraco or on the 21 timing of mediation. 22 Now, the comment that we saw on mediation was to the 23 effect that it was legally premature and might lead the 24 parties to a further entrenched position. What was your 25 view on the timing of mediation? 53 1 A. My understanding of Alastair's view on the timing of the 2 mediation was that there were further contractual levers 3 under the existing contract that could be used to, for 4 want of a better word, weaken Infraco's belief in their 5 contract and therefore weaken their negotiating position 6 or reduce its strength prior to a mediation. 7 My view on the timing of the mediation -- I can't 8 remember if at this point there had been a public call 9 for mediation. 10 Q. By 30 November, yes, the Council resolution had taken 11 place. 12 A. Right, okay. And what was happening now was that the 13 concept of mediation was gathering a momentum of its 14 own, and to delay that further would have actually -- 15 wouldn't have created any advantage, and would have 16 added more pressure upon tie and the City Council from 17 the political calls for mediation, and the more pressure 18 they were under -- CEC and tie were under on the way in 19 to mediation, the less likely they were to get as good 20 a result. 21 Q. If you didn't think it was premature, what was your view 22 on the timescale for mediation, that it should be as 23 soon as possible? 24 A. As soon as practicable, perhaps, yes. I don't recall if 25 there was -- at this point there was a timing set out 54 1 for mediation or whether it was just general phrases 2 like "as soon as possible". 3 There was an increasing frustration from everybody 4 about the lack of progress, both physical progress and 5 contractual progress, the lack of positive results that 6 had been -- the lack of positive progress produced by 7 the other strategies that we were following, and 8 therefore there was a sense of, well, let's try 9 mediation, and if we're going to try it, let's do it as 10 quickly as possible. 11 Q. We can see from this that, as well as considering 12 mediation, the possibility of termination is also being 13 considered. 14 What was your view on the advice that had been given 15 from Nicholas Dennys that it would not be advisable to 16 terminate on the basis of the RTNs then outstanding? 17 A. It's fair to say that I was a little irritated at the 18 time, that I had been completely open with the 19 City Council, particularly with the legal department, 20 and shared all the legal advice with them. They had 21 gone off and sought their own legal advice, which they 22 hadn't discussed with me and hadn't shared with me. So 23 I was somewhat irritated by what I considered to be 24 a breach of -- a breakdown of trust. 25 I never saw Nicholas Dennys' advice, so all I was 55 1 relying on was Alastair's interpretation of 2 Nicholas Dennys' advice. 3 Q. Just looking at that interpretation, which was to the 4 extent that it would not be advisable to terminate on 5 the basis of the work done by tie to date, what was your 6 reaction to that? 7 A. That was consistent with the opinion from Richard Keen. 8 Q. Just for completeness, looking at the -- it comes 9 slightly later, but the advice given by McGrigors and 10 Richard Keen, could we look at TIE00080959. We can see 11 this is a report for tie by McGrigors. It's dated 12 14 December 2010. Do you see all that? 13 A. Mm-hm. 14 Q. Could we go to page 4 of this document, please. If we 15 just go to the foot of the page, paragraph 1.5, you can 16 see the advice is: 17 "To the extent that Remediable Termination Notices 18 have already been issued, it would be unsafe to rely on 19 them: (a) without the benefit of the outcomes of the 20 forensic exercise referred to above; and (b) because 21 there is a material risk associated with the formulation 22 of the Remediable Termination Notices (based on the 23 sample that has been considered by McGrigors and 24 Richard Keen QC)." 25 So there seemed to be a problem then both with the 56 1 substantive content which needed a forensic exercise and 2 the form of the notices themselves. 3 A. Yes. 4 Q. Were you surprised to get that result in that this was 5 something that people had been working on for months? 6 A. I think -- I don't know whether the -- this document was 7 the first time I was made aware of this or whether I'd 8 already been briefed on this, but as I said earlier, it 9 was very frustrating to find that, having gone down this 10 route, we were now being told that we didn't have the 11 factual background, and the -- the formulation of them 12 was not reliable as well. So that was very frustrating. 13 Q. We've already mentioned there that the decision of the 14 Council to seek mediation had been made in mid-November, 15 and you've explained you thought that that would be 16 better sooner rather than later. 17 Were you aware at the same time also there was a new 18 Chief Executive coming into the Council, Sue Bruce? 19 A. Yes. 20 Q. I think you were involved in briefing her? 21 A. I was. 22 Q. Could we look, please, at production CEC00040807. We 23 see this is headed "Edinburgh Trams Update for Sue Bruce 24 5 November 1010", it's obviously intended to be 2010. 25 A. Yes. 57 1 Q. You say in your statement that this was used to brief 2 Sue Bruce? 3 A. Yes. 4 Q. She has denied ever having seen this document? 5 A. I am aware of that. 6 Q. Are you aware whether there was any other document or 7 a different version of this document, or can you explain 8 why she might feel she'd never seen it? 9 A. No. I have looked at an email chain around the time of 10 this document, and my recollection was that I actually 11 didn't circulate this document to anybody because it's 12 a pretty sensitive document, and I took a hard copy of 13 it with me to the meeting with Sue, and at the end of 14 the meeting she kept a copy and I was tempted to ask for 15 it back because of the sensitivity of it, but I decided 16 that would be an impertinent thing to do. 17 However, having looked at the documentation, I see 18 this document is actually attached to an email, I think 19 from me to Dave Anderson, dated 26 November. So there's 20 clearly some confusion over the date here because -- 21 because I think the email from me to Dave Anderson 22 says: attached is the briefing for Sue for next Monday. 23 Now, if that was sent on 26 November, then it can't have 24 been on 5 November that the briefing took place. 25 So there may be some confusion over the date and I'm 58 1 afraid I can't get to the bottom of that. 2 I do, though, specifically recall briefing Sue, 3 using this document. I'm fairly certain that the 4 meeting was attended by Brian Cox, who was the interim 5 chair of tie at the time, because by this time 6 David Mackay had resigned, and the meeting took place in 7 Sue's office late in the evening. Well, late, 5.30, 8 6 o'clock in the evening. 9 Q. Can we take it that all the things that you've put into 10 this document are your views of the project and the 11 organisations and where you stood at that time, the 12 difficulties faced? 13 A. Yes. I think some of them are my reflections on the 14 organisation that I inherited and some of them are my 15 reflections on the organisation as it stood at the time. 16 So they're not necessarily all contemporaneous with 17 that date, whatever the date was. 18 Q. Yes. 19 I would like to look at an email from you. It's 20 reference TIE00304261. 21 We can see this is from you. It's dated 22 22 November, and it was addressed to 23 Mandy Haeburn-Little and Tony Rush. Essentially within 24 tie? 25 A. Yes. 59 1 Q. You say it's a draft letter to CEO of CEC, and perhaps 2 fair to note that the subject matter is "Angry draft for 3 discussion". 4 The second paragraph says: 5 "As you know, when I took on this role the project 6 was already mired in controversy and disputes. As you 7 also know I believe that many of the issues we are 8 dealing with have been baked into this project from the 9 very beginning, the bulk of which were explained in my 10 presentation to Sue Bruce (attended by Dave Anderson and 11 Donald McGougan) on 5 November." 12 There you can see you're expressly referring to the 13 presentation given to Sue Bruce on that date? 14 A. And this is where I think there's some confusion, 15 because I believe Sue in her evidence talked about 16 a different presentation or a presentation on 5 November 17 that wasn't the presentation that we had up on the 18 screen a moment ago. 19 I don't specifically recall the presentation to Sue 20 attended by Dave and Donald. And that's where I think 21 there's some confusion over the dates. 22 CHAIR OF THE INQUIRY: You mentioned Dame Sue Bruce's 23 evidence. What are you talking about? 24 A. Written statement. 25 CHAIR OF THE INQUIRY: You have seen her statement? 60 1 A. Yes. 2 CHAIR OF THE INQUIRY: How did you get it? 3 A. Through the -- my legal team. 4 CHAIR OF THE INQUIRY: From Beltrami? 5 A. Yes. 6 MR LAKE: If you look at the second paragraph, you say: 7 "I have adopted a strategy (which has evolved over 8 time) guided by the board (which is well attended by 9 both CEC officials and councillors), and where possible 10 tried to take into account the views of CEC officials 11 and councillors expressed to me outside of the formal 12 board meetings. I accept that this strategy has not 13 produced the desired breakthrough on the project, but 14 still believe it was right that we adopted the approach 15 that we did as the alternatives would, in my view and 16 that of the board, have produced even less desirable 17 outcomes." 