1 Thursday, 7 December 2017 2 (9.30 am) 3 MR AXEL EICKHORN (continued) 4 Examination by MR MCCLELLAND (continued) 5 CHAIR OF THE INQUIRY: Good morning. You're still under 6 oath. 7 A. I understand, my Lord. 8 CHAIR OF THE INQUIRY: Mr McClelland? 9 MR MCCLELLAND: Thank you, my Lord. 10 Could you please have on screen document 11 CEC00183919. If we could go, please, to page 29. Do 12 you remember, Mr Eickhorn, that we looked at this 13 yesterday? 14 A. Yes. 15 Q. This is the first Project Carlisle Proposal from the 16 consortium. We see in that breakdown of the 17 consortium's proposed price a figure there for Change 18 Orders of GBP5.3 million. 19 A. Yes. 20 Q. If we could move, please, to page 32, do we see there 21 a list of Change Orders totalling GBP5.3 million? 22 A. Yes. 23 Q. So is that a breakdown of the Change Orders which formed 24 the GBP5.3 million we saw on the last sheet? 25 A. Yes. I can't say just now if all of these had been 1 1 finally agreed with the client. I have a figure in mind 2 of around 4 million of Change Orders that had been 3 agreed with the client between contract signature in 4 May 2008 and the time of that proposal. 5 Q. But this list of Change Orders here, were those the only 6 changes that Siemens sought payment for in the Project 7 Carlisle Proposal price? 8 CHAIR OF THE INQUIRY: Can we make it bigger to make it 9 easier to read? 10 A. I don't think so, because if -- we could probably go 11 back to the first page, because from what I see just 12 now, I don't think the -- our claims for the extension 13 of time are not included in those figures. These appear 14 to be changes more of a technical nature and not 15 a time-related nature. 16 MR MCCLELLAND: If this list doesn't include the extension 17 of time claims, is this a complete list of the Change 18 Orders relating to a change in Siemens' scope? 19 A. That were known at the date, yes. 20 Q. Yes, okay. Thank you. 21 Bear with me a moment, please. (Pause) 22 What you say in your statement -- I don't think we 23 need to go to it, but at page 23, paragraph 39 for the 24 record, you say that circa 100 of circa 850 of the INTCs 25 raised before the Mar Hall mediation related to Siemens 2 1 directly. These represented an increase claimed by 2 Siemens of approximately GBP35 million. 3 What I was wondering is if 100 of the INTCs related 4 to Siemens directly, why there were only the 20 or 30 5 that we saw in the list there. 6 A. I think the explanation is that there were more items 7 that were still under discussion, and in a kind of 8 preliminary stage, and the numbers -- I mean, the 9 multitude was probably around 100. The biggest 10 individual elements would have been the extension of 11 time claims. 12 Q. So when we see the shorter list in the Project Carlisle 13 Proposal, does that indicate that Siemens in respect of 14 scope were seeking payment for fewer changes than they 15 had intimated to tie beforehand? 16 A. I think there were more items than indicated here, but 17 they had not been agreed at the time and were still 18 under discussion and not decided. So I think that is 19 the nature of that list. 20 Maybe it would be helpful to go back to that first 21 overview of that -- in that document. 22 Q. Okay. That's document CEC00183919. 23 I think it was page 29. 24 Was that the page that you wanted to see? 25 A. Yes. yes, I think that line that says Change Orders 3 1 here, where we saw the list, these were the more or less 2 known and determined items at the time. Everything else 3 was wrapped up in that third line, the 26 million. 4 Q. Okay. So if we wanted to have an indication of the 5 price placed by Siemens on changes to their scope of 6 works, is that figure of GBP5.3 million an accurate one, 7 or is the figure higher than that because some of it is 8 wrapped up in the other part of the price? 9 A. Okay. Without looking into the details of those 10 figures, I would think that -- that there was 11 a potential that more changes would occur during the 12 development of the project. At that time design was 13 still ongoing. Scope clarifications with the client 14 were still ongoing. So I think the possibility of 15 additional changes was always there, but I think the 16 degree to which they could be determined at the time was 17 not sufficient to include them in this proposal. 18 However, all the known facts to date, we endeavoured 19 to include in that proposal to give the client the best 20 price certainty possible at the time. 21 Q. Okay. So I understand that there were changes that came 22 after the Mar Hall settlement, and I think we have other 23 documents which give us an indication of those. 24 As at the time of this proposal, was the 25 GBP5.3 million the best estimate of the value of any 4 1 changes in Siemens' scope? 2 A. For the scope related changes, yes. There were -- the 3 other figure I mentioned already is time-related impact. 4 That is a different story. 5 Q. Yes, thank you. 6 If we could go to page 33, please. His Lordship 7 asked you yesterday about what the charge was for 8 additional components. That document there appears to 9 be a breakdown of the additional components. 10 Can you just -- can you recall what these were 11 needed for? 12 A. The first item there, the Urban Traffic Light Control, 13 that is an item that in the original contract was listed 14 under the provisional sums, and we -- at the time we 15 sought to include that scope as part of the fixed price 16 Carlisle Proposal, if you like. 17 The second item were finials on OLE poles in the 18 on-street section, and that was a client requirement, if 19 I remember correctly, to have the street lighting on top 20 of the OLE poles which had not been foreseen in the 21 original proposal, in the original scope of the 22 contract. 23 Q. Okay, thank you. 24 Could we please have document TIE00667410. Now, 25 this, Mr Eickhorn, is the second Carlisle Proposal from 5 1 the consortium, dated 11 September 2010. Again, were 2 you involved in the pricing of this proposal? 3 A. I think I had more involvement in this one, in the 4 second one. 5 Q. If we could just go to page 63, please. 6 We see here the Project Carlisle scope, and the 7 first paragraph reads: 8 "As previously stated we have updated this Revised 9 Proposal to reflect the scope Infraco will be able to 10 agree on. In essence, we will carry out the works shown 11 on the GMP Drawings for scope of work between the 12 Airport to Haymarket and the enabling works." 13 So the scope of this proposal was shorter than the 14 scope of the first Carlisle offer which went to the east 15 end of Princes Street; is that correct? 16 A. Yes, I think that's correct. Before we had this term -- 17 termination point, I think it was, and that was in a not 18 defined location somewhere in the city centre, and this 19 does relate to the scope up to Haymarket, yes. 20 Q. Okay. So the key point is this is for a shorter line 21 than the first proposal? 22 A. Yes, as it seems. 23 Q. We don't need to go to it, but at page 70 of this 24 document, it confirms that once again this proposal 25 includes Siemens materials and equipment for the section 6 1 to the east. So beyond the line that was being built. 2 If we could go, please, to page 28, this is 3 a section giving the breakdown of Siemens price 4 proposal, and if we just move forward to page 29, 5 please, we see at the bottom there the total proposed 6 price is GBP118 million. So this is a shorter scope 7 than the previous proposal, and one would expect the 8 price to be lower, and we see that it is. 9 Can I just ask, in the previous proposal we saw 10 a detailed breakdown of the price, but in this proposal, 11 this sheet is all we have. 12 So can you explain why that was done in that way, 13 without the detailed breakdown? 14 A. I can't remember why this was presented in 15 a different -- different way. I can't remember the 16 reasons for that. 17 Q. Do you agree with me that it makes it difficult to 18 compare this proposal with the first Carlisle Proposal? 19 A. At first sight potentially, but, I mean, there was 20 always the option to -- to investigate from the client 21 side. So necessarily yes, at first sight of course, but 22 there was always the possibility to -- to substantiate 23 the proposal. So ... 24 Q. Yes. In the last proposal that we saw, you will recall 25 yesterday there was a breakdown that showed us where 7 1 there were additional costs and where there were savings 2 and so on. But this proposal doesn't give us that 3 breakdown. 4 A. It doesn't, but I suppose it could have been produced. 5 I don't know if it was at a later stage produced or not. 6 I don't recall that. 7 Q. Okay. 8 If we could turn now to document BFB00053258. 9 This is the consortium's Project Phoenix Proposal 10 dated 24 February 2011. We know from other witnesses 11 that this formed the basis of discussions at the 12 mediation at Mar Hall. Is that your recollection? 13 A. Yes, this was the proposal which -- was the proposal 14 made before -- yes, the mediation started and on which 15 basis the mediation took place. That's correct. 16 Q. If we go, please, to page 141, we see there this is the 17 scope of the proposal. The first paragraph, just 18 reading from the second sentence: 19 "In essence, Infraco will carry out the works shown 20 on the PPP Drawings for the scope of work between the 21 Airport and Haymarket (East end of Haymarket Viaduct), 22 and the Enabling works in Section 1A etcetera." 23 Can you just confirm, Mr Eickhorn, that the scope of 24 this proposal was the same as the second Carlisle 25 Proposal that we looked at a moment ago? 8 1 A. I think largely it would have been the same, yes. 2 Q. If we go, please, to page 27, this is the Siemens 3 Proposal, and we see down at the bottom that the 4 proposed price here is 136.8 million. Do you see that? 5 A. Yes. 6 Q. So there's an GBP18 million increase from the Carlisle 2 7 Proposal. Can you explain what accounts for that 8 increase? 9 A. I can only assume that this would have been 10 a time-related impact. 11 Q. So I think I'm right in saying that the time period 12 between the second Carlisle Proposal and this Phoenix 13 Proposal was about five months. So are we to understand 14 that that five months of delay came with a cost of 15 GBP18 million for Siemens' element? 16 A. It seems a lot, but the detail I cannot remember as of 17 just now. 18 Q. Yes, because it would break down at about GBP3.5 million 19 in delay cost per month. Is that more or less than the 20 cost for Siemens of being on the project for a month? 21 A. As I cannot remember what the basis of the -- what the 22 programme was in the first -- in the second Phoenix 23 Proposal, it's hard for me to tell. But the cost -- the 24 monthly running cost would have been lower. So I am 25 fairly confident that the price difference here is not 9 1 only an effect of the -- of the cost of time and 2 resources. 3 Q. So -- yes, for something else other than delay? 4 A. Yes. 5 Q. Can you recall even in broad terms the approximate 6 monthly cost for Siemens of being on site? 7 A. Sorry? 8 Q. Can you recall what it cost for Siemens to be on site 9 for a month? 10 A. It fluctuated a bit. I mean, we submitted the detail of 11 that in large detail to tie at the time, and the -- the 12 rates in the -- in the Settlement Agreement which 13 I cannot recall from the top of my head just now, but 14 they reflected -- gave a good impression or reflected 15 fairly the cost of Siemens for a month of extended 16 project execution. 17 Q. Okay. But do we understand it was quite a bit less than 18 GBP3.6 million? 19 A. Yes, that's why I -- I would have to look -- check the 20 detail of that build-up, but I assume that could have 21 been -- must have been some other influence. 22 Q. Okay. 23 Now, we see that the breakdown of the price is 24 presented in a third way. Can you explain why it was 25 done differently again? 10 1 A. From memory, we ran different scenarios of how the works 2 could be implemented, and different ways of looking at 3 things, the cost build-ups, et cetera. So this had 4 developed over time, and the end product was a slightly 5 different form of presentation. 6 I remember having discussions about the -- about the 7 build-up of the prices and the impacts with tie 8 personnel. The presentation of the price and front page 9 was never something that was of particular concern. 10 Q. Do you recall who you discussed the price with at tie? 11 A. Yes, the time element I discussed with Dennis Murray in 12 tie. He was, I think, the finance -- no, the 13 commercial -- principal quantity surveyor, I think he 14 was. 15 Q. Okay. It may be that these figures appear differently 16 to a quantity surveyor, but to the -- to the lay person 17 in this context, one can say that if you look at the two 18 Carlisle Proposals and then the Phoenix Proposal on this 19 front page sheet, it's actually very difficult to 20 compare one with the other. Do you accept that? 21 A. I accept that, but for our client with additional 22 detail, I think that would have been understandable what 23 was the detail and the rationale of that. 24 Q. Was it your impression that Mr Murray understood the 25 development of Siemens' price across the two Carlisle 11 1 Proposals and the Phoenix Proposal? 2 A. I would -- I think so. In particular I remember that 3 I think he understood very well that the greatest 4 problem in terms of cost for Siemens was the time 5 impact, because I had discussions with him about the 6 resources, the cost attached to those resources, and we 7 provided a lot of additional information to substantiate 8 our proposal at the time. 9 Q. We see down at the bottom of that list, an entry for 10 changes where it's GBP2.165 million. Do you see that? 11 A. Yes. 12 Q. If we go to page 28, we see the detailed breakdown of 13 that. 14 Both of the Carlisle offers, the entry for Change 15 Orders had been over GBP5 million. Are you able to 16 explain the reduction? 17 A. When looking at the list now, I think the content is 18 slightly different. I just -- by way of observation, 19 it's been a long time since I saw these lists for the 20 last time. 21 Q. Of course. 22 A. In the other one, for example, there was -- included 23 extension of time number 1, which doesn't appear on that 24 list. So I think we have a different list of changes. 25 From memory, I think that those changes here were 12 1 the ones that had been identified in the meantime 2 between the two proposals, and that were proposed here 3 to fix the price at the bottom line, at the bottom line 4 figure. 5 Q. Okay. I'm just trying to get an understanding of the 6 cost of change in the scope of Siemens' works. 7 I wondered whether it was fair to take the figure of 8 GBP2 million as shown on this sheet as a broad 9 indication of the cost of scope change for Siemens. Is 10 that fair? 11 A. Scope change in relation to technology, materials, 12 equipment, requirements, but not in relation to time. 13 Q. Yes. Excluding anything to do with time. 14 A. Yes. 15 Q. Thank you. 16 A. Again, at the time it was still possible to have 17 changes, because in my understanding still utility 18 diversions were going on, design was being developed, 19 approvals and consents were still coming in or 20 outstanding. So it was the best estimate made at the 21 time to fix the price to the -- to the scope known to 22 date. 23 Q. Thank you. 24 Now, I think I should probably just note for the 25 record that in your statement you've indicated that the 13 1 Phoenix Proposal, I think both for Siemens and 2 Bilfinger, included all of the claims that they 3 considered themselves to have accrued under the Infraco 4 contract to date. 5 A. Yes, that was certainly the purpose. That's correct. 6 The idea of the Phoenix Proposal was to give the client 7 more price certainty, taking into account all the 8 knowledge that we had acquired at that point in time, 9 and also -- this also is expressed in the -- in the 10 reduced number of Pricing Assumptions that were -- if 11 you compared those proposals with the original -- with 12 the original contract. 13 Q. I just want to look for the moment at the understanding 14 of Siemens' price that the other side had. 15 If we could go, please, to document BFB00094604. 16 If we could go, please, to page 4, first of all. 17 Now, we see, about halfway down the page, there's an 18 email from Brandon Nolan of McGrigors to 19 Fraser McMillan. Are you familiar with those 20 individuals? 21 A. Not -- I cannot really recall them, no. 22 Q. Well, these were the solicitors acting for the parties 23 in the run-up to the Mar Hall mediation. 24 If we just read from Mr Nolan's email he says: 25 "Fraser, with regard to Infraco's Project Phoenix 14 1 Proposal Price, tie and CEC would request more detailed 2 information in relation to Siemens' PPP Price 3 Breakdown." 4 That was the document that we looked at a moment 5 ago: 6 "Siemens' PPP of circa GBP136.5 million is double 7 Siemens' original price of GBP68 million (Airport to 8 Haymarket). It is not clear what the basis for this 9 increase is. There is no Schedule Part 4 Pricing 10 Assumption 1 issue in relation to Siemens' work which 11 has undergone little change since tender." 12 Just pausing there, I think from your previous 13 answers, you would agree that there wasn't a Pricing 14 Assumption 1 issue in relation to Siemens' work; is that 15 correct? 16 A. There wasn't -- sorry, again? 17 Q. There wasn't any issue arising from Pricing Assumption 1 18 in Schedule 4 of the Infraco contract, bringing about an 19 increase in Siemens' price; is that correct? 20 A. Pricing Assumption number 1 in the Infraco contract was 21 the Base Date Design Information. 22 Q. Yes. 23 A. I cannot positively exclude that there had been impacts 24 from design changes to the -- compared to the BDDI, no. 25 Q. If there was an impact, did it have a significant impact 15 1 on the cost of Siemens' works? 2 A. A significant impact was the time-related cost, as 3 I tried to explain earlier, and this analysis here is 4 fundamentally flawed in my point of view, because it 5 disregards -- it tries to calculate a price in relation 6 to a length of line, completely ignoring that the 7 original contract period had already expired at this 8 point of time. 9 Q. That's really my point, because these individuals are 10 trying to understand Siemens' price proposal, and 11 obviously you understood it because you knew how it had 12 been calculated, but it was difficult for others to 13 understand the basis of Siemens' price increase from the 14 way it was presented in the Phoenix Proposal. 15 A. If that was the case, then I don't understand why that 16 was the case, because during the course of the project, 17 we had gone to great -- a great deal of effort to -- to 18 develop and present our methodology of pricing the 19 impact of the delays, and all that information was 20 accessible to the client. 21 So it seems to suggest that this information had not 22 been passed on to the people that are on that email. 23 Q. Okay. So your evidence is that you had explained the 24 price fully to the quantity surveyors within tie? 25 A. That would have been part of our submissions. 16 1 I remember very well that the question of the resources 2 that we had deployed on the project and the cost of 3 those resources had been discussed in great length, and 4 one of the -- one of the topics I very well remember is 5 that the question of rates that represented a cost of 6 those resources, and even before the Phoenix and even 7 the Carlisle Proposals, we had our rates audited by 8 external firms to confirm that what we put -- had put 9 forward represented the true cost of those resources, 10 and these reports, if I remember, they were accessible 11 and known by the client, and I think the rates per se 12 were -- had been accepted as true and fair. 13 Q. Thank you. 14 If we could move just further up the chain to 15 page 3, we have just in the middle of that page, we have 16 an email from Anne Houston on behalf of Brandon Nolan. 17 He's saying -- this is another attempt to explain their 18 understanding of the price: 19 "tie's calculation of the Siemens figures are 20 deduced from the Siemens' CPA which totals 21 GBP96.9 million. tie's breakdown on a pro rata basis is 22 as follows." 23 Then we see a breakdown of various figures. He 24 says: 25 "As previously indicated, without further 17 1 information in relation to Siemens' PPP Price Breakdown, 2 meaningful analysis of it is not possible." 3 I think from your previous answer, you would say 4 that that was not an appropriate way to assess the cost 5 of Siemens' works between the airport and Haymarket? 6 A. Yes, any pro rata breakdown in this situation was not -- 7 not an appropriate way of analysing the price, I agree. 8 Q. But we see this email is dated 4 March and the mediation 9 began a few days later than that. 10 Based on your discussions with Dennis Murray, are 11 you surprised at that analysis of Siemens' price? 12 A. Maybe surprised is -- yes, I am surprised. I mean, 13 I can only reiterate. I mean, a lot of information had 14 been submitted also by -- I think by way of formal 15 communication, formal correspondence, in terms of the -- 16 the time impact had been well communicated. I mean, 17 these -- in the course of the -- what was referred to 18 the MUDFA claims, so I think there was a lot of detail 19 available. 20 So yes, I am kind of surprised that this information 21 was not taken into account when I read these emails, 22 which I have never seen before, by the way. 23 CHAIR OF THE INQUIRY: Can you recall if anyone contacted 24 you after -- about this time to say that the lawyers 25 were seeking clarification? 18 1 A. What I do remember is -- and that is -- by memory, the 2 most -- well, we had this process I earlier described 3 to -- to substantiate our rates, and the audits. That 4 was -- that was before mediation. 5 I remember going through that exercise again, but 6 after mediation, when we were discussing the on-street 7 works price, which again was heavily influenced by the 8 time element of that -- of that piece of the line, and 9 not so much by the works. 10 CHAIR OF THE INQUIRY: So the answer is no, you don't 11 remember anyone coming to you or asking you for 12 information to enable the solicitor acting for the 13 consortium at the mediation to respond to the question 14 by the solicitor on behalf of tie? 15 A. I cannot remember anything in particular, no. I must 16 say, though, that at the time shortly before the 17 mediation, I myself, I was ill at home, due to an 18 accident. So I can -- it could be that someone else 19 received such enquiries, but I'm not aware of them. 20 CHAIR OF THE INQUIRY: Thank you. 21 MR MCCLELLAND: Do you recognise the name Tony Rush? 22 A. Yes, but I have never met him in person. 23 Q. Okay. Were you aware of his role for tie in relation to 24 the project? 25 A. I understand he was a consultant to tie. 19 1 Q. You say that you never met him. Were you ever involved 2 in supplying information to him about Siemens' price? 3 A. Not directly. It could be that some information that 4 I produced was forwarded to him, but I had no direct 5 contact with Mr Rush. 6 Q. As far as you were aware, did Siemens pass pricing 7 information to Mr Rush? 8 A. I don't know that. 9 Q. Don't know. 10 If we could just look briefly at his statement to 11 the Inquiry, which is TRI00000141_C. If we could go to 12 page 9, please. At the second paragraph down, this is 13 Mr Rush discussing the Project Carlisle Proposals from 14 Siemens. What he says is: 15 "We analysed the differences between tie's offer and 16 Infraco's counter offer. The difference in relation to 17 Siemens' work was disproportionately higher than 18 Bilfinger Berger's. I think I regarded both sums as 19 being 'negotiable claims'. Because Siemens' work 20 content was substantially unchanged from BDDI my 21 reaction was that their element was largely 22 opportunistic and likely intended to correct tender 23 errors." 24 What's your response to that comment? 25 A. I think there are various aspects. Again, seeing this 20 1 for the first time, but my response now would be that 2 the second sentence, that the difference in relation to 3 Siemens' work is disproportionately higher, again 4 ignores the impact of the time-related cost that we had 5 suffered, and in comparison with Bilfinger's scope, 6 ignores the fact that the Siemens scope of work was 7 more -- I mean, the cost for that was more contingent on 8 time than maybe construction works. 9 I don't think -- substantially unchanged from BDDI 10 in relation to Siemens' work, I wouldn't agree to that. 11 It is true that the Base Date Design Information 12 informed the Siemens scope to a lesser extent, and 13 comparing the two elements of works, ie Siemens and 14 Bilfinger, I think the technical changes were less in 15 proportion. But to say substantially unchanged, 16 I wouldn't agree, and again, it ignores the fact that 17 our real problem was the -- was the thickening and 18 length of providing resources. 19 Q. Okay. Perhaps the most striking of Mr Rush's comments 20 is that Siemens' price was largely opportunistic and 21 likely intended to correct tender errors. 22 A. Okay. Opportunistic is -- I don't entertain any kind of 23 that language. I think we put forward a very -- very 24 fair proposal which was fair also in relation to the 25 scope and the time that had passed. 21 1 Tender errors, I myself am not aware that there had 2 been any significant tender errors that required 3 correction through any -- through reclaiming money from 4 the client, through false pretence. I really don't 5 understand these comments, and I don't think they are 6 true and fair. 7 Q. But do you accept that the consortium were in a strong 8 negotiating position before Mar Hall? 9 A. I wouldn't phrase it that way. I think it made sense 10 for all parties to find a way to continue the contract. 11 It was in fact seen as a major risk for Siemens that the 12 contract would end up in a termination scenario, whether 13 rightful or not. I mean, that was a different question. 14 But the intention was clearly to continue and to 15 compromise to get the scheme built. 16 Q. Thank you. 17 CHAIR OF THE INQUIRY: I appreciate that, but I think the 18 question was: did you consider that the consortium were 19 in a strong negotiating position -- 20 A. No, I didn't. 21 CHAIR OF THE INQUIRY: -- when you went into Mar Hall? 22 A. No, my Lord, I didn't, because at the time we were 23 willing to compromise on what we had put forward. 24 I think at the time -- I mean, we had put forward what 25 we believed to be fair and reasonable, and at the same 22 1 time we were willing to compromise to be able to 2 complete the project that we had come to build. 3 MR MCCLELLAND: If we could look briefly at your statement, 4 please, which is TRI00000171, thank you, at page 70, 5 paragraph 167. Just reading from 167, you note -- 6 you're talking here about the Heads of Terms agreed at 7 Mar Hall: 8 "The Heads of Terms included an agreed price of 9 GBP362.5 million for the Off-Street Works, certain 10 enabling works and the prioritised works. That figure 11 was based upon the price set out in the Phoenix 12 Proposal, less concessions made as part of the 13 negotiations. It is difficult to say to what extent the 14 Off Street works price agreed included a payment to 15 settle claims which the Consortium considered had 16 accrued to it under the Infraco contract. A commercial 17 negotiation took place and there is no detailed analysis 18 that I am aware of which attributes a specific figure to 19 the Consortium's claims. I do not know to what extent 20 the value of those claims were analysed, discussed and 21 agreed, and am not aware of any such analysis having 22 been recorded anywhere. The concessions made in the 23 settlement do not reflect any perceived weakness in the 24 Consortium's claims. In my opinion, however, the 25 settlement reached was adequate to recover an 23 1 appropriate portion of Siemens' rightful claims (but not 2 all of them) considering the potential consequences in 3 case of not finding a settlement." 4 Does that remain your position? 5 A. I think I've said the same thing in slightly different 6 words before. So I -- I stand to what I said there, 7 yes. 8 Q. If we look, please, at document SIE00000184, are you 9 familiar with this document? 10 A. Yes, I am. 11 Q. I think we see in the first column of numbers, which is 12 the second column from the left, those are the figures 13 from the Phoenix Proposal. 14 A. Yes. 15 Q. Then the red figures in the column to the right of that, 16 those are the discounts accepted by the consortium at 17 Mar Hall? 18 A. Correct. 19 Q. Then the following column are the figures from the 20 Settlement Agreement for the off-street works. So we 21 see there that Bilfinger Berger accepted a discount of 22 GBP10 million on their proposal and Siemens, 23 GBP11 million from their proposal. Does this suggest 24 that the consortium were largely successful with all of 25 the claims they'd made under the Infraco contract prior 24 1 to the mediation? 2 A. I'm speaking for Siemens now, because the commercial 3 aspects of the -- of the project were of course managed 4 by the respective companies. So speaking for Siemens, 5 it was not a sense of being successful. It was more 6 a sense of relief that we could find a position that 7 enabled the project to continue, and to get a fair 8 proportion of the claims and additional costs that we 9 had put forward recovered. But success at the time, it 10 was -- it was seen as a success that things were in 11 a position to move on. 12 Q. Did you come out of the mediation feeling as though the 13 consortium had won? 14 A. No. Definitely not. But there was a great sense of 15 relief, I think, throughout the team, and I think there 16 was still a bit of scepticism because all the new 17 methods of working and collaboration with the client 18 still had to be implemented and tested, but at the time 19 I think there was a sense of relief that a way had been 20 found to continue with the project. 21 Q. What you say in paragraph 167 of your statement, and we 22 don't need to bring it up on screen, you say: 23 "In my opinion, however, the settlement reached was 24 adequate to recover an appropriate portion of Siemens' 25 rightful claims, (but not all of them)." 25 1 Can we take it from that that Siemens did not make 2 a loss on the project? 3 A. At the time when the settlement was made, I think we 4 were still anticipating an overall loss on the project. 5 Q. And at the conclusion of the project? 6 A. At the conclusion of the project, I think our situation 7 had gradually improved, but if I may say that, this was 8 not the best project in Siemens' history. 9 Q. Was the commercial outcome for Siemens at the end of the 10 project better or worse than had been anticipated at 11 financial close? 12 A. I can't recall that. 13 Q. Just looking again at the document that's on screen, if 14 you look at the fourth and the fifth columns together, 15 the fourth column is the one headed up "Off-Street Works 16 Price", and then the one to the right of it is the 17 on-street works price. These are, you can take it from 18 me, the prices that appear in the Settlement Agreement 19 from September 2011. 20 If we just look at the Siemens line, there's a price 21 of GBP125 million for the off-street works and 22 12 million for the on-street works. So that gives 23 a total of about GBP138 million. 24 If we compare that to the -- you will recall the 25 figure of GBP96 million being Siemens' share of the 26 1 original Infraco price. There's an increase of about -- 2 I think it's about GBP46 million. 3 A. Yes. 4 Q. I think from your evidence nearly all of that was 5 attributable to the cost of delay? 