27 April 2023
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(10.00 am)
(Proceedings delayed)
(10.10 am)
Sir Wyn Williams: Before I invite oral submissions on the compensation issues which I have identified, it’s my sad duty to report that on 5 April Mr Robert Boyle, a former subpostmaster and a Core Participant, passed away suddenly. On my own behalf and on behalf of the whole Inquiry team, I extend my deepest sympathies and condolences to Mr Boyle’s family and friends.
Shortly after Mr Boyle’s passing, I received an application from his son, Christopher, who is Mr Boyle’s executor, to become a Core Participant in the Inquiry, and I have granted that application.
Mr Moloney, I understand the position to be, but correct me if I’m wrong, that Mr Boyle Senior, if I can call him that, received two interim payments under the Overturned Historical Convictions but his final award had not been finalised prior to his death. Thank you.
Right, well, I have an audience on a scale with which I am completely unused. So I think, Mr Chapman, it’s for you to begin the oral submissions.
Submissions by Mr Chapman
Mr Chapman: Thank you, sir.
I make these submissions on behalf of the Department for Business and Trade, which I’ll refer to as “the Department”. The Department was created on 7 February of this year to bring together aspects of the work of the Department for Business, Energy and Industrial Strategy, or BEIS, with that of the Department for International Trade. Amongst other areas of Government work, the Department’s taken on those functions relating to the Post Office, which were previously carried on by BEIS.
The Department has expressed on a number of occasions its disgust at the Horizon scandal and the awful impact it had on many people’s lives. It’s important to restate that today. The Department remains fully supportive of the Inquiry’s vitally important work in establishing the facts of how this appalling situation came about, identify fault and make recommendations to ensure nothing like it ever happens again.
For the purposes of today’s hearing, the Department wishes to reiterate that the issue of compensation remains one of its top priorities. Significant progress has been made on this front since the last hearing dealing with compensation matters.
In relation to both the Historical Shortfall Scheme, the HSS, and the compensation for postmasters with Overturned Historical Convictions, the OHC, the Department continues to devote considerable resources to working with the Post Office to ensure that full awards are provided to all those affected as soon as possible.
As you know, the Department itself is directly responsible for the implementation and administration of the Group Litigation Order, or GLO, further compensation scheme. This opened for applications on 23 March of this year and good progress – which we all recognise is positive news.
Sir Wyn Williams: I’m trying to think of something appropriate to say but I simply can’t, Mr Chapman!
Mr Chapman: Good progress has been made in the first month of its operation.
However, the Department recognises that there’s clearly much work still to be done. Its position remains one of genuine and open engagement, with the goal of doing whatever it reasonably can now and in future to ensure full and fair compensation as quickly as possible for everyone affected by the Horizon scandal.
The Inquiry has seen the Department’s written submissions for the purposes of this hearing, dated 6 April 2023, which are publicly available to read on the Inquiry’s website. I don’t intend to repeat what’s set out there but instead will seek to provide further relevant updates and engage with some of the issues raised by the other Core Participants in their written submissions, in the hope that that will be the most helpful, useful way to spend the allotted time this morning.
I’ll address these issues under four headings relating to four matters upon which you, sir, have requested Core Participants’ input at this hearing, and they are: bankruptcy; taxation; an update on the HSS and OHC schemes; and an update on the GLO scheme.
Starting with bankruptcy, the Department has been clear throughout that its objective is to ensure that all postmasters are put back in the position they would have been in had the Horizon scandal not happened. This applies as much to those who have faced bankruptcy due to Horizon as to all others. The Department is determined to do whatever is necessary, whatever it takes, to achieve that aim.
We are grateful to the Inquiry for commissioning and sharing the careful and detailed opinion of Catherine Addy KC. Without attempting to explore in any detail the obvious complexities of the issues identified, I will try to provide an update and summary assurance in relation to three points raised by the Core Participants.
First, as noted in our written submissions, there is one insolvency practitioner, Moore, who so far refused to agree that compensation payments under the GLO scheme do not vest in the bankruptcy estate. The Department has already been considering the option of an application to the court for a direction in respect of the 16 cases held by Moore.
The Department will now see if Catherine Addy’s opinion has caused that insolvency practitioner to reconsider its position, before making any application to the court.
Whatever the outcome, the Department will ensure that claimants personally receive full and fair compensation. It shouldn’t be necessary for any postmaster to take action themselves under the Insolvency Act and join the Department as an interested party, as Howe+Co have suggested in their written submissions.
Second –
Sir Wyn Williams: Before we leave that, Mr Chapman – and it’s a theme that will recur, so I might as well get it out in the open now – there’s an end point on the GLO of early August next year, yes? So delays related to – and I use the word “delay” at the moment without seeking to apportion any blame for delay, simply using it in that way – but delays in relation to issues such as whether Moore are right or Ms Addy and you are right are likely to be – or are likely to impact upon the timescale that we’re all working to here.
Mr Chapman: Yes.
Sir Wyn Williams: Ms Addy’s advice has been in the public domain for many weeks now and I would have hoped that a swifter resolution of this could have been achieved, in the sense that either Moore, putting it bluntly, say “Okay, you were right” or someone does something that prove that you are right.
Mr Chapman: I will address that head-on, the Department understands the point, and if – it realises that time is of the essence and, as a result of that, it is going to press Moore for an answer and, if the answer is not satisfactory, then it will take appropriate steps.
In relation to the delay, and I’ll turn to that – to the end point of the GLO scheme, and I’ll turn to that to address it more fully in due course, the Department is conscious that under the Appropriation Act which provides the statutory basis for the GLO scheme, there is a defined end point, and it has to work towards that. At the same time, as I’ve already indicated, the Department is keen to observe its objective that nothing should get in the way of full and fair compensation as swiftly as possible.
I was going to turn, sir, to my – to the second of the points raised by Core Participants and to address that. That relates to the suggestion made by Howe+Co that the Department has been, to quote, “holding back bankruptcy cases at the back of the queue”. That is not correct. The Department recognises the very difficult circumstances of bankrupts and that there’s often a particularly urgent need for resolution in their cases. However, what is absolutely clear is that the issues are complex and those have inevitably taken time to work through, and a great deal of effort to work through and, as just discussed, some of those issues are ongoing and are still being worked through.
It’s not possible for the Department to avoid or sidestep those complexities and, indeed, doing so and attempting to do so might simply store up issues for further down the line.
All bankrupts have now received GLO interim payments, except for one who has only recently applied.
The third, Howe+Co have suggested that the Department should provide further detail on how certain bankruptcy cases will be dealt with within the GLO scheme and have asserted that the current scheme doesn’t give sufficient protection to those made bankrupt through annulment or rescission applications or those who have been required to enter IVAs.
The Department actively encourages those who wish to seek an annulment or rescission to do so and will cover their reasonable legal fees.
Howe+Co have also proposed that the Department prepare a schedule of potential cases or situations where damages would not be recoverable by the insolvency practitioner. As set out in the Department’s written submissions, all but one relevant insolvency practitioner – that one being Moore – has signed a waiver to the effect that it is agreed GLO interim and final payments don’t vest in the bankruptcy estate. Given this, it’s unlikely to be necessary, in the Department’s estimation, for further detail on specific cases to be provided. But – and this is a sort of golden thread running through the Department’s position – it remains in listening mode and it will keep this under review.
Can I turn, then, to taxation.
Sir Wyn Williams: Well, can I again, just for clarity’s sake and so that I’m not minimising what’s going on here, the point of principle in the GLO relates to Moore, all other issues to a greater or lesser extent are issues of assessment and practicality. Yes?
Mr Chapman: Yes.
Sir Wyn Williams: Right, thank you.
Mr Chapman: Taxation.
As set out in our written submissions, compensation payments under the OHC and the GLO schemes have been exempted from tax. Payments to HSS claimants have not been. The HSS was set up primarily to put postmasters back into the financial position they would have been in had they not had to repay shortfalls, as well as reflecting any non-financial losses that they may have suffered. In a similar way to commercial compensation schemes, awards are calculated late on a gross basis, with tax then payable on amounts relating to what would have been taxable income in the year it’s received.
Now, for the OHC and GLO, where an exemption is now in place, awards are calculated on a net basis and then no tax is due on the final amount. In respect of financial losses, all of the Post Office compensation schemes aim to compensate the postmaster for the actual net amount that would have been received.
Sir Wyn Williams: You’re going to have to educate me, and Ms Gallafent may have something to say about this as well, but my understanding is that, in terms of computing the loss, both under HSS and the other two schemes, those administering the scheme adopt what I might call the conventional approach to computing damages. So, in other words, if there is a claim for loss of wages, the loss of wages paid to the particular applicant is the loss of wages net of tax. That would be what would happen in a court, wouldn’t it?
Mr Chapman: Yes.
Sir Wyn Williams: I’m assuming that this is what’s going on. You may tell me that’s not what’s going on, all right?
Therefore, I am struggling to understand the distinction that is being drawn between the two schemes, on the one hand, and HSS, on the other.
Mr Chapman: Can I perhaps cut to the chase in this way: that the HSS system was set up without recognition or without full recognition of the potential tax consequences that may flow from it, and it may well be that Ms Gallafent can also expand upon this, because this is, of course –
Sir Wyn Williams: Nothing like passing the buck!
Mr Chapman: I want to ensure that the Inquiry fully understands the position.
Now, at the time that the HSS was set up and, as you know and as we’ve discussed at previous compensation hearings, it was set up on the assumption – an assumption which turned out to be incorrect – that a relatively small number of applications would be made and that that relatively small number of applications would be to a relatively small value.
Sir Wyn Williams: Yes.
Mr Chapman: That has proved not to be the case but that assumption has affected the way in which the taxation consequences were understood.
Now, the Department recognises that, because of that, there is potential unfairness to those within the HSS of a non-exemption for tax and it has looked, together with HMRC and the Treasury, at the possibility of exempting payments within the HSS from tax, in the same way as the other scheme.
The problem – and that is a suggestion that you yourself made, sir, in a previous hearing.
The essential problem with that is that a number, a large number, of payments have already been made and in order to – if those payments were retrospectively to be exempted from tax, it would make the – or place the recipients of those payments in a substantially advantageous position, as compared to recipients of payments under the other schemes.
As is clear, as I’ve made clear previously, and as I’ll go on to make clear, one of the Department’s objectives is to ensure reasonable parity as between the different schemes.
Sir Wyn Williams: Yes.
Mr Chapman: What the Department is obviously keen to avoid is a situation where an exemption for the HSS payments is put into effect because that would, in order to achieve parity, involve retrospectively recalculating the payments and, in some cases, in order to ensure parity, seeking to or potentially seeking to recoup some of the payments and that is something that, for obvious reasons, it wishes to avoid.
But it does have – HMG, the Government, does have a solution to this. The Government will support the Post Office with funding to make additional payments to postmasters in the Historical Shortfall Scheme to ensure that compensation is not unduly lost to tax. So there are various ways of skinning the cat, but the Government, the Department, has concluded that that is the best – in practice, the best way of doing it.
The implementation of these payments is complex, and the Department will announce further details as soon as possible. But the outcome of that will be that recipients of compensation under the Historical Shortfall Scheme are in exactly the same position in relation to tax as recipients of payment under the other schemes where tax is exempted.
Sir Wyn Williams: Well, speaking – obviously having heard what you said for the first time, speaking therefore to an extent without having thought it through, it’s obviously highly desirable that parity is achieved in this way, and I don’t suppose that will be controversial by any right thinking person.
My concern is simply to ensure that the Department actually tells us what it’s going to do – and I’m not trying to be unduly difficult – but sooner rather than later, because these things are taking time, Mr Chapman.
Mr Chapman: The Department gets that; it understands that loud and clear.
Sir Wyn Williams: All right.
So, I was going to ask you and Ms Gallafent to give me a tutorial in the assessment of damages and the impact of tax upon it, but am I now to understand that that is unnecessary because, one way or another, every applicant to whichever scheme will in the end be treated in the same way, in practice?
Mr Chapman: In practice, in outcome, yes.
Sir Wyn Williams: In outcome, which is what presumably they are concerned about?
Mr Chapman: That’s what matters, as far as the Department is concerned, yes.
Sir Wyn Williams: Well, then we’ll defer the tutorial, unless Ms Gallafent disagrees with what you have to say.
Mr Chapman: Can I turn to tax advice and the cost of tax advice –
Sir Wyn Williams: Yes.
Mr Chapman: – because questions have been raised by Howe+Co in their submissions as to whether £1,000 is sufficient in legal costs to get adequate tax advice for postmasters claiming under the GLO scheme.
Given that GLO payments have been exempted from tax, the Department expects that £1,000 will be sufficient in many or most cases but, as Howe+Co are aware, the rates for legal costs were agreed by the Department with them and other claimants’ representatives and this includes a process for approving financial support for further expert advice, which might include tax advice, where needed in addition, on top of the £1,000.
So £1,000 is not a fixed, set in stone, upper limit.
Turning briefly to progress on the HSS and OHC. As you know, the Department does not have direct day-to-day responsibility for these, and this is not intended to be an example of buck passing, but the Post Office, Ms Gallafent, will obviously be better placed to provide details.
We’re pleased to note, however, the acknowledgement by, for example, Hudgell Solicitors that there has been encouraging progress, and we endorse that. We also make the following higher level comments.
First, in relation to the HSS, we welcome the substantial progress that’s been made with over 99 per cent of applicants having received first offers and the remaining 23 cases waiting on information from third parties. Late applications are being accepted without any requirement to justify or explain lateness, which is news with which the Department is very pleased. We’re also pleased that there has been a very high rate of acceptance of offers.
Second, in relation to OHC compensation, interim payments continue to be made promptly and the Early Neutral Evaluation has led to offers of non-pecuniary damages being made in 67 of the 69 claims which have been submitted to date. The Department welcomes the Post Office’s proposal to move to a remediation process for pecuniary damages, which should allow full and final settlement to be reached more quickly than would otherwise have been the case.
Then turning to progress on the GLO scheme, the Department has been working as fast as it can and has devoted substantial resources to this process to set up the GLO scheme since announcing it last year. The Department has asked me to express its condolences on the death of Isabella Wall and its regret that it was unable to get the GLO scheme up and running in time for her to receive final compensation before her sad death.
The scheme opened last month and, so far, some 377 registration forms have been received. 90 per cent of the claimants are already legally represented. I’m going to deal with six issues about the scheme which have been raised by other Core Participants and, indeed, in the media.
First, there have been concerns raised about the timeline for the scheme. The Department’s powers under the Appropriation Act to make payments run out in August 2024. Howe+Co have called for the Department to extend this deadline. That is not within the Department’s gift. The use of the Appropriation Act for these purposes is restricted by Parliament but, as I’ve already indicated, the Department is determined to meet the deadline and, indeed, complete the scheme well before that date.
It’s recently appointed Dentons as claim facilitators and they are currently undertaking a planning exercise. The intention is to agree with all parties, including claimants’ solicitors, a detailed timetable, for the scheme which will ensure its timely completion with all claimants having been given a proper opportunity to apply and to consider offers.
The progress of delivery against that timetable will be publicly reported.
Sir Wyn Williams: Well, I can’t express my anxieties about this timeline too strongly. Anxieties in the sense of, just put to it in terms I think we can all understand, you will have upwards of 400 people, no doubt, by the end, who are making applications under this scheme, and you have approximately 14 months or thereabouts, 15 months, in order to achieve your objective. Again, without wishing to attribute blame for this, albeit with much greater numbers, HSS is now roughly three years old and counting, so you understand why I’m concerned.
Mr Chapman: The Department hears that. I do emphasise again the Department’s commitment to doing what it reasonably can, doing everything it reasonably can, to ensure full and fair compensation.
Second, in relation to timing, a particular concern has been raised by Freeths and others about the pace of disclosures by Post Office. It’s important to emphasise that there is no issue about meeting the costs of disclosure. The Department is of the view that these disclosures are vital and that they will be delivered. The constraint on pace is the sizeable task; the difficulties faced by the Post Office in locating historical records; and, critically, the availability of resources, and that means, in this case, individuals with the right background and experience to ensure that the disclosure process is completed fully and properly.
This is plainly a very significant task requiring staff who understand the complexities of the accounting records. An estimate of 32 weeks was initially suggested for the completion of the task but, since that estimate was made, the Post Office have brought in additional resources from elsewhere in the business to accelerate the work and the Department is aware that the Post Office is currently developing a revised estimate.
It’s also important to note that the 32 – or the initial 32-week estimate was for all disclosure to be completed and, in practice, documents were produced on a rolling basis progressively over that period.
The Department is aware the Post Office will mitigate the effects of the process on the overall timeline for the scheme by prioritising disclosures for the most difficult cases, as identified by claimants’ solicitors.
The Department will also ensure that no applicants are prejudiced by lack of documents held by the Post Office. The GLO scheme guidance states that:
“Although it is in your interest that your claim is well evidenced and quantified in respect of each head of loss, the scheme recognises that this may not always be possible, given the circumstances and length of time which has passed, and that there will be an absence of evidence. As such, DBT will take a proportionate and considerate approach to the availability of evidence.”
Third, on the theme of documents and evidence, Freeths have questioned whether expert input will be allowed, such as from medical or forensic accountancy experts where required.
As part of the tariff which was agreed with claimants’ lawyers, the Department has agreed to consider requests to fund the provision of expert evidence and, where such applications are approved, claimants’ lawyers will be authorised to commit costs of up to £7,000 for advice from a forensic accountant and £3,000 for advice from a medical expert, and the Department will consider applications for further costs in more complex cases.
