1 Wednesday, 20 September 2017 2 (9.30 am) 3 CHAIR OF THE INQUIRY: Good morning. 4 MR MACKENZIE: Good morning, my Lord. The next witness is 5 Mr Alastair Maclean. 6 MR ALASTAIR MACLEAN (sworn) 7 Examination by MR MACKENZIE 8 CHAIR OF THE INQUIRY: Mr Maclean, can I ask you to speak 9 into the microphone and not too quickly for the benefit 10 of the shorthand writers. 11 MR MACKENZIE: Good morning. 12 A. Good morning. 13 Q. Can you state your full name, please? 14 A. Alastair David Maclean. 15 Q. And your current occupation? 16 A. Head of Legal. 17 Q. Where? 18 A. In Baillie Gifford, asset management firm. 19 Q. Thank you. You have provided a CV to the Inquiry. We 20 will look at that, please. It's CVS00000005. Lots of 21 zeros. Page 1, we can see under your employment history 22 you helpfully set out there, I think in short, you 23 qualified as a solicitor in 1997. You spent 13 years in 24 private practice with Maclay Murray & Spens in corporate 25 and financial services work, including three years as 1 1 a partner in that firm, before joining the City of 2 Edinburgh Council in 2010; is that correct? 3 A. Yes, it is. 4 Q. Might it in fact be you joined the Council in 5 December 2009? 6 A. Thank you. Apologies. I did indeed join early 7 December 2009. 8 Q. Thank you. 9 You say here that you joined the Council initially 10 as Head of Legal, Risk and Compliance. We've also seen 11 reference to the title Head of Legal and Administrative 12 Services. I just wondered which was correct as at 13 December 2009 into 2010? 14 A. The correct title was Head of Legal and Administrative 15 Services. It subsequently became known as Legal, Risk 16 and Compliance later on. 17 Q. Thank you. We can also see, sticking with your CV, that 18 then between 2012 to 2015, you were Head of Legal -- you 19 were Director of Corporate Governance at the Council, 20 and then from 2005 you were a Deputy Chief Executive 21 Officer and Chief Operating Officer. When did you leave 22 the Council? 23 A. I left the Council, December -- either December 2015 or 24 into the early part of January 2016. 25 Q. Thank you. Now, if we could then please look at page 3 2 1 of the CV. We can see the first bullet point. I think 2 you're here listing various matters in relation to your 3 role as Head of Legal and Administration. You say: 4 "Assisted in driving the failing Trams project to 5 conclusion, giving Edinburgh a working tram network." 6 What did you mean by "driving"? 7 A. There was a considerable amount of work needing to be 8 done during the Settlement Agreements. Certainly before 9 that as well, but if I take that particular part, with 10 Bilfinger Berger, Siemens, the consortium, and that 11 required a heavy involvement on my part, for which by 12 "driving", I meant a large degree of productivity and 13 effort required to go into it. 14 Q. Thank you. If we look then at page 4, now, again you're 15 listing various matters. In the second bullet point you 16 mention having been Chief Legal Officer and Monitoring 17 Officer to the City of Edinburgh Council. Just for 18 clarification, when did you become the Council's 19 Monitoring Officer? 20 A. So I was a Monitoring Officer, I think, for the other 21 entities when I was Legal and Administration Services, 22 Head of Legal and Administrative Services. I did not 23 become Monitoring Officer of the City of Edinburgh 24 Council until I became Director of Corporate Governance, 25 which was around September/October 2011. 3 1 Q. Yes. I think at page 1 of your CV, you had stated you 2 were Director of Corporate Governance, 2012 to 2015. 3 A. So I have not put months in there, and that's an 4 approximation to the calendar year 2012. The official 5 appointment of me being made Director of Corporate 6 Governance, I think was in the September, possibly the 7 October 2011 Council meeting, which came almost 8 immediately after the Settlement Agreement MoV5 was 9 signed with Infraco. 10 Q. Thank you. Now, the last matter I would like you to 11 again is again on page 4. We see the second last bullet 12 point states: 13 "Established and embedded an audit and risk 14 management environment through co-sourcing arrangements 15 to address internal control deficiencies resulting in 16 a substantial decrease of project failure." 17 Just before I ask about that, this is a key 18 achievement listed under, we see at the head of the 19 page, Head of Legal and Administration. I just wonder, 20 did you establish and embed this audit and risk 21 management environment when you were Head of Legal and 22 Administration, or did that come later perhaps when you 23 were Director of Corporate Governance? 24 A. Thank you. You are quite correct, that came later when 25 I was Head of Corporate Governance. 4 1 When I did do was amend and change the control 2 function within the legal function at that point in 3 time, but the audit and risk environment and the control 4 deficiencies there were not addressed until I became 5 Director of Corporate Governance. 6 Q. So that was late 2011 onwards. 7 Could you just explain a little what you mean by 8 having established and embedded an audit and risk 9 management environment? 10 A. There were a considerable number of control failings in 11 the Council, when I was Director of Corporate 12 Governance, and a full governance review on a number of 13 areas was carried out, which required a series of 14 projects and a series of Monitoring Officer reports by 15 myself to the Council management team. 16 That required changes to principally and initially 17 the audit team in the Council, the internal audit team. 18 It required setting up a risk function in the Council 19 team. From memory there was less than one full-time 20 equivalent employee in our risk function for the whole 21 organisation. And when you saw some of the issues and 22 problems the Council had at that point in time, and if 23 you believed in, as I did, our three-tier process, tier 24 1 where the business should be in control of what it's 25 doing, and then you should have a risk function, tier 2, 5 1 which is able to check and assist, and then a third 2 function being internal audit, that three-tier approach 3 didn't seem to exist in the Council, and that required 4 to be put in. 5 So when I talk about audit and risk environment, I'm 6 talking about introducing a three-tier approach to that 7 framework, resourcing up, and bringing in, as it 8 happens, external assistance to quickly provide 9 expertise in those areas to help the Council shore up 10 around its control frameworks. 11 Q. Thank you, Mr Maclean. A number of matters arise there. 12 Firstly, if -- where do we find documents showing 13 these sorts of changes? Would there have been reports 14 to Council around perhaps late 2011 and 2012, setting 15 out these matters? 16 A. There would be one or two Monitoring Officer reports 17 that I took to the Council management team, subsequently 18 known as the Council leadership team, that should be 19 identifiable from the Chief Executive's office. 20 There were papers taken to a number of different 21 committees, and I'm not going to be able to mention them 22 all, but possibly to the Council meeting. Definitely to 23 the governance risk best value. It might have been 24 known as the Audit Committee in those days. And on one 25 or two instances, I took papers or mentioned them at the 6 1 Council Leader's meeting every Monday morning. 2 And this was around also the time of the Statutory 3 Notices concerns that were ongoing at the time in the 4 Council. 5 Q. In terms of the time frame -- sorry for repeating 6 myself, but these papers would be late 2011 and during 7 2012? 8 A. I apologise. It would have been towards the beginning 9 of 2012, I think. 10 Q. Yes. Thank you. 11 Another matter you mention was a number of internal 12 control failings in the Council. Can you explain that 13 a little, please? 14 A. There were a number documented and a matter of public 15 record. But I say, I didn't see the three-tier 16 framework in audit and risk, I have mentioned already. 17 Sometimes there wasn't sufficient financial oversight. 18 Other times there were projects like Statutory Notices 19 where there patently had not been a sufficient control 20 framework in place. 21 There were a couple of minor frauds, and there were 22 certainly issues which I'm sure we will be coming on to 23 later around the governance and control of our arm's 24 length companies. Almost all of which, not all of them, 25 but almost all of which had issues arising over the 7 1 early part of my directorate -- directorship that 2 required the Council to better understand what was going 3 on with those entities. 4 Q. Just sticking with this point, did the internal control 5 failings include in relation to the tram project? 6 A. That was one of them. 7 Q. Just while we are on the point, what did you consider to 8 be the main internal control failings in relation to the 9 tram project? 10 A. The experience over the previous year or 18 months 11 showed me that there were considerable issues which I'm 12 sure this Inquiry will get to the bottom of within the 13 tram project, and similar issues were apparent 14 elsewhere. 15 The principal one in relation – control-wise in 16 relation to the tram project, I would say, at that time, 17 looking backwards in time, if you like, was that the 18 Council was too far removed and not able to properly 19 supervise or oversee the activities of its arm's length 20 company. 21 Q. Thank you. We will come back to that as you say. 22 You also mentioned a three-tier approach. Is that 23 something you were aware of from your private sector 24 background? 25 A. I possibly would have been. I maybe picked it up during 8 1 the role. It's certainly something that is private 2 sector-wise very well known. 3 Q. Is that set out in any guidance anywhere or where does 4 that come from, this three-tier approach? 5 A. I couldn't tell you if it's set out in any formal 6 guidance. I just know in the industry, in most private 7 sector businesses, and when dealing with risk functions, 8 that you understand there's a -- this three-tier 9 approach. 10 Q. But it's not your invention. You're not claiming credit 11 for that? 12 A. No, I'm most certainly not claiming credit for it. It's 13 a well-known industry matter. 14 Q. Thank you. Just for completeness, you mentioned 15 embedding an audit and risk management environment. You 16 mentioned the three-tier approach. 17 You've also referred in your statement -- we will 18 come on to the Council's Governance Risk and Best Value 19 Committee, and the question of the corporate programme 20 office. Are these elements of this audit and risk 21 management environment? 22 A. They were elements of a wider governance project or 23 programme that we were looking at in putting in place at 24 the time, one bit of which was this audit and risk 25 environment. 9 1 Q. We will perhaps come back to these features later. 2 Thank you. 3 Could we now please turn to your statement. The 4 number is TRI00000055. If we go to the last page, 5 please, just to confirm your signature, page 64. It 6 will come up on the screen as well. 7 Can you confirm, please, that's your signature and 8 this is the statement you have provided to the Inquiry? 9 A. I confirm that is my signature and this is the statement 10 I provided to the Inquiry. 11 Q. Thank you. So this written statement, Mr Maclean, 12 together with the evidence you provide today, will form 13 your evidence to the Inquiry. 14 Just going through some matters in your statement, 15 please, there is the question of -- you joined the 16 Council in December 2009. The previous 17 Council Solicitor, Gill Lindsay, remained with her role 18 until August 2010. I would like to look at that 19 a little more. 20 It may be helpful to start with a letter. If we can 21 please go to CEC00692177. We can see this is a letter 22 dated 12 November 2009 and it's sent by Mr Jim Inch, the 23 Director of Corporate Services, to the then 24 Council Solicitor, Ms Lindsay. 25 It refers in the first paragraph to recent 10 1 discussions regarding Ms Lindsay's working arrangements 2 once you commence employment on 1 December 2009. 3 Have you seen this letter before, Mr Maclean? 4 A. Yes, I have, and I think I was copied into that after 5 I handed my notice in with my previous employer and 6 before I started at the Council. 7 Q. I understand. If we then look at the rest of the 8 letter, please. It states: 9 "I confirm that with effect from 1 December 2009, 10 you will be carrying out the following duties ... 1. 11 Working as part of the Tram Project Team representing 12 the Council's interest in the tram project, including 13 ... (i) Membership of tram project sub-committees, 14 ensuring the Council is accurately briefed on the legal 15 aspects of commercial engagement and provide both 16 a support and challenge role with tie ... (ii) 17 Overseeing and facilitating ... the legal processes as 18 required on various project work streams including 19 acting as signatory for the Council for various legal 20 agreements ..." 21 Next bullet point: 22 "the legal elements of the transfer of shares from 23 tie to TEL and ultimately from Lothian Buses to TEL; 24 and ..." 25 Next bullet point: 11 1 "the legal elements relating to Phase 2 of the 2 governance arrangements relating to the tram project. 3 (iii) Ensuring the legality of board arrangements 4 under the current and future governance arrangements of 5 the tram project from the construction phase into 6 operations." 7 Lastly: 8 "(iv) Representing the Council in engagement with 9 external parties relating to legal matters." 10 So that's all to do with the tram project, and you 11 presumably note in passing under paragraph 2 that 12 Ms Lindsay was also to lead the legal advisory work 13 stream with the alternative business models programme, 14 which we don't have to go into there. So we can put 15 that letter to one side. 16 So those were Ms Lindsay's responsibilities in 17 relation to the tram project while she remained with the 18 Council. 19 What were your responsibilities in relation to the 20 tram project, Mr Maclean, while Ms Lindsay remained with 21 the Council? 22 A. Formally it was made clear to me from that letter and 23 from a conversation I had with Mr Inch before I started 24 in the Council that my responsibilities for tram were 25 nil, that they were passed over to Ms Lindsay for that 12 1 eight-month, nine-month period, and that was awkward and 2 frustrating; and before coming in, I was fully expecting 3 to be getting immersed in the tram project, and that 4 turned out not to be the case, and indeed the other 5 project as well, ABM, that they mentioned there, they 6 were the two largest projects ongoing in the Council. 7 At least with ABM, Gill Lindsay was still reporting 8 to me, but on tram she was not a direct report of me and 9 in fact was placed in an entirely separate office and 10 ring-fenced away from me and my team. 11 That having been said, that was the formal position. 12 Informally, frankly, there was something about us trying 13 to do the right thing and I was trying to, where 14 possible, with the relatively little information I was 15 getting, keep abreast of where things were, so when 16 I was able to get more involved, I could maybe hit the 17 ground running. 18 Q. So during this period from December 2009 to Ms Lindsay 19 leaving Edinburgh's employment in August 2010, are you 20 quite clear Ms Lindsay was not reporting to you in 21 relation to the tram project? 22 A. I'm very clear on that matter. As I say, it was 23 a matter of considerable frustration. The legal team 24 were based in City Chambers. Ms Lindsay used to sit 25 there. She was co-located there for a day or two when 13 1 I started to hand over the work of the division, and 2 then she moved down to Waverley Court, a separate 3 office. The legal team had no location there, and 4 Ms Lindsay, with the assistance I think of one of my 5 team members, Nick Smith, was heavily involved in the 6 tram project, liaising directly with Jim Inch, the 7 Director of Corporate Services, and the other directors 8 who were dealing with matters in the Council, Director 9 of City Development and Director of Finance. There was 10 no reporting to me at all on the trams. 11 Q. Other witnesses, Nick Smith and I think Mr Inch as well 12 yesterday, were asked who was ultimately responsible for 13 giving the Council legal advice on the tram project 14 during this period, and Mr Smith certainly said you. 15 I think Mr Inch also said ultimately you were 16 responsible. 17 What's your response to that? 18 A. In relation to Mr Smith, I suspect he never saw that 19 letter and wasn't fully aware of the position. 20 If I can be fairly direct on the matter, I think the 21 whole situation was a bit of a fudge put in place by the 22 Director of Corporate Services as a ruse by which 23 Gill Lindsay could be helped out in getting to her 24 50th birthday in order to obtain early retirement to 25 leave the Council. 14 1 Q. That may or may not be the case, but in terms of us 2 being quite clear as to who was ultimately responsible 3 for providing legal advice to the Council on the tram 4 project during this period, you've explained you think 5 Mr Smith may not have seen this letter, but Mr Inch, who 6 was the director, so one above, I think, his evidence is 7 that he considers you were ultimately responsible for 8 legal advice on the tram project to the Council during 9 this period, but you simply say that's not correct? 10 A. That is absolutely not correct. It was made very clear 11 to me that my role and task coming in was to address the 12 other fundamental issues in the Council and to pull the 13 two departments of legal administrative services 14 together and to address, again, a matter of public 15 record, the significant issues that were wrong with the 16 legal department at that point in time. 17 Now, that's a formal position. I come back to about 18 trying to do the right thing, that whilst that's 19 formally the position, and Mr Smith may be confused 20 because of this, informally I was trying to garner as 21 much information as possible, and he may have mistaken 22 that for me being formally responsible. That was not 23 the case. 24 Q. Now, you've mentioned, I think, both in your evidence 25 today and in your statement, that that was an awkward 15 1 situation. That wasn't ideal. Maybe it's an obvious 2 question, but why was that awkward, not ideal and 3 frustrating, another word you mentioned? 4 A. It was awkward in a number of scenarios. It was awkward 5 personally to be -- to have an overlap with my 6 predecessor for a nine-month period where effectively 7 there were two heads of legal in the organisation. 8 It was awkward because I understand Ms Lindsay's 9 departure, whilst ultimately on amicable terms, there 10 was a sensitivity around that. 11 It was awkward in that the two fundamental Council 12 projects were, if you like, slightly removed from my 13 oversight. 14 It was a situation that, frankly, I just had to 15 adapt to the best you can, having handed your notice in 16 with your former employer, and accepting a job and then 17 finding out that actually your predecessor would be 18 there for nine months, and that a project that was 19 becoming clear in the press was problematic, was not in 20 your immediate sight, then I think by anyone's 21 definition, that's pretty awkward. 22 Q. Did you feel excluded from the tram project at this 23 time? 24 A. Had it not been for the odd bit of information I was 25 able to garner from people like Mr Smith and others, 16 1 then, yes, I felt largely excluded from the tram 2 project. 3 Q. One other matter I should have asked you. In your 4 statement you stated that you were aware of significant 5 issues with the CEC legal team prior to your 6 appointment. Can you explain that? I'm particularly 7 interested in relation to whether these issues had any 8 effect on the tram project. 9 A. As a matter of public record, those issues are freely 10 available in 2008 -- I beg your pardon, 2007 and 2008 11 and 2009 Council reports. Mr Inch, the Director of 12 Corporate Services, took various papers to the Council, 13 sometimes at his behest, sometimes at the behest of the 14 elected members, I understand, because of concerns in 15 the Legal Department. 16 They ranged across a variety of matters. They 17 ranged across retention and recruitment of personnel 18 with the appropriate skill set. They ranged into 19 quality of the legal team. They ranged into experience 20 and, from memory, the last one in 2009 was maybe a bit 21 more corporate in its language by talking about merging 22 two divisions in order to achieve financial savings. 23 But it was much wider than financial savings. It 24 cut across and showed a picture of a team that was 25 struggling to recruit the experience and ability that 17 1 was required. 2 Q. You mentioned, I think, Mr Inch having provided various 3 reports to Council within 2007 and 2009. So when we 4 find these reports, we will see these issues set out 5 there? 6 A. Definitely. It was May 2007. I can't quite remember 7 when in 2008 and 2009, but there were three Council 8 reports which you are able to find as a matter of public 9 record. 10 Q. Thank you. I would like to move on to your greater 11 involvement in the tram project. 12 If we can go, please, to document CEC00223896. Now, 13 this document, Mr Maclean, is headed "Tram Internal 14 Planning Group Remit" and it's dated 25 May 2010. If we 15 go to the next page, please -- sorry, next page again, 16 I think it's by David Anderson. Go to page 3. That 17 might confirm that. Page 4. Yes, there we go. It's 18 a report by David Anderson, Director of City 19 Development. 20 Go back, please, to page 1. You can see the purpose 21 of the report in paragraph 1.1: 22 "This report reviews the composition and terms of 23 reference of the Tram IPG and recommends several minor 24 revisions." 25 If we could then, please, go to page 2, 18 1 paragraph 3.5, Future Remit and Key Objectives. It's 2 stated: 3 "It is proposed that the remit of IPG should in 4 future be focused more explicitly to address the 5 following objectives." 6 The first bullet point: 7 "To provide Council management, scrutiny and 8 oversight of the tram project and monitor progress 9 against the programme timetable and budget." 10 Et cetera. We can see what else is set out there. 11 If we then please go to paragraph 3.6, the future 12 membership of IPG: 13 "No fundamental changes are proposed to the 14 memberships of IPG. It is proposed that the core 15 membership of the group should remain as follows." 16 We can see who are listed there. 17 If we could then please leave that and go to another 18 document, CEC00224207. This is an Action Note following 19 the Tram IPG meeting on 9 June 2010. In terms of who is 20 present, we see the initials AM, which I think refer to 21 you, Mr Maclean. So it may just be a point of detail, 22 but in short, from looking at the action notes of the 23 IPG in 2010, I think what we see is that Ms Lindsay 24 attended meetings in January, February, March, April and 25 12 May was her last meeting. I think we see you 19 1 attended the meetings from 9 June onwards. I just 2 wonder, in short, whether -- I think in your statement 3 you mentioned having, I think, started attending these 4 meetings in perhaps August or September. I think in 5 fact it was June onwards. 6 Do you accept that is perhaps correct? If that is 7 shown in the action notes? 8 A. Yes, I can accept that I got my dates wrong by a month 9 or two there. Certainly things were changing in that 10 period of time, and I hadn't been on the IPG for a lot 11 of the first part of 2010. Round about summer 2010, 12 I think, Dave Anderson made representation to me that he 13 would like me to start going to that. So I could 14 believe that around about May/June would have been my 15 first IPG meeting, yes. 16 Q. When did you consider that you first came to have 17 a reasonably good understanding of the tram project and 18 the dispute? 19 A. I don't know if I put an exact date on it. I think 20 unrelated to when I became formally involved in the tram 21 project, as I say, informally I was trying to get 22 abreast of what was going on. So unrelated to those 23 dates, it possibly would have been around about 24 August/September, because in my mind, I can tie that 25 back to certain events that happened around about then. 20 1 Q. Which we will come on to, I think. 2 I should also have just checked with you, in terms 3 of the structure of your department, was Ms Lindsay 4 a member of your department? 5 A. She -- not that I'm aware of, unless something different 6 was done with the finances, of which I wasn't aware. 7 Certainly I remember asking for a list of all personnel 8 in my department when I arrived. And that took some 9 considerable time to get, but her name was not on it. 10 And she certainly did not attend any of my weekly, 11 twice -- fortnightly management meetings. 12 Q. So I think one can quite understand that Ms Lindsay is 13 a solicitor, a lawyer with the Council. You are the new 14 Head of Law and Admin. So one may think, of course, 15 Ms Lindsay sits beneath you in terms of seniority and 16 reports to you, and therefore you're responsible for her 17 decisions. But what you're saying is in fact she wasn't 18 a member of your department. She sat outside it? 19 A. No, I can understand in a perfectly logical, normal 20 world that when you merge two departments, you would 21 expect the two heads to then come and be subsumed 22 underneath that head. That most certainly was not the 23 case here. The Council secretary had left and 24 Gill Lindsay was removed from that department and left 25 on an island, effectively, on an island in 21 1 Waverley Court, doing those two projects; as I say, on 2 alternative business models, she did report to me and 3 give me briefings and let me know what was going on. 4 On trams, that was not the case, and she, again, 5 possibly, you can paint a positive spin on it, I guess, 6 possibly because she had the experience and the 7 knowledge of what was going on in the project to date. 8 But she continued to report, as far as I'm aware, to the 9 Director of Corporate Services and the other two 10 directors at the time as a special project, if you like, 11 as opposed to being part of my legal team. 12 Q. Thank you. I think the important point that arises from 13 this awkward period, if I can put it that way, is did it 14 affect the Council's approach to the tram project and 15 the dispute in any way? Let's perhaps test it this way. 16 If Ms Lindsay had been there, and you arrived in 17 December 2009 with clear responsibility for the tram 18 project, would your actions, advice or views have 19 changed in any way? 20 A. My actions and advice possibly would have been 21 accelerated by three or four months from, say, the 22 August/September 2010 to maybe the March/April 2010. 23 Whether those actions or advice would have made any 24 material difference at that point in time, I cannot say. 25 Possibly -- possibly people had to see the tie strategy 22 1 was failing over that period of time. So that when 2 I was able to come along with, if you like, a different 3 perspective, and at the same time tie's actions and 4 strategies were beginning to fail, maybe it had more 5 gravitas, more weight. 6 So the impact of that, I can't say. But I think 7 with the benefit of hindsight, possibly my knowledge of 8 the situation and different view on it would have come 9 out before August or September and maybe -- maybe as 10 early as March or April. 11 Q. What I wondered is to test this, you mentioned tie's 12 strategy being a failing one. 13 Was that based on the adjudication results starting 14 to go against tie? 15 A. If I understand your question correctly, why did I think 16 tie were -- tie's strategy was failing? 17 Q. Yes. 18 A. Thank you. 19 My recollection, if I put it this way, of 20 August 2010 was that a picture was being painted, if 21 I can put it that way. I'd gleaned information from 22 various sources on the Council, Nick Smith being one of 23 them, and I'm sure we will be talking about some of his 24 emails at some point in the day, and others, Alan and so 25 on, and I can see that there were historical problems at 23 1 the time the project was entered into. 2 I could see from the adjudications that by that time 3 I was getting much more heavily involved in and reading 4 myself, that they were really not going well on a number 5 of fronts. 6 I could read fairly simply from -- we may come on to 7 it -- part 4 of the Infraco contract. I can see the 8 page in my mind, page 3. Where it was patently obvious 9 there was a fundamental problem with that contract. 10 If you put the emails and possibly the hearsay that 11 was going around, together with Part 4 of the Schedule, 12 together with adjudications, and together with the 13 conflicting information we were hearing from a number of 14 sources; and then there was one other thing that stuck 15 in my mind, and this is when I then realised there 16 really was a problem with strategy. I think it was 17 later, maybe September 2010, I refer to it in my 18 statement. 19 There was a briefing, as there is before various 20 Council meetings, to one of the political groups. 21 I think it might have been the Labour. It might have 22 been the Conservative. I think it was the Labour Group 23 meeting, and a senior tie executive said in that meeting 24 that there was a cast-iron right to terminate the 25 contract, and that was backed up by QC opinion. 24 1 Without wanting to insult anyone in the room, 2 I don't think I have ever heard a QC say there's 3 a cast-iron right to terminate a contract, and that was 4 for me a significant alarm bell. I had seen these other 5 factors and indications, and suddenly to have something 6 so starkly demonstrated when, as I say, Part 4 of the 7 contract was so clear, or rather so unclear, that was 8 for me a defining turning point, if you like. 9 Q. Thank you. We will come back to some of these matters. 10 I have jumped ahead. 11 Just taking things chronologically, if you start, 12 please, with document CEC00473789. This is one of the 13 emails from Mr Smith. 14 CHAIR OF THE INQUIRY: While we are waiting for that, do you 15 remember who the senior tie executive was? 16 A. Yes, I do, my Lord. 17 CHAIR OF THE INQUIRY: Who was it? 18 A. It was Richard Jeffrey. 19 MR MACKENZIE: I'll come back to explore that, my Lord. 20 Now, we see this is email from Mr Smith dated 21 8 January 2010 to yourself, Mr Maclean. Subject 22 matter: tram briefing. I won't read it out. We have 23 read it already in the hearing. I'll give you a minute 24 just to refresh your memory. 25 Can you remember why Mr Smith sent you this email? 25 1 A. I think, from memory, I was doing a round of meetings in 2 my early part of induction with the senior politicians. 3 I think the particular one was a convener in one of the 4 committees from the SNP Group, and Mr Smith sent me that 5 so I would have some background information. 6 Q. Thank you. Did you discuss this email or the matters in 7 it with Mr Smith at the time? 8 A. I cannot recall, but I must have done. I can't believe 9 I would have received that email and not had 10 a conversation with Mr Smith. 11 Q. Now, in the email Mr Smith stated: 12 "Dissemination of the actual history here could 13 cause serious problems and we definitely don't want to 14 set hares running." 