Official hearing page

24 February 2023 – David Smith

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(10.05 am)

Ms Kennedy: Good morning, chair. Our witness today is Mr David Smith.

Sir Wyn Williams: Before we hear from Mr Smith, I’d like to make an announcement about what I anticipate is going to happen today. As you will know the Prime Minister has made a request that as many of us as possible observe a minute’s silence at 11.00 am this morning. I propose to observe that minute’s silence by remaining silent on the screen.

I understand that some people may wish not to observe that silence or may wish to observe it in private and, accordingly, shortly before 11.00 we will stop the proceedings. Those who wish to leave the Inquiry room are of course free to do so and those who wish to join from other parties of the Inquiry Team who are not in the room can come into the room if they wish to do so.

Then at 11.00 those of us who are in the Inquiry room, either in person or remotely, will observe the minute’s silence. Following that we’ll have our morning break until 11.15 and then, because this is all happening a little earlier than usual, we’ll probably take an early lunch and aim to complete our business by about 3.00 by these rather different means, Ms Kennedy. I hope everyone understands that. If you think I’m getting too close to 11.00 before adjourning just stop me all right, Ms Kennedy?

Ms Kennedy: Will do so. Thank you. Mr David Smith.

David Smith

DAVID SMITH (affirmed).

Questioned by Ms Kennedy

Ms Kennedy: Mr Smith, you’ve given two witness statements to the Inquiry, one in respect of Phase 2 and one in respect of Phase 3. Do you have the first witness statement in front of you?

David Smith: I do indeed.

Ms Kennedy: It should run to 24 pages. If you turn to the 24th page, is that your signature there?

David Smith: Yes, it is.

Ms Kennedy: It’s dated 30 August 2022?

David Smith: It is indeed.

Ms Kennedy: Have you read through it recently?

David Smith: Yes, I have.

Ms Kennedy: Is it true to the best of your knowledge and belief?

David Smith: It is.

Ms Kennedy: Turning to your second statement. Do you also have that there?

David Smith: I do.

Ms Kennedy: That should run to 16 pages and, if you turn to the 16th page, is that your signature there?

David Smith: It’s actually on the 17th page but it is indeed.

Ms Kennedy: It finishes on the 17th.

David Smith: Yes.

Ms Kennedy: It’s dated 7 February 2023.

David Smith: It is.

Ms Kennedy: Have you read through this statement recently?

David Smith: I have, yes.

Ms Kennedy: Is the also true to the best of your knowledge and belief?

David Smith: It is, yes.

Ms Kennedy: Those witness statements are now in evidence and everything I ask you is supplementary and can I start by saying thank you very much for coming to give evidence to the Inquiry today.

Starting with some questions about your background. Can you explain what you did before you joined the Post Office.

David Smith: I worked at British Airways – I started actually at British European Airways and worked in finance, first of all as an auditor, and then various roles in route accounting. I worked on the privatisation of BA at one stage and I was also the financial controller of British Airways Helicopters. I was actually sent in there to assist the managing director in selling the company, and we worked through that and sold the company, and one of the terms of the contract was that British Airways severance terms were available to me which I took and, after that, I joined the Post Office.

Ms Kennedy: That was in 1987?

David Smith: That’s correct, yes.

Ms Kennedy: What was your first job in the Post Office?

David Smith: I was chief financial accountant. It was a fairly broad role, actually, because it involved not just what you’d expect a financial accountant to do but it also involved running the factory in Chesterfield, some around 800-odd people involved in the back office work associated with office accounting and client settlement, subpostmasters’ remuneration, various business processes.

Ms Kennedy: Then in July 1996 you were appointed as director of central services group?

David Smith: Yes, this was – I retained my role as head of the finance executive whilst doing that. The – it was an odd role because my – I was charged with breaking up that directorate and, basically, attaching the various sections within it to other parts of the organisation. So it was a short-term role that lasted either six to nine months and then I was – the plan was that I was going to revert full time to head of finance executive.

Ms Kennedy: But what happened then?

David Smith: Well, I was approached by not one but I think three directors in total. I wasn’t told I was going to be heading up automation transformation but I was asked whether I would consider it. I mean, I’d spent over 25 years building a career in finance so I guess I went through some kind of grieving cycle. But I mean, I came to terms with it, and, you know, there started my long association automation projects.

Ms Kennedy: Why were you initially reluctant to take up that role?

David Smith: Part of the reluctance was it just wasn’t – I mean, it was not a job I sought and my initial reluctance was this was a lot to take on board. As I got to accepting that this was going to happen, I did, with Stuart Sweetman, challenge him about where the authority came to carry out this role because none of the projects, none of the business activities to deliver automation would report directly to me. In fact, many of them reported directly to directors. So how did I, where would I draw the authority from to get these people to do what I needed them to do, which is to work very closely together.

Stuart did take that away. He wasn’t the first to announce the outcome of that. I bumped into our marketing director actually walking along the street and he sort of bowed down to me and said “Well, I understand now, Dave, that I’m going to have to do as you tell me”.

And fair enough to Stuart, I think I did have the authority to – in particular when a big issue arose, to pull the parties together very rapidly to seek a resolution. Things didn’t normally happen that quickly in the Post Office, it might take you two or three weeks if you’re lucky, two or three months if you weren’t lucky, to get the right people together.

Ms Kennedy: Did you have any qualifications or experience in information technology at that point?

David Smith: Yeah, well starting from my university days I had done some ASA/Fortran, BASIC, the – as an auditor – I hesitate to call myself a computer auditor but I did start to audit through the system or through systems rather than just around them, and I would review system-based controls and then test them with test packs and what have you. At Helicopters as financial controller, systems was part of my responsibility.

When I joined the Post Office all the major systems were actually supporting the areas that I controlled. So I was the business’s major customer of systems, which meant that I engaged with the systems people on a regular places.

When I moved to the finance executive I led an SAP project called MICA SAP(?) **, unusually we delivered ahead of time within budget and the benefits were somewhat greater than we’d forecast in the business case.

So I think I’d had a fair amount of exposure to systems and involvement in systems project work.

Ms Kennedy: You said you were associated with the Horizon System from then until you left in March 2010; is that right?

David Smith: That’s right, yes.

Ms Kennedy: Just for clarity, shortly after you left, another David Smith took over as managing director; is that right?

David Smith: Yes, there were rather a few of us and matters were complicated by the fact that neither of us were given a second Christian name. So I became known as “David X” and he became known as “David Y”. But there was confusion over time. We’d get each other’s mail, and what have you, and some of the documents I’ve received were in fact meant for him.

Ms Kennedy: Between 1997 and 2010 you held a number of other roles. In 2004 you became acting IT director when Alan Barrie went to the Royal Mail?

David Smith: That’s correct, yes.

Ms Kennedy: Then in February 2005 you became general manager of IT, which then changed to Head of Change and IS; is that right?

David Smith: Yes, I mean, Post Office used to go through regular reorganisations and, you know, roles would be changed, not always significantly, but yeah, job titles. Essentially, I think, the difference between being general manager IT and Head of Change and IS was that I gained a much broader range of change in the business. I think it was over 1,000 changes a year we used to deliver, many of them seemingly minor changes but if you got them wrong could create massive disruption.

So the change in postage stamps for example was quite a significant operation and had to be project managed.

Ms Kennedy: Then in 2009 you were operations director until you left?

David Smith: Yes, that was just three months. Not until I left, no. That was a holding situation, Ric Francis left Post Office Limited and Mike Young joined and in the three months in between I just held the ring.

Ms Kennedy: Turning then to some questions about prior to the introduction of Horizon, if we could turn up your first witness statement, WITN05290100, and if we could turn to page 7 in that. Looking at paragraph 18, you set out there the basis of the cash account and described the process that a 200-strong group of individuals in Chesterfield would go through and you describe:

“A separate unit just to deal with pensions and allowances was even larger in size and a third group processing Postal Orders about 80 strong. There was also a unit in Edinburgh mirroring the Chesterfield operation dealing with Scottish branches.”

If we scroll down to paragraph 20 you set out that:

“Over five thousand errors per week were detected. Many of these would result in the issue of an error notice.”

Did you feel that was a lot of errors at that time under the paper-based approach?

David Smith: It sure as hell felt like it. I guess there’s no – I’d never in my working career come across something that was so paper based. I think it would be fair to say that the airline that I joined, the use of accounting systems was about 15, 20 years ahead of where the Post Office was. So I’d never come across a paper factory like this. I mean, I think I said it in the – further on in the statement, that there was a dedicated freight train just to bring the pensions and allowances paper into Chesterfield.

If you understand the cash account process, if you go through what’s involved in putting the cash account together, you know, it’s a very, very complicated process and it’s not surprising, therefore, that you’ve got the level of errors that we had. We tried all the while to drive them down but also the counter was a place of constant change. So as soon as you’d dampened down errors in one area, there would be a change to other products and a new source of error would arise in another.

Ms Kennedy: If we could turn over the page on that statement to paragraph 24, scrolling down. You say there:

“The five thousand plus errors mentioned … were merely the tip of the iceberg …”

David Smith: Yeah.

Ms Kennedy: Did you find that a very difficult environment in which to work?

David Smith: I mean, the – what I was getting at in – I mean, when I joined, one of my objectives was to take 200 posts out of Chesterfield and, you know, in most processes in most businesses the way to do that is either to radically reform the process or to take out waste.

And, you know, a lot of these – a lot of these errors were related to conformance. So for example, this freight train that came in each week, the pouches were meant to be made up to a particular standard. They very often weren’t, and we ran a trial with the Derby district and the Plain English Society, developed a refreshed set of instructions, just to get the, you know, conformance with the presentation standards that we required.

On the basis of the pilot in Derby, we rolled it out nationally, targeting 17 posts coming out just from, you know, people not putting paperclips, staples, segmenting the different classifications of benefits properly, and so a lot of this was about that sort of stuff. So my interest was to, you know, drive out these areas of error and drive the resources down.

Ms Kennedy: You mentioned the pensions and allowances in the freight train. If we turn back over the page to paragraph 21, and down – sorry, on to the next page again. You say there that that area was particularly prone to fraud.

David Smith: Yes.

Ms Kennedy: Can you explain what you mean, by that?

David Smith: Well, it was – the checks here, such was the volume of paper that it was not possible to run a 100 per cent check every week on – so, basically, these checks involved summation of the individual vouchers to a summary docket on to the cash account and, basically, we’re saying that, you know, the check was only done, I think, every couple of years or something like that. At the time I joined, there was one fraud that was being settled of £400,000, and what some postmasters would do was just enter an erroneous number onto the cash account, one that was deliberately erroneous, and effectively the cash would then – so they would be funded by the false amount that they put on the cash account and they would pocket the money.

And, again, I remember a few – a very short period of time into my service with the Post Office, there was a case of a subpostmaster who had fraudulently entered entries onto the cash account to the tune of £85,000, and the reason why it sticks is that when security went in and apprehended him, he wrote a cheque out there and then on the spot and it didn’t bounce.

So this was the result of, you know, a poorly designed process, really. I mean, in a – Horizon itself was, you know, kicked off by the Benefits Agency wanting to attack fraud at all sorts of different levels, mainly on their side, entitlement fraud; this was sort of encashment fraud involving subpostmasters.

Ms Kennedy: How prevalent was there is type of fraud, would you say, or what was your impression?

David Smith: I’m sorry, I would have known at the time but I can’t remember now. I remember those two big instances because they were, you know, even in those days, large sums of money but no, I can’t recall, I’m afraid.

Ms Kennedy: But you felt it was a real problem at the time?

David Smith: Oh, it was a real problem, yeah.

Ms Kennedy: Did you expect Horizon, when it came in, to catch these people out or to leave no room for them to hide?

David Smith: Well, had Horizon come in as it originally was intended, then this would have closed that down, because it would have been card driven and, you know, there was no – there would have been no question of the subpostmaster creating a false entry on the cash account.

As it was actually introduced when the system went live, there was simply a check that this was a valid book of vouchers that the subpostmaster was using. It was obviously subsequently replaced by a dedicated Post Office card account, which closed this area down.

Ms Kennedy: You mention in your statement that you stepped in on EPOSS during the process of the development of the program, the Electronic Point of Sale System. If we could turn up your first statement that’s WITN05290100, again. Then page 13. Scrolling down, please, to paragraph 41, you say:

“I was asked to describe the nature of the work I carried out in relation to EPOSS design. I must reiterate that I did not manage Horizon and it was normally for Horizon management team to manage the project issues and risks. I did, however, step in on this issue.”

Why did you step in on that issue?

David Smith: Well, there was a lot of concern about what was being developed. I mean, this was – this, in part, I think, came about was because of the PFI deal. So there was limited to zero exposure to what was actually being developed and we were – I mean, Darren being able to get in there and access what he did access was something of a surprise. I think it was considered, you know, very much against expectation at the time.

Unfortunately, Darren’s presentation doesn’t exist so I’m going a lot on memory here about what he brought to the table. I can’t say that his presentation in any way calmed the concerns around the – what was being developed at all, but without – I don’t think we’d even got the – I’d even seen the ATSG minutes for the meeting at which he presented that feedback.

Ms Kennedy: If we could turn up POL00028324, please. This is the Automation Transformation Programme and we can see there that you’re on the list for this Automation Transformation Steering Group and this is the notes of the meeting of 23 June 1998. If we scroll on to the second page, please, we see the “Red Light issues” there and you were giving a verbal update on new issues.

If we scroll down we can see EPOSS is something that’s on that list and scrolling down again, there’s also item 4 recorded as you there giving an update on the work on the EPOSS design.

The Inquiry has heard a lot of evidence about the EPOSS system but this was specifically something that was acutely on your mind; is that right?

David Smith: Yes, it would have been, to have been raised in this fashion, yes.

Ms Kennedy: If we could turn to POL00028484, please. This is a risk register, I think, from 1997/1998, but if we look at the fourth section down, “Operational: non conformance to business procedures in automated environment”, and we can see “Potential Impact for Automation” – yes, thank you very much. It says:

“Lost transactions

“Inability to operate effectively

“Loss of control

“Financial loss

“Increased errors.”

It is being discussed with the strategic director and you’re the owner of that. What does that mean that you’re the owner of that, you’re keeping it under review?

David Smith: Yes, it would. In terms of a risk register, absolutely.

Ms Kennedy: Lost transactions is a very serious issue, isn’t it?

David Smith: Yes, it would be, yes.

Ms Kennedy: Do you remember being particularly concerned about that at this time?

David Smith: I don’t know, I’m sorry. I mean, the fact that I had recorded there obviously says it was a concern. But, I mean, I don’t remember much about the specifics behind that.

Ms Kennedy: Turning forward in time slightly to 18 November 1999, if we could turn to POL00028550, please. Thank you. We can see there that this is a negotiation brief written by Keith Baines for David Miller, and it’s sent to both David Miller and to you. If we scroll over the page we can see the start of that brief. The point I wanted to take you to in particular is page 3 and, if we scroll down to paragraph 11, it records:

“The third area was the reduction in errors in accounting data passed from your systems into TIP, and the development of appropriate integrity controls for that interface. Progress in this area has not been encouraging. The overall area of levels has greatly exceeded the 0.6% target level – by an order of magnitude or not. Other criteria have also not been met. Analysis of the causes of new incidents has not met the 10 day turnaround target.”

Going down to 12:

“We also have some concerns about progress with the new integrity control. While Pathway have been reporting satisfactory progress against plans, our people on the ground perceive that there has been a reversion to old ways of working with the shutters being brought down. We have seen no progress on development of the joint processes that will be needed to manage the errors trapped by the control, and on this, and on the specification of interface processes, we have found Pathway unwilling to engage in meaningful discussions.”

So at this point in time, data integrity is a real concern and there is a worry, isn’t there, that Pathway aren’t giving you the access that you wanted?