The Department recognises that expert evidence will be required in many cases. However, its goal is to maximise the proportion of expenditure on the GLO scheme which goes to postmasters rather than to the costs of processing awards. It’s important to explain here that what I’m talking about is a proportion. There’s no arbitrary pot of money for the GLO scheme. In effect, it costs what it costs.
The Department will, as the guidance says, take a proportionate and considerate approach to the availability of evidence and so, in less complex or severe cases, expert evidence should not be necessary because the claimants’ factual evidence, such as GP records, will be held to be sufficient.
The Department is concerned that claimants’ lawyers will assume expert evidence is needed in too many cases where that is not necessary and that, in turn, will lead to unnecessary complexity and delay. For that reason, it does reserve the right to challenge claimants’ lawyers on the point but it will do so promptly when that’s appropriate.
So far, responses to all applications have been given within 15 days.
Fourth, questions have been raised about the banded approach to compensation for stigma or reputational damage and, indeed, for some other heads of loss. This seems to be based on the misperception that the bands represent or constitute an upper limit. They don’t. They’re based on awards made by the independent panel for the HSS, based on well established legal precedents, and the Department has yet to see precedents which are demonstrably inconsistent with the guidance given.
But at the Minister’s request, the advisory board has considered the issue. It comprises Professor Richard Moorhead, Professor Christopher Hodges, Lord Arbuthnot and the Right Honourable Kevan Jones MP, and they together have proposed that the GLO scheme’s principles and guidance be revised to make clear the following.
First, the bands are not maximum limits or a cap, but indicative guidance for claimants, their lawyers and the independent panel.
Second, that each case will, of course, be decided on its merits and it’s expected that there will be cases where the facts demand awards higher, indeed sometimes significantly higher, than the upper figure for the top band.
Third, if the claimants’ compensation cannot be agreed through the alternative dispute resolution process, claimants have the right to have it considered by the independent panel, which includes a KC and other experts.
Fourth, the independent panel will look at the whole of each case in the round and be guided by overall considerations of fairness.
So that was the advisory board’s proposal. It intends to hold discussions with members of the HSS independent panel in order to confirm the way in which their figures were devised and used, so as to encourage greater transparency and consistency about these matters. In a written statement to Parliament yesterday, the Minister has publicly accepted the board’s proposal and amendments to the principles and guidance will be published as soon as possible.
Fifth, concerns have been raised, particularly by Howe+Co, about the extent to which the Department has consulted with claimants’ lawyers in the design of the scheme and various criticisms are levelled at the design of the scheme on that footing.
The Department wishes to make the position very clear and to do so publicly. In fact, the Department has engaged extensively with Howe+Co and other solicitors representing claimants in the course of designing and developing the GLO scheme. This has included: circulating the initial draft of the scheme principles on 7 November last year and discussing comments from postmasters’ solicitors at a meeting on 14 November last year; publishing a further version of the draft scheme principles on the Department’s website for consultation on 7 December last year; informing postmasters’ solicitors on 26 January this year of the Department’s initial proposals on the sequence of actions under the scheme, the claim and registration forms, and the data which would be disclosed by the Post Office. This was then discussed at a further round table meeting on 27 January this year.
Engaging in a mediation process involving several meetings and exchanges of documents which led to agreement of the tariff of reasonable legal costs; providing a further draft of the scheme guidance and principles, together with a supporting Q&A document for claimants on 20 February this year for comment; providing a near final draft of the scheme guidance and principles, including the proposed bandings for stigma and other issues on 14 March; and providing a draft of the application form, claims overview form and claimant journey process map on 3 March for comment.
The Department therefore does not accept the assertion that the Department failed to consult with claimants’ solicitors.
The Department notes that both Freeths and Hudgells make the more specific comment that they did not feel there was sufficient opportunity for claimants’ solicitors to engage with the compensation bands and the tariff for stigma damages in particular. Freeths, as part of their contract with the Department, were asked to identify and give anonymised details of moderate, serious and severe cases, which could serve as benchmarks for the GLO scheme.
The Department’s lawyers developed an upper and lower figure for those cases described for each band based on awards made to claimants by the independent panel of the HSS. Given the pace at which the scheme had been developed, the Department regrets that, although it shared the banding information in advance of publication, there was insufficient time to consult claimants’ lawyers on the figures attached to each band. But it’s confident that the figures are consistent with established legal principles and the advisory board is continuing to review the evidence in this area, as I’ve already said. Amendments to the principles and guidance will be published soon to clarify the approach being taken and, in any event, the bands represent, in effect, guidance rather than caps.
Sixth, Freeths have also raised the point about whether there is an unduly narrow definition in the scheme’s guidance and principles documents about causation, where the wording “Horizon shortfall” is used rather than the “Horizon issue” wording that Freeths has suggested.
The Department recognises that the High Court’s judgments deal with issues of the Post Office’s conduct and contracts, as well as the false shortfalls generated by the Horizon system, and, in light of concerns about this issue expressed by Freeths, the Department inserted, in paragraph 1.3.4 of the scheme’s principles and guidance, a reference to the findings of common issues and Horizon issues judgments.
It believes that this reference should be sufficient to enable it to address the concerns which Freeths have raised. It has asked that, if losses are found which cannot be dealt with under the existing text, it should be notified as soon as possible so that it can assess whether and how the principles should be changed. But its view, in substance, is that the text of the – the text that’s been adopted should not restrict suitable awards and compensation.
Finally, a brief comment on the case of Nichola Arch, who I know is here in the hearing today.
Whilst the Department generally steers away from dealing with individual cases in submissions to the Inquiry on compensation issues, HJA have suggested that her case was only accepted into the GLO scheme following a detailed objection from Paul Marshall. That is not a correct analysis of the position.
As the Inquiry has noted, evidence of events over 20 years ago can sometimes be hard to come by. The Department has pursued all opportunities to seek out such evidence so that postmasters can be fully compensated. Where Post Office records are insufficient, it is sometimes necessary to ask the postmaster themselves if he or she has any evidence because it’s known that some of them do have relevant documents. However, that’s not necessarily and in all cases the only source of further evidence. It would be unfair on other postmasters if the Department did not take a consistent approach across every case and, in fact, the Department did find sufficient evidence from other sources to satisfy itself of the nature of the prosecution of Ms Arch, and an interim payment has been made. The Department is grateful to Ms Arch for liaising with it and for her patience as it’s worked to increase her interim compensation for the distress and hardship that she’s experienced over so many years.
I conclude with a brief word about what the Department’s doing to ensure consistency across the three schemes.
The existence of three separate streams of compensation reflects the complex history of the Horizon scandal and the way it’s developed over time. The Department already had extensive measures in place to ensure that postmasters in similar situations were given similar treatment, regardless of the particular scheme under which they fell. It has now created an internal programme board to provide additional assurance and it’s extended the remit of the GLO advisory board to include the Department’s supervision of the schemes delivered by the Post Office.
All three schemes have come a long way since the Inquiry reviewed them in July last year and, indeed, in December. When attempting to deliver a complex programme apace, some issues will inevitably emerge and the Department remains in listening mode. But the extent of progress should, at the same time, be recognised. The Department remains committed to ensuring that all postmasters affected by Horizon get full and fair compensation and they get it as promptly as possible.
The Department continues to stand ready to assist the Inquiry, however it can, and, in particular, to provide further updates on the progress of the compensation schemes that would be helpful in due course.
Thank you, sir.
Sir Wyn Williams: Thank you, Mr Chapman. Do you want a short break or are you happy to start straightaway, Ms Gallafent?
Ms Gallafent: I’m happy to start straightaway, sir, thank you.
Sir Wyn Williams: Let me adjust myself.
Submissions by Ms Gallafent
Ms Gallafent: Thank you, sir. We are grateful for the opportunity to update the Inquiry on developments in relation to compensation since the last hearing on this matter in December last year. Before doing so, the Post Office wishes to offer its most sincere condolences and sympathies in respect of the passing of Mr Robert Boyle. We wrote to the Inquiry in this respect on 20 April last week, copying in his solicitors, confirming the position in relation to compensation, which we hope is of assistance.
In advance of this hearing, we provided written submissions on compensation, dated 6 April, addressing the four particular topics on which you invited Core Participants to address you. I’m conscious that you will already have had the opportunity to read those submissions and they’ve been published on the Inquiry’s website, together with submissions from other Core Participants. I’m also very conscious you’ve just heard from the Department on a number of the same points as were set out in Post Office’s submissions.
In these circumstances, you may be grateful to know I don’t intend to go through every aspect of our written submissions but to flag the key points from the perspective of Post Office and to seek to respond to a number of matters that have been raised on behalf of the postmaster Core Participants in their written submissions.
Before I turn to those matters, I’d like to explain my use of certain terminology today. To date, the scheme established pursuant to the Group Litigation settlement deed has been known as the Historical Shortfall Scheme, or HSS. Similarly, the mechanism by which those with overturned convictions can obtain damages for malicious prosecution has been known as the Overturned Historical Convictions, or OHC. In the past few months, the Post Office has received feedback that some postmasters consider that the use of the term “historical” is inappropriate and offensive in this context, as it suggests that the suffering of postmasters affected by the Horizon scandal is in the past.
The Post Office wishes to make it absolutely clear that this was never its intention and it deeply regrets any further distress caused to any postmaster as a result of its use of that term in this context.
Having heard the depth of feeling on the part of some postmasters, the Post Office will now be taking steps to change the terminology used. So, for the purposes of today only, I will be referring to the Shortfall Scheme and to Overturned Convictions and, in due course, the Post Office will consider how best to change the names of those schemes.
If any postmaster wishes to raise any other concerns or queries about Post Office’s use of terminology in relation to compensation, or indeed otherwise, then Post Office would welcome their views.
Taking each of the topics, sir, in turn, I start, of course, with the issue of bankruptcy. With the Shortfall Scheme at the outset of my submissions, can I put the issue into context. Out of 2,417 applications to the Shortfall Scheme prior to June 2022, there are 63 cases in which it’s been determined that the cause of action vests in the trustee in bankruptcy, two in which it’s determined it vests in the IVA Supervisor and two in which that question is still being clarified.
In relation to 263 applications which have been received since June 2022, sometimes referred to as the “late applications”, there are 27 cases in which a potential issue due to bankruptcy or an IVA has been identified – sorry, 27 cases. Of those, there are six in which it’s been determined that the cause of action vests in the trustee in bankruptcy and the remaining cases are yet to be determined.
Starting with causes of action and entitlement to damages, with respect to the vesting of causes of action and entitlement, Post Office broadly agrees with paragraphs 34 to 36 of Catherine Addy KC’s opinion. At paragraph 10 of our written submissions, we’ve set out the Post Office’s approach in practice on making offers and apportionment of damages between the trustee and the individual. We would emphasise that to date there has been close engagement and co-operation with the Official Receiver with regard to the apportionment of losses in order to ensure that payment is being received by the appropriate party who has the right to recover damages.
Bankruptcy cases in which the trustee has an interest are intended to be settled through a tripartite settlement agreement, by which all parties agree the release of causes of action on the basis of the agreed apportionment of the damages between the trustee and the individual and any surplus from bankruptcy estate is then returned to the individual.
Now, individuals are encouraged to take legal advice, paid for by the Post Office, on this issue and they can also of course dispute the proposed apportionment if they wish to do so but, as yet, Post Office is not aware of any such dispute having occurred in terms of apportionment.
Sir Wyn Williams: Are most of those people, if not all of them, taking legal advice, Ms Gallafent, as far as you know?
Ms Gallafent: I believe so but I’ll be corrected otherwise if I’m wrong on that. But it’s an offer made to all of them.
The Post Office considers that the approach it’s taken to compensation offers relating to bankruptcies so far, in relation to the Shortfall Scheme, represents a fair outcome, consistent with the legal rights of the parties.
The position is of course slightly different when it comes to bankruptcies caused by a rise in shortfalls. Now there, the independent advisory panel considers each case on its merits, as it does with all cases, having regard not only to the complex legal principles involved in relation to bankruptcy but, of course, the overriding objective ensuring offers are full and fair.
In considering this, it makes no difference whether Post Office was the petitioning creditor or whether the postmaster applied for their own bankruptcy or whether another organisation petitioned for it. The panel considers and makes recommendations on all cases following the same principles.
In such a case, the panel assesses the heads of loss on broadly similar principles to those set out in Catherine Addy KC’s opinion, in respect of the order of general damages, consequential financial losses, diminution in value of the bankruptcy estate, other costs, fees and expenses incurred and consideration in particular in each case of the question of the postmaster applying to annul the bankruptcy order and the Post Office offers to pay the legal costs of any such application.
Moreover, the Post Office has waived its right to claim any dividend in the bankruptcy and will repay any dividend that may have previously been received.
In addition, the panel has sought to compensate individuals for the malicious institution of bankruptcy proceedings and/or an abuse of process where that’s applicable in an individual case, and we’ve used Lord Dyson’s findings in the Early Neutral Evaluation as well as damages awarded in cases in the Shortfall Scheme involving criminal prosecution but no conviction to inform the level of damages in that context.
We note the concern raised by Hudgell Solicitors in their written submissions, paragraph 12, that there appears to be, in their view, a change of approach to the assessment of the awards of general damages by Post Office. We would like to reassure postmasters that the panel has applied the same principles throughout to each and every claim. It may appear that higher offers are being made in the later stages of the process but we’d ask you to note, sir, as we anticipated, this is the result of more complex claims being assessed, not because there has been a change of approach in principle by the panel.
Each case is determined individually, on its own legal merits, according to the applicable legal principles. I also note that where the panel considers and determines that the bankruptcy was due to Horizon related shortfalls, it will consider an award of stigma attached to the bankruptcy.
We note the request for earlier offers where bankruptcy has been an issue to be revisited but, as the principles have been applied consistently, we don’t consider that that’s required, unless we receive further information from applicants. If further evidence is produced which goes to the issue of whether a Horizon shortfall loss was the cause of a bankruptcy, then Post Office will consider the issue of causation, taking into account that evidence. This is the approach that Post Office has always adopted and it’s reiterated this approach in correspondence recently with Dr Hudgell.
The Post Office is paying for legal advice for applicants on the offer and its allocation between the trustee and the individual, as I’ve mentioned. Similar principles to those I’ve just set out are applied to IVAs.
Sir Wyn Williams: So can I take it that the 63 cases that you referred to in which bankruptcy is an issue is a figure relating to those outstanding cases, those cases which are outstanding, I should say, and that there are more cases than 63 which may have been dealt with by an award which has been accepted? Have I got that right?
Ms Gallafent: No, it’s that there were 63 –
Sir Wyn Williams: So 63 is the total?
Ms Gallafent: Is the total figure.
Sir Wyn Williams: Right, so 63 is the total but some of them may have been resolved?
Ms Gallafent: Exactly, and I’ll come to that when I update you on the scheme more generally but yes, that’s the total. There aren’t more.
Sir Wyn Williams: No, no, that’s what I was wondering about.
Ms Gallafent: There are only two still remaining to be clarified but other than that there are 65, 63 with the official receiver –
Sir Wyn Williams: So that I’m absolutely clear, of the 2,400 plus cases which were received in time, if I can put it in that way, there were a total of 63 cases which involved bankruptcy?
Ms Gallafent: Possibly 65, two to be –
Sir Wyn Williams: So there were a total of 63 cases determined to be involving bankruptcy, two cases involving IVA and two which are in the process of being determined?
Ms Gallafent: Exactly. That’s exactly right, sir.
Sir Wyn Williams: Right.
Ms Gallafent: Thank you.
Sir Wyn Williams: Sorry to have taken you out of your thread but I wanted to be clear about that.
Ms Gallafent: No, no, it’s absolutely fine, of course.
Now, just dealing with one short point in relation to the assessment of damages, where there is a causal link between Post Office’s conduct and bankruptcy. It is Post Office’s view that a full and fair award has been determined in each case within the Shortfall Scheme, having regard to the individual circumstances, but there is one aspect where Post Office does differ with the opinion of Catherine Addy KC, which is at paragraph 49(ii), which is in relation to the relevance of the jury damages awarded to one Major Wilson and that was for a loss of credit and reputation in a case that dates from 1920.
Now, the principles derived from that case have been taken into account by the independent advisory panel in all of their assessments but we do say that Major Wilson’s circumstances were rather uncommon and personal to him and it’s Post Office’s view that it would be inappropriate to use his award as a yardstick for postmasters generally.
The important thing, we say, in every case, is that the independent advisory panel aims to achieve each postmaster having their case assessed on its own merits in a way that is personal to them, in accordance with applicable legal principles but I simply put that down as a marker, it being flagged up by some other Core Participants.
Sir Wyn Williams: So that people can understand my role in all this, there is an internal mechanism within HSS for resolving disputes?
Ms Gallafent: Absolutely.
Sir Wyn Williams: Ultimately, someone might push that point as far as it will go, so to speak –
Ms Gallafent: Indeed they might.
Sir Wyn Williams: – and it will be resolved –
Ms Gallafent: Exactly, that’s exactly right.
Sir Wyn Williams: – but I cannot resolve it.
Ms Gallafent: No, and we’re certainly not inviting you to, sir. It’s more a question of expectation management rather than anything else and we felt it right to be clear on that small point – but potentially important, of course, for individual postmasters who may have read or been reported the outcome of the Catherine Addy opinion – just to make it clear that that’s one point on which Post Office does diverge slightly but, absolutely, it’s a matter which, were it to be taken, could be resolved in accordance with the dispute resolution procedure.
Thank you.
Can I just deal with, then, briefly, the practical approach to applications for annulment or rescission of bankruptcy. Again, the Post Office seeks to engage the applicant in good faith regarding the potential to make such an application, should they wish to do so and it will cover their reasonable costs associated with it both to the costs incurred by the applicant and by an insolvency practitioner, both in respect of the decision to apply and the application themselves, were they to make it.
