1 Wednesday, 11 October 2017 2 (9.30 am) 3 MR ANDREW FITCHIE (continued) 4 CHAIR OF THE INQUIRY: Good morning. 5 Good morning, Mr Fitchie. You're still under oath. 6 A. I am. My Lord, if I may, yesterday you set me a piece 7 of homework in relation to some documentation which 8 I said existed in January 2008, and I have references in 9 my statement, and the references to those documents, 10 and I would like to give you them, give the Inquiry -- 11 CHAIR OF THE INQUIRY: You would like to what? 12 A. I would like to give you those references lest I forget 13 during the course of the day. 14 CHAIR OF THE INQUIRY: Yes. 15 A. I know your views on notes, but I couldn't remember this 16 without writing it down. 17 MR LAKE: If I can just interject, I think it may be 18 possible to identify these documents and look at them in 19 trying to work out which ones they may have been. 20 CHAIR OF THE INQUIRY: It might be useful. I'm aware 21 Mr Lake had identified some possible documents. 22 A. Very good. 23 CHAIR OF THE INQUIRY: But if you give me the references so 24 there's no doubt. 25 A. I will do that. And there is one other issue which 1 1 I would like to ask you about. 2 CHAIR OF THE INQUIRY: Just give the references first. 3 A. 7.262.2 in my statement. 7.262.3 in my statement, and 4 7.262.4 in my statement, and the document references 5 which are on -- you asked me, my Lord, yesterday where 6 these documents came from. They're on my SteelNet 7 archive. There is one other document which is a 21-page 8 draft document of Schedule 4, which is CEC01447446-01. 9 That is also on my SteelNet. 10 You asked me, my Lord, when I came to see these 11 documents, and I think I said yesterday, at around the 12 time when tie were doing their internal review of 13 Wiesbaden. 14 I'm not sure that's correct. I think some of these 15 documents I did not actually see until I began working 16 on my statement for the tribunal, for the Inquiry, I beg 17 your pardon. 18 The other issue, my Lord, if I may, and it would be 19 30 seconds. 20 CHAIR OF THE INQUIRY: Yes. 21 A. Yesterday we looked at the Wiesbaden Agreement, the 22 200-page document, and Counsel for the Inquiry was 23 asking me whether I agreed with the proposition that the 24 first four pages of that document were the only 25 contractual terms in it, main terms we were talking 2 1 about, and you expressed interest in that too. 2 I have looked at that document again, and if you 3 look at pages 47, 49 and 51, you will find a lot of 4 material which is directly relevant to Clause 19 and 5 Clause 16 in the Infraco contract, including definitions 6 for compensation events. 7 So my view, and I was hesitant yesterday, is 8 applying Counsel for the Inquiry's view on Schedule 9 Part 4 as a main term, those documents are also, or 10 those parts of that document are also main terms. 11 Thank you, my Lord. 12 CHAIR OF THE INQUIRY: Thank you. Mr Lake? 13 Examination by MR LAKE 14 MR LAKE: Mr Fitchie, if we can look at some of the 15 documents which I think go back to what you say were the 16 exchanges in January 2008 in relation to Schedule 17 Part 4. 18 If we go firstly to CEC01495585. 19 A. Yes. 20 Q. This is an email from Bob Dawson to Geoff Gilbert and 21 copied to Stewart McGarrity. It's dated 22 13 January 2008. Is that correct? 23 A. I agree. 24 Q. This is one of the emails you've been referring to this 25 morning to Lord Hardie? 3 1 A. I have. 2 Q. What it says is: 3 "As just discussed, I done an initial draft of the 4 above as requested." 5 The above is the contract package completion status 6 Schedule 4? 7 A. Correct. 8 Q. "I have incorporated the figures from the email titled 9 "Wiesbaden Deal" that you sent me on Wednesday 10 9 January 2008 but I'll need to have your input on a few 11 things that I don't know the background to and I have 12 made a few comments in red. 13 Unfortunately I can't attach it remotely for some 14 reason but I'll try and send it on my home email. If 15 all else fails I will be on the 6.30 am flight tomorrow 16 (weather permitting)." 17 Do you see that? 18 A. Yes, I do. 19 Q. That's is one of the emails to which you were referring 20 to. 21 If you go to a second email, CEC01447445. 22 You can see this comes from Robert Dawson and the 23 email address is -- although the second part of it has 24 been blanked out, we can see it's different from the 25 normal tie email address he would use? 4 1 A. I think he was at home. 2 Q. It's sent to Geoff Gilbert once again, with 3 Stewart McGarrity being copied in. All it says is: 4 "Attachment as per earlier email." 5 Do you see that? 6 A. I do. 7 Q. If we could look at the attachment to that, please, it's 8 CEC01447446. We can see the front page there, 9 Schedule 4 Contract Price analysis? 10 A. I see that. 11 Q. If we look at the second page of this, you can see that 12 that's simply a contents page identifying various 13 contract clauses and appendices? 14 A. Correct. 15 Q. If you go to the next page, this consists of clauses 16 which are the introduction, provisional sums and 17 provisional quantities. Do you see that? 18 A. I see it. 19 Q. There's nothing about Pricing Assumptions there; is that 20 not correct? 21 A. That is correct. 22 Q. If you look at the next page, do you see anything about 23 pricing assumptions there? 24 A. I do not. 25 Q. If we look at the next page, do you see anything about 5 1 Pricing Assumptions there? 2 A. Not on that page. 3 Q. Can we look at the next page and tell me if you see 4 anything about pricing assumptions there? 5 A. No, clearly not. 6 Q. Next page? 7 A. This page is about provisional sums. 8 Q. That's not the same as the Pricing Assumptions and 9 adjustment of price on that basis, is it? 10 A. My Lord, no, it's not, but the point I was making in 11 drawing these documents to the tribunal's attention is 12 that none of these emails are copied to DLA Piper. 13 This appears to be, and I don't know because it was 14 not shown to us, tie discussing internally what approach 15 they will take to the Pricing Schedule. 16 My point in referring these documents to the 17 Tribunal was I said there was a step between Wiesbaden 18 and 6 February 2008 when Schedule Part 4 first came to 19 my attention. 20 This is part of that step, and all I would say about 21 these documents is that it shows that tie were working, 22 and I would like to put on record that there are 23 a couple of other emails that I recall passing between 24 Geoff Gilbert and Scott McFadzen, about the Wiesbaden 25 Agreement at this period, I believe, or if not, shortly 6 1 after the Wiesbaden Agreement was actually signed. 2 My point was not to say that this document is 3 back-to-back with pricing assumptions. My point was to 4 say that tie had been working on this, not involving 5 DLA Piper. 6 CHAIR OF THE INQUIRY: I think Mr Fitchie, it was in the 7 context of the Pricing Assumptions questions that you 8 mentioned these other documents. I think if you just 9 bear with Counsel and let him take you through the 10 documents so we can confirm what the position is. 11 MR LAKE: Perhaps I can take this short, Mr Fitchie. Did 12 you have an opportunity to look at the documents -- 13 A. These documents? 14 Q. Yes. 15 A. I didn't see them. 16 Q. No, last night. On your SteelNet account. 17 A. My Lord, my purpose was to identify -- 18 CHAIR OF THE INQUIRY: I think the question is: did you -- 19 A. I looked at -- I looked at them, yes, in the context of 20 what I have just explained. 21 MR LAKE: What I can do, I just wonder if we can take this 22 short. If you can't answer this question, do just say 23 so. Is it fair to say that none of the emails that you 24 have referred to in those paragraphs in your statement 25 to Lord Hardie this morning, or the attachments to those 7 1 emails, deal in any way with the question of the pricing 2 assumptions? 3 A. I agree with you. 4 Q. Just leave it there then, thank you. 5 We broke off yesterday, I was looking at the 6 question of the letters issued by DLA to the Council at 7 the time of contract close. If I could turn to that 8 now, I would like to look at document reference 9 CEC01500975. 10 A. This is not at contract close. 11 Q. I didn't catch that? 12 A. This is not at contract close. 13 Q. No, but we are working up. What we'll do is start in 14 December and then go forward, and contract close was in 15 May, wasn't it? 16 A. Okay, I'm sorry. 17 Q. The contract letter in May refers to earlier letters in 18 March, which in turn refer to a letter in December, 19 don't they? 20 A. Correct. 21 Q. It makes sense to start with December? 22 A. Fine. 23 CHAIR OF THE INQUIRY: I think it would be easier, 24 Mr Fitchie, if you just listen to the question and 25 answer it. If I thought it was irrelevant, I would 8 1 intervene. So just assume that the question is 2 relevant, and that Counsel has a particular purpose for 3 asking. 4 A. Yes, my Lord. 5 MR LAKE: We can see this is a letter dated 17 December, 6 addressed to Gill Lindsay, the Council Solicitor. 7 A. Mm-hm. 8 Q. If we go to the fourth page, it's signed in the name of 9 the firm, DLA Piper Scotland LLP, but were you 10 responsible for the preparation of this letter? 11 A. Yes, I was. 12 Q. Could we go back to the first page, please. Enlarge the 13 lower half of the page. 14 We see a heading there, "Core Infraco Contract terms 15 settled and aligned with Tramco Contract"; do you see 16 that? 17 A. I do. 18 Q. The text underneath is: 19 "We are able to report the draft ETN contract suite 20 has been advanced to a point where there are no 21 significant legal issues outstanding on the core terms 22 and conditions which could currently be seen as an 23 obstacle reaching a contract close and signature as 24 programmed by tie." 25 A. Mm-hm. 9 1 Q. Now, as at 17 December, is it fair to say there wasn't 2 even a draft of Schedule Part 4? 3 A. Yes. And what I would say on that, if I may -- 4 Q. Yes. 5 A. Thank you. Core terms and conditions were the core 6 terms and conditions of the contract. 7 I know we have had a discussion yesterday about 8 whether Schedule Part 4 was a core terms and conditions, 9 but I would regard schedules to the contract as 10 different from core terms and conditions, ie Clause 1 to 11 120, whatever it was in the Infraco contract. 12 That is my opinion, and that is what I wrote. 13 Q. Viewing the matter from the standpoint of a recipient of 14 the letter, and dealing with the question of getting the 15 contracts and Condition 2 closed, do you imagine that 16 Gill Lindsay would have expected that the price is 17 something that would have to be settled before close of 18 the contract? 19 A. I'm reading the next sentence: 20 "Work remains to translate commercial and technical 21 positions being settled into agreed detailed drafting 22 and these tasks are being managed and closed out 23 methodically." 24 Q. At this stage you had no drafting at all to reflect the 25 Contract Price; is that correct? 10 1 A. We did not. 2 Q. Thank you. 3 If we go and look at the next letter in time, if we 4 go to CEC01351479. 5 A. If I may just make the point, my Lord, that the Pricing 6 Schedule is not normally something a lawyer would have 7 enormous input into. Thank you. 8 Q. Mr Fitchie, the Pricing Schedule here also has the 9 effect of allocating risk between the two parties, 10 doesn't it? 11 A. It does. 12 Q. In terms of entering into any commercial contract, the 13 allocation of risk is one of the most critical aspects, 14 would you not agree? 15 A. I do, and at this point -- 16 Q. That is something on which a lawyer is particularly well 17 placed to advise the party on how to implement the 18 allocation of risk? 19 A. I agree with you. Here we are on 17 December 2007, and 20 I have agreed with you that there was no Pricing 21 Schedule at that point. So it wasn't possible for me to 22 advise on that here. 23 Q. You could have advised that there was no agreement 24 whatsoever in respect of that matter, couldn't you? 25 A. I'm not sure that would have been part of the purpose of 11 1 this letter. That is my view. 2 Q. If we look at the next letter that I would like to look 3 at, it's CEC01351479. It's on screen now? 4 CHAIR OF THE INQUIRY: Can we go back to the last letter. 5 MR LAKE: Certainly. The reference for that would be CEC -- 6 we have it, it's okay. 7 CHAIR OF THE INQUIRY: Yes. The introduction at the top of 8 the letter. Under "PROGRAMME": 9 "The following was foreseen by tie as enabling 10 Council officers to recommend Full Council authorisation 11 for tie to enter into the ETN contract suite." 12 A. Mm-hm. 13 CHAIR OF THE INQUIRY: So the purpose of this -- or was the 14 purpose of this letter to give reassurance to the 15 Council that their officers could enter into this 16 contract suite? 17 A. I cannot disagree with your reading of that, my Lord. 18 CHAIR OF THE INQUIRY: So the answer is yes? That was -- 19 A. Yes. 20 CHAIR OF THE INQUIRY: Thank you. 21 MR LAKE: Just with this document for a minute, please. 22 Could we go to the second page of it, please. Could we 23 enlarge the heading "RISK" and the text underneath it. 24 You see under the heading "RISK", you say: 25 "We remain of the view (as in both our earlier 12 1 written reports to you) that the contractual allocation 2 of risk and responsibility between tie Limited and the 3 competitively selected private sector providers remains 4 broadly aligned with the market norm for UK urban light 5 rail projects, taking into account: the distinct 6 characteristics of the Edinburgh Tram Network, the 7 technical and commercial state of readiness at ITN issue 8 in October 2006 coupled with the development of scheme 9 engineering and data design since that date. Refinement 10 will be needed within the draft ETN contract suite 11 between now and programmed close to take account of the 12 actual final state of the Employer's Requirements, the 13 matching Consortium's proposals and project specific and 14 Background Information. This exercise is mapped and at 15 present is not expected to either materially alter risk 16 allocation or adjust the core contractual rights and 17 responsibilities." 18 A. Mm-hm. 19 Q. If we just go back to the previous page, I just want to 20 ask you what you meant by. 21 "... the distinct characteristics of the Edinburgh 22 Tram Network, the technical and commercial state of 23 readiness at ITN issue in October 2006 coupled with the 24 development of scheme engineering and data design..." 25 A. My Lord, I know you have asked me not to refer to my 13 1 statement and answer questions, but I am in difficulty 2 here because I answered that question in some detail in 3 my statement, and it would help me answering this 4 question if I could be taken to the part of my statement 5 where it sits. Otherwise I fear I am giving an 6 incomplete answer and I don't want to be in a position 7 where I'm somehow giving an answer that may be 8 interpreted differently to what I said in my statement. 9 CHAIR OF THE INQUIRY: Certainly your statement is available 10 and will be read and taken into account when I'm 11 assessing all of the evidence. I think, Mr Lake, can 12 you help the witness here? 13 MR LAKE: I can find the precise reference within the 14 statement. I'm more interested, though, in whether 15 Mr Fitchie could indicate now as the author of the 16 letter, what he meant when he wrote it, rather than 17 having to refer to his statement. 18 CHAIR OF THE INQUIRY: Can you help us there, Mr -- 19 A. I would rather -- 20 CHAIR OF THE INQUIRY: I know you would rather refer to your 21 statement. If you are not able to answer the question 22 as to what you meant, just say so, and we will just move 23 on. 24 A. I cannot answer the question without referring to my 25 statement. That is my -- I have given my best shot at 14 1 what I meant here in my statement, and that is my 2 evidence, my Lord. 3 CHAIR OF THE INQUIRY: I just wonder about that, Mr Fitchie. 4 Clearly if you've given an answer in the statement about 5 that, you must have been able to understand or recall 6 what you meant by that particular passage, and are you 7 saying now that something has happened in between times? 8 A. Not at all, my Lord. 9 CHAIR OF THE INQUIRY: Did you prepare the statement 10 yourself? 11 A. Absolutely. 12 CHAIR OF THE INQUIRY: So that there shouldn't be any 13 difficulty in telling us what this means. 14 MR DUNLOP QC: My Lord, I think the statement is 11.112, and 15 it is a multifaceted answer that the witness has given, 16 and with respect, it is not a memory test. 17 CHAIR OF THE INQUIRY: I appreciate it's not a memory test, 18 but the witness has written this letter. Surely he 19 knows what it means. Don't bother looking at the 20 statement. 21 A. I shall put the statement away. 22 I will attempt to answer this question, my Lord. 23 The distinct -- the question is what are the distinct 24 characteristics of the Edinburgh Tram Network. Is 25 that -- may I ask, is that -- this -- it's these phrases 15 1 at the bottom of this page. 2 MR LAKE: What did you mean by these and why did you feel it 3 necessary -- this is the second part of the question, 4 a new one -- why did you feel it necessary to add these 5 qualifications? 6 A. What I meant by this was the fact that the Edinburgh 7 tram is being put into streets. It was very different 8 to other light rail schemes where there were segregated 9 ways for use and construction, and therefore this was 10 going to be something that would affect the contractor. 11 The technical and commercial state of readiness at 12 ITN issue was my way of -- I ask the tribunal to bear in 13 mind that I discussed the content of this letter with 14 Ms Lindsay before writing it, and we discussed a number 15 of things which were in my view covered in these or 16 under these rubrics. Its technical and commercial state 17 of readiness. This was the state of the design. May 18 I see over the page -- coupled with the development of 19 scheme -- 20 Q. Yes. If we go to the next page? 21 A. And engineering design since that date. So that is 22 a direct reference to SDS being late, and MUDFA being 23 late. And these were things which I did discuss with 24 Gill Lindsay. 25 That is a very condensed version of what is in my 16 1 statement, I believe. I think there were other things 2 in my statement that I recall. I do ask for the 3 indulgence that this is a very long witness statement, 4 and I'm being asked to remember exactly what I meant ten 5 years ago. 6 CHAIR OF THE INQUIRY: It's not a case of asked to remember. 7 You're being asked to tell us, as you were able to do 8 fairly recently when you produced the statement, what 9 you meant. 10 A. I have tried now to do that, my Lord. 11 CHAIR OF THE INQUIRY: Very well. 12 MR LAKE: Could I ask you to look at the fourth page of this 13 letter, please, the lower half. In signing it off, you 14 say: 15 "We will continue to provide every support necessary 16 to tie Limited and CEC to achieve the successful outcome 17 the project deserves." 18 A. Mm-hm. 19 Q. So the reader of this, the Council Solicitor, perhaps 20 understands that you were also providing assistance to 21 the Council? 22 A. The reader was Gill Lindsay, and we had had a discussion 23 before that as to what our role was. We touched on this 24 yesterday a lot, and my position is that the 25 practical -- the way this operated practically was the 17 1 way it was set out in terms of duty of care in that 2 first set of June 2005 letters. 3 I also note this letter was copied to 4 Matthew Crosse. 5 Q. I'm not going to go back over the letters of duty of 6 care. We covered that yesterday. 7 Could you look now at the next letter in the chain 8 towards close. It's reference CEC01351479. Enlarge the 9 upper half of the page. 10 We can see this is dated 12 March 2008, and again 11 it's addressed to Gill Lindsay, the Council Solicitor, 12 and it comes from your firm. 13 A. Correct. 14 Q. The text of it says: 15 "This letter is our report to update you on the 16 matters which we addressed in our letter of 16 December 17 and to report further on the evolution of the contract 18 documentation towards tie's planned close date of 19 24 March 2008." 20 Now, the letter we have just previously been looking 21 at is dated 17 December, rather than the 16th, but is 22 that intended as a reference to that letter? 23 A. Yes, it is. I think it is a mistake. 24 Q. There is a draft of 16 December? 25 A. There's a mistake. 18 1 Q. If we can go over the page, to the top of page 2. 2 A. Sorry, just on that point, my Lord, the reason there was 3 a draft is because I believe that was shared with 4 Gill Lindsay and tie before it was issued. I'm sorry, 5 Mr Lake, to interrupt you. 6 Q. We can see at the top of page 2, it says: 7 "We are able to report that by close of business 8 today Wednesday 12 March the draft ETN contract suite 9 will have been advanced to a point where there are only 10 limited legal issues outstanding on the Infraco and 11 Tramco core terms and conditions which, after a further 12 full working session scheduled tomorrow, should not 13 prevent the documentation being ready for signature by 14 end of March." 15 Can I ask why you underlined "legal" in that text? 16 A. Because there were -- at this stage there were many 17 technical and commercial issues which were 18 outstanding: financial, commercial, engineering issues 19 outstanding. 20 Q. Were they likely to prevent the -- as at 12 March, do 21 you consider that they might prevent the documents being 22 ready for signature by end of March? 23 A. I would answer that question, my Lord, by saying that 24 this was optimistic, but it was my honest belief at the 25 time that tie was going to drive forward with Infraco to 19 1 try and get there. This isn't a guarantee. 2 Q. Can we look at -- 3 A. The next -- I'm sorry, my Lord. There is -- the rest of 4 that paragraph says: 5 "This forecast will rely also on the cooperation 6 and focus of, and interaction with, the BBS Consortium. 7 Detailed drafting remains necessary to ensure accurate 8 and fully agreed reflection of myriad commercial aspects 9 which have come together in the last 10 days." 10 Q. Would you include Schedule Part 4 in that -- 11 A. I would, my Lord. 12 Q. Could we look at page 4 of the document, please. 13 A. Could I, before we -- sorry, my Lord. 14 CHAIR OF THE INQUIRY: Is it something in relation to 15 a question you've been asked? 16 A. Yes. 17 CHAIR OF THE INQUIRY: What do you want to add? 18 A. We are looking at sections of the letter when there is 19 language in the letter that we don't look at which 20 I consider relevant to the question I've been asked. 21 CHAIR OF THE INQUIRY: If that's the case when you're shown 22 a document, by all means refer to the relevant language. 23 A. That's what I wanted to do now. We've not looked at 24 a paragraph which I think is important. 25 MR LAKE: Which paragraph do you consider we should look at? 20 1 Is it another one or the one you have just referred to? 2 A. The whole of the last half of that -- the last third of 3 that page: 4 "In our view the draft agreements in their current 5 state adequately capture the commercial positions which 6 tie has achieved. In our opinion, in order for tie to 7 issue a notification of intent to award, the following 8 tasks need to be urgently attended to tomorrow ..." 9 And I list them: 10 "Clearly this is a full and ambitious day's effort. 11 BBS should be requested to confirm their commitment to 12 close by latest 26 March ... That commitment would 13 exclude any further visits to any of these core elements 14 of the ETN contract suite." 15 Q. To be quite clear, what it says at the end is "these 16 core elements"; so everything in the bullet points is 17 regarded as a core element of the contract suite, isn't 18 it? 19 A. Correct. 20 Q. That includes completion of pricing negotiations, second 21 bullet point? 22 A. Right. 23 Q. So we can be clear that this is to be seen as a core 24 element of the ETN contract suite? 25 A. Yes, as opposed to terms and conditions, yes. 21 1 Q. Can we now go on and look at page 4, please. Look at 2 the second half of the page, under the heading "RISK". 3 5.1 says: 4 "Our view on the contractual allocation of risk and 5 responsibility between tie and the competitively 6 selected private sector providers remains that the 7 Infraco Contract and the Tram Supply and Maintenance 8 Agreements are broadly aligned with the market norm for 9 UK urban light rail projects, taking into account the 10 distinct characteristics of the ETN and the attitudes of 11 BBS and SDS to novation. The project's state of 12 technical and commercial readiness has matured since 13 Christmas. However, the fact that work still continues 14 on the Employer's Requirements Schedule - the core 15 project scope - at this very late stage (resulting in 16 SDS requiring an instruction to align their designs with 17 tie's Employer's Requirements and the Infraco Proposals) 18 means that technical ambiguity (and therefore delay/cost 19 risk) may exist in the interplay between design, scope 20 and method of execution. There is contractual 21 mitigation available whereby (1) the Infraco is under 22 a duty to bring any ambiguity in technical documentation 23 to the attention of tie; (2) tie's authority to direct 24 resolution of such issues; (3) the precedence of core 25 terms and conditions over Schedules; and (4) the 22 1 exercise of SDS now instructed by tie to align their 2 designs with the Employers' Requirements and the Infraco 3 Proposals so as to eliminate mismatches." 4 Now, the text at the start of that paragraph is in 5 many respects similar to the narrative given in relation 6 to risk in the earlier letter; would you agree? 7 A. Yes, the first -- first sentence, yes. 8 Q. By the time we have got to 12 March, the negotiations in 9 relation to the Schedule Part 4 had advanced; would you 10 agree? 11 A. Yes, sorry, we're at 10 -- we're on the 12 March, yes. 12 Q. Therefore it was apparent, was it not, that there was to 13 be a substantial shift of risk from the contractors back 14 to the Council? 15 A. Correct. 16 Q. No indication of that is given in this letter, is there? 17 A. Well, it is clumsy, my Lord, but that is what I'm trying 18 to do. 19 Q. Can I ask my question again. No indication is given of 20 the shift of risk -- 21 A. There is no sentence in this letter that says Schedule 22 Part 4 is a document which changes time and cost 23 responsibilities. 24 Q. I don't know if you recall when we looked at the 25 previous letter -- go back to it if you prefer -- but 23 1 you said that the exercise, the risk exercise is mapped 2 and at present is not expected to either materially 3 alter risk allocation or adjust the core contractual 4 rights and responsibilities. In fact, the exercise had 5 altered risk allocation? 6 A. It seemed that it was going to. 7 Q. Would that then, standing the statement in your earlier 8 letter that you didn't think there would be such 9 a change, make it all the more important that that 10 change was identified in the 12 March letter? 11 A. May I, before answering that question, look at the top 12 of this page if it's the right page to look at? 13 Q. Scroll up. Go back to the previous page if that will 14 assist you? 15 A. No, this is fine: 16 "BBS have taken a most risk averse stance, due to 17 their developing first hand views on SDS performance to 18 date, in particular in relation to design Consent 19 achievement, but also in relation to important aspects 20 of scheme design quality. 21 BBS have insisted on reinforced contractual 22 protection (in our view overplayed) and commercial 23 support in the form of tie accepting compensation 24 entitlement for BBS in the event of SDS default on 25 its design production and Consent delivery obligations." 24 1 Now, what I would say at this stage is that I -- 2 I have mentioned this in my statement. It was difficult 3 to report to the Council on positions that were not 4 closed, and I endeavour to do that in this letter, in 5 the paragraph -- the paragraph that we've looked at with 6 bullet points. 7 This letter was not intended to be an absolute sweep 8 through all of the contract negotiations and status of 9 those contract negotiations. That's my view, my Lord. 10 Q. If you're going to read that text as you did from the 11 section on page 4, could we look back to see how it's 12 headed. If you look to page 3. You see the foot of the 13 page. All you read out comes under the heading, 14 "CONFIRMATION OF NOVATION STRATEGY". 15 A. That's right. 16 Q. So we have got one section dealing with novation 17 strategy, and the following section headed "RISK" is 18 where you would expect to see any warning about risk 19 transfer, isn't it? 20 A. You would also see -- 21 Q. Could you answer my question, please, Mr Fitchie? 22 A. I'm answering your question. 23 Q. If there was going to be a statement about where the 24 risk had been transferred, you would expect to see that 25 under the heading "RISK", not under the heading 25 1 "Novation"? 2 A. Yes, and you would also expect to find it in paragraph 2 3 on that page where it says "UPDATED RISK ALLOCATION 4 MATRICES". This is the tool that Gill Lindsay told me 5 she referred to use to understand where contract was 6 placed. 7 CEC Legal received on a very regular basis issues 8 lists, revised contract drafting, and updated risk 9 allocation matrices. 