18 I think that's something you were referring to in 19 your evidence yesterday? 20 A. Yes. 21 Q. If we go towards the question of the timing for 22 mediation in the following paragraph: 23 "Last week things moved very quickly ..." 24 I should say as a matter of timing, I think it was 25 the previous week that the Council had voted in favour 61 1 of the mediation, by way of context: 2 "Last week things moved very quickly, with the 3 public call for mediation, then mounting political 4 pressure to enter mediation followed by our board 5 meeting on Wednesday and the Council meeting on 6 Thursday. I have always believed that an agreed way 7 forward (rather than litigation) between tie and BSC 8 offers the best hope for the project. Indeed I have 9 discussed the concept of a "mature divorce" with the 10 Chairman of the consortium and others on many occasions 11 in the past. I also believe that any final agreement 12 within determined in part by the relative strengths of 13 the parties on entering any process to reach that 14 agreement. It is my view that, because of the strategy 15 we have adopted, we are in a much stronger contractual 16 position now than we have been at any time in the last 17 12 months. I also accept that we are not in a stronger 18 political position. Personally I am not certain that we 19 are in a stronger contractual position now than we would 20 be in a few weeks time, however I can see there is now 21 a momentum behind entering a mediation process now, and 22 this was what persuaded the board to reach the 23 conclusion it did on Wednesday." 24 Several things there. Just dealing with that last 25 point, the impression that you give there is that you 62 1 feel that now is not the right time for the mediation, 2 and I'm just trying to square that with the earlier 3 email we looked at to Alastair Maclean which seemed to 4 be suggesting that you didn't think it was a good idea 5 to wait. 6 A. I'm confused, I'm afraid, because what I read here is: 7 "Personally I am not certain that we are in 8 a stronger contractual position now than we would be in 9 a few weeks time ..." 10 Q. Does that not suggest that you think it would be better 11 waiting a while -- 12 A. No, I think that suggests there would be no benefit in 13 waiting. 14 Q. Right, okay. In terms of -- because before that, you 15 say, the strategy, "we are in a much stronger 16 contractual position now than we have been at any time 17 in the last 12 months". 18 What factors do you rely on to say that you 19 considered you were in a stronger contractual position? 20 A. Notwithstanding the concerns over the Remediable 21 Termination Notices, I did feel that the factual 22 background behind the failure to manage the design and 23 failure to progress the works would produce a factual 24 basis which would give us sufficiently robust terms to 25 put forward a credible termination threat. 63 1 Q. Right. Because would you accept that as far as the 2 Clause 80 dispute was concerned, and the BDDI to IFC 3 disputes were concerned, things in the previous 4 12 months had rather moved against tie, with the 5 adjudication outcomes? 6 A. I'm not sure that we were necessarily in a weaker 7 position than when we started the DRP process. All that 8 had happened is that it had confirmed or it had failed 9 to confirm that we were in a stronger position. If you 10 think right back to July 2009, the Infraco's position 11 was you've only got two options, agree with us or 12 litigate. That was their position then, and here we 13 were 12 months later. We were in no -- we had failed to 14 put ourselves into a stronger position, but I don't 15 think that necessarily means we were in a weaker 16 position. 17 Q. Can we scroll down to the foot of the page here. The 18 final paragraph on the page says: 19 "I am also very concerned by the last paragraph of 20 Nick Smith's email 'I am not aware that Tom and the 21 other senior officers have decided what strategy to 22 adopt re both the mediation and/or the BSC/CEC 23 meeting'." 24 That's the end of the quote. You say: 25 "This would seem to imply that CEC expect to direct 64 1 the strategy for any mediation." 2 I take it from that comment that as far as you were 3 concerned at that time, if there was to be a mediation, 4 tie should be representing tie's interests at that 5 mediation? 6 A. There were a whole host of things going on around this 7 time, and I think tie's roles was beginning to become 8 much more blurred and much diminished at this time, and 9 the City Council was starting to adopt a much more 10 direct involvement. 11 I believe, I'm not certain, that by this time the 12 City Council had had several meetings with the 13 contractor, which were unknown to me, or at least the 14 content of which were unknown to me. I knew of the 15 existence of at least one of them, but there may have 16 been more. 17 And that I thought we were in serious danger here of 18 CEC effectively taking control of the project without 19 officially doing so. 20 There would be a genuine concern that there would be 21 too many -- too many chiefs. We also had a board which 22 had certain governance procedures, and of course it was 23 always within CEC's prerogative to say to tie: thanks 24 very much, we don't want you to run this anymore; 25 and I gave them several opportunities to do that 65 1 throughout my time there, but if we were going to do 2 that, it needed to be done clearly and cleanly, and my 3 concern here was that issues were becoming very blurred. 4 Q. Just that question about whether or not the Council 5 could say they didn't want tie to do it, could we look 6 at an email two days later from you. It's reference 7 CEC00013441. 8 If we enlarge the upper part of the page, we can see 9 that this is from you. It's dated 24 November 2010, and 10 it goes to Alastair Maclean, Tom Aitchison and 11 Donald McGougan; do you see that? 12 A. Yes. 13 Q. Is this intended -- I'll read on first of all: 14 "I thought I would capture my thoughts following 15 this afternoon's meeting. 16 My apologies again to Alastair for the speed and 17 nature of my departure, but I was already late for 18 another meeting and our conversation was becoming 19 unproductive." 20 There's obviously reference to a meeting having 21 taken place there. Was this just to follow up the 22 meeting, or was this also dealing with the letters we 23 saw in the draft angry email that we've just been 24 looking at? 25 A. First of all, the draft email, I don't actually know 66 1 whether that was ever sent. I have to say, reading it, 2 I think it should have been sent, but if I didn't send 3 it, I regret that. 4 The sequence of events, the previous emails you 5 showed me from Alistair and then my reply, were they 6 prior -- were they 23 November, were they? 7 Q. Yes. 8 A. Right. 9 Q. 22nd. 10 A. There was a -- clearly there was a meeting on the 11 afternoon of the 24th because my email here talks about 12 this morning's meeting, and it's timed 19.34. So 13 I obviously sent it that evening. So this email follows 14 up the meeting that happened that afternoon. 15 Q. In relation to the question of the Council and the 16 relationship with tie, could we look at page 2. 17 We see the first paragraph on the page is: 18 "In the spirit of openness, we are in danger of man- 19 marking here, and I think the real question is, if the 20 Council have lost confidence in tie, then exercise your 21 prerogative and remove tie from the equation. I am not 22 defensive about this, indeed I first suggested it in my 23 email to you several weeks ago, and that is a real 24 option for CEC to consider, but please do not keep 25 re-opening it. I expressed my views to you today on the 67 1 potential implications of such a course of action." 2 Now, the impression there is of someone who is very 3 unhappy with what is being said by the Council about 4 whether or not tie are going to be removed. Is that a 5 fair impression? 6 A. Not about whether tie are going to be removed or not, 7 but by the fact that they wouldn't make a decision. So 8 my point here was: if you don't want tie to run this, 9 just say so, that's fine, that is your prerogative. But 10 don't, as they say, don't buy a dog and bark yourself. 11 Either do it or let us do it, but don't try and do both. 12 Q. When it came to the mediation at Mar Hall itself, 13 I think that Council took the leading role and tie 14 a lesser role. Would you agree? 15 A. That's an understatement. tie was effectively to all 16 intents and purposes excluded from the mediation. Well, 17 tie with the exception of Vic Emery who was the then 18 chairman. 19 Q. At what time did the Council indicate to you that would 20 be their approach, and they eventually were going to be 21 taking it back from tie for that purpose? 22 A. They never formally indicated that approach. It just -- 23 that's how it happened. 