15 What did you understand him to mean by that? 16 A. I don't know. Mr Smith would be best placed to answer 17 that. But my feeling at the time was this was a highly 18 politicised dispute, and that people probably wanted to 19 make sure that in communicating things, it was done 20 accurately as opposed to in a blasé manner. 21 Q. Also, in the email, Mr Smith states: 22 "Be very careful what info you impart to the 23 politicians as the Directors and tie have kept them on 24 a restricted info flow." 25 What did you understand him to mean by that? 26 1 A. It could have referred to one of two things. It could 2 have referred to the fact that leakages and leaks were 3 happening all over the organisation, and many a time 4 information was given to certain elected members, you 5 knew -- probably didn't know this in January 2010, to be 6 fair, but you knew it would find its way into the local 7 press that afternoon. 8 Secondly, it refers, I assumed, to an organisation 9 I was quickly understanding was very hierarchical and 10 very controlled in its communication flow. 11 Q. Did you have any concerns at any time that members were 12 not given the full facts in relation to the tram 13 project? 14 A. At that stage, no, it was far too early to possibly 15 comment. Remember, I was in the organisation for four 16 or five, six weeks and I didn't know Mr Smith. For all 17 I knew, Mr Smith could have been talking absolute 18 nonsense. 19 CHAIR OF THE INQUIRY: I think the question was more 20 general, Mr Maclean. It was did you have any concerns 21 at any time? 22 A. Thank you, my Lord. 23 During my period as Head of Legal and Administrative 24 Services, I wasn't fully aware of all the conversations 25 and how elected members were briefed. But yes, it is 27 1 fair to say that I had later, in 2010, significant 2 concerns with what elected members were being told such 3 that I -- I'm sure we will come on to it -- felt the 4 need to depart with normal protocol and have a direct 5 conversation with the leader of the Council. 6 MR MACKENZIE: And when was that, roughly? Which month? 7 A. October/November 2010. 8 CHAIR OF THE INQUIRY: I wonder if you could just lean into 9 the microphone a little. 10 MR MACKENZIE: Thank you, Mr Maclean. I'll stick with 11 things chronologically and come back to ask you about 12 that when we get to that period. 13 Looking at the document, please, attached to 14 Mr Smith's email, that is CEC00473790. 15 Again, I'm not going to read this out, Mr Maclean. 16 I suspect -- I'll give you a minute just to go through 17 yourself, to re-familiarise yourself with it? 18 A. No, it's okay, Mr Mackenzie. I have seen it before. 19 Q. Have you read the transcript of the evidence of 20 Mr Smith? 21 A. Partly, yes. 22 Q. You will be familiar with some of the matters I read out 23 and discussed with Mr Smith? 24 A. Some of them, yes. 25 Q. Do you have any comments on the matters listed in this 28 1 document? 2 A. Comments now or at the time? 3 Q. I appreciate at the time you had come into this new and 4 probably had no views on these things, but I think in 5 short, I wonder whether what is set out, did that come 6 to largely reflect your own understanding and views of 7 the project, or were these all simply assorted matters 8 you really couldn't come to a view on? 9 A. Yes, I think it's a very fair summary. 10 Q. Just in passing, in bullet point 4, Mr Smith mentions 11 the suggestion of the Council obtaining independent 12 legal view on the fitness for purpose of the contract. 13 Just in general, and not particularly directing this to 14 the tram project, but in general do you have any views 15 on the desirability of the Council taking its own 16 independent legal advice before guaranteeing a contract 17 entered into by a Council-owned company? 18 A. So there are several ways the Council could have got 19 satisfied with knowing what was going on at the time. 20 And the need for giving a financial guarantee. The most 21 obvious, and certainly for a contract of this magnitude 22 is that if the Council did not have the skill set 23 internally or the time, would be to go out and get 24 external skill set brought in. 25 So question 1, did it have the information -- the 29 1 experience internally? Question 2, if not, go out. 2 There is a third way, but possibly brought in too 3 late in the day, which is for a duty of care letter to 4 be obtained from the lawyers on the other side, but you 5 would normally want to know that interests are aligned 6 and that that was issued from the outset, not halfway 7 through the project. 8 CHAIR OF THE INQUIRY: Again, I think the question was 9 a general one. It wasn't confined to the tram project, 10 Mr Maclean. It was whether you had any views on the 11 desirability of the Council taking its own independent 12 legal advice before guaranteeing a contract entered into 13 by a Council-owned company. 14 A. Thank you, my Lord. Yes, the Council should have 15 satisfied itself either internally or externally with an 16 independent legal view before granting the contract. 17 MR MACKENZIE: Just one other point, please, on page 2 of 18 this document, if I may. 19 The very bottom of the page, Mr Smith stated: 20 "Please also note that Members only have a small 21 knowledge of the above so the info should be treated 22 with caution." 23 Over time, over the course of 2010, did you have any 24 views on whether members only had a small knowledge of 25 these matters? 30 1 A. It's impossible for me to talk to the knowledge of the 2 members. If I take one example, which maybe helps 3 answer your question, this was not a fixed price 4 contract, yet the members felt it was. So if that's 5 an indication, then maybe the members did not have full 6 knowledge of the arrangement that they were entering 7 into. 8 Q. When did you first come to the view this wasn't a fixed 9 price contract? 10 A. When I read Part 4 of the Schedule. 11 Q. Thank you. 12 CHAIR OF THE INQUIRY: I think you said it was patently 13 obvious when you read Part 4. 14 A. I think I did say that earlier, my Lord, yes. 15 MR MACKENZIE: We will come to back to that very shortly, 16 Mr Maclean. 17 Could I, please, then go to page 6 of your 18 statement. Paragraph 26. This refers to an email that 19 you sent on 21 January 2010. You advised you had no 20 comments to make on a draft document: 21 "... other than to say that it still feels as though 22 we are being too reactive. I would like us to get much 23 more proactive around this if at all possible." 24 Can you explain your view there? I appreciate you 25 weren't involved in the day-to-day matter with trams, 31 1 but you're advising on one aspect here. 2 A. Sorry, I can't recollect what the note or the email was, 3 but there was -- I had a general feeling again. It was 4 more intuitive than it was well informed, and it came 5 from people like Nick Smith and Alan Coyle, and it just 6 came from a feeling as to how the organisation was run 7 and a feeling about how the tram project was being dealt 8 with, and it felt like tie had complete control of what 9 was going on here and the Council was too removed, and 10 I wanted to -- I wanted to understand, I wanted the 11 Council to understand better what was going on as 12 opposed to taking it at face value, what was being said 13 by tie. 14 Q. Thank you. We should perhaps just go to the email to 15 remind ourselves of that. The number is CEC00473835. 16 Page 2, I think. There's an email from Alan Coyle 17 stating: 18 "Following this afternoon's meeting, please find the 19 attached document which answers the points raised by 20 Richard's email earlier in the week. Alastair, if you 21 have any comments, can you please give me them so I can 22 get this off to RJ at the earliest opportunity." 23 Back to page 1, please. We don't have the 24 attachment here. It seems to be something in relation 25 to tram options. We see the middle of the page, the 32 1 second half of the page, your email of 21 January 2010. 2 You mention the need to get much more proactive around 3 this, and on top of the page, I think it might help us, 4 the top of the page, an email from yourself, again dated 5 22 January 2010, referring in turn to an email by 6 Alan Coyle of 21 January, saying: 7 "Donald and Dave ..." 8 So that must be Donald McGougan and David Anderson: 9 "... have endorsed the intention to seek an 10 independent legal view of the 'contractual outs' within 11 the contract. This will be put to Richard on Tuesday. 12 I would then say we progress this with haste. 13 Regarding your comment to be more proactive, 14 I actually agree. There must be a parallel process here 15 where the Council are doing their own thinking rather 16 than waiting on a briefing from tie." 17 I take it you agree with the points made by Mr Coyle 18 there? 19 A. Yes, I do. 20 Q. I think, just for completeness, I think the reference to 21 seeking an independent legal view of the contractual 22 outs, I think that was the Council independently 23 instructing, I think Shepherd & Wedderburn perhaps 24 around that time; is that correct? 25 A. No, I think it was Dundas & Wilson. 33 1 Q. I think you also say in your statement you weren't 2 involved in that at the time? 3 A. Correct. Nick Smith came to me looking for advice and 4 assistance, and I had concerns which I think are fairly 5 well-documented and articulated, and my advice to him 6 was: if you have concerns, then go and get the expertise 7 you need; and we had a conversation around -- it might 8 have been a bit later than this. We had a conversation 9 around which law firm in Scotland was not conflicted. 10 There weren't many left. 11 And Nick did that, but it triggered an intuitive 12 feeling I had from a meeting, I think in December or 13 January, which we may come to, with Richard Jeffrey and 14 his -- and tie's legal advisers, where they came more to 15 put a name to a face and a catch-up, and I asked him at 16 that point in time, more as a glib comment, around: is 17 there the ability to just walk away from this contract 18 voluntarily? And no one could answer the question. So 19 I -- at the time I had a -- I had an intuitive feel that 20 that wasn't a good response. 21 So then when Nick came to me maybe some weeks later, 22 saying he wants some help, and he needed to understand 23 the termination provisions; my natural response to him 24 was: get the help you need, off you go, get the 25 experience, please. 34 1 Q. Thank you. If we could then go to the meeting you 2 mentioned and back to your statement, please. Back to 3 your statement at page 6, if we may. 4 Paragraph 26, towards the bottom of the page, you 5 say: 6 "I think a meeting had taken place, that I referred 7 to earlier, between myself, Richard Jeffrey, 8 Andrew Fitchie and Brandon Nolan. I remember that 9 Richard Jeffrey and Andrew Fitchie singularly failed to 10 answer basic questions I had around the termination 11 provisions of the contract. That really did not impress 12 me at all. In my opinion it displayed a degree of 13 arrogance to the Council, as parent and financial 14 guarantor, in a way that took me aback. As a result of 15 that, I think it's probably still at this stage more gut 16 feeling than informed judgments, it seemed clear to me 17 that the Council needed to take its own advice." 18 Also I think -- 19 CHAIR OF THE INQUIRY: Can I ask, who was Brandon Nolan 20 acting for at that time? Why was he at the meeting? 21 A. So there were two sets of lawyers that tie had 22 instructed at that point in time. It's probably fair to 23 say I didn't understand why Brandon was at that meeting. 24 My understanding was that Richard Jeffrey had instructed 25 DLA and Andrew Jeffrey was with DLA. 35 1 I subsequently found out, and came to know well, 2 that Brandon Nolan had been instructed by tie around the 3 adjudications. So they obviously brought along both of 4 their lawyers to say hello. 5 The question I was asking about termination was 6 directed to the law firm advising on the contract, which 7 was DLA and Mr Fitchie. 8 MR MACKENZIE: Thank you. Also, at page 7 of your 9 statement, please, in paragraph 27, you say: 10 "I was concerned by what was referred to by senior 11 officers of the Council as the 'one family approach' ie 12 TIE and CEC had similar rights all the way through. 13 That didn't feel right. I felt that we needed to find 14 out our own view on what the termination provisions 15 said." 16 What did you understand was meant by the "one family 17 approach"? 18 A. That tie's and CEC's interests were fully aligned, and 19 that there was no need for Edinburgh Council to man-mark 20 tie, and that tie were getting on with matters, with all 21 the relevant expertise, and Edinburgh Council should not 22 deviate from that. 23 Q. Did you consider there were any matters in respect of 24 which the Council and tie's interests were not fully 25 aligned? 36 1 A. Forgive me, I'm not quite sure the time period we are 2 talking about here, but if this is back in January, 3 February, March 2010, I'm not sure that I had a full 4 indication about the lack of alignment, but I was 5 certainly hearing messages that suggested there was 6 a lack of alignment, and there was an intuitive feel. 7 I just didn't like, as I say, that meeting that we 8 mentioned earlier, didn't impress me. It felt like 9 there was a rigidity in tie's approach. And it felt 10 like there was a lack of inquisition from the Council. 11 So intuitively that didn't feel comfortable -- I'm 12 happy to succeed or fail by my own knowledge and 13 information, but I generally don't like and I don't like 14 other people doing it, I don't like having to fully rely 15 on others, and this felt like it was full reliance on 16 others without understanding what was going on. 17 Q. Presumably, if you as a solicitor are providing advice 18 on something to your client, it's self-evident you have 19 to understand the issues in order to provide the advice 20 and the advice has to come from you, it has to be your 21 advice, and not just you accepting somebody else's 22 advice? 23 A. So I'm unclear at that point in time, before the extent 24 to which Edinburgh Council felt that it really had 25 a right to be overseeing or questioning tie's approach. 37 1 Q. I think this perhaps ties into something else on page 9 2 of your statement, please. In paragraph 34, you state: 3 "As it pre-dated my arrival at the Council by 4 a couple of years, I wasn't involved in any way with the 5 drafting of the INFRACO contract or, in particular, the 6 Schedule 4 Pricing Assumptions section. As it happens, 7 I did later ask for Schedule 4 and experienced 8 resistance in getting it from tie. Did I see the 9 INFRACO contract at any time? Certainly, yes." 10 Now, this question of you asking for Schedule 4 and 11 experiencing resistance, resistance from whom? 12 A. Almost everyone. You know, it was a straightforward 13 question: can I please see the contract? And at that 14 point in time, again, it wasn't my formal role. It was 15 me being nosey and intervening and so on. There was 16 definitely a feeling of stepping on toes, and I -- from 17 whoever I asked at the time, and there were many and 18 multiple people, I did not see that contract, and wasn't 19 given it. 20 Q. Can you name any names of individuals in tie who 21 resisted giving you the contract? 22 A. I certainly asked in that meeting I mentioned in 23 December/January for a copy of the contract. It was 24 copies there that people were reading. 25 To be fair, it was a long contract, but 38 1 nevertheless ... 2 And I asked, if you like, back at base from within 3 the team. At the time, to be fair, I didn't read that 4 as being what I think I now know it was. I didn't read 5 that as being awkwardness. I think I read it more as 6 ineptitude or bad administration or in getting the 7 information out to people. 8 CHAIR OF THE INQUIRY: I'm not clear who you're speaking 9 about, Mr Maclean. Are you speaking about people in tie 10 or are you speaking about people in the legal department 11 of the Council? 12 A. So I asked people in tie, as I say, and I asked 13 internally in the legal department as well for a copy of 14 this, and it seemed to be very hard to get hold of that 15 contract. To be fair, I wasn't banging the drum and 16 saying: I must have, I must have; but I was asking 17 politely a few times for the contract, and didn't get 18 it. But it was more, as I say, I think, down to people 19 not getting round to it or not being able to easily put 20 their hand on it. The issue, internal legal department, 21 I possibly would have expected to be able to get a copy 22 of the contract fairly easily, just: there it is, in the 23 cupboard. In tie, in fairness, they, looking back at 24 it, may have had their hands full. 25 But yes, it was -- there was a dilatoriness, maybe, 39 1 better than resistance in getting -- 2 CHAIR OF THE INQUIRY: How did you eventually get it? Was 3 there a copy in the Council's possession? 4 A. I definitely got it in the Council, latterly, yes. So 5 there must have been a copy in the Council. That's why 6 I say dilatoriness. I don't want to sound evasive. I 7 can't remember. I remember I asked several times from 8 people and just didn't get a copy. 9 MR MACKENZIE: So in short, there was a copy of the contract 10 with the Council, and if you had insisted, presumably, 11 you could have seen it whenever you wanted? 12 A. That's probably a fair assumption from the best of my 13 recollection, yes. 14 Q. Do you remember approximately when you first did see the 15 contract, and in particular Schedule 4? 16 A. No. It would be -- the dates come together. It would 17 be round about the summer, August time. 18 Q. Again, can you just tell us, please, your views on your 19 initial reading of Schedule 4. 20 A. I was extremely concerned by the wording of Schedule 4. 21 I have already said it was patently obvious there was 22 a problem there, and I can summarise in my mind what it 23 said, and it said something like: all parties accept at 24 the time of entering into this contract, this contract 25 has been based upon a set of pricing assumptions. It 40 1 was almost as clear as this: all parties accept those 2 pricing assumptions are wrong at the date of signing 3 this contract. 4 It didn't quite say this, but it made it quite 5 clear, all parties accept that immediately after signing 6 the contract, there will be a claim because those 7 pricing assumptions are not correct. 8 I have rarely seen a contract that parties 9 acknowledge that you sign up to something and then find 10 openly admitting there will be a claim. 11 This was from that one clause alone a very clear 12 open-ended or certainly worrisome clause that in my mind 13 meant it wasn't fixed price. 14 Q. You came to that view, Mr Maclean, without any 15 background or experience in construction of contracts; 16 is that correct? 17 A. That's correct. 18 Q. So really any lawyer reading that could come to that 19 conclusion? I'm sorry. Do you agree with that? 20 A. I think, if any lawyer read that wording, they would 21 come to that conclusion, yes. 22 Q. Now, you may also have read the evidence or seen the 23 evidence of Councillor Balfour. He gave evidence to the 24 Inquiry that you had advised him at one point that your 25 views on the contract were that the contract was mince. 41 1 Is that correct? 2 A. I don't remember that meeting, but I have to say that 3 wording does sound like me. 4 Q. I see. It may be stating an obvious, but what did you 5 mean by describing the contract as mince? 6 A. It was riddled with deficiencies. 7 Q. So not just Schedule 4? Other matters too? 8 A. Yes. 9 Q. Can you identify these main other deficiencies in your 10 opinion when you read it? 11 A. The first one was that the letting of the allegedly 12 fixed price contract with -- without there being 13 a completed design was a big issue. 14 The second one was that the design provider -- 15 I have forgotten the name -- had then been novated into 16 the consortium contract. So effectively you were having 17 the designer and the contractor on the same team. 18 The third was the pricing assumptions were, as we 19 know from the adjudications, vague, with contradictions 20 in the first one, paragraph 34.1 I think it was. 21 The next issue, from memory, was that Clause 80, it 22 appeared that you could not -- tie, the contracting 23 party, could not force the contractor to carry on with 24 the works. And they could down tools. I think that's 25 probably enough for getting on with. There were 42 1 a number of problems that leapt out. 2 Q. You mentioned the question of design, SDS novation, 3 having the designer and contractor on the same team, 4 what concerns did that cause you? 5 A. So just in a very straightforward manner, and I am no 6 construction expert and certainly no expert on light 7 rail tram infrastructure, but if you go into a contract 8 with a pricing assumption, the design won't change, and 9 then you find the design does change, there felt to me 10 like there was a bit of conflict of interest there, that 11 the very party that could change the design also was 12 able to benefit from an increase in price. 13 Q. Thank you. I would like, please, to move on to emails 14 in August 2010. If you go, please, to CEC00098050. We 15 can see, at the bottom of the page, an email from 16 Nick Smith sent on 27 August 2010 to Richard Jeffrey in 17 tie, copied in to yourself and other officers in the 18 Council, subject: meeting follow-up. 19 Mr Smith sets out: 20 "Richard, Further to the meeting yesterday, 21 I thought I would set out my views on what CEC currently 22 requires to inform the ongoing decision-making process. 23 Please note that it is sent subject to Dave and Donald's 24 comments, as neither have had a chance to review these 25 points as yet ..." 43 1 A number of points are set out. Could we then go 2 back to page 1 of this document. We see at the top of 3 page 1 is an email from Richard Jeffrey dated 4 30 August 2010 to Andrew Fitchie of DLA Piper, 5 Steven Bell of tie, Stewart McGarrity of tie and 6 Susan Clark of tie. 7 Mr Fitchie sets out, towards the top of this email 8 did. 9 CHAIR OF THE INQUIRY: Mr Jeffrey. 10 MR MACKENZIE: I'm sorry. Mr Jeffrey sets out at the top of 11 this email: 12 "I have explained to Dave Anderson that I consider 13 this e-mail unhelpful and symptomatic of the CEC input 14 lacking focus. I am seeing Dave to discuss this on 15 Wednesday." 16 Do you have any comments, Mr Maclean, on these 17 emails? 18 A. Yes, I do. Maybe two. 19 The first one is that the email sent by Nick was 20 certainly sent with my acceptance, if not my request. 21 It was done with my knowledge. And I was very happy for 22 that email to go. They seemed to me to be perfectly 23 sensible questions to be asking. But I accept that was 24 maybe a change in approach that tie maybe to date 25 weren't used to. 44 1 The second was the response from tie, which if I'm 2 polite and positive, I would say suggested that they 3 were under pressure and feeling busy; if I'm being more 4 accurate, it was sign of ongoing resentment by tie of 5 any interference by the Council, and they did not like 6 being scrutinised or having any oversight. 7 Q. Now, in his evidence, Mr Smith spoke to a complaint 8 having been made about him around this time by a senior 9 member of tie to one of the Council Directors, which 10 resulted in you being asked to speak to Mr Smith about 11 this complaint. Do you recall that? 12 A. Yes, I do. 13 Q. What is your recollection of what happened? 14 A. So I can't recall exactly which director, and I'm afraid 15 that does sound evasive, and I don't mean it to. 16 I genuinely can't. It would either be Tom Aitchison or 17 Dave Anderson or Donald McGougan. 18 I remember where it took place, and I remember being 19 unsurprised that, if you like, there was push-back from 20 tie in response to these questions. We probably 21 expected there to be push-back at that point in time. 22 I was asked to make Nick be more pragmatic. And I had 23 a conversation with Nick and asked him to carry on. 24 Q. I think we didn't pick up in the [draft] transcript, at 25 least in our first pass, the names of the Council 45 1 Directors. I think you said it would either be, and you 2 named -- 3 A. It would either be the Chief Executive, Tom Aitchison, 4 or the Director of City Development, Dave Anderson, or 5 the Director of Finance, Donald McGougan. 6 Q. Thank you. When one of these Directors asked you to 7 speak to Mr Smith about this complaint, did you say to 8 the Directors words to the effect: Mr Smith is perfectly 9 entitled and correct to make these points and he's doing 10 it with my approval and backing. 11 A. I can't remember if I -- I would imagine I would have 12 said something like: what a surprise that tie is pushing 13 back, I'm happy Nick asked those questions, but I'll 14 have a conversation with Nick; I would imagine, but 15 I genuinely can't remember the detail of that 16 conversation. 17 Q. It may be suggested that the message should have been 18 put back by the Council to tie: you are a Council-owned 19 and funded company and the Council is not only entitled 20 to ask questions of tie that it wants to, but it's under 21 a duty, it's necessary to protect the Council's 22 interests. 23 A. No, that -- in a perfect world, yes, and I absolutely 24 agree with the question you've asked there and the facts 25 behind it. But that was not the Council's approach at 46 1 that point in time, and that approach needed to be 2 changed and persuaded and influenced towards being or 3 having greater scrutiny of tie. 4 Q. Yes. And presumably in terms of seniority, you were 5 presumably beneath the Directors of Finance and City 6 Development and Chief Executive in terms of seniority 7 within the Council; is that correct? 8 A. It was correct, yes. Having said that, this was about 9 trying to help the Council get to a place that scrutiny 10 could be applied and a different approach could be 11 taken, and we were -- in my mind we were working towards 12 that on that track. I needed the evidence base to get 13 there, to help change an approach, and it would have 14 been counterproductive, and I also mean this with the 15 benefit of hindsight as well. It would have been 16 counterproductive to have gone in all guns blazing and 17 sought to overnight change the approach. 18 Q. Why? 19 A. It wouldn't have got the result we wanted. 20 Q. Now, page 16 of your statement. In paragraph 51, and in 21 the bottom half of this paragraph, you say: 22 "Richard Jeffrey's comment ..." 23 This email we just looked at: 24 "... was indicative of a wider problem in the 25 working relationship between CEC and TIE." 47 1 And reference to Tom Aitchison being very keen on 2 the one family view: 3 "This essentially appeared to mean that there could 4 be no difference in position between CEC and TIE. This 5 stance wrongly assumed that TIE's and CEC's interests 6 were necessarily aligned. There was also a feeling that 7 there should be the appearance of little or no challenge 8 by CEC. Around about then, it was becoming abundantly 9 clear that TIE were failing and that they were resenting 10 and resisting CEC's involvement. It was also becoming 11 clear that CEC's supervision was not adequate and that 12 legitimate concerns were being and had been ignored. 13 The more interest that I or others began to show, the 14 greater the irritation and push-back from TIE. TIE 15 perceived CEC's interest as unhelpful or unwarranted. 16 They maybe even thought of it as a lack of trust from 17 the Council. That was certainly developing around 18 September to December 2010. At that stage it was 19 becoming clear that TIE's approach was failing." 20 I think that perhaps sums up your views around this 21 time; is that correct? 22 A. Yes, that's -- that sums it up. 23 Q. We should, I think, then go on to the question of 24 adjudications. I think the adjudication results were 25 one of the things that influenced and formed the views 48 1 you reached around that time; is that correct? 2 A. Yes. 3 Q. I think I won't go to them, but in your statement you 4 say, I think, you did not see nor seek the adjudication 5 results that came out in November 2009 and January 2010. 6 I think you also say that at the time, you didn't see 7 the adjudication results in May, June and July 2010. 8 But I assume there came a point where you did sit down 9 and look at the adjudication results; is that correct? 10 A. Most certainly I looked at all the adjudication results 11 later. 12 Q. Yes. 13 A. I think the first adjudication result I read was 14 Lord Dervaird's adjudication on the Murrayfield 15 underpass, Clause 80, which would have been around about 16 August/September 2010. 17 Q. What views did you form on the adjudication results when 18 you did sit down to read them? 19 A. They were confirming my view that tie's strategy and 20 approach was wrong, and confirming my fears about Part 4 21 of the Infraco contract, and they, as I said earlier, on 22 a number of matters then led me to believe that the 23 situation was substantially more dire than I had 24 previously understood to be the case, and that the 25 Council needed to be more involved. But my view 49 1 generally on adjudications was that it was not a good 2 picture. 3 Q. If you could please look at page 12 of your statement, 4 remaining on this point. Towards the top of the page, 5 about six lines down, the sentence: 6 "My first involvement, as I said earlier, in 7 relation to the adjudications was around 8 August/September 2010 at the Tram IPG." 9 Just to pause there, I think you attended the Tram 10 IPG from June 2010. Does that assist in when you first 11 read the adjudication, as would it have been closer to 12 June 2010 or was it closer to the August/September 2010? 13 A. No, I read the adjudication -- the first adjudication 14 I read was when Lord Dervaird produced his Murrayfield 15 decision. So we can date it to then. As I say, I think 16 that was around about August/September. 17 The relevance of this bit was that there was a Tram 18 IPG, which until recently I would have said was my first 19 one, so apologies, and I remember that -- and there will 20 be notes on it. But I remember hearing in the IPG 21 different messages about how the adjudications were 22 going. Again, it took me aback because I was also, like 23 most other people in Edinburgh at the time, reading the 24 local press and I was hearing a very different side of 25 the story in the local press and I couldn't put the two 50 1 different messages together. 2 Q. So what was the discussion within the IPG of how the 3 adjudications were going? 4 A. From memory, it was a message that was fed in from tie. 5 So it was Edinburgh Council people there, but they'd got 6 the message from people in tie, that some were being won 7 and some were being lost, and it sounded like it was 8 broadly equal. 9 Q. In your statement you also say: 10 "It was patently obvious and not a message that was 11 being well received that the adjudications were not in 12 TIE's favour. This was contrary to what CEC had been 13 led to believe by tie about their prospects of success 14 in the adjudications." 15 The question of it being patently obvious and not 16 a message that was being well received that the 17 adjudications were not in tie's favour, can you explain 18 that part? Not a message that was being well received. 19 Not well received by whom? 20 A. So I think that's conflated into the August/September 21 Tram IPG. It was later that we then got into the 22 adjudications and understood what they were telling us. 23 And I think there was disbelief amongst senior 24 management in the Council at the time. There was 25 possibly also a bit of fear. But there was disbelief. 