A Guide to Investigating Construction Disputes by Cameron Ford This guide is intended to assist with investigation of large construction disputes including claims by one side against the other. The methodology can be used in disputes of any size and type. Typically a dispute will be one side wishing to make a claim on the other and the investigation will be as to whether your company has a claim, or whether there is any substance in the other side’s threat to make a claim.

It should be assumed that the dispute will end up in court, and the investigation should be conducted rigorously, analytically and methodically to prepare for that eventuality.

Even if court proceedings do not eventuate, the result of the investigation will ultimately be whether to pursue or resolve a dispute of many millions of dollars. It must be based on a solid legal and factual foundation to enable the company to make the correct decision and to justify it to shareholders and any others properly interested. Deciding not to pursue a claim or dispute is just as big a decision as deciding to pursue one.

There will be a number of facets to resolving a large dispute. Not all of these will be the domain of the investigation team. Some of those facets are:

Practice reform

Settlement options

Financial ramifications

Alignment of stakeholders

Board notification

CEO notification

PR issues

Political issues

Legal liability

Resolution

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This guide examines the four major phases of the investigation, being:

Phase 1 Establishing the investigation

Phase 2 Conducting the investigation

Phase 3 Reporting the results of the investigation, and

Phase 4 Finalising the investigation.

It does not deal with the other aspects of the dispute mentioned above which are properly the domain of the company.

Phase 1 Establishing the investigation Establish the investigation involves developing:

1. Terms of reference

2. A budget

3. An investigation team

4. Systems and processes

5. Corporate commitment.

Terms of reference The terms should make it clear exactly what is to be investigated, the type of report expected and the time frame for the report to be produced. It is not uncommon for terms to be refined as the investigation progresses and information is revealed.

The project and corporate landscape can also change during the investigation, making changes to the terms necessary.

Some preliminary scoping of the problem may need to be undertaken to determine the most efficient terms of reference if sufficient is not known.

Legal professional privilege becomes important at this early stage because the way the terms are framed could determine whether privilege attaches to the investigation or not. It is better to keep the terms of reference confined to the need for legal advice and not to include, for example, a general request for a report on what occurred or recommendations on how to change practices etc. Privilege is considered in greater detail below, and it is important not to skip that section.

Sample terms of reference are: You are instructed to obtain and provide legal advice to the Chief Executive Officer as to [eg, whether the company has any claim, OR whether the company has an defence to any threatened or potential claim brought by xxx, OR the company’s legal position in relation to the dispute, OR … ] arising out of [briefly describe the contract or circumstances] and for that purpose to investigate the circumstances and report to the CEO with that advice on or before [date].

Budget This will be determined by the size and complexity of the dispute, its significance to the company, the necessary size and nature of the team, and the urgency of the situation.

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The investigation team Depending on the size and complexity of the dispute, a team will need to be assembled to investigate and analyse the results. That team will typically comprise:

• lawyers

• engineers

• programmers

• accountants

• other experts, depending on the technical nature of the dispute.

If the team is charged with negotiating solutions, or if the dispute is politically or publicly sensitive, it may be necessary also to have on the team or as consultants to the team:

• political strategists, and

• PR experts.

The team may be drawn from within the company or externally and engaged on contract, while some services may be provided by external firms and independent experts.

Critically, the team must have a high degree of independence from the project being investigated, with some members coming from outside the organisation to ensure practices are not taken for granted, and everything and everyone is questioned.

It is better not to have on the team anyone who is or was involved in the project under investigation. It is difficult for that person to be independent and to see things other than through the prism of their experience and their already established views. It is advisable for those people who may have special knowledge of the history of the project to be witnesses, interviewed by the lawyers at the appropriate time in the appropriate way as discussed below.

It may be advisable to house the team separately from the project being investigated to reinforce the perception and reality of independence, and to preserve confidentiality and legal professional privilege.

A large team and investigation should be run as a project in itself, with the appropriate project management approach.

For the reasons set out below under the heading Legal professional privilege, all factual investigation should be directed by a lawyer, and all reports of factual investigations should be given only to a lawyer. The lawyer can then forward reports to those who need them.

This determines the structure of the team. To protect privilege and to ensure the investigation is being conducted thoroughly, a lawyer should lead the factual investigations and all other investigators should report to a lawyer. The lawyer can then report to the project director or company, but if the investigators report directly to the project director or company, there is a very good chance their reports will not be privileged and they will have to be disclosed to any litigant where they are relevant.

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Structure A suggested structure to preserve privilege and ensure efficient investigation and analysis is as follows.

