18 October 2023 – Alan Lusher
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(12.00 noon)
Mr Stevens: Good morning, about to be good afternoon, sir. Can you see and hear me?
Sir Wyn Williams: Yes, I can. Before you go any further can I ascertain from you how we propose the rest of the day should pan out? My kind of provisional view was that we’d have a lunch break at more or less the normal conventional time and then an afternoon break does that coincide with how you see it going?
Mr Stevens: Precisely sir, yes.
Sir Wyn Williams: Fine. All right, thank you.
Mr Stevens: In which case, may I call Mr Alan Lusher.
Alan Lusher
ALAN KENNETH LUSHER (affirmed).
Questioned by Mr Stevens
Mr Stevens: Thank you, Mr Lusher. My name is Sam Stevens and, as you know, I ask questions on behalf of the Inquiry. Please could I ask you to state your full name.
Alan Lusher: Alan Kenneth Lusher.
Mr Stevens: Thank you for giving evidence today and thank you for the detailed witness statement which you’ve already provided. I want to turn to that now and I see you do have a bundle of documents in front of you?
Alan Lusher: I do.
Mr Stevens: Do you have your witness statement to hand?
Alan Lusher: Yes.
Mr Stevens: For the purposes of the – that’s dated 10 May, I should say, of this year. For the purposes of the record it’s referenced WITN05830100. Can I ask you, please, to turn to page 49 of that statement?
Alan Lusher: Yes, sir.
Mr Stevens: You’ll see it runs to 176 paragraphs.
Alan Lusher: Yes.
Mr Stevens: At the bottom, do you see your signature?
Alan Lusher: Yes.
Mr Stevens: Can I ask you to confirm that the facts stated within that statement are true to the best of your knowledge and belief?
Alan Lusher: Yes, they are.
Mr Stevens: Thank you. That stands as your evidence to the Inquiry. I’m going to ask you a few further questions and I’m going to start with some background, summarising your career at the Post Office, before discussing some parts in more detail.
It’s fair to say, is it, that the majority of your career at the Post Office was spent either in the Audit Team or as a Contract Adviser?
Alan Lusher: Yes, that’s right.
Mr Stevens: You joined the Post Office in 1982?
Alan Lusher: Yes.
Mr Stevens: I think you initially started working in Crown Office branches?
Alan Lusher: Yes, that’s right.
Mr Stevens: Then you became an Auditor at postal officer grade conducting audits of sub post offices?
Alan Lusher: That’s right, yes.
Mr Stevens: Then you worked in the Audit Team with promotions until around 2002, I believe?
Alan Lusher: Just referring to my statement there, it would be around 2002, yes.
Mr Stevens: Shall we bring that up. If we bring up your witness statement at page 2, paragraph 5, please. Thank you, at the bottom it’s an incomplete list but we have a list of roles which was, I think, generated from an HR system held by Post Office. We see you were Audit Team Leader East until 2002. Then, below that, you moved into the Security team as a Security Team Manager.
Alan Lusher: Yes, that’s right.
Mr Stevens: My understanding is, while you were in the Security Department in that role, you were dealing with cheque fraud, predominantly?
Alan Lusher: It was product fraud with the overall remit of the team and I specifically looked after cheque encashment fraud at that time.
Mr Stevens: That was presumably customers of Post Office rather than subpostmasters themselves?
Alan Lusher: That’s absolutely right, yes.
Mr Stevens: If we can go over the page, please, subparagraph (i), you refer to a role between 2003 and 2005: RLM. Later in your statement I think you say that was a sales role; is that correct?
Alan Lusher: Yes, that’s broadly the role of the Retail Line Manager.
Mr Stevens: You pre-empted my question. Then we have Manpower Planning, but at (k), from October 2005 the C&SM 16, does that stand for Contract and Services Manager?
Alan Lusher: Yes, indeed. Really, the title Contract Adviser or Contract Manager can apply from that date onwards.
Mr Stevens: I see. So right through until – if we can go down just slightly, please – right down until you finish at the Post Office in August 2019. All of those, effectively, the role of a Contract Adviser?
Alan Lusher: With some differences, from around 2010, the line (p) there, Commercial Contract Adviser, I was doing a slightly different job still within the contracts role but not log after subpostmaster contracts directly and, thereafter, I was involved in looking after the contracts for what we referred to the multiple partners, partners such as Tesco, One Stop and McColls, and so on, and those partners that large numbers of post offices each and so the means of managing the contract was somewhat different.
Mr Stevens: With these larger firms, from 2012 onwards, presumably you’d have a contact at, say, Co-op or whoever it is?
Alan Lusher: Yeah.
Mr Stevens: You would deal with them and then that person or someone within Co-op would deal with the individuals at the –
Alan Lusher: In general, that would be the way it went forward, yes.
Mr Stevens: That document can come down, thank you.
