National Grid Electricity Transmission Plc v McKenzie Harbour Management Resources Ltd & Anor (Rev 1)

This case is about the allegedly corrupt practices of an employee of National Grid and of a professional retained by it. I have found some of those corrupt practices proven. I have decided to grant the following relief:-

The judgment that follows is “fact heavy”: that is because over 26 days there has been a minute examination of the dealings of Mr McKenzie and of Mr Read/HMR, based substantially on hearsay evidence contained in documents, which Mr McKenzie has fought tooth and nail, and in support of claims which took every point against Mr McKenzie. I must explain why I have found in favour of National Grid (but not to the extent they sought).

I handed down this judgment in final form but subject to editorial corrections: and I invited further submissions on particular points. This judgment now incorporates editorial corrections and the results of further rulings.

The Claimant (Footnote: ¹) (“National Grid”) operates the high voltage electricity transmission system in England and Wales, including approximately 4500 miles of overhead line carried upon towers. The lines and towers require constant specialist maintenance and occasional diversion. This work is undertaken by approved contractors and each individual maintenance or diversion scheme is overseen by a National Grid Project Engineer.

On 6^th March 2000 the First Defendant (“Mr McKenzie”) was appointed as a Project Engineer within the Project Management team of National Grid. Between 2002 and 2006 amongst the schemes for which Mr McKenzie was responsible were a diversion over the A130 at Rayleigh, a diversion on line 4VN at Mannington in Dorset, refurbishment on line 4YE to 4YF between Exeter and Indian Queens in Devon and Cornwall, refurbishment of the 4YV and 4YW lines between Swansea North and Pembroke, and a diversion on line ZV at Shelford Quarry in Kent.

National Grid say that Mr. McKenzie acted corruptly and dishonestly in relation to the material schemes; that he did so in conspiracy with the Fifth Defendant (“Mr Read”) and Mr Read's company, Harbour Management Resources Ltd (“HMR”), the Fourth Defendant; and also with the Third Defendant (“Mr Good”) and Mr Good’s company, Rigout Erection Services Ltd (“Rigout”), the Second Defendant; and also with the Sixth Defendant (“Mr Squires”) and his company, Grimston Trading Limited (“Grimston”), the Ninth Defendant, and its employee, the 10th Defendant Rebecca Squires-Bull; and finally also with the 11th Defendant, Interserve Industrial Services Ltd (“Interserve”).

National Grid commenced proceedings in May 2006 which have been the subject of substantial amendment, re-amendment and elaboration so that the Particulars of Claim now extend to 137 pages. On 29^th October 2007 National Grid agreed terms with Interserve. The agreement expressly provided that the settlement was not an admission of liability or wrongdoing on the part of either party or any other person or entity. Interserve agreed to pay National Grid £450,000 of which £306,000 was attributable to National Grid's claims against InterServe and £144,000 attributable to National Grid's legal costs of the action.

Immediately before trial National Grid agreed terms with Mr. Good and with Rigout. They together paid National Grid £200,000 in respect of its claim and made a £200,000 contribution to National Grid’s costs of the action. At that time National Grid also agreed terms with Mr. Squires and Grimston (and its employee). They paid a total of £342,000, being £171,234 in respect of the claims and the balance as a contribution to the costs of the proceedings. A consideration in the negotiation of these terms was the warranted assets of Mr Good and Mr Squires.

At the trial (which lasted 26 days) National Grid appeared by Mr Stephen Phillips QC leading Ms Laura John and Mr Richard Hanke, supported by a team of solicitors from Dorsey & Whitney (led by Mr Burkill). I most readily acknowledge that their convenient presentation of the 16,000 case documents (and their familiarity with them) was of considerable assistance both to me and to Mr McKenzie and Mr Read. Staggeringly huge resources appear to have been devoted to the prosecution of this case. Mr McKenzie has throughout conducted his case as a litigant in person, and he did so at trial. He rapidly acquired forensic skills (but suffered a distinct disadvantage from having key witnesses called by National Grid at an early stage in his legal education). He was able to take advantage of a thorough skeleton argument that had been prepared by Ms Camille Slow and Mr Zulfikar Khayum for Mr Squires and Grimston. Mr. Read (to whom I gave permission to represent HMR) was simply overwhelmed, to the extent that in the end he did not even give evidence in his own behalf because he felt he had “nothing to contribute to the discussion”.

At trial National Grid sought from Mr McKenzie, Mr Read and HMR recoveries in the sum of £5.267 million (plus interest) together with costs (which I was told exceeded £6 million). That is a sum vastly in excess of those which National Grid accepted from Mr McKenzie’s and Mr Read’s alleged co-conspirators (who had the benefit of legal representation). It is a sum far beyond the likely means of an employee remunerated at the rate of £38,600 per annum (or £450 per hour, part time); and it was, even on National Grid’s own case, a sum far beyond what Mr McKenzie and Mr Read/HMR had themselves allegedly received (and the proceeds of which they might have retained). Moreover, this compensation was sought to be recovered on every conceivably relevant basis – bribery, fraud, breach of fiduciary duty, breach of contract, deceit, dishonest assistance in breaches of fiduciary duty, “unlawful means” conspiracy, procuring a breach of contract – each with its different constituent elements and different remedy but substantial overlap, and on all of which I of course heard argument on one side only (for the law was simply beyond Mr McKenzie and Mr Read). I intend no criticism of those who conducted the trial: they did so properly and skilfully. But only a multi-national company like National Grid could contemplate embarking on such a profligate course: and I formed the view that the case was more about the relentless pursuit of Mr McKenzie and of Mr Read (in order to make examples of them in case others with whom National Grid dealt might be similarly tempted to do what was alleged) and about the vindication of National Grid’s management team than it was about the recovery of compensation for alleged wrongs.

All this made the trial difficult to conduct in accordance with the overriding objective: and if this judgment does not deal with every cause of action and every remedy in relation to every one of the multifarious complaints made against these defendants it is because I have not thought it essential in the discharge of my duty and in the interests of justice to do so. It is not necessary to look under every stone from every angle to achieve an outcome that is fair. But I should emphasise that it was possible (with the co-operation of Mr Phillip QC) to conduct the trial in a manner that mitigated (if it did not eliminate) the disparity in resources: and neither Mr McKenzie nor Mr Read should think that the ultimate outcome would have been different if only they had had equivalent legal resources.

It is in the nature of cases concerning allegations of fraud and corruption that significant reliance must be placed upon documents. National Grid has deployed to the full the means afforded to search for and to recover documents, and through document management has been able to establish chronology and connection between various events. Key decisions that I have had to make have turned upon documents.

The many trial bundles produced for the hearing were not agreed by Mr McKenzie or Mr Read. But there was no challenge to the authenticity of any of them (so that CPR part 32.19 applies). Authenticity is, of course, a separate question from whether the documents prove the truth of their contents. I have treated the documents as amounting to hearsay evidence of the truth of their contents. Strictly, if National Grid intended to rely on that hearsay evidence it should have served a hearsay notice. Mr McKenzie and Mr Read would then have known what key facts it was intended to wring from the 60+ lever arch files of material. But the failure to serve a hearsay notice goes only to weight not admissibility. Whenever a hearsay statement was adduced in evidence i.e tendered as evidence of the fact stated, I have endeavoured to ask myself what weight may be fairly attached to it having regard to what challenges Mr McKenzie or Mr Read might have made to it.

The chief function of the oral evidence has principally been to put the documents in context, to seek to establish what the usual procedure might be, to tell me (with the benefit of hindsight) what the witness might have done if only he had known a particular fact, and to explain why the witness sanctioned the various transactions of which complaint is now made. There was a “whistleblower” (Ms Bishop with whom Mr McKenzie had had an affair, and who reported him immediately after the end of the affair). But she was not called as a witness and no hearsay statement was put in from her. Instead, a transcript of an interview was included in the trial bundle, and used as a basis for putting questions to Mr McKenzie. I have not accorded any weight to Ms Bishop's allegations.

As to the other National Grid witnesses, they did not come to lie. Some of them continued to work together in a team, and their evidence had an air of corporate carefulness about it, uniform and reconciled and lacking any sense of individuality. For instance, those who dealt with the subject all made the same mistake about whether a particular scheme constituted capital or operational expenditure, and all overlooked the same document. This alerted me to the possibility (particularly in relation to policies and their implementation) that I may be being given the “corporate view”, and that in practice things might have been different. (This is particularly relevant to issues such as the engagement of subcontractors or the supply of vehicles). I considered Michelle Clark (an asset strategy manager for National Grid), Martin Wilson (a development engineer for National Grid), David Maddocks (of Babcock Networks Ltd) and Iain Lamont (a divisional director of Interserve) to be impressive witnesses. I considered Mr Inglehearn and Mr Bryant to be the least satisfactory of National Grid's witnesses. The former (who was Mr McKenzie's line manager) was defensive, self protective and all too ready to deny awareness of e-mails, minutes of meetings, and other means of knowledge, and determined to rest upon the statement “I trusted Mr McKenzie”. The latter was plainly hostile to Mr McKenzie, but to his credit sought to control his antipathy. The remainder of the witnesses called by National Grid were perfectly adequate.