Company or Investigation

Leader

Lead Lawyer

Political

Strategists

PR experts

Independent accountants and other

experts

External law

firm Investigating

lawyers

Independent

engineers

Independent programmers

Lawyers The lawyers conducting the investigation and analysis should be experienced dispute resolution lawyers. There are many different legal specialties, each with their own unique skills, and dispute resolution lawyers are skilled at unravelling a factual morass, eliciting facts from often reluctant witnesses, taking detailed statements from witnesses, using their forensic skills in determining the relevance of facts and which of them are crucial, and determining how the law applies to the facts.

For a large dispute where there are many witnesses, it may be necessary to have a team of lawyers interviewing witnesses, all reporting to the lead lawyer. The team need not be large unless there is an unusually large number of witness or the issue is extremely urgent.

A paralegal or junior lawyer should have the sole responsibility of collating and indexing documents. This is not an extravagance as documents are crucial to a case and often prove or disprove witnesses’ recollection or reconstruction of events. If proper track is not kept of documents as they are obtained by the investigation team, some are invariably lost, to the real advantage of the opponent.

If you don’t have all the documents, you are flying blind and cannot know what your opponent has up his sleeve. Neither do you have a chance to put unhelpful documents to your witnesses to see if there is an explanation.

Engineers Almost invariably it will be necessary to obtain an expert independent opinion as to the technicalities lying behind the dispute. It will be appropriate initially to obtain the view of the engineers working on the project, but they are not independent and their opinion, even if correct, will carry little weight with an expert determiner, arbitrator, mediator or judge. They will also be close to the project and will typically be affected by emotive issues irrelevant to the legal resolution of the dispute. These issues may also cloud their opinion and make it less reliable than that of someone independent.

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Engineers of high repute should be chosen to provide their opinion. If in doubt, a law firm should be asked who they would recommend, and ideally the firm should engage the engineers to protect privilege and to ensure the engineers are seen as being truly independent. Experts such as these should agree to abide by the Federal Court Rules governing experts, which are designed principally to ensure experts are independent and do not simply give the desired opinion .

Programmers If relevant, programmers will need to be involved. The same comments apply here as those above to engineers. If available, it is appropriate to draw the engineers and programmers from the same independent firm.

Accountants Forensic or other accountants may be necessary to investigate the amount of any loss and to provide an independent expert opinion. The same comments apply here as made above to engineers.

Legal professional privilege Do not skip this part. It is vital to the investigation. Before examining the areas for investigation in detail, it is important to say something about privilege. It is vital that privilege be understood by the investigation team and those to whom it reports. If it is not properly understood, either the team will not have the freedom to report accurately and completely all it learns, or it will give a complete report which may be discoverable by the other side in any litigation, or by some other party in litigation years later. This last point is often overlooked. It is not only the present opponent who might be interested in a copy of any report or investigation. A different opponent years down the track may be entitled to the documents if the issues in that dispute are similar to those investigated. This is particularly so if any systemic problems or practices are relevant. It is also important to understand privilege to guide the establishment of the investigation team. To preserve privilege properly, all of the factual investigation should be done at the direction of a lawyer, and all of the results should be reported to a lawyer. It then should be a lawyer who reports on the results to the company, in the form of an advice and in anticipation of legal proceedings or without prejudice negotiations. A suitably qualified lawyer should be consulted when the team is being established to ensure the procedures are set up to protect privilege and confidentiality. If not set up at the beginning, privilege may be lost for ever. Every document created by the investigation team should have as its header words to the effect of “PRIVILEGED AND CONFIDENTIAL – FOR THE PURPOSE OF LEGAL ADVICE AND IN ANTICIPATION OF LEGAL PROCEEDINGS AND WITHOUT PREJUDICE NEGOTIATIONS. DO NOT COPY OR FORWARD”.

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This does not create privilege in a document. It protects privilege if it already exists. If those words or similar are not used, there is a chance any privilege in a document will be lost. Those words also serve the twin purposes of identifying documents created by the investigation team, and informing recipient of documents that the documents are privileged and should not be copied or forwarded. If that happens, privilege can be lost as explained below.

What is privilege? Legal professional privilege is an exception. It is an exception to the general rule that all relevant documents must be produced to the other side. There are a number of exceptions, or “privileges”, to that general rule, one of them being legal professional privilege. When we say a document is “privileged” we are using shorthand for “privileged from production”.