51 1 My take on it was in their minds, this strategy was 2 going to work, that the experts were on it, the 3 adjudications would go well. Then they heard, well, 4 it's maybe on balance, and then they're hearing 5 a message that we're losing these. These are not going 6 well. tie is not winning these, and there was almost 7 a period of trying to reappraise or get people to change 8 their mind-set around it. 9 So I'm not suggesting there that people were 10 refusing to hear it. I'm suggesting there that they had 11 difficulty hearing a different message. 12 Q. Thank you. We should then look to the report to Council 13 on 24 June 2010 by the Directors of City Development and 14 Finance. The document reference is CEC02083184. 15 There are two passages which deal with the 16 adjudication decisions. Firstly, on page 2, please, 17 paragraph 2.6, it states: 18 "Although the formal adjudications under the DRP 19 have produced mixed results, the advice received has 20 reinforced tie's interpretation of the contractual 21 position on the key matters under dispute and has also 22 saved circa GBP11 million from the initial claims 23 submitted by BSC." 24 Now, you in your statement say that no advice was 25 sought from you in relation to this report; is that 52 1 correct? 2 A. That's correct. 3 Q. If you had been asked to advise on this report with this 4 wording, what would your advice have been? 5 A. So I think you said this was June. 6 Q. Yes? 7 A. So I might not have known if that was correct or not 8 correct in June, because, as I said earlier, it was 9 probably more towards August that I saw the full colour 10 of the adjudications. 11 But looking back on it, in August/September, I would 12 absolutely known that that information was incorrect. 13 Q. Presumably, if you had been asked at this time, and 14 I think reports went to Council a week before the 15 reports were made available to members, so there would 16 have been approximately an initial draft early/mid-June, 17 if you had been asked for your views at the time, might 18 you perhaps have referred to Jim Inch's letter to 19 Ms Lindsay and said: ask Ms Lindsay for her view, she's 20 dealing with this. 21 A. I don't know. I would assume the way Council reports 22 are written, they are written by or on behalf of the 23 relevant director. I'm guessing that would be -- 24 I think they had joint directors on this type of thing. 25 So it probably would have been Dave Anderson and 53 1 Donald McGougan, and I'm assuming that they would have 2 pulled the relevant people together. So I would assume 3 that Gill Lindsay and maybe Nick Smith or others would 4 have assisted with that. 5 That's what I would have assumed at the time. I now 6 know or subsequently found out that a lot of -- very 7 often information would be asked of tie and that would 8 just find its way into Council reports. 9 So would I have been able at that point in time, in 10 June, to have corrected that statement? I suspect not. 11 Had it been a few months later, yes. 12 Q. So if you had been asked to give advice on this report 13 at that time, would you have said: I'm sorry, I have not 14 been sufficiently involved in the tram project to date 15 to be able to advise on this. 16 A. I don't know. I don't know. 17 Q. Just for completeness, at page 5, in paragraph 3.12, 18 page 5, we see the final sentence: 19 "The outcome of the DRPs, in terms of legal 20 principles, remains finely balanced and subject to 21 debate between the parties." 22 That is what members are being told about the 23 decisions. There's another document to go to, my Lord. 24 CHAIR OF THE INQUIRY: This might be a convenient point to 25 break, but before that, could I ask you, Mr Maclean, 54 1 you've been referred to the report to Council which 2 mentioned the outcome of the adjudications. When did 3 you -- how did you get access to the results of the 4 adjudications, the decisions? 5 A. I would imagine, but I could be putting words into the 6 person's mouth, I would imagine I would have gone to 7 Nick Smith and asked him to get me a copy. But again, 8 I can't recall and I know I did get access in August or 9 September and got copies that way. I would have found 10 it substantially easier to ask my own team for that 11 information than I would have to ask tie. 12 CHAIR OF THE INQUIRY: As far as you're aware, are you able 13 to say whether copies of these decisions were in the 14 possession of the Council's Legal Department? 15 A. I don't think I could swear to that. I think the answer 16 to that would be yes, but I don't think I have the 17 knowledge to answer that, my Lord. 18 CHAIR OF THE INQUIRY: We will break for 15 minutes and 19 begin again at 11.20. 20 (11.04 am) 21 (A short break) 22 (11.23 am) 23 CHAIR OF THE INQUIRY: You are still under oath, Mr Maclean. 24 MR MACKENZIE: Thank you, my Lord. Mr Maclean, sticking 25 with the adjudications, I would like now to look at 55 1 a letter sent by the consortium to members of the 2 Council on 13 October 2010, and the reference is 3 TIE00301406. If we go to the second last paragraph on 4 this page, the consortium state, in the last sentence in 5 this paragraph: 6 "In the interests of accuracy and transparency, if 7 tie will agree, we have no objection whatsoever to the 8 disclosure of all adjudication award texts to elected 9 members in order that you can make your own judgment." 10 Do you remember this letter, Mr Maclean? 11 A. Yes, I do. 12 Q. What were your views on that offer to make the 13 adjudication decisions available to elected members so 14 they could make their own judgments? 15 A. My views were that that was not an offer to be taken at 16 face value, and that it was a tactical ploy designed by 17 the consortium to generate maximum impact. 18 Q. What were your views on whether members should be given 19 access to the adjudication decisions so they could come 20 to their own views on them? 21 A. My views were very clear and, from memory, I went in 22 with an email to each of the political group leaders to 23 ask them to decline that polite request so that we could 24 make sure we could give the members at the appropriate 25 time better knowledge and information as to what was 56 1 going on. At the time, from memory, we had gone out -- 2 or were going out to Shepherd & Wedderburn and 3 Nicholas Dennys QC for a wider view as to what the legal 4 position was, from the Council's perspective, and that 5 this was coming at the wrong time and we needed a bit 6 longer to make up our minds. 7 My view was that rather than going in half-baked or, 8 if you like, losing control of the position, it would be 9 better to get our ducks in a row and to engage when it 10 was more successful and more effective. 11 Q. But this was the middle of October 2010. There had by 12 that time been a number of adjudication decisions. 13 Wasn't it about time that members were either given 14 proper advice on those decisions or at least could look 15 at the decisions for themselves? 16 A. So I cannot speak for exactly what information had been 17 imparted to the elected members, but this -- my view of 18 that letter was that the consortium had a very effective 19 media and comms machine, and that they had advice to 20 approach the members directly, and I have quite a strong 21 belief the elected members need to be given advice on 22 correct factual and legal information, and exposing the 23 adjudications to the members where they're not being 24 given the advice is wrong. 25 Q. Well, they had been advised, of course, in June 2010 57 1 report that the adjudications had produced mixed results 2 and that the overall outcome in terms of legal 3 principles remained finely balanced. So that was the 4 advice they had been given at that stage. 5 I think it's correct to say that members were not 6 given access to the adjudication decisions; is that 7 correct? 8 A. So I can't speak for the June report. I can speak for 9 my part in it and I'm happy to put my hand up for my 10 part in it, and I'm happy to say -- not happy to say, 11 rather, but I will say, that I gave the advice that it 12 would be better for the Council to get its ducks in 13 a row. We were on a path here, the legal team were, of 14 deep suspicion about tie, deep suspicion about the 15 adjudications, deep suspicion about the contract, and 16 rather than having this exposed to mayhem, I wanted the 17 Council to hold off and get the right information. 18 So I agree, they probably, by the looks of it, were 19 not given the right information at an earlier date, but 20 they were going to get the right information, but 21 I needed time to do that. 22 Q. When were the members given, if I can use the 23 expression, proper advice on the adjudication decisions? 24 You said you wanted time to get your ducks in a row. So 25 did there come a time when that happened and you were 58 1 then in a position to advise members on the adjudication 2 decisions? 3 A. No, matters were overtaken. We got our ducks in a row 4 after getting full QC advice and legal advice 5 externally, allied with our own internal views, and that 6 was taken to the senior management of the Council. 7 I mentioned earlier my meeting with the Leader of the 8 Council. That is a point where I would have expected 9 all the information to be made available, but matters 10 were overtaken politically by our desire to move towards 11 mediation. 12 Q. So there did come a point where you advised the leader 13 of the Council of your views on the adjudication 14 decisions; is that correct? 15 A. I think I advised the Leader of my general views on 16 where things were and what the prospects of success were 17 in tie pursuing termination against the consortium, 18 and I would have touched upon, in short, the 19 adjudications. 20 Q. When was that approximately? 21 A. I mention it in my statement, but that would have been 22 into November, I think. 23 Q. 2010? 24 A. 2010, yes. 25 Q. So were you aware -- I'm sorry. Let me start again. 59 1 With Mr Smith, we referred to a note he produced at 2 the very end of 2010, it was either in November 2010, 3 where he concluded that it was -- I think it was a -- 4 certainly a win or lose ratio that was very much in the 5 consortium's favour in relation to adjudication 6 decisions. 7 Did that reflect your view around that time of the 8 outcome of the adjudications, that the consortium had 9 won most of them? 10 A. I can't recall Mr Smith's note, but if you can direct me 11 towards it. But if I can try and answer the question, 12 I -- my feeling was the Infraco consortium were winning 13 most of the decisions in the adjudication. 14 Q. And were members ever advised of that? 15 A. I don't know. 16 Q. Did you have any responsibility for advising or briefing 17 members or was that done at a more senior level? 18 A. That was done at a more senior level. 19 Q. By the Directors and Chief Executive? 20 A. Correct. 21 Q. But presumably there were occasions when you sat in on 22 briefings or even meetings at the Council; is that 23 correct? 24 A. I think at that point in time in my career, I sat in 25 very few political briefings. Certainly when I saw the 60 1 Leader, that was almost unheard of. I sat in, as 2 I mentioned earlier, a couple of the briefings in the 3 group political briefing rooms. 4 No, I think I briefed the elected members rarely in 5 relation to trams, in fact rarely in relation to a lot 6 of matters. 7 Q. I understand. Now, you did mention your email to the 8 group leaders. If we could look at that, please. 9 CEC00012786. 10 CHAIR OF THE INQUIRY: While we are waiting for that, was 11 there ever an occasion when you were in a briefing of 12 the Conservative Group Leader with other senior 13 officials when you were going to say something and were 14 stopped from doing so? 15 A. That was not me, my Lord. 16 CHAIR OF THE INQUIRY: So that if Councillor Balfour 17 recollected that, he's wrong? 18 A. The individual Mr Balfour is referring to was 19 Dave Anderson who was stopped as he was about to speak 20 or something. It wasn't me. 21 MR MACKENZIE: Just to explore that a little, so 22 Councillor Balfour in his evidence said that you knew 23 that information that councillors were being given at 24 the time was inaccurate, but you felt unable to counter 25 that at the time because you were not a senior officer. 61 1 Is that correct? 2 A. I don't think that's entirely accurate. I'm not sure 3 when I said that to Mr Balfour. Looking back on it, 4 I now know, and if it was into end of -- if it was into 5 2011/2012, that comment, looking back on it, I knew that 6 information was inaccurate that was given to members. 7 At the time, did I know any information given to 8 elected members in briefings that I was in was 9 inaccurate? No, with the exception of that one meeting 10 where senior tie executives talked about a cast-iron 11 right to terminate. But I don't think I sat in any 12 briefings where I heard falsehoods being told to elected 13 members. 14 CHAIR OF THE INQUIRY: Can I just clarify your answer to me. 15 You said it was Mr Dave Anderson, the Director of City 16 Development, who was stopped from speaking at that 17 briefing. Were you present at that? 18 A. I was present at a briefing. I think it was the 19 Conservative Group meeting. And Donald Anderson, the 20 Finance Director was there. I was there. I think it 21 was also Richard Jeffrey. I think people around about 22 October were doing briefings of various groups, and 23 Dave Anderson did go to speak, and Donald McGougan put 24 his hand across to stop Mr Anderson speaking. If I can 25 try and expand on that, I'm not convinced, I do 62 1 genuinely mean this, I'm not convinced that was to stop 2 Dave Anderson saying something that would have been 3 inconvenient. Sometimes Mr Anderson has a tendency to 4 speak a lot, and the impression I got at the time was 5 Mr McGougan was just trying to keep people to the point. 6 MR MACKENZIE: Let me explore that with those two 7 individuals. Do you remember approximately when that 8 meeting was? 9 A. I would imagine it was -- I would imagine it was around 10 about October 2010. tie were ramping up towards 11 termination and, from recollection, I think people 12 thought termination might be happening in the October 13 Council meeting. And these were briefings around that, 14 I think. 15 Q. Just for completeness, when Councillor Balfour said in 16 his evidence to the Inquiry that you had challenged 17 senior officers in relation to the information that 18 members were being given at the time and was told to 19 shut up and that wasn't your role, you say he's simply 20 mistaken about that? 21 A. So I have heard about this and I have been racking my 22 brains over the last few days or weeks. I never 23 remember being told to shut up. I certainly remember 24 resistance towards an acceptance of what I was saying or 25 the position. But I was never expressly told to shut 63 1 up. Impliedly, possibly, but expressly not. 2 Q. If you had concerns that from a legal perspective that 3 members were being given inaccurate briefings or 4 information, what would you have done? 5 A. What I would have done and what I did do are possibly 6 two different things, but what I would have done is 7 I would have mentioned that to the relevant person 8 giving that information, and I would have mentioned that 9 to my superior, to Jim Inch, the Director of Corporate 10 Services. 11 What I did do, because I was concerned about the 12 position and those giving the briefings maybe didn't 13 fully understand the position, so that those receiving 14 the information didn't fully understand the position, 15 was that the legal team took a period of time round 16 about September, October, into early November, to get 17 the right information, to consolidate its view, and then 18 to make it very, very clear what our position was. 19 In that time period of, let's say, six weeks, there 20 was -- there were a whole factor of matters, but 21 I wanted to go with a fully reasoned view and I felt the 22 need to get a very senior legal mind to support that 23 view for fear of not being listened to. 24 Q. Thank you. We will come back to that. I think there 25 was an instruction of Mr Dennys QC? 64 1 A. Yes. 2 Q. We will come back to that. 3 Now, I think we were looking at the document on 4 screen which I think is the second half of the page. 5 I think it's an email sent on behalf of yourself, the 6 second half, dated 13 October 2010 to the various group 7 leaders; is that correct? And copying in the other 8 senior officers. 9 A. Yes, that's correct. 10 Q. Thank you. We have read this before. But in the fourth 11 paragraph you say: 12 "Whilst it is a matter for tie, I do not consider it 13 to be wise for tie to agree to release the formal 14 adjudication decisions at this time." 15 This is in the context of an offer by the consortium 16 to release these decisions to members of the Council, 17 not the public at large, to members of the Council; is 18 that correct? 19 A. That's correct. 20 Q. And you've explained your position in that regard. 21 Sticking with the question of adjudications, go, 22 please, to what the Council were told in the report of 23 14 October 2010 by the Directors of City Development and 24 Finance, and the document reference is CEC02083124. 25 Please, at page 7, paragraph 2.50, if we just go to the 65 1 final sentence, we will see again the sentence we saw in 2 the June report, that the overall outcome of the DRPs in 3 terms of legal principles remains finely balanced and 4 subject to debate between the parties. 5 We can leave that document, because you cover this 6 point, back to your statement, please, at page 20. At 7 the bottom of the page in paragraph 59, three lines from 8 the bottom, you say: 9 "The draft I was given did not contain the wording 10 to which you refer in paragraph 2.50. In fact, to the 11 contrary, it was clear in that draft that we are 12 presently evaluating matters and that we would be 13 bringing a comprehensive view in December. I am aware 14 that the statement in paragraph 2.50 was TIE's view. 15 That wording was not in the draft that I was asked to 16 comment on. I did not agree with the statement in the 17 report that the overall outcome of the dispute 18 resolution process remained finely balanced. I most 19 certainly did not agree with that statement. That was 20 TIE's view. No advice was sought from me or given by me 21 on this matter." 22 So to pause there, Mr Maclean, what we appear to 23 have a situation is that a report has gone to Council 24 containing a legal opinion or advice in relation to the 25 outcome of the DRPs, despite the head of law 66 1 administration having disagreed with that statement, if 2 you had seen it at the time; is that correct? 3 A. That's correct. 4 Q. How can such a situation have arisen? 5 A. So I was pretty angry about this. I -- 6 CHAIR OF THE INQUIRY: When did you become aware of it? 7 A. In the Council meeting. 8 CHAIR OF THE INQUIRY: Sorry? 9 A. In the Council meeting. I -- and I remember at the time 10 looking through my various emails and documents, 11 and I saw draft 1 or draft 2 of that report, and I gave 12 my comments on it and that clause wasn't there. 13 And in fairness, it's hard to -- it's easy to 14 believe that people are sneaking things in, but actually 15 I understand how it happens. I'm guessing Dave Anderson 16 and his team were compiling views on a report from 17 multiple sources. I'm guessing that a view on these 18 adjudications was taken from tie and simply lifted into 19 the report and there was no final sign-off or checking 20 of points that were changed in subsequent drafts. 21 As I say, I saw draft 1, draft 2. That was not 22 there. I fundamentally disagree with that wording. 23 MR MACKENZIE: Did you consider then that statement to be 24 inaccurate. 25 A. Yes, I did. 67 1 Q. Did you consider it to be misleading? 2 A. I don't know. I think probably yes, with the benefit of 3 hindsight, but I can see alternative arguments. 4 People's definition of what was successful in 5 adjudication and what was unsuccessful were different. 6 That sounds pretty basic to me. You just need to look 7 at how the adjudication costs were divided and you 8 generally know, but my view was you win or lose based 9 upon the argument you are putting forward. If you argue 10 something and find that the principle is lost, that's 11 a loss. 12 I think tie -- and I understand looking back, tie 13 sometimes felt if they argued something, even if they 14 lost the principle but they managed to save some money 15 on the claim or the award, then that was a win. 16 So people were playing, I think, with what was a win 17 or what was a loss. 18 My view is that -- I have said it already in 19 evidence -- that the adjudications were generally 20 favouring Infraco and my view was and is that this 21 statement is incorrect. 22 Q. The question of trying to accentuate the positives, is 23 that essentially spin? 24 A. That's what it felt like. 25 Q. Do you consider that reports to Council should include 68 1 any elements of spin? 2 A. No. I will stand back from it, and it's very clear in 3 the Council that directors are responsible for their 4 reports, and they are meant to present fair and neutral 5 positions as to the options, with then a recommendation 6 at the end, and elected members can accept, reject or 7 amend that view. 8 But they should be correct in their facts. 9 Q. Now, you mention, I think, becoming angry when you 10 became aware of this statement at the meeting. Did you 11 take any steps to correct what members had been told in 12 that regard? 13 A. No, I did not. 14 Q. Why not? 15 A. Two reasons. One, we were being worn down by that point 16 with our permanent battle of trying to make sure the 17 position was being correctly looked at. But we were 18 experiencing resistance repeatedly. 19 But secondly, I was trying to take a more strategic 20 or longer term view of not being side-tracked by the 21 hurdles on the way, but let's get to a full reasoned 22 view as to where we are. Let's get a legal advice. 23 Let's have our own view. Let's not dance to the new 24 crisis from tie or the new crisis from a Council report, 25 or the new crisis from anything else that was coming up. 69 1 Let's focus on getting our view and when we've got 2 a view, we will then have the full position insofar as 3 we can get it, because factual information was lacking. 4 We will then have a full view that we can actually go to 5 people and say: this is where we are. 6 So my view was: I don't want to be side-tracked and 7 I don't want the team to be side-tracked, I want the full 8 view and then we will take it to the right people. 9 Q. So I think the picture you are painting, Mr Maclean, is 10 of wanting time to fully understand the dispute in the 11 contract and all the issues in order then to be in 12 a position to properly advise the Council; is that 13 correct? 14 A. Yes, and, because I think by then I pretty much did 15 fully understand or was getting to fully understand the 16 position, it was also to get reinforcements. 17 Q. I see. So you had come to your own initial views, but 18 you considered you needed reinforcement to back up those 19 views? 20 A. I was coming to my views. Whether I'd actually 21 finalised them at that point, I think I was coming to -- 22 pretty finalised, but certainly needed reinforcement. 23 Q. Just for the avoidance of doubt, why did you consider 24 there was a need for reinforcement? 25 A. To date, people were not being listened to. To date, 70 1 the substantial louder voice in the park was tie. And 2 we disagreed with that view and got push-back on 3 a regular basis. The senior management were beginning 4 to change their view of the position, but probably still 5 believed the experts, if you like. The tie experts. 6 Possibly in fairness, I was relatively new in the 7 door and I was an unknown quantity. But this was 8 transition. This was a transitional time. 9 Q. Thank you. Just before we leave the question of the 10 advice to members, two final documents, please, if we 11 may. One is CEC00012827. 12 Now, if we could please go to the bottom of the 13 page, we can see it's an email from Councillor Barry 14 dated 18 October 2010. It's sent to Tom Aitchison, 15 stating: 16 "Dear Tom, I should be pleased if one of your staff 17 could give me some advice about the problematic contract 18 for trams and an understanding of the relationship 19 between the various parties." 20 There's then a list of queries, I'll just read out: 21 "What is the relationship between TIE/TEL/CEC/BSC? 22 Is there a contract between TIE and CEC?" 23 Over the page, please: 24 "BSC have written to us all and say that the risk 25 for any delay or unexpected thing lies with CEC, so what 71 1 is the contract we have with BSC and what is the 2 Council's exposure to delay, et cetera, risk and why is 3 this risk not with TIE alone?" 4 Then: 5 "Where can I view a copy of the contract with BSC? 6 Where can I view the results of arbitration? 7 I would hope you are able to supply this 8 information, but if you require an FOI request, please 9 treat this as such." 10 Then go back to page 1, please. I think in short, 11 Mr Aitchison forwards this to you. I think you then ask 12 one of your -- in the middle of the page, there's an 13 email from yourself dated 18 October 2010, to one of 14 your colleagues, Carol Campbell: 15 "Could you help me out on this please as I am 16 beginning to drown." 17 What's the reference to "beginning to drown" at this 18 stage? 19 A. I was busy with a number of matters running the 20 department, various other matters that were happening 21 legally at the time, and I was reading a lot of 22 information about trams and so on at that point in time, 23 and I had to delegate the matter of responding to this 24 particular councillor. 25 Q. If you see, for completeness, the top of the page, we 72 1 see the email from Carol Campbell, dated 19 October, to 2 yourself, draft reply to Councillor Barry attached. If 3 we can go to the reply, please, it's CEC00037338. 4 We can see this is a letter dated 21 October 2010. 5 It's sent from Tom Aitchison, Chief Executive, to 6 Councillor Barry, and then you can see, for example, 7 question 3, the response to that. It's stated: 8 "Tie is a party to the Infraco contract with BSC. 9 The Council is the financial guarantor of the project." 10 Over the page, because that in itself isn't perhaps 11 a very full response. We see that was in fact the 12 response to question 3. 13 Question 4, which was: What is the Council's 14 exposure to delay, et cetera, risk, and why is this risk 15 not with tie alone? The response is: 16 "As indicated above, the Council is financial 17 guarantor for tie. As you note, the aim is to be in 18 a position to report to the Council in December 2010 as 19 to the updated position and also to provide 20 recommendations on the way forward." 21 Then the other questions and responses. Question 6: 22 "Where can I view a copy of the contract with BSC; 23 where can I view the results of arbitration?" 24 Mr Aitchison states: 25 "The Infraco contract and the arbitration results 73 1 are subject to detailed confidentiality provisions. 2 Unfortunately, it will therefore not be possible for you 3 to view these." 4 So I think that's right, that councillors weren't 5 provided with the arbitration decisions; is that 6 correct? 7 A. That looks the case, yes. 8 Q. I think nor were they provided with the contract 9 including Schedule Part 4; is that correct? 10 A. Correct. 11 Q. Did you have any concerns around this time, Mr Maclean, 12 about whether members were being properly advised and 13 informed in relation to the dispute? 14 A. My view was that they probably had not been fully 15 advised and informed with correct advice in the past. 16 My view was they will get properly informed and advised 17 going forwards, but before I can do so, I need time. So 18 please hold off and you will get the full position. 19 CHAIR OF THE INQUIRY: I'm not sure if that's a direct 20 answer to the question. I think what was being asked 21 was: did you have any view as to whether they were being 22 properly advised; and, in particular, could I just 23 ask: was it correct to say that the Infraco contract was 24 subject to confidentiality, that the councillors 25 couldn't see that at that stage? It was signed. What's 74 1 the confidentiality point in relation to the contract? 2 A. So I understand the question, my Lord. I think there 3 was a sensitivity around all these questions coming in, 4 losing control of the message, and the message that 5 I and my team were trying to achieve was we wanted 6 people to hold off for a short time to get them the 7 correct information. 8 If we'd released all that information, then we would 9 just never -- we would have been drowned out and not 10 able to get to the substantive analysis. 11 CHAIR OF THE INQUIRY: Why not say that then: we want to 12 wait; I think you may have done that, Mr Aitchison may 13 have done that; as opposed to telling an untruth about 14 the contract? 15 A. I can't answer that, my Lord. My position remains that 16 this was about getting to the right position -- 17 CHAIR OF THE INQUIRY: I understand that, Mr Maclean, and 18 that's your position, but what concerns me is that this 19 councillor was being told something that wasn't true. 20 There was no confidentiality point about the contract, 21 was there? 22 A. So I think we can read into that in great detail. 23 I think in fairness, the arbitration results were 24 subject to confidentiality. But the consortium -- 25 CHAIR OF THE INQUIRY: I'm asking not about the adjudication 75 1 results. I'm asking about the Infraco contract. 2 A. No, I agree with that, and one would have assumed 3 actually that the members would have seen the Infraco 4 contract. But yes, with the benefit of hindsight, they 5 could have been given a copy of the Infraco contract. 6 CHAIR OF THE INQUIRY: But this councillor is asking for it 7 and he's being told he can't have it because of 8 confidentiality, which isn't true. What do you have to 9 say about that? 10 A. My Lord, there's nothing I can say about that. 11 CHAIR OF THE INQUIRY: Just following on from that, if the 12 report to Council that we've looked at contained 13 something you thought was inaccurate, and misleading, or 14 probably misleading, I think you said, and if 15 councillors had been told or a councillor has been told 16 that he can't have the contract because it's subject to 17 confidentiality, if these are false statements, does 18 that amount to maladministration? I ask that because of 19 your experience as Monitoring Officer. 20 A. So I think if -- in a Council report a falsehood is -- 21 a falsehood is put forward, that would be 22 maladministration because members weren't able to be 23 properly advised on taking a decision, definitely. 24 In fairness, I don't think the answer to the 25 question 6 is maladministration. It's incorrect. 76 1 I accept that. But I -- 2 CHAIR OF THE INQUIRY: What about the report? 3 A. The October report? 4 CHAIR OF THE INQUIRY: Yes. 5 A. Yes, so that's what I was referring to, my Lord. 6 There's patently an incorrect factual statement in 7 there. 8 CHAIR OF THE INQUIRY: Amounting in your view to 9 maladministration? 10 A. Yes. 11 MR MACKENZIE: Thank you. 12 Mr Maclean, you said that members had probably not 13 been properly advised in the past, but your view was 14 that they would get proper advice after you had looked 15 into all these matters. 