England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY and CONSTRUCTION COURT

		St. Dunstan's House Fetter Lane, London, EC4
		29 September 2004

1. Introduction

1. This judgment concerns a dispute arising out of the Foot and Mouth clean up operations carried out across the United Kingdom between March 2001 and June 2001 with a small amount of further work in the early months of 2002. The claimant ("Ruttle"), was one of 86 companies whose contractual arrangements to carry out clean up operations under resulted in work of at least £1 million in value being completed. Ruttle's contract, according to its valuations, was in fact worth overall about £23.26 million plus VAT, which if accurate, would make it the fourth largest contract in terms of value. In all, over 1,200 contractors were employed on the supply of goods and services on clean up operations at a total cost of £1.1 billion^[1]. The defendant, The Secretary of State for the Environment, Food and Rural Affairs ("DEFRA"), was responsible for arranging, managing, valuing and paying for this work as the successor to the Department involved at the time, The Ministry of Agriculture, Fisheries and Food. DEFRA was created as the successor Department of State to the Ministry of Agriculture, Fisheries and Food ("MAFF") after the Foot and Mouth outbreak had been eradicated but, for convenience, I will refer in this judgment to both as "DEFRA".
2. Ruttle's business is the hiring out and transporting of Plant and Machinery, with or without operatives, to the civil engineering industry and the provision of services, such as tractors and mini-diggers, for use in farming, by landowners and the transport industry for such activities as landscaping, drainage and road laying. Ruttle is the subsidiary of Ruttle Plant Holdings Ltd who owns 99.99% of Ruttle's issued shares. Ruttle is the operating company of the group of companies which are very much Ruttle family-run companies. Mr H Ruttle is Ruttle's managing director and it is based in Chorley, Lancashire. In 2001, its turnover was nearly £22 million and in 2002 nearly £19.9 million. The 2002 accounts excluded a debt of £8.3 million from its accounts, being most of the disputed element of the sum it has invoiced DEFRA for. Ruttle's accounts noted that it had been obliged to exclude this debt from the accounts because of these proceedings and that this debt would have to remain excluded until their outcome is known.
3. The company owned, in 2001, about 2,500 items of plant and equipment and had approximately 400 regular clients. Most of the plant drivers and the site-based operatives were subcontractors hired in as necessary, its own employees numbered 15 plant hire operatives and 6 administrative staff.
4. The work involved cleaning up 334 farms and undertaking erection and renovation work for a number of temporary offices required by DEFRA, particularly at Gisburn. This work was spread through 9 of DEFRA's Disease Control Centres ("DCC") which were set up at or under the direction of each Animal Health Divisional Office and were responsible for controlling animal disease outbreaks in each of DEFRA's regions. The DCCs with which Ruttle was involved were the Chelmsford, Leeds, Stafford, Preston, Bury St Edmunds, Caernarfon, Carlisle, Dumfries, and Worcester DCCs. In all, about 1,248 invoices, each covering one week's work at a farm or other outlet, have been submitted involving at least 15,000 daywork sheets for individual operatives and many thousands of invoices and receipts for plant, materials and fuel.
5. The dispute arises out of the non-payment of approximately £13.3 million of the total invoiced total of £23.2 million, both figures excluding VAT. Thus, approximately 57% of the invoiced sum remains unpaid. Since the hearing was concluded, DEFRA has paid a further £851,063.82 on account, being £1 million inclusive of VAT. Thus, 53.6% of the invoiced sum remains unpaid.
6. The disputed elements of the invoices cover a long list of separate grounds. However, three principal grounds predominate. These cover over £9.3 million of the disputed sum. They relate to timesheets that were never signed by a DEFRA representative during the work or subsequently; alleged overcharging for men who were not working on site confirmed by Ruttle's subsequent alleged refusal to produce back up sheets which DEFRA contend it is entitled to see and which Ruttle contends it is contractually entitled to withhold; and transportation costs, particularly the driver's time in driving the plant on low loaders to or from the depot or between sites. The disputes have acquired a surprising amount of documentation as a result of the various protracted stages through which the verification, authentication and approval processes that the claimed sums have been subjected. The dispute has now reached court. With the parties' active assistance, the first trial has been confined to 16 issues of principle since it is felt that much of the dispute will be resolved once these issues have been answered. The issues were conducted in relation to three of the nine DCCs and, in relation to issues arising out of time sheet verification and the documentation Ruttle can be required to produce, to a limited number of farms and other locations at these three DCCs.
7. The DCCs where Ruttle undertook work that have been investigated in greatest detail and were the basis of evidence and submissions at trial were those at Leeds, covering the affected Counties of Bradford, Leeds and North Yorkshire; Chelmsford, covering the affected Counties of Essex; Greater London and Thurrock, and Stafford covering the affected Counties of Cheshire, Derbyshire and Staffordshire. Chelmsford was chosen because a significant number unsigned timesheets, emanated from this DCC. About 80% in value of the sheets overall were said by Ruttle to have been signed but the schedules produced by DEFRA that support its defence suggest that that figure is lower at about 70% since DEFRA is currently disputing, on account of unsigned sheets, a total of £2.3 million, or about 30%, for labour; £2.5 million, or about 40%, for plant; and £900,000, or virtually 100%, for materials.

2. The Trial

8. Ruttle started proceedings by issuing a claim form on 28 January 2003 claiming the balance of its invoiced sums totalling £13,323,666 plus VAT. DEFRA, in its defence, pleaded in detail in schedules the invoiced sums accepted and challenged. These showed that the entirety was disputed and, further, since £9,828,293.87 had been paid^[2], that Ruttle had been overpaid £428,487.21. However, as already noted, DEFRA has since paid Ruttle a further £851,063.83. The parties agreed the issues to be determined at the first trial and Ruttle has also applied for an interim payment, an application which I directed should be heard at the same time as the trial of the issues agreed to be heard first.
9. The parties have reached this agreement as to how the issues, when answered, should govern the claims at those DCCs other than Leeds, Chelmsford and Stafford. This agreement reads as follows:

"It is agreed between the parties that the Court's determination of and ruling on each of the Issues contained in the Schedule to the Order dated 24 February 2004, relating to Leeds, Stafford and Chelmsford DCCs, should apply to and bind the parties in respect of every like issue which is, or has been or will by raised by DEFRA on each and every invoice submitted by Ruttle as part of its account under the contract dated 20 June 2001, relating to the Foot and Mouth Outbreak."

10. In addition to the agreed list of issues, the parties argued and sought a determination of a number of generic contractual issues.
11. The trial and the interim payment application occupied seven days. The parties dispensed with oral closing submissions. The claimant called two witnesses, namely Mr Carrol Ruttle's Group Development Director and Mr O'Connor its Commercial Director. DEFRA called seven witnesses, namely two Animal Health Officers and a Dairy Hygiene Inspector being Mr Jarratt, Mr Brand-Benee, and Ms Holden and four consultants being Mr Heath a Meat Technician, Mr De Kock an Accountant, and Mr Ward and Mr Pye both quantity surveyors. In addition, Ruttle relied on two witness statements, from Mr Bramley and Ms Williams. Both of these were originally served by DEFRA, the first in this action and the second in an earlier Foot and Mouth case that I tried, JDM Accord v DEFRA^[3].
12. I will first summarise the evidence and make relevant findings. I will then apply those findings to the 16 liability issues and 3 contractual issues that I must decide.

3. Factual Information Background

3.1 The Foot and Mouth Outbreak

13. The outbreak and size of the Foot and Mouth epidemic in 2001, DEFRA's pre-existing plans to deal with such an epidemic, the huge strain placed on the available resources to eradicate persons, animals and premises that had become infected by the epidemic and the methods and administrative procedures adopted to clean up infected premises have been described in detail in my judgment in the JDM Accord case, a description taken largely from the NAO and House of Commons Public Accounts Committee Reports^[4]. The highly infectious nature of the viral disease, involving the infection of buildings, vehicles, equipment, fodder and anything else coming into direct or indirect contact with the disease, required a massive clean up operation on every farm that had had contact with the infection. No clear or detailed specification of work required existed or could be drawn up in advance. The nature of the clean up operations had been identified in general terms in a DEFRA internal working party report, the Bradbourne Report, published in May 1999. A principal conclusion of that report was that it was not possible until disease is suspected and investigated to predict the requirements dictated by any given scenario. All that could be identified were the range of tasks and activities that would cover the total range of predicted matters that might require cleansing and remedial action.
14. As it turned out, the disease, the required rapid responses to it and the shortage of trained manpower prevented the drafting of individual of specifications work, bills of quantities and drawings at each contaminated site. This would be the usual means of delineating operations of the type involved in the clean up that Ruttle was involved in. Hence, the contract, as in the JDM Accord case, was rudimentary for the needs of a contract which became a multi-million pound contract and was based on the simplest possible scope of work. This was usually identified verbally by a DEFRA official on the first day that Ruttle appeared on site following telephoned instructions. The contract involved no more than the provision of a group of men and a fleet of plant ordered verbally by the DEFRA official at the same time. Ruttle's remuneration was identified using a pricing mechanism that involved no more than a work and materials valuation based on the manhours provided at an agreed hourly rate, the actual cost of hiring the plant that had been ordered verbally and the provision of required materials that were invoiced at cost on a bought-in basis.
15. The disease control strategy that was developed involved movement control, the maintenance of biosecurity, rapid reporting, tracing and identification of infected animals, rapid slaughter and immediate disposal of carcases followed by preliminary and then secondary cleansing and disinfecting ("C & D") work of premises. It is something of a misnomer to describe the overall operation as "cleansing". On most sites, Ruttle's work involved, in general terms, the construction of temporary roads, hard standings, buildings and disinfecting facilities; the provision of secure barriers and other means of precluding movement onto and off site; and the construction of a fresh source of water and an isolated water disposal system, in both cases frequently using temporarily constructed lagoons. The high pressure jet hoses had to be accessed to every potential nook where infected material might be lurking. This, and the pressured water jets from the hoses, often involved the demolition or breaking down of parts or the whole of buildings, sometimes large buildings. These breaking into, demolition or damaging processes involved rooves, structures, foundations and the permanently installed fittings in buildings including pens, metalwork and plant. Any significant damage had to be repaired or reconstructed. Ruttle also had to isolate power supplies; clean, redecorate and reinstate farms and farm buildings and move and replace contaminated material.
16. The actual cleaning involved using high pressure hoses which did much damage to the buildings which then required to be repaired. A major part of the operation was the collection and safe dispersal of the large volume of slurry that was created, containing potentially infected material, safely into lagoons or other isolated spots. On occasion, Ruttle was also required to construct and watch over pyres, burial pits and other carcass disposal methods.
17. This range of activities involved large and multi-tasked gangs of men and a mini-fleet of plant which involved such heavy plant as excavators, bulldozers and other earthmoving plant, bowsers and tankers, hydraulic lifting plant and fork lift trucks, heavy duty pumps, concrete mixers, generators and 25 tonne dump trucks as well as a plethora of power tools. None of the work was listed in writing and the number of men and the deployment of plant at each farm was instructed orally by a DEFRA official or a DEFRA representative such as a vet or even, on occasions, an Army Officer. The amount of work was dictated by the size of the farm, the number of animals previously located on the farm, its accessibility to independent water supplies and its facilities for access, water storage and water supply and the age, number, size and condition of the farm buildings.
18. The NAO Report particularly commented on how DEFRA's overriding priority was to eradicate the disease. Speed was paramount and cost of secondary importance since the best value for money would be achieved by eradicating the disease as quickly as possible. As a result, cleansing and disinfecting work started before financial budgets had been set and, certainly in Ruttle's case, such budgets were never set. Guidance on carrying out disinfecting was complex and local DCCs carried out different practices with regard to areas of uncertainty such as milking parlours and infected slurry. On some farms, including some Ruttle was involved in, the parlours were completely dismantled and reconstructed.
19. DEFRA conducted a review of C & D costs in July 2001 and some value for money measures were introduced including a requirement for a clear business plan to be prepared before work started which provided a statement of the number of days to be worked, a cost estimate and details of who would be undertaking the work. The Report particularly noted, as a partial explanation for the huge cost of cleansing and clean up work, that large numbers of contracts at individual sites were ordered by inexperienced DEFRA officials or representatives orally.
20. The scope and cost of the work undertaken varied from DCC to DCC. The NAO Report tabulated the average cost of C & D work up to October 2001 by DCC, the following being the average cost per farm for the relevant DCCS^[5]:

Leeds:	£31,000
Stafford:	£26,000
Colchester:	£26,000

The majority of DCCs had average costs per farm of between £30,000 and £40,000 with Worcester and Caernarfon bucking the trend with average costs of £44,000 and £70,000 respectively, albeit that Caernarfon was expected to drop to £38,000 and the other costs were expected to rise following the then anticipated update by DEFRA of these figures.

21. Taking Ruttle's figure for its total claim as being £18.7 million^[6] and the number of farms that it worked as being 334^[7], Ruttle's average cost per farm works out at approximately £56,000 so that Ruttle's average cost is about 40% higher than a possible revised average of the various DCC average costs of £40,000. This may well be explained by the fact that Ruttle was, in the main, employed on the larger farms and those involving the more difficult clean up processes. DEFRA would, however, seek to explain the difference by Ruttle substantially overcharging in various respects. I should record that this rudimentary statistic was not put forward or relied on by DEFRA in support of its challenge to Ruttle's invoices but it highlights the need for particular vigilance in assessing the veracity and authenticity of that account.

3.2 Establishing the Contract

22. Ruttle had cultivated a commercial relationship with Maff prior to the Foot and Mouth outbreak. The company had provided emergency assistance for Maff during the 1967 Foot and Mouth outbreak and over the years it continued to provide limited but regular assistance to Maff. When Mr Carrol joined Ruttle from J. Mowlem Construction plc in 1995, he was able to foster that relationship, particularly with the Preston DCC for whom Ruttle undertook a clean up contract in the mid 1990s and to whom he gave an annual lecture. This led to Ruttle being appointed as a company who would provide a site and fuel for a pyre for carcasses in the event of an outbreak of disease. It was no doubt because of its being known to DEFRA that Ruttle was appointed at short notice in August 2000 by the Bury St Edmunds DCC to carry out clean up work in East Anglia in connection with an outbreak of Classical Swine Fever. This work carried on for many months in all four stages needed to eradicate that disease and particular satisfaction was expressed of Ruttle's work by DEFRA for the work undertaken at Hill Farm, Chillesford in December 2000.
23. There was some suggestion within DEFRA that Ruttle's work and the terms on which it was prepared to work in relation to the Swine Fever clean up were unsatisfactory and that this had delayed settling its final account and, possibly, to greater caution being applied to its Foot and Mouth claims in the early stages of its work on the Foot and Mouth outbreak but there was no evidence either of any dissatisfaction for or of contractual difficulties and I dismiss those as being relevant factors in relation to the Foot and Mouth work. The contract was a simple one incorporating a schedule of Ruttle's plant rates which did not, on the face of it, give rise to any difficulty.
24. When the Foot and Mouth outbreak surfaced on 20 February 2001 at an abattoir in Essex, premises located in the area covered by the Chelmsford DCC. Mr Hurn from the Bury St Edmunds DCC, who had been working with Ruttle on the Swine Fever clean up, immediately contacted Mr Carrol and asked whether Ruttle could provide immediate assistance with men and equipment. Ruttle was able to respond forthwith and a clean up team was sent to Cheale and Old England Farms located at Upminster, Essex followed by two more Essex farms located near Brentwood. On 23 February, DEFRA sent Ruttle a copy of its standard terms and conditions which it proposed should form the contract under which Ruttle should carry out the Foot and Mouth clean up work but Ruttle replied by return querying several of the proposed conditions. There contractual matters stood until the discussions in June leading to the signing of a formal contract on 20 June 2001.
25. The initial method of working was that each DCC was autonomous in ordering work, receiving invoices and validating them for payment which was done centrally from DEFRA's Page Street, London office. This system was soon overwhelmed by the volume of invoices, by the large number of individual contractors and by staff shortages and long delays in payment soon developed. In response, DEFRA slowly improved its validation and payment procedures. From March 2001, external quantity surveyors were employed and allocated to DCCs to agree schedules of rates for labour, plant and materials and to validate and approve contractors' invoices. A payment on account system was introduced with effect from early May 2001 whereby contractors could submit applications for such payments pending the finalisation of the validation of their invoices. The independent quantity surveyors were appointed to make recommendations for appropriate on account. Up to 50% of the invoice value was authorised for on ­account payments.
26. A further development, from April 2001, was that DEFRA began to employ specialist contract administrators at each DCC to arrange contracts where these were not in place or to negotiate better terms for DEFRA as well as monitoring contractor's performance.
27. A third simultaneous development was that DEFRA appointed forensic accountants to examine the invoices of the largest contractors including those, numbering 86, awarded contracts in excess of £1 million.
28. By early May 2001, Ruttle had been paid £531,000 against specific invoices. However, it was one of the first principal contractors to come under the scrutiny of the independent quantity surveyors appointed to each DCC. This was because concern at national level was being registered at the Joint Coordination Centre on four levels. Firstly, there was concern that the incomplete accounting procedures for the Swine cleansing work were becoming mixed in with Foot and Mouth accounting. Secondly, Ruttle had no formal contract or, apparently, an agreed set of rates that were both fair to DEFRA and applicable to the Foot and Mouth work. Thirdly, Ruttle appeared to be submitting some of its invoices to the wrong DCC. Finally, there was concern, from an early stage, about the delays in validating Ruttle's invoices resulting from the growing number of perceived inconsistencies and discrepancies in Ruttle's invoices and their perceived delay in submitting their invoices. By June only £1.3 million had been invoiced out of a perceived total value of work performed of in excess of £3 million.
29. The first step that DEFRA took in relation to Ruttle was in early May 2001 to appoint Mr Graham Love of the quantity surveyors Davis Landon & Everest to audit all its invoices. Mr Love initially attempted to sort out what rates were applicable to Ruttle's Foot and Mouth work since much higher rates were thought to be being used by Ruttle than it had used for the Swine Fever work. The Chelmsford DCC sorted out and separated, the Swine Fever invoices from the Foot and Mouth ones. DEFRA then retained a forensic accountant, Mr De Kock, on a contract basis and assigned him to the Ruttle invoices, initially moving him to the Caernarfon DCC to validate the invoices submitted from farm work in that area. The third step DEFRA took was to convene a meeting with Ruttle, chaired by Mr Carty the Procurement Advisor to the Director of Purchasing with Mr De Kock and the representatives of the four separate firms of quantity surveyors who had been investigating Ruttle's invoices at different DCC's to co-ordinate a common validation strategy and to agree upon the line to take in contract negotiations Mr Carty was to have to regularise and improve upon the contractual relationship with Ruttle and the rates to be applied for its Foot and Mouth work. This meeting was held on 1 June 2001 and a strategy was devised.
30. The outcome of that meeting was a meeting held on 4 June 2001 with Mr H. Ruttle and Mr Carrol of Ruttle attended by Mr Carty, Mr De Kock of DEFRA supported by Mr Morrish one of the independent quantity surveyors. A contract was drafted by a team appointed by Mr Carty and, after discussion with Ruttle, was signed by both parties on 20 June 2001. This contract was, in effect, a call off contract with an initial three month period of operation, renewable on a three monthly basis. A table of rates was incorporated into the contract, backdated to the start of the Foot and Mouth epidemic on 20 February 2001. It was also agreed that all Ruttle's previously submitted invoices would be resubmitted on the new contractual basis.

4. The Eleven Sites Considered in Evidence

4.1 Introduction

31. Ruttle's evidence, which was not challenged, as to how the work at each site was ordered and set up, was that the pattern of ordering work on a farm was set in the Colchester area, being the first DCC that it worked in at the outset of the Foot and Mouth outbreak. Originally, Ruttle mobilised from temporary offices located in the car park of DEFRA's Bury St Edmunds offices from which the Swine Fever outbreak clean up work was being organised, work which continued in parallel with the Foot and Mouth clean up for some weeks. However, after about 10 weeks, Ruttle's Foot and Mouth mobilisation activities were moved to DEFRA's Chelmsford offices under the supervision of Ms Norma Cooper who had moved from DEFRA's Chelmsford office to be closer to the Essex outbreak.
32. The initial instructions were received orally, often by telephone. These instructions were sometimes, but not often, confirmed in writing with the name, address and location of the farm being given but nothing else. The instructions were either to send a 3-man rapid response team to undertake initial disinfecting work. This work was carried out under the direction of the DEFRA official present who was usually a vet. The other type of instructions was to undertake C & D services involving a complete clean-up of the farm in question. Ruttle would be informed of the number of animals on the farm which would give a broad indication of the initial crew that would be required. Ruttle's representative, in the early stages Mr Carrol or Mr O'Connor and later one of the roving foreman, would attend immediately and, on arrival at site, would be met by the site­based DEFRA official, whether an Animal Health Officer or a vet or an agency supplied official. Ruttle's roving foreman would receive instructions from the official as to what was to be done and in what order. The official would also instruct the foreman on the size of the gang and the items of plant that would be required. The site specific nature of the work meant that these requirements could only be finalised by the DEFRA official on site after discussion with the Ruttle foreman.
33. The usual size of gang would be between 10 to 20 operatives which included a working foreman but labour intensive activities such as stall dismantling would often require appreciably larger gangs. Ruttle also had roving foreman who would visit each site on a regular basis to ensure that work was proceeding safely, efficiently and to iron out any developing problems. This foreman was also a channel of communication between the DEFRA site-based official and the labour gang as to what had to be done, in what order and to what standard.
34. Ruttle's labour, apart from the roving foremen, was largely hired in although some labour was engaged directly on a casual basis. Ruttle regularly works with a list of labour only subcontracting companies who supply the required number of operatives on request. Its major supplier, usually its first port of call, was Willow Construction (Liverpool) Ltd ("Willow"), a Merseyside-based company who readily sent gangs all over the United Kingdom. The labour requirements were communicated from site to Ruttle's Chorley office and from there to Willow, or to any other subcontractor by telephone. The DEFRA official's plant requirements were also telephoned to Chorley who arranged for the mobilisation of the appropriate plant and operators, again usually contract operatives, from Ruttle's plant fleet. The requirements were usually that all plant should remain on-hire on site, once delivered, because it was known that there were severe shortages of plant as a result of the Foot and Mouth requirements and of many local hirer's reluctance to hire out for Foot and Mouth work because they did not want their plant to be seen in infected premises. Thus, once plant was obtained and was present on site and, hence, "captured", the DEFRA site-based officials instructed that that plant should remain on site and on-hire whilst clean-up work continued at that location.

4.2 Site Procedure

35. DEFRA had a clearly defined record keeping procedure that its site-based staff were to follow at each IP. This was set out in packs issued to each site by DEFRA. These packs were supplemented by guidance that it published and which was available in DEFRA's website. The packs, called FMD packs, contained day sheets, logs on which daily comings and goings of people and plant were to be logged and a diary-like form to record site activities on a daily basis. These documents were required to be filled in regularly by the site-based supervisor who was also required to ensure that everyone arriving and leaving site were required by the DEFRA official manning the gate onto the site to sign the log on arrival and on leaving, thereby recording the times of these comings and goings. Thus, every operative on site every day and his hours on site, every item of plant on site every day and the comings and goings of everyone onto and off the site with their times of arrival and departure should have been logged and recorded and those records sent back to the relevant DCC and kept on file there^[8].
36. For its part, Ruttle's foreman kept records on a daily basis recording each man on site on each day with the number of hours worked and the plant on-hire on site. These sheets were then made up on a weekly basis into an allocation sheet which the DEFRA procedure required to be signed by the site foreman and DEFRA's representative to provide a factual and agreed record of men and plant used each day. One signed weekly sheet should have been given to the DEFRA site representative, a second copy should have been sent with Ruttle's invoice to DEFRA and a third should have been retained by Ruttle.
37. The procedure for recording men and plant required by DEFRA was set out in published guidance which was readily accessible to anyone with access to DEFRA's internal website. The guidance available from 4 April 2001 was contained in Procedure FMD 001 entitled "Foot & Mouth Disease Invoice Payment Procedure Document" - Invoices General. This required that all invoices had to be checked against local records set up and maintained for this purpose. Once the review of procedures had taken place in June 2001, DEFRA issued Procedure Note FMD 003 which supplemented and endorsed the existing procedure. This contained this section:

"1.1.4. C & D teams will also have ensured adequate on-site supervision by DEFRA representatives to enable contractor's weekly time sheets (employees and equipment) to be signed to enable subsequent certification of invoices."

Although this requirement was not set out in the Procedure Note FMD 001 issued in April 2001, it was clearly one that pre-existed both Procedure Notes as can be seen from the contents of the IP pack issued to site supervisory staff and from the requirements of the contract produced for Ruttle to sign in June 2001 which required all Ruttle's timesheets to be signed by DEFRA personnel and provided that only staff and hours on these signed timesheets would be paid for.

38. The site generated documents and DEFRA's copy of the signed Ruttle timesheets were required to be sent back to the DCC office on a regular basis. Indeed, at most DCCs, a weekly meeting was held with all AHOs at which the previous week's logs and time sheets were handed in. These meetings stressed the particular need to maintain these records and for AHOs to check that the site-based supervisors were both recording and keeping the necessary data on the logs and time sheets. These were all added to the discrete file kept for each farm called the CPH file. By the end of the FMD C & D work, over 250,000 such files were in existence and these were all relocated to a central depository known internally as "Iron Mountain".^[9]

4.3 Payments

39. A significant part of the work, being that carried out from 21 February 2001 until June 2001, has been invoiced twice. It was invoiced originally using the rates tendered by Ruttle in February 2001. The invoices were then corrected by substituting the revised rates agreed in June 2001 for the original rates and the invoices were reissued in a revised format following the signing of the formal contract in June 2001. Many of the reissued invoices have since been supplemented or have been reissued in an amended form so as to correct errors and omissions that they contained.
40. Prior to 11 May 2001, Ruttle was paid £340,398.29 against specific invoices issued at the DCCs other than Leeds. Ruttle pleaded that it had been paid a further £201,884.18 against 11 specific invoices issued in relation to Leeds DCC work. The balance of the payments made against specific invoices, being £340,398.29, was received in four separate payments all received on 10 May 2001. Thereafter, starting with a payment of £750,000 on 10 May 2001, DEFRA has since only made general on-account payments.
41. Ruttle did not identify the invoices against which these specific early payments were made but at least part of that overall sum appears to have related to invoices submitted for the initial work carried out in the Essex area covered by the Chelmsford DCC. This is because the first 2 invoices relating to the Essex area had been submitted by Ruttle to the Chelmsford DCC on 11 March 2001, one of which for £42,837.69 related to Old England Farm. A further batch of 22 invoices for the Essex Region were submitted on 31 March 2001, of which 2 were for Old England Farm and 1 each for Clay Tye and Marsh Farms, and a further batch of 12 were submitted on 22 April 2001.
42. The contract, even in its revised form, does not contain any express requirement as to the timing of the submission of any particular invoice by Ruttle relative to the date on which the services to which it relates were carried out nor as to the periods of time to be covered by any particular invoice nor as to the interval of time that should elapse between the submission of any invoice or batch of invoices. The contract merely states in Condition 10.1 that, unless otherwise agreed by the Secretary of State:

"invoices ... [will be] submitted in arrears on completion of the Contract"

and that "Contract" in its context in Condition 10 had the meaning given to that work in Condition 1 which was:

"... the Secretary of State's requirements [at] the location where the services are to be performed".

43. Thus, the contract envisaged that each site or farm would be invoiced and accounted for discretely and separately. Since each DCC was responsible for engaging services in its Region, Ruttle invoiced each DCC for the work carried out in that DCC's area, making up separate time sheets, daywork sheets and invoices for each site. Thus, in form, Ruttle was engaged by 9 separate employers, being the 9 DCCs in whose area work was carried out, to perform services in 344 discrete contracts, being the number of separate sites at which it worked across these DCCs, each site being invoiced and accounted for separately.
44. No express additional agreement was reached by Ruttle with DEFRA either centrally or at any particular DCC as to the timing and frequency of its invoices save that DEFRA asked Ruttle at the meeting preceding the signing of the June contract to submit future invoices on a weekly basis. DEFRA and Ruttle also agreed that all previously submitted invoices would be resubmitted using the new rates and DEFRA informed Ruttle that no further invoices would be certified for payment until the existing invoices had been resubmitted.
45. The scale and intensity of Ruttle's FMD work overwhelmed its limited invoice and finance department which consisted of Mr Carrol assisted by Mr John Simpson and a small number of administrative staff who were supplemented by temporary short term additional staff. This department was based in Ruttle's Chorley offices. In consequence, the production of invoices was not as speedy as Ruttle would have hoped for. What happened in practice was that Ruttle would submit its invoices for any particular DCC in batches at irregular intervals during and for some months after activity in that DCC's area. By way of example, taking the Chelmsford DCC, the following pattern of invoice submission emerged:

Date	Number of invoices submitted
2001
11 March	2
31 March	22
22 April	12
9 May	4
15 May	1
16 May	2
29 May	4
31 May	1
11June	1
29 June	1

June Contract - Resubmission of old invoices with the newly agreed rates in the newly agreed format and further invoices for work not previously invoiced.

2002
28 February	9
1 March	12
7 March	21
8 March	36
9 March	1
11 March	14

No invoices were submitted between May 2001 and February 2002 because most of the Chelmsford DCC area work had already been carried out prior to the June 2001 contract. Further invoicing was held up by Ruttle's other invoicing work at other DCCs was held up by invoicing work and its work with the Invoicing Panel.

46. This process of invoicing each DCC separately was continued throughout but the subsequent validation, approval and payment processes were significantly altered from May 2001 onwards. To start with, and as a result of the new contract signed in June 2001, Ruttle had to resubmit all previously submitted invoices recalculated using the newly agreed rates which it had been agreed would have retrospective effect and a new format before DEFRA would certify any further invoices for payment. A further alteration resulted from the June 2001 arrangements. This was that although invoices continued to be submitted to the host DCC as before, the approval process was undertaken centrally. Mr De Kock co-ordinated the reception of invoices from each DCC and the subsequent approval process and DEFRA's Finance Officer certified on-account payments. As a result, in the four months from mid-May until mid-September 2001 £5.75 million was paid on-account in 7 tranches. Thereafter, the Invoicing Panel procedure was set up and the approval and payment process changed again.
47. The payment pattern has been extremely irregular. It falls into four phases. The first phase lasted from 25 April 2001 until 10 May 2001 when approximately £600,000 was paid against specific invoices which were paid in full. The second phase lasted from10 May 2001 until 14 May 2002. This phase coincided with the intense scrutiny of Ruttle's invoices undertaken by the various quantity surveyors attached to each DCC, by Mr De Kock when continuously present in Ruttle's offices for about a month and by the Invoicing Panel. It involved 11 large on-account general payments towards all of Ruttle's work at all DCCs. The payments consisted of 1 payment of £1.75 million, 4 payments of £1 million, 5 payments of between £750,000 and £1 million and one payment of £300,000, all being made inclusive of VAT. The total sum paid in this period was £10,431,577. The third phase lasted from 14 May 2001 until 19 September 2003 and resulted in no further payments at all. The fourth and final phase lasted from 19 September 2003 to July 2004 and coincided with the preparatory stages for this trial. In this phase, 4 further on­-account payments totalling approximately £2.175 million have been paid.

4.4 The Chelmsford DCC Sites

4.2.1 Introduction

48. The first outbreak was detected at Old England Farm No 1, Upminster, Essex on 20 February 2001. In all, there were ultimately 11 infected premises in the Essex and surrounding areas covered by the Chelmsford DCC. The interval between the notification of the first and last case was 51 days, namely between 20 February and Mid-April 2001^[10]. Ruttle was involved in the C & D work at 7 of these and also carried out construction and installation work for a Mobile Stores Unit and the temporary Southern Area General offices^[11]. Ruttle's first involvement was on the first full day of C & D work on 21 February 2001 at the Old England Farm and at an adjacent farm, Cheale Farm.
49. The Essex region DCC under Mr Hurn was based in Bury St Edmunds for about 10 weeks. This DCC directed and controlled all FMD Infected Premises ("IP") work including the detection of infection, slaughtering, carcass disposal and all C & D work. Strictly, the DCC, as all others Ruttle was involved in, was a District Emergency Control Centre ("DECC") set up in a DCC region to control FMD but I, for convenience and following the convention adopted in the NAO Report, will refer throughout to these Centres as DCCs. Some administrative and invoicing difficulties were caused by the on-going Swine Fever IP work also continuing to be administered by this DCC since Ruttle continued to be fully involved in that work as well. Ruttle occupied temporary offices in the car park of these offices.
50. The overseeing of the IP FMD C & D work was directed by Ms Norma Cooper and she moved to Chelmsford with the FMD IP supervision after about 10 weeks to be nearer to the seat of activities. Ruttle took their overall directions from her. Two Area Health Officers, Mr Jason Brand-Benee and Mr Jim Cooknall worked directly under Ms Cooper, also from the Chelmsford offices. Other AHOs involved in this region included Mr Milton and Mr Hammond. Beneath these AH0s were site based DEFRA officials, usually of Inspector status. Mr Brand-Benee's evidence was that every farm where C & D work was in progress in the Essex region was always manned by a DEFRA official.
51. Each DCC had a Chief Veterinary Officer who was, in terms of seniority, of at least equal status to the IP Director and, beneath the CVO was a team of Vets, at least one of whom was located permanently on each IP during slaughtering and C & D work. There was a shortage of qualified vets and the CVO in the Essex region was Dr Janet Todd Hunter. She had moved temporarily from the Preston region to supervise the Swine Fever outbreak and then became actively involved supervising the FMD outbreak in its early stages.
52. Ruttle' s organisation was headed initially by Mr Carrol until he moved on to the Staffordshire region as the FMD outbreak and Ruttle's activities began to spread. The chief Ruttle representative in the Essex region was Mr Mick Grundy who had a role, and the title, of roving foreman, moving from site to site in overall superintendence of Ruttle's work. Ruttle had a representative running the temporary offices it set up, being Mr Kenny Bullen in Chelmsford and Mr Bobby Bell in Bury St Edmunds. On each site a working foreman or, on the larger sites, two working foreman supervised the work. These included Mr John Williams and Mr Brian Lewis.
53. Three sites were dealt with in evidence, those at Old England Farm, Clay Tye Farm and Marsh Farm. Specific invoices from Great Warley Hall, Wick Farm and the Mobile Stores work were also adduced in evidence.