Mr McKenzie did come to lie to me, and he did so. He was plainly a highly competent and hard-working engineer. By common consent he carried a workload of 120% and delivered all his projects within budget and to time. I had a real sense that he was perhaps not exacting in his adherence to every corporate policy and procedure: but he achieved results. His intimate knowledge of the projects on which he was engaged was impressive. It is not possible to say that because he lied to me on certain issues his word simply cannot be taken on any issue. Mr McKenzie is much more complex than that.

National Grid describes its claims against Mr McKenzie as founded upon fraud (bribery), breach of fiduciary duty, breach of contract, deceit and “unlawful means” conspiracy. The first of those is a label applied to various claims which may be brought at common law or in equity. The second is an equitable claim. The remainder are claims which may be brought at common law and are dependent upon proof of loss. It might be thought that the burden of proof on each element of these claims lay squarely upon National Grid. But in its Particulars of Claim National Grid claimed the entirety of all payments made by it “pursuant to the frauds perpetrated by Mr McKenzie and one or more of the other defendants” but “less any amounts for which it is proved by the defendants that National Grid must give credit”. Accordingly National Grid asserts that the burden lies upon Mr McKenzie to prove that it did not suffer some of the losses it claims. I have not approached the evidence in this way. I have taken the view that at common law the burden lies upon National Grid to prove its loss: and that in equity the burden lies upon National Grid to prove a breach of equitable duty and the circumstances which entitle it to request an order for an account. If an account is ordered then there may well be a burden upon the accounting party to justify deductions.

National Grid described its claims against Mr. Read and HMR as founded upon fraud and bribery breach of fiduciary duty, breach of contract, procuring Mr. McKenzie's breach of contract, dishonest assistance in Mr. McKenzie's breaches of fiduciary duty and “unlawful means” conspiracy. National Grid again asserts that a burden lies upon Mr. Read to prove that it did not suffer some of the losses it claims from him. I have approached the claims by National Grid against Mr Read on the footing that the burden of proof lies on National Grid.

The case made by National Grid against Mr. McKenzie and Mr Read proceeds on the footing (whether or not a necessary element of the precise cause of action) that they have been guilty of seriously dishonest conduct. In assessing the evidence I have reminded myself of what was said by Lord Hoffmann in Re B [2008] UKHL 35 about the degree of persuasion which the court must feel before it decides that a fact in issue did happen, and in particular about the suggestion that the standard of proof may vary with the gravity of the misconduct alleged. I have sought to apply the principle that there is only one civil standard of proof, and that, when assessing the probabilities, I must have in mind as a factor (to the extent only that is appropriate in this particular case) that in general, the more serious the allegation, the less likely it is that the event occurred, and so the stronger should be the evidence before I conclude that the allegation was established on the balance of probability: but that the evidence on each issue has to be assessed within the setting of the entire evidence.

On 6 March 2000 Mr Mckenzie was engaged as a Project Engineer within the Project Management Team of National Grid at a starting salary of £27,500. My attention was not drawn to any job description for or statement of duties of a Project Engineer. However in his evidence Mr Inglehearn described the role in these terms:-

“It was their job to identify the scope of work required on each scheme and to ensure that the tender documents identified accurately what the contractors were required to deliver. They were also responsible for liaising with prospective tenderers and worked closely with the Project Team Leader to assess the tenders received and, ultimately, to identify the successful tenderer. Once work had started on a scheme, [National Grid] relied on its project engineers to identify whether the work for which a contractor was seeking additional payment fell within the definite work or was to be met out of the provisional sums allocated to the scheme (in which case the project engineer was responsible for arranging for payment to the contractor, usually by way of a Variation Order). It was also their responsibility to review all invoices and quotations received from contractors or sub-contractors to ensure that [National Grid] was at all times receiving value for money”.

Mr Inglehearn was the first witness whom Mr Mckenzie cross examined. Mr Mckenzie did not challenge this description of his duties. I accept it as broadly accurate though, consistently with my view of Mr Inglehearn as a witness, I consider that it probably understates Mr Inglehearn’s responsibility as Project Team Leader. Thus, for example, this description fails to record that no Variation Order could be made by Mr McKenzie without it having been considered by Mr Inglehearn, who had to sign the Variation Order itself to show that he had approved it.

The description also fails to relate the role of the Project Engineer to that of the Procurement Team Leader (in relation to the material schemes, Mr Gary Hill). The role of the Procurement Team was to provide commercial support, to assist with preliminary estimates and to evaluate different procurement options, determining the most appropriate contract strategy for a given project. Once the strategy had been determined and the contract let then issues might arise whether a particular item of work fell within the “definitive works” as identified in the contract, or constituted additional work to be paid for out of disclosed or undisclosed provisional sums. The evidence of Mr Hill was that National Grid relied on its project engineers to ensure that contractors met the costs of all works falling within the scope of the definitive works: and that current and likely future utilisation of provisional sums were the subject of monthly meetings between a scheme’s Project Engineer and its allocated Project Accountant, with any anticipated additional expenditure identified in these monthly meetings being communicated by the Project Accountant both to the Procurement Team (Mr Hill) and the Project Team Leader (Mr Inglehearn). Indeed, the Procurement Team had to countersign every purchase order that was requisitioned by the Project Engineer and, as Mr Hill was frank enough to accept in cross-examination, there was a very close relationship between procurement officer and project engineer. Mr McKenzie put to Mr Hill that Mr Hill had not been influenced by him in any contract awarded by National Grid to which Mr Hill responded:-

“My Lord, we had to work together to make these decisions and to reach a satisfactory conclusion. It is without doubt…likely that I influenced him in some of those decisions and he influenced me. This was a joint approach looking at the selection of the tenderers in order to reach the right solution…Mr McKenzie did not influence me, My Lord, but – how can I put it? We did have a shared view in many cases”.

This is a much fairer view of the role of a project engineer than Mr Inglehearn’s slanted and self-protective account.

Having considered the job Mr McKenzie was engaged to do, I turn to consider his contractual obligations. Mr McKenzie’s letter of engagement incorporated National Grid’s Employee Rules. These were not in evidence. A version dating from 2004 was in the trial bundle and Mr Inglehearn said he believed that a similar version was in force before. I accept that evidence. These Employee Rules required Mr McKenzie:-

The Employee Rules refer to a Code of Conduct. The evidence established the version of this that existed in April 2004 (but not any earlier version) and that in April 2004 Mr McKenzie had attended a course drawing the Code to his attention. The Code of Conduct made clear:-

In April 2002 Mr Squires was engaged by Mr McKenzie to undertake work for National Grid as a site supervisor on the Rayleigh diversion. Mr Squires made his services available through Grimston. I find that this company was Mr Squires’ alter ego. Grimston was an Isle of Man registered company which used banking facilities with HSBC in Jersey. National Grid adopted the practice of engaging all non-permanent staff through a single employment agency called Spring Technology Staffing Services Limited (otherwise SpringConnect Limited) (“Spring”). Spring would not deal with off-shore companies. Accordingly Rigout (an English company) was inserted into the contractual chain as a middleman. The formal contractual chain to secure the services of Mr Squires was therefore National Grid - Spring - Rigout - Grimston - Mr Squires.

Following this initial arrangement Mr Squires was engaged by Mr McKenzie to work on the material schemes (and others which it is unnecessary to detail) as a site supervisor, a linesman, a surveyor and a job “specifier”, so that he was providing virtually continuous services until late 2005.

On 26^th February 2004 (some two years after he was first engaged) Mr Squires wrote a cheque for £5000 on his personal Jersey account in favour of Mr McKenzie, who paid it into a joint account he held with his wife at HSBC Lincoln. When National Grid discovered the existence of this cheque relatively late in the proceedings and challenged him about it, Mr McKenzie said that this was a loan to help him discharge a tax bill. As will appear, I regard the explanation as legally irrelevant: but I do not in any event accept this evidence. Mr McKenzie would, at this stage and for some three years past, have been on PAYE. He did not disclose and was unable to produce the relevant tax bill (although it had been formally requested in December 2007 and a further opportunity to produce it arose in the course of the trial) or to explain how the liability arose. It can be demonstrated that he did not in fact use the £5000 to pay any tax bill; and also that he did not repay any “loan”. I find that this was a gift by Grimston/Mr Squires (the two are indistinguishable) to Mr McKenzie.

On 23^rd March 2004 Grimston transferred £15,000 from its Jersey Bank account to a new account that Mr McKenzie had himself set up with HSBC Jersey in February 2004: and on 26^th May 2004 it transferred a further £20,000. Mr McKenzie said that these were loans to help him purchase his house. As will appear, I regard this as legally irrelevant. But I do not in any event accept the evidence.