16 Now, you also mentioned earlier various problems you 17 saw in Schedule 4 when you read it, that it was obvious 18 it wasn't a fixed price contract, that there were other 19 defects or problems with the contract, and in short, did 20 there come a point where members were expressly told of 21 these matters, together with the risks these matters 22 created for the Council? 23 A. So we were leading up to coming to that point when all 24 the ducks were in the row, as I say, towards 25 November/middle of November. 77 1 Matters were completely overtaken by the desire to 2 move towards mediation, which was concerning. 3 The members, as we were amending the contract as 4 part of Settlement Agreements, were given many briefings 5 and data room briefings and confidential appendices and 6 so on, where they would have been aware of the issues 7 that had arisen. 8 But at that point in time, were they aware of these 9 issues? No, because, as I say, we were putting together 10 a picture that could be then taken to the appropriate 11 people. 12 So bad was that position that rather than responding 13 to any particular query or question that came in, it was 14 a matter that I took, as you know, to the 15 Chief Executive and to the Leader of the Council. 16 Q. Now, you say that there did come a point, I think, after 17 mediation, when members were aware or were told of the 18 various problems with the contract and the risks that 19 created in the Council; is that your position? 20 A. Yes. 21 Q. How were they told? I don't think we see reference to 22 these matters in the reports to Council in 2011. 23 I don't think so. Were they told in some other way? 24 A. So when I was at great pains, given, if you like, the 25 noise of members not having been informed in the past 78 1 that was being talked about, at great pains to point out 2 in two confidential appendices -- one went to the 3 May 2011 Council meeting and one went to the 4 October 2011 Council meeting -- to point out how what we 5 termed MoV4 and MoV5 was changing the contractual 6 position, how that was done. And how there were still 7 residual issues with that contract that could not be 8 cured as part of that mediation process. 9 So the members were given very fulsome briefings 10 around what MoV4 and MoV5 meant and how the Infraco 11 contract was being changed, and as I say, they were 12 provided information in data rooms, and they had 13 officers there in the room that they could ask questions 14 of at any point in time. 15 So I would say, and I am satisfied to say, that 16 members became aware of the issues when there was a much 17 more open and transparent form of communication in 2011. 18 Q. Also you had told Councillor Balfour the contract was 19 mince in your view. That was towards the end of 2010? 20 A. No, it wasn't. I was Director of Corporate Governance, 21 as I understand the evidence, and I became Director of 22 Corporate Governance in September 2011. 23 So my -- as I say, I can't remember the meeting, but 24 if I take the timings correct of what Mr Balfour says, 25 then I said that in my capacity as Director. It must 79 1 have been after September 2011. 2 Q. I understand. I would like to come back to 2011. I am 3 just trying to stick with the chronology, if I may. Can 4 we go to your statement at page 17. In paragraph 52, 5 this raises the question of remediable termination 6 notices that were served by tie around September 2010. 7 You say at the end -- in the middle of this paragraph, 8 you say: 9 "Given the complexity of the contract and the 10 factual matrix, I just could not form a view without 11 specialist external help. However, it was sufficiently 12 clear that there were significant concerns. We began to 13 instruct Shepherd & Wedderburn around about the end of 14 September/early October 2010. Until then, maybe with 15 the one exception (the advice from Dundas & Wilson) my 16 understanding is that the Council were relying broadly 17 on tie and their advisers to deal with the issue. Given 18 my concerns about the approach of TIE, DLA, and in some 19 cases CEC's management team and the Project Team, we 20 just felt it was absolutely necessary to seek external 21 legal advice for CEC." 22 Now, you mentioned there your concerns about in some 23 cases CEC's management team. What is that a reference 24 to? 25 A. Two things. Firstly, and primarily, and I have 80 1 mentioned it already in my evidence, that they were 2 struggling to see a different position. They'd been led 3 to believe that the contract was fine, that tie's 4 strategy was working and going well, that termination 5 was cast-iron, and then they were hearing probably an 6 increasing noise around how that was not the case. 7 I mentioned earlier that we felt we needed some 8 reinforcements or back-up. Trying to persuade 9 a management team that were trying to do their best -- 10 and they were trying to do their best there -- try to 11 persuade them that actually the position was somewhat 12 different from what they'd been led to believe was hard. 13 So I had concerns that they maybe weren't entirely 14 willing to listen to that version of events or of 15 version of advice, and I had concerns about their 16 approach and ability in relation to these matters. 17 Q. Do you remember ever showing the other directors 18 Schedule 4, in particular the clause you referred to 19 about pricing assumptions being based on certain facts 20 which the parties acknowledged not to be true? 21 A. I don't know if I ever actually showed them the clause, 22 but I would have mentioned -- I would have mentioned to 23 Dave Anderson: Dave, the contract is not good. 24 Q. Did they have any comments or response to that? 25 A. So I think David Anderson was getting increasingly 81 1 concerned, and to be fair, so was Donald McGougan. 2 I don't think they fully understood the extent of the 3 problem. As I say, it was a transitional period and it 4 took them time to get this there, and this was -- we can 5 look at each day and this week, but this cumulatively 6 was getting them to a place that they became aware of 7 the gravity of the situation. 8 Q. Thank you. Please over the page to page 18 of your 9 statement. In paragraph 54 you explain: 10 "In the second half of 2010, tie explored 11 terminating the INFRACO contract ... a special planning 12 forum (War Room) was established by TIE." 13 You sent an email on 13 October 2010 to 14 Donald McGougan stating that the special planning forum 15 was for the Council and not tie, and stated that: 16 "TIE should come along to help us where we need them 17 and not take control!" 18 You say: 19 "At this stage, it felt like TIE were hurtling down 20 a termination path and taking CEC with them. TIE, who 21 had all the information, were in control and CEC were 22 potentially taking a critical decision that was not 23 fully informed." 24 A few lines down, you say: 25 "I had quite serious concerns about the direction of 82 1 travel. I realised that I was in a very small minority 2 at that stage." 3 To pause there, was that again a reference to what 4 you've just described as the other members of the senior 5 team, who had accepted tie's advice up to this point? 6 A. Yes, it is. The small minority was pretty much me and 7 a few people in the legal team that were realising the 8 way things were, and struggling to get our voice heard. 9 Q. You go on to say: 10 "TIE were quite forceful in getting their own way 11 with CEC. My job was to try and protect CEC's position. 12 In my view, I thought we should get some independent 13 thinking to assess the information. If I look back on 14 it all now, this was a bit of a turning point. I didn't 15 realise at the time, but looking back, from that point 16 onward, the control of the project slowly started to 17 move away from TIE to CEC." 18 Just continuing this, please, then at page 22 of 19 your statement, paragraph 64, you say: 20 "Our own legal advice was being reported to CEC. At 21 this point we had had the adjudications [which we have 22 discussed] the Remediable Termination Notices, the 23 inability to get information and the push-back from 24 TIE." 25 You have mentioned the Remediable Termination 83 1 Notices. Just by way of overview, what was the issue or 2 difficulty with those notices? 3 A. There were two issues. One, to assess the validity or 4 otherwise and the ultimate success of termination in 5 court should tie go down that route and should the 6 Council approve it. Then you had to understand what the 7 facts were, and the Council did not have an 8 understanding of the factual position at that point in 9 time. 10 Most of the facts were understood by tie and the 11 Council were playing catch-up with little information and 12 certainly not information we felt we could rely on. 13 The second point was that the drafting of these 14 Remediable Termination Notices looked concerning. 15 Q. Do you know who drafted them? 16 A. No, I do not. 17 Q. Presumably it wouldn't have been tie in-house 18 presumably. It would have been based on legal advice? 19 A. I would be sure it was tie with legal advice. 20 Q. Yes. The top of page 23, you say: 21 "We had also had the briefing by TIE and others to 22 the Labour Group where everybody in the room was assured 23 by TIE that their QC had said that there was a cast-iron 24 right to terminate and win. I've never heard a QC ever 25 say something like that." 84 1 Just to pause there, what is your recollection of 2 this meeting? 3 A. Sorry, what was my recollection of the meeting? 4 Q. What was your recollection of this meeting? 5 A. I think it was a genuine intention by the senior 6 officers to explain to the politicians where things were 7 and how termination is the only option left. I think 8 that people believed that. 9 I think that from the Edinburgh Council side, people 10 did believe that termination would be successful, but, 11 as is often the case in political briefings, it was the 12 officers and I think tie were there, trying to persuade 13 the politicians that this was the right way to go. 14 Q. If we jump forward, please, to page 28, on the same 15 point, paragraph 73, halfway through it, you say: 16 "They were also present ..." 17 This is your concerns. Your concerns: 18 "... were also present earlier than that when 19 Richard Jeffrey assured the Labour Group that there was 20 a cast-iron right to terminate the contract. I think 21 that was on 12 October 2010." 22 Now, are you absolutely clear, Mr Maclean, that 23 Mr Jeffrey said that? 24 A. I am absolutely clear he either said cast-iron right or 25 guaranteed right to terminate the contract. 85 1 Q. Is there any possibility you're mistaken in your 2 recollection? 3 A. No. 4 Q. Just sticking with this point, could we then please look 5 at an email sent by Mr Jeffrey the following day, 6 13 October. The document reference is CEC00012737. Go 7 to page 2, please. We can see at the top of the page 8 this is an email from Richard Jeffrey, dated 9 13 October 2010, sent to various persons, including 10 yourself, commencing: 11 "There is much to be done over the next few weeks if 12 we are to be in a position to recommend termination of 13 the contract in late November/December." 14 Then if we can go, please, to page 5, and in 15 paragraph 1 at the top, the last sentence: 16 "We must, however, recognise that this issue may end 17 up being resolved in the courts, which is expensive, 18 lengthy and risky for all parties, and has no certainty 19 of outcome." 20 So on the face of it, Mr Maclean, it seems hard to 21 reconcile what Mr Jeffrey is saying in this email with 22 what you say he said at the meeting. 23 A. That's -- that's what he said at the meeting, and as 24 I say, I think there was an element of trying to give 25 comfort to the members that termination as the only 86 1 course left, would be successful. 2 Q. Did you take any steps to correct what members had been 3 told at the briefing? 4 A. Correct, no. To go away, get the evidence and the 5 back-up needed to present an alternative position, yes. 6 Q. But did you take any steps after this meeting on -- in 7 October, even to say to members something like: well, 8 hang on, I'm not sure if I agree with this advice; we 9 are doing this; the Council legal team is looking into 10 this in more detail and getting some external advice and 11 we will come back to brief you properly, but in the 12 meantime you should take what was said with a large 13 pinch of salt. 14 A. No, I can't remember the detail of that response, but 15 I would have said that -- because we were doing it, the 16 Council is looking into the position of termination and 17 will be able to recommend whether or not that would be 18 wise. 19 Q. Just to complete this point, at page 14 of your 20 statement in paragraph 47, you say: 21 "I did have concerns as to whether members of the 22 Council had been or were being kept fully informed in 23 relation to the tram project. Alarm bells were 24 beginning to ring around this time about member 25 involvement. The klaxon only really went off when I sat 87 1 in on some of the elected member briefings around about 2 October 2010. Coming out of one of those briefings, 3 I felt it necessary to instruct independent legal 4 advice. I ended up having to discuss my concerns 5 directly and confidentially with Jenny Dawe, the Leader 6 of the Council around that time (see document of my 7 meeting with Jenny)." 8 Just pause there. Do you still have that document 9 of your meeting with Ms Dawe? 10 A. Yes, they were paper handwritten notes and I provided 11 them to the Inquiry when I gave my statement. But yes, 12 I still have a copy of it. 13 Q. Thank you. 14 Now, when you say the klaxon only really went off 15 when you sat in some of the elected member briefings 16 around about October 2010, is this again a reference to 17 what we just discussed with the briefings, the 18 Labour Group in October? 19 A. Yes, it is. 20 Q. Was there only that one briefing or were there other 21 elected member briefings around that time that alarm 22 bells went off? 23 A. So there would have been two or three briefings. There 24 was a Labour one we have talked about. I think it was 25 a Labour one. But there was the Conservative one we 88 1 have mentioned. They are the only two I remember, but 2 logically, there must have been others, because you -- 3 generally all political groups get advised at the same 4 time. So there would have been an SNP one, certainly. 5 Q. Why did you feel it necessary to discuss matters with 6 Jenny Dawe? 7 A. So I think the evidence is conflated there. My concerns 8 with Jenny Dawe were discussed once I got the 9 Nicholas Dennys QC advice, and that came in some time in 10 November. 11 Q. What did you say to Jenny Dawe? 12 A. Now I wish I had my notes in front of me. It was 13 something like: I'm very concerned about the strategy 14 that tie are deploying. There was one particular week 15 that there were six options on the table, and they 16 changed from one strategy to another three or four 17 times. They had three or four different strategic 18 options in that one week. They were -- you have already 19 quoted it -- hurtling towards termination. 20 I didn't agree with that. I didn't agree with the 21 position that I had seen from the adjudications and the 22 contracts. I was concerned around the member 23 involvement, what members had been told, and I also told 24 her in high level terms what the advice was from 25 Nicholas Dennys QC. 89 1 Q. Just by way of overview, what was the advice from 2 Mr Dennys? 3 A. That termination was unlikely to succeed as it presently 4 was; that the Remediable Termination Notices were vague 5 and unspecific; that a much more sceptical position 6 should be adopted towards tie's project management to 7 date, which was suspicious; that the Council and tie 8 should seek to enforce the contract, not in the way that 9 tie were doing through attrition, but rather look for 10 things like design from the consortium; and if that 11 didn't yield results, and if future conversations around 12 amicably settling the matter didn't work, then to 13 position tie into a much stronger position where they 14 could correctly prove Infraco to be in breach. 15 Q. Now, at page 28, please, of your statement, just to 16 continue this, in paragraph 73, in the final sentence, 17 you state: 18 "In summary, by late 2010 I had lost confidence. 19 Senior management at CEC apparently had not." 20 Is that an explanation of why you discussed these 21 matters with Jenny Dawe directly, rather than through 22 senior management? 23 A. Yes, it is, and it's highly unusual and goes against 24 protocol, but it was the right thing to do. 25 Q. So just for the avoidance of doubt, protocol would be 90 1 for you to report upwards to those above you; is that 2 correct? The directors? 3 A. That's correct. 4 Q. But at this time you were so concerned about the project 5 that you decided you wouldn't do that and you would 6 report directly to the Leader of the Administration? 7 A. No. I did report up the line to the Chief Executive and 8 others. I think I copied a detailed note into my boss, 9 Jim Inch, the Director of Corporate Services. Maybe 10 others, Dave Anderson, Donald McGougan, and they 11 convened a meeting with Richard Jeffrey, where we would 12 talk about it again. 13 Richard Jeffrey of tie walked out of that meeting, 14 followed up an email later to explain that he didn't 15 entirely agree with that stance. He did say actually 16 that he had taken Richard Keen QC's advice and he 17 already knew the position, which was news to us, 18 and I again felt that our advice was about to be drowned 19 out by the somewhat louder voice of tie, and at that 20 point so concerned was I that I asked for a meeting with 21 the Leader of the Council. 22 Q. You mentioned a meeting at which Mr Richard Jeffrey 23 walked out. Approximately when did that meeting take 24 place? 25 A. One or two days after Nicholas Dennys QC's advice had 91 1 been received. So 13, 14, 15 December, around about 2 then. 3 Q. Were you present yourself at this meeting? 4 A. Yes, I was. 5 Q. Who else was present? 6 A. There is a detailed note that the Inquiry has, but from 7 memory, Tom Aitchison was there, I was there, and 8 Richard Jeffrey was there. I cannot recall if any of 9 the other three Directors were there. 10 Q. Why did Mr Jeffrey walk out? 11 A. I think he was inflamed at what I was presenting. 12 Q. So you were explaining to Mr Jeffrey and the Council 13 Directors the content of Mr Dennys' advice? 14 A. I was explaining to certainly the Chief Executive and 15 Richard Jeffrey, query the Council Directors, the 16 content of Mr Dennys' advice, yes. 17 Q. That was enough to prompt Mr Jeffrey to walk out of the 18 meeting? 19 A. Yes, he subsequently claimed that he had another meeting 20 he had to urgently depart for, but he walked out of the 21 meeting. 22 Q. Did he say anything at the time when he walked out of 23 the meeting? 24 A. I don't recall. 25 Q. So your position essentially is that as well as 92 1 reporting Mr Dennys' advice and your concerns to the 2 Chief Executive and the Senior Directors in the Council, 3 you, in addition to that, met separately with the 4 Council Leader? 5 A. Correct. 6 Q. Why did you feel the need to meet separately with the 7 Council Leader? 8 A. I felt in an invidious position. I had made my position 9 clear, what I saw as fairly certain place to senior 10 management of the Council. 11 I experienced significant push back from tie. 12 I wasn't getting an intuition or feeling of agreement 13 from my superiors at that point in time. Correction, 14 from those in that meeting. And I was concerned that my 15 message would be ignored or lost in translation. 16 Q. Now, you say in your statement you had lost confidence 17 by this time with tie. Had you also lost confidence in 18 the Senior Directors at the Council? 19 A. I wouldn't go that far, no. 20 Q. I understand. 21 Moving on, please, at page 31 of your statement, 22 paragraph 79, you explain that: 23 "The legal strategy advised by Nicholas Dennys QC 24 was that ultimately terminating was the most likely and 25 probable route we should go down if things couldn't be 93 1 sorted. However, that route should only be undertaken 2 when CEC and TIE knew where they were and had positioned 3 themselves that INFRACO were in breach. A possible 4 breach could have been failure to progress the design. 5 Where was the design that still hadn't been completed? 6 Nobody had pushed the INFRACO for the design by that 7 stage. Instead, Remediable Termination Notices were 8 being served by TIE for other things. If termination 9 was going to happen, it should happen when you've got 10 strong ground for terminating." 11 Two issues arise. Firstly, why were you critical of 12 tie for going down the route of termination when that 13 appears to have also been the advice of Mr Dennys? 14 A. I wasn't critical of going down the route for 15 termination. I was critical of going down the route of 16 termination now, at that point in time. They didn't 17 have their facts sufficiently clearly set out that could 18 demonstrate the right to terminate. The notices were 19 not great, and I wouldn't have wanted anyone to rely on 20 them, and I had a very, very strong feeling, the likes 21 of which, as a lawyer, you rarely get, that the Council 22 would have lost -- correction, tie as a contracting 23 party would have lost in court a subsequent battle with 24 Infraco for termination. I think they would have lost 25 that case. 94 1 I made that clear to the Leader of the Council, that 2 I could see an in excess of GBP200 million claim coming 3 to the Council in two years' time if we allowed tie to 4 keep going down the route of termination. I preferred 5 the strategy of doing one of two things: either forcing 6 compliance with the contract if possible through 7 Clause 80.20 or specific implement, or, and probably 8 leading to termination, but waiting until you can prove 9 Infraco were in breach correctly, as opposed to doing it 10 in a half-baked manner at that stage. 11 Q. Thank you. This other point may just be a point of 12 detail, but in the interests of accuracy, you say in 13 your statement -- you suggest that the Remediable 14 Termination Notices haven't been served in relation to 15 design, but for other things. Could we just go to one 16 of the notices. It's CEC02084522. 17 We can see the cover sheet, tie Remediable 18 Termination Notice in respect of Design Trackwork, and 19 the next page, please, page 2, just simply look at the 20 heading. We can see in the heading, "INFRACO DEFAULT 21 DESIGN TRACKWORKS". 22 For completeness, I think there was also an 23 Under-Performance Warning Notice served on 24 12 October 2010 in respect of the same issue. Do you 25 accept that at least in respect of Design Trackworks, 95 1 Notices appear to have been served? 2 A. I accept that, but it possibly underlies our uncertainty 3 about the actual factual position. But I accept it 4 looks like it's been served, yes. 5 Q. Thank you. I would like to move on to another document 6 on the matter, please. It's CEC00013342. We looked at 7 this document with Mr Inch yesterday, but if we go to 8 page 3, please, this is dated 17 November 2010. It is 9 a memo by yourself to Mr Inch as Monitoring Officer. 10 Just to pause there, this is 17 November. So does 11 this come just after the meeting you referred to 12 Mr Jeffrey had walked out of? 13 A. Yes, there was a surprising timing coincidence, but this 14 happened one or two days later. 15 Q. Now -- so what lay behind this memo in the sense that 16 how did this come about? What happened? 17 A. I think Mr Jeffrey either -- did he email me? I think 18 he maybe came to see me, to explain he had some big 19 concerns about the Infraco contract, and -- step back 20 a bit. I suspect when Mr Jeffrey calmed down from being 21 presented with a position that was showing the actual 22 position wasn't all that rosy, then thought about 23 circumstances around contract let, and he presumably was 24 aware of before or had just heard of various things that 25 gave him rise to suspect that the contract might have 96 1 been entered into in a nefarious way. 2 So with that in mind, he wanted to share that 3 information with me as Head of Legal, and he came to 4 talk to me about matters which, on the face of it, could 5 be very concerning. 6 Q. Did Mr Jeffrey explain why he hadn't raised these 7 matters with the Council earlier? I'm trying to think 8 when he was Chief Executive of tie. It must have been 9 around the middle of 2009, I think. He's certainly been 10 in post for over a year by this stage; is that correct? 11 A. It would be about that period of time, yes. I can't 12 categorically say if it was a year. It was round about 13 a year. 14 He did not tell me why he suddenly brought this to 15 me at that point in time. I can't remember whether he 16 told me then or I later heard that he had mentioned it 17 in passing to Donald McGougan, the Director of Finance. 18 I couldn't tell you when that was, but I remember my 19 recollection being suspicious about the timing that this 20 was presented to me. 21 Q. What were your suspicions? 22 A. That this was a useful red herring to point out why the 23 position was so hopeless. 24 Q. Why would it be useful? 25 A. So tie -- tie had entered into a contract that was not 97 1 ideal. Senior management of that organisation changed 2 at least once. Richard Jeffrey joined it as 3 Chief Executive, I think, and David Mackay as 4 Chairperson, and the -- from what I knew at the time 5 appeared to get straight into enforcing the contract 6 against the contractor, and termination and going down 7 a certain route that they maybe didn't look into the 8 position more fully on their arrival. This is my 9 perception. 10 When the strategy started to unravel, and almost 11 every option probably from their perspective it felt 12 like they had exhausted, then there was going to be some 13 fallout from that, and it could either be true or it 14 could be useful, and I'm open to both, but we were 15 hearing about it straight after I had pointed out, if 16 you like, the big set piece move of saying: here are all 17 the ducks in a row, this isn't looking good. It felt 18 odd. 19 Q. Did Mr Jeffrey tell you what was the basis for his 20 concern? He obviously wasn't with tie at the time that 21 the contract was entered into. Did he say what was the 22 basis of these concerns? 23 A. No, he didn't. In fairness to Mr Jeffrey, whilst on one 24 level he was circumspect, I actually -- he was nervous, 25 and this is a man who normally comes across as very 98 1 confident. So he was nervous; and he was concerned 2 about sharing too much information with me, and 3 I understand that because of the criminal offence of 4 tipping off. And he might have been concerned about it 5 getting into the public domain. 6 I think he also held a very clear view that liaising 7 with the Council was dangerous sometimes, because leaks 8 happened, and if this were proven, neither he nor I nor 9 others would want to be in a position of tipping off. 10 Q. Now, what did you consider you required to do and why 11 when you were advised of these concerns? 12 A. So the concerns effectively said several things. It 13 alluded to possible criminal behaviour, maybe a serious 14 fraud. And it also alluded to maybe the voidability of 15 the Infraco contract, if the contract were entered into 16 for incorrect purposes. 17 I was more concerned about the first than the 18 second. So recognising that there could be a serious 19 criminal offence having been carried out, and remember, 20 these were not yet supported by any evidence, I passed 21 them on to my superior in his capacity as Monitoring 22 Officer in the event of any illegality of the 23 organisation, query about its subsidiaries, but in the 24 event of illegality of the organisation, the Council 25 Monitoring Officer required to be made aware of it. 99 1 Q. Now, in the page we're looking at, we can see it 2 concludes, 4: 3 "Recommended course of action." 4 4.2: 5 "[insert next steps]" 6 What did you consider the Council ought to have done 7 on receipt of this information? 8 A. I was certainly expecting there to be some engagement 9 between the Monitoring Officer and Richard Jeffrey. 10 Q. Do you know whether that happened? 11 A. So I do now know if it's happened, but at the time I did 12 not know and didn't expect to hear back from the 13 Monitoring Officer as to what was going on. 14 Q. Did you hear back at the time? 15 A. From the Monitoring Officer. 16 Q. Yes. 17 A. No. 18 Q. So as far as you were concerned, you had sent this memo 19 to Mr Inch and heard nothing further back? 20 A. I sent the memo to Mr Inch and discussed it with him in 21 one of my weekly or monthly catch-ups. And then left it 22 with him. 23 Q. In your whole time at the Council, were there any other 24 occasions where you reported matters to the Monitoring 25 Officer? 100 1 A. That was the only occasion that I reported something, 2 I think, to the Monitoring Officer in my time at the 3 Council, and in those days, with the type of 4 organisation it was, I think the Monitoring Officer 5 route was relatively infrequently called upon. 6 Q. Now, I think we know what happened is that Mr Jeffrey 7 instructed solicitors to look into the matter and report 8 back to him or to tie. Do you have any views on whether 9 that was appropriate? 10 A. I think it's the best we were able to get, but no, 11 I didn't feel that was appropriate. 12 Q. Why not? 13 A. For two reasons. It felt like the review that 14 Mr Jeffrey was getting, I think it was from Anderson 15 Strathern, was, let's say, a light touch review. 16 Actually three reasons. 17 Secondly, when I did hear back about the outcome of 18 it, it reinforced the light touchiness of it. 19 Thirdly, it was tie looking into itself. And that 20 didn't feel particularly rigorous. 21 Q. Now, there came a point in time, Mr Maclean, when you 22 were the Council's Monitoring Officer. If concerns like 23 these had been reported to you as Monitoring Officer, 24 what would you have done? 25 A. In fairness, I think the Council as an organisation 101 1 moved on a lot in that intervening period and it's -- 2 I think what it stood for and how it behaved and the 3 culture of the organisation changed dramatically in that 4 two or three year period. 5 But to answer your question, I would have 6 investigated it. 7 Q. It may be suggested that regardless of the culture of 8 the Council, on one view it's perfectly obvious that the 9 Council should conduct its own independent investigation 10 and not rely on an investigation instructed on behalf of 11 the organisation that is the subject matter of the 12 concerns. 13 A. I think that's why I referred the matter on. I was 14 aware that Mr Jeffrey was going to instruct 15 Anderson Strathern, and I referred the matter on because 16 I felt the Council should be doing something. 17 CHAIR OF THE INQUIRY: Would the Council have the resources 18 to investigate the allegations of criminal activity or 19 is it something that you just simply passed to the 20 police? 21 A. So I have experienced that in my time as a Monitoring 22 Officer, and generally if there's criminal behaviour, 23 I passed matters to the police. 24 CHAIR OF THE INQUIRY: Even an allegation, presumably. 25 A. Correct. 102 1 MR MACKENZIE: Just to complete this chapter, Mr Maclean, 2 when you did become Monitoring Officer, did you revisit 3 this matter to consider whether any further 4 investigation ought to be undertaken and/or the matter 5 reported to the police? 