10 Q. We will come to the matrix, don't worry. 11 A. I'm merely trying to be complete, my Lord, in what's in 12 the letter. 13 Q. We can then go to the next letter in the chain. It's 14 the one dated 18 March, reference CEC01351480. Now, we 15 can see the letter here is dated 18 March and once again 16 it's from DLA Piper, and it's addressed to Gill Lindsay, 17 the Council Solicitor. 18 A. I agree. 19 Q. We can see the heading is: EDINBURGH TRAM NETWORK, DRAFT 20 CONTRACT SUITE AS AT 13 MARCH 2008. So although it's 21 dated the 18th, it's commenting on a position as at 22 13 March. Do you see that? 23 A. I do. 24 Q. Then the first sentence is: 25 "We write to update you on our report yesterday." 26 1 A. Yes. 2 Q. Now, when it's referring to "yesterday", is that 3 intended to refer to the report of 12 March -- that is 4 the day before 13 March? 5 A. My Lord, this is difficult to recollect. This is ten 6 plus years ago. 7 I'm not sure what "yesterday" means. It would be 8 odd if I was writing "yesterday" in connection with 9 something that had been done on 12 March. 10 I'm not in a position to say what the report was, 11 whether it was -- whether it was a meeting or whether 12 there was a document. I cannot make that connection in 13 my memory. 14 Q. Okay. If we just look at the remainder of this letter 15 for the time being, it gives a narrative on page 1 of 16 the core Infraco and contract terms, says: 17 "There has been measured progress in closing out the 18 core provisions, despite extreme time pressure and 19 interruption for detailed commercial discussion. tie 20 has achieved a level of closure and agreement which will 21 support the notification of intent to award letters 22 being dispatched today." 23 A. Yes. 24 Q. You do narrate within your statement the desire on the 25 part of tie to issue the notification of intent of award 27 1 letters, and your feeling that that was inappropriate at 2 that stage? 3 A. Yes. I had been aware of tie's wish to formalise the 4 march towards close since I came back from leave on 5 8 January, and I had been vocal about this. 6 Q. You then move to the letter of 12 May, the one issued on 7 the eve of the signature of the contract. It's 8 reference CEC01033532. 9 We see this is a letter dated 12 May. It's from 10 DLA Piper, and this time it's addressed to both 11 Gill Lindsay, the Council Solicitor, and 12 Willie Gallagher, the Executive Chairman of tie? 13 A. Correct. 14 Q. If you go to the second page, please -- sorry, pardon 15 me. Can we go back to the first page. For 16 completeness, I should have noted that the first 17 paragraph says: 18 "We are instructed to report to tie and to CEC in 19 relation to the status of the ETN Suite of documentation 20 as at 12 May 2008. You of course have our letters of 12 21 and 18 March, copies of which are appended for ease of 22 reference." 23 Those are the letters we've just been looking at; is 24 that correct? 25 A. Yes. 28 1 Q. You then go to the second page of this. If we look at 2 the upper half, under heading "1.1. Core Infraco 3 Contract Terms", you note: 4 "The Core Infraco terms are closed as to all matters 5 of contractual, technical and commercial principle. BBS 6 legal teams were instructed on 24 April to respond 7 during the final quality assurance period of 7 days 8 in order to remove or refine any omissions or errors 9 co-operatively. No issues have arisen since we last 10 reported which have resulted in any adverse alteration 11 (of consequence) to risk balance." 12 A. Mm-hm. 13 Q. Now, is that you representing that even the conclusion 14 of negotiations on Part 4 of the Schedule had effected 15 no adverse alteration in the risk balance? 16 A. My memory of the close on Schedule Part 4, and I had 17 written on 18 March, was that from 18 March until the 18 end of those discussions, not a great deal happened 19 which was to do with Pricing Assumption 1 -- sorry, 20 Pricing Assumption 1.3.4 which was the main alteration 21 of responsibility for time and cost in Schedule Part 4. 22 Q. So we saw that in the 12 March letter, there was 23 a statement as to risk and responsibility which was the 24 same as had been made in December. Do you recall that? 25 A. Yes. 29 1 Q. Now in May you are saying: no issues have arisen since 2 we last reported to result in any adverse alteration of 3 risk balance. 4 A. Since we last reported, correct. 5 Q. So if you read your letters together -- that's this one, 6 the one on 12 March and the one on 18 March -- the 7 understanding of the reasonable reader would be that 8 there had been no change in risk since 17 December. 9 A. This reader -- 10 Q. Could you answer my question? If you read this letter 11 together with the two it refers to, what this represents 12 to the reader is that there has been no adverse change 13 in risk since December, 17 December. 14 A. I think this letter attaches risk matrixes. 15 Q. We will come to that. 16 A. Yes, there is no -- thank you. 17 Q. Shall I ask my question again? 18 A. I said yes. 19 Q. If you read this letter together -- yes. 20 But in fact the situation was that there had been an 21 adverse change in risk in the form of Schedule Part 4? 22 A. The last sentence of that paragraph says: 23 "As they stand, the terms and conditions represent 24 a clear reflection of the positions which have been 25 negotiated by tie and are competent to protect and 30 1 enforce those positions." 2 Q. Let's see what you do say in respect of this. Could we 3 look at page 3 of the letter, and look at the heading, 4 "RISK", and the text, two paragraphs underneath it. You 5 say that: 6 "Following on from our letter of 12 March, we would 7 observe that delay caused by SDS design production and 8 CEC consenting process has resulted in BBS requiring 9 contractual protection and a set of assumptions 10 surrounding programme and pricing. 11 tie are prepared for the BBS request for an 12 immediate contractual variation to accommodate a new 13 construction programme needed as a consequence of the 14 SDS Consents Programme which will eventuate, as well as 15 for the management of contractual Notified Departures, 16 when (and if) any of the programme related pricing 17 assumptions fall." 18 Now, you refer there to programme assumptions. But 19 clearly Schedule Part 4 also dealt with the content of 20 design as well as the programme for works. 21 A. It did, and I think, my Lord, the first paragraph: 22 "Following on from our letter of 12 March, we would 23 observe that delay caused by SDS design production ... 24 has resulted in BBS requiring contractual protection and 25 a set of assumptions surrounding programme and pricing." 31 1 Q. Yes. Now, what do you consider should be taken from 2 that in light of your previous comments about any new 3 adverse alteration of risk balance? 4 A. I take from that, as this is in the paragraph dealing 5 with risk, that if these assumptions fall, then there 6 will be an effect on programme and pricing. 7 Q. But not any adverse alteration of risk balance, as you 8 said earlier? 9 A. There is no sentence in this letter that specifically 10 says there has been an alteration of risk balance in 11 Schedule Part 4. 12 Q. If you just put it this way, this letter gives no 13 intimation whatsoever of the magnitude of risk transfer 14 that had been effected by Part 4 of the Schedule. In 15 fact it represents there has been none. 16 A. I don't agree with you. 17 Q. Okay. If we go down to page 6, 11.3, it says: 18 "The Pricing Schedule (Infraco Contract Schedule 19 Part 4) has been extensively discussed over the past six 20 weeks and is now settled as to its key assumptions, 21 value engineering items, provisional sums and fixed 22 prices. tie has assessed the likely financial impact of 23 the assumptions not holding true and triggering 24 changes." 25 Again, there's no indication given there of the size 32 1 of the shift brought around by Schedule Part 4, is 2 there? 3 A. That's correct. 4 Q. What was the source for your statement that tie has 5 assessed the likely financial impact of the assumptions 6 not holding true and triggering changes? 7 A. The source of my sentence -- my putting that sentence in 8 the letter was my presence at tie project management 9 meetings and tie executive management meetings, in which 10 tie's quantitative risk assessment process was 11 discussed, seeing minutes of meetings in which 12 individuals were charged at a very early stage to carry 13 out or continue this process through so it could be 14 reported to both the Council and Transport Scotland; and 15 I think it's reasonable to assume, having seen those 16 documents and attended those meetings, for me to be 17 saying that they have made an assessment of the likely 18 financial impact of the assumptions not holding true. 19 Q. Did anyone discuss with you what assessment they had 20 made of the likelihood of those assumptions not holding 21 true? 22 A. No. They did not. 23 Q. Had anyone indicated what value they had attached to the 24 risk of those assessments not -- those assumptions not 25 holding true? 33 1 A. No, they had not. 2 Q. Could we look at the risk allocation matrix that we saw 3 referred to in the letter. It's reference CEC01347795. 4 You can see this is headed -- it's got the logos of both 5 DLA Piper and tie on it. It's headed "EDINBURGH TRAM 6 NETWORK CONTRACTUAL ALLOCATION OF RISKS IN THE DRAFT 7 INFRACO CONTRACT as at 12th May 2008". So this would be 8 the risk allocation matrix you are referring to; is that 9 correct? 10 A. Yes. 11 Q. We just look at the first page as an example. The first 12 item is 2.2: 13 "Failure to serve notice to propose extension no 14 later than 180 days prior to expiry date." 15 There are then ticks in one or more of the boxes to 16 the right-hand side indicating where that risk lies 17 under the contract. 18 A. Yes. 19 Q. Essentially when there's the number in square brackets, 20 that is a reference to a term of the contract? 21 A. Correct. 22 Q. So, for example, if Clause 2.2 requires tie to serve 23 a notice proposing the extension, that's how that risk 24 has been allocated to tie? 25 A. Yes. 34 1 Q. So a large part of this is identifying who bears the 2 responsibility to take certain actions under the 3 contract? 4 A. Yes, or failing to take actions under the contract. 5 Yes. 6 Q. But it refers more to contract terms than identified 7 risks? 8 A. The purpose of the document is to show how the clause -- 9 and I have mentioned this in my evidence -- occasionally 10 it's difficult to decide, and that's why ticks get 11 shared, in passing a clause there may be different 12 circumstances. 13 But the general -- the purpose of this document is 14 to show how in particular or how time and cost 15 responsibility lies in the contract terms. 16 Q. Could we look at page 26, please. If we look at the 17 upper half of the page, we see in the section of the 18 table entitled "Risk : Changes", we see the second item is 19 80: 20 "tie Changes, Mandatory tie Changes and Notified 21 Departures". 22 And the risk there is allocated to public sector? 23 A. Correct. 24 Q. That is for these three items, tie Changes, Mandatory 25 tie Changes and Notified Departures, the public sector 35 1 has to pay for the consequences of those? 2 A. That is correct. 3 Q. Is there any mention in this Risk Allocation Schedule of 4 Part 4 of the Schedule and the Assumptions? 5 A. Not specifically, because this Schedule -- there is 6 a limit to how much information could be put in this 7 Schedule about the -- about the actual contract terms 8 and their text. What this -- this Clause 80 states 9 Mandatory tie Changes. The fall of an assumption would 10 be a Mandatory tie Change. 11 Q. I should say for completeness, if you look at page 22, 12 and we look at the lower table on that page, the heading 13 is "Risk : Relief Events (time) and Compensation Events 14 (time and/or costs)". The first thing is definition of 15 compensation event. Pricing assumption does not hold 16 good. That's allocated to the public sector? 17 A. Correct. 18 Q. Do you think that gives any notice of the effect of 19 Schedule Part 4? 20 A. Yes, I do think it gives an indication. It shows that 21 risk is on the public sector. 22 Q. Okay. We have finished with that. 23 I want to turn to the Dispute Resolution Process? 24 A. Yes. 25 Q. Within your statement, on a number of occasions, you 36 1 express concern that tie were not doing all they could 2 to enforce contract provisions? 3 A. Mm-hm. 4 Q. Including the dispute resolution provisions. Do you 5 recall that? 6 A. I recall in my statement being concerned about the use 7 of the SDS contract, and the use of warning notices 8 and I also -- yes, in relation to the Infraco contract, 9 I give -- my evidence is concerned about DRP. 10 Q. I think you say in that statement that you gave advice 11 to tie that they should go to DRP in late summer 2008? 12 A. Correct. 13 Q. When do you think DRP could first have been used 14 under -- talking about the Infraco contract? 15 A. This means going to Clause 80, and I know you're going 16 to take me to Clause 80 in due time, but when there were 17 Notified Departures arising which caused -- which 18 revealed what BBS's essential strategy was going to be 19 in relation to Notified Departures, some of those 20 Notified Departures, and I'm not in a position to say 21 how many or when the first were, but having talked about 22 this to Dennis Murray very quickly after contract close, 23 we knew of course that there was going to be V6 to V28, 24 and we -- 25 Q. Just for clarity, that's the different versions of the 37 1 SDS Design Delivery Programme? 2 A. Correct, and it was pretty quickly version 31, but we 3 talked about that yesterday briefly. I'm sorry, I'm 4 diverging. 5 The question was when did I think would have been 6 the optimal time for tie to engage on DRP. 7 Given that the Clause 80 provision that deals with 8 the ability to go to DRP has a caveat in it about where 9 SDS -- there are problems with the SDS design, in my 10 opinion the time to have gone to DRP would have been 11 when there was a -- when there was a notice -- when 12 there was a problem with a Notified Departure which 13 related to estimation and perhaps not something that was 14 related to SDS design, otherwise they would have been 15 confronted with that problem. 16 So earlier than -- when I gave my advice, would be 17 my answer to that question. 18 Q. In late summer 2008? 19 A. Yes. 20 Q. Now, in terms of Clause 81 of the issues, affected the 21 contract was whether or not -- partly whether 22 information was provided about Notified Departure, but 23 also whether an estimate of the effect of that had to be 24 provided by Infraco to tie. 25 A. Correct, there were two tiers to that. One was provide 38 1 an estimate, and if tie's opinion was that that estimate 2 was insufficient to be looked at and evaluated and 3 agreed, there was another -- another sub-provision in 4 Clause 80 which allowed the Infraco slightly more -- 5 allowed them, I think, from memory, 18 -- there was 6 a time limit for them to request further time to provide 7 an estimate. 8 Q. Now, before we get to the stage of whether or not 9 estimates have to be provided, there was the issue of 10 course whether or not it was accepted that this was 11 a Notified Departure? 12 A. Correct. 13 Q. And that is something that tie were not accepting at 14 that stage because of disputes about contractual 15 interpretation; is that correct? 16 A. I cannot -- I cannot -- sorry, I cannot recollect the 17 first time the issue of whether or not this was 18 a notified departure arose. That is my -- 19 Q. What is the issue that would have been taken to the 20 Dispute Resolution Procedures in late summer 2008? 21 A. My Lord, I'm not sure I can answer that question because 22 my recollection -- my recollections of precisely what 23 types of disputes had arisen in the late summer of 2008 24 is not -- is far from perfect at this point. I'm sorry, 25 I can't help Mr Lake with that question. 39 1 Q. What difference do you think it would have made, taking 2 a matter to dispute resolution? 3 A. I think it would have made a number of differences. The 4 first difference that it would have made would have been 5 to give BBS notice that tie was going to fight on this 6 issue, and I was concerned and I expressed this concern 7 that it had been clear to me prior to contract award and 8 much before contract award that this contractor was 9 going to use the contract aggressively. And this 10 contractor's hands were tied because BB (UK) Limited was 11 a very small operation, and the people who were actually 12 controlling this were in Wiesbaden. And my experience 13 told me from working in Germany for a major civil 14 engineering contractor for five years that this contract 15 would be engineered by a set of quantity surveyors 16 looking for claims, and that is exactly what happened. 17 So to fight back as soon as possible, and to get 18 a resolution on the DRP if it was a contractual matter, 19 or if it was a quantity surveying matter, would have 20 been useful in my opinion in those two ways. 21 As far as -- I'm sorry, Mr Lake. Your question of 22 what difference would it have made, I cannot speculate 23 at this point, but at that stage the difference that it 24 would have made would have been what I said, which is it 25 would have showed that tie meant what they were saying 40 1 about not agreeing estimates and they were prepared to 2 go and dispute it. 3 Q. Now, in relation to the issue that arose of whether or 4 not a change from the Base Date Design Information 5 intended for construction design information constituted 6 a Notified Departure, you will be aware that in a number 7 of ultimately adjudications, tie were unsuccessful on 8 that? 9 A. I would like to help you on this, Mr Lake. 10 Q. I'll ask the question more precisely. There were 11 adjudications in respect of the Carrick Knowe Bridge, 12 the Gogarburn Bridge and the Russell Road retaining wall 13 where this issue was argued, and in each case tie was 14 unsuccessful. It was held there was a notified 15 departure; do you recall this? 16 A. Yes, I do recall that. 17 Q. So if those -- if that dispute had been brought to 18 a head earlier and started earlier and got that result 19 earlier, tie would have showed they were willing to have 20 a fight and then lost it. What benefit would that have 21 had for tie? 22 A. I think it would have crystallised tie's thinking about 23 how to deal with this matter, this -- these disputes. 24 Q. In what way? 25 A. I have difficulty answering that question because 41 1 I wasn't sitting in tie's project management. I was the 2 lawyer. In fact, in this instance I was the lawyer once 3 removed because as soon as dispute resolution came into 4 being, I consulted internally and got agreement from DLA 5 to -- from the firm to bring a construction contract -- 6 a construction litigation specialist up to handle the 7 dispute resolutions. 8 So my knowledge of the guts of the DRP -- the 9 adjudication awards and so on is understandably 10 second-hand. There was another partner dealing with 11 this. 12 Q. Were you involved in advising tie as to the effects of 13 and best responses to the adjudication awards which went 14 against tie? 15 A. Yes. 16 Q. So could you -- so what I'm interested in is dealing 17 with tie's responses to adverse adjudication decisions. 18 What difference would it have made if those decisions 19 had come earlier, if the adjudication process had been 20 started earlier? 21 A. I have tried to answer that question as best I can. 22 I don't know because I wasn't tie management. 23 Q. Could we go to a bit in your statement now. It's 24 page 249. Paragraph 8.33. 25 A. Could we have it a wee bit larger, my Lord. 42 1 Q. "I am asked in Question 107 to comment on the DLA Piper 2 advice recorded at paragraph 2.8 in CEC00633071 which is 3 the minutes from a 15 April 2009 Tram Project Board 4 meeting. This note records that "DLA Piper were 5 confident of TIE's position with regard to the principle 6 areas of contractual disagreement'. The basis of this 7 view was that DLA Piper considered that an Adjudicator 8 presented with legal submissions and confident expert 9 witness evidence as to how PA1 [pricing assumption 1] 10 should be read from an engineering and technical 11 standpoint would resolve any ambiguity in TIE's favour." 12 A. Mm-hm. 13 Q. Are you happy that your advice was accurately 14 represented there, that you were confident of tie's 15 position? 16 A. The timing of this is 15 April 2009. This note. 17 I am aware that there is advice written -- there is 18 a paper written piece of advice. Maybe you are going to 19 take me to it, Mr Lake. 20 Q. I'm just asking, are you happy -- as at April 2009? 21 A. Yes, I -- yes, and what I was looking for was an 22 engineer's view on this. 23 Q. One moment. I'm concerned to check that date is 24 correct. Yes, it is correct. 25 There were various bits of advice, sorry, being -- 43 1 it's not so much the looking for an engineer's view. It 2 is the basic statement that you were confident of tie's 3 position regarding the principal areas of disagreement. 4 Was that correct? 5 A. The basis of this view was that DLA Piper considered 6 that an Adjudicator presented with legal submissions and 7 confident expert witness evidence -- 8 Q. Were you confident of tie's position with regard to the 9 principal areas of contractual disagreement? 10 A. I wouldn't have phrased it like that, but that is not my 11 document. 12 Q. Were you confident of tie's position with regard to the 13 principal areas of contractual disagreement? 14 A. The principal areas of contractual disagreement, I'm not 15 in a position to say yes or no. 16 Q. You have told us in your evidence yesterday of the 17 concerns you had regarding the effect of Schedule 18 Part 4, and whether or not changes would arise. Whether 19 or not changes would arise was one of the principal 20 areas of contractual disagreement, wasn't it? 21 A. I'm not trying to be difficult, my Lord. I'm just 22 thinking about this. (Pause) 23 Yes, and the reason for those Notified Departures 24 and the claim for those Notified Departures centred 25 around design, a technical issue, and changes to that 44 1 design, which needed to be interpreted by somebody with 2 that expertise. 3 Q. As at the time that you were negotiating Schedule 4 Part 4, you didn't have expert advice available to you 5 in that regard, did you? 6 A. Are you -- you're saying "you". I'm sorry, my Lord. 7 Can the question be clarified so that -- 8 Q. Did you personally have expertise from the design -- 9 regarding the design and technical issues available to 10 you when you formed your view about Schedule Part 4 11 prior to May 2008? 12 A. I did not have expert advice on Schedule Part 4. 13 Q. Why had you not told tie about the concerns you had 14 about the effect of Schedule Part 4 and the changes that 15 would arise? 16 A. What date are you asking me the question at? 17 Q. The date of this Board meeting, 15 April 2009. 18 A. My answer to that, my Lord, is: I'm not sure that I saw 19 this Board meeting. If I was at the board meeting, then 20 it was certainly an error on my part not to correct 21 this. 22 Q. Had you told tie of your concerns as to the effect of -- 23 as at 15 April 2009, had you told tie as to your 24 concerns about the effect of Schedule Part 4 and the 25 changes that could arise under it? 45 1 A. My Lord, yes, I had told tie a year earlier about my 2 concern on the interpretation -- the potential 3 interpretation of Schedule Part 4. 4 Q. Now, I think you went on to take an opinion from Counsel 5 from Calum MacNeill; is that correct? 6 A. I did. tie did. I persuaded tie that Senior Counsel's 7 advice was necessary and we took it. 8 Q. What I would like to do is look at the briefing note 9 that you prepared for taking that advice, and the 10 document for that is CEC00962477. 11 It's apparent that you consulted with Mr MacNeill on 12 or about 1 June 2009. It appears that this brief was 13 prepared and sent out somewhere between 21 May and that 14 date of that consultation, very probably on 21 May; does 15 that broadly accord with your recollection? 16 A. I think I would need to rely on the documentation. So 17 yes. 18 Q. If we could just look at the terms of this, and the 19 introduction, it deals with a lot of issues, so I'm just 20 going to try and -- if we go to page 1. 21 Yes. If we could go to the fourth paragraph here: 22 "A limb of this Infraco positioning, and the Infraco 23 negotiations on other key risk fronts, developed into 24 the late inclusion of a more complicated Schedule Part 4 25 than was originally envisaged [see Counsel's Papers at 46 1 5]. This involved the Infraco requiring a long list of 2 pricing assumptions and notified departures which were 3 intended to shield the Infraco from certain risks that 4 it would otherwise assume under the main provisions of 5 the Infraco Contract." 6 I should ask, did you draft this? 7 A. No, I did not. 8 Q. Do you know who did draft it? 9 A. This was drafted by the contentious construction 10 department associate. I would have read it at the time, 11 certainly. And it was drafted by him and would have 12 gone out under the signature -- under the authority of 13 the senior construction litigation partner who was at 14 that point -- 15 Q. Who was that? Who was that? 16 A. Who was it? 17 Q. Yes. 18 A. Bill Bentley. 19 CHAIR OF THE INQUIRY: Sorry, was he the partner or the -- 20 A. He was the partner, and Keith -- the associate's name 21 was Keith Kilburn, my Lord. 22 MR LAKE: Another one of your colleagues gave advice on this 23 matter, Fenella Mason. What is her role within the 24 firm? 25 A. Fenella Mason was Head of Construction. Sorry -- you 47 1 are shaking your head. 2 Q. I was speaking to someone else. 3 A. At last I have seen you smile, Mr Lake -- 4 Q. Fenella Mason, when you say construction, was that 5 contentious or non-contentious? 6 A. Contentious -- there wasn't really a full -- irrelevant. 7 She was the Head of Contentious Construction, but 8 I'm not sure now, and I would need to be taken to firm 9 records, whether Fenella was still with the firm in the 10 date of this, which is June 2009. I think not. I think 11 Fenella had gone to work for another Scottish firm. 12 Q. If we look at the second page of this, we see there's 13 a heading right at the top, "What is Base Date Design 14 Information?". 15 So this is dealing with a separate issue of trying 16 to identify what the Base Date Design Information 17 actually is? 18 A. Correct. 19 Q. Then if we can jump forward through that, from that 20 part A, if we go to part B on page 8, we can see what it 21 says there is: 22 "The dispute surrounding the Base Date Design 23 Information ..." 24 CHAIR OF THE INQUIRY: Could we maybe just blow it up? 25 MR LAKE: Sorry, the upper half of the page: 48 1 "The dispute surrounding the Base Date Design 2 Information revolves around the Infraco assertion that 3 anything beyond very minor changes to the BDDI after 4 contract signature on 14 May will constitute a Notified 5 Departure under the agreement and therefore give rise to 6 an entitlement on the part of the Infraco to additional 7 time and money. 8 The Infraco has served a number of formal notices 9 under the Infraco Contract. Those notices purport to 10 give notice to tie that a tie Change has occurred - the 11 basis of the tie Change is said by the Infraco to be 12 that a Notified Departure (which is a Mandatory tie 13 Change) has occurred as a result of changes in design 14 from BDDI to IFC stages. This triggers section 3.4 of 15 Schedule Part 4. The difficulty with this 16 interpretation is, in the opinion of Instructing 17 Solicitors, that it results in the Infraco (and its 18 design consultant) enjoying absolute freedom to change 19 the design to serve their own purposes as opposed to 20 achieving compliance with the Employer's Requirements. 21 Instructing solicitors are of the view that the 22 changes in design from BDDI to IFC stages may not, of 23 themselves, give rise to an entitlement on the part of 24 the Infraco to additional time and/or payment." 25 Now, that last sentence, does that accord with the 49 1 advice that you were giving tie? 2 A. That I was giving tie? 3 Q. Yes. 4 A. At what -- at this time? 5 Q. At any time. (Pause) 6 A. Looking at this now, I'm not sure I would have phrased 7 that in that way. 8 Q. Is that not rather avoiding giving a straight answer to 9 the question? What you're telling us now is the advice 10 is quite different from what was recorded here. 11 A. I'm not trying to be awkward, my Lord. I'm thinking 12 about this because it's important, and I accept that 13 this -- this view expressed here is different to the 14 view I had -- I held. 15 Q. But you did not say anything to Mr Bentley or 16 Mr Kilburn, his associate? 17 A. I can't recall discussion on this particular point. And 18 I am -- yes, I am puzzled here and that's all I can say, 19 my Lord. 20 Q. Can we go on to page 10. If we can enlarge the upper 21 part of the page. We see a heading, "What constitutes 22 'normal design development' as intended by Schedule 23 Part 4?" 