24 Q. My Lord, I'm now turning to ask a few final questions -- 25 probably they won't take a great deal of time -- about 68 1 the mediation, but if there was to be a break, this 2 would be a suitable time. 3 CHAIR OF THE INQUIRY: Before the break, can I just clarify 4 about Sue Bruce's statement. Did you receive other 5 witness statements from Beltrami? 6 A. No, and I didn't receive a copy of Sue's statement. 7 I was informed by Beltrami that within Sue's statement 8 was a denial -- sorry, a non-recollection of this 9 presentation. I didn't physically -- I haven't seen her 10 statement. 11 CHAIR OF THE INQUIRY: And did you get similar information 12 about other witness statements? 13 A. Not that I recall. 14 CHAIR OF THE INQUIRY: Thank you. We'll adjourn and resume 15 again at 11.25. 16 (11.09 am) 17 (A short break) 18 (11.25 am) 19 MR LAKE: Mr Jeffrey, I would now like to turn to the 20 mediation that took place at Mar Hall. 21 You've indicated -- I put it neutrally -- you had 22 little role to play in the discussions which took place 23 at the mediation itself. 24 Who conducted those discussions? 25 A. They were conducted by Sue Bruce and Vic Emery and 69 1 Ainslie McLaughlin, were the three who went into the 2 negotiations, discussions with the Infraco. 3 Q. Sue Bruce, I understand her role obviously is the then 4 Chief Executive of the Council. 5 What role was played by Vic Emery, as far as you're 6 aware? 7 A. I don't know. He was there in his capacity as the 8 chairman of tie, but I don't know what role he played. 9 Q. I ask the same question for Ainslie McLaughlin. What 10 role did he play? 11 A. I don't know, I'm afraid. I wasn't involved in any of 12 the meetings to see how they panned out. 13 Q. So you didn't see what the contribution of those parties 14 was? 15 A. No. 16 Q. It may be then you're not able to assist me with this 17 next question. Do you have any idea how the settlement 18 figures were actually reached? 19 A. Not directly. I was involved in -- there were 20 effectively two rooms. There was a CEC/tie room at 21 which there was many people present, myself, Tony Rush, 22 the lawyers, Dave Anderson, Alastair Maclean, 23 Steven Bell and others. And that was the room that Sue, 24 Vic and Ainslie would come back to. There would be 25 a discussion and then they would go off again. So I 70 1 don't know anything that happened in the discussions 2 directly with the Infraco. 3 Within the room where we all met, there were 4 discussions around values and price and cost of 5 alternatives and so on. 6 Q. So coming back to my earlier questions then, were you 7 able to see what role Vic Emery and Ainslie McLaughlin 8 played in those discussions when they weren't in the 9 Infraco, it was the sort of -- 10 A. Yes, I would describe their roles as passive. 11 Q. Both Vic Emery and Ainslie McLaughlin? 12 A. Yes. 13 Q. What about the availability of information to inform the 14 discussions that were taking place? Who was providing 15 that? 16 A. Well, the members of the senior tie team, myself, 17 Steven Bell, I can't remember if Susan Clark was there, 18 but there were a few members of the senior tie team. 19 There was Tony Rush, Nigel Robson, Brandon Nolan, 20 I don't recall if DLA had anybody there. And whatever 21 information was requested, if it was available and could 22 be provided, was provided. 23 Q. In terms of financial information, that was -- that 24 would be provided by tie, would it? 25 A. Some was and some was provided by Tony Rush. 71 1 Q. What was your involvement in providing information for 2 or producing the terms of the opening statement given by 3 Dame Sue at the start of the mediation? 4 A. I don't think I had any involvement in that. I think 5 that was done between Sue's office and McGrigors. 6 Q. I think it's fair to say you expressed some unhappiness 7 or dissatisfaction with the amount of money that was 8 ultimately paid to the consortium by way of the 9 settlement? 10 A. I did. 11 Q. What was in essence your dissatisfaction? 12 A. Well, I thought it was too much. 13 Q. What -- apart from just looking at the number, what in 14 your view indicated that it was too much? By what 15 measure? 16 A. It's a difficult one, and I fully accept that there was 17 a judgement call to be made because the alternative -- 18 one of the alternatives to not reaching an arrangement 19 at Mar Hall, an agreement at Mar Hall, was effectively 20 back to where you started from, which was trying to 21 enforce a weak contract, with all the attendant 22 uncertainty. Ultimately the possibility of some form of 23 termination and what that might lead to. 24 So there was a cost to not reaching an agreement at 25 Mar Hall. So let's put that to one side for a moment. 72 1 If you come back and say: where did we start 2 Mar Hall from? There was the value of the work done to 3 date, and there was the quantum of the work done to 4 date. So, for example, the -- most of the tram vehicles 5 were constructed and purchased, and there was a very 6 high degree of certainty that the cost of the tram 7 vehicles was going to be what it was going to be. So 8 I think that was about GBP60 million, but let's say 9 there's GBP60 million that you can put aside there and 10 say there's a degree of certainty to that. 11 There was a whole section of works already done, the 12 depot was largely complete. The bulk of the 13 infrastructure for the section west of Edinburgh was 14 largely complete. 15 So there were a number of things you could have 16 a high degree of certainty on, and therefore again sort 17 of take out of the equation, if you like. 18 So what you're left with is two things that you 19 don't know. One is the value of the works still to be 20 completed and the second is the cost of buying that 21 certainty. If you like, buying your way out of the 22 contract that had caused so many problems. 23 There's a reasonable degree of certainty that can be 24 placed upon the value of the works still to be done. 25 There would always be some dispute on that, but that's 73 1 something a quantity surveyor could look at and say it 2 should cost this much. 3 What you're left with then is effectively the value 4 of buying out the uncertainty, or put another way, 5 that's the value of settling the contractor's claim. 6 If you take the view that litigation would be 7 a catastrophic outcome, and could cost an unknown amount 8 of money, then you could use that justification for 9 almost any price you liked on the basis that, well, it's 10 better than litigation. 11 I don't think sufficient consideration was given to 12 the option of Project Separation, as it was called, or 13 the mutual divorce, and saying: right, let's strip out 14 even the cost of the work still to be done; and 15 say: just what is the value for buying out of this 16 contract? 17 I'd had indications from Richard Walker, the 18 chairman of the consortium, prior to the mediation as to 19 the sorts of quantums that they would be looking at and 20 he was talking about GBP30 million or GBP40 million for 21 Bilfinger. He'd said that he thought Siemens would be 22 happy as long as they were paid for the value of the 23 work done and the materials on site, and that CAF, as 24 I say, was a reasonably uncontentious issue. 25 I think if you added that to the cost of reprocuring 74 1 the works, you would have come up with a number less 2 than the number that was settled at, at Mar Hall. 3 Now, I am aware that there were alternative views 4 provided by, I think, Gordon Harris Partnership, via 5 Tony -- Gordon Harris Partnership were a quantity 6 surveying firm that were engaged, and I think their 7 information was fed in through Tony. And I'm not 8 holding myself up as a quantity surveyor to say: well, 9 I think they're wrong and I'm right. This is as much 10 a feeling as it is a precise science, but my sense was 11 it was a pretty high price to pay for certainty. 12 Q. You say that the advice from Gordon Harris Partnership, 13 that was advice on what a replacement contract might 14 cost if you brought in a different contractor, what they 15 might price -- do the remainder of the works? 16 A. Yes. And there were added to that things like a bad 17 project premium, which seemed to me to be 18 a reasonably -- I'm not sure if that was added in by 19 Gordon Harris Partnership or somebody else, but that 20 seemed to me to be a somewhat arbitrary figure. 21 Again, from the documents that I have seen from the 22 database, some of that appears to me to be 23 rationalisation that appeared after Mar Hall, not prior 24 to Mar Hall. 25 Q. What you're describing there is taking a completely 75 1 different approach to what was obtained by the 2 mediation, that you would have been looking to obtain 3 a clean break, with no further works being done by the 4 consortium. If I have understood you correctly. 5 A. Emotionally that was my preferred option, but 6 practically I think that option should have at least 7 been on the table so that there was something to compare 8 the deal to. Because by only having the prospect of 9 litigation as the other comparator, you could justify 10 pretty much any number you wanted. 11 Q. Right. In terms of the price that was ultimately 12 agreed, are you aware -- you may not be -- whether or 13 not that was arrived at by essentially an analysis of 14 costs, be it the costs of works, the cost of litigation 15 and other things, or was it what could be called rather 16 colloquially a horse trade? 