I’m going to focus primarily on your period of dealing with subpostmasters when you were a Contract Adviser and also when you were in audit. Before then, I want to look at some points on reliability – perhaps we took that document down too soon, if we could go back to it at page 49, paragraph 175, please. Thank you.
If we could start at 175. Thank you. This is at the end of your statement and you say:
“At the time of the introduction of the system and consistently throughout the time when groups of SPMs were questioning the robustness of the Horizon system, my colleagues and I in the Contracts team were assured of its complete reliability. I was assured that the Horizon system was not capable of causing discrepancies.”
How often did you discuss the reliability of Horizon or its ability to cause discrepancies while you were an Auditor or Contract Adviser.
Alan Lusher: I think I’d be right in saying, sir, that, as an Auditor, the matter never arose and, as a Contract Adviser, I’d made – the case Rivenhall is mentioned in the documents and I think that was the first case I came across when the integrity of the Horizon system was questioned. We were – “we” being the team of Contracts Advisers – were repeatedly advised by Post Office Limited that there was nothing to be concerned about with the Horizon system and the integrity was complete.
Mr Stevens: When you say you were advised by Post Office Limited, who in particular gave you that assurance?
Alan Lusher: Well, the discussion came up in team meetings on a fairly regular basis. Not exactly sure of the dates because that’s so long ago but from the first inklings of difficulties in what 2004/2005, something like that, right through to the end, there was kind of a continuum. Things got – the pressure increased, as it were. Initially, there’s not too much consideration given to it but, latterly, the Post Office issued us with a statement to read out at application interviews, which the Legal team had prepared, to assure people that the Horizon system was sound. And so, you know, latterly, given – well, you asked me to speak up to 2012, didn’t you?
Mr Stevens: Well, no, do go on for latterly, please?
Alan Lusher: Well, latterly, the concern obviously increased. As just an ordinary member of the public watching the BBC documentary on the case, and so on, we became rather concerned and things changed in the team, in that the decision-making roles moved up the food chain, as it were, senior managers had to make decisions which had been previously made, perhaps, by Contracts Advisers, and so concern grew for myself and when I had the opportunity to leave the employment of Post Office Limited, I therefore took it.
Mr Stevens: I’m therefore going to come back to that issue of matters moving up the seniority in a moment.
Alan Lusher: Thank you.
Mr Stevens: When you say this message of assurance came in team meetings, where do you think the source of it was from? Was it more senior management or was it within your team?
Alan Lusher: Senior management. All the issues to do with Horizon, to the best of my knowledge, were dealt with by senior management.
Mr Stevens: Again, are you able to identify anyone in particular who was – who passed the message on to you that Horizon couldn’t cause discrepancies?
Alan Lusher: Well, my team leader in the final years was Keith Bridges, before that Lin Norbury.
Mr Stevens: Was that Steve Bridges?
Alan Lusher: Keith.
Mr Stevens: Do forgive me.
Alan Lusher: Sorry.
Mr Stevens: And Lin Norbury?
Alan Lusher: Yeah.
Mr Stevens: This belief that Horizon was not capable of causing discrepancies, how did it affect the way you approached subpostmasters who said they had a discrepancy that they couldn’t explain?
Alan Lusher: Well, initially, it made it very difficult to understand their point of view. We were given the assurances that the system could not cause errors and, when a subpostmaster came along and said the system caused errors, obviously that’s very difficult to balance up, isn’t it? So it was difficult for us to hear and understand the complaint of the subpostmaster but any such complaint from my perspective would have been passed to the accounting people in Chesterfield, who would be able to help out with the details of the Horizon implications.
Mr Stevens: You’ve mentioned it earlier and you say in your statement about SPMs complaining as to the reliability of the Horizon IT System.
Alan Lusher: Yes.
Mr Stevens: Did you ever have cause to doubt that Horizon was incapable of causing discrepancies?
Alan Lusher: No, given the reassurances from the company until much later, sort of 2015 onwards, then I thought the Horizon system, the integrity, was complete.
Mr Stevens: The Inquiry has heard evidence that people within Post Office were aware of bugs, errors and defects within the Horizon IT System, for example the Inquiry has heard evidence of Post Office employees being aware of a bug, called the Callendar Square bug, in at least 2006, that caused regular discrepancies in branches for years?
Do you think Contracts Advisers should have been made aware of such bugs, errors and defects.
Alan Lusher: I’ve never heard of that bug or defect before and, yes, it would have been helpful to be aware of that, yeah.
Mr Stevens: Why would it have been helpful?
Alan Lusher: It would have been helpful because it would have cast doubt on the integrity of the Horizon system.
Mr Stevens: In your statement, page 12, please, paragraph 41, I should say as background, you were asked – as you say in your statement, you were given two Rule 9 requests, one of which asked open questions with very little, if any, documents and the other one was more targeted, providing further documents. Paragraph 41, I believe, is a response to the first request.
You’re asked about your recollection of errors or issues within the Horizon system and you refer to the Rivenhall branch, which you’ve mentioned already just earlier?
Alan Lusher: Yes.