We note the submissions and the request made by Howe+Co, paragraphs 58 to 61 of their written submissions, for a list of all cases where Post Office secured bankruptcies of postmasters as the petitioning creditor, and they seek witness statements from Post Office, confirming those orders shouldn’t have been being made.
Sir, the short point is Post Office is already communicating with postmasters about bankruptcies which should not have been pursued due to Horizon related shortfalls where the Post Office was the petitioning creditor, and it is already taking all practical steps to assist the postmaster in annulling such bankruptcies within a reasonable time. In those circumstances, quite apart from the data protection issues that would arise in any proposal to provide such a list to all solicitors firms, we consider it would not take matters further to provide the information suggested.
Sir, you may want to note, going back to your earlier query, of the applications accepted into the Shortfall Scheme prior to June 2022, in time applications, if I can put it like that, the Post Office has identified 27 applications where a causal link exists between Horizon shortfalls and bankruptcy and it’s made offers in all of those 27 cases.
So far as applications that were accepted after June 2022, Post Office is yet to determine the total number of applications in which a bankruptcy or personal insolvency has been caused by Horizon shortfalls but work considers apace on those applications and Post Office hasn’t yet, of course, made them any offers in respect of those applications.
We reiterate these figures are not static, issues can arise, they are resolved as the circumstances develop in each case. We are, of course, very happy to continue to update the Inquiry, as regularly as it would wish to, on the numbers involved.
In respect of personal causes of action that clearly vest in individuals or where they otherwise have a right to recover damages, Post Office is currently looking to make interim payments to those postmasters who entered bankruptcy by reference to any personal injury and/or distress and inconvenience that they’ve suffered and for which they should be compensated.
We note and agree with the indication in the written submissions of Hudgell Solicitors that the bankruptcy issue in respect of shortfall cases is more complex than in relation to Overturned Convictions. We equally welcome their view that some encouraging progress is being made in this respect.
We also note the concerns raised by Howe+Co, paragraph 76 and 105 to 109 of their written submissions, regarding procedural delays in relation to one of their clients in the Shortfall Scheme. The Post Office wishes to apologies for the delay that’s occurred and wishes to reassure you and her representatives that a letter will be sent to her within the next fortnight.
Can I turn to bankruptcy issues in respect of Overturned Convictions. As we indicated in our previous note on bankruptcy on 16 January this year, Post Office and relevant stakeholders had resolved the key issue affecting compensation payments. That was in relation to Moore. Those were resolved in a way which is consistent with Catherine Addy KC’s opinion on the basis that compensation didn’t vest in the bankruptcy estate and that enabled compensation payments to be made to the claimants in that group.
Of the 16 claimants identified by Post Office as having potential insolvency-related issues, 14 have brought non-pecuniary claims and received offers. 13 of those have been settled and paid. One has been settled in principle but not yet paid.
The remaining two claimants who fall into this category who haven’t yet brought non-pecuniary claims have both been paid interim payments with appropriate waivers being given in each case by the trustees in bankruptcy. There is no suggestion that similar waivers won’t be available in respect of forthcoming non-pecuniary settlements once reached.
No claimants with bankruptcy issues have yet settled their pecuniary claims. There is one case in which Post Office is waiting receipt of a waiver from the Official Receiver in respect of a settlement offer, but the Post Office does not regard that as an insolvency issue per se and doesn’t seek to trouble you, sir, upon that matter. It’s seeking to resolve the issue. If and when it becomes clear that there is an insolvency issue concerned, or bankruptcy, we will inform you and seek to resolve the matter as soon as possible, but we will keep you, as it were, up-to-date if anything changes in respect of that single case.
We note the invitation of Hudgell Solicitors at paragraph 8 to confirm in advance that we will meet an agreement that has already been made to reimburse the claimants who had their bankruptcy cases with Moores as part of their pecuniary loss claims. Post Office has no reason to depart from what it’s already agreed with Hudgell Solicitors. It encourages those claimants to claim reimbursements when they’re making the claims for pecuniary losses.
Finally, for completeness, when addressing the submissions made by other Core Participants, I note that Post Office doesn’t intend to engage in this forum with the submissions made by Hodge Jones & Allen which are based on communications and discussions which are subject to confidentiality and, we say, ought not to have been referred to on an open basis in written submissions.
The Inquiry is aware, as we have updated you on several occasions, considerable progress has been made in resolving part or all of the claims from a number of postmasters with Overturned Convictions on a confidential basis, including through negotiation, mediation, and the Early Neutral Evaluation process.
All of those processes depend on the very well-established principle of confidentiality, applicable in all alternative dispute resolution processes, designed to enable the parties to resolve disputes without recourse to the courts. We say breach of the confidentiality are highly regrettable and not in the interests of any party.
Sir, can I then turn to the issues of taxation, a slightly shorter issue than I might have anticipated. Can I make it clear, Post Office has always been live to the concerns raised about the tax treatment of some recipients of payments and have been working closely with DBT and supporting them in its discussions with His Majesty’s Revenue & Customs as to whether the tax treatment of the Shortfall Scheme could be approved. Sir, we entirely agree that, in the light of the indication given by the Department this morning, it’s not necessary to give a full tutorial on the tax regime applicable and why it might differ between the Shortfall Scheme and Overturned Convictions but it may be helpful just to note, sir, for your understanding the rationale which comes down to timing.
So compensation paid under the Shortfall Scheme since 2020 has been awarded on a gross basis. Now, it isn’t entirely on a tax-free basis because sometimes the Post Office is required by tax legislation to withhold tax; for example, compensation relating to earnings from an office holding, it’s required to withhold it on a POI basis. So it isn’t as straightforward as saying on every case it’s paid out gross and of course, equally, there are some elements of compensation where no tax will be payable in due course, such as compensation for personal injuries, damages and distress. So it’s slightly more complicated but I don’t invite you, sir, to get into the weeds of it because the reason why it’s different in relation to the Shortfall Scheme and the Overturned Convictions is that, when the Shortfall Scheme was set up, paying out on the gross basis, save where it was required to do otherwise, meant that payments could be made much more swiftly because, if they had been looked at individually according to the tax positions of each individual applicant, that would have created an inherent delay in getting the offers out and the payments made.
The difference is that postmasters with Overturned Convictions, those payments are subject to an announcement made in September of last year, which was subsequently legislated to give effect to it, whereby they would be exempt from income tax, capital gains tax, and a number of other provisions. That was made with retrospective effect from 22 July 2021, and that date is after a large number of interim payments had been made but shortly before the first agreed settlements in relation to non-pecuniary loss had been entered into. So you may remember this is the period in which the Early Neutral Evaluation process was ongoing and, very soon after that, that process unlocked the ability to make offers and they to be accepted in relation to non-pecuniary claims.
So the reason that the exemption was capable of being made in relation to the Overturned Convictions was that there’s no need to go back and unpick or revisit the tax treatment of those payments because of the timing of when those payments were offered and made. So that’s why historically there is a key difference.
But we don’t say that, sir, you need to trouble yourself other than perhaps putting your mind at rest that there is a rationale for it, but the Post Office welcomes the Department’s indication that it will support Post Office with funding to make additional payments to postmasters in the Shortfall Scheme to ensure that their compensation is not unduly lost to tax, and we await formal advice from Government as to exactly how it’s intended that we do that.
Sir Wyn Williams: Nothing as formal as a direction, but I would, simply for my own peace of mind, encourage Mr Chapman and yourself to persuade your clients that when the Department makes a formal announcement about this, it either at the same time has a fuller explanatory note than might otherwise be the case, or is prepared to write to me to explain to me the basis for what it is doing because I don’t want to prolong today’s hearing with esoteric topics, but the relationship between taxation and compensation I find quite difficult, and it would help if I had in writing precisely what it is you are both seeking to achieve.
Ms Gallafent: We can assure you what we’re seeking to achieve is that no postmaster suffers as a result of the tax treatment.
Sir Wyn Williams: I understand. I understand that Mr Chapman and I agree the end point, it’s just the route to the end point or the posts along the route that I need a bit of educating about.
Ms Gallafent: And we certainly need that guidance or indication or direction, however one is characterised as well, in order that we can implement what the Department is proposing. So I think on this, sir, we’re in the same shoes.
Sir Wyn Williams: Good.
Ms Gallafent: Sir, then may I briefly give a progress update on the Shortfall Scheme itself?
Sir Wyn Williams: Yes.
Ms Gallafent: At the last hearing, sir, in December, I explained that Post Office was expected to meet its target of making offers of 95 per cent of eligible applications by the end of that day. That was ahead of its self-imposed deadline by the end of the year. It did, in fact, meet them that day, shortly after I’d finished speaking, but I don’t seek to identify any causal relationship between that.
It has now made offers in more than the 99 per cent of eligible in-time applications and, as of the point that I’m speaking now this morning, that is 2,396 offers in total. So there are just 21 cases remaining, and those cases each involve specific complexities. The Post Office is working through them, balancing speed with the overarching principle of full and fair compensation. But very significant progress, sir, has been made since we last updated you, and the offers that the Post Office has made represent a combined value of approximately £97.8 million, including interest and the deduction of withheld tax.
Now, out of the offers which have been made, 1,979 applicants have accepted offers in settlement. That’s approximately 83 per cent.
Sir Wyn Williams: 19 …?
Ms Gallafent: 1,979, and payments have been made in 1,940 cases, approximately 81 per cent. So the total payments, including interim payments, now reach approximately 63.3 million.
Now, we note the concerns raised by Howe+Co about delays in the operation of the scheme. We fully acknowledge that it has taken longer than expected and indeed hoped to make some offers and we expressly and unequivocally apologise for those delays, but Post Office is taking all steps available to progress the outstanding claims. In the just under 1 per cent of claims remaining outstanding, the reason offers haven’t been made is because they are awaiting information from third parties, from applicants, or the determination of the final case assessment principles that I’ll come on to on particularly difficult and sensitive issues.
It may help, sir, you referred earlier to the dispute resolution procedure under which issues which are not agreed can be resolved. Now, in relation to applicants who didn’t initially accept their offer, there have been 410 of these, including queries rather than objections. 128 applicants have subsequently accepted it, and of those, 82 accepted it before any good faith meeting which, sir, you will remember is the first stage in that process. 41 had accepted it after a good faith meeting but before an escalation meeting, and, of the 14 cases that had proceeded to an escalation meeting, to date four have accepted the offer thereafter, three have asked to proceed to mediation, and following mediation, one applicant has accepted the offer. A total of the 282 further cases are currently being actively supported through the Shortfall Scheme dispute resolution procedure by the dedicated dispute resolution team.
Now, that team continues to work to schedule goof faith meetings as quickly as possible. In some cases, such a meeting has not yet occurred and this can be for a number of reasons. Now, of the cases that haven’t yet got to the good faith meeting within 100 days of the offer, approximately 30 per cent of those applicants have declined or cancelled good faith meetings or not responded to invitations. Approximately another 30 per cent have had their case reassessed by the Independent Advisory Board rather than go to the good faith meeting as further information has been supplied which might result in a revised offer. The remaining cases, the remaining third, have been delayed where an applicant wishes to source further evidence or where a response is awaited from applicant’s solicitors.
The dispute resolution team hasn’t declined any good faith meetings request to date and, as I’ve indicated, sometimes it isn’t actually necessary as a dispute is resolved before that stage.
Can I move to interim payments, a matter on which, sir, we have updated you previously. The ability to request an interim payment has now been specifically drawn to the attention of any applicants who entered the scheme’s dispute resolution process, and to date 215 interim payments have been requested, and that includes those which we previously referred to as being hardship payments. Of that 215, 193 payments have been paid representing a total value of approximately £7.67 million.
Can I move on to the topic of legal assistance. Since 10 October 2022, when, sir, you will recall the arrangements changed, Post Office has received 290 requests to pay legal fees. It sought to work through those requests as quickly as it can in order to avoid delay in progressing applications. It’s made payments to applicants in 229 cases. A further 61 offers are awaiting proof of payment.
Post Office listened to the feedback from a claimant firm that there are different governance paths to follow between the Shortfall Scheme and the GLO scheme for approving legal costs which they suggested was inefficient and time-consuming. We recognise the need for a fair and consistent approach to assessing the legal and professional costs and, as such, it’s now modified the Shortfall Scheme cost assessment process, and representatives of applicants to the Shortfall Scheme were informed of these changes on 25 April, earlier this week.
The Shortfall Scheme costs allowance is now broadly in line with those published in the GLO scheme and representatives are required to self-certify the allowance applicable to their clients’ case.
Now, the result is a more streamlined process enabling cases to progress through dispute resolution without undue delay and, we say, providing an improved journey for applicants.
It’s hoped that this more streamlined process will address the delays in obtaining expert evidence that have been referred to by Howe+Co in their written submission (for your note, sir, paragraphs 97 to 100).
We also note the submissions made by Howe+Co (paragraphs 43 to 46) in relation to multiple causes of action. Now, we wish to reassure all postmasters we are alive to the issues identified in relation to multiple causes of action by Ms Addy in her opinion at paragraph 37 and to emphasise that each case is assessed and managed in accordance with the principles that she has identified. As such, we don’t consider that it would advance or assist matters further by providing the schedule of claimants with potential multiple causes of action requested by Howe+Co.
Can I turn then to late applicants, that is applications by postmasters who submitted their applications after the 27 November 2020 deadline. Post Office carefully listened to and considered your comments following and during the hearing on 8 December 2022 and, in particular, acknowledges your statement in the interim statement of 9 January this year that fairness now advanced an unequivocal statement to the effect that all applications received by Post Office but made after 27 November 2020 will be accepted into the Shortfall Scheme, provided other eligibility criteria are met.
We have now made the unequivocal statement, sir, that you asked for. On 2 March this year, Post Office and the Department agreed that late applicants will not be required to provide a reason for the late submission of the application. The decision was put into effect immediately. The website was updated on the same day to remove the requirement to provide a reason and the question and answer document was equally updated for new applicants.
We have ceased, therefore, asking late applicants to provide reasons and evidence and we wish to make it clear that no application has been or will be rejected because it was not brought by the provisional November 2020 deadline.
The Post Office is in discussions with the Department about the time at which the Shortfall Scheme will in due course close but it can confirm this will be no earlier than 31 March 2024.
Sir Wyn Williams: Well, it may assist you to know that I certainly don’t think it inappropriate for there to be an end date.
Ms Gallafent: That’s a very helpful indication, sir, thank you.
Sir Wyn Williams: I don’t think this can be open-ended, all right?
Ms Gallafent: No.
Sir Wyn Williams: So, on this issue, I will allow you to discuss an appropriate end date.
Ms Gallafent: I’m grateful. At the moment we can say it will be no earlier than the date of the end of March 2024 and I can also indicate that as soon as that date is agreed, that will be published on the relevant page of the Post Office’s website. But we reiterate that we encourage all applicants who are eligible under the Shortfall Scheme to come forward and submit their applications as soon as possible.
So just in terms of progress update on those late applications we have received to date: 263 have been received of which 242 have been assessed for eligibility and 214 found to be eligible. 27 found not to be eligible but none of those were due to reasons of lateness. There is an outstanding query in relation to one application that’s yet to be determined and there are 21 yet to be assessed at all. 27 offers have been made totalling just over £350,000, 13 payments have been made totalling approximately £84,000.
Post Office is committed to achieving an effective resolution of all of these cases, again, as you indicated, sir, balancing speed with the overarching principle of fair and full compensation.
Sir Wyn Williams: I’m smiling, Ms Gallafent, because I think on every occasion that you’ve written since I used that phrase and addressed me, you’ve reminded me of it.
Ms Gallafent: I hope usefully, rather than otherwise, but we’re grateful for that characterisation, sir.
Can I move on to a slightly different cohort, in relation to prosecuted but not convicted. Now, that’s a category of applications that has some pretty case specific complexities, and it has taken longer to proceed to issue offers in that category. Those are potential instances of prosecution but not conviction or the issue of a caution by the Post Office or, in some cases, by the police in lieu of prosecution.
Now, we addressed the status of these applicants in our submissions at the last hearing. Again, we acknowledge that the progress of these applications has not proceeded as quickly as it had hoped.
In the majority, we’ve had to undertake additional investigations to determine, firstly, whether or not a prosecution had in fact been commenced or a caution issued in lieu of prosecution and, secondly, what matters the prosecution or the caution related to, in other words whether it was or wasn’t a prosecution or caution relating to a Horizon shortfall or whether it was in relation to some other matter.
Sir Wyn Williams: I remind myself, I think, that this category of cases excludes those prosecuted but acquitted who are members of the GLO, where you would have had much more information in all probability.
Ms Gallafent: Exactly.
So, in some cases, we have had to send requests for further information to potentially affected postmasters but, based in part on the findings of the Early Neutral Evaluation regarding non-pecuniary losses of postmasters who were prosecuted and convicted – that’s, of course, in late July 2020 when we had that – and following completion of additional investigations, the independent advisory panel has determined a fair approach to compensating Shortfall Scheme applicants who were prosecuted and not convicted cautioned in relation to what the panel has determined to be Horizon shortfalls. We have duly proceeded to make offers to 17 of these applicants.
Can I turn then to the progress update on Overturned Convictions. Again, we say we have worked hard to deliver both interim and final payments in respect of the claims we have received to date but can I take the opportunity, at the risk of repeating myself on every occasion, to reiterate the importance of all potential claimants coming forward to bring claims and submit schedules of loss. We encourage all claimants and potential claimants to do so, as soon as they’re able to.