17 A. I'm not aware how it was arrived at. 18 Q. There's one last thing I would like to ask you. I asked 19 you a question yesterday about Infraco's willingness to 20 do on-street works, and do you remember you gave me an 21 answer about that. 22 I take it you're answering that from your knowledge 23 of the time that you were on the project? 24 A. Can you repeat the question and I'll tell you why 25 I answered as I did. 76 1 Q. The question is -- I think what I'd intended to ask 2 was: while you were in position as Chief Executive of 3 tie, were you aware whether or not the consortium 4 carried out any on-street works under the original 5 contract? 6 A. And I think -- that's right, my answer was that I'm not 7 aware that they were, and I don't think they did. There 8 was the -- the only works that were undertaken were the 9 Princes Street -- on-street works were the 10 Princes Street works and they were done under the 11 Princes Street Supplemental Agreement. 12 The only possible grey area would be the works at 13 Haymarket Yards, but I don't think they were classified 14 as on-street works, although technically they were on 15 a road, but it wasn't -- they weren't classified as 16 on-street works. 17 Q. Is that the viaduct works? 18 A. Yes. 19 Q. But in terms of things that were carried out before you 20 were in post, that's something that we would be better 21 putting to other people within tie? 22 A. Indeed. 23 MR LAKE: Thank you very much, Mr Jeffrey. 24 CHAIR OF THE INQUIRY: I have received notice of possible 25 questions from two sources. One, Ms Forster on behalf 77 1 of Bilfinger Berger and the other by Beltrami on behalf 2 of Mr Jeffrey. 3 So before looking at these, I would like to -- 4 I think some of the attached emails or letters referred 5 to cross-examination. Can I just remind parties that 6 this is not a court. It's an investigation process 7 which does not involve cross-examination. 8 So could I, first of all, ascertain whether and to 9 what extent the written notices still exist? If I could 10 ask Ms Forster, first of all, to what extent have the 11 issues that you mentioned been covered already or are 12 there matters that you want to deal with? 13 MS FORSTER: My Lord, I have no further questions. I think 14 all the matters have been adequately dealt with, thank 15 you. 16 CHAIR OF THE INQUIRY: That leaves Mr Fairley. I wonder, 17 Mr Fairley, if you could indicate to -- whether the 18 issues in your written notice, first of all, are -- 19 I appreciate you may have other matters to raise, but 20 have they been covered and if so, to what extent? 21 MR FAIRLEY: My Lord, the issues in the written notice on 22 this occasion were relatively general and were intended 23 really to be an indication of lines. Broadly speaking, 24 all of those lines have been addressed by Inquiry 25 Counsel, but what I would say is that in relation to 78 1 those lines and within those lines, there are some 2 matters on which I would welcome the opportunity to ask 3 some further questions by way of clarification. 4 I say that because there are some issues -- I don't 5 know whether my Lord wishes me to deal with these issues 6 in front of the witness. I can see that there would be 7 disadvantages to doing so, because it may be said in 8 a sense to be telegraphing where I want to go with the 9 witness, and I don't want there to be any suggestion 10 that I'm trying to lead the witness. 11 But I can give my Lord a general indication of what 12 these points were. 13 For example, he was asked yesterday some questions 14 by Inquiry Counsel about the absence of reference in the 15 Tram Project Board minutes to the specifics of legal 16 advice obtained. I would like in light of some of the 17 evidence he gave this morning simply to explore, I hope 18 relatively briefly, what the reasons for that may have 19 been. 20 There were a couple of points yesterday where I'm 21 sure inadvertently points were put to him which don't, 22 respectfully, seem to me to be factually correct on the 23 documents. Again, I would welcome the opportunity just, 24 I hope, very briefly, to go to those. 25 CHAIR OF THE INQUIRY: Could you indicate from the written 79 1 notice which bullet points you wish to seek 2 clarification about? 3 MR FAIRLEY: Sorry, my Lord, from -- 4 CHAIR OF THE INQUIRY: From the written notice. The bullet 5 points. 6 MR FAIRLEY: The points to which I wish to seek 7 clarification largely relate to the reporting in the 8 Tram Project Board meetings relating to DRPs. He was 9 taken yesterday to certain passages from Gogarburn and 10 Carrick Knowe, and so it's -- I don't have -- 11 CHAIR OF THE INQUIRY: So this is discussion of the DRP 12 outcomes at the Tram Project Board from late 2009? 13 MR FAIRLEY: Yes. It would be that. It would be 14 discussions of DRP outcomes at the Tram Project Board, 15 and that really encompasses a great deal of what I want 16 to ask him about, in particular in relation to the 17 questions put to him yesterday about Gogarburn and 18 Carrick Knowe. 19 I would also wish to ask about advice received from 20 Richard Keen in relation to the Remediable Termination 21 Notices which he wasn't taken to by Inquiry Counsel, and 22 that features in my next, sixth bullet point, the advice 23 received by Richard Keen during 2010. 24 I would welcome the opportunity to clarify with him 25 more generally the discussions about DRP strategy and 80 1 the evidence he gave about that, because it seems to me 2 that there may be an issue arising from the evidence he 3 gave about the Dervaird decision which bears upon that, 4 and there's a fairly obvious question which arises from 5 that that has not been put to him so far about timing. 6 Finally, he has mentioned a couple of documents but 7 he has not been able to give references for them. 8 I think I may be able to help with that by putting the 9 documents and asking him if those are the ones he was 10 referring to. So those are the areas that I would seek 11 to explore. 12 CHAIR OF THE INQUIRY: Does anyone else wish to raise 13 matters? 14 MR MARTIN: My Lord, I have one matter to raise, if I may, 15 with the witness arising out of the evidence he gave 16 very recently about his comments on the Mar Hall 17 settlement figure. It's really to put a single 18 proposition to him, and it may take two or three 19 questions. But I think in fairness, because it may be 20 raised later, I should put it to the witness. 21 I can explain to my Lord, again not wishing to 22 telegraph what the point is, if my Lord wishes me to do 23 so. 24 MR DUNLOP QC: My Lord, such concerns as I vocalised 25 yesterday are almost certainly going to be clarified by 81 1 my learned friend Mr Fairley with whom I have had 2 a chance of discussing. Assuming that to be the case, 3 I won't require to ask leave to ask any questions. 4 CHAIR OF THE INQUIRY: I think, Mr Fairley, if we can just 5 start with the discussions of DRP outcomes. 6 Examination by MR FAIRLEY 7 MR FAIRLEY: A proposition was put to you yesterday, 8 Mr Jeffrey, by Inquiry Counsel that a representation in 9 the January Tram Project Board papers at page 47 was 10 inaccurate, and what was put to you was that the 11 description of the Gogarburn and Carrick Knowe decisions 12 being largely in favour of Infraco, which was the word 13 used in the January minutes, was inaccurate. Do you 14 recall being asked about that yesterday? 15 A. I do, yes. 16 Q. I think you were pressed on it by Inquiry Counsel, who 17 put to you the proposition that in fact the Gogarburn 18 and Carrick Knowe decisions were wholly in favour of 19 Infraco, and so the use of the word "largely" was 20 a sugar coating. I don't think that was the expression 21 he used, but that was certainly the implication of what 22 was being put to you? 23 A. Yes, I remember. 24 Q. I just wonder, could we look at the Carrick Knowe 25 decision, please, which is document reference 82 1 CEC00479431. 2 This was a document you were referred to -- I think 3 you were referred to parts of this yesterday. If you 4 take it from me that the referring party here is tie and 5 the responding party, as it's described, is Infraco. 6 Could we look, first, at page 25, and in particular 7 could you blow up paragraph 7.76 at the foot of the 8 page. 9 Now, this is a passage dealing with the question of 10 the adjudicator's fees, but it's more the content of the 11 paragraph that I'm interested in. What is recorded 12 there is: 13 "As the Responding Party [that is to say Infraco] 14 have only been partially successful in defending the 15 Notified Departure when considered from perspective of 16 each of the Notified Departures ..." 17 He then makes a certain allocation of fees. 18 Was that reflective of your understanding of the 19 partial nature of Infraco's success at Carrick Knowe? 20 A. Yes, it was, and that would be entirely consistent with 21 the description in the Board minutes of it being largely 22 successful for Infraco as opposed to wholly successful 23 for Infraco. 24 Q. Simply for completeness, I think if we look into this 25 document at page 22, at the foot of that page at 7.62, 83 1 if you can blow up the whole of that and the heading, 2 I think I'm right in saying that we see there, in the 3 final sentence of that, a finding by the adjudicator 4 that he was not prepared to allow the matter of 5 temporary sheet piling to adjust abutment bases as 6 a Notified Departure. The way he expresses it is 7 slightly opaque, but I think if one reads the content of 8 it, what he's saying is he's not minded to allow this 9 item as an extra, which would effectively mean he was 10 not allowing it as a Notified Departure. 