4.2.2 No Signed Time Sheets

54. Unlike most time sheets produced by Ruttle at other DCCs which were then appended to invoices submitted for work carried out, very few of those produced in relation to, and appended to invoices for, the sites in the Chelmsford DCC were countersigned by DEFRA on-site officials. The Pelling Schedule shows that only 23 of the 117 invoices were backed up by time sheets signed by DEFRA officials. These sheets represented £1.86 million of the total claimed sum for labour and plant of £2.83 million.
55. There is no obvious pattern to the time sheets that were signed compared with those that were not signed. At Clay Tye Farm, for example, 5 of the 24 invoices were backed by unsigned time sheets, although a second signed time sheet and contemporary DEFRA-kept logs appear to be in existence and to remain accessible in the CPH Files, 8 were invoices that were recorded as being ones where site information was missing despite the availability of the CPH Files and 11 where the time sheets were signed. The only obvious explanation for the difference between signed and unsigned time sheets is provided by the fact that certain DEFRA site-based officials still signed sheets even though most did not. Moreover, the Pelling Schedule is not wholly reliable since, by way of example, two invoices adduced in evidence were said to be backed by unsigned time sheets where a DEFRA signature is clearly visible.^[12]
56. Mr Carrol stated that he had met Dr Todd-Hunter when visiting the Charles Meat Ltd' s abattoir in the second week of the FMD outbreak. He had already met and dealt with her during the Swine Fever outbreak C & D work. During their discussion, Dr Todd-Hunter confirmed that all time sheets were to be sent to Chelmsford DCC's offices for signature because there was no DEFRA official on site who was authorised to sign them. He had raised this with her because he had recently been informed by Mr Grundy that Mr Grundy had himself been informed by DEFRA site-based supervisory staff at Cheales Farm that only Mr Jim Cooknall or Mr Jason Brand-Benee at DCC's office could sign time sheets when he had asked the officials to sign Ruttle's sheets at that farm.
57. I am satisfied that Ruttle was instructed to send its time sheets to the Chelmsford office for signature. There would be no reason for Ruttle to fail to obtain signatures on many of the time sheets if such an instruction had not been given since it had no difficulty in seeking and obtaining signatures elsewhere. No one within or acting for DEFRA subsequently, suggested that the absence of signatures was the fault of Ruttle and DEFRA did not attempt to lead evidence seeking to rebut this evidence of Mr Carrol. Thus, since Dr Todd-Hunter had ostensible authority to issue such an instruction, I find that Ruttle was entitled to invoice DEFRA for its Chelmsford DCC work without first obtaining a DEFRA verifying signature on the time sheets and DEFRA could not subsequently insist on a signature without first giving Ruttle reasonable notice that it intended to revert to the contractual requirement for a signature first to be obtained before any payment was made.
58. However, it is clear that on at least some of the farms the time sheets were signed by the on-site representative as well as copies being sent to the Chelmsford offices for further signature. These farms include the Clay Tye and Marsh Farms where copies of some of these time sheets signed by the DEFRA on-site representative were adduced in evidence. Moreover, a full set of the IP files, logs and daily records were obviously kept by the DEFRA on-site supervisors as Mr Brand-Benee and Ms Millen testified and as Mr Granshaw's signed statement confirmed. Moreover, Mr De Kock has reviewed all these logs which have been kept by the Chelmsford DCC on what his statement described as "particularly detailed records on its CPH Files". He withdrew this part of his first witness statement because these CPH files were the files which had clearly not been made available to the Invoicing Panel during its nine months of its existence during which it continuously sought them. It follows that although the parties have treated the Chelmsford DCC farms as being ones for which there are no signed time sheets, for all, or the great majority, of weeks worked on each farm there are in existence and readily available signed time sheets and, in addition, detailed daily records maintained by DEFRA's on-site supervisory staff.
59. Following Dr Todd-Hunter's confirmatory instruction, Ruttle, in the main, delivered the unsigned time sheets to the Chelmsford office. This was initially done by Mr Carrol and, when he moved away from the Chelmsford Region, by Mr Bullen and Mr Bell. Unfortunately, no one at the Chelmsford DCC offices then signed these sheets.
60. At no time after the first two weeks of the FMD outbreak did anyone from the Chelmsford DCC take up with Ruttle that its time sheets were not being signed. Instead, some of the first invoices were paid without there being any signed time sheets, no query was raised by the two quantity surveyors who were assigned to this DCC in March 2001, Mr Graham Love and Mr Colin Harrison of Davis Langdon & Everest as to why the sheets were not signed and the Invoicing Panel adopted a procedure at its first meeting in September 2001 that:

"... timesheets with no definite signature ... would be checked and signed off as technically correct, using one of the standard templates. They would then go to the Finance Managers who would decide whether to try to get a retrospective signature or to pass for payment. DEFRA would have the responsibility for obtaining signatures."^[13]

61. However, the unsigned Chelmsford DCC Region time sheets remained a problem. Firstly, the organisation was and remains administratively inefficient. This has lead to a failure to authenticate the time sheets when they were first delivered to the DCC's Chelmsford office. Secondly, many of the supervisors were from overseas and were no longer contactable for further information once the immediate C & D measures had been completed. Others with less knowledge of site conditions found it impossible to reconstitute the work carried out by Ruttle so as to be able to authenticate the relevant allocation sheets that had been prepared by Ruttle or had been extracted from Ruttle's time sheets. Finally, the Chelmsford office failed to provide the Invoicing Panel with the back up documents that had been submitted to it by Ruttle so that no authorisation for payment for work not backed by signed time sheets could be obtained and, in consequence, the invoices were never submitted to the Finance Managers for approval and payment.^[14]

4.2.3 Supporting Information Missing

62. The supporting information provided by Ruttle with its invoices for other sites at both the Chelmsford DCC and at other DCCs was sufficient for DEFRA's purposes. However, given its inefficiencies, this supporting information was not passed on to the Invoicing Panel. The Panel finally decided on 18 April 2002, after unsuccessfully trying to obtain this information from the Chelmsford DCC, to arrange meetings at Chelmsford with Mr Bell and Ms Cooper to try and get the unsigned time sheets signed off but the activities of the Panel were terminated following that meeting and nothing further was done to chase up the missing information or to obtain signatures on the unsigned time sheets.
63. Two years later, in March 2004 when the Pelling Schedules were prepared, the supporting information had still not been obtained from Chelmsford DCC by those working on these invoices for DEFRA nor had copies of the relevant documents been sought or obtained from Ruttle although it is clear that Ruttle still retains copies of these documents. This is because some of the invoices referred to in the Pelling Summary Sheets as not supported were adduced in evidence by Ruttle along with copies of the supporting information.
64. At the same time, in late March 2004, as Mr Pelling was preparing the schedules that are annexed to his witness statement dated 1 April 2004, Mr De Kock was independently preparing his witness statement. As part of his preparatory work, to quote from his witness statement also dated 1 April 2004, he:

"reviewed the invoices submitted by Ruttle against [particularly detailed records maintained on its CPH Files] and have produced a schedule of discrepancies".

DEFRA volunteered to withdraw this material from the evidence adduced by Mr De Kock after Ruttle had objected to it being relied. Ruttle's understandable objection was that the material relied heavily on the contents of the CPH Files which it had never previously consulted despite there having been a period of over two years during which Ruttle's invoices had been subjected to several detailed reviews by DEFRA and its consultants including Mr Pelling.

65. It was therefore clear that supporting information by way of time sheets was originally supplied by Ruttle, that copies of this information are still held by Ruttle, that further copies have always been and remain on Chelmsford DCC's CPH Files, that those CPH Files contain extensive independent data recording the numbers and periods of time that Ruttle's labour and plant were on site on a daily basis prepared by DEFRA supervisory staff using the IP recording procedures, that many of Ruttle's timesheets are in fact signed and verified by DEFRA staff, that the invoices recorded on the Pelling Schedules as having no supporting information are in fact backed up by such information which is currently in DEFRA's possession and that such timesheets as were not originally signed by DEFRA officials were not signed because of DEFRA official's instructions which Ruttle complied with.

4.2.4 State of Account

66. The current overall state of Ruttle's accounts for the Chelmsford DCC are as follows:

Amount invoiced:	2,837,556.64
Amount admitted:	880,499.67
Balance in dispute:	1,957,056.97

4.2.5 Old England Farm and Old England Bungalow

67. Old England Farm in fact consisted of two adjoining sites being Old England Farm and Old England Bungalow. The work at the Bungalow involved a significant amount of demolition and reconstruction work. The two were run as separate sites and invoiced separately. The current state of these invoices, inclusive of VAT is as follows:^[15]

Old England Farm

Week Ending	Invoice[16]	Labour	Plant	Total
25.2	2392#	3,999.07	2,274.84	6,243.91
4.3	83211A*	35,571.55	18,037.52	53,609.07
11.3	83446AA*	31,010.04	31,802.98	62,813.02
18.3	83446AB*	25,778.28	36,949.81	62,729.09
25.3	1042A*	20,425.16	26,925.75	47,350.91
1.4	83586AA*	6,714.00	17,505.55	24,219.55
8.4	83586AB*	2,628.30	8,142.54	10,770.84
15.4	2026A*	278.15	7,395.18	7,673.33
Total		£122,405.48	£146,759.33	£269,164.81

Old England Bungalow

25.3	1043A*	4,997.07	7,319.30	12,316.37
1.4	1033A*	4,478.64	5,870.31	10,348.95
8.4	1003AB*	0.00	2,158.66	2,158.66
Total		£9,475.71	£15,348.27	£24,823.98

68. The roving DEFRA official on both sites was Mr Brand-Benee. He also attended four other sites where Ruttle carried out C & D work, being those at Clay Tye Farm, Elizabeth Lodge, Great Warley Hall and Marsh Farm. Mr Brand-Benee gave some generalised evidence that he recalled that, towards the end of the C & D work at these two sites, there seemed on occasion to be too many men working and that plant was kept on site, or moved there from other sites, which was not in current use on the Old England Farm.
69. However, there is no evidence that any instructions were ever given to Ruttle to reduce the size of its labour gang or to put any item of plant off-hire. The nature of the contract was such that it was DEFRA who instructed Ruttle as to the number of men and the items of plant required and who was responsible for reducing these requirements if circumstances dictated. It followed that the mere fact that some items of plant were temporarily stored at the Farm, a convenient place for this purpose given its size and location, did not mean that DEFRA was not obliged to pay for that plant during these quiet periods or that the plant had become off-hire. Mr Carrol gave unchallenged evidence that DEFRA required Ruttle to keep on-hire for its C & D requirements items of plant not currently in use so as to ensure that such plant would be readily available when required.

4.2.3. Clay Tye Farm

70. Clay Tye Farm was one of the bigger farms to have been subjected to C & D work. The invoices were as follows:

Week Ending	Invoice[17]	Labour	Plant	Total
4.3	2402A	1,305.81	1,450.96	2,756.77
11.3	2403A	7,261.15	7,580.96	14,841.35
18.3	2404A	1,668.92	636.48	2,305.40
1.4	83583A#	8,198.05	14,608.60	22,806.65
8.4	2405A	0.0	6,548.52	6,548.52
29.4	2027A*	29,730.83	30,984.45	60,715.28
6.5	1053AA#	34,349.44	49,168.58	83,518.02
13.5	1053AB#	38,272.79	47,317.94	85,590.73
20.5	2028A*	34,484.40	46,007.22	80,491.62
27.5	1115AA#	32,255.81	42,533.66	74,789.47
3.6	1115AB#	26,974.25	30,634.24	57,608.49
10.6	1115AC#	22,590.43	31,163.51	53,753.94
17.6	2034A*	22,613.75	31,891.17	54,504.92
24.6	2406A#	21,820.93	32,849.61	54,670.54
1.7	2407A#	16,507.74	32,658.87	49,166.61
8.7	2032A*	15,176.89	32,926.15	48,103.04
15.7	2033A*	13,531.29	32,393.79	45,925.08
22.7	2029A*	15,355.08	33,835.08	49,190.16
29.7	2030A*	15,756.51	33,761.77	49,518.28
5.8	2031A*	15,756.51	33,480.67	49,237.67
12.8	2408A#	8,041.49	29,360.85	37,402.34
19.8	2409A#	8,041.49	25,754.72	33,796.21
26.8	2448A#	8,875.95	28,896.14	37,772.09
9.9	2473A#	2,563.38	540.80	3,104.18
Total		£401,132.89	£656,983.98	£1,058,116.86

71. After 4 weeks of disinfecting work, the C & D work started on 25 April 2001 and lasted for 20 weeks until 9 September 2001. Overall, just over £1M has been invoiced for this farm. There were between 15 and 20 men working on this farm. Two AH0s, Ms Lorraine Wallace and Ms Cathryn Michell supervised the C & D work with Mr Brand-Benee making frequent visits to site. These were supported by two EO field officers, Mr Neville Granshaw and Ms Marion Scott who worked a split shift. The 7 invoices adduced in evidence all were supported by signed time sheets, the signature being that of Mr Granshaw.^[18]
72. The probability is that all Clay Tye Farm invoices were signed by Mr Granshaw. A witness statement, which was signed, was obtained from Mr Granshaw but he was not called and his statement was not formally adduced in evidence. It was, however, placed in the trial bundles. Of greater significance were the copies of some of the logs and time sheets that he had kept on a daily basis as required by DEFRA's IP supervision procedures whilst superintending work at the farm which were adduced in evidence and which clearly formed part of a complete set of his logs kept during the whole of the C & D work carried out at this farm which are still available to DEFRA. I have used the continued existence of all of his logs and the contents of the copies adduced in evidence as background material in putting together the primary facts about this farm. It is also significant that of the 24 weeks of work at this farm, the Pelling Schedules suggest that there are 8 weeks where the weekly invoice is devoid of any supporting information yet copies of Mr Granshaw's logs covering those weeks were sufficiently readily available to be adduced in evidence.^[19]
73. The farm was very large with a number of buildings including several derelict ones which were dangerous and had to be demolished. The conditions were described by Mr Granshaw as appalling. Before C & D work started, a large lagoon had to be constructed. Mr Granshaw carefully noted who was present on site each day and also listed all plant and, on his logs, noted which items of plant were not in use. Pages from his logs were adduced in evidence. There was one which corresponded to the time sheets adduced in evidence by Ruttle. The entries, both as to the men working and as to the hours worked, tallied with the Ruttle sheets which had all been signed by Mr Granshaw.^[20] Mr Granshaw estimated that up to 30% of the plant was not in use at any one time. Mr Brand-Benee also stated that the farm was used as a storage depot for plant and that unless an item of plant was not going to be used again, it was kept on-hire on site.
74. Both Mr Brand-Benee and Mr Granshaw stated, in general terms, that the work was, particularly towards the later stages, carried out more slowly than it need have been carried out. However, DEFRA has not challenged any claim for labour or plant on the basis that the time was worked but the working rate or output was too slow nor identified from Mr Granshaw's signed time sheets or the corresponding entries in his logs specific men or hours worked that it would not be reasonable for Ruttle to charge for. Moreover, at no stage since the work was carried out in 2001 has DEFRA sought to identify specific items of plant which should have been put off-hire and returned to the Ruttle plant depot that it had come from despite Mr Granshaw's records identifying which plant was not in use on any particular day.

4.2.4 Marsh Farm

75. Marsh Farm was worked during an intense 7-week period between 12 March and 29 April 2001. This farm was constantly supervised by an on-site DEFRA supervisor, Ms Julie Millen. She is employed by the Rural Payment Agency or RPA as an Inspector. This is an agency of DEFRA dealing with the payment of grants and compensation to farmers and landowners. For the first part of the FMD C & D clean-up work, until 6 April 2001 when she moved to another farm to set up C & D work there, she was seconded to the Chelmsford DCC and during the Marsh Farm clean-up she was located on site as DEFRA's full time Field Officer. She kept meticulous and detailed records of all that occurred and clearly paid particular attention to her role as the on-site supervisor of Ruttle's performance, output and required level of men and plant.
76. The pattern of invoicing for labour and materials at Marsh Farm was as follows:

Week Ending	Invoice[21]	Labour	Plant	Total
11.3	1044AA#	0.0	909.12	909.12
18.3	1044AB#	10,423.28	8,799.81	19,223.09
25.3	1044AC#	18,817.84	16,381.00	35,198.84
1.4	83580AA*	13,889.44	18,024.44	31,913.68
8.4	83580AB*	16,182.90	21,472.66	37,655.56
15.4	1071AA	35,953.52	24,593.82	60,547.34
22.4	1071AB	41,630.29	23,339.10	64,969.39
29.4	1962A#	28,728.09	16,152.76	44,880.85
Total		£165,625.36	£169,672.71	£335,298.07

77. Ms Millen described her role as follows:

"I supervised the entire cleansing and disinfecting procedures and took on general responsibility for the FMD operations on the farm."

She was supported by Mr Hammond and Mr Milton and, above them, by Ms Cooper from the Chelmsford DCC office on the administration of the work and on any major decision she had to take on site. She worked closely with Ruttle's on-site foreman, Mr Joe Skett. On the three days she was away from the farm, a colleague covered for her and, on one of those days, the colleague instructed Ruttle to replace the gang which was done immediately. Whilst on site, she liaised closely with Mr Skett and, in signing the time sheets, only signed for the men who were present and for the hours that they were working or on breaks for which Ruttle was entitled to charge. This followed a meeting on site between Mr Skett and Mr Grundy at which Mr Grundy insisted that Mr Skett should ensure that the time sheets were signed by Ms Millen. Ms Millen stressed in her statement:

"If Ruttle's timesheets looked correct I signed them on that basis. Where guys were absent on farm on a particular day I checked that they had nor been included in the timesheets. I did not want to allow someone to get paid if they did not work. I always understood that the labour timesheets partly prepared by me and the Ruttle timesheets prepared by Joe [Skett] had to be signed in order to allow Ruttle to be paid for the work that they did. I generally left it up to Ruttle to chase me for a signature on the timesheets that they prepared. As I have already indicated, this also appeared to be the understanding of Ruttle's men, including Joe [Skett] and Mick [Grundy]."

78. The first few days of Ruttle's C & D work were particularly stressful. A number of health and safety issues arose which had to be resolved and damage was done through careless working. These difficulties appeared to result from the manner in which Ruttle's foreman was supervising the gang and were soon resolved, mainly because the new gang that started on 4 April and its supervisor were more efficient and better organised. However, it was Ms Millen's view that although there were a lot of Ruttle's men on site, there were not too many since there was a lot of work to do. She also reviewed the plant lists contained on Ruttle's invoices and in her witness statement expressed the view that all the plant listed in these plant lists was needed.
79. Ms Millen's overall view of the first "Wigan team" which started the work before being replaced on 4 April with a "Liverpool team" was very slow, lacking in common sense and initiative and not proactive in moving things forward. However, the job was getting done but could have been done quicker. This assessment, from an experienced RPA Inspector, is one which I readily accept. It amounts to Ruttle's initial team being given a low pass grade, sufficient to entitle it to be paid in full for its services, namely the provision of men and plant to work under DEFRA's supervision and direction on C & D tasks.

4.2.5 Invoicing Investigations

80. From early May 2001, two quantity surveyors from Davis Langdon & Everest, Mr Harrison and Mr Love were seconded to the Chelmsford DCC following DEFRA's decision to provide such assistance to every DCC. The NAO Report described such quantity surveying assistance in these terms:

"From March 2001 quantity surveyors were employed by the Department to give independent assurance that it was being charged reasonably for the work carried out by contractors. Quantity surveyors were tasked with agreeing schedules of rates for plant, equipment, materials and labour. They were also responsible for the validation and approval of contractors' invoices and checking that paperwork was correct. The Department employed up to 80 quantity surveyors at Disease Control Centres."^[22]

81. These two quantity surveyors clearly spent time examining the paperwork, invoices, time sheets and contractual arrangements of Ruttle's work since it was involved in most of the C & D work being carried out at that time at the Chelmsford DCC. At the meeting called on 6 June 2001 to coordinate all of the Ruttle invoice processing activities at all DCCs it was then involved in, the minutes record this as the then view of the two quantity surveyors assigned to the Chelsmford DCC:

"Two batches of invoices have been received so far. Approximately 10 invoice per batch with each batch valuing approximately £500,000 - £600,000. Invoice dates range from the beginning of March to the first/second week of May. If the March invoices are for work carried out in February, then there is a chance that they could be for [Swine Disease] work. [Mr Harrison and Mr Love] need to sort out and separate FMD from [Swine Disease] invoices.

Ruttles have been approached over the validity of some of their submitted invoices, ie rates wrong; arithmetical errors; additional personnel."

82. It is now clear that the concerns being expressed, in relation to invoiced work to a value of in excess of £1m and concerning amongst other farms the Old England, Clay Tye and Marsh Farms, were confined to details. For example, the concern about, "additional personnel" related principally to whether Mr Carrol and Mr Grundy' s time should be charged for since they were not regularly based on one site but were providing roving supervision to all Ruttle sites in the Chelmsford DCC Region. The investigations had not, apparently, unearthed unacceptable practices with regard to the number of men or the items of plant being charged for or with regard to the method of recording and those men and plant items on time sheets by both Ruttle and DEFRA personnel or with regard to the methods adopted by both Ruttle and DEFRA to verify and authenticate the records shown on Ruttle's time sheets used to support its invoices.
83. The Invoicing Panel subsequently had great difficulties obtaining from the Chelmsford DCC the information and verification that it was calling for, which was surprising given the full and detailed CPH Files that were held by the DCC at Chelmsford. Despite having been in operation for 6 months, the Invoicing Panel was still, on 28 March 2002, calling for copies of the Ruttle invoices and supporting documentation; for signatures on the 200 allocation sheets that had been prepared for time sheets not apparently contemporaneously signed for by DEFRA officials; reports from the AHO/Supervisors at sites where there was only limited information about the work carried out and its quality; and an estimate of the value of work carried out. This work and information from the DCC was estimated at the meeting held on 28 March 2002 as involving 5 man-weeks to produce.^[23] At the subsequent IP meeting on 18 April 2002, the Panel agreed that it was necessary for Ruttle to meet with Mr Bell, from the Chelmsford DCC, and with perhaps 2 Panel members to get invoices signed off and to tie the meeting with DEFRA's Central Finance Section. A suggested date for the meeting would be advised in the near future. Unfortunately, the work of the IP then petered out and no such meeting was arranged by it or by DEFRA or by the Chelmsford DCC.

4.3 The Leeds DCC Sites

4.3.1 Introduction

84. The Leeds DCC Region covered the Leeds, Bradford and North Yorkshire areas and had 140 IPs to deal with and an interval of 164 days or nearly six months between the notification of its first and last case. It spent £28 million in C & D work up to October 2001, a total only exceeded by two DCCs. The average clean up cost per farm was £31,000. Ruttle was involved in 12 farms and was also involved in the construction or renovation of temporary accommodation at 7 locations including two major locations at Gisburn.
85. The current overall state of Ruttle's accounts for this DCC are as follows:

Amount invoiced:	3,054,919.07
Amount admitted:	2,525,084.05
Balance:	529,835.68
Agreed Deductions:	224,285.68
Balance in dispute:	£305,549.68

The "agreed deductions" figure is what Mr Pelling contends is the product of the series of without prejudice meetings held in the early months of 2004 between GTF on behalf of DEFRA and Ruttle. This information, even if accurate, is not, strictly speaking, admissible in evidence and has not been responded to by Ruttle.

86. Three of the Leeds locations were examined in detail in evidence, those at West Brook and Bobby Green Farms and at the Gisburn Market renovation and construction project of office accommodation for DEFRA. Invoices for particular weeks from many other sites in the Leeds DCC area were also adduced in evidence.

4.3.2 Gisburn Market

1. General

87. The Gisburn Market facility involved the provision of temporary accommodation for 100 vets. The principal work involved constructing a large office facility on the old market hard standing. The work was ordered in a telephone call that Mr Carrol took in late May and the work had to start immediately. There were, as usual, no documents or contract documents and it would appear that the work, involving amongst other measures, the provision of an access road, heavy duty cabling and extensive electrical power to provide the required provision of 16 computer outlets and 11 double sockets in each office and an air conditioned computer facility. This involved intensive work for about five weeks.
88. A second phase of activity then look place between the beginning of July and 4 November involving Ruttle having a regular gang of men available to undertake odd jobs, such as adding to or adapting the facility, cleaning vehicles that had come into contact with FMD. A third phase of activity then took place between February and the end of May 2002 when further work was undertaken to the office accommodation and restore the site. These three phases of activity can be seen from the summary of the Gisburn Market invoices.
89. The invoices produced for Gisburn Market are as follows:

Week Ending	Invoice	Labour	Plant	Total
27.5	1125AA	27,331.15	14,344.03	41,676.08
3.6	1125AB	38,164.21	22,627.88	60,792.09
10.6	1125AC	32,301.91	34,703.89	67,005.80
10.6	1753A	3,800.91	2,716.06	6,516.99
17.6	1125AD	40,523.03	43,057.74	83,580.77
17.6	1754A	8,114.77	5,180.56	13,275.33
24.6	1755A	8,114.77	5,486.20	13,582.97
1.7	1756A	5,216.64	3,901.32	9,147.96
8.7	1760A	4,057.39	3,228.68	7,286.07
15.7	1757A	4,057.39	2,209.64	6,257.03
22.7	1758A	4,057.39	2,215.64	6,273.03
29.7	1759A	4,057.39	2,215.64	6,273.03
5.8	1761A	4,057.39	2,215.64	6,273.03
12.8	1762A	4,057.39	2,215.64	6,273.03
19.8	1763A	4,057.39	2,215.64	6,273.03
26.8	1764A	4,057.39	2,394.38	6,451.77
2.9	1765A	4,057.39	2,131.64	6,189.03
9.9	1766A	4,057.39	2,131.64	6,189.03
16.9	1767A	4,062.39	2,047.64	6,110.03
23.9	1768A	4,057.39	2,047.64	6,105.03
30.9	1769A	4,057.39	2,047.64	6,105.03
7.10	1770A	4,057.39	2,047.64	6,105.03
14.10	1771A	4,057.39	2,047.64	6,105.03
21.10	1772A	4,057.39	2,047.64	6,105.03
28.10	1773A	4,057.39	2,047.64	6,105.03
4.11	1774A	4,057.39	2,047.64	6,105.03
3.2	2065A	9,105.66	13,578.39	22,684.05
10.2	2066A	9,771.89	15,582.85	25,334.74
17.2	2067A	11,049.38	16,083.62	27,133.00
24.2	2068A	12,888.53	13,532.90	26,419.43
3.3	2069A	9,850.37	10,729.26	20,579.63
10.3	2090A	10,484.83	9,729.26	20,214.09
17.3	2091A	10,285.00	11,449.96	21,714.96
24.3	2092A	10,356.60	6,883.31	17,229.91
31.3	2093A	10,539.79	4,726.19	15,265.96
7.4	2094A	10,210.04	6,147.05	16,357.09
14.4	2095A	11,857.28	8,017.01	19,674.29
21.4	2096A	10,374.92	3,818.74	14,193.66
28.4	2097A	9,807.01	4,653.56	14,460.57
5.5	2098A	8,373.13	2,289.90	10,612.73
12.5	2099A	5,348.19	2,421.93	7,770.12
19.5	2100A	4,472.10	2,042.85	6,514.95
Total		£391,360.13	£303,259.76	£694,619.89

90. Evidence of the work carried out, the procedure for record keeping and the subsequent invoicing that took place was given by two facilities engineers involved at the project, Mr Bramley and Mr Harkin, both of whom were working for Citex at the time of the FMD outbreak. In both cases, their evidence was confined to their witness statements. Citex's work for DEFRA was to organise the accommodation needs of DEFRA and its staff. During 2001, its role was widened to include providing managerial and supervisory assistance in the FMD C & D work. Their work involved them in dealing with problems and queries raised by Ruttle or DEFRA.
91. Mr Harkin's involvement at this site started immediately prior to Ruttle's first day on site on 24 May 2001. He participated in discussions on site between Mr Webberley of DEFRA's Estates Strategic Services Division and Mr Carrol of Ruttle during which DEFRA's requirements were communicated to Mr Carrol. As soon as work started, Mr Lord was assigned by Ruttle to manage the site as the foreman on its behalf and order the necessary materials and plant. He stated:

"My recollection in relation to the month that I spent at the Gisburn Market is also patchy. However, I would say that I signed the majority, if not all, of the labour and equipment sheets for work done throughout that period by Ruttle because I was the DEFRA representative who was almost always on site."

92. The timesheets adduced in evidence included those for the 24 May 2001 to the 24 June 2001 inclusive. Each recorded the men on site, the hours each was on site and the plant on site and had been made up by Ruttle's site foreman Mr Lord in his handwriting. Each timesheet had been double signed by him and by Mr Harkin.
93. Mr Harkin was re-assigned to other duties towards the end of June and was replaced by Mr Bramley. This change coincided with the conclusion of the construction work and the start of the less intensive and extended period of maintenance, cleaning and irregular odd jobs performed on site. Mr Bramley stated that he worked under the direction of DEFRA's Regional Operation Director and attended the site on a regular basis, three to four times per week, from July 2001 until the end of 2002. During that time, Ruttle had 3 labourers and a foreman on site. The work being performed included odd jobs, C & D work on vehicles entering and leaving the site and the adaptation and extension of the office accommodation. He signed most if not all of Ruttle's timesheets. He stated:

"The purpose of me signing the timesheets was to sign for the hours that the men were on site. I can see no reason why Ruttle would have been unable to get their timesheets signed by me even though I was riot on site at all times. The reason for this is that a process had already been put in place by Vincent Harkin before I arrived whereby timesheets were signed on a Friday."

94. Mr Bramley also stated that the ROD, the administration staff working on site and the security staff were present on site at all times. It followed that there was the opportunity for DEFRA to maintain a separate recording system verifying all who were present on site and the times of their arrivals and departures.
95. Since this site was not a FMD C & D farm site, no formal CPH File was kept for the site. However, a file of documents relating to the construction, maintenance and cleaning work that were carried out on site must have been kept by DEFRA and daily records, including logs of arrivals and departures, plant on site and the activities performed must also have been kept, particularly for the period up to the end of June when the offices were being constructed. None of these documents were adduced in evidence by DEFRA.
96. Overall, there is no reason, on the basis of this evidence, to query the accuracy of the timesheets. Mr Harkin and Mr Bramley had the means of checking their accuracy when initially presented with each timesheet for signature, there were staff, including security staff, on site at all times who could, and probably did, record all comings and goings and there were the proffered sheets made up by Mr Lord with no apparent reason for concluding that his timesheets and the contemporary records he must have kept and from which the entries on the timesheets were taken were inaccurate. However, based on an invoice from a supplier of electricians to site obtained on discovery from Ruttle, DEFRA sought to show that the Gisburn records were inherently unreliable and incapable of supporting Ruttle's claim for labour at this site.

2. Electrician's Time Sheets

97. Mr De Kock obtained these from Ruttle's records at Chorley when he was inspecting Ruttle's internal records and documents over six days in September and October 2003. He obtained a copy of an invoice submitted to Ruttle by Moore Electrical Contractors Ltd for that period 27 May 2001 to 1 June 2001 inclusive when 10 of its electricians attended site to wire up the computer terminals. These men were charged for by Moore by the hour and when the hours claimed for each man are compared with the corresponding number of hours claimed on the Ruttle timesheet for that man, there is an extra period of between 30 minutes and 90 minutes on the Ruttle timesheet and between 90 minutes and 150 minutes on the Ruttle daywork or allocation sheet.
98. Mr O'Connor was cross examined at length about this series of discrepancies. He explained that there were up to three hours difference between the recorded hours on the daywork sheet and on Moore's invoice and up to two hours difference between the timesheet and Moore's invoice. He thought that the explanation was that Moore was not entitled to charge Ruttle for either meal periods taken on site or for travelling time whereas Ruttle could charge DEFRA for both periods. The travelling time allowed was one hour which was not shown on the timesheet but was added to the hours set out on the allocation sheet used to make up the invoice. Moreover, Ruttle was entitled to charge foremen for two hours travelling time so that the uplift for them on the daywork sheet was two hours. Any further discrepancy or difference was likely to have resulted from errors in time recording or time records kept by Moore. So far as Ruttle was concerned, the only relevant document and the only one consulted and used to make up the daywork sheets and invoices was the timesheet made up and signed by Ruttle's foreman and then signed by DEFRA's site representative.
99. There was no reason to doubt that evidence, albeit that Mr O'Connor had no personal knowledge or recollection of this particular site, let alone this particular aspect of it. The overall discrepancy in hours was about 300 hours. Taken on its own, the mismatch between the supplier of electrical labour's claimed hours and Ruttle's corresponding number of claimed hours was no evidence of systematic or widespread overcharging. There was a credible explanation provided for the apparent difference in hours, DEFRA had authorised the hours claimed by Ruttle and had made no attempt to disclose its own internal records or to explain why they were no longer available, the site was not a FMD C & D site at all but a relatively ordinary building site and the terms of the two contracts were not back to back so far as chargeable hours was concerned.