When first responding to this evidence (in an affidavit sworn on 5^th June 2006) Mr McKenzie said that these payments were loans which were the subject of written agreements. By the time of his witness statement in April 2008 he said that they were loans agreed orally to enable him to purchase a new house and “in return, under very loose terms, [Mr McKenzie] would reserve the land at the rear [for a joint venture between himself and Mr Squires] on a first refusal basis for any potential future development”. By the time he gave oral evidence Mr McKenzie said that the payments were loans made without any specific agreement as to how the money was to be used, and that it was in fact used in general expenses (including on fees and furnishings related to the move). I note however that on 26^th May 2004 (the date of the second Grimston payment) Mr McKenzie wrote a cheque in the sum of £18,500 which he told me (and I believe) went to his solicitors in connection with the house purchase (which completed in June 2004).

What is to account for these changes in recollection? Mr McKenzie explained to me that in May 2004 he was drinking to excess and that his recollection was therefore hazy; but that the proceedings had been a great “wake-up call” to him so that he had sat down and tried to piece together the relevant events (though without the benefit of many documents). I am sure that there is a measure of truth in this. But these changes all occurred after the “wake up call”: and whilst the evidence concerning these two Grimston payments was been given I formed a strong impression that the changes in story arose not from a varying authentic recollection but rather by way of reconstruction in response to emerging material, and as such the evidence given by Mr McKenzie was not reliable. I do not accept that these payments were either loans or a “down payment” on a loose arrangement to share development profits. I find that the payments were gifts by Grimston/Mr Squires to Mr McKenzie.

I have not been assisted in reaching this conclusion by National Grid’s assertion that because the payments were made by Grimston to a newly opened Jersey account in Mr McKenzie’s name, this of itself demonstrates some dishonest or wrongful conduct. There are perfectly legitimate reasons for opening an off-shore account. Mr McKenzie’s was that as Grimston received its funds off-shore it preferred to make its payments offshore: and it did so in relation to all its employees. In opening his own Jersey account he responded to a request from Grimston at the time when it was going to make payments connected to his house purchase: and he made no attempt to conceal the account opening. The documents bore this out. Thus Mr McKenzie received details of the account from HSBC by means of a message to his National Grid e-mail address: and he used the account to pay another National Grid employee for a car. This plainly does not demonstrate that Mr McKenzie drew to the attention of his employers that he had opened an off-shore account or that they must be taken to have known that he had: but it does negative the suggestion by National Grid that it was “secret” and that such secrecy was a badge of impropriety. (This is one of the many examples that occurred in the course of the trial where National Grid laboured to extract every possible adverse inference out every event or statement, and which contributed to Mr McKenzie’s cross-examination lasting 9 days).

On the 9^th August 2004 Grimston transferred £10,000 to Mr McKenzie's Jersey account. This was followed by a further payment of £20,000 on 16^th December 2004, another £20,000 on 11^th July 2005 and a final transfer of £30,000 on the 27^th September 2005. Mr McKenzie did not (and could not) deny receipt of these sums. He said they were consultancy payments for the development of two projects in which he was involved with Grimston. If there existed a genuine separate commercial arrangement between Mr McKenzie and Grimston under which sums were transferred a different light might be cast upon the payments, and National Grid’s claim would have to be put upon some footing other than mere fact of payment. But I do not accept this evidence.

Before linesmen are permitted to work upon towers and lines a “fall arrest system” must be installed. That utilised by National Grid had been developed by Rapid Rail International. Mr McKenzie’s skills (developed throughout his working career and not simply from his three years employment with National Grid) told him that a system based on a top anchor at the apex of a pylon, and which facilitated “free climbing”, would be preferable. In the third quarter of 2004 he therefore approached Mr Squires and Mr Good of Rigout with a design idea. Mr Good suggested that the design should adapt components already manufactured by another fall arrest company called “Uniline”; and on 23 August 2004 Mr Good sought initial pricing information. Thus in outline the “Rigout Uniline FAS” joint-venture was established with (broadly speaking) a three way profit split between the participants.

The proposals were discussed with Uniline in September 2004 with a view to Uniline producing initial ideas in relation to the top anchor and other parts. The product development required the erection of a test pylon on Uniline’s premises: but this was not completed until July 2005. Meanwhile the terms of Uniline’s participation were discussed (the broad outlines of which were only agreed in November 2004) , and the project proceeded on a very general (and deliberately non-client-specific) basis. By January 2005 fairly fundamental design parameters (whether particular brackets were intended to be load bearing) remained to be set in order to enable Uniline to proceed with design concepts and prototypes. Mr McKenzie’s role in the work being undertaken by Uniline (or more accurately, designers retained by Uniline) seems to me to have been to highlight the practical problems with the existing Rapid Rail system and to provide constructive feedback on Uniline’s proposed solutions at a couple of meetings. The project ground to a halt in 2006 when National Grid could not commit to further development, and the arrangements between Uniline and Rigout were formally terminated in April 2007.

For three reasons I do not accept Mr McKenzie’s case that this context is relevant to the payments received by him. First, Mr McKenzie's initial evidence was that the August 2004 payment received from Mr Squires was made because it was apparent that the fall arrest system could achieve a large market with a considerable profit margin. I do not find that credible having regard to the date on which the payment was made and the stage at which the Rigout Uniline FAS joint venture then was. Mr McKenzie changed this evidence at trial to say that the payment (and the later ones) was for development and was not a profit share from a developed product. I accept that it was not an advance on profit share but I do not otherwise accept this alternative analysis. (Save for the July 2005 payment, which coincides with the erection of the test tower) I cannot satisfactorily relate the timing and nature of the payments to Mr McKenzie with the timing and nature of his contributions to the development process. What he was paid is not explained by what he was doing. Second, it is not clear why Grimston (as opposed to Rigout) should pay Mr McKenzie for what he was doing for Uniline. The only pattern that emerges is that when Mr McKenzie had spent one tranche of money given to him by Mr Squires he then received another. Third, according to a document produced by Rigout in mid-2005 if the Rigout Uniline FAS system was fully developed and achieved sales of 1000 systems Mr McKenzie would only have been entitled to £50,000 in respect of the “concept” (as opposed to installation). I cannot see why Mr McKenzie should receive a sum exceeding his anticipated profit share before development was completed, manufacture undertaken or a single sale made. I find that the payments totalling £80,000 to which I have referred were straightforward payments by Grimston to Mr McKenzie, not made under any commercial arrangement relating to the Uniline project.

A separate explanation was given by Mr McKenzie for the final payment of £30,000 on 27 September 2005. This was that (quite apart from his input to the FAS system) he had invented a noncorrosive “step bolt”. A step bolt is a bolt with an extended shank which is attached to the tower leg on alternate faces, so that the leg and extended shanks together constitute a form of ladder used by a linesman to access the tower. A pylon or tower has an anticipated life of 80 years, during which the step bolts will corrode several times over. Mr McKenzie had the idea of replacing the metal bolts with plastic of sufficient strength. Although it was his idea the prototypes were developed by a specialist manufacturer. Mr McKenzie said that Mr Squires had agreed to pay him £30,000 for “consultancy services” in connection with this project. I accept that Mr McKenzie had such an idea (though it is impossible to assess its originality) and I accept that preliminary steps were taken to identify a potential prototype manufacturer. But the arrangement to pay £30,000 for this “idea” in September 2005 rests entirely upon Mr McKenzie's unsupported word: and given that his other explanations concerning the true nature of the payments made to him by Mr Squires/Grimston have not, in my judgment, withstood scrutiny I do not feel able to accept such evidence. (In saying that the arrangement to pay £30,000 rests upon Mr McKenzie's unsupported word I have not overlooked the fact that there exists a consultancy agreement dated 15^th July 2005 under the terms of which Mr McKenzie apparently agreed to provide consultancy services to Grimston as from 30 August 2005. But (in an echo of Mr Inglehearn’s and Mr Hill’s evidence) it was Mr McKenzie's case that he simply signed this document without reading it because he trusted Mr Squires who said that Grimston's bankers required such a document to be signed by everyone who received a payment from Grimston: and the document itself appears to relate to the provision of services for microwave projects rather than electricity transmission. So it does not appear to relate to the payment of £30,000 for step bolts. I have, therefore, as previously indicated, treated this simply as a direct payment by Mr Squires/Grimston to Mr McKenzie.

At the end of February 2005 Mr McKenzie became the registered keeper of a new top of the range Audi A4 Diesel Saloon which cost £34,495 (a sum that was then just short of his annual salary). The car was bought for cash, and was paid for by Mr Squires by means of a cheque drawn on Grimston’s Isle of Man account. The order for the car specified that it must be “debadged”. These facts could not be disputed.

From the outset National Grid asserted that this was an improper gift by Mr Squires/Grimston to Mr McKenzie. It was their case that the debadging of the car was evidence of dishonest concealment. It was the evidence of Mr Inglehearn that he had made enquiry of Mr McKenzie about his fine car and had been told by Mr McKenzie that it was being provided (on a rental basis) by Mr McKenzie’s father.