11 A. I think that's right, and if you look at the first line, 12 in fact, it says he doesn't agree with the responding 13 party. 14 Q. Well, I think in fairness, Mr Hunt was the person who 15 made representations at this adjudication on behalf of 16 tie? 17 A. I beg your pardon. 18 Q. What he's recording there is Mr Hunt does not agree with 19 Infraco's contention for a Notified Departure, but I'm 20 really more interested in what the adjudicator does with 21 this. He says: 22 "I therefore dismiss this item as an extra." 23 Am I right in reading that as being a refusal by the 24 adjudicator to allow it as a Notified Departure? 25 A. Yes. 84 1 Q. If you look forward now at page 24, at paragraph 7.70, 2 the question of deck expansion joints, the final 3 sentence simply reads: 4 "I therefore find that this is not a Notified 5 Departure." 6 Is that right? 7 A. Yes. 8 Q. So again, not supporting the position that was put 9 forward by Infraco? 10 A. Correct. 11 Q. If we go forward again to page 25, at paragraph 7.74, if 12 you expand the whole of that, please, freestanding wing 13 walls and soil embankments and abutments, the 14 penultimate sentence beginning with the words 15 "I therefore dismiss" on the third-last line: 16 "I therefore dismiss the freestanding wing walls and 17 soil embankments and abutments on the basis that 18 I consider them to be normal design development." 19 Again, he is not finding in favour of Infraco, but 20 is finding that these are not Notified Departures? 21 A. That's correct, yes. 22 Q. Does that then give some colour to the use in the 23 January Tram Project Board papers to the phrase 24 "largely", in the context of these decisions being 25 largely in favour of Infraco? 85 1 A. Yes, it does. 2 Q. Thank you. 3 Now, can I come back now and ask you about the 4 question of Tram Project Board papers and what they 5 record in relation to legal advice. 6 You were asked some questions about that yesterday 7 by Inquiry Counsel, and as I understood the line of 8 questioning which I think you accepted, it was that 9 there was no mention within the Tram Project Board 10 papers of the detail, or even a summary of the legal 11 advice that tie had been receiving from its legal 12 advisers; do you recall that passage of questioning? 13 A. I do, yes. 14 Q. It's that that I want to ask you about now. 15 In taking legal advice, should we understand that 16 what you wanted to be informed about or the reason that 17 you wanted to be informed was to instruct your strategy 18 going forward into the adjudication process, and whilst 19 adjudications were up and running? 20 A. That's correct, yes. 21 Q. You mentioned yesterday in your evidence, and again 22 today in your evidence, concerns that existed over the 23 leaking of information into a wider domain that may have 24 emanated from within the Tram Project Board. 25 Have I understood that correctly? 86 1 A. Yes. The concern was one of a general nature. 2 Q. Yes? 3 A. But it included potential leaks from the Tram Project 4 Board. 5 Q. Yes. Now, to be quite clear here, I'm not suggesting 6 that anybody was sitting within the Tram Project Board 7 deliberately leaking materials to the outside world. 8 But I would imagine that when you have a circulation 9 list for Tram Project Board papers which is as long as 10 the circulation list was for the Tram Project Board, 11 that enhances the risk that the contents of those papers 12 may find their way by some means into a wider audience? 13 A. That's correct. 14 Q. And doesn't necessarily mean that that is malign or 15 malevolent. It's simply a fact that when you put 16 something in written papers, you enhance the chances of 17 them finding their way beyond their original intended 18 audience? 19 A. That's correct, and in fact, although it didn't occur to 20 my knowledge during my time, I believe it had occurred 21 prior to my time at tie. 22 Q. Yes. 23 Now, we've also heard evidence from another witness 24 about at one stage, and it is prior to your involvement, 25 at one stage there being a concern that legal advice in 87 1 the pre-contract phase might be the subject of a Freedom 2 of Information request, and it was therefore presented 3 as being a DLA paper when in fact it was something that 4 was being communicated by tie to the Council. 5 Was there any concern about -- in your time as CEO 6 of tie about the use of Freedom of Information requests, 7 possibly to recover information within Tram Project 8 Board papers? 9 A. There was. In fact, I'm sure it will be a matter of 10 record somewhere. There were a very large number of 11 Freedom of Information requests, and they did include 12 requests for legal advice and items that were meant 13 parts of the Tram Project Board papers. Wherever we 14 could, we resisted those, and I actually had at two 15 meetings to my recollection with the Information 16 Commissioner in St Andrews to discuss how we might deal 17 with these. 18 Q. The background to this is this is all taking place 19 within what might be described as quite a highly charged 20 political environment in that there was mixed support 21 for the tram project; is that fair? 22 A. That's correct. 23 Q. It was also taking place in an atmosphere of fairly 24 intense media scrutiny in that there was at least one 25 newspaper which was writing regularly about the tram 88 1 project? 2 A. Yes. I think that's potentially an understatement. 3 There was one particular month, I recall, where there 4 were 180 separate media articles in a month. 5 Q. Another unusual feature, I think a unique feature, of 6 this particular project was of course that the former 7 Council Leader, Councillor Anderson, had assumed 8 a position with Bilfingers, apparently as a consultant 9 to that organisation. Am I right about that? 10 A. Yes. 11 Q. Against that background, how damaging would it have been 12 to tie's commercial strategy with Bilfingers if the 13 legal advice tie was receiving, and the advice it was 14 receiving from its lawyers on strategy, had leaked into 15 the public domain and become known to Bilfingers? 16 A. It would have made a very difficult position impossible. 17 Q. May we take it that it was not the practice of tie, when 18 it received legal advice, to forward copies of that 19 legal advice to Bilfingers? 20 A. Indeed. 21 Q. For very obvious reasons? 22 A. Yes. 23 Q. That when you're involved in a commercial dispute with 24 another side which is looking as if it's going towards 25 or is already entering litigation, the last thing you do 89 1 is tell the other side what legal advice you are 2 receiving? 3 A. Correct. 4 Q. Was it, however, the case that everybody on the Tram 5 Project Board was well aware that legal advice was being 6 taken about the early adjudication decisions? I'm 7 talking here in particular about Gogarburn and 8 Carrick Knowe. 9 A. Yes, that's my recollection. 10 Q. I ask that because there was a question put to you 11 yesterday by Inquiry Counsel about the PowerPoint 12 display that you presented for the December Tram Project 13 Board minute, and the way the question was put was: your 14 PowerPoint display doesn't even say that legal advice is 15 being taken. But by that stage am I right in saying 16 that there had already been, at the November Tram 17 Project Board, a lengthy discussion about a full review 18 of the Gogarburn and Carrick Knowe decisions? 19 A. Without the papers in front of me, I couldn't say 20 specifically which meeting it was, but yes, it was 21 certainly one of those meetings, possibly September, 22 October or November. 23 Q. Well, can I perhaps help you. Could we have document 24 number CEC00416111, please, and this is the papers for 25 the Tram Project Board meeting of 16 December 2009. 90 1 Can we go within that first of all to the minutes of 2 the November meeting which we find -- the start of those 3 is at page 5. If you simply take it from me that these 4 are the minutes of the November meeting, the passage 5 I want to refer you to is on page 7. 6 If we can enlarge the box at the top of that page, 7 please. 8 What we see noted there is that the adjudicator has 9 decided on Carrick Knowe and Gogarburn, and a full 10 review of this determination is under way. So can we 11 take it that the Board was advised that a full review of 12 these decisions was under way? 13 CHAIR OF THE INQUIRY: Mr Fairley, I think this was referred 14 to yesterday by Mr Lake. So the witness has seen this. 15 MR FAIRLEY: It was, my Lord, but Mr Lake then followed it 16 up with a question about the December Board meeting, 17 which was a month later, which said that the PowerPoint 18 slide didn't even indicate that a legal review was under 19 way. What I'm anxious to ascertain from the witness is 20 whether the expression "a full review" here is intended 21 simply to mean an internal tie full review, or whether 22 that is something that was intended and was intimated to 23 the board as having involved lawyers. 