Official hearing page

21 September 2023 – Stephen Dilley

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(10.00 am)

Mr Blake: Good morning, sir. Can you see and hear me? I think you may be on mute.

Sir Wyn Williams: Yes, I can hear you. That’s fine.

Mr Blake: Thank you very much. Can I call Mr Dilley, please.

Sir Wyn Williams: Yes.

Stephen Dilley

STEPHEN JOHN DILLEY (sworn).

Questioned by Mr Blake

Mr Blake: Thank you very much can you give your full name, please.

Stephen Dilley: Stephen John Dilley.

Mr Blake: Mr Dilley, you should have in front of you, a very lengthy witness statement, 194 pages in total. Could I ask you to have a look at page 178, which should have a signature. Yes. Is that signature yours?

Stephen Dilley: Yes, it is.

Mr Blake: Is that statement, dated 8 June 2023, true to the best of your knowledge and belief?

Stephen Dilley: Yes, it is, save for three points I wish to draw to the Inquiry’s attention.

Mr Blake: What are those?

Stephen Dilley: Can we turn to paragraph 130, please. At paragraph 130 I talk about a letter that I sent to BDO Stoy Hayward on 22 August 2006. That was a letter to which the Inquiry directed me at question 24 of 49 in its Rule 9 Request. I subsequently talk about a draft accountancy report that BDO prepared. When you read paragraph 130 and subsequent paragraphs, you may conclude that it was that letter of 22 August that led to the draft accountancy report.

In fact, there was a very similar letter of 22 August, which the Inquiry has not put to me but I sent to the Inquiry – and I know that they have it, they had it from Post Office – that led to the draft accountancy report. So I would not wish to create the impression that it was that particular letter that led to it.

Mr Blake: Thank you. Is that the only amendment you’d like to make?

Stephen Dilley: No. Can we turn to paragraphs 357 and 358. In paragraph 357 of my statement, I talk about a meeting with Andrew Wise on 14 June 2006. I talk about the agenda of the meeting which I produced to the Inquiry. At paragraph 358, I talk about an attendance note of that meeting, and at paragraph 359 I quote from the note.

That meeting note is not exhibited to my statement and that is my error, for which I apologise to the Inquiry. We have sent it to the Inquiry who already had it, so they’re aware of that but I wish to draw it to your attention.

Mr Blake: Is there one more?

Stephen Dilley: There’s just a final point. When I reread the statement which is 194 paragraphs (sic) and, with all the exhibits, comes to over 1,700 pages in these three/four lever arch folders. The impression that that can create is that this is a statement entirely from my memory. It isn’t. When I got the Rule 9 Request in – I think it was April, I looked down the request and I looked at the questions and this was a case that, this October, I took on about 18 years ago.

And I looked at the questions, and I thought “I don’t know that one, I don’t know that one, I don’t know that one, I do know that one, I do know that one, I don’t know that one”. So I could have given a very, very short statements to the Inquiry that largely said “I don’t remember”. I didn’t think that would be helpful because we’re here to learn.

I thought what would be a more helpful approach is to go through the information to which the Inquiry directed me, plus more documents from my firm’s file, to be able to reconstruct the story for you and to make it easy and that’s what I have done, and I said as such in my witness statement. But I don’t want to create the impression – the process of doing that helped me remember it but I don’t want to create the impression it’s all been from my original memory. It hasn’t been.

Mr Blake: Thank you very much, that witness statement has the unique reference number WITN04660100. That will be published in due course and it will be on the Inquiry’s website, available to the public.

Mr Dilley, you are currently a solicitor and partner at Womble Bond Dickinson; is that correct?

Stephen Dilley: Yes.

Mr Blake: Womble Bond Dickinson was, at the relevant time, known as Bond Pearce?

Stephen Dilley: That’s correct.

Mr Blake: You had conduct of the case of Mr Lee Castleton?

Stephen Dilley: Yes, I did.

Mr Blake: You clearly reflected a lot on the contents of your witness statement and, before we begin, having reflected on the evidence, the evidence of the Inquiry as a whole, is there anything you would like to say to Mr Castleton or to his family?

Stephen Dilley: No, there isn’t.

Mr Blake: Do you consider that you bear some responsibility for what happened to Mr Castleton?

Stephen Dilley: In what way?

Mr Blake: There’s nothing you wish to say to him. Is that because you consider that this case was conducted appropriately?

Stephen Dilley: I have been asked in this statement whether I would do anything differently in this case. And now might be a good time to turn to that part of this statement because that contains my evidence on this.

Mr Blake: I’ll take you to the statement in due course but I’m asking you a question about anything you’d like to say to Mr Castleton and your answer is no. My question for you today is whether you consider you bear any responsibility for what happened to Mr Castleton in the conduct of the case, in the way that the case was conducted by yourself?

Stephen Dilley: I’m satisfied that I acted and my firm acted professionally and politely and appropriately at all times.

Mr Blake: I’d like to look at your statement. Can we get up on screen, please, WITN04660100. Thank you very much. Scroll down to page 4, please. From page 4 onwards, for the next few pages, there is a summary of events leading up to the litigation, as you’ve described it.

Can we please look at paragraph 13, which is on the next page. Thank you.

You describe there at paragraph 13 evidence that Helen Rose gave in her statement to the court in the Lee Castleton case and, if we scroll down, there is a large paragraph, paragraph 15, which quotes from paragraph 9 of that statement.

Stephen Dilley: Yes, that’s right.

Mr Blake: That reads as follows:

“The inspection revealed that the safe was left open, the safe keys were left in the safe door and it was not secured, that cash and stock were not secured at lunchtime if the subpostmaster was not on the premises, that travellers’ cheques were not kept in the safe and foreign currency was not held securely, that standard procedures for adjusting losses and gains were not adhered to (because losses were unauthorised) and personal cheques on hand had been incorrectly treated. However I should add that I believe the reason Mr Castleton was subsequently suspended was because the Marine Drive branch was short of significant amount of cash rather than because of the control gaps that the security inspection identified.”

That paragraph there takes up approximately a third of that summary of events leading up to the litigation. Did you include that paragraph in this witness statement to suggest, in some way, that Mr Castleton was sloppy or slapdash?

Stephen Dilley: I included that paragraph to reflect the evidence given to me in not one but two witness statements of Helen Rose in the case and that was the evidence that was contained in her statement. I have read our note of the trial and one thing I think she either may say in her – either in her statement or in our note of the trial is that the security checks that she started to do were not finished. They became overtaken by events. So I wouldn’t want to suggest that that was completed.

Mr Blake: Indeed, there was a paragraph before that paragraph in her witness statement that explained that those checks had not been completed and did you hear her evidence to the Inquiry that she said that was simply incorrect, that paragraph?

Stephen Dilley: I didn’t hear that part of her evidence to the Inquiry, no.

Mr Blake: Why is it so prominent in your summary of the events? Why did you select that paragraph in particular?

Stephen Dilley: Because that was her evidence. That was her evidence to me at the time, contained in two witness statements.

Mr Blake: Can you see it doesn’t make Mr Castleton look very good, does it, the suggestion that, in some way, he left the safe open, for example?

Stephen Dilley: What Helen Rose said is not my evidence, that’s her evidence.

Mr Blake: But you’ve included in your evidence –

Stephen Dilley: Yes.

Mr Blake: – and you’ve selected from her witness statement two specific paragraphs –

Stephen Dilley: I have –

Mr Blake: – and included that quite prominently?

Stephen Dilley: It’s a short statement she made. Paragraph 9 is longer than paragraph 5, and so it would come across as more prominently because it is longer. But the really important thing from Helen’s statement, in my view – the really important thing – was the fact that the audit involved physically counting – and that’s a shorter paragraph, because it’s shorter to say – physically counting cash and stock at the Marine Drive branch.

And in the process of her counting – and she had an assistant it was somebody called, I’m going to say someone like Chris Taylor. She had an assistant and in the process of physically counting the cash and stock she found that there was insufficient cash. That’s the really important point from her statement.

Mr Blake: So why include paragraph 9?

Stephen Dilley: Because it’s part of her statement. That’s what she said in her statement that she found.

Mr Blake: Let’s look at her statement, it’s POL00071196. This is the second witness statement. Can we turn over the page, please, page 2. So there are a number of paragraphs before paragraph 9 and if we look at paragraph 8, she says there:

“As part of a normal audit, we have to complete a procedural security inspection. This was initiated by my colleague Chris Taylor. When a postmaster is suspended then any remaining compliance tests are not completed, because of the large number of compliance tests (including security compliance) that have to be completed for each audit. Accordingly, although the procedural security inspection was started as a matter of routine, I do not recall it being completed because Mr Castleton was suspended prior to its completion and it then became irrelevant.”

You didn’t include that paragraph in your statement for this Inquiry, did you?

Stephen Dilley: No, I have not.

Mr Blake: No, and it was paragraph 9 that you included, which Ms Rose has told the Inquiry should not have been included because it didn’t happen. It was not correct.

Stephen Dilley: That’s not – you know, her evidence to the Inquiry has been either yesterday or the day before. My statement was produced in June.

Mr Blake: Yes. Absolutely. I’m not suggesting that you knew what she was going to tell the Inquiry but it’s quite a significant paragraph in your witness statement to this Inquiry. Do you accept that that paragraph, paragraph 9, is highly prejudicial against Mr Castleton?

Stephen Dilley: I think it is prejudicial, yes, I do. But if you look at paragraph 8, my understanding from what she was saying in that – and she may have – from the evidence she’s given to the Inquiry, she may say that effectively I’m wrong but my understanding from what she was saying is that the security check had been started, the issues she’d found are at paragraph 9 but the security check hadn’t been finished.

Mr Blake: In fact, her evidence to the Inquiry was that that list of safe was left open, safe keys left in the safe door was simply a checklist that hadn’t been completed. Did you hear that evidence?

Stephen Dilley: I did not.

Mr Blake: If we scroll down, please, staying with that paragraph 9 but over to the next page, in the last sentence there she says:

“However, I should add that I believe the reason Mr Castleton was subsequently suspended was because the Marine Drive branch was short of a significant amount of cash, rather than because of the control gaps that the security inspection identified.”

Stephen Dilley: Yes.

Mr Blake: Its purpose, therefore, was not to prove the case against Mr Castleton of that paragraph; is that fair?

Stephen Dilley: That is fair.

Mr Blake: In fact, its purpose is simply to prejudice against Mr Castleton?

Stephen Dilley: I think the control gaps, which I had understood her to have identified through the incomplete security report, may have begun to offer an explanation to what happened to the cash. One thing I was clear about at the time, and I’m clear about today, is I did not think that Mr Castleton had been dishonest.

Mr Blake: The impression given by paragraph 9 is one of a sloppy postmaster, is it?

Stephen Dilley: That’s the impression that I take from that. It says that travellers’ cheques were not kept in the safe, that they were not held securely, that standard procedures for adjusting losses and gains were not adhered to, but because losses were unauthorised – I mean that – I’m surprised that she has resiled from that because it is correct that, in Mr Castleton’s case, that process wasn’t adhered to: losses were unauthorised.

Mr Blake: Well, that’s one very short part of that paragraph but the significant passages that relate to the safe being left open, the safe keys, et cetera – I mean, the impression that’s given in your witness statement is that this is a neat legal case about whether somebody signed or didn’t sign accounts. What I’d like to understand is actually the relevance of any of that, even if it were true, to the case that was being brought against Mr Castleton?

Stephen Dilley: Well, I think it offers, or may offer – but not if Helen Rose doesn’t support it – but it may begin to give some alternative insight into what happened to the money.

Mr Blake: Putting to one side that significant evidence that, in fact, Ms Rose says was incorrect, more broadly, do you consider that the case that was conducted by yourself was intended to make an example of Mr Castleton?

Stephen Dilley: I think that question really goes to Post Office’s motives in this case, Post Office’s state of mind, and I have said in this statement and I believe it today: I don’t think that there was one single consistent motive that dominated throughout the entire life of this case.

I think when the claim was first issued, it was issued to pursue what Post Office believed was a debt. However, as the case continued, I think the motivation of Post Office changed and what they wanted out of the case changed. I think it was less about making an example of Mr Castleton and more about sending a message that they were willing to defend the Fujitsu Horizon System.

Mr Blake: Do you see a significant distinction in making an example of Mr Castleton by setting a legal precedent and defending the Horizon System?

Stephen Dilley: This case had the potential to set a new legal precedent. It had the potential to become a test case but, ultimately, it didn’t. It just reconfirmed old law.

Mr Blake: Well, it did say some significant things about the Horizon System though, didn’t it?

Stephen Dilley: In Mr Castleton’s branch, it did.

Mr Blake: Mr Castleton’s evidence to this Inquiry was that you said that the Post Office would ruin him. Did that happen?

Stephen Dilley: I do not believe that it did, no.

Mr Blake: Well, I’d like to look at some documents which show the general approach that was taken over the course of those proceedings. Can we look at LCAS0000535, please. This is the original claim form, so we’re starting on 9 June 2005. If we scroll down, we’ll see the statement of claim on the next page or the page after, page 3 and if we look at paragraph 7, that’s at the bottom of page 4, you have there the sum that is said to be owed and paragraph 7 says:

“Such loss, and the Defendant’s failure to account for it, could not have occurred without the Defendant’s negligence, carelessness or error and/or the action or inaction of the Defendant’s assistants.”

Stephen Dilley: Mm-hm.

Mr Blake: If we now turn to the defence, POL00082222, page 2 of that, this is the Defence and Counter Claim of 15 August 2005. If we could scroll down, thank you, and over to the next page, it’s here that Mr Castleton raises issues with the Horizon System. He said:

“The Defendant repeatedly sought assistant from his managers within the Claimant company during the period over which the apparent shortfall accumulated. No assistance was forthcoming. The Defendant avers that any apparent shortfall is entirely the product of problems with the Horizon computer and accounting system used by the Claimant.”

Could we scroll down, please, to the “Counterclaim”. Mr Castleton then brings a counterclaim and at paragraph 9 he says:

“The Defendant avers that the Claimant wrongfully terminated the Defendant’s contract as a subpostmaster following his suspension and that the true cause of the apparent shortfall in the accounts of Marine Drive Post Office is the Claimant’s own computer system not any misconduct or negligence on the part of the Defendant or his assistant.”

The Horizon accounting system is at the core of Mr Castleton’s case; do you accept that?

Stephen Dilley: I accept that, absolutely, that Mr Castleton made allegations about the computer system. But a really important point is Post Office succeeded in its claim in spite of the computer system. It succeeded in its claim on the basis of physical accounting records.

Mr Blake: We’ll get to that in due course. But in terms of the case that he is bringing, so his defence, his counterclaim, Horizon is front and centre?

Stephen Dilley: That’s correct.

Mr Blake: Let’s look at how this was dealt with, bearing in mind the allegation that you said to Mr Castleton that the Post Office will ruin him, an allegation that you deny. Let’s look at POL00072669, so we’re starting now 24 February 2006, so early 2006. This is an attendance note following, I think, a conversation between yourself and Mandy Talbot, who was the Post Office Legal Case Manager; is that right?

Stephen Dilley: For the majority of the case, that’s right.

Mr Blake: It says there:

“I had a telephone conversation with Mandy Talbot …

“Internally the Post Office feels conflicted about which direction to go in with the Castleton case. The Post Office believes the Horizon System is robust, but the downside is the cost (In Post Office’s time and money) in proving a negative (ie that there are no faults) and that is expensive. For example, Mandy would need to get a report from Fujitsu (who apparently have difficulty writing in plain English) and get someone in the Post Office to review Fujitsu data to see if there are any anomalies.”

This the significant passage that I’d like to take you to, although I will return to that first paragraph. It says there:

“It is Mandy’s view that the Post Office must [I think it says it must mean ‘not’, ‘must not’] show any weaknesses and even if this case will cost a lot, there are broader issues at stake than just the Castleton claim: if the Post Office are seen to compromise on Castleton then ‘the whole system will come crashing down’, ie it will egg on other subpostmasters to issue speculative claims. Mandy knows that Mr Castleton is talking to Barjarge (the other subpostmaster bringing a Horizon based claim). The Post Office’s clear line to the industry must be that we are to take a firm line with Castleton. She even said that she thought it might be damaging to settle the claim on confidential terms rather than fight it and lose.”

I put to you earlier about Mr Castleton made an example of. Does that not give you the impression that the Post Office were seeking to make an example of him?

Stephen Dilley: We’re looking at this now some 17/18 years later but the advantage that I do have is that I was there at the time. Mr Castleton will see this – completely understandably – this point about – being about him, but really what Mandy was saying is Post Office wanted to show that they were willing to defend the system.

In fact, this talk about their motivation is in some ways, in some ways, irrelevant because, once the claim had been issued and once the counterclaim had been issued, which most of the time was put at £250,000, the Post Office had no choice. The Post Office could not simply discontinue their claim without having to deal with the counterclaim and Post Office tried many times to settle with Mr Castleton.

I think the – in that paragraph I think that’s a reference to Mr Bajaj, and there’s a typographical error in how that’s been spelt. So I don’t – the way I understood it, it wasn’t – and Mr Castleton will feel this, of course he will – but it wasn’t about making a personal example of him; it was about sending a message that they were willing to defend the system against somebody pursuing them for a large counterclaim.

Mr Blake: Irrespective of the personal effect on Mr Castleton, do you agree with that?

Stephen Dilley: Can you put the whole question together for me?

Mr Blake: I mean, it was quite short. Your suggestion is that it wasn’t about him but it was certainly irrespective of the personal impact on Mr Castleton and in knowledge of?

Stephen Dilley: I think they were cognisant of the personal impact on Mr Castleton and they didn’t want to go to trial. They wanted to settle.

Mr Blake: Well, that’s not what the last sentence there says. It says:

“She even said that she thought it might be damaging to settle the claim on confidential terms rather than fight it and lose [it].”

Stephen Dilley: That was Mandy’s thought and she – as you’ll have seen from my attendances note, she says things that are eminently quotable but you have to look at the actions where they tried to settle because actions speak louder than words. And they tried on multiple occasions – and I’ve set out a table in this statement that would illustrate my point if we were able to find it. They tried on multiple occasions to settle this case.

Mr Blake: But looking at 24 January 2006 at least, so relatively early stages of this litigation, it certainly seems, as far as Mandy Talbot was concerned, that the case shouldn’t be settled and that Mr Castleton should effectively be sacrificed in order to prevent further challenges against the Horizon System. Do you agree with that?

Stephen Dilley: No, I don’t.

Mr Blake: Okay, well, let’s look at more contemporaneous documents as time goes on. Let’s look at 7 March 2006, that’s POL00070882. If we could start at page 2 of this document and halfway down. It’s an email from yourself to Mandy Talbot and you say:

“Dear Mandy …”

I’m looking in particular at the final paragraph there:

“Is there any tactical preference for getting Castleton tried for Bajaj or the other way around? It sounds as though Bajaj has not issued a claim yet so presumably it would be helpful to have a favourable judgment on Castleton asap before Bajaj goes to trial (if either of them get that far).”

Stephen Dilley: Please can you scroll up, so I can see the date on that?

Mr Blake: Absolutely, that’s 7 March 2006. Then, if we scroll up further, we can see her response. Thank you. She says there:

“Bajaj has not as yet issued proceedings so tactically a decision on Castleton or better still Castleton disappearing would be advantageous.”

Stephen Dilley: Mm-hm.

Mr Blake: Let’s look at the –

Stephen Dilley: And I take “Castleton disappearing” to mean Castleton settling and I can give you the context of that on page 107 of my statement.

Mr Blake: We don’t need to turn up your statement. Perhaps you can tell us why you think that provides context?

Stephen Dilley: Because these emails need to be set in the context in which we were operating. On 7 November 2005, I was instructed by Mandy Talbot, just before then, to offer a mediation to see if the claim can be settled and we did.

On 8 November, Mr Castleton’s solicitor replied and said he would only mediate after disclosure.

On 17 November, on behalf of the Post Office, we urged Mr Castleton to reconsider his position on mediation.

On 5 January, with the blessing of Mandy Talbot, we made an offer pursuant to part 36 of the Civil Procedure Rules to try to settle the claim.

Mr Blake: Can I stop you there. Is the point that you’re trying to make that throughout the Post Office were trying to settle the claim?

Stephen Dilley: Absolutely.

Mr Blake: Okay. I’ll continue with these emails. Can we look at POL00070824, please. It’s over the page. Thank you. This is an email from yourself to Mandy Talbot. We’re now on 24 April 2006. I’ll go chronologically throughout April, June, August. “Assets”, then we have the final paragraph that’s currently on the page, thank you. You say there:

“Dear Mandy …”

You address the issue of Mr Castleton’s assets and then you say:

“There is a ‘bigger picture’ ie that the [Post Office] wishes to be seen to be taking this claim very seriously, to defend the Horizon System and to discourage other subpostmasters from pursuing similar claims. However, looking at the case in isolation, the cost/benefit of pursuing it to trial, even if you succeed, is uncertain.”

That bigger picture being to dissuade other subpostmasters from bringing Horizon based claims?

Stephen Dilley: Yes, and that goes to the point that I’ve been seeking to make: they were trying to show that they were willing to defend the Horizon System.

Mr Blake: But not willing to, as we’ll see in due course, disclose very much material relating to the Horizon System?

Stephen Dilley: Well, I’m really happy to be taken through disclosure.

Mr Blake: Thank you. We’ll get to that shortly. Can we look at POL00071165, we’re now on 6 June 2006. This is an attendance not. It has Adrian Bratt’s name. Who was Adrian Bratt?

Stephen Dilley: He was a solicitor at Bond Pearce. I think at the time he was probably a trainee.

Mr Blake: Thank you. In attendance was yourself, somebody called Mared Hughes, some people from Fujitsu, so we have Anne Chambers there, for example, Gareth Jenkins, and others.

Stephen Dilley: That should say Andy Dunks.

Mr Blake: Andy Dunks, yes, thank you. If we look at the first substantive paragraph under “The Horizon Disputes”, we have:

“The meeting open with SJD …”

I think that’s you.

Stephen Dilley: Yes.

Mr Blake: “… introducing the agenda and outlining the Castleton case. [You were] outlining [the Post Office’s] point of view with regards to settlement and that they are very keen not to set a precedent and they would like to take a firm line, thus giving a clear signal, such that the accounting system is okay and they do not want to be taken for a ride. [You think] that we will struggle to settle this case.”

Then there’s a reference to other cases, Bajaj and Bilkhu.

Stephen Dilley: Yes.

Mr Blake: So at that stage, it was clear to you that there were other cases in the pipeline relating to the Horizon System?

Stephen Dilley: Yes. There were two other cases, those of Mr Bajaj and Bilkhu.

Mr Blake: Thank you. If we move forward to August 2006. Can we look at POL00071088. This is an attendance note, a telephone attendance note from you, 18 August in the Castleton case and it refers to a telephone conversation you had with Cheryl Woodward. Do you remember who Cheryl Woodward was?

Stephen Dilley: Distantly. Cheryl Woodward was the person who I think first instructed my firm to issue the claim. She was based in Chesterfield in the – I think what was known as the former Agents Debts Team. So she worked in the business. I didn’t understand her to be in the Legal team.