6 A. Yes, a significant portion of that was. 7 Q. You may not be able to answer the questions about 8 Bilfinger, so don't speculate if you can't, but their 9 figures, GBP221 million for the off-street and 10 GBP34 million for the on-street, so the increase in 11 price for them is around GBP120 million from the 12 original Infraco price; does that seem about right? 13 A. Yes. 14 Q. Was their increase a combination of both delay and 15 change in the scope of their works? 16 A. I think it's fair to assume that that was the case, yes. 17 Q. Was there a higher proportion of their increase 18 attributable to scope change than was the case for 19 Siemens? 20 A. By the nature of their work, I would expect that 21 a higher proportion was directly related to scope 22 changes than to time-related changes, but that really is 23 for Bilfinger to answer. I have no insights in their 24 detailed financial analysis of the project. 25 Q. Okay. If we focus for the moment on the delay costs, 27 1 the increase attributable to delay, in your view could 2 anything have been done on the project to avoid or 3 reduce those? 4 A. The main contributing factor, in my point of view, were 5 the ongoing utility diversions, and these halted the 6 works on the critical path, resulting logically in the 7 delays that we saw. 8 So any way of dealing with those proceeding utility 9 works would have helped a lot, and this was in this 10 contract the client responsibility, and the client 11 probably could have ensured that the sites had been 12 handed over in the shape and form where they were ready 13 for the construction works for the tram to commence. 14 Q. Let's imagine that all the utility works had been 15 completed before the contract began. In your view would 16 some delay still have occurred? 17 A. I cannot entertain that kind of speculation, but again, 18 the utilities were the most major contributing factor. 19 So I think it's fair to assume that less delays would 20 have occurred. There were other problems, though, in 21 terms of other inputs to be provided. It's difficult to 22 say. 23 Q. Now, if we could go to document CEC02084685, please. If 24 we just look at paragraph 5 in that list, it says: 25 "Price ..." 28 1 I should say, this is the list of key points of 2 principle agreed at Mar Hall. It says there: 3 "Price includes all Siemens materials and equipment 4 to Newhaven." 5 So that includes the stretch beyond York Place. We 6 had some discussion about this yesterday. I'm just 7 going to read from your statement. I don't think we 8 need to bring it up on screen. Page 72, paragraph 175: 9 "The price of GBP362.5 million also included all 10 Siemens’ materials and equipment to Newhaven. There was 11 an extensive list of materials that were transferred to 12 CEC in an inventory provided under cover of a letter 13 from the Consortium to CEC ... There were some materials 14 that could be cancelled and in those circumstances, it 15 was agreed that the items would not be supplied, and the 16 Consortium would give credit for those items against the 17 price." 18 Then reading on a little bit further: 19 "Furthermore, CEC did not want to cancel them in the 20 event that they could be used in the near future as part 21 of the secondary phase, (Phase 1a of this Project." 22 The way that's put there, suggests that the Council 23 have got some but not all of the materials and equipment 24 that are needed to build the line to Newhaven; is that 25 correct? 29 1 A. At the point in time when the Mar Hall mediation took 2 place and the Settlement Agreement was fixed, it is 3 correct what is stated here, that the price included all 4 the materials from the Siemens side of -- point of view 5 that would have been needed. 6 After we went through a cost engineering exercise, 7 if you like, and in the course of that, some of the 8 remaining orders that still could be cancelled at that 9 point in time, they were then cancelled and a credit 10 given to CEC. 11 So -- but your question was as of now, not -- not 12 all available -- not all materials are on site and 13 available to build the extension. 14 Q. Okay. Are you able to say how close the Council are to 15 having everything that they would need? Have they got 16 half the items that they would need, have they got 17 90 per cent of them? 18 A. I would -- I would probably say maybe even less than 19 half, but it's hard to tell. I mean, some things have 20 been taken into storage. There's electrical equipment, 21 that's been in storage for some time. So it would have 22 to be checked, is it still in good condition, still 23 usable, et cetera. 24 So this would have to be assessed in detail, 25 I think, in the course of planning the extension. Heavy 30 1 equipment like rails, that was -- and OLE poles, that 2 was what still would be cancelled, and we cancelled 3 that, so that would have to be re-procured. And from 4 a Siemens point of view, that represents 5 a substantial -- substantial cost, should Siemens build 6 the track again. 7 Q. So do I understand from what you said that the price 8 agreed at Mar Hall was based on the assumption that the 9 Council would buy all of the equipment required, but 10 that afterwards, there were credits given for orders 11 being cancelled? 12 A. No, any credit was not anticipated. I mean, up to the 13 point in time when the Settlement Agreement was signed, 14 we were technically under the obligation to provide all 15 materials up to -- up to Newhaven, and accordingly -- 16 yes, that was -- and that's why -- and most of the 17 orders had been placed. So the discussions about 18 cancelling some orders were later -- I think there was 19 some sort of anticipation that in the near future the 20 extension would be built. 21 Q. Was that an assumption on the part of the Council? 22 A. I can't recall that. What I do recall, that as a matter 23 of fact, we completed -- as a consortium, completed 24 design to the -- to the extent possible for the 25 secondary phase 1a, as it was referred to then. 31 1 So there wasn't -- I think there has always been the 2 plan to build it, but when is a different question. 3 Q. What you say in paragraph 175 is that CEC did not want 4 to cancel them in the event that they could be used in 5 the near future as part of the secondary phase, phase 1a 6 of this project. 7 Now, that suggests that there were some orders that 8 could be cancelled, but which the Council decided not to 9 cancel; is that your recollection? 10 A. I can only refer to the facts. I mean, that 11 cancellation then happened later, after -- after the 12 settlement had been signed as part of -- as a cost 13 engineering exercise. 14 I don't recall any discussions about cancellations 15 of orders before that. 16 Q. So it sounds as though if in the future the Council 17 decides to extend the line all the way to Newhaven, it's 18 going to have to buy materials and equipment which it 19 doesn't presently have? 20 A. Yes, that's correct. 21 Q. Will they have to buy that from Siemens? 22 A. There is no must, no. I think it would -- I think from 23 my point of view, it would make sense to continue with 24 Siemens because it is a case of extending the systems 25 that we have installed there. So for many reasons it 32 1 makes a lot of sense technically, I would even think 2 commercially, from a maintenance point of view, but it 3 is not must. 4 Q. But if the Council holds materials and equipment 5 supplied by Siemens, whatever proportion it is, for the 6 line from York Place to Newhaven, is it straightforward 7 for another supplier to supply materials that will 8 integrate with that material? 9 A. Depends on the nature of the material. I mean, 10 I suppose if there were any OLE poles, they could be 11 erected by anyone, I suppose, installing and testing of 12 switch gears is a different story, even more complicated 13 than installing of signalling equipment. 14 So it depends really on the element of work. 15 Track work, I suppose, is a very generic type of 16 work, so that could easily be done by another company. 17 So for some elements, it makes a lot of sense to 18 continue with the company that has already installed the 19 equipment, for others to a lesser extent. 20 Q. So the Council's decision at Mar Hall to buy equipment 21 from Siemens for the part of the line yet to be built, 22 does that give Siemens a commercial advantage over other 23 suppliers when it comes to supplying the rest of the 24 equipment that's needed? 25 A. It's hard to say -- 33 1 MR MACLEOD: My Lord, I'm sorry to interject at this point, 2 but I do wonder what relevance this line of questioning 3 has to the remit of the Inquiry, which, as I understand 4 it, is not looking at the extension part of the process. 5 CHAIR OF THE INQUIRY: I think it may have some relevance to 6 the consequences. 7 MR MACLEOD: If your Lordship is satisfied that that is in 8 the terms of the Inquiry's remit, then so be it. 9 CHAIR OF THE INQUIRY: Do you remember the question? 10 A. No, if you could ask the question again. 11 MR MCCLELLAND: Yes. The Council having decided to buy 12 materials and equipment from Siemens for the line 13 between York Place and Newhaven, does that give Siemens 14 a commercial advantage over other suppliers when it 15 comes to supplying the rest of the materials and 16 equipment that are needed to build that line? 17 A. Not necessarily. I can't say. I mean, it is -- it is 18 a matter of fact to determine what the scope of such 19 extension would be. And then to -- to determine what 20 the design will look like and what technologies were to 21 be applied. 22 So it -- it is not possible to say that Siemens 23 would have per se a commercial advantage. 24 Q. Is it easier for Siemens to supply the missing bits than 25 it would be for another supplier to do it? 34 1 A. Yes, because it is a -- it is a system that is already 2 exists, to integrate your own technology and to extend 3 it is obviously -- very obviously easier than it would 4 be for a third party. 5 Q. Are you referring there to the rest of the line that's 6 already installed, rather than to the extra materials 7 and equipment that are sitting in a warehouse? 8 A. I'm -- I cannot comment on the items that are put in 9 storage because I'm not aware of the condition in which 10 they are. 11 Q. Okay. 12 Now, you've explained in your statement that there 13 were various vesting certificates given to the Council 14 in relation to that materials, those materials and 15 equipment. If we just look briefly at page 73 of your 16 statement, please. 17 In paragraph 176 you list the vesting certificates 18 and the values attributable to the items in each of 19 them. 20 In paragraph 177 you say: 21 "Due to there being no rates available for these 22 materials, the price was in effect a proportion of the 23 price for equipment from the Infraco Contract. The 24 price for equipment in the Infraco Contract would have 25 been based upon a contract specific sell-rate (ie the 35 1 cost of the items plus an element of profit and overhead 2 costs)." 3 Could you just explain that a little bit more, 4 please? 5 A. Yes, I think at the time the question came up how to 6 value those equipments in a fair and transparent manner, 7 and from memory, I think they made reference to the 8 original contract value, we identified the direct cost 9 of those materials, plus the -- plus the surcharges, the 10 element of design cost of that material, and then other 11 mark-ups, and that was the basis that formed then the 12 prices in that list. 13 Q. If the works had been done under the Infraco contract in 14 its original form, would the prices paid for these items 15 have been the same? 16 A. If nothing had changed, I think that would have been the 17 case. 18 Q. I'm just trying to understand, was there any increase in 19 the price of these items compared to what would have 20 been paid under the contract in its original form? 21 A. I can't say. In a way it was a bit of a -- let's say -- 22 it was an exercise to get some value to those -- to 23 ascertain some value of these items. The precise 24 methodology that we applied at the time, I cannot 25 remember. 36 1 Q. Okay. 2 Now, I'm just conscious of the time. Briefly, 3 Mr Eickhorn, do you recall that under Minute of 4 Variation 4, which was entered into after Mar Hall, 5 there was a payment of GBP49 million made by tie to the 6 consortium? 7 A. To the consortium, yes. 8 Q. I think part of that was for the materials and equipment 9 that we've just been discussing? 10 A. I think in fact the payment was made in several 11 instalments, but the materials would have been a part of 12 that, yes. 13 Q. Yes. If we could just look, please, at document 14 SIE00000304. This is an MIS report from Siemens dated 15 13 April 2011. 16 Sorry, I think I may have given you the wrong 17 document reference. 18 There's something gone awry with the document. 19 Can we maybe just look at the second page of that. 20 Sorry, page 3. 21 There's a passage in the middle of that page headed 22 "Disputes", and it reads: 23 "On 2 March 2011, prior to the Mediation at 24 Mar Hall, the Adjudicator found in favour of Infraco in 25 the dispute relating to payment of preliminaries. As 37 1 a result Infraco is entitled to payment of outstanding 2 preliminaries of GBP14 million." 3 Was there any connection between that sum due to the 4 consortium and the GBP49 million payment under Minute of 5 Variation 4? 6 A. I'm not -- I'm not familiar with the details of that 7 dispute. I remember as a matter of fact that the client 8 had not paid prelims for some time in the period before 9 that. I think for over a year, if I remember correctly. 10 There was more -- I mean, our concern, yes, it was 11 the time-related costs, and at the time I think we -- 12 our concern was to find a transparent and logical 13 mechanism to -- to put us back into a cash position 14 where we weren't suffering any longer, as we did at the 15 point in time. Then the idea was to vest the materials 16 that you already had to the client, to give the client 17 the benefit, and by way of doing that, to substantiate 18 a payment to the consortium. 19 I explained that there were direct costs of 20 materials and mark-ups. So some of the mark-ups could 21 have included an element of preliminaries, but I'm not 22 able to say to what extent, and I don't recall any 23 direct connection of that and the vesting exercise. 24 Q. I think the total value of the materials and equipment 25 comes to something like GBP28 million, GBP29 million. 38 1 I was just wondering if that GBP14 million of 2 outstanding preliminaries was part of what was paid 3 under Minute of Variation 4. 4 You can't recall if that was the case? 5 A. I can't say if it was the case and to what proportion. 6 By the way, also these 14 million are an Infraco number, 7 if I see that correctly, and the 49 and respective 8 portions of that were different. 9 From memory, I think certainly the idea was to catch 10 up in terms of cash flow somehow, to catch up the 11 non-payment of prelims in the period before. 12 MR MCCLELLAND: Okay. Thank you very much, Mr Eickhorn. 13 I know you have come a long way to be here, so thank 14 you. And I have no further questions for you. 15 A. Okay. 16 CHAIR OF THE INQUIRY: I don't think anyone else has got any 17 questions. 18 Thank you very much, Mr Eickhorn. You're 19 technically -- not technically, you are still under your 20 citation, so you could be recalled if other matters 21 arose. Hopefully that won't be necessary. 22 In the meantime, you're free to go, and safe 23 journey. 24 A. Thank you, my Lord. 25 MR MCCLELLAND: The next witness, my Lord, is to be taken by 39 1 Mr Lake. So I'm not sure if you would prefer a short 2 break to allow the handover. 3 CHAIR OF THE INQUIRY: Yes. We'll have a break of five 4 minutes, I think. We will just break for five minutes. 5 (10.40 am) 6 (A short break) 7 (10.45 am) 8 CHAIR OF THE INQUIRY: Yes, Mr Lake. 9 MR LAKE: My Lord, the next witness is Julian Weatherley. 10 MR JULIAN WEATHERLEY (affirmed) 11 CHAIR OF THE INQUIRY: You are going to be asked questions 12 initially at least by Mr Lake, Counsel to the Inquiry. 13 If you listen to the question and answer it as 14 directly as possible, if you speak into the microphone 15 so everyone can hear what you're saying, and don't speak 16 too quickly, so that the shorthand writers can keep up 17 with you. 18 A. Okay. 19 Examination by MR LAKE 20 MR LAKE: Thank you, my Lord. 21 Mr Weatherley, could you state your full name, 22 please? 23 A. Julian Michael Weatherley. 24 Q. Thank you. I would like you to look at a document, 25 please. You should have a hard copy in front of you. 40 1 It will also be shown on the screen. It's reference 2 TRI00000103. 3 I hope it's the same document you have both in hard 4 copy and in the electronic form? 5 A. Yes. 6 Q. Is that the document containing the questions and 7 answers that were put to you and then answered by you 8 for the purposes of this Inquiry? 9 A. It is, yes. 10 Q. Are you content that that be taken as your evidence for 11 the purposes of this Inquiry? 12 A. I am, yes. 13 Q. What I would like to do is just ask you questions about 14 certain passages within your answers for the purposes of 15 clarification. 16 Could we look, please, first at page 5. If we 17 enlarge the upper half of the page. 18 We can see question 5 there, which is asking about 19 your first impressions of the project, and the second 20 paragraph of your answer notes: 21 "My first impressions were that I did not see the 22 clarity in some of the client side Project Management 23 functions that I would expect to see on a project such 24 as this. For example, programme, risk and reporting 25 functions all required greater clarity." 41 1 I just want to look at this a little bit further and 2 ask you: what do you mean by a lack of clarity? 3 A. Well, I think at the time at which I mobilised on the 4 project, a number of these functions weren't operational 5 because the project had been in mediation. So at that 6 point they had presumably been stood down. 7 So the project was starting up again, and a number 8 of the functions, if I take risk management as an 9 example, wasn't operational as such at the time which 10 I mobilised. It had been pre mediation, so I understood 11 from undertaking the review, but it wasn't in operation 12 at the time that we mobilised. 13 Q. I see. So just to be clear, the comments that you make 14 here are very much related to the instant you took over, 15 after the mediation? 16 A. Yes. 17 Q. So when you refer to the programme, that is 18 reflecting -- is it the case that that is reflecting the 19 position that there was no agreed programme for the 20 works as agreed in the Mar Hall Agreement? 21 A. Well, in the case of programme, a new programme had been 22 agreed as part of the Mar Hall Agreement. I suppose 23 what I'm really referring to is the way in which the 24 programme was managed holistically by the project rather 25 than the programme itself. 42 1 Q. I think this is something you come to later, that you 2 were given a programme which related solely to the 3 Infraco works, but didn't pull in all the other elements 4 of work that would be required to deliver the project as 5 a whole? 6 A. That's correct. 7 Q. Is that one of the things you observed on your start? 8 A. Yes. 9 Q. I'll come back and ask you a few more questions about 10 that later, rather than now. 11 If we look at the following paragraph here, you say: 12 "The utilities risk was evident from my first 13 involvement but the extent of utilities related issues 14 did not become fully clear until spring 2012. It was my 15 view that addressing the utilities risk was one of the 16 key elements of a successful outcome, as this would 17 minimise change within the Infraco contract. 18 I considered that the team addressing the utilities risk 19 was under resourced at the point of Turner & Townsend's 20 mobilisation, and this was addressed as one of our 21 initial actions." 22 Now, firstly there, right at the end, when you refer 23 to being at the point of Turner & Townsend's 24 mobilisation, was your understanding that the team had 25 in effect been stood down pending the mediation? Or was 43 1 this a position that you understood had been in 2 existence all throughout the works? 3 A. There was a -- a utility. tie had a utilities team in 4 place at the time of our mobilisation. It was a small 5 team, no more than one or two individuals from memory. 6 And there were some works, I think, largely a desk study 7 being undertaken around the potential presence of 8 utilities within the on-street areas, and that was 9 a work stream which was in progress at the time via 10 mobilisation and Turner & Townsend effectively took over 11 at that point. 12 Q. So was that a function that had been going on throughout 13 the previous contract or was that something that had 14 been started up in the context of -- 15 A. I would imagine it had been done as part of the previous 16 contract, but I don't know for certain. 17 Q. You don't know for certain. 18 At the start of that paragraph that I just read, you 19 say: 20 "The utilities risk was evident from my first 21 involvement." 22 Can you clarify what you mean by the utilities risk? 23 A. Yes, simply that in order for the Infraco works to 24 progress as set out within the contract programme, they 25 required access to areas that didn't have utilities in, 44 1 or at least they required that the works would not be 2 held up by utilities. The programme didn't provide -- 3 the Infraco programme didn't provide for their works 4 being held up by utilities. 5 And therefore there was a risk that if their works 6 were held up by utilities, that they couldn't deliver to 7 their programme. 8 Q. Did you have a view as to how likely it was that 9 utilities would be discovered where they weren't 10 expected? 11 A. I thought it was very likely. We identified it as the 12 biggest risk to the project. 13 Q. Towards the end of that paragraph, you note that you 14 considered the team addressing utilities risk was 15 under-resourced. Was that simply a matter of manpower 16 and the number of people that were engaged in it? 17 A. Largely. Also -- I don't recall what plan tie had in 18 place for establishing the presence of utilities at the 19 time in which we mobilised. We took over this work 20 stream very quickly, so it's difficult for me to 21 remember exactly what was in place and what we put in 22 place, but there needed to be simply an increase in 23 resources. There needed to be some design work streams 24 in place. So there were a number of mitigations put in 25 place in order to deal with the utilities, one of which 45 1 was redesigning certain elements of the works to avoid 2 utility clashes. 3 So that design work stream needed to be put in 4 place, and that started with the production of some 5 class detection drawings, some CAD drawings that needed 6 to be produced. 7 Q. When you say design work streams, was that design work 8 to be carried out on the utilities or on the 9 infrastructure works so as to avoid conflict with 10 utilities? 11 A. It could have been either. Our preference for dealing 12 with utilities was that the solution was designed out 13 because that was the least expensive solution. But it 14 could have been either of those. 15 Q. Just to be clear, when you say designed out, does that 16 mean re-examining the infrastructure design to see if 17 the need for utilities works could be minimised or 18 avoided? 19 A. It could have included -- largely it was designing 20 changes to the utilities. So moving utilities. That 21 was the -- probably the most likely design conclusion. 22 But in some cases it did involve redesigning 23 infrastructure works so that they didn't clash with 24 utilities. 25 Q. Now, there has been evidence presented to the Inquiry 46 1 that the works were -- utilities works were 2 substantially complete. A figure of 97 per cent is 3 contained within the documents. 4 Is the sort of scope of work you're discussing, 5 including design work streams, going beyond the 6 3 per cent that was incomplete and revisiting the 7 97 per cent that were thought to be complete? 8 A. Sorry, could you ask the question again? 9 Q. Yes. I'm trying to think of a more focused way of 10 putting it. 11 When you had to do -- consider design work streams, 12 perhaps considering the Infraco, was that in sections 13 where utilities works had already been carried out under 14 the MUDFA contract? 15 A. I'm not certain the extent of the utilities works under 16 the MUDFA contract, but potentially, yes. 17 Q. But would you know, if you were turning to an area where 18 there was, for example, a conflict, whether utilities 19 works had already been carried out in that area? 20 A. In some cases that was certainly the case, yes. In 21 other cases perhaps not. 22 Q. In those situations, was that where it was necessary to 23 redesign or re-examine the Infraco works as well as 24 looking at the existing utilities works? 25 A. I can't be certain of that. The requirements to 47 1 redesign either utilities or Infraco works really 2 related to throughout the on-street areas. There were 3 limited examples where the Infraco works needed to be 4 redesigned. That wasn't the majority of the situation, 5 but potentially they could have occurred anywhere on the 6 on-street works section, from memory. 7 Q. When you say that could have occurred on the on-street, 8 is that the redesign of the infrastructure or -- 9 A. Both. 10 Q. Both. I'll come back to ask you a few more questions 11 about design in a little while. 12 At the moment I want to turn to the infrastructure 13 contract as it stood when you took over, as it had been 14 varied. 15 Perhaps if you could look at what became Schedule 45 16 of the Infraco contract. It's document reference 17 CEC02085627. 18 I don't know if you recognise this, looking at the 19 title with reference to Schedule 45 referred to in the 20 agreement between tie and Infraco? 21 A. Yes. 22 Q. Perhaps if we could look in particular at page 6 of 23 this. 24 Do you recognise this? 25 A. I will have seen it at the time I was on the project, 48 1 certainly. 2 Q. There's a reference within this Clause 6 to Pricing 3 Assumptions? 4 A. Yes. 5 Q. It's noted that: 6 "The On Street Works Contract Price and the 7 On Street Works Programme has been fixed on the basis of 8 ... Pricing Assumptions." 9 Then look at Clause 6.2. It's noted that these have 10 been necessary. 11 I take it you were aware of the Pricing Assumptions 12 that underlay the contract? 13 A. Yes. 14 Q. If we look at the following page, page 7, and 15 Clause 6.4, we can see here the Pricing Assumptions, 16 including the first one: 17 "The design will not be amended" 18 If you look down at number 5, we can see also 19 there's an assumption that Infraco will not discover any 20 utilities which require to be diverted, or in respect of 21 which protected works were required. 22 These assumptions were already in place by the time 23 you took over. That's correct, isn't it? 24 A. That's correct. 25 Q. Did these assumptions give you concern as to the ability 49 1 to perform the contract? 2 A. Well, it gave us concern that there were likely to be 3 variations as a result of the Pricing Assumption 4 variations, yes. 5 Q. Were there any of the assumptions which were particular 6 causes for concern? 7 A. Well, the discovery of utilities most significant. 8 Q. Did you give advice about that? 9 A. I think in our preliminary report that we wrote when we 10 mobilised, I believe we raised this as a significant 11 risk. 12 Q. Another thing that arose in the contract, I think you 13 refer to it in your statement, is that the basis of 14 payment under the on-street contract could change from 15 the fixed price to reimbursable -- cost reimbursable? 16 A. Yes. 17 Q. That was to arise or could arise if there was occurrence 18 of what was known as the on-street works trigger date. 19 Do you recall that? 20 A. Yes. Sorry, I don't think it was a date. It was an 21 on-street works trigger, but I don't think it was 22 a date. 23 Q. If we look perhaps to page 5, Clause 5.1 in particular, 24 to identify the point at which this might happen, it's 25 noted that it shall occur on the first valuation date, 50 1 if any, on which: 2 "The Aggregate Claims Amount exceeds the Aggregate 3 Certified Amount by GBP750,000 or more; and/or 4 The Aggregate Extension of Time Claim exceeds 21 5 calendar days." 6 Now, I think you note in your statement this was 7 a concern to you? 8 A. Yes. 9 Q. Why? 10 A. Well, we thought that given the likely -- given the 11 amount of utilities we thought that we were likely to 12 encounter, we thought it was very likely that there 13 would be a significant number of variations, and that 14 there would potentially be either one of those criteria 15 met for the on-street works. 16 Q. Is this sort of provision whereby there's a switch from 17 a defined price to cost reimbursable on the basis of 18 claims or extension of time one you've encountered in 19 other contracts? 20 A. No. 21 Q. Did anyone explain to you what the reasoning for this 22 inclusion was? 23 A. No. 24 Q. Did you discuss it and your concerns in relation to it 25 with anyone at the Council? 51 1 A. I'm sure it came up in discussions during the 2 mobilisation. It was referred to in our preliminary 3 report and we presented our preliminary report to the 4 Council. So yes, there would have been discussions but 5 I don't recall the detail. 6 Q. Did it in fact change the cost reimbursable as you 7 expected it would? 8 A. Not to my knowledge, and not while I was on the project. 9 Q. You've referred there a number of times to the 10 Turner & Townsend report. I wonder if we could just 11 take a look at that, please. It's document WED00000103. 12 Now, I take it you recognise this document? 13 A. I do. 14 Q. This is the preliminary report that you've been 15 referring to; is that right? 16 A. Yes. 17 Q. This is the version that the Inquiry has, and we see 18 towards the bottom right it's got the word "draft" on 19 it. Was there a later version prepared? 20 A. I don't believe there was. I don't believe it was ever 21 issued as a final document. 22 Q. I understand. Could we look at page 17 of this, please. 23 Enlarge the lower half of the screen, 4.2.7. 24 This is a comment we see from the heading in 25 relation to the on-street works pricing. The second 52 1 paragraph there notes: 2 "There are a number of areas of risk which will 3 require a well-resourced commercial team, working in 4 tandem with project managers and appropriate 5 record keeping to preserve as much of CEC's position as 6 is possible in the light of an unfavourable 7 arrangement." 8 Now, in your statement you make the point that you 9 didn't draft this section of the report. I think that's 10 right. 11 A. I didn't, no. 12 Q. Nevertheless, I think this was a report prepared by 13 Turner & Townsend intended to assist them in discharging 14 their function; is that correct? 15 A. Yes. 16 Q. It was intended that Turner & Townsend would rely on it, 17 and you did in fact rely on it? 18 A. Certainly to inform how we would set up our team, the 19 capability of our team and what we would focus on, it 20 was used to inform that, yes. 21 Q. So on that basis, I take it you would expect it to be 22 well considered and reliable? 23 A. Yes. 24 Q. Did you form a view as to whether or not the 25 arrangements in the contract for on-street pricing were 53 1 unfavourable? 2 A. Not personally. I believe what we were referring to 3 here was the -- we were envisaging a situation where 4 Infraco were fully mobilised, with all the costs 5 associated with a fully mobilised team, but not being 6 able to progress with certain works because there were 7 utilities in the way. 8 Q. Is that back to what you meant about the -- dealing with 9 the utilities? 10 A. Yes. 11 Q. Was the -- a risk to the discharge of the contract? 