Mr Stevens: What, in particular, stood out about this issue and the Rivenhall branch as to why you remembered it?
Alan Lusher: The subpostmaster was Mr Ward and I recall him being quite clear in interview in saying that the Horizon system – or there’d been figures input into his account, into the Horizon system, therefore, which were not of his doing.
Mr Stevens: Well, let’s bring up a document related to that, please. It’s POL00117650 and if we could start at page 2, please. You see there this is an email from you, Alan Lusher, at the signature at the bottom. If we could just go back up on to page 1, sorry, to get the time – thank you – 15 October 2008 to Andrew Winn, and then back to page 2, please.
You say that you attach notes of the interview to the email. We don’t have copies of those notes or the Inquiry doesn’t have copies of those notes but you set out two issues raised by Mr Ward and the first is, as you say, a claim that:
“… on a number of occasions figures have appeared in the cheques line of his account. He suspects these have been input to his account electronically without his knowledge or consent.”
Was that the first time someone had made an allegation like that to you or had you heard something like that before?
Alan Lusher: As far as I can recall, that was the very first occasion that I’d come across such a statement.
Mr Stevens: Mr Ward gave evidence in Phase 1 of the Inquiry, which looked at Human Impact, so the evidence was going to how the scandal affected him. One of the points he raised is about these repeated discrepancies in the cheque line between April 2006 and September 2008. In his witness statement, he said that you told him that he was the only one experiencing these issues in his interview. Do you think that’s something you would have said or do you recall saying that?
Alan Lusher: I don’t recall saying that in 2008 but, given that it was the first occasion that I’d come across such a thing, it could have been the case, though I think it rather unlikely, to be honest. Could I also just say that, you know, I read the statement that Mr Ward made and it’s very distressing, the results of the – all this, the results on him personally. I have great sympathy towards Mr Ward. He suffered quite a lot.
Mr Stevens: Can we just go to page 1, please, now, of this email. This is Mr Winn’s response. To point (1), he says:
“The only way [Post Office] can impact branch accounts remotely is via the transaction correction process.”
That’s something we’ll come to cover briefly later on. He goes on to say, towards the end of that paragraph:
“Fujitsu have the ability to impact branch records via the message store but have extremely rigorous procedures in place to prevent adjustments being made without prior authorisation – within POL and Fujitsu.”
Was that the first time you were aware of Fujitsu’s ability to do as it says, to impact branch records via the message store?
Alan Lusher: Yes, it would be the first time.
Mr Stevens: What did you make of that at the time?
Alan Lusher: I’m pleased that you brought this document forward because, essentially, it’s me asking an expert on the Horizon system how to proceed with this unusual allegation and Andy Winn, as the expert, has come back and said basically that there are extremely rigorous procedures in place to prevent adjustments being made and so my reaction to that was, well, there must have been some other cause because we really ruled out the Horizon system as being the problem here.
Of course, Andy then goes on to say that such a casual accusation could be extremely serious to the business, if there was, in fact, changes to the Horizon system made without the consent of the subpostmaster.
Mr Stevens: What, if anything, did you do to investigate whether, in this case, there had been use of this remote access to affect Mr Ward’s branch accounts?
Alan Lusher: I don’t believe I took any further action on this, accepting the fact that the changes couldn’t have been made to the Horizon system.
Mr Stevens: Did you tell Mr Forward about Fujitsu’s ability to insert data into the branch accounts without his – sorry, insert data into the branch accounts?
Alan Lusher: I don’t recall but probably not.
Mr Stevens: Why not?
Alan Lusher: Because, at that stage, I would be content myself that the changes couldn’t be made to the Horizon system and, therefore, there must have been another explanation for the discrepancies in the account.
Mr Stevens: Well, what it says here is that changes could be made to the system but there were rigorous controls in place?
Alan Lusher: Indeed.
Mr Stevens: So for cases such as Mr Ward’s and any cases going forward, did you consider it to be important to ascertain whether those controls were being upheld when there were unexplained discrepancies?
Alan Lusher: No. I assumed that they were being upheld.
Mr Stevens: In terms of this general knowledge of the ability for Fujitsu to impact branch records, was this common knowledge amongst Contracts Advisers?
Alan Lusher: I don’t know.
Mr Stevens: Thank you. That document can come down.
I’m going now to go to audit and I want to start broadly by looking at the role of the Auditor. Is it a fair summary that an Auditor’s role was to check whether cash and stock holdings in a branch matched the figures recorded on the latest account?
Alan Lusher: Broadly, that is indeed exactly right.
Mr Stevens: Leaving to one side the sources of information, did that role remain the same before and after the introduction of Horizon?
Alan Lusher: Yes, it did.
Mr Stevens: Was the role of an Auditor to understand the reason for why a discrepancy arose?