Test Legal professional privilege applies if the document came into existence for the dominant purpose of giving or receiving legal advice, or for use in anticipated legal proceedings. In other words, if one of those purposes was the dominant purpose the document came into existence, it does not have to be produced to the other side. Dominant purpose simply means the main purpose. There may be a number of purposes for which a document comes into existence, but if the main one is one of those privileged purposes, the document itself is privileged. For example, a report on an accident may be prepared for a number of purposes, such as to make an insurance claim, to prevent future accidents happening, to determine if anyone should be disciplined, to test corporate policies and procedures, and to determine if anyone is legally liable. That report will not be privileged unless the main purpose was to determine legal liability. The other purposes are not covered by privilege. If determining legal liability was just another one of the purposes, the report will not be privileged and it will have to be produced to the other side in any litigation. So, reports for the purpose of enabling a company to decide how to arrange its funding, how to get projects back on track, how to manage its affairs, how to price future bids, what contracts to bid for, whom to employ/fire, how to reform its practices, whether its practices need reforming, determining what went wrong, determining who was at fault, etc etc will not be privileged. They must be produced to anyone in litigation where they are relevant.

From or for a lawyer This test can be put another way. A document will not be privileged unless it is from or for a lawyer. Even then it is not certain that it will be privileged, but it will not be privileged unless it is from or for a lawyer. This is an oversimplification but is a handy test for those without formal legal training.

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The questions to ask in determining if a document is privileged are:

1. is it from or for a lawyer? If no, not privileged. If yes, go to 2;

2. what is the dominant purpose?

3. is it for giving or receiving legal advice? If no, go to 4. If yes, privileged.

4. is it for use in anticipated legal proceedings? If no, no. If yes, privileged.

That can be represented as:

Privilege can be lost The simplest way privilege can be lost is by someone copying or forwarding the document. The copy or the forwarded document are new and separate documents from the original. If the dominant purpose of their creation was not privileged, they will not be privileged even though the original was. For example, legal advice may be given to the CEO which contains factual matters as to the background of the issue. This is typical. That advice is privileged. But if the CEO copies that advice to the Chief Risk Officer and asks him to look into the problems and address them, that copy is not privileged because it was created for internal management purposes. The better course is for the lawyers who provided the advice to give the CRO a copy of the advice. This is privileged because it is legal advice from a lawyer. How the CRO reacts is a matter for him and does not affect privilege. Alternatively, the problems could be extracted from the legal advice, reworded and given to the CRO. Privilege can also be “waived”. There are many ways this can happen, but the most common is where one side tells the other part of what is in the privileged document,

Is the document from or for a lawyer?

What is its dominant purpose?

Is it to seek or provide

legal advice?

Is it to use in anticipated

legal proceedings?

NOT PRIVILEGED

PRIVILEGED

Yes

YesYes

No

No No

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or gives them a summary of the content of the document. For example, privilege has been waived in barristers’ advice where solicitors wrote to the other side and said “we have barrister’s advice that we will win”. This is another reason why only lawyers should communicate the content of any legal document to anyone.

Systems and processes It is necessary to:

• designate a secure location on a hard drive for electronic documents and files to be saved. This must be a location to which no-one outside the investigation team has access so as to preserve legal professional privilege. If anyone else has access to the documents, privilege can be lost.

• designate a secure method and location within the premises for storage of the documents collated by the investigation team.

• establish protocols for the receipt and circulation of documents and information by and within the investigation team so everyone is aware of all relevant matters.

• indentify the author of each document created by the investigation team for privilege purposes and for future reference.

Corporate commitment It is vital if the investigation is to have any success, for there to be commitment at the highest levels of the company to the investigation. At times the expense will seem high and will be questioned, there will be resistance from project members at their time being “wasted”, their practices being questioned and because of the uncertainty as to the result, and the investigation may not reveal palatable truths. To overcome all of these and more, there must be commitment from the beginning to going all the way with the investigation rather than pulling out when the going gets tough.

Phase 2 Conducting the investigation The team is established, or at least the core, they have premises, systems and procedures established, and they know the essence of the dispute from those who have commissioned them. The next phase is to start investigating. Bear in mind that there will be considerable myth and folklore around the project and the dispute. It is important not to accept these at face value and to dispel them with a disciplined, rigorous, analytical, unemotional approach. Investigations and legal cases typically take sharp twists and detours along the way. Do not be dismayed or distracted by these. Most avenues have to be pursued for a time at least to determine if they are fruitful or mere dry gullies. Discoveries, either legal or factual, will be made one day that suggest a good claim or defence but are dashed by an equal and opposite discovery the next day. Again, this is typical and does not mean the investigation is not no track. The important thing is not to raise expectations unrealistically by prematurely reporting good news.

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Areas for investigation or analysis There are five main areas to be investigated or analysed. They are the:

1. contract

2. facts of the dispute

3. expert explanations

4. amount involved, and

5. programming.