Mr McKenzie did not in his evidence deal with the circumstances of the acquisition of the Audi (or with Mr Inglehearn’s assertions): but he had in his Defence asserted that he received only the use of the Audi. In oral evidence he explained that he had decided to leave the National Grid car scheme (and instead take a monthly allowance) because he covered high mileage and felt that he needed a better car. He identified an Audi A4 1.9 Diesel as meeting his needs: but Mr Squires told him of the availability of an Audi A4 3 litre Diesel Quattro at a dealership in Poole, which he offered to acquire and to let Mr McKenzie use in return for the monthly allowance (though in the end Mr Squires never sought and Mr McKenzie never offered such monthly payment). The result was that whilst McKenzie had the use of the car and was its registered keeper the “financial interest” belonged to Mr Squires/Grimston.

I do not accept this explanation. First, I consider it inherently more probable (having regard to the other outright gifts made by Mr Squires/Grimston and having regard to the fact that Mr McKenzie was the registered keeper of the Audi and insured it in his own name) that an outright gift rather than a loan of the car was intended. Second, when (in consequence of a Freezing Order obtained by National Grid) Mr McKenzie was required to state his assets he included the Audi, swearing that he owned the vehicle and that there was no outstanding finance. I have reached my conclusion without reliance on the fact that the car was “debadged” or Mr Inglehearn’s recollection. Debadging a car of course indicates a desire to conceal its specification, but says nothing about the motive for concealment (which I decline to infer must be dishonest). In Mr Inglehearn’s evident desire to exculpate himself I do not feel able to rely on his recollection.

In September 2004 a Dell computer was supplied to and installed at Mr McKenzie’s house at Goole at a total cost of £1,708. The costs of supply and installation were initially borne by Rigout, but in their defence Rigout and Mr Good asserted that that cost was reimbursed by Mr Squires/Grimston. Mr Good did not, of course, give evidence at trial: but Mr McKenzie told me that the Rigout Defence was accurate. He said that the computer had been supplied for his children by Mr Squires, and that he did not regret accepting the gift (although he now acknowledged that he ought to have disclosed it to his line managers). I find that Mr Squires/Grimston effectively gave £1,708 to Mr McKenzie in September 2004.

In August and September 2005 Mr McKenzie had a patio (including a gazebo) built at his Goole house at a total cost of £23,000. It was National Grid’s case that this constituted another corrupt payment to McKenzie. It was common ground between National Grid and Mr McKenzie that the builder who undertook the work had been introduced to him by Ivan Stewart, an employee of Interserve. National Grid asserted that there was an agreement between Mr Stewart and Mr McKenzie that the cost of plant and materials for carrying out the building of the patio at Mr McKenzie’s home should be covertly charged to National Grid under the guise of variations on the project at Shelford Quarry. The basis for this was two e-mails sent by Mr Stewart internally within Interserve saying that certain costs “plus all plant and materials at [Mr McKenzie’s] house” should be included in variations on the Shelford Quarry project.

Mr McKenzie’s case and evidence (before and at trial) was that he had paid the builder in cash for the work undertaken in August and September on Friday on a weekly basis: and he identified the relevant cash withdrawals. This was eventually accepted by National Grid to be the case. But the documents disclosed that certain machinery and materials had been supplied by Interserve ie by someone other than the builder paid in cash. Mr McKenzie’s evidence was that he knew that one lorry load of sub-base material had been supplied by Interserve, because it was redundant material of which he took advantage in exchange for some topsoil from his garden. But he denied knowing anything about the provision of plant or other materials, saying that he thought he was paying the builder in cash for that plus his labour (though he now accepted that matters were not as he thought at the time).

National Grid sought to discredit this evidence by establishing a close connection between Mr Stewart and Mr McKenzie, including an allegation that Mr McKenzie had forged the signature of a purported employee of Mr Stewart’s private company. The purpose of this was to invite me to infer that everything that Mr Stewart did, Mr McKenzie must have known.

In my judgment the case about the patio is the product of suspicion and assertion. There is no evidence of genuine quality to found a finding that Mr McKenzie knowingly received from Interserve the benefit of the supply of plant and materials for the building of his patio (apart from his admitted knowledge of the receipt of a lorry load of sub-base material in exchange for a lorry load of top soil). This claim for £7,688 fails.

National Grid contended that Mr Squires had paid for the flight and hotel expenses of Mr McKenzie and his family for Christmas holidays in 2004 and 2005. Mr McKenzie accepted that Mr Squires had initially paid for the flights for the 2004 holiday but alleged that he had repaid a total sum of £5,200 in two batches of payments in February 2005 and August 2005. Neither in his Defence nor in his witness statement did he address the 2004 hotel payments. Both in his Defence and in his witness statement Mr McKenzie alleged that he paid for all costs associated with the holiday at Christmas 2005.

National Grid did not have to prove that the 2004 flights were paid for by Mr Squires because Mr McKenzie accepted that this was so. I do not accept Mr McKenzie’s evidence that he reimbursed this expense. Reliable documents establish that the holiday lasted from 15 December 2004 until 4 January 2005. The flights would therefore have been booked by Mr Squires shortly before 15 December 2004. On 16 December 2004 Mr Squires/Grimston paid into Mr McKenzie’s Jersey account £20,000. I regard it as inherently improbable that Mr Squires should purchase air tickets on the basis that Mr McKenzie would reimburse him for them and then within a matter of days make a gift of £20,000. Nor do I accept that the two batches of payments in 2005 which constitute the alleged reimbursement are any such thing. They are simply round sum cash withdrawals (in fact made out of further gifts made by Mr Squires/Grimston and credited to Mr McKenzie’s Jersey account). I again regard as inherently improbable the idea that Mr Squires/Grimston should make large cash gifts which were to be utilised in part by repaying in dribs and drabs the cost of air tickets purchased months earlier. Mr McKenzie proffered no convincing explanation. I find that McKenzie received from Mr Squires £5,200 in respect of flights to Thailand at Christmas 2004.

National Grid led no credible evidence that Mr Squires in addition paid any hotel expenses in 2004. What National Grid did was to put to Mr McKenzie the accusations of Ms Bishop (the whistle blower whom they did not call) as to what she had been told. Mr McKenzie’s denial is the only proper evidence before me: and I accept it.

It was common ground before me that the cost of the flights for the Christmas 2005 holiday totalled £5,308 and was paid out of the joint bank account of Mr McKenzie and his wife in October 2005. It was National Grid’s case that this debit was covered by a credit made on 7 December 2005 from Mr Squires. This case is founded upon suspicion and assertion, but not on evidence (even if the suspicion is described as “inference”). There is no reason to connect the October debit with the December credit in an active current account. An examination of the bank statements suggests that the only sound inference is that the £5,000 credit was used in part to transfer £4,000 to a credit card (whether to reduce an outstanding debit balance on the credit card or to pre-load it with a credit for holiday expenses being a matter of pure speculation). The £5,000 credit to Mr McKenzie’s account cannot in fact be matched to any debit in Mr Squires/Grimston’s disclosed banking documents. Mr McKenzie’s surprising inability to remember the source of so large a payment from a third party is not itself evidence that it came from Mr Squires.

I therefore find only that Mr Squires paid Mr McKenzie £5,200 towards the expenses of the holiday in Thailand in 2004.

I therefore find that Mr McKenzie has received from Grimston payments totalling £126,908 and a car costing £34,495.. These payments were received by virtue of his employment but in dereliction of his duty. I hold that these secret payments were bribes paid by Mr Squires/Grimston (then a supplier of labour used on National Grid projects under Mr McKenzie's supervision as project engineer) to Mr McKenzie (the employee and agent of National Grid and undoubtedly a fiduciary in the loose or comprehensive sense that that word is used in connection with bribery): see Boston Deep Sea Fishing v Ansell (1888) 29 ChD 339 at 357 per Cotton LJ and Anangel v IHHI [1990] 1 Ll Rep 167 at 171. There is no doubt that National Grid is entitled to claim from Mr McKenzie the amount of the bribes (Reading v Attorney General [1951] AC 507). It is not suggested that in this case it is necessary to examine whether that recovery is by way of damages for presumed loss in tort (Hovenden v Millhoff (1900) 83 LT 41) or equitable compensation for breach of fiduciary duty or by way of restitutionary claim (Virgo “Restitution” 2^nd ed. ch.18) or by way of constructive trust (A-G of Hong Kong v Reid [1994] 1AC 324).

But there is equally no doubt that as an alternative National Grid may proceed against Mr Mackenzie and seek to recover damages for fraud in respect of the actual loss which they sustained: Mahesan v Malaysia Housing Society [1979] AC 374. Such an election does not have to be made until after judgement has been delivered; but National Grid at trial indicated that this was the course it intended to pursue. It is therefore necessary to examine in connection with what contracts the payments by Grimston were made and to assess the losses which National Grid has suffered by reason of acts in connection with which the payments were made.