Alan Lusher: That’s more difficult because there would be some investigation by the Audit Team to establish the reason for a discrepancy, a discussion with the subpostmaster normally, which may result in the fact that he had some local knowledge, that the lottery scratch cards are kept in a different drawer, or something like that, which hadn’t been disclosed to the Auditor, which would resolve the problem – nine times out of ten would resolve the problem but, occasionally, of course, that would be left in the air.
So there was some discussion with the Audit Team to understand the cause of an audit but basically their role was to report on the facts.
Mr Stevens: Going back quite a way now to when you started as an Auditor, do you recall if there were any minimum qualifications or minimum experience required in order to be appointed as an Auditor for Post Office?
Alan Lusher: A degree of experience in sub office – in –
Mr Stevens: Sorry, I missed that?
Alan Lusher: Sorry, a degree of experience, perhaps, with working with sub offices was desirable but there were no formal requirements for qualifications.
Mr Stevens: So working on the counter or as a manager in a sub post office?
Alan Lusher: That would certainly help, yeah.
Mr Stevens: Do you recall what, if any, training you received?
Alan Lusher: The training would have been working with other Auditors.
Mr Stevens: In your statement you say in 1988 you were promoted and took the role of Management Accountant still within the Audit Team?
Alan Lusher: No.
Mr Stevens: Sorry, was that –
Alan Lusher: The Management Accountant role was separate to the Audit Team.
Mr Stevens: I see. My apologies. So what was a Management Accountant’s role?
Alan Lusher: The Management Accountant in the area that was working at the time, I believe it was the Norwich Head Post Office area, probably, or the Anglia district – it was the Anglia district. The role of the Management Accountant there was to do with budgeting, monitoring budgets, producing performance statistics and communicating those things to the budget holders and probably not of interest to the Inquiry, to be honest.
Mr Stevens: So it’s then you go back to the Audit Team as a team leader?
Alan Lusher: Yes.
Mr Stevens: Again, was there any particular qualification or experience you needed to become a team leader?
Alan Lusher: No, there was no formal qualification required.
Mr Stevens: I should just – I think it’s clear – put it: as a team leader you would supervise other Auditors?
Alan Lusher: Yes.
Mr Stevens: Very briefly, you’ve referred already to regions, and the Inquiry has heard evidence that in pre-‘99, Audit Teams were organised regionally. Then in 1999, following a review, the service was effectively brought under a national structure; does that ring true to you?
Alan Lusher: I don’t recall the dates very well, being so long ago but, broadly, that is what happened, yes.
Mr Stevens: Can you recall whether that change, from regional processes to national process, was in any way linked to the introduction of Horizon?
Alan Lusher: I don’t believe it was linked to Horizon.
Mr Stevens: Were there any changes to the audit process, from your region, when your region moved into the national region?
Alan Lusher: No, there were no fundamental changes to the audit process, apart, perhaps, from the way the Auditors were planned – the audits themselves were planned; there was greater reliance on risk management.
Mr Stevens: The Inquiry has heard evidence that the number of Auditors reduced, as well, following the nationalisation; is that correct?
Alan Lusher: That was a steady reduction in the number of audits from the time I joined until the time I left the Audit Team, yes.
Mr Stevens: To what extent, if at all, do you think that affected Auditors’ relationships with subpostmasters?
Alan Lusher: Well, the audits became less frequent at offices that were running without any difficulties and more frequent at offices that did have some degree of – or high degree of risk, shall I say, rather than difficulty.
Mr Stevens: The reporting line for Auditors was moved into the Security Department; do you recall that?
Alan Lusher: Yes.
Mr Stevens: The Security Department was responsible for investigating allegations of criminal conduct within the Network?
Alan Lusher: Yes, I believe Tony Marsh was in charge of the Security Department at the time, they were kind of separate wings of operation that he managed.
Mr Stevens: Please could you explain the difference in practice between the role of an Auditor and the role of an Investigator?
Alan Lusher: Yes. I think we’ve described the role of an Auditor already, in that they produced the facts, the numbers, resulting probably in a discrepancy. The Investigation Team would be looking at the result of the audit and considering the possibility of a criminal investigation, usually either concerning theft or false accounting.
Mr Stevens: So would it be fair to say that – how the system was designed at least, Auditors were supposed to be doing a neutral fact-finding exercise, whereas Investigators would be evaluative in determining whether on the facts they believed there was criminal conduct?
Alan Lusher: That’s exactly right.
Mr Stevens: Was there any difference in practice once Auditors moved under the purview of the Security team?
Alan Lusher: No.
Mr Stevens: The Inquiry has heard evidence that Investigators and Auditors would, on occasion, attend branches together at the same time?
Alan Lusher: Yes.
Mr Stevens: So you do recall that?
Alan Lusher: Yes.
Mr Stevens: Why did that happen?
Alan Lusher: The Investigation Team would ask for an audit to be completed at a particular branch because there were concerns at that branch there may be a shortage or something amiss.
Mr Stevens: Do you see any problems with Investigators attending with Auditors for what is an apparently neutral exercise in an audit?