Mr Blake: Okay. You summarised the claim and the defence to her and I’m just going to read this paragraph. It says:

“Explaining that what initially started as a debt recovery matter has now turned into a much broader point given the Horizon type defence of Mr Castleton and that Post Office Legal consider that if they are seen to settle on this case, or walk away, then that will open floodgates for lots of other subpostmaster claims given that they are talking to each other on blogging websites, however explaining to her the costs given 7-10 days in court and ten or more witnesses could well be [£200,000 or £300,000]. Accordingly, if you look at the case in isolation it is completely nonsensical, especially given that Mr Castleton’s asset position suggests that he would be unable to pay. However, the PO have taken a broader view.”

That is, is it not, entirely consistent with the suggestion that Mr Castleton would be ruined if the case went ahead?

Stephen Dilley: Can you take me, please, if we’re going to talk about Mr Castleton being ruined, to the attendance notes of the calls I’d had with him in November 2006. Look, I entirely accept that, insofar as we could understand Mr Castleton’s asset position, there was a significant risk that he would be unable to pay.

He did take out insurance and, at one point, I wrote to his solicitors and said, “You haven’t served a notice on us” because, prior to the Jackson reforms in 2013, if you took out an insurance policy, if it was an after-the-event insurance policy you were required to serve a notice, and the fact that I wrote that letter suggests to me that, at one point, we didn’t know if it was an after-the-event insurance policy – which, if it was and we’d have succeeded, could have potentially paid some or all of our costs – or before-the-event insurance policy, and we weren’t sure how much it was for.

Nevertheless, I entirely accept that we had advised Post Office more than once that it was a serious risk that, if they succeeded in their case against Mr Castleton, that he would be unable to pay all of their claim.

Mr Blake: We are going chronologically. We may well come to November. If we don’t, then you can have an opportunity after lunch to identify the particular document that you’d like to bring to the Chair’s attention.

Stephen Dilley: I think it gives really important context to the point that you’re trying to make.

Mr Blake: Well, we have, as at 18 August 2006, a clear suggestion that Mr Castleton would be unable to pay any costs against him.

Stephen Dilley: That is correct.

Mr Blake: We also have the very fact that, at the end of the trial, Mr Castleton was unable to pay the costs against him.

Stephen Dilley: That is also correct.

Mr Blake: So it would have been clear to the Post Office that the effect of this litigation would, in effect, be to ruin him?

Stephen Dilley: Whether that is correct or not, I refute using that language and I’m happy to take you to the contemporaneous attendance note of the calls – notes of the calls that I had with Mr Castleton about that.

Mr Blake: So is your evidence that, if you had said you would ruin him, you would have made a clear note of that and put it on your case file?

Stephen Dilley: Well, two things on the “ruin” comment. When – first of all, it just doesn’t sound like – I know myself and it just doesn’t sound like language I would use. It just doesn’t sound at all like something I would say. It makes me sound like a Vinnie Jones character from an East End gangster film. It’s just not at all who I am. But the second – you know, that sort of knowing myself.

But the second point really, I – to be able to address this question, I think it would be really helpful to go to the contemporaneous attendance notes. Those contemporaneous attendance notes were only made for me. You know, I’m the only audience. There is one note, not a note I’m talking about, where I talk about a call or a letter to BDO, and what gets typed up is “video”. These notes aren’t written for anybody else.

You’ve already spotted a typographical error in one. They’re written for myself and they were dictated after the call. So –

Mr Blake: So is your evidence that you would have written it down had you said it?

Stephen Dilley: Yes. And more than that, in the – that’s part of it and the contemporaneous note shows that that language wasn’t used but, also, if you – if we could – to answer the question, if we please get the note on screen that I’ve made of the call in November, it doesn’t fit with the other part of the note, the tone of the note, in which I said to Mr Castleton – I think it was probably for the first time that I’d said that to him because he started acting in person – I said to Mr Castleton “Look” – I didn’t need to say this but I believed it and I still believe it, I said to him: “I don’t think you’ve been dishonest”, and I believe that today.

I don’t think he dishonestly took money from Post Office and I think, and I hope, it will give him some comfort for me to confirm that to this Inquiry. I said it to him at the time. Our barrister – it can be seen from the transcript of the – our note of the – written note of the hearing, our barrister said it at the end of the case, “I disavow any allegations of any honesty”. It was not in our pleaded case. I’d said it to his solicitors, who had said it to him – who’d told me they’d said it to him many times, that’s captured in a note, and I said it to Mr Castleton again.

It’s just a really odd – in that attendance note of a call I had with him, where he alleges that I said this, it’s really odd for me to say, on the one hand “I don’t think your dishonest but we’re going to ruin you”. It just doesn’t fit with the tone of it.

Mr Blake: It was, though, consistent with the position of the Post Office at that time, that they would been proceedings against him that would have the effect of bankrupting him?

Stephen Dilley: You’re asking me about use of specific language. That attendance note shows that I had a call with Mr Castleton and in part of the call I was saying to him that – I’d like to be taken to the attendance note so I can remember it better, please – but that attendance note shows that, in the call I had with him, I was saying to him “The costs are going to be significant, significant if we win”, and that’s entirely right.

That’s very different, very different, from saying to somebody “We or Post Office are going to ruin you”. It’s really different. But it’s right to record that I was saying to him that the costs are going to be significant. Whether, you know – I don’t want to speculate on what his mind was saying to himself as I said that because that would be my opinion evidence, not evidence of fact. But I’m clear, really clear, that the language I used to Mr Castleton was not that Post Office would “ruin” him.

Mr Blake: So there’s a dispute as to the particular words that were used but, while he was a litigant in person, you did say to him that the costs that will fall against him will be huge?

Stephen Dilley: If you would like precision about what I said or more accuracy, we need to go to the note.

Mr Blake: Was there only one conversation then –

Stephen Dilley: – but.

Mr Blake: – because you’re taking us to a particular note –

Stephen Dilley: Yeah, I’m sorry. Let me look it up in my –

Mr Blake: No, we can get to it in due course but was there only ever one conversation between you and Mr Castleton?

Stephen Dilley: No.

Mr Blake: So you’re focusing on a particular note, a particular point in time –

Stephen Dilley: I am, because that’s when I think he has said something like we – “Mr Dilley called me after such-and-such a date”, and I was trying to find when abouts, by reference to comments, he had made that we could have had this conversation.

But the other point you just made is – I think you might have made is that: were these comments only made to Mr Castleton? During the course of 2006, we had, on more than one occasion, told Mr Castleton’s solicitors – he had solicitors for the vast majority of the case. We told Mr Castleton’s solicitors that the costs of going to trial would exceed £200,000. So they knew.

Mr Blake: That was a matter that you specifically brought up in conversation with him in November when he was unrepresented?

Stephen Dilley: Yes.

Mr Blake: Can we look at POL00069622, please. We’re now in September 2006, 11 September, and this is after a conference with counsel Richard Morgan in counsel’s chambers. The main purpose of the conference was to meet four of the key witnesses to go over their draft statements with him.

I’ll return to this particular attendance note because it’s quite significant in relation to a number of different witnesses but could we just have a look at the bottom of page 5, please. So we’re now in September 2006 with the trial approaching. At the bottom there’s “Meeting with Mandy Talbot”:

“Mandy Talbot said the difficulty is this has almost become a test case in spite of itself. The Post Office other solicitors’ cases are waiting and watching on this.”

So, at that point in time, was there significant pressure coming from the Post Office in order to succeed in this particular case?

Stephen Dilley: I don’t recall Mandy Talbot calling – in any conversations, applying pressure on us. We wanted, as you do with any client, to do your best by them, within, of course, the rules of the court and your professional ethics rules and so, in an adversarial system, it is my absolute duty to do – to act in their best interest. But I don’t recall Mandy saying to me “Stephen, you’ve absolutely got to win, win, win this”, or anything like this.

Mr Blake: But she did say it’s “become a test case in spite of itself”?

Stephen Dilley: That’s the language that she used and it did have the potential, at one time, to have become a test case. It ultimately didn’t become a test case because Mr Castleton did not produce any IT evidence. So it just became a case in the end that reconfirmed old law.

Mr Blake: Are you not aware of the Post Office in any case having brought the Lee Castleton case to the court’s attention in order to support the robustness or otherwise of the Horizon System?

Stephen Dilley: I can only speak to the cases in which I was involved and I have set them out in my statement. I think what it’s fair to say or would have been fair to say in other cases is that, in the case involving Mr Castleton, Anne Chambers of Fujitsu had taken a call and she’d had a look at the system and what she had said to us is that she’d been unable to find anything wrong with it.

Make of that what you will but her comments were confined to this case. So you could say “Well, we’ve had a look at it and we can’t find anything wrong with it”. Yes, but in this case. And I’ve been clear in my statement that when I was looking at issues, whether there were issues with the Horizon System and considering the points that Mr Castleton’s solicitors were putting on his behalf to us, I was interested really in whether there were issues at his branch.

Mr Blake: We’ll get to that in due course and we’ll get the words in Ms Chambers’ statement?

You’ve said that she made it clear that the system check was only in this case. Do you think you made that sufficiently clear to the court in the Lee Castleton case.

Stephen Dilley: Well, look. You’ve got the transcript of evidence. You’ve got –

Mr Blake: I don’t think we’ve got a transcript. We’ve got some rough notes.

Stephen Dilley: Sorry, I apologise. You’ve got my handwritten notes. You’ve got a transcript of – the transcripts that we’ve been able to locate of certain of the witnesses’ evidence. The transcripts, I have to say, some of the sound quality recording wasn’t good but you’ve also got our typed note and my recollection, albeit distant now, was that, yes, that was made clear.

Mr Blake: Thank you. We’re now going to 10 November 2006, so around the period in which you’ve said that you were speaking to Mr Castleton. Can we look at POL00069779, please. This is an email from yourself to Mandy Talbot 10 November 2006. It’s over the page, please, (d):

“Even if the [Post Office] wins and is awarded its costs without a capping order, its costs would be sea stand on assessment the [Post Office] may be awarded 60% to 70% of its costs. This could mean that the irrecoverable element of just those costs that are incurred between now and the end of the trial could easily be around £40,000. This would more than cancel out any ‘gain’ of the extra £3,500 the [Post Office] might make if it gets judgment. Of course, balanced against this is that there would be a significant commercial advantage to the [Post Office] to having a reasoned judgment in its favour: it would send out a clear message to other subpostmasters.”

Stephen Dilley: Can you just scroll up to the date of that, please?

Mr Blake: Absolutely. We’re quite late on, quite close to trial now, 10 November 2006. The trial was in December.

Stephen Dilley: It was.

Mr Blake: Yes. A similar time to the period in which you were speaking to Mr Castleton. It was very clear to you and Ms Talbot that, although you are unlikely to receive your costs back, there would be a significant commercial advantage to the Post Office.

So, at that time, you knew that there were a number of other cases that were challenging or potentially challenging the Horizon System.

Stephen Dilley: I certainly knew there were two.

Mr Blake: It was important at that stage – you say it wasn’t ultimately, but at that stage – it was important for the Post Office to get a good precedent in order to avoid other claims that were challenging Horizon from succeeding?

Stephen Dilley: “Precedent” is a really interesting word because we all use it in different ways. The way lawyers and barristers and judges will understand the word “precedent” is almost certainly a legally binding precedent, a case law precedent. Okay? In – within law firms, that use of the word exists but there’s another usage as well. We talk about “precedents” in the sense of know-how, in a much wider sense.

So “Stephen could you give me a precedent particulars of claim” or what – in looser language, “What sort of knowledge do we get from that case?” It’s a looser language of the word “precedent”.

In this case, we didn’t know until quite late on that Mr Castleton would not be serving expert evidence. We were robustly defending what I believe that Fujitsu believed and Post Office believed to be a good system and we were ready to meet the case that didn’t come. And there was a PTR, a pre-trial review, in November and the date will be absolutely in my statement, and it was only then, it was only then, where, because Mr Castleton had had previous opportunities to serve expert evidence and hadn’t, that the judge decided to debar him from doing so. So we didn’t know – we didn’t know until quite late on, relative to the trial, that the case we were prepared to meet, if it did come, would come.

Mr Blake: You’ve spoken about different interpretations of the word “precedent”. I mean, it’s quite clear in that very final sentence that the precedent that the Post Office was hoping for was a clear message to other subpostmasters not to challenge Horizon?

Stephen Dilley: Yes, and I think that’s right. So what I’m – what I mean by that and don’t mean by that, I don’t mean a legally binding case that sets out clear rules for whether Horizon is good or bad because it only looked at Horizon in Mr Castleton’s case and there was no expert – there was no CPR part 35 expert report into Horizon. But it did send out a commercial message that Post Office were prepared to defend the system, and you’re absolutely right about that.

Mr Blake: Even if the effect of that would be to ruin Mr Castleton?

Stephen Dilley: Well, Post Office were aware of the risks that they would not be able to enforce their judgment.

Mr Blake: This continues after judgment as well. Perhaps we can look in May 2009 – sorry, must be May 2006 – POL00070237. It does say 2009, actually. If we scroll down to the bottom, there’s a message from yourself to Mandy Talbot, and this is talking about the Castleton case. It relates to the bankruptcy proceedings, et cetera –

Stephen Dilley: Mm-hm.

Mr Blake: – so that explains perhaps why it’s a few years down the line. You say there at the bottom:

“It is frustrating that there is no financial recovery in this instance although we knew that the prospects were slim particularly after he was made bankrupt. Post Office Limited’s main goal in pursuing Mr Castleton was achieved in that we had a good judgment precedent which helps us to defend the Horizon System.”

So although your evidence was that, ultimately, it wasn’t really about the Horizon System, the Post Office and yourself seemed to have very much seen it as a judgment precedent that helps to defend the Horizon System.

Stephen Dilley: I don’t now agree with the comment I made in that second sentence there, because when you step back and look at the judgment, all it did was reconfirm old law in terms of a legally binding precedent and so the – my language there was broader and I was trying really, I think, in that email, to remind Mandy of the – of their goal in pursuing Mr Castleton.

I might have more accurately have written that – something like what you’ve already showed me, you know, that Post Office were willing to demonstrate that they were willing to defend the Horizon System.

In terms of precedent, though, by reconfirming that old law, which includes – which was all about a case called Shaw v Picton from the 1900s, insofar as that was concerned, I do think, I do think that helped – could have been helpful as a precedent. But that concerned accountancy principles rather than the Horizon System.

Mr Blake: Putting aside legal niceties as to the definition of a precedent, this statement from you makes very clear that Post Office’s main goal was to defend the Horizon System. Do you accept that?

Stephen Dilley: I think that their main goal changed during the course of the litigation but that by certainly well before the end of the litigation they wanted to show that they were willing to defend the Horizon System. But I think if that’s where the analysis ends, it misses some really important points.

Mr Blake: Do you think it was fair for the Post Office to bankrupt somebody in order to defend the Horizon System?

Stephen Dilley: Post Office didn’t bankrupt Mr Castleton.

Mr Blake: Do you think it was fair for the Post Office to engage in legal proceedings against Mr Castleton in a case in which he raised significant issues with the Horizon System and resulted in his bankruptcy in order to defend the Horizon System?

Stephen Dilley: Post Office didn’t commence the claim against Mr Castleton with a view to defending the Horizon System. Post Office commenced the claim against Mr Castleton to recover a debt. He pursued them. He, in return, issued a counterclaim for £250,000 and we wrote to his solicitors and said, “Look, are you sure you’ve suffered £250,000 loss?” And they wrote back to us reasonably late on and insisted that he did have that claim, that he had suffered that loss.

And once they they’d issued their claim, once they’d issued any claim, it will either settle or go to trial, and once they’d issued that claim, Post Office had no choice but to go to trial or to settle. That’s the only way for it to end and they tried really, really hard to settle the case.

And I do have one regret, actually, in the case, you were asking me about that earlier, and that is that we were unable to settle it.

Mr Blake: The impression that’s given in your statement and in some of your evidence this morning is that the case wasn’t really about the Horizon System but it was a neat little legal argument about accounts and the signing of accounts. Do you accept that the intention in this case throughout, through the documents that I’ve shown you this morning, was indeed to defend the Horizon System and to avoid further litigation in relation to the Horizon System?

Stephen Dilley: I think that the Post Office – as I say, they didn’t have any choice. They couldn’t have voluntarily ended this litigation and so their motives, in some ways, were entirely academic because they didn’t have control over the endpoint of this litigation. I think perhaps the irony of this case is, because no expert evidence was served in relation to the Fujitsu Horizon System, because no evidence was served in the end, although they were ready to meet the case, it didn’t become about Horizon.

Of course, Horizon Issues were discussed in the trial. You had Anne Chambers give evidence, for example, about what she found, but it didn’t become about that. It became about accounts. And you talk about it in a neat little way as though it wasn’t a substantive point. It’s a really, really, super important point. By the end of the trial – Richard Morgan, the barrister for Post Office in the case, by the end of the trial, he was all over the numbers. I don’t know, of course, what he will remember but he was all over the numbers and, by the end of the trial what he had done, he’s got all the primary accounting documents, all the primary accounting documents, and reconciled in them to the cash accounts.

So if we’d have done, again, a taking of account, it would have come to the same result and Mr Castleton confirmed that in evidence. So, in the end, the reversal of the burden of proof on that, yes, it was helpful, I won’t say it didn’t matter, but it sort of didn’t matter because we could do it. So we proved this case, irrespective of the Horizon System.

I’ve talked in my statement of what I would have expected to have seen, based on my understanding of what witnesses were telling me, had there been an issue with the Horizon System, and that is where there was a mismatch between what Horizon was saying and the paperwork, I would have expected an error notice to have been generated – not I would have expected but that’s what the witnesses were telling me because, you know, it wasn’t my evidence. But the really interesting thing in Mr Castleton’s case is I think there were only about 15 error notices generated.

If the computer system changed what he or his assistant typed into it, you would expect there to have been loads of error notices and there weren’t.

Mr Blake: Mr Dilley, how on earth could you know that, though? Are you an expert on the Horizon System?

Stephen Dilley: I’m – a really important point that I make in my statement is that the only thing I can tell anybody about this now is from what people have told me. So I’m – this is my secondary evidence, if you like. This is my evidence of their evidence.

Mr Blake: But, I mean, you’re in some ways suggesting that, as a matter of fact, that is what would happen but, in fact, what you’re saying is you’re just simply regurgitating what you’ve been told by others?

Stephen Dilley: It is – it was my belief by what I was told from a number of the witnesses that that would happen, and the error notice system was nothing to do with Horizon or Fujitsu, nothing to do with that. So this case was brought on the basis of physical paper accounts, agnostic of the Horizon System, and that’s why, in some ways, it’s an odd case to be looking at.

Mr Blake: Mr Dilley, I’ll ask you one last time about this final sentence here:

“Post Office’s main goal in pursuing Mr Castleton was achieved in that we had a good judgment precedent which helps us to defend the Horizon System.”

Was the main goal of the Post Office in that case to defend the Horizon System?

Stephen Dilley: They didn’t have one consistent goal throughout the life of the case but it is reasonable to say that, partway through the case, certainly we’d advised them – and you’ve taken us to my advice, rightly to my advice – they believed that the starting goal of a recovery of a debt wasn’t going to be achieved and so what they wanted to show is that, if the Horizon System was challenged, they were willing to meet that challenge.

As I say in the end, the irony was the case didn’t come on the IT. Notwithstanding what I say there, the case did not come on the IT because the IT expert evidence was not produced, and that’s the somewhat irony.

The case in the end was based on paper accounts.

Mr Blake: I said I’ll only ask once but perhaps I’ll take it slightly differently. You’ve already given evidence about how consistent your paperwork and your notes are with what you actually did at the time. Your note here clearly says that Post Office’s main goal was defending the Horizon System. Do you accept that that was, in fact, their main goal?

Stephen Dilley: It became a goal. It became their main goal that they would be willing to litigate where subpostmasters and, in this case, one subpostmaster was making an allegation about the system because, for all the documents you’ve rightly taken me to this morning, they were willing to have – litigate to send the message that they would stand firm, and that’s what these documents show.

Sir Wyn Williams: Mr Dilley, I’ve got two questions about that sentence, which I hope will resolve this issue. First of all, is that sentence accurate? Secondly, if it is not, why did you write it?

Stephen Dilley: I don’t think it is as accurate as I would have liked it to have been, rereading that now. I think I was simplifying –

Sir Wyn Williams: But you were –

Stephen Dilley: – simplifying in a way what Post Office were doing, and –

Sir Wyn Williams: So what should you have written?

Stephen Dilley: I should have said something like:

“Post Office’s main goal in pursuing Mr Castleton was achieved in that we showed the world, if you like, you were willing to defend allegations about the Horizon System.”

It also set a useful precedent, insofar as it renewed the authority, the old authority in Shaw v Picton. That would have been a bit wordy but it would have been more precise.

Sir Wyn Williams: When Ms Talbot received that communication from you, did she write back saying, “Hang on, you’ve got it wrong; that wasn’t our main objective”?

Stephen Dilley: I don’t recall but it’s entirely possible you’ve got a response –

Sir Wyn Williams: I make it clear, Mr Dilley. I don’t know the answer to that question. I’m just asking you whether you know.

Stephen Dilley: I don’t but the file might tell us.

Sir Wyn Williams: All right, thank you.

Mr Blake: Thank you, sir. Shall we take our mid-morning break until 11.30?

Sir Wyn Williams: Yes, of course. Fine.

Mr Blake: Thank you very much.

Sir Wyn Williams: Sorry, what time?

Mr Blake: Just after 11.30.

Sir Wyn Williams: Yes, that’s fine.

Mr Blake: Thank you.

(11.11 am)

(A short break)

(11.30 am)

Mr Blake: Sir, can you see and hear me?

Sir Wyn Williams: Yes, I can, thank you.

Mr Blake: Thank you very much.

Mr Dilley, we’ll move on to the topic of disclosure, something that you wanted to talk about. Can we look at POL00082222, and that is the defence and counterclaim from Mr Castleton. I took you to this much earlier today, and I took you to paragraph 5, that’s over the page, and also paragraph 9, and the point that was made was that the Horizon System was certainly front and centre of Mr Castleton’s defence and counterclaim. It was a broad attack on the Horizon System.

Can we look at POL00069298, please. This is a response to a request for further information. So for those who aren’t aware of the process, the Post Office makes a request for further information and a defendant to proceedings will respond in the way they have here, providing that information. Can you see that on your screen in front of you?

Stephen Dilley: Yes, I can.

Mr Blake: Is that a correct summary of the process?

Stephen Dilley: Yes, it is.

Mr Blake: Yes. Can we scroll down, please. This response is dated 10 April 2006. Now, the wording there is the Post Office’s wording, in that it sets out what the request from the Post Office was to Mr Castleton. Can you see that? There’s no need to look at hard copy documents, they’re all coming up in front of you?

Stephen Dilley: Thank you. Yes, I can.

Mr Blake: Yes. Paragraph 1.1, you’ve asked or the Post Office has asked Mr Castleton to please state precisely:

“The full nature and extent of the problems that the Defendant alleges he encountered with the Horizon System and on what occasions he encountered them.