Sir Wyn Williams: How many firms of solicitors are you actually dealing with in that – we’ll call it a scheme, for want of a better word at the moment?
Ms Gallafent: The last I was aware of it was five, sir, but it might now be six, but I’m sure someone can correct me if it’s changed since the last time I was advised of that.
Sir Wyn Williams: Are there any “litigants in person” in that scheme?
Ms Gallafent: Sir, I believe there is one, and I will come on to deal with the position of that individual, but they have been encouraged, you may recall from the last time, to seek legal advice and assistance.
So far then on interim payments, there are 84 convictions that to date have been overturned on appeal. Sir, you may be aware that there are two that are in the Court of Appeal today. They are not being contested, so that will go up as of today to 86.
But of the 84, as of earlier this morning, the applications for initial interim payments have been made in 83 cases, the one remaining claimant is a deceased estate who doesn’t wish to make an application for interim payment. They have been offered, accepted and paid in 80 of those cases. No further applications have been declined, putting aside for a moment the three – what we have referred to as public interest only cases.
As we indicated in December, following the increase in the value of interim payments up to £163,000, in the light of Lord Dyson’s Early Neutral Evaluation, all claimants who were not going to be offered – sorry, not going to be able to lodge non-pecuniary claims by December 2022, would be offered a top-up interim payment up to £63,000. We have made offers to 31 such claimants and to date 29 of them have accepted those offers and received that top-up payment. The remaining two have not yet accepted offers that were made to them in December 2022.
So far as settlements are concerned, the position is as follows: the Post Office has received non-pecuniary claims from a total of 69 claimants with Overturned Convictions and made offers in respect of 67 of those claims, 55 of which have been accepted, so that’s non-pecuniary.
So far as pecuniary claims are concerned, we have received claims, rather, from a total of 14 claimants, 11 of which have been fully particularised, the others not fully particularised. We have reached full and final settlement in respect of four claims including two of the three public interest only cases. We have made offers in respect of four of the six claims received by mid-2022, together with offers of further interim payments where appropriate. The remaining three claims, this is the pecuniary claims, were received last month in March 2023, the Post Office is in the process of reviewing them and will endeavour to make offers in relation to those claims as soon as possible.
Now, in total, the Post Office has paid over £18.5 million in compensation to postmasters with Overturned Convictions since August 2021.
As I have already flagged up, following a process of independent mediation, full and final settlements have been reached with two of the three public interest only claimants, both represented by Hudgell Solicitors. As yet, Post Office has been unable to agree a settlement with the remaining public interest only claimant who participated in the mediation.
Can I move on then to the question of pecuniary claims and contingency planning. Sir, Post Office has carefully considered the observations you made in relation to the need for contingency planning for disputes about final compensation payments that cannot be resolved by negotiated settlements. That was flagged up in your original progress update from August of last year reiterating your statement of January this year.
Now, to, we hope, at least some extent address your concerns, Post Office has been in active discussions with claimant representatives as to the best way to approach the assessment of compensation for those losses and, in particular, on 31 March of this year Post Office shared on a without prejudice – on a confidential basis proposals with claimant representatives relating to a new process for managing claims by those with Overturned Convictions and those proposals concerned both the first of two tranches of suggested principles to help determine the value of pecuniary losses and, secondly, a suggestion in the process for handling such claims, which includes an option for an independent assessor to make a recommendation in respect of any aspect of a claim which cannot be resolved consensually.
Now, Post Office is currently consulting with claimant representatives in relation to these proposals, it hopes that these proposals will make it simpler for claimants to present their claimants and allow Post Office to make full and fair offers of compensation more quickly.
You will have indicated, I said that they – the first tranche of principles have been sent through. We intend to send the second tranche of principles which is 55 out of 16 of the principles to be included. Those tranche of principles also to help determine pecuniary losses, we intend to send those through next week. They’re just going through the final stages of the Post Office governance process. Again those principles are open for consultation and responses by Core Participants and/or claimant representatives about principles.
Now, we have reaffirmed to claimant representatives our commitment to paying claimants’ reasonable costs of participating in the new process and that includes the process for considering and commenting on the proposed principles and process. That’s to be assessed on a standard basis not agreed.
We acknowledge that the work to design and consult on this process has taken some time but our hope and expectation is that that initial investment of time will increase the rate at which claims come forward, as I’ve indicated it’s only 14 to date and in which then offers can be made in respect of pecuniary claims and also will provide claimants with a greater degree of transparency as to how Post Office intends to approach issues relating to compensation and that, of course, we hope will also help achieve consistency in levels of compensation offered.
It will also, we hope, establish useful and agreed arrangements for independent third party resolution of disputes arising in the course of such assessments.
To ensure that the introduction of this process doesn’t cause any delay, though, Post Office will and has been continuing to make offers and consider offers in relation to pecuniary claims that have already been received and will continue to do that on any that are received during this consultation period. It emphatically doesn’t want the introduction of this process and these principles to delay potential claimants coming forward and submitting claims now.
So we’re very happy to provide an update on those principles and that process, if it would be of assistance, once the consultation period has ended and we have drafted them, taking into account those comments, but I leave that, sir, in your Inquiry team’s hands. But as I have indicated, in respect of any of these matters, we are happy to update but it does seem to me and Post Office that that’s a matter upon which you would welcome some further information in due course.
Can I move then to a slightly separate topic of prosecution related payments. So these are cases where claimants have been subject to financial recovery measures, either by Post Office or His Majesty’s Court Services in the course of criminal proceedings against them. Our understanding is that up to 67 of the overturned conviction claimants were subject to such measures. That’s either because they proactively repaid claims said to be owing, in the hope of avoiding prosecution or receiving a lesser sentence, or because a formal confiscation or compensation order was made against them in the context of a criminal trial.
We had originally intended to repay these sums at the same time that it processed and settled pecuniary claims but, given the relatively small number of pecuniary claims received to date, we have now commenced a more proactive process to do this.
Now, Post Office through its solicitors has analysed the historical Post Office and third party records to identify and quantify the amounts actually recovered, so as to enable Post Office where possible to commence proactive repayments of its amounts which will be made together with compound interest at 3.45 per cent. That is in advance of receiving particularised pecuniary claims. That is subject to one somewhat technical caveat which is confiscation orders paid through HM Courts and Tribunal Service, rather than directly to Post Office are required at the request of the Court Service to be recovered through them, rather than through Post Office, but Post Office will proactively assist affected claimants with that process.
Sir Wyn Williams: So, again, just so that I can get the picture, if a postmaster voluntarily paid £20,000 either to try and avoid a prosecution or to, as you say, help with sentence, Post Office themselves can activate whatever needs to be done in order to repay the sum?
Ms Gallafent: Yes.
Sir Wyn Williams: If, however, the postmaster was subject to a confiscation order by the court, there has to be a different process through the court?
Ms Gallafent: Exactly, but we will assist with that process that needs to be gone through. That’s at the request of the Courts and Tribunal Service and we will assist with that.
So, as of today, 16 offers have been communicated in relation to such payments and two have been accepted and paid. So where Horizon related shortfalls were paid directly to Post Office, the number of offers or settlements are 23 out of a potential 39. We will continue to review our records and we will make further offers in due course, if that’s possible.
Can I just deal with two other short matters.
The first is in relation to potential future appellants. Now, sir, you may recall, in our submissions at the previous compensation hearing, we set out the considerable efforts that Post Office and the CCRC had been taking to ensure that all convicted postmasters are contacted and encouraged to consider their options for appeal. That included, you may recall, most recently setting up a dedicated phone line and a micro site, in collaboration with Citizens Advice, so that postmasters who felt uncomfortable interacting with the Post Office, or otherwise wish to seek independent advice, could do so.
However, as of today’s date, of 700 – that’s the figure, sir, which following further investigations we believe to be the number of potentially Horizon related prosecutions during the relevant period – of 700 only 159 individuals have brought an appeal or applied to the CCRC. That leaves 541 who are yet to appeal, whether they wish to do so.
Sir Wyn Williams: Without committing you to what might happen in any of the appeals, when you use the phrase “700 Horizon related convictions”, do I understand that those are convictions which you accept potentially might give rise to a ground for appeal?
Ms Gallafent: I’m going to come on to exactly that point, sir. Those are cases in which Horizon had some role –
Sir Wyn Williams: Right.
Ms Gallafent: – and what Post Office has done, to take an even more proactive approach, is that it has decided that it should determine whether it already holds sufficient material to reach a view that an individual’s case could properly be conceded as a Horizon case, as set out by the Court of Appeal in Hamilton and others, were an appeal to be brought. Now, the decision, of course, as to whether or not a conviction should be overturned remains that of the appropriate appeal court.
Sir Wyn Williams: Of course.
Ms Gallafent: But that process is now in place, it’s being administered by the Post Office’s external criminal lawyers and the process is that cases are initially reviewed by independent junior counsel and then King’s Counsel will provide Post Office with the formal advice on whether, on the papers available currently to Post Office, the case could reasonably be conceded by Post Office if an appeal were to be received.
Sir Wyn Williams: And then what?
Ms Gallafent: Then, in respect of appeals and cases where the appeal lies to the appropriate appeal court, the Post Office intends to contact those individuals to notify them it would not oppose any future appeal on the basis of the information that it currently holds and it would set out what to do next.
For cases where the necessary route is via the CCRC, Post Office is in discussions with the CCRC as to what approach should be taken, how that route should be followed.
Now, in terms of the progress that’s already been achieved to date in relation to this process, junior counsel have already reviewed the vast majority of cases of the 541, where no appeal or application to the CCRC has been brought and King’s Counsel are in the process of drafting their advices. Post Office’s remediation committee has delegated board authority to deal with criminal appeals and it will shortly consider the first cases that senior counsel has identified are cases that could properly and reasonably be conceded were an appeal to be brought. It’s anticipated that letters will be sent to this first tranche of individuals in May or June of this year.
We are continuing to review options in relation to those cases where it has been impossible to identify as a case that the Post Office could reasonably concede. So there are obviously going to be a number of cases where the material before Post Office at the moment doesn’t mean that it’s in a position to say that they would reasonably have conceded.
Now, this initiative goes beyond Post Office’s legal duties of post-conviction disclosure but I make it clear Post Office wishes to take every step to ensure that no miscarriage of justice is missed, so we will obviously continue to update you in relation to this exercise in due course.
Finally, can I deal with the GLO compensation scheme.
Firstly – it might not be quite finally: pre-finally. Firstly, in relation to that scheme, we welcome the announcement of 23 March that the GLO compensation scheme is now open for applications. We further welcome the statement yesterday that the scheme’s guidance and principles will be amended to make it clear to postmasters that the guidance is not prescriptive, the facts of each case will be looked at in the round and all decisions guided by considerations of fairness.
We note that since 2021 the Post Office has encouraged and supported the commencement of such a compensation scheme and indeed on 25 May that year, the then Chairman of the Post Office, Tim Parker, wrote to the then Parliamentary Undersecretary of State for then BEIS, proposing options for further and more fulsome compensation for postmasters.
Post Office has been collaborating and co-operating fully with the Department on matters of disclosure to support the scheme, it is using all resources available to it to collate disclosure for that scheme but I would emphasise that the gathering of the data to support these claims does require a detailed and technical knowledge of Horizon and other Post Office systems, meaning that specialist personnel within Post Office are required.
Now, we note the concerns raised on behalf of postmasters both by Howe+Co and Freeths and, indeed, concerns, sir, that you have reiterated this morning in relation to the timeframe for disclosure. We would wish to emphasise that the indicative timeframe of 32 weeks is for the total delivery of the project. We will aim to provide a regular output of disclosure once applications are formally received by Post Office from the Department. In other words, the indicative time is not how long each application will take, it’s the long-stop anticipated currently for all of them.
We emphasise though delivery of disclosure is subject to a number of external factors: receipt of complete applications and application volumes, paired with the availability of appropriately experienced and skilled staff. The timeframe for provision of disclosure is under constant review by Post Office. We fully aim to provide a service to the Department in order to support the GLO scheme, as soon as reasonably practicable. We continue, in the meantime, to service all urgent applications from the Department relating to any form of hardship to avoid any delay.
Sir Wyn Williams: For these purposes, I accept what you tell me, Ms Gallafent, that, even on the basis of the rolling programme, which of course I fully accept will occur, inevitably it’s going to be virtually the end of the year before some documents relating to some applicants surface.
Ms Gallafent: Sir, I would accept that.
Sir Wyn Williams: So I keep banging on about it, to use that phrase, but that leaves eight months next year.
Ms Gallafent: Sir, we entirely accept that, and we are using all best endeavours.
Finally, sir – and I promise this is actually finally – can I just emphasise that Post Office fully recognised that, although today’s hearing concerns compensation, money is not the only form of redress that Post Office could or should offer, and Post Office is listening to the calls for restorative justice similar to the processes agreed in the Windrush and the Grenfell Tower civil litigation recently. It will work closely with the Department to consider how best it can assist with any restorative justice proposal.
Now, during Post Office’s opening submissions in October last year, Post Office invited any postmaster who would like to meet a senior member of Post Office and receive a personal apology to contact Post Office for that to be arranged. So far, six meetings have either occurred or have been scheduled. Both the Chief Executive Officer of Post Office, Mr Read, who sits to my right, and the Chair, Mr Staunton, who sits behind me, are present today and both take this issue very seriously.
On behalf of Post Office, I renew the invitation, which is made in good faith and a genuine desire to listen to those affected by the scandal and to apologise for it, and I would encourage all the postmasters to consider it.
Thank you, sir. I’m conscious that I’ve overrun my time, but I hope that was helpful.
Sir Wyn Williams: All right. Don’t worry about overrunning, Ms Gallafent, I’ve been listening carefully to what both you and Mr Chapman have to say.
I think everyone knows that, for my convenience, I want to take lunch at 12.00 today and not 1.00 and we’re almost there so I’m not going to ask anybody to speak before lunch, so can we start again at 1.10? Is that all right?
Fine, perfect.
(11.57 am)
(The short adjournment)
(1.14 pm)
Sir Wyn Williams: Before we begin, in our enthusiasm to get through this morning’s submissions, I forgot to have a break for the transcriber, so we need to have an appropriate break this afternoon. That might mean that the person speaking second, I’d ask to organise their submissions so that they allow for a break for the transcriber. All right?
Mr Henry: Sir, could I, in fact, ask for a break before my submissions? Would that be possible? Because I need to take more instructions.
Sir Wyn Williams: All right. That may solve the problem.
Submissions by Mr Jacobs
Mr Jacobs: Sir, I have told the transcriber I speak quite slowly, so that might help.
Sir, I make these submissions today on behalf of the Core Participants who Mr Stein KC and I represent, who are instructed by Howe+Co who act for 156 Core Participants, including 60 applicants under the GLO scheme, 10 applicants in the HSS and five applicants under the Overturned Convictions Scheme, and some of our clients, we’re very happy to say, have attended today.
Sir, you have our written submissions, dated 13 April, at tab A2. Before I start, I would like to say, in fact I am instructed to say, that our clients firmly believe that any progress that has been achieved in relation to compensation is very largely due to the fact that the Inquiry has taken an active approach on this point, and our clients have asked us to urge that the Inquiry continues to hold these hearings and publish progress updates to ensure that DBT and POL meet their commitments to the victims of this scandal.
We understand that Mr Henry, on behalf of Hodge Jones & Allen today, will be proposing that the GLO scheme is restarted from scratch. We’ve thought about that suggestion and, although we completely understand why the suggestion is being made, we are unable to support this proposal because our clients instruct that they need compensation now and can’t afford to wait any longer.
So my submissions are based on how we work with the scheme as we have it now and, sir, there are three headline issues that I would like to draw your attention to.
Firstly, and it might come as no surprise after this morning’s hearing, that the deadline of 7 August 2024 for all processes and payments under the GLO scheme is simply unworkable.
The second point is that the delays by the Government are negatively affecting and, in some cases, retraumatising our clients.
The third point, sir, is that this scheme must, we suggest, include consideration of facts that are being established now within this Inquiry. Fair compensation must include fair consideration of all the facts.
Sir, on the first issue, the 7 August 2024 deadline, we know that the scheme sets out at 4.4.2 that it is to enable payments to be made no later than 7 August 2024 and, in your January 2023 statement on the compensation issues, you said at paragraph 39 that the effect of this deadline was that approximately 550 claims would have to be considered in the course of the next 20 months.
Sir, you said today, which I adopt, that it’s 400 in 14 months now, so it’s not getting any easier or better.
Freeths have sent a letter in to the Inquiry dated 20 April 2023 and they’ve expressed serious concerns over the August 2024 deadline for the scheme. Part of the problem, they say, is that the scheme can’t move at a reasonable pace because of the process of disclosure of documents by Post Office Limited, that’s been exceptionally slow and been made unnecessarily complex by Post Office resourcing problems being cited by them as the major issue.
Mr Chapman’s confirmed this morning that there is no issue about meeting costs on disclosure but it is a resource problem. Freeths are extremely concerned, they say, that there will be insufficient time for DBT to conduct a full and fair evaluation and that there is an obvious risk that compensation offers will be made by DBT without there having been time for consideration of expert accounting and medical evidence.
Our position hasn’t changed for quite a while. We raised this issue, sir, with you in Howe+Co’s letter of 9 January 2023, which is in the bundle at tab B, 7B. We repeat these concerns and we agree with Freeths that the August 2024 deadline does represent a serious project risk and it appears to our clients that the scheme will barely have got off the ground before the clock runs down, before the claims are timed out. This would, we say, represent yet another scandal for our clients.