Alan Lusher: The Investigators wouldn’t have had a role to play in that visit to the office until a discrepancy was discovered – disclosed, rather than discovered.
Mr Stevens: I mean, in those circumstances, would subpostmasters be aware that the Investigation Team was there as well?
Alan Lusher: I can’t recall any specific examples, I’m sorry.
Mr Stevens: On times when Investigators weren’t there, please could you just summarise when an Auditor would engage the Investigation Department?
Alan Lusher: Yes. Once a discrepancy had been confirmed in the account, then the Auditor would normally contact the Contract Adviser first, although there would also be attempts to contact the Investigation Department, possibly. So there was three people involved there or three parties involved and, if the Contract Adviser had concerns had there may be criminal activity, then the Investigation Team would be alerted.
Mr Stevens: Was that for any discrepancy –
Alan Lusher: No, no.
Mr Stevens: – or discrepancies of a certain level?
Alan Lusher: Generally, the Contract Manager wouldn’t be advised of discrepancies less than £1,000 or so, unless there was an admission of falsification of accounts or theft, and the Investigation Team, their parameters changed over time, to the extent wherein, latterly, there were far fewer investigations and virtually no criminal prosecutions with an emphasis on the recovery of lost funds.
But if we go back to, I don’t know, 2005/2010 then, if there was any kind of admission or a larger loss with less likelihood of recovery, then the Investigation Team would be advised. On occasions, they would visit the office there and then, if they were able to, so that they were there while the Auditors were still there, which enabled them to conduct investigations very effectively.
Mr Stevens: You said then in your evidence if there was admission or if there was a large loss where recovery may have been more difficult – paraphrasing you there – why would the difficulty of recovering the amount of money on the discrepancy be relevant to whether or not Investigators should investigate whether there’s been criminal conduct?
Alan Lusher: Yes, that’s a very good point that you raise there and perhaps I was wrong in saying that that would be – unless there was a very large sum of money involved, in which case an investigation would be worthwhile, even if there was no criminal case to follow.
Mr Stevens: Again, when you say you were wrong in saying that, did that then actually reflect the thinking at the time, though, that Auditors would take into account the difficulty of recovery as to whether or not they would refer it on to the Investigation Team?
Alan Lusher: I believe I was probably wrong in saying that a few moments ago. An Auditor would be concerned if there was a large sum of money involved, tens, hundreds of thousands of pounds perhaps, and may, at that stage communicate with the Investigation Department.
Mr Stevens: Earlier you referred to £1,000, a number we’ll see and come to in respect of suspensions, do you know where the figure of £1,000 being picked as a relevant figure for referral was?
Alan Lusher: I don’t know whether that was empirically based or just a convenient figure, I don’t know.
Mr Stevens: But that was effectively what Auditors worked to, was it?
Alan Lusher: Mm, yeah.
Mr Stevens: Very briefly on the conduct of audits, we don’t need to turn it up, but in paragraph 91 of your statement you say audits would generally be performed when the branch was closed. I take from that that sometimes they would be performed when the branch was open?
Alan Lusher: Yes. The normal thing was to try to arrive at the office before opening time and get access to the cash and stock, so that an audit could at least be started before the public had access to the Post Office and, therefore, service disruption was minimised.
Mr Stevens: The Inquiry has heard evidence from subpostmasters that some Auditors would carry out audits while the shop was open –
Alan Lusher: Yeah, yeah.
Mr Stevens: – which made them feel humiliated in public. Are you aware of any complaints at the time made by subpostmasters as to audits being carried out in public while the shop was open?
Alan Lusher: I can’t remember any specific examples but I could understand a subpostmaster feeling like that.
Mr Stevens: We’ve mentioned earlier, looking at audits again, that, pre-Horizon, the audit would be done on a cash account that was done on a paper-based system?
Alan Lusher: Yes.
Mr Stevens: At an audit, the Auditor and the subpostmaster could consult all the data upon which the paper-based cash account was based.
Alan Lusher: Yes.
Mr Stevens: The subpostmaster who did the analysis and put together the cash account would be there to answer any questions about how that account was put together?
Alan Lusher: Not necessarily but, normally, that would be the case, yes.
Mr Stevens: Yes. But let me put it another way. If the subpostmaster was there, they would be able to answer questions on how the account was put together?
Alan Lusher: Yes, that’s right.
Mr Stevens: Now, the introduction of Horizon, the cash account was generated automatically by the computer?
Alan Lusher: Yes.
Mr Stevens: What training did you receive in Horizon as an Auditor?
Alan Lusher: I honestly can’t remember, it was so long ago. There wouldn’t have been very much training and the Auditor wouldn’t have to interact with the Horizon system very much at all during the process of an audit. It was the starting figure, which was important, which would be produced, presumably printed out on the last account, which would be the starting point for the audit. And so there wouldn’t be very much interaction between the Auditor and the Horizon system.