24 CHAIR OF THE INQUIRY: Well, how is this taking me any 25 further? I have seen this passage yesterday. 91 1 MR FAIRLEY: I'm about to link it, my Lord, to a passage 2 further in these papers, and that will be the last thing 3 I will ask about. 4 CHAIR OF THE INQUIRY: That might be the quickest way of 5 doing it then. 6 MR FAIRLEY: The reference there to full review, Mr Jeffrey, 7 can we pick that up by going to page 23 of these papers. 8 Can you enlarge the section headed "Period 9 9 Update". Do we see there in the first bullet point 10 a reference to the adjudicator preferring Infraco's case 11 on 5a and 5b, which is Gogarburn and Carrick Knowe, and 12 a reference to this currently being under review by tie 13 and by tie's legal advisers? 14 A. Yes. 15 Q. Do you see that? 16 A. That's correct. 17 Q. So as at December -- in fact, as at November 2009, would 18 anyone on the Tram Project Board not -- who had read 19 these papers not have been aware that there was a review 20 being undertaken by tie's legal advisers, and that 21 advice was being sought? 22 A. No, I don't believe they could have been under the 23 impression that there was no -- sorry, there's too many 24 negatives there. 25 I do believe that they had -- that they were aware 92 1 that there was a review undertaken, including legal -- 2 a legal review. 3 Q. What we don't see in the papers is the output of that 4 review. 5 A. Correct. 6 Q. Could you scroll down the table, please, there because 7 before I leave this, I want to look at the -- in fact, 8 I think we may need to go over the page. 9 Before we go over the page, do you see that 10 Russell Road is highlighted in that table in green? 11 A. Yes. 12 Q. If we go over the page, please, I think we'll see what 13 that means. If you enlarge the -- thank you. 14 The green annotation suggests that the DRP in 15 question was launched by BSC, as opposed to being 16 launched by tie, which is the blue annotation; do you 17 see that? 18 A. Correct, yes. 19 Q. So should we understand that the Russell Road 20 adjudication was not one that formed part of tie's 21 strategy of taking matters to DRP, but in fact had been 22 launched, as it is recorded here, by the Infraco, by the 23 consortium? 24 A. That's correct. 25 Q. Can I leave that document now and can I come on to ask 93 1 you a couple of questions, please, about Russell Road. 2 CHAIR OF THE INQUIRY: Which point is this? 3 MR FAIRLEY: This is the DRP reporting question, my Lord. 4 Could you have in front of you, please, document 5 CEC00034842. 6 Now, when this document appears, there will be two 7 passages that I want just to ask you very briefly about, 8 but while we're finding the document, if I've understood 9 your evidence correctly, there were essentially two 10 reasons for taking disputes to the Dispute Resolution 11 Procedure that you have certainly referred to in your 12 evidence. 13 If I just identify what my understanding is of these 14 first, I can then ask you questions. 15 If I have understood you correctly, the first reason 16 for taking disputes to DRP was to try and secure 17 clarity, or at least some form of understanding of what 18 the contract meant, particularly in relation to price 19 and particularly in relation to this question of BDDI to 20 IFC drawings. 21 A. That's correct. 22 Q. But the other reason that I think you referred to this 23 morning was that at least until Lord Dervaird issued his 24 decision in early October of 2010, another reason for 25 taking disputes to Dispute Resolution was tie's 94 1 understanding that by so doing, it could issue formal 2 instructions to Infraco to get on with the work. 3 Have I understood that correctly? 4 A. That's correct. 5 Q. So putting those two together, the first is primarily 6 related to cost, the BDDI to IFC is primarily related to 7 the cost of works. I appreciate it may have programme 8 implications, but you're principally looking there at 9 what you're paying for; is that right? 10 A. Yes, cost and the principle of what was or was not 11 included in the price. 12 Q. Of course. Yes. 13 The second is primarily to do with just keeping the 14 works moving? 15 A. That's correct. There was also a third motivation, 16 which is in some cases it was purely an issue of 17 valuation, in that there were some instances where 18 the -- there was no dispute in principle, but the 19 valuation was unacceptable to tie. 20 Q. Yes. 21 So even if it might be said that there came a point 22 in the summer of 2010 or by the summer of 2010 when it 23 was clear that tie was not winning points of principle 24 on BDDI to IFC adjudications, there would still be an 25 incentive to put those into Dispute Resolution because 95 1 it would allow you to try to keep the contract moving, 2 to instruct Infraco to do the work, even though 3 an estimate had not been produced for the cost of those 4 works; is that correct? 5 A. That's correct, yes. 6 Q. So even though you were losing on the principles, there 7 was still a benefit to be gained because Infraco were 8 saying: we're not doing any of these disputed works 9 until there is a completed estimate, and in some cases 10 they were refusing or failing to give you estimates? 11 A. That's correct. 12 Q. And tie needed to try and get the works moving and to 13 keep -- to keep the momentum in the programme going; is 14 that right? 15 A. That is correct, yes. 16 Q. Because one impact of a programme which is delayed is 17 significant additional cost; am I right about that? 18 A. That's correct, yes. 19 Q. We'll see a document that we'll look at in a moment -- 20 that the tie strategy of referring disputes to DRP 21 really came to an end round about August of 2010. Do 22 you recall that? If you don't, I can take to you 23 a document that shows that. 24 A. No, I couldn't be exactly precise, but it certainly was 25 around that time, would be my recollection. 96 1 Q. If you take it from me that in the September Tram 2 Project Board meeting papers there is a reference to 3 tie's strategy of referring matters to DRP having ended 4 in the previous period, which would be August 2010. 5 Does that roughly accord with your recollection? 6 A. Yes. 7 Q. What we know of course is that Lord Dervaird's decision 8 in relation to Clause 80, which was the second of my two 9 reasons for referring disputes to DRP, to keep the 10 programme going, that was dated 7 August 2010; is that 11 right? 12 A. That's -- yes. 13 MR LAKE: Can I just interject for a point of clarity. The 14 point that was put to Lord Dervaird -- taken in evidence 15 this morning, Clause 80.13, which is not the one that 16 depends on having put matters to DRP. That's 80.15. 17 And these questions are leading the witness into 18 confusion by conflating the two. It may be quite 19 important for the witness to know that they're two 20 separate things. 21 MR FAIRLEY: I'll put it this simply. Did there come 22 a point when tie realised that its strategy of 23 putting -- its belief that by putting matters into DRP, 24 it could compel Infraco to carry out the works, did 25 there come a point when tie realised that was not going 97 1 to work either in terms of the contract? 2 A. Yes, as I think I have already said in evidence, these 3 things didn't occur overnight. It wasn't that one day 4 you thought something and the next day you thought 5 something else. 6 What happened was that over time, your opinion and 7 your belief evolves to the point where, by around this 8 time, we took the view that continuing to pursue the DRP 9 strategy for anything other than tactical reasons was 10 not going to produce the results that we wanted. 11 Q. So there came a point, did there, where tie realised 12 that neither of the two objectives of getting the 13 clarity it wanted in the terms it wanted about the cost 14 aspect and about the keeping matters moving under 15 Clause 80 aspect was actually working? 16 A. That's correct, and that was around the sort of late 17 summer/autumn of 2010. 18 Q. Around about the same time that tie discontinued its 19 strategy of referring matters to DRP? 20 A. Yes. 21 Q. Coming back to the Russell Road decision, can I just 22 look briefly at two aspects of that that you weren't 23 referred to. 24 Can you look firstly at Clause 65, please -- 25 CHAIR OF THE INQUIRY: Is this back to the first point? 98 1 MR FAIRLEY: This is the DRP reporting, yes. I'm sorry, 2 I went off at a tangent because I thought it was 3 important to clarify with the witness. 4 CHAIR OF THE INQUIRY: It would help if you could finish a 5 point and then move on. The whole point about core 6 participants having -- being allowed to ask questions is 7 to give prior notice of issues that they think they want 8 the Inquiry Counsel to cover, and if they're not being 9 covered, then to pursue them. But to pursue them as 10 concisely as possible, without repetition, and without 11 jumping back and forward. 12 MR FAIRLEY: I apologise, my Lord. 13 CHAIR OF THE INQUIRY: So can we just finish that point. 14 MR FAIRLEY: That was what I was trying to do. I was trying 15 to use the time usefully to ask a point about the DRP 16 strategy that I was going to ask anyway, while we found 17 the document on Russell Road. But I'm now returning to 18 Russell Road and I'm now returning to the question of 19 the accuracy of the DRP reporting. 20 Could we look at paragraph 65 at page 14. 