As Freeths have commented, there’s a real problem with Post Office giving disclosure in respect of compensation and this perhaps may not come as much of a surprise because we know that disclosure is a recurring theme, a problem, with the Post Office in this Inquiry. We have referred, at paragraph 30 of our written submissions, to DBT having informed Howe+Co by email on 4 April this year that POL explain the constraints that mean the full set of disclosure will take 32 weeks and Mr Chapman dealt with the 32 weeks point in submissions today and said that this estimate is being revised.
But the problem that we see, sir, is that the matter is still in flux. We have nothing specific, we have no date or time to give to our very anxious clients, and this is part of the problem. We are constantly being told or our clients are constantly being told that something will be done but they don’t know when it is going to be done by.
Sir, those who instruct me are very interested in putting forward solutions that are pragmatic and might assist the Inquiry and we propose two solutions to perhaps overcome this – what might be an existential problem for the GLO scheme.
The first solution that we propose is that you, sir, impose a timetable for the GLO scheme to deal with disclosure, offers and reviews in a meaningful way, so as to avert the disastrous consequences that would follow from any further delays by DBT and POL in relation to the GLO scheme.
The imposition of a timetable by you, sir, would require Post Office to really get on top of disclosure, and perhaps, almost like an unless order, there could be a provision within the timetable that if disclosure isn’t forthcoming by a certain date then presumptions will operate in favour of the applicant.
It would also enable DBT or require DBT to remove what we say is unnecessary bureaucracy in the scheme. We don’t understand why there has to be a role of facilitator and we don’t understand why so much time has been taken to approve requests for expert evidence.
A timetable would concentrate minds in this regard. By way of a suggestion, we think that perhaps the progress from start to finish ought to take no more than eight months within this timetable and that would give us sufficient buffer for the August 2024 deadline.
We know from what Mr Chapman told the Inquiry this morning and from what is written at paragraph 41 of DBT’s written submissions that the Department is working with Dentons, independent claims facilitators, and Addleshaw Goddard, DBT’s legal advisers, to agree a detailed timetable for the scheme, against which the scheme will be monitored, delivered and publicly reported.
The submissions go on to say, somewhat ominously, that the timetable will be reported to the Inquiry when it has been agreed.
Sir, the difficulty with DBT’s position is that there is no timetable for a timetable, and we’re only 14 to 15 months away from the time when the Department’s legal powers will expire and our clients cannot be expected to put their lives on hold waiting for DBT to agree a timetable with a variety of other parties. They’ve waited long enough, sir.
Sir, the second solution that we propose is the appointment of an overseer, perhaps or ideally a retired senior judge, with power to resolve disputes in the GLO scheme and to ensure that the scheme is delivered effectively and in a time-efficient manner. This has been done before and to good effect.
Sir, you will recall that Sir Anthony Hooper was able to manage the mediation scheme in a robust and efficient manner and we say that a similar appointment is necessary to allay our clients’ very real concerns over the deadline and to wrest control of the scheme away from the Government and placed in the hands of an independent figure.
If this problem is left unchecked, there will be a very real possibility that a current application in a complex case that proceeds to review stage would most likely use up all of the time that is available.
Now, I’ve spoken to one of the claims lawyers at Howe+Co who has given me an indicative timescale of how long it will take to process a claim that was complex and proceeds to the review stage, and she says that:
May 2023 would involve perusal of Post Office documents, if they’d already been received, if they’d already been disclosed;
June 2023, perusal of hospital records;
July 2023, draft first witness statement;
August 2023 is when it’s anticipated that authority would be received for medical or accounting reports;
September 2023, that’s when those who instruct me would expect to receive expert reports, and that’s somewhat optimistic because there are only a limited amount of experts and I expect they will all be very busy in this area;
October 2023 would be preparation of witness statements and a schedule of losses and the preparation of a bundle to lodge with Dentons;
November/December 2023 will be a first meeting following an offer from Addleshaw Goddard, and then of course we have Christmas and New Year intervening;
So a mediation would take place in January 2024;
A first panel meeting, non-binding, March 2024;
A final panel meeting which is binding, May 2024;
A review would take place in July 2024;
Final offer and completion of the matter in August 2024.
So when looked at and when analysed from the point of view of a compensation lawyer, if a case is complex, it’s going to be very, very difficult to resolve it in the very limited timeframe and this is, in my submission, the stuff of sleepless nights for compensation lawyers. Sir, you have already indicated this morning that it’s a matter that you’ve viewed with anxiety.
There might even be less time, and one shouldn’t speculate, but if there is an autumn 2024 general election, DBT will be required to enter into a period of purdah, which will effectively halt matters for, I believe, three months.
There are other reasons why an independent overseer would be useful and we say that the appointment of an overseer would protect the victims of this scandal from some of the more objectionable views that – or actions of the scheme’s administrators that we’ve recently witnessed. For example, on 25 April, only two days ago, DBT wrote to a number of representatives of the GLO scheme applicants and stated – Mr Chapman covered this this morning in his submissions, but I’ll read out what was said:
“We want to maximise the proportion of our spending which goes to postmasters rather than to pay for the compensation process. To ensure a proportionate approach and that we’re only using expert evidence as far as reasonably necessary to assist claimants with their claims, we are asking Addleshaw Goddard to develop some standardised approaches to common situations, working with those claimant legal advisers and their experts who have significant numbers of clients in the scheme. This work should help us process claims more quickly with less to and fro between the parties. Once developed, these standardised approaches will be shown to representatives of all claimants. They will not be rigid and each case must of course be considered on its merits but we hope you will find them helpful.”
What we say is this is another layer of decision-making, another administrative layer of delay, and our position is this approach represents a serious misstep. It is not for DBT to determine whether expert evidence is needed in any particular case. That must be the decision of each applicant’s legal representatives, lawyers and officers of the court. They are in the best position to know what evidence they need for their clients acting in their clients’ best interests to advance their claims, and if that’s expert evidence, it’s a decision for them, not for the DBT.
This is an example of further unfairness in the operation of the scheme, which will only lead to more delay, and it’s a good example of the sort of issue which an independent overseer could grapple with and resolve very quickly.
So the solutions that we propose – the impose a timetable and the appointment of an independent overseer – we say, are reasonable and pragmatic and we hope that the Inquiry will adopt these suggestions.
We’ve proceeded, of course, on the basis that the August 2024 date is stet in stone because that’s what the DBT has told the Inquiry. It appears that there was an Appropriation Act, which fixes funding to that date. We don’t, however, know the exact legislative basis for the deadline and we would like to know from DBT the particular legislation involved so we can look at it and we can advise our clients accordingly, so they can understand.
We will also be very interested to know whether there are any contingency plans in place for when and if the clock runs down on GLO scheme applications. It’s been said this morning by Mr Chapman that it’s not within the Department’s gift to extend the deadline. We would like to know whether there can be or whether there should be or whether there are any contingency arrangements so that we can explain that to our clients and advise them accordingly.
Sir, the second issue is the consequences of ongoing delays and we want to say that the Government has unacceptably delayed in publishing the GLO scheme. Howe+Co called for the establishment of the GLO scheme in correspondence with BEIS, as the Department then was, as long ago as October 2021. That’s over a year and a half ago, sir. The scheme was published only until 23 March 2023 and yesterday, perhaps in keeping with a tradition for there to be a ministerial statement the day before an Inquiry hearing, there was a ministerial statement which said that the Department will publish a revised version of the guidance in due course.
Now, in fairness to the Department, the statement has taken on board a number of issues which has been raised by Core Participants in this Inquiry but it is unhelpful, sir, that the Department continues to make announcements on the very eve of every compensation hearing, it seems, and this wasn’t foreshadowed in DBT’s written submissions. If there is going to be a ministerial statement in future, we would like to have some advance warning of it we say that the decision to amend the guidance is in response – I think it’s quite clear – to the views of a Horizon Compensation Advisory Board, but this further delay would not have been necessary had Howe+Co, who represent approximately 130 GLO litigants, been meaningfully consulted on the scheme prior to its publication last month.
Now, I hear what Mr Chapman has said, of course, about consultation and my instructions are that there have been discussions but every decision is presented as a fait accompli and perhaps an example of the approach that is being taken is that yesterday there was an announcement by the Minister that there would be changes to the scheme. Howe+Co knew nothing about that, and I assume no other representative for Core Participants or applicants under the schemes, potential applicants under the schemes, would have known.
The real issue, sir, is that these delays are affecting our clients and we suggest that there should be a second stage of interim payments that could be based on the first offers that the scheme produces. There’s no rationale for holding any money back until the final resolution of an application.
Sir, it’s often the case that the best proposals for action to be taken come from our clients, from those who are directly affected, and I would like to read out a letter that we received, I think yesterday, from Chris Dawson, one of our GLO clients, and he said:
“I write to ask that Howe+Co ask the Chair to recommend a second round of interim compensation payments to be made by the Department of business. I’m sure I’m not alone in being grateful for the interim payment, albeit I wish it had been made many years ago. However, that interim payment was made some months ago and I am also sure I am not alone in respect to having to use a considerable amount of the interim compensation to pay off debts accrued in the years since being made bankrupt.
“With the current cost of living crisis, fuel crisis, food price increases, electricity and gas prices, I am finding myself living hand to mouth. Again, I’m sure I’m not alone in this. It has taken years for the Post Office and the Department of Business to agree to pay any compensation at all. Last year they made big announcements about a compensation scheme for postmasters who were part of the group action. However, it is not far off a year since that announcement and the compensation scheme appears to be moving at a snail’s pace.
“It is not fair to ask postmasters like myself to wait for POL and DBT to get their act together and move things forward so that postmasters can receive final compensation. If they cannot do this efficiently, then at least they should help me and others out by making a further interim payment. Although I’m asking you to raise this with the Chair, I’m embarrassed to do so as it makes me feel that I’m going cap in hand to those who wrecked my life.”
This is very much the psychology of how the victim feels in these processes; they feel that they have to ask someone to compensate them when it should be the authority that is making those approaches.
Francis Maye, another of our clients whose interim payment was taken in part by a bankruptcy trustee, has told us that he has learned to live with the mindset that there could be a disaster at any time. He said last week:
“I have got used to things hanging over my head. It’s embedded in my head that the rope can be pulled from under me again. It’s always there, it will never go away.”
The husband of Isabella Wall, (who died very sadly before she was finally compensated) Peter, he says:
“Isabella was found not to have committed any crime but deemed unfit to run a post office and required to pay back thousands of pounds because Horizon had recorded large shortfalls in the accounts. Isabella was suspended indefinitely. We continued to fight the cause but eventually were forced into bankruptcy and an IVA. We lost the Post Office and store, two flats above, all our savings, investments and health and retirement. I am working. I still owe thousands of pounds.”
Suzanne Palmer is unable to move from a tiny flat in an area where she feels unsafe because of the ongoing consequences of her bankruptcy and the scandal. I have received, and Mr Enright and Mr Stein have also received, many other messages from other Core Participants. Time does not permit me to read them out. But the important point is that all of these clients are still suffering. Aside from the seemingly never-ending financial difficulties that they continue to face, our clients who were made bankrupt as a consequence of the scandal also live with the stigma of having been made bankrupt. Ms Palmer told me that she remembers bailiffs putting her furniture out on the street in the view of all her neighbours.
We say that everything possible must be done to alleviate the ongoing suffering of our clients. An obvious solution, sir, would be a second interim payment and as I’ve already said, by way of an example, if an initial offer under the GLO scheme is rejected as being too low, there would be no reason for DBT not to pay that sum pending resolution of the final compensation award.
Sir, the third point is about assessing compensation on the basis of the full facts. In the course of this Inquiry, sir, we learn in every new tranche of disclosure and at every hearing more of what happened: the deliberate stigmatisation of postmasters as criminals, notwithstanding no proof of offending; the deliberate turning of the screw against postmasters within the IMPACT programme; the desire to win cases against postmasters whatever the cost; and the deliberate suppression of the truth. We can all see that the judgments of Mr Justice Fraser in the High Court were hugely incriminating against the Post Office. But these findings were incomplete because the trial process did not conclude and do not portray the very worst of it, and we will see that and we will continue to see that as the Inquiry progresses into its next phases.
But despite the worsening picture for POL and DBT, the scheme guidance says that the scheme will be divided by considerations of fairness in addition to applying established legal principles and the findings from the common issues judgment and Horizon issues judgment.
We say it shouldn’t stop there. Instead, the scheme must, we suggest, include a consideration of the facts that are being established now within this Inquiry. Fair compensation must include fair consideration of all the facts.
There is of course a tension, because no one wants the payments for the GLO litigants to be delayed for even a day more than necessary, but in my submission, sir, we have to be realistic. The facts under examination in this Inquiry will, and not may, be relevant to consideration of the extent of harm and pain and suffering within traditional models of compensation assessment. The GLO litigants’ module comes close to the end of this Inquiry, I think it’s Phase 5, and there will be facts that will affect compensation payable that will emerge within that module.
When the Inquiry investigates the conduct of the litigation in Phase 5, no doubt our clients will be forced to relive much of what happened to them and will have access to more detail of just how appallingly the Post Office acted towards them. This is a factor, sir, that we say needs to be incorporated into all of the schemes.
Sir, I’m conscious of the time, I will briefly address you on other matters.
Sir Wyn Williams: Yes.
Mr Jacobs: I will do so as quickly as I can.
As far as the Historic Shortfall Scheme is concerned, Howe+Co act for ten claimants for making applications. There are problems with delays, and I appreciate Ms Gallafent having apologised in relation to one of our clients, I believe Ms Elliott, who has been affected by the delays, and may now have to face an interim IVA.
One of the problems – it’s important though that Post Office recognise that the delays are inflicting harm on our clients and contributing to their suffering. A particular concern that Howe+Co have had is that it’s difficult to go into a good faith meeting fully armed without an expert report to establish what it is the claim is about, and those are taking time.
Howe+Co act for five clients in the Overturned Convictions Scheme and we’ve said in our written submissions that a dispute has arisen in relation to whether payments received under the 2019 settlement agreement should be deducted from the final payment made to applicants who are in the Overturned Convictions scheme but who are also in the Group Litigation.
Howe+Co’s position is that payments to the GLO in the settlement agreement expressly excluded malicious prosecution. This is a matter which we would like to perhaps lay down a marker for the Inquiry to consider when dealing with the settlement agreement in Phase 5.
There is a related point to the August 2024 deadline in respect of clients who were made bankrupt and have had entered into IVAs being in a more precarious position in relation to the GLO scheme, and this is because bankrupt and IVA affected subpostmasters are required to discharge a more onerous evidential burden than applicants who are not burdened with trustees or office holders.
The GLO scheme requires that applicants who have been subject to bankruptcy must provide details and documentation to support their claims, and they’re additionally required to demonstrate that the bankruptcy insolvency was due to the Horizon shortfall rather than –
Sir Wyn Williams: Mr Jacobs, can I just ask you, because I obviously haven’t got them at the tip of my fingers, are you saying that the evidential burden for GLO claimants who were made bankrupt is a different or higher burden than is applied in HSS for bankrupt people?
Mr Jacobs: Sir, probably not, because they still have to produce all their accounts, produce all the details of their bankruptcy –
Sir Wyn Williams: Because, as you’ll appreciate, what I’m concerned about is overall fairness and consistency, and I would obviously be worried if schemes were applying different criteria.
Mr Jacobs: Yes, of course.
Sir Wyn Williams: But I take it from what you’ve said that what GLO effectively does is reproduce what is in HSS about proof in bankruptcy cases?
Mr Jacobs: Absolutely, sir, I think the point that I was trying to make was that the more onerous evidential burden means that it’s going to be more difficult for them to hit the August 2024 deadline.
Sir Wyn Williams: Well, I think there’s – as I said, this morning, it’s like that piece of rock with something running through it and August 2024 is certainly a strand that’s bound up with all these things.
Mr Jacobs: Absolutely, sir.
I can also say that there’s likely to be an issue in relation to aggravated damages. We say that it cannot be only the case that aggravated damages will follow when the Post Office was the petitioning creditor. Francis Maye, for example, told us that the Post Office told him that they had blocked the sale of his lease unless the Horizon debts, which had led to the sale in the first place, were paid from the proceeds of the sale. He instructs that, had he been given reasonable time to pay the Post Office, it’s likely that he would have been able to avoid bankruptcy.
There is a “but for” presumption that we submit ought to be necessary. We ask that aggravated damages are paid where it can be established that but for the Horizon shortfalls the subpostmaster would not have been made bankrupt. There doesn’t have to be a nexus between the Post Office being the petitioning creditor and the –
Sir Wyn Williams: Well, I don’t wish to sound unhelpful, but you are trying to ease me into the position where I cannot be, with these submissions, Mr Jacobs, since the statute specifically prohibits me from determining civil liability.
Mr Jacobs: Absolutely.
Sir Wyn Williams: But I understand that you use me as a forum for some of your submissions.
Mr Jacobs: I shall avoid doing that and move on.
There are outstanding issues with insolvency practitioners, we’ve heard from Mr Chapman, and it’s Moore. We say that it would be entirely proportionate and appropriate for DBT to commence proceedings almost immediately if Moore doesn’t respond positively to the opinion of Ms Addy KC, and we echo your comment that you made this morning, sir, that a swift resolution is needed.
It’s also important that applications for annulment and rescission proceed as quickly as possible because those are the very devices that can have the best means, certainly in relation to stigma, of restoring people to the position they would have been in but for the scandal. If there is a public acknowledgement that they should never have been made bankrupt in the first place, that would mean a great deal to very many clients. Some of them will say “Well, it’s too late now”, but others may very, very much want that relief.