“1.2 How and why each of the alleged problems with the Horizon System meant that the losses in question were allegedly theoretical rather than real.”

Stephen Dilley: Yes.

Mr Blake: If we go over the page, we’ll see his reply to that request for further information.

Stephen Dilley: Yes.

Mr Blake: He sets out there a number of problems that he said he encountered with the Horizon System.

Stephen Dilley: He does.

Mr Blake: If we look at (i) he says, “Not communicating properly”. I think if we look down that paragraph, it says:

“The Defendant believes that periodically, several times throughout a day’s trading, the base unit would then transmit data input both to it and through the node unit, onwards to the central station. On occasions too numerous to recall during the period in question, the Defendant told the Claimant that he considered that the 2 units were not communicating with each other properly.”

The next problem that he encountered, “Screen freezing”.

Stephen Dilley: Yes.

Mr Blake: If we look at the last sentence there:

“This problem was a regular occurrence and happened approximately weekly during the period in question.”

Stephen Dilley: Yes.

Mr Blake: Over the page, “Blank screen”:

“The display of one or other or both of the terminals would suddenly go blank before returning to the sales screen. This problem occurred approximately monthly during the period in question.”

Stephen Dilley: Yes.

Mr Blake: Next one “Card swipe not reading”?

Stephen Dilley: Yes.

Mr Blake: Next one “Rolling over cash figures”?

Stephen Dilley: Yes.

Mr Blake: “The Defendant believes that the Horizon system ‘rolled over’ cash figures in the weekly cashflow figure (a report that can be produced, also known by the Claimant as On Hand Cash Handling, or ONCH) giving a figure that was 4-5 times as big as the actual cash declaration for that day.”

Stephen Dilley: Yeah.

Mr Blake: If we scroll down at the end of that paragraph, it says:

“On average, the figure given by the system was incorrect on at least one occasion each week (although previously, prior to the Defendant being aware of the facility to print the figures, Ms Train had noticed that the figure was incorrect more frequently, often several times each week).”

The next problem he identified “Lost transactions”:

“The Horizon System would ‘lose’, ie fail to record, transactions which the Defendant knew he had entered onto the system.”

Stephen Dilley: Yes.

Mr Blake: Can we scroll down over to the next page, please, and Mr Castleton says here at 1.2:

“How and why each of the problems experienced by the Defendant with the Horizon System means that the alleged losses in question were theoretical rather than real, is an issue that will require disclosure from the Claimant for the period in question, in particular as to the correct operation of the Horizon System’s software (including any modifications or upgrades), and the correct operation of the hardware maintained by Fujitsu Services (including any replacement equipment), together with expert evidence, both in the field of Information Technology and Accountancy.”

Stephen Dilley: Yes, he does.

Mr Blake: Then, without prejudice to that, he provides a response.

Stephen Dilley: May we just go down and quickly look at the remainder of the response? Thank you.

Mr Blake: Thank you. Can we look at LCAS0000354, please. This is the disclosure list. It’s dated 18 May 2006, so a month after that response to the request for information. Many of the complaints in Mr Castleton’s request for information are familiar to the Inquiry. Is there any detail in the list that follows of any of those complaints – of any investigations having been conducted with Fujitsu, for example, to identify wider problems with the Horizon System? Can we scroll down.

Stephen Dilley: Yeah, have a look. You’re really testing my memory but, please, take me to it.

Mr Blake: Okay.

Stephen Dilley: Yeah, can we go on to the list which was attached, please. No, not that one. Keep going. Okay. Just keep scrolling down. Yeah. Keep scrolling down. Go on to the next page, please. Just keep going through this list. That’s helpful. Thank you. Mm-hm. Mm-hm. Mm-hm. Mm-hm. If you can just slow down now, please.

Okay. Go on to the next page. Thank you. Mm-hm. Okay. That’s fine, thank you.

Mr Blake: So having looked at that list, I think you had a smile on your face –

Stephen Dilley: Oh, sorry, I forgot the question! Can you put the question?

Mr Blake: Is there disclosure in that list of, for example, investigations having taken place in relation to those kinds of problems in the Horizon System?

Stephen Dilley: Gosh, that would require me to remember what all of those documents – all of those documents meant and I don’t. But what I can see the list does include is Fujitsu product codes, transaction logs, which is – my understanding of what I was told is that was the line-by-line IT record of each transaction processed in a branch; an events log, which is a record of events on the Horizon System, such as logging on, logging off, printing reports, everything that happens on the system; overnight cash holdings, I don’t know if we saw a mention of that in the part 18 response that you took us to a moment ago; Horizon System Helpdesk logs; and NBSC call logs.

In the Horizon System Helpdesk logs, I would imagine you – I mean, I haven’t got them in front of me but, if they’re in the pack, we could go to them. I would imagine in the Horizon System Helpdesk log, which I think was the second tier of the Helpdesk, as I recall it, there would have been evidence of or information about Mr Castleton calling the Horizon System Helpdesk and what they did, I think, to look into it.

But it is also fair to say, for completeness, that in this list of documents, it doesn’t contain the entirety of Post Office’s disclosure because, after this list was served, Mr Castleton’s solicitors asked – and when I – when we prepared this list, I believed at the time that this was a thorough list, and I still believe that, I believe they carried out – Post Office carried out a reasonable search, but it is fair to say, and I must say for completeness, this wasn’t the entirety of the information supplied to Mr Castleton and his team.

Mr Blake: Well, at this point in time, this was the disclosure list that was provided to Mr Castleton –

Stephen Dilley: Yes, it was.

Mr Blake: – May 2006 –

Stephen Dilley: Yes, it was.

Mr Blake: – and that followed his response to the request for information?

Stephen Dilley: Yes, that’s right.

Mr Blake: Now, this isn’t a law exam but what do you understand the tests for inclusion in that list to have been, broadly?

Stephen Dilley: Yeah, so, Post Office’s duty – and I’ve set it out from the rules in my statement, so you’ve got it word for word – was to carry out a reasonable search for documents that could help or harm its case or Mr Castleton’s case. My belief at the time this list was prepared is that they had done a thorough job.

Mr Blake: The tests include material that would adversely affect the Post Office’s case –

Stephen Dilley: It absolutely does, that’s right.

Mr Blake: – and it includes material that would support Mr Castleton’s case?

Stephen Dilley: That’s correct, and when you have to take into account the – you have to take into account four factors that are relevant to the reasonableness of a search and they include the number of the documents involved; the nature and complexity of the proceedings; the ease and expense of retrieval of any particular documents; and the significance of any document which is likely to be located during the search.

Mr Blake: Given the centrality of the Horizon System to Mr Castleton’s own case, do you think that was sufficient?

Stephen Dilley: At the time, I did.

Mr Blake: Do you now consider it to have been insufficient?

Stephen Dilley: Well, I have explained that we prepared a supplemental list of additional documents that we disclosed after this list had been prepared. I would have preferred, had I known about those other documents, to have put them in this list here.

Mr Blake: Can you tell us – you may not be able to tell us off the top of your head, perhaps by refreshing your memory from your statement – when you disclosed further documents?

Stephen Dilley: Yes, I can. Promptly, promptly after serving this list, reasonably promptly, Mr Castleton’s solicitors wrote back to me and said “We haven’t got the full audit trail we want” and I picked that up with Post Office and tested that with them and they said that’s what the transaction logs are. So he had got that but another thing he picked up with me is, for example, they wanted to see software updates.

So there was – Mr Castleton had a belief, I think, that, when Fujitsu released software updates, it could cause problems with his system and so his solicitors wrote to us and said, “Well, we want to know, when was this software updated?” Perfectly reasonable question on the part of his solicitors, it seems to me. We went back to them promptly with a spreadsheet of the software updates so they could know. What we then did, later on in the case, because we made various further disclosures, is later on in the case, we pulled those together in a supplemental list that, for the most part, referred back to disclosure – further disclosure we had then, by the time that supplemental list was preparing, had made.

Mr Blake: This list was provided on 18 May 2006?

Stephen Dilley: Yes.

Mr Blake: Do you think, by that stage, you were sufficiently on notice that Mr Castleton’s case focused on the entire Horizon System and the reliability of that system?

Stephen Dilley: It’s absolutely clear, at that case, that Mr Castleton was concerned, very concerned, with the operation of the Horizon System at his branch, yes. What we found it harder to understand, much harder, which is why we served the Part 18 Request, is the specifics of that because his defence and counterclaim was – the original defence and counterclaim, he later amended it – was quite broad and high level.

So what we wanted to do is draw out in that Part 18 Request more specifics so we could understand what he was saying and focus on the problems that he was putting to us.

Mr Blake: Having received that response to your request for further information, a month before this list was produced, do you think there is sufficient information in this list relating to all those problems that he identified?

Stephen Dilley: It certainly took us a step further than we had been in, it’s absolutely right to record that, and that was useful. When we, however, stood back, even from that list, and reflected on it over the course of a period of time, particularly after I’d gone to see with a colleague Mr Bratt, Fujitsu in June, we were still struggling to understand not what he was saying, because, you know, he said what he said in the response, but how that would – was said to have caused illusory losses at his branch.

Mr Blake: On receiving his response to your request for information, did you put in train enquiries about Horizon terminals not communicating properly, screen freezing, blank screen –

Stephen Dilley: Yes.

Mr Blake: – card swipe not reading?

Stephen Dilley: Yeah, yeah, yeah.

Mr Blake: So you put in train an investigation into each one of those issues and you disclosed the product of that investigation?

Stephen Dilley: What we did, and it’s documented in my statement and the exhibits to it, is, even before we got that list in November, in – I think it was about November 2005, my date might be wrong, but it was certainly in 2005 – we prepared back then a letter to Fujitsu, before we had that Part 20 information, and we said, “This is a case where this is our claim, this is the defence. There are allegations about the system. We need from you, we need from you” – and that was our thinking at that point in time – “an IT expert report into it”.

And I sent it to a chap at Post Office called Nick Samuel, who doesn’t otherwise really feature in the case, and said, “I don’t know who to speak to at Fujitsu, can you pass that on to them?”

We didn’t – I didn’t get – I didn’t get any response. I can see in the additional documents in the core bundle, some of which have been passed to me very recently, that Post Office got a response from Fujitsu. When I saw that the other day, I cross checked it against our correspondence file, I turned the page on it, I couldn’t see it anywhere in our file which led me to believe that we weren’t given that response, as far as I can tell. And I can’t remember having got a response at that time.

So in November we commission – we say, “Come on, Fujitsu, this person’s telling us there’s problems with the system”, but to my knowledge, we didn’t get a response.

There’s then a call – I’m going to say it was about March, but that date may be wrong. There’s then a call we have with Hugh James solicitors, who were at that time looking at the cases of Mr Bajaj and Mr Bilkhu, and we have a call and we say, “How are we going to get information from Fujitsu?” And it was decided on that call we’d have to go and see them and there was no shortcut to going to see them, and I was to go and see them and, initially, with a partner at Hugh James, called Mr Hulbert, although ultimately he sent somebody else, and we went to see them in June and we put to them, we put –

Mr Blake: I’m going to stop you there because we will get to this period in time but can you tell us where are you in timings now? Where are we?

Stephen Dilley: So when we went to see – so we had, in about November 2005 said to Fujitsu “We’re going to need some information from you”. In the spring of 2006 we hadn’t got that information, and we thought “We need that information from them”, and in June –

Mr Blake: Did you get that information?

Stephen Dilley: In June 2006 I went to see them and I put to them – by which stage of course, you’re entirely right, we had Mr Castleton’s response to our request, and I put that to them and we went through it with them, point by point, and tested it with them, to understand whether what he was saying would have the effect that he was describing.

Mr Blake: Is it your case that, despite that taking place after this list had been written, you then subsequently provided all of that information to Mr Castleton?

Stephen Dilley: To the best of my knowledge and belief at the time, we did, save for – save for one document which came out much later, much later, and that document is called a Tivoli event log.

Mr Blake: We will also get to that but I’m focusing now on, let’s say, 18 May 2006. You’ve produced this document. I actually want to take you back in time and let’s look at POL00073739, please – sorry, POL00070563. Thank you very much.

So this is November 2005, this is six months before that disclosure list that you were required under the Civil Procedure Rules to provide. It’s a letter from Mr Castleton’s solicitors to Bond Pearce, and I’m going to read quite a lot of that letter into the record. They say:

“We refer to [an earlier letter] and … the November 2005 edition of the SubPostmaster Magazine.

“You will see the highlighted section is a letter from a subpostmaster in Chelmsford complaining of acute problems with the operation of the Horizon computer system, and the complete unwillingness on the part of both the Post Office and the Horizon helpline to assist with the problem, or even acknowledge that a problem exists.

“The parallels with our own client’s position are striking. Indeed, our client’s research shows that the situation in which the subpostmaster in question finds himself is duplicated among a substantial number of other subpostmasters around the country.

“We are instructed that your client has been forced to settle claims bought against other subpostmasters, some of which involved very substantial payments being made to the subpostmaster, rather than take the matter to trial. Your client then commonly insists on the insertion of a confidentiality clause into the settlement agreement to prevent the subpostmaster discussing either the dispute or the terms of the settlement.

“One entirely reasonable assumption, based on the above, is that your client is only too aware that the Horizon System does not perform properly but that it cannot and will not publicly acknowledge that fact because to do so would potentially expose it to a wave of claims from subpostmasters who have been accused of shortfalls and who have made good the alleged losses. To acknowledge the problem would also most cause acute embarrassment to your client and, most likely, a public relations disaster.

“In short, this not an isolated incidence of problems with Horizon. This is entirely consistent with our client’s position since the dispute first arose. Your client flatly refused to countenance that the alleged shortfall could be the result of anything other than user error (or even outright fraud) on the part of our client or his employees, despite the fact that it knew very well that there are numerous other cases with similar, if not identical facts, around the country.”

Stephen Dilley: Mm-hm.

Mr Blake: I mean, that’s spot on, isn’t it, about the situation with Horizon at that time?

Stephen Dilley: My knowledge was actually – concerns – the sort of limit of my knowledge concerns two other cases, Mr Bajaj and Bilkhu. If Post Office themselves knew about more than those other cases, then that’s – I can’t give that evidence because I don’t know.

Mr Blake: But in November 2005, you were being told by Mr Castleton’s solicitors that the problem is with the Horizon System, not simply Mr Castleton’s own Horizon terminal?

Stephen Dilley: Yes, but that was not in his pleaded case.

Mr Blake: Well, we can go back to his pleaded case. Let me just finish this letter first because the letter is quite important. If we go over the page, please, they say:

“In the circumstances, this supports our previously-expressed requirement that your client provide full and frank disclosure of the problems that it has experienced with the Horizon System, the claims that it has pursued against other subpostmasters on the basis of alleged shortfalls and the outcome of those claims. We shall expect your client to comply with its disclosure obligations in this regard as and when these proceedings move on to the service of List of Documents.”

So this was November 2005. We’ve looked at the list of documents. Is it fair to say that, in that list of documents, there was no such disclosure of problems with the Horizon System that had been experienced by the Post Office?

Stephen Dilley: No, it’s not fair to say that because, in the call logs to which I have referred, they demonstrate Mr Castleton trying to contact two different helpdesks and raising issues with the system but it would be fair to say, if this is your question, that our disclosure didn’t relate to other branches. That would be absolutely right to say.

Mr Blake: And that your investigations didn’t relate to other branches?

Stephen Dilley: Correct.

Mr Blake: Despite the fact that, as we’ve established, the Horizon System was front and centre of this case?

Stephen Dilley: Well, I was absolutely concerned to investigate the operation of the Horizon System at Mr Castleton’s branch. I’ve explained – you know, this question has been put to me in evidence and I’ve worked through it fully, I don’t think I can add to it in oral submissions today. But I’ve explained how we approached this, we looked at the cost of – we went away after I got this letter – and you’re right to say it’s a significant letter. We went away and looked at the cost of getting information about other branches and we were told it would take a certain amount of time and cost a certain amount of money, but really –

Mr Blake: £2,000 to £3,000?

Stephen Dilley: Yeah, but the other point is, can you just flick to the –

Mr Blake: We’ll go to that –

Stephen Dilley: Can you just flick back a page? The other point I think they were saying here – just scroll down, please – the other point I think they were, as I understand it, they were saying they wanted – please may we just scroll down a little bit more? If we just go on to the next page again.

So look, in this paragraph here, what I understood Mr Castleton’s solicitors to be talking about is (1), disclosure in relation to any problems its experienced with Horizon system, and (b) the claims it has pursued against other subpostmasters on the basis of alleged shortfall and the outcome of those claims, which may or may not, in that instance, relate to problems with the Horizon System.

Do you see that? That’s how I’d understood it at the time and I just thought that was super, super, super broad. Super broad. And way, way, way beyond, way beyond Post Office’s disclosure duties to carry out a reasonable search – way beyond.

Mr Blake: We spent much of this morning looking at how Post Office saw defending the Horizon System as a main plank of – main part of this case?

Stephen Dilley: Mm-hm.

Mr Blake: Do you not think that disclosure about wider problems in the Horizon System would have assisted Mr Castleton’s case or undermined the case for the Post Office?

Stephen Dilley: You’re asking me to speculate on what such disclosure would have revealed but where I come back to in the case against Mr Castleton is – and so that’s sort of a “what if” speculation but where I come back to in the case against Mr Castleton is this was a case that, in the end, whilst absolutely he said, as we’ve seen all morning, there are problems with this system, is that what the case was decided upon was agnostic of the Horizon System.

It was based upon physical records and we knew, we knew, that we had the underlying primary accounting documents that matched the cash accounts. So if the system had been causing illusory losses, there would have been this mismatch.

Mr Blake: Mr Dilley, that was your case, that was the Post Office’s case. It was Mr Castleton’s case that there were problems with their overall Horizon System. Was it not right to afford him the opportunity to have disclosure of wider problems with the Horizon System?

Stephen Dilley: I stand by what I’ve said. I understand the point you’re putting and I understand you have to put the point, of course you do, but I stand by what I said in my evidence and I absolutely believe that Post Office met its duty of carrying out a reasonable search by the criteria in the Civil Procedure Rules.

Mr Blake: Can we look at POL00073739, please, and it’s the bottom email. That I’d like to start with. This is an email from you to Mandy Talbot, 11 November 2005. So that’s the day after the letter that I’ve just drawn to your attention –

Stephen Dilley: That’s right, that’s right.

Mr Blake: – was received. You say in the bottom paragraph there:

“I attach a letter dated 10 November 2005 for Mr Castleton’s solicitors to Bond Pearce for your information, together with an article from the November 2005 edition of the SubPostmaster Magazine in which a subpostmaster in Chelmsford complains of problems with the operation of the Horizon computer system. Other subpostmasters’ problems are in my view irrelevant to the issue of whether the Horizon worked for Mr Castleton, unless there is evidence of widespread problems. Mr Castleton’s specific point is that there are widespread problems with Horizon and accordingly he should not have been dismissed.”

Stephen Dilley: Correct.

Mr Blake: So you’ve identified there that the issue, so far as Mr Castleton saw it, related to the widespread problems in Horizon?

Stephen Dilley: Yeah, and I was – as I say, the only other issues about which I was made aware, as far as I recall, are in two other branches at that time: Mr Bajaj and Mr Bilkhu. And when we put to Post Office – because it’s important of course you put these points – when we put the point to the Post Office “Is this system robust”, whenever we put those points they came back and said that that’s what they believed.

Mr Blake: Could we scroll up, so it’ll be the first page, it’s the further email from yourself to Mandy Talbot and Cheryl Woodward. It says:

“Mandy, please can you let me know whether the Post Office has experienced widespread problems with Horizon?”

So that’s the question that you’ve just referred to.

Stephen Dilley: Yes.

Mr Blake: “Mr Castleton’s solicitors disclosure of this sort of information before they agree to mediate. If it would be difficult for you to find out this information, please can you give me an idea of how and why it would be difficult (and expensive) to retrieve it? (eg perhaps there are no central records). This will give me some ammunition to go back to Mr Castleton’s solicitors with to explain why the Post Office does not feel it is appropriate to disclose it and to try to persuade them to mediate sooner rather than later.”

Stephen Dilley: And that led, I think, to either a call or an email exchange with a chap at the Post Office called Dave Hulbert, to which I’ve referred.

Mr Blake: You’re there seeking “ammunition” to try to bat away a disclosure request.

Stephen Dilley: I thought the disclosure request from Mr Castleton’s solicitors at the time was far too wide but it is also fair to say that, in a lot of litigation, you do have an issue where the claimant’s solicitors want as wide a disclosure as possible and, to my mind, what they were seeking was miles too wide. It wasn’t just – you remember from the letter – issues with Horizon; it was any litigation with any subpostmaster.

Mr Blake: So at this stage –

Stephen Dilley: And I – and what I did think, though, would be relevant is if there were issues at his branch.

Mr Blake: At this stage, November 2005, you didn’t have instructions from the Post Office yet to say that it was too onerous; it was your view that it was too onerous and you seemed to be asking the Post Office there to give you some ammunition to bat it away?

Stephen Dilley: Gosh, it’s difficult to be definitive about that but I think when I saw – you know, with the distance of time, but I think when I saw their letter, I thought “Yeah, this is much, much too wide”. Not a bit too wide but miles too wide. That was my view, based on the view that I genuinely held based on the Civil Procedure Rules, my understanding of them, the way Mr Castleton was putting his defence at the time.

Mr Blake: If you had known, at the time, that there were a large number of challenges bubbling away and bubbling up, do you think you might have taken a different approach – challenges about Horizon?

Stephen Dilley: Gosh, that’s certainly a good question that I would want to reflect on, because I – I mean I do say, if there are widespread issues, it would have been something I would have had to have really thought hard about. But the ones that I recall being told about is that there were two.

Mr Blake: So you recall being told about two?

Stephen Dilley: Mm-hm.

Mr Blake: If you had been told about a larger number, do you think that would have encouraged you to make much wider investigations into the Horizon System?

Stephen Dilley: If Post Office had said to me, you know, “We’re” – I don’t know whether this is true, I’m going to pluck figures out of thin air – I knew at the time that there were thousands of Post Office branches, and I’ve looked back for the purposes of this statement and we’ve got some records from a Post Office document submitted to Parliament that at this time there were about 14,000, okay? That’s loads of Post Office branches up and down the country.

If I had been made aware that there’d been, for example, thousands and thousands and thousands of people saying that their computer system was wrong, it was causing illusory losses, you’d have had to have thought much harder about all sorts of things, but including what your duty of disclosure was and the scope of it.

Mr Blake: So the example you’ve given is thousands and thousands and thousands. If there were thousands and thousands and thousands, would you have disclosed wider problems with the Horizon System, if they existed, if you’d searched for them?

Stephen Dilley: I think that is much more likely.

Mr Blake: Hundreds?

Stephen Dilley: What are hundreds as a percentage of 14,000 branches?