24 It says: 25 "Instructing solicitors' view is that: The inclusion 50 1 of the drafting phrase 'normal design development' in 2 Schedule Part 4 Price Assumption 3.4.1 should logically 3 be construed to imply that not every change in design 4 from BDDI to IFC will be sufficient to trigger the 5 Notified Departure mechanism. 6 Rather: there must be a standard, set by the 7 application of reasonable engineering judgment and 8 technical expertise, to any particular design change, 9 which represents the magnitude and type of amendment 10 that any design can undergo between preliminary and 11 final readiness before such amendment would be deemed 12 abnormal development." 13 A. Mm-hm. 14 Q. Did you draft this? 15 A. I think you have asked me that question, and the answer 16 is no. 17 Q. I'm just -- particularly that paragraph, because the 18 habit of saying "rather", single word, and then putting 19 a colon is something we see quite a lot in your 20 statement. Are you sure you didn't draft this? 21 A. I'm absolutely confident that I didn't draft this. 22 Q. Continuing through the rest of it: 23 "Instructing solicitors consider that refinement of 24 a design, rather than an alteration to an essential 25 element will, in most cases, be insufficient to be 51 1 deemed abnormal [design] development. The test should 2 be to establish what level of amendment would an 3 experienced designer anticipate to his preliminary 4 design in order to bring that design to a state where it 5 is ready to be issued for construction." 6 Now, that view there, that it in most cases would be 7 insufficient to be deemed abnormal development, is once 8 again quite inconsistent with the view that you're 9 telling us you expressed to tie? 10 A. Yes, this view here, I must say, appears to sidestep the 11 difficulty of the language in 1.3.4. 12 Q. Were you concerned that instructions were going to 13 Counsel to get a view that would guide the company, and 14 the views of your firm are not being accurately 15 expressed? 16 A. As I've said, I cannot recollect at this point reading 17 these instructions closely, but I did attend the first 18 conference with Senior Counsel. There were in fact two 19 consultations -- there was a lengthy consultation in 20 tie's offices attended by Steven Bell, Dennis Murray, 21 I think were the attendees, possibly someone else, 22 myself, Bill Bentley, Keith Kilburn, and what I would 23 say is these instructions do now, reading them, puzzle 24 me. 25 I would have -- if I had read this, I should have 52 1 intervened. However, I do believe that the actual 2 language in Schedule Part 4 on design development was 3 discussed in that consultation. 4 Q. We can see that the last paragraph for completeness 5 notes: 6 "The parties have exposed their basic arguments on 7 this matter in the correspondence which is included at [9] 8 in Counsel's papers. Counsel will note that considerable 9 emphasis placed by the Infraco on the Pricing Assumption 10 1 language excluding any amendment to design principle, 11 shape, form and/or specification." 12 A. Mm-hm. 13 Q. If we go then to look at the -- 14 A. Could I just observe, I think that to some extent keys 15 into what I have just said, and I find some comfort in 16 seeing that language there. 17 I know from memory from that consultation, that it 18 was a discussion in the round. So this was -- what sits 19 in the first couple of paragraphs in these instructions 20 didn't exclude or stop Counsel considering this issue 21 which is exposed in the last paragraph. 22 My Lord, may I ask for a comfort break? 23 CHAIR OF THE INQUIRY: We will have a break for 15 minutes. 24 That gives the shorthand writers a break as well. 25 We will resume again at 11.10. 53 1 A. Thank you very much. 2 (10.55 am) 3 (A short break) 4 (11.12 am) 5 CHAIR OF THE INQUIRY: You're still under oath. 6 MR LAKE: Mr Fitchie, could I ask you to look at a new 7 document, please. It's CEC00901460. You will see this 8 is headed "NOTE BY SENIOR COUNSEL for tie LIMITED". If we 9 go to page 7, we can see it's got Mr MacNeill's name 10 there and the date of 2 June 2009. 11 A. I see that. 12 Q. Do you recall seeing this at the time? 13 A. Yes, and I recall that tie were very anxious to get it, 14 and that as I mentioned earlier, my Lord, there was a -- 15 there was actually a second consultation, I believe. 16 Q. If you go back to the first page, Mr MacNeill begins by 17 saying: 18 "I refer to the consultation held at Citypoint 19 yesterday." 20 That would have been on 1 June. Were you at that 21 consultation? 22 A. Yes, I was. I can't recall now whether I was there for 23 the whole five hours, but yes, I was at the 24 consultation. 25 Q. Could we go to page 4 of 8, please, and the foot of the 54 1 page. You can see there's a heading, "BDDI to IFC stage 2 and "normal development and completion of design"." 3 A. Mm-hm. 4 Q. What Mr MacNeill has said is: 5 "Pricing Assumption 1 in Schedule Part 4 is that the 6 SDS Provider will not change certain things from the 7 BDDI, other than amendments arising from the normal 8 development and completion of designs. The Infraco, 9 therefore, is assumed to have taken into account, when 10 pricing, all the amendments to the design as at the 11 design freeze date which would result from the normal 12 development and completion of the designs." 13 Just to pause there, that's very similar to the 14 solicitor's view as expressed in the briefing note, 15 isn't it? 16 A. You're right. 17 Q. Mr MacNeill continues: 18 "I understand that the Infraco has maintained that 19 every change from the BDDI constitutes a Notified 20 Departure. However, such a claim ignores this important 21 qualification. 22 What constitutes "normal development and completion 23 of design" as opposed to alterations in "design 24 principle, shape, form and/or specification" which do 25 not arise from the normal development and completion of 55 1 design would require to be a matter of professional 2 opinion and, inevitably, judgment. 3 I have also been asked if there is any other 4 phraseology which would help an expert to determine 5 whether a change during this phase would or would not 6 arise from "normal development and completion of 7 design". I would be reluctant to put a gloss on the 8 phraseology, whether by supplementing the words of the 9 contract or paraphrasing, as that would invite the 10 criticism that the actual terms of the contract are not 11 being interpreted accurately." 12 So what we can take from this is that Mr MacNeill 13 appears to reject the approach that has been taken by 14 Infraco, and on the face of it appears to be accepting 15 the view that was put forward in the instruction or 16 brief that was provided to him? 17 A. My Lord, I have to agree with Mr Lake on this. 18 I don't ... 19 Q. Now, did you consider what action should be taken in 20 light of this opinion, you personally? 21 A. I think I had a discussion with Bill Bentley and 22 Keith Kilburn about this when the advice came. I do 23 recall discussing this. I don't -- I honestly do not 24 recall very much about this -- this consultation, 25 although it was five hours. This was -- sorry. Context 56 1 maybe is not important. 2 Q. Did you place reliance on this opinion -- 3 A. I was concerned the advice was incomplete and I believe 4 that is one of the reasons why there was further 5 consultation with the Senior Counsel on this. 6 Q. Did you get further detail of the advice during that 7 consultation? 8 A. I do not remember. 9 Q. Can you remember whether you -- sorry, before I ask 10 that, was this note passed to the client, to tie? 11 A. It would have been. Subject to the fact that the client 12 also wanted to have the further consultation, but yes, 13 it would have been. 14 Let me qualify that. I was not the prime mover at 15 this point on DRP. I have explained that. So it would 16 not have come off my desk because the idea here was to 17 have a separate unit within DLA Piper providing the 18 support for tie. 19 So I can't confirm that definitely the client got 20 it, but it would have been strange if tie had not seen 21 this. 22 Q. What reliance did you and/or tie place on the opinions 23 expressed by Mr MacNeill? 24 A. I am -- I was the client partner. And I have said 25 earlier that I am not somebody who attempts to shirk 57 1 responsibility. It was my responsibility to communicate 2 with tie on this, as well as Bill's. 3 I can only answer that question, I think, by having 4 a look at what happened as a result of the second 5 consultation. 6 Q. Is it the case that what started to happen is that the 7 dispute resolution procedures in respect of some of the 8 BDDI to IFC issues were pursued and were pursued all the 9 way to adjudication? 10 A. My best recollection, my Lord, is that there were six 11 adjudications between -- I think the first one was the 12 Hilton Hotel and I would place that -- dates evade me 13 now, but in 2009/2010, there was an adjudication 14 ongoing. The last one was the Dervaird decision -- that 15 I was involved in would have been the Dervaird decision. 16 I can't say for sure that disputes about BDDI were 17 pursued on this -- only on this basis. There were some 18 disputes that were to do with quantity surveying 19 matters, ie the size of the estimate or the delay in 20 receiving the estimate. 21 I'm not attempting to evade the question. I simply 22 can't answer with precision. 23 Q. Do you remember later on advice being taken from 24 Richard Keen QC? 25 A. I do. 58 1 Q. Were you involved in obtaining that advice? 2 A. I was instrumental in advising tie that advice should be 3 obtained. 4 Q. Could you look, please, at the advice that was provided. 5 Firstly we will look at an email. It's reference 6 CEC00648852. 7 If we go to a different document, it's reference 8 00648853. If you look, please, at a different version 9 of it, it should be CEC00356397. 10 Now, we can see a copy here of an opinion from 11 Senior Counsel for tie Limited, regarding the Edinburgh 12 Tram Network Infraco Contract and Dispute Resolution 13 Procedure. 14 Could we look within that, please, at page 9. We 15 can see this -- the bottom has got Richard Keen QC and 16 the date of 14 January 2010. Will you just take it from 17 me that you were sent a copy of it round about that time 18 by your partner, Bill Bentley? 19 A. I was sent a copy. 20 Q. Do you recall seeing this, or a version of this? It 21 presumably wouldn't have had Nick Smith's name on it? 22 A. I -- this is odd, but my recollections about this period 23 in January 2010 or around about this time of dispute 24 resolution matters are not strong, because somebody else 25 within the firm who was dealing with it. I -- may I see 59 1 the first page again, I'm sorry? 2 Q. Go back to page 1. 3 A. Thank you. 4 I honestly, sitting here this morning, I do not 5 recall seeing this opinion. The matter -- the 6 instructions which I prepared and which went to 7 Richard Keen were to do with the prospect of terminating 8 the Infraco contract. So I cannot say definitely I saw 9 this. 10 Q. Can you recall when you sought the advice in relation to 11 termination of the contract? 12 A. I -- this is -- the consultation date is in my 13 statement. At this point, no, I cannot. It would have 14 been in perhaps September this year, 2010. 15 Q. If you look at that front page, you will see Mr Keen 16 says: 17 "For convenience of reference I set out here the 18 issues which I am expressly instructed to address." 19 The first is: 20 "(1) Which interpretation of Pricing Assumption 1 … put 21 forward by the parties in the Adjudication process is to 22 be preferred." 23 Were you aware that at this time, the start of 2010, 24 that was still an issue? 25 A. Yes. 60 1 Q. You were aware of the outcome of the Carrick Knowe and 2 Gogarburn Bridge adjudications? 3 A. Yes. 4 Q. What was the reaction within tie to those decisions 5 going against them? 6 A. Difficult to describe. From my perspective, sort of 7 shrug of the shoulders, I would describe it. 8 Q. On tie's part? 9 A. Well, tie were disappointed, but that's what I would 10 say. You've asked me for tie's reaction. 11 I personally did not meet within tie to take their 12 reaction, my Lord, on these results. This would have 13 been the disputes team or the DRP team, Bill Bentley and 14 Keith Kilburn. 15 Q. What was your reaction to the loss of those two 16 adjudications? 17 A. I was disappointed, but I had never been -- I was 18 disappointed, and I was not -- I was not -- I was not 19 unduly impressed with the quality of expert evidence 20 that was put forward on tie's case in that -- in those 21 adjudications. And that is why later in this year, 22 I looked at instructing Robin Blois-Brooke as an expert. 23 Q. He's -- provides engineering expert evidence? 24 A. Correct. And he provided a -- one of the last things 25 I did before I went on leave in early November on ill 61 1 health grounds was to instruct Robin and I believe -- 2 sorry, I don't know how relevant this is to your 3 question, Mr Lake. I don't want to waste time. 4 Q. We will move on. The real point is: was there any 5 concern on your part as to what the effect of this would 6 be for all the other disputes that were arising under 7 the Infraco contract? 8 A. Yes, clearly. These losses meant Infraco would be 9 encouraged to take this position in the knowledge that 10 they had won adjudications. 11 Q. Did you give any advice as to what the possible 12 practical or financial consequences could be for tie of 13 that decision -- those decisions running against them? 14 A. The practical consequences were that the engineering of 15 the contract by Bilfinger Berger would be probably even 16 more aggressive than it had been. And the financial 17 consequences, my Lord, I was not in a position to assess 18 the financial consequences other than that they would be 19 negative. 20 I have to say in this period -- I have to say in 21 this -- in this period the -- there was a lot of -- 22 there was a lot of discussion between tie and BBS, 23 I understood, in relation to estimation. In other 24 words, there was negotiation around trying to reduce the 25 claims being made or the Notified Departure claims. 62 1 There was an effort being made at this point, 2 shortly after the arrival of Tony Rush within tie, to 3 get heads together in order to get solutions on 4 exaggerated estimates, and I believe also that some of 5 the adjudications were liability awards, in essence 6 where there had been an adverse finding, but the 7 adjudication had found for less money than the 8 contractor had claimed. 9 So there was, if you like, although losing was ugly, 10 there was a resolution on that particular dispute. 11 Q. Did losing the principle of adjudication that these 12 things were notified departures, did that bring home the 13 fact that the effect of Schedule Part 4 was to make 14 a substantial change to the risk allocation in the 15 contract? 16 A. Yes. 17 Q. Did you discuss that with people at tie? 18 A. Yes, I did. 19 Q. With whom? 20 A. Predominantly with Steven Bell, because Steven Bell was 21 the person or one of the two parties who had had 22 discussions on the effect of Pricing Assumption 1.3.4 23 and these various clauses in -- as I say in my 24 statement, starting in early February 2008. 25 And Steven had -- talk in my statement about 63 1 Steven's work ethic. But Steven had taken a decision, 2 I believe, not to commence DRPs, and I felt that this -- 3 you have asked me these -- you have asked me a series of 4 questions earlier today, my Lord, about what I thought 5 the effect of DRP would be, and in my opinion one 6 thing -- perhaps one thing that was missing from my 7 evidence was if you're going to get bad news, get it 8 early. 9 Q. Returning to Mr Keen's opinion and look at page 8, 10 please. 11 A. Yes. 12 Q. Paragraph 11. This says: 13 "The first issue submitted for my opinion is as 14 follows: Which interpretation of Pricing Assumption 1 … 15 put forward by the parties in the Adjudication process 16 is to be preferred?" 17 The quite blunt opinion is: 18 "In my opinion the interpretation put forward by 19 Infraco is to be preferred to the interpretation put 20 forward by tie." 21 A. I see that. 22 Q. What was the reaction to that on your part? 23 A. I had to accept what Senior Counsel was saying, but 24 I still felt the question of the expert opinion was 25 critical. 64 1 Q. What would the expert opinion relate to? 2 A. What was normal design development and completion and 3 what were changes or the -- what was the meaning of the 4 language to do with the evolution of design and -- to -- 5 from BDDI essentially to IFC, and this exclusionary 6 language about -- I think we know this language by 7 heart, but the exclusionary language, what has been 8 described as the circularity in that clause. 9 Q. That's what I was coming to. If there is that 10 circularity, what is the relevance of normal design and 11 development because it's put in in one part and taken 12 out in the other. So why would expert evidence make any 13 difference? 14 A. I see your point. But I still felt that -- you say why 15 would expert evidence not make any difference. If legal 16 argument -- if there was a legal argument structured to 17 attack that language, and an expert who could give 18 a view on what changes to design shape, form, scope -- 19 sorry, I don't have the language now. That was what 20 I was looking at. And I understand what you're saying 21 to me, my Lord, which is it would have made no 22 difference, but I had a different opinion in the 23 trenches at that point. 24 Q. Did you have discussions with tie about the effect of 25 this opinion, Mr Keen's opinion? 65 1 A. I do not recollect, but I am certain that the 2 construction team would have. 3 Q. Who do you mean by the construction team, Mr Bentley and 4 Mr Kilburn? 5 A. Correct. I'm sorry, my Lord, in relation to this set of 6 instructions -- let's leave it. That's my answer, 7 my Lord. 8 Q. You continued to act for tie in relation to the tram 9 project throughout 2010? 10 A. Correct. 11 Q. What difference did having this opinion make to the 12 approach that they took to the contract? 13 A. I feel that that is a question that tie needs to be 14 asked, or those people who were making decisions within 15 tie. 16 By this time Tony Rush had arrived and had formed 17 very robust views on how to try and deal with the 18 impasses which were still sitting there in relation to 19 Notified Departures. And I think part of my answer to 20 what tie's view was is that we were instructed to assist 21 Tony Rush in all ways possible to push forward on what 22 was called Project Notice and Project Carlisle, and 23 Project Notice, I think, is known, was the use of -- the 24 analysis of notified departures where estimates had not 25 been provided properly or estimates were grossly 66 1 exaggerated, or in some cases during 2010, there was 2 simply a refusal on the BBS's very large quantity 3 surveying team down at Edinburgh Park to provide 4 an estimate. 5 And there was actually correspondence about this in 6 2009, where BBS said that Clause 80 wasn't working, it 7 was too difficult. It was too difficult, it was too 8 onerous on them in relation to production of estimates. 9 So that was one reason why Tony took the view that the 10 way to push Bilfinger Berger contractually was to use 11 the contract terms and build up a case that there was 12 a serial breach of the obligation to provide proper 13 estimates in a timely way under Clause 80. 14 So the change in attitude from tie came with the 15 arrival of Tony Rush. 16 Q. It is a matter which, as you say, can be raised with the 17 people at tie, but are you aware of this advice from 18 Senior Counsel to the effect that the Infraco argument 19 was to be preferred over the tie one, had any effect on 20 their thinking and their -- 21 A. I'm not aware -- I'm sorry if I wasn't clear. I'm 22 neither aware who at tie would have discussed this 23 advice, if indeed you have -- I have taken it that this 24 is a piece of advice that came back as a result of 25 instruction from DLA Piper. 67 1 Q. Yes. 2 A. That is correct. Do we have the instructions that go 3 with it? 4 Q. I'm not proposing to look at them just now. 5 A. But we do have them? 6 Q. Yes. 7 A. Might I have the reference for that. 8 Q. Not offhand, I'm afraid, from memory? 9 A. I'm sorry, I didn't hear. 10 Q. Not from memory, I'm afraid. 11 Could I ask to you look at another document, please. 12 It's CEC00005337. 13 You can see here a document headed "COMMENTARY ON 14 VARIOUS MATTERS REFERRED TO DISPUTE RESOLUTION PROCEDURE 15 UNDER THE INFRACO CONTRACT". Did you draft this 16 document? 17 A. Can I see -- I'm sorry, my Lord. Can I see some other 18 pages? This is a DLA document? 19 Q. Yes. 20 A. No, I did not draft this document. 21 Q. Do you recall having the contents of this document 22 discussed with you? 23 A. I do not. We are -- could I see the end of the 24 document? 25 Q. Of course. 68 1 A. Thank you. And we're -- I have to say this morning, 2 I don't recollect discussing this document. I'm sorry 3 not to be more helpful. 4 Q. I won't ask you any questions about that then. 5 I want to turn to a different matter now. Did you 6 give advice to anyone at tie about confidentiality 7 surrounding the outcome of the Dispute Resolution 8 Process? 9 A. I didn't -- I do not recollect giving that advice. 10 Q. In particular, did you ever give advice to the effect 11 that people at tie were not permitted to disclose 12 adjudication decisions to Council officials and 13 councillors? 14 A. Absolutely not. There was an awareness at tie, a very 15 deep awareness, about leaking of documents and the whole 16 freedom of Scotland -- freedom of Scotland, yes. 17 Freedom of Information (Scotland) Act, and a process 18 evolved which I was aware of in terms of looking at 19 documentation which might be accessible to the public. 20 I never gave any advice to anybody at tie, nor did 21 anybody at DLA Piper give advice, that councillors or 22 the Council should not be privy to information about the 23 DRP. 24 Q. We've previously had some discussion about Clause 80 of 25 the Infraco contract. 69 1 A. Yes. 2 Q. You set out in your statement the circumstances in which 3 at the end of April 2008, Geoff Gilbert from tie gave 4 you a new draft of that? 5 A. I do. 6 Q. Mr Gilbert has no recollection at all of that. Could 7 you explain that? 8 A. I find that extremely surprising. 9 Q. Because in the papers that have been provided by DLA, we 10 don't have any copy of a draft provided by Mr Gilbert to 11 you. Are you aware of that? 12 A. I am aware, I think, of a letter that was sent -- excuse 13 me if this is imprecise, but Messrs Brodies on my behalf 14 after they contacted me sent a letter explaining some of 15 the circumstances here, and I can elaborate on that if 16 that's what you would like. 17 Q. Even after you say you drafted that, there's never an 18 email to Geoff Gilbert or anyone else at tie to 19 say: here is the version of -- here is the redrafted 20 version of Clause 80, or here is the contract with the 21 new Clause 80 that you requested. 22 A. Well, I put this in context of time. The document which 23 arrived with me from Geoff Gilbert, I would time close 24 to 22 April 2008, at which time it had been agreed by 25 the parties that there would be a moratorium on putting 70 1 more material into the contract. 2 I believe that the document that came to me from 3 Geoff Gilbert was in fact Pinsent Masons' drafting of 4 Clause 80 which he had -- had been sent a copy of that, 5 and had worked on it. That is why it's not on the 6 DLA Piper system. 7 I would like to refer the tribunal to a set of notes 8 which Geoff Gilbert made relating to a meeting which he 9 had on 6 March 2008 with Herbert Fettig, who is the 10 German Senior Director of Siemens in Erlangen, and 11 Suzanne Moir. 12 If you look at those notes, you will see a number of 13 things. One is that Geoff invited Suzanne Moir to 14 present drafting on Clause 80, and the date of that is 15 6 March. Nobody from DLA Piper was present at that 16 meeting. 17 He also agreed to the amendment of Clause 4.3 in the 18 Infraco contract, and he said that he was going to 19 redraft Schedule Part 4. This was still in the 20 discussion period of Schedule Part 4. 21 So the absence of a document which represents 22 drafting from Geoff Gilbert to me is in part explained 23 by that, and as to here is the redrafted Clause 80, we 24 were right up to the brink of closing the contract and 25 having a contract which could be proofed properly, and 71 1 my best recollection is that that drafting, after I had 2 discussed it with Geoff Gilbert, went into the contract 3 as the agreed -- the client agreed version, and my 4 evidence is clear that I had discussions with 5 Geoff Gilbert and explained with precision what 6 Clause 80 now meant as far as tie's position was 7 concerned. 8 That, my Lord, is my evidence on that. 9 Q. You see, there's no email round about that time -- 10 that's 2008 -- or even later, which refers to that 11 Clause 80 having been drafted by Mr Gilbert. Even 12 within the tie system. 13 A. Why -- why -- why would there be if he was working off 14 a document that had been given to him by Pinsent Masons 15 and discussed with Richard Walker? And may I add in 16 my -- sorry. I interrupted you. 17 Q. No, carry on. 18 A. Who goes first? Me? 19 Q. Yes. 20 A. I believe in my statement I make it -- I'm sorry. 21 In the communication that was sent, my Lord, to the 22 Inquiry about this, I made the point that nobody at 23 DLA Piper, least of all myself, at that point would have 24 been addressing Clause 80 and amending it and agreeing 25 things. This was very shortly before closeout, 72 1 and I would also make the point that Clause 80 was 2 a clause which I had specifically included in the 3 Rutland Square Agreement as being a no-go area, and it 4 sat there, a no-go area, with a red line -- a line in 5 the sand as being something that Infraco had agreed not 6 to revisit. 7 It sat there until basically this draft arrived with 8 me. I knew that Richard Walker had made representations 9 to Geoff Gilbert about something in Clause 80 that 10 Bilfinger Berger were concerned about. But I had no 11 involvement in those discussions at all, and I believe 12 that the note which I have referred you to, 13 Geoff Gilbert's handwritten note of that meeting with 14 Suzanne Moir and Herbert Fettig, shows the genesis of 15 that document which came to be the amendment. There was 16 an invitation -- I'm sorry. There is a note of what 17 people are going to do, and one of them is that Pinsents 18 are going to redraft, it says Clause 80.24, but it 19 didn't -- what came to me was not a redraft of 20 Clause 80.24. It was a revamp of what I had rejected on 21 tie's behalf earlier, saying Clause 80 is a no-go zone, 22 we may need to make some amendment, as I say in my 23 statement, to incorporate -- to make sure definitions 24 match up with mandatory change, with, I believe, some 25 compensation events. 73 1 But that's it, gentlemen. There's to be no further 2 messing with the contract. 3 That is the sequence of events that I remember, and 4 I'm absolutely clear about it. There was no instruction 5 for DLA Piper to amend Clause 80 at this point. None. 6 Q. At which point, are you saying? At the time of the 7 Rutland Square Agreement, when you -- 8 A. No, Rutland Square Agreement all the way through this 9 period. Clause 80 did not get negotiated at all. It 10 was off-limits and then it came. 11 Q. Could you look, please, at document CEC00619254. 12 Look at the upper half. 13 You can see it's an email from you? 14 A. Yes. 15 Q. To Tony Rush, Steven Bell and Dennis Murray, copied to 16 other people within tie and Brandon Nolan at McGrigors; 17 do you see that? 18 A. Yes. 19 Q. Dated 3 March, and the heading is "Clause 80 and other". 20 What you say in the text is: 21 "Gents, all, please find attached: 1. one element of our 22 advice (of which there is more) given in November 2008 23 on Clause 80.13 in the context of tie's considerable 24 efforts to see if the log jam over BSC's approach could 25 be broken. I believe this note contains a practical and 74 1 succinct explanation of tie's position." 2 A. Yes. 3 Q. We can read past 2, which is just the BSC letter, but it 4 continues: 5 "I will review our other previous advice and see how 6 (if needed) best to summarise this - Tony's fresh 7 opinion on this is very important, as is Brandon's. 8 What struck me on the call this morning was the 9 reference to DLA by Richard Walker in the context of 10 Clause 80. He is dead right. It may not be elegant - 11 because it was heavily negotiated - but we did insist on 12 the final words in Clause 80.13 (bear in mind that there 13 had been various attempts by Bilfinger to entirely 14 recast Clause 80) and there was a heated argument about 15 this at the time - precisely I imagine because Bilfinger 16 recognised it could be used to unpick their desired 17 approach." 