Mr Stevens: So the process we referred to before of when it was a paper-based system, you may ask quick questions of the subpostmaster as to how the account was generated and questions here and there about that. The Auditor couldn’t do that with the Horizon system, in that the Auditor couldn’t interrogate how the cash account was generated; do you agree with that?
Alan Lusher: No, I don’t think I can agree with that. The basis of the account was still available on the Horizon system or by talking to the subpostmaster. I mean vouchers may still be on hand, which can be checked; obviously the cash and stock was still there under a manual system before Horizon; then some of the vouchers would have been sent away and so couldn’t be checked and, similarly, under the Horizon system.
The key difference, I guess, is that under the Horizon system, many of the transactions or increasing numbers of the transactions were dealt with entirely electronically.
Mr Stevens: Let’s put it another way. As an Auditor, do you recall what reports you had access to which Horizon could generate?
Alan Lusher: My time as a hands-on Auditor was almost entirely pre-Horizon and so I was managing the Audit Team for much of the Horizon time and so I didn’t have that level of expertise within the Horizon system itself. I can’t recall the reports that were called off. There was an office snapshot, which was crucial to the audit because that would highlight and list the cash and stock on hand, enabling the Auditor to check what was on hand against some figure from the account.
Mr Stevens: The Inquiry is very familiar with ARQ audit data, which is data held by Fujitsu, which was the basis for prosecutions in many cases and shows activity on the Horizon system. As an Auditor, your team wouldn’t have had access to ARQ data in the branch, would they?
Alan Lusher: As far as I can recall, I haven’t heard of ARQ data before.
Mr Stevens: If there was a discrepancy in the set of branch accounts that was caused by a bug, error or defect in the Horizon IT System, do you accept that, as an Auditor, you wouldn’t be able to determine that the discrepancy was caused by a bug, error or defect?
Alan Lusher: Yes, that’s true.
Mr Stevens: This may not apply to you because of your evidence that you weren’t dealing hands-on with audits at the time but I’ll ask anyway in case you have knowledge of it. When Horizon was implemented, were you aware of a tool that would allow Auditors to insert transactions into a set of branch accounts without the subpostmaster’s knowledge?
Alan Lusher: Absolutely not. The Auditors would not be able to amend the subpostmaster’s accounts.
Mr Stevens: If I say the words “global user rights”, does that mean anything to you?
Alan Lusher: Global user rights, that would mean that somebody could access the system with presumably a password and had rights to every aspect of the system.
Mr Stevens: Do you recall Auditors having – sorry, I should rephrase that question.
Do you recall, in your time as an Auditor, when going into a branch, having global user rights access?
Alan Lusher: No.
Mr Stevens: No. Okay, I want to move on now to dealing with contracts and your time as a Contract Adviser, so this is 2005 onwards. Again, were there any minimum requirements in respect of the qualifications or experience required by someone before being appointed as a Contract Adviser?
Alan Lusher: No, there were no specific requirements of that nature.
Mr Stevens: Did you receive any training upon being made a Contract Adviser?
Alan Lusher: Again, it would be working with experienced Contracts Advisers. There were – there was training during that time for all Contracts Advisers, just to enhance skills.
Mr Stevens: To what extent did you receive any training in Human Resources?
Alan Lusher: I’m qualified as a Master of Business Administration from the Open University and had some experience of human resource management through that but I can’t recall anything specifically from the Post Office.
Mr Stevens: Did the Post Office provide any training on how to conduct disciplinary procedures – I should say, sorry, to Contracts Advisers?
Alan Lusher: Disciplinary procedures?
Mr Stevens: Yes, so if someone was accused of misconduct, for example a subpostmaster is accused of theft or false accounting –
Alan Lusher: I think – correct me if I’m wrong, but I believe disciplinary procedures refers to employment law. The subpostmasters weren’t employed by the Post Office; they were under contract for services.
Mr Stevens: There’s no issue between us there. I take that. It’s just a question of whether or not, as a Contract Adviser, you received any training on how to handle a procedure where you were determining whether a subpostmaster was responsible for misconduct?
Alan Lusher: There was no initial training, other than sitting with experienced Contracts Advisers, as far as I can recall, but there was – as I said before, there was training on an ongoing basis, and I can recall a session of training where the Contract Adviser were all taken away for a few days to, you know, a hotel somewhere and trained in various aspects of interviewing, for example, and probably dealing with discrepancies and dealing with subpostmaster contracts in that way.
Mr Stevens: When you say interviewing in that context, is that interviewing for the purposes of determining whether a subpostmaster was responsible for misconduct or for determining whether to appoint a subpostmaster?
Alan Lusher: The latter, appointment.
Mr Stevens: Was any training given in how to investigate whether or not a subpostmaster was responsible for misconduct?
Alan Lusher: Misconduct?
Mr Stevens: Let me put it another way. One of the roles of a Contract Adviser, which we’ll come to, is to determine whether or not a subpostmaster was in breach of contract; would you accept that?
Alan Lusher: Yes.
Mr Stevens: Was there ever any training given to Contract Adviser on how to conduct an investigation into whether or not a subpostmaster was in breach of contract?