Mr Blake: So you would have taken an arithmetical calculation as to –

Stephen Dilley: No, it’s really – these are “what if” questions. You have to make decisions. The beauty now is we have the benefit of knowledge some 17/18 years later. At the time, you have to do the best with the information you were given and what Mandy – I certainly don’t recall it and I believe I absolutely would recall this, Mandy didn’t come back to me and say, “Hi, we’ve got loads of problems with Horizon, Stephen”. And I don’t think – well, she will have to give evidence about what she was aware, but in relation to one particular problem, which Mr Castleton told us about late on, she emails me and said to me that this came as a bolt out of the blue and that’s the language in her email.

Mr Blake: We know much further down the line that at the Bates litigation, for example, there were 555 claimants.

Stephen Dilley: Mm-hm.

Mr Blake: If there was a significant action like that afoot, would that have prompted you to make wider enquiries in the –

Stephen Dilley: If there had been a class action pursued by 550, I think you said, ish, subpostmasters, your disclosure duties would have to be looked at very differently.

Mr Blake: Can we look at POL00070496, please, and it’s the bottom email. 21 November 2005, so very soon after.

Stephen Dilley: Mm-hm.

Mr Blake: An email from Tom Beezer to yourself and others?

Stephen Dilley: Yes.

Mr Blake: The very last line on that page:

“Hugh James are currently trying to contain an embryonic and not yet issued class action relating to the Horizon System. A judgment in relation to it (even a default) is currently very bad news for [Royal Mail].”

Stephen Dilley: Mm-hm.

Mr Blake: Isn’t that an example of a class action that is happening, in its embryonic stages, which might have prompted you to rethink your disclosure obligations?

Stephen Dilley: I understand the purpose of the question, you must put it, but when we probed with Mandy what that was, our understanding was really that she was talking about Bajaj and Bilkhu. And I don’t wish to criticise Mandy Talbot but she did have a turn of phrase that wasn’t always, I came to learn, that wasn’t always accurate and the only two cases that came to my attention when we dug on this are those two.

If she was aware of more cases, 550 cases, she never told me and she never told my firm.

Mr Blake: Wouldn’t the mention of a class action make you think about your disclosure obligations in this particular case?

Stephen Dilley: Well, I agree with you, the mention of a class action caused us – caused us to have conversation about what this was about. But actually there was two other cases. So, yeah, you’re right. You do have to think about it. I mean, disclosure hadn’t come up at that point in time but you do have to think about it, you do have to think ahead. But when we tested that with her, there was Mr Bajaj and Mr Bilkhu.

Mr Blake: In November 2005, so you’ve received a letter I think, from Mr Castleton’s solicitors about wider problems.

Stephen Dilley: Mm-hm.

Mr Blake: You’ve received information from Mandy Talbot –

Stephen Dilley: Mm-hm.

Mr Blake: – talking about a not-yet-issued class action. Were you not getting concerned at that time about getting together sufficient information to disclose to Mr Castleton in respect of the core of his claim?

Stephen Dilley: I think it’s fair to say, when I first inherited the case, a lot of the focus was on setting aside a default judgment, which Mr Castleton had obtained, but I do recall, from refreshing my memory on the file that I looked at, pre-action disclosure which had been done. And, at that point in time, as I record in my statement, I did have concerns about pre-action disclosure, which had been done and whether it could have been more extensive.

Mr Blake: Do you see as a missed opportunity to look further into the Horizon System?

Stephen Dilley: It was an opportunity that was probed with Mandy by asking her what it was about. And can you scroll up, please, on to the preceding page and just scroll up to the – yes, there we go. So this email exchange, this internal email exchange between Tom Beezer, who was the supervising partner on the case, and myself, was – the context on this was off the back of our discovery that Mr Castleton had obtained default judgment.

So it’s a very – Tom is reporting the conversation he had, so my evidence of it, of course, is secondary. Tom is reporting a conversation that he had with Mandy Talbot. The right thing to do, which we did, was to probe and understand that and get under the skin of it, which we did, and what we were told, what we were told, is that there were issues with Mr Bajaj and Mr Bilkhu.

If – now, Mandy may or may not have been aware of more but that’s what we were told. But, if that is the extent of what was going on, I think it would have been inaccurate of Mandy to have talked about an embryonic and not-yet-issued class action but she was quite dramatic and I think she was saying this in the context of worrying because a default judgment had been obtained.

Mr Blake: Can we scroll down and over the page, please, because there are “Requests from Mandy”:

“Mandy has made number of requests that I feel we MUST comply with.”

Looking at number 2:

“that she be sent a full set of proceedings (in order) and a full set of correspondence … from the outset of the matter. Stephen, this MUST BE DONE ASAP. Mandy has a meeting on the Horizon matter on Friday this week. She needs this paperwork. Please confirm that the files and an appropriate covering letter … will be sent out in tomorrow’s DX …

“3) due to the matters handled by Hugh James relating to Horizon …”

So that’s the matter we’ve just been talking about.

Stephen Dilley: Those two matters, yes.

Mr Blake: Pardon?

Stephen Dilley: They were handling two matters, Mr Bajaj and Mr Bilkhu, separate matters.

Mr Blake: Where does it say that?

Stephen Dilley: No, that’s what I came to learn.

Mr Blake: Well, the wording here is:

“… Mandy asked that we speak to them to ensure we were all pulling in the same direction. This is even more important given the threatened class action …”

She again repeats the word “class action”?

Stephen Dilley: Yes, it is.

Mr Blake: “Who makes this call is partly dictated by how many Horizon related cases we currently have.”

Stephen Dilley: Mm-hm.

Mr Blake: “More on this below.

“4) Mandy asks that we NEVER issue proceedings on a claim based on Horizon evidence (or connected in any way to Horizon) without her specific consent. Please let everyone know this.”

Is this – do we see the Post Office trying to exert control over the conduct of Horizon-based litigation, so far as you could tell at that time?

Stephen Dilley: Yes.

Mr Blake: “5) Mandy wants a report on how many Horizon based claims we currently handle. Please action with your teams. I will coordinate the response …”

Can we, please, now go to POL00070492. We’re now on 22 November 2005. If we look at the bottom email, it’s an email to Mandy – is it from you – no, you’re copied in. I think it’s from Tom Beezer; is that correct?

Stephen Dilley: Mm-hm.

Mr Blake: He says at (3):

“an updated spreadsheet is being prepared listing all Horizon related cases. From my end you are aware of Blakey and Patel.”

So are those the two that you were talking about or where does Bajaj fit into that?

Stephen Dilley: No, Bajaj and Bilkhu. That’s what Tom is saying to Mandy Talbot.

Mr Blake: So those are, sorry, the two cases or are there now more than two cases?

Stephen Dilley: Well, I mean, this is my evidence of a conversation that somebody else had with Mandy Talbot but what that email is saying is, “From my end, you are aware of Blakey and Patel”. That is not Bajaj and Bilkhu.

Mr Blake: So there is a spreadsheet being prepared of Horizon cases?

Stephen Dilley: Mm-hm.

Mr Blake: Now, it seems there are at least, at a minimum, four because there are the three that you mentioned –

Stephen Dilley: Yes, correct, correct.

Mr Blake: Of course, these are only matters that have reached court proceedings, they aren’t a list of, for example, complaints about the Horizon System. They’re matters that have actually reached at least the litigation stage, whether it be pre-action or in court?

Stephen Dilley: That’s my inference. What I don’t know, though, from looking at this, is how do you define “Horizon related matters”. For example, is it – do you define that as a case where you’re running it based on evidence from the Horizon System? Do you define it as a case where the subpostmaster or subpostmistress has said “I don’t think Horizon is working very well”. So I don’t know, looking back on that, what the definition was.

Mr Blake: Were those questions you asked at the time?

Stephen Dilley: I just – I just can’t recall but, you know, it was just so long ago. I can’t – I don’t now know what was meant by “Horizon related cases”. I mean, the Horizon computer system was in every Post Office branch. So if you took a really expansive view, you could say, well, any litigation must be. Well, that didn’t mean that the litigation that a subpostmaster said, “There’s a Horizon based problem”, and it didn’t necessarily mean that it was pursued on reliance of Horizon information. So I just can’t remember at this stage, I’m sorry.

Mr Blake: This is November 2005, so well before that disclosure list in May 2006.

Stephen Dilley: Mm-hm.

Mr Blake: You were, by that stage, aware of a spreadsheet relating to Horizon cases?

Stephen Dilley: Mm-hm.

Mr Blake: The case of Blakey, the case of Patel, two other cases. You’re aware of mention of an embryonic class action.

Stephen Dilley: Mm-hm.

Mr Blake: Did that make you think there that it would be reasonable and proportionate to do broader searches into problems with the Horizon System?

Stephen Dilley: So Blakey, Patel, as I say, I don’t – they weren’t cases that I recall myself working on, and I don’t know how we defined “Horizon related issues”. Bilkhu and Bajaj handled by Hugh James were the only other two. Four? No.

Mr Blake: Well, it’s a spreadsheet, it may not just be four.

Stephen Dilley: Well, I don’t remember seeing the spreadsheet. I might have done but, certainly, as I’ve turned the page on our file relating to Mr Castleton, I haven’t seen it.

Mr Blake: Pursuing a claim that was ultimately going to lead to somebody’s bankruptcy, for the purpose of defending the Horizon System, reading about Horizon related cases at this time, might it have been worth pressing the Post Office and Fujitsu a little bit more?

Stephen Dilley: I don’t think the case would necessarily have resulted in Mr Castleton’s bankruptcy, even if he could not have afforded to pay the judgment debt. I don’t think that was by any stretch set in stone at that point in time. But all I can say, with the knowledge that I had in the time, is that I was more than satisfied, as I’ve recorded in emails at the time, that – and I advised Post Office, “Look, we must do a thorough job”, and I thought they had.

Mr Blake: Can we look at POL00070455, please. We’re still in 2005, November 2005, 24 November. This is an email from yourself to Tom Beezer, I think he was also a solicitor at your firm; is that correct?

Stephen Dilley: He was a partner in the firm who supervised me on this case.

Mr Blake: “You will recall that one of the questions Mr Castleton’s solicitors have raised is that we should give them wider disclosure of all Horizon related problems at the [Post Office], details of the claims made involving shortfalls and the Horizon System …”

Stephen Dilley: That’s right.

Mr Blake: So it seems as though it was narrowed to details of the claims made involving shortfalls in the Horizon system and the outcome of those claims:

“This is because they state that there are endemic problems with Horizon.”

You say there:

“This seems like an onerous request.” That’s the –

Stephen Dilley: I’m summarising that but I actually think their letter was broader than that. Yeah, it did seem to me, absolutely, it did seem like an onerous request.

Mr Blake: The request here relates to two Horizon helplines –

Stephen Dilley: Mm-hm.

Mr Blake: – and you say:

“Calls are not logged by category, so someone would manually have to go through the records of every … call logged to tell whether it concerned a Horizon based problem.”

Stephen Dilley: Yeah.

Mr Blake: “[David] Hulbert estimated a junior manager would have to do this and it would take them 3 to 4 weeks to go through 3 to 4 months worth of call logs and this would cost the [Post Office] approximately £2,000 to £3,000.”

Stephen Dilley: Mm-hm.

Mr Blake: “Obviously the time and cost are increased if more than 3 to 4 months worth of information is needed.”

Stephen Dilley: Mm-hm.

Mr Blake: How much did the litigation ultimately cost the Post Office?

Stephen Dilley: In – by the end of the litigation, it was, I think, over £300,000, although we did not know that it would cost that, at that point in time.

Mr Blake: Do you think that £2,000 to £3,000 would be so unreasonable, so disproportionate, in the context of –

Stephen Dilley: In the context of what I knew at the time, yes. And if you look at (1), point (1):

“Horizon System helpline … which receives 12,000 to 15,000 calls per month. This is for technical problems with Horizon.”

When I have a computer problem at work I will ring our IT support desk. That will mostly flush out that I’ve made a mistake with the computer and I’ve done something. So the production of Horizon System – you know, 12,000 to 15,000 calls a month, I think would have flushed out potentially that sort of issue that I’ve raised. It may have also flushed out other issues, I don’t know because we didn’t go and get it.

Mr Blake: So is 12,000 to 15,000 a large number or a small number?

Stephen Dilley: Of calls, 12,000 to 15,000 calls a month seems to me to be a large number but what that note doesn’t say, it says – “for technical problems with the Horizon”, but it – you know, as I say, ring my IT support desk because I think I’ve got a problem with my computer and, when you make the call, it’s mostly me.

Mr Blake: You’ve described 12,000 to 15,000 as a large number.

Stephen Dilley: I think so.

Mr Blake: Wouldn’t that be precisely a reason for investigating the Horizon System further?

Stephen Dilley: I don’t think so, no. I think that 12,000 to 15,000 calls a month isn’t telling us that – yes, it’s telling us that the subpostmasters raised issues but it’s not telling us what caused those issues and, as I say, to draw my own analogy, kind of a large amount of the time, it’s me, and I don’t cast any judgment on the subpostmasters for this.

One thing I took away, if nothing else, from this, is this system wasn’t the easiest system to use. I remember at trial, we had in the trial bundle a user manual that was one or two lever arch folders thick and if you had a user manual that was one or two lever arch folders thick I think you’ve got a problem with its usability, if nothing else.

Mr Blake: Am I to understand you correctly that 12,000 to 15,000 is too many to search but not enough to show that there’s a problem with Horizon?

Stephen Dilley: I didn’t think that – I think there’s two issues with this. First of all, I didn’t think it would generate relevant information or it might have flushed out, I suppose, both relevant and irrelevant information and, if you like, drowned Mr Castleton because if people are ringing with problems that are caused by themselves, then providing him with information about that is not going to help.

Mr Blake: That’s a matter for him though, isn’t it? I mean, you said it might flush –

Stephen Dilley: One of the criticisms –

Mr Blake: – relevant information –

Stephen Dilley: One of the criticisms claimants – when you hear about disclosure being talked about, one of the criticisms claimants sometimes make is “Oh, the defendant has absolutely swamped us”.

Mr Blake: So providing him with relevant information – you said it might flush out relevant information – providing him with relevant and irrelevant information, in your view, would have been too much for him?

Stephen Dilley: I believe that what was absolutely relevant was the IT at his branch, unless Post Office were telling me there were lots of problems with the system. We have seen them tell me that there are two other people – two other people – it has come through to, that there were issues and the previous email which you showed me mentioned two different people but I don’t know how Horizon was defined in that, as I’ve explained.

Mr Blake: “Absolutely relevant”, is that the test for disclosure? Those the words you’ve just used, “absolutely relevant”. Is there some sort of qualification on relevance?

Stephen Dilley: I think that searching through 12,000 to 15,000 calls per month for what, for how long? When’s the start date? When’s the end date? I think that what would be – you know, you have to factor into account the reasonableness of the search and the CPR say that includes the number of documents involved. Well, we had 12,000 to 15,000 calls a month to sort through, and this was a claim that, yes, there was a counterclaim for £250,000, but the claim was for about £25,000/£26,000.

And I thought that the fact that they would have to look at 12,000 to 15,000 calls per month was a factor that you had to take into account. I mean, it’s not what I say, it’s what the Civil Procedure Rules say.

Mr Blake: How much was the counterclaim at that stage?

Stephen Dilley: It was put at £250,000 and we –

Mr Blake: At that stage, November 2005 –

Stephen Dilley: It was – I think it was put at that stage, if memory serves me correctly, at £250,000. We thought it was not – we believed that the quantum was materially overstated, as ultimately proved to be the case when we got an amended defence and counterclaim shortly before trial that reduced it to about, I’m going to say, in the region of £11,000.

Mr Blake: You have a counterclaim that’s worth £250,000 or valued by the defendant at £250,000. You have –

Stephen Dilley: It –

Mr Blake: I haven’t finished.

Stephen Dilley: Sorry, sorry.

Mr Blake: You have a case that, we have established, was significant for the Post Office in defending the Horizon System. There are documents, 12,000 to 15,000 calls per month that you think might flush out relevant information and you don’t think that £2,000 to £3,000 is a cost worth incurring?

Stephen Dilley: Well, you have to bear in mind a number of factors. The number of documents involved £12,000 to £15,000 per month – sorry, 12,000 to 15,000 documents – calls per month, how many documents does a call generate? I’m imagining each call generates one document; does it generate more? But it – I’m assuming that there’s 12,000 to 15,000 documents per month over what period? When do you start? When do you end?

But, yes, the conclusion I came to or would have come to, is that went – bearing in mind the number of documents involved, the nature and complexity of the case, we didn’t think it could have been a £250,000 claim because the contract with him contained a three-month termination provision for no fault. So I don’t think the true value of the claim was £250,000, although it is absolutely right to record that his – even when put to his solicitors, they said “No, no, no, it is”, until quite late on where they changed their position.

But, bearing in mind all the factors, all the factors that you have to take into account, yeah, I think this would have gone – my view that I held is that this would have gone way beyond, way beyond.

Mr Blake: Mr Dilley, we started today and I asked you if you had anything to say to Mr Castleton –

Stephen Dilley: Mm-hm.

Mr Blake: – and you didn’t have any regrets. I mean, looking at this particular issue, do you regret not providing disclosure in relation to those calls?

Stephen Dilley: No. But I didn’t say that I didn’t have any regrets in this case. I record in my statement that I do regret that we were unable to reach a settlement but we did try hard to do so and it’s right to record that.

Mr Blake: Yes. This is November 2005. May 2006, we have the disclosure list. Can we look after the disclosure list, POL00069878. We are now in December 2006, so shortly before the matter goes to trial.

Stephen Dilley: Mm-hm.

Mr Blake: Can we go over the page, please. Sorry, if we go slightly above we can see who it’s to and from. It’s to Mandy Talbot from Juliet – in fact, sorry, can we start from the very bottom email. Thank you. Mandy Talbot says to Juliet McFarlane:

“Juliet can you drop me a line urgently to let me have your comments about why these cases were dropped if they involved allegations about the HORIZON System at all. We need this urgently because we have a civil trial which challenges HORIZON on next week. I know that there is not a lot of information to identify the cases but please let me know what you can.”

Stephen Dilley: Mm-hm.

Mr Blake: If we look above, we have an answer:

“Mandy,

“Thomas is my case.”

I think that’s Hughie Noel Thomas, whose conviction was subsequently overturned; are you aware of that?

Stephen Dilley: No.

Mr Blake: “He was charged with Theft of [£48,000]. He blamed the online banking system claiming that reports had several transactions showing NIL transaction.”

So you were looking, very shortly before the trial, at these different cases. Is that because they were raised by Mr Castleton himself?

Stephen Dilley: I think so, yes. And when he put specifics to us, we asked Post Office to look at them, to see if they were relevant.

Mr Blake: So the way that the process worked is you waited for Mr Castleton to identify cases that the Post Office might be involved in and then to identify what they involved. In this case –

Stephen Dilley: That –

Mr Blake: – an allegation that there were issues with the transactions?

Stephen Dilley: The question suggests or implies that we didn’t give consideration to the issue of other cases on disclosure, and we did. And, to the best of my recollection at the time, bearing in mind what the court rules say, we believed that we had more than met our duties and that – or that Post Office had more than met its duties. That’s my recollection.

But when Mr Castleton raised specific cases, I thought it was – you know, you want to be thorough. That’s not saying we weren’t thorough earlier but if there’s information that comes to light that he raises, I wanted to put the point to Post Office and I thought it was right that we should point the point to Post Office and we did.

Mr Blake: Why was the burden, though, put on Mr Castleton to identify cases that might involve disputes about the Horizon System?

Stephen Dilley: We weren’t putting the burden on Mr Castleton. He did raise them and, when he raised them, it was right to test it with Post Office.

Mr Blake: Was this a case that the Post Office had made you aware of before December 2006?

Stephen Dilley: No.

Mr Blake: Can we please look at POL00070175, please, and we’re looking at the second page. A bit further down, please. This is an email to Lesley Joyce and it says:

“Hi Lesley

“The last one this week and then I am on leave for a week. There are two visits that have direct reference to losses although some from earlier years allude to problems with balancing.”

That is the case of Ferryhill.

Stephen Dilley: Mm-hm.

Mr Blake: Was that a new case to you?

Stephen Dilley: Yes.

Mr Blake: Can we please look at POL00070126. This is the attendance note that I think you alluded to earlier, 6 December 2006, very close to trial.

Stephen Dilley: Mm-hm.

Mr Blake: “[Mandy Talbot] saying that today’s news about problems with the Horizon System at the Falkirk branch had come as a bolt from the blue, that she had known nothing about it and that Fujitsu did not give any indication. Could we get a Fujitsu witness to give evidence?

“[Richard Morgan] is saying that we need a Fujitsu witness to identify why there was a problem, but Lee Castleton’s was not. Was there a latent defect or a software problem from a subsequent update or a hardware problem specific to that branch?

“[Richard Morgan] saying he was concerned about whether we have to give disclosure of this fact. He thought probably yes, but wanted to find out if the judge thought it was relevant.”

Stephen Dilley: That’s right.

Mr Blake: “[Richard Morgan] was prepared to put off a decision this until after his opening. [Richard Morgan] asked [Mandy Talbot] to get some definitive answers from Fujitsu. [Richard Morgan] saying that we may finish in court by lunchtime tomorrow.”

Stephen Dilley: Mm-hm.

Mr Blake: So there you have become aware of a problem at the Callendar Square branch?

Stephen Dilley: Yes, that’s right.

Mr Blake: That is one of the bugs, errors or defects that is in the Bates and Others judgment. I don’t know if you’re aware of that?

Can we look at POL00070131. If we scroll down to the bottom of the page, it’s an email from Mandy Talbot to Lynne Fallowfield:

“Lynne further to our chat can you advise what are the names of the postmasters and the addresses of the branches if possible of the following FAD codes.

“In [February] of this year you wrote to Gary Blackburn and he wrote to Shaun Turner and then Sandra MacKay about these branches which had apparently registered complaints about the HORIZON system.”

So that’s four branches.

Stephen Dilley: Mm-hm.

Mr Blake: “Fujitsu have told us that in respect of Callendar Square that there was a problem when stock was transferred from one stock unit to another but this would only apply when there was more than one stock unit [something] than one position at the counter.

“Did you find out what the problems were at the other branches and what did [Post Office] and Fujitsu do to correct them?”

Stephen Dilley: Mm-hm.

Mr Blake: We’re now in 6 December 2006.

Stephen Dilley: Mm-hm.

Mr Blake: The impression that’s given is it’s quite a lot of last minute scrabbling about in relation to a number of different complaints and problems with the Horizon System. Do you agree with that?

Stephen Dilley: I have to set that question in its context. Firstly, when we did disclosure back in May time, we didn’t get Mr Castleton’s disclosure and it was – I had to – it felt a little bit like, in some of it, going to the dentist and pulling teeth. I had to pull it out over a long period of time. Later disclosure came in and, in civil litigation, litigants are under an ongoing duty of disclosure.

Mr Castleton – so you – yes, you do disclosure at a moment in time but you’re also under a duty to keep it under review. Mr Castleton raised these cases, brought them to our attention. When they were brought to our attention late – I can’t help that – what we did do is put them to Post Office. The issue around other branches was put to the trial judge and he made a ruling on it.