David Smith: Absolutely, yes.

Ms Kennedy: I’m not going to turn up the Second Supplementary Agreement but it’s fair to say the target level in terms of errors was 0.6 target level that’s recorded there.

David Smith: Yes.

Ms Kennedy: But, at this stage, errors were exceeding that?

David Smith: Yes, one of the, I think, Rule 10 documents I was given does actually contain the actual percentage levels week by week and, I mean, many orders of magnitude greater than 0.6.

Ms Kennedy: If we could turn up POL00028545, please. This is a speaking brief for you on 24 November 1999, and it sets out:

“[The] Purpose was agreed between Dave Miller and Richard Christou as: To agree a programme of work to be completed by 3 December 1999 which will provide POCL with further information to enable us to decide whether or not to exercise the right to suspend rollout.”

Do you remember this meeting or this – the reason for this speaking brief, other than what’s set out there?

David Smith: I mean, I don’t remember it but the brief is in front of me and that’s what I will have spoken to.

Ms Kennedy: If we turn down to paragraph 2 or number 2, it says:

“All criteria in the 2nd supplementary agreement to be met by 14 January … The only change to be the exclusion of the period to date from the 0.6% criterion for the accounting integrity incidents.”

So again, you’re flagging that that is of real concern to the Post Office at that time –

David Smith: Yes.

Ms Kennedy: – is that right?

David Smith: Absolutely. It was – it had still got some way to go in terms of proving that Fujitsu were getting on top of it.

Ms Kennedy: If we turn to POL00028440, this is the internal audit. If we turn to page 2, this is November to December 1999. Scrolling down we can see your name there. If we turn over the page to page 5, please, and scrolling down, we can see there the conclusions of that audit, which in short was that their opinion was that:

“… the procedures for identifying problems and reporting performance was good. We have recorded in the detailed audit findings the issues identified during our visits and can confirm that all issues reported by Post Offices and Transaction Processing … had been formally recorded as problems.”

I believe this – when it talks about “our conclusions”, this is Chris Paynter and Ian Johnson; is that right?

David Smith: It was certainly Chris Paynter, because I think his name is on the report.

Ms Kennedy: If we could turn over the page again to page 7, and scrolling down we see here again that:

“The volume of errors generated by Horizon offices was a cause for concern. Initially horizon offices generated twice as many errors as manual offices.”

That must have been very difficult for you given how you felt there were already so many issues on the paper-based system and this seems to be making it worse. Do you remember finding this frustrating at the time?

David Smith: Not particularly, no. I think there was a poor understanding of the soft change elements of introducing a completely different system. There’s a document, a research services document that introduces something called a coping curve, which demonstrates that, over time, performance in branches returned to pre-Horizon introduction levels. I think that should have been better understood, that we would go through that learning curve when the system was introduced. But, I mean, at the time we weren’t aware of that.

I mean, at this stage, handling the errors, you know, was not my personal responsibility. Therefore, I wouldn’t have had the same level of concern if I was still running the factory. If I had been running the factory, I would have been very, very concerned about that ahead of a national rollout because that would have swamped the unit. But, as I say, I think there could have been a better understanding of, you know, how this process of introduction of people becoming as familiar with a new system as they were with the old system, how that transition worked and the journey that people went through.

Ms Kennedy: Did you know about an EPOSS Task Force Report written within Pathway around summer of 2000?

David Smith: No, I don’t recall it, no.

Ms Kennedy: Do you recall being told that there had been a decision that the EPOS System wouldn’t be rewritten but it would be fixed. Do you recall being told anything about that?

David Smith: No, I don’t recall that. I mean, I do recall – I can refer you back to the – what I recall of the Darren Bosco report. I mean, one of the things he specifically addressed is that, you know, the inherent weaknesses in what had been designed, you know, couldn’t be – you could put plaster over them but, if you really wanted to put something different in place, then you had to start again.

Ms Kennedy: When it came to rollout of the system, your view was that Horizon was fit for purpose and that was partly because of the rigorous testing process that took place?

David Smith: It was, yes.

Ms Kennedy: Did you have any concerns, at the rollout stage, lurking in your mind that you felt there were things that you should look out for?

David Smith: Um, we went through a very, very extensive process of trying to pick out from the live trial the things that needed to be fixed and it’s fair to say there were things that were required to be fixed that went beyond the issues that have been surfaced in this Inquiry.

We put in place quite a comprehensive set of measures. In the business at the time, there was a complete disbelief that rollout could actually happen.

It went relatively smoothly. Not to say, I mean, you know, when you look at the number of offices, the number of people concerned, even if you are hitting, you know, 90 per cent satisfaction, that’s still a lot of people who, you know, have got issues with the way you’re doing things and, to the extent that we could, we tried to address those issues but, I mean, we did – the process did make, in terms of the reaction of the network to it, significant strides from what was, you know, a pretty poor performance, I think, in the live trial. I mean, 50 per cent of people satisfied with the way you’ve done it is a bad result in anybody’s book.

Ms Kennedy: Do you remember – fast forwarding in time, do you remember the IMPACT Programme that had its inception, I think, in 2003 and was completed in 2005?

David Smith: Yes, I do.

Ms Kennedy: Were you involved in that programme?

David Smith: Yes, involved at various stages because I think it had – its birth was really work that we did as part of the Transformation Management Team. The original case for original Horizon, it was the least worst option business case. I mean, it was not a business case you take to a bank expecting to get funding. So one of the things that I was asked to do was to look at the proposition of automation and understand how we could get value out of automating post offices.

And there was a programme called Era that emerged out of that, a lot of work was put into that, and the IMPACT Programme was an element of that. It was driven – it was enabled, if you like, by automating the products by, you know, bringing into the modern world things like the issue of driving licences, and stuff like that, so that you were capturing transactions often driven by tokens and stuff like that. And this enabled this radical change in the IMPACT Programme to happen.

So from that very early stage it was developed and we developed a roadmap of how the – how automation was going to happen, through these releases, S50 to S90, and some of that was driven by – the order of some of those things was driven by contractual matters.

So as part of the Benefits Agency withdrawing from Legacy Horizon, it was set down that there would be a Post Office card account. It was also part of that that we were – we had to meet the target for the introduction of PIN pads and stuff like that so there were some fixed points around which the rest of it had to work, so IMPACT was positioned at S80.

Ms Kennedy: Was part of the objective of the IMPACT Programme cost saving, making things simpler and –

David Smith: I think with all – I think it was a better system, because what the old system was doing was settling with clients, based on summarised numbers on cash accounts. What lay behind IMPACT, if you like, was it was based upon where you passed a stream of transactions to clients, and settled on the value of those transactions.

Yes, it did, I think, you know, drive some numbers down but the real value in all the automation that happened was very often derived by the people who owned the products.

Remember most of what was transacted across the post office counter were products that didn’t belong to the Post Office. You know, the exception to that was postal orders. So a lot of benefits were derived by Government agencies, for example, being able to streamline their own back office process, as a result of now getting – instead of getting, you know, a lorryload of paper, getting an electronic stream of data.

Ms Kennedy: Did you hear the evidence of Susan Harding who gave evidence –

David Smith: No, I didn’t, no.

Ms Kennedy: Was she someone who ultimately reported to you, do you remember her?

David Smith: Yes, Sue was the programme management for IMPACT, yes.

Ms Kennedy: She told the Inquiry that the decision to remove the suspense account function came from above her. Was that your decision or was that the IMPACT Programme Delivery Board? Who would that have been?

David Smith: I don’t recall making that decision. That’s not to say I wasn’t involved in it but I don’t particularly recall it.

Ms Kennedy: Do you recall who would have made that decision or who would have been at that level?

David Smith: I think the process ownership would have been whoever was running transaction processing at the time. They would be the process owner here.

As – in charge of project management, we didn’t make up the requirements. The requirements came from the sponsor. So in this case, with IMPACT, the sponsoring unit would have been Transaction Processing. Just as with, if we changed the method of handling TV Licences or something like that, then – I have to be careful, we may have lost TV Licences by then, but say road tax, it would be driven by the account team, who were acting on behalf of the DVLA. They would drive the requirements. They would decide what was delivered. Our job was to deliver it.

Ms Kennedy: So the policy decisions made in the IMPACT Programme weren’t your responsibility or didn’t come from –

David Smith: No, they weren’t, no. They would lie with the business unit. Now, that’s not to say we wouldn’t be involved in the decision making by that Policy Unit.

Ms Kennedy: If we could bring up POL00029293, please. This is a major incident report dated 24 August 2004 and we can see it’s a document generated by Fujitsu, and it relates to the S60 release. If we scroll down, please, your name is not on the list of – for distribution. But we can see there the external distribution is “Post Office Limited Library plus reviewers”. If we turn over the page and scroll down, we can see this was sent to someone called Dave Hulbert?

David Smith: Yes.

Ms Kennedy: Who is Dave Hulbert?

David Smith: Dave Hulbert worked in the service management team and he, I believe, was responsible for managing the service from Fujitsu. Back in the early days there was a piece of work done by PA Consulting which created the framework for the set-up of service management in Post Office and that unit was embedded in the Operations Directorate. So we, in my area, would deliver the project but once it was delivered, once it was rolled out, control of what happened passed to service management and they would deal with day-to-day incidents.

If there was an incident that affected the – a large number of post offices, then we would normally be called in to provide support and very often would take over managing that incident. But in –

Ms Kennedy: At that high a level, though?

David Smith: At that high a level, this incident would have been managed by Dave and that team.

Ms Kennedy: Well, if we turn to page 5 and scroll down, please. The scope of this document is:

“The scope of this report covers the failures of Fujitsu services to Deliver AP client data to a number of AP clients, those of which do not receive files on all 7 days of the week between the period 10th July-15th July 04 …

“It also covers the failure to produce automated APS reconciliation reporting accurately in the form of daily CTS file produced, between 10th July 04-29th July 04. It should be noted that whilst the automated process was non-operational manual reporting was being covered daily.”

If we look down at the “Management Summary”, midway through the first paragraph, it states:

“It was suggested that this file was considerably less … than would have been normally expected. The approximate value of transactions being reduced by up to [300 million].”

If we turn over to page 6 and we scroll down, we can see a “Detailed explanation of the incident”. If we look at the headline figures at the bottom, we can see that:

“There were 581,481 transactions in the pass through files that were not processed. These include Reverse/Reversal pairs that should not be sent to clients.

“There are 578,091 transactions not placed into client transmission files.”

Over the page:

“These transactions had a value of [22 million].”

Is this the type of thing that would have been escalated to your team?

David Smith: I don’t recall it having been so. I do recall the incident, but I don’t recall my team being asked provide assistance in sorting this matter.

Ms Kennedy: When you say you recall the incident, how did you come to hear about it?

David Smith: Well, because it was – I mean, clearly – I mean, we weren’t passing customer data. Bear in mind what’s behind this is someone paying their gas bill or their electricity bill. If the data doesn’t get through to the utility company, that person’s bill is not settled and they get a red letter. So this was something of a – it was an embarrassing incident.

Ms Kennedy: Did it give you cause for concern in the system itself?

David Smith: Well, of course it did because, you know, it had such a significant impact. But, you know, we didn’t step in on every single incident; only where the small team of architects that was nested within my department were required to give specialist advice, and I don’t recall them being asked on this particular occasion.

Ms Kennedy: Would this type of issue ever be raised or escalated to board level?

David Smith: Oh, undoubtedly this would have been reported through to board level. I mean, there was a process of Directorate reporting in to the board and I can’t imagine that the Ops Directorate wouldn’t have included this in that report. But I would have expected it, in any case, to have been raised by the Ops Director with the Managing Director anyway, in the normal course of things.

Ms Kennedy: If we could turn up POL00021485, these are the minutes of a board minute held on 13 October 2004. I can’t see this incident having been reported in this meeting but you’re quite sure it would have been at some point?

David Smith: Well, this is – when I – sorry, when I said previously the board, this would be the executive management team of Post Office Limited, okay? I don’t recall – I mean, I attended for this one item at this board meeting as acting IT director. I didn’t have a seat on this board so I can’t really address the process at that board. I mean, I think the board – I think the board only met three or four times a year anyway and I don’t think it dealt with operational issues. It dealt with more – things at a more strategic level.

Ms Kennedy: So those kind of incidents wouldn’t have made their way – the operational, if you –

David Smith: As I say, I didn’t attend that meeting on a regular basis so I am not really familiar with the process at that board meeting. There will be others who would be.

Ms Kennedy: This particular board meeting, as you’ve said, you did attend, and that was – if we turn to page 10, and scrolling down, this was to present the Horizon Next Generation business case?

David Smith: Yes.

Ms Kennedy: Do you want to explain what that was?

David Smith: I think this was – can you remind me of the date of that meeting again, sorry.

Ms Kennedy: Yes, this is 13 October 2004.

David Smith: Yeah, this would have been funding, I think, to carry out the initial stages of the work. I think anything over £1 million had to go to the group to get approval and, as such, it would pass through the Post Office Board. I don’t think this would have been the final business case asking for approval for the project proper, which I forget the exact number but it was around 125 million. It certainly wasn’t that case, but it was – the money, if you like, to do the initial stages of the project.

Ms Kennedy: That was because the current Fujitsu contract was going to expire in 2010 and it was going to be the work your proposal for the work –

David Smith: Yeah, well, what triggered the whole thing was I think the account manager in Fujitsu at the time was a guy called Ian Lamb and he had a regular – I mean, the account manager would have a regular meeting with the IT director and he walked into Alan’s office one day and he drew on a flip chart the cost curve of the Legacy Horizon and then a cost cover for this idea they had to replace the existing infrastructure, and it showed a very, very big cost gain. And that triggered off the work that became, eventually, Horizon Online. That was the origins of this.

And yes, it, you know, given the lead time on a system of this stage, then it did – it only made sense if you were talking about a contract extension, because it would have taken us pretty close to the expiry date of the existing contract, 2010, before the system was implemented.

Ms Kennedy: If we could turn up RMG00000044, this would have been the business case that you wrote on 1 September, so around this time, so 1 September 2004.

David Smith: Yes, and this again is acting – asking for the money to – for the initial stages of the project. Not for – at this stage, we’re not getting approval for the 125 million, which, I mean, I think, if I remember it correctly, not even the group board could actually approve it. It had to go to Government to get authority.

Ms Kennedy: If we turn to page 2 and scroll down, this sets out a summary, your summary of why do it and it says:

“Horizon NG significantly reduces the cost of IT. Compared to a ‘do nothing’ baseline (no branch hardware refresh and consequent increasing maintenance costs), Horizon Next Generation is estimated to deliver ongoing cash savings of £25m+ over the life of the proposed extended contract to 2015.”

So part of the business case was the saving of costs; is that right?

David Smith: Absolutely, and one of the things that we achieved in the revised contract was the Legacy contract had cost escalators which increased significantly the cost of the system each year. So by – I don’t think we – there were no cost increases allowed but we really drove down how much Fujitsu could increase the cost of the contract year by year, and I think there was another – eventually in the business case there was another 25 million per annum claimed for avoiding those cost increases through the new contract. So it was a very, very substantial cost case.

Ms Kennedy: Chair, I’m mindful of the time. I think it’s 10.59. I think you’re on mute, sorry, Chair.

Sir Wyn Williams: Right. Just so that we’re coordinated, I’m two minutes behind you but that doesn’t matter. We’ll go by the clock in the room. So we’ll now stop hearing evidence and anybody who wishes to leave, please do so and anybody who wishes to join us, please do so.

Then in a few seconds – I don’t think we need to be completely synced with 11.00 throughout the country, I’ll announce that we’ll observe a minute’s silence, all right?

Is there any more movement taking place or is everybody settled down?

Ms Kennedy: I think everybody is settled.