Alan Lusher: I don’t recall any specific training, no.
Mr Stevens: Let’s look at the contractual position for losses. Please can we turn to your witness statement page 19, paragraph 66. Thank you. Here you open by saying you’ve been asked to confirm your understanding of the contractual position for losses, and you quote:
“… ‘the subpostmaster is responsible for all losses caused through his own carelessness, negligence or error and also for all losses caused by his assistants. Deficiencies due to such losses must be made good without delay’.”
The first part of that is taken from the subpostmaster’s contract in force from 1994.
Alan Lusher: Indeed, and that statement is common to a variety of contracts.
Mr Stevens: There was a different type of contract, I think, from 2011 onwards called the Network Transformation Contract; do you recall that?
Alan Lusher: It’d be – you had the main and local contracts, yes.
Mr Stevens: Precisely. Do you recall that that had a different position for dealing with losses for subpostmasters?
Alan Lusher: No, I can’t recall the difference.
Mr Stevens: Can we please just turn in your statement to page 32, paragraph 116. You are here – this is just for context – discussing the settling centrally function, which was brought in by the IMPACT Programme, and you refer to a document dated 14 November 2008.
If we go over the page, please, you again talk about the settle centrally facility. But at 119, you say:
“At the time, the contractual position in respect of losses was clear and the SPM was responsible for all kinds of losses whether caused by carelessness, negligence or error and losses of all kinds caused by assistants.”
That’s not correct in 2008, is it?
Alan Lusher: That was my understanding when I put the witness statement together. I stand to be corrected.
Mr Stevens: Was that – well, actually, we’ll come to that point now. Let’s go back, please, to page 19, paragraph 66. Thank you. So, again, the clause is there in quotes. Can you explain what you understood that clause to mean?
Alan Lusher: Yes. I see it as being fairly self-explanatory, in that the subpostmaster was indeed responsible for losses, as stated, caused by carelessness negligence or error and for all losses caused by the assistants, which, of course, means that there are – or there could be losses in the sub office not caused by carelessness, negligence or error, which would not be covered by this statement.
Mr Stevens: So if a loss was caused – well, let’s start. Firstly, there has to be an actual loss.
Alan Lusher: Yes.
Mr Stevens: Secondly, if an assistant is responsible for that loss, the subpostmaster is liable for it?
Alan Lusher: Yes.
Mr Stevens: But if the loss is the subpostmaster’s, he or she is only responsible for it if it is caused by their own negligence, carelessness or error?
Alan Lusher: That’s what it says, yes.
Mr Stevens: So a loss caused by a computer error or a fictitious loss would not be the responsibility of the subpostmaster?
Alan Lusher: Logic demands that that’s the case. The most common cause of loss not caused by carelessness, negligence or error was a loss caused by a robbery or burglary, in which case the Security Operations Manual would be sort of the subsection of the contract which would come into play.
Mr Stevens: Let’s look at some of the policies that derived from this. If we could turn up, please, POL00088904. You see the “Losses and Gains Policy Within the Post Office Counters Limited Agency Network”. At page 2 we can see it’s dated 20 November 1998, so pre-Horizon.
Please can we turn to page 4. This is the introduction, which says that it’s a policy document that has been developed:
“… under the auspices of the Counters Risk Management Committee, in order to provide clear and consistent guidelines about financial losses within the agency network.”
If we can go slightly further down, please, thank you. At the start of the paragraph at the bottom, you see it says:
“The general principles addressed by this paper are, of necessity, mandatory upon Regions.”
Do you recall being given this policy and using it in the Audit Department?
Alan Lusher: Yes.
Mr Stevens: So the aim of it was, as it says, to be a reference guide for Post Office employees on how to deal with losses or gains in accordance with the contracts between the subpostmaster and Post Office?
Alan Lusher: The contract was very clear. I think the policy was more to Do with the day-to-day deployment where there may be occasions to deviate from the contract, in cases of hardship, for example.
Mr Stevens: Well, we see, it’s the third paragraph down on the page that’s on the screen:
“From a purely contractual perspective a subpostmaster or other agent is responsible for all losses caused through his own negligence, carelessness or error.”
Alan Lusher: Yes.
Mr Stevens: It goes on to say of the same with assistants. So that’s in accordance with the contract?
Alan Lusher: Absolutely right, yeah.
Mr Stevens: This introductory section, is it fair to say that an introduction to a policy document like this, you may read it once but, when you’re going back to refer to it, you’ll go to the more substantive chapters later on?
Alan Lusher: That may be the case. The paragraph you’re referring to does go on to say that this stance of the contractual position may be varied in appropriate circumstances and –
Mr Stevens: Yes, and, as you say, it there talks about if there’s financial hardship, et cetera.
Alan Lusher: Mm-hm.
Mr Stevens: That’s working to the benefit of the subpostmaster when considering mitigation?
Alan Lusher: Yes, absolutely.