12 A. Yes. 13 Q. Were you given any information, as you took over, about 14 the extent to which utilities and the discovery of 15 utilities had impeded the infrastructure works? 16 A. Prior to mediation? 17 Q. Prior to Turner & Townsend taking over. 18 A. I don't recall -- I would imagine that we did, but 19 I don't recall receiving any. 20 Q. If we could look at page 19 of this, please. 21 CHAIR OF THE INQUIRY: Is it page 19 of the document? 22 MR LAKE: I think it should be page 19 of the electronic. 23 I should say it's apparent from Mr Weatherley's 24 statement or questions and answers that sometimes the 25 page numbers don't match. The difficulty was at an 54 1 early stage, the page numbering wasn't fixed. It 2 renumbered itself each time a document was opened, but 3 I think Mr Weatherley has in fact throughout his 4 statement identified the correct passages, the ones to 5 which his attention has been drawn. 6 If you could look under the heading, "Planning 7 Perspectives", please. The second paragraph there, you 8 note that: 9 "Tie/CEC have found little satisfaction or 10 confidence in the schedules provided by BBS, nor will 11 they until common data structures and vocabulary are 12 established and schedules are combined into one master 13 programme to which all have coincident access. This 14 should lead to a consistent basis for the evaluation of 15 the project, or at least provide accurate information 16 for negotiation, resolution and the determination of 17 coherent action." 18 Again, I think once again you make the point this is 19 not something that you actually drafted? 20 A. Correct. 21 Q. But were you able to form a view on these matters about 22 the difficulties that arose from the lack of common data 23 structures and vocabulary? 24 A. One of the things that came out of our discussions with 25 tie during and just preceding the production of this 55 1 report, was that there wasn't or hadn't historically 2 been agreements on the position of some aspects of the 3 programme. 4 We thought that that was -- one of the reasons for 5 that was because particularly following the Mar Hall 6 Agreement, the programme as presented by Infraco didn't 7 represent the full scope of the works, and so there 8 wouldn't -- it would be difficult without finding some 9 common methodology for aligning the Infraco contract 10 with the remaining scope of the works. It would be 11 difficult to form that agreement. 12 Q. What would the effect be of being unable to form that 13 agreement? 14 A. Well, principally it would be very difficult to predict 15 when the sectional completion dates of the project would 16 be achieved. 17 Q. If you don't have a programme -- I will put it the other 18 way round. You described having a master programme that 19 draws all these things together as best practice within 20 your statement. 21 Is it ever the case that contracts of this sort of 22 scale are carried out without a master programme that 23 pulls all the elements together? 24 A. It doesn't always have to be in one programme. But 25 there needs to be either one programme or a suite of 56 1 programmes that contains the full scope of the works. 2 Otherwise, it's impossible to manage the interfaces 3 between the various contracts. 4 Q. Were you aware of to what extent there was an agreed 5 programme or an agreed suite of programmes prior to the 6 Mar Hall Agreement? 7 A. Only from the discussions that we had with tie at the 8 time we mobilised, and it was clear that there wasn't, 9 let's say, an agreed set of programmes between Infraco 10 and tie at that time. 11 Q. Was an explanation given to you as to whether or not 12 this had resulted in difficulties, and if so, what those 13 difficulties were? 14 A. Well, I got the impression that it had resulted in 15 difficulties in agreeing the status of the project. 16 Q. When you say you got the impression, was that your own 17 view, looking at the state of the project, or things 18 that were said to you? 19 A. It was things that were said to me. 20 Q. Who were you discussing this with? 21 A. I can't recall the name of the individuals, but I spoke 22 to a number of individuals within -- within tie, both 23 those responsible for programme and more widely, and it 24 was evident that there was or had historically been 25 a lack of alignment of client side and Infraco 57 1 programme. 2 Q. Just for a bit more clarity, when you say this gave rise 3 to difficulties in agreeing the status of the project, 4 in practical terms, what did that mean? What was 5 happening or not happening in contract administration? 6 A. Sorry, could you -- 7 Q. What was happening or not happening in terms of contract 8 administration when you didn't -- when tie didn't have 9 this suite of agreed programmes? 10 A. I didn't discuss that in -- I can't recall that level of 11 detailed discussion when I was talking about it with 12 tie. What I was saying previously was that in the 13 absence of having a holistic programme, it would not be 14 possible going forward to accurately predict the 15 sectional completion dates of the programme, or to 16 manage the interfaces. 17 Q. What effect does that have on project management and the 18 delivery of the works? 19 A. Well, it's impossible to plan the delivery of the 20 project and to focus on the right things. It's also 21 difficult to predict the outcome in terms of cost if 22 the -- we don't know when the programme is going to 23 complete, we don't know how much the project is going to 24 cost to deliver. 25 Q. You referred there to programme as being an element of 58 1 predicting the final date. Would I be right in 2 understanding that it's also necessary for predicting 3 all the different elements of works and the sequencing 4 of them to lead to completion? 5 A. The project was very heavily dependent on the successful 6 management of interfaces. So by that, for example, when 7 were the utility works, when were we going to get access 8 to do utility works, and when were the utility works 9 complete in a particular area that allowed Infraco to 10 mobilise. 11 Well, clearly you want that mobilisation to be 12 efficient and therefore if you don't know when it's 13 going to happen or there's ambiguity about when it's 14 going to happen, there's a risk that the project is not 15 delivered in the most efficient way. 16 Q. Was your understanding that had been one of the 17 difficulties? From what you were told, was that your 18 understanding, that had been one of the difficulties? 19 A. I'm not sure that I discussed that level of detail with 20 tie. I imagine it would have been a difficulty, but 21 I don't know that for sure. 22 Q. Then looking at your experience of other projects, if 23 there isn't an agreed programme where everything is 24 drawn together, is that a problem that is likely to 25 arise? 59 1 A. Yes. Sorry, is what a problem? 2 Q. The difficulty in managing interfaces between works and 3 ensuring the efficient delivery? 4 A. Yes. 5 Q. If you could just go back to your statement, please, and 6 look at page 8, in paragraph -- the answer 6.8 at the 7 foot of the page, you refer here to schedule 3A or 8 perhaps revision 3A, sometimes it's referred to: 9 "... was BBS's contract programme at the time the 10 settlement agreement was signed, following mediation. 11 It therefore represented the contractual baseline for 12 the project against which the impact of all post 13 settlement agreement change would be measured. Any 14 client or third party initiated change to the activities 15 contained within the programme may have led to 16 a variation in the overall project cost and programme. 17 During our mobilisation stage we obtained further 18 information to create an integrated master schedule." 19 Now, I take it from what you say at the end there 20 that the programme revision 3A was not an integrated 21 one? 22 A. Well, I suppose it was integrated as far as the Infraco 23 responsibility that the Infraco contract was concerned, 24 but it wasn't for the full scope required to deliver the 25 project. 60 1 Q. Do you have any recollection of what particular elements 2 there were where further integration would be required? 3 A. Well, the -- the inclusion of utility-related activities 4 was the most significant omission, but there were -- 5 I believe there were others relating to the achievement 6 of third party consents and that sort of thing. 7 Q. To jump around a little bit, could I ask you to go back 8 and look at the Turner & Townsend preliminary report, 9 please. It's WED00000103. If we go to page 61 of the 10 electronic version. 11 We can see this is page 59 of the lower version. 12 If we could highlight the last entry on the table, 13 row 7, you note there in the first of the columns, 14 sorry, I should have taken you back to a previous page 15 to provide some context first of all. 16 We can see this is under the heading, "Key Strategic 17 Risks and Mitigation Measures", and a table is provided 18 which has got reference -- I think RAG, that's red amber 19 green, isn't it? It's how the risk is categorised? 20 A. Yes. 21 Q. Then we've got categories, route cause, risk definition 22 and the potential mitigation. 23 This is an examination of the various risks that lay 24 to implement the works post Mar Hall? 25 A. Yes. 61 1 Q. Then if I could ask you to go back to the following page 2 and look at row 7. We can see this is what -- the 3 category is given as being "Programme", and the route 4 cause is that the revision 3A programme only relates to 5 Infraco construction works: 6 "There is no visibility of activities relating to 7 design, approvals and consents, assurance and acceptance 8 testing. Also no visibility of construction works which 9 sit outside of the Infraco contract, including utility 10 works, diversions and basement works." 11 The risk that arises in relation to this is that: 12 "... the overall project requirements are not 13 understood and that the true project progress is not 14 correctly quantified." 15 Now, would I be correct in understanding that that's 16 the sort of risks that arises where you don't have an 17 integrated programme or a complete suite of programmes? 18 A. Yes. 19 Q. And the mitigation measure you've noted in the 20 right-hand column there was: 21 "Establish a Baseline Master programme to cover all 22 project activities (Infraco and non Infraco)." 23 A. Yes. 24 Q. That was something you in fact did? 25 A. Yes. 62 1 Q. We have finished with that document for the moment. 2 I would like to go back and look at the question, 3 some of the issues surrounding design. If we could 4 look, please, at 22 within your statement, questions and 5 answers. 6 If we could highlight or enlarge question and answer 7 30. 8 The question you were asked was: 9 "To what extent was the design not yet complete when 10 Turner & Townsend commenced work on the job?" 11 You said: 12 "Design issues were resolved between 13 Turner & Townsend's design representatives and the BBS 14 design team. A number of design items remained 15 outstanding at the time Turner & Townsend commenced work 16 on the project, for example: the design of public realm 17 works, tram and carriageway alignment in York Place, 18 Cathedral Lane sub-station, On Street Works traffic 19 modelling, Edinburgh Gateway retaining wall; 20 Scottish Water legacy works and works north of 21 York Place." 22 Now, a number of those seem limited to quite defined 23 geographical situations such as north of York Place or 24 indeed the carriageway alignment in York Place itself? 25 A. Yes. 63 1 Q. There isn't a general reference, any general reference 2 here generally to the Infraco design works throughout 3 the whole of the route. Would you take it from that 4 that there was no design impediment to works starting in 5 the areas other than those referred to here? 6 A. Well, that is not necessarily a complete list. We had 7 ongoing design meetings throughout my time on the 8 contract. I was on it for 18 months and there were 9 design issues discussed at meetings throughout that 10 period. 11 So there was a list of discrete design issues that 12 needed to be dealt with. I'm not aware of many or 13 any -- I can't think of any examples where the lack of 14 design, with the exception of utility works, held up the 15 construction. 16 Q. When you say with exception of utility works, could you 17 explain what you mean there? 18 A. There were circumstances where utility works or works 19 relating -- works adjacent to utilities had to be 20 redesigned, and there were examples where that did hold 21 up the programme. 22 Q. Once again, to come back to a question I asked earlier, 23 were these utility works that had already been carried 24 out or were these ones that had not been yet addressed? 25 A. I think I would have to say a mixture of both. 64 1 Q. Just for clarity's sake once again, in terms of the -- 2 other than utility works, just looking at the design of 3 the infrastructure works themselves, have I understood 4 your answer to be that there were no design impediments 5 to actually getting the work started on the 6 infrastructure contracts? 7 A. I can't think of any examples, but -- there may have 8 been, but I can't think of any. 9 Q. You've referred there to -- the end of that answer to 10 works to the north of York Place, which you probably 11 think of as going down Leith Walk and beyond? 12 A. Yes. 13 Q. In that the final agreement after Mar Hall was to take 14 the tram only as far as York Place, what were the issues 15 arising for works north of York Place? 16 A. My memory is that these were fairly minor in nature. 17 I think something of the order of GBP300,000 worth of 18 work in total, and it was to do with just wrapping up 19 works that hadn't been completed. So there were 20 temporary traffic management arrangements in place at 21 this location which needed to be -- needed to have 22 a permanent solution, and there were small amounts of 23 design work associated with that, but it was relatively 24 small in nature. 25 Q. In terms -- you mentioned there the tram and carriageway 65 1 alignment in York Place. What was the scope of design 2 work that was required there? 3 A. I think there were possibly two issues that I can think 4 of. One was the location of the tram stop, and the 5 turn back facility had not been concluded at the time we 6 mobilised. There was also, I think, the alignment, from 7 memory, both horizontal and vertical in York Place 8 hadn't been concluded because we were awaiting some 9 survey information relating to the precise location of 10 cellars which went under the carriageway, and therefore 11 could have impacted on the design. 12 Q. You said that there were minor issues arising in 13 relation to the design of the tram track generally over 14 the remainder of the route. Can you give me any 15 indication of the sort of issues that remained 16 outstanding? 17 A. In terms of design? 18 Q. Yes, please. 19 A. It was -- for example, there was some design issues 20 related to the form and location of the overhead line 21 electrification masts and supports; where they clashed 22 with the utilities, for example, they had to be in some 23 cases redesigned so that they were moved. There were 24 some locations where the presence of utilities meant 25 that we couldn't get adequate clearance at the top of 66 1 the utilities when the -- where the tracks went over it, 2 and there had to be special local designs to the track 3 slab to -- so effectively a reduction in thickness of 4 the track slab locally to allow the utilities to pass 5 underneath, that sort of thing. 6 Q. To come back to a question I have already asked in 7 a number of guises, were these areas where the utility 8 works had already been carried out? 9 A. I can't be certain. 10 Q. I'm just interested to know whether or not there was 11 a situation where utility works had been carried out, 12 and then you had to change infrastructure works such as 13 the location of masts, and whether there were any 14 questions asked as to why the utility works carried out 15 had this knock-on effect? 16 A. Yes. I think that is a likely scenario. I think that 17 probably did happen, but I can't be certain. 18 Q. If the concept had been that the infrastructure 19 contractor would be left with a clear path in which they 20 could simply put up the design that had been prepared, 21 was it not a cause for some concern if at this late 22 stage, they're having to reconsider the infrastructure 23 design to fit in with the utilities works already done? 24 A. It was of concern. I don't -- I don't recall instances 25 where the redesign of infrastructure works -- and 67 1 I think there were a handful of locations where that 2 occurred -- but I don't recall instances where that 3 impacted on the schedule. 4 Certainly not to a significant extent. 5 Q. Were there areas where simply the infrastructure works 6 could not -- when a late conflict was identified, the 7 infrastructure could not be changed and it was necessary 8 to redo utility works that had already been done? 9 A. Again, I think it's -- it's possible that that situation 10 occurred, but I can't think of specific examples. 11 Q. If we look further down the page, please, at question 12 and answer 31, you note here that this was a design and 13 build contract and it would be normal practice for 14 design works to be progressing at the same time as the 15 construction of other elements. 16 The Inquiry has heard evidence to the effect that 17 the original contract intention was that detailed design 18 would be complete by the time the contract was awarded. 19 Did you have views as to whether there were still items 20 of what might be termed detailed design that had to be 21 carried out while you were involved in the project? 22 A. Yes, and they are the items that are listed in the 23 question that we went through a moment ago. 24 Q. Yes. But in terms of the -- rather than the specific 25 locations such as York Place, looking at the remainder 68 1 of the line from Princes Street, obviously it might be, 2 say, from St Andrew Square west, were there questions of 3 detailed design still outstanding there? 4 A. There may well have been in relation to electrification 5 or items that were perhaps further downstream in the 6 construction programme, but we weren't redesigning large 7 sections of infrastructure works as we were building 8 them. The design was completed in time. Generally in 9 time for the works to be constructed. 10 Q. When you talk about electrification works being 11 designed, are you talking about the works that would be 12 undertaken by Siemens? 13 A. Yes. 14 Q. As opposed to the civil engineering works? 15 A. Yes. 16 Q. So was the detailed design outstanding in relation to 17 any of the civil engineering works from St Andrew Square 18 west? 19 A. Not wholesale along the full length of the on-street 20 works to my knowledge, but discrete locations, yes. 21 Q. Again, can you recall the sort of issues that arose, 22 where further design, civil engineering detailed design 23 was required? 24 A. It was the sort of thing like designing highway 25 junctions, traffic light operations, that sort of thing. 69 1 Locations of where overhead line gantries might be 2 attached to buildings. 3 So there was the alignment issue along York Place. 4 So there was a handful of maybe 20, 15 or 20 items that 5 were outstanding. 6 Q. When you took over, were you aware of any design issues 7 which had in fact been outstanding for some time and 8 required to be -- were only first resolved while you 9 were the Project Director? 10 A. I don't really know how long the design items that were 11 outstanding had been outstanding. 12 Q. But there were some design items outstanding when you 13 took over? 14 A. There were, yes. 15 Q. Were you given any indication, perhaps by the 16 representatives from BBS or the Council, as to why it 17 was possible to resolve these design issues after you 18 took over when they hadn't been resolved before? 19 A. Not really, no. I didn't have that discussion, no. 20 Q. No one indicated to you that different procedures were 21 assisting matters, or what blockages had been in the 22 past? 23 A. Not really. 24 Q. Were any changes made to obtaining -- the processes for 25 obtaining design approvals while you were involved in 70 1 the project? 2 A. During my time on the project? 3 Q. Yes. 4 A. I don't think so. The methodology for -- the governance 5 structure for discussing design issues was established 6 fairly early on, I would say within the first six to 7 eight weeks of our mobilisation in the form of design 8 control meeting. All the matters relating to design 9 were discussed at that meeting, and any issues where 10 things were unresolved or things that required action or 11 things that required escalation were identified at that 12 meeting. 13 Separate to that, there were detailed discussions on 14 specific points of design outside of that control 15 meeting, between largely the on-street works team and 16 the Infraco design representatives, and broadly that was 17 successful and continued throughout the 18 months that 18 I was on the project. 19 Q. What would be involved in an issue being escalated? 20 A. When this relates really to any items, whether they're 21 design or otherwise. 22 We discussed all aspects of the project delivery 23 through the control meetings that occurred, I think 24 every two weeks. So they related to design construction 25 programme risk, commercial issues. Anything that came 71 1 out of those meetings that couldn't be resolved at those 2 meetings or couldn't be resolved between the parties was 3 identified and was discussed at either the tram briefing 4 meeting in the case of Turner & Townsend involvement -- 5 or the programme delivery -- the project delivery group 6 meeting. 7 Q. Was that with a view to bringing in more senior 8 representatives of each of the interested parties, the 9 Council -- 10 A. Well, it was really -- there was -- there was no more 11 senior meeting between Turner & Townsend and Infraco 12 than the control meetings. There were a handful of 13 items that perhaps required more focus, largely client 14 side, that were identified in these meetings. So design 15 approval not being progressed or something like that. 16 But perhaps needed support from more senior 17 representatives of the client side team and therefore 18 they were escalated to the tram briefing meeting or to 19 the project delivery group meeting. 20 Q. That's really what I was getting at. When we're talking 21 about escalation, is it a different meeting within the 22 governance hierarchy for the tram project, or a more 23 senior person within respective organisations? 24 A. No. I mean, the -- the most senior representatives -- 25 as far as the day-to-day delivery of the project was 72 1 concerned, the most senior representatives of the client 2 team, of the project management team and of the Infraco 3 team, were all represented at the control meetings. 4 So the head of project for -- Martin Foerder for the 5 Infraco, Alfred Brandenburger for Siemens, and myself, 6 all attended the -- not necessarily all the meetings. 7 A large majority of the control meetings were attended 8 by us and generally speaking, we resolved most matters 9 in that forum. 10 Q. What sort of issues as a generality required escalation 11 that couldn't be resolved there? 12 A. It was largely around -- I'm trying to think of 13 a specific example. It would have been around items 14 that required -- that required scope definition or 15 approval that was a responsibility from the -- from the 16 client side team. 17 So I'm thinking -- for example, if it was an item 18 where we required Network Rail's approval to do 19 a particular piece of works, but hadn't achieved it 20 through the control meeting process, then that would be 21 escalated and we would come up with a strategy for 22 dealing with items such as that. 23 MR LAKE: My Lord, I think it was arranged to give the 24 suppliers a break around 11.30? 25 CHAIR OF THE INQUIRY: We will adjourn now for the benefit 73 1 of the shorthand writers until about 11.45. 2 (11.30 am) 3 (A short break) 4 (1145 am) 5 CHAIR OF THE INQUIRY: You are still under oath. 6 MR LAKE: Thank you very much, my Lord. 7 I would like to ask you some questions about the 8 utilities. In terms of the utilities that might be 9 found off-street, is it correct to say that the risk of 10 that was going to be taken by the contractor and was 11 included within the price agreed? 12 A. Yes, that's generally true, yes. 13 Q. When you say generally true, what was the qualification? 14 A. I think there was one exception to that, but in most 15 cases the price of the cost of diverting utilities were 16 included within the off-street works fixed price. 17 Q. If I could just go back to your statement for one 18 moment, and we look at page 34, and question and answer 19 58, it's more the last part of your answer there, when 20 you say: 21 "A lack of clarity on risk allocation in relation to 22 Off Street Works utilities frustrated resolution of 23 commercial issues between BBS and Turner & Townsend's 24 commercial teams." 25 What was the lack of clarity as to risk allocation? 74 1 A. I think this is related to one specific issue where -- 2 where there was a need to divert a gas main on the 3 off-street work section, and I think there was 4 a difference of opinion as to whether the cost of that 5 diversion should have been included within the 6 off-street works fixed price or not. 7 Q. You say there it frustrated resolution of commercial 8 issues. That gives the impression that it went beyond 9 that particular dispute, and had a wider effect. Is 10 that correct? 11 A. No, not to my knowledge. That particular issue was not 12 fully resolved between the respective commercial teams 13 and it was one of the items that, from memory, went to 14 the independent certifier to take a view on. 15 Q. I think you've indicated in your statement that the -- 16 having the independent certifier there was an effective 17 means of resolving matters where the parties couldn't? 18 A. I think so, yes. 19 Q. As far as the on-street works are concerned, the risk of 20 those was all to be taken by the client, the Council? 21 A. Yes, I think that's true, yes. 22 Q. Now, you said in your statement, the passage we have 23 looked at earlier, that utility-related issues became 24 clear in spring 2012. 25 A. Well, I think they were becoming clear. I don't think 75 1 they were clear at all by spring 2012, but the -- 2 I suppose the way I would describe it is the risk of 3 utilities was progressively becoming clear as we were 4 excavating more of the on-street work sections. 5 By spring 2012 a large majority of those utility 6 conflicts would have been identified, but certainly not 7 all of them. 8 Q. So what was becoming apparent was the scope of conflict? 9 A. Yes. 10 Q. The idea that there would be conflict was really known 11 from the outset? 12 A. Yes. 13 Q. You said within your statement that you carried out 14 further desk study and surveys. That would infer you 15 didn't feel that the investigation work that had been 16 carried out prior to your involvement was an adequate 17 basis on which to proceed; is that a fair comment? 18 A. Well, I think that is a fair comment, and that could 19 well have been because the desk study and survey works 20 that had been completed had not been completed for the 21 full section of the on-street works, and certainly that 22 was quite a large piece of work that we undertook, was 23 to undertake surveys and desk studies for all of the 24 on-street work sections to try and understand what the 25 scale of risk was that we were going to encounter. 76 1 Q. I just want to be clear, what was the work you carried 2 out? First of all, surveys, did you survey the whole of 3 the on-street works -- on-street area, sorry? 4 A. It varied. In -- as a minimum, we undertook a desk 5 study for the whole of the on-street works. By that, 6 I mean look at existing statutory utility provider 7 records and see what information they had in relation to 8 the likely location of utilities, and where that might 9 cause conflicts with the infrastructure works. 10 It would well have included in some locations 11 undertaking slit trenching, so digging trenches from one 12 side of the road to the other side of the road to 13 identify where there were -- to identify the physical 14 presence of utilities and the likely nature of the 15 remedial works that would need to be undertaken. 16 Certainly towards the latter end of my time on the 17 project, it became desirable to excavate from kerb to 18 kerb. In case of Shandwick Place, we excavated the full 19 road, we had to replace the full road carriageway 20 construction anyway. So we actually excavated the full 21 road and did a similar thing in York Place as well to 22 identify where all the utilities were, but I think in 23 most cases, we did as much -- as much identification 24 through survey works and desk study works as we could 25 before we excavated. 77 1 Q. Well, just dealing with that, when you say you did desk 2 surveys, had -- using the existing utility records, had 3 that not been carried out in some areas? 4 A. I'm sure it had, and I don't know to the extent to which 5 that had already been completed, and the extent to which 6 we needed to finish that off, but it was certainly 7 something that we were doing from the time we mobilised, 8 was undertaking desk studies. 9 Q. Did you then pick up work that had already been done, or 10 did you start afresh, saying we'll get utilities 11 records -- 12 A. We picked up work -- I said earlier that tie had a small 13 utilities team that were looking at desk studies at the 14 time we mobilised, and that's a piece of work that we 15 picked up as soon as we mobilised and continued with it. 16 I'm not sure of the scale of the need to do further 17 desk study works, but we would have certainly made sure 18 that a desk study was done for the whole on-street work 19 section. 20 Q. What about slit trenches? Had that sort of 21 investigation been carried out? 22 A. Previously? 23 Q. Yes. 24 A. I can't be certain. 25 Q. As I understand your evidence, that you decided there 78 1 should be further ones carried out? 2 A. Yes. 3 Q. What led you to believe there should be further ones 4 carried out? 5 A. I can't -- I can't remember the timing, but I think the 6 first time we -- the first location we excavated in was 7 Haymarket. And we found in Haymarket the presence of 8 a number of utilities we weren't expecting to find, and 9 I think that influenced our decision to undertake quite 10 extensive surveys elsewhere in the on-street. We were 11 anticipating that we would similarly find utilities that 12 we weren't expecting to find. 13 And that proved to be the case. 14 Q. Now, do you have experience of -- had you -- at the time 15 you started work, did you have experience of this sort 16 of utility investigation in other projects? 17 A. Personally. 18 Q. Yes? 19 A. No. Well, I had experience in doing utility diversion 20 works, but not -- certainly not on this scale. 21 Q. Did you have experience of it within Turner & Townsend 22 that you could draw upon? 23 A. No. 24 Q. Were you able to form any view as to what extent the 25 level of investigation you required to carry out in 79 1 Edinburgh, including slit trenches, compared with other 2 locations where works were carried out? 3 A. Certainly within the team there was that capability and 4 we had a number of people within the team who had 5 undertaken similar works on other tram projects 6 elsewhere in the UK, and in Ireland, and certainly they 7 were -- they were very much able to take a view on the 8 appropriate action to take. 9 Q. At what stage in carrying out the works did you realise 10 it would be necessary to carry out further 11 investigations to verify the records of the utility 12 companies? 