Sir Wyn Williams: Right. Well, then we will commence our minute’s silence now.

Thank you, everyone. We’ll now adjourn until 11.15.

Ms Kennedy: Thank you, Chair.

(11.00 am)

(A short break)

(11.15 am)

Ms Kennedy: Hello, Chair.

Sir Wyn Williams: Hello there.

Ms Kennedy: Mr Smith, before the break we were discussing Next Generation Horizon, which became Horizon Online. If we could pull up FUJ00098040. This is a slide show done by you in September 2010. Can you just tell us a bit about how you came to prepare this?

David Smith: Yes, when I finished with the Post Office, senior people in Fujitsu felt it was – would be advantageous if they engaged me to do some consultancy work. I am not sure that was entirely welcomed by the account team who were – Gavin and his boss were fairly new brooms in Fujitsu, but the account team kind of welcomed my involvement because there’d been such a change in personnel that they’d lost all the history of what had gone on and so what they asked me to do was to write the story of Horizon, you know, as best as I can remember it. And this is what I produced.

Ms Kennedy: If we turn to page 71 of this document, throughout this slide show, as you say, you set out the various releases. This is the section where you deal with what became Horizon Online; is that right?

David Smith: That’s right, yes. Yes, and this is Ian Lamb approaching Alan Barrie, as I think I referred to before the break. Yeah.

Ms Kennedy: If we turn over on to page 73, it sets out on the slide there some of the issues we were also discussing before the break of getting the Post Office on board with this and the fact that it was a very large project that would take up a lot of time and money.

If we could then turn to page 77, you describe there how:

“Getting to an acceptable proposal from Fujitsu was a long and arduous process.”

Can you describe what you meant by that?

David Smith: Well, as this slide describes, we use the Gartner organisation to work through what the service or what was being proposed should cost, both in terms of development cost but also in terms of annual running costs. And Fujitsu came up with a proposition – and, you know, to add balance, I think it wasn’t just Fujitsu’s fault, I think our own architects, I think they designed the system that it would have been ideal for us to have had instead of Legacy Horizon.

And it didn’t meet the Gartner levels in terms of development costs and it had this upward curve with ongoing operating costs, with the year-on-year escalations. So there was a gap between Fujitsu’s initial proposal and the guideline, if you like, that we’d used within the group to say “We won’t do this competitively, we’ll go down a non-competitive route”.

It eventually came to the point that my colleague Ian O’Driscoll and I sat with Clive Morgan and Liam Foley from Fujitsu and told them “We are walking away from Fujitsu. We will go and do this in a different way”. That resulted in a changed approach from Fujitsu and, particularly taking on board the fact that all the major developments – I mean, there were no more clients left to re-engineer the products so a system that was designed to support that intensive period of change that we’d gone through was no longer required.

And we also put on the table some requirements in terms of how things might evolve in the future and this involved breaking the contract down into a number of different areas which could be competed separately. So we were trying to move Fujitsu into a space where they would be the systems integrator but not necessarily the provider of all the services.

And, I mean, this was taken on board by Fujitsu and they came up with a proposal that met the goals, underpinned by the Gartner work, which had been embedded not only in Post Office’s business plan but also aided and abetted by McKinseys in the group plans. And it was on that basis that we contracted.

Ms Kennedy: You mentioned that the initial proposal from Fujitsu was what, on the basis of what you would have ideally had rather than Legacy Horizon. Were you not surprised by that, given it was Fujitsu who were handling Legacy Horizon?

David Smith: Um, well, this was not so much about the functionality of the system. This was about – so for example, one of the things in the proposal was to use one of the data centres as the test environment and that was, you know, pretty radical but also expensive sort of stuff.

Now, it would have been – I mean, there was an issue that emerged in 2004 where, because the volume testing had to be a result of testing and modelling, a design implementation fault was not picked up. Now, if you were using one of the data centres as your test environment, that would have been identified. So there was a lot of learning, if you like, from things that had gone less well during Legacy Horizon that were built into this proposal.

A better way of working up requirements and turning those into design, that sort of stuff, which would all have been appropriate to what happened during the lifetime of Legacy Horizon with the – you know, this constant period of change but was less appropriate to a period where we expected change to be a much more – on a much more modest level.

Ms Kennedy: You mentioned you then took the proposal to the Post Office Board. If we turn to page 88, this slide records what your memory in 2010 was of that process and the questions that were in your mind at the time. Is there anything in addition to what’s on the slide that you want to tell the Inquiry?

David Smith: No, I think that summarises the position as I understood it.

Ms Kennedy: Was part of the problem the last bullet point on the slide, “What’s the alternative?”

David Smith: Well, the alternative would have been – you know, one of the things I think that was a concern at the time of going to competition, was the sheer amount of management effort that were required in the business to go through to get there, plus then working with a new supplier.

Now, there were – I think there were some arrangements in the contract that if we changed the supplier, that resources could – and knowledge could be moved across from Fujitsu. But I mean, that was seen as – taking the whole thing and shifting it elsewhere was seen as a step too far.

Ms Kennedy: Easier to stay with what you know?

David Smith: Easier to stay with what we know but, as I say, the – what we came to in the end was something which did allow breaking out, so for instance data centres, and competing those in the marketplace, and then requiring Fujitsu to manage the process of phasing out their data centres and integrating a new supplier into the overall service.

And that was seen, I think, at the time, as being a more manageable way forward than taking the whole thing and replacing it in one go.

Ms Kennedy: If we could turn to page 94 of the slide show. This records the stage at the holding board approval and the first bullet point records that the Post Office was technically bankrupt at that stage. How did that fact impact on you doing your job?

David Smith: Well, it was a bit of a road block at the time because I think, as it says here, the directors of the business would have been criminally liable if they had approved a major project like this with a business that was technically bankrupt.

I mean, it was a – you know, it was something that was overcome eventually but I think it built in a delay of a number of months before we could actually move forward. So there was an element of frustration having got to a proposition that we, you know, we could support, not being able to move forward as quickly as we might have been able to.

Ms Kennedy: That document can come down, please. If we could turn to POL00070492, please. This is an email chain from 22 November 2005. Your name is mentioned here. We’re going to go through it in a moment in detail in relation to attending a meeting concerning Lee Castleton.

If we could turn up your second witness statement, please, which is WITN05290200, and page 11, please. Looking at paragraph 28, it says:

“It was towards the end of 2004 … when completely out of the blue I received a telephone call from Mandy Talbot [who was in that email chain we looked at a moment ago]. She explained that she worked for the Group Solicitors team and had recently been assigned to POL cases. She was dealing with a civil case referred to as Cleveleys which the Post Office was on its way to losing. She was most concerned that this would create a precedent which could be used in future cases. She wanted to know if I could suggest a way to retrieve the situation.”

So is this your introduction to Mandy Talbot, the Cleveleys case?

David Smith: It was indeed, yes.

Ms Kennedy: What was the Cleveleys case? The Inquiry has heard about it before but what do you remember of it?

David Smith: Well, I guess the – I’m aware Mandy was an – was that an expert had been appointed jointly, I believe, by the Post Office and the defendant.

It had basically said that Horizon could have caused this problem and what I remember was that Mandy was really, really concerned that this would create a precedent and could I suggest a way we could get out of this hole? I mean, the only thing I could suggest to her was to access the audit file for the branch and to test the proposition that Horizon was to blame.

Ms Kennedy: Scrolling down in your witness statement, I think you say that. You say:

“The only way to counter this, in my view, was to demonstrate that Horizon had not created the discrepancy and the only way to do that was the audit file.”

David Smith: Yeah, I mean, the only way that basically I believe would produce incontrovertible proof that it wasn’t Horizon or, I might add, had Horizon caused the problem it would also surface that Horizon had caused it.

Ms Kennedy: But a moment ago you said the audit file was the only thing you could think of?

David Smith: Without going into the details of the case, yes.

Ms Kennedy: But wouldn’t this have been a good time to go into the details of the case and to do a proper review on the integrity of Horizon?

David Smith: It wasn’t – I mean, it wasn’t part of my brief to do so.

Ms Kennedy: What do you mean by your “brief”?

David Smith: Well, I was there as a project manager to deliver projects, not to get involved in the whole process of, you know, dealing with subpostmasters.

Ms Kennedy: But you just told the Inquiry a moment ago that you got a call from Mandy Talbot asking if you could get her or the team out of a hole; is that not becoming involved?

David Smith: Yes, but, I mean, it was – you know, the audit file was – and the processes around it – was something that was specified in the original Horizon, I believe, by the security team. So it was there. I was simply pointing her in the direction of what already existed.

Ms Kennedy: At that time, did you think the audit file was the start and end of the matter, in terms of the integrity of the system?

David Smith: Well, yes, I believe it would actually – you know, if there was a suggestion that the system had introduced an error, accessing the audit file – the audit file was a record of what the subpostmaster had asked or the subpostmaster or the office staff had asked the system to do. It wasn’t an audit of what Horizon had done, and so it was possible, against that audit file, to test what Horizon had done to see if it was actually in accordance with the subpostmasters instructions.

Ms Kennedy: Did you think, “I remember there was a problem with the EPOSS system during the design of Legacy Horizon, might there be an error introduced in something like that?”

David Smith: No, I didn’t, no.

Ms Kennedy: If we could return to the email thread at POL00070492, please.

Could you have an overview of who each of these individuals, Mandy Talbot, Tom Beezer and Stephen Dilley, are, please?

David Smith: Can you repeat the names again, one by one?

Ms Kennedy: They should be in front of you: Mandy Talbot?

David Smith: Mandy was from the Group Solicitors department.

Ms Kennedy: Tom Beezer?

David Smith: I can’t recall, I’m afraid.

Ms Kennedy: Or Stephen Dilley?

David Smith: Can’t recall.

Ms Kennedy: If we scroll down to the bottom of that page, we can see the initial email is from Tom Beezer and it says:


“I have called and left a message. I will try again this afternoon.

“The points I wanted to discuss are (in short form):

“1) a full set of papers is being prepared for you.

“2) I suggest that you, Stephen Dilley and me have a con’ call at your convenience to discuss and plan the next steps in this matter.

“3) an updated spreadsheet is being prepared listing all Horizon related cases. From my end you are aware of Blakey and Patel. We can discuss the level of information you require on each or all of the Horizon related matters when we speak.

“4) I have put out to the team the message that there are to be no proceedings issued relating to a Horizon based claim without your knowledge and ‘ok’.”

There’s a spreadsheet mentioned there. At this stage the Post Office is already preparing a spreadsheet of Horizon-based cases; is that right?

David Smith: Yes, one of the – so resulting from Cleveleys, there were a series of meetings, I believe, with interested parties and one of the issues that surfaced was that there was not one place where all cases, both criminal and civil, were consolidated. Partially due to the fact that the civil cases, I think, were dealt with by the Retail Line, without the involvement of security, but also the fact that the organisation of the Post Office, through various iterations, was regionally based. So there wasn’t even a sort of consolidated view from the regional teams.

So I think this is – I wasn’t included in this particular conversation but I think the – this is an attempt to pull all of this activity together in one consolidated statement.

Ms Kennedy: Were you aware of that spreadsheet at the time?

David Smith: Um, I think there’s a reference in the earlier letter to it being tabled at the meeting so I would have been at that meeting.

Ms Kennedy: If we scroll up to that, the top email again, please, and it says the third paragraph:

“I’m attending a meeting with David Smith, Tony Utting and Clare on Friday to discuss this case but also to plan a way forward so this type of problem does not occur again.”

What do you think “this type of problem” means? What’s being referred to there.

David Smith: Well, it’s getting into a situation where we’re going to lose a case and I mean the recommendation at the time was to access – you know, where we got into proceedings and Horizon was claimed to be the fault of the problem, was access the audit file.

The immediate issue was that security had, I think it was the right to access the audit file 100 times in a financial year. They were currently using all of those opportunities. They were only resourced to deal with 100 accesses of the data. If you extended this to civil cases it needed more resource to process the data. I mean, this could be – for some unknown reason, £1 million for 100 accesses was numbers that are floating around in my head. I don’t know if that’s what’s right but, for some reason, that’s what’s there.

And I think as part of the Rule 10 documents that I received, there’s an email there from Tony Utting, who was from the security department, where he had put together a proposition in terms of increasing the resource within security to enable them to handle the additional accesses of the audit files, were the funding to come forward.

Ms Kennedy: But, again, coming back to the type of problem, you said the problem was losing the case, not getting to the –

David Smith: Well, the problem was how you established – how do you establish – so against – it was Horizon: how you established a watertight case that it wasn’t Horizon.

Ms Kennedy: How you establish a watertight case?

David Smith: Yes.

Ms Kennedy: That was your concern at the time?

David Smith: That was Mandy’s concern at the time and that was – as I say, it was not an answer that I had come up with because the security team, before Horizon was implemented, had specified this audit file facility so that they could, when they were prosecuting subpostmasters, they could demonstrate that Horizon wasn’t to blame for the discrepancy between the system and the physical cash balance.

Ms Kennedy: But the idea of checking the audit file came from you, didn’t it, when you spoke to Mandy Talbot?

David Smith: My – extending it from beyond the – sorry, the criminal cases to the civil cases.

Ms Kennedy: What do you remember about this meeting, if anything –

David Smith: Nothing.

Ms Kennedy: – about Lee Castleton?

David Smith: No, nothing.

Ms Kennedy: Do you remember the case at the time at all?

David Smith: I remember a couple of phone calls from Mandy. I remember her basically saying that they’d accessed data and that Castleton’s solicitors had disappeared left field but believed that they had seen the data and they recommend that he – that he settled. And then, when the case was actually found in our favour, Mandy was somewhat ecstatic, I think, was the right word because, particularly in the judge’s summing-up, I think he used some words that we, I guess, you know, we would have wished him to write about the integrity of Horizon.

I mean, I did receive in the Rule 10 document, a very extensive bundle of documents, and I went through all of them, and I absolutely, you know, underpinned my recollection that I wasn’t involved in any way in the detail of this because I’m not included in any of that correspondence, other than, I think, this letter.

Ms Kennedy: Were you pleased about the judgments in the Castleton case?

David Smith: Well, obviously, I was pleased that, you know, we had won the case. But, I mean – yes. But, I mean, I wasn’t “Yippee” pleased. I mean, you don’t want to deal with these cases at all.

Ms Kennedy: Did you feel the Castleton case shut down for a while any suggestion that there was an issue with the integrity of Horizon?

David Smith: Well, I think it shut Mandy down for a while, phoning me about the issue because I think she felt that she had a way forward in dealing with these cases. It was when, you know, the interest in the media, you know, started to surface that I got re-involved, although I don’t think it was Mandy that got me re-involved.

My recollection is that it was the PR team, which again was a group function, started to get concerned about the reputational damage that was being caused by the stuff that was appearing in the media.

Ms Kennedy: So it was the public relations team that then –

David Smith: That’s my recollection, yes.

Ms Kennedy: That document can come down, thank you.

If we could turn up FUJ00080526, please. This is a document prepared in October 2009 by a Mr Gareth Jenkins. If we turn to your second witness statement, WITN05290200, and we look they bottom of that page, you set out that you can’t be sure but you believe this document was produced as a follow-up to your telephone conversation that you had with Gareth Jenkins; is that right?

David Smith: Yeah, yeah.

Ms Kennedy: How did that conversation come about?

David Smith: I think the witness statement goes on to explain that.

Ms Kennedy: Yes, shall we turn over to the next page.

David Smith: Yes. Basically, I was – via Finance, I was asked to meet with partners of Ernst & Young, who were the group auditors and, basically, in preparation for that meeting, I wanted to make sure that, you know, my understanding of certain facts were – was correct. I didn’t want to tell Ernst & Young something that wasn’t right.