6 A. No, I did not. And I would just like to explain why my 7 take wasn't that it was a done matter. It was more that 8 there were a whole load of investigations going on in 9 the Council at the time in relation to trams. One is 10 another court action that I think the Inquiry is aware 11 of, and the other itself is the Inquiry is looking into 12 this. 13 So it is something which, if you like, is being 14 investigated by others, and I think when those findings 15 come out, people will need to then think about what is 16 done about that. 17 That having been said, the Council's only -- the 18 Monitoring Officer's only right is fairly weak. It's 19 that they can write a report to Full Council. And 20 that's it. It's to report the matter. 21 So these matters are known about and being 22 investigated, and if proven correct, I would imagine, 23 the police investigation inquiry would take place. 24 Q. Thank you. I would like to move on to another matter. 25 This is heading towards the Mar Hall mediation in 2011. 103 1 Go back to your statement, please, at page 21. In 2 paragraph 60, you, I think, were referred to the 3 Highlight Report to the meeting of the IPG in 4 October 2010 which contained a Lessons Learned section. 5 Again, in December 2010, and you say: 6 "My view was that the IPG wanted to spend time on 7 a process driven lessons learned review and it would be 8 preferable to have a genuine thorough review as to where 9 we were, what we needed to do, and what strategy we 10 would be deploying. TIE's strategy (to terminate the 11 contract), thankfully, didn't proceed. The thorough 12 review that I wanted didn't proceed as, later, the 13 political drive for mediation took over from any proper 14 reasoned analysis as to the best legal, financial and 15 commercial tactics." 16 Just to continue this point, please, at page 31 in 17 your statement, in paragraph 80, you say: 18 "The short form mediation was CEC going in without 19 having all its ducks in a row, hoping to do some sort of 20 a deal. My clear view from a legal and financial 21 perspective was that you only go into something when 22 you're ready for it. I advised that mediation for 23 a contractual dispute such as this would take a lot 24 longer than two or three days, but I can understand why 25 that was undertaken." 104 1 So just to pause there -- sorry, I'll just continue 2 this, if I may, please. At page 33 of your statement, 3 paragraph 87, that refers to the Highlight Report for 4 the meeting of the IPG on 21 January 2011: 5 "It notes that both Nicholas Dennys QC, instructed 6 by CEC, and Richard Keen QC, instructed by TIE, had 7 advised that the best option was to seek to enforce the 8 contract until grounds of termination could be 9 established as a result of failure to perform the works. 10 It was unclear to what extent there had been a rigorous 11 approach by TIE to enforcement of the contract pending 12 the Carlisle negotiations and their focus on 13 termination." 14 There's then a quote from the report to the IPG on 15 21 January 2011 as follows: 16 "TIE Ltd presently appear to be in a weak position 17 legally and tactically as a result of the successive 18 losses in adjudications and service of remediable 19 termination notices which do not set out valid and 20 specific grounds for termination." 21 The report also noted that: 22 "The consortium was noted to be extremely well 23 prepared." 24 The report went on to note: 25 "However, there was a desire commercially and 105 1 politically to move towards mediation notwithstanding 2 TIE Ltd's (apparently) relatively weak tactical and 3 legal position. That is likely to have a financial 4 implication with the INFRACO as the party in the 5 stronger position faring rather better out of it than 6 might otherwise have been the case. Against that there 7 are financial and other costs involved in allowing 8 matters to continue." 9 You then go on to say in your statement that: 10 "These extracts of the Highlight Report were my 11 views, drafted by me and spoken by me at the Tram IPG. 12 My views were known by Tom Aitchison, Donald McGougan, 13 Jim Inch and the Leader of the Council, Jenny Dawe. CEC 14 nevertheless chose to proceed with short form mediation. 15 I do not know to what extent my views and those of 16 internal and external legal of the Council were 17 disseminated to the wider elected member group." 18 So looking at those passages, Mr Maclean, it would 19 be correct to say you had some concerns about the 20 Council and tie going to mediation at this stage? 21 A. From a legal and commercial perspective, yes. 22 Q. What do you mean by that? 23 A. So I was legal adviser, not decision-maker. And I could 24 only offer my legal views supported by -- ably supported 25 by better minds than my own in the shape of our QC. 106 1 So legally it didn't look like a good idea and 2 commercially it didn't look like a good idea for reasons 3 you can see there, that tie was in a weak position and 4 the consortium were in a strong position. 5 So my strong view there was we should not be going 6 towards short form mediation. That having been said, 7 the city was in disarray. The businesses were 8 suffering. Costs were racked up repeatedly. 9 Politically, this had become huge news and media-wise it 10 had become huge news. 11 So in fairness to the decision-makers, you have just 12 got to look at your legal advice as one piece of that 13 jigsaw, so that they came to a decision which was 14 different from my one bit of that jigsaw, is entirely 15 fine. That's what decision-makers are meant to do. But 16 legally I disagreed with it. 17 Q. At this time do you consider you had a good 18 understanding of the legal aspects of the contract and 19 dispute? 20 A. You will have to help me. When was that quote? Was 21 that December? 22 Q. This is from December 2010, and the quote was from 23 a report of the IPG in January 2011? 24 A. Yes, I think I had a good enough view of the legal 25 position. 107 1 Q. So we can go back to this page 31. Paragraph 80, the 2 second sentence, when you say: 3 "My clear view from a legal and financial 4 perspective was that you only go into something when 5 you're ready for it." 6 You mentioned legal perspective. Isn't the position 7 you did understand the contract and the dispute; it's 8 rather the case your view was you should seek to use the 9 contractual provisions, try that route, to put tie in 10 a stronger position before then speaking to the other 11 side? 12 A. Exactly right. 13 Q. How about the financial perspective? From your 14 statement it suggests that from a financial perspective 15 the Council weren't ready for mediation. What do you 16 mean by that? 17 A. So no, I don't think that's what I was getting at there. 18 It was a high level comment that where two parties go 19 into negotiation, inevitably the one in the stronger 20 position will be able to do better out of it. 21 My fear was the Council and tie, certainly the 22 Council, were going in without having access to all the 23 full factual information. And that tie was in a very 24 weak position, and my concern was that out of that 25 commercial negotiation having called the shot for 108 1 a mediation, that out that commercial negotiation, tie 2 and the Council would do worse than it would were it in 3 a better position. 4 Q. I quite understand that point about relative strength 5 going into a mediation or a negotiation, but go back, 6 please, to page 21. In paragraph 60, halfway down, when 7 you stated "The thorough review that I wanted didn't 8 proceed as, later, the political drive for mediation 9 took over from any proper reasoned analysis as to the 10 best legal, financial and commercial tactics"; can you 11 just explain that sentence? 12 A. So the Council didn't have all the factual information. 13 Quite the contrary. It had, I was learning, hardly any 14 of the factual information. 15 So here we were, trying to understand whether 16 termination could happen without knowing fully the 17 factual matrix behind it. 18 So I wanted the Council to, if possible, take some 19 time to get the information and better understand 20 factually where we were. 21 This IPG was aiming to do a sort of quick lessons 22 learned review about what went wrong, and frankly, 23 I thought that was nonsense. We hadn't even got to the 24 bottom of the substantive issues of the dispute yet. 25 People wanted to do a lessons learned review, and that 109 1 beggared belief. 2 Q. So when you refer to "The thorough review that I wanted 3 didn't proceed", was that essentially for the Council to 4 gain better understanding of the facts? 5 A. Correct. 6 Q. Is it your position that the Council went into the 7 mediation at Mar Hall without a thorough and proper 8 understanding of the factual position? 9 A. No, I don't know if that's the case. There was a change 10 of Chief Executive at that point in time. My fear was, 11 as things were in the Council at that point in time, had 12 the Council gone into mediation, tie would have got its 13 own way, and directed the proceedings, and the last 12 14 to 18 months would be repeated all over again. 15 A different Chief Executive came in, and made it 16 very clear that the Council was in control, and that tie 17 was there to inform the Council during the mediation. 18 Q. That's all very well, Mr Maclean, but one can again 19 quite understand that, taking back control, but in 20 paragraph 60, you talk about a thorough review that you 21 wanted didn't proceed because it was taken over by 22 political drive for mediation. I think you accepted in 23 your evidence that at this time -- this was the end of 24 2010 -- the Council wasn't in possession of all of the 25 facts. Do you accept that? 110 1 A. Yes, I do. 2 Q. So presumably any review, whether it's legal, financial 3 or commercial, it has to start with the proper 4 understanding of the facts? 5 A. In a perfect, logical world, correct. 6 Q. And presumably, between this time in late 2010 through 7 to the mediation in March 2011, I quite understand your 8 point about the new Chief Executive and taking control. 9 Did anything happen in that period to give the Council 10 a complete and proper understanding of the facts? 11 A. My -- I think the only way I can answer that question is 12 that tie and the Council were maybe better sharing 13 information in January, February, March. But -- so 14 between the two was a full understanding of the 15 position, possibly yes, but did the Council ever have 16 the full factual position going into that mediation? 17 Definitely not. 18 And I think the position of the project was so dire 19 for almost everyone concerned, and by that I do mean the 20 public and businesses, that maybe you have to accept 21 a suboptimal position and go with that. 22 But I'm talking here for others. That wasn't my 23 decision. 24 Q. Do you accept the proposition that any legal, financial 25 or commercial analysis depends upon having a proper and 111 1 complete understanding of the factual position? 2 A. Yes. 3 CHAIR OF THE INQUIRY: To go back to the question that you 4 were asked, at this stage of the mediation is it the 5 position or is it not that the Council did not have 6 a full appreciation of the facts? 7 A. So, my Lord, I'm not entirely sure I'm the best person 8 to answer that, but I'll do my best. 9 I think the Council on its own would not have had 10 a full understanding of the facts. I think the Council 11 working in conjunction with tie collectively should have 12 had a full understanding of the facts. I think that's 13 the best I can do to answer that. 14 CHAIR OF THE INQUIRY: Does that depend on tie giving 15 accurate information to the Council, which you said in 16 the past, your impression was that they hadn't? 17 A. Yes, the factual information was largely held by tie, 18 and it required tie to co-operate with the Council in 19 order to make that available to them. The Council 20 singularly struggled when I was -- in that period that 21 I was there with getting that information. And went 22 into mediation with hopefully, again, the 23 decision-makers can tell you this, but hopefully enough 24 information. 25 But did they have a full understanding of the facts? 112 1 I think that would be very, very hard for the Council to 2 have had a full understanding of the facts in that two, 3 three-month period. 4 So if I can answer the question, I think the Council 5 would not have had a full understanding of the facts 6 going into mediation, but it would have been good enough 7 for a commercial negotiation with tie giving that 8 information to the Council. 9 CHAIR OF THE INQUIRY: Is that a convenient point? 10 MR MACKENZIE: Thank you, my Lord. It may be a convenient 11 point to stop. 12 CHAIR OF THE INQUIRY: We will break for lunch and resume 13 again at 2.05. 14 (1.02 pm) 15 (The short adjournment) 16 (2.05 pm) 17 CHAIR OF THE INQUIRY: You're still under oath. 18 MR MACKENZIE: Thank you, my Lord. 19 Mr Maclean, just again, moving on towards mediation 20 at Mar Hall, in relation to the preparations for 21 mediation, you have that at page 34 of your statement, 22 if we could go to that, please. 23 In paragraph 88 you explain that in representation 24 for the mediation, various meetings took place, and you 25 name some individuals. Sue Bruce, the new 113 1 Chief Executive, Colin Smith. What was his role? 2 A. Colin was brought in as an adviser to certainly 3 Sue Bruce. I think the Council as well at that stage, 4 and he later became the Senior Responsible Officer later 5 in 2011. 6 Q. Also from tie Richard Jeffrey was part of those 7 discussions. Donald McGougan, Dave Anderson, yourself 8 and some tie external advisers, Tony Rush, Nigel Robson, 9 Brandon Nolan. You refer to various meetings took 10 place. 11 What was the purpose of these meetings? 12 A. To try and work out how best to proceed at mediation and 13 to garner as much information as possible prior to that. 14 Q. Now, if we could also go on to page 35, you say in 15 paragraph 89: 16 "I didn't play a huge part in the preparations for 17 the mediation. I attended the meetings that included 18 CEC that I've just mentioned. The objective seemed to 19 be more about collating information for a horse trade 20 rather than a full mediation on the merits." 21 Can you explain that sentence, please? 22 A. So I -- this wasn't a full mediation. It was a short 23 form mediation. 24 The time to prepare for it was substantially less 25 than you would expect for full mediation, and the time 114 1 duration of the mediation itself was a lot shorter than 2 one would expect for full mediation. 3 I think I and probably most people saw the short 4 form mediation as a commercial negotiation to settle the 5 dispute. 6 Q. Is that what you mean by the reference to a horse trade? 7 A. Yes. 8 Q. Is that in short what happened in Mar Hall? 9 A. I wasn't party to a lot of the meetings that took place 10 there, but certainly the end result of it, the 11 principles that came out, was as a result of a high 12 level commercial negotiation, yes. 13 Q. For the avoidance of doubt, which officers led for the 14 Council in the preparations for the mediation? 15 A. In the preparations for mediation, Sue Bruce led for the 16 Council preparing at these meetings at tie. Colin Smith 17 was helping her in the background and the other advisers 18 were there. But principally I would say Sue and Colin. 19 Q. What discussion was there with members of the Council 20 before the mediation in relation to what members wished 21 to achieve? 22 A. I don't know, I'm afraid. 23 Q. Would I have to ask Sue Bruce? 24 A. Yes, I think Sue Bruce and the Leader of the Council, 25 Jenny Dawe, would be able to shed more information. 115 1 Q. Are you aware whether any discussion between officers 2 and members was restricted to Jenny Dawe or whether 3 there was wider discussion with the -- all of the 4 members of the Council? 5 A. I have no knowledge, I'm afraid, of what conversations 6 took place. My -- my assumption was that Sue Bruce and 7 Jenny Dawe, and maybe the Deputy Leader of the Council, 8 had a conversation beforehand, but I wasn't privy to 9 that. 10 Q. Do you have any knowledge of whether officers discussed 11 with or sought instructions from members on the figures 12 that officers should try and agree at Mar Hall? 13 A. I have no knowledge of that. 14 Q. Again, is that something we should check with Sue Bruce? 15 A. Yes. 16 Q. Thank you. I would like now please, sticking with 17 page 35 and paragraph 90, you explain: 18 "The objectives of mediation were to settle the 19 dispute. It was to try and get to a negotiated position 20 by either re-scoping the contract (ie shorten the line) 21 or to walk away and terminate for as little cost as 22 possible. The preference then appeared to be to rebase 23 the contract and shorten the line." 24 So that is your understanding of what the mediation 25 objectives were? 116 1 A. Yes, that was my understanding, and of course the 2 mediation statement will set out technically what the 3 objectives were, but that was my understanding. 4 Q. I understand. 5 Now, moving on to the mediation itself, which 6 I think we understand took place at Mar Hall, between 8 7 and 12 March 2011, who led for the Council at the 8 mediation? 9 A. For the Council, Sue Bruce. 10 Q. Were you present at the mediation? 11 A. I was present at mediation, yes. 12 Q. What was your role and involvement? 13 A. Very little in the first half of mediation. I wasn't 14 called upon for much support. There was a plenary 15 session where there were many people involved, and that 16 was a debate or an opening position by Sue Bruce and by 17 a member on behalf of the consortium. I think it might 18 have been Dr Keysberg. 19 There were various sub-sessions if you like, 20 break-out sessions, where people would debate numbers or 21 finance. I was present when everybody on the Edinburgh 22 Council tie side came back to discuss, but I wasn't 23 present, I don't think, in any other engagements with 24 the consortium with the exception, I think, somewhere 25 later in that week, I was present at a conversation with 117 1 CAF, the provider of the tram vehicles. 2 Q. Now, I think you said you had very little involvement in 3 the first half of the mediation. Do I understand that 4 I think on Day 3, on 10 March, a key points of principle 5 document was signed. Is that what you mean by the first 6 half of the mediation, days 1, 2 and 3? 7 A. So when the key points of principle was signed, I was in 8 the room hearing what had been agreed and had been 9 drafted. And that's when mediation ran out of time and 10 some of the participants had to decamp from Mar Hall to 11 go to the offices of McGrigors. It's that second half 12 for another day or two after that where we tried to 13 flesh out the one-page statement of principle into 14 a five or six-page Heads of Terms document that I was 15 involved fairly heavily in helping to convert the 16 principles into Heads of Terms. 17 Q. We will come to these documents in a moment. 18 You say that you were in the room hearing what had 19 been agreed and had been drafted. Is that a reference 20 to the initial one-page key points of principle 21 document? 22 A. That's correct. 23 Q. So does it suggest from what you have said that you 24 weren't present when these key points of principle were 25 agreed? 118 1 A. That's correct. 2 Q. So who on behalf of the Council were present when these 3 key points of principle were agreed? 4 A. I don't know. I do know that Sue Bruce and Vic Emery 5 were present, and heavily involved in coming up with the 6 final prices, the 362.5 million for the off-street works 7 and the 39 million for the on-street works. They were 8 present on that negotiation. I think that was quite 9 late at night, actually, when many of the participants 10 had by then gone back to the hotel. As for the other 11 points of principle, on the one-page sheet, I don't know 12 how they were fleshed out. 13 Q. So you are describing an agreement in relation to price 14 taking place quite late at night? 15 A. Yes. 16 Q. On which day, 1, 2 or 3? 17 A. On the night before we decamped from Mar Hall. So the 18 final night, I guess. I couldn't tell you whether it 19 was day 2 or day 3, I am afraid. If we were there for 20 three days, it would have been the second day. It might 21 have been the third, the third evening. It was the last 22 evening we were there. 23 Q. We will come to it in a second. The key points of 24 principle one-page is signed on 10 March, day 3. Does 25 that help? 119 1 A. Thank you. The deal on price must have been on the 2 evening of 9 March. 3 Q. Because -- is that because an agreement on price was 4 reached and then the one-page document key points of 5 principle would have been typed up and signed? 6 A. Correct. My understanding was that the key to unlocking 7 it, if you like, was to agree, presumably to rebase the 8 contract and to agree on price. And then I'm assuming 9 the other bits and pieces fell into place behind that. 10 Q. So your understanding is that in the evening of day 2, 11 an agreement on price was reached? 12 A. Yes. 13 Q. You have described those present as being Sue Bruce, 14 Vic Emery. Who else? 15 A. I couldn't tell you. I understood that there were 16 people from the consortium. I'm assuming the two 17 doctors, Keysberg and Scheppendahl. I don't know if 18 they had advisers, but I certainly know from Edinburgh 19 Council's side, Sue Bruce and Vic Emery were present. 20 Q. Do you know whether Transport Scotland were represented 21 at this Agreement? 22 A. I don't. I would assume so, but I couldn't cast-iron 23 say, I'm afraid. But they will be able to advise. 24 Q. We should now go to the document. If we look, please, 25 at CEC02084685, I think this comprises two documents. 120 1 If we look firstly at page 1, the top left-hand corner, 2 if we can blow up the dark bold type, we see: 3 "ETN MEDIATION WITHOUT PREJUDICE MAR HALL AGREED KEY 4 POINTS OF PRINCIPLE". 5 At the bottom of the page, if we look at the 6 signatories, it's not easy to decipher all of them, but 7 I think on the left-hand side of the page, it's signed 8 by someone on behalf of Siemens, and then the one next 9 to that on the right may also be on behalf of Siemens, 10 and then one over at the bottom, I think we see 11 Sue Bruce, 10 March 2011. Do we see that? 12 A. Yes. 13 Q. Above Sue Bruce's signature, I don't think we can make 14 it out, but it may be on behalf of the consortium. It 15 may be Dr Keysberg. We can check that. 16 Then the far right of the page, signature of 17 Vic Emery on behalf of tie. Do we see that? 18 A. Yes, I do. 19 Q. So is this the key points of principle document you 20 mentioned a moment earlier? 21 A. Yes, it is. 22 Q. If we could just please look at, firstly, paragraph 1, 23 price: 24 "GBP362.5 million for the Edinburgh Tram Network 25 from Airport to Haymarket (excluding CAF but including 121 1 integrated Design to Newhaven)." 2 There's a handwritten insertion above that, we don't 3 need to go into, but I think in short, that is an agreed 4 price for what is later referred to as the off-street 5 works; is that correct? 6 A. That's correct, yes. 7 Q. Are you able to explain how that figure was arrived at? 8 A. No, I'm not. 9 Q. Just -- I'm sorry for labouring the point -- who should 10 we ask to explain how that figure is arrived at? 11 A. Sue Bruce and Colin Smith should be able to explain -- 12 sorry, Sue Bruce and Vic Emery should be able to explain 13 how that negotiation ended up at that figure. 14 Q. Thank you. 15 A. Possibly with finance support from others, but in that 16 room at the time, it would be Sue Bruce and Vic. 17 Q. Then paragraph 2: 18 "Consider proposed Infraco price for the Edinburgh 19 Tram Network from Haymarket to St Andrew Square 20 (excluding utilities) of GBP39 million, to be adjusted 21 by reference to target price mechanism to be agreed." 22 I think this is a reference to a target price for 23 the on-street works; is that correct? 24 A. Yes, it is. 25 Q. Again, are you able to explain how that figure was 122 1 arrived at? 2 A. No, I'm not. 3 Q. Again, for completeness, who should we ask to explain 4 that figure? 5 A. The same people from the Edinburgh Council side, 6 Sue Bruce and Vic Emery. 7 Q. Thank you. Dropping down to paragraph 12, please, we 8 see it states: 9 "Non-binding, indicative Heads of Terms to be 10 entered into between the parties to give effect to these 11 non-binding agreed key points of principle, by close of 12 business 11 March 2011. These key points of principle 13 are subject to contract ..." 14 Just to pause there, is this a reference to 15 decamping to, was it McGrigors' offices to then flesh 16 these out that you mentioned? 17 A. Yes, I think that was the only clause that I had an 18 input into there. When these points of principle were 19 put together, I asked for it to be made clear they were 20 non-binding, and if people wanted to go off to agree 21 Heads of Terms, again, I wanted to make sure that they 22 were non-binding. But yes, it's a reference to 23 decamping to McGrigors' office. 24 Q. So was there a recognition at the time the key points of 25 principle were signed that in themselves they weren't 123 1 sufficient and people would get a bit more detail 2 agreed. Was that fair to put it that way? 3 A. Yes, this was very, very high level commercial 4 negotiation, commercial points that were agreed. There 5 was a good amount of detail that required to follow on 6 from that. 7 Q. Thank you. In paragraph 13 it states: 8 "CEC and tie's commitments in respect of these key 9 points of principle are subject to and conditional on 10 availability of funding." 11 We can leave that there. Over the page we can see 12 this is headed, this document, HEADS OF TERMS FOLLOWING 13 MEDIATION, et cetera. 14 If we just go over the page to 2, please, in 15 paragraph 6.1 we see again a reference to the total 16 price for the on-street works shall be ... 17 I pause there. It states: 18 "The Total Price for the Infraco works other than 19 the on-street works shall be the sum of GBP362.5 million 20 and shall relate only to the off-street works." 21 Then again at paragraph 6.3, we see the target price 22 for the on-street works of GBP39 million. Simply pause 23 there and for completeness, Mr Maclean, are you aware of 24 the extent to which either of these sums include 25 a figure in settlement of the consortium's claims for 124 1 notified departures? 2 A. Yes, my understanding is the settlement figure was 3 included in clause 6.1, the GBP362.5 million. 4 CHAIR OF THE INQUIRY: I wonder if you could move forward 5 a bit for the -- 6 A. Sorry. Would you like me to repeat that? 7 CHAIR OF THE INQUIRY: Did you say 6.1 -- what else did you 8 say? 9 A. My understanding was that the settlement figures that 10 were agreed were included in Clause 6.1, the off-street 11 works price of 362.5 million. 12 MR MACKENZIE: In on-street works target price, was there 13 any allowance in that target sum for settlement of the 14 consortium's claims for notified departures? 15 A. I would imagine there was somewhere. I don't know if it 16 was in that target sum figure or if it was -- my 17 understanding was it was rolled into the Clause 6.1 18 figure, but certainly somewhere between those two 19 figures, the settlement figure was included. But 20 I understood it was in the 362.5 million. 21 Q. Yes. But in terms of the agreed off-street price of 22 GBP362.5 million, do you know how much of that sum 23 related to settlement of the consortium's claims for 24 notified departures? 25 A. Sorry, I beg your pardon. I understand now. No, 125 1 I don't. 2 Q. Again, for the avoidance of doubt, who should we ask to 3 try and clarify that matter? 4 A. The same people. Sue Bruce and Vic Emery. 5 Q. Now, on the face of it, these two figures were agreed 6 quickly on day 2 of the mediation. Was there any 7 reporting back to members of the Council before these 8 figures were agreed? 9 A. I don't know about the reporting before the figures were 10 agreed. I know that Sue Bruce had telephone 11 conversations with Jenny Dawe throughout the week of the 12 mediation. But I don't know the content of those 13 conversations or whether or not there has been 14 conversation before the numbers were agreed. 15 Q. Thank you. On page 4 of this document we're looking at, 16 in paragraph 8.4, we see a reference to the consortium 17 shall commence the prioritised works on or before 18 1 May 2011, et cetera. So I think there was an 19 intention that there would be certain priority works 20 carried out first; is that correct? 21 A. That's correct. 22 Q. That became known as Minute of Variation 4; is that 23 correct? 24 A. That's correct. 25 Q. I think we can also see an intention halfway down this 126 1 clause that the parties will enter into an additional 2 Minute of Agreement in respect of the off-street works, 3 other than the prioritised works, and the on-street 4 works not later than 1 July 2011. 5 Pause there. I think in the event that date was 6 extended to 14 September 2011; is that correct? 7 A. That's correct. 8 Q. That final Settlement Agreement, I think, became 9 referred to as Minute of Variation 5; is that correct? 10 A. Yes. 11 Q. Thank you. In passing, we can see in clause 9.1, we 12 see: 13 "The parties shall agree amendments to Clause 65, 14 Clause 80, and Schedule Part 4 to give effect to the 15 principles of these Heads of Terms including the 16 Mar Hall principles." 17 I think these were some of the problematic clauses, 18 if I can put it that way, that required to be addressed; 19 is that correct? 20 A. Yes, it is. 21 Q. We should finally look at the signatories on the last 22 page of this document, please. I think the signatories 23 from the top, I think may be Martin Foerder on behalf of 24 the consortium. Then Sue Bruce, then Vic Emery, and 25 then I suspect a Siemens signature; is that correct? 127 1 A. I recognise the first three, but not the fourth, I'm 2 afraid. 3 Q. Yes. This page isn't dated. When was this document, 4 the Heads of Terms, agreed, was it during the sessions in 5 McGrigors' offices, so at the end of week 1 of the 6 mediation; or was it some time later? 7 A. No, it was during week 1, at the end of week 1, in 8 McGrigors' offices. 9 Q. Thank you. I would like now to go, please, to page 37 10 of your statement. In paragraph 94, approximately 11 halfway down, you say: 12 "I just can't say if it was a good or a bad deal 13 financially. This was because I didn't know what the 14 numbers were and where people were." 15 To pause there, just for the avoidance of doubt, why 16 weren't you able to say whether it was a good or a bad 17 deal financially? 18 A. I don't think I had the information that I needed. 19 I don't know why the negotiations came about. I was the 20 lawyer there to help out with any legal issues or the 21 dispute, but I couldn't even get a feel commercially if 22 the negotiation was a good one or a bad one. 23 So this was a high level commercial settlement on 24 numbers that I didn't see the detail of, and I make no 25 comment about whether that's good or bad. Just, in 128 1 answer to the question I think I was asked there, I have 2 no idea if that deal was the best one they could have 3 got. 4 Q. Was anyone in the Council in a position to say if the 5 deal was a good one or a bad one financially? 6 A. I don't know. I don't know, I'm afraid. 7 Q. Perhaps ultimately that's something I should ask the 8 signatory of the deal, Sue Bruce, perhaps? 9 A. Yes, Sue and Rick would be more able to comment. Maybe 10 Donald McGougan on the finance side. Yes. 11 Q. But why, in response to the question: 12 "Was anyone in the Council in a position to say if 13 the deal was a good one or a bad one financially?" 