21 Now, this is one of many conclusions that the 22 adjudicator reached in relation to Russell Road, but his 23 conclusion here is recorded as: 24 "I conclude that the Contract provides that Infraco 25 delivers the Infraco Works comprised in the Employer's 99 1 Requirements for the Contract Price, including the 2 Construction Works Price, being expressly a fixed lump 3 sum save adjustment in accordance with the Contract. I do 4 not agree that on a proper construction, 5 the Construction Works Price can be construed as 6 being solely for the Works shown on the BDDI or any similar 7 alternative construction." 8 Just looking at that second sentence there, was it 9 the contention of Infraco that on a proper construction, 10 the Construction Works Price should be construed as 11 being solely for the works shown on the BDDI? 12 A. Yes, it was, and I believe -- I don't know if it was 13 this adjudication, but there was one very specifically 14 where the Infraco's lawyer was asked about the number of 15 tram stops and the answer was: we only priced BDDI. 16 Q. How important to tie was that as a point of principle of 17 contractual construction? 18 A. Very important. 19 Q. Why? 20 A. Because if it was true that the Infraco only priced 21 BDDI, then effectively this became a re-measurement 22 contract, and effectively a cost plus contract. So the 23 Infraco could design whatever they wanted because they 24 had control of the designer, and all they had to 25 demonstrate was that the IFC drawings were different to 100 1 the BDDI, and they would automatically trigger 2 a Notified Departure. And that was their contention up 3 to this point. 4 They then modified their argument and took it in 5 a slightly different direction, but this was the -- this 6 was a fundamental issue in terms of the difference of 7 interpretation of the contracts. 8 Q. That was really my next question. 9 Up until this point was Infraco's contention that it 10 had priced only for works shown on the Base Date Design 11 Information really at the very heart of the dispute 12 between Infraco and tie about price? 13 A. Yes, it was. 14 Q. So would it therefore be fair to categorise this as 15 a conclusion of principle that went to the very heart of 16 the issue between Infraco and tie as at this point, 17 certainly, before Infraco developed its argument later 18 on? 19 A. Yes, and this more closely accords with my recollection 20 at the time. I know Counsel to the Inquiry took me 21 through this yesterday, and led me to a conclusion that 22 in fact this wasn't a good outcome for tie. That didn't 23 accord with my recollection at the time, and actually, 24 reading this section now, that does more closely accord 25 with my recollection at the time, which was that this 101 1 was not a -- that this was actually, at least in part, 2 helpful adjudication for tie. 3 Q. Just before leaving this point then, you were referred 4 to a passage yesterday in the January Tram Project Board 5 minutes. Can we look at CEC00473005. Can we go to 6 page 47, please, and blow up the two paragraphs 7 immediately above the table at the foot of that page. 8 In particular, in the passage beginning "BSC have so 9 far referred". Do you see that paragraph? 10 A. Yes. 11 Q. You were referred yesterday by Inquiry Counsel to the 12 final sentence of that paragraph. We could maybe take 13 that in the two parts that I think it falls into. 14 "A significant saving resulted (in excess of 15 400,000) on the estimate presented by BSC ..." 16 This is in relation to Russell Road retaining wall. 17 That is accurate, it's an accurate statement of what the 18 adjudicator decided? 19 A. Yes. 20 Q. Necessarily implicit in that of course is that Infraco 21 had been paid some money for Russell Road retaining 22 wall? 23 A. Yes. 24 Q. It's a saving. It's not a complete victory. 25 A. Correct. 102 1 Q. So anyone reading this would understand that there had 2 been monies paid to Infraco? 3 A. Yes. 4 Q. It's just that they didn't get paid as much as they'd 5 asked for? 6 A. That's correct. 7 CHAIR OF THE INQUIRY: Mr Fairley, that sounds like 8 a closing submission which you can no doubt make. 9 MR FAIRLEY: Thank you, my Lord. 10 What is then said is that the adjudicator agreed 11 with tie on many of the principles in dispute. 12 Now, having now had the opportunity overnight and in 13 Inquiry Counsel's further questions to you today, and in 14 light of the passage I referred you to a moment ago at 15 paragraph 65, what is your position on whether that 16 statement is an accurate or inaccurate summary of the 17 Russell Road decision? 18 A. I believe it's an accurate summary. 19 CHAIR OF THE INQUIRY: Do you consider it's a frank and full 20 disclosure of the outcome of that decision to 21 communicate to Transport Scotland in that way? 22 A. No, within the limits of what -- what can be conveyed in 23 a single sentence, it's not a full and complete summary, 24 but, as has already been pointed out, these notes were 25 not -- in my view, were not designed to be that full and 103 1 complete summary. 2 CHAIR OF THE INQUIRY: But did it not form part of the 3 report to Transport Scotland. 4 A. They formed part of the report to Transport Scotland, 5 which in turn formed part of the overall reporting to 6 Transport Scotland, which was not solely confined to 7 this report. 8 CHAIR OF THE INQUIRY: I appreciate that. Mr Fairley? 9 MR FAIRLEY: Picking up on his Lordship's point, we saw 10 yesterday that the report that went to 11 Transport Scotland was pretty much in identical terms to 12 this passage that I'm referring you to here, including 13 the table; is that right? 14 A. Yes. 15 Q. So anyone at Transport Scotland who saw this would know 16 that the Russell Road adjudication was about BDDI to 17 IFC? 18 A. Yes. 19 Q. Even if they didn't know what BDDI to IFC meant, 20 presumably they could have asked somebody in tie if they 21 were in any doubt about what that meant? 22 A. Yes, but I can't imagine that anybody in 23 Transport Scotland who had an interest in this project 24 would not know about the BDDI to IFC issue. 25 Q. The reason I ask you that question is we heard evidence 104 1 from Mr Ramsay, who was asked if he understood what BDDI 2 to IFC meant, and he said he didn't. Is it possible 3 that he didn't understand that? 4 A. It's hard to believe, given that it was such a dominant 5 issue for so long, that anyone with a knowledge of the 6 project would not know what BDDI to IFC was about. 7 Q. So anyone reading this would understand that there was 8 a Notified Departure issue in that dispute, and also 9 that Infraco had been paid money as a result of that; is 10 that fair? 11 A. Yes. 12 Q. Leaving this then and moving on to another point about 13 advice from Richard Keen, were you aware -- sorry, 14 before I ask you this question, can I maybe ask you to 15 look at a document. 16 CEC00207814. 17 We see this is an email from Joanne Glover, who 18 I think was a solicitor at DLA, and it's dated 19 23 September 2010, and it's addressed to you and others. 20 Do you see that? 21 A. I do. 22 Q. What is recorded there is that comments have been 23 received from Richard Keen on the RTN. Do you recall 24 what this is a reference to? 25 A. I don't recall this particular email, but I can deduce 105 1 from looking at it that it would appear that 2 Joanne Glover had consulted Richard Keen on the RTNs. 3 Q. Is it a fair reading of this email that it appears, at 4 least, that Mr Keen has had some involvement in the 5 drafting of the RTNs? 6 A. Yes. 7 Q. Was that your understanding at the time? 8 A. I can't be certain that -- I couldn't say specifically 9 I knew who was consulted over which RTNs. I was of the 10 impression, and it was my understanding, that the RTNs 11 had been produced with suitable legal input. 12 Now, exactly where that legal input had come from, 13 I couldn't specifically say. 14 Q. What's recorded there after the various bullet points 15 noting changes or amendments to the draft RTN is: 16 "Keen appeared comfortable with the approach taken 17 in the RTN and raised no concerns (other than the 18 amendments above). For the second time, Keen appears 19 extremely engaged on this." 20 Do you recall what that was about? 21 A. Not specifically, I'm afraid. 22 Q. This email came to you at the time though on 23 23 September 2010, didn't it? 24 A. It did. 25 Q. Should we take it that at the time you would have been 106 1 aware that Richard Keen was involved in the process of 2 drafting and revising RTNs, or at least an RTN? 3 A. Yes, certainly on reading that email, I couldn't be 4 under any other impression. 5 Q. Did it come as a surprise to you later on, after 6 Nicholas Dennys had given his opinion, that Richard Keen 7 expressed the views that the RTNs would not do the job 8 for which they had been intended? 9 A. Yes, as I've said earlier, it was surprising and 10 frustrating. 11 Q. Finally then, Mr Jeffrey, there are just a couple of 12 documents I want to ask you if I've correctly 13 identified. 14 You referred in your evidence yesterday to believing 15 that at some stage shortly after you joined tie, you had 16 produced a sort of summary of where matters had got to 17 and how they had got to that position, and I wonder if 18 I can refer you to a document, and ask you if this is 19 the document you are referring to. It's TRS00010706. 