And so it covered two – now, what I recall at the time was that one of the things that was being said by a number of subpostmasters was that the circumstances in which Horizon was creating these false balances was thorough power interruptions, whether it be through storms or the grid failing or a power surge.

I think it’s fair to say that the original design of Horizon was – the choice of the Escher Riposte product was very much driven by its ability to recover from such circumstances.

The other was around the audit file and the security around the audit file. I mean, I won’t go into detail but there were a lot of security procedures around that audit file which meant that when someone accessed it, it was possible to see that you were the only person that accessed it. No one had been in before and had interfered with it.

So that was the reason why I spoke to Gareth, and –

Ms Kennedy: How did you come to be in touch with Mr Jenkins in particular?

David Smith: I think I did it through the account team. So it would have been through – I think Suzie Kirkham’s name is mentioned on the document, and I would have said to Suzie “Look, I’ve got this meeting coming up with Ernst & Young, can you put me in contact with someone who can address these issues for me?”

Ms Kennedy: She gave you the name Gareth –

David Smith: I think Gareth phoned me. I think Gareth phoned me. So she triggered Gareth contacting me to go through this.

Ms Kennedy: Did you understand him as being the expert at this time?

David Smith: I understood him as being an expert. I mean, his name used to crop up quite frequently when we were dealing with stuff. So he was well known yes, and, he was – he wasn’t the only expert but his name was pretty prominent.

Ms Kennedy: Just looking at your witness statement again, at that paragraph 2 and the bit that’s on the screen now, it says:

“The subpostmasters had no hard evidence that Horizon had produced false balances but there were suggestions that power interruptions might have been the cause.”

David Smith: Yeah.

Ms Kennedy: What hard evidence, in your mind, could the subpostmasters have produced to show that there was an issue with the Horizon at this stage?

David Smith: It’s a great question. It would have been, I think – it – I’ll try to answer this without getting into too much detail, but it’s possible on Horizon to – at the start of the day you get a till. You log on to the system, it’s you – it identifies all the transactions until you log off to you and to that till. At the end of the day’s session, you count up the cash. If somehow the cash is out of balance, that will be flagged up.

Now, not all branches did this. But from that, you could spot a difference, you know, in a lot of offices the – I mean, I worked on the counter on a number of occasions during industrial disputes and I remember doing that, going through that process and ending up with very significant differences. You know, I cried help and the branch manager or assistant branch manager would come along and they would go through a checklist of obvious things that I might not have done and in both those cases, actually they immediately resolved the problem.

But you might go through that checklist and then you might conclude “Well, I can’t spot an obvious error”, and, at that stage, you might pick up the phone to the helpdesk to trigger off – you know, to trigger off a help – you know, “This has happened, I don’t think it was me, I think it was the system”.

Ms Kennedy: What hard evidence would you have at that stage that it was the system?

David Smith: Well, you wouldn’t. All you’d have is an unexplained difference.

Ms Kennedy: So then you would be in the hands of the Post Office?

David Smith: You would then be in the hands of the call handlers and they would go through – I mean, there are various levels of – various levels involved in phoning up. So the first level would probably work through scripts. Eventually, you’d get to a more technical desk who would look into it and indeed in the Horizon Issues trial there’s a story of how some of those calls eventually got to the people who understood how the system worked and investigated the detail.

Ms Kennedy: But you accept, on the basis of the Horizon System in front of the subpostmaster, sometimes there would be no hard evidence available to them?

David Smith: There would be no hard evidence available to them, no.

Ms Kennedy: If we could turn back up FUJ00080526, please. So turning back to this report, you said that Mr Jenkins phoned you. How long did that conversation last?

David Smith: It wouldn’t have been a short one because, with respect to technical architects, they didn’t always speak in, you know, everyday language, so I would have had to do a fair bit of testing of understanding. So I can’t imagine we discovered – sorry, that we covered this area in a short conversation. It would have – I mean, I didn’t run a stopwatch on it, obviously, but it would have taken at least an hour, I would have thought, to go over this sort of material.

Ms Kennedy: Do you recall whether you found Mr Jenkins particularly difficult to understand or do you have any recollection?

David Smith: No, no more so than any other technical architect. I mean, one of the problems with this whole area is the use of abbreviations and, you know, which can be deeply layered. So he was no more difficult to understand than any other person.

Ms Kennedy: If we could turn to page 5 of this document, it sets out the “Purpose”. It says:

“This document is submitted to Post Office for information purposes only and without prejudice.”

What do you understand “without prejudice” to mean in this context.

David Smith: I think I would have read that heading at the top of the page. It was basically for my use and internal use only and we weren’t to – I mean, I think it quite explicitly says elsewhere that we shouldn’t – we shouldn’t use this document in any court cases.

Ms Kennedy: So it was just for your understanding?

David Smith: It was – that’s – yes, it was – that was why I made, you know, made the contact with Fujitsu: to have this call in the first place.

Ms Kennedy: If we turn over on to page 6, please. There’s a section entitled “Horizon Data Integrity”. It says, in the first paragraph:

“The Horizon system is designed to store all data locally on the counter’s hard disk. Once the data has been successfully stored there it is then replicated (copied) to the hard disks of any other counters in the branch (and in the case of a single-counter branch to the additional external storage on the single counter). Data is also passed on from the gateway counter to the Horizon data centre using similar mechanisms.”

Did you know this before you had this conversation with Mr Jenkins –

David Smith: Oh, yes, I knew this because this was – I think this goes back to one of the reasons why the Escher Riposte product was chosen by Fujitsu. In those days, dial-up telephone networks weren’t terribly reliable. So in designing the system, it was important that when there was an interruption in a transaction, that it was recoverable. I mean, this reflected the – this reflected, you know, some of the important elements of the Riposte design. I mean, I met with Escher on a number of occasions as part of a user group, and they were boy silly on the contents of that particular paragraph.

Ms Kennedy: The third paragraph then goes on to read:

“Every record that is written to the transaction log has a unique incrementing sequence number. This means it is possible to detect if any transitions records have been lost.”

Did you understand that before you received this report?

David Smith: Yes, I did.

Ms Kennedy: Scrolling down again, it says:

“While a customer session is in progress, details of the transactions for that customer session are normally held in that computer’s memory until the customer session (often known as the ‘stack’) is settled. At that point all details of the transactions (including any methods of payment used) are written to the local hard disk and replicated (as described above). It should be noted that double entry bookkeeping is used when recording all financial transactions, ie for every sale of goods or services, there is a corresponding entry to cover the method of payment that has been used. When a ‘stack’ is secured it is reason in such a way that either all the data is written into the local hard disk or none of it is written. The concept of ‘atomic writes’ is also taken into account when data is replicated to other systems (ie other counters, external storage or data centre).”

Scrolling down to the bottom, it states:

“Any failures to write to a hard disk (after appropriate retries) will result in the counter failing and needing to be restarted and so will be immediately visible to the user.

“Whenever data is retrieved for audit enquiries a number of checks are carried out:

“1. The audit files have not been tampered with (ie the Seals on the audit files are correct).

“2. The individual transactions have their CRCs checked to ensure they have not been corrupted.

“3. A check is made that no records are missing. Each record generated by a counter has an incremental sequence number and a check is made that there are no gaps in the sequencing.”

Reading this did you then proceed on the assumption that, “Well, if the audit file says something, then we can rely on the audit file and it’s correct?”

David Smith: That was my belief, yes.

Ms Kennedy: Did you understand that to be the key issue with data integrity in Horizon and the answer to the Post Office’s problems?

David Smith: I believed it was – I believed that this was a way of investigating a claim that Horizon that caused a misbalance – or a wrong balance in the cash balance for the branch.

Ms Kennedy: Did you say to Mr Jenkins on the phone call “What about before it gets to the audit stage? Is there a way of telling that there’s a bug or an error or something that otherwise has corrupted the data?”

David Smith: No, I didn’t. I was asking him to take me through the way in which the system recovered transactions when there’d been interruption to the service.

Ms Kennedy: But it is entitled “Horizon data integrity”?

David Smith: Well, that was his title. That wasn’t my title and I said in my written statement that I understood data integrity to be a wider issue than the topics covered in this document.

Ms Kennedy: But if it is a wider issue, then why not ask him to address it and explain what other issues –

David Smith: Because I had one specific area of information that I wanted to validate my understanding of it before I met with Ernst & Young. I wasn’t carrying out an investigation into data integrity.

Ms Kennedy: With the benefit of hindsight, do you think you should have?

David Smith: Do I think I should have? I think that – it’s very difficult to answer that question without taking all the stuff that I know, so for example, having read the Horizon Issues trial and clearly when you take the totality of what was discovered, there more ought to have been done than was done.

Ms Kennedy: Should more have been done by you at this time?

David Smith: Well – ha – I read about, I would say I read about the issues that had arisen in the Horizon Issues trial for the first time in that Horizon Issues – in Justice Fraser’s judgment.

Ms Kennedy: Who was it in the Post Office or Fujitsu who could have done more at this time?

David Smith: Well, I mean, the visibility of these – you know, the specific issues would have been within service management. The issues were all dealt with in different ways. I mean, there are a number of those issues where the resolution of the issue was quite quick. I mean, a lot of the differences that were created were clearly – were investigated and corrected. So if you’ve got a bunch of issues coming up that are identified and corrected, I mean, there would have been no question on those issues of a subpostmaster being taken to court over them.

And the evidence is there in abundance in Justice Fraser’s write-up of those issues. He – there’s – in the technical appendix, there’s constant reference to transaction corrections being raised. But, yes, taking – if I’d have had that stuff laid out in front of me, I’d have felt inclined to do something, to, you know, have a root and branch review of what’s going on here.

Ms Kennedy: Do you remember the names of any of those people in that team who would have had that oversight?

David Smith: Um – I remember one or two names of the people in the service management team. What I’d be less certain of is what their particular roles were and there was, in the service management team, I think, varying over time who was heading it, a difference in the level of, you know, some people believed that, you know, this was for the supplier to manage and it was for the supplier to get on with it, and you didn’t spend a lot of time, you know, second-guessing them.

Ms Kennedy: Or picking over the data?

David Smith: Yes, that’s right. This was for the supplier to do and not for – it’s the linkages here, I think. What’s missing in all of this is whether those people in service management, or indeed with Fujitsu, would have drawn a line from these incidents to postmasters appearing in a court.

Ms Kennedy: But you felt unable to draw that line, is what you are telling us, on the basis of what you knew?

David Smith: What I’m saying on the basis of what I knew, I mean, I didn’t know about a lot of this stuff that was going on. It wasn’t, you know, these – some of these involved multiple post offices, some involved only one or two post offices, and these weren’t the kind of issues that would come across my desk.

If it had come across my desk then I would have felt inclined to, you know, to ask some serious questions about what was going on, and – but whether I’d have made the immediate contact – sorry, the immediate connection with subpostmasters appearing in court is a different issue.

Ms Kennedy: You don’t view Lee Castleton’s case, for example, as coming across your desk?

David Smith: It did but bear in mind that the process, actually – I mean, to quote the judge himself, “The integrity of Horizon is beyond question”.

Ms Kennedy: If we could turn back for a moment to Horizon Online. We’re now in March 2010. If we could turn up FUJ00094472, please. These are the “Notes of Horizon Next Generation Joint Progress/Release Board meeting”, and we can see there the programme manager is Mark Burley, who we heard from a couple of days ago. He reported in to you; is that right?

David Smith: That’s correct, yes.

Ms Kennedy: Did you work well together?

David Smith: I think so. I don’t know what he said.

Ms Kennedy: Did you work closely with him on this?

David Smith: He was one of a number of reports – I mean, Mark – there’d probably be – during a week, Mark and I would have two or three conversations about the progress, quite apart from more formal situations when we would meet and discuss it. I tried not to sit on his shoulder and second-guess his moves. Also, I was, at this stage, probably about 10, 12 working days away from retiring.

Ms Kennedy: If we turn to page 3. If we scroll down first, actually, on that page, we can see you were on the distribution list.

David Smith: Mm-hm.

Ms Kennedy: If we turn to page 3 and scroll down, and down again, please. At the bottom of that page it records “Actions and Points” arising from the previous meeting. One of the issues there recorded is:

“Trial Report/Final Balance issue: PN to check if the proposed workaround is acceptable …”

Then it says:

“[Post Office] have requested this to be a Hot Fix as it is required before we migrate any further branches.”

Would you have been across this level of detail or is that something you would have left to Mr Burley?

David Smith: I think I did get involved in this. Again, the Rule 10 disclosure of documents, I think buried in there, was a document that referred to my involvement and I was concerned – I mean, I think this was reporting two conflicting numbers and I was concerned – and I think it was me that drove this activity. I was concerned about the potential implications of that in terms of data integrity and I think there are references in there to legal teams being involved.

Ms Kennedy: If we could take that document down, please, and pull up POL00002268, please. This is an email thread from February 2010 and it’s between, we can see there, Andrew Winn, Hayley Fowell, Dave Hulbert, who we have discussed before, you, Jacqueline Whitham and Ann, and it’s about the media coverage of Horizon. Is this the PR team or is this – I know Andy Winn is in branch improvement and liaison but are you being brought in again?

David Smith: The only name I recognise on that, apart from my own, is Dave Hulbert’s. So I can’t recall where these people worked but it could be that it was the PR team. I don’t know, is the answer.

Ms Kennedy: If we scroll over to page 2, please. This is an email from Hayley Fowell to you, Michele Graves and Dave Hulbert, saying:

“Media Inquiry – Horizon.

“We’ve had a media Inquiry from a Retail Newsagent magazine; they have been talking to a subpostmaster who said that his branch was closed in [September] 2008 because of financial irregularities which he claims are the fault of Horizon.

“I am providing our stock line which states the system is robust but in case we get more questions on this please can you advise if you have any record of an investigation for this individual and any relevant details …”

Why were you sent this email directly?

David Smith: I don’t know, because, you know, I wouldn’t have had the information that Hayley was looking for.

Ms Kennedy: You said a moment ago you don’t remember these people. You have no idea who Hayley Fowell was?

David Smith: No, I don’t recall. I don’t recall the name or Michele Graves.

Ms Kennedy: Was that because you were becoming a bit of a point person for these media enquiries and assisting with setting out that the system was robust?

David Smith: I think that there were people – if I go back to Mandy’s contact with me, and likewise with the PR team, I think these people who were dealing with these issues were having difficulty getting the attention of senior people and I suspect that the PR team had had some contact with Mandy and it’s for that reason that they actually came to me. But I wouldn’t have records of investigation for individuals. I mean, that was not part of my role.

Ms Kennedy: Why do you think they were having trouble getting hold of senior people? Did they tell you that or was that a guess?

David Smith: With the Mandy stuff, I’m going back I don’t know how many years and, in all honesty, I can’t be certain, but I – my memory is telling me that she used words to that effect.

Ms Kennedy: Why would it have been that senior management wouldn’t have wanted to know about this?

David Smith: Well, I can only guess. But, I mean, again, I don’t have, never had, visibility of all the action that Post Office took against all subpostmasters but I guess if all that action was successful, why would you change anything?

Ms Kennedy: In the email Ms Fowell says:

“I’m providing our stock line …”

Was there a stock line at this stage that the system was robust?

David Smith: If there was, I wasn’t aware of that line and I certainly wasn’t aware of putting that line together.

Ms Kennedy: So it didn’t come from you?

David Smith: It didn’t come from – neither was – I believed that Fujitsu were involved in supporting certainly the security team and probably in civil cases, the conduct of the case. I can’t recall ever being consulted about Fujitsu’s involvement in it. It probably would have fallen under the bailiwick of service management anyway but I was never consulted on, and never asked, actually, to participate in supporting the teams in those actions.

Ms Kennedy: But would you have agreed with that position at the time, that the system was robust and that’s the position the Post Office took?