I find that the payments were probably made in connection with contracts for the provision of labour by Mr Squires and by other Grimston personnel.

It is common ground that between May 2002 and February 2006 Mr Squires was paid by National Grid as a sub-contracted operative. The means by which this was achieved is also not in dispute. The actual supplier to National Grid was Spring Connect Ltd (National Grid’s nominated personnel provider, with whom it had established invoicing and billing procedures). Spring did not contract directly with Mr Squires. Mr Squires’s labour was provided through Grimston (as his services company) to Rigout, and Rigout contracted for the supply of those services with Spring. The complete contractual chain was thus: Mr Squires - Grimston – Rigout – Spring – National Grid. It is also common ground that Rigout rendered invoices to the value of £506,141.50 to Spring in respect of services allegedly provided by Mr Squires, which invoices were supported by time sheets. The case advanced in the pleadings was that these time sheets were grossly inflated. The nature of the case advanced in support of the allegation of gross inflation was (a) that for any given period the number of hours worked was improbably large; (b) that he had charged for days worked when it could be demonstrated that he was outside the United Kingdom; (c) that Rigout had charged both National Grid and Rapid Rail for the same days worked by Mr Squires. But at trial a rather more radical case was advanced. This was that from the outset the whole employment of Mr Squires was improper and was in effect a scheme by Mr McKenzie to pay his close friend Mr Squires for doing nothing. Since the material deployed in pursuing this more radical case has an impact upon the assessment of the pleaded case I will begin by addressing these more fundamental questions.

First, it was suggested that there was no need for Mr McKenzie to engage Mr Squires to work for National Grid at all, and that the whole arrangement was simply a favour for a friend. The twin bases of this argument were (a) a submission that there was unchallenged evidence from Mr Bryant that any work should have been done by internal National Grid employees and (b) Mr McKenzie’s acknowledgment that the arrangement came about because of “nepotism”. Neither is a proper foundation for the argument. Mr Bryant’s evidence appeared to be directed to one particular task which Mr Squires undertook. The established arrangements with Spring demonstrate that operational (as opposed to administrative) staff were regularly recruited on sub-contract basis, and examples of this emerged (often in other contexts) during the course of the trial. One example was Mr Turner, a former employee of Interserve who performed the role of a project engineer for National Grid on a sub-contract basis through Spring: likewise a Mr John Eaton, who appeared to discharge the role of site engineer. So also supervisors and linesmen (to whom I will refer later). The suggestion that National Grid did not need to engage people like Mr Squires on a sub-contract basis does not withstand scrutiny. Indeed, Mr Hill acknowledged in an e-mail to Mr Inglehearn in 2007 (after this action had commenced) that he was aware that Mr Squires had been engaged to sort out problems relating to Rapid Rail contracts in South Wales where the sheer volume of work and difficulties occasioned by the engagement of two contractors to deal with the supplier had necessitated additional skilled help.

Nor does the suggestion that the arrangement owes everything to “nepotism”. Mr McKenzie explained (and I accept) that he did not mean by this that he was doing favours for anyone: only that within the industry there were strong family and gang working connections. Mr Bryant (on whom National Grid principally relied) did exactly the same. There was disclosed (though not originally included in the trial bundle) an e-mail from Bill Wrigley in Australia to Mr Bryant in February 2005 in which Mr Wrigley said:-

“I have started to think about what I need to do re work and besides my contract which I assume you are looking at you need to let me know how you want to play it…I think it would be politic to talk to [Mr McKenzie] as it is his contract and also we need to talk as from your last e-mail the scope of my job is widening…”.

National Grid do not say that Mr Bryant’s engagement of Mr Wrigley was a cosy arrangement between friends to provide employment for an out of work engineer returning to this country, which work was not really needed: they call him as witness to say how improperly Mr McKenzie acted. I see what Mr Bryant was doing in relation to Mr Wrigley as an example of the way site engineers or project engineers recruited skilled labour when required from sources known to them. And I view Mr McKenzie’s engagement of Mr Squires in the same light.

It was next suggested that Mr Squires had done no real work for National Grid. Recognising the difficulties which face a party who seeks to establish a negative, it is nonetheless my judgment that this submission cannot be made out. First, during the course of Mr Squires’s engagement his presence was known to and discussed by senior team members such as Mr Inglehearn and Mr Hill. Mr Bryant’s evidence on behalf of National Grid was that he had discussed Mr Squires with Mr Inglehearn on several occasions (which neither he nor Mr Inglehearn could identify). From the tenor of Mr Bryant’s evidence it may be assumed that the subject of discussion was what Mr Squires was doing (and whether that task could be undertaken by Engineering Services within National Grid). It seems inconceivable that, the issue having been directly raised, Mr Squires could continue to be engaged if he was in fact doing nothing. Moreover Mr McKenzie said in evidence (and it was not demonstrated that he was wrong) that there were no less than 47 e-mails passing between Mr Hill (the Procurement Officer) and Rigout and Spring concerning Mr Squires’s engagement: it seems inconceivable that with that degree of correspondence Mr Squires could in fact be engaged to do nothing.

The original and the continued engagement of Mr Squires was not a secret deal between Mr McKenzie and Mr Squires. The original proposal was (in March 2002) the subject of analysis and negotiation by Mr Hill with Spring. It led to a purchase order for the provision of Mr Squires’s services on the A130 Rayleigh bypass (where the project manager was Mr Mercer, where the project manager’s authority to countersign the purchase order was exercised by Mr Bryant, where the purchase order was countersigned by the requisite finance officer and the purchase order itself approved by Mr Hill (following his discussions with Spring)). The purpose of the engagement was stated to be “the provision of the services of Mr Mick Squires as site supervisor from 8 April until 30 June 2002”. Mr Mercer would not have authorised signature of the purchase order if those services were not required. The finance officer would not have countersigned the purchase order if the costs could not be accommodated within the project budget. Mr Hill would not have countersigned the order unless he was satisfied that its terms could be justified. The A130 site was difficult. The site was shared with another contractor (the one building the bypass). The circuit on which the work was being done was on which there could only be limited “outage” because of the impact on Bradwell nuclear power station of de-energising the circuit. I see no reason to reject Mr McKenzie’s evidence that these factors meant that additional site supervision and emergency response oversight was required. I do not accept that all the National Grid departments that processed the purchase order were duped into engaging Mr Squires for a job that did not exist.

That initial purchase order appears to have been extended whilst the work on the A130 continued, Mr Hill being directly consulted in relation to the invoices for June and July 2002. (In fact documents produced by Rigout on disclosure and referred to at the trial before me suggest that the contract was for six months).

The next contract that I can identify is one for a further six months from February 2003. This was the subject of an e-mail from Mr McKenzie to Mr Hill containing the assertion that the contract had been approved by Mr Bryant. In his evidence Mr Bryant had no recollection of having given such approval: but I consider that the e-mail probably represents the truth since it would have been a high risk strategy for Mr McKenzie to make a false statement that could be so readily checked. Moreover Mr Bryant told me that he discussed Mr Squires’s employment with Mr Inglehearn: and Mr Inglehearn told me that he had a recollection of having approved the engagement of Mr Squires to do wayleave work on the Indian Queens line in March 2003. So I would again find that this was not a cosy arrangement to engage Mr Squires to do a job that did not exist.

It is not possible to scrutinise in the same way each purchase order for each period of Mr Squires’s engagement. But to his Defence Mr McKenzie annexed a schedule which he described as a “high level diary” identifying the projects on which Mr Squires was engaged and describing in general terms his role in each. There is force in Mr Phillips QC’s submission that the descriptions are somewhat vague, and he was able to demonstrate in his cross examination of Mr McKenzie could not in every case remember exactly what it was that Mr Squires was doing at any particular location. But Mr McKenzie had been careful to include on his schedule contact details for the main contractor on each site and for National Grid’s site representative at each site. National Grid therefore had full opportunity, if they wished to advance an affirmative case that Mr Squires did no work, to investigate and adduce evidence in support of such a case. No such evidence was adduced. Indeed of the identified site managers who were called to give evidence Mr Griggs confirmed that Mr Squires worked on the Mannington line: and it was the evidence of Mr Bryant that Mr Squires was present on the projects for which he was responsible, and that he objected and succeeded in having Mr Squires removed temporarily.

On this material I reject National Grid’s case that the engagement of Mr Squires was wrongful from the outset, resulted purely from arrangements made between Mr McKenzie and Mr Squires, that Mr Squires did no real work and that what he did do could and should have been done by National Grid employees so that the whole of the £506,000 that has been paid to him was paid for nothing. But this was a late way of putting the case. The case as pleaded was that the £506,000 included grossly inflated charges. In my judgment that case substantially succeeds.

It is not possible for National Grid to criticise the essential terms of Mr Squires’s engagement. The job for which he was originally engaged was identified and the amounts that National Grid was prepared to pay (as to basic rate, benefits and allowances) were the subject of specific negotiation by Mr Hill with Spring on initial engagement, and subjected to further consideration on first renewal). But two specific terms require further comment.