3. 24-Hour Watch

100. At this Gisburn Market site, and at a near-by site where Ruttle undertook extensive refurbishment work on a building to be occupied by DEFRA as offices, Ruttle was instructed to have available on stand-by at all times when the site was not manned an electrician, a plumber and a joiner. These were to be available to cope with any emergencies that might develop out of hours. At Gisburn Market, this requirement was instructed by Mr Harkin in conversation with Mr Carrol. As a result, from late May for three weeks at his site and in July at the Gisburn Offices' site, Ruttle had three such craftsmen available on-call on a 24/7 basis when they were not actually working on site. They were, on occasion, called out and their time has been included in timesheets and, at this site, signed for by Mr Harkin. It follows that the only question that can arise is the appropriate rate, in the absence of a contractual rate, that Ruttle can charge DEFRA for at times when the men were on-call but not on site. Ruttle has charged all hours at the contract labour rate applicable when more than 39 hours were worked in the week.

4.3.3 Bobby Green Farm

101. The invoices produced for Bobby Green Farm are as follows:

Week Ending	Invoice	Labour	Plant	Total
11.3	1190A	5,957.70	4,014.02	9,971.80
18.3	1191A	23,147.96	16,103.12	30,251.08
25.3	2263A	17,796.49	16,180.31	33,976.80
1.4	2264A	18,945.75	16,710.77	35,656.52
8.4	1192A	22,561.74	26,724.70	49,286.44
15.4	1193A	24,508.82	28,146.38	50,655.20
22.4	1194A	24,710.33	31,385.41	56,075.74
29.4	1195A	22,561.74	33,665.54	56,227.26
6.5	1196A	10,066.68	18,481.96	28,548.66
8.5	1315A	1,355.64	2,431.67	3,787.31
13.5	1316A	366.39	4,688.45	5,052.87
Total		£171,979.24	£198,532.33	£370,511.57

102. This farm was in Rawdon in West Yorkshire and for the first 7 weeks until 16 April 2001 was supervised by Ms Kath Halliday with a neighbouring farm, Westbrook Farm. These were the only two farms in West Yorkshire which required FMD C & D work to be undertaken on them. On 16 April 2001, she was relocated to North Yorkshire and the C & D work on both farms was unsupervised from 16 April 2001 until 25 April 2001 when Mr Charles Jarratt, an AHO, was sent to supervise operations there. He reported to Mr Derek Shaw, a temporary SEO based in the Leeds DCC. When Mr Jarratt arrived, he found copies of the daily log sheets and labour and plant timesheets that had been maintained by Ms Halliday. He then maintained similar records during his stay at the Farm, which lasted until 3 May 2001 when Ruttle left site. These records were maintained with meticulous accuracy. He gave both written and oral evidence and copies of his records were adduced into evidence.
103. Mr Jarratt explained that on days when he was not present or was not present when the operatives arrived or left, he accepted the word of the Ruttle foreman and the records presented to him to sign. That foreman was Mr Bill Downey. Mr Jarratt accepted that he signed for the men who were on site and that he would not have signed for any number of the men or plant on site who, although on site, were unreasonably surplus to requirements. He also explained that Ruttle supplied labour and materials for a short period for the neighbouring farm to build a lagoon there. Other cleansing work at that farm was undertaken by the farmer who used some of Ruttle's plant for this purpose.
104. Mr Jarratt spent his first few days acclimatising himself to the working on the farm. He described how he slowly formed the view that there were too many men and too much plant on site for the remaining C & D tasks. His view was that instead of the 13 men on site, only about 8 were needed, 2 of whom were the farmer and his son. There were also some tractors, a JCB and a 45 Artic Boom surplus to requirements. Having instructed Ruttle on 29 April to reduce the labour force and the items of plant on site without success, Mr Jarratt obtained his manager's permission to terminate Ruttle's services with effect from 3 May 2001 and engage the farmer to finish the C & D work which he did over 160 hours. However, Ruttle kept on-hire pumps and other plant from May until DEFRA put them off-hire in September and it is entitled to charge for the hire of that plant over that further period.
105. Mr Jarratt was closely questioned as to why, if he formed the view that there were too many men and too much plant, he had not instructed Ruttle to reduce these services sooner and had also signed Ruttle's timesheets without qualifying them or indicating that there were surplus men and plant being charged for. He was also asked how it had come about that there was a surplusage. He responded that the number of men and the plant requirement had been fixed by DEFRA's site representative at the outset. He stated:

"Q. (judge) Who decided what items of plant should be brought on to the farm at the outset?

A. Initially the vet who diagnosed foot and mouth disease who would be Roger Nelson.

Q. Does one conclude from that that for good or bad reason the explanation for there being too much plant on site was because Roger Nelson asked for too much?

A. It could possibly be that it was - a lot of it was used or most of it was used in the early stages, but when I became responsible for it, as the time went on, it was not needed.

Q. Was there any procedure for instructing the contractor where it was regarded the contractor had too much plant that he should off hire some of the plant?

A. I think it was left down to the person on site, which ultimately was me.

...

Q. So that, as you saw it, the implementation of your decision that there was too much plant was in obtaining the authority of the Leeds office and then putting them off hire?

A. Yes".^[24]

He also accepted in evidence that originally the number of men on site had been reasonable and that the surplusage occurred towards the end of the clean up operations. He had not immediately instructed a slimming down of the labour force when he first arrived on site because they were on site and, until stood down by DEFRA, had to be paid for.^[25]

106. I conclude that the contracts for C & D work of the kind Ruttle was working to, Ruttle's obligation was to supply the number of men and the items of plant instructed by DEFRA and to work them on tasks and for hours dictated by DEFRA's site-based supervisory staff who were answerable to their line management who visited on an occasional basis or who were office based in the relevant DCC office. It was for the DEFRA supervisor to decide to reduce labour or plant, a decision which could and should be implemented by giving appropriate instructions, with line management approval, to the contractor on site. This procedure was one operated fully and to effect by Mr Jarratt who was following his instructions. It was a procedure which could and should have been resorted to at every other FMD site where C & D work was being undertaken if there was surplus labour or plant present on site.

4.3.4 West Brook Farm

107. The invoices produced for West Brook Farm are as follows:

Week Ending	Invoice	Labour	Plant	Total
8.4	1237A	2,506,66	999.15	3,505.81
5.4	1238A	8,191.37	4,288.29	5,052.87
23.9	2265A	311.43	17,120.11	17,431.54
Total		£11,009.46	£22,407.55	£33,417.01

108. The farm was the farm adjacent to Bobby Green Farm at which Ruttle supplied labour to construct the lagoon and also hired plant over an extended period after the conclusion of the C & D work in this village in order to enable a number of on-going tasks to be completed. These were field grading, using a 360 Samsung; pumping water out of the tanks into the dirty water lagoon using a sludge pump; moving dirty water using a water tank; cleaning the poultry sheds using pressure washers; and emergency lighting using generators. This hire was at DEFRA's request and the plant came off-hire when DEFRA instructed Ruttle to return to collect it.

4.4 The Stafford DCC Sites

4.4.1 Introduction

109. The Stafford DCC Region covered the Cheshire, Derbyshire and Staffordshire areas and had 72 IPs to deal with an interval of 146 days or nearly five months between the notification of its first and last case. Ruttle was involved in 11 farms and was also involved in the construction or renovation of temporary accommodation at 1 further location.
110. The current overall state of Ruttle's accounts for this DCC are as follows:

Amount invoiced:	1,092,217.67
Amount admitted:	640,491.67
Balance:	451,726.00

111. Two of the Stafford locations were examined in detail in evidence, those at Brookes Farm, Lower Loxley and Lower Farm, Little Wyrley. Invoices for particular weeks from many other sites in the Stafford DCC area were also adduced in evidence.

4.4.2 Lower Farm

112. The invoices produced for Lower Farm are as follows:

Week Ending	Invoice	Labour	Plant	Total
1.4	2057A	9,387.26	2,545.67	11,932.93
8.4	2058A	16,436.06	4,129.65	20,565.71
15.4	2060A	15,534.24	4,657.73	20,191.97
22.4	2276A	2,568.34	589.19	3,137.53
29.4	2069A	2,271.87	1,456.55	3,728.42
13.5	2059A	8,061.45	3,846.40	11,907.85
20.5	2061A	7,247.83	2,788.49	10,036.32
27.5	2277A	5,854.54	2,636.70	8,491.24
Total		£67,361.59	£22,650.38	£90,011.97

113. Lower Farm is located at Little Wyrley, Cannock, Staffordshire and is immediately adjacent to Home Farm across the road. The Farm consisted of grain and feed stores, a barn, a dairy and store rooms and also an old cowshed, an old mill and another old building. There were also two loose yards, a hard standing area and other general open areas. A temporary dirty water lagoon and a slurry compound had been constructed adjacent to these areas with a further cylindrical slurry tank placed near the entrance. Across the road at Home Farm were various unused buildings save for one used as a feed store and covered storage areas used for vehicles, fertiliser and vehicles. The C & D work at Lower Farm was undertaken from late March until 25 April 2001 when Mr Noel Gray, a Veterinary Officer, passed both Lower Farm and the area of Home Farm that had been potentially contaminated and subsequently subjected to C & D treatment.
114. Ms Sandra Holden was assigned to supervise the C & D work at this farm by DEFRA and started on 8 April 2001 when the work was almost complete. She took over supervision from Mr Ian Ordidge and when she arrived, she found that the C & D work was being undertaken by a 4-man team from Powa Pak. Ruttle was present on the site but its activities had been confined to constructing the above-ground slurry store and the dirty water lagoon. Ruttle had also provided the temporary slurry tank. An old caravan, shared by both sets of operatives, had been located in the farm by Ruttle for use for messing and rest purposes. Ruttle's presence on site had started in the early stages of the C & D work and it lasted until Monday 16 April when the operatives moved out. Thus, the Ruttle's men worked alongside Ms Holden from 8 to 16 April 2001 inclusive.
115. Ruttle had completed the slurry compound/water lagoon construction work prior to Ms Holden' s arrival. During the working week that Ms Holden's presence coincided with Ruttle, Ruttle had up to 7 operatives on site that Ms Holden saw and 8 operatives and 2 working foremen that it claimed for. The only work undertaken under her supervision and at her request was in repairing and extending the slurry pit on 11 April 2001 since this was both full and leaking and part of its sleeper wall had been removed. This work involved, she recorded, 4 of the Ruttle's team. The remaining Ruttle presence on site from 9 April to 15 April 2001 were working in the large open barn making up linings for use in a temporary lagoon being constructed on another farm. This work was undertaken with Ms Holden's permission on Lower Farm because it was extremely wet weather and there was no under cover location on the other farm. The linings had to be sized and glued so that they formed an impervious water barrier. Ms Holden made it clear to Ruttle that that work was not being undertaken under her supervision and formed no part of the work that she would authorise or sign timesheets for.
116. Ms Holden formed an adverse view of Ruttle's men both as to their attitude to C & D work and as workers. This attitude was understandable given the uncooperative attitude of Ruttle's foreman, Mr Darren Ashall and her belief that Ruttle were unwanted guests present as a favour to them to enable them to complete what she regarded as non-DEFRA work. Ms Holden believed that the sizing and gluing work was not being undertaken for DEFRA. She was mistaken in this view since Ruttle was only present in the area and was only making up temporary lagoons for FMD and C & D purposes but her attitude was understandable since she regarded the DEFRA work she was supervising as being confined to the cleaning and disinfecting of Lower Farm.
117. When Mr Ashall presented Ms Holden with a timesheet to sign for the week ending 15 April 2001, she declined since it related, as she saw it, to work which she was not responsible for. As a second, albeit lesser reason, she regarded the timesheet as recording the presence of up to 10 Ruttle operatives on site when she only saw a maximum of 7. She could have signed for the temporary lagoon work but this small part of the recorded time was not discussed in the course of what appears to have been a heated discussion with Mr Ashall. Subsequently, and unknown to Ms Holden until she saw the timesheet when asked to make a statement in March 2004, Mr Ashall went to Ms Christianne Purchase an AHO at the Stafford DCC who signed the timesheets for all 10 men claimed for and for the hours claimed. Mr Ashall countersigned the sheets for Ruttle.
118. The evidence did not disclose where Ruttle was working on C & D work or for which farm the linings were being made up for. The invoices for the period week ending 1 April to week ending 27 May 2001 are all headed Lower Farm but Ruttle was not working there save temporarily on lagoon construction work and the C & D work at that Farm was certified as being completed on 25 April 2001. Ruttle was clearly working elsewhere in that period and up to the end of May since there was adduced in evidence the invoice and timesheets for the week ending 20 May clearly marked "Farm Number F061", the reference allocated by Ruttle to Lower Farm. The supporting timesheets were signed by Mr G. Ashell, the other working foreman included in the earlier timesheet, and by Ms Purchase on behalf of DEFRA. The invoice is supported by hotel receipts for the 5 men working in that week, from a hotel in Stafford and it has been accepted as being payable by GTF, subject to deductions of the kind being contended for generally.
119. I conclude that Ruttle did have a 10-man team working for DEFRA on FMD work throughout the week ending 15 April 2001 and that that team was temporarily relocated on Lower Farm but actually cleaning up on another farm under Ms Purchase's overall supervision, an operation which lasted on that farm from 16 April until the week ending 27 May 2001 with a lagoon lined with material glued up on Lower Farm. The same team had originally been assigned prior to Ms Holden's arrival to Lower Farm to construct the lagoon and slurry pit but had been relocated, again prior to her arrival, to this second farm. I also conclude that there were 10 men working for Ruttle in that week.
120. The difference between Ruttle and Ms Holden as to the number of men who were present is explicable in two ways, firstly Ms Holden was not overly concerned with the Ruttle work and workforce, save for the four on the one day who repaired the slurry pit on Lower Farm, and she may well have underestimated the number of men. She was not, after all, in her mind going to sign for the men anyway. Secondly, some of the group may have been working at the other location for which the liners were being constructed. Overall, however, these men were not answerable to Ms Holden but to Ms Purchase and she has signed all timesheets assigned to this Farm for all of the Ruttle men and hours claimed for. No subsequent statement, explanation or rebuttal has been obtained by DEFRA from Ms Purchase that undermines her signatures or the verification of the men, dates and times claimed for.

4.4.2 Brookes Farm, Lower Loxley

121. The invoices produced for Brookes Farm are as follows:

Week Ending	Invoice	Labour	Plant	Total
8.4	2064A	1,545.68	851.57	2,397.25
15.4	1014AA	10,192.56	5,915.27	16,107.83
22.4	1014AB	6,059.42	4,890.59	10,950.01
29.4	1014AC	5,922.02	4,807.13	10,729.15
6.5	2065A	6,004.46	5,562.20	11,566.66
13.5	2280A	0.0	7,158.04	7,158.04
Total		£29,724.14	£29,556.96	£59,281.10

122. Brookes Farm, Lower Loxley is a pig farm which is intensive and small in area. It is located on a very steep bank, a lagoon could not be constructed and its drains were located in the road outside the farm. This created difficulties with regard to the safe storage and disposal of slurry and contaminated water. This had to be done using a holding tank. The DEFRA on-site supervision was provided by two artificial inseminators working for Genus ABS and temporarily seconded to DEFRA for FMD work, Mr Roy Heath and Mr Chris Dale. They were permanently stationed on site and supervised Ruttle's working gang of three. Mr Heath gave both written and oral evidence. He was present on site from the outset in early April until he went into hospital for reasons unconnected with FMD work for the last two weeks of work at this farm. He worked on the farm, in consequence, for six weeks.
123. Mr Heath was critical of the attitude and speed of work of the small Ruttle team. The working set up was unusual for FMD work in that there were, in effect two full-time supervisors overseeing a gang of three operatives. For the first two weeks, little activity occurred since all were awaiting delivery of the slurry tank. However, Mr Heath or Mr Dale signed every timesheet and did not question Ruttle's entitlement to charge for the presence of all operatives on every day for all hours claimed.
124. It emerged that the only issue that the trial was concerned with that Mr Heath was able to address was the general issue of the accuracy, reliability and authenticity of the signed timesheets. It appeared that the timesheets that he signed, which were only a few of those signed since Mr Dale signed most of them, did not have the lower part of them, where the plant items were written in, filled out. In other words, as he recollected the sheets when he signed for them, only the labour entry was filled out. He had been surprised, therefore, subsequently when preparing his statement to see a copy of one of the timesheets he had signed containing plant entries. He assumed these had been added later by the Ruttle operative who signed for Ruttle.
125. The evidence that the plant items had been added subsequently was ultimately confined to observing the originals of two timesheets signed by Mr Heath where the unique serial number of one item of plant was in a different colour biro entry from the rest of the sheet which was written up in a dark colour. This was probably added later but the rest of the sheet appeared to have all been written up at the same time. However, of greater significance was Mr Heath's unprompted, open and candid acceptance that all the items of plant recorded and signed for had been present and in use and that, had he been presented for signature with the list he thought had been added later, he would have unhesitatingly have signed for the entire list.
126. I conclude that the list was signed for originally, save for the completion of the entry of one item so as to identify it more clearly, that the timesheets accurately recorded the plant in use on each day and that the evidence, in so far as it enables general conclusions to be drawn from entries relating to one small farm over a six-week working period, confirms the accuracy and reliability of the signed timesheets and of the system of verification adopted by DEFRA using on-site officials to sign for and verify the contents of timesheets.

4.5 Conclusions - On Site Evidence

127. The evidence, including the witness statements and oral evidence and the contents of the documents adduced as exhibits, enabled a clear overall pattern of working to be reached. This was because there was good first-hand evidence of working conditions on sites spread across three of the DCC areas in four clearly different and distinct parts of the United Kingdom, Essex, West Yorkshire, Gisburn near Preston and Staffordshire. This evidence shows that Ruttle was engaged on every site in the same way. It. was regarded as providing, and did provide, a service whereby it produced the labour, the numbers of men and the plant that were required and then worked on such tasks, on such days and for such hours as the on-site DEFRA supervision instructed.
128. Ruttle had no function to identify what work was to be done or to specify the resources by which that work was to be done. What it had to do, and did do, was to record precisely what labour and plant were used and to ensure that this was verified by an appropriate DEFRA official. In the Chelmsford area, it was instructed to obtain an office-based authorisation for its timesheets and on many, but not all sites, adopted this procedure from an early stage, regularly delivering the unsigned timesheets to the office. At no time did any official in the Chelmsford DCC query this practice.
129. There was in operation throughout every site a clearly defined system imposed by DEFRA on all its supervisory staff to maintain their own independent and contemporary records of chargeable labour, working time and plant that had been used on site and to deliver these to the appropriate DCC on a regular basis. These records were all kept on appropriate files in the DCC in question. This system appears to have been followed on all sites, save possibly the non-farm site at Gisburn Market, and if the internal DCC files are no longer available at Leeds or Stafford, that is as a result of administrative failure or unfortunate accident outside the knowledge or control of Ruttle.
130. In the main, Ruttle's men appear to have worked well. There were instances of grumbles and complaints about their attitude, their inclination to work at the slowest rate that they could get away with and at the attitude of some supervisors. However, there was no evidence that the workforce ever worked at a rate which disentitled Ruttle to be paid for their services or to have its claims reduced on that account. This was never suggested in contemporary reports, save for one from Ms Holden at Lower Farm but her suggestion was based on a misunderstanding as to Ruttle's role on her site. The accuracy of the timesheets was challenged but the evidence of inaccuracy was in the end confined to possible overcharging in relation to a few hours claimed for electricians and labourers at two Gisburn locations, but at best for a small proportion of the suggested overcharged hours. It follows that the general accuracy of the timesheets was established and the suggestions of general inaccuracy are to be rejected.
131. My overall conclusions leave out of account the many specific and patent inaccuracies contained on individual timesheets as a result of the rushed manner of the preparation of all paperwork supporting invoices by Ruttle's overstretched and under-resourced accounts staff. These inaccuracies are readily susceptible to both recognition and eradication and they have already been, and continue to be, the subject of extensive post-FMD analysis by the army of quantity surveyors, accountants and administrative and financial officials that have been examining Ruttle's documentation for the last three years.

5. DEFRA's Examination of Ruttle's Invoices and Timesheets

5.1 Introduction

132. DEFRA has adopted a two-fold approach to its defence of Ruttle's claims based on its invoices. The first, or "macro" approach to the claims is by way of a general attack on the veracity, accuracy and reasonableness of the claims. In general terms it is contended that too many men are claimed for too many hours. In relation to the men that did work and to the hours actually worked, significant overall reductions should be made because of Ruttle's unduly slow, inefficient and overmanned working practices. For labour, similar complaints are made. In particular, DEFRA contends that only plant actually in use should be paid for, any plant surplus to Ruttle's contemporary requirements or that was lying idle on a particular day should not be paid for.
133. These generalised allegations found three general positions maintained by DEFRA.

1. DEFRA should have full access to, and be provided with full disclosure of, all back up documents in Ruttle's possession, particularly the timesheets, invoices and payment details of every supplier of labour and of every supplied labourer and the payment records of every directly employed operative.

2. Using the full range of disclosed documentation, an audit should be carried out that matches recorded names, days, hours and locations of operatives on timesheets to the payments actually made to those operatives or to the supplier of their labour and identifies the plant actually in use as opposed to being on-hire and located unused on a farm. This audit would be carried out over all sites and cross-checks, sensitivity analyses and inter-DCC verifications should be carried out.

3. No further significant payment should be made until all outstanding discovery and auditing exercises have been completed.

134. This approach has not, been pleaded, certainly in any detail. DEFRA answers that complaint by suggesting that it is only recently that it has been able to formulate this approach since it has only recently obtained sufficient data and completed sufficient analyses of the data it has had access to for this to be done. DEFRA also contends that the appropriate time to plead this overall case in detail is after it has had discovery and has completed its analyses of the disclosed documents.
135. DEFRA's second approach is a "micro," approach involving a separate analysis of each invoice and its supporting material so as to remove any inaccuracies, discrepancies, arithmetical and other errors and charges or rates which are contractually invalid. This approach has been pleaded in detail and its implementation would be, following the answers to the issues I have been set to answer, capable of being concluded without undue additional time. This is as a result of the huge effort already expended on analysing Ruttle's invoices over the last three years.
136. Much evidence was adduced about the details and results of the checking and analyses already undertaken. This work is relevant since DEFRA's conclusions as to the need for a full audit are drawn from the work done to date. Ruttle challenges both the reliability of those analyses and the validity of DEFRA's conclusions. This work is also relevant in determining whether DEFRA should be allowed to complete a full audit before making any further payment and in determining whether, and if so what, further on-account payment should now be made to Ruttle.
137. There were, in sequence, ten distinct stages to the invoice investigations. These were:

1. Verification of individual invoices at individual DCCs in the early weeks of the FMD work on a site by site, week by week basis.

2. Investigations in each DCC by individual external quantity surveyors appointed by DEFRA from April 2001 until June 2001.

3. Forensic accountancy investigations by Mr De Kock, largely in the Caernarfon DCC area, from early May until late June 2001.

4. An audit of Ruttle's invoices by DLE between May and June 2001.

5. The negotiation of a new contract with retrospective effect in June 2001.

6. Investigations of all Ruttle's internal paperwork by Mr De Kock assisted by Mr O'Connor between 25 June and 6 July 2001,

7. The establishment of an Invoicing Panel of quantity surveyors and Mr De Kock to validate Ruttle's invoices in the period September 2001 until June 2002.

8. Internal investigations by DEFRA's quantity surveying team led by Gardiner Theobald Fairway ("GFT") , first appointed in November 2002, between November 2002 and August 2003.

9. Without prejudice meetings held between Mr O'Connor and GTF to agree the contents of individual invoices at Chelmsford, Leeds and Stafford DCCs between September 2003 until March 2004.

10. Preparations for trial including the reinspection by Mr De Kock of Ruttle's internal documentation and the preparation of schedules by GTF summarising discrepancies in Ruttle's invoices from early 2004 until 1 April 2004.

5.2. Contemporary Records

138. It is worth reconsidering and being reminded of the procedures set up by DEFRA for the independent collection of data by its own site-based staff, for verifying of Ruttle's and all other contractors' data and for the retention, storage and accessing of that data once collected. This system involved two streams of verified data being collected simultaneously. The first stream was DEFRA's supervisory staff's own records in the form of diaries of events, records of what work was performed, logs and timesheets of men and plant used and records of all movements of all personnel including operatives and all vehicles on and off site. These movement details included details of when each operative arrived and left site and of what plant or other load was delivered to or left site. These records were to be transmitted to the relevant DCC offices and were to be used when necessary as a check against a contractor's submitted invoice and supporting details of each payment claim. Any complaint by site-based DEFRA officials sufficient to constitute a challenge to or query about a contractor's entitlement to payment of any part of a timesheet-based claim would be recorded in this documentation and brought to the DCC verification team's attention.
139. The second stream of verified data comprised the contractor's timesheets which would be dated and signed by the contractor's site-based representative and counter-signed by the DEFRA site-based representative or, where none was available, a suitable representative from the DCC's office or a roving representative as appropriate. The signing of the sheet was no mere formality, it constituted a certificate or approval of the accuracy of the contents and an acknowledgement by the DEFRA official that the contractor's entitlement to payment for the work in question could be based upon the full complement of hours worked and plant recorded. These details were supplemented by copies of receipts from the hotel or lodgings occupied by the operative in question and invoices for any materials purchased for use on a site. On-site records would be kept logging plant usage for use in conjunction with maintenance and servicing requirements which could be consulted or produced where the presence on site of any item of plant was in doubt.
140. These procedures resulted from the guidance provided to on­site officials in the guidance notes issued for FMD by DEFRA, in pre-existing practice that had developed in many disease outbreaks including recent Swine Fever outbreaks and from the contents of the IP packs issued to and used by every on-site official and located on site at every IP. It was this background that led to the terms of Ruttle's contract and to the invoicing requirements that it incorporated.
141. As I have already found, the evidence suggests that these procedures were followed by DEFRA officials, by DCCs and by Ruttle. It is true that at Chelmsford, on-site signatures were in part dispensed with but the alternative procedure that was adopted when on-site signatures were not obtained was a reasonable alternative procedure suited to local needs. It may be that these so-called unsigned timesheets were not formally verified by an office-based official but the means of obtaining verification existed since the on-site officials maintained the required records and logs and the Chelmsford DCC kept copies of all such records on its files. Indeed, Mr De Kock was particularly complementary about the relatively detailed documentation maintained by Chelmsford DCC's records and filing systems.
142. DEFRA and its consultants do not, in the main, appear to have gathered in or consulted the DEFRA internal records. Mr De Kock merely reported that:

"the extent to which such records were maintained differed ... Leeds and Stafford had very little."

No explanation was given as to the limited use that was made of the records made by DEFRA officials by DEFRA and its consultants from March 2001 onwards, nor as to why these records was not consulted at each stage of the process of receiving, checking, auditing, verifying and approving Ruttle's invoices and timesheets

143. No evidence was given as to the documentation retained in the other six DCC's, nor as to why all the internal documentation was not searched out and used from an early stage of the invoice checking procedures adopted for Ruttle's accounts. Moreover, no explanation was provided as to where all the records have gone, why they are no longer available, if such be the case, and as to why the documentation was not carefully preserved. Furthermore, apart from the enquiries made by DEFRA's litigation solicitors as part of the preparations they made for this trial, no interviewing of on-site officials or of those who signed timesheets has ever been undertaken so as to obtain information as to why and in what circumstances timesheets were signed and as to the reliance that should be placed on the DEFRA signatures and on the DEFRA officials', contemporary internal records. Equally, the relevant officials have not been listed and in many cases their current contact addresses or telephone numbers have not been retained. The only exception is that DEFRA's solicitors have with considerable diligence interviewed a number of such officials when preparing evidence relating to the limited number of sites about which evidence was led at the hearing.
144. It is particularly surprising that no use was apparently made from an early stage of DEFRA's internal records to check or cross-check the contents of timesheets proffered for signature by Ruttle and to instruct the maintenance of those records if such were not being kept. Independent quantity surveyors were in place in each DCC from April 2001 onwards and any incorrect or inadequate procedures then in place in any DCC and any failure to follow DEFRA's internal recording procedures by site-based officials could have been corrected for work carried out from then on.
145. Notwithstanding all these shortcomings, the accuracy and reliability of most signed timesheets and of the Chelmsford unsigned timesheets appeared to be substantial. The on-site staff employed both by DEFRA and Ruttle appear to have applied themselves diligently and consistently to the need to make and maintain accurate records. Any shortcomings have been in the subsequent retention of these records and in a persistent failure by investigators to root out, consult and use the DEFRA records or to share their contents with Ruttle during the pre-Invoicing Panel, Invoicing Panel and without prejudice meetings stages of DEFRA's investigations into Ruttle's invoices. Even now, where the logs and other internal documents are still available, they could be used to resolve many of the specific outstanding queries on particular invoices without recourse to any other source material.

5.3 Individual Stages

5.3.1 Build up to Ruttle's Initial FMD Contract

2000

146. Ruttle is, essentially, a plant hire company who owns most of the plant it hires out. The company keeps its large fleet of plant at its depot in Chorley, Lancashire although it keeps a limited amount of plant at small depots in Chesterfield, Lichfield and Preston. Ruttle itself employs a very small staff of about 15 but it has a service company, Chargot, who employs the remaining staff such as foremen, plant drivers and drivers. This company hires out these staff to Ruttle under a long term overall service contract. However, until its involvement in Swine Fever disease control, it supplied only limited direct labour. Ruttle's practice, which it adopted for both Swine Fever and FMD C & D work, was to employ Willow Construction Ltd, a Liverpool-based labour supply contractor or, if Willow could not supply the requisite labour or specialist electrical or similar contracting was required, other suppliers from the Liverpool area such as Moore Electrical Contractors Ltd. These operatives were not recruited in the area where FMD work was being carried out but came or were recruited from the Merseyside area. During the FMD C & D work, about four other suppliers including Moore were used by Ruttle but Willow was the predominant supplier and, overall, at the height of the FMD work, a total of nearly 500 operatives provided by suppliers were being used simultaneously across the country.
147. Ruttle's involvement with DEFRA was, until 2000, confined to providing advisory services to DEFRA's Preston office on such matters as emergency disease control measures and training. This led to the development of an outline contingency plan whereby Ruttle would provide emergency C & D services at short notice if a notifiable disease broke out. This plan covered the Preston, Cumbria and Nottinghamshire areas. Ruttle offered this service since it had a large plant fleet and a ready supply of contract labour both of which could be called on and could be moved long distances at very short notice.

August 2000 - January 2001

148. As it happened, Ruttle's emergency services were first employed for assistance in C & D work at the Classical Swine Fever outbreak around Bury St Edmunds. The first call was received on 14 August 2000. This work was carried out under a simple contract comprising a schedule of plant rates, a brief list of conditions governing the employment of labour on a time and rate basis and two clauses governing DEFRA's indemnifying Ruttle and insuring against personal injury liability. Ruttle was involved in all stages of the Swine Fever clean up operations and, by February 2001, had supplied labour and plant to an approximate value of £3.8 million. By the time the FMD was first notified, the SVD outbreak C & D work was nearly complete.

February 2001

149. Ruttle was the first contractor to be engaged on FMD C & D work because the first outbreak was notified in the Chelmsford area, Ruttle was heavily involved in SVD work in the same area and had proved itself in that earlier work to be capable of providing a rapid and reliable C & D service. The first contact came from Mr Hurn at DEFRA's Bury St Edmunds' office by a telephone call to Mr Carrol on 20 February 2001 and work started on site the following day. On 23 February 2001, Mr Woodhouse, one of DEFRA's procurement officers based in London, sent Ruttle a set of standard terms and conditions which Mr O'Connor replied to by submitting a list of qualifications and amendments the same day. These included a sheet setting out the proposed plant and labour rates. Plant was to be hired out at FCEC/CECA rates and labour rates and conditions were also set out. This was not responded to in writing by DEFRA but, as DEFRA subsequently accepted, work at each DCC continued thereafter continued on these qualified terms and was subject to Ruttle's February rates until this contract was superseded by the June 2001 contract which contained modified rates. DEFRA's acceptance of these modified conditions was confirmed orally by Mr Woodhouse to Mr O'Connor in a telephone conversation on 28 February, a conversation confirmed in a handwritten note placed on a copy of Ruttle's letter by Mr O'Connor at the time he took the call.
150. What is significant about the terms under which Ruttle was working from February until June 2001, during which the greater part of its work was performed, is that the contract provided that Ruttle was working under the direct control and supervision of DEFRA officials, whether a SHO or an AHO and that the work to be performed was as instructed on site when Ruttle first attended. The effect of this contract was that Ruttle would attend whichever sites it was instructed to attend anywhere in the United Kingdom and carry out such FMD C & D services as it was instructed to perform. The plant to be provided would be provided, if possible, from Ruttle's own stock and it would provide such labour and plant as it was instructed to perform.
151. It is instructive to read Sections M and N of the Manual produced by DEFRA and covering clean up work. Section M predated the FMD outbreak and covered the employment of labour and the hire of plant. It listed the possible sources of labour as including those provided by major civil engineering contractors where the resources of local contractors were inadequate. The manual stated that some major contractors, who obviously included Ruttle, had agreed with Head Office to provide assistance when needed in dealing with outbreaks, particularly if the disease was occurring on a national scale. Major civil engineering contractors would usually provide their own plant. Veterinary Officers, who would ordinarily be supervising the work, should ensure that plant was returned to normal work at the earliest possible moment. Plant would normally be charged at fixed inclusive rates, per hour, per day or per week. The manual informed users that hire rates were set out in the Day Works Schedules of the FCEC. The Manual stated, significantly:

"Contractors' Accounts.