David Smith: If I go back to my airline days, I was involved in a piece of work around automated ticketing, and there was a debate about whether it was necessary to still keep a paper copy of the ticket that’s printed or whether we could rely on the electronic facsimile of that ticket. And the project consulted widely. There were a number of QCs involved in that consultation, and include – and IT experts from outside the business.

And in that debate, someone asked the question: could anybody ever stand up in a court of law and say that automated record could not be corrupted? Could you ever say it could never happen? And could anyone ever really stand up and say it could never happen that Horizon could get it wrong or that the back office checking systems could ever beat it?

So I would have – I would qualify that by saying, you know, I had belief that the back office checks were robust and would pick up any errors and, as I say, that’s evidenced, I think, in the very detailed accounts that Justice Fraser gave of the investigation of the bugs, defects and issues that were found.

Ms Kennedy: So, in short, at this stage, you would have said yes, that is correct, this is –

David Smith: Yes, in very broad terms. I’ve said the whole thing end to end, gave you – that it would be – you know, the system was robust, it had inbuilt checks and balances that should prevent Horizon creating a false balance that resulted in a subpostmaster being prosecuted.

Ms Kennedy: If we could go back over on to the first page up the chain and scrolling down a bit, there’s a bit of discussion about this case. You don’t respond on this email to say “Well, hold on a minute, maybe we should look at X, Y or Z or give Fujitsu a call and see if there’s anything to this”?

David Smith: No, because I wouldn’t have been handling the – it would have been – for anyone to respond to that, in terms of the detail of photographs being done, it would have fallen within Dave Hulbert’s area of responsibility because, you know, issues with the day-to-day service were for service management to manage.

Ms Kennedy: If we scroll up again, just to the last email in the chain. It states there that:

“We are due to restart our former agent debt recovery process. I just wanted to check the recent communications to ensure there was nothing there to suggest we should not do this.”

Is that how you understood the Post Office’s approach to be: even when there was a dispute, you’d go ahead and you start the debt recovery process?

David Smith: I really don’t – I don’t understand this. So I don’t understand why the process needed restarting. I just don’t understand it. And as I say, I wouldn’t have been involved anyway. I think this would have – if anyone in that email would have been involved in that it would have been Dave Hulbert.

Ms Kennedy: If we could turn up FUJ00092754, please. Sorry to jump around about, this is back in the chronology, 27 January, this is another “Note of the Horizon Next Generation Joint Progress/Release Board Meeting”. So on the one hand you have the discussion of Horizon Online going on and, on the other, you’re also involved in discussions regarding the integrity of Legacy Horizon. These two threads of things are coming up around the same time, quite close to when you retire; isn’t that right?

David Smith: That’s correct, yes.

Ms Kennedy: If we go over the page to page 3 and scroll down, at 140.09 it states:

“The delay in the commencement of Volume testing means that we will not be able to perform a significant amount of testing before commencing the Medium Volume Pilot. Hence we need a significant amount of data to be collected from the Live Branches and Data Centre.”

Do you remember whether there was less testing at this stage than was initially anticipated or planned?

David Smith: That’s what the minute says.

Ms Kennedy: You go off the minute, you don’t remember anything to the contrary?

David Smith: Well, the important reference here is “LF”. LF, I believe, was Lee Farman, who is a technical director of a company called Acutest, and he was a testing specialist, and he basically is saying here, the statement that closes the issue, that he believed that the level of testing was adequate “for now”. Now, I guess one would have to ask Lee what he meant “for now”.

I suspect it was adequate for the purposes of a pilot, and I would read into that that you would expect some follow-up before there was a rollout to ensure – to test check again whether the level of testing was adequate to roll out.

Ms Kennedy: If we could then turn up FUJ00097159, please. This is from the same day. It’s a “Horizon Next Generation Release Authorisation AG3 – Joint Board”, and you were there as Head of Change and IS?

David Smith: Yes, I was, yes.

Ms Kennedy: Was the priority at this stage to secure or to accept the Horizon Online system?

David Smith: This was release authorisation not acceptance.

Ms Kennedy: I see.

David Smith: So this is about the process of – so the way these processes work, contractual acceptance is, you know, it’s set out contractually and you pass or fail the test and, at the end of it, you either accept or you don’t. You can accept a product but the release authorisation process can say “No, it’s not fit to go into the network in its current state”.

And there was an example of this for instance with CSR+ when, actually, in this instance, it was Fujitsu Services or ICL Pathway, as it then was, service management team who said “No, we are missing some key control reports and, therefore, the release cannot go in to live operation”. But actually contractual acceptance had already been achieved.

Ms Kennedy: If we could turn forward in time to FUJ00092875, please, and if we could turn to page 3 this is an email from Alan D’Alvarez, who the Inquiry heard from yesterday, on Wednesday, 3 February. You’re not copied into this email chain, I believe it’s an internal Fujitsu one. But if we scroll down we can see that there are two issues that require fixing, prior to being able to enter into a medium volume pilot.

It states that:

“The decision has been taken to deploy HNG-X to a further 10 branches with the migration button being pressed tomorrow for migration to complete [on] Friday …”

There are two issues outstanding at that stage, there’s the branch trading statement issue and the counter pauses in live. What’s recorded at paragraph 4 is:

“We had a meeting with Post Office this evening which Mark Burley led from the Post Office side. Post Office are desperate for a date to start planning/rescheduling medium volume pilot. They accepted our position that we were not able to give this today. I expect that Mark will be keeping Dave Smith briefed and my reading is that if we are not in a position to give a target date by [close of play] tomorrow it is likely to result in an escalation to Mike Young.”

At this stage, were you and your colleagues at the Post Office “desperate” for a start date or a date to start planning the medium volume pilot?

David Smith: That’s what the document says.

Ms Kennedy: But this wasn’t written by you.

David Smith: No, but this would be reflecting, I think, what was coming across from Mark and his team and I’ve no reason to disbelieve it.

Ms Kennedy: Do you remember at this time it being quite stressful, trying to get everything ready for HNG-X being fully rolled out?

David Smith: I think I had a degree of unease about the way things – the way things were progressing. There was pressure from – I think from within the business to get on with it because, clearly, whilst we were rolling this thing out, other big things couldn’t happen in the branch network. So, I mean, matters were already being considerably delayed and so I think there was a degree of pressure to crack on with it but, I mean, I don’t think that pressure would have extended to, you know, doing silly things, moving ahead when there were, you know, serious issues that, you know, would dictate that you shouldn’t – this is not a sensible thing to be doing.

So there would have been pressure to get on with it, crack on with it but there would have also been a degree of caution. I think it is – I mean, I think there are number of areas where it’s reflected in some of those JSB minutes that issues had to be cleared or at least the business had to agree that there was a suitable workaround to a particular issue before we moved forward.

Ms Kennedy: You described pressure internally. Were you being quite forthright, the Post Office, with Fujitsu about timescales and needing to push on but not do something silly?

David Smith: Well, that would have been Mark who would have done that. I would imagine, yes, he would have done, yeah.

Ms Kennedy: If we turn over to POL00032999, please. This is the acceptance report for HNG-X Acceptance Gateway 3 and if we scroll down, this is something that you were sent, we can see your name on the distribution list. Do you remember receiving this document?

David Smith: No, I don’t, but, I mean, I think the documents that have been disclosed to me as part of this process are probably less than 5 per cent of the total documents that I would have received so recalling individual documents is beyond this aged memory.

Ms Kennedy: If we turn to page 9, please. The introduction sets out that:

“This document comprise the HNG-X Acceptance Report to the HNG-X Acceptance Board for the assessment of the progression through Acceptance Gateway 3 … Readiness for Pilot.”

If we scroll down, we can see that it sets out clearly what the purpose of the Acceptance Board is, which is:

“‘To agree the Acceptance status of the relevant Release … and provide the recommendation to the “Joint Release Authorisation Board”.’ The proposed options that this board can select from are described in appendix D.”

I think you say in your statement that you thought that anything that would have affected acceptance would be closed in this report.

David Smith: Yes.

Ms Kennedy: Is that right?

David Smith: Yes.

Ms Kennedy: There’s one thing that you highlight at the bottom of page 9, if we scroll down again. It states:

“It should be noted that there are also defects that are not linked to POL Requirements and which are not the subject of Acceptance Incidents. A separate assessment of the status and significance of these has been undertaken and will be available for consideration at the Release Authorisation Board.”

Do you remember what kind of defects those may have been?

David Smith: No, I don’t, but I seem to think, in going through the documents that I received, there were some – buried in another document, there were some references to what – you know, what issues had actually come up under this heading. So there was – I think, the reason why I alluded to it in my witness statement, I was asked a question generally about was there other stuff that should be taken into account and I pointed to this, and I think there was – and I can’t recall the document but there was evidence in other documents that such evidence had been brought forward.

I’d no reason to believe at the time that that wasn’t complete. I obviously can’t talk to what subsequently happened after I left.

Ms Kennedy: If we could then turn up FUJ00094393, please. This is “RMGA HNG-X Counter Application Review”, and this one is dated 25 February 2010. Do you remember this document?

David Smith: I don’t recall it from the time. But I do remember it now because it had been supplied to me and I’ve worked thorough it in some detail.

Ms Kennedy: This was, as far as you can recollect, the version that was supplied to you?

David Smith: I don’t recall whether I saw this issue in this level of detail at the time. I think this relates to the Derby –

Ms Kennedy: Yeah.

David Smith: – the Derby issue. I would have known about the Derby issue because Mark would have brought it to me. I can’t say whether I did or whether I didn’t receive that detailed document.

Ms Kennedy: Did you ask for this report to be done?

David Smith: Again, I can’t recall. No, this is an internal Fujitsu document and it doesn’t – I don’t think it sort of points to Post Office specifically having asked for it. On the other hand, I would have expected Mark to want this level of detail in explanation about what caused the incident.

Ms Kennedy: This was what was sent to you?

David Smith: I don’t – I can’t confirm or otherwise whether I received it.

Ms Kennedy: At the time, did you understand this report to have been undertaken by independent experts or Fujitsu employees?

David Smith: Well, as I say, I can’t recall the document, so … (the witness laughed)

Ms Kennedy: If we scroll down we can see, as you’ve already said, the background to this paper and the reason why it was written. And it’s to do with the Derby issue, which you’ve described, which is to do with transactions and banking transactions. Did you consider this to be a serious problem at the time?

David Smith: I was aware of the incident, yes. It was a serious incident, and it was taken very seriously at the time.

Ms Kennedy: Was it – sorry. Go on. You finish.

David Smith: I mean, I think, having read this report – I mean, I think, if I’ve understood it, and I’ve had no one to bounce my understanding off, and usually my process in looking at technical issues was to bounce it off people so I’d interpret it correctly, but under Legacy Horizon, when you used “fast cash”, you also pressed “settle”. With Horizon Online, both those keys were still available but you only, in this example, had – the person operating this transaction should have only pressed “fast cash”. They pressed “settle”, which shouldn’t have been active and was active.

This would have caused me to ask questions about the approach to negative testing, because where you take something where the process was press both, and you change it to where you only press one, but the other key is still there, you would have – I mean, negative testing is a very difficult area because you’ve got to sort of work through all the combination of things that people might throw at the system that you wouldn’t expect, in the normal course of things, to hit it.

But when I read this, that appeared to me to be pretty fundamental: that such an obvious test had been missed. And I think this document, or a document related to it – in fairness to Fujitsu, it does actually record that – it does ask the question about whether the approach to negative testing was as it ought to have been.

Ms Kennedy: At this time, do you remember whether the Post Office was stressing to Fujitsu the importance of data integrity so that postmasters could be prosecuted? Was that something that would have been communicated?

David Smith: Don’t think that – I don’t think that necessarily would have been top of mind at all. Certainly not in the programme team.

Ms Kennedy: Rather, just data integrity –

David Smith: It was just about data integrity. It was just about getting the system right.

Ms Kennedy: There’s another version of this report. If we could turn up FUJ00093031. I appreciate you say you don’t remember receiving this report.

David Smith: Mm, mm.

Ms Kennedy: So you don’t know the way in which it played in your mind, but I’ll take you to one paragraph. So you can see there the date is 9 February. My understanding from the documents is that you weren’t sent this. If we scroll down to the bottom paragraph, this doesn’t appear in the later version that was sent on to the Post Office, but it says:

“The net effect would be that the Post Office and the branch records would not match. Where this happens, the Post Office investigates the branch and postmaster with a view to retraining or even uncovering fraud. It would seriously undermine Post Office credibility and possibly historic cases if it could be shown that a discrepancy could be caused by a system error rather than a postmaster/clerk action.

“Most importantly, the central database, as the system of record, would be called into question.”

Does it surprise you to see that comment there in that report?

David Smith: I think, in the circumstances of the fault that arose, you couldn’t disagree with that statement.

Ms Kennedy: Okay. So –

David Smith: I mean, it shows an understanding, I think, in Fujitsu, of the relevance of data integrity to actions taken against subpostmasters. But totally appropriate, because you’ve got – you’ve got duplicate baskets being settled.

Ms Kennedy: Thank you.

Ms Kennedy: Chair, I believe we initially discussed taking an earlier lunch. This might be a convenient moment if we were to stop at 12.30.

Sir Wyn Williams: That’s fine. If we have our usual hour, that still gives us sufficient time this afternoon?

Ms Kennedy: Yes, I won’t be very long at all.

Sir Wyn Williams: Right. Then yes, that’s what we’ll do. We’ll break now until 1.30.

Ms Kennedy: Thank you.

(12.30 pm)

(The Short Adjournment)

(1.30 pm)

Ms Kennedy: Good afternoon, Chair.

Sir Wyn Williams: Good afternoon.

Ms Kennedy: Could we please pull up POL00054371, please. This is an email thread with the subject “Horizon disputed cases”. If we turn over to the third page and scroll down, please, to the bottom, we can see the start of this email chain between a Jason Collins, Graham Brander and Andy Hayward. You’re not copied into that, Mr Smith. If we just scroll over, just so we can see the end of that email, but it says:

“Andy called me and asked whether you guys, (Graham, if FIU have any cases in dispute/new issues that could affect your case) could put together some stats on these cases where the accused’s defence was/is that the Horizon data is unreliable for any amount of reasons given by the accused.

“This should be sent to Iain within the next few days. Iain will need as much information as possible.”

If we scroll up we can see a further email, again at the top of that page, talking about two cases, West Byfleet and Orford Road. Scrolling up again a little bit – but, again, you’re not copied into that email – but if we control up further, we can see you start being copied in on this email thread about people essentially using or saying that the Horizon data used in their cases isn’t right. Do you remember being copied in to this email threat?

David Smith: Not particularly, no, I don’t.

Ms Kennedy: Do you know why, again, you would have been copied into this –

David Smith: It was Mandy who was copying me in, so I was kind of Mandy’s go-to person when she had things like this crossing her desk. My advice, if I had been asked, it would have been exactly the same: use the audit file.

Ms Kennedy: It seems as though that email comes from Andy Hayward and it looks as though he’s the one who is has copied you –

David Smith: Oh, that’s right, yeah.

Ms Kennedy: Do you know who he was?

David Smith: No, I can’t recall, no.

Ms Kennedy: You don’t know whether he was someone in Mandy’s team?

David Smith: No. I mean, I recognise some of the others Rod Ismay ran transaction processing; Sue Lowther was the head of information security; and John Scott was head of security.

Ms Kennedy: If we scroll up further, please. This email says:

“As was discussed on the conference call and taking into account Rob’s comments …”

Were you on this conference call, do you remember a conference call?

David Smith: I can’t recall it, no. It doesn’t mean I wasn’t in it but I just don’t recall it.

Ms Kennedy: “… to confirm that what we are looking at is a ‘general’ due diligence exercise on the integrity of Horizon, to confirm our belief in the robustness of the system and thus rebut any challenges.”