We say that the Post Office should do everything they can to support those applications and we’ve asked for witness statements for use in annulment applications where Post Office agrees with the test but for – and agrees that the order for bankruptcy should never have been made. That will certainly make the passage of these claims go much quicker through the courts. So we don’t agree that this is something that’s not necessary because Post Office are already communicating with subpostmasters.
We don’t think necessarily that there are data protection issues. We would only ask for information in respect of our own clients. But this is something that is proactive, that Post Office can do, to ensure that these claims are dealt with in very short time periods. We all know how long the court process can take.
In relation to payment for annulment and rescission where the Post Office was not the petitioning creditor, again, we ask for a but for presumption that Post Office should pay for the rescission and annulment applications, where the Post Office was the petitioning creditor, where the Horizon shortfall or actions of the Post Office materially contributed to the subpostmaster or another party making an application for bankruptcy. We’ve also asked that DBT modifies the scheme, the GLO scheme, to expressly provide for funds for SPMs to receive legal advice on matters in relation to annulment of bankruptcies and rescission and that they help facilitate the making of such applications where appropriate.
Sir, moving on to IVAs, Ms Addy KC’s view is that, as IVAs operate on their individual terms, it’s not possible to generalise in relation to what assets will or will not be caught by them.
We ask that there is a reflection in the scheme, that there is an appropriate degree of flexibility or discretion on the question of IVAs, in particular cases involving those subject to IVAs must be considered by specialists as individual cases and funding for such advice provided as a matter of course, this is not something that can just be done by a general lawyer, these are complex technical matters and this issue is especially urgent for one of our clients, Ms Elliott, who is facing the prospect of having to enter into an IVA and who requires advice very quickly on how to proceed with her compensation claim.
In relation to taxation, we’ve made the point in our written submissions that the £1,000 cap was unreasonable because a tax consultant would have to deal with matters of a complex historical nature which may very well be affected by an insufficiency of documentation. Mr Chapman has said that this is not set in stone and it’s not an upper limit. We think that is something that we would like you to record in your decision, if possible, sir, just so that that is there.
There are likely to be difficulties where postmasters are pushed into a higher tax bracket due to receiving a lump sum payment, other Core Participants have said that in their submissions, and we note that DBT, at paragraph 21 of its submissions, is working urgently to address this issue.
Mr Chapman has given a proposal today that there be a sort of a form, for want of a better word, and indemnity by way of additional payments to those in the HSS scheme who aren’t exempt, and we note that that does appear, at the very least, to resolve this issue but, again, we need to have a decision made very quickly for the benefit of our clients.
In order to – in respect of the issue of stigma for bankruptcy, I note what Mr Chapman said this morning that the advisory panel has said that the bands are indicative only, cases will be decided on the merits, and awards may be significantly higher and, if not agreed, there is a right for consideration by an independent panel.
But this nevertheless is very important because stigma is an overwhelming issue for those of our clients who have been made bankrupt. It does appear to be in discussion stages only. I hope that’s not unfair. So I would ask that you rule or that you recommend that there be a confirmed and concluded decision on this issue very possibly, and I give an example of how many of our clients are still continuing to be affected by bankruptcy.
I referred earlier on to Ms Palmer, she gave evidence in phase 1, she was prosecuted and acquitted at trial, however the Post Office refused to restore her contract and she lost her branch. This led to her shop losing business and eventually she borrowed some money from one of her children to petition for bankruptcy. She lost her home, moved into rented accommodation with her husband and suffered significant stigma. I referred earlier to bailiffs putting her furniture out on the street, her car was clamped in full view of her neighbours in public, she describes this as total humiliation.
Although she was discharged after a year, the stigma has never gone away. She is still unable to rent property, she was rejected when she applied from a credit card after she received her interim payment, she and her husband wanted to go away on holiday for Christmas and wanted the assurance that a credit card can bring. She has also recently had to declare her past bankruptcy state when applying for motor insurance. Furthermore, she has a telltale six-year gap in her credit record which would alert any potential lender, we say, to her former bankrupt status.
So the stigma of bankruptcy is very real for our client even today. Ms Palmer lives in a tiny housing association property in an area where she says there are drug dealers. She is desperate to move but can’t borrow or rent property and it’s this situation arising from stigma which still continues to oppress Ms Palmer and her husband. So we want some finality on the banding and levels of compensation for bankrupt clients who suffer from stigma as soon as possible, and we suggest maybe there should even be a separate head of damage within the scheme. Stigma of bankruptcy, for our clients, never goes away.
So, sir, I’ll conclude. As set out above, as I’ve said, there are three main issues in relation to the GLO scheme. Firstly, the need to avert a further scandal to SPMs running out of time and being forced to accept derisory offers as a consequence of the GLO scheme August 2024 deadline.
There is another related issue of course, if a solicitor is required to advise a client as to whether to accept a low offer or have no compensation at all, that puts that solicitor in a very invidious position because it would be potentially negligent to advise a client that they should accept an offer which is derisory or substantially lower than what they ought to have claimed.
We hope that our proposed solutions of the imposition of a timetable and, perhaps more importantly, the appointment of an independent overseer in the mould of Sir Anthony Hooper will do much to alleviate this very real concern.
Secondly, we are concerned that many of our clients continue to live in desperate financial situations. We suggest that Chris Dawson’s suggestion of a second interim payment would go a long way to resolving the plight of many. We see no reason why these suggestions couldn’t be adopted and wouldn’t work very well to resolve this issue.
Finally, it’s important that a degree of recognition is given to the fact that some of the worst facts may not be known yet and will be uncovered in future phases and we say that the compensation regime or compensation scheme, should address these points.
As I’ve said at the outset, sir, it’s very important that the Inquiry continues to monitor this issue of compensation.
Sir, the Post Office Minister has given a statement and said:
“We will keep fighting for the postmasters and their families and it is right that they will now receive full and fair compensation for the pain and suffering caused by this scandal.”
Sir, that is an exasperating statement in the ears of our clients, from their point of view. What is needed, in my submission, for the GLO scheme to have any effect whatsoever and to be capable of resolving the very serious issues that it addresses is robust case management and that is what we are proposing.
The sentiments expressed by the Minister have not been borne out by the fact that there have been delays which cause continued suffering to our clients and there is the fact, the unavoidable fact that the GLO scheme may very well time out.
Sir, can I just finally say something about restorative justice. We welcome what Ms Gallafent said today about the six meetings that have been arranged, but restorative justice is not about apologies. In the Grenfell Inquiry, by way of example, the bodies administering restorative justice appointed an appropriate adviser to consult with the victims. That is the sort of action that is needed.
Sir, if I could refer you to page 31 of our written submissions, we set out what we say a restorative justice scheme should involve. I won’t read it out because of the time but what we ask for is we ask for the Post Office to engage with Howe+Co on those very issues.
Sir Wyn Williams: So this is paragraph 132, yes?
Mr Jacobs: Yes, it is, sir, yes.
Sir Wyn Williams: Fine.
Mr Jacobs: In relation to compensation, we ask that the Inquiry determines, in line with what’s been held in the Infected Blood Inquiry, that compensation under the schemes should be open to family members of those who have been affected by the Post Office scandal and the Inquiry has heard evidence in Phase 1 that many family members became carers of subpostmasters or mistresses whose health was affected by their parents’ or family members’ treatment at the hands of the Post Office. Many children of subpostmasters suffered adverse mental health impacts as a result of stigmatisation of their parents. Other family continue to suffer the financial consequences, even today, associated with having provided assistance to subpostmasters who experienced shortfalls.
So it’s very important, we say, that the compensation which arises from this Inquiry recognises that the Post Office’s conduct impacted on whole families and not just the individual subpostmasters who were targeted by the Post Office.
Absolutely very finally, sir, Ms Gallafent helpfully referred to an internal review in relation to unsafe convictions and a process that’s being established. That, of course, is a welcome step but we say that it needs to include the victims. Those victims need to be able to have input into that review and they need legal representation to do so because they may not agree with the decisions and the outcomes and they need to have a right to be heard in that, as in all the other schemes.
Sir, I’m sorry for going off quite so long. Unless I can be of any further assistance, those are my submissions.
Sir Wyn Williams: That’s fine, thank you.
Right, so it’s very nearly 2.00. How long would you like to take instructions, Mr Henry?
Mr Henry: Sir, could I ask for 20 minutes?
Sir Wyn Williams: Approximately how long will you be, having taken instructions?
Mr Henry: Having taken instructions, sir, I hope very much that I will be no more than 30 minutes.
Sir Wyn Williams: Right, fine. I think I’ll remember that.
Mr Henry: You shall. You shall.
Sir Wyn Williams: Just so that we can be clear, Mr Moloney, how long do you expect to be?
Mr Moloney: Sir, I think I can make my submissions much shorter than the written submissions, given what’s been said, so I would like to keep them within 15 minutes.
Sir Wyn Williams: So it looks like we’re going to finish comfortably within the normal afternoon, so you can have your 20 minutes, Mr Henry.
Mr Henry: Thank you, sir.
Sir Wyn Williams: Right.
(2.00 pm)
(A short break)
(2.23 pm)
Submissions by Mr Henry
Sir Wyn Williams: Everybody ready? The floor is yours, Mr Henry.
Mr Henry: Thank you, sir.
We’re all familiar with compassion fatigue. Here we are again, sir, compensation fatigue. You keep, as you say, “banging on”. One might imagine more satisfaction would be derived from bashing one’s forehead repeatedly against a stone wall, such is the frustration that any right thinking member of society would feel: a sense of outrage, in fact, at the grotesque spectacle that occurs again and again, notwithstanding your best efforts.
You are, in one sense, being stonewalled because you are always being assured that it’s just around the corner, great progress has been made, all best endeavours will be undertaken, and these are accompanied with emollient words and ardent expressions of disgust and how everybody is fully supportive about identifying fault and making sure that nothing like this happens again.
The leader in The Times yesterday, sir, reveals the reality, and you are familiar with the reality, and it may be presumptuous of me, but your patience and your ineffable courtesy, at times it appeared that even you seemed to be, as it were, overwhelmed by the sense that you were again being kept at a distance and those people who were destroyed by the Post Office – either through wrongful civil judgments or being forced to repay imaginary debts that never existed except in a flawed computer program, or being sent to prison – well, that they really – they don’t matter.
But they do matter and you know that. But the clock is running, and it is running down very badly.
Now, on 8 December I addressed you as follows, and you will find this, sir, in the coda to our submissions which were submitted on 6 April. There are two issues. The first is the continuing and inexcusable delay in delivering compensation to the wronged, to the innocent, and that will include whether the awards proffered are even remotely approaching acceptability. The second, which is inextricably entwined with the first, is whether the Post Office will accept that it:
“… deliberately denied, obstructed and delayed appellate rights needlessly unjustly and wrongly prolonging the suffering of those that it had devastated either by civil judgments and bankruptcy or criminal convictions.”
That remains unanswered, and it does not auger well. We continued, in paragraph 32:
“The second issue was a direct question to test the candour, integrity and remorse of the Post Office, and the continuing silence of the Post Office does not auger well for either disclosure or compensation. The question as to deliberate and tortious suppression of appellate rights was framed in the context of an additional head of damages but there is silence.”
Now, sir, it was our concern that why are these poor people rushing into settlements, their lives having been destroyed, for years they have suffered huge financial insecurity, loss of earning power, loss of reputation. One of my clients, she does not mind me mentioning it, is facing eviction on 6 June, Mrs Misra, unless she can muster six months’ rent to be paid in advance.
Yet a number of these poor people, whether represented or not, it doesn’t matter, are rushing into settlements which, as we saw from Mr Moloney’s submissions on 8 December last year, some of them were agreed on an irregular basis where a global law firm had, as it were, it seems, failed to appreciate that there were additional heads of damages to which these claimants were eligible.
So, sir, the problem with this continuing lack of candour by the Post Office is that it is part and parcel of the disgraceful conduct that brings you and I here today, with all of these other people who have suffered. It is part of that disgraceful conduct where they are continuing to suppress the truth.
Only until you get at the truth, that they for years knew about this and deliberately suppressed it and manipulated evidence and procedure to their advantage, will you arrive at proper quantum. Because there is, for example, the wrongful bankruptcy – and, again, your ingenuity and creativity in asking Ms Addy to address those issues, and we thank you on behalf of the Core Participants for that – but there is also the tortious abuse of process as well. Yet those whom I represent, certain of them, who have put in claims, have been told “Well, you’re not getting that. You’re not getting abuse of process. Nobody else has”.
The fact that they have got away with it with other people is no answer to depriving our clients of rightful and proper compensation. Or is it because they are standing on what really is the most unfortunate settlement, whereby, for absolutely nothing, for zero consideration, those convicted innocent people in the Group Litigation forfeited every other claim, except for malicious prosecution, at the insistence of the defendant? How bizarre was that: driving a wedge, as it were, between the claimants in the Group Litigation?
So, sir, until we get at the truth, then I’m afraid this exercise in which we are involved, in which you have played a very important role in trying to keep it on track, I regret to submit will be hopelessly derailed. Because what will happen – and I hope that I am wrong – is that we can see in a few years’ time people will come and they will say “Well, we were had over, we were trounced, we were taken advantage of. This settlement is a travesty, this compensation that we’ve been awarded is utterly unfit for purpose”.
Of course, apart from the GLO scheme, who is nominally in charge of those other schemes, the Post Office, aided, advised, assisted, dare I say abetted, by Herbert Smith Freehills? Now, I submit what I do now – what I now submit I do with care and forethought and deliberation.
On 4 October 2022, Mr Sheldon, King’s Counsel together with his learned junior Mr Mertens, put in written submissions on behalf of UKGI, the Relativity reference is SUBS0000006.
This is what you were told, sir. You were told, in paragraph 214 that the board met to consider the issue of recusal in obviously Horizon, mention is made that Lord Neuberger had been asked to provide an opinion which was strongly in favour of making a recusal application. UKGI’s general counsel, the shareholder of the NED played no part in the board’s decision-making on the recusal issue. The other member, the Permanent Secretary, recused himself from the decision, and so on and so forth.
As we know, that recusal application was made, it was dismissed and the subsequent application for permission to appeal was refused. But it is, in our respectful submission, a seminal episode in the whole saga of injustice.
May I briefly develop why and its relevance to compensation will therefore be obvious.
Because we all have heard and, in the same way that people repeat apologies, I suppose, on behalf of the Core Participants, I repeat words such as egregious and iniquitous, turpitude, et cetera, on behalf of the Post Office’s – characterising the Post Office’s conduct.
But what can be in no doubt, sir, is that the Post Office knew that the CCRC was riding on the back of the Horizon litigation. That was apparent to the Post Office. If the Horizon litigation had foundered, if it had resulted in a defeat for the claimants or a miserly settlement, perhaps even more miserly than the one that was eventually obtained after the funders’ costs and interests had been deducted, et cetera, but if the Post Office had succeeded, again, sir, you and I, together with all of these other people, would not be here. But, worse, who can say what would have happened to the CCRC referral?
So, therefore, the Post Office was playing for very, very high stakes indeed by attempting to recuse Mr Justice Fraser.
Well, in paragraph 215 of the submissions of the UKGI, it was then stated:
“Accordingly, Mr Justice Fraser continued to hear the Horizon issues trial. UKGI provided the Secretary of State with an update on the current state of the litigation on 12 April 2019, including the fact that following intervention by the Chair and the Shareholder NED, the Post Office had refreshed its legal team [whatever that means] including internally reorganising its legal team and replacing its general counsel and employing a new firm of solicitors, HSF, to revisit the approach to the litigation.”
But, sir, we know that, however it came to be, and that submission being made and submitted to you, sir, by none other than leading counsel and a highly reputable junior, that was wrong. Who knew what when, who conned who in respect of paragraph 215, it’s not really for me to say. But what is clear is that there was an attempt, deliberately or inadvertently, to mislead you.
Everybody can read. These documents are circulated. There was no correction from the Post Office, no correction from anybody on the Post Office team, so far as I am aware. If there has been a correction at the time, saying “I’m terribly sorry, Herbert Smiths were directly involved in advising us on the recusal”, then I will withdraw what I have just submitted.
These are public documents, they’ve been published and circulated, cross-served. There has been no correction.
So, sir, here you have Herbert Smiths advising on the recusal, advising the Post Office and witnesses in respect of this Inquiry, in which the recusal application will be a seminal moment in Phase 4, and also supervising certain of the compensation schemes, one of them, them having to supervise it because the original hard bargain they drove, ruthlessly drove on behalf of their clients, consistent with their duty to their client, was completely unfit for purpose.
It’s a hopeless conflict but what concerns us particularly, sir, is the fact that, unless you get at the truth then there can be no proper sum awarded in compensation and, more importantly, sir, because, as Ms Skinner said to you many, many, many, many months ago:
“No amount of money can compensate us. But what we do owe, we owe the debt, and there are people, as we sadly know, who have died, either by their own hand or through just the passage of time. We owe them and their families the truth and those who have survived this catastrophe.”
We respectfully submit that this compensation as currently supervised by Herbert Smith on behalf of the Post Office just will not do, because if they are involved in the recusal, which is a massively aggravating feature of this campaign of wrongful conviction, this campaign of injustice, perhaps the worst to be seen in modern times, then you will inevitably fail, sir, despite your best efforts.
Sir Wyn Williams: Can I just see where the logic of what you are submitting is taking me, because I understand full well your submission that it is necessary to get at the truth in order to properly compensate people. I follow that.
Mr Henry: Yes.