13 A. I think pretty much immediately. 14 Q. Did you say you carried out slit trenches on 15 Princes Street? 16 A. I am not -- I can't be certain that we did on 17 Princes Street because much of the -- the track was 18 already installed in Princes Street, and much of the -- 19 much of the infrastructure works had been completed at 20 the time we mobilised. So there may have been a need to 21 do local surveys. There was certainly utility works to 22 be undertaken in Princes Street, but I can't remember 23 whether they were identified through slit trenching, or 24 I think it was more local excavation. 25 Q. You said also you had full excavation in Shandwick Place 80 1 and York Place. 2 A. Yes. 3 Q. What led you to take that approach? 4 A. Well, the design provided for the excavation -- in order 5 to build the foundation for the tram works, 6 a significant amount of the carriageway needed to be 7 excavated. The track slab was something of the order of 8 1.2 metres deep. So that's quite a sizeable piece of 9 excavation for a tram travelling in two directions down 10 Shandwick Place. 11 Once that excavation is taking place, there's very 12 little of the existing roadway left. And the need to -- 13 you can't excavate a vertical trench to build anything 14 in a road. It needs to be stepped. By the time you've 15 undertaken that, the time you have constructed that 16 detail, you've virtually dug the whole road out anyway, 17 in a narrow road like Shandwick Place; in York Place, 18 which is a bit wider, perhaps not the case. 19 But basically, there was so much excavation in 20 Shandwick Place anyway, and the design provided for the 21 need to reconstruct the carriageway. By the time that 22 was done, there was a very large excavation in 23 Shandwick Place, almost kerb to kerb. In fact it was 24 excavated kerb to kerb, and therefore that exposed the 25 majority of the utilities. 81 1 Q. The excavation would be part of the -- as you said, the 2 track slab under the infrastructure contract? 3 A. It would have been, yes. 4 Q. So were you essentially joining the utilities work to 5 the infrastructure work in Shandwick Place? 6 A. Sorry, could you -- 7 Q. Were you doing the utilities work together with the 8 infrastructure work in Shandwick Place? 9 A. In very close succession. I can't remember the precise 10 sequence of events, but I think what we did in 11 Shandwick Place is the utilities contractor McNicholas 12 and certainly in some locations, McNicholas undertook 13 the full excavation for the track slab in order to 14 identify the utilities and put those right, and so we 15 took the opportunity, since we were going to dig the 16 excavation anyway, to only dig it once. 17 Q. That would contrast, for example, with areas to the west 18 towards Haymarket, where you carried out investigations, 19 desktop and slit trenches, fixed the utilities, and then 20 did the track slab; is that correct? 21 A. I think a similar approach in both actually. In all 22 locations we would have done investigations before we 23 excavated to assess the scale of the utility diversions 24 required. 25 Q. For example, if we go towards the west, towards the end 82 1 of Palmerston Place, for example, where the trams would 2 run there, were the utility works done there ahead of 3 the infrastructure works, or were they done together? 4 A. I'm not sure where Palmerston Place is. 5 Q. It's to the west of Princes Street, between 6 Princes Street and Haymarket. 7 A. Right. 8 Q. Were the two different parts of work there, firstly the 9 utility works and then the infrastructure works? 10 A. I'm not sure. In an all cases there was a -- 11 a programme of utility diversion works in advance of -- 12 at least utility excavation works to identify the -- the 13 extent of the utility conflicts before there was the 14 need to undertake infrastructure works. I think that's 15 the case in all cases, that in some cases it was -- it 16 was prudent to do the two almost sequentially. 17 York Place is the classic example of that. 18 Q. We will come to York Place. I think essentially the 19 investigation, the actual carrying out of the utilities 20 works and then the infrastructure works were essentially 21 part of one process. 22 A. Yes, I suppose -- I suppose so, in the sense that we 23 didn't -- we didn't excavate for utilities, fill the 24 hole in and then re-excavate for infrastructure. But 25 they were done by different contractors sequentially. 83 1 Q. There was one excavation which covered investigation, 2 utilities and infrastructure? 3 A. I think generally speaking that's true, yes. 4 Q. That was true in York Place. Was that true throughout 5 the on-street works? 6 A. Generally I think that's the case, yes. 7 CHAIR OF THE INQUIRY: If the excavation was part of the 8 Infraco works to enable them to put in the concrete 9 slab, but was undertaken by the utility contractor, what 10 happened about payment for that? 11 A. Yes, I'm not entirely sure, my Lord, how that worked. 12 It might be that the Infraco did do the excavation, that 13 then the utility teams did their utility diversions, and 14 then Infraco completed their works. 15 York Place was slightly different to that. 16 CHAIR OF THE INQUIRY: What was different about York Place? 17 A. In the case of York Place, one of the Infraco 18 subcontractors, Crummock, had a separate contract which 19 was managed by Turner & Townsend to do the excavation 20 works under our direction at the same time that we 21 undertook utility works, which just meant that 22 effectively all of the preparation prior to Infraco was 23 undertaken or was overseen by Turner & Townsend, so we 24 knew that everything was complete before Infraco came 25 along. 84 1 CHAIR OF THE INQUIRY: Would that then be reflected in the 2 price paid to Infraco? 3 A. It would have been, yes. 4 MR LAKE: In terms of carrying out utility works in other 5 locations, other projects, are they normally joined the 6 way they were at Princes Street, or were the utilities 7 works done first and then the infrastructure works 8 later? 9 A. I think it varies. It depends on the scale of the -- of 10 the utility works to be undertaken. In the case of 11 Edinburgh tram, there were so many utilities that needed 12 to be moved, it was likely that in order to address 13 them, there would need to be a large amount of 14 excavation. 15 York Place, again, being a good example of that, and 16 if you're going to undertake a large amount of 17 excavation, it makes sense to do the infrastructure 18 works at the same time. Otherwise there's a need to 19 excavate twice. If there was a project where the amount 20 of utility works was much smaller, then it could be done 21 as a separate contract in advance. 22 Q. If the excavation is the first time that there's also 23 an investigation carried out as to what's there, how did 24 you go about getting agreement amongst all the utilities 25 as to what was to be put in place, how they were to be 85 1 diverted? 2 A. I think in all cases we undertook both desk studies and 3 survey works in advance. So we -- by the time we got to 4 excavate, we had a pretty good idea of what we were 5 going to find. We had a co-located representative from 6 each of the statutory utility providers with our 7 on-street works team. And as that design and 8 preparation was being progressed, we worked with them to 9 identify what the likely best solution would be, and we 10 worked with Infraco to work out what the likely phasing 11 of arrangements would be, and the most efficient way of 12 delivering those works. 13 Q. Do I understand that in relation to the whole of the 14 on-street works, there was always some form of survey, 15 desktop or otherwise -- 16 A. Yes. 17 Q. -- initially? 18 A. Yes. 19 Q. You always had an idea as to what utility diversion 20 works would be required? 21 A. Yes. 22 Q. When you opened the surface of the road and you 23 discovered that utilities weren't where you thought they 24 were, or that there were other utilities there, what did 25 you do to get agreement to the utilities to further 86 1 solutions that would be required? 2 A. Well, there was a whole range of solutions. I suppose 3 the first thing was the establishment of a co-located 4 team. So we had representatives of the statutory 5 utility providers working with us on site so that we 6 could make decisions with them, quickly. Those 7 decisions varied and there was a sort of hierarchy of 8 preference as to how we would deal with each of the 9 utility conflicts. 10 Q. What do you mean, a hierarchy of preference? 11 A. So our preference was always to design out the solution, 12 which would be to either satisfy ourselves through 13 design that we didn't need to move the utility, or it 14 could be that we could put ducting around the utility so 15 that it could be passed through the infrastructure 16 works. Passed through the reinforced concrete base of 17 the track slab, for example. 18 So the simple rectification was always the 19 preference, and then the second layer of hierarchy would 20 be to perhaps undertake some modification work either to 21 the utility or to the infrastructure. 22 And then the third would be to actually slew, to 23 divert the utility, which is the most complex and 24 time-consuming solution, and we tried to minimise the 25 number of those occurrences. 87 1 CHAIR OF THE INQUIRY: If you passed the utility through the 2 concrete slab, how do you get access to the utility if 3 there's a fracture, say? 4 A. I think there was a very few number of occasions where 5 that occurred. Generally speaking, in the few occasions 6 that it did occur, there was a reduction in thickness of 7 the track slab depth. So a special track slab design to 8 pass over the utilities. But the utilities were passing 9 under cross ways. So the width at which you couldn't 10 get access was a few metres. It wasn't a significant 11 length, and that was done through agreement with the 12 statutory utility providers. 13 MR LAKE: In your view, did the co-location of the various 14 utilities with you, and taking decisions in the way you 15 have described, work? 16 A. Yes, very much so. 17 Q. Were you aware to what extent that differed from what 18 had gone before, before your involvement? 19 A. I can't answer that, I don't know. 20 Q. You say within your statement that the utilities 21 contract was on a cost-reimbursable basis and you 22 consider that that enables a quick response. Is there 23 any reason that that's preferable to having an agreed 24 schedule of rates with the utilities contractor? 25 A. Effectively, there was an agreed schedule of rates that 88 1 was used to build up the cost for the cost-reimbursable 2 contract. So we had a set of rates that we could call 3 upon for labour, plant, materials, which were used to 4 price the cost reimbursement contract. 5 Q. So when you say cost reimbursable, nonetheless, the 6 costs they could charge were defined by the contract? 7 A. Yes. 8 Q. Turning to a different issue, that of reporting, if you 9 could look, please, at page 11 of your statement. And 10 the answer to question 7. Could I highlight answer 7. 11 In the third paragraph you note that you haven't 12 seen the Tram Project Board papers and were not involved 13 in the project during the period which they cover, and 14 that you are not able to comment on these reports 15 specifically. 16 You go on to say: 17 "From my knowledge of the project review undertaken 18 by me and my Turner & Townsend colleagues as part of our 19 mobilisation, we concluded that the project reporting at 20 that time was unclear, was inconsistent between Tie and 21 Infraco, and did not place adequate emphasis on 22 addressing the main issues facing the project." 23 Now, just dealing with the elements of that 24 sentence, first, the project reporting was unclear. 25 What did you mean, it was unclear? 89 1 A. Well, I read some example progress reports at the time 2 which I mobilised on the project, and I have a personal 3 view about what makes an effective progress report, and 4 that's clarity on -- clarity on the progress achieved, 5 but also clarity on the items which are potentially 6 impacting on progress. But more specifically, clarity 7 on how they should be addressed. 8 My recollection of reading those reports was that 9 they identified issues, but they didn't necessarily 10 identify how they should be resolved. 11 Q. You say that the reports were inconsistent between tie 12 and Infraco. What inconsistency are you referring to 13 there? 14 A. Well, if I take schedule as an example, there wasn't an 15 agreed position on schedule between tie and Infraco 16 historically. 17 Q. On schedule? 18 A. On schedule. 19 Q. Which schedule? 20 A. On the construction programme. 21 Q. That's the issue we've discussed before the break? 22 A. Yes. 23 Q. Finally, that there wasn't adequate emphasis on 24 addressing the main issues facing the project. Can you 25 recall any of the main issues which you felt didn't get 90 1 the emphasis they merited? 2 A. Well, I don't know what the main issues were really at 3 the time in which tie were managing the project. 4 I don't recall that from reading the reports, but 5 I suppose what I'm picking up on is that there were 6 issues raised within the reports of things that either 7 weren't done or weren't agreed, but that it wasn't clear 8 to me, at least, reading the report, what the way 9 forward was in order to resolve those issues. 10 Q. Where there is this lack of clarity you're describing 11 there, what can that give rise to? Why do you seek to 12 avoid that lack of clarity? 13 A. Well, in order to deliver a project in the most 14 efficient way, it's important that in my mind, that all 15 the parties to the project and to the contract have an 16 agreed way forward, both from CEC and from the project 17 manager, and from the various contractors. 18 If we all understand what the issues are and we all 19 understand what the plan is to address them, then we'll 20 address them in the most cost-effective efficient way. 21 Without that clarity, then we won't. 22 Q. If we could look lower down the page, please, to 23 question and answer 8. The question 8 is referring to 24 the preliminary report we have looked at, and notes that 25 the existing procedure for contract administration is 91 1 described as "not adequate". You are asking if you can 2 explain the basis. 3 You have noted you weren't involved in drafting that 4 section of the report, but you also note that: 5 "Robust change control procedures were implemented 6 on the project following Turner & Townsend's 7 mobilisation ..." 8 Now, were you involved in the robust change control 9 procedures that were implemented when 10 Turner & Townsend -- 11 A. Yes, I was. 12 Q. In deciding what had to be introduced, did you not 13 require to take some view on what the problem was that 14 you had to deal with? 15 A. Well, in relation to change control and other items of 16 procedure, at the time of our mobilisation, some of 17 those procedures weren't in place because the project 18 had effectively been on hold. There was a new team had 19 been established involving Turner & Townsend and some 20 new representatives from CEC as well, and so there was 21 an opportunity to establish what we considered to be 22 best practice in terms of change control. 23 So we weren't necessarily establishing best practice 24 because we thought that there was something wrong with 25 the previous change control process. I don't have 92 1 knowledge of that personally. 2 The process for change control that we established, 3 we established because we thought it was the right thing 4 to do, and we agreed that between the parties. 5 Q. What in your view were the key elements that had to be 6 present in a change control process to make it robust? 7 A. Well, I think the main objective is to deal with them 8 swiftly and to have a process that flags up when changes 9 are agreed, to agree them, or otherwise swiftly, and 10 then to implement them swiftly, and that was done 11 through a combination of the control meetings which was 12 one source where the need for changes was identified. 13 We also had a -- we had a regular meeting -- I can't 14 remember whether it was weekly or two-weekly -- between 15 ourselves and the City of Edinburgh Council, where all 16 changes that were -- or potentially changes were raised, 17 papers were produced; I think from memory, we completed 18 them and there was -- a draft change order was produced 19 for that meeting, and then we went through them every 20 two weeks, possibly more frequently if necessary, and we 21 either agreed them or -- that they should be implemented 22 or otherwise. 23 Q. If there wasn't agreement, what would happen? 24 A. If there wasn't agreement, then we didn't undertake that 25 scope of the work. It was -- it was normally where 93 1 there was a discussion as to whether additional scope 2 items were required. If they were required for the 3 successful completion of the project, then they 4 generally were implemented. 5 Q. Could I ask you to look at the following page of this, 6 page 12 of your question and answer. 7 Look at question and answer 10. You refer there to 8 meetings within the governance structure in which 9 Turner & Townsend were involved, and that is the project 10 delivery group, the tram briefing meeting and the four 11 control meetings which you referred to. 12 A. Yes. 13 Q. The project delivery group and the tram briefing meeting 14 are both noted as being ones where Turner & Townsend 15 present information to others. 16 A. Yes. 17 Q. In terms of where the decisions were actually taken as 18 to what happens or what is to happen in future, was that 19 taken by the other parties at these first two meetings 20 or was that a matter for the control meeting? 21 A. Sorry -- 22 Q. You describe Turner & Townsend making presentations to 23 the first two meetings? 24 A. Yes. 25 Q. At which meeting were the decisions taken as to what was 94 1 to happen, how the project was to be implemented? 2 A. Well, at all meetings I would say. The control meetings 3 involved Infraco. And some of them involved CAF as 4 well, the tram provider. So those were the meetings 5 where, from a day-to-day project progression point of 6 view, decisions would be taken. 7 Really the tram briefing meeting and the project 8 delivery group was an opportunity to report progress 9 from Turner & Townsend to the client, and to give an 10 update on risks and programme and how we thought our 11 items arising should be taken forward. 12 And they were generally speaking, those -- the 13 presentation and our proposed approach for dealing with 14 things was agreed at that meeting. 15 Q. Dealing with the questions of programme, if we look 16 forward, please, to page 19 of your statement, and 17 answer 23 at the top of the page there, the third 18 paragraph on the screen at the moment refers to the 19 two-weekly planners forum, and you note that: 20 "This forum comprised representatives from 21 Turner & Townsend, BBS and CEC who were briefed to 22 reach cross party agreement on the status of the 23 contract schedule and the methodology for controlling 24 and reporting progress throughout the remainder of the 25 project. This forum proved effective in providing 95 1 a joined-up view of progress and identification of 2 critical and near critical paths." 3 Is that something, a form of meeting that you would 4 expect to see on most projects of this scale? 5 A. Yes, I think so. On all projects there needs to be some 6 common ground, some common agreement between the client 7 or the project manager's view of programme and the 8 contractor's view of programme. This was an effective 9 form of achieving that agreement. A very effective 10 form. 11 Q. In terms of requiring the parties to reach agreement at 12 fortnightly meetings, is having such regular meetings, 13 in your experience, does that lead to easier agreement 14 or more scope for disputes being identified? 15 A. No, I think the more frequent -- more frequently, people 16 can meet and agree the status of a project, the better. 17 I mean, in the case of Edinburgh tram, the project, 18 particularly at the phase which the planning forum -- 19 planners forum was introduced, was changing quite 20 rapidly. The impact of -- it was a situation where 21 there were various sites that were occupied by 22 McNicholas undertaking utility works and other sites on 23 the on-street section where Infraco were working and the 24 respective interaction between the two, and the handover 25 of one site to another -- from one party to another, was 96 1 changing quite rapidly, and there was -- because of the 2 nature of the utilities, and the scale of the utilities, 3 that position changed quite frequently. 4 So to have a regular planners forum that agreed what 5 had happened historically up to that point was very 6 useful because once you lose an assessment of current 7 status, it's very difficult to get it back again. 8 Q. I would like to refer to you a different document now, 9 please. Could we look at CEC01890994. 10 Now, this is the opening page in an agenda for 11 a joint project forum for Monday, 12 December. I think 12 you note in your statement that that is not a meeting 13 that Turner & Townsend -- that you would be represented 14 at. 15 A. Correct. 16 Q. Nonetheless, could we look forward to page 3 of this. 17 We can see that these are the minutes for the joint 18 project forum meeting that had taken place on 19 17 November 2011. 20 Within that, if we look forward to page 5, do you 21 see there a heading, "Governance - Project Team Structure, 22 Resourcing and Behaviours"? 23 A. Yes. 24 Q. Looking at the second paragraph there, we note that: 25 "Martin Foerder agreed that they were building 97 1 a good relationship with Turner & Townsend but there was 2 a concern over their interpretation of the contract and 3 the challenges that were being raised regarding the 4 contract. It was felt that they either did not 5 understand the contract or did not have a good working 6 knowledge of the terms of the contract. 7 Sue Bruce noted that this did not sound like the 8 current client instructions to Turner & Townsend, and it 9 was the Council's intention to constantly review and 10 hone the Project's arrangements to increase efficiency 11 and increase the good working relationships." 12 I accept you weren't at this meeting, but as the 13 Project Director from Turner & Townsend, were you aware 14 of the concerns that were being expressed as to your 15 interpretation or Turner & Townsend's interpretation of 16 the contract? 17 A. Certainly it was never mentioned in a -- it was never 18 mentioned formally in a meeting that I attended. As 19 with any contract, the process of value -- of valuing 20 the project on a period basis, there are disagreements 21 that occur, and there was a process for dealing with 22 those, and generally they were effective. 23 Q. If we look at the decision underneath this matter, if we 24 scroll up just slightly, we will see the first item 25 there is noted: 98 1 "To agree that CEC would review and discuss client 2 instructions with Turner & Townsend." 3 Which was something allocated to Dave Anderson. 4 Do you recall your instructions being modified or 5 reiterated in any respect? 6 A. No. 7 Q. What were your instructions? 8 A. Well, we had a scope of services which in very broad 9 terms required us to administer the contract in order to 10 achieve the Employer's Requirements. It was fairly 11 broad. 12 Q. Over and above that, were you given any perhaps more 13 informal guidance as to the manner in which you were to 14 approach the task? 15 A. No. 16 Q. Was it ever said to you that there should be a gentle 17 touch in a sense to the administration of the contract? 18 A. That was never discussed, no. 19 Q. Was it ever suggested that it was important to avoid 20 conflict? 21 A. It's always ideal to avoid conflict, but we were never 22 to my recollection coached on how we should administer 23 the contract. 24 Q. You see the second item here under the decision is that 25 there would be a briefing session on the terms of the 99 1 contract with Turner & Townsend. Was that something you 2 attended, you were given a briefing? 3 A. There was a session set up with -- between ourselves and 4 McGrigors. I can't remember the exact timing of that. 5 It was fairly early on, following our mobilisation. 6 I didn't attend it. 7 Q. Could we look at another document then. That one was 8 from November 2011. Look at a document from 9 January 2012. It's reference CEC01891213. Enlarge the 10 upper half of this. You can see that these are meeting 11 notes from the project delivery group that took place on 12 19 January 2012. 13 This time we can see that from the third last name 14 that you were represented and present at that meeting? 15 A. Yes. 16 Q. Can you go over to the second page of this, please. And 17 look at the lower half of the page. Under the heading, 18 "SOFT REPORT AND CLIENT DECISIONS REGISTER", it's noted 19 that you, Rob Leech, Shirley Mushet and 20 Alastair Richards highlighted successes, failures, 21 opportunities and threats, which had not been covered by 22 the tram briefing meeting: 23 "The following areas were highlighted: 24 The improvement in relations between 25 Turner & Townsend, BBS and CEC was continuing and meant 100 1 Project changes were being resolved as they occurred." 2 In what way had there been a need for an improvement 3 in relations between the parties? 4 A. I don't recall there ever being an issue with relations 5 between the parties. I suspect that was referring to 6 the fact they did continuously improve as we got into 7 a -- more of a business as usual approach with the 8 project administration. But I don't recall there ever 9 being a specific need for improvement. 10 Q. Would you agree with me that when one reads that the 11 first matter highlighted is an improvement in relations, 12 gives the impression at least that there had been 13 initially poor relations? 14 A. All I can say is that I don't recall there ever being 15 poor relations between the parties at the time that we 16 were administering the project. 17 Q. Was it the case perhaps that Turner & Townsend were told 18 that they had to change their approach to the 19 administration of the contract in dealing with the 20 consortium? 21 A. To my knowledge that didn't happen. 22 Q. Look at another document, please. This one is reference 23 CEC01942260. This is later still. It's note of 24 a meeting of the Joint Project Forum of 21 March 2012. 25 Once again, we are looking at a minute of a meeting that 101 1 you were not present at; is that correct? 2 A. Yes. 3 Q. If we look at page 4 of this, and highlight item 3, 4 headed "Governance - Project Team Structures and 5 Behaviours": 6 "Sue Bruce highlighted the achievements of the last 7 year since mediation. The improved relationship was 8 a key factor in what had been achieved. There had been 9 occasions where Turner & Townsend's approach had caused 10 some tension and further discussions would be held with 11 Turner & Townsend to clarify that the Council expected 12 the Project to continue in the spirit of the settlement 13 agreement." 14 Now, firstly, were you made aware of occasions in 15 which Turner & Townsend's approach had caused tension? 16 A. No. 17 Q. Did Sue Bruce speak to you, or any of the other senior 18 Council representatives speak to you about this? 19 A. I don't recall them speaking to me about it, no. 20 Q. It's also said -- 21 CHAIR OF THE INQUIRY: What position did you hold in 22 Turner & Townsend? Were you a partner or -- 23 A. I'm a Director within the infrastructure part of our 24 business. 25 CHAIR OF THE INQUIRY: Were you a Director at that stage? 102 1 A. I was. 2 CHAIR OF THE INQUIRY: So it wouldn't be a case of someone 3 else more senior to you would raise the matter -- 4 A. There were no conversations with anyone more senior than 5 me where I wasn't present. 6 MR LAKE: It was said there that there would be discussions 7 held with Turner & Townsend to clarify what the Council 8 expected. Were you aware of discussions -- did those 9 discussions take place? 10 A. I don't recall them. 11 Q. If someone from the Council had come to you in about 12 March 2012 or thereafter, and said: this is our 13 expectation as to the spirit in which the contract would 14 be administered; is it likely you would recall that? 15 Would that be unusual? 16 A. I would think I would recall that. I also think the 17 spirit in which we executed the project was -- was in 18 a good spirit. We collaborated and played our full part 19 in collaborating. So I would have been very surprised 20 at any suggestion that we hadn't. 21 Q. I just wonder if you can shed any light on -- these 22 three documents are giving the impression, at least, 23 that there was tension or disagreement, that the Council 24 had to ask Turner & Townsend to change their approach? 25 A. The only tensions and disagreements that I'm aware of 103 1 were -- would have related to discussions around the 2 valuation of the application for payment each month. 3 There were -- each period, there were -- inevitably, as 4 with all projects, there were discussions around what 5 that payment should provide for, and there were 6 disagreements around that, but no one ever suggested 7 that we were not administering the contract correctly. 8 CHAIR OF THE INQUIRY: From the first document that we 9 looked at, it appeared that it was Mr Foerder who was 10 complaining that you didn't understand the contract. 11 Nobody ever raised that matter with you? 12 A. No. 13 MR LAKE: If we could look at page 17 of your statement, 14 please. Question and answer 20. You were asked the 15 question there about payments that were made to Infraco, 16 despite the fact that the information the independent 17 certifier said was required had not been made available. 18 Do you recall this question? 19 A. Can I just -- sorry, can I just -- 20 Q. I'll give you a chance to read it. (Pause) 21 A. Yes, I do remember that question, yes. 22 Q. If we scroll down so we can see the final part of your 23 answer, you say you were neither involved in the 24 detailed discussions relating to this change, nor in the 25 certification which was governed by the independent 104 1 certifier: 2 "I cannot comment on why CEC instructed 3 Turner & Townsend as they did in relation to this 4 payment." 5 An instruction from the Council to make a payment 6 despite the fact the information hadn't been provided, 7 would that be given to you or someone else within 8 Turner & Townsend? 9 A. It would have -- it would have been probably copied to 10 me, but it would have gone directly to the commercial 11 team, Turner & Townsend's commercial team. 12 Q. Is that something unusual, that the client directs you 13 to pay despite the fact information required by the 14 independent certifier is not available? 15 A. I don't recall it happening on other projects. 16 Q. So this is unusual then? 17 A. Yes. 18 Q. Did you form any view as to why the Council were doing 19 this? 20 A. I didn't, no. 21 Q. I mean, if it was suggested to you that this shows that 22 the Council were determined to avoid disputes even at 23 the cost of paying the sums that the certifier -- paying 24 sums in the absence of evidence required by the 25 certifier, would you agree with that? 105 1 A. Sorry, could you repeat the question? 2 Q. This is indicative that the desire to avoid disputes 3 goes so far as paying sums, despite the fact they're not 4 vouched? 5 A. I can't really comment on the reasons why CEC would ask 6 us to make a payment. From memory, we wrote an advice 7 note on this. 8 I don't recall the detail of that advice note, but 9 I do recall that we -- that there was discussions around 10 the amount of evidence that was provided in relation to 11 this item, and I think our commercial team was of the 12 view that not all of the information that they had 13 expected to receive had been received. 