That suggests that at this stage the position of at least the people on this email thread is that there is no problem with Horizon but we just need to check and find a way of making sure that we can justify that that’s the case; is that how you read that?

David Smith: Yeah, yeah.

Ms Kennedy: Does that reflect the wider attitude you experienced in Post Office at this time?

David Smith: Um … I can’t say that – I mean, by “wider Post Office” I think you’re going into areas like the Network team.

Ms Kennedy: Just your – I mean, even within your team?

David Smith: Within the team, I believe that there would have been a belief that the system was robust, notwithstanding what I said about you could never say never.

Ms Kennedy: If we scroll up again, this email thread to the first page, and down a little bit, this is again an email from Dave King to the thread, and it says:

“As discussed, I can confirm that we are in no way questioning/investigating the financial integrity of Horizon, or of the accounting system as a whole.”

There’s almost a defensiveness to that, isn’t there, that someone could ever question the systems?

David Smith: Um … I think there are several ways you could read that. I mean, that may be defensive in the sense that some other party was not happy that information security were delving into this area. So this should just be clarifying, “No, we’re not about that, we’re about this”. But the answer is, you know, I don’t know, I’m just speculating in giving that answer.

Ms Kennedy: Do you think at this stage this would have been a good time to do that proper analysis?

David Smith: My belief right at the time, and I don’t know whether we’ll come on to the slide set that safety I produced, that it did need – the way the issue was boiling up, it did need something to happen, something different to happen. Not least of which, at the senior level in the business, people to get a hold of this issue. I mean, this is what the PR team were contacting me for. You know, we need to get a grip of this thing and deal with it before it actually bubbles up out of control.

Ms Kennedy: Shall we go to that slide deck that you prepared which is at POL00090575.

So this is the first slide of a slide deck.

David Smith: Yes.

Ms Kennedy: Do you want to tell us what this slide deck is and why you made it.

David Smith: So there are two reasons why I created the slide deck. The first was that – and I can’t be sure who but I think it was probably the PR team had called a meeting/meetings to discuss this issue, and I was due to go on annual leave and I was asked to jot down some thoughts on the subject. So that was why.

The other thing I used this slide deck for was to – I would have kept my boss informed of what was going on, both – I mean, going back to the original Cleveleys issue, it would have at least briefed them on it. My boss, Mike Young, also had as his reports, service management and also security. So he would be well placed to take a wider view than just my view.

So for those two purposes, as I say, I created this just before I went on annual leave.

What I meant with this – well, part of this was about accessing the audit file in all cases. The other part came about, I was invited to support the chairman of the Welsh Postal Board who’d been summoned to meet with an MP – MPs to discuss the case of Mr Bates.

Up to this point, I’d assumed that, you know, what – the noise that was being created around subpostmasters who were claiming that their balance had been distorted by Horizon and had been prosecuted. What I heard in that session with the MP was something different and it seemed to me that there were these cases bubbling around in the media, and I, for one, you know, guilty of assuming that they were all about that, and in Mr Bates’ case it was somewhat different.

I mean, at the heart of it it was still Horizon but if you’re going to deal with these issues, then you need to know what you’re dealing with. So that’s what I was really driving at in – the people who I sent this to I’d been discussing this with on the telephone or face to face. So I was literally summarising my thoughts in the deck.

Ms Kennedy: A moment ago you said at the meeting with the MPs you got a somewhat different picture. Could you –

David Smith: Well, it was – as I recall it, it wasn’t about Mr Bates being prosecuted because of a difference between his cash balance, physical cash balance on the system. I think Mr Bates’ contract was terminated because, he would argue, because of events that were caused by the Horizon System and that was a different take on it.

Ms Kennedy: Looking at this first slide, it says:

“I’m strongly of the opinion that in order to win the argument …”

What’s the argument there?

David Smith: Well, the argument is that Horizon is causing misbalances and resulting in subpostmasters being prosecuted.

Ms Kennedy: “… we have to focus on what actually happened and not allow others to conduct the debate around speculation about what might have happened.”

And “what actually happened”, you mean –

David Smith: Is the audit file, yeah.

Ms Kennedy: Just the audit file?

David Smith: It’s the only way, going back in history, that you can test this idea that Horizon caused the misbalance. If Horizon introduced a false transaction, for the sake of argument, that would be revealed by examining the audit file.

Ms Kennedy: But it didn’t occur to you at the time that there could be something other than the audit file that might show a problem with the system?

David Smith: Not really, no. In the context of this debate, no.

Ms Kennedy: What do you mean by “no?” As in, you didn’t think that – you thought the audit –

David Smith: I believe the only way of going back to actually prove it, would be the audit file. Remember, the proposition is that Horizon caused the problem, so how do I prove that Horizon didn’t cause the problem? And that would be via the audit file. Now, if the subpostmaster had made – introduced errors into the system, entered in the wrong amounts or something like that, there were other means by which that would come to the surface but, I mean, that wasn’t being said.

Ms Kennedy: Or a bug or an error?

David Smith: Um –

Ms Kennedy: How would that come to the surface?

David Smith: Well, the Horizon audit, again, would – had one of those been missed, not picked up and not corrected, then that would come through from examining the audit file.

Ms Kennedy: If we could turn over the page, you set out the history of Horizon and you chart through a variety of cases, two of which are the main ones we’ve already discussed, which are Cleveleys and – if we turn over the page again, and again, and again, one more time – Castleton. Those were the two main cases where Horizon’s integrity had been called into question, which is what you’ve recorded here?

David Smith: No, those were the two cases that Mandy Talbot corresponded with me on. Yeah.

Ms Kennedy: So you’ve limited it to what you knew about –

David Smith: I limited it to what I knew about it because Cleveleys I was asked for some advice, which I gave, and then Mandy – Castleton, I think, was the first test, as far as Mandy was concerned, after Cleveleys and that’s why it was so important. I think that’s why she continued to correspond with me. After that, you know, there was radio silence.

Ms Kennedy: If we could turn over to the next page please you say there:

“Castleton ‘killed’ the noise until Computer Weekly ran an article in 2009.”

David Smith: Yeah.

Ms Kennedy: What do you mean by “killed the noise”?

David Smith: Well, I didn’t hear any more about it, about this issue in general, I think, until 2009. That’s when it really became quite a hot topic.

Ms Kennedy: The way you’ve drafted that suggests that it’s not just in terms of your own knowledge; it’s generally. It says, “Castleton ‘killed’ the noise”; it doesn’t say, “I didn’t hear about anything until the Computer Weekly article”?

David Smith: No, I didn’t, no.

Ms Kennedy: Does that not suggest that this is the totality of the cases that Post Office knew about –

David Smith: I don’t think anybody would have understood that at the time.

Ms Kennedy: Okay. If we could turn over the page to page 10, please, you’ve summarised what you understand the Horizon integrity to be, and the mechanisms. Was this drawn from your conversation with Gareth Jenkins –

David Smith: It was indeed, yes.

Ms Kennedy: – and that document we discussed earlier?

David Smith: Yes, it was and, indeed, I think I probably – I think the attached PDF document –

Ms Kennedy: Would have been that –

David Smith: – would have been that document, yes.

Ms Kennedy: – document we looked at earlier?

David Smith: Yes.

Ms Kennedy: If we could turn over one more page to page 11. You posit some explanations as to why these cases are arising. 1 “Subpostmaster has had hands in the till”; 2 “Assistants have had hands in the till”; 3 “Accounting error”. Is that the order in which you thought was most likely?

David Smith: No, there was no particular order.

Ms Kennedy: There was no assumption that a subpostmaster would have –

David Smith: No, no assumption, no.

Ms Kennedy: – had their hands in the till?

David Smith: No, I think, from my point of view, had the audit file been applied, it simply said Horizon was not the explanation. That didn’t say, that didn’t automatically imply guilt on behalf of the subpostmaster.

Ms Kennedy: If we could turn over to the last page, please, page 12. You say:

“Of the cases I am aware of …”

Then we’ve already discussed Mr Bates’ case.

David Smith: Yes.

Ms Kennedy: You say in your last bullet point:

“Details of the cases do bear looking at.”

David Smith: It’s back to the point made on the front slide that, because of what I experienced in supporting the Chairman of the Welsh Postal Board, we really needed to understand what the – what each individual was claiming and what was the basis of that claim.

Ms Kennedy: To what end were you looking at that?

David Smith: I think from the point of view that, I guess, prompted by the PR team, you know, we had to start pushing out some kind of answers. So making sure that we’re answering the questions that are being put, not just assuming that this was about prosecutions.

Ms Kennedy: If we could take that document down, please, and this is the last document I’m going to take you to. It’s FUJ00094958, please. This is turning back to Horizon Online, and if we could scroll down, please, we can see there that this is an email from you – to scroll up a slight bit again, please – on the 26 March, which I believe was your last day at the Post Office, or close to it?

David Smith: I finished on 31 March, so this was a Friday. Clearly looking at the time, I wrote this on the train going home.

Ms Kennedy: You write this email to Gavin Bounds. Remind us who Gavin was?

David Smith: He was the account manager for the Post Office – well, the Royal Mail account I think they would probably term it.

Ms Kennedy: It says:


“I want to follow up our earlier telecon rather more formally.

“Whilst we don’t yet have a root cause of today’s issue given recent events it is difficult not to suspect that it might be related to the introduction of a change. Quite simply there have been too many incidents where poor execution of change has caused a problem in live.”

What did you mean by “problem in live”?

David Smith: This was – I mean, I think we’re in pilot at the time, so this would have been an incident happening in a branch office and, I mean, I can’t remember the specific incidents but it could have been loss of service, it could have been problems with transactions. I don’t know. But this is problems experienced in the branch.

Ms Kennedy: It goes on to say:

“The situation demands that Fujitsu take action that is game changing whether that be increased rigour, an injection of differby [sic] skills or change in mindset.

“I also have to be concerned that we seem to be ahead of you and finding out for ourselves that there has been an incident in live rather than hearing from you. We have been here before and I will take a lot of convincing that this not symptomatic of a reactive mindset. Again, we need to see action that is game changing to a proactive style of management.

“The wider POL business and major stakeholders have been incredibly patient thus far. I believe we are now on the cusp of losing them and if we do then experience tells us that we could well end up on the front page of the Daily Mail. That will do damage to the reputation of both our businesses.”

Were you angry when you wrote this email?

David Smith: No, because I would have calmed down. I would probably have been angry when I had the phone call but my general approach to these things, if I felt angry, to do nothing, and then to record it in writing later.

I mean, I am very uneasy about the nature of the issues that were arising but also, there was a sense of déjà vu and this reference to mindset was really a reference back to 2004, when we did appear on the front page of a national newspaper and which resulted in me writing a mail to Fujitsu on Christmas Eve about the reactive nature of their service management, which was not my area. I stepped outside of contract, I stepped outside of the law, I said, “You may have contractual acceptance but you ain’t getting the money until you do a number of things”, and one of those was – well, both of them were involved in independent review.

One was an independent review of some architectural issues. I meant external independent review but there was no way, in terms of the architect, that Fujitsu would agree to that.

The other was in terms of their service management organisation where they did bring in a third party and that third-party report was quite damning in terms of the stuff that had been going on.

Now, the story as far as service management after that was much better. I’d previously, earlier on in the year, as a result of a number of incidents, spoken to Ian Lamb about the mindset in service management. I left it at that and he came back and said, “Okay, we understand”, and they went out and recruited back to Fujitsu a guy called Dave Baldwin who worked there before and Dave came in with a completely different mindset.

There was a lot of investment and we got a very different experience in terms of managing the service. You almost felt that Fujitsu were ahead of the game, in control of the situation, rather than the situation controlling them.

Dave moved on to be the account manager. He was replaced by Naomi, I forget her surname, but she was cut in the same mould as Dave. She was in turn replaced by Wendy Warham, who had a different style but very much lived the philosophy that no matter how good it is, it can be better.

Then we got to this stage and, all of a sudden, it felt quite, quite different. Now I can’t recall exactly what the meeting was, but I went to a – I think it was probably the Joint Release Authorisation Board meeting, and the performance of service management in that meeting was lamentable. I mean, never mind being behind the ball, they weren’t on the pitch, so much so that a guy called Graham Welsh who worked in that – and is referred to in emails and documents I’ve been seeing – he phoned me up afterwards to try to reassure me that on the ground things were rather better. And this is what I was getting at there, you’re now being driven by events instead of you having control of them.

I think, within Fujitsu – I think within Fujitsu that there was some feeling along those lines, as well. In the – I can’t remember which document it was, but I think I had 74 Rule 10 documents to trawl through, and there’s a document – there’s an email there where Alan D’Alvarez is asking Fujitsu to inject senior person to deal with problems. And I guess that’s one of the things that I was driving at here, you know, this needs some bolstering of effort, this needs something really different, plus you need to get – you know, we shouldn’t be hearing from the branches first – the first we hear of an incident shouldn’t be from the branch; it should be from Fujitsu Services.

So I was very worried about the way things were going at that stage.

Ms Kennedy: You mentioned your last day was 31 March.

David Smith: Yes.

Ms Kennedy: Did you feel like you had unfinished business on Horizon Online when you left the Post Office?

David Smith: Yeah. In fact, I wrote another email that day that had been – there’d been another incident overnight, which, again, it implies the sort of unease I had about stuff. There had been an ice storm in Northern Ireland. Now, ice storms don’t normally happen in our part of the world. They usually happen in northeast America and it would have been easy to dismiss what happened as down to, you know, once in 100 hundred years weather situation.

What happened was power lines were brought down. I mean, these things can actually not just bring the power lines down but they can bring the pylons down with them, as well. And the system had – so there’s back-up generators and the system hadn’t failed over to the back-up generations properly and this caused a disruption to service in the branches.

And again, I found myself writing to Gavin on my last day saying, “How can this happen? You know, the system as specified should fail over cleanly. What’s going on here?”

So I was – I left very worried about the way things were going but, I mean, I had to hand over to someone else to deal with it.

Ms Kennedy: You mentioned that you were subsequently engaged by Fujitsu as a consultant?

David Smith: Yeah.

Ms Kennedy: How did that come about?

David Smith: I don’t know the background from the – I mean, Fujitsu approached me and, by this time, it was time to start thinking about what happened after 2015. If you’re going to go to – if you’re going to go to competitive tender, and I think things were quite clear at the time that on this occasion we’d have to go to competitive tender. You needed to kick the process off around then.

You needed to do your strategy work first of all and then you needed to put that into an ITT, go through the process of selecting a supplier and start working with them. So I mean that’s where – that’s very much where, you know, my head was.

Ms Kennedy: Thank you very much, Mr Smith. I have no more questions for you. I think Mr Stein has some and some of the other Core Participants, as well.

Questioned by Mr Stein

Sir Wyn Williams: All right Mr Stein, first, yes.

Mr Stein: Mr Smith, I’ve just got one area I want to ask you about. I represent a large number of subpostmasters and mistresses that have been affected by this scandal, so you’ll understand from my questions that point of view. Now you’ve been taken by Counsel to the Inquiry Ms Kennedy to documentation that reveals your point of view in 2010 at the time when you’re, I think, just moving on.

David Smith: Mm-hm.

Mr Stein: Okay. You’ll recall the question she’s asked you, which was asking about whether, when you wrote a particular email, you were angry and you described the fact that you try not to write emails when hot –

David Smith: Yeah.

Mr Stein: – but deal with them slightly later. Do you recall that email?

David Smith: Yeah.

Mr Stein: I can take you to it if you wish.

David Smith: Yeah.

Mr Stein: So at that particular juncture, what you seemed to be saying is this: that you’d realised that there was a problem, the third party report has been damning – your words – you’ve got Dave Baldwin and other people coming in and you regard their quality as being better, reactive and looking at it in more detail; is that fair?