Contractors should be instructed to send their accounts to the appropriate FMD Centre .... Staff will be provided by the RD to carry out the checking of contractors' accounts. The VO in charge of an outbreak must ensure that records are kept of the number of men and number of types of machines employed, and the hours worked each day so that he can provide information against which the contractors' accounts may be checked. He may delegate this task to an SAHO/AHO."

152. Section N, entitled "Foot and Mouth Disease - Cleaning and Disinfectant" was dated 17 May 2001 in the copy adduced in evidence. However, the instructions it contained were clearly in force from the outset of the FMD outbreak. This Section of the Manual made it clear that the ROD was responsible for the organisation of contractors, that DVMs were responsible for supervising progress on site, recording C & D events on the Disease Control System, organising and supervising the contractors and that CDOs were responsible for maintaining a detailed record of the process in a log-book whose contents would be transferred to the C & D file for that premises.
153. Section N of the DEFRA Manual also spelt out in some detail the nature, purposes and required standards of the C & D work. The work was undertaken pursuant to Article 11 of the Foot and Mouth Disease Order 1983 which empowered DEFRA to require or to undertake the disinfection of premises infected by FMD. Once infection was diagnosed, DEFRA would issue a direction requiring the slaughter of all animals on the farm premises and prohibiting any restocking of the premises until they had been completely cleaned and disinfected.
154. There were two distinct and clearly defined purposes of this work which were to be carried out under two successive processes. Initially, Preliminary Disinfection or PD was carried out to minimise the risk of the spread of the virus from an IP to susceptible animals in the area. This was started at the time of slaughter and continued after slaughter until the carcasses had been disposed of. Secondly, C & D work was then carried out to minimise the risk of the crudesence of the disease. This was an entire process and until it had been completed and a certificate of disinfection had been issued, restocking of the farm was prohibited and could not start. The process was, to quote from part 6 of Section N: "expensive, labour intensive, involves the use of chemicals and may be lengthy."
155. C & D involved the cleaning of all surfaces so as to provide a grease-free, clean surface followed by the application of an approved disinfectant . All surfaces had first to be cleaned and bedding, manure and slurry had to be removed from buildings that had housed susceptible animals. All grease and dirt then had to be removed from all surfaces by use of a degreasing agent and a cold water wash. All surfaces had to be visibly clean before further progress was allowed. There then followed two cycles of disinfection with a 7-day rest period in between them. These activities had to be carried out in a manner that allowed excess drainage to be contained, stored and disposed of with minimum risk to the environment. Particular attention was required to remove all traces of organic or faecal material or shreds of bedding adherent to all surfaces or lodged in crevices.
156. In carrying out this work, all slurry had to be stored, handled and disposed of so as to minimise the risk of virus persisting on the farm premises or spreading to neighbouring farms or polluting the environment via ground and surface water. The Manual contained detailed guidance on suitable methods of treating slurry and on the construction and use of slurry pits and lagoons. It also advised on what repair, restoration or other structural works of buildings or equipment should be carried and on how to treat external surfaces and roofs of buildings before disinfection was undertaken.
157. Once farm premises became subject to an Article 11 Order, they had to be isolated, the continued presence of livestock on the premises was prohibited and any livestock already present had to be destroyed, the premises had to be cleaned and disinfected and all movements onto and off the premises were restricted and subject to the control of the appropriately authorised DEFRA officials and to all precautionary measures needed to prevent cross-infection and re-infection. The premises were, therefore, unusable as a farm unless and until they had been fully cleaned, disinfected and certified as disinfected.
158. The C & D work was to be initiated by a Schedule of Work drawn up by the CVO who would be responsible for supervising the work. This was to consist of an outline plan of the premises and a record of the C & D work to be applied to each building. That defined the extent of the work. The ROD, DVM, VO or SAH, as appropriate, was responsible for identifying all work to be carried out, organising the contractors, supervising the process, certifying that disinfection was complete and recording all events on site and all hours of both labour and plant usage. These DEFRA officials were also required to undertake all appropriate risk assessments of the risks of infection posed by a particular premises, of any process involved in the cleansing and disinfection work and of any use of chemicals or other hazardous activities.

5.3.2 Stage 1 of Invoice Verification Process

159. This stage involved the verification of individual invoices on site and at DCCs in the early weeks of the FMD work on a site by site, week by week basis. This lasted from 22 February 2001 until April 2001.

March 2001

160. Ruttle's FMD C & D work mushroomed dramatically in March 2001. By the end of March, Ruttle was working in all but one of the 9 regions it worked in and had started work on about 70 different sites. However, only a limited number of invoices had been sent through to 7 of the DCCs concerned and none to the eighth, being the Stafford DCC. These were sent to the DCC involved. On receipt, they were checked by the appropriate official authorised to ensure that the information contained on the invoice and accompanying documents were complete and correct. That information was to include appropriately signed daywork sheets recording both labour and plant and backed up with receipts recording both lodging and materials, all as provided for in the contract. Invoices were then batched and validated before being sent to DEFRA's FMD Finance Section in London for payment. These procedures were intended to be complete and payment made within 30 days of receipt of any particular invoice.

5.3.3 Stage 2 of the Invoice Validation Process

April 2001

161. Stage 2 involved investigations by individual external quantity surveyors appointed by DEFRA. Each DCC had one or more quantity surveyors appointed to assist it and work with it. These quantity surveyors were only concerned with invoices and claims within the DCC that was being worked in but the investigation of any one contractor was extended across all farms in that DCC area the contractor was working in. This lasted from April 2001 until June 2001.
162. During March, DEFRA had employed quantity surveyors at each DCC for this purpose:

"to give independent assurance that it was being charged reasonably for the work carried out by contractors. Quantity surveyors were tasked with agreeing schedules of rates for plant, equipment, materials and labour. They were also responsible for the validation and approval of contractors' invoices and checking that paperwork was correct."^[26]

163. These quantity surveyors clearly included a consideration of Ruttle's invoices at those DCCs where Ruttle was involved and was submitting invoices from an early stage of their work. By May 2001, the following quantity surveyors had been involved in the following DCCs in validating Ruttle's invoices:

1. Ayr and Dumfries: Mr Chris Smith of Citex.

2. Worcester: Mr Simon Peplow of Citex and Mr Julian Ward of Francis Graves Ltd.

3. Caernarfon: Mr Leon Beards of Citex.

4. Chelmsford: Mr Colin Harrison and Mr Graham Love of Davis Langdon & Everest.

5. Leeds: Mr Andrew Nock of Francis Graves Ltd.

6. Stafford: Mr Carl Dunne.

7. Preston: Mr Phil Hammond of Citex.

Mr Ivor Morrish of Francis Graves had also been involved in the process of validating Ruttle's invoices.

164. By the end of April 2001, Ruttle had become involved at 90 sites, including 20 for the first time. Ruttle had, by the end of April 2001, submitted 165 invoices through these various DCCs and had received its first payment, on 25 April 2001, of £20,864.55.
165. A further step was taken by DEFRA by the end of April 2001. This was to employ specialised contract administrators at each DCC. Their main tasks were:

"To ensure that appropriate written contracts were in place;

to negotiate better terms for the Department where they could;

to encourage contractors to maintain accurate records of staff, materials and plant deployed;

to encourage contractors to maintain accurate records of staff, materials and plant deployed;

to monitor contractor performance, giving feedback to Department staff as necessary; and

to provide expert advice to the Department."^[27]

5.3.4 Stage 3 of the Invoice Validation Process Investigations

May 2001

166. Stage 3 involved investigations by Mr De Kock in Ruttle's offices going through Ruttle's paperwork with Mr O'Connor. This lasted for about two working weeks between 25 June and 6 July 2001. Mr De Kock was appointed as a forensic accountant initially to work in the Caernarfon DCC area but this appointment lead to work co-ordinating a general approach to the validation of Ruttle's invoices across every DCC. It was associated with and to the settling and signing of a contract to replace with retrospective effect existing contractual arrangements. This period lasted from early May until late June 2001.
167. Mr De Kock was working on a contract basis for DEFRA. He was initially sent to the Caernarfon DCC because concerns had been raised about Ruttle and its invoicing at several of the DCCs. By May 2001, DEFRA had put in place the following procedure:

"[the] employment of forensic accountants to examine the invoices of 107 of the largest contractors, including the 86 companies awarded contracts worth more than £1 million. ... The Department is withholding payment of the remainder until it is satisfied that contractors have provided sufficient evidence of work carried out."^[28]

168. Mr De Kock spent two weeks at the Caernarfon DCC working on the process of validating Ruttle's invoices. He was not provided with any of the DEFRA internal documentation and his work involved reviewing the rates being charged in the invoices against the rates submitted by Ruttle in February 2001. He was also asked to gather everything that was available to help assist in the validation process. He worked with two quantity surveyors who had already been put to work to examine the Ruttle invoices. He also began the task of checking to see whether any particular individual was claimed for on two different sites simultaneously and he began to devise a procedure for checking for and identifying double and overcharging where the timesheet had been signed by a DEFRA official. Remarkably, Mr De Kock was not instructed as to the IP documentation that ought to have been available nor that this information should be obtained and consulted. He only first learnt of the existence of this source of data in February 2002. His ignorance appears to have been shared by all the quantity surveyors working on Ruttle's invoices.
169. Caernarfon was chosen by DEFRA for this particular exercise because Ruttle's work in that area had largely been completed. Ruttle worked at 19 sites in that region and its invoices currently total £1.8 million. About £1 million had been invoiced by the time that Mr De Kock started his validation exercise. Some of the timesheets supporting these Caernarfon invoices had not been signed by DEFRA officials and these were validated later in the year in a separate exercise in which Mr O'Connor was involved. Apart from the lack of a signature on some timesheets, no particular problems were identified by Mr De Kock and the quantity surveyors working at Caernarfon that were reported to the group meeting held on 1 June 2001. Mr De Kock did identify a variety of specific discrepancies but none that indicated to him that there was systematic, deliberate or opportunistic overcharging by Ruttle.

5.3.5 Stage 4 of the Invoice Validation Process

170. Stage 4 involved the establishment of an overall audit of Ruttle's invoices to be conducted by Davis Langdon & Everest. This followed DEFRA's decision to install quantity surveyors in every DCC and to set up a Financial Control Team whose role was to ensure that financial controls at DCCs were consistent with each other and contract administrators at each DCC^[29]. Davis Langdon & Everest was appointed and Mr Love wrote to Ruttle from its Peterborough office on 3 May 2001, out of the blue from Ruttle's point of view, as follows:

"We have been called in by MAFF to audit all of your invoices in connection with the above outbreak. To assist us with this could you please provide us with a copy of the priced proposal that you submitted to MAFF with details of your labour rates and mark ups etc. We would also like to see copies of the correspondence from MAFF accepting your proposal."

171. DEFRA has not disclosed any document which explains why DLE was appointed, what advice it had received from the various professionals who had been investigating Ruttle's invoices prior to its decision to appoint DLE, what DLE's terms of reference were or what advice it provided to DEFRA following its appointment.
172. Ruttle was obviously concerned at learning of this nation-wide audit and asked DLE what the timescale would be before invoices would be cleared. DLE replied that it would start to approve invoices for payment as soon as it had enough information to be able satisfactorily to check Ruttle's invoices.
173. DLE was appointed in a lead role to check and validate all Ruttle's invoices for any anomalies, errors, inconsistencies or erroneous charging and invoicing practices. DLE also took the lead in making recommendations to DEFRA for general on-account payments to Ruttle which was how Ruttle was paid from 21 May 2001 onwards. This centralisation of payment recommendations to DEFRA coincided with DLE's appointment to a general auditing role and Mr De Kock's appointment to a forensic accountant role and with the introduction by DEFRA of an on account payment procedure for all contractors in a procedure document issued on 14 May 2001. This procedure applied for most contractors at a DCC level but, between May 2001 and May 2002, was operated centrally for Ruttle, initially through DLE and Mr De Kock and then via the Invoicing Panel. DEFRA has not disclosed any documentation passing between DEFRA's advisors and DEFRA containing recommendations as to the size of on account payments to be made by DEFRA and as to the decisions taken by DEFRA as to whether to make or to withhold on account payments and as to the amount to be paid.
174. Meanwhile, Ruttle continued with its C & D activities. By the end of May 2001, Ruttle was working in, or had completed work in, 250 sites. The number of invoices submitted had increased overall by a further 62 and 7 payments had been made totalling just over £2 million. The first 5 of these were payments against specific invoices including 11 submitted to the Leeds DCC, the remaining 2, totalling £1.5 million, were payments made on account. The system of making general on account payments followed the appointment of DLE to conduct the general audit of Ruttle's work and invoices.

3.6 Stage 5 of the Invoice Validation Process

175. Stage 5 involved the establishment of a group which had three objectives: to negotiate a new contract and contract rates with Ruttle; to co-ordinate the audit work being conducted by DLE and Mr De Kock assisted by the quantity surveyors working in each DCC; and to co-ordinate and strengthen the validation of every outstanding invoice. The activities in stages 3 and 4 had allowed a large team of professionals to become familiar with specific parts of Ruttle's activities and invoicing practices as well some being able to develop an overview. Of immediate concern was the absence of any clearcut contract and an acceptable collection of rates.
176. In consequence, Mr Carty, from DEFRA's procurement department, convened a meeting on 1 June 2001 at which 11 consultants attended and two others sent apologies. It is clear from the minutes that detailed investigations of Ruttle's invoices had been undertaken at each DCC for which it had by then been working. It was agreed that all data and information would be passed to Mr De Kock, that military records of those signing into and off sites controlled by military personnel should be consulted, that all QSs were to cheek that the method of validation being adopted by each of them was consistent and that Ruttle would be informed as to the information it should supply in order to enable its invoices to be validated. It was also agreed that Mr De Kock would visit Ruttle's offices in the near future.
177. It can be seen from this that a full scale audit of Ruttle's invoices down to late May was by 1 June 2001 in full swing. The audit work was being co-ordinated by Mr De Kock and all relevant data and information was being passed to him. Each quantity surveyor involved was particularly alert to the need to seek out any overcharging for additional personnel, the use of erroneous rates and the charging of excessive hours and plant and to ensure that they were all using the same validation procedures for timesheets. For the future, a standard range of information backing up invoices would be required. A final comment was made at the meeting under the heading "ways of resolving problems":

"MAFF realise that staffing problems at the start of the outbreak means that some contractors will not now have timesheets etc signed by MAFF personnel. MAFF are therefore now reliant on the good will and co-operation of these contractors to provide information from their own records, which will backup their invoices. This is of course reliant on the contractors' standard of record keeping."

178. In other words, DEFRA was accepting that it could not insist on being provided with information such as a labour supplier's timesheets. Such information could only be obtained if the contractor was prepared to supply it as a goodwill gesture. The overall conclusion of the meeting was that the problems with Ruttle's invoices were fourfold: there were delays in the invoices being submitted; the invoices were full of arithmetical and other errors which were verifiable but only following a time consuming process; some invoices and timesheets were not verified by a DEFRA official and some invoices were not in a standard format and lacked some back up data so were not easy to check. Notwithstanding the enormous efforts already made in validating and auditing Ruttle's invoices, no other complaint had emerged and no suspicion that the invoices were inherently unreliable had arisen. The full minutes of this meeting, which record the views of those attending which I have just summarised, show that the two representatives of DLE who had been appointed to audit Ruttle's invoices and who had also participated in the verification of those invoices that related to the Chelmsford DCC agreed with and approved these comments and conclusions which are not, overall, particularly critical of Ruttle or of the validity and accuracy of its invoices.
179. The meeting also agreed the line the DEFRA negotiators would take with Ruttle in agreeing a new contract. The two matters of particular concern were the labour and plant rates, which were to be renegotiated and applied retrospectively and the quality and timing of Ruttle's invoices.
180. This led to a meeting on 6 June 2001 at which the new contract was agreed. Mr H Ruttle and Mr Carrol represented Ruttle and Mr Carty, Mr De Kock and Mr Morrish, a consultant quantity surveyor, represented DEFRA. Mr Carty was an adviser to DEFRA's Procurement Contracts Division. It was agreed that Mr De Kock would make a financial assessment of how much could be paid to Ruttle, that all future invoices would be submitted on a weekly basis with full back-up and that any further difficulties with payments should be referred to the quantity surveyor at the relevant DCC and then to the Finance Manager.
181. The meeting readily agreed a new comprehensive schedule of rates and contract conditions. It was agreed that for the future all invoices would be submitted on a weekly basis with full back up information in the new format set out in the contract and that all invoices issued to date would be reissued in the new format and using the newly agreed rates. This new format was set out in Annexes A and B to the new contract. These annexes had been drafted by DEFRA's contract negotiating team consisting of four people and chaired by Mr Carty.
182. By the end of June, when the contract with Ruttle was signed, Ruttle had worked in, or had started to work in, over 300 of the farm premises it ultimately worked in. It had submitted a further 40 invoices and had been paid a further £300,000 on account. The meeting held on 1 June 2001 estimated that the value of Ruttle's FMD work that had already been carried out was then between £3 million and £7 million. If Ruttle's current invoices and claims are taken, that figure was more likely to have been between £12 million and £15 million and, by the end of June, this had risen to between £15 million and £18 million. The volume of Ruttle's work appears to have been undertaken such that, by value, it would resemble a Bell or U-curve if value was plotted against months and that the three heaviest months would be April, May and June during which over 60% of Ruttle's work by value was undertaken.
183. In summary, therefore, by the end of June when the new contract came into effect, well over 75% of Ruttle's work by value had already been undertaken. The sums received on account meant that, on any view, by the date of that new contract, well under one third of the value of Ruttle's work had by then been paid to it and at least half of the value of its work already performed had been invoiced. The agreement whereby Ruttle would invoice the entirety of this work whilst struggling to complete the remaining work and invoice that as well meant that Ruttle's invoicing facilities were overwhelmed and the delivery of invoices under the new format continued somewhat erratically for nearly a year well into 2002.

5.3.7 Stage 6 of the Invoice Validation Process

July 2001

184. Stage 6 lasted from late June 2001 until late August 2001 and involved the audit and verification teams continuing their work and co-ordinating and sharing their collected data in the manner agreed at the collective meeting held on 1 June 2001. Mr De Kock spent six days in Ruttle's offices familiarising himself with all its internal documentation and agreeing with Mr O'Connor on the invoicing procedure to be followed in future. At the end of this visit, he discussed and agreed with Mr O'Connor the nature of the errors that had occurred in the invoices submitted to date and on the format of the invoices and back up material to be supplied.
185. Mr De Kock had a further meeting with Ruttle's representatives in the Dumfries DCC offices on 19 July 2001 accompanied by Mr Carty. Nothing was said by the DEFRA representatives at that meeting to suggest that DEFRA had begun to form the view that Ruttle's invoices were subject to wholesale unreliability or overcharging.
186. During July 2001, Ruttle completed the great bulk of its work and started on the unenviable task of invoicing all of it, including the reissue of all previously issued invoices. An on account payment of £1 million was made on 6 July 2001.

August 2001

187. In early August 2001, Mr De Kock alighted on what he considered to be a significant potential overcharge which he believed had not been discussed during the June contract negotiations. He believed that Ruttle was only entitled to charge for plant for the time it was actually in use whereas Ruttle was charging plant for the entire period that a site was being worked so long as that item of plant was present on site at DEFRA' s request and was available for use. This and his experience to date led him to send an email to Mr Rabey, who was DEFRA's then Director of Purchasing and Supply and the official who was in overall direction and command of the exercise of verifying Ruttle's invoices. This email was sent just before Mr De Kock was assigned to other duties in relation to another contractor at the Cardiff DCC. The relevant passage stated:

"I believe that a team of QSs should be convened together on a National basis to certify and clear invoices, to avoid repetition and ensure conformity between DCCs."

188. Such co-ordinated strategy of invoice verification had, in fact, been put into place by those attending the co-ordination meeting held on 1 June 2001 and seemed to be working reasonably well. It had led, in the 2 months that had passed since those arrangements were in place, to payments on account of £4.7 million, to the identification of most of the problems with rates and invoicing and to much work being undertaken by Ruttle and members of the loose network of professional advisers in submitting and verifying invoices.
189. It therefore came as a considerable surprise to Ruttle to receive, from Mr Rabey, the following letter dated 29 August 2001:

"As you are aware Ruttles has been among the primary contractors engaged on foot and mouth disease work. The invoices for this work are being examined by quantity surveyors and forensic accountants retained by DEFRA to ensure that all expenditure has been properly incurred, accounted for and authorised.

Following detailed investigation of the Ruttles account I am sorry to have to inform you that serious concerns have been raised by our experts and which will prevent any further payments on account until they are resolved to our satisfaction. The concerns are:

•    · evidence of possible overcharging for both labour and plant time;

•    · recording of labour hours;

•    · chargeable hours for plant;

•    · validity of invoiced items;

•    · costs for personnel carriers;

•    · invoicing inaccuracies in general;

•    · site accommodation charges.

In addition to the above we are becoming increasingly concerned with Ruttles' inability to send invoices to the correct DCCs; the slowness of properly presented and checked invoices being submitted including the re-issuing of invoices; and queries not being responded to in a reasonable time period. The ambiguity surrounding an accurate statement of account for Ruttles is a further cause of acute concern.

The f act that I have written to you should give you an indication of the seriousness with which we view the current situation. I should like to suggest that we meet at the earliest possible opportunity to resolve this impasse to our mutual satisfaction. My secretary will be in touch with your office to make the appropriate arrangements."

190. DEFRA has not disclosed any communication or advice from DLE, its appointed audit firm, Citex or the other quantity surveyors involved or from Mr De Kock, other than the email which I have already referred to. However, the letter states that the complaints it makes were based on "serious concerns expressed by" the various consultants involved. There is no evidence of these serious concerns being expressed to Ruttle or DEFRA and the validation process that had been in train since April had not thrown up anything of the kind suggested by this letter. Mr De Kock stated that the extent of his involvement in advising on the contents of this letter was to outline his concerns in a telephone call when Mr Rabey telephoned him. As for the difficulties as to rates and invoicing, these had been apparently already been resolved by the contract negotiations and the ensuing new contract and by the close working collaboration that had evolved between Mr De Kock, DLE and the other quantity surveyors on the one hand and Mr O'Connor and his colleagues on the other.
191. The result of this letter was an inconsequential meeting held on 7 September 2001 at which Mr Ruttle and Mr O'Connor met with Mr Rabey and 10 colleagues during which, according to Mr Ruttle, only Mr Rabey spoke and no supporting data was provided to support the seven complaints made in the letter and the unilateral decision announced by Mr Rabey at the meeting that further invoicing validation should be handed to an Invoicing Panel. Ruttle, in order to try and move its invoicing and payments forward, agreed to this procedure. The effect of this decision was to terminate DLE's audit being undertaken in conjunction with the co-ordinated validation of invoices by quantity surveyors and Mr De Kock.

5.3.8 Stage 7 of the Invoicing Validation Process

192. Stage 7 involved the establishment of an Invoicing Panel consisting of three quantity surveyors and assisted by a team including Mr De Kock to sort out and resolve generic issues and then go through each invoice and identify what could and could not be paid. This panel met approximately once a month in the period September 2001 until June 2002 as well as spending 61 days at Ruttle's premises and visiting some of the DCCs. The original intention had been for this panel's activities to be concluded within three months of being established.
193. There was no discussion with Ruttle before DEFRA decided to establish the IP and, so far as was evident at the trial, no advice had been given to DEFRA to terminate the audit being conducted by DLE and Mr De Kock and the investigations being conducted in individual DCCs by quantity surveyors to assist that audit save for the two line suggestion in Mr De Kock's email of 20 August 2001 to Mr Rabey that a team of quantity surveyors should be convened on a National basis to certify and clear invoices so as to avoid repetition and ensure conformity. That suggestion would have slightly modified the procedure already being followed by the many professionals involved in the audit being carried out by DLE and Mr De Kock. What was instead imposed on Ruttle was the termination of the audit and its associated co­ordinated validation of invoices and its replacement by a cumbrous multi-person IP tasked with validating every invoice.
194. The terms of reference of the IP were provided to Ruttle at the meeting held on 7 September 2001 and were wide ranging. They were as follows:

"Mandate For Invoicing Panels

•    · Check the validity and value of invoices received by each DCC in whose area the supplier has worked.

•    · Working closely with QS's and Finance Managers at the DCC, establish the processes to be followed to achieve the above. Items which will require particular attention are the rates being charged for a specified item of equipment or piece of work (including the hours claimed). These may be below the rate allowed by the contract, but must not exceed that rate. All invoices must be supported by appropriate documentation, including timesheets or suppliers, invoices where necessary.

•    · Where discrepancies are found, these must be noted, with an explanation as to why the invoice is unacceptable (incorrect rates, incorrect quantities, lack of supporting evidence etc.).

•    · Should supporting documentation be found not to carry a DEFRA signature, the invoices should be recorded and batched, then sent to the Finance Manager for forwarding to the ROD for signature as appropriate. A standard letter should then be sent to the supplier, along with the invoices, stating the reasons why the invoices cannot be paid.

•    · The lack of a DEFRA signature is no reason why the documents should not be checked for compliance in all other respects. Before sending unsigned documents to the Finance Manager as above, they should be checked for accuracy and technical compliance; they should, if appropriate, be annotated to the effect that once they have been so checked, and that they may be approved for payment once the signature has been added.

•    · Using the list of problems and concerns identified, and to be identified later, engage in dialogue with the Finance Director and the Quantity Surveyor to resolve. Work closely with any appointed Director of a QS organisation and the allocated Forensic Accountant.

•    · Keep Monitoring Manager fully appraised and give advance warning of any difficulties within DCCs.

•    · Conduct meetings with the Company concerned, with a view to resolving difficulties amicably. Meetings with suppliers should be minuted, and the minutes agreed by both parties.

•    · Mediation - will be determined if no agreement can be reached with the Client and needs to be discussed with the Monitoring Manager.

195. This procedure had been devised by DEFRA to deal with all companies where substantial unresolved claims based on invoices remained which covered more than one DCC. The procedure was undoubtedly intended to provide a mechanism for the satisfactory resolution of claims where little or no previous validation had been undertaken. It involved, in effect, the validation of individual invoices in collaboration with the contractor, the discussion and agreement of rates to be charged where the claimed rates appeared too high and the identification of disputed figures or rates.
196. The clear intention was to produce as soon as possible a situation where every figure in every invoice could be categorised into one of three component parts, namely those that were validated and recommended for payment, those that were unsigned but were validated and, subject to approval by the ROD, were recommended for payment; and those that were invalidated, whether supported by signed or unsigned timesheets and were not in consequence recommended for payment.
197. No formal secretariat or procedure was established to drive this work by the Ruttle IP forward. Much of the work envisaged by the terms of reference had already been done in Ruttle's case which could have been called on had the personnel remained identical to those involved in the previous audit but the members of the panel were not all drawn from the audit team. The procedure decided upon set aside most of the previous validating work of Ruttle's invoices and started that work afresh. Since the IP followed on from: (1) individual DCC validation work; (2) the validation of invoices by individual quantity surveyors in each DCC; (3) the DLE audit; and (4) the De Kock co-ordination work, it amounted to the fifth invoice validation initiative embarked upon by DEFRA.
198. The IP was formally established at a meeting chaired by Mr Carty on 24 September 2001 attended by Mr O'Connor, Mr De Kock and Mr Hammond a quantity surveyor from Citex who were to provide most of the manpower for the IP. It was explained to Mr O'Connor that the IP would be chaired by Mr Leon Beards working with Mr Clive and a third to be appointed. Mr De Kock would act as Team Leader co-ordinating the work and providing forensic accountancy input. Mr Mark Weaver of Citex would provide "higher level support" to the IP. Since Mr Weaver, Mr Beards and Mr Clive were all Citex representatives, the clear intention was that the IP would largely be driven by quantity surveyors from that practice. Only Mr Beards had previously been involved in Ruttle invoices, at the Caernarfon DCC and he in fact did not participate in its work after this initial meeting.
199. The panel's formal meetings were, in the main, attended by Mr Billington of Francis Graves, Mr Harrison of DLE and Mr Bates of Citex with Mr De Kock as team leader. On Ruttle's side, Mr O'Connor attended. No-one acted as formal chairman of the meetings although the discussion was fully minuted. Meetings were held on 1, 4 and 10 October 2001, 1 November 2001, 12 December 2001, 28 March 2002 and 18 April 2002. A further meeting had been scheduled for early June 2002 but this was cancelled unilaterally by DEFRA. However, the formal meetings were but the tip of the iceberg. Many days were spent at each DCC by Mr De Kock and one or more members of the panel or associates of the panel members. Over 400 individual query sheets were raised by the IP addressed to Ruttle requiring answers to specific points and many sheets raised different queries on many separate invoices.
200. This activity yielded much progress. By way of example:

1. A procedure was evolved at the first meeting to deal with the unsigned timesheets, particularly those from Chelmsford DCC.

2. The individual heads of discrepancy, disagreement or uncertainty were soon identified. These were, largely, matters of principle which still remain in dispute but, in relation to points of detail on individual invoices, covered discrepancies in the invoice with other documents including a mismatch between recorded and claimed hours in individual cases for both labour and plant, apparent double charging based on operatives with the same name being charged for simultaneously at two or more sites, missing supporting documents and unsigned daywork sheets. These areas of difficulty had been identified before and at the meeting held on 4 October 2001.

3. The panel decided to operate by going through every invoice and identifying any doubt, difficulty and discrepancy using the general list of types of difficulty as its guide and then going through the invoices for a second time reaching agreement or disagreement as they went.

201. The identification of difficulties, the first trawl of invoices and the footwork in Ruttle's offices and at each DCC took until late March 2002. In the meantime, five further on account payments, totalling £3.3 million, were made in the period 24 September 2001 and 14 May 2002 although no details of how or on what basis these payments had been decided upon, bringing the total payments up to about £10 million. At the meeting held on 28 March 2002, it was envisaged that the second trawl would start in the near future, that it would be a lengthy and complicated business and that the final invoiced amount was about £22 million or more than double the payments made or soon to be made. In terms of recommending payment and receiving payment, the IP minutes record that the procedure to be followed and the timing of such payments were not finalised but it was hoped that everything would be complete by July. Mr Carty had also informed Mr De Kock, as he informed the meeting, that the panel would stay as it was until it had completed its task.
202. It is important to observe that there did not appear to be any wide ranging suspicion that the quality and contents of Ruttle's invoices was such that they were inherently unreliable or that there was massive over claiming involved. Although the points of principle, if added up, amounted to substantial sums, it was clear that those involved in the IP' s work envisaged that the greater part of the outstanding £12 million would become validated, approved, certified and payable.
203. The second stage of the invoice validation process never started although the IP continued working, without formal meetings being held, until August 2002. The reasons for this slow down and, finally, abandonment of the IP validation process were never made clear to Ruttle but can be seen to have been for four related matters. I will summarise these in turn.

1. Ruttle's invoicing delays.

204. No-one foresaw the enormous burden that invoicing DEFRA would place on Ruttle following the signing of the June 2001 contract. That required Ruttle to resubmit every invoice for nearly three quarters of their work whilst continuing with existing work and invoicing and with the detailed demands of the IP. All this was in the hands of Mr O'Connor and a tiny support staff and the result was that Ruttle's invoices continued to be delivered in batches until well into 2002. Although this was both regrettable and administratively inconvenient, the pattern of delivery was unavoidable, given Ruttle's unusual circumstances whereby it was faced with a sudden huge and temporary surge in the demands being made on its invoicing resources with no means of meeting that demand save for what amounted to the one man band being played by Mr O'Connor. No evidence has ever emerged that he undertook any invoicing dishonestly or resorted to deliberate or opportunistic overcharging. The many discrepancies that the invoices contained were all the product of inefficient, over pressurised and insufficient invoicing resources. These delays, whose causes never seem to have been appreciated or accepted by the many professionals with their large back up staffs that Ruttle was involved in and they appear to have led to a general feeling within DEFRA's hierarchy that the delays and their consequences were evidence of Ruttle overcharging it in a disreputable and opportunistic manner.

2. Unsigned timesheets

205. For reasons that were never explained, the Chelmsford DCC never signed the many timesheets it had had submitted to it for signature following the instructions given to Ruttle to submit timesheets to the DCC for signature rather than relying on site ­based staff for that purpose. This problem was compounded by the IP neither obtaining nor actively seeking copies of the unsigned timesheets from the DCC for validation nor being able to obtain post-contract validation from the Chelmsford ROD when this was ultimately sought. It would appear that these problems left with DEFRA senior management a feeling that there had been significant over charging at the Chelmsford DCC which might have been the result of collusion with locally based officials. However, any such belief, if indeed it existed at all, was not brought to Ruttle's attention.

3. Plant

206. Plant hire charging became a bone of contention because the sums being invoiced appeared so large. DEFRA management became aware that Ruttle was invoicing for plant on site for the totality of the time that a site was being worked rather than for the time that the plant was being used. Because so much plant had been ordered from Ruttle by site-based management, a very large sum being claimed represented plant hire for plant not actually in use although on-hire. Moreover, it seemed to DEFRA management that some plant hire rates were excessive and that significant charging was occurring for plant not actually on site at all. These concerns only surfaced in and after April 2003 and appear to have been based on advice received from GTF who had just been appointed to advise and whose advice to DEFRA at that time has not been disclosed since litigation privilege is claimed for it.

4. GTF's advice

207. GTF was initially retained in November 2002 and formally retained some weeks later to advise DEFRA. It is not clear why DEFRA appointed a further independent consultant quantity surveyor notwithstanding the previous detailed involvement of DLE, Citex, Francis Graves and other firms less involved with Ruttles. GTF started to undertake some reconciliation exercises which led it to believe that there had been massive overcharging for plant and significant double charging for labour. This inference arises from the terms of the evidence presented at the trial by two of the senior representatives of GTF involved in Ruttle's invoicing dispute, Mr Ward and Mr Pelling.
208. The result of these four related sources of concern was an effective embargo of further productive work by the IP from about June 2002 and the crystallisation of this dispute. The attitude of DEFRA by June 2002 can be seen from two letters. The first, dated 5 July 2002, was sent by Mr Rabey to Mr O'Connor. It reads:

"I do not intend to reply in detail to the points made in your letter [under reply], but will confine myself to the fundamental misunderstanding that you and your organisation appear to be labouring under.