14 Why did you say: 15 "I don't know. I don't know, I'm afraid." 16 It sounds as though you have some doubt or 17 hesitation as to whether anyone in the Council was in 18 a position to say if the deal was a good one or a bad 19 one financially? 20 A. Yes, I do have some doubt around that, and again, 21 I don't want to overstress the point. This was more 22 about settling and commercial negotiation than it was 23 about a debate or an argument on its merits where you 24 end up to a logical conclusion. 25 As with any commercial settlement and negotiation, 129 1 only those in the room can actually comment about how 2 hard the other side was pushed or not pushed, and when 3 the other side squealed and what their body language was 4 and so on. So it's very hard for me to comment on that. 5 Those in the room will be able to. 6 Certainly I think people felt relieved the deal was 7 done, but I think people definitely came away and 8 thought: gosh, that's a high number. 9 CHAIR OF THE INQUIRY: Sorry? 10 A. That's a high number. 11 CHAIR OF THE INQUIRY: You referred to it as a horse trade, 12 and you mentioned earlier that the upper hand, as it 13 were, or the strength, the negotiating strength lay with 14 the consortium. So would this be a horse trade from the 15 Council's point of view, a horse trade from a position 16 of weakness? 17 A. That was my fear. I don't know if that came to pass 18 during the negotiations, but that was my fear going into 19 it, that it was a commercial deal from a position of 20 weakness, yes. 21 CHAIR OF THE INQUIRY: If that's the case, are you able to 22 indicate whether it's likely or not that the final 23 figure was higher or lower than you might have expected? 24 A. I don't think people had a definitive figure in mind 25 going into it. All I can speak to is that people, when 130 1 they heard the final figure, felt it was a high number. 2 To be fair, they are probably comparing that against 3 the numbers they had heard previously of 545 million and 4 600 million. So I'm not convinced that was a comment 5 that it was a bad deal. I just cannot say if it was 6 a good or bad deal. All I can say is that I did feel 7 that we were going into that negotiation in a weak 8 position. I'm quite sure most in Edinburgh Council 9 would agree with that. 10 CHAIR OF THE INQUIRY: When you're speaking about the 11 smaller figures of GBP545 million or GBP600 million, are 12 you speaking about figures that were being canvassed 13 a few months previously? 14 A. Yes, I'm speaking about numbers that people had assumed 15 the project would -- the whole line would come in for, 16 which was I think was 500 or 545 million some months 17 before, and there was a number canvassed, I think, by 18 some of the finance people some months before that the 19 contract might get to 600 million. 20 You know, I think these numbers probably, from what 21 I could understand later, were wrong. The ultimate 22 number of 700-odd million, that's a deal that was done, 23 and I don't mean to suggest it was a bad deal. I just 24 can't say if it was a good or a bad deal. 25 CHAIR OF THE INQUIRY: Thank you. 131 1 MR MACKENZIE: Thank you. 2 Mr Maclean, were these figures agreed at Mar Hall 3 reported immediately to the Leader of the Council, to 4 group leaders and to rank and file members? 5 A. I don't know, I'm afraid. The numbers were certainly 6 reported subsequently, quite some time later in, 7 I think, the June Council report. I don't know if they 8 were -- I would imagine they were communicated pretty 9 quickly to the Leader of the Council, but I don't know. 10 I do not know if they were reported to the group 11 leaders. 12 Q. It wasn't your job, I don't think, to communicate these 13 matters to members. Whose role was that? 14 A. From the Council, it would either be the Director in 15 charge of the project, Director of City Development, 16 Dave Anderson, but given that the new Chief Executive, 17 Sue Bruce, was so heavily involved, I would imagine that 18 Sue Bruce would have done any communication on that. 19 Q. I'm not going to go to it, but in your statement, 20 between pages 42 and 45, you list, I think, 17 issues 21 and details that still required to be discussed and 22 agreed after Mar Hall. So obviously in the weeks and 23 months after Mar Hall, further matters required to be 24 agreed. 25 Just back to the point of -- sorry for labouring 132 1 this, but are you aware when the figures agreed at 2 Mar Hall were first reported to all members? 3 A. I don't know when they were first reported to members. 4 All I can say is they were reported to members in the 5 lead-up to the June Council report in great detail. 6 Q. Dealing firstly with the report to Council on 7 16 May 2011 by the Director of City Development, if we 8 can go, please, to CEC01914650. Go to the next page, 9 please. That's page 5, it starts. We can see this is 10 headed "Edinburgh Tram Update", 16 May 2011. It's by 11 the Director of City Development. 12 But if we can go, please, to page 6 of this 13 document, in paragraph 3.6, it's in the context of 14 arising of outcomes of the mediation. This paragraph 15 states: 16 "The Council is asked to note a number of short-term 17 actions that are required to restore momentum to the 18 construction of tram infrastructure in priority sections 19 of line 1a. These will be managed through a Minute of 20 Variation to the contract 'Priority Works Minute of 21 Variation', reference hereafter as MoV4, which deals 22 with the immediate priority issues that were resolved 23 through mediation. The main provisions of MoV4 are 24 summarised in appendix 1." 25 If we then please go to Appendix 1, which is at 133 1 page 12, we can see this is headed, "PRIORITY WORKS 2 MINUTE OF VARIATION - SUMMARY OF KEY TERMS". Did you 3 draft this appendix, Mr Maclean? 4 A. Yes, I think I did, with help from external counsel. 5 But I was certainly involved in that, if I didn't draft 6 it, yes. 7 Q. Under paragraph 1, in relation to the Siemens materials 8 and equipment and certain other works, under 1, scope: 9 "The Council will take ownership of certain Siemens 10 materials and equipment needed to complete line 1a. In 11 addition, payments are to be made for costs in respect 12 of ..." 13 Certain matters set out. 14 Again, I am interested in the question of payments. 15 We then see beneath that, under the heading 16 "Payment", it states: 17 "Payments will be issued in the amounts certified by 18 an independent certifier who will have a duty of care to 19 the Council, tie and the Infraco." 20 Then a few paragraphs beneath that, under the 21 heading, 2, Priority works, Payment: 22 "Monthly payments will be made to the Infraco based 23 on works completed or delivered in that month, as valued 24 and certified by the independent certifier." 25 I think that's all that's said. We should for 134 1 completeness perhaps go to the next page, page 13. Just 2 take a second to look at it. I don't think the question 3 of payments is set out there. Is that correct? 4 A. That's correct. 5 Q. I would like, please, then to go to look at the Minute 6 of Variation 4 to see what it says about payments. 7 I think the reference is CEC01731817. 8 CHAIR OF THE INQUIRY: This is dramatic language. It says 9 "cessation of hostilities, "there is a ceasefire in 10 respect of existing disputes". 11 A. I think I raised a few eyebrows with that language, 12 sadly. 13 MR MACKENZIE: I think we can see the heading of this 14 document, Minute of Variation to the Infraco contract. 15 If we could go, please, firstly to page 11. Just 16 pausing here, Mr Maclean, I think this is a Minute of 17 Variation between tie and the consortium. It appears to 18 be dated on or about 20 May 2011. So just after the 19 report to Council. 20 Are you aware whether the Chief Executive of the 21 Council gave tie authorisation to enter into this Minute 22 of Variation? 23 A. This was an issue which raised itself either MoV4 or 24 MoV5. I cannot recall if she gave authorisation. There 25 were conversations between Sue Bruce and Vic Emery, 135 1 I think Chief Executive of the Council, and Vic Emery 2 agreed in some shape or form that this would be entered 3 into. Vic Emery was the Chair of tie. I don't know if 4 he took it back to his board or not. 5 Q. But do you know whether the Chief Executive of the 6 Council gave tie authorisation to enter into this 7 contract? 8 A. I don't know if she gave express written authorisation, 9 but she certainly was fully aware of this contract being 10 entered into and was in favour of the contract being 11 entered into, yes. 12 Q. Are you aware whether members' approval was sought for 13 tie to enter into this contract? 14 A. So members' approval was sought, as I understand it, 15 from the May Council meeting. I need to go back to look 16 at the recommendations on that. But that was the basis 17 of this contract being entered into, was the May Council 18 report. 19 Q. I think you were asked in the report to note this 20 variation, approval wasn't sought -- 21 A. Right. 22 Q. -- for it to be entered into? 23 A. So it must have been done under some authorisation or 24 authorised signatory type basis. 25 Q. If we go, please, to page 10, if we blow up 136 1 paragraph 6.1, please, this provides that on 2 15 April 2011 -- so that's a number of weeks prior to 3 the report to Council in May – “the Certifier issued 4 a certificate, (Certificate 1 - First Materials and 5 Equipment, and First Payment Certificate) to Infraco and 6 tie, 7 certifying payment of the agreed sum of 8 GBP27 million ... Such payments shall be made by tie on 9 22 April 2011 and transfer of ownership in and 10 unencumbered title to such materials and equipment by 11 Siemens to CEC shall be made on the date of receipt of 12 payment by Siemens." 13 Were members aware or told of that payment at the 14 time? 15 A. I don't know, I'm afraid. 16 Q. Who should we ask to clarify that matter? 17 A. So the Independent Certifier, I think, was Colin Smith. 18 Dave Anderson or Sue Bruce or people in tie would be 19 able to explain. 20 Q. Because we saw reference in the appendix to the May 2011 21 report to Council of a summary of the Minute of 22 Variation, and it did refer to a payment to be made to 23 Siemens in respect of transfer of ownership of 24 materials. What on the face of it may seem odd is that 25 the Appendix Summary in the Report to Council, May 2011, 137 1 didn't mention this price of 27 million, which, at the 2 time that report was put to Council, presumably had been 3 paid. 4 A. No, I'm sorry, I can't help you with the exact amounts 5 that were there. There was a high level summary, you 6 are quite correct, but I don't know if members were 7 informed about what the sums were and when they would be 8 paid. 9 Q. So we can check that with other witnesses? 10 CHAIR OF THE INQUIRY: Can you tell me what the advantage to 11 the Council was of paying GBP19.5 million for equipment 12 from Siemens which related to the tramline 1a that's 13 beyond York Place. So if it was never built, this 14 equipment would just lie unused, would it? 15 A. That's correct, my Lord. 16 CHAIR OF THE INQUIRY: Are you able to comment on whether 17 that seems to be a prudent solution? 18 A. When I heard about it either at or shortly after 19 Mar Hall, it sounded odd, but that was the deal that had 20 been agreed. 21 MR MACKENZIE: Is the position not worse, Mr Maclean, in 22 that when a deal had been agreed in principle at 23 Mar Hall, it was subject to approval by the Council and 24 the Council may have decided in fact they didn't want to 25 go ahead with this deal at all. They may have preferred 138 1 to go down the route of terminating the contract, and in 2 that event the Council may have been left with a lot of 3 expensive equipment for a tramline that was never built. 4 A. That's certainly a logical interpretation. As I say, 5 I wasn't party to the conversation. I guess those that 6 were could possibly argue that the money was being 7 racked up all the time in the dispute, and this was less 8 money in the grand scheme of things that got them to 9 a final place. 10 Was that part of the negotiation, commercial 11 negotiation that was there? I don't know. But 12 I understand the point. 13 Q. Again, we can perhaps clarify these matters with 14 Sue Bruce and Vic Emery. Is that correct? 15 A. Yes, I think they would be able to shed more light on 16 it. I was certainly aware of, in relation to this 17 point, cash flow issues of the consortium being 18 mentioned, and I think this request, from what 19 I understood, came in fairly late in the Agreement 20 around the Points of Principle. 21 Q. If we could also go back to minute of variation 4, under 22 paragraph 7, we see the heading, "CERTIFICATE 2 - SECOND 23 PAYMENT". This states that: 24 "By 3 May 2011 [parties] shall request that the 25 Certifier shall issue a certificate in accordance with 139 1 the Certifier Agreement (Certificate 2 - Second Payment 2 Certificate) to Infraco and tie, certifying payment of 3 the agreed sum of GBP9 million ... and payment shall be 4 made by tie to Infraco of the amount certified on 5 17 May 2011." 6 Now, again, do you know what this payment related 7 to? 8 A. No. If I can maybe take a step back, the deal was 9 a rebasing of the contract, as I understood it, from 10 airport to St Andrew Square or York Place for ideally 11 a fixed amount of money which turned out not to be the 12 case. 13 But then there were payments for materials that 14 Bilfinger Berger or Siemens had, to go all the way to 15 Newhaven, and there was also a payment for the design on 16 the whole line, even though it was being shortened from 17 airport to St Andrew Square. 18 As I said earlier, I had understood or had picked up 19 the position that there was a request made by the 20 consortium for cash flow reasons for certain payments to 21 be made on a phased basis, which I think related to 22 things like rail tracks and so on to Newhaven, and that 23 was an agreement that was commercially reached. 24 On the face of it, that seems odd, because you're 25 shortening the line from airport to St Andrew 140 1 Square/York Place, why would you need the information 2 and materials to Newhaven? But nevertheless that was 3 the deal that was agreed for whatever reason. 4 Q. But again, on the important questions of why were these 5 matters agreed, and were members told at this time, we 6 should ask these questions to Sue Bruce in particular? 7 A. Sue Bruce, Vic Emery, yes, whoever was there in the 8 negotiation room. But I would imagine Vic and Sue, yes. 9 Q. I'm not going to take up time, but there are three 10 further clauses just to note in passing in 11 paragraphs 8.1, 8.2 and 8.3. We don't have to go to 12 them, but I think three further payments are to be paid, 13 4.3 million on each occasion. 14 So I think in short the Minute of Variation provides 15 for sums totalling approximately GBP49 million to be 16 paid to the consortium. Again, sorry for labouring the 17 point. Again, Mr Maclean, for us to understand why that 18 was agreed and whether and when members were told, we 19 should again ask Sue Bruce? 20 A. Yes. Again, I can only assume there was a delegated 21 power in place under the original 545 million that this 22 fell part of, and people felt empowered to commit to 23 those. But that's an assumption. 24 Q. Thank you. 25 I would like, please, next to turn to the next 141 1 report to Council on 30 June 2011. Again, it's by the 2 Director of City Development. If we perhaps take this 3 by going to your statement, please, which is at page 41. 4 In paragraph 102 you say: 5 "On 30 June 2011 CEC were advised of the options for 6 the tram project in a report by the Director of City 7 Development. It was recommended that CEC complete the 8 line from the Airport to St Andrew Square/York Place at 9 an estimated cost of between GBP725 million and 10 GBP773 million, depending on the risk allowance. 11 I can't completely recall how the increase in cost of 12 the tram project for a shorter line was received by 13 members, but I remember it being a difficult meeting 14 with senior officers, including myself, taking a very 15 active part in presenting the options to the members." 16 Why do you remember it being a difficult meeting? 17 A. It was -- it was a highly unusual meeting in that the 18 way Council meetings normally work is that the senior 19 officers of the Council sit up at a top table and say 20 nothing for the entire meeting as the politicians debate 21 points amongst themselves, more often than not led by 22 a report maybe from officers in this case. And then the 23 politicians debate it. And there's never normally 24 a chance to speak to Council meeting. 25 Sue Bruce was very keen for full openness to be 142 1 there and for officers to be exposed, so to speak, to 2 answering whatever questions the members had. I think 3 some of the political groups didn't like that and didn't 4 want the officers to be there speaking, but given the 5 numbers involved and the gravity of the situation and 6 the media and political issues that had arisen, the top 7 table was there of, from memory, Sue Bruce, myself, 8 Donald McGougan, Dave Anderson and Colin Smith, and 9 officers -- I beg your pardon, elected members fired 10 questions in great detail about the options on the 11 table. 12 So that was, I think -- my recollection was that 13 that was the sort of first real formal time that the 14 deal that had been agreed or the options, rather, were 15 being brought to members. 16 Q. Can you remind us, please, what is local authority's 17 obligation in respect of obtaining the best value? 18 A. It's a nebulous concept, best value. It's not just 19 about getting the best financial value. It's getting 20 the best all round value, including finances, but 21 quality, or risk, or you can put a whole load of things 22 together. 23 It could possibly even be best value for the 24 citizens, for the city. 25 So it was a wide-ranging concept. 143 1 Q. Did officers advise members that the Mar Hall deal did 2 represent best value? 3 A. Oh, gosh. I can't recall, I'm afraid. 4 Q. Were officers in a position to advise members as to 5 whether the Mar Hall deal represented best value? 6 A. I think officers were very clear that they felt the 7 Mar Hall deal was the best option on the table. 8 Q. And does that equate to best value? 9 A. No, I don't know if it does equate to best value. It 10 was the best option that was on the table. 11 Q. Did you have any views or concerns as to whether the 12 Mar Hall deal represented best value? 13 A. No. 14 Q. Is that a matter primarily for the Director of Finance, 15 perhaps? 16 A. I think that would be unfair. I think ultimately best 17 value, and the delivery of that, is probably a matter 18 for whoever the project sponsor is, to make sure that 19 they are offering the best options and best advice. 20 I think the Director of Finance would absolutely 21 have a say in that as finance, but best value is a wider 22 concept. So I think the Director of Finance, the 23 sponsoring director, and the Chief Executive would all 24 think that that was the best that could be achieved. 25 Whether it was best value, I think, is a matter of 144 1 debate, but certainly one that they'll have a view on. 2 Q. Now, I would like to clarify two matters you note in 3 your statement, please. 4 At page 41 of your statement, paragraph 104, the 5 second last line, you say: 6 "Documents which are relevant are the Heads of Terms 7 MOV4, MOV5, and the May 2011 Council report." 8 You say: 9 "There's a confidential appendix to that report 10 which I've not seen in the papers." 11 I think that's the papers the Inquiry provided to 12 you: 13 "It's hugely important the Inquiry sees that 14 confidential appendix." 15 So that is a reference to a confidential appendix to 16 the May 2011 report. 17 We have asked for that from the Council, but I think 18 the Council were unable to provide us with anything. 19 Can you describe what this confidential appendix is or 20 what it said or ...? 21 A. It was a very, very thorough appendix, setting out the 22 changes that were being made in the May one to the 23 contract for MoV4. 24 It analysed or set out the risks, and it set out 25 some of the things that weren't being changed. 145 1 It was direct and clear and it was drafted by my 2 team with the assistance of external legal advisers, and 3 it was done with a very, very clear intention that 4 members would not be able to say they had not been fully 5 advised the way they had in the past. 6 It is a matter of some disappointment to me, if 7 those two appendices, which were extremely carefully 8 worded and drafted, cannot be found. 9 Q. Just on that point, Mr Maclean, there may be some 10 confusion as to which report to the Council in this year 11 they are appended to. So I'll just carry on with that. 12 You also say in your statement: 13 "Other documents that are important are the June 14 Council report ... again, there's a confidential 15 appendix to that report which I have not seen ..." 16 What we were given in relation to the June 2011 17 report is, firstly, a document by McGrigors, McGrigors' 18 draft report, which we can perhaps briefly go to, which 19 is one of the documents. While we are looking for that, 20 another confidential appendix to the June 2011 report is 21 CEC02086429. If we can blow up the text on the top of 22 the page, I think it's a spreadsheet. Certain 23 figures -- 24 A. That's not the document. If I can help out, the two 25 confidential appendices were prepared prior -- so the 146 1 members would have information available to them prior 2 to signing MoV4 and MoV5. So I may have got my dates 3 wrong in the statement. From memory, MoV4 was signed in 4 May. MoV5 was signed -- was going to be signed in 5 August. It's the approvals would have been sought in 6 May and August. So they are the two reports that would 7 have referred to confidential appendices. 8 That, as I say, was designed to let the members know 9 what they were entering into. 10 Q. Well, let's look next at CEC02086430. 11 I think the understanding of the Council in response 12 to our request is that this document on screen now, this 13 did form one of the confidential appendices to the 14 report to Council on 30 June 2011. Do you want that 15 document blown up? 16 A. Yes, please, that does look like one of the documents. 17 Q. So it's headed, "KEY TERMS OF REVISED CONTRACTUAL 18 ARRANGEMENTS". It refers to Mar Hall. Perhaps we can 19 just scroll down the page. It seems to set out the key 20 terms, and over the page as well, please, again, if we 21 blow it up, perhaps. Again, it's all setting out what 22 has been agreed. 23 Over the page again, please, scroll down and carry 24 on going until you get to the end. The next page, 25 please. 147 1 Yes, blow that up. We see it's dated 23 June 2011. 2 What we're not told is who drafted this. I think 3 there's a suggestion it may have been Ashursts 4 Solicitors, but that was just a suggestion. 5 A. So there were two confidential appendices and that looks 6 like one of them. Both of whichever Council reports 7 they were, refer to Council appendices. So you can see 8 clearly on the public records the exact dates. 9 This -- the last one was certainly drafted if not by 10 my team, with input from Ashurst, by Ashurst with input 11 from my team, between my team and Ashurst. 12 A confidential appendix was prepared. 13 For the life of me, I can't remember who drafted the 14 first one, because I think for MoV4, McGrigors were 15 involved, so that may have been drafted by my team, with 16 McGrigors' input or vice versa. 17 But somewhere between the confidential appendices 18 they were drafted by or with the assistance of external 19 legal help. 20 Q. So in short, you are referring to two confidential 21 appendices advising members on the changes to the 22 contract following Mar Hall and the key terms of the 23 Mar Hall settlement. This is one of the two, but it 24 sounds as though there may still be another one we still 25 have to try and find? 148 1 A. Correct. There were very definitely two and this is one 2 of them. 3 If I can just extrapolate just a bit further, 4 members also saw the one-page statement of principles, 5 and they also saw the Heads of Terms that were drafted, 6 and accompanying documents from McGrigors and from 7 Faithful+Gould and others in the data room, an extensive 8 data room, where they had access to all information that 9 officers had in relation to the settlement deal, and the 10 ability to come along and ask questions of the team that 11 was assembled for them to answer. 12 Not all of them availed themselves of that 13 opportunity, but nevertheless we were at great pains to 14 make as much information as possible available to the 15 members after Mar Hall. 16 Q. Just for completeness, I should also go to this. 17 In the report -- yes. In the meeting of Council on 18 25 August 2011, the Inquiry understands that that 19 included another confidential appendix. If we can go 20 to, please, CEC02086443. 21 Now, we can see this is a different document. We 22 can see on the face of it, again, it's headed "KEY LEGAL 23 RISKS OF REVISED CONTRACTUAL ARRANGEMENTS", which I say 24 the Inquiry understands was with the report in 25 August 2011. You're shaking your head, Mr Maclean, so 149 1 that's not it? 2 A. No, that's not it. I can see that immediately because 3 that is not particularly user-friendly for elected 4 members. We wanted to make a comment on what the issues 5 were, how they came about and how they were dealt with, 6 and that's written in a bit of a legal code. So that's 7 definitely not it. 8 Q. I think it actually was a query by the Inquiry, who did 9 prepare this document; was it Ashurst, was it the 10 Council or what? 11 A. That -- looking at the typeset and looking at the footer 12 that says "London" there, and also initials, that is 13 a document prepared by Ashurst, and it looks like 14 it's -- it's almost an internal officer document when 15 we're negotiating MoV5 to analyse where things were 16 going, but it does not look like the confidential 17 appendix that we gave to members. 18 Q. Thank you. So just to summarise, and go back, please, 19 to your statement at page 42, so it looks as though the 20 confidential appendix to the May 2011 Council report, it 21 looks as though we haven't been provided with that. So 22 we should try and make further efforts to get that. But 23 is it also correct to say that I think I did show you, 24 we had the confidential appendix to the June 2011 25 report? 150 1 A. One of those is -- looks like one of the confidential 2 appendices, the document you showed me. I'm confused by 3 dates, if I'm honest about it. I feel I would have 4 sworn the dates would have been May and August. So I'm 5 slightly confused by the June date there. But you've 6 got one of the confidential appendices. I think the 7 other one needs to be seen. 8 Just to clarify, again, what we find in a lot of the 9 Council reports was they were quite verbose, and 10 actually I preferred the style of one paragraph that 11 said: you want to know about legal stuff, then please 12 see the appendix which I have drafted and -- or is 13 drafted by lawyers, and no one else has played with. 14 So we wanted to be quite clear, this appendix is the 15 thing we want to talk about, and we did not want in the 16 public domain because we were still negotiating with the 17 consortium. We didn't want to show our hand or risk 18 alliances or so on. 19 Q. The Inquiry can take further steps, perhaps, my Lord, 20 with the Council to recover that. 21 CHAIR OF THE INQUIRY: Just to clarify, the missing appendix 22 is somewhere between May and August, you think? 23 A. Yes. 24 CHAIR OF THE INQUIRY: And we should -- would it be apparent 25 from the report to Council that there was an appendix -- 151 1 even a confidential appendix? 2 A. Yes. We wanted to make sure that this type of situation 3 didn't arise, that we would always be able to pinpoint 4 the confidential appendix had been provided to the 5 members, and didn't want people denying that down the 6 line. So we deliberately inserted to relevant Council 7 reports: there is a confidential appendix. We didn't 8 attach it to the Council report. We made it available 9 to the members in either the data room or the group 10 briefing rooms. 11 If it helps the Inquiry, I would imagine the 12 external lawyers may have a way of giving you up-to-date 13 drafts if they're not held by any of the parties. 14 CHAIR OF THE INQUIRY: That would be McGrigors, because it's 15 McGrigors' report that's missing. 16 A. I need to spend longer looking at which confidential 17 appendix that was, to be able to say which one is 18 missing. 19 CHAIR OF THE INQUIRY: I think the one we looked at had 20 a London designation, as it were, with MPE. That's 21 Ashurst, isn't it? 22 A. It is, but that wasn't the confidential appendix. That 23 was a different document. It was the one before that. 24 CHAIR OF THE INQUIRY: The one before that that you 25 identified as a confidential appendix also had London 152 1 MPE. Perhaps we can go back to it. 2 MR MACKENZIE: Yes, my Lord. I think the number is 3 CEC02086430. 4 Perhaps we could blow it up. 5 A. You're quite correct, my Lord. 6 CHAIR OF THE INQUIRY: So it's the McGrigors' document which 7 became a confidential appendix that we're looking for? 8 A. Indeed, it looks that way. 9 CHAIR OF THE INQUIRY: Mr Martin, I think my recollection is 10 that the Notice is reserved about this, but I will check 11 this. Could you perhaps clarify with your clients as to 12 whether they can locate this appendix? 13 MR MARTIN: My Lord, I can. The position is that steps are 14 already being taken, given the evidence this afternoon, 15 to ensure that these documents will be provided if they 16 can be identified. I would, with respect, have to 17 confirm myself that they were the subject of an actual 18 Section 21 Notice, but I think, my Lord may take from 19 me, as I understand my instruction at the moment, the 20 Council will certainly make this available if it is 21 physically possible to do so. 22 CHAIR OF THE INQUIRY: Yes. And clearly as soon as 23 possible, because it may have a bearing on future 24 witnesses. 25 MR MARTIN: I quite understand that, yes. 153 1 CHAIR OF THE INQUIRY: Thank you. 2 MR MACKENZIE: My Lord, I don't have much more to put to 3 Mr Maclean, but I'm moving on to another report, another 4 document. I'm not sure whether my Lord wants me to 5 carry on or take a break? 6 CHAIR OF THE INQUIRY: I think we may as well have a short 7 break, and give the shorthand writer a break. 8 So we will resume again at 3.25. 9 (3.14 pm) 10 (A short break) 11 (3.22 pm) 12 CHAIR OF THE INQUIRY: You are still under oath. 13 MR MACKENZIE: Thank you, my Lord. 14 Mr Maclean, the next document I would like to go to 15 is a report by Faithful+Gould of 19 August 2011. The 16 reference is CEC02083979. We can see this is headed 17 "City of Edinburgh Council Post Settlement Agreement 18 Budget. Budget Report 19 August 2011". 19 Did you see this document at the time, Mr Maclean? 20 A. I saw it but did not read it in any detail. 21 Q. So who in the Council would have instructed this report? 22 A. I think Alan Coyle instructed it and -- as a member of 23 the finance team, and he would have reported to Donald 24 Anderson (sic) the Finance Director. 25 Q. When you did look at the report, did anything jump out 154 1 at you? 2 A. No, I didn't look at it in any detail. 