The reason for this is obvious but should still be stated. A claim or a defence to a claim is a combination of facts and the law – it is not either in isolation. Often there may be grounds of factual complaint about the other side’s behaviour, but if the contract or the general law does not support the complaint, there is no claim. Likewise, the contract may be clear in prohibiting certain behaviour, but if the other side’s behaviour does not really contradict the contract, there is no claim.

This can be demonstrated in a simple equation:

X = FACTS

LAW

CLAIM

If the facts are, for example, that a company has suffered a loss of $10m and a delay of 10 months, but that the contract or the law protects the other side, the equation is:

X =

0

0 $10m + 10 months

Contract analysis The contract must be thoroughly and independently analysed by the lead lawyer and other lawyers on the team. It must be read as if for the first time in the organisation, and without any regard at all to the interpretations applied by the project team. This should be the first step as, until the contract is properly understood, the relevant questions cannot be asked.

Do not accept at face value any view of the contract held by the project team, even by those of ultimate seniority or apparent great experience. Over time, the project team will have acquired or fixed on certain interpretations of the contract and will have certain views. Those interpretations and views may in fact be a hang over from the bid team and may or may not be correct. Simply because a particular interpretation appears to have been adopted by both parties does not mean it is correct or that it is binding.

Very strong opinions can be held by those in the project team, both as to the contract and to the facts. They should be respected but not necessarily accepted. It is a

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common phenomenon that those closest to the dispute feel the strongest but do not necessarily have the clearest view.

Opinions can be expressed with voices raised and tables thumped, but this does not make them correct. Lawyers and judges tend to think that if such emphasis is needed to support an argument, there is not much else to it. An equation which has proved true for at least 20 years is:

VOLUME + VEHEMENCE ≠ VALIDITY + VERACITY

There is every chance that the contract will have been administered by commercial managers who may or may not be legally trained and who may not have the degree of independence from the project leaders to question received interpretations and approaches.

The preferred approach is to gain an understanding of the contract unassisted by anyone in the project team, and then to check with the appropriate people as to their interpretation and how it has been applied. If there is a difference, the correct interpretation will have to be determined, and you will need to have the courage and independence to disagree if need be.

There is a good chance that wrong interpretations, procedures and approaches have been taken because of assumptions or misunderstandings at the beginning. They should be brought into line with the contract as soon as practicably possible and in a way which preserves the company’s position.

Management and front-line staff will have certain understandings of their rights and obligations under the contract. They should not be accepted at face value, and the question to be repeatedly asked is “Why?”. Insist in being shown a clause in a contractual document which imposes the obligation or gives the right. If it is not there, has it been agreed ex-contractually or is it a trade usage?

It is convenient to draft a table of rights and obligation under contract to assist in your understanding and to help explain it to the project team. To this table can be added more columns later as necessary to record how those rights and obligations were performed and what happened in practice. A draft table is below with fictional data. The last two columns would be added as the factual investigation progressed.

CLAUSE OUR RIGHT / OBLIGATION

OPPONENT’S RIGHT / OBLIGATION

WHAT HAPPENED?

NATURE OF CLAIM ARISING

15.2(b) Give written notice in 5 days of discovery of latent conditions

Give direction or variation within 5 days of notice

Urgent. No written notice. Oral notice followed by oral direction.

Estoppel by conduct.

Cl 15.9 urgent situations?

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Notices

Notices and claims given under the contract should also be collated and analysed. Most contracts have strict provisions relating to the giving of notices and the making of claims, with other steps also having to be taken if notice is given.

The notices and claims should be compared closely with the terms of the contract to ensure they comply and, if they do not, arguments developed as to why they do not (for example, inability due to the nature of the breach alleged).

Since the purpose of notices and claims is to enable the other side to know of a potential dispute and not to be taken by surprise, if the notices and claims do not comply with the contract, a fresh notice or claim should be given as soon as possible with the necessary information to comply. Considerable thought will have to be given as to how this is done so as not to undermine the company’s position or the arguments developed as to why the notices and claims already given do not comply.

Factual investigation Once the contract is understood, the factual investigation can begin on a proper foundation. There are two parts to a factual investigation, witnesses and documents.

The factual investigation should be conducted by the lead lawyer, assisted by his team (if any). Others dipping down into the factual investigation has the tendency to confuse the investigators and the project team, muddy the waters, duplicate effort, occupy limited time of witnesses, annoy witnesses by repeating stories, and dilute evidence by

Documents

Ideally, all relevant documents would be gathered and then put to the witnesses for their comment and explanation. This is not possible in practice because may documents are only discovered after speaking to witnesses and obviously someone must be spoken to to learn where the project documents are kept and how they are accessed.

Nevertheless, as many documents as possible should be identified, collated and indexed (the index is very important and should not be overlooked). Often there will be a central document repository which can be searched in any number of ways to obtain documents.