We appointed an invoicing panel which embarked upon a process (fully understood and agreed with your company) to verify invoices that you claim arise from work Ruttle Plant Hire carried out during the foot and mouth disease outbreak and, separately, invoices you claim arise from work Ruttle Plant Hire carried out some years ago during the classical swine fever outbreak.

Despite several requests for information being made to your company for verification, responses to date have been: a mixture of responses not in reply to the questions posed; no responses; and inaccurate and misleading responses. Of 475 invoices check sheets with queries attached supplied to your company, only 45 have been returned and of these many have content inadequate for the invoicing panel to continue its work.

Despite this, payments have been made to your company whenever the panel were able to recommend them. Recently, the panel has raised serious concerns about the validity of some of these invoices. These concerns are being reviewed by independent experts as a matter of urgency. In the circumstances we are not in a position to make further payments.

Your management and your lawyers have now made it clear in numerous recent telephone conversations that your company is withdrawing its co-operation from the work of the invoicing panel.

Clearly, the situation is intolerable from DEFRA's perspective. We have asked you to make proposals, but none have been forthcoming. We have on two occasions suggested appointing an independent firm of accountants or surveyors to audit the accounts and in effect act as experts. DEFRA offered to pay half the fees for that exercise. Your company rejected this and have never given any reasons.

We have as stated above asked for information on a number of occasions but it has never been provided; your company generates invoices worth millions of pounds, many months and in some cases years after the work is claimed to have taken place, send them to us and immediately demand payment.

Our position is that we wish to avoid litigation but will defend it vigorously if it ensues. We wish the work of the invoicing panel to continue but are considering our position in the light of the latest information. Finally, we will consider carefully any constructive proposal that you or your company wishes to put forward. This does not embrace what you refer to in your letter as a normal business process of checking invoices.....".

209. I make several findings about the statements in this letter. Firstly, no intimation of the contents of the serious concerns about the validity of invoices expressed by the panel or independent experts that apparently preceded the letter were ever drawn to Ruttle's attention or have been disclosed since. Secondly, the problems arising from unsigned timesheets were entirely of DEFRA's making and could readily have been resolved by the IP who had adopted a method of dealing with them and had available detailed internal DEFRA records that could have been used to further verify these documents. Thirdly, Ruttle had attempted to answer the many detailed questions and outstanding unanswered questions could have been resolved during the second stage of invoice verification had it been allowed to continue. Fourthly, Ruttle had been complying with the constant and continuing requests for assistance and had suggested, quite reasonably, that the IP procedure should continue. Finally, since four separate independent firms of consultants had already been appointed to audit Ruttle's invoices (DLE, Mr De Kock, Citex and GTF), there was no reasonable basis for DEFRA to be suggesting the appointment of a yet further firm the cost of which Ruttle should pay half.
210. On the same day, 5 July 2002, DEFRA's solicitors Eversheds wrote to Ruttle's solicitors what amounted to a letter before action in these terms:

"... serious concerns which have arisen from the invoicing panel's analysis of your client's invoices, the issues are as follows:

1 Factual errors

1.1 Systematic overcharging for items of plant(l), including rates for tractors, pressure washers and water bowsers and generators.

1.1.1 This is an issue that has recently come to light and is obviously a matter of serious concern, particularly where there appears to be a consistently applied practice of overcharging (l).

1.1.2 The invoicing panel is unable to quantify the sums involved until the verification process is complete. In addition, the invoicing panel will need to revisit previously verified invoices to consider this issue (2).

1.1.3 We have advised our client that it will be required to fully investigate the possibility that these overcharges are systematic and intentional before any further payments can be authorised (2). The implications of the outcome of this investigation are clear(3).

1.2 Systematic charging for subsistence where Ruttle have used local labour and is not entitled to any payment for subsistence(4).

1.2.1 This is an issue which has come to light following our client's analysis of the invoices submitted in respect of the Caernarfon DCC and other DCCs (5). We have advised our client that all invoices for subsistence should now be examined (whether or not previously verified) to confirm that your client has not invoiced for sums to which it is not entitled.

1.3. Double charging and overcharging

1.3.1 The invoicing panel found numerous items of double charging and overcharging for items such as labour, travel and administration and subsistence (6). This is an issue which the invoicing panel will only be in a position to reach a final conclusion on when the total number of invoices has been submitted and verified (7).

1.4. Arithmetical errors

1.4.1 We are instructed that there are numerous arithmetical errors (8) contained in your client's invoices.

2 Disputed contractual issues

2.1. In addition to the factual errors contained in your client's invoices, there are numerous items (9) for which your client has invoiced which our client does not believe your client is entitled to be paid for under the terms of the contract. These include, but are not limited to, items such as overtime, mileage (as conceded or agreed by yourselves), charges for supervisory staff, personnel carriers, meal breaks, directors and agents. We have advised our clients that these issues are subject to legal argument and may require negotiations between the parties to reach an agreement as to the precise sums to be paid.

3. Evidential issues

3.1 Our client has examined its internal site records which indicate in some cases that your client has charged for labour and plant when it was not, according to our client's records, on site and in other cases where the plant was on site but has been charged for incorrectly (10).

Because our client's concern has increased so significantly, our client is, as you know, no longer able to justify making any further payment to Ruttle until such time as these issues are resolved (11).

211. This letter was written on the instructions of DEFRA and the solicitors, who had only recently been instructed, were clearly relying on the contents of those instructions in writing it. The underlined portions contain allegations which would have been new to Ruttle since they had not previously been made and the evidence and professional advice on which they were based was not, and still has not been, provided by DEFRA. I particularly make these findings about the passages against which a number in brackets appears:

(1) The thrice repeated suggested that there had been systematic overcharging for plant had not previously been raised and the basis for it still remains unclear. DEFRA's case is and remains that the contract precluded Ruttle from charging for plant which was on site but not in use during a working day whereas Ruttle maintains an entitlement for such plant. This difference of opinion had crystallised in September 2001 and had led to the establishment of the IP. No other evidence has emerged and certainly no other evidence of systematic overcharging of a kind suggesting deliberate or fraudulent overcharging.

(2) The IP never suggested to Ruttle and Mr De Kock did not suggest in his evidence that the nature of the discrepancies in the invoices was such that no further payment on account could be made, and no invoice could be regarded as having been validated until all invoices had been examined in detail. The second sweep of invoices was intended to sign off as validated or not validated each invoice successively and for further interim payments and final payments to be made as the process continued.

(3) Although the letter states that the implications of the allegation of systematic and deliberate overcharging are clear, these implications are not clear. The only sensible meaning to be given to this statement is that DEFRA were contemplating suing or counterclaiming for fraud or dishonesty arising out of over payments already made for such systematic overcharging.

(4) The suggestion that the evidence of systematic overcharging of subsistence had come to light following an analysis of the Caernarfon invoices was also surprising since the Caernarfon invoices had been the first to be examined in detail, an examination conducted by Mr De Kock in May 2001 when first appointed to the Ruttle invoice validation exercise. He made no mention of this discovery in his evidence. If there was any substance in the suggestion that these invoices revealed systematic subsistence overcharging, the evidence would have featured in the subsequent discussions between Mr De Kock and Mr O'Connor in May 2001, would have featured in the reports about Ruttle's invoices from Mr Beards, the Citex quantity surveyor appointed to the Caernarfon DCC in April 2001 yet he made no mention of it in any reports disclosed in the trial or at the 1 June 2001 co-ordination meeting and it would have emerged during the visits of the IP to Caernarfon and in the IP minuted discussions and the questionnaires submitted by the IP to Ruttle but nothing appears to have been mentioned about it in the period from September 2001 until May 2002.

(5) The suggestion that Ruttle had charged subsistence for local labour when such charges could only validly be made for labour who had come from afar and had to lodge locally overnight was new, particularly since the allegation was that this had been done on such a large scale as to suggest that the overcharging was systematic. The allegation was particularly surprising since the great majority of the labour employed by Ruttle, whether from its own labour supply company or from labour suppliers, had come from afar and had had to lodge locally whilst work proceeded.

(6) There does not appear to have been any discussion in the IP meetings of evidence of significant numbers of instances of double or overcharging. The only mention of such matters related to a few instances of simultaneous charging for men with the same name at different sites on isolated occasions, a possible complaint which Mr O'Connor appears to have dealt with to the satisfaction of the IP at the time of the subject first being raised.

(7) It had not previously been suggested that the instances of over charging and double payments referred to would precluded any further payment until all invoices had been validated.

(8) and (9) It is clear from the IP meeting minutes that it was a gross exaggeration to state that there were "numerous" examples of arithmetical errors and matters of doubtful legal or contractual interpretation. Those that existed were manageable and not unduly extensive in number.

(10) It is surprising that it is stated that DEFRA had examined its own internal records and that these showed substantial overcharging for labour. These records were not examined by DEFRA, are not even now relied on by them and do not, if examined, appear to show any substantial number of occasions of overcharge.

(11) Although the letter contends that Ruttle was already fully aware that no further payments would be made pending completion of the entire review of its invoices, this had not previously been stated. Indeed, it had received its most recent interim payment on 14 May 2002 and had been led to believe by the IP at that time that further interim payments would be recommended by Mr De Kock in the near future. No payments at all were made between May 2002 and November 2003.

212. Overall, therefore, DEFRA had clearly decided at relatively short notice to bring the work of the IP to an end and to move the claims for payment and the invoice validation process into a dispute that would require to be litigated. It no doubt had good reason for this decision and change of strategy but if so, it never explained to Ruttle the basis upon which it had formed the views that were so clearly but succinctly set out in its solicitors' letter before action.

5.3.9 Stage 8 of the Invoice Validation Process

213. Stage 8 involved internal investigations that were carried out by GTF. These included cross-DCC sensitivity checks and more general checking of invoices and a scheduling of all sums disputed under various categories of defence. The firm was first appointed in November 2002 and formally appointed in February 2003. This phase lasted from June 2002 until August 2003. It was this work that was used as the basis for DEFRA's scott schedule pleaded in its defence and the general evidence from Mr Ward and Mr Pelling on which DEFRA placed particular reliance at the trial to support its case of the systematic unreliability of all of Ruttle's invoices.
214. What is evident from the pleading and the scott schedule prepared and served by DEFRA is that DEFRA is, on the basis of those pleadings, seeking to challenge specific parts of Ruttle's invoices on a number of discrete grounds such as that certain claimed sums for labour or plant are not backed by a signed timesheet, arithmetical errors, absence of supporting information, duplicated claims for travel time, erroneous labour rates and so on. However, the pleading makes these general assertions:

1. In addition to the specific challenges made under these various heads and particularised in the scott schedule on an invoice by invoice basis, DEFRA contended:

"Ruttle has not fully substantiated its claims for payment in that (i) it has failed to provide all supporting information and (ii) on a full audit and arithmetical check the sums claimed are not due. ... DEFRA will be requesting further material, including original documentation, from Ruttle to enable DEFRA to carry out a full audit and arithmetical check."

2. The additional documentation has since been identified as including all timesheets submitted by each labour supplier, pay records and plant records. These, once disclosed, would be used to identify discrepancies and to reduce Ruttle's claims accordingly. The discrepancies referred to included:

(i) any claim for hours of labour supplied by any operative on any site on any day where the invoice and supporting signed or unsigned timesheet records a greater number of hours than appears from the additional material that is requested.

(ii) any instance where an operative with the same name and initial appears on two or more timesheets at the same time at different sites. The apparent duplication is disallowed.

(iii) any plant claim where it appears from other documents that there was no operative on site capable of operating the plant or where the plant was not in use or was surplus to requirements on the day in question. The period of non-use is disallowed.

3. DEFRA does not accept that a DEFRA signature on any timesheet has any particular evidential or contractual status, certainly in relation to any of the categories of discrepancy summarised above. Thus, if it appears that there were, say, two diggers on site when only one was in use on a particular day but the timesheet recording the chargeable use of two diggers was signed by DEFRA's on-site representative, nonetheless only one digger would now be chargeable. However, where no discrepancy is evident, DEFRA will accept the claimed hours that are supported by a DEFRA signature.

4. DEFRA accepts no obligation to pay any invoice where the supporting timesheets are unsigned. However, by way of concession, DEFRA pleaded:

"If and to the extent that Ruttle can fully substantiate through another method an otherwise disallowed invoice, DEFRA will consider allowing it."

In practice, this concession puts signed and unsigned timesheets into a similar category since, whether the timesheet is signed or unsigned, no further payments are accepted by DEFRA to be due until Ruttle has provided full documentation and each timesheet has then been compared to this underlying documentation. Once this exercise has been undertaken for all invoices at each DCC, only those labour and plant hours claimed on a timesheet which are corroborated by equivalent hours identified in Ruttle's underlying documentation or, for plant, by evidence of actual use and which do not appear to be duplicated will be paid for.

5. DEFRA's case for a full scale audit is based on the alleged unreliability of the invoices and timesheets. This unreliability is allegedly shown by the large number of discrepancies already identified and by the suspicion, fuelled by the partial disclosure of underlying documentation, that a full audit of that documentation will show a considerable number of further discrepancies.

215. It is particularly noticeable that DEFRA does not plead any reliance on its own internal documentation and has not disclosed this to any significant degree. Disclosure, of course, includes an explanation of where documents no longer available have gone to. Thus, DEFRA proposes that Ruttle has the onus of establishing an entitlement to any claim where the supporting timesheet is unsigned by reference only to its own documentation and also that the documentation to be used in the search for discrepancies should be confined to that in Ruttle's possession and should not extend to any DEFRA internal documentation and that no particular reliance or evidential value should be placed on a DEFRA signature where the hours that have been signed for exceed those supported by Ruttle's underlying material. In such a case, Ruttle's claim is confined to what is supported by its underlying documentation notwithstanding an apparent acknowledgement, by the DEFRA official's signature, that a greater number of hours are claimable.

5.3.10 Stage 9 of the Invoice Validation Process

216. Stage 9 involved without prejudice meetings held between Mr O'Connor and his colleagues and GTF at which the invoices at the three DCCs at Chelmsford, Leeds and Stafford were considered individually. These meetings were intended to identify each dispute on each invoice. The work was not completed but a detailed exchange of information and schedules summarising the differences on the invoices analysed have been produced. This phase lasted from about September 2003 until March 2004.
217. This process has not been completed since GTF took a decision that it could not put its signature to any summary of agreed and disagreed items until it had conducted a full audit of each timesheet following the disclosure and audit procedures DEFRA claims an entitlement to undertake. However, the exercise has identified the specific items of disagreement under each of the specific topics that have been in play since DLE's original audit work in May 2001.

5.3.11 Stage 10 of the Invoice Validation Process

218. Stage 10 involved DEFRA's preparations made for the trial. These included Mr De Kock revisiting Ruttle's Chorley offices over 7 days in September and October 2003 and March 2004 and reinspecting internal documentation. It also included the preparation of further schedules by GTF analysing discrepancies in and challenges to Ruttle's invoices in the three DCCs I am currently considering. This phase, in the main, lasted from early 2004 until the service of witness statements on 1 April 2004.
219. Following Mr De Kock's visit in March 2004, DEFRA asked Ruttle for the first time to produce its underlying documentation. This documentation had been inspected by Mr De Kock on two separate earlier occasions without his seeking copies or placing any reliance upon it. The first was when he went through Ruttle' s documentation during his initial two week visit to its Chorley premises in June 2001. The second was when he visited Ruttle's Chorley premises over a significant number of days, albeit not in one block, in order to inspect all its documents. These visits were made as part of the IP investigations. On the third occasion, Mr De Kock again started to inspect the Ruttle internal documentation but Mr O'Connor removed them from him because he foresaw a danger of a widened series of issues emerging a few days before trial based on documents which he regarded as being contractually irrelevant and not strictly disclosable. However, Ruttle agreed to provide copies to DEFRA of some of these documents following a specific discovery application.

5.4 Conclusion - Invoice Validation Process

220. It can be seen from this detailed analysis of the lengthy and sustained processes involved in DEFRA's examination of Ruttle's invoices and timesheets that the examination had involved repeated and exhaustive checking and validation of Ruttle's work and claims. There would now appear to be little by way of documents or detail left for DEFRA to examine and certainly little that would be thrown up by discovery which DEFRA or its representatives have not already examined on more than one occasion. Furthermore, there would appear to be little justification for a full audit since the equivalent has already been undertaken. Moreover, there would appear to be little in DEFRA's case that it has only recently been able to plead to the detailed case of Ruttle. The result of the many checking and validation exercises already undertaken by DEFRA would appear to be that no systematic, general or overall case has emerged that could amount to an effective general or overall challenge to Ruttle's claims which would have any real prospect of success. Throughout, moreover, Ruttle appears to have responded to DEFRA's queries and requests for assistance with patience and with every attempt to co-operate and, indeed, to have shown remarkable tolerance at what would appear to have been a sustained fishing expedition by DEFRA to find, without success, a handle with which to beat off Ruttle's claims.

6. DEFRA's General Evidence of Discrepancies

6.1 Introduction

221. DEFRA called three witnesses to support its case that a general disclosure of Ruttle's documents followed by a general audit of its invoices involving a comparison of all of those invoices with the disclosed documents should proceed before any further payments or signing off of any invoices. These were Mr Ward from GTF, Mr De Kock and a further independent expert quantity surveyor, Mr Pye. Mr Ward's written and oral evidence was supplemented by a brief witness statement from his colleague Mr Pelling.
222. There were several strands to this evidence. In summary, Mr De Kock explained that his perusal of Ruttle's internal documentation showed that there were a number of discrepancies between the documents he examined and the corresponding timesheets and daywork sheets supporting the relevant invoices. He also gave evidence about the delayed submission of many of Ruttle's invoices. Mr Ward submitted schedules which sought to analyse the discrepancies thrown up by the Leeds, Stafford and Chelmsford schedules and explained the sensitivity analyses that had been started with the aim of seeing to what extent there was excessive plant located at farms unused but being charged for. Mr Pye gave general evidence that a contractor's underlying records were usually used as a means of checking daywork sheets and of ascertaining what sums were due where the contractor was being paid on a time and rates basis.

6.2 Findings - DEFRA's General Evidence

6.2.1 Labour Discrepancies - Supplier's Timesheets

223. Mr De Kock stated that on the basis of Ruttle's internal documentation that he had inspected, there appeared to be significant over claiming. He examined the labour suppliers' timesheets and invoices and the documents that identified the labourers and operatives in question. This examination was undertaken in two stages. Initially, in September and October 2003, he confined his detailed investigations to 69 operatives. Each operative was investigated over a one-week period although the weeks chosen for each operative differed. This limited exercise revealed that in 37 of the 69 man weeks examined there was a difference between the hours claimed each day by Ruttle and those that the labour supplier had invoiced Ruttle for. No indication was given as to the extent of this difference but I infer from the evidence adduced at the trial in relation to the Gisburn Market site, which related to some of these 69 man weeks, that that difference was between half an hour and three hours, with Ruttle's claimed number of hours always being greater than the supplier's invoiced claim on Ruttle. Mr De Kock's investigation related to both a supplier of operatives and the supplier of electricians.
224. Mr De Kock secondly re-examined these records once copies were provided to him by Ruttle. This examination revealed that there were 17 examples of added on hours in relation to labourers, 20 examples in relation to electricians and 9 examples of what appeared to be double charging by Ruttle for travelling time for labourers. However, no indication is given as to the size of the population from which these examples were taken or as to how reliable a basis for extrapolation to all labour records this exercise might be.
225. These examples of overcharging were investigated in evidence since some of the timesheets in question were examined. I have already dealt with this evidence and have concluded that the examples of suggested overcharging, at Gisburn Market, can be explained by the different entitlement of Ruttle and the supplier to charge travelling time and meal breaks. In Ruttle's case, it could charge for both but in the suppliers' cases they could charge for neither. Moreover, as Mr O'Connor explained in evidence, the relevant Ruttle timesheets were authorised and verified by the signature of a DEFRA on site official, he and his colleagues did not refer to or use the suppliers' timesheets or invoices in preparing its own timesheets and, in some cases, the suppliers' timesheets were on analysis obviously unreliable and unverified by a Ruttle representative. Ruttle also relied on its view of the contract to the effect that it was entitled to be paid on the basis of the records shown on signed timesheets and that the contents of underlying documentation were irrelevant.
226. Mr O'Connor also undertook his own sampling exercise which involved analysing the entire set of underlying documentation from which Mr De Kock had drawn his examples of overcharging. Mr O'Connor added up the total number of manhours claimed by Ruttle on the relevant timesheets having removed inappropriate hours and compared that total with the equivalent total Ruttle was invoiced for. This exercise showed that Ruttle had claimed for 7,919 hours spread over 650 days worked yet had been invoiced and had presumably paid suppliers for 7,856 hours spread over 666 days worked. Thus Ruttle charged for 16 less man days than they paid out for albeit that the total number of hours they paid out for was 63 less than DEFRA was invoiced for. At worst, on this larger sample than that analysed by Mr De Kock, albeit that Mr De Kock' s sample was included within the larger population sampled by Mr O'Connor, Ruttle invoiced DEFRA on a similar basis to that on which it had been invoiced and, at best, Ruttle under invoiced by about 2.4%.
227. I therefore repeat my finding originally based on the Gisburn Market examples taken from the limited samples from one DCC examined by Mr De Kock that there was no evidence that there had been anything other than isolated examples of overcharging. This finding is supported by the fact that at no stage until a few days before trial did DEFRA seek discovery of Ruttle's internal documentation despite the many different professionals on many different occasions who had previously considered it but had not sought to show that it revealed significant overcharging. It is also supported by the fact that Mr De Kock's exercise was inconclusive, had no proved statistical validity and was apparently invalidated by Mr O'Connor's similar exercise which also lacked statistical validity.

6.2.2 Plant Overcharging

228. It emerged in evidence that GTF had been instructed by DEFRA to examine and analyse Ruttle's claims for plant hire to see whether there had been any overcharging for plant that had not been in use but for which hourly hire charges were being claimed. The exercise involved what Mr Ward described as matching labour to plant. Evidently, GTF was instructed that DEFRA was only required to pay hire charges for plant actually in use and did not have to pay for plant which was present on site awaiting use or in case it was needed which a DEFRA official had instructed should be retained on site and had signed for on a timesheet. Indeed, Mr Ward understood that, as he put it:

"Our understanding [from DEFRA's instructions] was that there should have been some management of the process [by Ruttle] and that it there was what appeared to be an excess volume of plant on the site, it should be considered. ... We were conscious, my Lord, that we were looking at this after the event; that we had not been to site and that what we were doing was a paper exercise. Notwithstanding that, we were asked to present our opinion on what appeared to be excessive plant."

Mr Ward and his colleagues undertaking this exercise took no account of any instructions given by DEFRA officials to Ruttle as to the provision of plant and as to whether or not it could be removed from site nor, where the plant had been signed for, of the fact that that plant that had been signed for in a timesheet by a DEFRA official. The evaluation was, in other words, the same whether or not the relevant timesheets had been signed for. Finally, no account was taken of internal DEFRA documentation since such as existed was not provided to GTF.

229. The present conclusion of this exercise is that at least £600,000 of the sum invoiced for plant is duplication but that, without a great deal of further information and documentation from Ruttle, a final figure cannot be put on this element of duplication. The exercise that is required would need to be undertaken over all DCCs but it would seem that the overall figure representing alleged overcharging for plant is likely to rise significantly and is unlikely to be reduced.
230. Given the foundation of this exercise, GTF's conclusion is not surprising. However, the exercise is flawed in several respects. It was based on a number of erroneous assumptions including these: that Ruttle's contract gave it a responsibility for deciding on what plant was required and in putting plant off -hire if it became surplus to immediate requirements; that Ruttle was only entitled to be paid for plant whilst that plant was actually in use; that a signature on a timesheet acknowledging the existence of plant on hire on a particular day for a stated number of hours had no contractual significance; that DEFRA's internal records were not a source, let alone a primary source of information to be relied on; that there was no need to identify the precise work content of any particular site and that there was an acceptable and reliable method of matching to the actual labour recorded as being present on site a theoretical plant hire requirement.
231. In those circumstances, the somewhat rudimentary evidence related to plant usage and plant overcharging was of no use and did not begin to establish the existence of any over charging by Ruttle.

6.2.3 Double charging for Labour

232. GTF produced computer generated spread sheets which were created from the labour records that had been inputted onto a programme GTF had devised. The spread sheets produced every example of a match of names on any site for the day. These showed that there were a significant number of occasions where a man with the same name and first initial was being claimed for in two locations simultaneously. The total number of such suggested duplicated number of hours yielded a suggested cumulative overcharge of nearly £300,000.
233. The first port of call, in order to see whether these records were indicative of overcharging, would be the lodging and subsistence records and DEFRA's internal records since these would show how many Ruttle men had been present on each of the two sites in question on a particular day of apparent overcharging. If these showed that the recorded number of men on both sites corresponded to the claimed number of men, the fact that a man with the same name was recorded as being present on both sites would be immaterial. Ruttle would be entitled to be paid in full and the explanation for the double naming would then be administrative error in the use of the name; two men, with the same name which would not be uncommon given the Liverpool-area base of much of the labour; the use of false names, again not uncommon from men who were recruited from the section of the population containing many who were often shy of criminal, tax, social security and Child Support Agency investigations; or finally a further discrepancy by Ruttle's overworked invoicing section.
234. Overall, it was clear that each discrepancy could be examined on a case by case basis as each invoice was gone through by the parties. The extent of possible overcharging, once the considerations I have listed are taken into account, was not significant and was not an indicator of systematic deception by Ruttle.

6.2.5 Discrepancies

235. Mr Ward produced a multi-coloured schedule for the Leeds, Stafford and Chelmsford DCCs which showed what discrepancies had been identified under each category of discrepancy using a different colour for each category. These schedules did not list duplication of labour, plant, travelling time or subsistence since these discrepancies cannot be finalised until all invoices at each DCC has been considered in detail and a further sweep of all invoices is then undertaken. In consequence, these schedules did no more than repeat evidence contained in the scott schedules in a different format and did not advance DEFRA's case beyond the scott schedules.

6.2.6 Late invoicing

236. Mr De Kock produced a graph and supporting schedules showing that every invoice submitted by Ruttle had been submitted well outside a time frame of 28 days from the date the work was carried out. This had to be corrected because it initially took no account of the requirement to reinvoice every invoice initially issued prior to the contract. However, this evidence was not material to any determination of whether there was evidence of systematic over charging by Ruttle. The invoicing was clearly and persistently delayed but, as DEFRA knew from March 2001 onwards, Ruttle lacked the resources to invoice any faster given the unprecedented demands being made on its very small invoicing department.

6.2.7 Mr Pye's evidence

237. Mr Pye was instructed by DEFRA as an expert quantity surveyor to give opinion evidence as to "industry custom and practice". I had not been prepared to give permission for this evidence when DEFRA applied for permission but left it to the parties to seek to agree whether it was admissible or not. Ruttle withdrew its objection to its being admitted and, with some hesitation, I allowed Mr Pye's report and brief cross-examination. I remain of the view that his evidence is inadmissible.
238. Mr Pye's conclusion was that the only way of conducting an audit of Ruttle's account for payment and for resolving Ruttle's entitlement to payment in relation to both signed and unsigned timesheets and to the disputes and discrepancies that have arisen is by recourse to all categories of Ruttle internal documentation sought by DEFRA. He also expressed a view as to Ruttle's entitlement to its claims for transportation of plant to and from site; for roving foremen and as to the appropriate rate for plant where the particular item of plant was not referred to expressly in the contract plant rate schedule.
239. These views relate to the correct meaning and interpretation to be placed on particular provisions of the contract and on the application of the contract to the heavily fact specific claims in question. They did not take into account the contents of the witness statements, the oral evidence, DEFRA's internal documentation or Ruttle's case as to the primacy of signed timesheets. with great respect to Mr Pye, therefore, who was giving his opinion on the basis of the instructions he had received from DEFRA, his opinion as to industry custom and practice in relation to the matters he expressed an opinion about was inadmissible, since he was giving an opinion on matters of law which were issues that I must decide, and irrelevant, since it was not based on the factual background being Ruttle's working relationship with DEFRA whilst cleaning and disinfecting specific infected premises during the foot and mouth disease.

6.3 Conclusion - DEFRA's General Evidence of Discrepancies

240. DEFRA's evidence does not disclose any systematic overcharging for labour or plant or that Ruttle's internal documentation would show any significant overcharging by Ruttle. On the basis of the evidence adduced at the trial, I conclude that DEFRA was not reasonable in terminating the IP validation exercise, that once the first validation exercise had been complete, little would remain for deduction from a second final audit validation of invoices and that Ruttle is clearly entitled to a significant interim payment arising from the first validation exercise if that were completed.

7 Conclusion - Evidence Generally

241. The evidence adduced in relation to the specific sites, to the various validation exercises already undertaken by DEFRA and by DEFRA' s consultants and expert witnesses all lead to the conclusion that a second full scale audit is not, on the basis of that evidence, justified or reasonable and that if the first validation exercise of all invoices was completed in the near future, Ruttle would be entitled to a very substantial on account payment.

8 Contract and General Issues

242. Ten generic or contract issues were raised by the parties which underlay most of the issues they agreed that I should determine. These issues were addressed separately in the parties' written submissions. I have therefore drafted wording for each of these issues and answered each of them and numbered them 17 to 26, following on from the 16 issues drafted by the parties. I have then answered the parties' agreed list of issues taking into account my answers to issues 17 to 26.

8.1. Factual Matrix

243. The contract is a commercial contract for the supply of services to DEFRA. It was drafted and proffered by DEFRA. Thus, it is to be construed and interpreted so as to give effect to its commercial purpose in a way that complies with commercial common sense. Any technical term should be given the meaning and effect that such a term bears when used in an equivalent technical context outside the contract.
244. In construing the contract, recourse should be made to the mutual factual background or matrix known to both parties on 20 June 2001, the date of the contract. This factual matrix should be used as an aid to the ascertainment of the contract's commercial scope and purpose, the construction of its ambiguous, unclear or unusual terms and any consideration of how to fill in its gaps. The relevant factual matrix included full details of the nature and extent of the FMD C & D work required of Ruttle at each IP, the problems associated with the rates previously being applied to FMD work and the problems encountered in the preparation, submission and validation of Ruttle's invoicing for that work. The renegotiated contract was to apply prospectively to FMD work still to be performed, retrospectively to FMD work already performed and to the invoicing and payment of all Ruttle's past, present and future FMD work.

8.2 Contract Services

245. The contract stated that it had been made on 20th June 2001 and that the contract period was three months renewable on a three monthly basis back dated to 20th February 2001. It stated that Ruttle had agreed to provide certain services defined in it. The definition of services was:

"the services to be provided as specified in the contract or purchase order and shall, where the context so admits, include any materials, articles and goods to be supplied thereunder."

Annex A of the contract, the specification, provided:

"Ruttle Plant Hire Ltd

The supplier will, under the terms of this Agreement, provide the Services as detailed below:

Plant equipment, materials and labour, as necessary, to deal with operations in relation to Foot & Mouth Disease as directed by the Secretary of State.

Supplier will agree timescales for the delivery of equipment with the Disease Emergency Control Centre (DECC) responsible for the infected premises. Usually the supplier will be required to assemble equipment and labour on an infected premises within 24 hours of receiving the request from the DECC. ...

Whilst on the Infected Premises the workmen and foreman will be under the control of the DEFRA representatives (eg DEFRA Veterinary Officer/DEFRA Animal Health Officer or Army) and they must not leave the site without fully disinfecting clothing and equipment as directed by the DEFRA Officer.

Supplier must comply with relevant Health and Safety standards and Environmental standards whilst on site.

Supplier will provide a foreman, or designate one of their operators, to oversee operations on site.

Supplier's foreman to ensure that Daywork Sheets are maintained in respect of plant and labour (including sub­contractors) and that they are signed off on a regular basis by the DEFRA Officer on site."

8.3 Issue 17 - One or Many Contracts

8.3.1 The Issue

246. Issue 17 is:

"Was the FMD work carried out at each IP undertaken under one contract or under a series of separate contracts with similar terms?"

8.3.2 Answer to Issue 17

247. The contract is drafted on the basis that it could be operated in one or other of two ways. It could either be an umbrella contract under which all services instructed for a defined period by DEFRA would be performed or it could be the vehicle for identifying the terms to be used in a series of separate contracts containing identical terms that would be called off in the future by separate purchase orders. These alternative options arise because the contract defines itself as being "the contract or purchase order" which specifies the premises at which Ruttle's services are to be performed and also the services to be performed there.
248. Since this contract was negotiated and entered into at a time when the invoicing and auditing for all work at each of the nine DCCs that Ruttle was associated with had been centrally co­ordinated, it is obvious that the parties had chosen the one contract option. This interpretation also arises from the fact that no separate purchase orders had been issued for each farm in the period leading up to the contract. Instead, Ruttle had simply been instructed to present itself at each farm as the need arose and, on arrival, to carry out the same tasks, complete the same work scope and use the same specification defined in Section N of DEFRA's Cleaning and Disinfection Manual and in its IP Packs as at all previous farms.
249. The answer to Issue 17 is:

"Ruttle carried out all FMD work at each of the 334 locations it worked at pursuant to the terms and conditions of a single contract, being that made on 20 June 2001."

8.4 Issue 18 - Contractual Scope of Work

8.4.1 The Issue

250. Issue 18 is:

"What was the scope of work carried out by Ruttle?"