First, holiday entitlement. When Rigout offered Mr Squires to Spring their quoted rate was £36.50 per hour “which shall include holiday entitlement of two paid weeks per year”. After negotiation by Mr Hill National Grid’s purchase order specified a rate of £36.50 per hour and noted:-

“This rate includes administration fee and two weeks holiday entitlement”.

As I have indicated the initial contract period is not entirely clear: some documents suggest that it was from April 2002 until the completion of the A130 Bypass project: others that it may have been a six month contract. For present purposes the difference is immaterial: the key point is that the contract was not for a year. In that context there was a dispute at trial between National Grid and Mr McKenzie as to what the holiday entitlement provision meant. Mr McKenzie says that the arrangement was that Mick Squires could take two weeks holiday per year for which he would be paid at the specified rate (even though he was not working). Mr Phillips QC argued that an hourly rate which was stated to include two weeks holiday entitlement meant that the rate that National Grid was paying Spring was at such a level that it enabled Spring or its supplier to afford the operative two weeks paid holiday ie during which he would continue to be paid by Spring even though Spring was not rendering invoices to National Grid because the operative was not working. I accept the construction put forward by Mr Phillips. The consequence is that if Mr Squires was on holiday (and not on site for National Grid) Spring could not invoice National Grid. On the contractual chain I have described, Spring was simply an administrator of the personnel supply contract: so it may be taken that the same term was incorporated into Rigout’s supply contract. The short point is that Mr Squires was not entitled to claim that National Grid should pay him whilst he was on holiday.

The second point concerns overnight allowances. In his quotation for the supply of Mr Squires’s services Rigout had specified:-

“He shall receive overnight lodge allowance of £50 per night or £350 per week”.

When (after negotiation) Mr Hill signed off the purchase order he approved payment of (overnight allowance £50 per night). An allowance is generally a fixed periodic payment against a known variable expense. If an employee is entitled to a car allowance of £100 per month it is not normally contemplated that he must produce vouchers to support expenditure in that sum for that month, and that if he produces vouchers for £50 in April that is all he receives, and that if he spends £150 in May he only receives £100. But the term “allowance” might in some contexts mean “expenses up to [the stated amount]”. On the purchase order requisition signed by Mr Hill the £50 per night appears simply as an “allowance”. But on the purchase order itself (also signed by him) it appears as:-

“Overnight allowance…subject to expense receipts”.

The confusion was identified by the beginning of July 2002 when Rigout submitted invoices with unsubstantiated claims for £50 per night allowance whereas Mr Hill was expecting the invoiced claim reimbursement of expenses. The solution reached was that until the end of June 2002 Mr Squires should be entitled to claim a £50 per night allowance, but from the beginning of July he would have to claim expenses supported by receipts up to a maximum of £50 per night. The was confirmed in an e-mail from Mr Hill to Spring that was copied to Mr McKenzie. Mr McKenzie suggested that he may not have been aware of the contents of this e-mail because he “spammed” copy e-mails. But I reject this explanation (a) because Mr Phillips QC’s cross examination demonstrated that Mr McKenzie did not routinely “spam” copy e-mails: and (b) it is apparent that Rigout was informed by Spring of the new arrangements and immediately contacted Mr McKenzie with a request that Spring should be reminded of the original arrangement. I therefore find that from the beginning of July 2002 Mr Squires was only entitled to vouched expenses and that Mr McKenzie knew this to be the case.

The third matter relates to vehicle allowance. Rigout’s original quotation had provided for the payment of £300 per week as a vehicle allowance to cover Mr Squires using his own 4x4 vehicle as a site vehicle. The purchase order requisition signed by Mr Hill authorised the payment of £300 per week in respect of the provision of a 4x4 site vehicle. The purchase order delivered to Spring ordered the provision of a 4x4 site vehicle for £300 per week. It is in my judgment clear that that allowance was only to be paid for weeks during which Mr Squires worked: that is plainly the context in which the payment was sought by Rigout: and it is a fair reading of the purchase order itself. Mr McKenzie was disposed to argue that the £300 per week could be claimed by Mr Squires for every week during his period of engagement (whether he actually worked it or not) because he needed to maintain and fund the depreciation of his vehicle whether he worked or not: but in my judgment that is not what the agreement between National Grid and Spring (or between Spring and Rigout) provided for.

Having disposed of those three issues I can turn to the heart of the debate. Each request for payment directed to Spring by Rigout had to be supported by a time sheet showing the number of hours worked by Mr Squires. Those time sheets were signed off by Mr McKenzie as the project engineer. Mr McKenzie accepted in cross examination that it was his duty as project engineer (a) to ensure that Mr Squires’s employment was for the benefit of National Grid; (b) to satisfy himself that the time sheet accurately recorded the number of hours Mr Squires worked; and (c) that Mr Squires was only paid for the hours he did work. Mr McKenzie was not brow beaten into making these acknowledgments: and I accept them as an accurate summary of his duty.

National Grid then sought to establish that Mr Squires’s time sheets as signed off by Mr McKenzie were from April 2002 works of pure fiction. There were two prongs to the attack. The first was that Mr McKenzie had admitted to creating time sheets: the second was that the time sheets were on their face (having regard to the daily hours worked and the periods for which those daily hours were maintained) wholly incredible.

I was not assisted by pursuit of the case that Mr McKenzie admitted fictionalising time sheets. It was yet another example of National Grid’s endeavour to extract every adverse interpretation out of every event or statement (however minor). On 16 May 2005 Mr Read (then engaged on behalf of National Grid to scrutinise costs being incurred in South Wales) e-mailed Mr McKenzie to alert him to a potential overcharge by the main contractor in relation to design costs. In passing he said:-

“They will no doubt produce time sheets to justify the times, but we’ve experienced the creative accounting of [design office] time sheets in the past from the other side of the fence”.

That was a reference to a time when both Mr Read and Mr McKenzie had worked for that main contractor. In those days if their manager had asked them to produce a time sheet showing design costs valued at £60,000 then, Mr McKenzie said, that is what you did: and he acknowledged that in one sense that was fraudulent. (He wanted to qualify that answer when he came to re-examine himself: though he in fact forgot to do so). This passing reference in an e-mail (and the incident to which it refers) will not bear the weight put upon it by National Grid. Just because Mr McKenzie did what he was told as an employee does not mean that as a project engineer he will embark on the creation of fictionalised time sheets.

Nor do I consider it possible to conclude that the daily hours worked and the periods for which they were worked themselves demonstrate that the time sheets are fictionalised. I will have cause to examine this argument in another context, and will then examine the relevant material. For the present I record that that material persuades me to the same conclusion in relation to Mr Squires’s time sheets.

I therefore do not approach Mr Squires’s time sheets on the footing that they are admitted fabrications so that there is simply no record of the hours actually worked by Mr Squires (if he worked any) – the approach I was invited to adopt by National Grid. I approach the time sheets on the footing that they probably contain a kernel of truth (since the contracts themselves were openly entered into and the presence of Mr Squires was common knowledge within the management team from Mr Inglehearn downwards): but that given Mr McKenzie’s admittedly central role in the verification of the time sheets and the fact that at this time Mr Squires/Grimston were making generous gifts to Mr McKenzie, there is a very real possibility that they are in some respects falsified. That, in fact, is what Mr Phillips QC has succeeded in establishing.

The methodology employed was to take each time sheet for Mr Squires that had been signed off by Mr McKenzie, and then to cross reference the data for each day with material available in the disclosure of other parties, and from that comparison to draw inferences as to the reliability of the entries on the time sheet. The thoroughness with which the task was undertaken means that I can express my findings quite shortly. Of necessity this process involved putting to Mr McKenzie isolated facts drawn from documents scattered amongst the sixty plus trial bundles, facts in respect of which no coherent hearsay notice had been given. I kept under constant review whether this process was fair to Mr McKenzie – for example, whether it unfairly deprived him of the opportunity to challenge inferences that I was being invited to draw. For example, on 6 and 7 June 2002 the time sheets for Mr Squires claimed that he worked eight hours on each day. But his bank statements appear to show that he made on-board ferry purchases on 6 and 12 June (but no English transactions). I was invited to conclude that Mr Squires could not have been both working at Rayleigh and on a ferry bound for Belgium (where he had a house). Such a conclusion assumes that Mr Squires had only one card that could operate his bank account, and that it was he who made the on board purchases. But I am satisfied that National Grid’s case had been pleaded with sufficient particularity (see paragraph 28B of and schedule 2 to the Particulars of Claim) to enable Mr McKenzie to know in advance the material that would be deployed and to prepare to answer it. It remained open to him at trial to call Mr Squires. I am therefore satisfied that I can fairly reach the following conclusions.