All documents should be placed in easily accessible files or folders and stored centrally and securely. These will ultimately be used externally to support the claim or defence, or internally to show why there was no claim or defence. They will probably be kept separately from the project documents thereafter, even when the investigation is complete, to preserve both privilege and the history of the investigation.

A notice should be circulated to all in the project team as soon as the investigation team is assembled that they must not destroy any documents. To do so would be in breach of the discovery obligations under court rules and could lead to significant penalties. Not only is it in breach of the rules, but valuable evidence is lost which again can give the opponent an advantage.

When more facts are known and if there are tens of thousands of documents (as there probably will be), key words can be developed to search the documents electronically.

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These are typical Boolean searches which can be applied to most document forms including PDF.

Witnesses

The term “witnesses” is used to emphasise the importance of this part of the investigation. It should be assumed that the dispute will end up in court, and everything should be done properly to that end. Even if it does not go to court, the advice will ultimately be whether to pursue or resolve a dispute of many millions of dollars. It must be based on a solid factual foundation to enable the company to make the correct decision and to justify to shareholders and any others properly interested.

The purpose of interviewing a witness is to learn what that witness knows and to record it in their own words. It is not to educate the witness or display the interviewer’s knowledge.

There are six steps to a thorough factual investigation of witnesses, namely:

1. identification of witnesses

2. preparation for interview

3. conducting the interview

4. drafting the statement

5. amending the statement

6. finalising the statement.

There is a temptation to shortcut these steps and to “get to the crux” quickly. This temptation should be resisted as yielding to it produces inferior results which can be unreliable as a foundation for making or resisting a claim, developing corporate strategy and for reforming practices. There is rarely an effective second chance to get it right.

Preliminary chats with witnesses might be held, but care has to be taken and they should only be held by experienced dispute resolution interviewers. There are at least two potential problems. When interviewed properly later, witnesses often feel “I’ve told you all this before” and become antagonistic and unhelpful. Even where they do not do so, they can edit their evidence because they think they have told the interviewer relevant parts before, or that the interviewer knows them from chats with other witnesses.

The purpose of interviewing witnesses is to get to the real facts, to dispel myth, folklore, supposition and obfuscation, and to determine what each witness actually knows for themselves. This last is particularly important and often not known, as it is important to know what each witness actually knows first hand themselves rather than what they have heard. If this does not occur, the myth and folklore simply spread. These three are vital in determining what action to take on a potential claim and, from a broader view, developing corporate strategy on the project and generally.

Inexperienced interviewers look for evidence that supports their position, rather than simply everything that the witness knows. It is not helpful to the ultimate decision the company has to make to obtain only part of the story. The company needs to know the whole story, good and bad, to be able to make an informed, defensible decision.

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Identification of witnesses Those commissioning the investigation will know the identity of the leaders of the project being investigated. That does not mean they are the key witnesses or that the investigation should commence with them. Questions should be asked of others around the project to ascertain, as far as possible, those who might be relevant to the investigation.

As with documents, not all relevant witnesses will be known at the beginning of the investigation. Some will only become known or relevant as the investigation progresses and takes the twists and detours typical of investigations.

Which witnesses you commence interviewing will depend on the nature of the issue being investigated, the project and the people. For example, if it is suspected that problems lie with management of the project, it might be better to commence with interviewing those above and below management.

This is to try and learn as much as possible around the probable issue and arming yourself with as much information as possible before interviewing those who are thought to be the potential cause. Similarly, if the cause is thought to be with the front line staff, interviews might be better commenced with those around them, rather than with those people.

The aim is to be equipped with as much information as possible to conduct meaningful interviews with those thought to be at the heart of the issue. Without this issue, vital questions can be missed and answers amounting to no more than rhetorical flourish and Gallic gesticulation can be wrongly accepted. Hard facts and documents are needed to test the assertions of those thought to be around the centre of the issue.

Do not assume that there will be a second chance to interview crucial witnesses and thus arrange an interview prematurely. There may well be time to interview them again, but often there is only one chance to interview people effectively, particularly if they do not wish to tell the whole truth. Even if they are initially co-operative and truthful, second and subsequent interviews can annoy and frustrate so that less than the full story is gleaned.

Of course, it may be possible to interview effectively again where information is obtained contradicting earlier statements, but then and adversarial position can be taken which may not be helpful to the investigation. On the other hand, it can be used to elicit admissions or further information. There is more than one approach, but these issues need to be borne in mind when deciding which approach to take.

Once the witnesses are identified and the approach determined, a timetable for the interviews should be drafted. This will have to yield to practicalities and there is every chance interviews will have to be conducted when witnesses are available, which probably will not be in the desired order.