Mr Blake: The suggestion seems to be that Mr Castleton was disclosing matters late. These were bugs, errors or defects or allegations of bugs, errors or defects at Post Office branches. Why on earth would be the burden have been on him to identify bugs, errors or defects?

Stephen Dilley: Well, both parties have disclosure duties to provide information which helps their case, or might harm their case or the other person. So both parties have duties and I’ve explained how we approached that, insofar as Post Office’s duties were concerned. But it wouldn’t be right to say that the only party that has a duty is Post Office but it did, of course, that have its duty.

Mr Blake: How was that going to work, then? Was he expected to go up and down the country to different post offices asking them if they had bugs, errors or defects, if they had Horizon problems?

Stephen Dilley: I didn’t advise Mr Castleton in relation to how he approached disclosure to comply with his duties.

Mr Blake: Do you think the suggestion that he failed in his duty of disclosure relating to Callendar Square is a little ridiculous?

Stephen Dilley: I don’t know when Callendar Square came to his attention. I do know, actually, when it came out, it turned out to be – it was discussed in the trial and it actually turned out to be, in this instance, a complete red herring. But it was looked at and, fortuitously, Anne Chambers had looked at it and was able to give evidence about it and her evidence about it was, number 1, it could only happen when there was something called individual stock unit balancing. Mr Castleton didn’t have that in his branch.

The way I understand that, to use a metaphor, is his computers, just to use a metaphor, had what I’ll call a hive mind. But Callendar Square – the Callendar Square problem could only happen, according to Anne Chambers, when there was individual unit stock balancing.

The other point that – she made other points about it, including that it happened at more than one site and that, when it happened, it was obvious to Fujitsu.

Mr Blake: You described it as a “red herring”. Horizon was front and centre of Mr Castleton’s case, problems with the Horizon System. Do you still not think that a bug, error or defect of the significance of the Callendar Square problem should have been disclosed to Mr Castleton far earlier in the case by the Post Office?

Stephen Dilley: No.

Mr Blake: Sir, I’m moving on to another topic. I am happy to start it or we could take a slightly early lunch. We do have quite a lot to get through today.

Sir Wyn Williams: Well, if that’s the case, I think we’ll take an early lunch so that we have breaks at reasonably – well, at reasonable intervals. So let’s have lunch now. What time shall we start?

Mr Blake: Sir, if we start at 1.45.

Sir Wyn Williams: All right, fine.

Mr Blake: Thank you very much.

(12.46 pm)

(The Short Adjournment)

(1.45 pm)

Mr Blake: Good afternoon, sir.

Sir Wyn Williams: Good afternoon.

Mr Blake: Thank you.

Mr Dilley, I’m going to move on to a different topic, general case strategy against Mr Castleton. Can we begin on 29 September 2005, POL00072389, thank you very much.

This is a memo to yourself from Denise Gammack. Who was she?

Stephen Dilley: She was a solicitor who used to work at Bond Pearce and, for a time, she had conduct of the case before me, before she left.

Mr Blake: Is this a briefing note, essentially, to you about the Lee Castleton case?

Stephen Dilley: It is.

Mr Blake: If we scroll down, there is some background. She says:

“CMS have been passed bulk instructions from Royal Mail …”

Who are CMS?

Stephen Dilley: “CMS” stood for Credit Management Services.

Mr Blake: Is that part of Bond Pearce?

Stephen Dilley: Yes.

Mr Blake: So they’d been passed bulk instructions from Royal Mail via Stephen Lister:

“… to prosecute subpostmasters/mistresses for losses that Royal Mail say occurred during the course of their employment. Indeed, the losses normally lead to their dismissal.”

Then it says:

“Traditionally, Royal Mail’s approach to this has been to prosecute the former employee for theft and to get them convicted, to make a public showing of the fact that these losses will not be tolerated. However, the focus now is very much on recovering the money rather than obtaining a conviction.”

Were you aware of a change in strategy, as far as the Post Office was concerned?

Stephen Dilley: This note tells me that there was a change of strategy, but I wasn’t – I don’t recall being aware beyond this note. I should say that the first paragraph in this note contains a material inaccuracy.

Mr Blake: Which is that?

Stephen Dilley: “CMS have been passed bulk instructions from Royal Mail (via Stephen Lister) to prosecute subpostmasters …”

We didn’t do any prosecutions. This case wasn’t a prosecution; it was a civil claim.

Mr Blake: So, in fact, it may be intended to say they’ve passed bulk instructions to take action against subpostmasters?

Stephen Dilley: To pursue civil claims.

Mr Blake: Yes. Traditionally their approach was to prosecute but now they’re moving on to recovering money?

Stephen Dilley: That’s what the note tells me, yes.

Mr Blake: From your experience of the Royal Mail and the Post Office, can you understand or did you understand why there was that move?

Stephen Dilley: The only knowledge I have of this is what this note tells me.

Mr Blake: So in your long time dealing with the Post Office and the Royal Mail, they didn’t give you any indication as to why they were moving to taking more civil recovery actions, civil actions?

Stephen Dilley: My long time?

Mr Blake: Well, how long were you involved?

Stephen Dilley: This was the first case I’d worked on.

Mr Blake: Yes, and consequently?

Stephen Dilley: I set it out in my statement: I was involved in two other cases.

Mr Blake: So in your time involved in this case and those two other cases and what looks like quite a considerable amount of correspondence between yourself and Mandy Talbot, for example, quite a lot of communication over that period, did she or did anybody else give you any indication as to why that strategy had changed?

Stephen Dilley: Not as far as I recall, no.

Mr Blake: Did you suspect any reason for that change?

Stephen Dilley: I’m not sure that I considered it much.

Mr Blake: Can we go back, please, to POL00072669. This is the note of 24 February 2006 and we saw this note earlier and it’s the first paragraph, where it says:

“Internally the Post Office feels conflicted about which direction to go in with the Castleton case. The Post Office believes the Horizon System is robust, but the downside is the cost (in Post Office’s time and money) in proving a negative (ie that there are no faults) and that it is expensive.”

Now, for example, Mandy would need to get a report from Fujitsu who apparently was having difficulty with writing in plain English. That’s the passage I took you to earlier.

Stephen Dilley: Mm-hm, it was.

Mr Blake: Were you aware that a concern that the Post Office had was that it was difficult to prove that there were no faults with the Horizon System, legally?

Stephen Dilley: I – let me set the context to this conversation. Mr Castleton’s solicitors had put various points to us in exchanges of correspondence – to us, by which I mean my firm. One example of which was a report by Bentley Jennison but, over the life of the case, there were a number of others. My approach, and you can see this time and again, and I relearnt it when I reread the file, my approach was to go to Post Office to try to find the person who could address the concern put to us to see – to understand what the answer was and then to be able to understand whether it was a real issue and to respond appropriately to Mr Castleton’s solicitors.

And so I suspect my work in dealing with that, one example of which is a report disclosed to us – I think it might have been on a without-prejudice basis by a firm of accountants called Bentley Jennison. So the way I suspect that came across to the Post Office is that Stephen Dilley was running around trying to prove a negative because, in a sense, I was.

Mr Blake: Proving a negative, ie that there are no faults, is a difficult burden for the Post Office to overcome?

Stephen Dilley: It was, particularly in circumstances in which we believe the allegations were not specific or insufficiently specific.

Mr Blake: Can we look at POL00069622, please. This is an attendance note of 11 September 2006. I think we’ve already looked at it. It’s the attendance note where there was a conference with counsel and it’s the significant meeting with various Fujitsu witnesses?

Stephen Dilley: Yes, yes.

Mr Blake: Could we, please, look at page 5. There is a summary of a meeting, the meeting with Mandy Talbot.

Stephen Dilley: Mm-hm.

Mr Blake: The bottom of page 5, sorry:

“Tom explained that the big issue in this case was proving the loss. Horizon is like a big calculator and it can be changed after the event (Tom went on to explain why).”

Just pausing there, are you aware of what was meant by being able to change after the event?

Stephen Dilley: My recollection, which I’ve explained in my statement, is – and it might be contained in this note, higher up – is that during this meeting, Catherine Oglesby, who was Mr Castleton’s Retail Line Manager, told us that subpostmasters could change information in Horizon after the event. I don’t recall, however, that the specific way to – or the context in which she was saying that.

Mr Blake: “The only way to prove the loss is in taking the starting position and the ending position and see what the difference is. Richard Morgan explained that the alternative is to say that we rely on the admission with of the cash accounts, ie that they were signed by the subpostmaster.”

Then it goes on to say:

“It is not easy to prove that the Post Office is owed money. To achieve proof will cost more money than the claim is worth. Anne Chambers will be persuasive but she is investigating an occurrence where the subpostmaster said that the electronic banking authorisation and said that the system could not rescind it. Cath Oglesby was sensitive as to whether the decision was taken in advance of the hearing to dismiss Mr Castleton. This doesn’t affect the case legally, but it isn’t great PR. However, the accounting work to be done with litigatory [I think it may be ‘litigating’] the opening audit to see where the cash had gone. We will move the territory away from Horizon to what cash came in and what cash went out. Their dense is that the Horizon System was to blame, but they haven’t really made their defence very clear.”

Stephen Dilley: Mm-hm.

Mr Blake: So is it right to say that the strategy that had been developed by September 2006 was to rely on the admission of the cash accounts, that they were signed by the subpostmaster, and the Post Office’s case was trying to move the case away from the Horizon System?

Stephen Dilley: It is partly right, yes. But it isn’t the complete story, because we did – we sent the two letters to BDO in August, one of which asked them to prepare an IT report, which I think we must have ultimately asked them to pause on. But the other issue is this: we didn’t know at that point in time whether Mr Castleton would produce himself an IT report and, by which, I mean an IT expert’s report, and if he had done so. You know, we were ready to meet the case but that didn’t come.

So that’s what I mean that it was partially right.

Mr Blake: Did you feel that you had provided him with sufficient disclosure in order to properly instruct and inform an expert?

Stephen Dilley: Yes.

Mr Blake: Can we look at paragraph 304 of your witness statement. It’s WITN04660100. It’s page 133 of that statement.

Stephen Dilley: I’ve got it in hard copy.

Mr Blake: It says:

“I have summarised the key parts of Amended Particulars of Claim much earlier in this statement. The relevant point from this is that POL pursued this matter as an accounting claim. In this regard, POL needed to carry out a reasonable search for relevant accounting documents for the purposes of disclosure.”

It seems as though the strategy that was adopted avoided, in your personal view, the need to make disclosure of Horizon problems because you were focusing on the fact that it was an accounting claim.

Stephen Dilley: Can we have a look at paragraph 305, 306, 307, 308, which then talks about the other side of the coin, which is Mr Castleton’s defence and counterclaim. What I had said in paragraph 303 is I thought it would assist the Inquiry if I set out the statements of case – plural – because that’s the framework through which disclosure in a civil claim is done.

Mr Blake: I’m sorry, what’s the point you would like to make from that?

Stephen Dilley: Statements of case, plural. So it wasn’t just about Post Office’s Amended Particulars of Claim, it was also about the defence and counterclaim. And I had spent some time trying to understand the points that Mr Castleton was putting to us about the IT issues he said he was experiencing.

Mr Blake: Did you think you had made sufficient enquiries and received sufficient information from the Post Office and Fujitsu to properly satisfy yourself that that wasn’t something that needed further investigation?

Stephen Dilley: Yes, I did.

Mr Blake: Can we look at the BDO report that was obtained. That’s POL00069592. Sorry, this is a letter from BDO. So there came a point at which you had instructed the chartered accountants, BDO Stoy Hayward, to carry out an investigation into the matter and write an accountancy report; is that correct?

Stephen Dilley: Yes, it is.

Mr Blake: This is an earlier letter from them, 5 September 2006, where they set out some initial findings. If we look at the first page, if we could scroll down, they say:

“We realise this is a complex matter with possible implications that a far wider than just Mr Castleton’s operation of his sub post office.”

Had you made it clear to BDO that, actually, what you were looking at was a wider challenge to the Horizon System?

Stephen Dilley: I wasn’t looking at a wider challenge to the Horizon System. I knew about and we talked about this morning the cases of Mr Bajaj and Mr Bilkhu, and then there were two other cases mentioned which, if you take them at their highest total form, I knew there were 14,000 branches and those four together, if you take them at the highest, is less than 0.03 of 1 per cent.

Mr Blake: What about the class action that was referred to?

Stephen Dilley: Well, I’ve talked about that this morning. The only cases we were talked about – that we were told about, were Bajaj and Bilkhu, so I don’t think the phrase “class action” was right.

Mr Blake: What about the spreadsheet that was being compiled?

Stephen Dilley: Well, there were two cases mentioned on it or referred to in that email, to which you directed me. I mean, as a proportion of the network, it’s minuscule.

Mr Blake: So it wasn’t you that gave BDO the impression that this matter had far wider implications?

Stephen Dilley: BDO – I don’t think I can add to my evidence about what BDO knew. I think the implications the wider implications which we talked about this morning were more that, over the course of this case, Post Office’s motive changed and it became, for them, about showing that they were willing to stand firm to defend a system that they believed and Fujitsu believed was fine.

Mr Blake: Can we move to page 3 of this document, please, and it’s the bottom of page 3. I’m just going to read for the transcript what they say about their early indications of problems with the Horizon System. They say:

“We have found there is some indication of possible problems with Horizon from our initial review of the electronic information you sent us. You sent the transaction summaries for January, February and March 2004. In theory the system should reflect the double entry nature of each transaction, eg the system should show the sale of a stamp and the receipt of the cash paid by customer. Therefore the Horizon transaction entries for a period … should total zero. From our initial review we can see that the March balances but January is out by £2.47 and February by £4.05. We have found which transactions cause the differences and will investigate them in due course. Although these are very small amounts they do indicate that some problems may exist, ie that the double entry is not being put through.”

Stephen Dilley: Mm-hm.

Mr Blake: I’ll take you now to the actual final report. That’s –

Stephen Dilley: Sorry, there wasn’t a final report.

Mr Blake: The final draft report, shall I say.

Stephen Dilley: Yes.

Mr Blake: POL00069955. So you’ve made very clear that there was no final report?

Stephen Dilley: No, there wasn’t.

Mr Blake: Did you ask for the work to be stopped at this point when you received the report?

Stephen Dilley: Can I just take a moment to find where I deal with this in evidence because I think it’s answered in my statement.

Mr Blake: You can speak to it now as well? We have what you say in your statement. But certainly –

Stephen Dilley: Sorry, it’s a long statement and I’d like to refresh my memory, if that’s okay.

Mr Blake: Absolutely.

Stephen Dilley: Thank you.

Mr Blake: I’m told it may be paragraph 140.

Stephen Dilley: Thank you.

Mr Blake: Does that assist?

Stephen Dilley: (The witness nodded)

Mr Blake: How does it assist?

Stephen Dilley: I think you were asking me about the finalisation of this report, and what that – what paragraph 141(a) to (g) explain is where we got to on that report and why it was not finalised and I’m happy to take the Inquiry through that if that would assist.

Mr Blake: In summary, is it right to say that you were instructed not to disclose it?

Stephen Dilley: That was one. There’s seven reasons why it wasn’t finalised. So it would be a summary but it wouldn’t be complete.

Mr Blake: Okay, would you like to give us briefly the seven reasons why you consider it wasn’t disclosed?

Stephen Dilley: Yes. Pursuant to the order of Master Turner of 23 October it was envisaged there would be a sequential exchange of accountancy experts’ reports. This was so that Post Office’s accountancy expert could consider any specific allegation Mr Castleton was making in respond to it. We never received an accountancy expert from Mr Castleton.

I pause here, incidentally, to say I know that he had one but we never got it so I don’t know what it said.

Secondly, the draft report from BDO was supplied to me after a time when the court had ruled that the parties could not adduce expert evidence. We were debarred.

The third point is that before receiving this report, counsel was content that Post Office’s case was made out on the basis of the witnesses of fact. So we’d not decided, even before getting it, that we’d definitely use it in any event.

The fourth reason was this was only supplied in draft and we would have wanted BDO to have corrected it for any errors, although noting it was their report and they would have been content with its accuracy to have finalised it.

The next reason is that I’m not sure that it would have been possible for BDO to have corrected any errors and finalised their draft report in the seven days prior to trial. I’m not sure, actually, we’d have also got permission to use it out of time.

The other – next point is that counsel advised us not to disclose it and he didn’t think Post Office needed to – needed it to prove its case.

And the final point is that, as you rightly said, that Mandy Talbot instructed me not to disclose it.

Mr Blake: Thank you. Can we look at page 6, please, which is the “Introduction and Terms of Reference”. The authors say there, at 3.1.2:

“I have been asked to focus on the issue of whether the losses can be proved arithmetically.”

Stephen Dilley: Yes, that’s right.

Mr Blake: Was that at your request?

Stephen Dilley: Yes.

Mr Blake: Can we look at page 7. It goes on to address “Sources of Information” at 3.2. Is it right to say that no information in respect of this report was sought from Fujitsu, the providers of Horizon?

Stephen Dilley: Gosh, it was a long time ago. Let me just think for a moment.

Mr Blake: I’m happy for you to read 3.2 to yourself if it assists?

Stephen Dilley: Thank you.

I think, in order to properly answer that question, to be confident about my answer, I’ll need to be taken to the letter to which I referred to this morning, which was the letter of 22 August that I sent to BDO about an accountancy report that might contain the answer to the question.

Mr Blake: Well, it may be that we look at that in due course but, looking at the sources of information that are set out in BDO’s report, is there any suggestion in that that they were, for example, provided with information that there might be bugs, errors or defects in the Horizon System?

Stephen Dilley: Well, the – at – first of all, it’s right to record that this report that they were producing was an accountancy report and not an IT expert report and we didn’t pretend it was. But the information I think that they were provided with, which I think must ultimately have come from Fujitsu, is contained at 3.2.3, which is the transaction and events records, unless there’s any other sources of information on the following page.

So yes, the various witness statements. So if any of the witness statements with – which we had supplied them with, so for example if we’d have – if we supplied them with Anne Chambers’ witness statement, if we had supplied them with Andrew Dunks’ witness statement, he was somebody else from Fujitsu, you know, that would have set out that side of things. But I’m ever so sorry, I just can’t remember now the particular documents that we had sent to them without going back through the records thoroughly.

Mr Blake: Would you accept that there is no record there of them being – having been provided outside of, for example, witness statements, detailed information about bugs, errors or defects that may have been in the Horizon System?

Stephen Dilley: Not outside of the witness statements but Anne Chambers’, you know, statement, for example, set out the investigation that she’d carried out but there, no, not outside of that.

Mr Blake: Because I think you said that Anne Chambers wasn’t investigating the Horizon System; she was just investigating Mr Castleton’s branch?

Stephen Dilley: Yes, but the system at his branch but not more broadly, no, you’re right.

Mr Blake: Can we look at page 13, please, where there is a description of an overview of Horizon. If we scroll down, 5.2.1 says:

“Each transaction should be a double entry accounting basis, for example that sale of a postage stamp for cash will show in Horizon as a sale and as an increase in the cash balance.”

If we scroll down to 5.2.3:

“The system is designed to record all financial transactions at the post office.”

Is it right to say that that is an assumption, it’s not something that they are saying definitively occurs.

Stephen Dilley: I just can’t remember, it was so long ago. I’m sorry.

Mr Blake: 5.3.5, please. It says:

“Operating a modern computer system such as Horizon should reduce the scope for staff error. Many transactions are dealt with by scanning barcodes on products such as books of stamps and other products are entered by using a touchscreen system where the clerk selects the item sold from a picture menu. The need to add up the price stamps sold and similar manual entries should be eliminated. There is also a simplification in that Horizon prints postage labels which eliminates the need to use high value stamps for parcels etc. Clearly this will never eliminate the possibility that a clerk may give the wrong change or pay out too much in pensions.”

Again, the suggestion or the statement there that Horizon should reduce the scope for staff error, reading that now, do you think that they were provided with detail of bugs, errors or defects in the Horizon System or sufficient detail of bugs, errors or defects in the Horizon System?

Stephen Dilley: As I say, we’re asking them. This was an accountancy report, this was not an IT report. So I can’t amplify the evidence I’ve already given you about what they were provided without being taken to the primary document and I’m happy to do that if it would assist the Inquiry but that’s the limit of my memory.

Mr Blake: Can we look at page 18, please, 6.1.1:

“The Horizon System records every accounting transaction at a post office from the sale of a single postage stamp to the receipt of cash for the weekly payment of pensions. The system operates on a double entry system which it is possible to extract a trial balance in the form of a weekly cash account.”

Looking at all of this, I appreciate you say it’s an accounting report –

Stephen Dilley: Yes.

Mr Blake: – but, knowing what we know now about the Horizon System, do you think that they were provided with sufficient information about bugs, errors or defects in the Horizon System?

Stephen Dilley: Well, you probably know more now than I do because my involvement was confined to this case and two other cases that I’ve described in my statement. I’m not pretending I don’t – I certainly am aware of Mr Justice Fraser’s two judgments but, you know, I had no reason to believe at the time that they weren’t provided with enough information. I’ve no reason to believe that now either in particular.

I thought they had and think they had more than sufficient information. But – but, but, but – if this was an IT report, I would have expected them to be supplied with different information but quite what that looks like after the passage of all these years I’m not sure I’d be able to tell you.

Mr Blake: If we scroll down, they refer to “Addition errors”?

Stephen Dilley: Yes.

Mr Blake: They say:

“I have looked at the three transaction spreadsheets and observe that two out of the three (January and February) do not add up by small amounts of £2.47 and £4.05. I have identified that the £2.47 falls in week 42 (the period Mr Castleton has tried to reconcile manually) and that it is represented by two separate amounts of 92p on 12 January and £1.55 on 15 January.”

If we continue to scroll down, he summarises at the very end of this section, so 6.2.4 he says:

“I do not have an explanation for these errors but my review of the transactions listings for the three months has given no indication of any other errors.”

Stephen Dilley: Mm-hm.

Mr Blake: I think he addresses this in his final conclusions. If we go back to page 4, it’s 2.1.2(a), he says:

“My conclusions can be summarised as follows …”

1. is:

“The only indications of possible computer problems that are apparent from the accounting records are three very small differences in the cash account (trial balance) but each are less than £5. This is discussed in section 6.2.”

So it does look as though he was looking into whether there were possible computer problems, doesn’t it?

Stephen Dilley: Yes.

Mr Blake: In fact, he has found a difference in the cash account?

Stephen Dilley: Yes.

Mr Blake: So, even without information from Fujitsu about bugs, errors or defects in the Horizon System, there is at least an indication of a possible computer problem with Horizon in that report?

Stephen Dilley: I read that conclusion differently to you. I read that conclusion as, in essence, that there was no – that, in essence, in essence, there was no computer problem because the issues they found were really small. And, look, this was a draft report. Had we got it much earlier in time we’d have had to work through that and there may well have been answers to those questions, as we tended to find when other points were put to us and we went away and investigated them.

Mr Blake: I mean, it does say that there are indications of a possible computer problem there?

Stephen Dilley: Well, look, this is their report but if you have a look at paragraph 6.6.4 (sic), I think there’s some more information that would help the Inquiry on this.