8.4.2 Answer to Issue 18

251. The contract defined the Services to be performed as being:

"the services to be provided as specified in the contract or purchase order, these conditions, and any other documents (or parts thereof) specified in the Purchase Order".

252. The Specification provided that Ruttle would:

"Provide the Services as detailed below:

Plant, equipment, materials and labour, as necessary, to deal with operations in relation to Foot & Mouth Disease as directed by the Secretary of State.

Supplier will agree timescales for delivery of equipment with the Disease Emergency Control Centre (DECC) responsible for the infected premises."

The Specification also required Ruttle to:

"comply with relevant Health and Safety standards and Environmental standards whilst on site."

253. By the time that the June contract was signed, Ruttle had started work at about 300 separate farms and had completed work in at least 100 of these farms. It had also started work refurbishing or constructing about five separate temporary office premises including two at Gisburn.
254. At most of these farms, Ruttle undertook the entire cleaning and disinfection process and at some it also undertook part of the initial preliminary disinfection service. At the small minority of farms where it did not provide a complete C & D service, it provided the plant, or some of the plant and/or some of the labour required to undertake the same service, the balance being provided by the farm or by another contractor. Ruttle was not provided with a separate purchase order or scope of work document or, if anything was provided in writing, it was somewhat rudimentary in content. Instead, the work was carried out pursuant to the DEFRA Manual and IP packs.
255. Essentially, the C & D work involved cleaning and disinfecting all surfaces of those parts of the farm that had been isolated and cleared of livestock that required this treatment in the light of the virus load throughout the various parts of the farm and the consequences of failure to eliminate the virus prior to restocking. The nature and extent of the cleaning and disinfection required was determined at each farm by the Veterinary Officer or Animal Health Officer in charge at that farm. At those premises where construction or refurbishment work was carried out, the work was identified in documents issued on site by the DEFRA official responsible for directing and co-ordinating the work.
256. It followed that the parties understood that Ruttle's scope of work was to carry out such parts of the PD and C & D work required at each farm it was involved in as was directed by the DEFRA official in charge of work at that location and such renovation or installation work at temporary office accommodation as it was instructed to perform. The PD and C & D work was that specified in DEFRA's Foot and Mouth Disease Manuals and the location, nature and extent of work was dictated by individual site conditions and decided upon by the DEFRA official in charge at that site.
257. By June 2001, therefore, it was clear that the work involved was that specified in the DEFRA Manual concerned with FMD control. This Manual closely defined the cleaning objectives and the manner in which the cleaning was to be carried out. This was the PD and C & D work defined in a document which was one of those Environmental Standards the contract required Ruttle to comply with. What was left for site determination was which surfaces and areas on an IP that had to be cleaned and how the particular surfaces to be cleaned were to be exposed, accessed and reinstated. The method of cleaning was clearly specified, as were the precautions needed to ensure that contaminated water and slurry was removed from the premises in a way that did not contaminate the water supply or surrounding areas.
258. It follows that the parties knew and were acting on the basis that the plant equipment and materials to be supplied as directed would all be directed to FMD C & D work and some PD work and would be such part of those specified processes as DEFRA directed. Ruttle's work would not merely be labour, plant and materials but would be those services working to the clearly defined requirements of the Manual as further defined on site.
259. The answer to issue 18 is:

"The scope of Ruttle's work was such part of the PD and C & D work specified in DEFRA's FMD C & D Manual and further specified by DEFRA's officials on site that was required of it and directed at each farm by the DEFRA supervising official at that farm and such construction or refurbishment work as was directed on site at sites where such work was directed."

8.5 Issue 19 - Annex B

8.5.1 The Issue

260. Issue 19 is:

"What is the contractual status of Annex B?"

8.5.2 Answer to Issue 19

261. The issue arises because the contract defines the contract documents in a way that excludes Annex B. The definition is as follows:

"The Services shall be provided in accordance with ...

1.1 This Contract Agreement;

1.2 The General Conditions of Contract ("the conditions") annexed hereto;

1.3 the Specification annexed hereto;

1.4 the Pricing Schedule annexed hereto;

all of which are held to be incorporated in and form part of the Contract."

These four documents were, respectively, the one page agreement signed by Mr Ruttle on behalf of Ruttle and Mr Carty on behalf of DEFRA; the conditions being pages 2 to 7 of the contract; annex A: Specification; and annex C: Pricing Schedule. On that basis, annex B: FMD Invoicing, was not a contract document although bound into the documentation and bearing an annex reference within the sequence of contract annexes. The conditions, entitled: "Department for Environment, Food and Rural Affairs, Standard Conditions of Cotnract for Services" was dated "Revised June 2000" and was obviously the standard conditions in use by DEFRA for a wide range of service provision including service provision related to infective disease control such as but not confined to FMD. Such services would obviously range in size from a few hours of service provision at one location upwards.

262. The status and purpose of annex B becomes clear if condition 10 of the conditions is considered. This reads:

"10. Payment

10.1 Unless otherwise stated in the Contract, payment will be made within 30 days of receipt and agreement of invoices, submitted in arrears on completion of the Contract or as otherwise agreed by the Secretary of State, for the Services completed to the satisfaction of the Secretary of State ...".

This provision relates to a simple case where one farm or premises is worked on or a relatively small volume or value of supplies over a relatively short period of time are provided. These will be paid for in one payment following a post-completion submission of one invoice.

263. However, Ruttle's FMD work and services were one of the largest and most complex provision of services imaginable under this DEFRA contract. Moreover, the parties to the Ruttle contract were aware that enormous difficulties had been experienced in relation to invoicing since Ruttle had started FMD work sixteen weeks previously. These difficulties included those associated with the timing, frequency and volume of invoices, the many different cost centres involved in Ruttle's work, rates, the quality and method of presentation of the contents of invoices and their backup materials, signatures on and verification of timesheets and daywork sheets, delays in payment and the large number of different people concerned with validation, many of whom were unqualified or inexperienced, that had been yielding slow and inconsistent results.
264. In those circumstances, the parties availed themselves of the two provisions in condition 10 allowing for the agreement of ad hoc payment regimes. Firstly, they "otherwise stated in the contract" how the invoicing and agreement of invoices would be carried out. Secondly, the Secretary of State "otherwise agreed" that the submission of invoices would not be submitted in arrears on completion of the contract but would be submitted "within 28 working days of the works being carried out."
265. These two agreements were enshrined in annex B which is entitled "FMD Invoicing - Ruttle Plant Hire Ltd". This amounts to a detailed code setting out how invoices should be prepared, what information and DEFRA verification or approvals they should contain, what back up information they should be supported by and the frequency of their submission. Annex B is, therefore, agreed to be a contract document having been brought into being and having obtained contractual status through the parties operation of the machinery of clause 10 of the conditions. It is a one-off agreement or specification negotiated specially by the parties for the Ruttle FMD contract in the light of difficulties that had emerged in that relationship during the earlier stages of FMD C & D work that is intended to govern all invoicing and payment for that work pursuant to condition 10 of the conditions.
266. The answer to issue 19 is:

"Annex B is a contract document following agreements reached by the parties as to invoicing pursuant to condition 10 of the conditions."

8.6 Issue 20 - HGCRA

8.6.1 The Issue

267. Issue 20 is:

"Was the contract dated 20 June 2001 a Construction Contract as defined by sections 104 and 105 of the Housing Grants, Construction and Regeneration Act 1996?"

8.6.2. Introduction to Issue 20

268. The relevance of this issue is that Ruttle contend that the contract contains certain implied terms relating to invoicing and payment and the Housing Grants, Construction and Regeneration Act 1996 ("HGCRA") provides for the imposition of mandatory implied terms into a contract that relate to interim payments where the contract is a construction contract whose contractual payment provisions are inadequate by comparison with the statutory standard for such terms that is set by the HGCRA.
269. Essentially, two implied terms are relied on by Ruttle:

1. DEFRA would agree, or provide reasons for disagreeing with, each of Ruttle's invoices within a reasonable time after receipt of that invoice.

2. DEFRA was not to frustrate Ruttle's ability to obtain payment by failing or refusing to sign timesheets submitted for signature.

Ruttle also relies on the fact that the HGCRA covers at least some of the work carried out by Ruttle and the consequent imposition of statutory implied terms into the contract to cover such work as a factor in support of its wider contention that DEFRA is not entitled to withhold further payment under its invoices pending full disclosure of Ruttle's internal documentation and a subsequent full audit of Ruttle's final account of its entire FMD work.

270. Ruttle has not pleaded reliance on the HGCRA but, instead, relies on a contractual implication of the two terms in question and on ordinary contractual principles applicable in determining whether a term should be implied into a commercial contract. In other words, Ruttle contends that the two terms it relies on are implied by necessity; so as to give the contract commercial efficacy and so as to fill in obvious gaps into the payment regime of a contract based on mutual co-operation and fair dealing. Ruttle's initial reluctance to rely on the HGCRA was based on its belief that the HGCRA only applied to some of the work and that, in consequence, a further factual complexity would be introduced, namely the need to seek to identify which parts of each invoice related to construction operations and which did not.

8.6.3 Should the Issue Should be Addressed?

271. During the trial, I raised the question of whether the HGCRA applied to the totality of the work and whether it was possible to determine the existence of contractual implied terms whilst ignoring the existence of mandatory statutorily imposed implied terms applicable on any view to at least part of the work undertaken under the contract. This was because it would be difficult to determine whether it was necessary to imply a term without first determining what other express or mandatorily implied terms the contract contained.
272. Both parties urged caution in my addressing head on the question of whether, and if so to what extent, the operations undertaken under the contract were construction operations and whether the HGCRA provisions as to payment therefore applied to Ruttle's work. Ruttle's caution was based on its concern that a further detailed factual investigation would be needed which the parties had neither prepared for nor fully investigated. It was also based on its concern that the statutory definition of "construction operations" was difficult to apply to Ruttle's FMD work and might lead to the need to draw a line between activities which were and were not construction operations which, given the factual complexities and previous non-reliance on the HGCRA, the court would be unable fairly to draw.
273. I do not accept that there is any factual difficulty involved in determining whether or not the contract or defined part of its was a construction contract. The question that arises is whether the scope of work required of Ruttle by the June 2001 contract, or any part of it, amounted to construction operations as defined in the HGCRA. This question must be decided on the basis of the contract when it was entered into. Unlike most contracts DEFRA made for FMD work, this contract post-dated much of the work Ruttle was to undertake yet it covered all such work. By that time, it was known that Ruttle was being instructed to enter IPs and, in most of the many farms they were working on, to undertake as a package the entire C & D work, the outlines of which were defined in the DEFRA Manual and the fleshing out of which was defined by DEFRA officials on site. Thus, were these C & D work packages "construction operations"? This question, which is one of mixed law and fact involves an initially tightly defined factual question as to whether the work packages I have summarised involve predominantly construction operations because, if they do, the entire contract is a construction contract.
274. I see it as essential that I address this question since I cannot answer any question as to what implied terms are incorporated into the contract without first deciding whether the HGCRA statutory implied terms are applicable. The only fact needed to answer this question are those adduced in relation to particular sites and the contents of the FMD C & D Manual. Both parties addressed detailed submissions as to whether or not the Ruttle scope of work was a construction operation. For all these reasons, I can and do decide the issue of whether the Ruttle contract was a construction contract.

8.6.4 Construction Operations

275. The C & D work involves, as its core activity, the cleaning of all relevant surfaces with high pressure water and disinfectant. Such work was carried out on premises which had been closed to farm activity and from which all livestock had been removed. The farmer or landowner was prohibited by law from re-opening the farm until it had been isolated and the C & D work had been carried out and completed. This work was, in a real sense, restoring the farm and its buildings. Before the work was carried out, the premises had been rendered unusable as a result of the arrival of the FM virus and the operation of mandatory Disease Control measures applied by DEFRA. These premises could only be restored to being farm premises and to farming activities if the C & D work was carried out on them.
276. This work was very expensive, involving expenditure of up to £1 million on the larger farms, and it involved a team of up to 20 men working for up to 16 weeks with great intensity seven days a week and up to 14 hours a day. The plant required was largely heavy engineering and construction plant. As already stated, the core activity was high pressure water cleaning and the associated construction of lagoons, water channels and slurry pits. Access roads and hard standings had to be constructed at each premises. Piping and temporary tanks were usually required to be supplied and installed.
277. In all, the operation was tailor made for the relevant statutory description of "external or internal cleaning of buildings and structures carried out in the course of their restoration." The process was called, generically, "cleansing" and was defined in paragraph 3 of Section N of the Manual as: "cleaning surfaces to provide a grease-free, clean surface followed by the application of an approved disinfectant". The purpose of the exercise was to put the farm and its associated buildings and structures into a state in which it could be re­stocked and the farm, farm buildings and associated structures such as hard standings, yards and pens brought back to working life and so as to: "minimise the risk of recrudescence of disease when the IP is re-stocked prior to the removal of restrictions from the farm." That process readily fits the description "restoration" which is defined in the Oxford English Dictionary as being: "to bring back to the original state" and: "to reinstate, bring back to a former condition". The process is similar in concept and execution to the wholesale washing of the external facade of a large building, a well-known process which also clearly falls within this statutory definition of construction operations.
278. Such work, if looked at broadly and in the round as at 20 June, falls within this definition of construction operations in section 105 of the HGCRA:

"(d) external or internal cleaning of buildings and structures, so far as carried out in the course of their ... restoration.

(e) operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations ... including site clearance, earth-moving, excavation, ....erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works."

At the sites such as Gisburn Market where temporary offices were created by constructing temporary buildings or renovating existing buildings, the work was without doubt a construction operation but such work was a minority of the work Ruttle carried out for DEFRA.

8.6.5 Blue Pencil Test

279. Ruttle submitted that the wording of section 104(5) of the HGCRA requires a court to apply a "blue pencil" test to valuations and claims arising out of a contract which, in part involves the performance of construction operations and in part involves operations outside the ambit of such operations. This is because section 104(5) reads:

"Where an agreement relates to construction operations and other matters, this Part [concerned with adjudication and payment] applies to it only so far as it relates to construction operations. An agreement relates to construction operations so far as it makes provision of any kind within subsections (1) [ie for the 'carrying out of construction operations']."

280. Judge Gilliland QC, the TCC case of Fence Gate Limited v James R. Knowles Limited^[30] gave this helpful explanation of how a court should proceed where it was concerned with a contract involving, in part, construction operations and, in part, "other matters". He stated:

"It seems to me that section 104 (5) is intended to make clear that where a contract relates to construction operations and to other activities, that the contract is to be treated as severable between those parts which relate to construction operations and those parts which relate to other activities and that Part II [of the HGCRA] and the provision for adjudication are to apply to the contract only so far as the contract relates to construction operations."

I agree with that interpretation of section 104(5) of the HGCRA and find that I am bound to adopt it since, on any view, a considerable part of the scope of work provided for by the contract and significant parts of the work performed by Ruttle were carried out under a written contract and involved construction operations.

281. However, before the blue pencil test is applied, it is necessary to consider whether the overall scope and objective of the contract is a construction operation. Clearly, if attention is focused on a tiny part of the work or on a tiny part of a working day of an individual operative, the particular operation being examined may not be, in isolation, a construction operation. But that is to apply the statutory definition in the wrong way. The HGCRA is concerned with "construction contracts" and it is they that are defined as being those that involve the "carrying out of construction operations". Thus, the question is: "was the contract of 20 June 2001 a construction contract involving the carrying out of construction operations?"
282. Since the work and the working area was self-contained, indeed almost hermetically sealed off, since the sole objective and purpose of the contract and of the work at each farm was to restore the relevant farm area sealed off back to working life, since the work was carried out by a defined group of operatives using a defined set of plant determined by the employer and since the work at any one farm was only concluded when the process was certified as being complete, the contract as a whole was a construction contract and the works were either restoration by cleaning or works which were integral or preparatory to or for rendering complete that overall cleaning restoration process.

8.6.6 DEFRA's Submissions

283. DEFRA dismissed the submission that this contract was a construction contract by asserting that the process was not restoration and could not be since the work involved was provided at an hourly or daily rate. Furthermore, it was asserted that the cleaning was carried out on behalf of the state and not, in general by the landowners for public policy reasons to prevent economic damage to the economy rather than to keep the buildings in good condition. However, the process was nonetheless an entire process at each farm and involved both cleaning and restoration. The fact that the state employed the contractor for public purposes does not transform what would otherwise be a construction operation into something different and, besides, the work was primarily for the benefit of each farmer since it was intended to restore useless farms and farm buildings closed down by FMD back to life as working farms, farm buildings and structures.
284. Ruttle's reservations were confined to a concern that some activities carried out might not be construction operations. It referred to building and operating funeral pyres for animals, the removal of carcasses and animal parts, wool fibres and droppings. It also expressed a reservation as to whether the cleaning, washing, scrubbing down, spraying and disinfecting of a cattle yard or shed, where no demolition or reconstruction of a pre­-existing structure was involved, could amount to restoration even if the farm had been rendered unusable by infection.
285. The various forms of burning and removal all fall within the definition of ancillary works provided in section 105(e) of the HGCRA. Indeed, the massive funeral pyres, when they were built, involved such engineering construction as to fall within the definition of "construction of any works forming part of the land". Thus, the critical question about which Ruttle expressed a reservation was whether the process as a whole amounted to restoration. Since section 104 (e) defines "restoration by washing buildings and structures" as a construction operation and since the working farms, rendered idle, empty and useless by FMD, were being restored to life as working farms by cleansing, there is no good reason for excluding the entire C & D operation and the necessary precursor of PD operations from the ambit of sections 105(d) and (e) of the HGCRA.

8.6.7 Answer to Issue 20

286. The answer to issue 20 is:

"Yes, the contract was a construction contract as defined in sections 105(d) and (e) of the HGCRA, being essentially a contract for the provision of FMD C & D services on farm premises. Additionally, some works were carried out in relation to the provision of temporary or permanent offices and those were, additionally, a construction operation by virtue of section 105(a) of the HGCRA."

8.7 Issue 21 - Implied Terms

8.7.1 The Issue

287. issue 21 is:

"What terms relating to the preparation, submission and payment of invoices were implied into the contract?"

8.7.2. Payment

288. The contract provided in condition 10 that payment would be made:

"within 30 days of receipt and agreement of invoices".

DEFRA contended that that 30-day period only started to run from the date it finally agreed the entire invoice or had completed the process of validation so as to finally determine what part of the invoice was agreed. Thus, the period between first receipt of the invoice and the completion of this validation process and the date of submission of the invoice by the consultants or DCC officials involved in validation to the Finance section of DEFRA with a recommendation of payment did not count towards the timescale for payment and that period could be as long as it took for the validation process to be completed.

289. In those circumstances, Ruttle contended either that sections 109, 110 and 111 of the HGCRA, taken with the applicable statutory instrument, The Scheme for Construction Contracts (England and Wales) Regulations 1998, SI 1998 No. 649 ("the scheme") was applicable or that the contract contained an implied term that that validation process had to be completed within a reasonable time and that Ruttle had to be notified in detail within that timescale of the reasons for any non-validation of any part of a submitted invoice.
290. In summary, the HGCRA and its associated regulations provide:

1. For contracts whose duration exceeds 44 days in length, a contractor is entitled to payment by instalments or by periodic payments. The parties are free to agree the amounts, intervals or circumstances in which these payments become due.

2. Every construction contract shall provide an adequate mechanism for determining what payments become due and when and shall provide a final date for payment in relation to any sum which becomes due. The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment.

3. If there is no agreement as to the amounts, intervals or circumstances of instalment payments or as to the adequate mechanism for determining payment and the period between the sum becoming due and final payment, the terms for such matters imposed by the scheme shall prevail.

291. In this contract, taking the circumstances prevailing on the date it was made into account, the following agreed payment procedure was in operation and was to apply for the remainder of the contract:

1. The invoicing and payment of all work would be undertaken in a co-ordinated procedure being operated by the audit team under DLE and Mr De Kock.

2. Ruttle would resubmit all invoices previously submitted as soon as possible. It would submit invoices for future work within 28 days of the work in question being carried out. These invoices would be submitted to the appropriate DCC who would log them and forward them to the audit team.

3. These invoices would be subject to the "on account invoice payment" procedure introduced by DEFRA by procedure document FMD 002 on 14 May 2001 which had been operated by DEFRA since that date for Ruttle's invoices. This procedure involved the duly authorised member or members of the audit team submitting batches of invoices to DEFRA on a regular basis to RMD (Alnwick) for logging and payment. These invoices would be authorised and checked for arithmetical errors before submission. The payment would be on account pending a full audit of the invoices and a determination of the final amount due.

4. For Ruttle, this process involved advice first being given to the relevant Finance Director, being the FD at the DCC or DCCs involved, who would communicate his acceptance of that advice to the audit team who would then forward batches of invoices as required for on account payment.

5. The sum invoiced would be that derived from the signed timesheets and supporting documents and would be prepared in the manner specified in annex B to the contract. That sum, less any deductions emerging from the authorisation and checking process, would be the subject of an interim on account payment.

6. The audit would proceed and no timescale was provided for that process. Ruttle's final account, in the form of its last invoice, was to be submitted 28 days after all work under the contract was completed.

7. Payment of any batch of invoices or of any recommendation for payment would be within 30 days of Alnwick's receipt of the relevant documentation or, in Ruttle's case, by necessary inference within 30 days of the submission of the audit team's recommendation to the relevant FD or FDs.

292. Ruttle does not appear to have been provided with a copy of the invoicing and on account payment procedures issued by DEFRA to each DCC. However, these procedures had been applied to its works by the various DCCs it was involved in and by the audit team after it was established in early May 2001. The invoicing arrangements had been centralised by agreement as was confirmed at the meeting at which the contract was negotiated which recorded:

"Mr Carty confirmed that since action was now being dealt with on a National basis, [a meeting involving particular DCCs need not take place] . . . . Mr Carty confirmed that following the meeting, Mr De Kock would be making a financial assessment of how much can be paid to Messrs Ruttle on account and would be reporting to the Finance Director after the meeting and advise Messrs Ruttle of the amount being paid by 5 June 2001."

In fact, a further £300,000 was notified and paid to Ruttle on 15 June 2001 and a further £1 million on 6 July 2001.

293. It follows that the only part of the procedure specified by the HGCRA that was not agreed was the period between submission of invoices and recommendation of payment, the validation, authorisation and arithmetical checking procedure or of the final audit. If the matter stopped there, the period would have to be determined by reference to paragraph 4 of the scheme and would be 7 days after the submission of invoices which, in turn would be submitted at intervals of no longer than 28 days.
294. However, the parties agreed, in early September 2001, to substitute for this audit procedure the IP procedure. The agreement to establish the IP, to the method of working to be adopted, to the need to establish a programme to validate all invoices and complete their audit and to make on account and final payments within a defined timescale was one reached pursuant to condition 10 of the contract and it superseded any previous agreement covering these matters. For practical purposes, therefore, the IP replaced the audit team as the body responsible for receiving from individual DCCs Ruttle's invoices and logging, arithmetically checking and validating them and then making recommendations to the Finance Director as to payment.
295. Mr O'Connor agreed with Mr Carty and Mr De Kock the procedure and programme to be followed. This agreement was largely reached at the round table meeting in early September 2001 and at the first meeting of the IP and its framework and most of its detail is recorded in the minutes of that second meeting. The agreed methodology may be summarised as follows:

1. The panel would take each DCC in turn, starting with the Preston DCC. A programme of work would be agreed and invoices would be validated on a weekly basis by the IP. In other words, the programme would identify the order in which each DCC would be taken, the period of time over which each DCC's invoices would be validated, the order in which the invoices would be validated and the programme of invoices to be validated each week.

2. A standardised approach would be used to validate and certify all invoices. Invoices would be sent to the relevant DCC in the first instance by Ruttle and that DCC would forward them to the IP, based in Birmingham.

3. The validation exercise of each invoice could not be finalised until all invoices had been initially considered and validated and any discrepancy or query identified, and all invoices had then been revisited in a second swoop.

4. The on-going payment on account procedure would operate until the initial validation exercise had been completed. The sums to be paid on account would be sums shown to be due after the initial validation of any invoice.

5. This procedure would produce general on account payments made in a way that would ensure that sums would be recommended for payment on a weekly basis, being the sums initially validated by the IP in the preceding week. The recommendations would be sent by the IP to each relevant FD as soon as each was made.

6. The sums recommended for payment, once signed for by the relevant FD, would be included in an on account payment within 30 days of the relevant IP recommendation. Payment applications to Alnwick would be co-ordinated by the IP. The actual submission of invoices to Alnwick would be made by the individual FDs concerned.

7. A programme of work, DCC by DCC and within each DCC would be agreed by the IP and Mr O'Connor. No overall timescale was envisaged but it is clear from the evidence that the parties thought and accepted, at the time of establishing the IP at the initial meeting and at the first meeting of the IP, that the overall period of work would be between three and six months. In March 2002, this period was extended unilaterally by the IP to nine months or June 2002.

8. The IP would not only validate all invoices but would agree and recommend a final sum for payment representing the final value of Ruttle's work under the contract. This process would also be completed within the envisaged timescale. This process would replace the on-going audit previously in the hands of DLE. Mr De Kock, the forensic accountant assigned to that audit, would work with the IP in a similar role.

296. In these circumstances, although Ruttle's agreement was given to the arrangements reluctantly and in an attempt to find a way through the invoicing and payment impasse it found itself in September 2001, the parties had agreed a timescale for the submission of invoices and for their validation and payment. The effect of that agreement was that there would be thereafter only one final date for payment, being the date of payment of the final account. There would, however, be regular on account payments from September 2001 until the final date for payment.
297. If follows that there is no need for the imposition of HGCRA payment terms or for the implication of terms by reason of necessity or commercial need. It is true that the timescales involved were lengthy by HGCRA standards but the FMD C & D process were complex to an unforeseeable extent and the problems of invoicing, validation and payment that confronted both DEFRA and Ruttle were uniquely difficult. In those circumstances, the IP procedure I have summarised amounted to one authorised by sections 109(2) and 110(1) of the HGCRA as being agreements as to the circumstances in which payments were to be determined, the amounts of such payments and the timescale for such payments, being pursuant to a rolling programme which would ensure all payments were made within 6 months or by the end of March 2002.

8.7.3 Notification of Withholding

298. Ruttle also contended that the contract contained an implied term that DEFRA would notify Ruttle of any disagreement of sums invoiced within a reasonable time of its receipt. This term mirrored the provisions of the HGCRA which provide:

1. DEFRA could not withhold payment after the final date for payment unless a withholding notice had been served specifying the amount proposed to be withheld and the ground for withholding payment.

2. That notice was to be given not later than the prescribed period before the final date for payment or, if none is prescribed, not later than seven days before the final date for payment.

299. However, as already summarised, the parties had agreed, as part of the IP procedure, a procedure whose effect was that there was to be, after September 2001, only one final date for payment, being the date for the net final payment to Ruttle representing the balance due to it after all invoices had been finally validated. That date was envisaged, at the time the IP procedure was established, as being a date no later than six months later, being the end of March 2002. All other payments were to be on account payments pending final validation of the invoices.
300. It follows that, after September 2001, there was no need for an implied term and no room for the operation of the withholding notice procedure. Any disagreement, and the details of that disagreement, as to sums invoiced would be identified during the regular IP meetings held to work through the envisaged rolling programme. No statutory obligation to serve withholding notices arose since these are linked to the date of final payment of any sum due and only one such date remained but was never achieved.
301. Subsequently, DEFRA unilaterally terminated the agreed IP procedure and disbanded the IP. This unilateral decision, taken without notice to or consultation with Ruttle, was effected by its cancellation of a meeting of the IP scheduled for 27 June 2002 at very short notice and its subsequent letter and that of its solicitors to Ruttle both dated 5 July 2002. At that point, all outstanding sums due to Ruttle became due. However, DEFRA had served what amounted to a withholding notice, by its and its solicitors' letters both dated 5 July 2002, stating that all outstanding sums were being withheld pending investigations into possible fraudulent conduct and a possible pattern of deliberate overcharging by Ruttle.
302. The effect of the subsequent procedure set up by court orders in 2003 and 2004, whereby each invoice at each DCC would be considered in turn in without prejudice meetings and all points of agreement and disagreement were to be set out in a jointly prepared minute of each meeting, was to reinstate the IP validation process but DEFRA decided in June 2002 that no further on account payment should be made notwithstanding any sums identified as being due until the entire validation exercise, including the second audit stage of the IP procedure, has been finalised and the value of Ruttle's final account has been ascertained. It has, in fact, without explaining the basis of the payment, made three on account payments in September and November 2003 and in June 2004 totalling approximately £2.24 million.
303. These proceedings are, in effect, seeking to enforce Ruttle's unpaid claims on its invoices and to seek recovery of a final payment for FMD work which became due 17 days after the termination of the IP procedure on 5 July 2002.
304. For all these reasons, DEFRA has no surviving obligation to make known to Ruttle its reasons for non-payment of any part of any sum invoiced.

8.7.3 Answer to Issue 21

305. The answer to Issue 21 is:

"1. No terms relating to the preparation, submission and payment of invoices were implied into the contract because the parties had reached agreement, which had contractual effect. as to these matters as follows:

2. The parties agreed in September 2001 that all invoices would be agreed and all outstanding sums paid in one overall invoice validation, agreement and payment procedure involving the IP within a timescale of up to six months from September 2001. This agreement meant that there would be one remaining date for final payment and a series of preceding on account payments. There was, in consequence, no other implied or express term concerned with the date by which or the period within which any sum was to be paid or any invoice claiming payment was to be agreed.

3 There was no implied or imposed term as to the furnishing of details by DEFRA of any disagreement as to sums invoiced. This was because any disagreement would be notified to Ruttle during the IP validation process carried out in accordance with the procedure agreed by the parties in September 2001. DEFRA subsequently served withholding notices on 5 July 2002 stating that no further sum would be paid until it had completed all proposed investigations into Ruttle's conduct in invoicing and applying for payments".

8.8. Issue 22 - CECA Schedule

8.8.1. The Issue

306. Issue 22 is:

"To what extent were the contents of and the notes and rates contained in the CECA schedule incorporated into the contract?"

8.8.2. Answer to Issue 22

307. The contract contained two provisions relating to plant hire. These were:

1. In Annex B: FMD Invoicing:

"Plant

· All charges to be as agreed schedule.

· If items not in agreed schedule then they shall be accurately referred to the FCEC/CECA daywork rate items.

· Where either of the above is not possible, then invoices supporting hire rates will be acceptable."

2. In Annex C: Pricing Schedule:

"Item No	Subject	Cost (pounds sterling)
CECA Daywork Ref	Daywork Ref Hire rates for plant as FCEC/CECA day rates
14(31) (another 107 such items)"	Mini Bus	11.94 per hour

308. The CECA daywork rates were taken from a document published by the Civil Engineering Contractors Association ("CECA") dated 1 July 1998 entitled Schedules of Dayworks Carried Out Incidental to Contract Work and was in four parts: 1. Labour; 2. Materials; 3. Supplementary charges; and 4. Plant. The plant section runs to 38 pages and lists out items of plant and the daily or hourly charging rate provided for. These are the CECA day rates referred to in Annexes B and C of the contract. The reference referred to in the first column of annex C (eg "14(31)") is a reference to the appropriate section (14) and the appropriate item no in that section (31) and the subject reference ("mini bus") is the description of the item of plant appearing in that location in the CECA schedule. The item in the cost column is the hire rate taken from the CECA schedule for that item. Thus in section 14, entitled "Lorries/vans etc, at item 31 appears the entry: "Personnel carrier/coach/bus - up to 14/17 seater - £11.94 per hour".
309. The CECA schedule contains an introductory section relating to plant which explains what the hire rates cover and do not cover.
310. Two questions arise, therefore. Firstly, is each item listed in annex C a reference to the precise item of plant in the CECA schedule which it is cross-referred to? This question arises because the verbal description of the item of plant in annex C is not always identical to the corresponding verbal description in the CECA schedule (eg "mini bus" in annex C, "personnel carrier/coach/bus - up to 14/17 seater" in the CECA schedule). In practical terms, if a mini bus was provided with a larger capacity than 17 seats, could Ruttle charge a larger hire rate on the grounds that the CECA rate was only applicable for mini buses with a capacity of between 14 and 17 people or was it confined to the contract hire rate since the rubric "mini bus" was wide enough to cover all mini buses of whatever capacity?
311. The answer to this question is obviously that the contract rate is only applicable to such plant as the CECA rate was applicable to. Otherwise, there would be no reason for placing against each item of plant in annex C the CECA cross reference or reference to the item of plant in the CECA schedule being referred to.
312. The second question is whether the notes in the CECA schedule referring to plant were applicable to the hire and hire rates of items of plant where the rates were those taken from the CECA schedule. These items were either those set out in annex C or those which, although not contained in annex C were nonetheless supplied and which merit an entry in the CECA schedules. The answer is that the notes are applicable, were incorporated into the contract and govern the circumstances of DEFRA's hire of the relevant plant and of the applicability of the rates drawn from the CECA schedule. This is because the "CECA day work rates" are incorporated into the contract and the rates are hourly rates chargeable in defined circumstances for defined items of plant. By incorporating CECA rates, the contract is clearly incorporating the rate, the precise item of plant to which that rate applies and the governing notes defining the circumstances in which that rate is applicable and which it refers to.
313. The answer to Issue 22 is:

"The CECA plant schedule, including the description of all plant items and rates it contains and the notes relating to plant hire were incorporated into the contract and were applicable to the determination of Ruttle's entitlement to payment for plant hired to DEFRA."

8.9. Issue 23 - Control

8.9.1 The Issue

314. Issue 23 is:

"Did Ruttle have any responsibility to decide: (1) what numbers and grades or categories of men and which items of plant would be hired for a particular site; (2) the days and hours for which these would be charged on any particular day; and (3) whether any men or plant were surplus to requirements and should be moved off site and off hire?"