First, Mr McKenzie routinely (and by arrangement with Mr Squires) overcharged Spring (and ultimately National Grid) by two hours per day from the beginning of July 2002. He admitted doing so. His justification was that he considered it wrong that Mr Hill should deprive Mr Squires of his £50 per night “allowance” by requiring the production of receipts (which would always be difficult to obtain and sometimes impossible – if, for example, Mr Squires informally moved in with somebody). This does not provide a justification in law for the deliberate and deceitful overcharge of two hours per day. Mr McKenzie submitted that if I was to award damages because he had added an extra two hours per day then I ought to reduce those damages to take into account the likelihood of Mr Squires claiming his £50 per day overnight expenses allowance and justifying it by the production of receipts. This submission sits uneasily for the supposed justification for the arrangement itself (namely the difficulty of producing receipts). Mr McKenzie adduced no evidence as to how, in fact, the nightly allowance might have been claimed and he did not direct my attention to any material in the trial bundle to demonstrate that anyone had, in fact, successfully claimed expenses. In the circumstances I am satisfied that National Grid has established, on the balance of probabilities, that it suffered a loss (caused by Mr McKenzie’s breach of contract or deceit) of £73 for each day that Mr Squires may properly be regarded as having worked.

Second, I find that the time sheets record Mr Squires as having worked on days upon which, on the balance of probabilities, he cannot have been available to work for National Grid.

It is therefore proved by detailed evidence that there is an overcharge of at least 1,822 hours in respect of occasions when Mr Squires was outside the UK. This included extended periods of absence during which the £300 per week vehicle allowance was being charged. Looking at the matter most favourably to Mr McKenzie there are, I think, at least 21 occasions when such a charge was made without justification.

Not content with this National Grid embarked upon a similar exercise in an endeavour to demonstrate that there were occasions where Mr Squires could not have been at the site referred to in Mr McKenzie’s high level diary because he was recorded as attending a meeting (or conducting a banking transaction) somewhere else in the country. The inferences here, however, were weaker and Mr McKenzie’s evidence carried greater conviction. So, for example, although Mr Squires’s engagement might have been on the Mannington line, Mr Squires might have had to travel to Yorkshire to collect drawings or to a National Grid depot to collect parts. Moreover, some of the material on which National Grid relied for its criticism was less secure than, for example, Mr Squires’s passport entries. Thus, there was extensive debate about the precise weekend on which a test tower for the Rigout Uniline FAS system was erected, and whether Mr Squires had purported to charge National Grid for the time spent: a debate to which seemed to me inconclusive. Without shirking the burden of deciding sundry detailed issues in this category I consider that a fair disposal can be achieved by finding (as I do) that it is likely that the approach which Mr Squires and Mr McKenzie adopted in relation to absences abroad will have infected the assessment of time spent within England and Wales, and that this likelihood is best reflected by adjusting the charge made for days actually worked: for roughly one in seven (say 15%) were spent otherwise than on work properly chargeable to National Grid.

To that overall approach I would make one further adjustment. From March 2005 until October 2005 Rigout rendered invoices totalling £118,320 in respect of Mr Squires’s services. (I would ignore, as over refinement in the assessment process, the fact that these invoices include an additional two hours per day). My 15% adjustment for this period would reduce the chargeable invoices by £18,000. But it is demonstrable that for this period Rigout (whist charging National Grid for Mr Squires’s services) was also charging Rapid Rail for Mr Squires’s services, total invoices of approximately £28,000 being rendered. Mr McKenzie attempted to persuade me that Mr Squires could faithfully discharge his duties to both employers and give each full value. He said that the work for Rapid Rail was probably “specifying”, a desk job done on the drawings. But the invoices were rendered for “surveying installations” that had been completed by other gangs. This is not a desk job done in his own time, but a job that overlapped with what he was doing for National Grid. He obviously spent time worth £28,000 doing work for Rapid Rail and that time was being paid for by National Grid. So I would add an additional £10,000 to the allowance of 15%.

Third, National Grid submitted that I must regard the Grimston personnel time sheets as entirely unreliable because of the disparity between the amount that Rigout billed for the Grimston personnel (over one million pounds) and the amount it actually paid the Grimston personnel (some £600,000). It was argued that the fact that Rigout charged £405,000 more than the Grimston personnel received demonstrated that Rigout was charging for more hours than the Grimston personnel were expecting to be paid for. I also reject this submission. When labour is outsourced the provider obviously charges the client more than he pays the employee. I have no material upon which to assess whether the profit margin achieved by Grimston was so excessive as properly to found the inference that its achievement must involve some impropriety (such as charging unworked hours). This is particularly so when there is material which suggests that Grimston personnel were paid cash sums in addition to the amounts passing through Grimston’s cash account. (a) Mr McKenzie gave evidence that Mr Squires would fund the living expenses of Grimston personnel by cash payments whist they were on the job: and National Grid relies (for other purposes) on daily cash withdrawals by Mr Squires of significant sums. This evidence seemed to me entirely credible. (b) In another context entirely application of monies received by Grimston fell to be examined by Mr Greg Izatt of Rigout: he alludes to the possibility that Mr Squires is paying a cash bonus to the Grimston personnel. In these circumstances the disparity between receipts booked in and disbursements booked out does not of itself support the inference of wrongdoing as suggested. I approach the Grimston personnel time sheets on the footing that (Dave Mansfield’s entries apart) they are essentially correct, but alert to the possibility (based on Mr McKenzie’s behaviour in relation to Mr Squires’s time sheets and to significant payments by Mr Squires/Grimston) that the sheets have been falsified in particular respects.

Fourth, National Grid secured from Mr McKenzie the admission in cross examination that the daily charge for Grimston personnel includes two hours in respect of “overnight allowance”. It also secured the acknowledgment that the time sheets allow a travelling day at the beginning of each working spell. The contract under which Rigout supplied the Grimston personnel to Spring for use on National Grid projects was governed by Spring’s standard terms and conditions. These provided that travel time was the responsibility of Rigout (ie was not chargeable to Spring for transmission to National Grid). They also provided that expenses incurred were the responsibility of Rigout in the absence of any other provision. So far as I can ascertain each individual contract relating to each of the Grimston personnel provided that expenses claims had to be submitted and approved each week on the time sheets. It was not suggested by Mr McKenzie that the National Grid purchase order which produced those contracts contained terms to any different effect. Accordingly Rigout could not claim in respect of any of the Grimston personnel any travelling time: nor could Rigout claim to charge for overnight subsistence save by way of an expenses claim on the relevant time sheet. Mr McKenzie circumvented these restrictions by converting the claims into claims for hours worked. He did so on his own authority and without drawing it to the attention of Mr Hill. This was on its face a breach of his contractual duty only to approve time sheets which he believed to be accurate: and the fact that he knowingly approved inaccurate time sheets means that he did so deceitfully. I suspect that he did so not only to benefit Mr Squires, but partly because he knew that he was in practice necessary to fall in with the arrangement in order to get the job done. He told me that he knowingly charged more than the hours worked in winter because the winter working conditions on the exposed towers were so horrific that the men told him they would not do the job if their hours were cut. The terms on which RJC (UK) Limited was prepared to offer painters in February 2004 lends credibility to this evidence (though it falls short of establishing that this was the industry norm). Mr McKenzie could have run the argument (and adduced evidence to support it) that if he had in fact done what he ought to have done (and drawn to the attention of Mr Hill that he was circumventing the terms of the labour supply contract) that Mr Hill would have been driven to concede that some allowance had to be made. But this case was not put to National Grid: and the underlying material (Mr McKenzie’s direct evidence and a single quotation from another supplier) is not so strong that I think National Grid would be bound to concede it. I must decide the issue on the evidence actually adduced and the arguments actually canvassed. On that basis I am bound to find and hold that Mr McKenzie’s approval of these extra charges was wrongful, and that on the balance of probabilities National Grid has in consequence suffered the loss by being overcharged by that equivalent amount (without any reduction).

National Grid persisted in claiming the whole of the one million pounds paid to Grimston in respect of the Grimston personnel. This is not maintainable on the facts. The calculation of the true overcharge was not the subject of examination at trial: but early in the proceedings I required National Grid to state (for the benefit of Mr McKenzie and Mr Read) what, in pounds and pence, each of the plethora of claims advanced actually amounted to. In that statement National Grid valued the “overcharge” at £182,500. This seems to me to be broadly right and I assess damages in that sum.

Having undertaken the process of assessing the damages payable by Mr McKenzie I have tried to stand back and ask myself two questions. First, would I award a significantly different sum if I were to analyse the facts in terms of the manifold other causes of action advanced by National Grid (in particular, in terms of an “unlawful means conspiracy” where damages would be at large). I have concluded that I would not. It seems to me that the same fundamental principle of trying to compensate National Grid for the amount that they were wrongly charged by Rigout because of Mr McKenzie’s actions would still underlie the process of assessment: and I have not felt constricted by rules relating to causation, remoteness or measure of damages in the process of assessment such that I feel that there is some loss which the mainstream rules do not enable me to compensate National Grid for. I would hope that those having to plead and argue cases will resist the temptation to advance multiple analysis of the same facts in terms of differing causes of action unless it is anticipated to produce a significantly different outcome. Hearings will become unwieldy, judgments interminable and costs wholly disproportionate unless such a discipline is observed.