18 A. Mm-hm. 19 Q. Now, surely if the wording of Clause 80 had been 20 provided by Mr Gilbert at the last minute, and 21 particularly if it reflected Pinsents’ drafting, that 22 would have been the place to say it? 23 A. It might have been, but I was not concentrating on the 24 precision of where the drafting for Clause 80 came from. 25 What it says is it was heavily negotiated. What 75 1 I meant by that was that it -- Pinsents came with their 2 draft. I had a long discussion with Suzanne Moir about 3 why it was not acceptable, and it was quite a heated 4 discussion. And what I got out of it -- sorry. That 5 then ceased, and I would place that discussion some 6 point in early April, and I come back to the proposition 7 that there was then -- there had been discussions -- 8 immediately prior to that there had been discussions 9 about consents, and -- consents and compensation events 10 and SDS design. 11 I'm drifting off subject. The point I wish to make 12 about this statement here, that this does not contradict 13 anything I have said. 14 The final words in Clause 80.13, and this is the 15 language, "unless tie otherwise directs", was something 16 that I tried to salvage out of this document, to give 17 tie a chance to use that in order to instruct work. 18 Q. I'm more interested in the fact you say "it may not be 19 elegant because it was heavily negotiated". That would 20 tend to indicate that the wording perhaps is a little 21 bit clunky, precisely because it was the input of 22 several different parties? 23 A. No, the concept here that I'm talking about, "it may not 24 be elegant because it was heavily negotiated", is the 25 final language in that Clause 80.13, not the entire 76 1 Clause. And I insist on that. And I know that is true. 2 Q. I want to go back now to an issue relating to reporting 3 to the Council at close. 4 You have explained your view of Schedule 4 -- 5 Schedule Part 4 and the effect it had, and that you gave 6 advice on that matter to people within tie. I think 7 that's evidence you gave yesterday. 8 A. Yes. 9 Q. I think you expressed in your evidence, and also in your 10 statement, the effect that that would entitle Infraco to 11 come back and seek additional money where there was 12 a departure from the assumptions, that the departures 13 were likely and the result was a transfer of risk -- 14 A. Time and cost responsibility, yes. 15 Q. What I want to be clear about is just to whom that 16 advice was given within tie. I may not have asked this 17 very clearly yesterday, but I want to be quite clear. 18 Who did you give that advice to? Did you, for example, 19 give it to Steven Bell? 20 A. I think my statement is clear on who I gave the advice 21 to and when. And I also gave -- and the sequence of 22 what was happening. 23 There was a meeting which I deal with in my 24 statement which happened on 9 May. This was immediately 25 after the meeting with Mr Gallagher about the bonus, 77 1 and I describe where that meeting took place and who was 2 present, and I repeated that advice about Schedule 3 Part 4 in that meeting, and present in that meeting were 4 Steven Bell, Geoff Gilbert, Jim McEwan and 5 Dennis Murray, and possibly also Graeme Bissett partly. 6 I cannot honestly remember. 7 But the other gentlemen were in that room with me, 8 and they didn't like the advice I was giving, and after 9 I had given that advice, along with other commentary on 10 what was going on, which was a meeting where Bilfinger 11 were presenting a claim for an extra 17 -- I believe 17 12 or 19 million, which eventually came to be the agreement 13 known as the Final Price Agreement. But I expressed 14 in -- I expressed my concerns about SP4 in that meeting, 15 and I think I'm clear in my statement about when -- 16 within reason, when and to whom I gave my views on 17 Schedule Part 4. 18 I must stress that the individuals who were 19 receiving that advice at tie had been the people who 20 were negotiating Schedule Part 4 on their own, all the 21 way through this period from, as we've looked at this 22 morning, January 2008 until the closeout, the effective 23 closeout of that document, which was probably in March, 24 20, 22 March. 25 That is my response, my Lord. 78 1 Q. In terms of the people who negotiated it, the names we 2 have seen coming up are Geoff Gilbert, Jim McEwan -- 3 A. Matthew Crosse. 4 Q. My mind has just gone blank on the other name? 5 A. Dennis Murray. 6 Q. Yes, thank you. 7 What I'm interested in is other people. 8 Now, you have said Graeme Bissett might or might not 9 have attended the meeting on 9 May. Did you give the 10 advice to him any other time? 11 A. Graeme, I believe, at that point -- I'm going to give 12 the answer first because I know that you'll like that, 13 and then I'm going to put some context around it. 14 CHAIR OF THE INQUIRY: It's not that we like it, Mr Fitchie. 15 It's the rules. 16 A. It's the truth and the rules, yes. 17 I do not recall specifically giving that advice to 18 Graeme Bissett. However, Graeme Bissett was not 19 a reporting line for me as an adviser on the project 20 contract or the contract team. Graeme Bissett held, 21 I believe, the title of strategic -- Corporate Strategy 22 Director, and Graeme Bissett at that point, I believe, 23 was on a two or possibly -- possibly a two or three-day 24 consultancy to tie. So he was not present at many of 25 the meetings, and he certainly did not attend 79 1 negotiation sessions. 2 So imparting that information to Graeme didn't seem 3 to me something that would change matters. 4 The people who received the advice were Steven Bell, 5 who was Project Director, Engineering Director or acting 6 Project Director, and Geoff Gilbert, who had been 7 responsible for negotiating the document. 8 Yesterday, my Lord, I was asked did I -- essentially 9 the question: did I check out Geoff Gilbert and 10 Bob Dawson's credentials and my answer was no. I would 11 like to add to that answer that I believe it's 12 reasonable for the project lawyer to assume that 13 a vehicle, a company that has been set up in a specific 14 project management role, would have expertise at 15 Commercial Director level to understand what contract 16 drafting meant, and to draft it. 17 MR LAKE: Did you, when you were giving that advice to 18 Steven Bell, to Geoff Gilbert, have any discussion with 19 them as to whether or not it would be passed on to other 20 members of the management, including, for example, 21 David Mackay, Willie Gallagher or Neil Renilson? 22 A. Answering in the order that you've mentioned, I cannot 23 remember a specific discussion with Steven Bell and 24 Geoff Gilbert who were at project directorate level. 25 I think it is reasonable to assume that they would 80 1 have discussion with their management. Bear in mind 2 that I wasn't in charge of how tie communicated 3 internally between its units, between its departments, 4 and I have said in my statement that there were 5 difficulties with that, definitely, which I observed 6 myself. 7 I believe that I had a discussion with 8 Willie Gallagher about Schedule Part 4 at the 9 Rutland Square meetings, when the protocol was joined 10 up, and I have said that in my statement, and I have 11 said why I didn't think he was taking it on board. 12 As far as Neil Renilson is concerned, the only 13 contacts I had with Neil were early in the project when 14 Lothian bus was essentially an objector to the tram 15 project. So I did not feel that -- I had no direct line 16 of responsibility in terms of giving legal advice, 17 passing legal advice to Neil Renilson. 18 David Mackay, who at that point was the chairman of 19 TEL, again, I had no reason to believe that I needed to 20 tell TEL about this information. That is my 21 recollection, and I hope I have answered the question 22 adequately. 23 Q. You have. Just looking then at Willie Gallagher, 24 Steven Bell, Geoff Gilbert and, query, Graeme Bissett, 25 they're the people who might have had direct advice from 81 1 you to the effect -- as to the effect of Schedule Part 4 2 on the transfer of risk? 3 A. Within tie, yes. 4 Q. Within tie. 5 A. Yes. 6 Q. They then would have been in a position to know that 7 there had been a shift in risk between October 2007 and 8 the contract close in May 2008? 9 A. I am absolutely clear that they would have had that -- 10 they would have formed that opinion without my advice. 11 Geoff Gilbert had been essentially the architect of 12 tie's position in Schedule Part 4. 13 I should also include Jim McEwan. Jim McEwan -- 14 Jim's role was somewhat unclear to me, as I said 15 yesterday, but Jim attended the meetings on Schedule 16 Part 4, and Jim was the person who asked me the email 17 question about the effect of Schedule Part 4 after V26 18 to V28. 19 So Jim obviously understood what Schedule Part 4 was 20 doing as prepared by tie commercially. 21 Q. So these people would have been aware that the statement 22 in the reports going to the Council at contract close 23 that there had been no shift in risk since October 2007 24 was untrue? 25 A. So far as Graeme Bissett was concerned, I can't -- 82 1 I don't know. Certainly if he had -- if he was in the 2 meeting room downstairs on the first floor of CityPoint 3 on 9 April as a break-out from that meeting with BBS -- 4 Q. Did you mean 9 May there? You said 9 April. Did you 5 mean 9 May? 6 A. 9 -- 9 April was the meeting I was talking about. We're 7 okay with that? Yes. Okay. 8 Q. So you were talking about -- 9 A. Who had knowledge. I cannot -- I will not attribute 10 full knowledge to Graeme on this because he was not 11 involved in any of the contractual negotiations. In 12 fact, I have mentioned in my statement that I found it 13 odd that the senior figure within the company who was 14 most remote -- who was remote from these transactions, 15 these commercial decisions, was drafting the close 16 report. But that was a delegation that came from, 17 I assume, Willie Gallagher. 18 So far as Jim McEwan was concerned, Jim clearly 19 understood what Schedule Part 4 was doing because he 20 wrote me that email and asked for my advice. Without 21 knowing how Schedule Part 4 was going to work, that 22 email would not have been possible. 23 I am confident that Geoff Gilbert and Steven Bell 24 both understood what my advice had been, and even 25 without my advice, they must have understood it because 83 1 they were -- they were present in virtually every 2 discussion on Schedule Part 4, and Geoff Gilbert had 3 been -- he had been the draftsman on the Wiesbaden 4 Agreement, and he had been the draftsman and negotiator 5 on virtually all of Schedule Part 4 on tie's side, and 6 he had -- shortly after the Wiesbaden Agreement, he had 7 had a series of discussions with Scott Fitzgerald which 8 would -- I believe try to modify what became Pricing 9 Assumption 1.3.4, and I had mentioned that I had not 10 been able to find that email traffic, but I was shown 11 it, or came into knowledge of it, I believe, during 12 Stewart McGarrity's history check of tie archives. 13 Those emails exist. So I would not accept -- 14 I would find it incredible if either of those gentlemen 15 said that they did not understand the effect of Schedule 16 Part 4. 17 CHAIR OF THE INQUIRY: I think the question was: would the 18 people mentioned, putting aside Mr Bissett, that would 19 be Willie Gallagher, Steven Bell, Geoff Gilbert and 20 Jim McEwan, possibly -- 21 A. I would include Dennis Murray, I'm sorry, my Lord. 22 CHAIR OF THE INQUIRY: Would they have been aware at the 23 time of the letters in May to the Council that the 24 information being given to the Council was inaccurate? 25 A. The Close Report? 84 1 CHAIR OF THE INQUIRY: Yes. 2 A. My Lord, I was not party to who was -- yes, they would 3 have known that information was inaccurate. 4 CHAIR OF THE INQUIRY: It's pretty obvious, isn't it? If 5 you say you have told them before then, and they are 6 party to the close report, they must be aware that it's 7 not true. 8 A. Yes, my Lord. 9 CHAIR OF THE INQUIRY: Can you just listen to the question, 10 please, and answer it as directly as possible. Mr Lake. 11 MR LAKE: Going back then to May 2008, you would have been 12 aware that they were knowingly providing false 13 information to the Council. 14 A. You've used a strong word, "false information". And 15 you've said, I believe, "knowingly providing false 16 information to the Council"; I would have been aware 17 that they were knowingly providing false information. 18 I would hesitate to go as strong as that agreeing 19 with you. I agree that the information in those -- in 20 those close reports was deficient. 21 CHAIR OF THE INQUIRY: Well, it's more than deficient, isn't 22 it? It wasn't accurate. 23 A. Yes, my Lord, it was not accurate. 24 CHAIR OF THE INQUIRY: It wasn't true. 25 A. Correct. 85 1 CHAIR OF THE INQUIRY: So it's false. 2 A. Yes. 3 CHAIR OF THE INQUIRY: Is that right? 4 A. I agree with you, my Lord. 5 MR LAKE: Because -- you hesitate there because you know the 6 legal significance of knowingly providing false 7 information to someone, don't you? 8 A. I do. 9 Q. Because it amounts to fraud, doesn't it? 10 A. It potentially is a criminal offence, yes. 11 Q. And you -- 12 A. And a civil one as well. 13 Q. And you were aware of that in May 2008 -- you were aware 14 that's what was happening? 15 A. I read those documents. They were provided to me. 16 I had to form a view as to whether they were fit for 17 purpose. 18 My Lord, I have answered your question as to whether 19 that information was false. I am unwilling to accept 20 the question to me that I knowingly let this go. 21 CHAIR OF THE INQUIRY: Well, I think yesterday you may have 22 accepted that you knew that the information wasn't -- 23 A. Yes. I did, my Lord. 24 CHAIR OF THE INQUIRY: -- accurate when it was being 25 submitted to the Council. 86 1 A. I did. 2 CHAIR OF THE INQUIRY: So does it not then follow that you 3 knowingly permitted this to be submitted to the Council 4 in the knowledge that it was false? 5 A. What I was -- 6 CHAIR OF THE INQUIRY: Could I just ask you to address the 7 question. 8 A. Yes. I allowed that information to go to the Council 9 together with DLA Piper's letter which we've discussed. 10 I think that's my answer. 11 MR LAKE: Thank you, my Lord. I've got no more questions 12 for Mr Fitchie. 13 CHAIR OF THE INQUIRY: I think a number of parties have 14 indicated that they have questions, but a lot of them 15 seem to have been covered. I don't know whether, 16 Mr Martin, do you have any? 17 MR MARTIN: My Lord, I'm very much obliged to Inquiry 18 Counsel who has indeed covered virtually all that I had 19 included in the application of the Council. 20 I wonder, my Lord, if I might suggest that if there 21 are others to ask questions, and I may then have a few, 22 if I could suggest respectfully that the Inquiry allows 23 others to ask the questions, given the significance of 24 this witness to the Council, so that I ask my questions 25 last? I appreciate it's a matter for my Lord, but 87 1 I would make that request. 2 MR DUNLOP QC: On behalf of DLA Piper I have certain 3 clarifying questions I would like to ask. I have not 4 submitted notification in advance because the points 5 arise in a way that I couldn't have anticipated. 6 I would respectfully ask that I get to go last, 7 given the significance of this witness for my clients. 8 CHAIR OF THE INQUIRY: Well, this is not court proceedings, 9 Mr Dunlop, as you appreciate. Are you effectively 10 seeking to re-examine the witness? 11 MR DUNLOP QC: No, my Lord. I seek to clarify in particular 12 three particular points. 13 The witness was asked about certain discussions with 14 certain people regarding Notified Departures, and it was 15 suggested that their evidence might be different from 16 that which the witness deponed to. I wish to explore 17 that with him. 18 It was put to the witness that he hadn't advised 19 various people as to the risks of notified departures 20 and I seek to explore that briefly with him. 21 There was questions this morning being put to him 22 regarding his involvement in the instruction of Counsel 23 and I wish to clarify that point with the witness. 24 None of those, my Lord, could have been anticipated 25 other than as a result of what has happened in the 88 1 course of the last day and a half. 2 CHAIR OF THE INQUIRY: Thank you. 3 Mr Fairley, I think you have also indicated you have 4 some questions. 5 MR FAIRLEY: My Lord, I have a couple of matters of 6 clarification that essentially arise from the questions 7 I have previously given intimation of. I'm quite happy 8 to go first if my learned friends Mr Martin and 9 Mr Dunlop wish to keep their powder dry until they have 10 heard what I have to say, but I doubt anything I have to 11 say will materially affect them. 12 CHAIR OF THE INQUIRY: I don't think anyone else has 13 questions. 14 Mr Fairley, if you go first. 15 A. My Lord, may I have five minutes to avoid an accident? 16 CHAIR OF THE INQUIRY: Certainly. 17 I think we will adjourn for five minutes. 18 (12.13 pm) 19 (A short break) 20 (12.17 pm) 21 CHAIR OF THE INQUIRY: You're still under oath, Mr Fitchie. 22 Yes, Mr Fairley. 23 Examination by MR FAIRLEY 24 MR FAIRLEY: Mr Fitchie, you were taken by learned Inquiry 25 Counsel to a note prepared by Calum MacNeill QC and 89 1 I think we saw in that a neat summary of the position 2 that was being taken by Infraco in relation to 3 Schedule 4. 4 If I have understood Mr MacNeill's summary of that 5 correctly, the position at that time that was being 6 taken by Infraco was that any departure from or addition 7 to Base Date Design Information automatically 8 constituted a Notified Departure. Was that your 9 understanding of the question as it was put to 10 Mr MacNeill? 11 A. Yes. 12 Q. That being a relatively extreme position, when we come 13 to the point when an opinion is taken from Richard Keen, 14 he is asked to consider, is he not, whether there are 15 any exceptions to that very extreme position, or whether 16 it is as stark as Infraco would have it? 17 A. Mm-hm. 18 Q. If we look back at the -- if we could look back at the 19 opinion, please, that was provided by Richard Keen, and 20 the document reference for that I will find in just 21 a moment. 22 The Inquiry reference for that is CEC00356397. 23 I'm sorry, is that document available? 24 Before I look at the content of that document, 25 Mr Fitchie, are you able to explain why it bears 90 1 a watermark that contains the words "reference 23 2 Nick Smith"? 3 A. No. 4 Q. Do you know who Nick Smith was? 5 A. Yes. 6 Q. He was a lawyer within City of Edinburgh Council Legal; 7 is that right? 8 A. Correct. I take it that this document was provided to 9 Nick Smith because the decision to instruct Richard Keen 10 at this point was a decision that tie had, on advice 11 from DLA Piper, given that I am accepting that this is 12 a document which came -- came to DLA Piper, I am 13 accepting that. 14 I don't know why the document is headed "Draft", and 15 the reason it went to Nick Smith is because at that 16 point, and we are, I think, in mid-2010 -- 17 Q. January 2010? 18 A. Thank you very much for the correction. DLA Piper were 19 under instruction from tie to provide CEC with legal 20 advice that was being taken, and for that matter, any 21 reports which we produced. So if this is indeed 22 a DLA Piper -- addressed to DLA Piper instruction, it 23 would have gone to Nick Smith. 24 As I say, I have no knowledge of why it says "draft" 25 on it. That clearly is something that Counsel put on 91 1 the opinion. 2 Q. Yes. 3 Should his Lordship understand then that in 4 colloquial terms, CEC Legal were being kept in the loop 5 of legal advice that was being sought at this time? 6 A. That is correct. 7 Q. Now, one of the questions that Richard Keen, who was at 8 that time the Dean of the Faculty of Advocates was 9 asked, was whether the reasoning of the Adjudicator in 10 the Carrick Knowe and Gogarburn adjudications was 11 correct? 12 A. Mm-hm. 13 Q. Taking this as shortly as I can, the opinion which is 14 expressed in this document, in a passage you were not 15 taken to, is that the adjudicator's reasoning was 16 incorrect. Do you recall that? 17 CHAIR OF THE INQUIRY: It might be easier, Mr Fairley, if 18 you take the witness to the passage. 19 MR FAIRLEY: Yes. If we go to page 5 of this document, in 20 fact it's easier if we start at page 4, I'm sorry. 21 At page 4 Senior Counsel looks at paragraph 6 there 22 at the Adjudicator's analysis of the issue, which he 23 describes as having "a superficial attraction", more 24 particularly -- "a superficial attraction when one comes 25 to consider the provisions of Schedule Part 4 and more 92 1 particularly the definition of terms in that Schedule". 2 He then summarises the Adjudicator's reasoning in 3 paragraph 7. I don't think I need take you all the way 4 through that, because if we then move on to paragraph 8, 5 on the next page, which is page 5, he concludes that the 6 result of the Adjudicator's analysis would be that any 7 part of the design of the Edinburgh Tram Network for 8 work required in terms of the Employer's Requirements 9 which was not incorporated in the base design 10 information drawings issued to Infraco to 25 November, 11 would, on the Adjudicator's analysis, constitute 12 a Notified Departure. 13 So in paragraph 8 there he summarises the 14 Adjudicator's reasoning in the Carrick Knowe and 15 Gogarburn adjudications for finding against tie; do you 16 see that? 17 A. I do. 18 Q. He says in the last two lines of that paragraph: 19 "That conclusion, whatever its superficial 20 attraction, is in my opinion wrong." 21 Do you see that? 22 A. I do see that. 23 Q. So it would appear that what tie are being told by the 24 Dean of Faculty in January 2010 is that the reasoning of 25 the Adjudicator in the Carrick Knowe and Gogarburn 93 1 adjudications is wrong? 2 A. Mm-hm. 3 Q. Do you remember seeing this or being -- of that view at 4 the time, that that was what Richard Keen was saying? 5 A. I think if we look -- I cannot give you the reference 6 for it, and I cannot give you the exact timing of it, 7 but there is a document where DLA Piper, on behalf of 8 tie, drew up an analysis of where the adjudications had 9 taken us; and one part of that analysis, and I do refer 10 to it in my statement, was the position that putting it 11 very simply, the position on -- following this opinion, 12 and agreeing with it, was that if a design didn't exist 13 at 25 November 2007, and it was required to deliver the 14 employer's requirements, then that would not be -- 15 sorry. 16 Yes. So this is -- the design which was not 17 existing at 25 November, but it was required to deliver 18 the Employer's Requirements, wouldn't be a Notified 19 Departure, which is what Richard Keen QC is saying here. 20 I remember that very distinctly in that document. 21 In other words, agreement with Senior Counsel on that 22 point. 23 He says: 24 "I shall now endeavour to set out my own reasoning 25 with respect to this issue." 94 1 I can't tell you, my Lord, whether that reasoning 2 came. But what I do know is that this is one of the 3 grounds that we were looking at in 2010 to appeal DRP 4 decisions, and it is one of the reasons why I went to 5 Robin -- why I was instructed to find an expert, 6 and I found or knew of Robin Blois-Brooke. 7 Q. If we go forward to page 7, please, and could you expand 8 within that subparagraph 4 on that page. Subparagraph 4 9 and the answer. 10 Now, Senior Counsel records there -- the Dean of 11 Faculty, I should say, records there the question that 12 is put to him by DLA on behalf of tie, and it is this: 13 "Is the construction works price ... limited to only 14 what is depicted on the Base Date Design Information?" 15 Do you see that? 16 A. I do. 17 Q. That, I think, if I have understood the position 18 correctly, is the extreme position that was being 19 adopted by Infraco? 20 A. Yes, that is Siberia, definitely. 21 Q. Sorry, what do you mean by that? 22 A. Very cold and very stark. 23 Q. Yes. That's the position that was being taken by 24 Infraco, that if it wasn't on the Base Date Design 25 Information, then it wasn't part of the contract 95 1 works -- construction works price, and therefore they 2 could charge more money for it. That's right, isn't it? 3 That's what -- the position Infraco was taking? 4 A. Correct, and we see that in Calum MacNeill's advice too, 5 I believe. 6 Q. Yes. And when the Dean of Faculty is asked whether or 7 not that proposition is correct, that the construction 8 works price is limited to only what is depicted on the 9 Base Date Design Information, such that Infraco can 10 charge extra for anything that's not on the Base Date 11 Design Information, he says that is not a correct 12 proposition, doesn't he? 13 A. He does. 14 Q. But he says that does appear to be the conclusion 15 reached by the Adjudicator, which is why he says the 16 Adjudicator is wrong? 17 A. Correct. 18 Q. He notes that the Adjudicator's conclusion ignores the 19 rest of the wording of Clause -- of the price assumption 20 paragraph 3.5, which provides that the Contract Price, 21 including the construction works price, is fixed on the 22 basis, and he highlights the words "inter alia", in 23 other words amongst other things, upon the Base Case 24 Assumptions but not upon those alone. 25 A. Mm-hm. 96 1 Q. So is it fair to say then that the Dean of Faculty in 2 this opinion is giving a view which is not consistent 3 with the extreme position that was being adopted at this 4 point by Infraco? 5 A. I agree with you. 6 Q. He goes on to narrate the next question which he's 7 asked, which is: 8 "Can it be said that a Notified Departure has 9 occurred in the circumstances where an item of work is 10 not depicted on the Base Date Design Information, but 11 that item of work is nonetheless called for or required 12 by the Employer's Requirements or referred to in the 13 Infraco proposals?" 14 Do you see that? 15 A. I do. 16 Q. I think this may be the point you alluded to a moment 17 ago, when you talked about DLA having given advice that 18 if something was simply not shown on the Base Date 19 Design Information, but was nevertheless required, that 20 would in DLA's opinion not have been a Notified 21 Departure? 22 A. Correct. And if I can just add one thing, Mr Fairley, 23 if I may, shortly, and that is that the issue with what 24 was the Base Date Design Information, and I have 25 mentioned in my statement that was a problem for SDS and 97 1 tie and BBS in agreeing or producing a composite and 2 accurate list of Base Date Design Information -- was 3 never solved. There was initially, when this came up, 4 the idea of Base Date Design Information. 5 I asked Dennis Murray what is the list for this, how 6 will that be presented in the contract? And there was 7 difficulty for several months in finding CDs and finding 8 that information, such that, as I say in my statement, 9 contract award date -- BBS, Scott McFadzen appeared with 10 about 12 or 15 cardboard boxes saying that is Base Date 11 Design Information. 12 Q. I'm sorry to interrupt, Mr Fitchie, but that is not at 13 all what I'm asking you about here. 14 A. I'm sorry, I misunderstood. 15 Q. What I'm actually asking you about here is the Dean of 16 Faculty's response to the question that was put to him. 17 A. Yes. 18 Q. He appears to agree with, if that's the correct way of 19 putting it, DLA's interpretation of this, which is that 20 simply because an item is not depicted on the Base Date 21 Design Information, that does not inevitably lead to it 22 being a Notified Departure if it is otherwise required 23 by the Employer's Requirements or referred to in the 24 Infraco proposals. Do you see that? 25 A. I agree. 98 1 Q. So again, do we see here that the Dean of Faculty is 2 indicating that he does not assent to or agree with the 3 extreme position on the Pricing Assumptions that was 4 then being taken by Infraco? 5 A. He -- I agree with you. He is, and he's said that that 6 particular -- Adjudicator's decision was superficial. 7 Q. If we just finally, before I leave the Dean of Faculty's 8 opinion, can we look at the question 6 that was put to 9 him: 10 "Can it be said that the Infraco is entitled to an 11 increase in the sums due to it under the Infraco 12 contract in the circumstances where an item of work is 13 not depicted on the Base Date Design Information, but 14 that item of work is nevertheless called for or required 15 by the Employer's Requirements or referred to in the 16 Infraco proposals?" 17 Unsurprisingly, perhaps, given the opinion that he 18 has already expressed in questions 4 and 5, his answer 19 to that is again no. Do you see that? 20 A. I do. 21 Q. This is all part of the Dean of Faculty's reasoning for 22 his conclusion that the Adjudicator, in relation to 23 Carrick Knowe and Gogarburn, got it wrong, bluntly, on 24 the interpretation of the Schedule? 25 A. I agree, and I shared that view at the time. 99 1 Q. Now, when you were taken by Learned Counsel to the 2 Inquiry to this document before, you were taken only to 3 paragraph 11, and we see that on the screen there. 4 A. Mm-hm. 5 Q. What is narrated there is that a question which was put 6 to him was: 7 "Which interpretation of Pricing Assumption 1 put 8 forward by the parties in the adjudication process is to 9 be preferred?" 10 Do you know which part of the Pricing Assumption 11 3.4.1 is being referred to in that question? 12 A. It seems to be being limited to 3.4.1. 