David Smith: Yes, I think so.

Mr Stein: Right. Now, you know by this point, because of what’s been going on in the press and you know from your involvement in the Post Office, that people had been prosecuted by the Post Office, yes?

David Smith: Mm-hm.

Mr Stein: Now, at this particular juncture, on leaving the Post Office at that time, do you think to yourself, well, some of these subpostmasters and mistresses have been prosecuted and imprisoned in the past under a regime that you, in fact, regarded, it seems, as being inadequate?

David Smith: The period I’ve just described in terms of the service management was – so in 2004, what happened, we moved from a system that was – you might have loosely described it as a batch system, where if there was a failure in Fujitsu’s central infrastructure, it would have little to no effect, immediate impact, on the branches – to the online world of banking.

So when there was a problem with the infrastructure, it would impact the branches in a big way. It was that transition that Fujitsu didn’t make at that point in time. They didn’t make the – I suppose, in my view, it’s about technical people not seeing boxes and wires but seeing customers in branches and, you know, counter clerks, subpostmasters, trying to serve them.

So Fujitsu didn’t change the mindset. You know, this is happening here and now. People are being impacted here and now, as opposed to in a batch world where the impact on people was perhaps more delayed.

And, secondly – and, I mean, what we found subsequently as a result of the review that I asked Fujitsu to undertake, was that certain tools and techniques that ought to have been implemented as a result of moving into the online world hadn’t been put in place and, in fact, I think Fujitsu invested over £1 million in those tools and techniques, and I recall actually being – taking a trip to Bracknell and spending a day going through and being shown how those tools and techniques helped Fujitsu manage the service.

So I would say, at the beginning of the process, Fujitsu services management was way, way short of industry standards. But 12 months later, it had caught up and what I was observing was fit for purpose.

Mr Stein: What we’re talking about is, by the time you get to the juncture where you’re leaving, you’re writing these emails when you’re trying not to write them when you’re hot tempered –

David Smith: Yeah.

Mr Stein: – you’re dissatisfied with what you have learnt about the system, yes?

David Smith: Yeah.

Mr Stein: You, in your own mind, believe that it’s been inadequate, it’s been insufficiently insightful into the basic nature of problems, yes?

David Smith: What – there’s two things that I feel at this stage. One is I’m uneasy about the sorts of problems we’re getting. They’re problems that, when you look at them, you say that really oughtn’t to have happened, yes? And the second point is about the way in which Fujitsu as an organisation appears to be reacting to the issues as they arise. The fact that we’re hearing from the office that the service is down, not from Fujitsu picking up the phone and telling us the service is down.

Mr Stein: Right, so let’s pinpoint this. 2010, the time when you’re about to move on, you’ve got this in your head, problems that shouldn’t be arising and, secondly, you’re learning about it from the offices, rather than Fujitsu.

David Smith: Yeah.

Mr Stein: Okay, these two big problems, yes?

David Smith: Yes.

Mr Stein: Now, at that time, just when you’re about to move on, you also know in your mind that people have been prosecuted and prosecuted before the criminal courts or chased for debts before the County Courts, and some people have gone to prison. You also know that fact as well, don’t you?

David Smith: Yes.

Mr Stein: Right. Now, with the information that you’ve got in your head, which was the problems that were unexpected and, secondly, you’re learning from the wrong part of the system about issues, with that, did you by any chance go to the legal department at POL and say, “There may be a big problem here in relation to historic cases, I’m not satisfied with what’s been going on, and we need to look into those past cases”? Did you do that, Mr Smith?

David Smith: No, I didn’t. Why would I take something about a new system that was only just being introduced and reflect that back to things that had happened – you know, quite different system?

Mr Stein: You didn’t think the two –

David Smith: No, they were two completely different systems. Two completely different systems. Now, I did – and in the Rule 10 bundle, I think this was around one of the incidents – I think I did get involved with – certainly, Fujitsu’s legal people were involved on whether this had an implication in terms of any prosecution that might arise. But that was looking forward, not looking backwards. Linking what’s happening Horizon Online to what happened in Legacy Horizon, I don’t think you’d do that, would you?

Mr Stein: Didn’t occur to you, Mr Smith?

David Smith: No, of course it wouldn’t.

Mr Stein: Thank you.

Questioned by Ms Page

Ms Page: Thank you, I’m also representing a number of the subpostmasters in this case, Flora Page.

The first thing I want to ask you about is going right back, if I may, and if I could have a document brought up, it’s POL00092888. This document, I hope, is one you’ve had a chance to have a look at but I know you’ve seen a lot of documents. It’s apparently an account by a subpostmaster who was experiencing difficulties with Horizon and it seems to have been in 2001 because that’s the date stamp we see at the top.

If we scroll a bit further down and if we just stay there. If we zoom in a little bit on what’s in the lower part of the screens we’ll see your name is mentioned.

David Smith: Ah. A Dave Smith.

Ms Page: A Dave Smith. That’s why I wanted to ask you.

David Smith: I mean, generally speaking, the discipline we’d operate is for me not to contact subpostmasters direct. At times almost impossible to, because we, as senior managers, we used to address meetings of subpostmasters on a regular basis.

The idea is that if a lot of managers got involved in solving out subpostmasters’ issues, they weren’t passing through service management. Service management, therefore, didn’t get a complete overview of –

Ms Page: That’s fine, if what you’re saying is this wasn’t you.

David Smith: No, I don’t think this was me, no.

Ms Page: You don’t have any memory of this?

David Smith: I got a lot of correspondence for Dave Smith that didn’t relate to me.

Ms Page: That’s absolutely fine. I just wanted to be clear whether you had any memory of having actually dealt with the subpostmaster experiencing Horizon difficulties?

David Smith: No.

Ms Page: No. All right. Well, then let’s then move on a little and what I’d like to ask about is the process that was part of the IMPACT Programme which removed lines from the – removed the suspense lines, as you put it, from the automated cash accounts. You put that in your statement and I just want to understand that that’s what you – is that the way that you would describe the removal of the facility to put money in the suspense account?

David Smith: I think if I recall my witness statement, I think I will have referred to that in terms of the implementation of Legacy Horizon, and I used to visit offices that – where the systems had been implemented and one of the complaints – I mean balancing was the thing that always came up and in particular on balancing the back office printing, which was, you know, a big cause of the problem.

The other thing that came up was the fact that certain moves that the people in branches – and I include both our own branches in that – could take to deal with the discrepancy was to bury it for later investigation. And what I was referring to in my witness report was the fact that the – with Legacy Horizon, some of those avenues were closed down to people in branches.

Ms Page: As part of the IMPACT Programme?

David Smith: As part of – no, as part of Legacy Horizon. I don’t think – if you could point me to the –

Ms Page: Well, there are two bits of your witness statement which deal with this, so perhaps we can bring it up.

David Smith: Yeah, if you could, that would be helpful. Thank you.

Ms Page: I’m just trying to find the reference but I hope somebody else might have it.

Ms Kennedy: I think it’s WITN05290200.

Ms Page: That’s very helpful. Thank you. It’s paragraph 17 and paragraph 29 of the areas which deal with this. I think it must have been 29 that refers to the suspense lines in automated cash accounts.

I tell you what I think’s going on here, we’re probably looking at the wrong witness statement. I’m sorry.

Ms Kennedy: That’s completely my fault. It’s WITN05290100.

Ms Page: Yes, that’s the one. Thank you.

So if you want to cast your eyes over paragraph 29 there.

David Smith: Yes, this refers to Legacy Horizon not –

Ms Page: So it’s certainly – I’m not talking Horizon Online, we’re both talking about Legacy Horizon.

David Smith: It’s Legacy Horizon, yes.

Ms Page: The Inquiry has heard evidence to suggest that these facilities were taken away as part of the IMPACT Programme?

David Smith: The IMPACT Programme, yes, IMPACT Programme did – I mean, IMPACT Programme changed radically the way that branch accounting was carried out. I’m not hugely familiar with the detail of that. The fact that I was able to recount rather more detail on Legacy Horizon was – I spent, I think, the best part of six weeks when I first joined the Post Office being a cash account, being the supporting documents, and it kind of cemented in the brain.

Also, when I was going around, I remember going to Colchester branch – a Crown Office – and the branch manager and the assistant branch manager spending an hour berating me about the fact that they couldn’t tuck these things away for later investigation but I really had no insight into –

Ms Page: Just to pick you up on that, because that’s new for us. So on a visit, a person running a branch said to you and was berating you, that they couldn’t put things in the suspense account?

David Smith: Yes, and my response was “And you’re not supposed to because you weren’t supposed to before. You weren’t following the instructions, you weren’t meant to use the manual system in that way”. The thing with manual systems is they’re much easier to manipulate than automated systems, which are much more rigid.

Ms Page: Well, that’s the way the things were under the manual system. Then we have Horizon in its original iteration before the IMPACT Programme, in which people were still able to use the suspense account to –

David Smith: They were indeed, yes.

Ms Page: – park discrepancies.

David Smith: Yes.

Ms Page: Then the programme introduces the requirement to, if there is a discrepancy, not to put it in a suspense account but to make it good immediately?

David Smith: Yeah.

Ms Page: Yes? There’s some documents around that and I don’t necessarily need to take you to them but there is one point from one of those documents that I would like to put to you, just to sort of solidify this point, if I may.

It’s POL00038878. If we can go, please, to page 22. Now, if we zoom in on that middle section and the bottom part of it, it says here, and this is just – as I say, I don’t expect you to have seen this before but it’s to put this in a context for you. What it says is, part of this IMPACT Programme:

“The analysis has also identified requirements to more tightly control and police the use of the suspense account within the branch accounts, only a limited subset of the existing suspense account products will be retained. The contractual requirements for agents to make good unknown errors in branch accounts will be used instead.”


David Smith: Yeah.

Ms Page: Now, what I want to look at, then, is this: given the history of AI376 and what we know about that and what we know about the fact that 0.6 per cent was the target and so, therefore, even if hitting the target, there would still be some errors, would this not have been recognised as unfair, that unknown errors had to be made good, no matter what?

David Smith: Well, there’s a lot tied up in that question. First of all, the 0.6 per cent. Unfortunately, I’ve seen a lot of documents, I’ve got a trolley-load behind me – how 0.6 per cent was arrived it is not at all clear from the documents but I did trawl through them all and the point about the integrity check, it was – so what TP were doing, they were taking the cash accounts as committed by the subpostmasters and then taking the stream of transactional information and deriving a cash account and the two should correspond.

But the system process to harvest the transaction information was not working properly. There were gaps in it and Fujitsu, to be honest – I mean, a lot of these integrity controls should have been in the design from the outset. I remember a conversation – it’s almost – a conversation at the time with Ruth Holleran, the business assurance manager, saying it’s almost as if they didn’t realise it was an accounting system.

So the idea of this check was to trap faults in that harvesting process. Now, if you go into the third agreement, I forget the exact title of it –

Ms Page: Supplemental.

David Smith: – the Third Supplemental, and you go deep into the detailed terms of it there’s this wonderful statement “An inaccurate cash account is not an inaccurate cash account (non-data error)”, and if you drill down into what that means, is that in a limited number of circumstances, there are cash accounts – the cash account committed by the office – which are wrong, and it does list the number of circumstances from which those can arise.

Now, clearly, those shouldn’t count in targetry terms against Fujitsu. And I can’t prove this because there is not a complete audit trail but I believe that may indeed be part of what the 0.6 allowance was for: faults that were not Fujitsu’s fault.

The second point buried in there around situations where Fujitsu have identified a fault but haven’t been able to implement the fix. As a result of that, there’s a sort of a side agreement that says, “But you can supply the correct information manually”. And again, quite clearly, it – I mean, that would still come up in the comparison of the derived cash account and the cash account as a fault, but it’s quite clear that that shouldn’t count as part of Fujitsu missing the target because they have corrected it – corrected the derived stream, albeit manually.

So I think the 0.6 per cent was not a relaxation of the target. I think there’s plenty of stuff deep in that Third Supplemental Agreement which suggests that these were let for –

Now, this point here, is something completely different. This is about preventing offices from using the suspense account for reasons that it shouldn’t be used.

Ms Page: Well, let’s just go back to what you were saying about the various agreements. What they certainly do is recognise there’s the possibility of unknown errors arising, don’t they?

David Smith: Clearly, with the term “incorrect cash accounts which are not data error”, it not only accepts that there can be errors in the cash account but it actually lists down the reasons why those occur.

Ms Page: So given that, wasn’t it more fair to allow postmasters a place to put discrepancies if they thought they were unknown, if they couldn’t understand why they were being caused?

David Smith: Well, at that time in Legacy Horizon, they did have a place to put them, which was the suspense account. It wasn’t until IMPACT came along that that was – that area started to be closed down.

Ms Page: Okay. Well, in those circumstances, do you think it would have been fair and appropriate to do a proper investigation of what was going on with the usage of suspense accounts, how much money was going into them, whether it had grown or decreased since Legacy Horizon was introduced, et cetera, before introducing the removal of the suspense account facility?

David Smith: Well, I – you know, that wasn’t – I mean the people driving these requirements were the people from TP and from the Network, that wasn’t my – you know, this is a reflection of the requirements that were handed –

Ms Page: Do you think it would have been fair?

David Smith: Um … I think, you know, I think when you’ve – when you want to get rid of something, then you should understand the implications, both positive and negative, of the actions that you’re taking. And, I mean, one of the things that often, I think, happens with system developments is that, you know, this change is introduced because it will reduce this level of – pool of error over here, and then implement and then suddenly you find this level of error has appeared over here as a consequence.

So, yes, as good practice, you would think through the changes that you are making and make sure that you fully understand all the implications of them.

Ms Page: Did it perhaps suit Post Office to remove the sums from the suspense accounts in this way, because that, in fact, removes an indicator that Horizon may have been generating unknown errors?

David Smith: Sorry, can you repeat that again, just make sure I’ve got –

Ms Page: Well, if money is going into the suspense account it rather highlights, doesn’t it, that postmasters are saying there’s unknown errors here?

David Smith: Yes.

Ms Page: If that money is no longer going into the suspense account, you’ve no longer got that indicator?

David Smith: Yeah, but you would still expect that if there was an unexplained error, that the subpostmaster would pick up the phone to the helpline and to pursue it through that route.

Ms Page: But then it gets buried, doesn’t it, in the helpline and you haven’t got to be a big stark figure saying, “Here it is in the suspense accounts”?

David Smith: Um, well, I mean, even if the – as I understand it, and I’m not hugely familiar with the processes within TP at the time, but I think even if the subpostmaster has to make it good, there was a process for registering the fact that the subpostmaster didn’t agree with the fact that they’d had to bring it to account themselves.

Ms Page: Can I just turn to one more small issue before I finish, and it’s relating to the slides that evidence already had a look at, and it’s POL00090575, page 6. What I’m just going to focus in on, if I may, is the two sort of sections in the middle there:

“Believe Castleton’s solicitor examined audit trail and concluded that there was no substance to Castleton’s claim and advised him to settle.

“Castleton sacked solicitor and proceeds.”

Now, in actual fact, and fairly obviously, you can’t have known what advice he received from his solicitor, can you?

David Smith: No, no.

Ms Page: What I’m interested in is how you came to believe this, where did this come from, this idea that he had been advised because his solicitor thought there was no substance in his claim?

David Smith: Mandy Talbot.

Ms Page: So Mandy passed on to you what she thought Mr Castleton’s solicitor had advised him of?

David Smith: Yes.

Ms Page: Did that strike you as unprofessional at all?

David Smith: I can’t add to that. I mean, I wouldn’t know. I’m not a solicitor or a barrister and, you know, I don’t know your professional standards.

Ms Page: Did she mention, for example, that, in fact, Mr Castleton was now acting for himself?