8.9.2 Answer to Issue 23

315. The contract terms, the scope of Ruttle's work, the terms of DEFRA's IP pack and Manual and the way in which the parties operated on each farm site are all crystal clear. All these sources clearly provide or show that DEFRA was in sole control of what work was to be performed, what labour was to be used, what plant was to be hired and left in working order ready for immediate use on site whilst men were working on site, the movement of all men and plant onto and off site and the manner in which the work was to be performed. This analysis arises not only from the contract and other documents but from the evidence of the site based personnel who gave evidence. This evidence and the contract provisions have been analysed in detail already."^[31] The most obvious contractual reference having this effect is in the opening words of the specification, annex A of the contract, which provide:

"[Ruttle] will ... provide ... plant, equipment, materials and labour, as necessary, to deal with operations in relation to Foot & Mouth Disease as directed by the Secretary of State."

316. The answer to issue 23 is:

"No. DEFRA was in sole control of: (1) what work was to be performed, what labour was to be used; (2) what the days and hours of working were to be; (3) what plant was to be hired and left in working order ready for immediate use on site whilst men were working on site; (4) the movement of all men and plant onto and off site; and (5) the manner in which the work was to be performed."

8.10 Issue 24 - Status of Signed Timesheets

8.10.1 The Issue

317. Issue 24 is:

"To what extent, if at all, was a signed timesheet conclusive as to Ruttle's entitlement to payment for the labour and plant recorded on that timesheet?"

8.10.2 Introduction

318. Three issues arise: (1) is the presentation of a signed timesheet a condition precedent to payment for the labour and plant provided on the days and at the site to which a particular timesheet refers; (2) does a signature on a timesheet have the effect that Ruttle is entitled, without further proof, to be paid for the men, plant and hours of use recorded on the timesheet; and (3) is the timesheet conclusive evidence, which may not be departed from or shown to be inaccurate, by other evidence?

8.10.3 Timesheets Under the Contract

319. The contractual provisions for timesheets are contained in annexes A and B. These are:

1. Annex A: Specification

"[Ruttle's foreman is to ensure that Daywork sheets are maintained in respect of plant and labour (including sub­contractors) and that they are signed off on a regular basis by the DEFRA Officer on site."

2. Annex B: FMD Invoicing

Criteria to be followed by contractors and suppliers submitting invoices or applications for payment.

DEFRA and their Auditors will require contractors to fully substantiate all claims for payment as follows:

Labour hours and rates

•    · All timesheets are to be signed and dated by DEFRA personnel, Veterinary officers and the Army.

•    · The contractor is to identify which are his own staff and which of those are subcontractors, farmers, etc.

•    · Only staff and hours on timesheets will be paid for.

•    · The contractor is to identify all machinery drivers.

•    · Only agreed charge rates shall be used.

Subsistence and Travelling

•    Contractor to provide proof of subsistence payments to staff - ie hotel invoices etc.

•    Contractor to provide proof of payment of travelling expenses.

Plant

•    · All charges to be as agreed schedule.

•    · If items not in agreed schedule then they shall be accurately referred to the FCEC/CECA daywork rate items.

•    · Where either of the above is not possible, then invoices supporting hire rates will be acceptable.

Subcontractors

•    Invoices required for all subcontractors accounts.

Submission of Invoices or Application for Payment

•    All invoices or applications for payment are to be submitted within 28 working days of the works being carried out.

Payment of Accounts

•    Payment will only be made in full, when all supporting information has been provided and a full audit and arithmetical check carried out.

8.10.4 Condition Precedent

320. It is to be noted that, for labour, there are two cumulative provisions to the effect that all the numbers and type of labour on site, the day and number of hours and the site in question are to be recorded on a daywork sheet which is to be signed and dated by a DEFRA on site official on a regular basis. That is what is obviously required by an obligation to maintain a daywork sheet and to have signed and dated a timesheet on a regular basis. The contract and the parties treated a timesheet and a daywork sheet as being synonymous. It is also to be noted that this requirement only relates to on site operatives. If an operative or foreman was required by DEFRA, the recording of that person's time was not necessarily to be recorded in this way. Instead, a timesheet was to be presented to an appropriate DEFRA official without any stipulation as to where that official should be located or when the submission should be made. This is because off site personnel are governed only by Annex B.
321. The language of Annex B appears to be mandatory. The "criteria" it contains are "to be followed by contractors" and "only staff and hours on timesheets will be paid for". Following the June contract, the format of a timesheet was agreed and thereafter used. Annex B was, as has already been determined, a one-off document drafted to give effect to the particular circumstances of the Ruttle - DEFRA relationship with its preceding difficulties about invoicing and the content and provision of supporting documentation. The parties had agreed that the new contract would provide for standard form invoicing to facilitate the validation process and to account for the large number of invoices relating to a large number of farms located in 9 separate DCCs across the United Kingdom. Speed of submission, validation, approval and payment of invoices was accepted by the parties, in their pre-contractual discussions, to be of the essence. Thus, it accords with the underlying commercial purpose of the contract that the mandatory language relating to signatures connotes requirements whose fulfilment is a condition precedent to payment. This is in stark contrast to the standard form annex A which does not provide that the provision of a signed daywork sheet is a condition precedent to payment.
322. I conclude that, although the sentence: "only staff and hours on timesheets will be paid for" can mean, but does not necessarily mean that the fulfilment of this requirement is a condition precedent to payment, the parties clearly intended it to have that meaning when the factual matrix of the 20 June 2001 contract is taken into account.

3.10.5 Signature as Proof of Entitlement to Payment

323. Ruttle contended that a signature on a timesheet has the effect that Ruttle is entitled, without further proof, to be paid for the men, plant and hours of use recorded on the timesheet. In considering whether that is so, it is necessary to consider again the validation and payment steps envisaged by the June 2001 contract and the parties' then practice as to the presentation and verification of Ruttle's payment applications that had developed since FMD work had started and which the contract was intended to crystallise into a contractual process. Ruttle was invoicing each DCC, supporting its applications with signed timesheets save for farms where there was no site-based official or where, as in the Chelmsford DCC, it had been told to submit timesheets for signature to the DCC. These invoices were then passed to the centrally based audit team who were unable to fully validate them given the inconsistencies and discrepancies the invoices from different areas were throwing up. The audit team had, therefore, adopted the DEFRA on account payment procedure and had left the final verification and ascertainment of Ruttle' s final entitlement until the end of the work at all DCCs and the finalisation of the accounts at each farm premises. That final account process would involve a finalisation of the audit DLE and Mr De Kock was undertaking.
324. This procedure was clearly given effect to in Annex B. As has been seen, the criteria to be followed involved the submission of invoices backed by signed labour timesheets, only staff and hours on the timesheets would be paid for but payment in full would only be made when all supporting information and fully substantiated claims had been provided and a full audit and arithmetical check had been carried out. It was clear from the DEFRA evidence, particularly that of Mr De Kock, Mr Ward, that a full audit and arithmetical check could only be undertaken once all invoices had been submitted and initially validated, and that that was the view of the audit team in May and June 2001. Indeed, Mr O'Connor was himself aware of that view and the consequent slow down in payments and was largely motivated to agree to a new contract with retrospective effect, with its requirement to resubmit all previously submitted invoices, because he understood that the flow of interim payments would significantly increase in number and size.
325. In those circumstances, a clear meaning can be seen to have been intended by the parties. Ruttle would submit invoices, being applications for payment, backed by signed timesheets. DEFRA would accept that material, and no other, as the basis for validating the invoices for the first of the two validation stages to be undertaken, the one that would lead to on account payments. Subsequently, all invoices would be subject to a full audit. That audit would require full substantiation and all supporting information to be provided. What that would entail would depend on the nature of the audit, the nature of any apparent errors or discrepancies identified or being identified by the audit and the kind of audit trails that were reasonably requested by DLE or the then audit team in the light of any information previously received.
326. It follows that unless and until a full audit was undertaken and it was reasonable to require further documentation and internal information at that stage, Ruttle was not required to submit further documentation and was entitled to be paid for its on site labour solely on the basis of signed timesheets. The words: "only staff and hours on timesheets will be paid for" were, for the purpose of the interim on account payments, excluding any other form of verification of labour.
327. As for plant, Annex B made no provision for signed timesheets. These were provided for in Annex A but this merely required timesheets to be maintained. These were not conditions precedent to payment for plant nor were they stated to be the sole means of verification, even at an interim stage.

3.10.6 Signature as Conclusive Evidence of Entitlement to Payment

328. Ruttle also contended that DEFRA was not entitled to go behind a signature on a timesheet which was, in consequence, conclusive evidence of Ruttle's entitlement to be paid for the numbers and time on site and for the plant and hours of use recorded and signed for.
329. A signature on a timesheet by a duly authorised DEFRA site­based official is undoubtedly an acknowledgement that the labour and plant that was being authenticated had been present on site as recorded and had undertaken work for the period recorded entitling Ruttle to be paid for that work. This was particularly so given the instructions communicated to site-based officials by DEFRA in its packs which have already been dealt with. In summary, a signed timesheet:

1. Constituted an admission that chargeable labour and plant hours acknowledged on the sheet had been worked by Ruttle and they were entitled to payment for those hours.

2. Constituted reliable hearsay evidence of the same facts.

3. Constituted a contractually agreed basis for on account payment without production of other records.

330. However, the contract does not state in terms that the signed timesheets shall constitute conclusive evidence in the nature of a bill of lading, letter of credit or other commercial document having conclusive evidential effect. Moreover, the audit provisions of annex B clearly envisage situations when further authenticating or supporting documents will be consulted, particularly of course DEFRA's internal documentation. However, given the admission constituted by a signature, the contents of the document provide evidence of an entitlement to payment which could only be gainsaid by clear evidence that it was in error. In other words, the signature gives rise to a rebuttable presumption of accuracy. Merely to produce another document that differed in content would not be sufficient to rob the signature of its evidential effect.

8.10.7 Answer - Issue 24

331. The answer to issue 24 is:

1. A signed timesheet recording men and hours on site was a condition precedent to payment for such labour but was not a condition precedent to the payment for plant.

2. Ruttle was entitled to on account payments for labour and plant on the submission of invoices supported only by signed timesheets and was not required to produce any further validating documentation with the invoice but could, if it was reasonable to require this, be required to produce any other relevant documentation as part of the audit that DEFRA was to carry out of all invoices following completion of Ruttle's FMD C & D work.

3. A signed timesheet constituted an admission by DEFRA that Ruttle was entitled to payment for the men, plant and hours of working or hire verified by the signature but that admission was rebuttable, but only by clear and reliable evidence.

8.11 Issue 25 - Recovery for Work Where there Was No Signed Timesheet

8.11.1 The Issue

332. Issue 25 is:

"Is Ruttle entitled, in the light of events that have occurred, to payment for the provision of on site labour and plant hire for any such provision which is backed by timesheets that have not been signed by a DEFRA official?"

8.11.2. Answer to Issue 25

333. Ruttle estimated that about 80% by number of its timesheets had been signed and that a considerable majority of the unsigned balance related to sites in the Chelmsford DCC area. However, there are some unsigned timesheets in all other areas. The reason for these timesheets remaining unsigned is, at Chelmsford, the instruction given to Mr Carrol by Dr Todd-Hunter that these should not be presented for signature on site but should be sent to the DCC offices for signature which Ruttle, in the main, complied with.^[32] The other reason is that on individual sites at particular times, there was no on-site DEFRA official or representative nor one from the Army present at the time such sheets were presented for signature. DEFRA has not put forward a case that any of the unsigned timesheet was unsigned for any other reason, particularly any other reason for which Ruttle is responsible. It points, however, to the absence of any evidence in relation to any one non-Chelmsford unsigned timesheet that it was positively available for signature at the time of its issue and that signature was positively frustrated by the absence of any DEFRA official to sign it.
334. Ruttle contends that it is entitled to payment and to a validated invoice recommended for payment on the basis of the contents of the unsigned timesheets. This is based on a contractual argument and on an agreement to that effect it contends was reached on 24 September 2001.
335. It is first necessary to consider the effect of the condition precedent as to presentation of a signed timesheet being set aside or not being fulfilled by DEFRA. On ordinary contractual principles, if a party has waived reliance by the other party on a condition precedent or has, by its own conduct, prevented the other party from fulfilling that condition, that party may not thereafter require compliance with the condition precedent without prior notice and the contract is to be performed as if the condition precedent had been set aside or removed. In other words, there no longer survives a condition precedent that payment will only be made where there is a signed timesheet for any timesheet that was not signed as a result of DEFRA's failure to sign, its instruction that a signature was not required or its failure to provide an on-site official at the time that the timesheet was ready and available for signature.
336. There are, or may be, some timesheets from DCCs other than Chelmsford which could have been signed by DEFRA officials but which were not because of oversight or due to an error by a Ruttle foreman in failing to seek out the official and obtain his or her signature.
337. DEFRA contended that all unsigned timesheets should be treated as being thus through Ruttle's errors but it was not correct in submitting that there was no evidence that these unsigned timesheets remained unsigned because of DEFRA' s failure to make available an on-site official. For example, it is clear that the audit group accepted that at least some of the unsigned timesheets were unsigned for this reason. The minutes of the co­ordination meeting held on 1 June 2001 record:

"MAFF realise that staffing problems at the start of the outbreak means that some contractors will not now have timesheets etc. signed by MAFF personnel. MAFF are therefore now reliant on the good will and co-operation of these contractors to provide information from their own records which will backup their invoices. This is of course reliant on the contractors' standard of record keeping. QS's should also look at Military records to establish substantiating evidence for invoices."

Moreover, Mr Carrol, basing his evidence on what he had been informed by Mr O'Connor and by site foremen he had spoken to, stated that on occasions it was simply not possible to obtain a signature from an on-site DEFRA official. This evidence, based as it is on a variety of reliable sources, is itself reliable.

338. I conclude that in a significant number of instances other than at Chelmsford where timesheets were unsigned, the reason was because of the unavailability of DEFRA staff due to staff shortages. It is not possible to make any further finding on the basis of the general evidence adduced by both parties at the trial.
339. However, Ruttle relies on an agreement or an agreed course of conduct reached within the IP procedure whose effect is to amount to an agreed waiver of the requirement to obtain a signed timesheet. The minutes of the meeting held on 24 September 2001 record:

"Timesheets

Hugh Carty then turned to the subject of timesheets. If some timesheets had no definite signature, these would be checked and signed off as technically correct, using one of the standard templates. They would then go to the Finance Managers who would decide whether to try and get a retrospective signature or to pass for payment. DEFRA would have the responsibility for obtaining signatures."

340. This procedure mirrored a procedure to obtain signatures on unsigned timesheets in the Cardiff DCC which had been followed earlier for Ruttle. Mr Carty's suggested procedure was one which Ruttle agreed to and it amounted to an agreement by the parties under condition 10 of the contract which allowed for the agreement of invoices in the manner stated in the contract or as otherwise agreed by the Secretary of State. Mr Carty clearly had express authority to reach agreement on the validating procedures to be adopted to cope with unsigned timesheets as the DEFRA official who negotiated the contract and who signed it on DEFRA' s behalf.
341. DEFRA suggested that Mr Carty did not have authority to reach this waiver agreement but that is self evidentially incorrect, given his role in negotiating and signing it. DEFRA also relied on Mr De Kock's evidence that the agreed procedure had not been intended as a substitute for Ruttle's obligation to obtain the appropriate signature on a timesheet. However, Mr De Kock did not explain what the procedure was intended to achieve instead and, in any case, was not entitled to seek to reinterpret the words of a written agreement whose objective meaning was both clear and unambiguous. DEFRA finally relied on Mr O'Connor's evidence. However, his evidence was as follows:

"Q. Now, what this means is that the timesheet would be checked for accounting accuracy; yes?

A. Yes, verified by the panel. Yes.

Q. Then sent for signature, if appropriate?

A. I cannot comment on that.

Q. But that is all that that agreement means; that is right, is it not?

A. It says that they would send for retrospective signature or pass for payment.

Q. But it does not mean that Ruttle were being forgiven the requirement that timesheets be signed, does it, Mr O'Connor?

A. No, because there was not anybody on site to get them signed. Therefore, it was recognised that that was an issue that DEFRA had caused and this was a method that they - as far as I understood it, it was a method that they would implement to rectify that.

Q. Yes, if the AH0s thought it appropriate to sign?

A. Well, it was just that it was sent for signature. Who signed the timesheets, it is DEFRA's internal workings that has done that.

Q. But you were not being released from the obligation to produce signed timesheets, were you?

A. No, the contract is quite specific on that, but if we cannot get them signed then there has to be some method of putting in place and getting them signed. We submitted the timesheets with the invoices when the invoices were issued and DEFRA then, because they knew where all their staff were who could sign those sheets, would take them to them."^[33]

342. Mr O'Connor's evidence could not have been clearer. He was saying, in summary, that Ruttle agreed to DEFRA's suggestion at the IP meeting that the obligation that Ruttle should obtain a signed timesheet would be waived in relation to any timesheet which had been submitted with an invoice which was unsigned. This suggestion was made by DEFRA because it recognised that many timesheets were unsigned because of staff shortages and the unavailability of DEFRA staff to sign them when needed. Instead all timesheets would be technically validated and then sent to the FD for signature or for payment if the FD decided to authorise payment without first obtaining a signature.
343. I conclude that Mr O'Connor is correct and that the parties reached a binding agreement waiving the requirement for obtaining a signature and replacing it with a procedure which would enable all invoices to be validated and authorised for payment.
344. What was not spelt out is what would happen to invoices where the FD was not able to obtain an authenticating signature and would not pass the invoice for payment. It was not sufficient to do what DEFRA did, namely treat the whole invoice as not being recoverable. What DEFRA, whether it be the IP or the FD at the DCC in question, had to do was rely on the unsigned timesheet unless it had reasonable grounds to challenge any part of it. If so, the on account payment should reflect the part of the timesheet which was not challenged and the invoice would then be subject to the second round of validation and audit, using such additional sources of information and documentation as it was reasonable to call on.
345. The answer to issue 25 is:

"1. DEFRA waived the condition precedent set by the contract that an application for payment and a payment had to be supported by a signed timesheet for labour and plant. This waiver occurred by agreement reached on 24 September 2001.

2. Ruttle was entitled to an on account payment for sums based on the contents of each unsigned timesheet unless and to the extent that DEFRA had reasonable grounds to challenge any part of that timesheet. In such a case, the challenged part of the timesheet would be subject to full validation and audit and DEFRA was to use all reasonable sources of information and documentation in that validation exercise."

8.12. Issue 26 - Ruttle's Obligation to Disclose Suppliers' Timesheets and Other Internal Documentation

8.12.1 The Issue

346. Issue 26 is:

"Is DEFRA entitled to disclosure from Ruttle of underlying documentation and, if so, on what terms?"

8.11.2 Answer to Issue 26

347. The effect of the contract and the IP procedure that the parties adopted pursuant to condition 10 was that the validating and payment of invoices was to be a two-stage process. Initially, each invoice would be validated for discrepancies and arithmetical errors using no more than the timesheets and other documents provided for in Annex B of the contract and then a second stage process amounting to an audit would be carried out to take in all matters which could not be validated during the first stage and using such additional sources of information and documentation as it was reasonable to use in conducting "a full audit and arithmetical check" with "all supporting information". This second audit stage would result in payment in full.
348. In deciding what should be called for and used during this second stage, the following principles would need to be taken into account:

1. The signature on a timesheet by a DEFRA official was placed there pursuant to a defined procedure imposed by DEFRA. The signature amounted to recognition and approval of the accuracy of the contents of the timesheet and that the labour and plant being signed for were chargeable by the contractor having been authorised by DEFRA. Thus, good evidence or good ground would be needed that contradicted the facts validated by the signature.

2. The first and most obvious port of call for additional material would be the supporting documents themselves, DEFRA's internal documents and the contractor's internal documents.

3. A full audit trail ought not to be necessary unless there remain good grounds for challenging the timesheets and other documents supporting an invoice and the first port of call has retained or created reasonable grounds for challenge.

4. Reasonable grounds for challenge at each stage include an element of proportionality. Thus, there ought to be a reasonable potential saving spread through a reasonable number, by number and value, of items before a first stage audit, let alone a second stage audit, is contemplated.

5. The purpose of the first on account trawl through the invoices was, in part, to see what discrepancies existed that merited further audit and, if so, what audit using what documents.

6. A final consideration would be: over what proportion of invoices should any audit trail or recourse to further documents be spread, should it be confined to the particular invoice, the particular site, the particular DCC or the whole of Ruttle's work or to some other proportion of any of these?

349. I have derived these principles from the terms of the contract, the procedure evolved by the parties during the IP process which had, in turn, evolved from the preceding audit work, and from the overriding principle derived from necessity that the validating and auditing involved should be reasonable in both size, ambit and timescale.
350. In this case, as I have already found, the audit work before September 2001, the work of the IP and the investigations by GTF and Mr De Kock since November 2002 have not yet identified any significant evidence of systematic overcharging or deliberate inflation of invoices. The labour claims appear to be based on accurate claims for both numbers of operatives and daily hours and the plant claims on items of plant that were on hire for the hours for which claims were made. Other than the possible generic heads of deduction based on rates to be charged and other issues already pleaded to, the discrepancies in the invoices are all apparently individual or one off discrepancies, albeit significant in number. The limited recourse to suppliers' timesheets and internal plant records have not, as I have already found, yielded any clear evidence of discrepancies, even on a limited basis. Moreover, DEFRA has, unreasonably, not had any recourse to its own internal records or, where none are available, to tracking down and interviewing site-based officials. Moreover, no explanation has been given as to what records are available and what has happened to the records that are no longer available.
351. For all those reasons, DEFRA has, at present, only a limited case for full disclosure of the entirety of Ruttle's internal documentation. However, DEFRA has still to conduct an audit or to undertake the second sweep of invoices and has yet to plead out its case in relation to what auditing it is proposed should be carried out and what disclosure, documentation and investigations it is proposed should supplement that audit. If DEFRA does apply for disclosure of any part of Ruttle's internal documentation for use in the audit, I would need to consider whether such disclosure should be conditional upon DEFRA providing Ruttle with full disclosure relating to the same sites of:

1. DEFRA's internal documentation.

2. An explanation of what documentation was once in existence but is no longer available.

3. An explanation of what has happened to documentation currently unavailable and of the steps already taken to try and locate it.

4. A full list of its on-site officials at sites covered by Ruttle's additional disclosure with such information as to their current whereabouts as is now available to DEFRA.

5. All working papers and internal communications of all those associated with the DLE/De Kock audit in the period May - September 2001 and with the IP between September 2001 and June 2002.

6. All communications and internal documents concerned with Ruttle's invoices and entitlement to payment within, from and to the Purchasing and Supply Department and each DCC that Ruttle was working with.

352. However, further consideration of what DEFRA is entitled to discovery of and what Ruttle is entitled to in reply must await DEFRA's detailed proposals of what audit work it proposes to carry out and of the invoices, sites and DCCs it proposes that work to extend to.
353. The answer to issue 26 is:

"DEFRA is not, at present, entitled to disclosure of any of Ruttle's internal documentation but if it hereafter conducts an audit of any of Ruttle's invoices, the relevant and material parts of that internal documentation will be disclosable on reasonable terms. In identifying what those reasonable terms are, account will need to taken of the principles set out in paragraphs [348 and 351] of the judgment."

8.12 Issue 27 - Further On Account Payments

8.12.1 The Issue

354. Issue 27 is:

"Are Ruttle currently entitled to further on account payments prior to any further audit work and the finalisation of its entitlement to payment?"

8.12.2 Answer to Issue 27

355. In the light of my findings, it is clear that the first sweep of invoice validation ordered by the court should proceed and that since there is little evidence of systematic over charging or of discrepancies which can only be resolved following a first sweep of those invoices, substantial further on account payments can and should be made based upon the sums that emerge as being payable from the first sweep of invoices prior to any adjustment following the second sweep and audit. Furthermore, in the light of the extensive work undertaken over the last 3 years, from May 2001, the first sweep should be capable of being completed within a few months of the date this judgment was handed down.
356. The answer to issue 27 is:

"Yes, Ruttle is entitled to substantial further on account payments following completion of first sweep validation of invoices at each DCC on a DCC by DCC basis."

9. Specific Issues

9.1 Issue 1 - Timesheets

9.1.1 Issue 1.1.

357. Issue 1.1. is:

"1.1. In what circumstances, if any, did the requirement that Ruttle submit to DEFRA signed and dated timesheets in support of any claim for payment for labour or plant not apply?"

358. Issue 1.1 has already been answered within issue 25 above. The answer is explained in paragraphs 48-61 above. The answer is:

"Following the instructions given to Ruttle in February 2001 on site by Dr Todd-Hunter for the Chelmsford DCC and the agreement reached on 24 September 2001 between Mr Hugh Carty and Mr O'Connor as part of the Invoicing Panel procedures, the requirement that Ruttle submit signed and dated timesheets in support of any claim for payment was waived or was no longer capable of being relied on by DEFRA."

9.1.2 Issue 1.2.

359. Issue 1.2. is:

"1.2. What information, if any, did Ruttle have to provide to DEFRA to support a claim for payment for labour or plant where the claim was not supported by a signed timesheet, but only by unsigned timesheets?"

360. Issue 1. 2. has already been answered with issue 21 above. The answer is explained in paragraphs 192-212 above. The answer is:

"Once the Invoicing Panel started work validating invoices, none save the invoices, timesheets and supporting documents defined in annex B. Once the first sweep of invoice validation had been completed, Ruttle was to provide such documents as DEFRA reasonably required on such terms as were reasonable in order to assist DEFRA in conducting its second sweep of invoices, its audit and its determination of the final sum due and owing to Ruttle."

9.1.3 Issue 1.3.

361. Issue 1.3 is:

"1.3. In what circumstances, if any, can DEFRA refuse to meet a claim by Ruttle for payment for labour or plant that is supported by signed and dated timesheets?"

362. Issue 1.3 has already been answered with issue 24 above. The answer is explained above. The answer is:

"Where DEFRA has reasonable grounds, supported by reasonably reliable evidence, that the contents of any timesheet, although signed and dated, are inaccurate or unreliable and where it is reasonable, in the light of those grounds and that evidence, to withhold payment in full or in part of the sum invoiced in reliance on that timesheet."

9.1.4 Issue 1.4.

363. Issue 1.4. is:

"1.4. Do any such circumstances apply in this case?"

364. Issue 1.4. has already been answered and the reasons for that answer given in issue 24 above. The answer is:

"On the basis of the evidence and documents adduced in evidence at the trial of these issues, DEFRA has not yet identified circumstances which justify a conclusion that the contents of any signed timesheet are unreliable."

9.1.5 Issue 1.5.

365. Issue 1.5 is:

"1.5. Was an agreement reached, at the meeting on 24 September 2001, relating to unsigned timesheets? If so, to what extent, if at all, is DEFRA entitled to challenge the agreement relating to unsigned timesheets?"

366. Issue 1.5. has already been answered and the reasons given for that answer in paragraphs 48-61 above. The answer is:

"Yes, an agreement was reached at the meeting on 24 September 2001 relating to unsigned timesheets. DEFRA is not entitled to challenge the agreement. Moreover, it has not sought to challenge the agreement, it merely denies there was one and that, if there was one, it was entered into by Mr Carty on its behalf without its authority. DEFRA is incorrect on both counts."

9.2 Issue 2 - Absence of Supporting Information

9.2.1 Issue 2.1.

367. Issue 2.1 is:

"2.1. To what supporting information was DEFRA contractually entitled in order for Ruttle to fully substantiate its claims for payment?"

368. Issue 2.1. has already been answered and the reasons for that answer given in issue 21 above. The answer is:

"Prior to the trial of these issues, DEFRA was not contractually entitled to supporting information save such information as the contract required to be submitted with each invoice. However, if and when DEFRA conducts a second sweep of invoice validation and a full audit of Ruttle's invoices, it will be entitled to such supporting documentation as is relevant which it is reasonable to require subject to such terms as it is reasonable to impose on DEFRA."

9.2.2 Issue 2.2.

369. Issue 2.2. is:

"2.2. What was the time for payment of invoices submitted by Ruttle to DEFRA?"

370. Issue 2.2 has already been answered and the reasons for that answer given in issue 21 above. The answer is:

"Ruttle was entitled to payment of invoices pursuant to the IP procedure in two stages:

(1) An on account payment. This was to follow the first stage validation of that invoice and a recommendation for payment. This validation was to take place as part of a programme for the validation of all invoices to be undertaken between September 2001 and March 2002.

(2) A final payment. This was to be made as part of one final payment of all outstanding sums due to Ruttle to be recommended and paid following the second sweep and audit of all invoices and was to be paid by the end of March 2002".

9.3 Issue 3 - Additional Charges

9.3.1 The Issue

371. Issue 3 is:
372. "3. Was Ruttle contractually entitled to charge DEFRA for supervisors or "roving foremen" (whether in control of other foremen or otherwise) or are such charges to be treated as administration charges under the contract?"

9.3.2 The Answer

373. The contract required Ruttle to provide labour on each site of variable size and to provide appropriate supervision of that labour by way of a foreman or foremen. The only express provision for supervision was in Annex A: Specification. This provided that Ruttle would provide:

"a foreman, or designate one of their operators, to oversee operations on site."

Annex C: Pricing Schedule, contained separate labour rates for labourers and foreman.

374. If the words of the contract are applied literally, Ruttle would supply one and only one foreman per site regardless of how many operatives were working on that site. The numbers ranged from four up to 25, depending on the size of site and the volume and complexity of work required. On a large site, the operatives required could at times include a gang of electricians, plant operators and drivers, other technicians such as carpenters, plumbers and scaffolders and up to 15 labourers or operatives. At the height of the FMD work, in the period April to June 2001, Ruttle had upwards of 500 operatives a week working over the country as a whole and upwards of twenty sites in a DCC. It is inconceivable, and certainly contrary to industry practice, for only one foreman per site to be required or paid for regardless of the size of the site and the number of sites and operatives being employed at any one time in a specific DCC area. The evidence of Mr Pye was to the effect that it is customary for a construction gang of up to 6 ordinarily to require one foreman and, by inference, further foremen for each additional six or less men.
375. Given that background, the contract requirement in Annex A can and should be read as referring to a need to designate one individual on each site as the overseeing foreman, the "Sergeant Major" for that site. Annex A did not preclude other foremen, working under the overseeing foreman, also being appointed. These might be seen as "Sergeants". This interpretation of the contractual requirement, permitted by the language of Annex A, is more in tune with commercial reality and the factual matrix since, by June 2001, many sites had been worked on where more than one foreman had been employed, invoiced for and paid for. All Annex C provided was one separate rate for each foreman, which would be payable for each foreman employed on site where a site gang size justified more than one foreman.
376. Ruttle went further and in some areas appointed a so-called roving foreman. This individual travelled around all sites being worked in a DCC or locality, visiting each site as often as was possible in the extended working week being worked. His role was brought about because DEFRA had difficulty in providing full time on-site supervision or supervisors such as vets who could devote sufficient time whilst on site directing and supervising Ruttle's operatives. Furthermore, DEFRA officials at each DCC found it easier in many instances to communicate direct with a member of Ruttle's management about day to day matters of FMD administration and disease control working rather than communicating via an on-site supervisor to the overseeing foreman. Finally, with Ruttle working on occasions in several different locations simultaneously within one DCC with a total labour force of in excess of one hundred men, most of whom were working far away from base, it was essential to have a foreman-­type person travelling around from site to site to deal with all of the myriad problems such intensive working would produce which an on-site working foreman could not reasonably be expected to resolve.
377. Thus, it can be seen that it was reasonable for Ruttle on occasion to need roving foremen and that DEFRA's working requirements reasonably implied on occasion such foremen to be employed in addition to the on-site foremen. Such foremen had been employed at several DCCs for several weeks prior to 20 June 2001 and their employment and the reasonable need for this formed part of the factual matrix of the contract. These men were not part of the service for which a 3.5% administration charge was provided for. This charge related to head office and office-based administration not site-based operatives in a supervisory capacity.
378. The answer to issue 3 is:

"In principle, where it was reasonable and reasonably necessary to employ a roving foreman in a particular area in addition to site-based working foremen, Ruttle is entitled to charge for such foremen whether or not they were directly in control of other foremen and such a charge is not to be treated as part of the allowable percentage mark up for administration charges provided for by the contract."

9.4 Issue 4 - Excessive Hours

9.4.1 Issue 4

379. Issue 4 is:

"4.1. To what extent does Ruttle have to prove that work which appears excessive (ie 24 hours a day, 7 days a week for 6 weeks) was carried out:

(a) when there is a signed timesheet that appears for that work;

(b) where there are unsigned timesheets that support that work?"

9.4.2 The Answer

380. There were limited occasions, such as at Gisburn Market, where Ruttle was required to have on standby on a 24/7 basis certain operatives such as electricians, plumbers or foremen who could be called to site to deal with emergencies if these arose outside site working time. These operatives were often working up to 14 hours on site in a 24-hour period and then were on call for the balance of that time.
381. These operatives have been invoiced for a 24-hour working period and in many instances a timesheet has been signed with blocks of 24 hours being acknowledged. Ruttle claims entitlement to payment at the appropriate contractual hourly rate, irrespective of whether the period was worked or not. In other words, Ruttle is claiming the same hourly rate whether the operative was working or merely on call.
382. In reality, the contract has no appropriate rate for the provision of on call services. DEFRA has not proposed what that standby rate should be. The contract rate is defined as being payable for hours "worked per week" whereas the standby hours were not being worked.
383. What is required is a star rate for standby time, chargeable for all periods when the relevant operative was on standby. For that part of the week when he was working or called out, a full hourly rate is appropriate and for the balance of hours in each 24, the star standby rate should be invoiced, charged and paid for.
384. The answer to issue 4 is:

"Where time has been charged, whether on signed or unsigned timesheets, that is excessive in the sense of not being worked on site, whether because the operative was on standby, on call or because of some other reason, Ruttle is entitled to charge for such additional time but at an appropriate rate reduced from the rate that would be applicable for such working hours had they been worked on site."