Mr Blake: Paragraph 6-point?

Stephen Dilley: 6.4.

Mr Blake: 6.6.4?

Stephen Dilley: If we can go to that.

Mr Blake: Of this report?

Stephen Dilley: Yes.

Mr Blake: 6.4 or –

Stephen Dilley: 6.6.4 (sic).

Mr Blake: I’m not sure that that exists. What page do you say it’s on?

Stephen Dilley: Can we just do a scroll down until I find it?

Mr Blake: When you referred to “6.6.4” were you looking at a note of some sort or was it your witness statement?

Stephen Dilley: It’s not paragraph 6.6.4 of my witness statement. Keep going down – ah, sorry, 6.4.4:

“If Mr Castleton had suffered a problem with the Horizon computer system I would have expected to see that he was reporting a daily cash balance that suddenly fell below the cumulative calculated cash balance … but that looking at the daily balances up to the next Wednesday there would be the same difference (or at least a very close one) until the weekly reconciliation was performed. There is no indication that this was happening in January and February 2004 at Marine Drive.”

Further down, at 9.3.1 –

Mr Blake: Can we just stop there, we will pause at that particular one. Are you now saying that they are computer experts?

Stephen Dilley: Only BDO can account for what they are. But this is written in their report.

Mr Blake: But your evidence was that this was an accountancy –

Stephen Dilley: It wasn’t – it was. I think they were, from memory, I think they were – I mean, BDO are accountants but experienced in dealing with reports where there are IT issues but, as to their actual experience, you know, after the passage of the thick end of 17 years since this was done, you’d have to put that to them.

Mr Blake: Because, although that particular paragraph may be helpful to you, the point that I was taking you to was right at the front of his summary of conclusions. Can we go back, please, to page 4, 2.1.2(a), and he has indicated at the very beginning of his conclusions that there is a possible computer problem. Do you think that that was disclosable to Lee Castleton?

Stephen Dilley: Well, can you go, please, to 9.3.1, because I think that –

Mr Blake: Well, we can return to that in a second but I’m sticking with this particular paragraph –

Stephen Dilley: No.

Mr Blake: – the identification of a possible computer problem?

Stephen Dilley: No.

Mr Blake: Was that disclosable to Mr Castleton?

Stephen Dilley: No, no.

Mr Blake: No, it wasn’t disclosable to Mr Castleton?

Stephen Dilley: This report was, in my view, not disclosable.

Mr Blake: This report may not have been disclosable but was that information disclosable to Mr Castleton?

Stephen Dilley: What – I don’t know how that information would have been released without referring to this report, which had been debarred and which was only a draft, which wasn’t a finalised report.

Mr Blake: Did you discuss –

Stephen Dilley: There wasn’t – you know, disclosure involves carrying out a reasonable search for documents. What documents would we have been carrying out a reasonable search for that we hadn’t disclosed?

Mr Blake: Did you discuss whether this information triggered any wider disclosure duties on the Post Office?

Stephen Dilley: I anticipate that we would have discussed – I believe that I discussed this report with counsel. I cannot now recollect, after the passage of time, all the details of this discussion. But counsel was made aware of it and he advised not to disclose it. I’m sure that if he’d had considered that there – that it should have been disclosed, he would have given me that steer.

Mr Blake: Leaving aside the particular report and disclosure of that particular report, do you think that information should have set in motion some action, on your part, on the Post Office’s part, to provide further information to Mr Castleton regarding issues with the Horizon System?

Stephen Dilley: I mean, that talks about three small differences in the cash account trial balance. Those documents had been disclosed.

Mr Blake: So you don’t think it should have provided an incentive to look further?

Stephen Dilley: No.

Mr Blake: Out of fairness to you, please do take us to the passage that you wanted to in this report?

Stephen Dilley: Please may we have a look at 9.3.1.

Mr Blake: So that is a section, it begins on page 32 and it is headed “The accounting records after Mr Castleton was suspended”. So it’s one section of the report and we have the conclusion in respect of that section at the bottom of the page.

Stephen Dilley: You skipped over it. Can we go to 9.3.1. This is his conclusion.

“I would have expected that if there were computer problems affecting the accounting system that they would have continued in the weeks after Mr Castleton was suspended. There is no indication that this has happened.”

And they were right about that.

Mr Blake: Do you think that an accountant from BDO Stoy Hayward would be the right person to make that conclusion?

Stephen Dilley: Mm-hm.

Mr Blake: Yes?

Stephen Dilley: Yes.

Mr Blake: But that of course would be helpful to your case but 2.1.2(a), if we go back to page 4, it’s the paragraph I was drawing to your attention before, you don’t consider that that information would have assisted Mr Castleton in his case?

Stephen Dilley: I don’t think that I can add to the evidence on this report that I’ve already given to the Inquiry.

Mr Blake: Can we look at POL00069612, please. This is an attendance note, it has your name on it, dated 7 September 2006. I believe this is after receiving BDO’s first letter, so perhaps it was before the draft report but after receiving the letter. You say here:

“I had a telephone conversation with Tom Beezer …”

I think he was a solicitor at Bond Pearce.

Stephen Dilley: Mm-hm. He was a partner at Bond Pearce, yes.

Mr Blake: “… to discuss strategy in view of …”

This is where the “video” comment is –

Stephen Dilley: Yes.

Mr Blake: – so I think that’s “BDO”?

Stephen Dilley: Yeah.

Mr Blake: Was this dictated or –

Stephen Dilley: At the time, this is going to make me sound very old-fashioned, we used to dictate into a handheld device with these little cassettes, you used to take the cassette out, attach it to a file and walk it down a corridor to be typed. So, sometimes, either my diction wasn’t as clear as it needed to be or, sometimes, the quality of the cassette wasn’t as good. Needless to say, “video” rhymes with “BDO” and sometimes you get some slightly amusing typing like that.

Mr Blake: So:

“… in view of [BDO’s] letter about the proposed costs of £62,000 in relation to the Accountancy Report. Also Tom expressing his concerns that the expert said that they found some early indications of possible problems with Horizon from their initial view of the electronic information.”

So it was sufficiently significant to you to put that in that note?

Stephen Dilley: Yeah, yeah, yeah.

Mr Blake: “They say that Horizon should show the double nature of the transaction, eg sale of a stamp and receipt of cash by customer. However, they said January is out by £2.47 and February by £4.05. My comment to Tom is that I thought those amounts were quite small and that there will probably turn out to be a rational explanation because I have met Fujitsu and they are utterly convinced of the integrity of their system and really it is just an electronic calculator so it is only as good as the person who inputs information into it.”

Stephen Dilley: Mm-hm.

Mr Blake: In summary, you didn’t think much of the discrepancy and you’re satisfied with Fujitsu’s explanation?

Stephen Dilley: And the conclusions in BDO’s draft report, to which I’ve also taken the Inquiry.

Mr Blake: Can we look at the final paragraph there, it says:

“Agreeing with Tom that the strategy should be that we pick up the phone to Lee Castleton’s solicitors, point out to them that Castleton has made an error analysing the cash account (without necessarily disclosing the Fujitsu analysis), tell them what our accountancy expert alone is going to cost and invite them to ADR [Alternative Dispute Resolution] before we instruct an expert. Tom agreed and we agreed that we should speak to counsel about this and Mandy about it on Monday.”

So having received that indication from BDO, that it was possible for Horizon to show a discrepancy, your view was you should pick up the phone to Lee Castleton’s lawyers and enter into dispute resolution without disclosing that information?

Stephen Dilley: This attendance note is dated 7 November 2006. I received BDO’s draft report by email on 29 November 2006.

Mr Blake: Yes. So the letter that you received, that summarised their initial findings, that was then subsequently replicated in the draft report, you had received that letter –

Stephen Dilley: Mm-hm.

Mr Blake: – you’d received that information –

Stephen Dilley: Mm-hm.

Mr Blake: – and your view of the appropriate strategy to take in those circumstances was to phone Lee Castleton’s solicitors without disclosing the information and telling them how much the accountancy is going to cost, despite the fact that you knew there was, in fact, something undermining your case in the potential report?

Stephen Dilley: It doesn’t say – that was “without necessarily disclosing the Fujitsu analysis”. I think that is a reference to a piece of work carried out by Gareth Jenkins and Anne Chambers into cash account period – I’m going to get this the wrong way round. I think they did some analysis in relation to cash account period 42, which Mr Castleton’s solicitors had written to us about, I think, in June 2006 and said, “Look there’s a problem with this, you need to – you know, we’ve got a problem with this issue”. And we commissioned, we asked Fujitsu via Brian Pinder, who was our liaison person at Fujitsu to get somebody to look into it, and he got – that’s – I wrote to a lady called Penny Thomas, it got passed on to Anne Chambers and Gareth Jenkins they looked at it and my distant recollection of their analysis was that, actually, it was fine.

Now, when it – when I ultimately came to put it to Mr Castleton’s solicitors over the phone, I’m pretty sure they said, “I know we wrote to you about week 42 but we really meant week 49”, and they’d just done all this analysis for nothing.

So I think that’s what that analysis is meant there in brackets.

Mr Blake: I appreciate my question was long. Can we please highlight, in the first paragraph, the words:

“Also Tom expressing his concerns that the expert said that they found some early indications of possible problems with Horizon from their initial view of the electronic information.”

Now, those concerns were about BDO’s letter, weren’t they?

Stephen Dilley: In that paragraph, yes. That’s right.

Mr Blake: Yes. Your case strategy that followed that information, that there might be early indications of possible problems with Horizon, was not to pick up the phone to Mr Castleton’s solicitors and say, “We may have found some early indications of problems with Horizon”, it was, in fact, to not disclose that information and try and force settlement, wasn’t it?

Stephen Dilley: I don’t think that is an accurate representation because, firstly, BDO – BDO’s letter was not their finished analysis by any stretch. So we didn’t know what their considered view was. And the strategy, insofar as ADR was concerned, I mean, consistently throughout the case, consistently, we tried to settle and we’d been rebuffed.

In this instance, I think what we were trying to do was to settle before incurring additional cost, as my experience of cases is the more money you incur, you can – I mean, the advantage of incurring more money and it leaving it too close to the trial is you’re in possession of more information but the more costs you incur. And so, if you can settle earlier, you know, you need to think hard about that and that’s what we’ve been trying to do.

Mr Blake: Mr Dilley, you spoke earlier in your evidence about an ongoing duty of disclosure.

Stephen Dilley: Mm-hm.

Mr Blake: Having received those concerns from BDO, you are picking up the phone to Lee Castleton’s solicitors to point out an error that Mr Castleton had made but it’s no part of your strategy to disclose to Mr Castleton that, in fact, he might be on to something?

Stephen Dilley: If we had got a finalised report from BDO – final report within BDO, within the – that expressed a considered view and that raised problems with the system and it was a final report within the time period in which we were allowed to disclose it, I’m sure we would have done so, absolutely. That was our approach.

We didn’t run away. We did not run away from issues put to us in this case. We investigated them, time and again. Here – here, I don’t know what BDO’s view is. I know that they’re looking at something but they haven’t finished their conclusion yet. It seems sensible to let that play out.

Mr Blake: You took us very carefully through paragraph 141 of your witness statement, all of those different entries are the reasons for not serving the report on Mr Castleton.

Stephen Dilley: Yes.

Mr Blake: Might a reason be that some of it was not helpful to you?

Stephen Dilley: You’re entitled to put that to me and you must do so, but that was – I thought that the BDO report, actually, notwithstanding your points about these really small numbers, I actually thought, as I’ve recorded, that the BDO report was helpful. So I don’t accept that that was a reason we did not disclose it. Not at all.

Mr Blake: Is that a reason you didn’t finalise it?

Stephen Dilley: No, I’ve explained the circumstances in which it wasn’t finalised. We were debarred. We were debarred. We couldn’t use it. We couldn’t use it, we were really close to trial. Could they have even done that in time?

I tell you what you can see on the file, absolutely comes through, is me pressing and pressing and pressing BDO to get on with their report but, in fairness to them, we’d asked them to pause work because we’d got really close to settlement and then hadn’t. So we’d paused all that preparation and Mr Castleton, via solicitors, I think it was, made a settlement proposal, we signed a Tomlin order, they wouldn’t sign, and so all this work that we’d, you know, got going to prepare for the trial, we stopped, to save costs, to save money because we thought – we hadn’t signed – well, we’d signed the Tomlin Order but it hadn’t been signed – you know, we thought we would get there and settle.

Mr Blake: In the email that we still have up on the screen or the note that we still have up on screen, it said that an accountancy report would cost £62,000. Presumably, by this stage, by the time you had received that draft report, most of that expense had already been incurred?

Stephen Dilley: I don’t know because the – I just really don’t know because the letter was quite short and it took from the 7 September to quite late in November to get even a draft. So my – if I – if you, you know, it’s really a question for BDO as to when they did their work on costs but my view is that most of their work fell after this point in time.

Mr Blake: Absolutely. Absolutely. I don’t suggest otherwise. The draft report is dated 29 November 2006.

Stephen Dilley: Yes.

Mr Blake: So very close to trial.

Stephen Dilley: Yes.

Mr Blake: By that stage, overwhelmingly the majority of the cost would have already been incurred, wouldn’t it?

Stephen Dilley: I would have thought so, by BDO. I would have thought so a lot of the costs would have been incurred by them. I don’t know, because we never did finalise it, how much work it would have taken to finalise it. We would have certainly wanted them to correct it for any errors.

Mr Blake: The additional costs, though, would not have been significant in the grand scheme of things, would it?

Stephen Dilley: I don’t know, I don’t know what the additional costs would be. It’s an event that didn’t happen.

Mr Blake: It is your evidence that there was no motivation in respect of not finalising that report brought about by their – the first of their conclusions?

Stephen Dilley: None whatsoever.

Mr Blake: Can we look at POL00069490, please. 10 October 2006, so we’re going slightly back in time but I want to talk to you about the ability for Mr Castleton to challenge the case against him. We have a note of a telephone conversation between yourself and Mr Morgan.

Stephen Dilley: Mm-hm.

Mr Blake: Paragraph 4 is the paragraph I’d like to read. It says:

“Richard thinks we should play some brinkmanship and press for a December trial. If they disclose an expert’s report that harms us then as they are doing so late, we can always ask the court to vacate the trial. However at the moment, they have not disclosed an experts report and he thinks we [should] go to trial without one. However, he wants us to get client approval for this strategy.”

Stephen Dilley: Mm-hm.

Mr Blake: So, as far as the expert’s report was concerned, you were playing a strategy of brinkmanship, is that what you understood the Post Office to have been playing?

Stephen Dilley: Yes.

Mr Blake: Can we look at POL00072432, less than a week later, 16 October. A telephone conversation between yourself and Mandy Talbot.

Stephen Dilley: Mm-hm.

Mr Blake: “Mandy said she noted that I had had problems getting from the Post Office copies of the opening audit. Telling her that that was correct and that the reason we wanted it was to compare the handover position with the closing position to try to get Horizon out of the picture.”

Paragraph 3:

“Counsel was much happier with the case now that we had all these witness statements …”

Stephen Dilley: Yes.

Mr Blake: “… and in fact thought that they were thorough and we didn’t really need expert evidence at this moment, because the statements proved the case by themselves …”

Stephen Dilley: Correct.

Mr Blake: “… unless that is that Mr Castleton’s solicitors serve late experts’ reports from either IT or Accountancy that we need to deal with. Counsel therefore wants to play some brinkmanship …”

Again, the word “brinkmanship”?

Stephen Dilley: Yes.

Mr Blake: “… with the other side, ie push for a December trial, but preserving our ability to get that adjourned if they serve a late report that we need to deal with. I said that we could prepare for a December trial if necessary and I was happy to do so, but I was concerned to make sure that we could reply to any expert reports served by Castleton. I also think that our counsel was effectively trying to ambush the other side because he thinks that when we serve these fifteen witness statements on them, they will be knocked reeling a bit. Mandy appreciates the tactics of this. She said that the only thing with a December trial is that the Post Office get very busy before Christmas generally.”

Stephen Dilley: Correct.

Mr Blake: I’m going to take you to one more document. POL00069453, 18 October, two days later. This is your note of your conversation with Mandy Talbot:

“She has spoken with Claire …”

I think that’s Clare Wardle, the general counsel at the Post Office at the time; is that right?

Stephen Dilley: I believe so, yes.

Mr Blake: “ …and Catherine …”

I think that must be Catherine Oglesby, is it? No.

Stephen Dilley: No. It’ll be – I think there was a Catherine someone or other in the Legal team.

Mr Blake: Thank you:

“They are happy to follow counsel’s advice and go for a December trial purely as a tactic, even though acknowledging that is an unlikely event. However if the other side seeks to [I think that must be ‘produce’] evidence we must preserve our ability to reply …”

Stephen Dilley: Mm-hm.

Mr Blake: So that is the Post Office agreeing to pushing for a trial in December –

Stephen Dilley: Yeah.

Mr Blake: – and what has been described as ambushing Mr Castleton with 15 witness statements.

Stephen Dilley: Mm-hm.

Mr Blake: Can we look at POL00069618, please. Now, there was a case management conference on 23 October 2006 –

Stephen Dilley: Yes, there was.

Mr Blake: – and this is the skeleton argument that was produced for that. The Post Office’s position, paragraph 2, if we look at the end of paragraph 2, is that:

“… the Claimant presently wishes to keep the trial date if possible.”

Stephen Dilley: Mm-hm.

Mr Blake: That is effectively keeping that December date?

Stephen Dilley: Yeah.

Mr Blake: Then perhaps if we could look at the bottom of page 2, “Experts”:

“Pursuant to the Order of Master Fontaine, the parties have permission to rely on the evidence of experts in the fields of accounting and information technology.”

Stephen Dilley: Yes.

Mr Blake: “This expert evidence is meant to go to [the Defendant’s] assertion that in some way the losses recorded by him were not real losses.”

Stephen Dilley: Yes.

Mr Blake: “[The Claimant] has sought clarification of the way [the Defendant] intends to make his case but still does not understand how [the Defendant] says losses did not in fact occur … The cost of expert evidence is high (even more so in a case worth only some £25,000) and [the Defendant’s] statements of case do not [the Claimant’s] experts to be instructed to focus on any particular aspects of the thousands of transactions conducted within the relevant period.”

Stephen Dilley: Yes.

Mr Blake: “[The Defendant] accepts that sequential exchange is desirable. In the circumstances, [the Claimant] invites the Court to direct that there be sequential exchange of experts’ reports within a timetable that allows [the Claimant] some time to respond, alternatively that there be no expert evidence at the trial, given that it is now so late and [the Defendant] does not seem to have any expert evidence to advance.”

Stephen Dilley: Yes.

Mr Blake: Now, this submission was made to the court at the time where you knew that you had 15 witness statements to serve on Mr Castleton, including some from Fujitsu witnesses addressing the Horizon System; is that right?

Stephen Dilley: I’m just going to remind myself of when we did witness exchange.

Mr Blake: So the reference to 15 witnesses was a note of 16 October 2006 –

Stephen Dilley: Yeah.

Mr Blake: – and this is 23 October 2006, so shortly before you had been talking about the brinkmanship on behalf of the Post Office and the service of 15 witness statements for the November trial.

Stephen Dilley: I – in order to answer the point you’re putting, can we find anywhere, because I think this will help the Inquiry, can we find the order by consent of Master Fontaine of 25 August 2006?

Mr Blake: We will have a break this afternoon, so we can certainly have a look.

Stephen Dilley: What I’m wondering but I just can’t remember is at that point in time, and the order might tell us, is if at that point of time we’d exchanged. I don’t think we’d exchanged witness statements but at one point I do remember we were ready to go and wanting to exchange and Mr Castleton wasn’t and, in the end, we sent him our statements and I can see from my little timeline at the beginning of my statement that Mr Castleton’s statements and summaries were provided on 29 November. I can’t remember when ours came.

Mr Blake: Do you think that it was realistic for Mr Castleton to be expected to produce an expert report in the absence of any significant disclosure on the wider Horizon System first?

Stephen Dilley: I think in the circumstances of the case, it was realistic for Mr Castleton to produce a report. We had – and he’d been given more than one opportunity to do that. On 9 March we’d had a timetable approved by the court for bringing the claim to trial, into which Mr Castleton’s solicitors had inputted, and that was the timetable number 1.

The dates, though, got pushed back by the order of – by consent of Master Fontaine on 25 August 2006, until we go before – we have two further case management hearings, there’s a CMC on 23 October and a PTR before His Honour Judge Seymour QC on 27 November. And my genuine view, in this case, is Mr Castleton had a number of opportunities to produce expert evidence and it was clear that when – after our disclosure was provided in May, I mean, Mr Castleton’s solicitors came back to us with what else they wanted to see, and we were on it and provided it.

So I think they had a number of chances, they inputted into the timetable. So they were on board with that. They – I don’t recall them saying to us “We’ve just not had a proper chance to do this”.

Mr Blake: Do you think the Post Office or yourself recognise the practical or technical limitations that he would have had in obtaining an expert report based on bugs, errors or defects in the wider Horizon System?

Stephen Dilley: In the wider Horizon System? We talked about disclosure this morning and we didn’t provide disclosure about other branches.

Mr Blake: Do you think that caused him limitations in what he could really obtain in respect of an expert report?

Stephen Dilley: I do think he had relevant information in relation to his branch.

Mr Blake: Did he have relevant information in relation to the case that he was pursuing that was a wider attack on the Horizon System?

Stephen Dilley: I thought so. I thought so.

Mr Blake: That’s in the past tense. Do you think so now?

Stephen Dilley: I should like to, in order to be able to properly, properly answer that question, have a very deep understanding of the Horizon Issues judgment in the GLO and to really reflect on what other information, if any, might exist that I don’t know about. And I think unless you do that, you know, that’s what you’d have to do to really properly answer that question.

Mr Blake: The submission at the case management conference that, given it was only a £25,000 claim the cost of expert evidence was high, was it realistic to suggest that Mr Castleton should incur that cost, knowing what you knew about his financial position?

Stephen Dilley: Well, you say knowing what I know. We did know some things but we didn’t have a complete picture. We knew that he had before-the-event insurance. We didn’t know how much and I didn’t know – you know, in some instances that could have picked up the costs. What I also knew is that he’d already produced what I’ve recorded as the Bentley Jennison report and his solicitors either told me or wrote to me at one point and said that Mr Castleton is “not a man without means”, language they used.

But what I can’t absolutely and don’t pretend to get away from, is Mr Castleton’s means, I expect, would have been less than – much less than the Post Office’s means. You can’t get away from that and I can’t change that in any litigation of this nature.

Mr Blake: Looking back, do you think the brinkmanship and the tactics were appropriate?

Stephen Dilley: Yes.

Mr Blake: Does it make a difference that the Post Office was a publicly owned company, in your mind?

Stephen Dilley: The – sorry, just picking up very quickly on a point of brinkmanship. I thought that the brinkmanship point to me is that Post Office were taking a risk. It wasn’t a risk, as I saw it, for Mr Castleton. The risk was that he would produce something at a later stage that then they would have to deal with, but the idea behind that was, if he produced a report, it would have more – which we believed, and were ready to deal with if he did, that’s why we sent BDO the letter on 22 August – if it had more specificity, we could have produced our own more targeted report, which would have been more proportionate because, without that, you’d have had to have produced a general report.