3 Q. I'm going to take you to a number of passages and ask 4 you a number of questions, but if I'm asking the wrong 5 person, let me know and direct me to who I should be 6 asking these questions to, please. 7 So if we can start, please, at page 3, and then, 8 please, to page 4, we can see an introduction at 9 paragraph 1.1. It states: 10 "Faithful+Gould was asked to carry out a review of 11 the Budget for the delivery of the Edinburgh Trams 12 project following the Settlement Agreement." 13 Paragraph 1.2: 14 "The review would consider the robustness of the 15 financial assessment as presented to the City of 16 Edinburgh Council on 30 June 2011." 17 In paragraph 1.3: 18 "Due to the time constraints (effectively three 19 weeks) the review relied on previously quantified items 20 and project data." 21 Does that accord with your recollection of the 22 purpose of the report? 23 A. I don't know why it was instructed. I would hazard a 24 guess, again, it's a finance matter and I had no input 25 into that. I think from memory the June Council meeting 155 1 requested some further comfort around the numbers, and 2 possibly it was instructed by my finance colleagues for 3 that purpose. 4 Q. Thank you. Then, please, page 5 of the report. In 5 paragraph 2.7. This is in relation to the on-street 6 works. The report states: 7 "We are of the opinion that the on-street work costs 8 are grossly inflated by INFRACO both for the civil work 9 and the Siemens works. The Siemens position is 10 explained in paragraph 2.6 above. Siemens hold 11 a 'golden key' due to the materials being on site and 12 already paid in full. With regards to the civil works, 13 the cost is also grossly inflated and the contractor has 14 allowed for the very worst case scenario for all works. 15 If this was a competitive tender, then we would expect 16 some of the risk to be taken by the contractor to secure 17 the works. We have highlighted areas that we think are 18 overpriced." 19 There's then a list. Is that something you remember 20 seeing at the time? 21 A. No. I say, I saw the document because it went into, 22 I think, the data room, but I have not read the content 23 of this document. And I have not seen that before. 24 Q. I should perhaps just pause to ask to you explain what 25 you mean by the data room. What was that? 156 1 A. On -- for some of the Council meetings where information 2 was made available to elected members, various reports, 3 advice, documents such as this were put into a data room 4 under confidential conditions so that they were not 5 leaked by elected members. But they were made fully 6 available for elected members to see, and if I'm not 7 mistaken, I certainly remember a Faithful+Gould report 8 having been instructed and being made available in the 9 data room. 10 Q. Thank you. Go on, please, to page 7, paragraph 3.3. It 11 states: 12 "The Off-Street Works (Lump Sum) relate to all costs 13 and works prior to the MOV5 date of 1 September 2011 and 14 a lump sum agreement to complete the works from 15 Edinburgh Airport to Haymarket Station. These have been 16 the focus of extensive mediation between the 17 parties ..." 18 Pausing there, I think in your evidence a lump sum 19 for the off-street works was agreed on day 2 of the 20 mediation; is that correct? 21 A. Yes, it is. 22 Q. The reference in this report to that having been the 23 focus of extensive mediation between the parties doesn't 24 seem right. 25 A. I agree with that. 157 1 Q. Just returning to this paragraph, it states: 2 "... and as such it was felt that, in the available 3 time, Faithful+Gould should concentrate on the risks 4 associated with the agreed lump sum insofar as future 5 expenditure and specified risks that could affect this 6 element of work." 7 I think in short it appears that the scope of 8 Faithful+Gould's instruction was to consider the price 9 for the -- the target price for the on-street works, but 10 in relation to the off-street works, it appears to be 11 the case that because that was a done deal, they should 12 simply focus on looking at the risks associated with 13 that agreed lump sum. Is that a fair analysis? 14 A. It looks -- it certainly looks that way. It certainly 15 seems a fair analysis. I probably can't help you a lot 16 more than that. 17 The correct person to direct that type of question 18 to is Alan Coyle, who I think would be the person that 19 instructed, and was involved in the instruction of that 20 report. But certainly what you said there makes sense. 21 Q. Thank you. Do you know whether this report was made 22 available to members? 23 A. I don't know, but I can recall a Faithful+Gould being 24 talked about, and I'm pretty sure it was part of the 25 data room. 158 1 Again, Alan will be able to confirm that for sure, 2 and there should be a data room index that will set that 3 out. 4 Q. I see. So in terms of the Council records, there should 5 be an index of all documents in the data room at any 6 particular time? 7 A. Yes, there should be. 8 Q. Does the index tell us anything else in terms of who is 9 allowed to see these documents? 10 A. So all elected members were invited to -- by the 11 Chief Executive to see those documents. An inventory, 12 a list of those that attended was also kept. And they 13 were asked to sign confidentiality agreements. 14 Q. Thank you. I would like to put that document to one 15 side, please, and refer to the report to Council on 16 25 August 2011 by the Director of City Development, and 17 the number is TRS00011725. 18 The paragraph 1.1, again, you can see the purpose of 19 the report is to advise on progress made. Then in 20 particular on page 4, in paragraph 3.16, it states: 21 "In order to achieve the most robust possible cost 22 estimates, Faithful and Gould have worked with Council 23 Officers to validate the base budget ... a confidential 24 schedule summarising of the findings of Faithful and Gould 25 Review has been prepared and will be shared on 159 1 a confidential basis with Elected Members." 2 Now, I don't think we've been provided, Mr Maclean, 3 with that confidential schedule. Is that something we 4 may find in the data room? 5 A. It possibly looks like the Faithful+Gould report in its 6 totality was not put in the data room, but rather 7 a confidential schedule was, judging by that paragraph. 8 Again, I couldn't say. Alan Coyle would be the 9 right person to direct that towards. But from memory, 10 it accords with my vague recollection that from May, the 11 elected members wanted comfort around the numbers, and 12 a report from McGrigors was prepared on the legal side 13 of things, and it couldn't come to a final conclusion 14 because of numbers, and a report was prepared that Alan 15 instructed from Faithful+Gould -- it was Faithful+Gould. 16 And then my understanding was that they were both 17 put in the data room. Whether the Faithful+Gould report 18 in its entirety was put in the data room or 19 a confidential schedule, I can't say. Alan or the index 20 to the data room will be able to help you. 21 Q. So in short I think we may have to go back to the 22 Council to check both whether the full Faithful+Gould 23 report was available to members, and also to see what 24 this confidential schedule to this report said; is that 25 correct? 160 1 A. Yes, I think either go back to the Council or ask 2 Alan Coyle, who will know. 3 Q. And these are matters you can't help us further with? 4 A. I'm afraid not, no. 5 Q. Mr Maclean, I'm going to take a lot of the other matters 6 as read because they're set out very clearly in your 7 statement in terms of what happened after the settlement 8 agreement, how the project was run differently. You set 9 out your views on governance, both the previous 10 arrangements and the new arrangements, and you also set 11 out your views on why the problems arose. 12 There's one final matter I shouldn't leave hanging 13 in the air. Again, it goes back to Councillor Balfour. 14 I'll take you to his statement, please. It's 15 TRI00000016. 16 We can see this is the witness statement of 17 Councillor Balfour. If we can go, please, to page 33, 18 and in paragraph 97, I simply ask you this, Mr Maclean, 19 for clarification because I'm not sure what 20 Councillor Balfour is referring to. 21 Councillor Balfour states that: 22 "I refer to the minutes of the Project Delivery 23 Group dated 24 January 2013. It was discussed during 24 the meeting if governance was the best value. This was 25 discussed under what is known as a B item. This could 161 1 be disclosed into the public domain." 2 Does he mean this could not be disclosed into the 3 public domain? 4 A. I think he does, yes. 5 Q. "The answer I got from Alastair Maclean after the 6 meeting has never been in the public domain. This is 7 all confidential. During the course of the meeting, 8 Alastair Maclean advised me that I would be expected to 9 ask a question at the Governance, Risk and Best Value 10 Committee later the same day. This question would 11 relate to the recovery of damages connected to the tram 12 project. I was to ask the question as to whether there 13 was an opportunity to recover money from a third party, 14 due to the advice we had been provided with." 15 So it's really that point there, the councillor 16 suggesting that you were to ask -- you said to 17 Mr Balfour that he was to ask a question. Does that 18 ring any bells? 19 A. No. It's -- it's normally the elected members that ask 20 the officers questions. Sometimes you might help the 21 members work out points of relevance. I don't 22 understand or recognise this. It makes some sense when 23 it gets into recovering money from a third party, which 24 I think is referring to a court case that the Inquiry is 25 aware of, but I'm struggling with the rest of it without 162 1 the context, I'm afraid. 2 It could be -- it could be that he's talking about 3 best value and questions were being asked later. Maybe 4 round about then, about what chance does the Council 5 have to recover money against any of the former 6 advisers. That's the best I can do, I'm afraid. 7 CHAIR OF THE INQUIRY: Are you familiar with the phrase an 8 inspired question, goes to Parliament, where the 9 question is planted, as it were. The Minister knows, he 10 effectively indirectly causes himself to be asked the 11 question that he wants to be asked. Is this something 12 equivalent that an official was coming up with an 13 inspired question? 14 A. No, I can see he's suggesting that I have planted 15 a question towards him. I cannot remember if that was 16 the case or not, my Lord. Either way, if it's -- if it 17 was alluding to it's an opportunity to recover money in 18 governance committee, I think that's what he's alluding 19 to, but I genuinely can't remember planting the 20 question. 21 CHAIR OF THE INQUIRY: Thank you. 22 MR MACKENZIE: Thank you. I have no further questions. 23 Thank you. 24 CHAIR OF THE INQUIRY: Mr Dunlop, I understand you have one 25 matter that you wish to ask. You will be fairly brief. 163 1 Examination by MR DUNLOP QC 2 MR DUNLOP QC: Mr Maclean, could you be taken back, please, 3 to CEC00013342? Just while it's coming on the screen, 4 Mr Maclean, to save time, this is the report to the 5 Council Monitoring Officer that you were taken to 6 earlier, 17 November 2010. I really just want to look 7 at this very briefly out of fairness. 8 You mentioned the potential concerns about 9 criminality surrounding this document: you list concerns 10 at 2.2, and in the subparagraphs; if we could blow 2.2 11 up, please. 12 One of those concerns specifically mentions 13 Andrew Fitchie, you will see 2.2.4, and what's said 14 there is the concern is that Mr Fitchie was paid a thank 15 you payment or bonus after financial close into his 16 personal bank account without the knowledge of DLA. 17 I think we've heard already bonus payments would be 18 expected and were standard. So the concern that's being 19 outlined here is a concern that Mr Fitchie was paid 20 whatever he was paid without the knowledge of DLA; yes? 21 A. That was the concern expressed to me by Mr Jeffrey, yes. 22 Q. We have Mr Fitchie's statement, and if Lord Hardie 23 accepts what is contained therein, that the proposed 24 bonus was disclosed by Mr Fitchie in advance to his line 25 manager, then I'm right in understanding that would 164 1 assuage that particular concern? 2 A. Remember, these weren't my concerns, but to answer your 3 question, yes. 4 MR DUNLOP QC: Thank you. I'm obliged, my Lord. 5 CHAIR OF THE INQUIRY: Mr Fairley, you have given notice of 6 a number of questions. Some of them have been dealt 7 with. 8 MR FAIRLEY: Some of them have, but I'm afraid I do still 9 have some questions under the three heads that I 10 intimated. 11 Examination by MR FAIRLEY 12 MR FAIRLEY: Mr Maclean, are you aware that, from around 13 August 2010, tie discontinued its strategy of referring 14 contractual disputes in relation to the Infraco contract 15 to adjudication under the DRP process? 16 A. No. 17 Q. Should his Lordship take it then that you have never 18 become aware of that, or that that was simply something 19 you were not aware of at the time? 20 A. I have not been aware of it to date. 21 Q. In that case I will trouble you with it no further. 22 So far as adjudication decisions prior to your 23 becoming more closely involved in the tram project were 24 concerned, at paragraph 58 of your witness statement, 25 you say that you don't know why adjudication decisions 165 1 on the Infraco contract were not made available to 2 elected members in the past. 3 Should we understand your reference to "in the past" 4 to mean prior to your involvement? 5 A. Correct. 6 Q. You said, I think, in answer to some questions asked by 7 you of Counsel to the Inquiry that, from the point when 8 you did become more closely involved, from August 2010 9 onwards, you wanted to, I think the way you put it, was 10 get your ducks in a row about what the adjudications 11 meant before engaging with councillors about them; is 12 that right? 13 A. Yes, that's right. 14 Q. Could I ask you, please, to look at a document. If we 15 can get it up on the screen, the document reference is 16 CEC00242585. 17 Now, we've already heard some evidence about this 18 document from another witness, and taking it in short, 19 what we see at the bottom of that page is an email from 20 Nick Smith in CEC Legal to Gordon Mackenzie, who is one 21 of the councillors; do you see that? 22 A. Yes, I do. 23 Q. Again, taking it as shortly as I can, this email, 24 I think, was written in response to a request by 25 Mr Mackenzie for information about the adjudication 166 1 decisions in the first four adjudications which had 2 taken place in late 2009 into early 2010, and they are 3 listed there as Hilton, Gogarburn, Carrick Knowe and 4 Russell Road; do you see that? 5 A. Yes, I do. 6 Q. What is recorded from Mr Smith in this email to 7 Councillor Mackenzie is that he has reviewed the short 8 summary that Councillor Mackenzie had of the 9 adjudication decisions and with regard to the actual 10 adjudication decisions, he says he has reviewed those in 11 detail; do you see that? 12 A. Yes, I do. 13 Q. He confirms to Councillor Mackenzie that the summary is 14 broadly accurate. Do you see that? 15 A. Yes, I do. 16 Q. He also goes on to place a number of caveats upon that 17 because he points out that, quite properly, that they 18 are extremely complex issues. It's difficult to distil 19 the adjudication interpretation to just a few sentences, 20 and that he has been given some further background 21 information on them by tie, but he says it's not 22 possible to expand upon that detail in any meaningful 23 way. Do you see that? 24 A. Yes, I do. 25 Q. It would appear from this, and this was certainly 167 1 consistent with Mr Smith's evidence, that he had read 2 these adjudication decisions in detail by 17 June 2010; 3 is that your understanding? 4 A. That's the way it comes across in the email, yes. 5 Q. So by that stage the ducks appeared to be in a row, at 6 least in relation to the four adjudication decisions 7 that had taken place at Hilton, Gogarburn, Carrick Knowe 8 and Russell Road. That's right, isn't it? 9 A. Yes. 10 Q. Did there come a point when you yourself read those four 11 adjudication decisions which are referred to by 12 Mr Smith? 13 A. Yes. 14 Q. Again, please correct me if in trying to summarise this 15 I don't do it justice, but is it fair to say that in 16 three of those four adjudication -- clearly those four 17 adjudications, a point of principle at issue was as to 18 the correct interpretation of Schedule 4 of the 19 contract? 20 A. Correct. It was to do with the pricing assumptions. 21 Q. Yes. Specifically, there was a major issue of principle 22 about what was meant under the contract by notified 23 departures from what was described also as base date, 24 design information; is that right? 25 A. Yes. 168 1 Q. So far as these adjudications were concerned, the issue 2 of interpretation for which tie contended went against 3 tie in the Carrick Knowe and the Gogarburn 4 adjudications; yes? 5 A. Yes. 6 Q. It was the same adjudicator in fact who made both of 7 those decisions, Carrick Knowe and Gogarburn? 8 A. Gogarburn and Carrick Knowe, yes, it was Mr Hunter. 9 Q. On the same principle of interpretation of Schedule 4, 10 tie's position had largely been accepted by a different 11 adjudicator in relation to the Russell Road 12 adjudication? 13 A. Yes. 14 Q. Of course, the adjudicator for Russell Road was not 15 bound by the decision of the earlier adjudicator, 16 Mr Hunter? 17 A. Correct, there was a difference of opinion about that -- 18 the interpretation of pricing assumption. 19 Q. So the position by the time Mr Smith writes this email 20 on 17 June is that one adjudicator had accepted the 21 consortium's construction of Schedule 4 and a different 22 adjudicator had largely accepted tie's interpretation. 23 That's right, isn't it? 24 A. Yes. 25 Q. We see that Mr Smith is saying to the councillor, 169 1 perhaps understandably, that there are complex issues 2 here, and it's difficult accurately to summarise them in 3 just a couple of sentences. Would you agree with that? 4 A. In a couple of sentences, most certainly it could not be 5 summarised. 6 Q. But based on what he describes as a detailed review of 7 the actual decisions, Mr Smith was able to confirm to 8 the councillor that the summary the councillor had had 9 of the outcomes was broadly accurate. That's what we 10 see here, isn't it? 11 A. Yes. 12 Q. So whatever reason, when we wind forward to August 2010, 13 whatever reason you or Mr Smith may have had for not 14 providing the elected members with chapter and verse 15 about these four adjudication decisions, that was not 16 because ducks were not in a row about what they meant? 17 A. I'm sorry, I have to take issue with what you're saying 18 there. 19 My evidence was not about ducks in a row on four 20 adjudication decisions. My evidence was ducks in a row 21 on a number of matters, on strategy, on termination. 22 We saw the adjudication decisions and indeed 23 adjudication decisions were still coming in, in August 24 and September. 25 So I was picking it up and seeing a number of 170 1 different matters, and my version of ducks in a row is 2 when you see a wider picture and you've got a robust 3 view as to what the conclusion is as a result. 4 I wasn't looking at one part, and saying: there are 5 four decisions, we have got an answer. I looked in the 6 round at where that would take us and what tie's 7 strategy was, and whilst Mr Smith was aware of this in 8 June, I don't think I was. 9 So ducks in a row meant me understanding where 10 things were and putting it together with my 11 understanding of the other issues, and getting ultimate 12 QC's opinion on the prospects of success for 13 termination. 14 So that is what I mean by ducks in a row as opposed 15 to just ducks in a row on these four adjudications. 16 Q. Can we agree on this. At least one facet of what you 17 wanted to get your ducks in a row about was an 18 understanding of what outcomes there had been in the 19 adjudication decisions, and why those outcomes had 20 resulted? 21 A. We can agree certainly that one facet was becoming 22 clearer around the adjudications, but even then, there 23 were other adjudication decisions that touched upon 24 them. If I remember, there was the Tower Bridge one and 25 there was the MUDFA one, and I think there was a -- 171 1 another one as well I have forgotten about, round about 2 that point in time, and then there was Lord Dervaird's 3 opinion in August, and there were two other subsequent 4 to that coming in, I can't remember exactly when, but 5 I would hazard a guess, September, October, maybe into 6 December of that year. 7 So there was shifting sands where you couldn't see 8 the overall picture, but in a spirit of being helpful, 9 I do agree that one facet maybe was clear than the 10 totality of the position. 11 Q. The fault I'm sure is mine, Mr Maclean. You're jumping 12 a little bit ahead in the chronology here, because I'm 13 just asking you about this email, 17 June. 14 As at 17 June, whatever reason there may have been 15 for not giving Councillor Mackenzie and the other 16 councillors copies of the adjudication decisions, that 17 was not because Mr Smith didn't understand what he said, 18 was it? 19 A. I think you can only ask Mr Smith that question, but 20 I would be willing to go along with the view that people 21 had to be very careful in information made available to 22 Councillor Mackenzie. 23 Q. If we scroll up to the top of this email, the reason I'm 24 asking you about this, Mr Maclean, is that this email 25 was copied to you, I think, wasn't it? 172 1 A. Yes, it was. 2 Q. You're on the distribution list from Nick Smith of 3 17 June and this is the email where he says: 4 "I had a long discussion with Councillor Mackenzie 5 re this morning during which I gave away very little. 6 However, he wanted my take on tie's DRP summary which 7 I will also forward for your info. My view is set out 8 below. He is clearly concerned that the public want to 9 see the full picture re the DRPs on a won/loss basis. 10 I advised that we should resist this even though it may 11 be politically difficult." 12 His reasoning, as intimated to you, for not wanting 13 to give Councillor Mackenzie copies of the 14 adjudications, was not because those within CEC Legal, 15 including himself, didn't have an understanding of what 16 they meant, was it? 17 A. I'm sorry, Mr Fairley, I cannot explain what 18 Nick Smith's reasoning was. What I can say is that he 19 appears to have reviewed those four adjudication 20 decisions before I was fully involved in the project. 21 He's written an email there, where he's told me, Alan 22 and some of the senior people in the organisation he had 23 a conversation with Councillor Mackenzie. And I can 24 only surmise that he, as I said earlier, he was very 25 concerned around information that went to this 173 1 particular councillor, because there was a perception 2 that this particular councillor leaked information into 3 the public domain. 4 Q. I don't want to be unfair by asking you things about the 5 period prior to your detailed involvement. 6 Can I move on, please, and look at another document 7 that does post-date your more detailed involvement in 8 the tram project, and that's CEC00012776. 9 Again, we've heard some evidence about this. It's 10 an email dated 13 October 2010 from Nick Smith, copied 11 to you -- sent to you and copied to Carol Campbell. Do 12 you see that? 13 A. Yes, I do. 14 Q. The context in which this was written was that by this 15 stage, the consortium had written to all of the 16 councillors within the City of Edinburgh Council 17 individually, offering, amongst other things, to 18 disclose the full copies of the adjudication decisions 19 if tie were similarly happy. Do you see that? 20 A. Yes, I do. 21 Q. Now, if I tell you that Mr Smith's evidence last week to 22 the Inquiry was that he had read all of the adjudication 23 decisions and was able to come to an opinion about what 24 they said and did, and was able to form a view as to 25 which party the decisions favoured, that is the 174 1 hypothesis on which I'm asking you the following 2 questions. 3 You were aware at this point, in October, as to why 4 Mr Smith was recommending against releasing the 5 adjudication decisions, and to councillors, and more 6 generally to the public, weren't you? 7 A. Sorry, could you repeat the question? 8 Q. You were aware of exactly why Mr Smith was recommending 9 that the adjudication decisions should not be released 10 to councillors and, more widely, should not be released 11 publicly? 12 A. Yes, I see that from this document and the previous 13 document. 14 Q. And in line with questions I asked you a moment ago 15 about the first four adjudications, that recommendation 16 against release had nothing to do with an absence of 17 understanding on the part of Mr Smith, or indeed anyone 18 else within CEC Legal about what the adjudications 19 meant? 20 A. So my -- my view of this was that I was wanting to 21 understand those adjudication decisions in their 22 entirety. Mr Smith, I see from the email, has said he's 23 given it a detailed review, but my feeling was that it 24 didn't have the rigour that I wanted attached to it and 25 I wanted further detail on it and I wanted to look at 175 1 the position in the round. 2 And I have already given evidence to this Inquiry 3 that I did not take at face value a request by the 4 consortium to release those adjudication decisions. For 5 that reason, we did not release the adjudication 6 decisions, but, as I've already said, the intention was 7 for me as Head of Legal of the organisation, in charge 8 of the tram project, from a legal perspective, to fully 9 understand the position and to revert when I was ready, 10 and when I was ready was when I got the independent 11 legal advice that I was seeking. And we can look at 12 that and say I could have released a facet, by all 13 means, but I chose not to do that. I chose to get 14 everything that I had around and to get confirmation of 15 my concerns that broadly weren't being listened to. 16 And I feared by going out with one particular facet, 17 we would not be given the opportunity to look at 18 everything in the round. 19 CHAIR OF THE INQUIRY: I think, Mr Maclean, the question 20 really was that the decision not to release the 21 adjudication decisions was nothing to do with a lack of 22 understanding of the decisions themselves. I think your 23 answer seems to indicate the short answer is: that's 24 correct. It was nothing to do with that. Is that fair? 25 A. Yes and no, my Lord. I think we understood -- we 176 1 understood the generality of the adjudications. We 2 understood roughly what they meant, but there were 3 conflicting views on it. And there were conflicting 4 consequences of it. I didn't understand the consequence 5 of those adjudication decisions. 6 So why was information not released in more accurate 7 language? Possibly because we were saying we don't 8 understand the full consequences of these adjudication 9 decisions. We need to understand those consequences and 10 we need more time to understand them. 11 So were we aware of what they said? Yes. Were we 12 aware of what they meant and the consequences? Not at 13 that stage. I wasn't satisfied with that. 14 CHAIR OF THE INQUIRY: Mr Fairley? 15 MR FAIRLEY: Were you not aware then, Mr Maclean, as at 16 13 October 2010, there was a member of your own team in 17 CEC Legal who has told this Inquiry that you both read, 18 understood and formed a view upon the implications of 19 the adjudication decisions. Did you simply not know 20 that? 21 A. I did know that, but I also know that the same member of 22 the team pointed out to an earlier Tram IPG that the 23 position was more balanced than I am hearing here, and 24 that caused me concern, and I heard two different 25 messages from the same member of the team. I wanted 177 1 a chance to review the position and understand it myself 2 and the consequences of that. 3 Q. Even if you hadn't personally read all the adjudication 4 decisions that had been issued by 13 October 2010, you 5 could have asked Mr Smith what his view on them was, 6 couldn't you? 7 A. I had heard two different views from Mr Smith about what 8 those decisions meant over the previous two or three 9 months, and I wanted to understand myself what they 10 meant. 11 Q. So is it your evidence that Mr Smith changed his 12 opinion, his own personal opinion in the advice he gave 13 to you about what those adjudication decisions meant? 14 A. My evidence is that in the Tram IPG in August, a more 15 balanced view was presented, or at least I heard a more 16 balanced view of those decisions. And I heard 17 a slightly different version of that later. I think 18 also round about that time, Nick was asked to or went to 19 Shepherd & Wedderburn for views. It may have been 20 before or after October. 21 So my evidence is that I was hearing slightly 22 different positions, and I wanted to know personally 23 what they meant. I wanted to read them myself. 24 I wanted to understand what they meant. I wanted to 25 understand the consequences of what they meant, and for 178 1 that reason, I was holding off. 2 That is the reason that I was holding off the 3 members. Whether that is the message that was given to 4 the members is possibly a different matter, judging by 5 these documents, but my view was I was distrustful of 6 the different positions I was hearing from a number of 7 different sources. There were shifting sands 8 and I needed to rely on my own judgment and review them 9 myself personally. 10 Q. Mr Maclean, that's a very lengthy answer, but it doesn't 11 answer the question I asked you, which was: did Mr Smith 12 in your discussions with him appear to change his view 13 of what these adjudication decisions said? 14 A. In that period, yes, it appeared to be that the view 15 changed. 16 Q. So when you talk about conflicting views, you're talking 17 about conflicting views from the same source. That is 18 to say Mr Smith? 19 A. No, we heard conflicting views from tie as well at the 20 time, and as I said in my evidence earlier, in that, 21 I think, August IPG, we were hearing that they were 22 broadly balanced or at least that was my perception, yet 23 also in the press we were hearing a very different 24 story. So I was hearing in the press, I was hearing 25 tie's version. I was hearing a version in the August 179 1 Tram IPG. And I was hearing versions later in emails 2 like this that there was a different position. As it 3 happens, this version that's on screen is correct. It's 4 the one that is saying we're -- tie is broadly losing. 5 But I was not prepared to release the adjudication 6 decisions to the elected members at that point in time 7 because I wanted to come to a view and the elected 8 members were going to be fully informed based upon my 9 view, with help from external legal advice. 10 So it was my decision to hold off, and we did until 11 such time as we got the correct information. 12 Q. So should we understand then that as a strategic matter, 13 your decision was that it was better to say nothing 14 about the adjudications, given that there were 15 conflicting views on what you were hearing, conflicting 16 views on what they meant? 