Sir Wyn Williams: But, in terms of this Inquiry, getting at the truth means, in effect, hearing all except possibly the last phase of the Inquiry in terms of what you are now talking about, and it means me taking, no doubt inevitably, some months thereafter in order to formulate my conclusions upon it. So the logic of what you’re saying – and I’m not saying this in any critical sense, but simply to understand where we’re going – is that no proper compensation in the sense of it being reliably founded on evidence, on all relevant matters, can be paid for another 12 months or more.
Is that fair, Mr Henry?
Mr Henry: Well, sir, the way I’m going to dodge that bullet is to endorse –
Sir Wyn Williams: We’ve had passing the buck and now we’re dodging bullets!
Mr Henry: There we are. I’m endorsing Howe+Co’s approach, because one of the mischiefs of rushing into settlements and the financial pressure that these disadvantaged and marginalised people suffer, living in poverty, on the bread line, is that they’re forced to accept something without the truth being fully exposed.
Sir Wyn Williams: And, Mr Henry, that would be awful, let me make that plain.
Mr Henry: Yes. Yes.
Sir Wyn Williams: But we are on the horns of a dilemma, as I see it, in the way we’re trying to organise this.
Mr Henry: Not so, sir, if we endorse the Howe+Co approach, which is that there are structured interim payments where, if you can show that you are likely to receive substantial damages, and those Mr Marshall has the privilege of representing and, in this Inquiry, I have the privilege of representing are deserving of very, very considerable damages, then they can make applications for their reasonable requirements, and they can provide reasonable evidence of the strength of their claim. Therefore, they can receive – without any financial pressure driving them into an unjust settlement, they can receive proper structured interim payments. It’s also an integrity test as to whether Government and the Post Office really mean what they say, because it will protect people from being forced into a settlement.
Unfortunately, sir, whether this is happening up and down the wicket, I do not know, but it looks like, from the submissions that were made last year, that a number of people are settling because it would seem that really they have no choice but to settle, and they may be settling for a mess of pottage as opposed to a proper award, and that is the concern.
Now, can I just develop this because very important to answer your question. So it would not mean that the Core Participants who are eligible do not receive any money at all until the very end but they receive proper structured payments and that the matter can then be, as it were, set off at the very end when the final award is made.
At the moment, for example, further financial pressure is being exerted, inexcusably, on these unfortunate, weak, poverty stricken individuals because, for example, interim awards are then deducted when there is a payment of – towards general damages, and so, therefore, the Post Office, as it were, gives with one hand and then takes away with the other.
So it helps, no doubt, the Post Office’s liquidity, or rather the Treasury’s liquidity, but one might think the Treasury has a better way of coping with cash flow problems than people who have been living on the bread line or living way beyond the lifestyle that they ought to have had for years as a result of the Post Office’s misfeasance. So why, as it were, make the deductions? Why make the deductions that the Post Office insist? In other words, you’ll get your 163,000, but then as soon as a stage payment is made, that 163,000 is clawed back. So, in other words, you get the 200,000, but then there is a clawback.
It has been described in correspondence, forgive me, I’m sure that Ms Gallafent will not be amused, but it’s been described as “spiteful and vindictive” and that’s what it is because it is done deliberately, knowing that the other side do not have the means to withstand it. They are forced between the rock and the hard place.
Then the other argument, of course, is that there were ex gratia payments for the wrongly convicted. Ex gratia; it was charity. Now the Post Office are saying “Well, the charitable donations that you received from the other claimants in the GLO, you have having forfeited everything except for your claim for malicious prosecution, so those charitable ex gratia payments they’ve got to be deducted as well”.
Well, that’s a strict matter of law that can be litigated but, in good faith, in good faith, the Post Office should not even begin to countenance advancing an argument like that.
There was no consideration given by the Post Office for those claimants who had been the subject of wrongful conviction, surrendering all of their claims, surrendering absolutely every single one of their claims but for malicious prosecution. There was no consideration given at all. So now, after the event, the Post Office, seeking to deduct the ex gratia payments of the other claimants, again, we respectfully submit it’s low behaviour, and what the Post Office should do is that the Post Office should, even if it can’t reconcile itself to the arguments that have been properly advanced, the Post Office should say “Well, we’ll treat that as, as it were, ex post facto consideration, admittedly given by the claimants, for you surrendering your claims, so you can keep that and we won’t deduct it”.
So that would be my argument, sir, you’ve got to relieve these people of the financial pressure that they’re being put under, because they are being driven, we respectfully submit, quite deliberately, to settle below the quantum that they rightly deserve.
This is why we were asking for transparency. Some of my learned colleagues prefer not to have transparency in this matter. Everybody to their own. We can only respectfully submit that, in a case or a saga – and I don’t trivialise it by calling it that – involving so many secrets and discreditable manipulations behind the scenes, the lack of openness and the lack of transparency again gives rise to potential injustice.
Because if this awful episode in English legal history means anything, it means that if you can just get a group of people to coalesce, who actually know everything about each other’s cases, then you might have a chance against this behemoth or this monolith, you might just have a chance of getting a shot at justice. But if you’re dealt with individually and separately, you’re batted away or you’re swatted like flies.
So, sir, those are our submissions on the matter. I respectfully submit that it’s not destructive, what I am arguing. I’m basically trying to answer the point that you made in your 9 January report on the matter – your statement, forgive me, sir – where at paragraph 52 you were responding to my learned friend Mr Stein, King’s Counsel, and at paragraph 51:
“Mr Stein KC invited me to recommend that all three schemes should be subject to overall supervision by a person or body who is independent of BEIS and/or POL.”
Then I omit words.
“There are three schemes in various stages of their development which are functioning in substantially different ways. In my view, it would not now be possible to appoint a person or board to supervise all the schemes without there being a significant risk of substantial delay as a result. In relation to all schemes that would be very undesirable. In relation to the GLO however such delay could be disastrous.”
We respectfully endorse that, sir, so far as the GLO is concerned. But given the untenable position of HSF in this matter, because the recusal issue is central to the question of misfeasance, whether, for example, there might have been joined-up thinking between the criminal litigation, the criminal litigation that was in contemplation in the Court of Appeal, and the civil litigation, the litigation subcommittee, but it’s absolutely critical to the issues that you are required to investigate. If that isn’t a conflict and if they cannot see that it is a conflict, then one respectfully submits, well, they are so purblind that it’s even more dangerous, and that affects again disclosure.
So that is why, sir, somebody would have to come in and they would have to review, they would have to review the awards already made and also the conduct of the schemes going forward. We make that submission with regret but, in fairness, last June when we were making submissions to the Inquiry we alluded to the issue of conflict and that, ordinarily, we would therefore object but for the necessity to get these matters processed without undue delay. But at that stage we were not aware of HSF’s involvement in the recusal.
That now being apparent and the very, very unfortunate submissions that were made to you on 4 October by no less than UKGI itself, there is, in our respectful submission, very considerable cause for concern.
I can put it bluntly: why does the Post Office not want to countenance abuse of process? Why will they not answer the questions put to them on 8 December? Because HSF wasn’t a new broom, HSF was part of the problem, it was, as it were, an oily rag that tried to tarnish the reputation of the judge. Deeply implicated. That’s the problem. Why don’t they want to countenance abuse of process? Because they would have to disclose all of that.
That is, in our respectful submission, utterly unconscionable and that is why, sir, with regret, we have to make the submission we do, so far as HSF’s continued involvement in those compensation schemes.
Sir Wyn Williams: Thank you very much, Mr Henry.
Further submissions by Ms Gallafent
Ms Gallafent: Sir, I wonder if I may ask an indulgence to respond on one point of fact. I didn’t want to do Mr Henry the discourtesy of interrupting him mid-flow.
It’s suggested that someone should have corrected or objected to UKGI’s submissions, we don’t and didn’t for the simple reason that they are based on a contemporaneous document, which is BEIS0000071. I don’t ask you, sir, to turn it up, but can I just make it clear that that document does not say that HSF was involved in the recusal application. The inference that Mr Henry seeks to draw from it is completely different from what the document itself says. I wonder if I might simply give the factual timeline.
The decision was taken to apply for recusal of Mr Justice Fraser on 20 March 2019. On 21 March, the recusal application was issued. On 3 April, it was heard before Mr Justice Fraser. On 8 April, HSF made a presentation to the board as part of the proposed refreshing of the legal team referred to in the UKGI submission. The recusal application was heard and refused by Mr Justice Fraser on 9 April. It was thereafter that HSF were instructed. So they were not the people who advised on making the application. It is a simple point of fact, no doubt you will look at all the relevant documents in Phase 5, but it is important simply to put that down as a marker at this point before you consider Mr Henry’s submissions.
Mr Henry: I’m very grateful to Ms Gallafent. I’m not sure if I need to withdraw it though because –
Sir Wyn Williams: Well, I’m not going to let this continue. The facts surrounding it will be investigated.
Mr Henry: They will, yes.
Sir Wyn Williams: So that’s sufficient for these purposes.
Mr Henry: Thank you, sir.
Sir Wyn Williams: To what extent your recusal point is necessary for your more general point, I will ponder.
Mr Henry: Could I just mention one thing and, I promise you, one sentence.
Sir Wyn Williams: Really, one sentence, Mr Henry?
Mr Henry: One sentence: if they were not formally instructed, were they, as it were, acting below the parapet?
Sir Wyn Williams: That’s enough. There has to be some decorum in these proceedings. I like to be informal, but there comes a line and we’re about to cross it, and we’re not going to cross it again. All right?
Mr Moloney, are you ready?
Submissions by Mr Moloney
Mr Moloney: Yes, sir.
Sir, I make submissions, as you know, on behalf of Hudgell Solicitors’ Core Participants. Hudgell Solicitors represent 125 claimants under the Historical Shortfall Scheme, after this morning, 73 persons whose convictions have been overturned – the two did have their convictions quashed this morning, sir – and then four persons involved in the Group Litigation scheme.
We provided written submissions, sir, in respect of the issues you asked to us address and I’ll take each of those issues in turn briefly, if I may, sir.
Firstly bankruptcy. In respect of the opinion of Ms Addy, King’s Counsel, it seems that the only point of contention there, in respect of her advice, is the figure of £300,000 as the starting point for the stigma damages for bankruptcy.
Sir Wyn Williams: Well, if I could use you as a sounding board, having heard everyone apart from you now, and possibly Mr Beer, there is the £300,000, which is a point of contention, and there is what to do about more, and everything else seems to be, as a matter of legal principle, agreed.
Mr Moloney: Indeed, sir. Entirely, and I’ll come on to Hudgells’ position in relation to Moores in due course.
As you said, sir, but firstly it was dealt with by Ms Gallafent in relation to the HSS, it also applies to the Group Litigation scheme. As you said, sir, there is a potential dispute resolution process in HSS and the Group Litigation scheme where that point could be taken and resolved. But we wonder, sir, in the interests of consistency and in the interests of clarity, whether it might be useful, and we put this out as a suggestion, if there was a further Early Neutral Evaluation where that point could be adjudicated on by Lord Dyson or some other appropriate person, but it would be preferable that it’s Lord Dyson because he is now familiar with the cases and issues.
As you know, sir, in the early part of 2022 there was some distance between the Post Office and the Hudgell clients on the appropriate levels for non-pecuniary damages and the parties agreed to Early Neutral Evaluation in order – and this is the point of it – to secure some sort of realistic assessment of the damages that would be recoverable if the courts were required to adjudicate on this, because that’s what’s important in these cases ultimately, if these cases were to not be settled but go to litigation.
Lord Dyson, the former Vice President of the Supreme Court, with enormous expertise in the area, was agreed upon by the parties – not imposed by one party, agreed upon by the parties – and as is said by Howe+Co in their written submissions, the ENE has proved valuable in facilitating the settlement of the non-pecuniary claims of their clients, subject to, if I might call it this, sir, the GLO ex gratia clawback, subject to that concern, and it’s proved valuable in settling the non-pecuniary claims of the Hudgell claimants.
Now, I, sir, I’d submit, suggest that that issue of the proper stigma damages for bankruptcy is one of three issues really that have become apparent between the parties during the course of today’s hearing.
The second one is one I’ve just referred to, the ex gratia clawback, and the third one is whether – and Mr Henry has just mentioned it – whether the tort of abuse of process could make any difference to the awards for exemplary damages.
It may be that an Early Neutral Evaluation could deal with all three of those points, it seems to me that they’re all susceptible to Early Neutral Evaluation, and it could be just one applicant on the part of all of the Core Participants – we would be happy to step back to leave that to others – and there is no reason why it couldn’t take place very soon.
The issues are relatively confined and it could be decided very soon, before the summer break. The decision of Lord Dyson, or whoever else it may be, could then be made available to the Core Participants and the parties could get on with things as they choose, but with that background.
As I say, sir, it’s only a suggestion, but experience tells us that it’s been very useful.
Sir Wyn Williams: In the early days, by which I mean probably at the time of the first hearings about compensation, there was some – and this is my words, so nobody should read anything into it in particular, it’s just a description, but some disquiet that some of the people affected by the Early Neutral Evaluation scheme were not party to all its terms. If you recall, I think originally it was a scheme borne between Hudgells and the Post Office, and there were obviously other people who were not represented by Hudgells.
Your suggestion, I take it, now carries with it the suggestion that all the representatives of convicted postmasters whose convictions have been overturned would be party to this evaluation.
Mr Moloney: Not only all who have had convictions overturned but all who are part of the HSS, part of the GLS, Group Litigation Shortfall, all could be involved because they are points that apply to each of the schemes, as it were, and they are self-contained points of law with applications in a case-specific way to each of the cases which will be considered.
Sir Wyn Williams: This is a purely practical point, we’re not running into the difficulty that, in respect of all the people in all the schemes, there are simply too many lawyers involved to make this practical.
Mr Moloney: We would be prepared to step back, sir, there are points which can be made, they have been rehearsed in submissions already. We’d step back, I don’t know what Mr Stein’s position would be.
Sir Wyn Williams: I’m not asking for instant answers, I’m exploring your suggestion, Mr Moloney, that’s all.
Mr Moloney: In our respectful submission, sir, it only needs one to take the argument, if it’s agreed – so far as the Core Participants are concerned, if agreement be reached on the appropriate person to take the arguments, and we would step back.
Sir Wyn Williams: Okay.
Mr Moloney: So, sir, that’s the general point in relation to Ms Addy’s opinion.
If I could now turn to the specifics of bankruptcy in relation to the schemes, and use that shorthand, although – and, firstly, the Overturned Convictions. Today, matters are resolved, so far as the issue of bankruptcy, as it appears in Overturned Convictions for Hudgell claimants. We’ve heard from – you know, sir, that this has been the case for some time, that the Official Receiver has relinquished all interest in overturned conviction cases for those represented by Hudgells, and we heard from Mr Chapman this morning about the situation with Moores. We’d already resolved the position with Moores by essentially the three cases – the Hudgell cases that involve bankruptcy with Moores, payments were made to settle things with the trustee, and those payments were required because the persons affected had assigned a proportion of the benefit of their claims against Post Office to the trustee as part of the GLO settlement. We’re grateful for the indication that those payments will be reimbursed in full and that puts an end to it so far as Hudgells’ clients and Moores are concerned.
So far as the Historical Shortfall Scheme is concerned, this is more complex but, again, some encouraging progress is being made. I hesitate to use that term representing Core Participants, but we are actually making progress. The insolvency expert instructed by Hudgells is working closely with the Official Receiver to devise a formula for dealing with cases involving bankruptcy where Post Office or POCL was responsible for the bankruptcy and the proposal which is, in effect, the same as I gave when you asked me at the December hearing, sir, is that it first establish what’s needed to pay off the bankruptcies and, from there, gross up the proposed settlement to ensure that the claimants are restored to the position they would have been in but for what was occasioned to them from Horizon unreliability. There seems, sir, to be broad agreement as to that approach and things are moving forward in that way.
Additionally, sir, interim payments are now being made for losses, which it’s agreed could not form part of the bankrupt estate and that’s for the general damages, and they’re being made whilst the complex picture around each bankruptcy is analysed and resolved. And it is a complex process, sir, as you can imagine, because the Official Receiver needs to look at the records from some time back, in order to establish who they need to approach and so on.
At paragraphs 17 to 19 of our written submissions we identified concerns around the payment of damages for bankruptcy stigma in these cases, and what could be done to improve the position of Mr Duff and others. There have been discussions since then around the provision of further information, which have clarified matters and we expect to make progress in improving their position very soon, but it does have to be very soon, sir, and we’re conscious, as their representatives, of the duty on us and on others to make sure that this is done.
As we have said in each of these compensation hearings, these are some of the most vulnerable claimants for obvious reasons. Not just Mr Duff, one of the claimants who has recently instructed Hudgell Solicitors, a Mr Ranganathan Kumar – and of course whenever I use the name, sir, there is a consent to my using that name within these proceedings – Mr Kumar received a six figure offer but because of the nature of the bankruptcy only received an interim payment of £4,000. He is now facing repossession proceedings in respect of his family home at the end of May, despite the fact that he’s owed six figures in terms of damages, at least, on the offer that’s been made. So we’re having to work very hard to try and resolve that situation, sir, and we hope, following the discussions that we’ve had today and prior to today that we will be able to do that.
That’s it on bankruptcy, sir, save to say that many of the advances – and there have been many so far as Hudgells’ claimants are concerned – many of the advances around claims involving bankruptcy have followed the airing of these issues in the hearings that the Inquiry has devoted to compensation, sir, and for that we are grateful.
Now, sir, taxation. Sir, for many months, as is reflected in our written submissions, Hudgell Solicitors have been requesting that Government provide a tax exemption to bring the HSS into line with other schemes. We have now heard from Mr Chapman today that something’s going to be done. We don’t see how that tax exemption in just a simple tax exemption would advantage HSS claimants over the other schemes, but we are at least encouraged that something is to be done, but we echo very respectfully what you said, sir, that it needs to be done sooner rather than later, so far as those claimants are concerned.