9.5 Issue 5 - Reduction of Labour to Match Plant

9.5.1 The Issue

385. Issue 5 is:

"5. Was Ruttle contractually entitled to charge DEFRA in circumstances where there was insufficient plant for the labour to operate?"

9.5.2 The Answer

386. DEFRA has yet to plead this head of deduction. However, it had emerged as a potential issue before trial and should be resolved. DEFRA's contention is that where it can be seen, by matching the amount of plant on any particular site on any particular day to the amount of labour on that site on the same day, that there was insufficient available to allow the operatives to be fully engaged on site, Ruttle should only be entitled to charge for such numbers of operatives that this theoretical matching exercise provided for. This matching exercise is the result of Mr Ward' s desk-based evaluation which I have already held to be both irrelevant and inappropriate.
387. The ground of deduction is flawed for the following reasons:

1 The number of men on site on any one day was controlled by DEFRA. Ruttle had no part in the management process and was merely obliged to provide such labour and plant as was instructed to be on site by DEFRA officials. Thus, any imbalance was one for which DEFRA was responsible and was required to pay for.

2. The exercise on which the deduction is based assumes that there was a definable number of men capable of being related to defined plant so that if the number of men required on site that was deduced by that theoretical pairing exercise was exceeded, the excess number of men were idle. In fact, all such men, within large margins, would be able to be fully employed on site and, in any case, there was insufficient data available to allow for any reliable pairing, even as a paper exercise.

3. The chargeability of most of the labour deducted under this head was acknowledged by being included on signed timesheets and, for such labour, DEFRA has not produced any basis for showing that the signatory was erroneous in placing his or her signature to the timesheet.

388. The answer to issue 5 is:

"Yes, where the alleged insufficiency was said to have arisen as a result of a theoretical pairing exercise undertaken after the event by persons who were not present on site during the course of the relevant work."

9.6 Issue 6 - Number of Foremen

9.6.1 Issue 6

389. Issue 6 is:

"6.1. How many foremen was Ruttle contractually entitled to charge for at any one site?"

9.6.2 The Answer

390. The answer to issue 6 has already been discussed and reasons given under issue 3 above. The answer to issue 6 is:

"As many as it was reasonable to employ at that site at any one time given industry custom, the needs of the work, the need to comply with health and safety requirement, the need to address any risks identified by appropriate risk assessments and the size of the labour force on site."

9.7 Issue 7 - Mobilisation/demobilisation/transportation

9.7.1 Issue 7.1.

391. Issue 7.1. is:

"7.1. Was Ruttle contractually entitled to charge DEFRA for the cost of associated labour in attendance during the mobilisation/demobilisation/transportation of plant provided under the terms of the June 2001 Contract to and from site?"

9.7.2 The Answer - Issue 7.1.

392. The plant hired to DEFRA by Ruttle had to be transported to and from site. The plant, or the great majority of it, was supplied from Chorley and had to travel from Chorley to the first FMD site it was used on, then from that site to the next FMD site and so on until being returned to Chorley. Ruttle seeks to charge for the use of a low loader or a Brimac lorry and a driver on an hourly rate for the number of hours the relevant journey took. The contract, in schedule C, contained an entry for a low loader at an hourly rate of £55.61 and for a Brimac lorry at £29.49. It is clear from the notes to the CECA schedules that mobilisation and demobilisation of plant was to be charged for separately and that the only use for these two items included in Schedule C was for road transportation of plant since a low loader would not be needed or be capable of use on a farm site or directly for C & D operations.
393. DEFRA contended that the contract contained no express provision permitting recovery of labour in attendance during transportation of plant. However, the contract permitted recovery of all labour as necessary to deal with FMD operations. This labour was not confined to labour actually working on site so long as it was necessary for FMD operations and it was clearly necessary for a driver to be employed to drive the low loader to site that carried essential plant needed for FMD operations.
394. The answer to issue 7.1 is:

"Yes, the appropriate hourly rate for transportation and necessary driver or drivers during mobilisation, demobilisation or transportation of plant required for FMD operations was chargeable by Ruttle."

9.7.3 Issue 7.2

395. Issue 7.2 is:

"7.2. Was Ruttle contractually entitled to charge DEFRA for the cost of labour once it was on site but unable to carry out any work as a result of the plant on site not being assembled/present/in full working order?"

9.7.4 The Answer - Issue 7.2.

396. This issue is a variant of issue 5 above. Where labour was on site having been ordered by DEFRA, and where that labour arrived and stayed on site and was recorded in a timesheet signed or presented for signature, Ruttle was entitled to charge for that labour even if the operative would have been using an item of plant but could not use it because the item of plant was not assembled, present or in full working order. In practice, on such occasions, plant operators were redeployed on other tasks on site and DEFRA has not produced evidence that on such occasions the plant operators did nothing or were "unable to carry out any work". If such occurred however, on the basis of the assumption that such work was for the stated reason, Ruttle could charge for all time on site recorded in a timesheet.
397. The answer to issue 7.2. is:

"Yes".

9.7.5 Issue 7.3.

398. Issue 7.3. is:

"7.3. If so, upon what basis was that cost to be quantified? "

9.7.6. The Answer - Issue 7.3.

399. Since the operatives in question were engaged on site and had not been "stood down" by DEFRA, Ruttle was entitled to charge for their attendance on site during working hours at the appropriate contract hourly rate.
400. The answer to issue 7.3. is:

"At the appropriate hourly rate provided for in Annex C to the contract."

9.8. Issue 8 - Travel Time

9.8.1. Issue 8

401. Issue 8 is:

"8.1. Was Ruttle contractually entitled to add travel time on to workers' timesheets as well as adding the time on to invoices?"

9.8.2. The Answer - Issue 8

402. It is agreed by Ruttle and DEFRA that the answer to this issue is:

"No. Ruttle was not entitled to add travel time to workers' timesheets as well as adding the time on to invoices. Ruttle was only entitled to add on travelling time once."

9.9. Issue 9 - Minibus/van

9.9.1. Issue 9

403. Issue 9 is:

"9. On what basis was Ruttle contractually entitled to charge DEFRA for the hire of minibuses?"

9.9.2. The Answer - Issue 9

404. DEFRA concedes that it is required to pay the hire charge invoiced by Ruttle for the use of minibuses. The answer to issue 9 is:

"On the basis of the hourly charge set out in Schedule C at the contractual rate of £11.94 per hour".

9.10. Issue 10 - Mileage Allowance for Plant

9.10.1. Issue 10

405. Issue 10 is:

"10. It Ruttle has charged for mileage incurred by plant while being operated by Ruttle, is Ruttle contractually so entitled to charge?"

9.10.2. The Answer - Issue 10

406. Annex C contains, for labour, an additional mileage allowance of £0.40 per mile for labour driving from Chorley to site, between sites and back to Chorley. Ruttle has charged this allowance for plant such as minibuses, vans and cars being driven between sites. That charge is not recoverable. £0.40 per mile is chargeable by people not for vehicles. If a van was used to ferry people to or from site, the hourly plant rate could be charged for the time of the journey but an additional £0.40 per mile could not be charged. This was conceded by Mr Carrol. ^[34]
407. The answer to issue 10 is:

"No."

9.11. Private Cars and their Mileage Allowance

9.11.1. Issue 11.1

408. Issue 11.1. is:

"11. Was Ruttle contractually entitled to charge DEFRA an hourly rate and mileage allowance for company motor cars utilised and driven by their employees whilst engaged on DEFRA's behalf?"

9.11.2. The Answer - Issue 11

409. This charge was made for the travelling foreman driving to the first site to be visited, between sites, from the last site back to his lodgings and for any essential driving in between, such as to the DCC offices. Since a roving foreman was chargeable, where it was reasonable to charge for his services, there would also be a mileage allowance payable. This was not strictly provided for since roving foreman were not expressly provided for but their use was sanctioned by DEFRA or necessitated by the volume and pattern of work ordered by DEFRA. An analogous rate, being £0.40 per mile driven on roving foreman business, is appropriate and arises from necessary implication.
410. The answer to issue 11 is:

"Yes, at the rate of £0.40 per mile."

9.1.2 Issue 12 - Excess Standing Time

9.12.1. Issue 12

411. Issue 12 is:

"12. Was Ruttle contractually entitled to charge DEFRA for plant which was standing on site for more than 36 hours in the light of the agreement reached between the parties at a meeting on 12 December 2001?"

9.12.2. The Answer - Issue 12

412. On occasion, plant was left standing on site during a period of idleness during a working day or days. This occurred for one or other of two reasons. Firstly, the plant could not be moved because it had not been cleared for movement having been on an infected site. Usually, a period of three clear days was required before movement was allowed off an infected site. Secondly, the plant could have been surplus to requirements although ordered or not put off-hire by DEFRA.
413. An agreement was reached about such periods of hire at the IP meeting held on 12 December 2001. The agreement was recorded as being:

"Plant Hours - Standing Time

It was agreed that plant would be paid for at 12 hours per day or as signed for by DEFRA personnel and that plant would be paid for up to 3 days if left standing on site. If any plant is left standing longer than this period then the invoicing team are to clear requirements with the DEFRA personnel who signed for it."

This agreement, reached by Mr Ruttle and Mr O'Connor with Mr De Kock, Mr Billington and Mr Harrison, fell within the authority and discretion of the IP given it by its terms of reference. The agreement amounted to a detail of technical validation and the identification of discrepancies.

414. The standing time in question was in principle chargeable since it represented hire charges incurred on DEFRA's instructions and authority. Moreover, the charges were included on timesheets and were signed for. Thus, it was understandable that the IP agreed to accept all claims for plant up to 3 days and to refer to the FM for checking claims for periods in excess of 3 days. Where no answer or qualification was received from the FM, Ruttle was entitled to be paid on the basis of the claim evidenced on the timesheet in question.
415. The answer to issue 12 is:

"Yes, unless a claim for such standing time had been referred to a DCC who had notified a doubt, difficulty or explanation as to why the claim should be refused. If so, the claim was to be audited."

9.13. Issue 13 - Reduction of Plant to Match Labour

9.13.1. Issue 13

416. Issue 13 is:

"13. Was Ruttle contractually entitled to charge DEFRA for plant which could not have been operated by Ruttle's employees due to the existence of more plant than labour on site?"

19.13.2. The Answer - Issue 13

417. This issue has already been dealt with. Firstly, the evidence of Mr Ward relating to the exercise he carried out which sought to marry plant with labour has been found to be flawed. It is this exercise which founds deductions from invoices by DEFRA under this head. Secondly, it has been found that since DEFRA was in exclusive control of what plant was and was not on hire on site, and that Ruttle had no management function for deciding on plant requirements or plant movements off site. Thirdly, this issue has already been the subject of a finding under issue 5 above.
418. The answer to issue 13 is:

"Yes, if plant was on site having been instructed to be located on site by DEFRA, had not been instructed to be off-hired and remained on site ready for use and was included in a signed or an unsigned timesheet. Ruttle may charge for the plant unless there is good reason to show that the plant was not in fact on site or that DEFRA had not authorised it to be on site or had instructed it to be removed from site."

9.14. Issue 14 - Wrong Transposition

9.14.1. Issue 14.1.

419. Issue 14.1 is:

"14.1. What is the contract rate for (a) a Cherry Picker; (b) a Bowser, (c) Hoses; (d) Lights; and (e) Roses?"

9.14.2. Answer - issue 14.1.

420. This issue arises because Ruttle contends that it had to supply items of plant which were sufficiently different from apparently similar items found in Annex C and was therefore entitled to a different rate being the appropriate rate in the CECA schedule. Thus:

1. Cherry Pickers. Ruttle contended that it had to use an access platform on rough terrain which is a different item of plant to that described as a "cherry picker" in item 15(34) of the CECA schedule. DEFRA contended that the item supplied corresponded to the description of "cherry picker" and that item 15(34) was therefore applicable. Ruttle contended that that item was an ordinary terrain item only. In summary, if Ruttle had reasonably to supply and use the item of plant in question and if the industry description of that plant was such that it did not fall within the definition of item 15(34), Ruttle is entitled to charge the appropriate rate for the item in the CECA schedule covering the item supplied. The answers to these questions involves expert and factual evidence.

2. Bowsers/hoses/lights/roses. Equivalent questions arise. In each case, the item of plant supplied must be identified with precision, the item of plant in annex C that that item corresponds to must be identified, any item in the CECA schedule that that item corresponds to must be identified if there is no direct and exact equivalent in annex C and the appropriate rate then ascertained.

421. These questions can only be answered after expert evidence has been obtained and the precise items of plant identified. Only the point of principle can be answered.
422. The answer to issue 14.1. is:

"If Ruttle reasonably supplied plant which is not, applying industry standards, covered by an item and its description in annex C, Ruttle may charge for that item using the rate for whatever item in the CECA schedule which, again applying industry standards represents the item supplied."

9.14.3. Issue 14.2.

423. Issue 14.2. is:

"14.2. In what circumstances is Ruttle contractually entitled to charge the higher of two rates specified in the Contract without providing supporting documentation to justify this charge?"

9.4.4. Answer - issue 14.2

424. The answer to issue 14.2 is:

"Ruttle may charge for the higher of two rates specified in the contract if it reasonably supplied plant whose description and type equated to the plant with the higher of the two rates, otherwise it is entitled to charge the lower of the two rates."

9.15. Issue 15 - Mobilisation/Demobilisation/Transportation

9.15.1. Issue 15.1.

425. Issue 15.1. is:

"15.1. Was Ruttle contractually entitled to charge DEFRA for the cost of transporting plant provided under the terms of the June 2001 Contract to and from site?"

9.15.2. The Answer - Issue 15.1

426. I have already dealt with this issue in issue 25 above. Ruttle is entitled to charge DEFRA for the cost of transporting plant to and from site.

9.15.3. The Answer - Issue 15.1

427. The answer to issue 15.1 is:

"yes."

9.15.3. Issue 15.2.

428. Issue 15.2 is:

"15.2. Was Ruttle contractually entitled to charge DEFRA for the cost of plant once it was on site but unable to carry out any work as a result of equipment not being assembled/present/in full working order?"

9.15.4. The Answer - Issue 15.2.

429. Once plant arrived on site and was brought within the confines of the site, it had to be assembled and brought into full working order. From its arrival on site, it was on hire as the notes to the CECA schedule make clear:

"These rates apply only to plant already on site ... inclusive of repairs and maintenance."

Plant on site with DEFRA's authority is on hire even if not in use because essential equipment was not assembled, present or in full working order. This issue has been decided in issue 5 above. The answer to issue 5 is:

"Yes."

9.15.5. Issue 15.3.

430. Issue 15.3 is:

"15.3. If so, upon what basis was that cost to be quantified?"

9.15.6. The Answer - Issue 15.3.

431. The answer to Issue 15.3. is:

"The appropriate rates set out in Annex C."

9.16. - Issue 16 - Plant Hours

9.16.1. Issue 16

432. Issue 16 is:

"16. Was Ruttle contractually entitled to charge DEFRA for plant which had been "acknowledged" by DEFRA but for which hours had not been signed off by a representative of DEFRA?"

9.16.2. The Answer - Issue 16

433. The issue arises because on some timesheets a tick appears against an item of plant instead of a number identifying the number of hours that that item was in use on the day in question. The correct interpretation of this practice was discussed and Mr Carty stated in a document issued by the IP in October 2001:

"Plant: to be paid as per time in use. If day work sheets have been signed with hours stated then pay as per day work sheet. However, if day works sheets only ticked then pay as per labour hours for operator on site."

434. This accords with common sense. The number of hours that plant was in use corresponded to the number of hours on site of plant operators. Thus, a tick on the relevant time sheet was clearly intended by the DEFRA official signing the timesheet to be an acknowledgement that that item of plant was present and in use and in use for the number of hours worked on site on that day.
435. The answer to issue 16 is:

"Yes. "

10. Interim Payment Application

436. It is clear from my findings and answers to the issues raised by this judgment that Ruttle is entitled to a substantial interim payment pursuant to its application. I will, however, adjourn that application for four weeks from the date of the handing down of this judgment to enable the parties to attempt to agree what if any interim payment should be made and, if agreement cannot be reached, to submit further submissions if they wish based upon this judgment and the size of any interim payment is contended to be appropriate in the light of this judgment.

HH Judge Thornton QC

29 September 2004

Technology and Construction Court

[Note: the order of these issues is: 17-27, 1-16]

Issues and Answers

17. Was the work carried out under one contract or under a series of separate contracts with similar terms?

Answer.

Ruttle carried out all FMD work at each of the 334 locations it worked at pursuant to the terms and conditions of a single contract, being that made on 20 June 2001.

18. What was the scope of work carried out by Ruttle?

Answer:

The scope of Ruttle's work was such part of the PD and C & D work specified in DEFRA's FMD C & D Manual and further specified by DEFRA's officials on site that was required of it and directed at each farm by the DEFRA supervising official at that farm and such construction or refurbishment work as was directed on site at sites where such work was directed.

19. What was the contractual status of Annex B to the contract?

Answer:

Annex B is a contract document following agreements reached by the parties as to invoicing pursuant to condition 10 of the conditions.

20. Was the contract dated 20 June 2001 a Construction Contract as defined by sections 104 and 105 of the Housing Grants, Construction and Regeneration Act 1996?

Answer:

Yes, the contract was a construction contract as defined in section 105 (d) and (e) of the HGCRA, being essentially a contract for the provision of FMD C & D services on farm premises. Additionally, some works were carried out in relation to the provision of temporary or permanent offices and those were, additionally, a construction operation by virtue of section 105(a) of the HGCRA.

21. What terms relating to the preparation, submission and payment of invoices were implied into the contract?

Answer:

1. No terms relating to the preparation, submission and payment of invoices were implied into the contract because the parties had reached agreement, which had contractual effect, as to these matters as follows:

2. The parties agreed in September 2001 that all invoices would be agreed and all outstanding sums paid in.

3. There was no implied or imposed term as to the furnishing of details by DEFRA of any disagreement as to sums invoiced. This was because any disagreement would be notified to Ruttle during the IP validation process carried out in accordance with the procedure agreed by the parties in September 2001.

22. To what extent were the contents of and the notes and rates contained in the CECA schedule incorporated into the contract?

Answer:

The CECA plant schedule, including the description of all plant items and rates it contains and the notes relating to plant hire were incorporated into the contract and were applicable to the determination of Ruttle's entitlement to payment for plant hired to DEFRA.

23. Did Ruttle have any responsibility to decide: (1) what numbers and grades or categories of men and which items of plant would be hired for a particular site; (2) the days and hours for which these would be charged on any particular day; and (3) whether any men or plant were surplus to requirements and should be moved off site and off hire?

Answer:

No. DEFRA was in sole control of: (1) what work was to be performed, what labour was to be used; (2) what the days and hours of working were to be; (3) what plant was to be hired and left in working order ready for immediate use on site whilst men were working on site; (4) the movement of all men and plant onto and off site; and (5) the manner in which the work was to be performed.

24. To what extent, if at all, was a signed timesheet conclusive as to Ruttle's entitlement to payment for the labour and plant recorded on that timesheet?

Answer:

1. A signed timesheet recording men and hours on site was a condition precedent to payment for such labour but was not a condition precedent to the payment for plant.

2. Ruttle was entitled to on account payments for labour and plant on the submission of invoices supported only by signed timesheets and was not required to produce any further validating documentation with the invoice but could, if it was reasonable to require this, be required to produce any other relevant documentation as part of the audit that DEFRA was to carry out of all invoices following completion of Ruttle's FMD C & D work.

3. A signed timesheet constituted an admission by DEFRA that Ruttle was entitled to payment for the men, plant and hours of working or hire verified by the signature but that admission was rebuttable, but only by clear and reliable evidence.

25. Is Ruttle entitled, in the light of events that have occurred, to payment for the provision of on site labour and plant hire for any such provision which is backed by timesheets that have not been signed by a DEFRA official?

Answer.

1. DEFRA waived the condition precedent set by the contract that an application for payment and a payment had to be supported by a signed timesheet for labour and plant. This waiver occurred by agreement reached on 24 September 2001.

2. Ruttle was entitled to an on account payment for sums based on the contents of each unsigned timesheet unless and to the extent that DEFRA had reasonable grounds to challenge any part of that timesheet. In such a case, the challenged part of the timesheet would be subject to full validation and audit and DEFRA was to use all reasonable sources of information and documentation in that validation exercise.

26. Is DEFRA entitled to disclosure from Ruttle of underlying documentation and, if so, on what terms?

Answer:

DEFRA is not, at present, entitled to disclosure of any of Ruttle's internal documentation but if it hereafter conducts an audit of any of Ruttle's invoices, the relevant and material parts of that internal documentation will become disclosable on reasonable terms. In identifying what those reasonable terms are, account will need to taken of the principles set out in paragraphs, 348 and 351 of the judgment.

27. Is Ruttle entitled to further payments?

Answer:

Yes, Ruttle is entitled to substantial further on account payments following completion of first sweep validation of invoices at each DCC on a DCC by DCC basis.

1.1. In what circumstances, if any, did the requirement that Ruttle submit to DEFRA signed and dated timesheets in support of any claim for payment for labour or plant not apply?

Answer:

Following the instructions given to Ruttle in February 2001 on site by Dr Todd-Hunter for the Chelmsford DCC and the agreement reached on 24 September 2001 between Mr Hugh Carty and Mr O'Connor as part of the Invoicing Panel procedures, the requirement that Ruttle submit signed and dated timesheets in support of any claim for payment was waived or was no longer capable of being relied on by DEFRA.

1.2. What information, if any, did Ruttle have to provide to DEFRA to support a claim for payment for labour or plant where the claim was not supported by a signed timesheet, but only by unsigned timesheets?

Answer:

Once the Invoicing Panel started work validating invoices, none save the invoices, timesheets and supporting documents defined in annex B. Once the first sweep of invoice validation had been completed, Ruttle was to provide such documents as DEFRA reasonably required on such terms as were reasonable in order to assist DEFRA in conducting its second sweep of invoices, its audit and its determination of the final sum due and owing to Ruttle.

1.3. In what circumstances, if any, can DEFRA refuse to meet a claim by Ruttle for payment for labour or plant that is supported by signed and dated timesheets?"

Answer:

Where DEFRA has reasonable grounds, supported by reasonably reliable evidence, that the contents of any timesheet, although signed and dated, are inaccurate or unreliable and where it is reasonable, in the light of those grounds and that evidence, to withhold payment in full or in part of the sum invoiced in reliance on that timesheet.

1.4. Do any such circumstances apply in this case?

Answer:

On the basis of the evidence and documents adduced in evidence at the trial of these issues, DEFRA has not yet identified circumstances which justify a conclusion that the contents of any signed timesheet are unreliable.

1.5. Was an agreement reached, at the meeting on 24 September 2001, relating to unsigned timesheets? If so, to what extent, if at all, is DEFRA entitled to challenge the agreement relating to unsigned timesheets?

Answer:

Yes, an agreement was reached at the meeting on 24 September 2001 relating to unsigned timesheets. DEFRA is not entitled to challenge the agreement. Moreover, it has not sought to challenge the agreement, it merely denies there was one and that, if there was one, it was entered into by Mr Carty on its behalf without its authority. DEFRA is incorrect on both counts.

2.1. To what supporting information was DEFRA contractually entitled in order for Ruttle to fully substantiate its claims for payment?

Answer:

Prior to the trial of these issues, DEFRA was not contractually entitled to supporting information save such information as the contract required to be submitted with each invoice. However, if and when DEFRA conducts a second sweep of invoice validation and a full audit of Ruttle's invoices, it will be entitled to such supporting documentation as is relevant which it is reasonable to require subject to such terms as it is reasonable to impose on DEFRA.

2.2. What was the time for payment of invoices submitted by Ruttle to DEFRA?

Answer:

Ruttle was entitled to payment of invoices pursuant to the IP procedure in two stages:

(1) An on account payment. This was to follow the first stage validation of that invoice and a recommendation for payment. This validation was to take place as part of a programme for the validation of all invoices to be undertaken between September 2001 and March 2002.

(2) A final payment. This was to be made as part of one final payment of all outstanding sums due to Ruttle to be recommended and paid following the second sweep and audit of all invoices and was to be paid by the end of March 2002.

3. Was Ruttle contractually entitled to charge DEFRA for supervisors or "roving foremen" (whether in control of other foremen or otherwise) or are such charges to be treated as administration charges under the contract?

Answer:

In principle, where it was reasonable and reasonably necessary to employ a roving foreman in a particular area in addition to site-based working foremen, Ruttle is entitled to charge for such foremen whether or not they were directly in control of other foremen and such a charge is not to be treated as part of the allowable percentage mark up for administration charges provided for by the contract.

4. 1. To what extent does Ruttle have to prove that work which appears excessive (ie 24 hours a day, 7 days a week for 6 weeks) was carried out:

(a) when there is a signed timesheet that appears for that work;

(b) where there are unsigned timesheets that support that work?

Answer:

Where time has been charged, whether on signed or unsigned timesheets, that is excessive in the sense of not being worked on site, whether because the operative was on standby, on call or because of some other reason, Ruttle is entitled to charge for such additional time but at an appropriate rate reduced from the rate that would be applicable for such working hours had they been worked on site.

5. Was Ruttle contractually entitled to charge DEFRA in circumstances where there was insufficient plant for the labour to operate?

Answer:

Yes, where the alleged insufficiency was said to have arisen as a result of a theoretical pairing exercise undertaken after the event by persons who were not present on site during the course of the relevant work.

6. 1. How many foremen was Ruttle contractually entitled to charge for at any one site?

Answer:

As many as it was reasonable to employ at that site at any one time given industry custom, the needs of the work, the need to comply with health and safety requirement, the need to address any risks identified by appropriate risk assessments and the size of the labour force on site.

7.1. Was Ruttle contractually entitled to charge DEFRA for the cost of associated labour in attendance during the mobilisation/demobilisation/transportation of plant provided under the terms of the June 2001 Contract to and from site?

Answer:

Yes, the appropriate hourly rate for transportation and necessary driver or drivers during mobilisation, demobilisation or transportation of plant required for FMD operations was chargeable by Ruttle.

7.2. Was Ruttle contractually entitled to charge DEFRA for the cost of labour once it was on site but unable to carry out any work as a result of the plant on site not being assembled/present/in full working order?

Answer:

7.3. If so, upon what basis was that cost to be quantified?

Answer:

At the appropriate hourly rate provided for in Annex C to the contract.

8.1. Was Ruttle contractually entitled to add travel time on to workers' timesheets as well as adding the time on to invoices?

Answer:

No. Ruttle was not entitled to add travel time to workers' timesheets as well as adding the time on to invoices. Ruttle was only entitled to add on travelling time once.

9. On what basis was Ruttle contractually entitled to charge DEFRA for the hire of minibuses?

Answer:

On the basis of the hourly charge set out in Schedule C at the contractual rate of £11.94 per hour.

10. If Ruttle has charged for mileage incurred by plant while being operated by Ruttle, is Ruttle contractually so entitled to charge?

Answer:

No.

11. Was Ruttle contractually entitled to charge DEFRA an hourly rate and mileage allowance for company motor cars utilised and driven by their employees whilst engaged on DEFRA's behalf?

Answer:

Yes, at the rate of £0.40 per mile.

12. Was Ruttle contractually entitled to charge DEFRA for plant which was standing on site for more than 36 hours in the light of the agreement reached between the parties at a meeting on 12 December 2001?

Answer:

Yes, unless a claim for such standing time had been referred to a DCC who had notified a doubt, difficulty or explanation as to why the claim should be refused. If so, the claim was to be audited.

13. Was Ruttle contractually entitled to charge DEFRA for plant which could not have been operated by Ruttle's employees due to the existence of more plant than labour on site?

Answer:

Yes, if plant was on site having been instructed to be located on site by DEFRA, had not been instructed to be off-hired and remained on site ready for use and was included in a signed or an unsigned timesheet. Ruttle may charge for the plant unless there is good reason to show that the plant was not in fact on site or that DEFRA had not authorised it to be on site or had instructed it to be removed from site.

14.1. What is the contract rate for (a) a Cherry Picker; (b) a Bowser; (c) Hoses; (d) Lights; and (e) Roses?

Answer:

It Ruttle reasonably supplied plant which is not, applying industry standards, covered by an item and its description in annex C, Ruttle may charge for that item using the rate for whatever item in the CECA schedule which, again applying industry standards represents the item supplied.

14.2. In what circumstances is Ruttle contractually entitled to charge the higher of two rates specified in the Contract without providing supporting documentation to justify this charge?

Answer:

Ruttle may charge for the higher of two rates specified in the contract if it reasonably supplied plant whose description and type equated to the plant with the higher of the two rates, otherwise it is entitled to charge the lower of the two rates.

15.1. Was Ruttle contractually entitled to charge DEFRA for the cost of transporting plant provided under the terms of the June 2001 Contract to and from site?

Answer:

Yes.

15.2. Was Ruttle contractually entitled to charge DEFRA for the cost of plant once it was on site but unable to carry out any work as a result of equipment not being assembled/present/in full working order?

Answer:

Yes.

15.3. If so, upon what basis was that cost to be quantified?

Answer:

The appropriate rates set out in Annex C.

16. Was Ruttle contractually entitled to charge DEFRA for plant which had been "acknowledged" by DEFRA but for which hours had not been signed off by a representative of DEFRA?

Answer:

Yes.

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Note 1   NAO Report: "The 2001 Outbreak of Foot and Mouth Disease", published on 21 June 2002 ("NAO report"), Paragraphs 4.35 and 4.53 and Figure 55. Valuable additional information is to be found in the House of Commons Public Accounts Committee's Report: "The 2001 Outbreak of Foot and Mouth Disease", published on 14 March 2003 ("Select Committee Report").    [Back]

Note 2   The parties do not agree as to the overall sum paid. Ruttle alleged that £9,940,239.45 had been paid, to which must be added DEFRA's recent payment.    [Back]

Note 3   [2004] EWHC 2 (TCC), 16 December 2003. The judgment is reported in (2004) Construction Law Reports.    [Back]

Note 4   See, in particular, paragraphs 2-3 and 12-58.    [Back]

Note 5   NAO: paragraph 4.49, figure 58.    [Back]

Note 6   Being the total costs less transport costs in an attempt to obtain a like for like comparative figure.    [Back]

Note 7   Taken from Ruttle's "Calculation Rates for Transport and Plant" document attached to Invoice 2511A dated 28 August 2003 relating to transport charges.    [Back]

Note 8   Evidence of the existence and issue of the IP packs and of compliance with the procedure they provided for was given by Brand-Benee: D2/132/14 - /141/25.    [Back]

Note 9   De Kock XX D7/36/7 - 13.    [Back]

Note 10   NAO Report: Paragraph 3.6, Table 24.    [Back]

Note 11   DEFRA defence, schedule 3.    [Back]

Note 12   See Warley Hall, 22 April 2001 and 29 April 2001 allegedly unsigned but clearly signed (C/498 and C/551).    [Back]

Note 13   Minute 2b, Invoicing Panel Meeting - 28 September 2001.    [Back]

Note 14   See the Minutes of the Invoicing Panel: 28 September 2001, Minute 2(b); 28 March 2002, Minute 1.0 and 18 April 2002, Minute 4.    [Back]

Note 15   The figures for the various sites are taken from the Overall Summary Schedules produced by Mr Pelling, AWP1, C2/754 - 759.    [Back]

Note 16   * no supporting information. # supporting information but time sheets not signed.    [Back]

Note 17   * No supporting information. # Supporting information but time sheets not signed. Bold represents invoices with signed supporting time sheets adduced in evidence despite Pelling Schedule's assertion of "no supporting information" or "supporting information but time sheets not signed".    [Back]

Note 18   27 May (506); 3 June (521); 10 June (536); 17 June (454); 24 June (468); 1 July (483) and 15 July (438).    [Back]

Note 19   One log, for the week 8 - 14 July 2001 was copied and included in the extracts from Mr Granshaw's logs which were adduced in evidence was for one of the weeks which the Pelling Schedule recorded as being one for whose invoice the supporting information was not available.    [Back]

Note 20   Labour for 9 - 14 July (1076) matched Ruttle's time sheet for 9 - 14 July signed by Mr Granshaw (438 - 449).    [Back]

Note 21   * No supporting information. # Supporting information but time sheets not signed. Bold represents invoices with signed supporting time sheets adduced in evidence despite Pelling Schedule's assertion of "no supporting information" or "supporting information but time sheets not signed".    [Back]

Note 22   NAO Report : paragraph 4.62.    [Back]

Note 23   Ruttle Invoicing Panel Meeting Minutes, 28 March 2001, section 5: "Chelmsford Records".    [Back]

Note 24   Jarratt XX D3/50/8 - /9/22.    [Back]

Note 25   Jarratt XX D3/29/3 - /30/11.    [Back]

Note 26   NAO Report, paragraph 4.62.    [Back]

Note 27   NAO Report, paragraph 4.60.    [Back]

Note 28   NAO Report, paragraph 4.53    [Back]

Note 29   NAO Report: paragraphs 4.60, 4.62, 4.88 and 4.89    [Back]

Note 30   (2002) Con LR 202.    [Back]

Note 31   As referred to above.    [Back]

Note 32   See paragraph 57 above.    [Back]

Note 33   O'Connor XX D4/21/6 - /22/13.    [Back]

Note 34   Carrol XX D1/118/23 - 119/15 - 25.    [Back]