17 A. No, my decision was a strategic one that we would not 18 release all the adjudication decisions to all the 19 elected members at the consortium's request, because my 20 view was that they were playing a tactical game here 21 that would put us strategically in a worse position, and 22 that their request was not in the best interests of the 23 Council to go along with. 24 Q. If there was doubt in your mind as Head of Legal as to 25 what these adjudication decisions meant, surely the best 180 1 course was to say nothing to the councillors until you 2 had absolute clarity? 3 A. So I think that's broadly the tack we were trying to 4 take there. It was -- we didn't want to release the 5 adjudication decisions. We didn't use this language, 6 but: please hold off, until we manage to get ourselves 7 into a position we can advise properly; and, you know, 8 that language might have been used to articulate that 9 more clearly. 10 But I have given, I think, now extensive evidence 11 that I was confident that in the next four, five, six 12 weeks, my fears and concerns and my view of the position 13 would be confirmed and I would then be able to talk to 14 my senior management in the Council, and then for that 15 matter to be taken to elected members. 16 I did not like the view of our irreconciled position 17 to be taken to members without us having our view 18 finalised. 19 Q. So the answer to my question is yes? 20 A. I'm sorry, Mr Fairley, I have forgotten your question. 21 Q. I think, if I may, Mr Maclean, if you would listen to my 22 question and just try to answer my question, because the 23 answer that I have coming in front of me on the LiveNote 24 is very lengthy, but respectfully, it seems to me it can 25 be answered with a yes or no. 181 1 If there was any doubt in your mind as Head of Legal 2 as to what the adjudication decisions meant, surely the 3 best course was to say nothing to the councillors until 4 you had absolute clarity. That was my question. What's 5 the answer to it? 6 A. That would not have been the best course. The elected 7 members had received a letter from Bilfinger Berger 8 Siemens. The elected members were asking what those 9 adjudication decisions said and saying nothing would not 10 have been possible. 11 There was political pressure for people to know 12 more. You could not possibly have said nothing to the 13 elected members there. 58 of them wanted information. 14 We were not ready to give the information to elected 15 members. So that is why an email was sent by me to the 16 group leaders to say we're still -- broadly, we are 17 still thinking about it. 18 So no, I don't agree with you, saying nothing would 19 not have been possible. 20 Q. So the preferable course was to say to them: we are not 21 in a position to tell you about this yet, but we are 22 looking into it. 23 A. Yes, that would be fair. 24 Q. This email here is dated 13 October 2010. I want to 25 look at a document now that's dated the very next day, 182 1 14 October 2010, and the document reference is 2 CEC02083124. 3 This is the report -- sorry, could you go on to the 4 second page of that document? 5 CHAIR OF THE INQUIRY: This is the Council minute, 6 Mr Fairley. 7 MR FAIRLEY: I'm sorry. Two digits have been transposed in 8 the reference, my Lord. It may be because I did that. 9 The document I'm looking for is CEC02083124. What's 10 come up here is 214. It's 124 at the end. That's the 11 correct document now. 12 Now, this is the report to Council dated 13 14 October 2010 that you were asked a number of 14 questions about earlier today. 15 Could we go first of all to page 10 of that 16 document. Now, I think it may be a slightly different 17 version of the document to the one we looked at earlier; 18 I recall seeing the one we looked at earlier as being 19 redacted. 20 We see at the end there two contacts given, 21 Alan Coyle and Nick Smith; is that right? 22 A. Yes. 23 Q. The purpose of giving contact telephone numbers and 24 emails at the end of reports such as this is in case 25 councillors require more information about matters dealt 183 1 within the body of the report? 2 A. Yes. 3 Q. The Nick Smith who is named here at the end of this 4 report is, I take it, the same Nick Smith who had read, 5 understood and formed a view about the outcomes of the 6 adjudications up to 13 October 2010? 7 A. Yes. 8 Q. If we go back to paragraph 2.50 in this, which I think 9 is probably round about the fifth page -- it must be the 10 next page, I'm sorry. 11 Next page. 12 There we go. 13 You were asked some questions about the final 14 sentence of that passage, 2.50, about the overall 15 outcome of the DRPs in terms of legal principles 16 remaining finely balanced, and you said you were angry 17 about that description of the adjudication outcomes. 18 A. That's correct. 19 Q. You were angry about that appearing in a report to 20 Council which bore the name of one of the solicitors in 21 your department as a point of reference? 22 A. Yes. 23 Q. A solicitor who you knew had read and had understood the 24 adjudication decisions; yes? 25 A. Yes. 184 1 Q. But notwithstanding all of that, and notwithstanding 2 your anger, you did nothing to correct that statement? 3 A. My evidence in this point is very clear. The first time 4 I saw that statement was when I saw it in the Council 5 paper sitting in the Council meeting. I saw a draft 1 6 or draft 2. I did not see subsequent drafts. I have 7 not seen that statement before the Council meeting. And 8 my suspicion was that that statement came from tie. 9 Mr Smith can tell us if he's aware of that statement 10 or had any input into that. All I know is that I did 11 not and I wasn't aware of my team drafting that 12 statement or having an involvement in that statement. 13 Q. Mr Maclean, can I repeat my request that you just answer 14 the questions that I'm asking you. In spite of all that 15 you knew at the time when you saw this at the Council 16 meeting, you did nothing at any stage to correct that 17 statement? 18 A. So my evidence on this is already clear. I did not do 19 anything in relation to that particular clause because 20 I was away making sure that we had the full position to 21 correct the full scenario in four to six weeks' time. 22 Q. You said you were angry about this? 23 A. Yes, I was. 24 Q. You were angry about it because you knew, or you thought 25 at any rate, it was not correct? 185 1 A. That's correct. 2 Q. But you didn't at any stage say: that is not correct, we 3 are working on this and we will give you a correct 4 version in a few weeks' time? 5 A. So when a Council report is presented to a Full Council 6 and it's probably a webcast, you generally don't stand 7 up and criticise your director for having incorrect 8 information in a Council report. 9 There were two ways of dealing with that, 10 and I chose to make sure we got the correct information 11 and present it to the correct people in the correct way 12 at the time. 13 This statement was incorrect, and I was powerless to 14 change that clause in the middle of a Council meeting. 15 Q. You didn't speak to anybody who was in a position to 16 change the perception that might have created, did you? 17 A. I talked to my immediate team about that. I'm sure 18 I talked to my two closest advisers in legal on this 19 matter at the time. I cannot recall if I mentioned it 20 to Dave Anderson. So I wouldn't like to give evidence 21 to the contrary or in favour of that point. 22 I know that we were having difficulty having a voice 23 heard, as I have already said, and I needed back-up and 24 support to have that voice heard. 25 I saw here, notwithstanding an earlier draft that 186 1 had different wording in it, going in, which I believed 2 was tie's wording -- I may be wrong on that, but that 3 was my belief -- and rather than picking off individual 4 issues like this, I wanted to have the full position. 5 That is what I did. It is not just what I'm saying. 6 It's what we did. We went off and got the QC's advice. 7 We got the independent legal advice. It confirmed my 8 view. It confirmed in fairness Nick Smith's view in the 9 emails of October. It denied this wrong wording in 10 paragraph 2.50, and when I presented it to people, 11 people eventually listened. I don't know if my voice 12 would have been heard if I'd gone out after the Council 13 meeting and caused a storm about it. 14 Q. The Council did take advice from Shepherd & Wedderburn 15 on the interpretation of the DRP outcomes. Is that the 16 legal advice you were talking about? 17 A. No. I'm talking -- again, you're limiting this to one 18 facet of the adjudications. I was looking at a whole 19 host of matters, as I said earlier, in relation to 20 termination and contract interpretation, and 21 adjudications which goes slightly to contract 22 interpretation, but not entirely. 23 So the advice I'm referring to is the advice round 24 about this point in time to Shepherd & Wedderburn on the 25 different matter which ultimately meant the instruction 187 1 to Nicholas Dennys. 2 Q. That was regarding termination. That wasn't regarding 3 the DRP outcomes? 4 A. It was regarding interpretation of the clause of the 5 contract, and what termination meant, and Remediable 6 Termination Notice, and yes, you are right, there was 7 advice from Shepherds, I think in relation to 8 adjudications, but I was waiting on the termination 9 advice before being able to finalise my view for the 10 Council. 11 Q. You were asked by the Chair of this Inquiry whether the 12 use of the expression "finely balanced" in that report 13 constituted maladministration, and you agreed with him 14 that it did. Is that right? 15 A. Yes. 16 Q. By whom? 17 A. By the author of the report or -- 18 Q. By Nick Smith? 19 A. No, by the author of the report. 20 Q. By those whose names appear on the report, perhaps? 21 A. No, I think -- you know, I think that's very unfair. 22 A director is there to sign off on the report and to 23 sometimes write it. Sometimes supervise it. To collect 24 the right information. 25 I don't know, as I have said already now, where that 188 1 last sentence came from. My evidence to date has been 2 I believed it to come from tie. 3 I don't think it came from Nick Smith, but 4 Nick Smith could answer that. So I can't say where that 5 statement came from, but I disagree with it and I have 6 said to his Lordship that if that is not just an error 7 or an administrative error, if it's something actually 8 that is more substantive than that, then that would 9 appear to be maladministration, yes. 10 Q. What we do know is that both you and Nick Smith had 11 ground to believe that that statement, "finely 12 balanced", was wrong, was misleading? 13 A. That is correct. 14 Q. Is it not maladministration for you, as Head of Legal, 15 to sit angrily by in silence while councillors are 16 misled by a report which bears the name of one of your 17 team? 18 A. No, I do not think it is. As I said, I was taking steps 19 to pull a complete picture together, to report that 20 position to my superiors, and that is what I did. 21 Q. Can I move on to ask about the question of possible 22 termination of the Infraco contract. 23 Are you aware that tie attended a consultation on 24 8 July 2010 with Richard Keen QC to discuss the issue of 25 termination of the Infraco contract? 189 1 A. Yes, I was. 2 Q. Are you aware that Nick Smith was present at that 3 meeting? 4 A. Yes, I am. 5 Q. Could we look at document CEC00264717. 6 This is a note of the consultation with Richard Keen 7 which took place on 8 July 2010. If you take that from 8 me. 9 If you also take from me that there are 13 pages of 10 notes about the discussions that took place at that 11 consultation. 12 Have you read this note? 13 A. No, I have not. 14 Q. Did Mr Smith brief you about what was in this note? 15 A. Yes, he gave me a brief briefing on it. 16 Q. What's the note about? 17 A. I don't know. I have not seen the note before. As 18 I say, we were taking our own independent legal advice, 19 but my understanding of it was that termination -- the 20 briefing I was given was that termination would be an 21 error, that if the contract were purportedly terminated 22 incorrectly, that would leave the contract extant, that 23 to successfully sue for damages in the event of 24 successful termination, one would have to keep the whole 25 contract effectively going, and even then there would be 190 1 a limit of liability limited to 20 per cent. 2 That was the briefing I received on it, and it -- 3 Q. Was that Mr Smith's summary of the note? 4 A. Yes, I'm sure that -- I'm sure that was the case. 5 Q. Can I suggest to you that a more balanced summary of 6 that note is that it was advice being sought from Senior 7 Counsel about the contractual mechanisms available to 8 effect termination, and about what would be required 9 successfully to invoke those contractual mechanisms? 10 CHAIR OF THE INQUIRY: Mr Fairley, I think the witness has 11 said he hasn't seen this before, so how can he agree or 12 disagree with your summary of it? 13 MR FAIRLEY: Were you aware, Mr Maclean, that termination 14 was not the only option which tie was considering at 15 that stage? 16 A. I will be confused about dates, I'm afraid, but I'm 17 aware that tie were considering a number of options 18 over -- over actually a one-week period, as I said 19 earlier, but over a matter of months, yes. 20 Q. Looking just at the possibility of termination, before 21 it went down that route, tie would want to know that 22 there was a clear contractual mechanism to bring that 23 about; yes? 24 A. Yes. 25 Q. If I suggest to you that was one of the issues on which 191 1 Mr Keen was asked to opine in this consultation, would 2 you disagree with me on that? 3 A. No, I subsequently heard that Mr Keen did opine on 4 termination and it was news to me that his advice was so 5 strong, having been led earlier to believe that tie's 6 position on termination was robust. 7 Q. tie had received advice that there was a contractual 8 mechanism in the contract for termination. That's 9 right, isn't it? 10 A. Again, I can't tell you the detail of that advice, but 11 yes, there is a contract -- there is a right to 12 terminate the contract if you do so correctly. 13 Q. The other thing tie would need in order to terminate the 14 contract would be a solid basis on which to do so. 15 That's right, isn't it? 16 A. I would imagine so, yes. 17 Q. Whatever your memory now tells you happened on 18 12 October at the Labour Group meeting, that was in 19 truth the message which Richard Jeffrey conveyed? 20 A. I don't know, Mr Fairley, if I can put those two 21 together. You seem to be better informed at this point 22 than me. I can only give evidence as to what 23 I recollect Mr Jeffrey saying in that meeting, and the 24 effect it had on me, when I walked out of that room, and 25 felt the immediate need to get independent legal advice 192 1 to firm up the concerns. It may be the case my evidence 2 is -- my memory is mistaken, but it was so compelling. 3 Q. You were shown an email earlier -- can we have it up on 4 the screen again, please. CEC00012737. 5 You were referred to this email earlier on in 6 relation to the section a bit later on, where 7 Richard Jeffrey describes termination of the Infraco 8 contract as being risky for all parties, with no 9 certainty of outcome. Do you remember that? 10 A. Yes, I do. 11 Q. We see from the chain here that you appear to have 12 received this email from Nick Smith? 13 A. Yes. 14 Q. There is no email from you to Nick Smith saying: just 15 a minute, that's not what Richard Jeffrey told the 16 Labour Group yesterday; is there? 17 A. No, there is not. 18 Q. But your evidence to this Inquiry, therefore, must be 19 that by the time you got this email, on 13 October, you 20 must have known or thought that Richard Jeffrey had 21 misled the Labour Group; yes? 22 A. In -- I certainly felt Mr Jeffrey had misled the 23 Labour Group or had misrepresented the position. 24 Q. You see, what's in this email is completely different 25 from what you say he told the Labour Group. He talks 193 1 here about risk and an absence of certainty of outcome, 2 doesn't he? 3 A. So I can't quite see it from the document on screen, but 4 on the one -- 5 Q. Move on. I think it's probably two pages further on. 6 It's at the top of a page in the numbered -- numbered 7 paragraph 1. Go back a page. Go back another page, 8 please. 9 I think we've somehow we have gone into a different 10 document. That's it. Can we go on to the second page 11 of that document, please? Third page. Fourth page. 12 Fifth page. I'm sorry, I don't have the precise 13 reference, but it's a numbered paragraph at the top of 14 the page. 15 There we are. 16 The final sentence of paragraph 1: 17 "We must recognise that this issue may end up being 18 resolved in the courts, which is expensive, lengthy and 19 risky for all parties, and has no certainty of outcome." 20 Do you see that? 21 A. Yes, I do. 22 Q. If you're correct in your evidence about what 23 Richard Jeffrey, what you say Richard Jeffrey told the 24 Labour Group, then that is completely different, isn't 25 it? 194 1 A. Yes, it is. 2 Q. So when you read that, you would have thought to 3 yourself: wait a minute, Mr Jeffrey has misled the 4 Labour Group; yes? 5 A. Yes. 6 Q. You did nothing about that? 7 A. I was surprised, but no, I did not correct him in front 8 of the Labour Group. And as I say, I wanted -- I come 9 back to it, and it is my evidence -- I wanted to be able 10 to present in one go the information that we had before 11 us. 12 Q. You don't even say to anyone on your own team, in CEC 13 Legal: that's not what Richard Jeffrey said yesterday at 14 the Labour Group; do you? 15 A. I didn't say it by email, but I'm pretty sure I said it 16 to them orally and verbally. 17 Q. Let's look at what you did say in the email to 18 Nick Smith. Let's go back to page 1, please. 19 You don't say there: this is completely contrary to 20 what Jeffrey told the Labour Group yesterday. What you 21 say is: 22 "I'll just await the backlash … Not sure copying in 23 everyone was the right call but I understand your 24 frustration." 25 CHAIR OF THE INQUIRY: Is that not Mr Smith's email? 195 1 MR FAIRLEY: I'm sorry, that's Mr Smith. It's the section 2 before: 3 "Thank you, I had just finished dictating to 4 Debbie." 5 Do you see that? 6 A. Yes, I do. 7 Q. Does that mean that what you had just finished dictating 8 to Debbie was broadly similar to the response that 9 Mr Smith was proposing to send to Richard Jeffrey? 10 A. I'm sorry, Mr Fairley, I have no idea what I was 11 dictating to Debbie, my PA. 12 Notwithstanding no email response of what I'd heard 13 in the Labour Group room, I remember it clearly, and I'm 14 sure I referred that conversation back to my team. But 15 I absolutely concede that there's no corroboratory 16 evidence of that on the email chain you are showing me. 17 Q. If you are correct from what you say was said by 18 Mr Jeffrey on 12 October, is this not another example of 19 maladministration by you because you're doing nothing to 20 correct the mis-statement? 21 A. No, I cannot protest against that strongly enough. 22 You seem to be assuming that I should take an 23 immediate action in relation to a partial step in 24 a picture. If we reacted to every single slight 25 misdemeanour or every single mis-statement or every 196 1 single bit that came out here, we would never have got 2 to understand the totality of the substantive picture 3 here. 4 My goal and focus was not being dragged into points 5 like this. My goal and focus was to get the full 6 substantive totality of the position. To see the 7 picture -- 8 CHAIR OF THE INQUIRY: I just wonder if we're making much 9 progress. I don't think it's really enlightening me 10 very far. 11 MR FAIRLEY: I'm happy to move on, my Lord. 12 Can I simply suggest one last point to this witness 13 on this, and that is that you're simply mistaken in your 14 recollection about what Mr Jeffrey said at the 15 Labour Group that day? 16 A. I'm happy for you to suggest that. As I say, the memory 17 is embedded. I remember being shocked by it. 18 And I remember it stiffening my resolve to -- we must 19 get the advice from our QC and we must take it back 20 because people are not listening. 21 And I remember distinctly again thinking that no QC 22 would say such a thing. I was very surprised later when 23 I heard that Richard Keen's advice actually was similar 24 to Nicholas Dennys' later, because that for me was 25 a chink. I'd been led to believe, or the Council had, 197 1 that tie's position was strong. 2 So to hear that in a political briefing, it was my 3 abiding memory of that particular meeting. 4 Q. You used the word "hurtling" in your evidence to 5 describe tie's consideration of termination. Do you 6 remember using that word? 7 A. Yes, I do. 8 Q. It's quite an emotive description, isn't it? 9 A. Yes, it is. 10 Q. It rather suggests hurtling blindly towards termination 11 of the contract; yes? 12 A. I can see how it suggests that. My comments around that 13 were that tie appeared to be moving at speed towards 14 termination and were going to be wanting Edinburgh 15 Council -- latterly they didn't want Edinburgh Council 16 to sign off on it, but they were going to want Edinburgh 17 Council to sign off on termination, and if that were the 18 case, my goodness, Edinburgh Council needed to 19 understand what was going on. 20 So moving at speed towards termination where 21 whichever Council was going to -- the Edinburgh Council 22 legal team was going to have to respond in an almost 23 superhuman fashion, and I remember myself, Nick and 24 another member of the team were very concerned that 25 possibly Edinburgh Council would be bounced into 198 1 termination without us being able to get a message 2 across correctly. It actually became slightly worse 3 than that, because there was a suggestion from tie to 4 get it approved through its own governance structures, 5 either tie or TEL or the Tram Project Board. 6 And that was politically ridiculous. 7 But the hurtling suggests a speed at which 8 termination could be happening, and how Edinburgh 9 Council would have a hard time if we disagreed with that 10 in stopping that or slowing it down, and if I may be so 11 bold, I -- I really, really was concerned about this 12 contract being terminated on the basis of what I'd seen. 13 Q. Can we look at page 2 of this document, please. 14 My Lord, I would anticipate probably being about 15 another five to ten minutes. 16 CHAIR OF THE INQUIRY: Well, I think if you can try to 17 restrict it -- 18 MR FAIRLEY: My questions are very short. The answers I'm 19 getting are long and not always entirely relevant, but I 20 will do my best. 21 CHAIR OF THE INQUIRY: As long as the questions remain 22 relevant, Mr Fairley. 23 Mr Maclean, if you can answer the question briefly. 24 MR FAIRLEY: This is an email dated 13 October to various 25 people involved in the tram project, including yourself; 199 1 yes? 2 A. Yes. 3 Q. It begins: 4 "There is much to be done over the next few weeks if 5 we are to be in a position to recommend termination of 6 the contract in late November/December. Of course no 7 decision has yet been taken that this will be our 8 recommendation, but it is prudent that we plan for such 9 an eventuality." 10 Do you see that? 11 A. Yes, I do. 12 Q. That's not hurtling, is it? 13 A. I understand this email, and I see that. 14 Q. It's not hurtling, is it? 15 A. No, it is not. 16 Q. Then Mr Jeffrey sets out below that, if we go down the 17 email, a number of things that require to be determined. 18 Can we go to question 1, please. Question 1: 19 "Do we want to terminate the current BSC contract? 20 Evidence required. What are the alternatives?" 21 Go over to page 2, please. He notes the 22 alternatives: 23 "Carry on with the current contract, where does this 24 lead? Reach a commercial settlement, on what terms? 25 What were the possible consequences of termination?" 200 1 Legal risk, upside, down side, cost and length of 2 time to litigate. This is not hurtling, is it? 3 A. That email is not hurtling, no. 4 Q. Well, let me show you another email then. Can you look 5 at an email dated 10 November, please, which is 6 CEC00013212. 7 At the foot of this page here we see an email to you 8 and Tom Aitchison from Richard Jeffrey dated 9 10 November: 10 "Clearly any decision to terminate the contract will 11 carry risks, risks which should be fully explained and 12 understood by those empowered with making the decision. 13 Of course I will fully explain these risks to the Tram 14 Project Board and the TEL Board." 15 Not hurtling. Agreed? 16 A. I agree. 17 Q. I refer you to another email then. You spoke in your 18 evidence of Richard Jeffrey walking out of a meeting on 19 24 November; do you remember that? 20 A. Yes, I do. 21 Q. You said he followed it up later that day with an email 22 saying that he didn't agree with the Council's position 23 based on QC advice in relation to termination? 24 A. No, I think he came back, if my memory serves me 25 correctly, to explain he had another urgent meeting he 201 1 had to attend. He didn't agree -- whilst he agreed with 2 much or some of what was talked about, he didn't agree 3 with my, our QC's interpretation of tie's involvement of 4 project management. So it was something like that. 5 Q. But so far as the position on termination was concerned, 6 by 24 November 2010, Mr Jeffrey agreed with everything 7 that was being said by the Council and by the QC, didn't 8 he? 9 A. So from those emails, Mr Fairley, but I remember my team 10 being under pressure to go for -- I can't remember 11 whether it was October or November Council report, and 12 there was a pressure from tie to go towards termination. 13 I absolutely accept that round about the time that 14 Nicholas Dennys' opinion came out, there was a change in 15 pace and approach. I absolutely accept that termination 16 then slowed down or was stopped. I can't say if that 17 was as a result of Richard Keen's advice to 18 Richard Jeffrey round about then, or Nicholas Dennys' 19 advice to us round about then. 20 But leading up to that point in time, tie were on 21 a new course which was moving very quickly, given 22 Council reporting, towards termination that would have 23 put Edinburgh Council's legal team in a very difficult 24 position to understand whether that was wise or not. 25 Q. Can you look at document CEC00013441. 202 1 Is this the email that you were referring to earlier 2 in your evidence? 3 A. Yes, it is. 4 Q. Can we look at the top half of that page, please, down 5 to the numbered point 11 if it's possible to get that on 6 the screen. 7 Can you scroll it down so we can see who it's from. 8 I mean scroll it up, thank you. 9 Email from Richard Jeffrey to yourself, amongst 10 others; yes? 11 A. Yes. 12 Q. Dated 24 November at 19.34; do you see that? 13 A. Yes. 14 Q. Second paragraph: 15 "My apologies again to Alastair for the speed and 16 nature of my departure, but I was already late for 17 another meeting and our conversation was becoming 18 unproductive." 19 Yes? 20 A. Yes. 21 Q. The impression you tried to give in your evidence 22 earlier was that somehow Mr Jeffrey had flounced out of 23 this meeting, because he didn't agree with the advice 24 from Nicholas Dennys. That's not what that says at all, 25 is it? 203 1 A. He left abruptly, in response to my summary of what came 2 out of Nicholas Dennys' meeting. 3 I think it was more to do with the comments on tie 4 than on whether or not strategy going forwards was 5 correct. This email was sent to redress the situation, 6 and to say that he was late for another meeting. I know 7 that he left abruptly. I'm not sure of the relevance of 8 that, but my evidence was he left abruptly, and it was 9 when I was reporting a note I sent Tom Aitchison and 10 that we in turn sent on to Richard Jeffrey, and it was 11 a meeting in the boardroom of the Edinburgh Council. 12 Q. Point number 1 of the numbered points is: 13 "I think we are all agreed that terminating the 14 contract now is not the preferred way forward." 15 Yes? 16 A. Yes, that's correct. 17 Q. So by 24 November 2010, termination is off the table? 18 A. Yes, I think that position was eventually arrived at by 19 tie, but that was not the position a few weeks before. 20 Q. The only thing on which there seems to have been any 21 disagreement in these numbered points at least is the 22 time to initiate mediation. Point number 5. 23 A. On his numbered points, yes, correct. So my evidence is 24 that the tide has turned. tie were looking for 25 termination. They, I assume, received our QC's opinion 204 1 and their QC's opinion, and by then, in fairness to 2 Richard, he realised that termination was not the right 3 way forwards, and that's on 24 November. 4 Q. We are agreed that in mid-October, they were not 5 hurtling, they were considering, and by 24 November it's 6 off the table. Those are both correct, aren't they? 7 A. No. I stand by it, notwithstanding the emails you've 8 presented to me. Edinburgh Council legal team was under 9 significant pressure to respond to the fact that tie 10 were looking to go to an upcoming Council meeting 11 looking for termination. And we were extremely fearful 12 that was being driven through. 13 CHAIR OF THE INQUIRY: Mr Maclean, I think we're going over 14 ground that's been covered several times earlier in the 15 Inquiry. 16 I don't know if we're making much progress on this, 17 Mr Fairley. It's quite clear what his evidence is. 18 MR FAIRLEY: I have no further questions on this line. 19 I have one very short chapter, my Lord. It's not 20 even a chapter. It's two or three questions. 21 You were referred, Mr Maclean, to an email in which 22 Richard Jeffrey expressed what might be described as 23 a degree of irritation at a lengthy email he'd received 24 from Nick Smith asking for input on various legal 25 aspects. Do you remember that? 205 1 A. Yes, I do, Mr Fairley. 2 Q. It was an email that -- I can give the reference for it 3 simply for the notes. It's CEC00098050. But it's the 4 one where he spoke of a lack of focus by CEC Legal in 5 general. And Nick Smith in particular. Do you remember 6 that? 7 A. Yes, I do. 8 Q. Why was a solicitor in City of Edinburgh Council asking 9 tie directly for input on technical legal issues, rather 10 than just going to DLA? 11 A. I think that's a fair question. From memory, we could 12 possibly look at it, but from memory there were 13 a mixture of legal issues there and factual issues. 14 Maybe I'm wrong on that. 15 I think there was also a desire by Mr Jeffrey of 16 someone in tie wanting there to be one conduit, if you 17 like, one person to go through all questions. 18 So I understand on the face of it, it looks odd for 19 an Edinburgh Council legal person to be asking 20 Mr Jeffrey issues like that, but I think it was more 21 a collation of information. This is what we need if we 22 are going to have to move quickly on going towards 23 termination, here are ideas. 24 MR FAIRLEY: Thank you, Mr Maclean. I have no further 25 questions. 206 1 CHAIR OF THE INQUIRY: Thank you very much. We will 2 adjourn. 3 Mr Maclean, you are free to go now. You're still 4 under citation, should it be necessary to recall you. 5 We will adjourn until tomorrow at 9.30. 6 (4.45 pm) 7 (The hearing adjourned until Thursday, 21 September 2017 at 8 9.30 am) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 207 1 INDEX 2 PAGE 3 MR ALASTAIR MACLEAN (sworn) ..........................1 4 5 Examination by MR MACKENZIE ...................1 6 7 Examination by MR DUNLOP QC .................164 8 9 Examination by MR FAIRLEY ...................165 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 208