Preparation for and conducting interviews This is not the place to teach how to prepare for and conduct interviews. It is assumed that they will be conducted by experienced dispute resolution lawyers. The purpose of the interview is to learn what that witness knows and to record it in the witnesses’ own words.

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Those not experienced in dispute resolution may feel that the lawyers are being overly formal or rigorous. To allay that suspicion, below are some useful guidelines for conducting effective interviews:

• the interviewer should listen more than he speaks. A good guide is 90% listening and 10% speaking, with that speaking being mainly asking questions.

• the interviewer should not tell a witness what another witness has said unless it cannot be avoided to obtain this witnesses’ comment. (and it usually can be avoided). A witnesses’ evidence is weakened if it is based on or is in response to what others have said (reflecting human experience that we tend to moderate our views and memories to that of others).

• the interviewer should not suggest answers or wording to the witness. While this may look good no the statement and appear to be supportive of the case, in the end it will be very unhelpful as it will not reflect the whole truth and will undermine the factual foundation. It never helps to do this.

• the interviewer should record the witnesses’ own words, not the interviewer’s paraphrasing or understanding of those words which invariably leads to errors.

• it is usually more convenient to type answers as they are given rather than handwrite and transcribe later. If the typing is proficient enough, the witness can be given a draft of his statement at the end of the interview for checking, with strict instructions not to copy it or show it to anyone. Handwriting might be used where to type would intimidate a witness or cause them to be less open.

• sometimes it is useful to give the witness an idea in advance of the topics for questioning, but it is usually preferable to speak to them without much warning.

• the witness should never be given a list of questions in advance or as an alternative to an interview. Answers to those questions are never complete or accurate, and vital ancillary questions are missed which only become relevant in an interview. The demeanour of a witness is also very important, even outside court. The interviewer needs to be able to form an assessment of whether he is being given the whole truth or something less.

• everything a witness says should be doubted.

• the interviewer should never promise or indicate to a witness that something is “just between them”, or that the matter won’t go anywhere, or that no-one else will be told. It is a promise which cannot be kept while keeping your duty of faithfulness to your employer. One reason is that sometimes an investigation into a dispute will reveal breaches calling for disciplinary action. If such a promise is made, either the interviewer’s or the company’s position is compromised in any future action.

Drafting, amending and finalising the statement There are different degrees of statements, ranging from the draft general outline, to a signed, witnessed statement. It is not worth taking mere notes of interviews. The lack of discipline involved for both interviewer and witness makes them of little use, and they can in fact be a hindrance because of their opacity, lack of detail, and their half-truths. They are often worse than having nothing.

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Probably the investigation will not call for a signed statement, but there is a chance it will for a number of reasons. It is worth mentioning those reasons to enable a decision to be made.

A signed statement would be obtained where:

• there are serious doubts as to the witnesses’ veracity and quite a lot hinges on the evidence. A signed statement might be obtained here to reinforce to the witness the seriousness of the matter, to hold the person to their evidence later, or to have them declared a hostile witness if need be. This last can usually only be done if the witness contradicts in the witness box a previous signed statement. The value of having someone declared a hostile witness is that they can be cross-examined, a benefit of inestimable value where a witness turns.

• the witness is in a job or personal situation where he may not be able to be located in a number of years’ time. Under limited circumstances, if a witness cannot be found, a signed statement can be adduced in evidence in proceedings.

• the witness is old, ill or in a highly dangerous job and there is a higher than usual chance of their death. Again, under limited circumstances, signed statements of witness who have since died is admissible.

As stated above, the statement should be drafted at or immediately after the interview in the words of the witness. If the statement is not typed during the interview, it should be dictated or typed immediately following. The next day is usually not soon enough because the interview’s memory of detail and of understanding their notes fails.

Once drafted, the statement should be given back to the witness to check for errors. The ideal is not to email the draft statement to the witness but to sit with them while they go through the draft. This is to prevent their losing privilege by forwarding it to anyone else, which frequently happens for odd reasons.

When the witness has made all the changes they wish to make, which should not be discouraged at all (to get the whole story), final amendments should be made and the statement signed (if required) and filed. A copy should not be left with the witness. It is the company’s property, not theirs, and leaving it with them runs the risk of copies being made and privilege lost. If court proceedings eventuate, matters in the statement can be put to the witness to help them remember, and their statement can be used as the basis of the evidence to the court (usually now in the form of a statement initially).

On no account should one witness be shown the statement of another.

When all the witnesses have been interviewed, a bank of facts will have been assembled and it should be thoroughly analysed for inconsistencies, anomalies, unexpected consistencies and its general import.