The second question I have asked is whether the damages look about right when compared with the amount of the connected bribes: and whilst the judgment cannot be anything other than purely subjective, I think they probably do.

A third question arises, to which it is not possible to give an answer without further submissions. That question is: how is the award of damages payable by Mr McKenzie to be related to the agreed settlement sums paid by Mr Squires/Grimston and by Rigout in respect of causes of action pursued against Mr McKenzie jointly with either or both of those paying parties? If the recoverable loss in respect of the Squires time sheets was £182,500 it would be wrong to order Mr McKenzie to pay that if Mr Squires has already paid it as part of the settlement. Equally it would be wrong to appropriate for this head of claim £182,500 of the Squires settlement figure if that settlement figure also related to a number of other heads of claim. This question was argued when I handed down judgement, and argued in the context of all heads of claim. The conclusion at which I arrived was that it would be right to attribute the sums paid by Squires/Grimston and by Good/Rigout to one particular large claim (that to account for significant secret profits earned on contracts in South Wales, on which compound interest was running) and to ignore it in relation to all other heads of claim: that greatly simplifies the position.

National Grid made a further and separate allegation of wrongful conduct on the part of Mr McKenzie in relation to Mr Squires and the Grimston personnel (along with others). In connection with the RJC (UK) Limited quotation I drew attention to the fact that the labour provider was expecting National Grid to provide vehicle and fuel cards for his painting contractors. That is what Mr McKenzie arranged for Mr Squires and the Grimston personnel and National Grid now complain that he did so fraudulently.

The essential facts may be shortly stated. Rigout provided fuel cards to Mr McKenzie, Mr Squires, certain of the Grimston personnel, to the users of the two vehicles rented to National Grid (under arrangements to which I must come) and to an employee of Rigout. From 1 April 2004 to the end of October 2005 fuel to the value of approximately £42,000 was charged to these cards and paid for by Rigout. Rigout then invoiced Eve (the main contractor on the Mannington project for which Mr McKenzie was the project engineer) the enhanced sum of £86,605 for this fuel. There was a dispute as to whether Eve absorbed this cost or whether it passed it directly on to National Grid (its employer). Although the documentary trail could not be followed, Mr Neil Durant (a director of the Transmission Division of Babcock Networks Limited, which trades as Eve) gave evidence that the fuel payments were billed to National Grid as part of the normal monthly invoicing procedure. This evidence was not shaken.

Rigout continued to send fuel card invoices to Eve notwithstanding the end of the Mannington project: but Eve rejected them (probably precisely because it was a cost that was ordinarily passed on to National Grid and not routinely borne by Eve). When that occurred the invoices were credited back to Eve and Rigout were left unpaid invoices of £22,364. Rigout then informed Mr McKenzie that it would “regenerate new Rigout invoices…and send to your nominated payee”. In other words Mr McKenzie had to find some way of covering the fuel cost which Rigout did not itself intend to bear. Mr Read and Mr McKenzie arranged for the charge to be picked up by Interserve (though in the event I do not think any invoice was rendered to Interserve and instead Rigout absorbed the fuel charges in its contract costs rather than treating it as a separate recoverable expense).

For Mr Squires and the Grimston personnel the order placed by National Grid with Spring (and then by Spring with Rigout) provided for a £300 per week vehicle allowance. The additional provision of a fuel card would in effect have provided double recovery of fuel costs. There is no basis upon which Mr McKenzie could properly have thought that Mr Squires or the Grimston personnel should be reimbursed their fuel costs by means of a fuel card as well as collecting a weekly vehicle allowance: and I am satisfied that he did not think there was. This was a simple, straight forward scam. Equally there was no proper basis of which he could have thought (and he did not in fact think) that he could legitimately have a fuel card, since he received a vehicle allowance from National Grid and was accordingly reimbursed twice over. Nor was there any basis upon which Mr McKenzie could contrive to charge National Grid for fuel consumed by Rigout employees.

In short, I find and hold that the £86,605 charged to National Grid in respect of fuel consumed on these fuel cards was procured by the breach of contract and deceit of Mr McKenzie and that he is liable in damages in that sum.

On 31 March 2006 Mr Squires instructed Grimston’s bankers to pay £19,000 to Mr McKenzie “for consultancy fee and expenses”. The payment was made on 3 April 2006. On 12 April 2006 Mr McKenzie paid £15,490 for a Mini for his wife. The garage’s sale document was amongst the shredded documents recovered when Mr McKenzie’s home was raided pursuant to a Search Order in May 2006. The balance of the £19,000 was absorbed in general expenditure.

No-one suggests that the reason given by Mr Squires for the payment was true. Mr McKenzie’s evidence was that the payment was a gift by Mr Squires to Mr McKenzie’s wife on the occasion of their 10^th wedding anniversary. This prompted National Grid to embark upon an investigation into Mr McKenzie’s divorce in an endeavour to demonstrate that April 2006 was not his 10^th wedding anniversary. (This must rank (alongside the instruction of Thai solicitors to investigate Mr McKenzie’s holiday dates in Bangkok in 2004) amongst the more immoderate pieces of expenditure in this litigation). The attempt failed. Mr McKenzie gave a coherent and convincing explanation of his marriage in a Thai village on 11 April 1996, of the birth of his first child in 1997, and of the need to undergo a formal marriage ceremony (in the presence of his employer’s driver and accountant) in an office adjacent to the British Embassy in Bangkok in order to obtain a certificate that would support the grant of an entry visa for his wife on a visit to the UK in December 1998. But the fundamental question remaining after this wasteful skirmish was whether the wedding anniversary had anything to do with the £19,000 payment. Mr Phillips QC invited Mr McKenzie to look me in the eye and to tell me that the £19,000 was a 10^th wedding anniversary gift to his wife. He did so. He was lying. In my judgment the £19,000 was Mr McKenzie’s share of the sums earned by Rigout and Grimston out of a sub contract awarded in respect of the reconstruction of a culvert on the Exeter-Landulph-Indian Queen’s overhead line.

The relevant facts are these. The insulators and fittings on the Exeter- Indian Queens routes were suffering very advanced deterioration and there was severe corrosion on the route. In 2003 capital expenditure of £13.9 million pounds was sanctioned for the refurbishment of the line. The contract was let before National Grid’s “framework rate” system was fully implemented, and was competitively tendered. The contract was awarded to AMEC. They were also invited to tender for the refitting of step bolts and the installation of the Rapid Rail safety system on the same route: but this contract was eventually let to Interserve. The object was for AMEC to complete the work in October 2005. In July 2005 a culvert adjacent to tower 91 was identified as near to collapse. Rebuilding it would involve the construction of an access road. AMEC was invited to submit costs for carrying out a feasibility study for submission to Steve Turner (who was National Grid’s project engineer). The project delivery manager was Mr Bryant. Mr McKenzie knew of the problem because he was copied in on the minutes of the contract meeting as a member of National Grid’s network strategy construction team.

By August 2005 AMEC had submitted a feasibility study and costs for carrying out the relevant work. AMEC’s costings were based on the engagement of a local sub contractor to undertake the work on AMEC’s behalf. It included the construction of a permanent access track three metres in width. There is nothing to suggest that this quotation is anything other than entirely genuine. To the basic quotation AMEC would have been entitled to add a sum for profit and overheads: and they included a contingency of £10,000 because (as they explained in their letter of 10 August 2005 to Mr Turner) the proximity of the culvert to tower 91 suggested that an intrusive inspection needed to be carried out in order to establish the precise details of the tower foundations. So the quotation of £158,000 represented a cost to National Grid of the order of £200,000.

Mr. Read, Mr McKenzie and Mr Squires decided that they could earn for themselves the profit to be derived from carrying out this work: this is the clear inference to be drawn from an entry in Mr McKenzie's workbook which (from its placing in the volume) would have been made in August. The calculation suggests that if the job cost £80,000 to do then, if the price quoted was £193,000 (Mr McKenzie miscalculated it as £183,000) Mr Squires could take £25,000, Mr McKenzie could take £20,000, Mr Read could take £25,000, and a further £25,000 could be split between Ms Bishop (who became the whistleblower) and an employee of Interserve. I consider that Mr McKenzie intended the sub-contract to be routed through Interserve (who were already an approved contractor and who were already on site in connection with Rapid Rail installation). To that end Mr Read or Mr Squires prepared a quotation in the sum of £183,000 (reflecting Mr McKenzie's mistake) by their company Grid Line Services Ltd for the consideration of Interserve. The work quoted for was to a higher specification than that in the AMEC quote. It was approved by Mr McKenzie (as a joint venture member and not as an employee National Grid). This quotation was subject to further revision and was eventually sent to Interserve at the beginning October 2005. By that time it had been reduced to £135,000.