14 And that was -- that was included within the advice 15 note. 16 Q. Now, that particular issue related to the additional 17 sums payable to the consortium as a result of the late 18 start in works caused by the Council votes? 19 A. Yes. 20 Q. Looking now to a slightly different issue in relation to 21 sums payable for Scottish Water manhole connections, can 22 we look, please, at a different document. It's 23 CEC01942255. 24 We will see that this is your Progress Report 25 Number 6 for the period 25 February to 27 March 2012? 106 1 A. Yes. 2 Q. Could we look in this, please, at page 24. We see 3 a heading, 6.2, is "Key Issues". This is under a more 4 general heading of "On Street - Main Works", but there's 5 a sub-heading, "Scottish Water Manhole Connections". If 6 you look at the third paragraph, you have noted: 7 "In parallel with the re-design Turner & Townsend 8 has prepared a briefing note setting out the history of 9 the issues and a commentary on the possible 10 apportionment of responsibility. The note concludes 11 that Infraco has at this time not demonstrated why 12 a Pricing Assumption Variation has occurred. It goes on 13 to state however that it is important to note that 14 even in the event that Infraco is liable for changes 15 relating to manhole connections it will still be 16 entitled to raise a PAV for those elements of the 17 drainage requiring redesign as a consequence of 18 utilities. Finally the note recognises that the tram 19 project is at a critical stage of construction and 20 considerable effort has been expended on all sides 21 developing close working relations between Infraco, CEC, 22 and its representatives and Turner & Townsend. Whatever 23 decision is reached with regards to the contractual 24 apportionment of time and cost, consideration will need 25 to be given to ensuring the relationships, crucial to 107 1 successful delivery of the project, are maintained." 2 If I just stop there, that seems to be suggesting 3 that whatever the contractual rights and wrongs, it 4 might be necessary to agree to give money to the 5 consortium in order to preserve working relations. Is 6 that a fair reading? 7 A. I don't think that was the intent of the paragraph. 8 I think what it's suggesting is that the entitlement in 9 this particular case was unclear. 10 There was a Pricing Assumption that variation was 11 likely to occur because whatever the arrangements 12 relating to that specific issue, and they're quite 13 complex in their own right, there would certainly be 14 a need in order to undertake -- in order to implement 15 the solution to this issue, there was a need to divert 16 utilities. And that would have held up Infraco. So the 17 issue over whether or not a Pricing Assumption had 18 occurred, I think it was clear Pricing Assumption 19 Variation had occurred. The extent to which that 20 Pricing Assumption Variation, that the costs associated 21 with that should be attributable to the Infraco 22 contract, I think, was a subject of some discussion. 23 Q. You start there by noting in the third line that the 24 advice note that had been prepared by Turner & Townsend 25 was that it has not been demonstrated why a Pricing 108 1 Assumption Variation has occurred? 2 A. Yes. 3 Q. But towards the end of the paragraph, you're suggesting 4 that whatever decision is reached with regards to the 5 contractual apportionment, consideration will need to be 6 given to ensuring relationships are maintained. What 7 does that last sentence mean then: consideration must be 8 given to ensuring that relationships are maintained. 9 A. I'm assuming that it means that -- the important thing 10 is that the progression of the works continues. We'd 11 worked very closely with Infraco in order to -- in order 12 to make sure that their element of the works could 13 progress as quickly as possible, and in this particular 14 case that meant dealing with utility issues as well as 15 the potential -- the utility issues around the Pricing 16 Assumption Variation, as well as the issue with the 17 manhole. So there were two issues going on here. One 18 was clearly was a Pricing Assumption Variation. The 19 other one potentially was not, and hasn't been 20 demonstrated. 21 I think the purpose of this paragraph is to point 22 out that it's very important that whilst the discussion 23 around the Pricing Assumption Variation was going on, 24 that the issues relating to the utilities were resolved 25 quickly, to allow the Infraco to progress. 109 1 Q. If it was to be suggested that by this stage the works, 2 post Mar Hall, the rights and wrongs of the contract 3 were given much less importance than simply getting the 4 works done, would you agree with that? 5 A. No, I don't think I would agree with that. 6 Q. Is this paragraph not consistent with the desire not to 7 adhere to the strict terms of the contract? 8 A. I don't think that is what it's trying to suggest. 9 Q. To go back to the utility works just for one minute, we 10 see reference to legacy works in relation to 11 Scottish Water? 12 A. Yes. 13 Q. What was meant by that? 14 A. Legacy works were works where some element of work had 15 been undertaken during the MUDFA contract that preceded 16 our involvement, but which hadn't been fully closed out 17 to Scottish Water's satisfaction. There was a need to 18 go back and undertake further works in relation to those 19 items. 20 Q. Just turning now to one question concerning the 21 programme, if I could ask you to look at another 22 document. It's CEC01932700. We can see this is the 23 Progress Report, your Progress Report number 14 for the 24 period 14 October to 10 November 2012. Do you see that? 25 A. Yes. 110 1 Q. If we could turn to page 12, and the upper half of the 2 page, you've got the heading, "Programme", and then 3 sub-heading, "Programme Structure". The first paragraph 4 says that: 5 "Increasingly it has become apparent that the 6 actual, on-site, sequencing and progress of the 7 project in each work area has continued to diverge from 8 the Revision 5 and Revision 5C Infraco programmes. In 9 order to address this disparity, Turner & Townsend have 10 implemented changes to the Master Schedule this period." 11 It's noted that the previous approach was that: 12 "The Master Programme has historically been based on 13 the Infraco Revision 5 and Revision 5C more pessimistic 14 programme phasing, with opportunities for earlier 15 completion identified within the QSRA process." 16 The revised approach is that: 17 "The Master Programme has been amended to include 18 the current working sequences and anticipated programme 19 to completion. With specific risks to the attainment of 20 these dates modelled within the QSRA (along with the 21 existing project risks)." 22 First of all, QSRA, is that a risk analysis relating 23 to the programming of the works? 24 A. Exactly that, yes. 25 Q. Had that been carried out before Turner & Townsend's 111 1 involvement in the project? 2 A. I believe so. There was certainly in the preliminary 3 report, there was -- it was noted that before the 4 Mar Hall Agreement, that tie were implementing QSRA 5 process here. 6 Q. What was the -- the essence of the problem that you're 7 identifying here in terms of the divergence? 8 A. The Infraco submitted a progressed version of their 9 contract programme each period. So each four weeks. 10 And that -- that was basically an updated version of the 11 contract programme, but with all the contract logic and 12 durations within it. So the activities that had been 13 undertaken up to that point were progressed accurately 14 to reflect what had actually happened. 15 The activities beyond the current time at which -- 16 the time of the report, still contained the original 17 logic and the original durations. There were some 18 modifications to that because Infraco issued some 19 subsequent versions to the programme to take account of 20 major changes in approach, but at this point in time, 21 the progressed version of the Infraco programme that was 22 submitted each month in our view didn't reflect the 23 correct logic and duration of the future works, and it 24 therefore became quite difficult for us to get an 25 accurate prediction of when the sectional completion 112 1 dates would occur. 2 Q. So is this an example of the problem of being unable 3 predict how to manage the works if you don't have an 4 accurate programme? 5 A. Yes. 6 Q. In the paragraph up after the one I read, it begins "The 7 Master Programme", it says: 8 "The Master Programme now reflects the current view 9 of anticipated phasing of the working areas and presents 10 a more realistic view of the potential completion date. 11 The net result is a 3 month improvement on the 12 Section D completion date to 1 February 2014, when the 13 affect of the risk is scheduled." 14 Do you understand from that that the problem was 15 that the works were actually being done more quickly 16 than programmed and therefore when it was revised, it 17 had an earlier completion date? 18 A. Correct, yes. 19 MR LAKE: Thank you, Mr Weatherley. Those are my questions. 20 CHAIR OF THE INQUIRY: I don't think there's anyone else 21 with any questions. 22 Thank you very much, Mr Weatherley. You're still 23 under citation, so you could be recalled if any issues 24 arose. Hopefully that won't be necessary, but thank you 25 for your attendance. You are free to go. If you just 113 1 leave your statement. 2 A. Thank you. 3 (The witness withdrew) 4 MR LAKE: My Lord, the next witness is Brandon Nolan. 5 MR BRANDON NOLAN (sworn) 6 CHAIR OF THE INQUIRY: You appreciate you are going to be 7 asked some questions by Mr Lake, Counsel to the Inquiry. 8 If you just listen to the question and answer it as 9 directly as possible. Speak into the microphone so 10 everyone can hear what you are saying and speak at 11 a reasonable pace, so the shorthand writers can keep up 12 with you. 13 A. I'm obliged, my Lord. 14 Examination by MR LAKE 15 MR LAKE: Mr Nolan, could you state your full name, please. 16 A. My full name is Brandon Edward Nolan. 17 Q. I would like you to look at a document, please. You'll 18 have a hard copy in front of you, but I'll also have it 19 on the screen. It's reference TRI00000114_C. 20 Is that a copy of the questions and answers that 21 you -- the questions provided to you and the answers you 22 gave for the purposes of this Inquiry? 23 A. It looks like it, it's certainly the first page which is 24 up, but it does look like it. 25 Q. Is the paper copy the whole of that? 114 1 A. Indeed. 2 Q. I think on the final page it has your signature; is that 3 correct? 4 A. It does. 5 Q. Are you content that that be adopted as your evidence 6 for the purposes of this Inquiry? 7 A. I do. 8 Q. I would like to ask you some further questions of 9 clarification about some parts. If we could first look 10 at page 5, and the lower half of the page, in response 11 to a question about your initial impressions, your 12 answer is: 13 "My first involvement was through challenge meetings 14 when it became immediately apparent that the Pricing 15 Assumptions and specifically Pricing Assumption 1 16 presented significant problems for tie." 17 Now, the Inquiry has already heard a little bit 18 about Pricing Assumption 1, but what did you see at the 19 outset were the significant problems it presented for 20 tie? 21 A. Well, primarily in relation to Pricing Assumption 22 number 1, it was the exclusionary words at the end in 23 relation to defining design development, normal design 24 development. And on a literal interpretation, if 25 anything fell within the category of those exclusionary 115 1 words, on the face of it that wasn't normal design 2 development. 3 Q. Was that apparent -- you say it was immediately 4 apparent? 5 A. Well, the first challenge session that I attended was, 6 I think from memory, on or about 10 August 2009. 7 The purpose of that challenge session was in 8 relation to Gogarburn Bridge, and during the course of 9 the discussion at the challenge session, I asked about 10 how they would cater for the words at the end, and I was 11 informed that the expert witness, a Mr McKittrick, 12 I think his name was, was of the view that as a matter 13 of engineering expert evidence, we didn't transgress 14 those words at the end. 15 It was a point that I raised because it was of 16 crucial importance, but that was what I was told. 17 Q. I'll come back to look at that challenge session in 18 a little bit more detail in a moment, but first of all 19 I would like to look at the challenge function more 20 generally, please. 21 If you could look over the page to page 6, and your 22 answer to question 14. You note that: 23 "When McGrigors were appointed by tie it was to 24 attend challenge meetings in relation to matters that 25 were intended to be taken to adjudication." 116 1 What factors determined which issues were selected 2 for Dispute Resolution Procedures, not which disputes, 3 but which issues were the ones to be considered? 4 A. I'm afraid I don't know. 5 Q. Were you involved in that question at all? 6 A. No. 7 Q. Were you given any guidance as to what the objectives 8 were in taking matters to the Dispute Resolution 9 Procedure? 10 A. No. 11 Q. Prior to attending the challenge meetings, the first 12 ones you were involved in, were you provided with the 13 legal advice that had been given to tie up to that date 14 from DLA and the Council? 15 A. From memory, I don't think so. 16 Q. Can you recall at what stage you were provided with that 17 advice? 18 A. I think it was after the initial challenge session. So 19 we went through the first two or three or four, and 20 I can't specifically remember seeing any advice. 21 Q. I'm going to come later on in the questions I have to 22 the report on contractual issues that was prepared by 23 McGrigors in March the following year. But for the time 24 being, what I want to know is: were you asked to 25 consider or evaluate the legal advice that had already 117 1 been given? 2 A. No. What I was asked to do was to attend these 3 challenge sessions with a fresh pair of eyes, if you 4 like, and on the merits of those particular issues, 5 which were going to be taken forward, principally 6 through to adjudication, to stress test issues as 7 I thought appropriate. 8 If I may say so, the way it unfolded was that I was 9 just about to go on holiday in July 2009 and I can't 10 remember whether I received an email or a telephone 11 call, it was one or the other, from Steven Bell of tie. 12 I was asked if as a matter of urgency I could attend 13 tie's office, which I did. He asked me a bit about my 14 own experience in construction law. I answered those 15 questions, and then he explained that they were going to 16 go through a process which was to assertively deal with 17 specific issues, potentially through adjudication. 18 So that in effect was my briefing. 19 I then departed on holiday for a fortnight. Before 20 I went off, I did a letter of engagement, and I left it 21 in the hands of colleagues, and the first challenge 22 session actually took place when I was abroad. 23 So that, if you like, was the run-up. 24 Q. When Mr Bell spoke to you, he didn't give you any 25 indication as to what the purpose of the DRP was to be? 118 1 What tie hoped to achieve? 2 A. Well, I think the purpose was to achieve success through 3 the DRP process. But it was no more profound than that. 4 No specific issues were raised with me at the initial 5 meeting. I was told about Princes Street and that there 6 were major problems. One could read about that in the 7 Edinburgh Evening News. 8 So everybody knew about that. 9 But beyond that, there was no specification, if you 10 like, about particular issues. These only emerged when 11 we had the challenge sessions. 12 Q. Who attended the challenge sessions? 13 A. From memory, it would be Steven Bell, Dennis Murray, 14 I think Richard Jeffrey. I don't think he attended all 15 of them, but he certainly attended some, or if he would 16 attend, he might attend for part of it, and then depart. 17 Then there were people from DLA. Principally 18 Andrew Fitchie. I think Stuart Jordan attended from 19 time to time. He may not have been at all of them. 20 Keith Kilburn of DLA. And I think that was probably 21 about it. 22 Susan Clark may have attended some of the meetings, 23 and I think I've already mentioned Dennis Murray, 24 perhaps. 25 Q. You mentioned earlier reference to the particular 119 1 challenge meeting in relation to Gogarburn and 2 Carrick Knowe, or one of them. 3 If you could turn particularly to looking at the 4 paper that was prepared in relation to Gogarburn. Could 5 we look at CEC00805684. 6 We can see this is an email from you to 7 Dennis Murray of 24 August, where you provide your 8 comment paper in relation to case 5a. 9 A. That's right. 10 Q. Go and see what that comment paper is, please. That's 11 document reference CEC00805685. Can we enlarge the 12 upper half of this? 13 Is this a document that you have prepared? 14 A. I prepared this document. 15 Q. In terms of the analysis, you set out that: 16 "In order to come within the definition of a 17 Notified Departure, it would have to be established that 18 the IFC drawings in question differed from the Base Case 19 Assumptions and that that was not due to a breach of 20 contract by the Infraco, an Infraco Change or a change 21 in Law. 22 Infraco say that they come within the above 23 definition due to the changes in the drawings being 24 outwith normal development and completion of design 25 process." 120 1 Then you note: 2 "In terms of the Pricing Assumptions, which forms 3 part of the Base Case Assumptions, Infraco's contention 4 is relevant and the issue turns on the facts." 5 Do you see that? 6 A. Yes. 7 Q. If we just, still looking at the facts, if we just look 8 down a little bit, we will come back to the terms of 3.4 9 in a moment, but if we look at paragraph 6 you say: 10 "Infraco have not thus far elaborated on their bald 11 assertion that the IFC drawings go beyond the normal 12 development and completion of design process. However, 13 tie's position is that the drawings do not go beyond 14 normal design development and in particular there are no 15 changes of design principle, shape and form and outline 16 specification." 17 Do you see that? 18 A. Yes. 19 Q. Now, if we just turn for a moment to look at the terms 20 of Part 4 of the Schedule, that's document USB00000032. 21 You will recognise Schedule Part 4, I'm sure, from 22 looking at it many times? 23 A. Yes. 24 Q. Could we look at page 5 of this, please. In the lower 25 half of the page we see there Clause 3.4 is the Pricing 121 1 Assumptions, and the first is: 2 "The Design prepared by the SDS Provider will not 3 (other than amendments arising from the normal 4 development and completion of designs): 5 in terms of design principle, shape, form and/or 6 specification be amended from the drawings forming the 7 Base Date Design Information ..." 8 Now, seeing what you've said in paragraph 6 of your 9 position paper that the evidence that tie have is that 10 there were no changes of design principle, shape, form 11 or outline specification, did issues of normal design 12 development arise at all in relation to this, on that 13 factual basis? 14 A. I suppose what I had primarily in mind was the 15 exclusionary words at the end. 16 Q. Of the Pricing Assumption? 17 A. Of this particular Pricing Assumption. 18 Q. If we go over the page, just to look at those, if we 19 enlarge the upper half of the page, please, we can see 20 the proviso: 21 "For the avoidance of doubt, normal development and 22 completion of designs means the evolution of design 23 through the stages of preliminary to construction stage 24 and excludes changes of design principle, shape and form 25 and outline specification." 122 1 That's what you had in mind? 2 A. Indeed. 3 Q. Now, clearly that exclusion expressed there doesn't 4 apply if there was no change in design principle, 5 et cetera? 6 A. That's one way of interpreting that provision. 7 Q. I just want to be clear, because, as you say in your 8 position paper, the factual basis, which I presume is 9 the one on which matters are discussed at the challenge 10 session, was that there was no change of design 11 principle, et cetera? 12 A. Indeed. That's what I was told at the meeting. 13 Q. I accept you weren't being asked to form a view on that 14 because that was a technical matter? 15 A. And that's why I referred in that paper to the 16 requirement to get appropriate expert evidence in 17 relation to the issue. 18 Q. But if there was no change of design principle, 19 et cetera, not only would that not trigger the exclusion 20 there, but if we go back to the previous page, it would 21 mean that the -- there was no variation from the Pricing 22 Assumption anyway, would it? It wouldn't engage 23 paragraph 1.1? 24 A. Yes. 25 Q. So was there any discussion to the fact that if tie were 123 1 right on their principal contention, that -- on the 2 facts, the proviso was irrelevant? 3 A. Well, I think the position was that as far as Infraco 4 were concerned, Gogarburn Bridge triggered a Notified 5 Departure, a mandatory tie change pursuant to Clause 3.5 6 of Schedule Part 4. 7 So their position was that there was design 8 development in moving from BDDI in respect of the 9 Gogarburn structure to IFC. 10 I guess they would regard that as normal design 11 development in terms of complying, if you like, with the 12 provisions of 1.1, but their position was that the 13 exclusionary words at the end were triggered by how that 14 design developed, if you like, in terms of design 15 principle, shape, form and so on. 16 Q. Just to follow that through, I want to be quite clear as 17 to why it was that tie thought that there was a Notified 18 Departure. Did they consider that that triggered 19 Clause 1.1, just the terms that we see on the screen in 20 front of us? 21 A. I don't actually know what they thought on that point. 22 I think the position was simply that they were 23 confronted with a position on the part of Infraco that 24 we were in the territory, as far as they were concerned, 25 of a Notified Departure, and they wanted to test the 124 1 point. It was them who were actually going to take this 2 adjudication forward, and they wanted to test it before 3 an adjudicator. 4 So I think the context for all of this was Infraco's 5 position was this was a Notified Departure. tie on the 6 other hand did not take the view that Pricing Assumption 7 number 1 was applicable. 8 Q. I'm just trying to understand how on the one hand it 9 could be a Notified Departure, on the other hand Pricing 10 Assumption number 1 is not applicable. Can you assist 11 with that? 12 A. I'm not sure if I follow that, because Infraco's 13 position was that this was a Notified Departure, and 14 there was design development as a matter of fact because 15 the BDDI transformed itself into the issued for 16 construction status of the drawings. So there was an 17 evolution. 18 The critical question then became whether that 19 transgressed or gave life, if you like, to Pricing 20 Assumption number 1, and in terms of the opening words 21 of Pricing Assumption number 1, as you point out, it 22 says that the design, in order to be normal development, 23 would be in terms of design shape, form and 24 specification. 25 But then what you come on to in the last paragraph 125 1 is almost like a definition of design development, 2 normal design development, which excludes certain types 3 of changes, and that's what we were concerned with over 4 here. That was the battleground, if you like, on 5 Gogarburn between Infraco on the one hand and tie on the 6 other. 7 Q. I think this is something you have noted in your 8 reports, that if clause -- Pricing Assumption 1 as 9 a whole is given a literal interpretation, the effect of 10 that proviso on the page following the one on screen is 11 that normal development and completion of designs can 12 never save a change of design principle as normal design 13 development? 14 A. That was the problem. 15 MR LAKE: My Lord, I see it's past 1 o'clock. That would be 16 a -- 17 CHAIR OF THE INQUIRY: Do you think we'll finish this -- 18 MR LAKE: I think originally it was intended that 19 Mr Weatherley would start his evidence first thing this 20 morning, and obviously that wasn't the case. I'm 21 hopeful we may finish today, but I wonder if a shorter 22 lunch break would assist with that. 23 CHAIR OF THE INQUIRY: Yes. We'll resume again at 1.45. 24 (1.03 pm) 25 (The short adjournment) 126 1 (1.45 pm) 2 CHAIR OF THE INQUIRY: You're still under oath, Mr Nolan. 3 MR LAKE: Thank you, my Lord. 4 Mr Nolan, before lunch we were talking about the 5 challenge session in relation to Gogarburn. You said 6 you raised the issue about the difficulties in the 7 literal interpretation of Pricing Assumption 1? 8 A. Yes. 9 Q. What was the reaction to that? 10 A. The reaction from Steven Bell was that he did not think 11 or believe that the change from BDDI to IFC transgressed 12 the exclusionary words at the end of Pricing Assumption 13 number 1. 14 Q. That is that they wouldn't fall within the design 15 principle, shape, form or specification qualification? 16 A. Correct. The definition, if you like, of design 17 development is contained at the end of that particular 18 Pricing Assumption. So normally design development 19 doesn't include anything which involves a change in 20 shape and design principle and so on. 21 Q. But he felt that that was not going to present a 22 problem, as I understand that's what you're saying? 23 A. Correct, yes. 24 Q. Did you get any impression, or was it even said to you 25 directly, whether or not that had been the subject of 127 1 advice given to tie previously? 2 A. I can't recall that. I know that advice was taken from 3 Counsel, but I think the discussion in relation to that 4 came after the Gogarburn challenge session. I know 5 Calum MacNeill QC gave advice on various things and so 6 on. So there was a bundle, if you like, of advice notes 7 and DLA notes and such like, but I do not think that was 8 available at the time when we had this session. 9 Q. Either at that session or afterwards, was it ever said 10 to you that there had been advice in relation to the 11 dangers of Pricing Assumption 1 before the contract was 12 concluded? 13 A. No. 14 Q. To be quite direct about it, was it ever said to you 15 that Andrew Fitchie had warned tie about the dangers 16 that lay in Pricing Assumption 1? 17 A. No. 18 Q. Are you sure about that? 19 A. I'm absolutely positive. I had many discussions with 20 Andrew Fitchie. And in relation to Pricing Assumption 21 number 1, his belief was that you had to look at the 22 Employer's Requirements, and if you looked at the 23 Employer's Requirements, the price somehow correlated 24 with that. 25 And that's -- that was my understanding of his 128 1 position. 2 I didn't really discern anything in relation to 3 Pricing Assumption number 1 from Andrew Fitchie. 4 Q. He never said to you: I warned tie at the time that this 5 was a problem and now it's come home to roost; or 6 something like that? 7 A. No. 8 Q. Did he seem surprised when you raised the issue at the 9 challenge session? 10 A. I can't recall any surprise. No. 11 Q. The challenge session we have noted, or at least the 12 email with the paper, was in August 2009. I want to 13 look at a report you prepared in October 2009, please. 14 It's reference CEC00797337. 15 Now, do you recognise this as a report that you 16 prepared? 17 A. Yes. 18 Q. It's referred to in your statement. 19 If we look at page 7 of this, we see the date of 20 16 October 2009. Is that correct? 21 A. Yes. 22 Q. Could we look, please, at page 5 of this. In particular 23 at paragraph 34. The conclusion that you give is: 24 "The Infraco will therefore not be entitled to 25 a Mandatory tie Change where the change has arisen as 129 1 a result of design development of the BDDI produced by 2 the SDS Provider. Whether change falls within design 3 development (using the guidelines in Schedule Part 4 4 referred to above) will be a question of fact, and in 5 particular, engineering judgement." 6 Now, that appears to indicate that there's not 7 a great danger to tie provided we're looking at design 8 development of the BDDI; do I understand that correctly? 9 A. No. I think you have to read the two sentences 10 together. So the starting point is looking to see how 11 the design has developed, and then the critical question 12 is whether the change falls -- whether it falls within 13 the design development guidelines, which is the last 14 paragraph of Pricing Assumption number 1. And I refer 15 specifically to the challenge notes in the footnote. 16 That's footnote 11. 17 Q. When it refers to the comment on papers DRP, cases 5a? 18 That's the one we've just been looking at. 19 A. 5a is Gogarburn. 5b is Carrick Knowe. 20 Q. We will come and look at the others in just a moment, to 21 be clear. 22 When we looked at your statement earlier, it noted 23 that as soon as you read it, you thought there were 24 significant problems. I'm just trying to reconcile your 25 view on the one hand there's significant problems with 130 1 what you're saying here, that whether or not there's 2 design development is all a question of fact in 3 a particular engineering judgement. Why did you think 4 that was a significant problem? 5 A. I suppose the reason why I saw it as a significant 6 problem was simply the reaction to what I said at the 7 challenge session, where I seem to be a bit of a prophet 8 of doom, if you like. I was raising a point which 9 didn't seem to have -- really be considered in any 10 detail. 11 When I raised the point, I was informed that there 12 was no need for concern because, as a matter of 13 engineering, this didn't go into any of the exclusionary 14 words at the end. 15 Increasingly after that I saw the same issue in 16 Carrick Knowe, and Russell Road retaining wall. So 17 I can't remember, the timing of this may have come after 18 the decision, I don't know if you know the decision of 19 Gogarburn. 20 Q. No, this was prior to the decision in Gogarburn? 21 A. This is prior to it, yes. 22 Well, I saw an issue in relation to these Pricing 23 Assumptions, and the words that precede this, these are 24 known to not exist, if you like, that there will be 25 departures from them is a matter of fact. And therefore 131 1 I regarded the whole of Pricing Assumption number 1, not 2 Pricing Assumption number 1, the opening preamble to it, 3 as raising a huge question mark as to what the 4 quantification of all of this could potentially be. 5 Q. When you say the quantification, you mean what the 6 ultimate cost -- 7 A. Yes. But we were still feeling our way through this 8 process. This note -- I think this is a mark-up of 9 draft 2. There is a final version of it, I think, a few 10 days later or a few weeks later. 11 The first version of it, I can't remember the date 12 of. But what we were trying to do was grapple with 13 a number of different provisions, not just Pricing 14 Assumption number 1, but how the Employer's Requirements 15 and the Infraco Proposals worked together. That's the 16 preceding pages of this note. 17 How they tie in. Misalignment as a concept, where 18 there was known to be things in the Employer's 19 Requirements -- sorry, in the Infraco Proposals which 20 were at variance with what was in the BDDI, and I give 21 an example of that. And how that falls to be addressed. 22 So this note was designed to cover quite a number of 23 issues, as well as Pricing Assumption number 1. 24 Q. Sticking with Pricing Assumption number 1, and looking 25 at the other disputes we have made reference to, if we 132 1 could look at the challenge paper for Carrick Knowe, 2 please. First of all, the covering email, CEC00805916. 