A factual matrix can be prepared from the statements on each of the allegations or issues in the dispute. This helps distil the evidence and reveal exactly the quality of the evidence for each issue. A sample matrix with fictional data is:

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ISSUE BILL SMITH AMY JONES JIM BROWN SUMMARY

We notified the principal of the latent defects ASAP

Told Todd Brooks of the principal at 7 am the next day at a chance meeting offsite (no meeting diary). Brooks now says he doesn’t remember.

Todd Brooks’ offsider, Peter, asked her what the latent defect issue was. She didn’t know.

Question: what is Peter’s last name?

Peter ?? told him at the beginning that he didn’t want any hold ups with a whole lot of paper work with anything on the job and that they had to work together to get it all done. Peter had acted on oral notification of other issues (not latent defects) in the past.

Smith orally notified Brooks, acknowledged by Peter ??’s comment to Jones. This was in accordance with a previous general waiver of written notice.

Independent experts Independent experts such as engineers, programmers, accountants and the like are part of the factual investigation.

There are four steps in their involvement, which are:

1. choosing the expert

2. briefing the expert

3. the expert conducting his investigation, and

4. the expert reporting.

Choosing the expert

It is important that the right expert is chosen, not the cheapest or easiest. Their opinion will be a major factor in the multi-million dollar decision the company has to make about the dispute. It is false economy to skimp on the expert, which produces confusion, distraction and frustration for the investigating team and a flawed result.

It should be assumed that the expert will have to give evidence, or at least that his report will have to be shown to the other side. To that end, the expert should be of good repute in his profession to give his opinion weight and credibility both with the other side and with the court (or adjudicator, mediator, expert determiner etc).

The size, nature and urgency of the dispute will partly determine which expert is chosen. Some experts work in large firms where they can call on many people to

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investigate, and people from different disciplines. This may be desirable in a particular dispute, or may not be necessary.

If in doubt, a panel firm of solicitors or a barrister could be asked for their recommendation.

Briefing the expert

This is the most important part. An expert’s opinion is only as good as the brief. The brief will be discoverable to the other side and to the arbiter of fact. A standard and effective way in which to undermine an expert’s opinion is to attack his brief to show that it is incomplete, biased or wrong.

The expert has to be seen as independent and should comply with the Expert Code of Conduit (NSW version attached).

To prepare the brief, the approach is:

1. identify every document and piece of information the expert needs to provide an independent report; and then

2. remove all documents which contain information the other side should not see and replace them, if possible, with other documents or information which are not so sensitive. This may not be possible and a decision will have to be made by the lawyers about how best to brief the expert.

Care also has to be taken to ask the right question. If the wrong question is asked, privilege may not apply or the answer needed to resolve the dispute satisfactorily is not obtained.

The expert should be commissioned by either the lead lawyer on the investigation team, or the external law firm if one is being used on the investigation.

Expert investigation

To provide a meaningful report, the expert will have to have access to all people, documents and information. If there is any commercially sensitive information, protocols need to be established around to whom in the expert’s office they are disclosed, how the information is protected, and how it is reported. There may have to be a sealed attachment to the report containing the commercially sensitive information if it is vital to the report, or some other way or protecting the information. A deed of confidentiality could be signed by the expert, remembering, though, that the experts will be professionals who owe that duty in any case.

The investigation leader will almost certainly have to intervene on the expert’s behalf periodically to facilitate that access.

Expert report

The report should comply with the Code of Conduct.

It is not improper to obtain a draft of the report, but bear in mind that a draft is discoverable to the other side. The purpose of obtaining a draft is to ensure the report complies with the Code of Conduct and that it answers the questions asked in the brief. It must not be to have the expert rewrite his opinion to something more favourable.

An expert is within his rights to (and in fact should) refuse to amend his report if the proposed amendment does not reflect his views.

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The report should be provided to whoever commissioned it, the lead lawyer on the investigation team or the external lawyers, and then distributed by that person to others.

Quantum Determining the amount involved in any dispute is a separate line of enquiry and usually calls for expert assistance. This assistance may come from the independent experts, programmers and accountants, but it could also come from lawyers experienced in investigating quantum of claims. One of those lawyers could be made a member of the team, appointed as consultant to the investigation team, or engaged as an independent expert. That person will conduct investigations in conjunction with but probably independently from the lawyers investigating the facts of the dispute. If the scope of investigation is confined, one person could investigate both but typically the size of the dispute will require separation of functions. To preserve privilege, that person should also report to the lead lawyer or the external firm. At the end of the investigation, there should be

• indexed folders of documents

• indexed folders of witness statements

• folder(s) of expert reports

• folder(s) of quantum assessment (if relevant)