13 Q. If I was to suggest to you that it was the part of the 14 Pricing Assumption that begins with the words "for the 15 avoidance of doubt", would you disagree with me on that? 16 A. This is the last paragraph in 3.4.1? 17 Q. You see, if we scroll down this screen, the Dean of 18 Faculty sets out what the respective arguments of the 19 parties were -- 20 A. Mm-hm. 21 Q. -- before the Adjudicator, and taking this as shortly as 22 I can, it seems to have been tie's argument, advanced 23 before the Adjudicator, that provided something 24 constituted normal design development, it could never 25 constitute a change to design principle, shape, form 100 1 and/or specification; do you see that? 2 A. I do. 3 Q. Whereas Infraco were arguing before the Adjudicator that 4 if something was a change in design principle, shape and 5 form or outline specification, it could not be normal 6 design development; do you see that? I think we have to 7 go over the page to see the end of Infraco's argument. 8 A. "The Infraco position is based entirely on a reading of 9 Pricing Assumption 1." 10 Q. Yes. In fact on a reading of the section of Schedule 4, 11 beginning with the words "for the avoidance of doubt", 12 the Infraco position is inevitably correct on that 13 limited point, isn't it? We can look at it if you want. 14 But arguing, as it did, before the Adjudicator that -- 15 can you just go back to the previous page, please. 16 Arguing as it did before the Adjudicator for tie to 17 argue before the Adjudicator that something could not be 18 a change to design principle, shape, form and/or 19 specification if it constituted normal design 20 development, tie was bound to fail in that argument, 21 wasn't it? Because it was wrong. 22 A. Mr Fairley -- 23 Q. Would it helped if you looked at Schedule 4? 24 A. What I'm puzzled about here, if you can help me, is you 25 asked me about the Dean of Faculty's opinion in relation 101 1 to design -- in relation to design which was entirely 2 missing from Base Date Design Information. In other 3 words, there wasn't design, and I agreed with you that 4 there was an argument that could be mounted saying 5 anything which was to do with delivering the Employer's 6 Requirements through the Infraco proposals design is not 7 covered by design -- is not covered by the Infraco's 8 argument. 9 Now you're asking me a different point, I believe, 10 which is essentially saying that tie's argument before 11 this Adjudicator was not fully developed. Am I right? 12 Q. What I'm really putting to you, Mr Fitchie, is that what 13 the Dean of Faculty is saying to tie is you argued the 14 wrong point before the Adjudicator. 15 A. Right. 16 Q. You argued on the basis that if something constituted 17 normal design development, that that was an answer to 18 everything? 19 A. Mm-hm. 20 Q. And that if it was normal design development, it 21 couldn't constitute a change to design principle, shape, 22 form and/or specification. That's what tie argued. 23 The Dean of Faculty is saying you argued the wrong 24 point here, because that, on the wording of the Schedule 25 Part 4, is the opposite in fact of what Schedule 4 says. 102 1 What Schedule 4 says is if it is an alteration to 2 design principle, shape, form and/or specification, it 3 shall not be taken to be part of normal design 4 development. 5 A. Right. 6 Q. If we scroll back up to question 11, when the Dean of 7 Faculty says: 8 "In my opinion the interpretation put forward by 9 Infraco is to be preferred to the interpretation put 10 forward by tie ..." 11 What he is describing there is the conflict of 12 arguments which we see narrated in paragraph 12 below. 13 Do you see that? 14 A. Yes. He's saying what Infraco said to the Adjudicator 15 is a more powerful proposition than what tie argued. 16 Q. Well, he's saying it's correct, isn't he? On any 17 reading of the contract, the Infraco position, which was 18 that, if we scroll down again so I can see the words, 19 please. The Infraco argument was if something is 20 a change to design principle, shape, form and/or 21 specification, it cannot be part of normal development 22 because that's what the contract says. 23 A. Mm-hm. 24 Q. He is saying on that point Infraco was right. tie 25 pursued the wrong point at the adjudication. 103 1 A. Yes. 2 Q. Because if they had focused more closely on the other 3 aspects and the other consequences of the extreme 4 position that Infraco was taking, they would have noted, 5 for example, that if something simply wasn't shown in 6 the Base Design date -- Base Date Design Information, it 7 would not necessarily be a Notified Departure? 8 A. I agree with you. 9 Q. So the Dean of Faculty here is not saying to tie: you 10 are bound to lose all future adjudications because of 11 the interpretation of Schedule Part 4. What he's saying 12 is you pursued the wrong point. You argued the wrong 13 point. 14 A. Mm-hm. 15 Q. Thank you. 16 Now, can I just ask you very briefly about -- you 17 mentioned involvement, I think, with Richard Keen again 18 at a later stage in the process when I think you said it 19 was in connection with grounds for termination; is that 20 right? 21 A. It was in connection with tie's strategy which had been 22 built up by Tony Rush over a period of some months to 23 use, my Lord, what's called in the Contract Remediable 24 Termination Notices. So yes, that consultation and that 25 set of instructions was all about what tie would need to 104 1 produce or have ready in terms of substantive evidence 2 to back up the first stage of the termination, which is 3 a notice saying: you are in breach, please tell us what 4 you're going to do with that -- do about it within 5 30 days. 6 So yes, I was involved in that. 7 Q. Were you also involved in seeking advice from 8 Richard Keen on the Dervaird Adjudication in relation to 9 the effect of Clause 80? 10 A. No, I was not. Because that Adjudication was handled by 11 McGrigors. 12 Q. Did you at any time see a note from Richard Keen in 13 relation to the Dervaird Adjudication round about 14 19 August 2010, or again, was that something that you 15 simply had no involvement in? 16 A. My answer to that is I was asked a question by the 17 Inquiry about did different law firms cause problems. 18 In this instance I was unclear by whom McGrigors had 19 been instructed and whether I was -- whether DLA Piper 20 should get involved in reviewing the Dervaird -- I beg 21 your pardon -- Adjudication. 22 So I don't recall -- sorry, I'll go further than 23 that. I did not see either the Dervaird -- the Keen 24 opinion you have just referred to, nor did I see any 25 writing from McGrigors as to what they thought about 105 1 that arbitration or that Adjudication award. 2 MR FAIRLEY: I won't trouble you with that any further then, 3 Mr Fitchie. If you'll just bear with me for a moment. 4 Thank you. I have no further questions, Mr Fitchie. 5 CHAIR OF THE INQUIRY: Mr Dunlop? 6 MR DUNLOP QC: My Lord, I repeat my request to go last. 7 CHAIR OF THE INQUIRY: I have decided that you -- that your 8 submission -- 9 MR DUNLOP QC: Very well, my Lord. 10 Examination by MR DUNLOP QC 11 MR DUNLOP QC: Mr Fitchie, if I can take the points that 12 I adverted to earlier in reverse order, please. 13 Firstly, can I ask you, you were taken to the 14 instructions to Calum MacNeill QC, and you were asked 15 whether or not you had been involved in drafting the 16 instructions to Mr MacNeill. 17 Could I ask you to look, please, to document 18 CEC00901461. 19 Is that a letter of instruction on DLA -- if we look 20 at the top right-hand corner, DLA notepaper, addressed 21 to Calum MacNeill QC, 21 May 2009; is that correct? 22 A. Yes. 23 Q. If you look to the reference that's given, the 24 right-hand corner, just above the date? 25 A. Yes. 106 1 Q. Is that Keith Kilburn's reference? 2 A. It would be, yes. I'm sorry, it is, my Lord. 3 Q. If we go to the second page of that, please. Do we see 4 that in the pre-penultimate paragraph, the writer says: 5 "Should you require any further information, do not 6 hesitate to contact Keith Kilburn of this office." 7 A. I see that. 8 Q. So does this indicate that it is Mr Kilburn and not 9 yourself that's instructing Mr MacNeill? 10 A. On behalf of the firm it does. 11 Q. Thank you. 12 You were asked about the content of these 13 instructions. Is there anything unusual, Mr Fitchie, 14 about a Litigation Solicitor trying to devise 15 a strategy, perhaps involving a different view as to 16 interpretation of a contract, and taking Counsel's 17 advice to see if that strategy might work? 18 A. No, there is not. I have certainly done that in many 19 times in instructing Counsel. The idea of instructing 20 Counsel and the intellect, called intellect, is to 21 explore ideas. 22 Q. Thank you. If I can move then to the question of 23 identification of risks. You were taken to a document 24 I would like you to look at again, please. CEC01428734. 25 CHAIR OF THE INQUIRY: Is this point 1 or point 2, 107 1 Mr Dunlop? 2 MR DUNLOP QC: This is point 2, my Lord. 3 Do you remember being taken to this document, 4 Mr Fitchie? 5 A. Yes, I do. 6 Q. It has been described in the press as a DLA report, 7 perhaps because it's headed up, "DRAFT OF DLA REPORT"? 8 A. Mm-hm. 9 Q. Was it actually a DLA report? 10 A. No, it wasn't, and I think I deal with this in my 11 statement. 12 The reason that this -- this is a report, I believe, 13 drafted -- yes. It was described in that way because 14 there was a concern that if it went out as a tie report 15 it would be available under FISA, and so it was sent 16 under cover of the DLA Piper letter to give it grounds 17 under the Freedom of Information (Scotland) Act to 18 resist an application for disclosure. 19 Q. Do we see if we look down the page please, in the 20 penultimate paragraph on that page, please, if we can 21 highlight that, thank you. 22 Do we see in the last four lines: the main 23 negotiating team which have also had extensive support 24 from our external legal advisers, DLA Piper. 25 A. Yes, we see that. 108 1 Q. So the report refers to DLA Piper in the third person? 2 A. Correct. 3 Q. If we think about the risks, please, of Notified 4 Departures, the suggestion is that those risks have been 5 actively concealed by others, and that you yourself did 6 not make tie or CEC aware of the risks of Notified 7 Departures. 8 A. Yes. 9 Q. Were tie and CEC aware of the risks of Notified 10 Departures? 11 A. Sorry, Mr -- my Lord, I interrupted Mr Dunlop. I didn't 12 quite hear the beginning of the question. 13 Q. The suggestion is that the risks of Notified Departures 14 have been actively concealed by others? 15 A. Mm-hm. 16 Q. And that you yourself did not make tie or CEC officials 17 aware of the risks of Notified Departures; yes? 18 A. Yes. 19 Q. Were tie and CEC aware of the risks of Notified 20 Departures before contract close? 21 A. Yes. 22 Q. And how were they aware? 23 A. I've been through my evidence in relation to the tie -- 24 the tie management who had my view, a legal view on 25 Notified Departures. I believe that from -- CEC could 109 1 not have been unaware of this at a finance and legal 2 level. 3 This report itself says that senior tie and TEL 4 people have performed a review of terms independent of 5 the main negotiating team. The main negotiating team 6 elsewhere in the close reports is referred to as 7 something wider than tie and including Council staff. 8 Even on that basis it is clear to me that CEC may 9 not have liked what they were hearing about Schedule 10 Part 4 and Notified Departures, and the idea of risk 11 being assumed by the Council or by tie. They knew of 12 it. 13 Q. If I could ask you, please, Mr Fitchie to look at 14 a couple of documents you were taken to. If we could 15 look at them again, please. In the first instance could 16 you look at document CEC01500975. I think this is the 17 letter to the Council Solicitor in December 2007 that 18 you'll recall looking at -- 19 A. Yes. 20 Q. -- previously. 21 Could you go to the final page, which is page 4, 22 please. If we can expand the bottom half of the page, 23 please, and if you look to the -- if we see the indented 24 paragraph 3, and the last paragraph of that indent, we 25 see that: 110 1 "These agreements contain safeguards (to extent 2 tie's team were able to negotiate these either at the 3 parliamentary stage or later) but the project programme 4 and budget will nevertheless remain to some degree 5 vulnerable to any of these stakeholders seeking redress 6 within the limits of their commitments/rights. In 7 short: the actuality of even permissible and expected 8 disruption and inconvenience may result in these 9 stakeholders using their entitlements aggressively. tie 10 is alive to this risk and proper execution of tie's 11 planned management and mitigation strategy should reduce 12 these risks significantly. In negotiations to close, we 13 will continue to explore rigorously with the BBS Consortium 14 how they were prepared to absorb as much responsibility 15 for third party risk as is technically achievable, fair 16 and cost effective." 17 Was that correct at the time you wrote it, 18 Mr Fitchie? 19 A. Yes, it was. 20 Q. Thank you. 21 If you could move, please, to CEC01312366. This is 22 the letter to, again, the Council Solicitor, 23 12 March 2008. Again, you recall looking at this 24 previously. 25 If we could go to page 4 in that document, please, 111 1 and if we could expand the bottom half of that page, you 2 will recall being asked about 5.1. You weren't taken to 3 5.2? 4 A. Correct. 5 Q. Can I ask for your comments on that, please. We see it 6 says: 7 "We are not in a position to comment in relation to 8 the Project Master Programme which remains under 9 development. There is a risk that the SDS exercise in 10 aligning design with Infraco Proposals and Employer's 11 Requirements could have impact on Project Programme both 12 before and after contract award. We are aware that tie 13 is endeavouring to mitigate this risk by careful 14 management of the alignment process." 15 To what were you adverting when you wrote those 16 words, Mr Fitchie? 17 A. The entire -- the entire resistance to risk on design 18 which was coming from BBS and had been coming from BBS 19 consistently since BAFO, and it was one of the reasons 20 why the BAFOs were not -- heavily qualified. 21 So I was referring there to the fact that the SDS 22 design would -- I say could have an impact on project 23 programme. So I was referring to the effect of 24 project -- Schedule Part 4 in part. 25 Q. Thank you. You were asked about the reasonable reader 112 1 of this letter. So far as CEC were concerned, to whom 2 was this letter addressed? 3 A. The letter was -- all DLA Piper letters or all the -- 4 that were asked for at the various false dawns before 5 project close were addressed to Gill Lindsay at the 6 Council, and as my evidence states, a number of these 7 were discussed beforehand as to whether they met the 8 Council's requirements. 9 Q. So the reasonable reader here is a lawyer? 10 A. The reasonable reader here -- I had -- the reasonable 11 reader here is Gill Lindsay and those members of the 12 Council Project Executive Group who she must have shared 13 this letter with them, because those were the people who 14 were discussing with tie, and I saw the emails and 15 correspondence about this, in March, and some later than 16 that. 17 These individuals and staff members -- senior staff 18 members were receiving information and were shown the -- 19 for example, the draft letter of 10 March that DLA 20 produced which was the 12 March original document which 21 I was taken to this morning. 22 So DLA's letters were shared in draft with the 23 Council's, let's say, wider project team, finance, 24 engineering, I assume planning. 25 Q. Thank you. If we could move on, please, to a different 113 1 document, again one that you've looked at before. 2 CEC01466394. CEC01466394. (Pause) 3 MR DUNLOP QC: My Lord, given the time, perhaps we could 4 sort out the numbering over the lunch break. 5 CHAIR OF THE INQUIRY: We will resume again at 2 o'clock. 6 (12.58 pm) 7 (The short adjournment) 8 (2.00 pm) 9 (Proceedings delayed) 10 (2.05 pm) 11 CHAIR OF THE INQUIRY: I'm sorry. I hadn't realised 12 everyone was convened. 13 You're still under oath, Mr Fitchie. Mr Dunlop? 14 MR DUNLOP QC: Obliged, my Lord. I think the numbering has 15 been sorted and Mr Fitchie, we should now have on screen 16 the document that I wanted you to look at. 17 Could we go to the second page, please, first of 18 all. This is obviously an email chain. If we look at 19 the second half of the page, it's email from -- scroll 20 up a little bit, please -- Ian Laing at Pinsent Masons; 21 is that correct? 22 A. Yes. 23 Q. Solicitor acting for Bilfinger Berger? 24 A. He was a partner acting for Bilfinger Berger and as we 25 know, there was another law firm acting for Siemens. 114 1 Q. What he says there is -- this is addressed to 2 Steven Bell at tie and also to Jim McEwan at tie; is 3 that right? 4 A. Yes. 5 Q. "As we discussed earlier today, the Design Delivery 6 Programme will be v28. The Pricing Assumption in 7 Schedule 4 ... assumes that the Design Delivery 8 Programme will not change from v26. It follows that 9 there is the possibility that there will be an immediate 10 Notified Departure on contract execution. Given the 11 unusual position that we are in, please can you confirm 12 that this is understood and agreed by tie." 13 So this, Mr Fitchie, is 26 March 2008; is that 14 correct? 15 A. Correct. This is immediately after a meeting that 16 Steven Bell and Jim McEwan had had with Bilfinger. 17 Q. Mr Laing is -- correct me if I am wrong -- seems to be 18 being entirely candid and upfront and saying there is 19 a real possibility of a Notified Departure immediately 20 on execution of the contract; is that right? 21 A. Correct. The factual situation being that SDS had 22 advised that their Design Delivery Programme was going 23 to change, and since SDS were at that point mandated to 24 tie, they had reported that, and they had reported -- 25 and they were already engaged with BBS dealing with 115 1 design issues and they'd told BBS that that was going to 2 happen. 3 Q. Were tie under any misapprehension as to that real 4 possibility of immediate Notified Departure? 5 A. None, they had agreed it. 6 Q. Go up the page, please. We see a chaser, I think, on 7 31 March? 8 A. Yes. 9 Q. No, sorry, this is -- yes, it is. To Steven and Jim: 10 "Please can you let me have confirmation that the 11 position on the Notified Departure ... is understood and 12 agreed by tie." 13 A. Yes. 14 Q. If we go back to the first page of this document, 15 please, at the foot of that page, do we see Jim McEwan 16 passing it on to you and indeed Steven Bell, Schedule 4, 17 asking for your response, and we have the comment about 18 ensuring there will be no gaming of the position by 19 Bilfingers? 20 A. Correct. 21 Q. Then we have your response. His Lordship can read your 22 response for himself. Am I correct in summarising it by 23 saying that you indicated that there was a real 24 possibility of immediate Notified Departure, and that in 25 the second paragraph of your response, the only approach 116 1 is a factual one, not a contractual one. To capture as 2 many identified key changes as is possible in order to 3 mitigate the potential problem with Notified Departure. 4 A. Yes. The exercise that needed to be gone through, in my 5 opinion, not being a Programme Manager or a contractor, 6 was to look at this new design programme version and 7 look at BB's construction programme and say -- deal with 8 it and try and, as I say, capture the changes that BBS 9 were going to claim and agree them, so that these would 10 not be something that would come up under the Notified 11 Departure mechanism. They would be pre-agreed as having 12 been dealt with. 13 Q. Do we see then at the end of the first paragraph of your 14 response, you indicating that that estimate -- that's 15 the Bilfinger estimate -- is bound to be all 16 encompassing? 17 A. Correct. 18 Q. If we can look at the replies to that, please, which 19 I don't think we have looked at yet, in the first 20 instance, please, document CEC01465933. 21 I think we see in the bottom of that page the email 22 that we've just looked at from you. 23 A. Yes, and I just -- sorry, my Lord. The last paragraph 24 in my response to Jim McEwan, which we're on at the 25 moment, if we could just scroll down to the very last 117 1 few lines on the second page -- I'm sorry, Mr Dunlop for 2 doing this. The next page: 3 "This is one where Steven and Geoff must, I feel, 4 have a better sense of how factually to restrict BBS's 5 ability to exploit this." 6 This being version 26 to version 28: 7 "After this review, we might be able to go about 8 trying to structure acceptable controls in the Infraco 9 Contract." 10 In other words, what I had in mind there was 11 inserting something in the design -- Schedule Part 14, 12 which is essentially a design control document, because 13 Jim had indicated he was worried about gaming. One way 14 to avoid gaming is to get the design to pass through 15 that control process and see whether there is gaming 16 going on. 17 I'm sorry to interrupt. I just was reminded that 18 that was in my mind at the time. 19 Q. This is at the end of March 2008, Mr Fitchie. By this 20 point in time, have you already expressed your concerns 21 about the content of SP4 and the risks that it entails? 22 A. Yes, I have, in February twice to Mr Bell and 23 Mr Gallagher, and -- yes, I have, is the answer to that. 24 Q. Thank you. If we go to the top of the page of the 25 document we're looking at, this is Mr Gilbert's 118 1 response: 2 "My view is that we need to: a) confirm the 3 agreements made with SDS on how the differences between 4 the versions will be dealt with ... b) identify the 5 impact of these mitigations and any unmitigated 6 changes ... c) include the agreed ... mitigations in 7 the Programme Schedule. 8 "This is the best that we can do to pin BBS and SDS 9 down on this issue." 10 So looking at that, Mr Fitchie, do you apprehend any 11 misunderstanding on the part of Mr Gilbert? 12 A. My response is what Mr Gilbert says is what I -- 13 essentially what I have recommended as a lawyer to 14 Jim McEwan, and I see no -- nothing in that letter where 15 it's saying that we need further advice to DLA -- from 16 DLA or anyone else to understand how this is going to 17 operate. 18 Q. Thank you. If we look at another response, please, 19 CEC01465908. 20 If we look at the top of that page, please, 21 Mr Fitchie, we see at the bottom, looking at the middle 22 now, we see that the -- your original email. 23 If we then go to the top of the page, Mr McEwan 24 appears to apply to Mr Bell, without copying you in; is 25 that correct? 119 1 A. There is no copy to me and I have never seen this email 2 before. 3 Q. If I just ask you to look at it just now, what Mr McEwan 4 says to Mr Bell is: 5 "Steven, my view is that if we pursue Andrew's steer 6 on this, we will open up the whole can of worms on the 7 Infraco contract cost overall and that we have to take 8 on the chin that the programme version is not 9 consistent, get the deal signed and then fight the 10 notified departure tooth and nail." 11 So looking at that, and understanding you've only 12 just seen it for the first time just now, Mr Fitchie, 13 what's your comment on that with regard to the question 14 of the knowledge or otherwise of tie of Notified 15 Departures? 16 A. It appears to me what Mr McEwan is saying shows that he 17 understands perfectly what will happen with the change 18 from V26 and V28, and what he's doing is saying it's 19 better to get the contract under our belt and fight the 20 Notified Departure tooth and nail. 21 That's his view, and I strongly disagree with it, 22 because any contractor given a contract underneath them 23 with an automatic -- a change mechanism which allows 24 them to go for design is going to claim, and I find 25 that -- somebody of Jim's experience naive: 120 1 "... we will open up the whole can of worms on the 2 Infraco contract cost overall ..." 3 I don't understand that comment. This could have 4 been in my opinion ring-fenced and calculated, at least 5 part of it, to allow tie to have a sense that this 6 version change is captured in these agreements, and it 7 is not going to -- we have agreed the impacts on the 8 construction programme. So there can be no prolongation 9 cost or prelims cost or compensation events or anything 10 of that nature. It's agreed and it's gone. 11 So I -- "if we're all hopeful of getting this done 12 by 15th April". 13 I see. So I think what that means is if they took 14 my approach, they wouldn't be able to close the contract 15 in 15 days. 16 Q. Looking at that sentence that you've just looked at, and 17 indeed the first sentence, am I right to understand that 18 this appears to be Mr McEwan rejecting the advice which 19 you've given earlier? 20 A. Yes: 21 "I understand Andrew's point, but if we are at all 22 hopeful of getting this done by the 15th April (this 23 year) we cannot take his suggested approach." 24 Q. Yes. Thank you. 25 Another document, please. CEC01312358. If we look 121 1 at the top of the page, this appears to be an email from 2 Graeme Bissett to a number of others? 3 A. Yes. 4 Q. At Edinburgh Council predominantly; is that right? 5 A. Correct. 6 Q. Also copied to others including Susan Clark and 7 yourself? 8 A. Correct. 9 Q. Do we see that this includes -- encloses a number of 10 things, including point 2: 11 "DLA letter effective today, which updates DLA views 12 on Infraco Contract Suite ..." 13 A. Yes. Sorry, my Lord, can I just -- perhaps Mr Dunlop 14 can remind me that the date on this is -- 15 Q. It's 28 April 2008. We see that at the top of the page? 16 A. Yes, I do. 17 Q. Okay. It's referring to DLA advice at that date. If 18 you could now have that before you, please. 19 CEC01246045. Actually that's not what I'm taking you 20 to. If you could have a look at that document, please. 21 01246045. 22 A. This document I'm looking at at the moment says that the 23 text of the approval letters is with CEC Legal for 24 confirmation. So ... 25 Q. Indeed. 122 1 A. Yes. 2 Q. If we could blow that up, please. We see that this is 3 an email a couple of days later from Colin MacKenzie to 4 a number of people, including Nick Smith. What we see, 5 if you look to the bottom of that email, you see it's 6 signed off on behalf of, or kind regards, 7 Colin Mackenzie and Nick Smith; yes? 8 A. I see that. 9 Q. Just looking to the lesser, please: 10 "Further to the meeting this morning, Nick and 11 I have considered the DLA letters dated 12 March, 12 18 March and 28 April. You sought our views on this 13 correspondence. 14 "As you are aware we have from the outset expressed 15 reservations about the ability of DLA to effectively 16 review their own work. In this regard, it is difficult 17 to see how any letter from DLA could give full comfort 18 to the Council. Our preferred route was always that the 19 Council seek independent legal advice. In particular, 20 all of the DLA letters are heavily caveated and refer to 21 instructions from tie or positions achieved by tie. The 22 reality of the contract structure is that the Council is 23 to give a guarantee in respect of all financial 24 obligations being undertaken by tie. Instructions have 25 been given throughout by tie to DLA, with little input 123 1 from Council officers and accordingly no certainty that 2 Council instructions flowed through to DLA." 3 Now, pausing there, Mr Fitchie, I'm taking you to 4 those because I have previously been criticised for 5 ignoring that part of this email. So I want you to see 6 that and to understand it. Do you understand me? 7 A. The top -- the part you have read, Mr Dunlop? 8 Q. Yes. 9 A. Yes, I understand what's being said. 10 Q. What I want your comment on is what follows: 11 "The most recent letter dated 28 April does little 12 to remove doubts and uncertainties. Specifically, that 13 letter appears to give no comfort on the risk profile 14 and acceptability in relation to the market norm. The 15 lengthy letter also narrates matters which appear to us 16 to be risky for the Council and are not fully covered by 17 the QRA." 18 Just looking at that, please, have you seen this 19 document before? 20 A. Never. 21 Q. When it is commenting on your own letter of 28 April, 22 and we will look at that in a minute, the authors say 23 that that letter gives no comfort on the risk profile 24 and acceptability and narrates matters "which appear to 25 us to be risky for the Council". Without being prompted 124 1 by your own letter of 28 April, what was it that you 2 think they are talking about as matters risky for the 3 Council? 4 A. 28 April ... narrates matters that appear risky to the 5 Council. 6 I'm thinking that the letter dealt with the position 7 with design, position with MUDFA, the "not fully covered 8 by the QRA" ... and the fact that I am talking about the 9 contractor, I believe, at that point taking a very 10 adverse position towards risk and design risk in 11 particular. 12 Q. Yes. 13 A. I believe that that would be what they are referring to. 14 Q. Okay. If we could look at the letter of 28 April again. 15 I'm not sure we have seen that as yet. 16 CEC01312368. 