3 Pardon me, I have read the wrong reference. Could 4 we have CEC00805738. 5 You can see that this is an email from you dated 6 26 August to Dennis Murray, and this attaches your 7 comment paper in relation to 5b? 8 A. That's right. 9 Q. If we look at the attachment for that, it's reference 10 CEC00805739. Is that the challenge paper you drafted in 11 respect of case 5b, which was the Carrick Knowe Bridge? 12 A. It is indeed. And you'll notice that it's shorter than 13 the first one because it refers back to it. The same 14 principles applied. 15 Q. If you enlarge the analysis part of it, we can see 16 paragraph 3 begins by noting: 17 "The position in respect of 5b turns on the same 18 issues which we have commented upon in relation to 5a 19 subject to one important difference. In 5b it is 20 accepted that a Notified Departure exists but only in 21 respect of the Galleries which involved amendment from 22 the drawings forming the BDDI ..." 23 In 7 you note that: 24 "The comments in respect of 5a are entirely 25 applicable ..." 133 1 A. Yes. 2 Q. There was an additional issue here though, if you look 3 at paragraph 5. You say: 4 "It is intended to invoke Clause 80.15. However, it 5 is recognised that Infraco may argue (on a literal 6 interpretation) that Clause 80.15 is only applicable 7 where a Notified Departure is accepted and it is only 8 the Estimate that has been referred to the DRP for 9 determination. It would not be possible to carry out 10 the work in relation to the Galleries without building 11 the new structure." 12 You say, paragraph 8: 13 "It may be difficult to successfully invoke 14 Clause 80.15 if Infraco challenge this for the reasons 15 set out in paragraph 5 above." 16 Do you know whether there was an attempt to actually 17 require works to be done in accordance with 18 Clause 80.15? 19 A. I don't. I was just making the -- I think the obvious 20 point that if it's one component of a bigger structure, 21 it's difficult to see what the point of making progress 22 on the one component is, because presumably you have to 23 do the other work as well. It was no more profound than 24 that. 25 Q. Can you remember, from the challenge session, was there 134 1 any discussion as to whether or not Clause 80.15 issue 2 should be sent to adjudication? 3 A. No. I can't recall any discussion about that. 4 Q. For completeness, if we look at the third of the ones 5 mentioned in the report, firstly, the covering email 6 will be CEC00805916. This is dated 4 September 2009, 7 from you to Dennis Murray. You say you attach your 8 comment paper in relation to case 5c? 9 A. That's right. 10 Q. If we look at the paper that was attached to that, it's 11 reference CEC00805917. If we enlarge the analysis 12 section, we can see in paragraph 3 once again you note 13 that 5c turns on the same issues which have been 14 commented upon in relation to 5a and 5b. 15 A. That's right. 16 Q. If we look at paragraph 5 and 6, you can see once again 17 you refer to the issue of invoking Clause 80.15. 18 Although it's noted that Infraco might argue that 19 Clause 80.15 is only applicable where a Notified 20 Departure is accepted and it is only the estimate that 21 has been referred to the DRP for determination. 22 In paragraph 8 you note that it might be difficult 23 to invoke 80.15 if Infraco take that argument. 24 Can you recall, was Clause 80.15 the subject of 25 discussion as to whether or not it should be referred to 135 1 adjudication? 2 A. The fact that I'm mentioning it seems to suggest that it 3 was discussed, but I have -- sitting here just now, 4 I have no recollection of the actual discussion other 5 than what I'm reading on the screen. 6 Q. I'm finished with that document. 7 Now, Carrick Knowe Bridge and Gogarburn Bridge were 8 both decisions made by Mr Hunter, the adjudicator? 9 A. That's right. 10 Q. In respect of each of them, I think there's no dispute 11 that the outcome was that he determined that there had 12 been a Notified Departure? 13 A. That's right. 14 Q. Can we look at what your statement says in this regard. 15 Could we go to page 10, please, and enlarge the answer 16 to question 19. You note there: 17 "These decisions ..." 18 That's the two I referred to: 19 "... held that the development of the design from 20 BDDI to IFC came within the ambit of the final sentence 21 of Pricing Assumption 1 as a matter of fact. It was 22 therefore unsurprising that the Adjudicator gave 23 a literal interpretation to the final sentence of 24 Pricing Assumption 1. - see my answer to question 15 and 25 to my comment papers in respect of Gogarburn and 136 1 Carrick Knowe." 2 Now, firstly, just to be sure I'm understanding the 3 first sentence, is it simply to the effect that the 4 adjudicator's view was that the changes between these 5 two sets of drawings did amount to changes of design 6 principle, shape, form or specification? 7 A. Precisely. 8 Q. You say there: 9 "It was therefore unsurprising that the Adjudicator 10 gave a literal interpretation to the final sentence ..." 11 Why did the view he took of the facts make it 12 unsurprising that he chose a literal interpretation? 13 A. I think the question in relation to that was examined 14 very carefully by us after this when we carefully 15 considered whether these words really were meant to be 16 given a literal interpretation. But in a swift DRP 17 process like adjudication, it didn't seem to me to be 18 surprising that if one could show a change in shape, for 19 example, then the adjudicator would form the view that 20 that actually makes it a Notified Departure because 21 you're outwith the ambit of normal design development 22 because it's a change in shape. 23 Q. That danger, that if the adjudicator decided on the 24 facts that it was a change in design principle, 25 et cetera, he would also conclude it was a Notified 137 1 Departure -- 2 A. Yes. 3 Q. -- to give a literal interpretation, was that something 4 that had been discussed beforehand, that danger? 5 A. Yes. That's the fundamental point, that if any of these 6 words which are said to be the definition of normal 7 design development, what I call the exclusionary words, 8 if any of them arise, then you're not within the ambit 9 on a literal interpretation of Pricing Assumption 10 number 1 of normal design development. 11 Q. Leaving aside the question of the technical 12 interpretation of whether or not it was a change of 13 design principle, what was your view of the 14 interpretation? Was it correct to take a literal 15 interpretation, or did you think -- at that time, did 16 you think it should be a different interpretation? 17 A. At that time I hadn't given it the level of thought that 18 we subsequently gave it, because in effect I was 19 reassured by what was said, that: don't worry about 20 this, our expert engineer doesn't think it's a change in 21 shape, design principle or whatever. 22 I said: whatever you do, you have to speak to the 23 expert, and make sure, if you like, that his advice is 24 this doesn't come within the exclusionary words. If it 25 does, then we have a problem. 138 1 Q. I think there was some consideration as to whether or 2 not these decisions, Mr Hunter's decisions, should be 3 reviewed. 4 A. I'm sure there was. 5 Q. Were you involved in that? 6 A. I don't think so. No. Our focus -- this was 7 a disaster, these two initial results, as viewed by tie. 8 And I remember vividly when the decisions were handed 9 down attending a meeting which Richard Jeffrey chaired, 10 and he said: well, this has come as a huge surprise to 11 everybody, maybe not you, Brandon, but the rest. 12 And our focus thereafter went into considering the 13 words very carefully in their context to see if some 14 other formulation could be arrived at on an objective 15 basis to try and avoid a situation where every single 16 movement from BDDI to IFC was going to fall within these 17 words at the end and trigger a Notified Departure. 18 Q. Was there discussion of what the consequences would be 19 for the project if that was the view, that all BDDI to 20 IFC changes triggered Pricing Assumption 1? 21 A. I think there was a recognition in the room that this 22 would have a huge impact on price. We weren't so much 23 concerned with time at that point because Infraco were 24 proceeding with the works. That came later. The 25 problem on -- in relation to Clause 80 and that process 139 1 incrementally came into sharp focus, particularly at 2 a point in time where Infraco more or less ceased work. 3 But that was in the autumn of 2008. 4 Q. I'll come to Clause 80 -- 5 A. Sorry, 2010. 6 Q. -- Clause 80 and Clause 34 in due course, but just stick 7 with the Pricing Assumption 1 for the time being. 8 From what you described at the adjudication, there 9 were two issues. There was the technical issue for 10 engineering evidence and there was a legal issue of 11 interpretation. What you've described is further work 12 was done to see whether or not the legal issue could 13 be -- whether a different answer could be obtained. 14 Do you know whether any work was carried out on the 15 technical side, to see whether an argument might be 16 upheld that the BDDI to IFC change wasn't a change of 17 design principle, et cetera? 18 A. Absolutely. Engineering, expert engineering involvement 19 on that was taken forward. Robin Blois-Brooke was 20 an expert engineer employed by tie, and he gave 21 consideration to that. 22 Q. Do you know when he was engaged? 23 A. I can't remember when it took place. I can't even 24 remember whether it was me who suggested him or not. 25 Robin Blois-Brooke was an engineer I have used many 140 1 times and is a leading UK expert, so I was keen to get, 2 you know, a top person, if you like, looking at the 3 issue. 4 But one of the motivations for that was some comfort 5 in terms of how Mr Wilson in the Russell Road retaining 6 wall had approached the issue from an engineering 7 perspective, and he took -- from our perspective, as 8 tie, a more rounded view based on technical engineering 9 judgement as to what constituted a change in, for 10 example, shape. 11 Q. We will come to the Russell Road retaining wall in 12 a moment, but in the initial consideration of 13 Mr Hunter's decisions, was there a view taken as to 14 whether it would be possible to get different decisions 15 in future? 16 A. I think that would be a function of how the engineering 17 analysis would evolve, and also how the legal analysis 18 would evolve. Something had to change from tie's 19 perspective. We couldn't keep arguing just the same 20 thing. We would have to develop new lines of argument. 21 Q. Was there a view as to whether or not it would be 22 possible to generate new lines of argument, either on 23 engineering or the legal side? 24 A. Well, that's essentially what I was doing. I was 25 looking to see if I could come up with any further legal 141 1 analysis, and we did; as a function of not only speaking 2 to Richard Keen, as he then was, but also finally with 3 Helen Davies QC of Brick Court Chambers. 4 Q. I want to come and look at both of those, but first, can 5 we look at another document, please. It's reference 6 CEC00591754. 7 This is, you can see, a document titled "REPORT FOR 8 TIE LIMITED ON CERTAIN CONTRACTUAL ISSUES CONCERNING 9 EDINBURGH TRAM PROJECT", with a date of 23 March 2010. 10 And it's from McGrigors, your firm? 11 A. Yes. 12 Q. Is it a report prepared by you? 13 A. It was. I was assisted by other people, but I was 14 responsible for the report. 15 Q. Who had requested this within tie? 16 A. It was a stream of work which was one of many prongs to 17 something called Project Pitchfork. 18 Q. Can we look at page 13, please. Look at the upper half 19 of the page. You start in paragraph 7.1 by noting that: 20 "There are a number of difficulties with Infraco's 21 literal interpretation of Pricing Assumption No 1 22 which suggests that something has 'gone wrong' with the 23 words. This is because Infraco's literal reading 24 produces a result which, it is contended, a reasonable 25 person would not have understood tie and Infraco to have 142 1 intended at the point that the contract was entered 2 into." 3 I think you go on there to set out a number of the 4 considered absurdities; is that correct? 5 A. Yes. 6 Q. On the following page at paragraph 7.8, you say: 7 "It makes no commercial sense to arrive at 8 a conclusion that the 'lump sum fixed and firm price' 9 referred to in clause 3.1 of Schedule Part 4 extends 10 only to that part of the Infraco Works as may have been 11 the subject of design information drawings issued up to 12 25 November 2007. There is a tension between, on the 13 one hand, the provision for a fixed lump sum for the 14 delivery of the Employer's Requirements, as against, on 15 the other, the risk of the evolution of the design 16 sitting with tie." 17 You say that it makes no commercial sense that the 18 price was only for the subject of design information 19 drawings at 25 November. Were you ever made aware of 20 correspondence in which the consortium has said they 21 weren't willing to take the risk of design development? 22 A. Well, as a function of producing this report, I went 23 back to the prior communings, because putting it as 24 shortly as I can, it seemed that if one was adopting 25 a literal interpretation of Pricing Assumption number 1 143 1 and the significance of the words at the end, you 2 emasculated normal design development of pretty much all 3 content. It was deprived of any content. 4 The question that we were engaged with was: has 5 something gone wrong with the words? Could we actually 6 look to have it judicially revised? And if you like, 7 this was -- the immediate aftermath of Chartbrook and 8 cases like it, in the Supreme Court, where Lord Hoffmann 9 said there's no limit to the amount of red lining 10 a judge can make and so on. 11 So we were looking very carefully, because the 12 matter was of such significance, to test whether 13 something had gone wrong with the words, and that took 14 us back in time to before the contract was formed. 15 The results of our forensic investigation are 16 contained in a schedule to this report, but very 17 importantly, where it took us directly to eventually was 18 seeing for the first time the executed Wiesbaden 19 Agreement which had the same exclusionary words in at 20 the end. 21 So in terms of rectification, either under a statute 22 or judicially, we kind of hit the buffers in relation to 23 these words. 24 Q. I'll come back to the Wiesbaden Agreement in a moment. 25 But the effect of which interpretation was given to 144 1 Pricing Assumption number 1 determined which party was 2 to bear the risk of design development. Is that 3 something you agree with? 4 A. Yes. 5 Q. If we look then at an email prior to the execution of 6 the Wiesbaden Agreement, it's CEC00573351. 7 Look at the lower half of the page first of all. We 8 can see -- could we go out to the whole email a second. 9 Pardon me, yes. 10 Could we look at the email above that from 11 Richard Walker dated 20 December. 12 We are looking at an email here from Richard Walker 13 of 20 December to Geoff Gilbert and his colleague -- 14 that's Richard Walker's colleague -- Scott McFadzen, 15 dated 20 December 2007. Do you see that? 16 A. Yes. 17 Q. What he says is: 18 "Geoff, we still have issues with accepting design 19 risk. We have not priced this contract on a design and 20 build basis, always believing until very recently that 21 design would be complete upon novation. With the 22 exception of the items marked provisional which we have 23 now fixed by way of the 8 million we cannot accept 24 more ..." 25 It says "drain development": 145 1 "... other than minor tweaking around detail." 2 Do you see that? 3 A. Yes, I do. 4 Q. Would you agree that that appears to indicate that, as 5 far as the consortium were concerned, they did not want 6 to accept the design risk? 7 A. Yes. 8 Q. And that being so, trying to interpret Pricing 9 Assumption 1 on the assumption that the design risk was 10 to lie with the consortium in a sense was begging the 11 very question it was supposed to answer? 12 A. Yes. I follow that line. What, if you like, we were 13 trying to do was building on the back of Russell Road, 14 and Mr Wilson's comments, developing the engineering 15 analysis through Robin Blois-Brooke, speaking and taking 16 advice from Richard Keen, was to see how on earth we 17 could interpret this provision in a manner which was 18 more favourable to tie. 19 In doing that, I tried to identify things which 20 would have been absurd, such as if tie changed the 21 design -- sorry, not tie, Infraco changed the design for 22 their own reasons to improve buildability and suchlike, 23 and that changed the shape, just using that as an 24 example, and it cost more money, would that properly be 25 a Notified Departure under these provisions? Because 146 1 that doesn't seem right. 2 Equally, and it's an example that I used repeatedly, 3 was the example of the bat box, boxes at Gogarburn. 4 Sadly, the cost of the bat boxes was not huge. So in 5 terms of practical impact, it wasn't a great example, 6 but the Employer's Requirements explicitly required to 7 observe endangered species and suchlike, and bat boxes 8 therefore had to be provided, and if they were missing 9 at BDDI, the proposition was, since that was clearly 10 flagged up in the Employer's Requirements, why should 11 the cost of that be laid at the door of tie through this 12 mechanism? 13 So if you like, it was building a list of issues 14 which made the words on a literal interpretation too 15 broad, and we were looking to see how it could be 16 ameliorated. 17 The best position that we ended up in on the law, on 18 the legal analysis, was a note that I prepared and sent 19 to tie, and it's a synthesis of the advice that we got 20 from Brick Court Chambers. I could not improve on that. 21 There was no silver bullet, obviously. It would have to 22 be done on a case-by-case basis, and it would involve 23 engineering judgement, and that's kind of what the note 24 says. 25 Q. I'll come to look at that with you in a little while. 147 1 Just if we look at the Executive Summary, for 2 convenience, back in your report, your report was 3 CEC00591754. Look at page 5 this time. 4 Enlarge paragraph 1.5. 5 Bringing perhaps the argument in relation to seeing 6 whether or not -- the absurdities to a conclusion, you 7 say: 8 "Whilst there is a stateable argument that something 9 has gone wrong with the wording, this meets only part of 10 the required test. What is also required is to 11 determine the result which must rationally have been 12 intended, and to propose the wording that would achieve 13 that result. Whilst that may appear straightforward, it 14 is an extremely difficult exercise. That exercise is 15 not assisted by the factual background which has 16 presented in relation to the execution of the Wiesbaden 17 Agreement. This issue is still under consideration by 18 McGrigors LLP in conjunction with Richard Keen QC." 19 A. Yes. 20 Q. Now, you've mentioned already the Russell Road retaining 21 wall dispute. That was a question in which I think the 22 adjudicator accepted that that something had gone wrong 23 with the wording, and it would have to be given 24 a rewrite. Is that a fair comment? 25 A. I'm not sure if I would put it quite like that. The 148 1 engine -- Mr Wilson listened to the engineering experts 2 and I think he himself, I think, was an engineer. 3 Although I could be wrong. 4 What he did was he looked at these words, the 5 exclusionary words, from an engineering perspective. So 6 it wasn't so much a matter of words going wrong. It's 7 from an engineering perspective whether something falls 8 within shape, form and so on. 9 Q. Could we look at the decision of Mr Wilson. It's 10 reference CEC00034842. 11 Now, it's a long decision. I'll direct you to 12 different particular sections. If there's something you 13 think is not correct or there's something else you want 14 to look at, by all means indicate. 15 But if we can go firstly to page 20, and enlarge the 16 lower half of the page. You'll see a heading, 17 "Conclusions". This is in relation to the contract 18 interpretation issue. 19 He says: 20 "It appears that something has gone wrong with the 21 language of Section 3.4.1.1 as, on the face of it, on 22 a literal reading some part must be redundant to give 23 it meaning. I consider that the formulation advanced by 24 tie most nearly expresses the true intention of the 25 parties as can be discerned; namely that Pricing 149 1 Assumption Section 3.4.1.1 should read that the 2 'Design prepared by the SDS Provider will undergo 3 the normal development and completion of design and will 4 not in terms of design principle, shape, form and/or 5 specification be amended from the drawings forming the 6 BDDI (except in relation to Value Engineering)'." 7 In the following paragraph he says: 8 "As to 'normal' development, I consider that this is 9 the progression towards the Employer's Requirements as 10 would be expected by an experienced contractor and his 11 designer. If this results in amendment of the design 12 principle, shape, form and/or specification shown on the 13 BDDI drawings then it becomes a Notified Departure, 14 subject to the following paragraphs." 15 We will look at the following paragraphs in just 16 a moment, but what did you take from this decision for 17 the purposes of tie and its effect on the carrying out 18 of the project? 19 A. Can I firstly say that the use of the language that 20 something had gone wrong potentially with the words, 21 I think I introduced into the argument. It's the one -- 22 the Gogarburn and Carrick Knowe, having attended the 23 challenge session, that was it. We had no involvement 24 in the adjudications at all. 25 In relation to Russell Road, we were asked to 150 1 contribute -- it had to be done very quickly, overnight, 2 into a rejoinder, and I provided a two-page note which 3 mentioned some well-known cases about how you interpret 4 commercial contracts and words not having their normal 5 meaning, or something went wrong with the words. 6 So we took comfort from this decision in the sense 7 that Mr Wilson seemed to be more aligned, if you like, 8 to think about these words in a broader context, and not 9 just to give it a literal interpretation which would 10 emasculate or deprive design development from all 11 content. 12 Q. Mr Wilson does, from his paragraphs I have read, make it 13 plain that if normal design development leads to 14 a change of design principle, et cetera, it's still 15 a Notified Departure. 16 A. Yes. 17 Q. So what comfort did you take from this? 18 A. The comfort we took, and there may be other bits in this 19 which I would need to look at, I haven't looked at this 20 decision for a long time. But there were certainly bits 21 in it which involved a more sophisticated consideration. 22 So we did draw comfort from it -- we being tie and 23 McGrigors -- but it still left us -- this is the point 24 I want to make fairly and squarely. There was still 25 a massive problem. We lost the adjudication. tie lost 151 1 the adjudication. 2 So the issue remained, if you like. 3 That didn't divert the ongoing stream in terms of 4 trying to get an expert engineer of standing in the UK 5 to look at these words from an engineering perspective, 6 and that, if you like, was the key going forward for us. 7 If we could get an engineer to say these words from 8 an engineering perspective can be given content, and 9 just changing one minor point here or there from an 10 engineering perspective wouldn't result in a change in 11 shape or design principle and so on, that, if you like, 12 was the avenue, along with whatever we could do in terms 13 of legal analysis. 14 Q. Just to be clear, do I understand then what -- the 15 engineer would assist you in an interpretation of what 16 was meant by design principle, what was meant by shape, 17 what was meant by form and what was meant by 18 specification? 19 A. Yes. 20 Q. Because we see that Mr Russell (sic) does go on to 21 consider those points in paragraphs 103 and 104 of his 22 decision. 23 A. That's right. 24 Q. Did you consider there was room for going beyond that 25 with the benefit of additional engineering evidence? 152 1 A. That's what we were hoping for prospectively, that we 2 hadn't achieved that at this point. This decision came 3 out, I think, in early January. 4 Q. Yes. 5 A. So I think there was a stream of work which was then 6 being taken forward in terms of Robin Blois-Brooke. 7 Q. You've been quite candid in saying that this decision 8 still left a massive problem for tie. Was that 9 something that you discussed with representatives from 10 tie? 11 A. Yes. 12 Q. That it was still a problem? 13 A. Absolutely. 14 Q. Who did you discuss it with? 15 A. With Richard Jeffrey, Steven Bell, Dennis Murray. The 16 whole team. There was no doubt that there was a massive 17 problem. When the first two decisions came out, there 18 was huge demoralisation, and understanding for the first 19 time that there was a major issue. 20 My understanding was that tie's view was that normal 21 design development risk lay with Infraco. That seems, 22 as best as I can put it, the summary of their position. 23 So losing these first two adjudications was 24 a massive blow, and then it spawned a stream of work 25 which we were involved in, in looking to see how that 153 1 could be ameliorated as best as one could make it, given 2 the terms of the contract. 3 Q. The first two adjudications were the -- both the ones 4 from Mr Hunter? 5 A. Indeed. 6 Q. And this -- did you consider this had improved the 7 situation much in that regard? 8 A. Well, I think it did a bit, yes. I should say, 9 Mr Hunter has a high reputation. These adjudicators are 10 well known, and they are of standing. So that didn't 11 help at all from our perspective, looking at it from 12 tie's angle. 13 Q. If you go back to your report -- sorry, that was 14 reference CEC00591754, page 16. 15 Sorry, it's page 16 of the printed pages. It's page 16 20 of the electronic. If we look at the lower half of 17 the page. You note in paragraph 9.20 that: 18 "Recent experience in the Supreme Court suggests 19 that if the first limb of the test can be overcome 20 (something has gone wrong with the words), then the 21 court may be prepared to go quite far in what it will 22 imply or add." 23 That's a reference to the Chartbrook case? 24 A. Yes. 25 Q. Which is perhaps a high-water mark of judicial 154 1 intervention and interpretation? 2 A. If you look at subsequent Supreme Court decisions, they 3 say that nothing has changed. It's still the same. 4 Although in reality I think Arnold v Britton does push 5 the pendulum back. 6 Q. In the following paragraph you say: 7 "Whilst there is a stateable argument that something 8 has gone wrong with the wording, this meets only part of 9 the required test." 10 A. Yes. 11 Q. Would you accept that to anyone involved in litigation 12 or disputes, as soon as you see the expression 13 "stateable argument", it tends to indicate the view that 14 the prospects are not good? 15 A. Yes, I can -- I can agree with that. I concur with 16 that. 17 Q. Is that the way that you use these terms, that it was at 18 best stateable? 19 A. Yes. What we were involved in was the best damage 20 limitation that could be achieved in the circumstances. 21 That was the task. There was no silver bullet, as 22 I have indicated. It was trying to prepare a series of 23 premises, if you like, upon which we could go forward 24 with other adjudications potentially. 25 I should say that in terms of what McGrigors were 155 1 doing, we were simply producing this report and that was 2 it. I had no ongoing continuous brief, if you like. So 3 from the challenge sessions and the earlier results, we 4 moved on to this Project Pitchfork stream, and we 5 continued with that to a certain point, and then that 6 was it really for a while. 7 Q. Were you involved in any follow-up advice clarifying 8 this report that you gave? 9 A. Yes. There were two notes. One was a note which had 10 been approved by Richard Keen, and the second was the 11 advice from Helen Davies. 12 Q. We will come to look at those in just a moment, but one 13 of the things you consider in this report is whether or 14 not you could get another decision in the matter, 15 a decision from a court, because this was a matter of 16 some critical importance. Were you involved in 17 discussions with tie as to whether or not court 18 proceedings should be raised to seek a clarification of 19 this issue? 20 A. You know, I honestly can't recall whether I was or 21 I wasn't. The problem would be time. I mean, this was 22 in 2010, in March 2010, I think. I'm not sure how long 23 it would take to get a declarator in the Court of 24 Session, but it would take many, many months. Others in 25 the room will know better than me, but it couldn't be 156 1 done swiftly. 2 So one potential was, I guess, another adjudication, 3 but very carefully formulated with engineering advice. 4 Q. What would the benefit of another adjudication be if 5 there were competing decisions? 6 A. The benefit of another adjudication, if we won it, on 7 a different basis, would help our cause in relation to 8 the ongoing debate with Infraco. 9 Q. Even having a Court of Session action pending, was there 10 any consideration given as to whether it would send 11 a message to the consortium that tie believed in their 12 argument and were willing to fight it in court? 13 A. I gave no -- I was not involved in any such discussion, 14 from memory. 15 Q. Were you involved in discussion? Did you give advice as 16 to whether or not a Court of Session action should be 17 raised? 18 A. I'm sure we touch upon it in this note. 19 Q. If we look at the bit of the note that considers it, if 20 we look at page 18 -- sorry, that will be page 22. It's 21 page 18 of the printed version. 22 Paragraph 10.9 -- 23 A. I think from memory we talk about time period perhaps. 24 Q. Mm-hm. There is discussion of time. 25 Was there advice given that the danger in proceeding 157 1 to court was simply that tie were likely to lose? 2 A. The reason why I would not have favoured -- and I say 3 would have because I'm -- it was eight years ago or 4 seven years ago. I did not want to proceed unless we 5 had confidence that we had come up with the best 6 analysis possible, both from a legal perspective and an 7 engineering perspective. 8 In terms of the legal analysis, I think we landed -- 9 I was confident that we'd landed in the best position 10 through the advice synthesised through Helen Davies, if 11 you like. 12 On the engineering side, I think there was still 13 a stream of work going on, which I wasn't involved in at 14 that point in time, with Robin Blois-Brooke. 15 What happened, as a matter of fact, is that by the 16 time we got to March, there was a shift away from 17 launching more adjudications on Pricing Assumption 18 number 1 into a different stream altogether, which was 19 primarily the Remediable Termination Notices, and 20 a flow, if you like, through the summer into Project 21 Carlisle. 22 Q. So just to come back to the core point of my question, 23 were you ever involved in giving advice that the danger 24 of taking the matter to the Court of Session was that 25 the decision would be against tie and that would be game 158 1 over? 2 A. Yes, I'm pretty sure I would have said that. 3 Q. Now, you've also mentioned that there were arguments 4 that arose perhaps later on about getting the consortium 5 to actually carry out the works as they weren't willing 6 to do things, and reliance was placed, I think, on 7 Clauses 34 and 80. 