Analysing the results It is slightly artificial to deal with analysing the results only after the factual investigation is complete, as in reality the analysis is continuous as facts are being learned. However, a complete analysis will not be possible until the last expert report is obtained, which usually occurs after the witnesses are interviewed and the documents collated. In a case of any size, there will be a number of complaints or allegations each potentially giving rise to legal claims or defences. In turn, those claims or defences can be expressed in different legal forms. A convenient way to analyse the facts, allegations and legal consequences is in a table similar to the one on the next page. It is a good discipline to draft a Statement of Claim to see what is needed to establish the case and what evidence there is. This will reveal deficiencies in the evidence and enable it to be determined if the missing evidence can realistically be obtained. At the end of the analysis there should be a complete understanding of the potential claims or defences, the legal consequences, the amount of days and dollars involved, and the prospects of success of each.

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CLAIM LEGAL BASIS

FACTS DIFFICULTIES COMMENTS/ ASSESSMENT

1. Notified latent defects ASAP 2. $5.7m rectification 3. 2 weeks EOT

1. Cl 15.2(b) 2. Estoppel 3. Waiver 4. Variation

to contract.

Smith orally notified Brooks, acknowledged by Peter ??’s comment to Jones. This was in accordance with a previous general waiver of written notice.

1. notice not written

2. variation not written

3. word-on-word 4. Peter gone

1. Course of conduct should be able to overcome problems of notice and variation. 2. Prospects fair to good

Phase 3 Reporting the results A number of reports will probably be necessary, but everything should flow from the legal advice given either by the lead lawyer or the external firm. Again this is to preserve privilege. It is far better to keep reports to a minimum to avoid privilege being lost for a variety of reasons. Oral reports can supplement written reports where necessary. The reports required might be:

• Legal advice on liability

• Summary of legal advice

• Report on investigation team’s activities

• Board report

• Lessons learned from investigation about project

• Lessons learned about investigation process

Little need be said about the first two. Privilege applies to the summary of the legal advice since it is conveying privileged legal advice.

Report on investigation team’s activities

If this report is required, it should be written by a lawyer on the investigation team and should make clear at the beginning that (1) the team was established to investigate facts for the purpose of obtaining and giving legal advice, and (2) the report is a summary of those facts as found, provided for the purpose of legal advice and for use in anticipated legal proceedings and without prejudice negotiations. Possible wording is:

This report is a summary of the facts as found by the investigation team, which was established for the purpose of finding facts to give legal advice to the company and, if necessary, obtain legal advice from external lawyers. It is provided to assist in

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understanding the factual background to the legal advice given and to prepare for without prejudice negotiations.

The report should be careful not to be, or appear to be, for a dominant purpose which is not privileged, such as reforming practices, preventing future accidents happening, determining if anyone should be disciplined, or simply to find out “what happened”.

Board report

The Board should be encouraged to accept the legal advice as the only report. This is because any other report could have dual and equal purposes of making legal decisions and making commercial/management decisions.

If a separate Board report is required, it should convey the minimum amount of information necessary to inform the Board properly of the issues, be stated to be a summary of the legal advice, and not venture into commercial or management areas such as recommendations for future practices, reforms, discipline etc.

Lessons learned about project and investigation

It is very difficult to imbue these documents with privilege, since they are self-evidently for a purpose other than legal advice, etc. They are clearly for the purpose of reforming practices in the project and the company generally.

For this reason, they should be kept as non-specific to the project as possible, and should instead be promulgated simply as new policies, guidelines, procedures, without reference to the project or the investigation.

Remember that even if this dispute does not go to litigation, an opponent years down the track can seek inspection of these documents if they can be made relevant, for example by drawing in systemic problems, practices, procedures, etc.

Phase 4 Finalising the investigation Exactly how the investigation is finalised will depend in part on what flows from its reports. There might be litigation, claims under the contract, negotiations, or nothing at all. Whichever outcome results two things are important – to preserve the documents and findings for the future, and to preserve privilege. Even if no action is being taken, it may be necessary at some time in the future to justify why no action was taken. All documents gathered and created by the investigation team should be indexed, boxed, marked clearly as being legally confidential and privileged, and stored under the authority of a permanent lawyer in the company. If there is no permanent lawyer, it should be under the authority of the Company Secretary or the CEO. In the boxes there should be a separate, clearly marked folder with all of the reports, so someone coming to the matter in the future can easily determine what occurred. If notices and claims need to be made or updated following finalisation of the investigation, someone either in the project team or the company should be made responsible and equipped with whatever they need.

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If the investigation team is disbanded, their personal addresses, emails and phone numbers should be obtained to enable them to be contacted if needed in the future. Those details should be given to whoever in the company formed the team initially.

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