You also asked, sir, for a factual update on the Historical Shortfall Scheme and Overturned Convictions. Taking each in turn: Historical Shortfall Scheme, Hudgell represents 125 claimants, those include 26 bankrupt claimants and 12 out of time or late applications, which I know are matters of concern.
There are some encouraging matters to report. In previous submissions on compensation we explained how the lack of interim payments in HSS cases impacted claimants, obviously. We’re pleased to say that interim payments are now made on a regular basis and at a level of up to 80 per cent of the overall offer. Also there had been a delay in agreeing a cost matrix, including provision for expert fees, however that delay now appears to have been resolved and a matrix similar to that provided for under the Group Litigation Scheme but based on reasonable costs and not fixed fees is close to being formally adopted.
Hudgell Solicitors, as you know, sir, had previously expressed concern in July and December last year that expert evidence, such as a medical report, was not available to HSS claimants due to lack of funding. The current position now, sir, is that all cases are now able to benefit from appropriate analysis by relevant experts.
It’s not all rosy. Despite weekly meetings between Post Office and Hudgells, not one of the 120 plus cases, is currently capable of final settlement. They are cases of complexity which require significant investigation and negotiation and, inevitably, sir, I hope you will forgive me for repeating our previous concern, which in fact Mr Henry has just echoed, whether or not the earlier cases, where claimants were unrepresented were prematurely settled at a level which did not reflect their true value.
We take into account what’s been said about whether or not they might be the more simple cases, the more easily resolved and we, of course, realise that the Inquiry will be turning to this topic in stage 5 and so we say no more about it at this stage. But it’s hoped that the 125 cases will be resolved this year, but we can’t really guarantee that, but that is our hope.
In submissions on compensation in December, sir, we remarked on the delay of the HSS in deciding whether late applications would be accepted. There are 12 for Hudgells, four have been accepted, but there are eight that are still outstanding, sir, we have listened to what’s said this morning but there are eight of the 12 that are still outstanding.
Finally, sir, on this section, many of the concerns that were expressed in our July and December submissions, omitting heads of damage and loss, issues around burden of proof in the absence of documentation, limiting loss of earnings to 26 months, and the settling of cases without advice, those problems remain of concern to us, sir, and, in fact, are highlighted by others today, but we’re conscious that they’ll be returned to in stage 5 and so we say no more.
So far as the Overturned Convictions are concerned, since the December compensation hearing, there has been significant progress made in respect of non-pecuniary loss claims. The current position is as follows: 53 have been settled and paid, the total was 15 at the December hearings; two are subject to negotiation following the making of offers; and 12 are yet to be presented.
Now, those largely concern recently quashed convictions. But they’re also clients who would prefer to wait until the end of the Inquiry before settling their claims, which demonstrates that, contrary to what’s said by some, nobody is bound by the Early Neutral Evaluation. Clients are free to accept or reject the Early Neutral Evaluation and, indeed, free to proceed to litigation if they wish to. So, sir, that residual potential to proceed to litigation is very important to all of our clients, sir. So some have decided to, as it were, delay the decision on settlement until the Inquiry reports, as is their power.
The submissions on behalf of Howe+Co reiterate, as we’ve said before, how useful the ENE has been to their position, and it has been so far as the Hudgell claimants are concerned.
So far as the pecuniary loss claims are concerned, two cases have been settled, four are in negotiation following offers, three have been submitted in full with offers awaited, and the remaining cases are yet to be presented. Now, that delay is nothing to do with Hudgell Solicitors, nor indeed the claimants, we say, sir. You’ll remember sir, that in appendix E to our December submissions we provided details of the delay in the progress of the four cases, which were being used as a pilot for future cases. It was expected as well that those cases would provide a basis for principles proposed by Post Office for dealing with future cases. We’ve included in our written submissions the further delays that happened after December. I won’t go through all of those, sir, you have the details in the written submissions but, in case 1, the schedule of loss was submitted on 20 June 2022, that’s fully particularised, and there was a period of five and a half months between the last evidence being submitted and an offer being advanced.
In case 2, again schedule of loss submitted on 20 June 2022, and there was a period of five months from the last evidence being submitted to an offer being advanced on 2 March 2023.
Case 3, schedule of loss submitted on 5 August 2022, period of five months from the last evidence being submitted to an offer being advanced.
Then case 4, schedule of loss submitted on 20 June 2022, a period of three months from the last evidence being submitted to an offer being advanced.
For months and months, Hudgells pushed for draft principles for the resolution of claims. They were finally received from POL on the evening of Friday 31 March 2023, so just a week before the written submissions were due in relation to this compensation hearing, and we hear that there are more coming. We are considering the proposed principles, and will revert expeditiously, but we note that the principles do not preclude any head of loss from consideration, nor have any been precluded during the course of our work so far.
Moreover, they contemplate the recovery of joint losses with partners and others, which is important. We will be looking, as part of the discussions, to explore how far that approach will be extended, for example will it cover non-pecuniary losses of immediate family? But, obviously, that’s something to discuss as we move forward in relation to those principles.
But the delay from Post Office in making offers in the pilot cases and providing proposed principles for dealing with the remaining cases has meant that more pecuniary claims have been unable to be submitted.
There are also delays in case specific disclosure, which you have heard about, sir, from others, it’s still incomplete in many cases. We have raised this in previous submissions and it’s reflected in the experience of Freeths, in the GLS scheme, as set out in section 2 of their letter, and, indeed, those delays have been acknowledged this morning.
But, nevertheless, considerable progress is being made and we can repeat what we said at paragraph 40 of our December submissions, there is no reason why these claims realistically will not be resolved during the course of this calendar year.
So, sir, that’s the update in respect of the Overturned Convictions.
Finally, the factual progress updates on the implementation and administration of the Group Litigation Scheme. Hudgells only represent four claimants in this, each of whom is a relative of a client who pursues a claim pursuant to an overturned conviction. So I won’t take too long.
There is a general concern, repeating what we said in our December submissions, that, in the absence of a significant escalation of resources for the panels, then the complexity of the cases to which this scheme is devoted precludes any prospect that the full and proper compensation will be paid by August 2024 and, as has been said, the guidelines and tariffs for this scheme have recently been issued. Widespread concern about those guidelines or tariffs have been expressed. The provision that has attracted most public attention, namely the tariff for stigma damages was not the subject of any discussion with claimants’ lawyers. We are grateful to Mr Chapman for the acknowledgements of that during the course of the morning, but we would ask that if there is any further decision of that nature that there is consultation going forward, so that some input can be given.
So to conclude, sir, in preparation, we have spoken to approximately 200 clients for this, and these submissions reflect the responses we’ve received. Our clients really are rightly concerned about delay. That delay has not been on the part of them or their legal representatives and each time that the Inquiry calls for submissions, we have been able to identify delays in this process that have not been the fault of the clients nor their legal representatives.
We have included, sir, within our written submissions – and I hope you will indulge me just for another couple of minutes, sir, comments from some of our clients, that Barbara Atkins says that she feels like she has spent the last 20 years of her life trying to prove herself:
“… from in the early days explaining on CVs when employers ask for explanations of why I lost the Post Office, trying to explain over and over that I’d done nothing wrong but no matter what I say there is always an element of doubt on their faces.
“Why is it delay after delay even after the result of the Public Inquiry, it only adds up to victims more misery, anxiety, confusion and uncertainties and more nervous breakdowns.”
That’s the reality, sir. That is the reality for these claimants.
Margaret Smith, whose brother died, she says:
“The unacceptable amount of time that it took to process his and others’ claims. I wrote to the Historical Shortfall Compensation Scheme when John became ill as he wasn’t looking at his post, etc, so I lodged a power of attorney so they could correspond with me too, at John’s request. That was around April 2021. I told them John was ill but it still took over a year to process his claim. They could have offered him an interim compensation then as he was very short of money and it would have made his life less stressful and more comfortable. It would most certainly have given him comfort not just to get compensation but to get a formal recognition for himself and his family and friends that the Post Office and not him were at fault. It’s an injustice upon injustice that they have dragged this out so and not thrown more resources at sorting it out for the claimants.”
The other issue, sir, which exercises our claimants is that the Post Office dictated the narrative of this compensation process in the way that they have with previous schemes, and that’s why the last resort of going to the courts is so important to them. But they remain as well concerned that Post Office has not accepted liability for what’s occurred.
Examples of that include Mr Trousdale, Chris Trousdale, who is here today, who says that the Post Office’s ongoing failure to admit liability is actively and purposefully perpetuating the harm and suffering of myself and other victims on a continued daily basis. It is prolonging the healing process and delaying the start of what will ultimately be a long recovery. I need to see restorative action from the Post Office. How can I consider an apology and start to move on when Post Office are still refusing to admit liability? I cannot put into words how excruciating and exhausting it is to have to keep playing mental anguish as a currency of dealing with the Post Office. They seem to think we have an unlimited capacity for mental distress. We don’t.”
Then Jane Kemp:
“My view is that the Post Office need to accept that the issues caused by the faulty system had a direct impact on the lives of many subpostmasters and their families and the ongoing process to agree a fair settlement is just further stress and misery when we’ve not done anything wrong.”
Jaswinder Dosanjh says that:
“The offer has been covered by the caveat ‘without prejudice’, which I understand is probably standard practice in these matters but it also demonstrates that they are not serious about righting past wrongs.”
There is concern, sir, about something that has been raised today, that the absence of the admission of liability is preventing some from coming forward to address what has happened to them during the course of their convictions because they fear for what might happen to them during the course of any claim that they take.
So, sir, those are our submissions and thank you for the opportunity to present them.
Sir Wyn Williams: Thank you.
The only other person who is potentially likely to speak is Mr Beer, but I’ll just look at the transcriber for a moment.
Mr Beer, first of all, are you going to say something?
Mr Beer: Yes, in ten minutes.
Sir Wyn Williams: That’s fine. Over to you, Mr Beer.
Submissions by Mr Beer
Mr Beer: Thank you, sir.
You and the Core Participants know that, in the last three hearings about the issues concerning compensation that you have held, we as your counsel have not submitted to you that you should draw any particular conclusions from the material before you. This is partly because we do not understand our role generally to be to urge conclusions upon you after any evidence has been heard and, moreover, in relation to compensation issues, no evidence has yet been heard. That must await Phase 5.
On this occasion, however, in the light of the way that matters have developed, we felt able to isolate a range of issues which we suggest may benefit from consideration by you for inclusion in a further interim progress update or statement or, indeed, in an interim report issued under section 24.3 of the Inquiries Act 2005.
As you know, sir, we will be hearing evidence on compensation in Phase 5 of the Inquiry which is likely to be in the late autumn. For reasons already canvassed before you, there can be no further delay here in relation to some of the issues that have been canvassed.
Compensation relates to wrongs done many years ago, a decade or even decades ago. We’re two years on, almost to the day, from the decision of the Court of Appeal Criminal Division. Every day, week, month and year that passes further reduces the possibility of the achievement of the stated aim of the compensation process, namely of putting the wronged back in the position that they would have been in had the wrongs not been done to them.
The issues that we have identified are all ones where it’s not necessary, in our view, to hear oral evidence before making an interim report. You have a sufficient body of written material before you. You’ve identified to those properly interested in the subject matter the possibility of your making an interim report and you have received extensive oral and written submissions on the issues.
I should say briefly that the benefits of making a formal interim report under the Inquiries Act 2005, as opposed to producing a progress report or a progress statement include the following:
Firstly, such a report would stand in distinction to the progress reports and updates that you have made to date. It ought properly to be interpreted by those receiving it and by those to whom any recommendations in it are addressed as representing an escalation in the seriousness with which you view compensation issues.
Secondly, by section 26 of the 2005 Act, read with section 25.1 and 25.8, any interim report that you issue must be laid before Parliament. Although there is no requirement under the Act for the Government or for those to whom recommendations within a report are addressed formally to respond to such recommendations, the long-standing convention is that they do so, and that they do so formally, not simply by taking action or not taking action: by stating whether they accept your recommendation and, if not, why not.
Thirdly, the use of the facility of making an interim report and the convention that I’ve just mentioned may be particularly useful in the case of any recommendations that you make that touch on the GLO scheme, where something of a guillotine is in operation, the operative date being 7 August 2024. This is because the Inquiry itself will have a limited life and so you may consider that it’s time to use the formal powers and mechanisms that are open to you whilst you can.
So the four areas which I suggest respectfully could properly be amongst those which you consider are as follows, and I should stress this is simply a list of four. You’ve heard, by my reckoning, some 36 or 37 suggestions today.
Firstly, you should –
Sir Wyn Williams: I’ve lost count, Mr Beer.
Mr Beer: Yes.
First, you should consider whether to recommend to the Department that it should apply to the court for a direction pursuant to section 303 of the Insolvency Act 1986 before final compensation payments are made in the GLO scheme, that GLO scheme payments do not vest in the trustee in bankruptcy, and that, secondly, the Department should undertake to pay the reasonable legal costs of any subpostmaster involved in such proceedings.
You’ve heard and you’ve seen that it’s Catherine Addy’s opinion that such payments do not vest in the trustee in bankruptcy, paragraph 62 and 63 of her opinion. Another insolvency practitioner took the opposite view, affecting 16 cases and Ms Addy has suggested that the Department could apply to the court under section 303.
The Department said in response, in its written submissions at paragraph 16, that it was “considering the position”. You may consider that to be rather weak and non-committal. Today, the Department has said that it allowed time for Moores to respond to Ms Addy’s opinion. That opinion was published over a month ago. You may consider that this issue has gone on long enough.
Secondly, sir, I was going to submit that you should consider whether to recommend to the Government that it should exempt payments under the Shortfall Scheme from income tax, capital gains tax and National Insurance Contributions, just like those payments under the OHC and the GLO schemes are, highlighting that the consequences of the current arrangements and the difficulties that they present to the average subpostmaster. But in the light of the announcements made on behalf of the Department today, for the first time there’s no need for me to make a suggestion of such a recommendation, because it appears the Department and the Government more widely have taken a decision to address the issue differently, by making payments to subpostmasters in respect of tax. But this is a matter which you may wish to review within a set period, a number of months now, ie the operation of the Department’s new tax scheme to address problems created by the HSS.
Third, you should consider whether to recommend that the Government should exempt payments under the HSS and the GLO scheme from inheritance tax. This isn’t something that’s been developed in any of the oral submissions that you’ve heard today, the inheritance tax issue. You know, sir, that regulation 5 of the 2023 regulations provides that OHC compensation payments but not GLO scheme or HSS payments are exempt from inheritance tax.
There is an attempt at an explanation of this difference in tax treatment in paragraphs 22 and 23 of the Department’s submissions. I summarise: the explanation is OHC claims are principally about non-pecuniary loss, whereas GLO scheme and HSS claims are generally focused on pecuniary loss; and, secondly, that had subpostmasters in the GLO and HSS continued in the financial situation that they were, then their estate would have been subject to inheritance tax in due course.
You will wish to consider whether either of those explanations pass muster for the distinction in treatment. I would add that, given the large number of subpostmasters who were entitled to compensation have sadly passed away, including recently, this is not just a dry tax issue, it’s an issue of real substance that will have a real effect on real people.
Fourthly, you should consider whether to recommend that, first, the Department must promptly promulgate a timetable that will deliver fair and reasonable compensation for all applicants under the GLO scheme before 7 August 2024; that, secondly, that timetable should be published; thirdly, that the Department must put in place sufficient resources, including by making appropriate funds available to both the Post Office and to applicants, to enable the published timetable to be delivered by 7 August 2024.
So it’s essentially the promulgation of a timetable that meets the guillotine point that the Government itself, through its own legislation, has imposed on this scheme.
In this connection, sir, I should note that the Secretary of State for Business and Trade, Grant Shapps MP, stated in Parliament, back on 7 December 2022, that’s just under five months ago, on the announcement of the GLO scheme that:
“Experts [and by that he meant lawyers and ADR specialists] should be on board by the early spring, at which point full claims can start to be submitted and assessed. I hope that compensation will start to flow before the summer and that most cases can be resolved before the end of 2023.”
So three things were suggested by the Secretary of State in terms of timing: claims being submitted and assessed in early spring; compensation flowing before the summer; and most cases resolved before the end of the year. That’s a timetable to which the Department and the Post Office ought reasonably to have been held but it’s seemingly slipped already. Claims cannot now be submitted and assessed in early spring, as that date has already passed. Payments will unlikely be made before the summer. So you may consider that something new is required.
We would suggest that you ought to be circumspect when considering the submission made by Mr Jacobs to take on responsibility for setting the timetable yourself, given the role you perform, the statutory constraints upon it and your terms of reference. But what you can do is ensure that those whose job this is do it properly and you can set a timetable for a timetable, you can monitor compliance with it and you can, if necessary, hold those responsible for delivering the timetable to account if they fail to comply with it.
Sir, that’s all I say.
Sir Wyn Williams: Thank you very much.
Right, I think that brings to an end this compensation hearing. I will reflect upon the submissions that I have had in writing and orally, and deliver – I won’t say a report or an update, I’ll keep you all in suspense on that until you get it, but you will get something in writing as soon as I can muster it.
Obviously, to an extent, my ability to produce something very quickly is hampered by the fact that we are starting to hear evidence again next week from, as many would think, very important witnesses. So you will have to bear with me to an extent. But you will have something sooner rather than later.
Thank you all very much and I’ll see some of you on Tuesday morning.
(3.38 pm)
(The hearing adjourned)