8 A. Yes, the extremity of that particular problem was 9 building up by the time we get to March. It manifested 10 in its full sense in September and October, when works 11 actually came to a standstill, apart from the Gogar 12 depot, I think. And the issue was -- revolved around 13 Clause 80, and whether an instruction could be given to 14 proceed with the works, and in short, as you will know, 15 I gave advice that there was another provision which 16 could be employed, and that was 34, Clause 34.1. 17 Q. Mm-hm. 18 A. And that had not been tested, and I thought this was 19 meritorious. We should try. 20 I think I wrote a paper or an advice note on the 21 matter, and the advice note or my paper was appended as 22 a paper apart. I didn't actually know that's the way it 23 was going to be done, but that's the way it was done. 24 Q. Can we look at a letter that's dated 24 May 2010. It's 25 reference CEC02083927. 159 1 You can see here this is a letter that runs from 2 Edinburgh Trams, as the logo then styled them, to the 3 consortium with the date of 24 May 2010. 4 Is this letter immediately familiar to you? 5 A. Yes, it is. And I think this letter has the paper apart 6 at the end. 7 Q. If we look at page 6 of this letter, is that the paper 8 apart that you drafted? 9 A. Yes. 10 Q. So the arguments we see here in relation to -- we can 11 see 34.1 on that page, and if we look at the following 12 page, Clause 80.13, those were arguments that you had 13 prepared for tie? 14 A. Indeed, they were. 15 This was also advocacy. We were trying to advocate 16 the strongest position possible, and this was what 17 I came up with. 18 But I didn't realise, I should say, that this was 19 going to be disseminated in the form of a paper apart. 20 Q. Just for completeness, if we go to the following page, 21 you also set out again the arguments in relation to 22 Part 4 of the Schedule, contract in relation to pricing? 23 A. And this captures the advice that we got from 24 Helen Davies. 25 Q. Now, in relation to Clause 80, and the difficulties that 160 1 were arising to get work progressed, did you have 2 discussions about that clause and its origins with 3 Andrew Fitchie at the time? 4 A. I probably did. 5 Q. Did he ever suggest to you that that clause was 6 redrafted by tie at the 11th-hour in the weeks before 7 the contract was actually concluded and it was all their 8 wording? 9 A. I can't recall that. I certainly know that in relation 10 to the Pricing Assumptions he wasn't -- he said he 11 wasn't involved at all in relation to Wiesbaden, and 12 I think that seems to be clear. 13 Whenever I discussed it with him, he sort of 14 described it as a contract within a contract which he 15 hadn't been involved in. 16 Q. Just to be clear, I'm not looking at the Pricing 17 Assumptions in Schedule Part 4 here, I'm looking at 18 Clause 80? 19 A. I was coming to Clause 80, sorry. 20 He could well have done. I really can't remember. 21 I think what I do remember in terms of discussing 22 matters with Andrew Fitchie was that he felt very 23 strongly that the words at the end which I think say "or 24 otherwise direct" had to be given some utility, and 25 therefore that could be used as the technique for 161 1 directing that work should proceed. 2 Q. In relation to the adjudication decisions, by which 3 I mean Mr Hunter's two decisions and Mr Wilson's 4 decision, were you involved in the decision as to 5 whether or not they should be challenged, either -- 6 I know you have said there shouldn't be a court action 7 raised, but specifically in relation to those decisions, 8 rather than re-litigating the issue? 9 A. I am not sure what you mean by challenging the 10 decisions. 11 Q. Well, in some sense considering whether or not they had 12 been wrongly decided, whether there was an excess of 13 jurisdiction or it hadn't been exhaustive? 14 A. No, I never gave any consideration -- I think that would 15 not be tenable, to be perfectly honest. 16 Q. In relation to another adjudication concerning Notified 17 Departure in Tower Bridge, a concession was made that 18 change in question did amount to a Notified Departure. 19 Were you involved in advice as to whether or not that 20 concession should be made? 21 A. No, I can't recall Tower Bridge at all. 22 Q. There was another adjudication which took place before 23 Gordon Coutts QC in relation to drainage issues, where 24 an argument was advanced that if a matter wasn't shown 25 in the BDDI at all, and there was changes, that couldn't 162 1 amount to an amendment of the BDDI. Were you involved 2 in that? 3 A. No. But I should say that if you look back at the 4 paper, the first paper that I wrote, which you referred 5 me to earlier on, I did moot an argument that if -- if 6 there was virtually no design, the question is: could 7 you say that there's a change in shape, if you like, if 8 there is no design in the first place or very limited 9 design. I think that sounds like an extension of the 10 argument that I had toyed with at that point in time. 11 Q. I didn't take you specifically to the paragraph, but you 12 were aware that that was a matter which -- Mr Wilson had 13 seemed to express some sympathy for that approach in the 14 Russell Road retaining wall? 15 A. I think that does ring a bell, yes. 16 Q. Were you aware of the decision that was taken by 17 Mr Coutts QC in relation to the drainage adjudication? 18 A. I probably -- I probably was aware of it after the 19 event, but we had no involvement in the adjudication at 20 all. I think by that time these challenge sessions ran, 21 I think, for probably until November at the latest and 22 then they ceased. There was no further challenge 23 sessions as such. 24 Q. I want to look at a note that was supplementary to the 25 report we've just been looking at, please. Firstly, if 163 1 you look at the covering email, it's CEC00592602. You 2 can see this is from you to Richard Jeffrey, Tony Rush, 3 Steven Bell and Susan Clark with a date of 4 31 March 2010. In it you say: 5 "I attach a Note which follows on from our Report 6 and also from the discussion that we had with 7 Richard Keen QC last Thursday evening." 8 Do you see that? 9 A. Yes. 10 Q. Also, if we look at the end of the second paragraph, in 11 relation to Pricing Assumption 1, perhaps if I read from 12 halfway: 13 "Whilst Richard Keen QC considered that there were 14 arguments that could be utilised to support this 15 formulation (some of these are referred to in the Note) 16 he was not confident that a court would uphold it. 17 Further consideration is required and I think the point 18 has now come where I would like to test all of this with 19 leading Counsel in London from a commercial set as they 20 have the greatest experience of Chartbrook type 21 arguments and you will see that I am proposing that we 22 use Helen Davies QC." 23 A. Yes. 24 Q. Looking at the note that's attached to that, it's 25 reference CEC00592603. If we enlarge the upper half of 164 1 the page. 2 In paragraph 1.2 you once again begin by saying: 3 "There is a stateable argument that something has 4 gone wrong with the words of Pricing Assumption 5 No 1." 6 Again, that perhaps, as someone who understands how 7 that term would be used, indicates not very much 8 confidence in the argument at all. 9 A. It's how much is the something. That's really the 10 point. 11 Q. In what sense? 12 A. Well, the bat box sense and the buildability sense. So 13 those were two examples where the wording seems to have 14 gone wrong because if a bat box was there in the 15 Employer's Requirements and was supposed to have been 16 priced, then -- and if it wasn't mentioned in the BDDI 17 in November, introducing a bat box or two or three or 18 how many, should that result in a Notified Departure? 19 And our position on that was we didn't think so. 20 I think increasingly some concessions were made by 21 Infraco in relation to some of these issues. The 22 buildability argument was another one. 23 So I think that there is a stateable argument, as 24 I expressed it over here, the full rigour of the 25 wording, something had gone wrong. The problem, the 165 1 absolutely fundamental problem was: how do you come up 2 with a different analysis or interpretation which can be 3 objectively arrived at? That was where we had a huge 4 problem. 5 Q. Now, when you're talking about buildability or bat 6 boxes, the way you've presented your answer there, it 7 sounds like you think there was a reasonable argument in 8 relation to those matters? 9 A. I think so, yes. 10 Q. But when you describe it in this note as a stateable 11 argument, that gives the impression that you don't have 12 much confidence in the argument? 13 A. The problem with the bat box issue was it wasn't of 14 broad application. So it was a sort of minuscule point. 15 And in terms of buildability, it wasn't clear at all to 16 me that Infraco were changing design for the purposes of 17 their own buildability. So ... 18 Q. Looking at the matter broadly, is it, as you say, your 19 view is that it was stateable with all that that 20 imports? 21 A. Yes. The prospects were -- were not good. It was 22 a stateable argument, one that on an iterative basis 23 which was being refined, but at this point in time 24 nobody could come up -- Richard Keen couldn't come up 25 with anything, I couldn't come up with anything, which 166 1 would create an objective method of analysing the words 2 on a different basis. 3 Q. If we look at page 3, you carry that to a conclusion in 4 paragraph 3.1. In relation to the heading "Prospects", 5 you say that having looked at various possible 6 formulations of words, you say: 7 "Whilst this formulation of words appears to satisfy 8 the considerations discussed above, the prospects of 9 this wording being upheld by a court are uncertain. 10 This is because it can be said that the contract does 11 not contain express wording which apportions the risk of 12 change in the way contended for: the express wording 13 places almost the whole of the risk of design change on 14 tie." 15 A. Yes. 16 Q. Now, you do go on to recommend that there would be 17 a consideration of advice of Helen Davies, but did you 18 get a reaction from tie to your advice that it was 19 uncertain, and that the express wording placed the whole 20 of the risk of design on tie? 21 A. I mean, this came as no surprise in this advice note. 22 Q. To the people at tie? 23 A. To tie. It came as no surprise at all. This is where 24 we'd been for a while. 25 Q. Is that where you'd been since you got Mr Hunter's 167 1 decision? 2 A. Pretty much so. 3 Q. Dealing with the advice from Helen Davies then, you have 4 a covering email. Could we look at it, please, 5 CEC00323248. 6 This is from you to Richard Jeffrey and -- 7 Steven Bell, Andrew Fitchie, Tony Rush, Dennis Murray 8 and Susan Clark, with a date of 29 April 2010. 9 A. Yes. 10 Q. Then you attach a summary of your preliminary 11 discussions with Helen Davies QC and a draft letter to 12 Infraco. 13 Could you look at the summary of the discussions 14 with Helen Davies. It's document reference CEC00323249. 15 If we could enlarge the middle part of the page, in 16 looking at the issues arising out of interpretation, you 17 draw it in paragraph 7 to be that: 18 "That is likely to involve the exercise of 19 engineering judgement to some extent. The parties 20 intended that to be the case in invoking the concept of 21 normal development and completion of design, which 22 inherently requires the exercise of that engineering 23 judgement." 24 This was a view of Helen Davies, I take it, that's 25 recorded here? 168 1 A. Yes. 2 Q. If we go right to the end and look at the summary of 3 this, paragraph 25 on page 4, it's that: 4 "Whilst both the foregoing constructions of Pricing 5 Assumption No 1 have much to commend them the 6 prospects of a court upholding either one or other of 7 them must be regarded as uncertain. It will be seen 8 that both approaches require the application of 9 engineering judgement on a case by case basis." 10 I think that's what you were saying the advice was? 11 A. It was, yes. Getting a declaration from the court was 12 unlikely on the balance of probabilities to have been 13 with us, if you like. And it was a matter of looking at 14 every single Notified Departure, eventually there were 15 about 850 of them, on a case by case basis. 16 Q. Presumably, because of the number of them, and the need 17 for a case-by-case analysis, that presented a huge 18 problem to tie? 19 A. Very much so. 20 Q. Did they indicate that to you? 21 A. Well, it was obvious. We all knew that. They knew it. 22 I knew it. 23 Q. So while this advice holds out some hope that there 24 might be some cases where the test can be met, how was 25 the advice as a whole viewed by tie in its effect on 169 1 deliverability of the project? 2 A. I have some difficulty answering that question in terms 3 of what -- how tie viewed it as delivering the project. 4 What was crystal clear was that there was a major, 5 major problem, and potentially what may have lain ahead 6 was many more adjudications. 7 The problem wasn't so extreme or critical when 8 Infraco were proceeding with the works. The problem 9 critically arose when work stopped. 10 Q. The problem we're considering is one of what price would 11 be payable for the works. The Schedule 4 Pricing 12 Assumption 1; is that correct? 13 A. Well, that would certainly be an issue, of course. 14 Q. So irrespective of whether or not Infraco were carrying 15 out the works or were not, you had been looking for some 16 time to try and see if there was a way round a legal 17 interpretation to get round the literal wording of 18 Pricing Assumption 1. Have I understood that correctly? 19 A. Yes. 20 Q. And in essence what you're being told here, there is no 21 legal way round. It's going to be fact-specific, case 22 by case? 23 A. Yes. 24 Q. Now, did that not appear to you that that was going to 25 present an almost insurmountable difficulty in 170 1 administering a contract where there were 800 or so 2 claims? 3 A. Yes, a huge problem. 4 Q. So irrespective of whether or not Infraco were carrying 5 out the works, in terms of estimating the cost or likely 6 outturn, what was the effect of this? 7 A. Substantial. It had a huge impact. And this -- this, 8 if you like, was the problem that tie were wrestling 9 with, not from 29 April 2010, but prior to that, when 10 the first adverse decisions were issued. 11 Q. Even before you get to the stage where the Infraco 12 contractors started to down-man the site and stop 13 working, was there not what appeared on the face of it 14 to be an irresolvable problem in the conclusion of the 15 project. 16 A. It was for that reason, because of the problem, that tie 17 embarked upon two different strategies. 18 Q. That being termination and Carlisle? 19 A. One was issuing Remediable Termination Notices. And the 20 other was Project Carlisle. 21 MR LAKE: My Lord, if we were going to take a break this 22 afternoon, that would probably be an appropriate time. 23 CHAIR OF THE INQUIRY: Are we still on time for finishing if 24 we have 15 minutes? We will break for the shorthand 25 writers for 15 minutes and resume again at 3.15. 171 1 (3.00 pm) 2 (A short break) 3 (3.15 pm) 4 CHAIR OF THE INQUIRY: You are still under oath, Mr Nolan. 5 MR LAKE: Mr Nolan, in relation to the disputes over Pricing 6 Assumption 1, could we look back at your statement, 7 please, and page 11 of that. 8 I'm interested in question 23 and the answer to it. 9 The question was concerned with the fact that the 10 adjudication decisions were not challenged and you were 11 asked questions about that. 12 In the second paragraph of your answer you stated 13 that: 14 "tie were keen for some kind of dispute resolution 15 process in relation to Pricing Assumption 1 but we 16 recommended against expert determination, and also said 17 that the legal issues need to be pinned down first. The 18 conclusions reached in relation to Pricing Assumption 1 19 meant that the dispute resolution procedure was not 20 pursued and was overtaken by the mediation." 21 We've seen the conclusions that were released in 22 relation to Pricing Assumption 1 starting with 23 Mr Hunter, and then Mr Wilson right at the start of 24 2010. But the mediation -- there wasn't a resolution to 25 mediate until November 2010. 172 1 Was there something that happened in between that 2 time which resulted in the conclusion that there was no 3 merit in arguments regarding Pricing Assumption 1? 4 A. Well, two points, I think. The first is, and I'm 5 reminding myself by seeing my answer, that someone must 6 have mentioned expert determination as a way forward. 7 And I wasn't keen on that, for the reasons that we've 8 been over. 9 What happened when we were producing the long report 10 that we looked at just before the break and the further 11 advice notes from Richard Keen and Helen Davies was that 12 tie's focus had actually moved on a bit into the 13 Remediable Termination Notices, and whether there was 14 any form -- sorry, whether there was any prospect of 15 reaching a solution, a consensual solution with Infraco, 16 and that was Project Carlisle. Which I think started in 17 about June 2010. 18 So if you like, that's where the focus went. 19 I, in terms of McGrigors, ceased really to have much 20 of an involvement, if any at all, once we issued the 21 Helen Davies advice note as synthesised by us, other 22 than in respect of a number of specific ad hoc matters 23 and one particular adjudication, INTC 109, before 24 Lord Dervaird. 25 Q. Now, the issue in the adjudication before Lord Dervaird 173 1 was what reliance could be placed on Clause 80.13; is 2 that correct? 3 A. That's the way it worked out. That was never the 4 intention. That's what happened. My intention in the 5 report that I issued was to try and focus the matter on 6 Clause 34.1. 7 What was selected in terms of 109 was unfortunately 8 not that -- although Clause 34.1 was mentioned, it 9 really was under the banner of Clause 80.13. 10 I hadn't -- I hadn't proposed an adjudication on 11 80.13. But I was -- I thought 34.1 was worthwhile. 12 Q. If we could just go to Lord Dervaird's decision, it's 13 reference BFB00053462. 14 You will recognise that as Lord Dervaird's decision? 15 A. I do. 16 Q. If we could look at page 3 of it, if you look at 17 paragraph 8, we can see that the letter which formed the 18 subject matter of the dispute was from tie dated 19 19 March, and had squarely been entitled, the 20 Clause 8.013 instruction. 21 A. Yes. 22 Q. But if we put that paragraph back into its place so we 23 can look at the page as a whole, we can see that 24 Clause 34.1 was there in the arguments and is referred 25 to lower on the page. 174 1 A. Yes. What happened in order to give you some context 2 very briefly was that I'd advised going down the 34.1 3 route, and tie issued a letter and instead of putting 4 34.1 at the top, I think it was a draft, I said 34.1 has 5 to go at the top of the -- in the heading, if you like, 6 and unfortunately that didn't happen. 80.13 was put in, 7 and therefore in this particular adjudication, whilst 8 there was an attempt to bring 34.1 into it, it was 9 really decided on the basis of Clause 80.13. 10 Q. And it was decided against tie? 11 A. It was, yes. 12 Q. Now, that once again would have been open to have that 13 matter reconsidered by a court? 14 A. Yes. 15 Q. And particularly before a court to ensure, as far as 16 possible, that the Clause 34 argument was put in issue? 17 A. Yes, but the faster way of doing it would be just to 18 launch another adjudication on 34.1. I don't think we 19 were -- I don't think in terms of jurisdiction there was 20 a problem with that. The four corners of 21 Lord Dervaird's decision was on 80.13, so that would 22 have been the way forward. 23 What happened as a result of this decision was 24 I crafted four different letters where a Notified 25 Departure was disputed, and there was no estimate, 175 1 and I went through every permutation. So there were 2 four letters. 3 A letter also went to Infraco very shortly after 4 this decision, identifying those four permutations, and 5 setting out tie's position in relation to each of those. 6 I think that was in August. I can't -- this 7 decision, I think, was 10 August or something like that, 8 8 August. 9 Q. 7 August. 10 A. 7 August, yes. I do comment on this decision. There 11 are three notes, including one from Richard Keen. 12 But that's how the matter was left in mid-August. 13 There were the four permutations and that's how 14 everything was going to be classified going forward. 15 Is it disputed that there is a Notified Departure? 16 If it's not disputed, has an estimate been given? 17 Because there were quite a large number of cases where 18 there was no estimate. Clause 80 requires an estimate 19 to be given within 18 business days, unless Infraco say 20 that more time is needed. So there was a huge time lag. 21 Many of these adjudications, if I may say so, turned 22 on Notified Departures which were intimated a year 23 before. There was quite a large time lag between 24 notification of a Notified Departure and actually 25 a Dispute Resolution Process. 176 1 Q. As you say, there was advice given after Lord Dervaird's 2 decision to the effect that he hadn't determined the 3 Clause 34 argument. 4 A. Yes. 5 Q. But I think it's correct to say that there was no 6 adjudication launched even in relation to the Clause 34 7 issue by the time you got to mediation -- 8 A. Correct. 9 Q. -- in November? 10 A. Yes. 11 Q. Was there a decision taken not actually to pursue the 12 Clause 34, Clause 80 arguments any further? 13 A. I don't know because I wasn't involved. I came back 14 into this to run that one adjudication, and when I did 15 that, I came back out. 16 So we had no ongoing involvement. 17 Q. You came in later in the year in relation to the 18 question of termination. We will come to that in 19 a moment. 20 A. Indeed. 21 Q. Were you given any indication then as to whether or not 22 a decision had been -- an express decision had been 23 taken on Lord Dervaird? 24 A. No. I'm unaware of any such decision. 25 Q. There was also a strategy that was adopted by tie for 177 1 a while at least, being what might be termed 2 contractually assertive. Was that a strategy that 3 McGrigors had a hand in implementing and determining? 4 A. No. 5 Q. So you wouldn't have been aware of what the objectives 6 were in taking such a strategy? 7 A. No. 8 Q. Now, in relation to the question of termination or 9 project resolution, as it came to be called, I think, as 10 you say, McGrigors were brought back in and you advised 11 in relation to that towards the end of 2010. 12 A. That's right. 13 Q. Now, by the time you were brought in, I think it's 14 correct to say that it was some months since Remediable 15 Termination Notices had first been served? 16 A. Yes. 17 Q. You describe the purpose of looking at termination as 18 looking at the various options that were open? 19 A. Yes. 20 Q. But in fact it was an option that had been pursued for 21 some months. Was it explained to you why you were being 22 brought in at that stage, months after it had been 23 pursued? 24 A. The reason why I was brought back in was because by the 25 time we get to the end of October, I think 178 1 Andrew Fitchie was no longer attending meetings. 2 I can't recall precisely when that happened. 3 But it looked as if big decisions had to be made 4 round termination as one example, and I can't remember 5 how it came about, but I received a call from either -- 6 I think it was Richard Jeffrey, who asked me if I could 7 become re-involved in the matter. 8 Q. Could you look, please, at a document, TIE00080959. 9 I think this is another report that's prepared by 10 you. This has the date of 14 December 2010. It's 11 a report for tie Ltd on certain issues concerning 12 Edinburgh Tram Project? 13 A. It was, and it went through a number of iterations. 14 This was the final verse, I think. 15 Q. One of the things -- its purpose was to consider the 16 termination provisions of the contract? 17 A. Indeed. 18 Q. If we look at the Executive Summary on page 4, and the 19 conclusion in paragraph 1.5, it was to the effect that: 20 "To the extent that Remediable Termination Notices 21 have already been issued, it would be unsafe to rely on 22 them: 23 (a) Without the benefit of the outcomes of the 24 forensic exercise referred to above; and 25 (b) Because there is a material risk associated 179 1 with the formulation of the Remediable Termination 2 Notices (based on the sample which has been considered 3 by McGrigors and Richard Keen QC)." 4 A. Yes. 5 Q. Were there concerns both as the substance and form of 6 the notices? 7 A. Yes. 8 Q. In terms of the substance, if we look further up the 9 page at paragraphs 1.3 and 1.4 to see what the exercise 10 referred to is, 1.3, you say that: 11 "Establishing that an Infraco Default has occurred 12 requires detailed forensic analysis; the issue will be 13 subject to intense scrutiny in the context of any 14 ensuing dispute, which is ultimately likely to be 15 ventilated before the courts." 16 If we go forward to paragraph 1.4, you say: 17 "The exercise referred to in the foregoing paragraph 18 includes the compilation, review and analysis of all 19 relevant written material as well as witness evidence. 20 Expert input is also required in relation to technical 21 and planning issues. That exercise has now been put in 22 train." 23 Had you put it in train? 24 A. Yes. 25 Q. Was it a surprise to you that if Remediable Termination 180 1 Notices had been served, that that hadn't already been 2 done? 3 A. It was more a matter of disappointment and the reason 4 why I mention that is that I think in March, when 5 I issued the last report that we looked at, I think 6 I attended two more meetings at tie's offices, and it 7 was mentioned that RTNs or Remediable Termination 8 Notices were going to be embarked upon, and I said at 9 that meeting: you have to approach this with proper 10 forensic caution. You need to have the facts in place. 11 And you need to be very specific in the default. It's a 12 bit like drafting an interim interdict or 13 a declarator -- sorry, not a declarator. Specific 14 performance is the word I'm looking for. So that the 15 recipient understands precisely what the default is, and 16 what is required to rectify that default. 17 I think what I said caused a bit of annoyance, to be 18 perfectly honest. 19 Q. Is that what you said at the early part of 2010? 20 A. That's what I said in March, I think. But I wasn't 21 invited back to any further meetings. That was it. 22 And I did come back into it in October, and when we 23 reviewed the Remediable Termination Notices and the 24 responses, the advice I gave was I didn't think these 25 were sufficient, and we had to recast them and further 181 1 work was required. 2 Q. You said your advice in the early part of the year 3 caused annoyance. On whose part? 4 A. I'm just trying to -- there were many people in the 5 room, but basically, the impression I got was 6 that: never mind, we're embarking upon this stream. 7 I recall it vividly because I said: if you want to 8 ask my advice, I'll give it, and if you don't like my 9 advice, then don't ask me. 10 I remember that distinctly. 11 Q. Mm-hm. 12 A. That was the last time I attended a meeting for a while, 13 until I did the adjudication involving Lord Dervaird. 14 Q. Can you remember at all who it was who -- 15 A. I can't -- honestly I can't. It could have been any one 16 of a number of people. Tony Rush was there. 17 Dennis Murray. Steven Bell. I don't think 18 Richard Jeffrey was there. 19 Q. What was the reaction when you gave your report in 20 December, saying that it would be unsafe to rely on 21 these notices, both in form and substance? 22 A. I don't think there was any adverse reaction. I think 23 the view then was termination, if we're seriously 24 thinking about it, it is absolutely vital and critical 25 that we get this right. 182 1 Richard Keen had given his advice. So I think 2 people round the room just accepted it, that this is 3 what we had to do. 4 Q. Was there some -- 5 A. I also think that some of these meetings may have been 6 attended by people from CEC. I think Carol Campbell and 7 Nick Smith may have attended some of these meetings. 8 Q. When you say these meetings, which ones are you 9 referring to? 10 A. The ones where we discussed this report that we're 11 looking at on the screen. When we were talking about 12 termination, and being locked in and suchlike. I'm 13 pretty sure that not only was Richard Keen at the 14 meeting, but also Carol Campbell and Nick Smith of CEC. 15 Maybe David Anderson as well potentially. 16 Q. Was there any discussion as to why the things that you 17 said you were advising in December had to be done, why 18 they hadn't been done months after the service of the 19 Remediable Termination Notices? 20 A. No. 21 Q. I want to turn now to the question of the mediation. 22 We're finished with that document. 23 You were involved in the mediation that took place 24 at Mar Hall? 25 A. I was. 183 1 Q. Was there an articulated objective to that mediation on 2 tie's part or the Council's part? 3 A. Yes, I mean, I think it was to achieve a successful 4 Project Phoenix result as it was referred to, 5 a solution. 6 Q. Was there a strategy, a clearly defined strategy for the 7 mediation? 8 A. Well, in the run-up to the mediation, like virtually 9 every other mediation I have been involved in, one 10 analyses the strengths and the weaknesses of your 11 position, and then one articulates that as best one can, 12 in a mediation statement. 13 My principal involvement was actually to draft the 14 mediation statement, which is a production. And there 15 were many exhibits to that mediation statement. So not 16 only did I draft the mediation statement, but there were 17 various exhibits that -- when I say I, McGrigors drafted 18 a number of those exhibits. 19 Some of them revolve round the Helen Davies advice 20 on Notified Departures. Others involved Clause 34.1. 21 But overall the strategy was to find a consensual 22 solution because the situation that had been reached was 23 that no work was proceeding at all virtually, and we 24 were locked into a contract, and that had been fully 25 interrogated and understood, I think, both by CEC and by 184 1 tie. 2 So it was to find a solution. 3 Q. In terms of the mediation statement that was drafted, 4 did that, is it fair to say in essence, repeated the 5 arguments that had already been advanced in 6 correspondence over the previous year, both in relation 7 to Pricing Assumption number 1 and Clause 80/Clause 34? 8 A. Yes. 9 Q. There was nothing new in it in that regard? 10 A. There might have been the odd twist or turn, but by and 11 large it was pretty much what we had done over the 12 previous year. 13 Q. Now, that certainly as regards Pricing Assumption 14 number 1 was the -- were the arguments that had not 15 fared well at adjudications? 16 A. Yes. 17 Q. In terms of the Helen Davies advice, it was something 18 you had described as the stateable argument? 19 A. Yes. 20 Q. Was there any great confidence in those arguments? As 21 part of the tie Council team? 22 A. Not on our side of the fence, but I thought it was worth 23 advocating and putting forward in the context of the 24 mediation. 25 Q. Was there an understanding on the part of those 185 1 involved -- I'll say the Council, by which I mean 2 Council and tie generally -- was there an understanding 3 on those involved on the Council side that those 4 arguments were not strong? 5 A. Yes. 6 Q. Was it anticipated that they would be perceived as not 7 strong by the consortium team? 8 A. Yes. I don't think there was any thought process on the 9 part of tie that Infraco would come to the mediation 10 with anything other than confidence in their existing 11 positions. 