17 Is that the DLA letter of 28 April 2008? 18 A. Could I just see the signature block? 19 Q. If you go to the end of that document, please, I think 20 on page 6 of it. 21 A. That is -- that is half of my signature which isn't 22 correct on a DLA Piper Scotland letter. It's DLA Piper 23 ASF. But that is the firm's letter of that date. 24 Q. Okay, thank you. 25 If we go on to -- 125 1 CHAIR OF THE INQUIRY: Could I just clarify what is the 2 point about that? That it's not your signature? 3 A. My Lord, I made -- if you see, there's two bits to the 4 signature. The first initials there. No point. I made 5 an error when I was signing the letter, thinking I might 6 be signing my own name, but it's not a yours sincerely 7 letter. It needs to be signed DLA Piper Scotland LLP. 8 I'm sorry. 9 MR DUNLOP QC: If we go down in that letter, please, to the 10 third page, section 5, "Risk". 11 A. Mm-hm. 12 Q. "Following on from our letter of 12 March, we would 13 observe that delay caused by SDS design production and 14 CEC consenting process has resulted in BBS requiring 15 contractual protection and a set of assumptions 16 surrounding programme and pricing." 17 A. Correct. 18 Q. "tie are prepared for the BBS request for an immediate 19 contractual variation to accommodate a new construction 20 programme needed as a consequence of the SDS Consents 21 Programme which will eventuate, as well as for the 22 management of contractual Notified Departures when (and 23 if) any of the programme related Pricing Assumptions 24 fall." 25 A. Yes. 126 1 Q. So thinking back to what are the matters risky to the 2 Council that have been identified by Messrs Smith and 3 Mackenzie, does that assist? 4 A. It does. I would imagine that's central in their 5 spotlight. As one of the -- they're not specific in 6 their internal communication. This would be one of 7 them. 8 Q. Go to the close report, please, that was looked at in 9 some detail -- 10 A. Sorry, Mr Dunlop. Can you indulge me just for a second. 11 Q. Please? 12 A. Can we look at the list of attachments to this letter. 13 Q. If we go down the -- go to the bottom, it will list the 14 attachments. 15 A. Bearing in mind that CEC Legal and the two gentlemen who 16 were addressed by Colin Mackenzie and Nick Smith's 17 letter were members of what I understood to be a group 18 who had been working in conjunction with tie on the 19 close reports for about five -- four months, what we see 20 here is me sending the Council Solicitor the Infraco 21 Contract and Schedule Parts 1 to 44. 22 Schedule Part 4 would have been included in that set 23 of documents. 24 Q. Is your point that they could therefore have -- 25 A. Yes. My point is that if anybody had wished to find out 127 1 what the contract said about these risks, could have 2 easily used the risk matrices -- the risk matrix and 3 this copy contract to find out precisely what the 4 language in that document said. 5 Q. Yes. Okay. If we go on, please, to the close report to 6 which some reference was made earlier, that is document 7 CEC01338853. 8 You see that's the Close Report that you looked at 9 earlier? 10 A. Yes. 11 Q. Page 25, please. 8.1, under "Overview", just before the 12 bullet points, we see: 13 "The current status of the risks relating to the 14 Infraco and Tramco contracts which have been identified 15 as wholly or partly retained by the public sector beyond 16 Financial Close which are ..." 17 Approvals and consents, interface with the 18 implementation of utility diversion works, delays to 19 design approvals? 20 A. Mm-hm. 21 Q. Stakeholder instructed design changes? 22 A. Mm-hm. 23 Q. Is that not accurate? 24 A. As generality, yes. There are lots of categories of -- 25 yes, my answer is yes. 128 1 Q. Those matters all remained firmly within the risk of the 2 public sector? 3 A. Agreed. 4 Q. Okay. Over the page, please. We looked at 8.1 and we 5 looked at 8.2, Mr Fitchie. Just look at 8.3? 6 A. Yes. 7 Q. Infraco price basis and exclusions: 8 "The Infraco price is based upon the ERs which have 9 been in turn subject to thorough quality assurance and 10 the significant areas where post-contract alignment of 11 the SDS design will be required. Crucially, the price 12 includes for normal design development (through to the 13 completion of the consents and approvals process ...) 14 meaning the evolution of design to construction stage 15 and excluding changes if design principle, shape, form 16 and outline specification as per the Employer's 17 Requirements." 18 A. Mm-hm. 19 Q. Then the next paragraph we see: 20 "Significant exclusions from the Infraco price are 21 items not included in the Employers Requirements in 22 respect of ..." 23 Then a number of matters are identified. 24 A. Mm-hm. 25 Q. Is that correct? 129 1 A. I agree. 2 Q. Including any other scope required by third parties not 3 already included in the Employer's Requirements by 4 virtue of a commitment to an existing agreement; is that 5 right? 6 A. Yes. These are summaries of what is in Schedule Part 4. 7 Q. Yes. 8.4 then deals with responsibility for consents 8 and approvals. 9 A. Yes. 10 Q. If we could again turn the page, please, we should now 11 be on page 27. At the top of that page we highlight 12 number 2: 13 "In respect of consents and approvals outstanding at 14 Financial Close, tie/CEC will bear any incremental 15 construction programme cost consequences of SDS failure 16 to deliver design outputs in a timely and sufficient 17 manner to the consenting or approving authority." 18 Again, is that all correct? 19 A. Yes. 20 Q. We see towards the bottom of the screen, as you now look 21 at it, there's a list of bullets. Immediately above 22 that -- 23 A. Sorry to interrupt. Point 2 at the top of the page: 24 "In respect of consents and approvals ..." 25 That encompasses CEC's planning authority approvals 130 1 and any other approval body. So approval of design. 2 Q. Yes. And equally, at 3 do we see that: 3 "tie/CEC will bear the incremental cost and 4 programme consequences associated with a delay in 5 granting consents or approval having received the 6 required information in a timely and sufficient manner 7 and/or the cost and programme consequences of changes to 8 design principle, shape, form and outline 9 specification ..." 10 A. Yes. 11 Q. Looking then at the bullets towards the foot of the 12 screen, immediately above that, the text reads: 13 "To clearly delineate responsibility and therefore 14 risk allocation, the Infraco contract and associated 15 schedules, including the SDS Novation Agreement, clearly 16 defines in detail and in a manner agreed ..." 17 The last bullet point is: 18 "The programmed dates for delivering information and 19 obtaining the necessary consents and approvals 20 consistent with achieving the overall programme for the 21 project." 22 Again, is that accurate as at the date it was 23 written? 24 A. This is 28 -- 25 Q. This is the close. 131 1 A. This is at close. Yes, that is accurate. 2 Q. After the bullets: 3 "The role of tie in this complex process is to 4 carefully manage the programme of delivery and take 5 mitigating action as necessary to avoid any cost or 6 programme implications from slippage on individual 7 items. tie also retains responsibility for obtaining 8 specific items, including obtaining NR possessions which 9 align with the construction programme agreed with 10 Infraco." 11 Again, is that correct at the date it was written? 12 A. Yes, it is, and a point of detail. The NR, Network Rail 13 possessions. The NR, the Network Rail Agreement was -- 14 entering into discussion with the Network Rail on this 15 matter to have a construction site going on next to the 16 operating railway, was delayed for a long time in the 17 beginning of the project because the Council was 18 concerned about engaging with third parties and spending 19 money on this before royal assent. 20 So we had a problem with Network Rail. I think many 21 people in the construction industry will understand that 22 Network Rail is labyrinthine and difficult to deal with. 23 So obtaining an NR possession took a lot of time and 24 a lot of effort, and we had Clause 16 in the Infraco 25 contract dealing with this matter. 132 1 So this is absolutely up to factual reality. The 2 network possessions at that time were not actually 3 obtained to link with the construction programme. 4 Q. Finally on this document, please, if you could go over 5 to page 28 of the document, and expand the bottom 6 quarter of the page, please and just before the last two 7 bullet points, we see: 8 "tie has assessed these amounts as providing 9 adequately for the residual risk retained by the public 10 sector arising from the Infraco and Tramco works and the 11 post Financial Close consents ... however the risk 12 allowance does not provide for the costs of ..." 13 Two bullet points: 14 "Significant changes in scope from that defined in 15 the Employer's Requirements - whether such changes were 16 to emerge from the consents and approvals process or 17 otherwise; Significant delays to the programme as 18 a result of the consenting or approving authorities 19 failing to adhere to the agreed programme (Infraco/SDS 20 having met their own obligations) or any other tie/CEC 21 initiated amendment to the construction programme which 22 forms part of the Infraco contract." 23 Again, is that all accurate at the time it was 24 written? 25 A. It is, and it represents a significant important set of 133 1 events that could happen, which would initiate claims 2 for -- prolongation claims and delay claims from the 3 contractor. 4 Q. At the end we see: 5 "All other things being equal any such changes 6 falling into these categories would give rise to an 7 increase in the cost estimate for Phase 1a of the 8 project above of GBP508 million." 9 Is that right? 10 A. Yes. 11 Q. Now, you seem to assent, Mr Fitchie, in your evidence 12 earlier, to the proposition that this document, the 13 close report, was knowingly misleading. 14 Obviously his Lordship is going to have to look at 15 it as a whole, but looking at these other aspects I have 16 taken you to, do you retain the view that this document 17 is, read as a whole, misleading? 18 A. No, I don't, and I'm sorry for it. 19 I made a hasty judgment being shown the extracts and 20 shown the document that I was in the way I was earlier. 21 This section is written by a mind that understands 22 where the contract was, and what the risk factors were, 23 and it's dealing with costing risk allowance. 24 Q. Thank you. 25 CHAIR OF THE INQUIRY: I think, Mr Dunlop, it was in 134 1 relation to specific passages, if it was knowingly 2 misleading, and the witness assented to that. 3 I appreciate you are looking at other passages. 4 MR DUNLOP QC: My Lord, a point your Lordship has made to me 5 on more than one occasion already, we must read the 6 document as a whole. I'm simply asking the witness, if 7 he reads it as a whole, does he maintain the view it is 8 knowingly misleading. His answer, I think, is in the 9 negative. 10 CHAIR OF THE INQUIRY: No doubt you can make submissions in 11 your closing submissions about that. 12 MR DUNLOP QC: Indeed so. 13 The Close Report was accompanied by your own letter, 14 I think, of 12 May. If we could look at that briefly, 15 please, Mr Fitchie? 16 A. Yes. 17 Q. CEC01033532. Was that the document -- 18 A. This is what we looked at this morning with Mr Lake, 19 yes. 20 Q. If I can ask you to look again, please, at section 5. 21 It's in very similar terms to section 5 from the last 22 letter. It's on page 3. 23 Just before you look to the text of section 5, the 24 hypothesis that seems to be being put is that in some 25 way, the Council were unaware that there were Notified 135 1 Departures coming straight down the pipe. 2 Now, can we have a look, please, at paragraph 5? 3 MR LAKE: For the avoidance of doubt, I don't think that's 4 what I put to the witness and it wasn't the intention of 5 what I put to the witness. 6 MR DUNLOP QC: On the question, then, of the awareness or 7 otherwise of the Council of what was likely to happen 8 after contract execution, Mr Fitchie, do you -- were you 9 being in any way disingenuous in what you said at 10 paragraph 5? 11 A. No. 12 Q. Did you understand the Council, and Ms Lindsay in 13 particular, to be under any misapprehension as to what 14 was going to happen on contract completion? 15 A. No, I didn't. And I'm taken by the fact that I've 16 forgotten about the letter of 28 April, which is only 17 12 days before this, sending a full draft of the 18 contract as it stood to CEC. 19 But the answer to the question is: I do not know 20 anything which told me that Gill Lindsay, 21 Council Solicitor, could be misled or misunderstand what 22 was going to happen. 23 Q. Thank you. I think the final document I'd like you to 24 look at, with the exception of a couple of statements, 25 is CEC00473790. 136 1 Now, again, Mr Fitchie, just before you look at this 2 document, the context here is, as I understand it, the 3 suggestion that the Council were in some way before 4 contract execution in the dark as to the likelihood or 5 the signs of any Notified Departures that might be 6 coming their way. 7 A. Right. 8 Q. We've heard evidence that this is Mr Smith -- 9 Nick Smith's document, "Trams - A Potted History". If 10 I could ask you to look, if we could have expanded, 11 please, the sixth bullet point looking down the page. 12 We see here that Mr Smith writes: 13 "At that time the contract was very much being 14 presented by tie as being "fixed price". However, the 15 design was less than 40% complete and a warning 16 was flagged at the time that it was very risky to sign 17 up to a fixed price contract where the design was not 18 complete due to the significant possibility of cost 19 overruns." 20 Now, his Lordship can obviously make what he will 21 about knowledge arising from that document, but when 22 Mr Smith says "a warning was flagged at the time that it 23 was very risky to sign up to" this, by whom was that 24 warning flagged? 25 A. It may have been flagged by many people. It may have 137 1 been flagged by those in the Council who had knowledge 2 of the state of the design, since CEC was the prime 3 approvals body, and by this stage there had been claim 4 by the SDS provider for over GBP2.5 million citing CEC 5 as the culpable party. 6 But this less than 40 per cent complete and 7 a warning was flagged, that sounds very much like 8 something that DLA Piper wrote. 9 Q. So do you understand that this is referring to something 10 that you or your firm has flagged? 11 A. Yes. 12 Q. Thank you. 13 I'm now moving on to the last point I wanted to 14 explore with you, Mr Fitchie. 15 You will recall that in your evidence, you were 16 asked about certain discussions that you said you had 17 had with certain people, Geoff Gilbert and Steven Bell 18 in particular, regarding Notified Departures, and you 19 may recall that my learned friend Mr Lake suggested that 20 the evidence of those witnesses might be that they could 21 recall no such discussions. Do you remember that being 22 put to you? 23 A. I do remember that, and I remember saying that I hadn't 24 seen those witness statements. 25 Q. If I could just ask you to look at a couple of them, 138 1 please. Mr Gilbert's -- 2 A. Before, my Lord, before this, I just want to say that 3 I had occasion to learn what Mr Gilbert remembered about 4 these matters in probably February 2010, when I was on 5 a conference call when he was asked about his 6 participation as a Commercial Director, and his 7 recollections were decidedly flimsy. 8 Q. Okay. If I could ask you to look at a statement, 9 please. The document is TRI00000038. You will see that 10 that's the witness statement of Geoff Gilbert, and if 11 you could turn, please, to page 112 in that document. 12 A. Yes. 13 Q. Look to the bottom of the page, paragraph 284: 14 "I have been shown an email exchange dated 20, 26 15 and 31 March." 16 We looked at that earlier, Mr Fitchie: 17 "Part of that chain is an email dated 31 March from 18 Fitchie to McEwan and Bell. Andrew Fitchie noted that if SDS 19 could not commit to adhere to version 26 ... the result 20 would be that a notified Departure would be triggered. 21 I was not copied into McEwan's email to Steven Bell ... but 22 I note that he stated ..." 23 We have seen that already. That's the tooth and 24 nail comment? 25 A. Yes. 139 1 Q. If we then turn the page, please, and if we blow up the 2 top half of that page, please, in the middle of the 3 screen as you are now looking at it: 4 "There were probably discussions taking place on 5 this particular issue. We met fairly regularly. We met 6 before any of the negotiation meetings, so I am sure it 7 was discussed. I do not recall what was decided in 8 respect of the risk that this represented. I am 9 proposing, in my email of 31 March 2008, attempting to 10 understand the differences between potentially 11 conflicting programmes, reconciling them and 12 understanding how the differences between the two SDS 13 programmes would impact ... Ian Laing in his email 14 further down the chain ... is saying 'look at this and 15 understand'. Those emails noted that the effect of 16 Schedule 4 would be that there would be an immediate 17 notified departure ... I was made aware of this at the 18 time by virtue of Andrew's email. I think inevitably 19 there would have been discussion within TIE on this 20 issue." 21 A. Mm-hm. 22 Q. Does this accord with your recollection? 23 A. Yes. I'm quite shocked to read at the bottom of this 24 paragraph: 25 "I was made aware of this at the time by virtue of 140 1 Andrew's email." 2 So the two men that met with Ian Laing's client on 3 25 March or thereabouts to agree the Notified Departure 4 hadn't talked to Geoff Gilbert about it, and everybody 5 knew within tie that Geoff Gilbert was the architect of 6 Schedule Part 4. I find that quite strange, given that 7 we see at the beginning of Geoff Gilbert's statement 8 that he left tie on 23 April. 9 Q. If we could turn the page again, please, top of that 10 page, Mr Gilbert says: 11 "The emails appear to make it clear that because the 12 design programme to be used was not the one in the Base 13 Case Assumptions, it would mean that there was an 14 immediate notified departure on contract signature. 15 I note that I'm not copied into any of the initial 16 emails, but the chain was later copied to me by Fitchie. 17 I have already discussed earlier what consideration was 18 given to the Base Case Assumptions meaning there would 19 be an immediate notified departure on contract 20 signature." 21 Now, we saw earlier that Mr Gilbert has said that he 22 was sure there would have been discussions within tie. 23 Does that accord with your recollection? 24 A. Yes. 25 Q. And again, over the page, please -- 141 1 A. Can I -- could I -- Mr Dunlop, just interrupt, my Lord, 2 to make one point on this. 3 This confirms to me my evidence about there being 4 serious miscommunication within tie. Thank you. 5 Q. Over the page, please, 288, paragraph 288: 6 "I have been shown an email exchange … February … 7 March. I am party to those emails ... I, and other 8 senior personnel … were corresponding directly ... copied 9 Andrew Fitchie in … also been shown two further email 10 exchanges … I was party to the emails in both chains. 11 We were in a series of meetings. Andrew was involved in 12 those meetings (as was Laing ... These emails relate to 13 one of those meetings. Andrew probably summarised the 14 issues and there was an action for me to respond to." 15 Again, does that accord with your recollection? 16 A. It does, although there is a general comment about what 17 meetings I attended, and I've laid out which meetings 18 I attended. 19 Q. At those meetings, were you giving the comments or 20 advice that you say you did under SP4? 21 A. Yes, because those meetings would have been about SP4. 22 Q. Thank you. Mr Bell's statement, please. TRI000000109. 23 This is Mr Bell's witness statement. If you go to 24 page 51, please. 39 has a subparagraph (1). The question 25 asked at 1 is: 142 1 "What was your involvement in the discussions and 2 negotiations in relation to SP4 (both before and after 3 Mr Laing's email)?" 4 The second paragraph after that, halfway through 5 that paragraph, Mr Bell says: 6 "There would probably have been a couple of sessions 7 per week, maybe more depending on what topics were being 8 dealt with and that was, generally, working in a round- 9 table type forum. There would be ourselves, DLA, 10 (usually Fitchie), Pinsent Masons ... Susan Clark and also … 11 McFadzen." 12 Again, at those meetings, would you be discussing 13 and advising on SP4. 14 A. Yes, there would be break-out sessions to discuss points 15 arising. I also see something that I find rather 16 strange relating to the email exchange between 17 Jim McEwan and myself on 31 March. It's the top 18 paragraph there. It says: 19 "I could not find any response from me in the 20 correspondence that was provided to me by the Inquiry. 21 I would have thought, given that Ian Laing, 22 Andrew Fitchie and Jim McEwan commented on this, that 23 I would also have responded, unless we agreed that 24 Andrew would do it on my behalf." 25 But I was being asked by Jim McEwan to give tie 143 1 advice on the effect of V6 to V28. I wasn't being asked 2 by anybody to correspond with anyone on Steven's behalf. 3 What was wanted at that point was Steven to engage 4 with Geoff and possibly Jim and discuss what they were 5 going to do about it. And all we see at the moment is 6 Jim McEwan saying that he in simple terms disagreed with 7 my recommendation. 8 Q. Okay. Over the page, please. Subparagraph 3. The 9 question is asked: 10 "What were your views on the matters noted above?" 11 You say: 12 "Regarding the point "Is there going to be an 13 immediate Notified Departure based on the SDS design 14 programme? we knew and expected that to become 15 a Notified Departure, which I had no issue with." 16 Does that accord with your understanding of 17 Mr Bell's knowledge of the immediacy of the Notified 18 Departure? 19 A. The immediacy of it, yes. It seems that he came to -- 20 I don't understand -- sorry. Yes, is the answer. 21 What I would take issue with there, and would have 22 done at the time, if I'd seen Jim McEwan's -- "which 23 I had no issue with". What I was recommending to the 24 client was that they needed to get their heads together 25 and decide how to tackle it before the contract was 144 1 signed, and using their resource. 2 I remember having a very short discussion about this 3 with Jim, saying: can't you get TSS to take a look at 4 this and sit down with SDS and go through it? And ... 5 Q. Okay. On the same page, please, subparagraph (5): 6 "To what extent, if at all, were CEC advised of the 7 risk/likelihood of Notified Departures under Schedule 4, 8 including the potential number and cost of Notified 9 Departures?" 10 Mr Bell tells us: 11 "Right from the very start, when Schedule 4 was 12 proposed as a mechanic within the contract, CEC, through 13 the Tram Project Board and also CEC Legal directly, were 14 appraised of that. I am sure that was gone through in 15 great detail with Gill Lindsay, CEC’s Head of Legal. DLA also 16 provided specific advice to the Council on the contract 17 in addition to the advice they provided to TIE." 18 Does that accord with your recollection of the way 19 that matters unfolded? 20 A. Yes, although I would have no knowledge of how tie was 21 interacting through its TPB with CEC. I wasn't there to 22 look at how those communications at senior level and 23 between -- essentially Matthew Crosse and 24 Willie Gallagher and the tie Project Director were 25 interacting with CEC. But that is -- that is in accord 145 1 with what I believed was going on. 2 Q. Just thinking back to the SP4, Mr Fitchie, and the 3 wording used in it? 4 A. Yes. 5 Q. Was the immediacy of Notified Departures in any way 6 cloaked in the language used in SP4? 7 A. Sorry, Mr Dunlop, could you just ask me again. 8 Q. If you think back to SP4? 9 A. Yes. 10 Q. What I'm asking is: was the fact that a Notified 11 Departure was inevitable, was it in any way cloaked by 12 the language of SP4 or was it in fact utterly clear from 13 the face of the wording in SP4? 14 A. No. I believe the opening language in what became 15 Schedule Part 4 is a less legalistic explanation about 16 what that document is doing. So the answer to your 17 question is: there was no language which was cloaking 18 how Notified Departures were going to work. 19 Q. Did it rather say: this is based on certain assumptions 20 which both parties acknowledge are false. 21 A. That is essentially the language of the introduction to 22 that document. 23 Q. And went on to say that in the event those assumptions 24 change, then the Notified Departure mechanism will 25 apply? 146 1 A. Correct. 2 MR DUNLOP QC: Thank you. I'm obliged, my Lord. 3 CHAIR OF THE INQUIRY: Mr Martin? 4 Examination by MR MARTIN 5 MR MARTIN: My Lord, I'm obliged, and I shall minimise the 6 questions that I have to ask with appreciation to 7 Counsel to the Inquiry. 8 I should perhaps make it clear for the record that 9 I do so without prejudice to the Council's right in due 10 course to challenge any aspect of the evidence of this 11 witness, whether contained in his Inquiry witness 12 statement or otherwise. 13 To that extent, issues which have not been raised in 14 these questions should not be construed as the Council's 15 acceptance of what has been said in the statement. 16 Now, Mr Fitchie, I have, I think, three topics to 17 raise with you, although the third may be slightly 18 extended as a result of my learned friend Mr Dunlop's 19 question. 20 The first arises out of the duty of care which DLA 21 assumed so far as the Council is concerned. 22 Could you look, please, at your witness statement at 23 paragraph 2.18, which is on paragraph 10. The witness 24 statement is TRI00000102. 25 Now, that paragraph states: 147 1 "In 2005 DLA Piper accepted a request from TIE to 2 confirm that it owed an ancillary duty of care to CEC, 3 despite it not being DLA Piper's client. DLA Piper's 4 letter of 23 June 2005 set out the basis upon which 5 DLA Piper was willing to agree to assume this ancillary 6 duty of care." 7 What did you mean by the word "ancillary"? 8 A. Yes. This letter is 12 and a half years old. 9 I think what I meant by "ancillary duty" was the 10 duty that was set out in the letter that is subject to 11 us being -- the -- in other words, conditions under 12 which that duty of care would be owed. And I accept 13 that this is not elegant language, but that is what 14 I meant. 15 Q. Well, what did you mean? I'm not concerned with its 16 elegance. I want to know what it meant. What does 17 "ancillary" -- I would understand the word 18 "ancillary" -- 19 A. Beside -- 20 Q. Forgive me if I finish my question. Ancillary to mean 21 subsidiary, secondary to, something similar. What did 22 it mean? 23 A. A secondary duty of care. 24 Q. A secondary duty of care. What does that mean? 25 A. A -- a duty of care alongside the duty of care that we 148 1 owed to the primary client. 2 Q. Could you look, please, at the letter that you referred 3 to. I wonder if it's possible to keep the witness 4 statement on the screen, please, along with the document 5 DLA00006301. Thank you very much. 6 Now, I do apologise. Could I have page number 2 of 7 6301. This is the space for your signature, isn't it? 8 A. Yes. 9 Q. Did you sign this letter? 10 A. I never signed this letter. 11 Q. You never signed it? 12 A. Well, sorry, can I go over the page? 13 Q. If we go back to page 1, please? 14 A. Yes, thank you. 15 This is -- this is the cover letter which I sent to 16 Alex Macaulay. 17 Q. That's right? 18 A. Yes. 19 Q. So you will have signed it? 20 A. I imagine so, yes. 21 Q. We don't -- I think there is another version of this 22 letter in the CEC list of documents. It's not signed 23 either, but we assume you signed it because it was 24 a principal letter to Mr Macaulay. 25 In the second paragraph you say: 149 1 "Please find attached a draft letter which we are 2 ready to provide to tie. An explanation in brief: 3 "Paragraph 1. We are happy to extend to CEC the 4 same duty of care we owe to tie." 5 Just stopping there, what's the -- were the contents 6 of the draft letter intended to be accurate? 7 A. Intended to be accurate? 8 Q. Yes. Did you intend them to be accurate, what is said 9 in the draft letter, referred to in that paragraph? 10 A. It is a draft letter which I discussed with my -- as 11 I say, in the opening paragraph, which I discussed with 12 three different parties within the firm, and the reason 13 it's a draft is because if it came back from tie with 14 commentary on it, saying we want something different, 15 I would need to refer to those people within the firm to 16 discuss whether or not we could provide the letter. 17 Q. Was it intended to be accurate, the draft letter? 18 A. Yes. 19 Q. Thank you. Could you then go to the draft letter, 20 please, which is DLA00006300. I'm sorry, I was hoping 21 the witness statement might remain, but leave that ... 22 Thank you. 23 Now, if we go to the final part of this letter, 24 which is page 2, could we do that, please? 