You know, where do you start and stop looking? It’s – it’s like trying to board the ocean, potentially. So I thought the idea of – certainly of a sequential exchange was a good way of dealing with it. But I’m sorry, because I – can you put to me your second question again?

Mr Blake: Given what we’ve heard, the emails that we’ve read about ambushing with 15 statements, for example, or the words used, “brinkmanship”, do you think that is appropriate where the claimant is a publicly owned company?

Stephen Dilley: I mean, I think the word “ambush” that I think I use now was a bit strong, because, you know, I – when I joined the profession as a trainee in 1999, people used to say that before the Woolf Reforms came in, before the Civil Procedure Rules, you could ambush to the side but that had gone because the exchange of witness statements was mutual, simultaneous, you know? Everyone saw each other’s at the same time.

But what I do think it would be fairer to characterise that as is I suspect Mr Castleton’s solicitors were not expecting us to be as well prepared as we were and we wanted to be thorough.

Mr Blake: I’d like to ask you some questions about the nature of Mr Castleton’s alleged wrongdoing. Can we look back again at a document we’ve already looked at, it’s POL00071165, and it’s the significant meeting of individuals from Fujitsu.

If we scroll over the page there is reference to Mr Castleton’s response to the request for further information, and it is dealt with with Mr Jenkins and, if we keep on scrolling, we can see that Mr Jenkins addresses that.

Stephen Dilley: Mm-hm.

Mr Blake: Then if I could ask you about page 4, where you went through various call logs with Anne Chambers. It’s at the bottom of the page.

One thing to note at the beginning is that:

“[She] noted that she is third line support and only one of Lee Castleton’s calls came through to her.”

So although there is a long list of calls, in fact, she only had personal experience of one of them?

Stephen Dilley: Yes.

Mr Blake: Can we go to page 6. Pages 5 and 6 for some reason, I think, are out of order and so, in fact, page 6 comes before page 5. Then if we scroll back to page 5, this is – sorry, if we scroll down page 6, just to have a look at that very briefly, there’s reference to various call logs and, at the bottom, that’s dealing with one particular call log.

Stephen Dilley: Yeah.

Mr Blake: Then if we turn back to page 5, we will see that’s the same bit continued.

Stephen Dilley: Mm-hm.

Mr Blake: If we scroll down half the page, halfway down, it says:

“It was [Anne Chambers’] feeling that it was sloppy inaccuracies rather than fraud. Additionally as the [postmaster] is actually declaring the discrepancies this gives the impression of incompetence.”

At paragraph 379 of your statement and, in fact, in your evidence today, I think you said you didn’t feel that Mr Castleton was dishonest.

Stephen Dilley: No, I didn’t and I don’t.

Mr Blake: Can we please look at POL00071040. This is 24 August 2006. It’s an email from yourself to Richard Morgan. Can you tell us who Richard Morgan was?

Stephen Dilley: Yes. He was counsel for Post Office, so we instructed him and he was our barrister in the case.

Mr Blake: You tell Mr Morgan there at paragraph 2, you say:

“I’ve spoken to Greg Booth (temporary subpostmaster of Marine Drive from 21 April to 28 May 2004) and have agreed to meet him on Wednesday next week to take a statement. The gist of what he will say is that he didn’t have any problems balancing or experience any IT issues. However, he also made 2 other comments which were not especially helpful …”

Stephen Dilley: Yeah.

Mr Blake: He said:

“Lee Castleton told him that it was only when he transferred cash to the suspense account that the problems seemed to multiply. Lee told Greg he hadn’t taken any money and Greg believes him …”

Stephen Dilley: Mm-hm.

Mr Blake: “Greg believes that Lee Castleton was an inexperienced subpostmaster and before he was suspended he sought support and help from the [Post Office] but didn’t get it. He knows of another case (no names mentioned) where another branch lost money and a different …”

I think that’s regional line manager?

Stephen Dilley: I think it might mean Retail Line Manager.

Mr Blake: Retail Line Manager:

“… gave the subpostmaster much more support in marked contrast to this case. He also knows [Lee Castleton] is speaking to other subpostmasters.”

Stephen Dilley: Yes.

Mr Blake: You say:

“I assured Greg that [Lee Castleton] did get support, but perhaps the issue was that [Lee Castleton] didn’t actually see all of that because work was done in other places such as NBSC. In any case, Greg’s comments are unhelpful which [I think that’s Lee Castleton] might fish for in cross-examination or I fear Greg may volunteer.”

Stephen Dilley: I suspect it meant to say “Lee Castleton’s counsel”.

Mr Blake: Thank you. So, in essence, Greg Booth is saying that he believed that Lee Castleton hadn’t taken any money?

Stephen Dilley: Yes.

Mr Blake: Could we go back, please, to POL00069612, please, 7 September 2006. You say:

“Explaining to Tom that I had a conversation with Castleton’s solicitors earlier this week and they say they had not ruled out ADR but believed the whole case well turn on what the experts say and there is therefore no purpose in having ADR until their expert (hopefully for them) comes up with something to win the case for them. Tom asked me if I thought that Castleton had taken money for himself and I said he may not have done and may have mixed it with the car auction money, but this is just a hypothesis. However he has persuaded himself for one reason or another that the computers may be at fault.”

Stephen Dilley: Mm-hm.

Mr Blake: Can we look again at the draft BDO report, that’s POL00069955. It’s page 5 of that report. BDO say:

“There is a suggestion by Mr John Jones of the Post Office that Mr Castleton had omitted receipts from a car auction customer which paid in large amounts in cash to its Girobank account. My conclusions are that the three large amounts that Mr Jones refers to were correctly dealt with in the cash account.”

Stephen Dilley: Yes.

Mr Blake: Is that the hypothesis that you had slightly earlier, that BDO are saying is not actually right?

Stephen Dilley: Quite possibly, yes.

Mr Blake: Thank you. That can come down.

So we have there your own witness saying that he wasn’t dishonest?

Stephen Dilley: Mm-hm.

Mr Blake: Anne Chambers suggesting it was sloppiness, rather than something worse.

Stephen Dilley: Yeah.

Mr Blake: You had a theory but that then has been disproved?

Stephen Dilley: Yeah.

Mr Blake: Do you think that the Post Office were sufficiently open-minded to other possibilities in this case?

Stephen Dilley: I do, because when points were put to us, we went away and investigated them. That was our approach. So I set out in my statement a number of examples of us doing that. The Bentley Jennison report, another CPR Part 35 expert report came in, and it put an issue to us which, at first, I thought was quite serious. I went away and investigated it, and there was a benign explanation.

At the Part 18 request I went away and had a meeting with Fujitsu, which POL knew I was going to have and was supportive of. I also subsequently met Andrew Wise and I referred to the attendance note in the meeting in opening this morning. There was an issue raised into week 42, which POL were happy to support Fujitsu to do some more analysis around.

On 21st June, Rowe Cohen raised an issue around software updates, which we found some information out from Fujitsu and put back to them, to see if that would be an issue. When Greg Booth rang me up and said, actually, in my first witness statement I said I hadn’t had any problems with suspense account but I now have, we did a second statement and POL was supportive of that.

An issue about something about a Tivoli events log arose late in the case. POL were happy for us to disclose them and supportive of the action we took which, was not to oppose the continuation of the hearing.

There was an issue raised to us, I think, in about November/December time about the computer going down. We went and checked that with Brian Pinder; Post Office were supportive of that. Don’t get me wrong, I don’t think Post Office believed that Mr Castleton’s – you know, the information I was getting from them in conversations we were having and emails we were getting is they believed the system was robust, but they were supportive of us, rightly supportive of us, testing that and testing the points put to us to make sure.

Mr Blake: You’re getting issue after issue pointing away from significant issues in the Castleton case. You’ve spoken a lot about settlement and why didn’t Mr Castleton settle.

Stephen Dilley: Yes.

Mr Blake: Now, did the Post Office at any point consider whether they should simply withdraw?

Stephen Dilley: You can’t.

Mr Blake: Well, I appreciate there was a counterclaim but did they at any point say to Mr Castleton “We’re happy to not proceed”?

Stephen Dilley: At pages 107 to 111 of my statement I have tried to summarise all the steps that we took on behalf of Post Office to try to reach a resolution. And if – I mean, what Post Office could have done, in theory, is unilaterally serve a notice to discontinue their claim. They could have done that. There would have been two consequences of that: (1) they’d have been liable for Mr Castleton’s costs in relation to that claim; and (2) it would have left live the counterclaim. So all these, or certainly a lot of these issues we were litigating over would still have had to have been litigated and costs incurred.

So withdrawing by serving a notice of discontinuance, even had POL wanted to do it, would not have made this go away.

Mr Blake: Can we look at POL00069404, please. This is an email from you to Brian Pinder. I’m going to read to you that second paragraph there. You’ve spoken to Greg Booth, who, as we heard earlier, was the temporary subpostmaster?

Stephen Dilley: Yes.

Mr Blake: “Greg spoke to me last week and reported that his computer froze on Wednesday 25 or Thursday 26 October 2006 (I will clarify which day) whilst he was serving a customer and partway through a transaction. The transaction had not been settled. It related to a postage label. When he logged back in again, the computer had lost the transaction of £1.27. The computer did not prompt him to recover it. Greg is away this week, but I will be contacting him upon his return to obtain a supplemental witness statement about this point. Prior to then, Greg’s evidence was that he had never known the system to lose a transaction. In this particular case, Greg was £1.27 up because he had taken money from a customer. However, I anticipate the reverse would have happened if he had been paying money out.”

Stephen Dilley: Mm-hm.

Mr Blake: So now you have Greg Booth telling you not only that he didn’t think that Mr Castleton was dishonest but he now tells you that he, in fact, himself experienced a loss transaction?

Stephen Dilley: Yes. It wasn’t Post Office’s case that Mr Castleton had been dishonest but, yes, Mr Booth told me there was a problem and the right and proper thing to do was to talk to him about it, to understand it, to get under the skin of it and to produce a second witness statement about it, whether or not – whether or not – that witness statement counted for us or against us.

In the end – in the end – that’s what we were going to do – in the end, when we investigated it and began to understand it, actually – I mean, Greg Booth puts this in his second statement – it was – there was an issue, which I put down as what I call user error so it was benign. But it was the right thing to do. You know, prior to that point, that was his evidence. Something had come up to change his evidence, and we’d put in a second statement.

Mr Blake: Can we look at POL00069418, please. 27 October, you had a conversation with Greg Booth –

Stephen Dilley: Mm-hm.

Mr Blake: – who had just received your letter and then he describes the issue. It says:

“I asked him whether he thought that the system could lose transactions totalling about £26,000 and he said no. This was the only time in all his years working as a subpostmaster that he had known it to happen. However he thought he should draw it to my attention.”

Do you think he was qualified to answer the question of whether his particular error could or could not mean that the Horizon System was capable of losing £26,000?

Stephen Dilley: I wanted to understand his – he had experiences as a subpostmaster and I wanted to get – and I did not. I did not work the system and I just wanted to understand what he thought. I didn’t hold him up as, you know, an IT expert, for example, in – or an expert in how the system worked but I just wanted to understand his sense of it.

Mr Blake: Can we now look at the statement from Catherine Oglesby in the Lee Castleton case, it’s WBON0000095. Thank you very much. This is the statement that was filed on behalf of Catherine Oglesby. Can we look at page 15 of the statement, please. It’s paragraph 53. So she says there:

“Since Mr Castleton had been suspended, the temporary subpostmasters had worked with exactly the same Horizon kit and the balance had continued to be fine each day within expected parameters. Mr Castleton had not given any credible explanation for the unauthorised shortfalls. In the circumstances, I decided to terminate summarily …”

If we turn over the page, this was signed on 19 October so it was shortly before you had that conversation with Greg Booth.

Stephen Dilley: Mm-hm.

Mr Blake: Now, it’s obviously right to say that Mr Booth hadn’t experienced problems at Marine Drive but, shortly after this witness statement was written, you were aware, and in fairness to you, you did evidence that in a statement, that the temporary subpostmaster did experience a loss at another branch?

Stephen Dilley: Mm-hm.

Mr Blake: Looking at this period of time, you had a loss, albeit small, from the temporary subpostmaster.

Stephen Dilley: Mm-hm.

Mr Blake: You had that issue raised in the BDO draft report about a possible errors with the Horizon System. You had all the various issues that we’ve discussed today. Was it not a time to relook at, for example, your disclosure obligations or the conduct of the Post Office in this case? Was it not the time to question whether there were, in fact, problems with the Horizon System?

Stephen Dilley: Well, in the light of what Greg Booth was saying, that’s exactly what we did do. We did look at whether there was a problem and we were satisfied with the answer.

Mr Blake: You looked at a problem in relation to Mr Booth’s specific problem on that specific occasion?

Stephen Dilley: Yes, but –

Mr Blake: But did that not prompt you to dig a little bit deeper than you had been digging in relation to wider problems with the Horizon System?

Stephen Dilley: We were entirely satisfied with what Mr Booth said in his second statement. It was a problem that was resolved.

Mr Blake: Sir, I have a few more questions but not many. No more than about ten minutes but perhaps we can our break now. There are certainly questions to come from recognised legal representatives as well.

Sir Wyn Williams: Yes, by all means. So what time shall we start again?

Mr Blake: Thank you. If we come back at 3.25, please.

Sir Wyn Williams: Okay, fine.

Mr Blake: Thank you very much.

(3.11 pm)

(A short break)

(3.24 pm)

Mr Blake: Thank you, sir. I can see you on screen. We may be slightly early but I think we can begin.

Sir Wyn Williams: Very well.

Mr Blake: Thank you.

Mr Dilley, I’m just going to bring up on screen the BDO letter of instruction because that’s a document you wanted to be brought up earlier. It’s POL00071065. Is this the letter that you were referring to?

Stephen Dilley: No.

Mr Blake: No?

Stephen Dilley: Can you see, this is the mistake I made, as well, third line in bold “IT expert’s report”? The letter which generated the accountancy report says there “Accountancy expert’s report” and, although the accountancy expert’s report letter of instruction was not put to me by the Inquiry, what I ought to have done, which I was trying to explain this morning, at paragraph 130 of my witness statement, which deals with this – it’s question 24 of 49 of the Rule 9 Request – is I would have preferred – it’s entirely on me and I’m very sorry – I would have preferred to also give to the Inquiry – I know you already have it but I would have preferred to draw to your attention to the accountancy expert’s report. We sent it in when I realised this. It might have been last week, but you already had it, of course.

Mr Blake: So was BDO approached to provide an IT expert’s report?

Stephen Dilley: At the – it’s so long ago but the conclusion I draw from this is that there were two letters, two letters on 22 August. One was asking BDO to do an accountancy report and that’s the report that you’ve taken us to, the draft report. The other was this, asking them to do an IT expert’s report, but the conclusion I draw, not from my memory, is that we must have said to BDO “Pause on this”, because in the end what happened was we wanted Mr Castleton to produce his IT expert report so we could do something more tailored and responsive to it.

Mr Blake: Is another possible explanation that that draft report that we have seen, in fact, was intended to capture both the accountancy aspect and the IT aspect of the report?

Stephen Dilley: It’s possible but I don’t believe at all that that’s what it was doing.

Mr Blake: Perhaps if we scroll down, there is a list of documents, if we keep on scrolling, and more scrolling, please, thank you. If we could keep on going, “Documents enclosed”.

If I could ask you just to have a read to yourself of the documents that were enclosed –

Stephen Dilley: Mm-hm.

Mr Blake: – and over the page, further down. Am I right to summarise there that the information that was provided along with that letter of instruction did not contain wider analysis of the Horizon System outside of Mr Castleton’s own branch?

Stephen Dilley: Yes.

Mr Blake: I’m going to move on to a different topic and that is the evidence of Anne Chambers. Could we, please, look at POL00073838. Just for the record, we do, in fact, have the other document. I won’t bring it up on screen now because I’m not entirely sure it is with those sitting behind me but for the record it is POL00071069.

Anne Chambers. We have here her draft witness statement. This early draft, if we look at page 3, contained a section on the Helpdesk calls.

Stephen Dilley: Yes.

Mr Blake: Are these words drafted by yourself?

Stephen Dilley: I – the way we prepared, the general way we prepared witness statements in this case is I went to see – I went to physically meet almost all of the witnesses. We had a meeting with them. Made notes on what they said, and then I tended to put together the first draft. It is entirely possible that I put this first draft together based on, you know, the meeting I had had with Anne Chambers but I don’t have a specific memory of that any more.

Mr Blake: Do you tend to produce a statement includes as much as you would like to and ask the witness, effectively, to reduce it down if they need to?

Stephen Dilley: I think that would be an oversimplification. The statement is – the way the statements are prepared is an iterative process, it’s the witness’s statement, really important they have to be completely content with it. In Anne Chambers’s example, in Anne Chambers’s example it was reduced from the first draft because, looking act those “E” numbers, my recollection is that those were references to Horizon System Helpdesk call logs.

At the time, I think we were saying to Anne Chambers “Can you put into – can you just explain what these call logs meant? We know you didn’t deal with them but can you explain what they meant?” And, ultimately, she wasn’t comfortable doing that but Andy Dunks was so we rightly took them out of her statement but we just wanted someone to fulfil the narrative function of describing what they meant.

Mr Blake: We can see that in FUJ00122285, where she emails you – it’s the second email on the page, and she says – sorry, it’s page 3. Thank you. She says:

“I’m somewhat concerned about my witness statement containing all the PowerHelp calls, given that I had no involvement at the time … I was unaware of problems at the branch until 26 February when the call was sent to SSC.

“The way it is laid out at the moment is neither a verbatim transcript of the calls, nor my interpretation of what was probably meant at the time. I can provide the latter if that is what is required, but there needs to be a clear delineation between what was stated then and comments I make now.

“I do not particularly want to be questioned on the handling of calls by HSH, since I did not and continue to have no responsibility for this.”

I mean, it seems as though she was not comfortable with the inclusion of –

Stephen Dilley: Correct, and, if she wasn’t comfortable, the right thing to do was not to ask her about it.

Mr Blake: Can we look at POL00071092, please. 17 August 2006, this is an attendance note made by yourself in a conversation with Anne Chambers and, similarly, it says:

“Basically, she felt uncomfortable commenting on any of the calls other than those she was involved in”, et cetera.

Then it’s the second paragraph:

“7(a) we will probably leave as it isn’t really relevant and paragraph 40 in the Conclusion she will have to review to see if she feels properly able to say that. Anne will go over the statement and also put it more into her own words and explain the limits of her involvement. She will come back … tomorrow.”

So you had drafted an original conclusion paragraph 40 –

Stephen Dilley: Mm-hm.

Mr Blake: – and she was considering whether she could properly say that?

Stephen Dilley: Yes, that’s right.

Mr Blake: Perhaps can we look at that side by side with POL00073838, and that’s the draft witness statement, and if we could, on the left-hand side turn, to the page 9. Thank you. So the conclusion, as drafted by yourself was:

“There are no reasonable grounds for believing that the information stored on the Horizon System would be inaccurate because of improper use of the computer terminal. To the best of my knowledge and belief, during the material time, the Horizon System was operating properly at the Marine Drive branch or if not, any respect in which it was not operating properly was not such as to affect the production of audit record or accuracy of their contents.”

Thank you. Can we now look at FUJ00152292. This is a document you’ve only recently seen. It comes from Fujitsu. It doesn’t really add very much to what we’ve already seen, but I would like your thoughts on it.

It’s an email from Anne Chambers to Gareth Jenkins and she addresses the statement at the bottom. She says:

“This hasn’t had my full attention, lots of people are on leave and Martin landed me with a tricky POLFS/FP issue. Also, yesterday I got my witness statement which is (as I expect you found) full of things I didn’t say or do, including all those PowerHelp calls.”

Did you understand her to feel uncomfortable with the process at all?

Stephen Dilley: She – it’s right to record that she was not comfortable with giving evidence on the PowerHelp calls.

Mr Blake: I don’t think that that is necessarily limited to the PowerHelp calls, where she says, “Full of things I didn’t say or do, including the PowerHelp calls”. Did you sense a general concern on her part, in respect of the evidence that she was being asked to give?

Stephen Dilley: It came to my attention in a document that I first saw on Monday, in the additional documents bundle, which is basically a post mortem by Anne Chambers a while later, that Fujitsu had not told her, until shortly before the meeting I assume we had with her in June 2006, that we wanted her to give evidence. But I told Fujitsu that in April, so – but I didn’t know that at the time. I didn’t know that at the time.

But it, you know, that’s in a document that she wrote after the Castleton case, but I didn’t know that they’d not passed that on to her then.

Mr Blake: Can we now look at POL00069622, please. This is the meeting, the 11 September note. Can we look, please, at page 4, and it’s the bottom of page 4, “Meeting with Anne Chambers”:

“We went through Anne’s witness statement. She said she had personally got a new set of referrals for six years.”

Now it says:

“Three to four years subpostmasters had been complaining that there is a problem or have complained if there is a problem. Sometimes there is a major …”

It’s not clear, it may be something is highlighted there and photocopied or something it’s not entirely clear what’s missing there:

“… for example, all the cash and stock appears to have vanished out of the office.”

Now, I think you have said in your witness statement that your reading of that – if we could scroll up and perhaps just have the bottom of the page above, thank you very much – your reading of this is that she said that there are three to four subpostmasters each year. Isn’t it equally possible that she was saying that for three to four years, subpostmasters had been complaining that there is a problem with the Horizon System?

Stephen Dilley: Look, I wish – I wish my note, my dictation had been clearer. I checked the original, checked the original, and it’s not a highlighting issue, the word’s missing, which suggests to me my dictation wasn’t as clear. That’s not my belief that that’s what she was saying.

Mr Blake: You say that’s not your belief. I mean, you can’t recall either way; is that right?

Stephen Dilley: I can’t be sure, no. That is right.

Mr Blake: If it was something that Anne Chambers had told you, would that have been disclosable?

Stephen Dilley: In civil proceedings you don’t disclose information, you disclose documents. That’s really different from the criminal proceedings. You carry out a search for documents. It’s just it feels like the two are being mixed up in the question.

Mr Blake: Would that have caused you to rethink the reasonableness and the proportionality of your search if she had said to you that for three to four years subpostmasters had been complaining?

Stephen Dilley: Well, I’m not sure, even if that’s what she had said, it would have done, because the – if you go a little bit further down somewhere, she says – yeah, no:

“Sometimes there was a major [and then there’s a missing word] for example, all the cash and stock appears to have vanished out of the office. But those sorts of errors are singular and not continual.”

And the impression I got from that is there weren’t systemic issues with the system because they were – well, they were singular and not continual.

And, you know, I certainly didn’t get the impression – it was a long time ago, but I would remember it – I did not get the impression from that meeting with Anne Chambers that there was a bigger problem with the Horizon System. I didn’t.

Mr Blake: She’s coming to give evidence next week. If her evidence is that she said that for three to four years subpostmasters had been complaining, do you think that that should have prompted you to carry out wider investigation of the Horizon System?