12 Q. You were advancing arguments that had been put forward 13 unsuccessfully in adjudications, and in which -- 14 internal advice to tie had indicated concerns about 15 their strengths. 16 That being the case, what was the strategy to try 17 and get past that to a solution? Was it -- 18 A. Well, I'm sorry. The arguments as per Helen Davies 19 weren't advocated at Gogarburn and Carrick Knowe. 20 Q. Mm-hm. 21 A. And not -- not particularly in terms of Russell Road. 22 These had not been advocated in any adjudications that 23 I'm aware of. 24 Q. But it was the internal advice indicated, as you 25 discussed before, it was described as stateable? 186 1 A. It was stateable. The paper apart that we looked at 2 was -- remember the letter with the paper apart. 3 Q. Mm-hm? 4 A. In relation to Notified Departures, that was, I think, 5 the only communication to Infraco which pulled the 6 arguments together in that fashion. 7 CHAIR OF THE INQUIRY: You said that there wasn't any 8 thought process on the part of tie that Infraco would 9 come to the mediation with anything other than 10 confidence in their existing positions. 11 What about CEC? Because it was really CEC who were 12 running this mediation, wasn't it? 13 A. I suspect, my Lord, that CEC were of the view that the 14 status quo was just unacceptable, and that the arguments 15 had been lost at adjudications, and I don't think -- 16 I can't remember having the discussion with anybody at 17 CEC, but I suspect that their feeling was that this was 18 not sufficiently strong to make it viable in terms of an 19 argument in court, and given where the city of Edinburgh 20 was with the streets being dug up and no work 21 proceeding, the driver was definitely to try and find 22 a solution at the mediation on the best terms. 23 CHAIR OF THE INQUIRY: I appreciate that, but looking at the 24 strength or weakness of their position, are you saying 25 that CEC appreciated that they didn't have a strong 187 1 case? 2 A. I think they did, yes. 3 CHAIR OF THE INQUIRY: So that they were going into this 4 mediation, what, to achieve the contract being 5 completed -- 6 A. I think the Project Phoenix was the preferred course 7 which was completion of the contract with Infraco. 8 CHAIR OF THE INQUIRY: At any cost? 9 A. Well, I wouldn't say at any cost, no. No, definitely 10 not. 11 CHAIR OF THE INQUIRY: Well, was that discussed? 12 A. Well, there was work streams, substantial work streams 13 going on in terms of financial modelling. In terms of 14 how much -- how much the work done to date, if you like, 15 amounted to, and really they fed into what was called 16 the deckchair reports. I'm not sure if -- I think that 17 term has probably come up. 18 So you had people like Steven Bell feeding into 19 that. So tie did a lot of work in relation to that. So 20 did Alan Coyle. 21 And then latterly, in terms of CEC, I think 22 Colin Smith was looking at that as well very carefully. 23 CHAIR OF THE INQUIRY: So was there a ceiling on CEC's 24 commitment, financial ceiling, on their objective of 25 getting this contract under way? 188 1 A. I'm not privy to that. I don't know. 2 CHAIR OF THE INQUIRY: Thank you. 3 MR LAKE: In relation to the question from his Lordship 4 there, could I refer you to document WED00000197? Is 5 this a document that you prepared? 6 A. It was actually prepared by one of my assistants. 7 Q. We can see that the title is "Note of Key Points Arising 8 at Mediation Preparation Meeting on 28 February 2011"? 9 A. Yes. This followed receipt of Infraco's Project Phoenix 10 Proposal. 11 Q. If we look down to the foot of this page, please, we'll 12 see at point number 2, with the heading "Price 13 Certainty", the second bullet point is: 14 "tie ..." 15 Which we could also read "the Council": 16 "... needs to be clear about the financial line 17 beyond which it will not cross." 18 A. Yes. 19 Q. Did you ever get informed what was the financial line 20 beyond which it would not cross? 21 A. No, that was my point, that the financial thinking, if 22 you like, wasn't a matter that I was involved in in 23 terms of giving any advice. It was -- it was 24 essentially a core team comprising the people 25 I mentioned. 189 1 What I did do was in terms of the deckchair studies, 2 there were certain specific issues upon which legal 3 advice was given. For example, there was an advance 4 payment at the beginning of the works, and it was 5 unclear under the contract exactly how that -- what the 6 basis of that was. 7 And we looked at it in order to try and form a view 8 as to what would happen if there was a termination or 9 a separation, would monies come back in relation to that 10 advance payment? 11 There was also issues concerning preliminaries. So 12 there were specific things we had input on as requested, 13 but beyond that, in terms of the financial calculations, 14 they were complex and I certainly wasn't at the centre 15 of those discussions. 16 Q. When the Project Phoenix Proposal was received from the 17 consortium, I think you expressed some surprise at the 18 sums being claimed by Siemens, expressing the view that 19 they were double their original estimate. Do you recall 20 that? 21 A. I don't recall expressing surprise. Surprise was 22 expressed by Tony Rush. So this note that we have on 23 the screen was immediately preceded, I think the day 24 before, by a two-page email from Tony Rush to, I think, 25 about 12 people, including myself, and he'd read the 190 1 Infraco Phoenix Proposal, and had a list of comments, 2 and one of them was in relation to Siemens. 3 We then had this meeting the following day. 4 Tony Rush was out of the country. That's why he sent 5 his email. And my assistant took this note, and one of 6 the action points for me was to write an email to 7 Fraser McMillan of Pinsent Masons. Siemens were 8 actually represented by Biggart Baillie, but the channel 9 of communication for the mediation was all through 10 Pinsent Masons. 11 Q. You did engage in correspondence with Fraser McMillan 12 about the Siemens price? 13 A. I did. 14 Q. Did you get any explanation from anyone at tie of 15 discussions they had had with people at Siemens about 16 how the price was calculated? 17 A. No, I can't recall that. I have to say, in the run-up 18 to the mediation, I was flat out in terms of drafting 19 the statement, and co-ordinating everything concerning 20 the mediation, including all the exhibits, some of which 21 were being prepared by tie. 22 So that was pretty much it. 23 Q. Were you involved in consideration of what the Council's 24 position would be if there was no negotiated agreement? 25 A. Well, for that reason, all the streams that were ongoing 191 1 in -- because that didn't stop. There were further 2 INTCs, and a very substantial one which involved more 3 time. I think it was INTC 536, maybe; where the sum of 4 GBP40 million was claimed, plus more time. 5 So I had colleagues who were -- by this time we'd 6 taken over most things from DLA. So we were running 7 with all of that simultaneously, and both 8 Robin Blois-Brooke and Robert Burt of Acutus were 9 feeding information into McGrigors. If a deal hadn't 10 been done, we were back into further adjudications and 11 suchlike. 12 Q. Were you involved -- I think it's correct to say you 13 were involved in consideration of what the costs of 14 litigation would be in the event there was an attempt to 15 terminate the contract? 16 A. No. 17 Q. You don't recall that at all? 18 A. No, I received an email. It may have been 19 Stewart McGarrity, I think, Andrew Fitchie had given 20 an estimate. I can't remember giving any estimate. 21 Q. If we look at that email, it's reference CEC00043521. 22 If we look towards the lower half of the page, we'll see 23 there's an email from Stewart McGarrity to 24 Joanne Glover, who was at DLA, and yourself, dated 25 4 November 2010; do you see that? 192 1 A. Yes, I see that. 2 Q. He says: 3 "Thanks for this Jo. What this is about is 4 a reasoned estimate of the legal cost associated with 5 litigation following a termination. - I need to produce 6 one for CEC and they want a corroborated opinion. 7 Below I've pasted a previous email from Andrew (and 8 follow-up comments from Tony).- We've been telling the 9 Council GBP50 million to include for expert witness fees 10 is as good an estimate as any just now but that feels 11 very heavy to me." 12 First of all, you see that's what Mr McGarrity was 13 saying to you. 14 If you scroll down to see the advice from Tony Rush, 15 this is an email, we can see, 2 September 2010 to 16 Andrew Fitchie and Richard Jeffrey. 17 If we go over the page to see the text of the email, 18 you see here, in a very short email, he gives 19 an estimate of GBP30 million to GBP50 million for legal 20 costs. Do you see that? 21 A. Yes. 22 Q. Below that we see the email from Andrew Fitchie to 23 Richard Jeffrey and Tony Rush dated 2 September 2010. 24 He says GBP50 million would be at the top end, and in 25 the second paragraph: 193 1 "My own estimate for a case coming to a full hearing 2 over a two year period with a hearing lasting, say, 3 three months, would be in the GBP15 million to 4 GBP20 million range, with some cost recovery in the case 5 of a win" 6 Next paragraph: 7 "If there were appeals, then costs would reflect 8 this, but not in multiples, since appeals do not involve 9 the groundwork of evidence preparation and 10 preliminaries. Add another 5 million perhaps." 11 Did you comment on these estimates? 12 A. I don't think I did actually. I see that I was invited 13 to, but I can't recall any response. 14 I think 50 million is not realistic. That wouldn't 15 have been my estimate. 16 Q. Even the rather more modest, if it can be put that way, 17 estimate of Andrew Fitchie? 18 A. Yes. 19 Q. Would you agree that still seems quite extraordinarily 20 high for a litigation in the Court of Session? 21 A. Indeed. 22 Q. Shortly before the start of the mediation at Mar Hall, 23 there was a dramatic increase in the estimate of costs 24 of termination. Were you involved in that? 25 A. I remember it, but I can't remember -- by being 194 1 involved, I think I was aware of it, but I don't think 2 I was actually doing anything. 3 Q. The effect of increase in costs of litigation for 4 termination is to make that option obviously appear much 5 less attractive. 6 A. Yes. 7 Q. Was there a desire at that time amongst the parties 8 generally to make the option of not getting an agreement 9 appear as unattractive as possible? So as to pave the 10 way for getting an agreement of some sort? 11 A. No, that's not my recollection at all. My recollection 12 was that the focus was on finding a solution. That's 13 where I think all the primary effort went, and that was 14 the aim of the mediation, to find a solution. Not at 15 any price though. 16 I think CEC would have had prices in mind as 17 a function of the deckchair reports and the work 18 continued right into Mar Hall. Steven Bell and others 19 from tie were in a separate room, working away on 20 laptops and coming up with other figures, and 21 discussions with Alan Coyle and so on. 22 Q. How was the final settlement figure arrived at at the 23 meetings? 24 A. I don't know, is the short answer. 25 What happened, and I remember this vividly, the 195 1 mediation started on the Tuesday, and it was due to 2 finish on the Thursday, and on Wednesday Sue Bruce, Dame 3 Sue Bruce and Vic Emery, who were the two principals who 4 would go into private meetings with their counterparts, 5 I think, primarily, Joachim Keysberg and 6 Dr Schneppendahl of Siemens; there had been that going 7 on all day, if you like, and then at about 1.30 am on 8 Wednesday morning, a proposal was made by Sue Bruce and 9 Vic Emery -- 10 CHAIR OF THE INQUIRY: Was that Thursday morning? 11 A. Sorry, Thursday morning. My apologies, my Lord. 12 And I think that was -- I think that was their final 13 shot, if you like, at doing a deal. But I could be 14 wrong. 15 When we came back the following morning, on Thursday 16 morning, the feedback that was given to the two of them 17 was that, yes, we can work with these figures and a deal 18 was done on that basis. 19 We then had about, I don't know, 20 minutes, half 20 an hour, to try and write something up, and that's what 21 we call the agreed principles which had those figures in 22 them. 23 MR LAKE: The agreed principles, could we look at 24 CEC02084685. 25 Is that the document that you're talking about? 196 1 A. That's the document. 2 Q. We can see there the figures of GBP362.5 million in 3 Clause 1, and as it was then, GBP39 million in Clause 2. 4 Do you have any idea how those figures were arrived 5 at, to put them to the consortium? 6 A. All I can say is that those figures were the product of 7 the deckchair reports and all the analysis that was done 8 in the run-up to the mediation, potentially even at the 9 mediation itself. And it was a compromise between, 10 I think, CEC's position and Infraco's position. A deal 11 was done. 12 Q. It took very little money off the consortium position, 13 didn't it? 14 A. I think there were a number of points. One is rebasing 15 the contract going forward so that we no longer had -- 16 sorry, the Infraco contract no longer contained the 17 Pricing Assumptions, and we had a proper fixed price in 18 relation to the off-street works. Not the on-street 19 works. They were a target price which was to be agreed. 20 But the other aspect to it was a restoration, if you 21 like, a commitment one to another that going forward, 22 the breakdown in the relationship was going to be 23 resolved. That going forward, they would work together 24 in a true spirit of partnership. 25 What had happened up until this point is that the 197 1 relationship had broken down completely between tie and 2 Infraco. 3 Q. That rebasing, and improvement of the relationship, came 4 about because the sum offered was almost all of what the 5 consortium had been asking for, wasn't it? 6 A. Well, I can't say yes or no to that. 7 Q. Why not? 8 A. Because it involves speculation. I don't know. 9 Q. Was the sum almost all the consortium -- 10 A. I can't remember. If I could be referred to their 11 Project Phoenix offer, we could look at it. 12 Q. You were aware that the arguments in relation to 13 Schedule Part 4 were the ones that had the bearing on 14 the price? 15 A. It wasn't just that. It was the extension of time 16 claims as well -- 17 Q. Mm-hm. 18 A. -- arising from MUDFA. That was one of the primary 19 causes of delay alleged by Infraco. 20 Q. If you take it from me that the price that was agreed 21 was broadly equivalent to the price at close, plus the 22 full value of all the INTCs claimed, that would give the 23 impression that essentially it was accepted that Infraco 24 were broadly right, right down the line? 25 A. If that's the case, yes. 198 1 Q. Was there express discussion to that effect, that 2 essentially it was going to be accepted that they were 3 right on all these arguments? 4 A. No, not in front of me. 5 Q. Was there a discussion that their position would just 6 have to be accepted if the tramline was going to be 7 built? 8 A. I don't think so. I think the aspect that I need to 9 bring back into this equation was the advice that we 10 were locked into a contract and therefore, if 11 a consensual solution was not achieved, then we were 12 stuck in a situation where there was no deal. We 13 couldn't terminate at that precise moment in time. 14 Even if we could terminate on the basis of default, 15 and the other side, Infraco, didn't accept that, we 16 would be in court potentially for a year or two. At 17 interim, potentially no work would proceed. It was just 18 intolerable. 19 Q. All in all, was there an understanding by the people on 20 the Council team that it was a big grim position that 21 the Council were in? 22 A. I think so, yes. 23 Q. Did that dictate the idea that essentially this had to 24 be settled at virtually any cost? 25 A. Well, the principals would be best placed to answer that 199 1 question. 2 CHAIR OF THE INQUIRY: Sorry, there's a technical problem. 3 I wonder if we can have a brief adjournment for that. 4 MR LAKE: There's a technical problem and we're not being 5 able to record a transcript at the moment. So we will 6 just stop for a few minutes until it's rectified. 7 A. I don't need to leave the room? 8 CHAIR OF THE INQUIRY: We will just stay and see. 9 (3.58 pm) 10 (A short break) 11 (4.03 pm) 12 CHAIR OF THE INQUIRY: I think we seem to be ready now. 13 MR LAKE: To give you an opportunity to answer the question 14 I previously asked, Mr Nolan, I had said, first of all, 15 we'd agreed there was an understanding by the people on 16 the part of the Council team that it was a grim 17 position. Then I said: did that dictate the idea that 18 essentially this had to be settled at virtually any 19 cost, and you were answering that when we were 20 interrupted. 21 A. Well, I think my answer is I don't think that it would 22 be at any cost. But as I have said before, in terms of 23 the figures and the proposal, all I can say is it was 24 the product of all the work that was done beforehand, 25 and decisions were made by CEC, Sue Bruce and Vic Emery, 200 1 I guess, as to where they wanted to position the figure 2 that they put eventually in the early hours of Thursday 3 morning. 4 Q. You refer to the decision being taken by Sue Bruce and 5 Vic Emery. Were these the two individuals who 6 ultimately took the decision as to what was to be put 7 forward? 8 A. I think the decision-making was informed by discussions, 9 and Tony Rush was involved in this. There was a big 10 table and the people round the table were Tony Rush, 11 Vic Emery, Sue Bruce, Mr McGougan of CEC. And there may 12 have been two other -- Richard Jeffrey was in the room 13 as well. 14 Q. What was your role? 15 A. My role was documenting -- if we had to document 16 something straight away, I would have done it 17 immediately that night, in the early hours of the 18 morning. 19 Q. Did you give advice on the merits of tie's position on 20 the various contractual arguments? 21 A. That was beforehand. 22 Q. Did you give any further during the course of the 23 mediation? 24 A. No, there was no further advice on that. 25 Q. You had given a note before the mediation as to the 201 1 extent to which the adjudications were binding upon tie? 2 A. Yes. 3 Q. But other than that, the matters simply rested on the 4 basis of the adjudication decisions and your indication 5 of where they wouldn't necessarily bind the company? 6 A. That's correct. I should say there were discussions 7 with the CEC team in late January. That was my first 8 meeting with Sue Bruce. I think it was on a Saturday. 9 There was an all-day Saturday event, I remember that 10 well, and Colin Smith was there, and David Anderson and 11 various others, and also the tie people, where we ran 12 through some of the background and the difficulties and 13 issues which Pricing Assumption number 1 posed in 14 particular. I remember that. 15 So if you like, the briefings in terms of that, and 16 also separately to Vic Emery when he came on board, he 17 came to my office, and I spent two or three hours with 18 him downloading information, and I think Tony Rush then 19 saw him. 20 So if you like, the briefings and the analysis to 21 those coming into it, like Sue Bruce and Colin Smith, 22 took place in January and February, before arriving at 23 Mar Hall. 24 MR LAKE: I think we may have another problem, if we wait 25 one second. 202 1 CHAIR OF THE INQUIRY: Sorry, we seem to be still having 2 a problem with the recording. So we will have to have 3 another brief adjournment. 4 (4.07 pm) 5 (A short break) 6 (4.14 pm) 7 CHAIR OF THE INQUIRY: We seem to be ready to start again. 8 Before Mr Dunlop asks you any questions, there's one 9 matter that -- one point you asked Mr Lake if he could 10 refer you to the figures in the Project Carlisle or 11 Project Phoenix, I think it was. 12 I wonder, if you look at SIE00000184, now, that's 13 a schedule showing the original position of Bilfinger 14 Berger, Siemens and SDS, and as I understand it, the 15 figures on the left-hand column are what was originally 16 claimed, and the next column is the discount. So 17 from -- I wonder if it could be blown up. 18 So that you see that the original claim was 19 231,837,822 for Infraco, and the discount was 20 10 million. 21 And the claim for Siemens was 136,881,719, and the 22 discount was 11 million. 23 Does that help you in any way? 24 A. Well, I can see the figures, my Lord. And I can see the 25 figures which were part of the agreed principles. And 203 1 if the question is: do those figures look like they 2 approximate one to another; then the answer is yes. 3 CHAIR OF THE INQUIRY: Well, I think the question is: do you 4 think that the discount in relation to the claim is 5 substantial or not? 6 A. It's better than if the claim was ventilated and was 7 successful. 8 CHAIR OF THE INQUIRY: You mean it's better than if the full 9 amount was paid. 10 A. Yes, that's what I mean, my Lord. 11 CHAIR OF THE INQUIRY: But the question is -- there is 12 a discount. Do you think it's a significant discount 13 when compared with the original claim? 14 A. Well, it's GBP10 million, my Lord. 15 CHAIR OF THE INQUIRY: So you think it is? 16 A. It's -- yes, it is better than 5 million or -- the truth 17 of the matter is that when the offer was made in the 18 early hours of the morning, there was no grasping it by 19 Infraco. We all went away and it wasn't until the 20 following morning that in principle the figures were 21 accepted. 22 We then took all day Thursday into Friday, into 23 Saturday, before we were able to negotiate and arrive at 24 the settlement Heads of Terms. 25 CHAIR OF THE INQUIRY: Yes, but the figures -- 204 1 A. The figures remained the same, my Lord. 2 CHAIR OF THE INQUIRY: I don't understand what you say about 3 there not being any grasping. I understood that the 4 figures were arrived at by Sue Bruce and Vic Emery in 5 the early hours of Thursday morning. Was that in 6 discussion with the Infraco? 7 A. Yes. They put the proposal to Infraco, my Lord. In the 8 early hours of the morning. 9 CHAIR OF THE INQUIRY: Then everyone adjourned, went to bed 10 and got up in the morning -- 11 A. Yes. 12 CHAIR OF THE INQUIRY: -- and then the figures were 13 accepted? 14 A. But in the context of the other wording. So if we go 15 back potentially to where we were, the agreed 16 principles -- I don't know what the number is. 17 I apologise, my Lord -- one would see that they were 18 subject to various terms and conditions. 19 Sorry, I'm not sure if anybody is trying to get it 20 back on the screen. 21 Really what the big issue was, was whether -- 22 CHAIR OF THE INQUIRY: There you are. 23 A. Thank you very much. It says right at the end, 24 "pursuant to ..." 25 This manuscript wording was added, I think, by 205 1 Fraser McMillan of Pinsent Masons, and what became clear 2 when the words "pursuant to Project Phoenix" were used 3 is that when we received the first draft of the Heads of 4 Terms, the fixed price element was still subject to 5 various caveats. And that's what took all day Friday to 6 nail down. We wanted there to be no qualification, for 7 obvious reasons, at all. 8 This was a massive point. 9 Unfortunately, Dr Schneppendahl had left on the 10 Thursday, and Dr Keysberg had left as well, and it took 11 until about 11 o'clock on Friday night. We had decanted 12 to another hotel. We only had Mar Hall for the three 13 days. And at about 11 o'clock at night, I was informed 14 the principals -- the head of the various companies had 15 been spoken to, and they were prepared to drop their 16 qualification, and that paved the way for the Heads of 17 Terms to be finalised, again starting fairly early on 18 the Saturday morning, this time in my office, in 19 Glasgow, that the numbers became smaller and smaller. 20 And it took until 4 o'clock in the afternoon before 21 we reached agreement. 22 So whilst the figures were arrived at in the early 23 hours of the morning and accepted the following -- later 24 that morning, the deal itself underwent further 25 substantial negotiations. 206 1 CHAIR OF THE INQUIRY: I can appreciate that, but the 2 payment, the sum that was ultimately paid was never 3 changed? 4 A. Indeed, my Lord. 5 CHAIR OF THE INQUIRY: Mr Dunlop? 6 Examination by MR DUNLOP QC 7 MR DUNLOP QC: I'm obliged, my Lord. Mr Nolan, there has 8 been some criticism of DLA in acting for tie while at 9 the same time professing a duty of care to City of 10 Edinburgh Council. As a matter of professional 11 practice, do you see anything -- any difficulty with 12 that sort of arrangement? 13 A. No. And I can explain that because we also had a duty 14 of care letter, we being McGrigors, to CEC. And it's no 15 more than what we do in many occasions. It's just 16 a collateral warranty. 17 So the duty of care that we owed to tie in relation 18 to what we did and were instructed to do by tie in terms 19 of being exposed to a liability for professional 20 negligence through the collateral warranty, which 21 existed in favour of CEC, they would have recourse 22 against us potentially if we breached our duty of care. 23 Q. Yes. 24 A. There's nothing unusual about it in my opinion. 25 Q. Just for completeness, if we put on screen, please, 207 1 document CEC00774999. Is that the letter that you've 2 just mentioned? 3 A. It is indeed. 4 Q. So that's the letter dated 20 August 2009. 5 I think we see your reference there, BEN; is that 6 right? 7 A. Yes. 8 Q. We see that in the introductory paragraph: our client 9 has told us of the requirement that our duty of care be 10 owed not only to them but also to the Council. 11 Then paragraph 1, we see wording which may seem 12 familiar to anyone who has looked at the duty of care 13 letter by DLA. It's basically saying that on the basis 14 that the interests of tie and CEC are currently aligned 15 and will remain aligned, McGrigors owe a duty of care to 16 CEC as the sole shareholder of tie, et cetera; is that 17 right? 18 A. Yes. I don't think it was derived from another duty of 19 care letter by DLA. This was a formulation of words 20 which I received from the relevant person within 21 McGrigors who advised on this sort of thing. 22 Q. Yes. Do you know, is that just a standard wording? 23 A. I think it is standard form wording. 24 Q. And then paragraph 2 there's an importation of 25 a limitation of liability, so that the limit imposed on 208 1 tie would apply also to CEC? 2 A. Indeed. 3 Q. Just over the page, please, we see that it was to be 4 signed by Edinburgh Council, but doesn't seem to have 5 been. Was that the case? 6 A. I think what happened was I gave it -- can we -- it was 7 the date of this letter 9 August -- 8 Q. I think 20 August 2009. 9 A. 2009. So that's when we first became involved. So at 10 the same time as my terms and conditions, my appointment 11 letter, McGrigors' appointment letter was accepted. At 12 the same time as I issued that, I issued this, and 13 I think there was some delay in actually providing the 14 letter to CEC, because I think it was quite a while 15 after that that Stewart McGarrity or somebody, I think 16 Carol Campbell may have asked tie for it and it was 17 issued. 18 Q. Should we understand then that that is how matters 19 proceeded thereafter with McGrigors advising tie but 20 acknowledging it owed also a duty of care to the 21 Edinburgh City Council? 22 A. Yes. 23 Q. You've indicated that in your dealings for tie, there 24 were several meetings often attended by Nick Smith? 25 A. No. That only happened right at the end. I think the 209 1 first such meeting was in October, late on, mid-October 2 onwards, in 2010. 3 Q. Right. Did that meeting with Mr Smith express any 4 disaffection with the dual role that was being played by 5 McGrigors? 6 A. I didn't actually have a dual role, just to be clear. 7 My appointment was with tie, but I had a duty of care. 8 Q. Yes. 9 A. So CEC weren't giving me instructions. My instructions 10 and what I did was derived from tie, but I had a duty of 11 care to CEC. 12 Q. Did Mr Smith at that meeting express any desire that 13 independent legal advice be provided other than by 14 McGrigors? 15 A. No. 16 MR DUNLOP QC: Thank you, Mr Nolan. I'm obliged, my Lord. 17 CHAIR OF THE INQUIRY: Thank you very much, Mr Nolan. That 18 concludes your evidence. 19 You're still subject to the citation. So if it were 20 necessary, you could be recalled. Hopefully that won't 21 be required. 22 A. Indeed. 23 CHAIR OF THE INQUIRY: In the meantime, you're free to go. 24 Thank you very much. 25 I think some people have been wondering 210 1 understandably about the arrangements for the festive 2 season. The intention is that we've got evidence next 3 week, which is on the programme, and the intention is 4 that after Thursday of next week there wouldn't be any 5 more evidence sessions until next year. 6 I can't be more precise about when in January we'll 7 start. It will not be the beginning of January because 8 we are in discussions with witnesses at the moment. It 9 looks like the second and third -- maybe the 15th, the 10 week of the 15th and the week of the 22nd. That depends 11 on the availability of witnesses who -- we're still 12 discussing their availability. 13 As soon as we know -- we're having a meeting next 14 week. So as soon as we know, we'll put that on the 15 website and send a note round core participants, 16 indicating when oral hearings will resume. 17 MR DUNLOP QC: My Lord, in a similar vein, I wonder if I can 18 ask whether there's any indication as yet as to when 19 your Lordship is likely to require written submissions 20 by? I ask because -- your Lordship will anticipate 21 this -- the unanticipated spilling into January is 22 already causing certain diary clashes. I think it is 23 inevitable that I won't be here in January. I'm very 24 hopeful that Mr Walker will be. We are just wondering 25 what is the likely timescale. It may be impossible to 211 1 say at the moment. 2 CHAIR OF THE INQUIRY: I think it is impossible to say at 3 the moment. 4 The plan was that once we had heard all of the 5 evidence, we would adjourn for a period which I really 6 haven't firmed up on, but maybe three or four weeks, to 7 enable parties to prepare written submissions, and then 8 to exchange them, and then there would be a further 9 period of a fortnight or so to enable you to take into 10 account any aspects of the other participants' written 11 submissions, and then we would have short oral 12 presentations. 13 So -- but obviously the starting point is the end of 14 the evidence. 15 It wouldn't be fair to guesstimate at this time. 16 MR DUNLOP QC: When your Lordship convened the oral hearing 17 back in September, there was some mention of the 18 possibility of a short adjournment and then some expert 19 evidence, and then another adjournment for the written 20 submissions. Is it still envisaged we may have expert 21 evidence? 22 CHAIR OF THE INQUIRY: There may be. That's a matter that 23 we will discuss next week. But if we do, we'll try to 24 get it in as part of the evidence. There may not be 25 a break between other witnesses and any experts. That's 212 1 something we've still -- we'll adjourn until next week, 2 next Tuesday at 9.30. 3 (4.30 pm) 4 (The hearing adjourned until Tuesday, 12 December 2017 at 5 9.30 am) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 213 1 INDEX 2 PAGE 3 MR AXEL EICKHORN (continued) .........................1 4 5 Examination by MR MCCLELLAND (continued) ......1 6 7 MR JULIAN WEATHERLEY (affirmed) .....................40 8 9 Examination by MR LAKE .......................40 10 11 MR BRANDON NOLAN (sworn) ...........................114 12 13 Examination by MR LAKE ......................114 14 15 Examination by MR DUNLOP QC .................207 16 17 18 19 20 21 22 23 24 25 214