20 Sorry, do you need that reference again? It's 21 TRS00010706. 22 Thank you. 23 If we go to the foot of that page there, we see an 24 email from you to the various political party leaders 25 within the City of Edinburgh Council, dated 19 April. 107 1 Do you see that? 2 A. I do. 3 Q. What you record there is: 4 "I have been at tie for very nearly a year now, and 5 as such this provides me with a natural point to review 6 progress over the last 12 months." 7 If we then go over the next page, you give -- 8 I won't go through it all, but you appear to give quite 9 a lengthy explanation of what you have done over the 10 course of the preceding 12 months and an explanation of 11 some of the problems that have been encountered in that 12 regard; is that right? 13 A. That's right. 14 Q. If we scroll down that page, in the first bullet there 15 you're talking about DRPs. And you describe in the 16 third line there being a clear and conventional process 17 under the contract for reaching a conclusion on the 18 issue of what Infraco priced for. Do you see that? 19 A. I do. 20 Q. You then go on to say that there have been claims from 21 Bilfinger Berger that tie have lost, and you say: 22 "It is true that we did not get all the results at 23 adjudication that we would have liked, however it is 24 also true that the results do not support 25 Bilfinger Berger's extreme view of their entitlements 108 1 either." 2 Is that perhaps a reference to Russell Road? 3 A. Yes, and I think it's a summary of the -- it's 4 attempting to summarise all of the adjudication results 5 up to that point. 6 Q. Yes. 7 A. In -- within the limitations of this type of 8 correspondence. 9 Q. Is it also perhaps a reference to the fact that some of 10 the quotations put in by Bilfinger Berger were 11 significantly cut back as a result of the DRP process? 12 A. Yes. 13 Q. If I can leave that document, thank you. 14 The last document I want you to look at, please, is 15 CEC00012737. 16 I think there may be more than one page to this. 17 Could you go forward on to the second page, please. 18 What I'm looking for is -- I'm sorry. I think I've got 19 the wrong -- no, I've got the right document number, 20 yes. 21 On page 2 of this, there is an email from you to 22 various people, Council officials, Council employees, 23 and also individuals within tie. Do you see that? 24 A. I do. 25 Q. You begin with the paragraph that reads: 109 1 "Dear all, there is much to be done over the next 2 few weeks if we are to be in a position to recommend 3 termination of the contract ... Of course no decision 4 has yet been taken that this will be our recommendation, 5 but it is prudent that we plan for such an eventuality." 6 Do you see that? 7 A. I do. 8 Q. Was this the email that you were referring to earlier 9 when, in response to Inquiry Counsel's question about 10 a suggestion of hurtling, you said that you recalled 11 seeing an email timed at around the same time as that 12 allegation against you was made? 13 A. That's correct. 14 Q. Is this the email that you were talking about? 15 A. It is. 16 MR FAIRLEY: Thank you. I have no further questions, 17 my Lord. I'm grateful for the opportunity to be able to 18 ask those questions. 19 CHAIR OF THE INQUIRY: Mr Martin? 20 Examination by MR MARTIN 21 MR MARTIN: Thank you, my Lord. Just one matter arising out 22 of your evidence at the end of questions from my learned 23 friend Mr Lake. 24 Mr Jeffrey, you said in the context of the sum 25 agreed as a result of the Mar Hall mediation that, as 110 1 far as you were concerned, the so-called potential 2 amicable divorce bill of GBP40 million, together with 3 the cost which would be incurred in a re-tendering and 4 carrying out of the remainder of the contract by another 5 party, would have been less, in your judgment, or might 6 have been less in your judgment, than the sum agreed at 7 Mar Hall; is that a correct understanding of your 8 evidence? 9 A. Yes, that's what I said. 10 Q. Now, is it reasonable also to bear in mind that at that 11 point, if that procedure had been adopted, first, there 12 would be uncertainty about the actual cost for the 13 carrying out of the balance of the work, and secondly, 14 there would be delay in the carrying out of the balance 15 of the work by such new contractor as was appointed. 16 A. That is correct, yes. 17 Q. Do you agree that that delay would mean that the works, 18 in the state that they were, at the point of the 19 so-called amicable divorce, would remain as not being 20 worked upon? 21 A. Yes, during the period -- if -- it would depend entirely 22 on what was included within the amicable divorce, but 23 there would clearly be a point where no work was 24 happening whilst the work was retendered. Depending on 25 how it was retendered and the nature of the amicable 111 1 divorce, that could have been kept to a minimum, but 2 there's certainly the possibility it would have caused 3 some additional delay. 4 Q. Yes, but in the event of that delay, the works would 5 have remained in the state that they were at the point 6 of the amicable divorce. Physically speaking, what 7 state were the works in at about the point in March 2010 8 when agreement was -- 2011 when agreement was reached? 9 A. My recollection is that because there hadn't been any 10 additional on-street works, that there would have been 11 relatively little disruption to the city at that point, 12 and that there would clearly be an element in certain 13 areas of making safe and making -- mothballing, if you 14 like. But that in my view could all have been included 15 either in an amicable divorce or in some form of interim 16 contract that could have been let very quickly. 17 Q. Well, as I understood your position to be, you simply 18 took the GBP40 million amicable divorce figure, and your 19 expectation of what a re-tendering exercise would result 20 in, totalled those together and said they were less than 21 the total that was agreed at Mar Hall. Can we now 22 agree, Mr Jeffrey, that in fact you would have to take 23 into account both the financial consequences of delay 24 and/or dealing with disruption and also the physical 25 consequences within the city of uncompleted works 112 1 perhaps for a period of months, if not longer? 2 A. In my evidence I was -- I was summarising. There is 3 a document within -- on the database that sets out 4 a full list of all those works that would have been 5 required if we had gone down the amicable divorce route, 6 including the cost of re-tendering, including the 7 overhead costs that would have been carried on and so on 8 and so forth. 9 So all of that was included in my assessment. For 10 simplicity and shorthand purposes, I only picked on two 11 of the items in my evidence today. But my opinion was 12 based on a full list of what would have been required. 13 Q. In financial terms? 14 A. Yes. 15 Q. What additionally is to be taken into account is the 16 fact that the works would simply have been in their 17 pre-existing state -- that's to say at the point of 18 amicable divorce -- until a point at that stage 19 undetermined that these works could be completed by 20 someone else? 21 A. That is correct. 22 MR MARTIN: Thank you very much. 23 Thank you, my Lord. 24 Questions by CHAIR OF THE INQUIRY 25 CHAIR OF THE INQUIRY: Mr Jeffrey, at the beginning of your 113 1 evidence today, you referred to -- you were referred to 2 a minute of a meeting between you and, I think, four 3 Council officials, dated 16 March of 2010. I don't know 4 if you remember -- 5 A. I recall, yes. 6 CHAIR OF THE INQUIRY: In that minute it's disclosed that 7 tie had not challenged any of the adjudication 8 decisions. So that was a decision which had been taken 9 by 16 March, but it appears that the first time that's 10 recorded in the Tram Project Board minutes is 25 June. 11 If that's right -- it may not be, but if that is 12 right, are you able to explain the delay? 13 A. I think the -- the decision to not take any -- not to 14 challenge any of the adjudications was a decision that 15 evolved over time, and to a certain extent it was -- it 16 was not a decision that once made could never be unmade. 17 I think there was some time limitation on it, so 18 eventually, if you didn't challenge them, you would lose 19 the right to challenge them. 20 So I think it was an interim decision, perhaps. 21 It's also possible that it simply didn't get recorded 22 through an oversight. 23 CHAIR OF THE INQUIRY: Thank you very much. 24 That concludes your evidence. You're still subject 25 to the citation, so you can be recalled if anything 114 1 arises. Hopefully that won't be necessary. 2 In the meantime, you're free to go. Thank you for 3 your attendance today and yesterday. 4 A. Thank you. 5 (The witness withdrew) 115 1 INDEX 2 PAGE 3 MR RICHARD JEFFREY (continued) .......................1 4 5 Examination by MR LAKE (continued) ............1 6 7 Examination by MR FAIRLEY ....................82 8 9 Examination by MR MARTIN ....................110 10 11 Questions by CHAIR OF THE INQUIRY ...........113 12 13 MR TONY RUSH (sworn) ...............................115 14 15 Examination by MR LAKE ......................115 16 17 Questions by CHAIR OF THE INQUIRY ...........186 18 19 20 21 22 23 24 25 190