Stephen Dilley: No.

Mr Blake: If we scroll down, paragraph 5 and paragraph 6 in fact, she says that they want to delete paragraph 16.

Stephen Dilley: Mm.

Mr Blake: Perhaps we can look at FUJ00122323. Can we look at paragraph 16, that’s page 5. Do you think it’s correct to say that that it is the paragraph at that meeting she would like to have deleted?

Stephen Dilley: I’m not sure without going to the part of my witness statement where I set this out. In the preparation of my witness statement, I went through every draft of Anne Chambers’ system on our computer, so that I could understand how we’d got from the first version to the final version. So it would help refresh my memory if we could go to the right part, if you could help me with that.

Mr Blake: What I can do is bring on to screen the final witness statement and, perhaps, can we keep that one on screen and can we also see LCAS0000112, and it’s page 5 of that. Thank you. On the left-hand side, if we can go to page 5, thank you very much.

So the final version, this is the signed version on the left-hand side, has been changed from “There was no evidence whatsoever of any system problem but the continued losses and calls suggested the Marine Drive branch needed some business assistance” and it now reads “My conclusion was that there was no evidence whatsoever of any system problem”.

Stephen Dilley: Yeah.

Mr Blake: Was that changed to try to maintain the line that this was opinion evidence rather than expert evidence?

Stephen Dilley: Anne Chambers was a subject matter expert but she wasn’t a CPR Part 35 expert. I think that the change was to put the statement into language that was – she was content with saying and I don’t think it was about whether it – I don’t – I don’t think we were thinking is it opinion is it facts, specifically. I think it was more about, look, this is the witness, she’s got to be completely happy, completely happy with her evidence.

Mr Blake: Do you think she could have said that there was no evidence whatsoever of any system problem –

Stephen Dilley: Um –

Mr Blake: – because I think your evidence earlier was she didn’t interrogate the entire system?

Stephen Dilley: She didn’t and so she was wanting to talk about the investigations she had carried out, and what she hadn’t done – you know, she didn’t represent to the court that she had carried out a huge investigation of the system. She was quite specific with the judge, with the trial judge about what she had done and the limits of it, so we were changing her statement that made it more accurate and put it into the words with which she was content.

Mr Blake: Would it have been more accurate, on the left-hand side, to have added words such as “affecting Lee Castleton’s specific branch”, where she says, “My conclusion was that there was no evidence whatsoever of any system problem”?

Stephen Dilley: Ah, it was blindingly obvious at the trial, blindingly obvious, that that was what she was talking about. She was not absolutely saying – and we didn’t say to the trial judge, in fact it was the opposite, we said – and you’ll see it in our note of the trial – we said “We are not saying this system is free of problems, generally”. That was put before the judge.

So it was blindingly obvious. I think this is one of the things where we’re all looking back, as we only can 17 years later, and going “Could we have done this? Could we have done that?” But, at the time, we were satisfied, and she was satisfied that it was clear and it was.

Mr Blake: You say it was “blindingly obvious”.

Stephen Dilley: At the trial, yeah, at the trial, really, really clear.

Mr Blake: Reading that statement, it’s rather close to the line, isn’t it?

Stephen Dilley: Look, she was – I just don’t think I can add to my evidence on this point. She had to be satisfied with what she was saying and I think, if we looked at page 16, which she refers to of her exhibit, which is on page 338 of the trial bundle, I see, the conclusion was reflecting actually something that she had written at the time.

Mr Blake: The one on the right-hand side though, “There was no evidence whatsoever of any system problem”, as originally drafted by you, was plainly wrong, wasn’t it?

Stephen Dilley: Yeah, well, she was not content to say that and it was right that she had to talk about her investigation.

Mr Blake: The very final document that I’m going to take you to is FUJ00152299, and this is the document that you referred us to, the afterthoughts on the Castleton case.

Stephen Dilley: Mm.

Mr Blake: I’m going to skip through it very briefly because we will be hearing from Ms Chambers, “Review of technical evidence”. She says that she was concerned that there was no technical review of the Horizon evidence before the original call and going to court. She says:

“Once in court, I found myself being treated as an expert witness and answering a wide variety of questions about the system, although nominally I was a witness of fact and my witness statement covered just the investigation done in 2004.”

She goes on in the final paragraph there to say:

“If there is similar cases in the future, where the system is being blamed, would it not be sensible to have a technical review of all of the evidence …”

Was her criticism there, do you think that was a fair criticism of the way the case was conducted?

Stephen Dilley: Let’s break it down into parts because she says quite a lot there. “Once in court I felt myself being treated as an expert witness”. I suspect if – this my conjecture but, if you said to Anne Chambers “Do you mean a CPR Part 35 witness?” She’d have said, “What’s CPR 35?”

I think it is fair to say and perhaps more accurate to say she was regarded as somebody, and rightly regarded, as somebody who was knowledgeable about the Horizon System. She was and that’s how she came across. I think the other – she then talks about “I was able to fulfil the wider role”.

I think what she might be driving at there is the Callendar Square bug issue that got raised shortly before the trial, upon which she was then asked, and it was handy because she was the person who had investigated the Callendar Square bug and she was able to – so I think that’s the context in which she is talking.

Mr Blake: Do you think you properly explained to her the difference between an expert witness and a witness of fact?

Stephen Dilley: I – gosh, this is a very long time ago to remember specific conversations and advice but I am sure we would have been alive to that. We certainly made it clear to Fujitsu in the end that, if we were going to get an expert evidence, you know, it wouldn’t be them, notwithstanding the letter I sent to them on 22 November. So had we been concerned about that, I’m sure we would have dealt with it properly.

Mr Blake: Do you think that the way that the evidence had been presented put her in a difficult position in that respect?

Stephen Dilley: No.

Mr Blake: Scrolling down to “Disclosure of evidence”, very briefly, she said that:

“Fujitsu made a major legal blunder by not disclosing all the relevant evidence that was in existence. I found myself in the invidious position of being aware that some information (Tivoli event logs) existed, but not sure whether they should be disclosed”, et cetera.

Scrolling down, she refers to a conversation, I think, with yourself.

Stephen Dilley: And she quotes from something that I must have said.

Mr Blake: She said:

“This suggests that disclosure of the message store itself was an afterthought, although it is fundamental to the system”, et cetera.

She refers to fraud cases. She says:

“Many other files are also archived to the audit servers as a matter of course and could hold relevant information, although the Security team are not necessarily aware of their existence or potential relevance. I’d like to suggest that a list of these files is compiled so that similar mistakes are not made in future.”

Stephen Dilley: Mm-hm.

Mr Blake: “And what about calls on PEAK, which may have evidence attached?” et cetera.

Do you think her criticisms of the lack of disclosure that was made to Mr Castleton are fair?

Stephen Dilley: No.

Mr Blake: Why not?

Stephen Dilley: I’d need to take you to the part of my statement dealing with the signature of the first disclosure list and the email conversation I was having with somebody called – I think she was called Vicky Young – to begin to explain that.

Mr Blake: Can you briefly summarise what the point is that you would like to make on that?

Stephen Dilley: Vicky – sorry, Vicky Harrison. Vicky Harrison – you know, I said to Post Office “Look, you’ve got a duty to carry out this reasonable search, the penalties for not disclosing are severe”, or something like that, “we have to be thorough”. And Vicky Harrison wrote to me, I think it’s – it is set out in my statement – and said what I believe to be the case, which “You’ve got this, you’ve got that, this is how I’ve done it, including this stuff from Fujitsu”.

And so I believed that – absolutely believed that Post Office had more than – more than carried out their duties of carrying out a reasonable search. All that said, all that said, as I’ve said, we did disclose other documents after our list of disclosure was prepared, including, including Tivoli event logs, which is different from an events log, but actually, the disclosure of that turned out to be a non-issue. It didn’t help Post Office’s case but it didn’t help Mr Castleton’s case either.

Mr Blake: Looking at the reflections of a witness in the case, a witness with significant experience with the Horizon System, looking back at all you did, do you think that you could have made and should have made wider disclosure than, in fact, you did make to Mr Castleton?

Stephen Dilley: No.

Mr Blake: Sir, those are all the questions that I have. There are a number of questions from Core Participants, sir. I think we’re going to hear from Ms Page first. I suspect we may go on beyond 4.30 or are likely to go beyond 4.30.

Sir Wyn Williams: I’m not sure about that. This is all what I might call detailed and intricate evidence and I want to ensure that my concentration levels are the same now as they were about five hours ago. So I’m not at all sure that I’m going to be prepared to sit for any significant length of time beyond 4.30. So I think we need to have a realistic time estimate now of how much further questioning there is and decide how we deal with that.

So can I first of all ask Ms Page what she has in mind, since she obviously represents Mr Castleton, and this is primarily, if not exclusively, about Mr Castleton.

Ms Page: Thank you, sir. I was hoping or planning to take around 40 minutes.

Sir Wyn Williams: Right. Are there other counsel who wish to question?

Mr Blake: There are. Ms Dobbin has some questions but I don’t think a great deal of questions.

Ms Dobbin: Sir, I wasn’t anticipating being anywhere as long as Ms Page, so probably about 20 minutes.

Mr Blake: About 20 minutes on behalf of Mr Jenkins.

Sir Wyn Williams: Well, I am prepared to have 20 minutes’ worth of questions now but then I fear Mr Dilley will have to return either tomorrow or at some other suitable occasion, which is convenient to everyone involved.

Mr Blake: Thank you, sir.

Can I just check with Ms Page whether she would still like to go first in light of that or whether she’d like the evening?

Ms Page: I’m content to go first.

Mr Blake: Thank you.

Sir Wyn Williams: Well, then bring it to a close, Ms Page, at around about 4.20, all right?

Ms Page: Certainly, sir.

Questioned by Ms Page

Ms Page: Mr Dilley, you’ll have gathered from that that, alongside number of other subpostmasters, I represent Mr Castleton, who sits to my right.

Stephen Dilley: Mm-hm.

Ms Page: Mr Dilley, do you say that Mr Castleton has fabricate his evidence to this Inquiry, in that he says that there was a conversation in which you told him that the Post Office would ruin him?

Stephen Dilley: I don’t believe that in making that comment Mr Castleton has been dishonest but I do believe that he is mistaken.

Ms Page: Do you recognise that this case was a life-changing catastrophe for Mr Castleton?

Stephen Dilley: I imagine it was, yes.

Ms Page: Do you not think that moments like this were seared onto his memory?

Stephen Dilley: I don’t believe that his recollection of that conversation was accurate.

Ms Page: When settlement was discussed, Mr Dilley, at no stage did Post Office offer to pay Mr Castleton anything, did they?

Stephen Dilley: There was no offer from either side to pay each other – the other person anything. That’s correct.

Ms Page: Seeking settlement just meant that Post Office wanted him to pay the claim and say that Horizon was working?

Stephen Dilley: I remember writing to Mr Castleton’s solicitors, trying to persuade them and Mr Castleton to come to mediation and citing specifically a case that said, “Until you get into the settlement meeting, you don’t really know the bottom line”.

Ms Page: Well, you say that your only regret in the way that this case panned out was that you didn’t manage to settle the claim. So what you do there, really, Mr Dilley, you may think, is that you turn Mr Castleton’s courage around. In his courageous refusal to pay a debt he didn’t owe, you say, “Oh, what a shame he didn’t agree to pay that debt”.

Stephen Dilley: Sorry, I haven’t got any comment on Mr Castleton’s courage. I have no doubt, though, that going to trial was difficult for him. It’s difficult for any litigant.

Ms Page: Your only regret is that he didn’t agree to pay a debt that he did not owe?

Stephen Dilley: I regret that the parties were unable meet each other around the table on a without-prejudice basis and try to resolve their differences. That’s not just – when you go to these meetings, it’s not just about money. I think it would have been quite powerful, for example, for Post Office to have said, as I did to Mr Castleton in two conversations, “It’s not part of our case that you have been dishonest”.

I think it would have been helpful to have said that in a meeting, if we’d have been able to get there.

Ms Page: We’ll pass over, perhaps, the need for Mr Castleton to have judgement from the Post Office on his honesty and instead turn to a document: POL00072691. If we look at the middle paragraph of this telephone note of your call with Mandy Talbot, it says that:

“She reiterated that the Post Office are not going to settle this case lightly and her view is that they should take it to trial, just to take a firm line”, et cetera.

We’ve heard this sort of thing before. But the final sentence:

“However, we should be seen to be settling and that’s why she is willing to agree to Castleton’s offer of mediation.”

“We should be seen to be settling”.

Stephen Dilley: Mm-hm.

Ms Page: The offers of mediation were never sincere, were they, Mr Dilley? It was completely a sham?

Stephen Dilley: I completely disagree. It was so serious. We wrote and wrote and wrote. Mr Castleton’s solicitors blow hot and cold and I have set out in pages 107 to 111 –

Ms Page: Yes, we’ve heard you say that before.

Stephen Dilley: – the instances of it.

Ms Page: If we can go, please, to another document POL00072741, and after she could go, please, to page 2 and scroll to the bottom. This is a note of a meeting between you and counsel Richard Morgan, and your partner was there as well, Mr Beezer?

Stephen Dilley: Mm-hm.

Ms Page: You interject at the bottom of page two, “SD” I assume being you?

Stephen Dilley: Mm-hm.

Ms Page: “… this would have settled without the computer/Horizon issue and the subsequent subpostmaster’s bloggers website.”

Yeah? So that’s you telling counsel that the case would have settled, absent the Horizon issues.

Stephen Dilley: I certainly think – I certainly think that complicated this, it made it way beyond, as we’ve heard this morning, Post Office’s original goal of what they saw as a debt claim. It absolutely complicated it. That’s absolutely fair to say.

Ms Page: All right. Well, let’s go to counsel’s reaction towards the end of the meeting, which is on page 6 of this note, and the second paragraph:

“RM [Richard Morgan] stating that it should be stated to POL that this is madness and we could settle with drop hands and the confidentiality clause.”

Then he goes on to talk about an estimate of costs.

Stephen Dilley: Mm-hm.

Ms Page: “Madness”; do you accept that’s his advice?

Stephen Dilley: If you look at this case in isolation as an economic exercise in the recovery of money, I do.

Ms Page: Right, well, let’s look at how this advice was communicated to Post Office because they were not at that conference. If we turn to POL00071081, please, and if we go to page 2, please, about halfway down. There’s that paragraph that says – I’m taking this quite briefly but this letter is basically following the conference with counsel and passing on various points from the conference to counsel. It was written by Mr Beezer.

Stephen Dilley: Mm-hm.

Ms Page: That paragraph at the bottom of the page:

“As we discussed (and apologies for raising this matter again – I know you are aware of this advice – but I raise it here for the sake of completeness), the costs of pursuing this claim will significantly exceed what is at stake. Accordingly, even if you win, the [Post Office] will almost certainly not make a net gain as your costs will be assessed and possibly capped … irrecoverable … exceed the value of the … claim. In any event, you may well find it difficult to enforce any judgment because of Mr Castleton’s asset position … Accordingly the purpose of pursuing this claim now is not to make a net financial recovery, but to defend the Horizon System and hopefully send a clear message to other subpostmasters that the [Post Office] will take a firm line”, et cetera.

Stephen Dilley: Yeah.

Ms Page: What is not said is that this is madness, nothing like. Counsel’s advice was not passed on, was it?

Stephen Dilley: I don’t agree. I think the – it’s certainly true that the word “madness” wasn’t used but the sentiment in counsel’s advice was absolutely passed on.

Ms Page: All right. The opening sentence, do you accept that this is, effectively, Mr Beezer expressing to Post Office the fact that he’s already well aware that Post Office are not going to listen to reason on this?

Stephen Dilley: No. I think Post Office had their reason but their reason hadn’t become a net economic recovery in this case. It’s how it had started, but it had changed.

Ms Page: The only way that they were going to settle this case was strictly on their own terms, wasn’t it?

Stephen Dilley: Where does it say that?

Ms Page: Well, I’m inferring it from the fact that there was no prospect of settling this case in a way that was going to satisfy their purpose, unless Mr Castleton paid the claim and said Horizon was working.

Stephen Dilley: I certainly think that the longer the claim went on, the harder it became to settle, that’s right. And that’s why, you know, before the costs got really high, we’d offered mediation in November 2005 and it’s right to record that. And the longer it went on, the more money they’d spent on it, I think probably the more they wanted out of it.

Whether – what we’ll never know, because we never went to a settlement meeting – let’s imagine we’d have gone to a settlement meeting and Mr Castleton had said, “Hello, Stephen Dilley and Post Office, my assets are X. I will – look, so, you know, there’s no economic point in this, but I will accept, I will accept, if we’re able to reach a settlement, that I withdraw my allegations about Horizon System”.

We will now never know whether that would have resulted in a settlement but I think at some point we would have had – we would have worked very hard to recommend that sort of proposal to Post Office but we will now never know.

Ms Page: Well, I’m not going to go back over ground that you’ve already been taken to this morning. What I would like to go to, though, is the final exchanges on this issue, which is at POL00069775 and if we go down, please, to start off with page 3 of this document. This is in the November before the trial in the December.

Stephen Dilley: Mm-hm.

Ms Page: The email we’re looking at now is from Ms Talbot to the business but also copying you in, and she says that:

“[Everyone will be] pleased to know that the solicitors acting for Castleton have substantially accepted our counterproposal.”

In brief, the counterproposal is that Mr Castleton was to pay everything and was to give a non-disparagement – I think that was the legal terminology being used – a non-disparagement undertaking, to the effect that Horizon was working fine. We see that at the bottom:

“I [Mr Lee Castleton] the former postmaster at Marine Drive Post Office admit that a sum of money was owed by me to Post Office as a result of errors which arose while I was the postmaster … I had thought that this debt arose due to a malfunction of the HORIZON system but I [now] accept that I was mistaken and that the debt arose out of human error. I declare that the HORIZON system did not contribute to the errors in any way and formally withdraw all statements I made to the contrary.”

That was the attempt to resolve the case before the trial in the November, isn’t it?

Stephen Dilley: It wasn’t the attempt; it was an attempt. But there were several rounds of conversation between respective counsel and, in terms of disparagement, there was a mutual disparagement. So Post Office were to also, my recollection was, withdraw their – you know, any suggestion – which they hadn’t made, by the way – that Mr Castleton had been dishonest. So it was a two-way street.

Ms Page: This was the Post Office getting everything that they wanted, wasn’t it?

Stephen Dilley: I certainly thought it would have been a really good result for Post Office.

Ms Page: Yes.

Stephen Dilley: But I also think it would have been a good result overall. It would have saved a significant amount of money, for example, and it would have avoided the stress of a trial.

Ms Page: Mr Castleton paying a debt that he didn’t owe and paying costs that had been run up expediently and in order to make him into an example to hold up to others? That would have been a good result for him, would it?

Stephen Dilley: The judge found, having heard the evidence from all the witnesses at the time, that he did owe the debt.

Ms Page: Well, let’s just focus on whether that would have been a good result for Mr Castleton, shall we?

Stephen Dilley: His solicitors had advised him – they told me they’d advised him to settle and that they thought – they thought that he had bad case.

Ms Page: You were aware, weren’t you, that at this point in time Mr Castleton was not well, weren’t you?

Stephen Dilley: At some point he did become ill, that’s right.

Ms Page: Yes. Let’s just go up, please, to the response from the business. It’s on page 2. What we see is a response from Keith K Baines. It’s addressed to Mandy Talbot, and there are various people from Post Office copied in.

Stephen Dilley: Mm-hm.

Ms Page: I don’t know if any of these names mean anything to you, Biddy Wyles?

Stephen Dilley: That name is familiar. I think she might have been in the Legal team.

Ms Page: Clare Wardle, likewise in the legal team, I believe?

Stephen Dilley: Yes, yes.

Ms Page: Then we see a John D Cole, a Marie Cocket, a Richard W Barker, a Rod Ismay. Are these people that you communicated with directly at any stage before?

Stephen Dilley: Not insofar as I recall.

Ms Page: No. So on this occasion, and only on this occasion, you received an email direct from Keith Baines in the business and it was because he got involved with the wording of the non-disparagement clause, isn’t it? Do you see that?

Stephen Dilley: Mm-hm.

Ms Page: So it was the only thing that they cared about, really, wasn’t it?

Stephen Dilley: It did become really important to them. I don’t think it was the only thing but it was certainly an important thing.

Ms Page: The offers to mediate were a sham, weren’t they, Mr Dilley?

Stephen Dilley: Absolutely not.

Ms Page: They wanted this wording to show off, to make sure that all of the subpostmasters out there who might be bringing claims against them blaming Horizon would cower and would go away. That’s what this case was all about, wasn’t it, Mr Dilley?

Stephen Dilley: You’re asking me to give evidence about Post Office’s state of mind and I think that’s more accurately put to them. You know, I’ve given the evidence that I can do about their thinking, especially throughout the morning session.

Ms Page: Sir, that may be a good moment to break off.

Sir Wyn Williams: All right.

First of all, Mr Dilley, are you able to return tomorrow morning without very considerable inconvenience to you?

The Witness: I can. I would much prefer to get finished today, if we can, and I would be happy to –

Sir Wyn Williams: I appreciate that. I understand that and, normally, I would do my best to accommodate a witness but I have decided that I need to be concentrating fully on every aspect of your evidence and it’s very difficult to keep concentrating from now on, and I am afraid that’s a reason why I’m calling a halt. I appreciate that that will inconvenience you, and I would wish to avoid it but I don’t think I can.

So is anybody else who wishes to participate in the sense of asking Mr Dilley questions unable to appear tomorrow morning?

Mr Blake: No, sir.

Sir Wyn Williams: Then we’ll resume tomorrow morning. Is there a need to start a little earlier tomorrow morning to accommodate both Mr Dilley and Mr Morgan?

Mr Blake: I’m told by Mr Beer that there is no problem with Mr Dilley returning tomorrow morning. It may be perhaps we could ask Mr Dilley whether he would prefer an earlier start to the usual start.

The Witness: That would be very kind, if you could.

Sir Wyn Williams: Well, certainly I’m prepared to start at 9.30.

Mr Blake: Thank you, sir. Perhaps we can resume at 9.30 tomorrow morning?

Sir Wyn Williams: Is it just Ms Page and counsel for Mr Jenkins, did you say?

Mr Blake: Yes, Ms Dobbin.

Sir Wyn Williams: Yes. So we’re looking at a maximum of another 45 minutes, or thereabouts?

Mr Blake: Yes, that’s correct.

Sir Wyn Williams: Fine. All right.

Mr Blake: Sir, can we give Mr Dilley the usual warnings in respect of his evidence?

Sir Wyn Williams: Yes.

I’m sure it’s correct that I do so, Mr Dilley, even though I’m equally sure that you wouldn’t dream of talking to anyone about your evidence. That would be the last thing you would want to do, I assume, having talked about it all day. But, in any case, I do ask you to refrain from discussing your evidence with anyone, and I’ll see you again at 9.30 tomorrow morning.

The Witness: Thank you.

Mr Blake: Thank you very much.

(4.17 pm)

(The hearing adjourned until 9.30 am the following day)