David Smith: Oh, yes, I was aware of that. I was aware that he – you know, his solicitor went and that he conducted matters himself thereafter, yes.

Ms Page: Was there any suggestion or thought, do you think, from her, when she’d relayed this information to you, that Mr Castleton may have run out of money because of the Post Office’s –

David Smith: I don’t recall that. I don’t recall that. But that doesn’t mean, you know, she didn’t say that. I mean, we’re talking about some years ago. So I don’t remember every word in every conversation. That’s what I recall, and I wouldn’t have got that from any other source, than from Mandy.

Ms Page: Thank you. Those are my questions.

Questioned by Mr Moloney

Mr Moloney: Mr Smith, my name is Mr Moloney and I represent a number of subpostmasters.

I have really just one issue to ask you about if I may. Do you remember Ms Kennedy asking you this morning about the counter application integrity report to do with transactions being recorded twice?

David Smith: The Derby incident, yes.

Mr Moloney: Yes. I hope I recount your evidence correctly but you said you couldn’t remember receiving this report; is that right?

David Smith: No, I couldn’t – I don’t remember seeing that report but I was aware of the Derby incident.

Mr Moloney: Forgive me for this but may I just take you to one document to show that you did receive it.

David Smith: Okay, yes.

Mr Moloney: It’s a document that was disclosed to Core Participants yesterday, and it’s FUJ – yes, I didn’t even need to read it out, thank you very much, it’s on the screen now.

It’s FUJ00142176, and we see that this is an email from Alan D’Alvarez on 10 March 2010 and it’s to you, and also copied are Mike Wood and Gavin Bounds.

David Smith: Mm-hm.

Mr Moloney: It’s:


“Please find attached the report from the review undertaken as a result of transactions being recorded twice.”



“Alan D’Alvarez.”

David Smith: Yes.

Mr Moloney: Okay. Does this – and it may not, but just in order to be clear, out of an abundance of caution, does this assist your memory in relation to this report at all?

David Smith: No, it doesn’t but I think I, you know, in response to Ms Kennedy’s questions, I said to you this did concern me because at the root of this incident was something which, in my opinion, others may disagree, ought to have been covered in negative testing, ie there was a Legacy Horizon process that required the transaction being settled by using both the “Fast Cash” key and the “Settle” key, and that was changed under Horizon Online to just using the “Fast Cash” key, even though the “Settle” key was still there.

And that, to me, is sort of a classic case of something that, you know, we’ve changed here a process, the two keys are still there, you should test to make sure that the process filters out someone incorrectly pressing the “Settle” key after “Fast Cash”.

Mr Moloney: Thank you, Mr Smith. Can I just press you slightly on that in this way: you obviously were concerned about this.

David Smith: Mm.

Mr Moloney: This was something important, it wasn’t a minor issue, it’s something that had to be dealt with –

David Smith: Mm.

Mr Moloney: – and you will see that this is a report from the review that was undertaken as a result of transactions being recorded twice?

David Smith: Mm-hm.

Mr Moloney: Given your concern about this, did you understand that this was a review that would be independent of those people who were making decisions about this or was it something that had been made by a review, essentially conducted by the people who were responsible for this in any event?

David Smith: I can’t recall who the people were who carried out the event but I think there’s a full description in the report of the steps taken to correct the error and I think that, you know, in all honesty, that’s the most important thing. We’ve identified the root cause, we’ve gone in, we’ve fixed it, we’ve re-tested it and we’ve proven that the error couldn’t occur again. That’s what I’d be looking for in that report.

I mean, I wouldn’t have thought that this particular issue in itself would have called for a fully independent view. Had a report been produced that didn’t satisfactorily outline root cause, correction and what have you, then one might say “Look, I need someone, a fresh pair of eyes, to come and look at this incident”.

Mr Moloney: Thank you. Just on that now, obviously you were concerned with issues of integrity, and the subject line of this email is “Review of system integrity”, as we can see on the screen. Can you recall whether, given the ongoing concerns about integrity during Horizon Legacy and in Horizon Online and, of course, with the recent adverse publicity – or recent to then, in 2010, with the Computer Weekly article in 2009, and so on – whether, from your recollection, around this time POL – Post Office Limited – or Fujitsu ever considered input from an external third-party expert?

David Smith: The email that Ms Kennedy pulled up earlier –

Mr Moloney: From Ms Lowther?

David Smith: – where I wrote to Gavin Bounds, I did make the point there that, you know, I think I said in, you know, why wouldn’t I ask for an independent external report if I don’t hear of actions from Fujitsu that are going to change the game that we’re experiencing here.

Mr Moloney: Yes.

David Smith: So, I mean, I was very close. I mean, this asking for an independent report is not a card you play every day but I had played it three times previously during my tenure. And, generally speaking within Fujitsu – with a technical issue, you wouldn’t get them getting a third party coming in but what you would get is people from the very top of the organisation with no current connection to the Fujitsu account, brought in as a team to examine what was going on.

And that sort of thing was taken very, very seriously in Fujitsu. I think they have a term “red light issue”, and it would mean that also any recommendations in that report would get a high priority in terms of being met, particularly when it came to resources. So that’s what I was – you know, if you don’t show me that you’ve got some actions here to, you know, significantly change what’s going on, then I need you to do this.

Mr Moloney: Just from your recollection again, if I may, as the last question, did anyone within POL ever suggest to you that a forensic review of Horizon was needed? Away from those emails that we’ve seen, did anyone ever suggest that to you?

David Smith: No.

Mr Moloney: All right. Thank you very much, Mr Smith.

Questioned by Mr Whittam

Mr Whittam: Mr Smith, Richard Whittam on behalf of Fujitsu.

Do you accept that any system as complex as Horizon was bound to have some level of bugs, errors and defects?

David Smith: Absolutely, absolutely.

Mr Whittam: Their detection could probably fall into three categories: those that were detected, so found; those that were at any particular point in time undetected; and those that might be introduced at a later stage by way of an update, a fix or something like that.

David Smith: Yes.

Mr Whittam: That was therefore something to look for, those that might be introduced by bugs – sorry, fixes to pre-existing bugs?

David Smith: Yes.

Mr Whittam: I’d just like to return to your second statement please if we may, WITN05290200, page 5, please. We can see there paragraph 12:

“The ultimate decision whether to release new software into the network was a business decision. This was taken at a Release Authorisation Board which I normally chaired, although very much in a non-voting capacity, my role being to lead the meeting through the process. The Fujitsu release would be just one input as invariably other systems changes would be involved and business as usual departments would also have deliverables that required ‘green’ [light] status for the release to be approved. The practice was to hold rehearsal meetings in advance of the decision point and thus surface early any potential no-go issues. This would include the progress with testing of Horizon.”

If we went to, please, another document POL00030283, thank you, and we can see that’s a “Release Note – Deferred PEAKs List” with a reference number CS/REN/032, and we can see this is 13 October 2005. The “S80 Release Note – deferred PEAKs List – Counter”, details what it is and the abstract:

“This document details those PEAKs that are outstanding at S80.”

Although it’s a Fujitsu document, we can see that its external distribution, included Marc Reardon and Jamie Dixon, who were people at the Post Office, weren’t they?

David Smith: Yeah, yeah.

Mr Whittam: If we just go through, please, to page 5 of the document. The “Introduction”:

“This document is an addendum to the S80 Release Note detailing those PEAKs, which remain outstanding once S80 has been implemented. This document only includes PEAKs that impact on the counter. Data Centre PinICLs are detailed within a document”, and it gives the reference number.

It then describes the PEAKs as either being PEAKs which were outstanding at S60, S70 or S75 and had previously been targeted at S80 or raised in S80 testing and agreed to be deferred.

We can see, if we just go to the next page, so we can just follow the document through, please, there was no table of PEAKs deferred from previous releases. But if we can, please, just go to page 7, we can see there that this is the table of PEAKs identified during the S80 testing. First one listed there, I won’t read the number out, but we can see it’s a stock unit trial balance report differing from the layout specified in that it’s missing a blank line, and that was the first one to give it some context.

If we could go through to page 13, please. Thank you.

The first one listed there has a number, PC0116293. It relates to an imbalance warning clearing automatically:

“If there is an imbalance in an SU then a warning is displayed at rollover. This warning has a ‘Continue’ button and should not be cleared until the clerk presses the button, but it actually clears by itself. So if you’re not looking at the screen you may miss seeing this message.”

The analysis and proposal is that it’s not a new problem at S80 and the problem of SU imbalance is not a regular occurrence. Also, the message tablet, that’s displayed for the duration of time it takes to print the report, it’s thought at this time was low, and it’s going to be dealt with at a future release.

I’m not going to go through the other entries in it but what was your attitude towards a document like that when you were considering release?

David Smith: So as far as – so if we go to these two different processes. The acceptance and, by contractual definition, low severity errors are not an issue for acceptance. Medium severity, usually there is a maximum number of medium severity faults that can be tolerated. The usual practice with all medium severity faults was that there would be a workaround. So it would be possible to work round the problems created by the fault until such time as the fault was fixed. And then high severity faults, which prevented –

Now, high/medium/low is reference to business impact, and the view of low items was – I mean, I think the first one you referred to was a missing blank line on a report.

Mr Whittam: Absolutely.

David Smith: And those would be treated as low. Very often they weren’t fixed at all. Some were. And they wouldn’t – low items would not feature in acceptance, and they wouldn’t feature in release authorisation. Release authorisation, you would get a full list of the medium items with the appropriate workaround. And that applied not just to Horizon, but it would apply to any other systems that were involved, or indeed the readiness of a business unit. You could have a high severity business unit fault.

Mr Whittam: Would you, at any stage, follow up whether any fix had been put in place?

David Smith: I wouldn’t have done personally, no.

Mr Whittam: Why not?

David Smith: Because it was – I mean, there were hundreds of these things. And I mean, many of them, like the first one, which were of no consequence at all, these things would be handed over to service management, and the Service Management Team would – so at the point of rolling out the solution into the network, control would pass from my area, project programme management, effectively, to service management for them to follow up.

Mr Whittam: So somebody within the Post Office, once things like this were drawn to their attention, would be monitoring them, checking them, following them up?

David Smith: They would have them on their radar screen and decide whether they were worth following up or not. I mean, sometimes some of these things were brought through my process as part of change control, and one of our challenges, very much, was almost a business case challenge. So what’s the benefit of actually fixing this? Because very often there was – as with, you know, reinsert a blank line – it’s very difficult to prove that there was any benefit from making the change at all.

Mr Whittam: The issue you’ve told us about in relation to Mandy Talbot and her concern that all Post Office, civil and criminal litigation might collapse if things weren’t resolved, was brought to your attention in November, the following month of the same year. Did that trigger any concern about whether any fixes had actually been put in place, and there was any system within the Post Office to check?

David Smith: No, because the – you know, what Mandy brought to me was the question where what was happening in the court – as I understand it, the expert the jointly appointed expert was saying this could have happened, changed the position of the Post Office. It’s now incumbent upon the Post Office to prove that that event didn’t happen, and that was the question that I was addressing. And as it happened, there was an existing process in place which was used in criminal cases via the security team, which I referred, in effect, Mandy to.

And she took that forward. I think she convened meetings. I didn’t personally take part in those meetings. Keith Baines, my commercial manager, did. Because the action for my area would have been to put in place the commercial arrangements with Fujitsu to make more opportunities to access the database available.

Mr Whittam: Thank you.

Sir, may I just have one moment?

I’m grateful, sir. That’s all I ask.

Ms Kennedy: Chair, I think that completes the questions from the Core Participants.

Oh, Chair, you’re muted again.

Questioned by Sir Wyn Williams

Sir Wyn Williams: I was anxious for there not to be extraneous noise, so I keep muting myself.

Mr Smith, just following what Mr Whittam was asking you about what in effect, I think, he was talking about was the Cleveleys case, yes?

David Smith: Yes.

Sir Wyn Williams: You deal with that, and I don’t want to bring it up, but you deal with that at paragraphs 28, 29, 30, 31 and 32 of your second witness statement. All right? You set out your understanding of what was going on. I read it carefully and, if I’ve missed it, I’m sure Ms Kennedy or someone else will contradict me, but I can’t find in those paragraphs a recognition of the possibility that what the joint expert reported to the board was actually correct. All right? It’s all about how do we deal with knocking down his thesis, so to speak.

I’m just wondering whether it’s fair of me to have gained the impression that in 2004, when this was unfolding, the Post Office simply would not accept that Horizon could have caused the shortfall but, further, did nothing independently to assess whether in fact that was possible.

David Smith: The report that the independent expert produced was, in my view, deficient. This Inquiry has taken a great deal of – put a great deal of effort, in terms of making sure it gets the right people to produce the evidence. The expert didn’t do that in doing his research. I think, on the Fujitsu side, he spoke to someone from the helpdesk. You’d expect, in asking questions about whether the Horizon System could create problems in the balance, for him to talk to someone like a Gareth Jenkins, and he didn’t do that.

Equally, on the Post Office side, the people he spoke to were at a fairly – were at a level where I wouldn’t have expected them to be able to provide the kind of inputs he would have needed to make the judgement that he came to.

Sir Wyn Williams: So that I can be clear, are you saying that you personally read the expert report and reached the conclusion that it was flawed in material –

David Smith: Yes. Because the expert didn’t speak to – didn’t speak to the people with the kind of knowledge necessary for him to come to the conclusion that he reached.

Sir Wyn Williams: Was that viewpoint put to the judge who determined the case? Because, as I understand it, the Post Office lost the case.

David Smith: I think it – at the time I was involved, it had already gone past that.

Sir Wyn Williams: Sorry, as I’ve understood your witness statement, you were being asked to come up with suggestions as to how you could counter the expert report. At the stage I think you were consulted, or that’s the impression I gained from –

David Smith: I think it was more general that – sorry for interrupting, sir. I think it was more general than that, the question that was asked. It was “Is there anything we can do, given this position?” And, as I’ve said, the only thing that I think we could do in that situation was to call for the audit file.

In this particular case with Cleveleys, because I think it dated back to 2001, the retention period for the audit file was – I forget the number of years, but it wasn’t the seven years that it was subsequently changed to. So the audit file was no longer available.

Sir Wyn Williams: All right. Rather than try and work out the detail, which may not be productive, am I right in gaining the impression, then, that your view of the expert evidence produced in that case was that it was inadequate, and therefore could be ignored, going forward, provided certain other evidence like the audit file was produced?

David Smith: Yes. I mean the – bearing in mind that the expert witness in this case was the Post Office’s expert witness, because the Post Office, at a very junior level, and the defence, agreed a joint appointment of this witness. So I think, for the Post Office having agreed the appointment of the expert witness, to then sort of say well, the expert witness got it all wrong, I don’t think is a very credible position for the Post Office to take.

Sir Wyn Williams: Well, no doubt by examining the file we can discover whether that’s a wholly accurate characterisation of what occurred.

Do you know, Mr Smith, that an expert witness, whether appointed under the direction of the court or by the agreement of the parties, has a primary duty to the court?

David Smith: Not particularly, no, sir.

Sir Wyn Williams: You didn’t know that?

David Smith: No.

Sir Wyn Williams: Right. Good. But you would have expected that the solicitor of the Post Office would have known?

David Smith: Absolutely.

Sir Wyn Williams: All right. Yes. Thank you very much.

Well, thanks very much for coming this afternoon and this morning to answer all these questions. I think that probably sees an end to it now, since I usually have the last word.

Ms Kennedy: Yes.

Sir Wyn Williams: Unusually, Ms Kennedy, we are sitting on Monday, are we not?

Ms Kennedy: We are, yes. We have Mr Stephen Grayston on Monday.

Sir Wyn Williams: So I’ll see you at 10.00 on Monday. Thank you.

(2.48 pm)

(The hearing adjourned until 10.00 am on Monday morning)