25 We can see that this was intended to be signed by 150 1 DLA Piper, et cetera, and also by tie, and also by the 2 Council. Is that right? 3 A. That's right. 4 Q. Could we go back to page 1, please. Can we see that the 5 reference is AF/AF and then a couple of numbers? 6 A. I see it. 7 Q. Why is it "AF" twice, as a matter of interest? 8 A. This is 12 years ago and in truth I'm not really sure 9 why it says AF twice. 10 The 310299 number 1 is the tie client number. 11 Q. Forgive me. I was only asking about the AF, which 12 I take it refers to you. And you don't know why it 13 appears twice? 14 A. I don't. I suspect that this document went to word 15 processing as opposed to my -- our team secretary. 16 Q. Could we then just return to the page, please. 17 If you look at the third paragraph, please, it 18 reads: 19 "This letter confirms that as from December 5th, 2003 20 onwards, DLA Piper ... has owed and owes the same 21 contractual duty of care to CEC as owed to tie Limited 22 pursuant to ..." 23 Then various conditions. 24 A. Correct. 25 Q. Now, I asked you whether that letter was intended to be 151 1 accurate. 2 A. Mm-hm. 3 Q. May we take it that that is an accurate statement? 4 A. Yes. 5 Q. So DLA owed a duty of care to the Council from 6 5 December 2003? 7 A. That is what the letter proposes. 8 Q. With respect, Mr Fitchie, that is not right. The letter 9 isn't proposing a matter of history. That is why I took 10 you to the original letter which you must have signed? 11 A. Mm-hm. 12 Q. And why I asked you to confirm that this letter was 13 intended to be accurate. 14 That is a statement of historical fact, isn't it? 15 A. I'm sorry, my Lord, I'm not -- I'm not with this line of 16 questioning. I don't fully understand what I'm being 17 asked. 18 CHAIR OF THE INQUIRY: I think you're just being asked: does 19 the letter show that DLA Piper Rudnick Gray Cary 20 Scotland has owed a duty of care from December 5, 2003. 21 A. I remember discussing with Alec Macaulay that the 22 Council would want this to run from our date of 23 appointment. I'm not sure, looking at this now, 24 my Lord, why I'm saying December 5, 2003. I think there 25 is an error there because 2002 would be more the date of 152 1 our appointment. I cannot -- I remember some discussion 2 with Alex about this. I cannot now put my finger on it. 3 MR MARTIN: Do you accept or do you dispute, Mr Fitchie, 4 that this letter confirms that DLA, et cetera, has owed 5 a duty of care to the Council since a date stated to be 6 5 December 2003? 7 A. Yes. 8 Q. But perhaps might be a date even earlier? 9 A. Well, I have confirmed, yes, this is what this letter 10 proposes. 11 Q. How can it propose something historical which has 12 already occurred? 13 A. My answer to that is that you can assume 14 a responsibility for something that's happened in the 15 past. 16 Q. Does it say that? 17 A. No, it does not. 18 Q. No. Anyway, that can move on. 19 The letter or the sentence then goes on: 20 "... has owed and owes the same contractual duty of 21 care to the Council as owed to tie ..." 22 So in other words the duty of care being referred to 23 is identical to the duty of care being owed to tie? 24 A. Correct. 25 Q. So if we return to your witness statement at 153 1 paragraph 2.18, which is on the left-hand page, what is 2 ancillary about the duty of care to CEC? 3 A. Nothing, and so I think the answer is I made a mistake 4 in my witness statement at 2.18, using the word 5 "ancillary". 6 Q. Thank you. Indeed, the duty of care existed before the 7 letter of 23 June 2005? 8 A. Which duty of care? 9 Q. Both duties of care in fact, but in particular the duty 10 of care to the Council. 11 A. I disagree with that. 12 Q. Why? 13 A. Because we weren't appointed by CEC. We were appointed 14 by tie Limited. If we were to owe a duty of care to the 15 Council, a contractual duty of care, we would need to be 16 in contract with them under the terms of appointment. 17 We were not. The terms of appointment were signed with 18 tie. 19 Q. Mr Fitchie, I hope you're not going to take up the time 20 of Inquiry and not require me to go back to the letter 21 that you wrote and that we looked at a moment ago which 22 stated: 23 "This letter confirms that as from December 5, 2003 24 onwards, DLA ... has owed and owes the same contractual 25 duty of care to CEC as owed to tie ..." 154 1 A. I'm sorry, I'm really not understanding the point, 2 my Lord. I wonder if you can help me here. 3 This letter, the 23 June to Alex Macaulay, is making 4 a proposal. I thought -- forgive me if I'm wrong. 5 I thought I was being asked as of our date of 6 appointment of December -- let's say November 22, 2002, 7 we owed a duty of care to the Council. We could not 8 have owed such a duty of care to the Council, and that 9 was the whole point of this letter. That we were being 10 asked by tie, because somebody, according to Mr Macaulay 11 whose statement I have read, he was unsure who it was at 12 the Council asked him to get duties of care from their 13 consultants and subcontractors, and this was why this 14 letter was provided. 15 I believe that I have answered the question. No 16 duty of care could have been owed by tie to CEC during 17 the period November 2002 to June 2005 because there was 18 no contractual relationship. 19 Q. So what does the first sentence of the third paragraph 20 in the letter mean? 21 A. It means it's extending a duty of care back in time. 22 Q. Does it say that? 23 A. "has owed and owes the same contractual duty". So the 24 question is: would it be better if the letter said: this 25 letter is going back in time to owe and carry on owing 155 1 the same contractual duty of care? Do I understand the 2 question correctly, my Lord? 3 CHAIR OF THE INQUIRY: Well, I think we'll just move on, 4 Mr Martin. I think I can interpret -- 5 MR MARTIN: Thank you, my Lord. 6 The second matter I want to ask you about, 7 Mr Fitchie, arises out of the evidence that you gave 8 yesterday, and indeed in your witness statement, 9 regarding your secondment to tie. 10 A. Mm-hm. 11 Q. Could you look, please, at paragraph 7.48 to 53 of your 12 witness statement. That's pages 134 and 135. Now, you 13 narrate here the commencement of your secondment, which, 14 according to paragraph 7.52, came into play formally at 15 the end of October 2007? 16 A. Mm-hm. 17 Q. Now, once you were seconded, what was your legal status 18 so far as tie was concerned? 19 A. I was a partner at DLA Piper. I think we were -- I went 20 over this with -- my Lord, with Mr Lake in his 21 questions. 22 I was a partner at DLA Piper. And there was 23 a contract between DLA Piper and tie giving them 24 exclusivity of my time for a fixed fee. 25 Q. Could you look, please, at document CEC01656651. 156 1 CHAIR OF THE INQUIRY: Do you still want the statement left 2 on the -- 3 MR MARTIN: It perhaps might be better. I'm much obliged, 4 my Lord. It's not quite so important as the last one, 5 but yes, it would be helpful if it could be. 6 Now, this we looked at yesterday. 7 A. We did. 8 Q. I think it was dated in September 2007. 9 A. I'm not sure there's a duty on this document. 10 Q. No, but I think by associated emails it's about then. 11 If we can live with that answer? 12 A. I can. 13 Q. The position was described as "[Acting] Commercial 14 Director"; is that right? 15 A. That's what it says on this Heads of Terms document. 16 Q. Is it correct? 17 A. No, it's not. What came into effect was the 18 relationship between DLA Piper, tie and myself as I have 19 described. 20 I think I went through this in my evidence with 21 Mr Lake yesterday, my Lord, and explained that this 22 document was a proposal, a Heads of Terms, if you like, 23 that was discussed between me and Colin McLauchlan. 24 There had been some discussion between Michael Burton, 25 my manager -- my boss, my line manager in London, and 157 1 Willie Gallagher direct. Willie Gallagher had delegated 2 responsibility to organise the secondment to 3 Colin McLauchlan. 4 This part of the document -- my best recollection 5 came about as a result of me trying to understand what 6 it was that tie were saying. 7 The terms of appointment and the fee and matters on 8 page 2 were much more my thinking on how the secondment 9 would work out. That's where I am. I have more to say 10 on the timing of this, but I need to listen to the 11 questions on it, rather than expanding more now. 12 Q. Well, did you ever assume the position of Commercial 13 Director of tie? 14 A. No. 15 Q. Did you ever use that title? 16 A. No. There are some references in tie documentation 17 after close, after May 2008, making reference to 18 Andrew Fitchie as Contracts Director, but these 19 documents were not seen by me and they were -- tie were 20 under some pressure to demonstrate how they were 21 resourcing during the execution -- the implementation 22 period of the contract, and I think that just was put in 23 there because it was convenient to show they had 24 a resource to cover contract manager. 25 But I never assumed any formal position, Director or 158 1 anything else, within tie. 2 Q. Did you take instructions from your joint client, City 3 of Edinburgh Council, on the appropriateness or 4 otherwise of your being seconded to tie in whatever 5 capacity? 6 A. My view at the time was -- 7 Q. Forgive me, Mr Fitchie. Did you or did you not take any 8 instructions from CEC on your assuming, in whatever 9 respect, secondment to tie? 10 A. I think my statement says that I had one conversation 11 with Gill Lindsay about this secondment. Otherwise I do 12 not recall whether I had conversations with CEC about 13 this arrangement. 14 Q. Did you either consider, record, take any instructions 15 on how you could continue to exercise your duty of care 16 towards CEC whilst assuming a position of secondment in 17 one form or another to tie? 18 A. I had a discussion with Gill Lindsay, as I said, and at 19 this time my conversation is in my witness statement and 20 I'm not going to contradict that. 21 What I said was that DLA were not advising the 22 Council directly without instruction from tie. 23 The question from Gill Lindsay was: who would 24 continue advising the Council separately? And my answer 25 was that that would be covered, but DLA's duty of care 159 1 was -- owed to the Council was subject to direction from 2 tie, which was the position set out in the earlier -- in 3 the June 2005 letters, as opposed to the letter you 4 took -- or the -- there was a later letter which I was 5 taken to by Mr Lake which mentions co-client. 6 My position at this point, answering your question, 7 was no, I did not have a direct instruction from CEC on 8 this secondment arrangement. 9 Q. My question asked you whether you gave any consideration 10 to it, and indeed whether you recorded that 11 consideration, to whether you could properly fulfil your 12 duty of care to your joint client CEC while accepting 13 a position of secondment at tie. Did you have such 14 a thing? 15 A. No. 16 Q. Thank you. 17 The third matter I want to ask you about, 18 Mr Fitchie, again arises to some extent out of your 19 evidence yesterday. Could you go to paragraph 7.68 of 20 your witness statement on page 139, please. 21 A. I'm there. 22 Q. This begins dealing with the charging arrangement, and 23 if -- I'm sorry, could we go to the next page too, 24 please. 139 deals with the question of the bonus. 25 Now, you describe in paragraph 7.72 a single 160 1 paragraph -- 2 CHAIR OF THE INQUIRY: I think the next page -- 3 A. I'm confused. 4 CHAIR OF THE INQUIRY: The next page isn't up. Thank you. 5 MR MARTIN: Thank you, my Lord. 6 You describe in a single paragraph, 7.72, the 7 circumstances of the bonus? 8 A. Correct. 9 Q. Is that a full account of all the circumstances relating 10 to the bonus? 11 A. Mr Lake -- Counsel for the Inquiry, my Lord, asked me 12 a question yesterday about were there -- I think the 13 language was: was this raised again? And my answer to 14 that was yes, it was, and the consequence of it being 15 raised -- the client -- there was a disagreement between 16 me and my firm as to whether I had had clearance to take 17 the bonus, and after scrutiny and internal enquiry, the 18 firm took the bonus back, and that was my evidence. 19 Q. Why is that not in your witness statement? 20 A. Does it -- my answer is: I didn't think it added very 21 much to what I was saying. The fact of the matter is 22 that I accepted a bonus. 23 Q. Now, you indicate, because until yesterday we had no 24 evidence on this, there was some sort of internal 25 enquiry within your firm. How was that initiated? 161 1 A. I recall travelling to London to meet with my new 2 manager who is now European Group Head for Finance and 3 Projects, who in fact was a man who I'd met at Cambridge 4 and played football with, and he informed me that the 5 firm was displeased, and that there would be an enquiry. 6 So that's how it initiated. 7 Q. So he must have ascertained it somewhere? 8 A. Ascertained -- 9 Q. The fact of the bonus being paid and accepted by you? 10 A. Well, he ascertained it from the firm's records and the 11 fact that I had -- I had -- my position was I had 12 clearance within the firm. 13 Q. Which is what you say in paragraph 7.72. But that was 14 ultimately not accepted; is that right? 15 A. Yes. It was not accepted by the firm that I had 16 clearance to accept the bonus. There was some confusion 17 about this within the firm, I have to say, but the 18 ultimate -- ultimately, the decision was this was not 19 allowable, and I needed to pay the bonus back to the 20 firm. And I believe also -- I had no role in this 21 whatsoever -- that CEC -- that DLA Piper wrote to your 22 client saying: we have this money, it needs to be 23 reimbursed, how would you like that to happen? 24 And I recall having a conversation some years ago that 25 CEC had not said anything in relation to that letter. 162 1 That is the extent of my knowledge, given that 2 I retired from the firm after a period of illness in 3 November 2010, and I began living in Italy from 4 June 2006, which was my actual -- sorry, June 2011, 5 which was the end of my six-month notice period. 6 Q. My understanding from your evidence yesterday in 7 relation to in particular the emergence within the 8 proposed Infraco contract of the pricing assumptions in 9 Schedule 4, my understanding from your evidence was that 10 you were not instructed in any significant way to play 11 a part in giving legal advice on the effect, on the 12 consequences of these Pricing Assumptions in Schedule 4; 13 is that correct? 14 A. Not exactly. The evidence that I was giving was my 15 participation in negotiation -- the drafting, in the 16 genesis, drafting, negotiation and reaching completion 17 on Schedule Part 4, my role was limited. I think that 18 was my evidence. 19 Q. Yes. That was the period after Wiesbaden, after the 20 beginning of 2008, when Schedule 4 in something like its 21 ultimate form first appeared. Up to the point of 22 contract close in May 2008. Is that correct? 23 A. Yes. Well, I'm sorry, no. The period of negotiation 24 for Schedule Part 4 finished, as I think I have said in 25 my evidence under examination from Mr Lake yesterday, 163 1 my Lord, was in my -- to my recollection around about 2 25 -- 26 March. So it was -- Schedule Part 4, to all 3 intents and purposes, was finished by that date. 4 Q. Now, during that time, as I understood it, you said you 5 were working very hard. I may misrecall it, but 6 I thought you said 13 and a half hours a day; is that 7 right? 8 A. That's what the figures show. 9 Q. We also know that following contract close or at about 10 the point of contract close, April 2008, you were 11 offered this bonus of GBP50,000. 12 A. Correct. 13 Q. What was the bonus in recognition for? 14 A. I'm sorry, I'm looking to see -- 7.72: 15 "He said TIE wished to award me a personal bonus in 16 recognition of my work for TIE on the Project. He said 17 the recommendation was from the TIE Remuneration 18 Committee and that the amount would reflect TIE's 19 appreciation for my work ... He said the Remuneration 20 Committee comprising TIE senior executives and CEC 21 officers had recommended this." 22 It was the recognition for my work on the project 23 from the beginning -- I beg your pardon, from 24 November 2002 until that time. So six years. 25 Q. But to use the word you used a moment ago, you had 164 1 a limited role in relation to Schedule -- the Schedule 2 Part 4, which of course we now know was a critical 3 factor in the significant increase in costs for the 4 project. So you had a limited role in that. 5 My question is a simple one: why were you worth the 6 bonus? 7 A. My word, my Lord. I think I need to answer that 8 question by saying that if you worked in the project 9 finance world, and the projects world, and you've worked 10 on this project, there are many, many, many other things 11 going on in terms of advice, involvement, engagement, 12 making yourself available to CEC to explain what is 13 going on. 14 I'm extremely open person. I'm an extremely 15 dedicated person, and the reason that the bonus was 16 there was not exclusively for Schedule Part 4. I worked 17 very, very, very hard on this project for a long time. 18 CHAIR OF THE INQUIRY: Was the timing of the bonus related 19 to the conclusion of the contract? 20 A. Not at all, my Lord. 21 CHAIR OF THE INQUIRY: Mr Martin, will you find a time to 22 adjourn? 23 MR MARTIN: I'm virtually finished, my Lord. If I may just 24 continue. 25 A. My Lord, on that point, I want to help. I can say three 165 1 things. 2 On 9 April, after this meeting with Mr Gallagher, 3 when he handed me a letter, the next place I went was 4 into a meeting with BSC who tabled a demand for 5 GBP19 million, and we had a break-out meeting in which 6 I discuss in my statement in two places, and the people 7 attending that meeting were Mr Gilbert, Mr Murray, 8 Mr McGarrity -- 9 CHAIR OF THE INQUIRY: I'm just wondering, Mr Fitchie, 10 I just wonder how this relates to the bonus. 11 A. My Lord, you asked me about was the bonus related to the 12 completion of contract. 13 CHAIR OF THE INQUIRY: And you said no, and that's where we 14 are. 15 A. Thank you. 16 MR MARTIN: Thank you, my Lord. 17 You see, I would suggest to you, Mr Fitchie, that 18 the circumstances of this bonus, the amount that it was, 19 the fact that Mr Gallagher and the Remuneration 20 Committee proposed it, is not consistent with the fact 21 that you played only a limited part in one of the most 22 critical elements of the Infraco contract, namely the 23 conclusion of Schedule Part 4 and indeed what its effect 24 would be. 25 A. I disagree entirely with that proposition. 166 1 Q. You see, I have to put to you, and my learned friend 2 yesterday didn't, but when you say you had a limited 3 part in Schedule Part 4, you are not telling the truth. 4 You had a full part, seconded to tie, in frequent 5 contact with the officers of tie, fully aware of the 6 evolving drafts and developments in the contract, and 7 frankly, it's not credible that you did not play a full 8 part, owing a duty of care as the solicitor, in tie in 9 that respect, is it? 10 A. I disagree with you, and I have given my evidence on 11 that point to Mr Lake yesterday, and in my statement. 12 I have nothing further to add on that, my Lord. I don't 13 think I can assist. It's the same type of question as 14 I have answered already. I don't wish to be 15 discourteous, but I feel I have given evidence on this 16 and Mr Martin has that to look at with his client. 17 Q. Well, Mr Fitchie, I'm afraid we have to pursue these 18 matters for the benefit of the Inquiry, not for my 19 client's benefit or for anyone else. 20 I put it to you that you were fully involved in the 21 creation, the ultimate wording, and considering the 22 effects of Schedule Part 4, and indeed we have seen this 23 afternoon Mr Dunlop asking you about various letters in 24 April when you clearly did give advice about Schedule 4 25 which is again consistent with your full engagement 167 1 throughout, isn't it? 2 A. I don't wish to be unhelpful. I have given my evidence 3 on this point and I do not -- your first question 4 was: should I get a bonus or should the -- should the 5 bonus be tailored to the fact that I had limited 6 involvement in Schedule Part 4? My answer to that 7 question is: that is a matter entirely for tie and for 8 the representatives on the Remuneration Committee. 9 Presumably, if somebody on that committee had thought 10 Fitchie is not doing his job properly because he's not 11 fully involved in everything we're doing, they would 12 have said it. 13 The second part of the question is related to what 14 Mr Dunlop took me to, my Lord, and nothing Mr Dunlop 15 took me to undercuts what I have said about the way 16 I was engaged on Schedule Part 4, and I have been very 17 specific about it. I've been challenged by Mr Lake on 18 behalf of the tribunal and tested on that, and I stand 19 by what I said. 20 Q. You were asked by my learned friend Mr Dunlop about 21 a number of documents, in particular the close report? 22 A. Yes. 23 Q. You were referred to a number of passages where it was 24 indicated that there were expected to be immediate 25 Notified Departures; is that right? 168 1 A. Correct. 2 Q. Did we see in any of these documents, a statement along 3 the lines of your saying "and in addition it is likely 4 that there will be an unquantified and potentially 5 unquantifiable number of Notified Departures throughout 6 the carrying out of the Infraco contract by reason of 7 the wording of the Pricing Assumptions in Part 4 of the 8 Schedule"? 9 A. If I understand what you're asking me, the documents 10 that Mr Dunlop took me to were documents that were not 11 drafted by DLA Piper and not drafted by me. 12 Q. Well, what is the answer to my question? Did you 13 anywhere, and there were some documents that did emanate 14 from DLA, not least the letters -- did you at any point 15 draw to the attention of tie or indeed CEC -- put it 16 shortly -- the unquantifiable consequences of the 17 Pricing Assumptions in Schedule Part 4? 18 A. I had a specific exchange which we looked at on 31 March 19 which went to exactly that type of issue on notified 20 departure. 21 I was pressing tie to take a -- to -- to examine 22 what V26 to V28 meant, and yes, I had discussions, as 23 I say, and I have said, throughout this period about 24 Schedule Part 4 and what it meant, and we have seen the 25 evidence of Mr Bell and Mr Gilbert saying they 169 1 understood exactly what I was talking about. 2 So yes, I did. Is it written in precise language in 3 those tie documents? No. But it's pretty evident what 4 the mandatory change and Notified Departure will create, 5 and what those risks are, and we saw Council solicitors 6 taking a view on that as well. 7 Q. So you accept, Mr Fitchie, that there is no written 8 recording of the consequence which I outlined? 9 A. I do not accept that that is the case because the 10 28 April letter contained Schedule Part 4. It contained 11 a risk matrix. It was part of a discussion -- I'm 12 sorry. It was issued after discussions with the 13 Council Solicitor. The draft letters were shared with 14 her. 15 So my answer to the question is: yes, I did indicate 16 that there was going to be Notified Departures if there 17 were departures from assumptions, and I did indicate 18 that BSC had insisted on further contractual protection 19 of this type as a result of the design -- the state of 20 the design and as a result of the position on the MUDFA 21 contract. 22 Q. Do you rely on what is said -- I don't want to go back 23 to it -- of the letter of 28 April? 24 A. I rely on all of the DLA letters, all of the 25 conversations that I had -- if you're asking for 170 1 writing -- is that right? 2 Q. Mr Fitchie, you know perfectly well I started by asking 3 a question about writing. 4 A. Good. Then I rely upon the DLA Piper letters. I rely 5 upon the documents that Mr Dunlop took me through. Yes. 6 That's where I am. 7 MR MARTIN: My Lord, I'm much obliged for the opportunity to 8 ask these questions. I can deal with these matters in 9 submissions. 10 CHAIR OF THE INQUIRY: Mr Fitchie, that concludes your 11 evidence. You are still technically under your 12 citation, and it would be possible for the Inquiry to 13 recall you or to seek further evidence from you in 14 another way. 15 That may or may not be required. 16 A. Thank you, my Lord. 17 CHAIR OF THE INQUIRY: Thank you very much. 18 A. May I just thank you for your patience with me. And 19 thank Mr Lake for his excellent work on asking 20 questions. 21 CHAIR OF THE INQUIRY: We will just adjourn for 15 minutes 22 to enable the shorthand writer to have a break. And we 23 will bring in the next witness. 24 So we'll resume again at 3.50. 25 (The witness withdrew) 171 1 (3.35 pm) 2 (A short break) 3 (3.52 pm) 4 CHAIR OF THE INQUIRY: Mr Mackenzie. 5 MR MACKENZIE: Thank you, my Lord. The next witness is 6 Steve Reynolds. 7 MR STEVE REYNOLDS (affirmed) 8 CHAIR OF THE INQUIRY: Have a seat, Mr Reynolds. I'm sorry 9 you've been delayed in the start. The other -- the 10 previous witness took longer than scheduled. 11 A. Not a problem, thank you. 12 CHAIR OF THE INQUIRY: If you just listen to the questions 13 and answer them as directly as possible, and if it's 14 capable of a yes answer or a no answer, then that should 15 be the answer, subject to any qualifications you might 16 then want to add. 17 Could I also ask you to speak clearly into the 18 microphone and reasonably slowly, because the shorthand 19 writers have to keep up with you. 20 A. Okay. 21 Examination by MR MACKENZIE 22 MR MACKENZIE: Good afternoon. 23 A. Good afternoon. 24 Q. Could you state your full name, please? 25 A. My name is Stephen Christopher Reynolds. 172 1 Q. And your current occupation? 2 A. My current occupation is retired from my full-time role 3 with WSP, but I'm currently on a zero hours contract 4 with WSP for consultancy services. 5 Q. Now, you have provided a CV to the Inquiry. That will 6 come up on the screen in a second. The number is 7 CVS00000035. We can see at the very top paragraph, it 8 sets out in summary your profession. You're a Chartered 9 Electrical Engineer, with specialisation in business 10 management and programme management. 11 This must be your former position in the firm; is 12 that correct? 13 A. Correct, yes. 14 Q. As Director of Major Projects and Commercial Services. 15 Now, you referred to WSP. Did they take over 16 Parsons Brinckerhoff in some way or what? 17 A. Yes. As it says in the paragraph there, following the 18 acquisition of Parsons Brinckerhoff by WSP in 2014. So 19 that was November 2014 that WSP acquired 20 Parsons Brinckerhoff. 21 Q. We also see years of experience, 39 years of experience, 22 27 of which were with Parsons Brinckerhoff. 23 If we could then please go over the page to page -- 24 sorry, this page, go down a little bit. Scroll down. 25 We'll see that there we see you were a Director 173 1 responsible for light rail major projects between 2007 2 and 2013. 3 If we then go over to page 2, we'll see that in this 4 role, the second bullet point states you were Project 5 Director for the Edinburgh Tram Network Systems Design 6 Services Contract. 7 I think in short when we come on to look at your 8 statement, you fulfilled that role from around 9 February 2007 to around May 2008 full time, and then on 10 a part-time basis; is that correct? 11 A. Yes, that's correct. 12 Q. Thank you. Back to page 1, please. We can also see the 13 very last bullet point on the page that you were 14 Principal-in-charge of the Metrolink Delivery Partner 15 Contract with Transport for Greater Manchester. I'll 16 come back and look at your statement to see the 17 differences between Manchester and Edinburgh. 18 Put that to one side, please. Thank you. 19 Now, you have provided, Mr Reynolds, two statements 20 to the Inquiry. If we can go first, please, to 21 TRI00000124. This is stated to be -- you can see the 22 Burness Paull logo, witness statement of Steve Reynolds. 23 In short this was a voluntary statement provided back in 24 October 2005. 25 If we can go to page 40, we can see a signature and 174 1 a date, 8 October 2015. 2 I should ask you to confirm, please, is this your 3 signature and is this a written statement you have 4 provided to the Inquiry? 5 A. Yes. 6 Q. Thank you. 7 Now, second -- put that to one side. The second 8 statement provided will come up. It's TRI00000124_C, 9 and this one was provided in answer to the Inquiry's 10 various questions, and if we can please again go to the 11 last page, to page 196. Could I again just formally ask 12 you to confirm, please, that is your signature. We see 13 the date, 4 May 2017, and that this is a written 14 statement you have provided to the Inquiry? 15 A. Yes. 16 Q. Thank you, Mr Reynolds. 17 So your evidence to the Inquiry will comprise both 18 of these written statements, together with the evidence 19 you give at these hearings. Thank you. 20 Now, I would like to stick with this statement and 21 go to page 1, please. We will start by getting an 22 overview of your role in the Edinburgh Tram Project. 23 So in paragraph 1 in this statement, you explain 24 your immediate predecessor was David Hutchison who was 25 the Project Director up until your appointment in early 175 1 February 2007. 2 You refer to Parsons Brinckerhoff experiencing 3 commercial difficulties in the project. I'll come back 4 to ask about that later. 5 We can see what is said there. 6 We then go back, please, to the bottom of this page, 7 paragraph 3. You refer to Jason Chandler. I think he 8 was the Project Manager; is that correct? 9 A. Correct, yes. 10 Q. And Alan Dolan was the Deputy Project Director; is that 11 correct? 12 A. That's correct. 13 Q. Did both report to you? 14 A. Yes. 15 Q. And was Mr Dolan beneath Mr Chandler in terms of 16 seniority? 17 A. Yes. 18 Q. Thank you. 19 I would like then, please, to go to page 4 of this 20 statement. In paragraph 11 you explain a few lines 21 down, you focused full time on Edinburgh from 2007 until 22 contract novation in July 2007. At that point you'd won 23 the contract in Manchester, and you say: 24 "During May 2008, following novation in Edinburgh, 25 I took on the Principal in Charge role for Manchester. 176 1 My time, at that point, in Edinburgh was reduced to part- 2 time." 3 Page 5, please, of the statement. In paragraph 16 4 you explain your day-to-day involvement in the Edinburgh 5 Tram Project ended in early 2011. You explain after 6 novation, you were probably only spending a couple of 7 days a week on the Edinburgh Tram Project. 8 Could I also just ask, in the period between 9 February 2007 and May 2008, during that period was your 10 principal place of work in Edinburgh? 11 A. Yes, it was. 12 Q. Did you actually go to tie's offices to work or did you 13 have a separate office? 14 A. It was CityPoint, tie's office. 15 Q. Thank you. 16 Going back to the statement, please, looking at 17 page 6, page 6 in Manchester. I'll try and summarise or 18 paraphrase what you set out in your statement. 19 In short, I think you say that Parsons' involvement 20 in Manchester was very different to the involvement in 21 Edinburgh; is that correct? 22 A. Yes, that's correct. 23 Q. I should perhaps just ask you to -- overview, to 24 summarise the differences between the involvement in the 25 two projects. 177 1 A. Well, whereas in Edinburgh we'd been appointed as the 2 System Designs Services Provider, so we were doing 3 detailed design in summary, in Manchester we were 4 appointed in a programme management capacity with the 5 overall programme management for Manchester Metrolink 6 being a joint obligation on GMPTE as it was, 7 subsequently TFGM and ourselves. 8 So we were in a management capacity in Manchester. 9 We were in a detailed design provision capacity in 10 Edinburgh. 11 Q. So just for the avoidance of doubt, Parsons did not 12 provide design services in the Manchester project? 13 A. Correct, we provided limited design management, but not 14 detailed design services. 15 Q. So there's no question of there being any overlap in 16 Parsons design staff between Manchester and Edinburgh 17 because you certainly weren't providing those services 18 in Manchester? 19 A. Correct. 20 Q. I think you have also explained in your statement that 21 Manchester was a design and build contract; is that 22 correct? 23 A. Yes. That's correct. 24 Q. So that's another difference with Edinburgh. 25 In short, in Manchester, were Parsons playing part 178 1 of the tie role as project managers? 2 A. It was -- I think yes, you could say that. It was an 3 integrated delivery team structure. So, as I say, we 4 were working with TFGM, with TFGM staff and 5 Parsons Brinckerhoff staff, in an integrated delivery 6 team which then carried out that programme management 7 function. 8 So it was a more collaborative approach, if you 9 like, than it was in Edinburgh with tie in their own 10 right being the programme manager. 11 Q. When you refer to Parsons in Manchester carrying out 12 a programme management role, are you making 13 a distinction there between programme management and 14 project management? 15 A. Yes, because the -- the Manchester programme, as it's 16 turned out over time, is a GBP2 billion programme of 17 several projects to create the new light rail 18 infrastructure. So we were there not just managing 19 individual project delivery, but managing the 20 programming, the co-ordination, the various different 21 aspects of pulling those different projects together 22 under that one umbrella. 23 Q. I see. Just sticking with Manchester, am I right in 24 thinking there was a phase 3a which was completed in 25 2013, a phase 3b which was an extension to the airport 179 1 completed in 2014, and also a phase 2cc which I think 2 was just under a mile city centre crossing completed 3 this year, I think; is that correct? 4 A. Last year, for second city crossing, yes, that's right. 5 Actually no, this year, you are right, my apologies. 6 Q. And were Parsons involved in the programme management of 7 all three of these phases? 8 A. Yes. 9 Q. I understand. Thank you. 10 A separate point, please. Could we look at page 8 11 in your statement. In paragraph 26 you say, midway 12 through: 13 "There was not a pragmatic approach to delivering 14 planning consents for the scheme … The Edinburgh Tram 15 Project became bogged down with what you could argue was 16 an overly detailed approach to planning." 17 Is that another distinction you were seeking to make 18 with the Manchester project? 19 A. Yes, I think the key difference there is that Manchester 20 had been, as you rightly say, we started out with 21 phase 3a. Manchester had already been through phase 1 22 and phase 2, so there was experience from the 1990s of 23 actually having a tram system in Manchester, and there 24 was a desire for more. 25 Now, in Edinburgh it was different. It was green 180 1 field. There hadn't been that experience, and I think 2 not unsurprisingly, there was perhaps feeling the right 3 way to go about defining what that scheme should be. 4 CHAIR OF THE INQUIRY: In paragraph 26 you say there was 5 a lack of understanding, arguably, of the planning and 6 consents approach. Where do you think that lack of 7 understanding lay? 8 A. I think because the context was different. In 9 Manchester the context was adding to a tram system. So 10 the planning requirements, the consents requirements, if 11 you like, had already been proven on the earlier phases. 12 With Edinburgh, with what was a challenging, large 13 project, there was a need to develop those processes 14 from scratch almost. So it was -- it was far more 15 difficult in Edinburgh to address the major scheme and 16 create those specific processes for that scheme. 17 CHAIR OF THE INQUIRY: But was that a lack of understanding 18 by the planning authority or by Parsons Brinckerhoff or 19 by -- 20 A. By the planning authority, in my view. 21 MR MACKENZIE: Thank you. 22 Again, sticking on this page, could I also please 23 ask, in paragraph 27 on page 8, you explain: 24 "Manchester was different because it was an 25 integrated management team." 181 1 Then you say: 2 "The Edinburgh Tram Project was much more of 3 a supplier/client ring-fenced approach to delivery." 4 I wasn't quite sure of the differences you were 5 making there. Could you explain that, please? 6 A. Yes, I think -- partly this is with the benefit of 7 hindsight, but I think if you're looking back at lessons 8 learned and drawing the distinctions between the two 9 schemes, what we can look at now with the success in 10 Manchester was what we called the Metrolink family. We 11 took the initial delivery partner philosophy which was 12 a delivery partnership between ourselves and the 13 ultimate client, and we extended that into the supply 14 chain, which was Laing O'Rourke, Tallis. We extended it 15 into the operator, which was RATP, and everybody was 16 brought together in that integrated team approach. 17 Whereas the Edinburgh Procurement Strategy, and as 18 I say, part of this was with the benefit of hindsight, 19 was set up more as a set of individual organisations 20 with the interfaces between them where the management 21 focus was. 22 So it was a different approach. 23 Q. Thank you. Again, still on this page, bottom of 24 paragraph, paragraph 28, you say: 25 "During the early stages Parsons staff did not work 182 1 alongside TIE/CEC staff in an integrated delivery team. 2 It was only later in 2007 that we moved over to 3 CityPoint." 4 Do you remember approximately when in 2007 Parsons 5 staff moved into the tie office? 6 A. It would actually have been in 2006, and that was before 7 I got there. The point here, I think, is that we did 8 then get CEC planning staff alongside us in CityPoint, 9 and my recollection is that was very early in 2007. 10 Q. So just for clarity, Parsons were working in tie offices 11 in 2006? 12 A. Yes. 13 Q. The change you're referring to here is that in early 14 2007 Council staff also went into tie offices? 15 A. Correct. 16 Q. You also then, at the very bottom, you say: 17 "That problem was due to there being a gulf between 18 Parsons and CEC." 19 Can you explain, please, what you meant by a gulf 20 between Parsons and the Council? 21 A. The two bodies were operating in isolation. So it 22 was -- we would have been producing designs which were 23 then being passed over for review and approval in 24 isolation. 25 So gulf is perhaps the wrong word, but there was -- 183 1 there was definitely a separation between the two 2 organisations, whereas bringing us together in CityPoint 3 allowed for much more rapid communication and picking up 4 on particular issues, you know, face-to-face. 5 Q. Did that help? 6 A. Yes, it did. 7 Q. So with the benefit of hindsight, is that something that 8 may have helped to have in place from the outset? 9 A. Yes, I believe it would. 10 Q. Thank you. Over to page 9 of your statement, please. 11 You explain in paragraph 29 -- we can read for 12 ourselves -- the number of Parsons staff involved in the 13 project. 14 Then in paragraph 31, please, you say: 15 "We were not really all that close to CEC ... CEC 16 were kept at an arm's length from us." 17 I just wondered, was that even after the 18 co-location, or does that refer to before the 19 co-location of staff? 20 A. That's even after the co-location. The co-location was 21 the -- at the detailed level with the detailed planning 22 people, but beyond that, there was more of an arm's 23 length relationship, which you could argue was justified 24 by tie's programme management role. 25 So again, this is a difference between the 184 1 integrated philosophy in Manchester and the more sort of 2 point to point structure that was here in Edinburgh. 3 Q. Then please jump to page 22. In paragraph 76 you 4 explain: 5 "The way to avoid issues, such as the problems we 6 faced with obtaining approvals and consents, is to 7 introduce a collaborative culture across all parties so 8 that everyone is then focused on the ultimate intent, 9 rather than getting side-lined with specifics." 10 You explain that's your own personal view. And 11 you've seen it work in Manchester. 12 I wondered, would it have been possible in Edinburgh 13 to have produced that sort of collaborative culture, 14 given the separate contracts that were in place for 15 design, utility diversion and infrastructure 16 construction? 17 A. I think that's a very good question indeed, and the 18 truth of the matter is back in 2007, you didn't hear 19 people talking about collaboration, whereas these days, 20 everybody in the construction industry is talking about 21 collaboration. 22 I think if you -- if you wind the clock forward, 23 the -- if you were doing this again, you would use 24 different contract terms that promoted collaboration as 25 a way of doing business, but you're absolutely right. 185 1 The contract structure as it was didn't facilitate that 2 effective collaboration. 3 Q. Thank you. I would like now to move on to the issue of 4 why you became involved in the Edinburgh Tram Project. 5 I'll go to three documents shortly. 6 Could you perhaps just give an overview of the 7 reasons why you became involved? 8 A. Yes. It was towards the end of 2006, and the project 9 was -- it was a problem as far as Parsons Brinckerhoff 10 were concerned, because the monthly reporting on the 11 financial performance was showing that the results were 12 going in the wrong direction. The margins that were 13 being delivered were reducing. We were looking at 14 a seriously loss-making project. 15 Certainly early 2007, it was number 2 on PB's global 16 list of problem projects. So it needed senior 17 involvement to address that problem and come in and work 18 with all concerned to recover the commercial position 19 from PB's point of view. 20 Q. Did you know at that stage why it was becoming 21 a loss-making project for Parsons? 22 A. No, but I very quickly learned. As I arrived in 2007, 23 then it became apparent, as I went through the project 24 history in detail, and it wasn't solely focused on 25 recovering the commercial position. It was also focused 186 1 very heavily on improving the client relations across 2 the board, but particularly between ourselves and tie. 3 Q. You were brought in as a very senior Parsons man. You, 4 I think, sat on the board; is that correct? 5 A. That's correct, and on this particular project 6 I reported direct to New York, which was 7 Parsons Brinckerhoff's Headquarters. 8 Q. When you did become involved as Project Director, what 9 initial impressions did you form both as to why it was 10 becoming a loss-making project for Parsons, but also any 11 impressions about the project more generally? 12 A. The headline impression was that change control hadn't 13 been managed effectively, that the team here was bending 14 over backwards trying to accommodate repeated change, 15 but in trying to deliver the Parsons Brinckerhoff 16 services had lost sight of the need to enforce rigorous 17 commercial control on that change control process. 18 So one of the things I did very quickly was put in 19 a proper change control regime which achieved two 20 things. It highlighted to all parties the volume of 21 change that we were experiencing, and it made sure there 22 was better commercial assessment of the consequences of 23 change. 24 Q. Thank you. I'll take you now to three documents, if 25 I may. They will come up on the screen. 187 1 The first one is PBH00020993. We will see from the 2 top of the page it's an email very early in your 3 involvement as Project Director. It might even have 4 been slightly before that. I don't know. It's dated 5 1 February 2007 to Greg Ayres. Now, who was Greg Ayres? 6 A. Greg Ayres was my Managing Director in the UK. He was 7 the Managing Director of Parsons Brinckerhoff UK, 8 Europe, Africa. 9 Q. The main paragraph starts by saying: 10 "The project management structure is confused; 11 commercial control is inadequate; and in simple terms 12 the overall management of the project under Mike's 13 direction has been poor." 14 Is that a reference to what you told us a little bit 15 earlier about essentially change control and Parsons 16 making a loss in the project? 17 A. Correct. 18 Q. Does it go any wider than that? 19 A. No. It was -- as I say, I think coming in as I did in 20 February 2007, you can immediately look back over the 21 preceding months, and you can view what had been 22 happening in the round, whereas I think the people who 23 were here working day in, day out, they were attempting 24 to address issues, and things were getting out on a limb 25 and they had to be brought back under more effective 188 1 control; and as I say, the way to do that was to ensure 2 that the change log was available to everybody and that 3 focused people on delivering that commercial rigour. 4 Q. Could we next please go to another document. 5 PBH00027328. 6 CHAIR OF THE INQUIRY: While we are waiting for that, the 7 last sentence on that email says: 8 "We must not proceed any longer with the wool being 9 pulled over our eyes." 10 Who did you think was pulling the wool over your 11 eyes? 12 A. I think what that's saying is with the monthly financial 13 reviews, because we did a monthly project status 14 assessment, and I think things were -- were diverging 15 from the forecast, but there was a temptation on the -- 16 perhaps on the project team's behalf not to fully bring 17 that to the fore from a senior management perspective. 18 Again, that's because it may be diverging slightly, 19 then a little bit more, a little bit more. It's when 20 you can look back at perhaps a six-month period, you can 21 see how far it's moved away from the original forecast 22 intent. So that was the thinking there. We've got to 23 draw a line. This is the position now. This is the 24 status. This is how far adrift it is. This is what we 25 have got to address. 189 1 CHAIR OF THE INQUIRY: So it was really a failure on your 2 management team to recognise reality, as it were, and 3 to -- 4 A. Yes, you could say that. 5 Now, you know, it is a very complex project. So 6 it's not as if we were trying to do something that had 7 been done before and it was a readily available 8 solution, working with stakeholders who could appreciate 9 necessarily the bigger picture. So there were 10 mitigating factors, but that was what needed to be 11 confronted. 12 CHAIR OF THE INQUIRY: Thank you. 13 MR MACKENZIE: Just for clarification, why do you say it was 14 a very complex project? 15 A. Because the environment in the City of Edinburgh is 16 unique. It's a World Heritage site in part. There are 17 specific characteristics that are entirely different 18 from other cities in the UK with tram systems. It's 19 a different set of stakeholders. It's a different set 20 of aspirations. There are unique challenges with the 21 technical aspects. Every one of these tram schemes is 22 unique in that sense. 23 So from that point of view they are all complex. 24 Q. I think, just going back to Manchester briefly, I think 25 I'm right in saying that phase 3a used an existing rail 190 1 corridor; is that correct? 2 A. In part. The lines up to -- up to Oldham were existing 3 rail corridor. The lines out to the east weren't. They 4 were new build green field. So there was a mix. 5 Q. Thank you. 6 Now, this next document, PBH00027328, that's up on 7 the screen, we can see this was another email from 8 yourself, Mr Reynolds, dated 26 July 2007, again to 9 Greg Ayres. 10 The heading is "Tie Deliverables Analysis". I'm 11 interested in the paragraph in the bottom half of the 12 page which commences: 13 "Let's talk separately on the IDR strategy..." 14 What's the IDR strategy? 15 A. Interdisciplinary Design Review. 16 Q. You go on to say: 17 "... but I can't see that we have a strong case for 18 pressing IDR when we have still to respond to 19 yesterday's tie feedback. (some of which really came 20 as no surprise - at several points on this contract we 21 really didn't perform very well and whilst I hadn't been 22 made aware of the poor quality of the Requirements 23 Definition Report that statement has now been confirmed 24 to me." 25 I'm interested in what you say there of "several 191 1 points on this contract we really didn't perform very 2 well". What did you mean by that? 3 A. That does go back to that requirements definition phase 4 which was the very early months of the contract. And 5 the reality is that requirements definition duration was 6 concertinaed, because the contract was awarded later 7 than had been expected, so there was a very short period 8 of time to pull together quite a volume of work. 9 I think when you looked at it through the lens from 10 mid-2007, you would say that there had been some 11 shortcomings with that requirements definition 12 deliverables at December 2005. 13 Having said that, those problems were addressed in 14 the next phase, which was the preliminary design phase, 15 and I think if you go to the end of that phase, then the 16 problems have been -- well, have been addressed to the 17 point where that requirements definition shortcoming 18 wasn't a problem any more. 19 Q. Thank you. Then on to the third document in this 20 regard, is PBH00028567. If we go to the very bottom of 21 this email chain, please, we can see it's an email from 22 Chuck Kohler. Who is Mr Kohler? 23 A. Mr Kohler was the Chief Ops Officer for 24 Parsons Brinckerhoff in the UK. So he was alongside me 25 on the UK Board. 192 1 Q. Mr Kohler sends an email of 31 August 2007 to Greg Ayres 2 and copied to yourself in relation to Edinburgh Tram, 3 providing a draft lessons learned document, and asking 4 for a review and edits. 5 Then scroll up. We can see Mr Ayres on 1 September 6 has added his thoughts, and then, with the very top, we 7 see, I think, you, email of 4 September 2007, have added 8 some additional comments. 9 If we then go to the draft lessons learned document, 10 it's PBH00028568. If we can blow the whole page up 11 a little bit, please, if we can. 12 Now there are comments in all sorts of different 13 colours. I wonder, Mr Reynolds, if your comments might 14 be in red as the last set of comments. Take a minute 15 just to look at that, to see if that seems right. 16 A. That would seem to be right looking at the general 17 observations column. That would square with my thinking 18 at the time. 19 Q. I'll try not to take up time going through every point, 20 but if we look in the left-hand column, 21 Parsons Brinckerhoff factors, there's reference to 22 changed PM twice. Is that Project Manager? 23 A. Correct. 24 Q. Is that a reference to the very early days? 25 A. Yes, that's right. 193 1 Q. And PIC, is that Person-in-Charge? 2 A. That's right. 3 Q. Is that different to the Project Director? 4 A. Yes. 5 Q. So who is the person in charge? 6 A. Having said it's different, the PIC is often the person 7 co-ordinating activity, whereas the Project Director is 8 more of an executive role. But for this project the PIC 9 would have been Mike Jenkins who was the Rail Business 10 Unit Director and this project sat within the rail 11 Business Unit. 12 Q. In the red text it states: 13 "I would say the PIC was unable to establish an 14 effective working relationship with the client. The PIC 15 failed to educate the client as to how the scheme would 16 be engineered and was unable to work with the client to 17 agree a workable delivery plan." 18 Is that again a reference to the early days of the 19 project? 20 A. Yes, and I think you could argue it's as a consequence 21 of not being resident, and the point I made a little 22 while ago about my twin goals were to establish 23 commercial rigour, but also, more importantly, arguably, 24 to generate a closer client relations -- client 25 relationship, and that then addressed that point that's 194 1 made there, if you like. 2 Q. Did you become Parsons' person in charge from around 3 February 2007? 4 A. Essentially, yes, because what happened was the -- the 5 project with me coming on board as Project Director, 6 that essentially meant the project didn't need to report 7 into the rail unit. As I say, I was reporting direct to 8 New York. So essentially I took on board the PIC 9 duties, because of the strength of the management team 10 underneath me. 11 That worked very much better in my view. 12 Q. And the bullet point beneath that, the original text had 13 been: 14 "First major multi office delivery." 15 Someone had added: 16 "First major multi-office design delivery." 17 Possibly then your text: 18 "I think the key issue here is that it was the first 19 LRT detailed design delivery project (for a rail 20 inexperienced client)." 21 A. Correct. 22 Q. Are there two parts to your comment there? Firstly, 23 that it was the first LRT detailed design delivery 24 project by Parsons, and then secondly, for a rail 25 inexperienced client? 195 1 A. Yes, by Parsons in the UK, that would be right, in terms 2 of the first LRT project, and then the fact, I keep 3 coming back to it, it's a rail inexperienced client. So 4 there needs to be that much closer interaction to ensure 5 that the opportunities are taken advantage of and the 6 issues are discussed and addressed jointly. 7 Q. The fact that this was a first major multi-office design 8 delivery, was that a factor in the problems that 9 occurred at least in 2006? 10 A. No, I don't think so, because the multi-office 11 requirement, given that we had such large numbers of 12 people on the job, and there were different areas of 13 specialty, so structures design, roads design, for 14 example, those competencies resided in different offices 15 across the UK, and I don't believe that was a problem 16 because the coming together of those different aspects 17 of the deliverables were controlled by design managers 18 who did meet regularly here in Edinburgh with the 19 management team in Edinburgh. 20 Q. Thank you. Then two bullet points beneath that: 21 "A major subconsultant not co-located with 22 Parsons Brinckerhoff." 23 Is that a reference to Halcrow? 24 A. It is indeed. 25 Q. Who I think were subcontracted by Parsons? 196 1 A. Correct. 2 Q. Somebody, perhaps not you, had written in a purpley 3 colour -- somebody in blue had written: 4 "Is this key?" 5 To which somebody responded: 6 "It is if you don't effectively measure and control 7 his production." 8 I think in short, do you consider that Parsons did 9 effectively measure and control Halcrow's production? 10 A. Yes, we did. Inevitably there are shortcomings that 11 have to be addressed. That's part of a major project 12 like this, but by working closely with Halcrow, 13 ultimately we delivered a good product in my view. So 14 I believe we did control Halcrow effectively. 15 Q. I'm now going to ask you one further question about this 16 document. We can read about the tie factors in the 17 middle column, and then in the right-hand column, 18 general observations, the very last bullet point starts 19 with: 20 "The extended period of negotiation pre-contract 21 meant that contract award was delayed beyond the 22 client's business case aspirations. The client enforced 23 an unreasonably short period of time for the 24 requirements definition phase and this was signed up to 25 by Parsons. There was insufficient time for orderly 197 1 mobilisation and quality and timeliness of deliverables 2 suffered. As a consequence Parsons' reputation suffered 3 and the client's perception of Parsons' poor performance 4 carried through into preliminary and detailed design." 5 Is that point essentially again going back to the 6 very early stages of the contract? 7 A. It is, and bear in mind I wasn't there. So what I'm 8 reporting there is my interpretation of events as 9 reported to me. But certainly that was how I saw it, 10 and yes, it was those first three months from September 11 through December 2005. 12 CHAIR OF THE INQUIRY: Mr Mackenzie, is this -- 13 MR MACKENZIE: My Lord, I have finished with that document. 14 I just have three final tidy-up questions on this 15 chapter, if I may. 16 CHAIR OF THE INQUIRY: Yes. 17 MR MACKENZIE: Mr Reynolds, do you consider that there were 18 things that Parsons could have done better in this 19 project? 20 A. I think there are always things that you can do better, 21 particularly when you're engaged in something that is 22 unique. You can always look back and say yes, we could 23 have done that differently. 24 But I think we had a very strong team here in 25 Edinburgh who were working diligently to deliver 198 1 a successful scheme. 2 Q. What were the things by way of overview that you 3 consider Parsons could have done better? 4 A. I suppose if you look at it from the overall project 5 delivery, we could have been more vocal in highlighting 6 the consequences of, for example, the charrettes process 7 that was embarked upon in July 2006, which had a severe 8 impact on programme. We should probably, rather than 9 going along with that as the design provider addressing 10 changing requirements, we should have been more vocal to 11 make sure people appreciated the consequences of going 12 down that side-track, as it were. 13 Q. Is there anything else? 14 A. There are details. We should have done the 15 electromagnetic interference part of the project rather 16 better. But that's a very small part of the whole. 17 As I say, you'll always find elements of technical 18 detail that you could have done better. But nothing 19 that was significant from a critical path point of view, 20 I would argue. The critical path was overwhelmingly 21 impacted by the repeated change problems. 22 MR MACKENZIE: Thank you, my Lord. That's perhaps a good 23 point to pause for today. 24 CHAIR OF THE INQUIRY: Thank you very much. We will adjourn 25 for the night, Mr Reynolds. We will resume again 199 1 tomorrow at 9.30. 2 Ms Fraser will speak to you about arrangements. 3 A. Thank you very much. 4 CHAIR OF THE INQUIRY: We will adjourn until tomorrow at 5 9.30. 6 (4.35 pm) 7 (The hearing adjourned until Thursday, 12 October 2017 at 8 9.30 am) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 200 1 INDEX 2 PAGE 3 MR ANDREW FITCHIE (continued) ........................1 4 5 Examination by MR LAKE ........................3 6 7 Examination by MR FAIRLEY ....................89 8 9 Examination by MR DUNLOP QC .................106 10 11 Examination by MR MARTIN ....................147 12 13 MR STEVE REYNOLDS (affirmed) .......................172 14 15 Examination by MR MACKENZIE .................172 16 17 18 19 20 21 22 23 24 25 201