Mr Stevens: Can we turn to section 3, please, at page 14. This section deals with “Accounting Losses”, and it says:
“The subpostmaster is required to make good all losses however they occur (Subpostmaster’s contract Section 12 paragraph 12).”
That’s not what the contract says, is it?
Alan Lusher: No.
Mr Stevens: Do you know why this policy, on the section for accounting losses, contained this statement?
Alan Lusher: I didn’t put the policy together but it does refer to the section of the – the relevant section of the contract, which you’ve referred to. Perhaps that’s just an inaccurate shorthand to say “make good all losses”.
Mr Stevens: Well, it’s not shorthand, is it? It’s materially different?
Alan Lusher: It is materially different, yes.
Mr Stevens: Would you accept that Auditors or anyone using this document would be misled if they read this paragraph?
Alan Lusher: If they read the first part of the paragraph without the reference to the contract and without referring to the contract, they could be misled, yes.
Mr Stevens: If we turn to page 33, please. So this is in an annex which deals with the detailed processes for how to handle cash account discrepancies. If we could just go slightly further down, please, thank you. It says:
“If the discrepancy is a shortage, the agent should be advised to make the amount good. If the shortage is the result of a known error, or if making the amount good immediately would inflict financial hardship, the agent may be allowed to hold the amount in the unclaimed payments section of the cash account for a period of up to eight weeks.”
Could you assist us, what does it mean when it’s referring to a “known error” there?
Alan Lusher: If the subpostmaster had recognised the fact that an error had been made and was awaiting an error notice – in this case, a transaction correction – to rectify that error, that would be a known error.
Mr Stevens: So it was for the subpostmaster to say there’s a known error here and effectively persuade the Post Office that this would be corrected in due course with, at that time, an error notice?
Alan Lusher: Yes.
Mr Stevens: That document can come down. Thank you.
Does this policy or section 3 that we referred to reflect the thinking of Post Office Auditors and Contract Managers at the time that, if there was a loss, the subpostmaster had to make it good, unless they could establish a known error?
Alan Lusher: Or unless there was financial hardship.
Mr Stevens: Leaving financial hardship to one side, if there was no financial hardship, was it on the postmaster to show that there was a known error?
Alan Lusher: Yes.
Mr Stevens: Are you aware as to why there was no discussion in that policy of Post Office investigating the cause of the discrepancy itself?
Alan Lusher: I’m sorry, I was drawing breath to add – I didn’t wish to cross your speech then – but the unclaimed payments table could be used for known errors or disputes, so there would be a degree of softening around that and, subsequently, in the Horizon days, then it would be like the settled centrally process, would be the same, you know. You can settle centrally only if there’s a known error or if there’s a – you enter the dispute resolution process.
Mr Stevens: That, sir, is probably a good time to pause and we’ll come to the dispute resolution process after lunch.
The Witness: Thank you. I’ll look forward to it.
Sir Wyn Williams: I was just unmuting myself.
I agree, Mr Stevens. Thank you.
Mr Stevens: Thank you, sir.
Sir Wyn Williams: 2.00?
Mr Stevens: Yes, sir, thank you.
(12.59 pm)
(The Short Adjournment)
(2.00 pm)
Mr Stevens: Good afternoon, sir. Can you see and hear me?
Sir Wyn Williams: Yes, I can, thank you.
Mr Stevens: Thank you, sir. I’ll carry on.
Mr Lusher, we were just discussing the local suspense account and you referred to dispute resolution. I want to turn there now ask.
Alan Lusher: Mr Stevens, on reflection, I may be able to give a slightly better answer to one of the questions which you asked this morning. Would that be helpful to the Inquiry?
Mr Stevens: Yes, which question was that?
Alan Lusher: The question was about the global user availability password for Auditors for the Horizon system, and I wasn’t quick enough at the time but, on reflection, I just realised that if there was an unfortunate circumstance of the death of a subpostmaster, then the Auditors would be able to gain permission to use the system, in order to wrap up the accounts, do whatever was necessary.
I don’t know the protocols for that but it would certainly be something which wasn’t dished out easily.
Mr Stevens: I see. So the capability was there to have these global user rights, as far as you are aware. The circumstance you refer to is the death of a subpostmaster but you can’t assist us with the control mechanisms in place for how an Auditor would get access to those privileged access rights?
Alan Lusher: That’s quite right, sir, yes. I hope that’s helpful.
Mr Stevens: Thank you, and repeating it to make sure I’d understood, thank you.
Local suspense account, then. If we could please bring up your witness statement, page 31, paragraph 111. Thank you. You start the paragraph by saying that you’ve been asked to explain what role the local suspense account played before its removal, and that was removal in the IMPACT Programme. You say:
“The role of the local suspense account was to account for any unclaimed payments or receipts uncharged to the account. The suspense facility would also enable shortages or surpluses to be declared, but not made good or withdrawn. For example, if the balance of account showed a shortage, this could be entered as an unclaimed payment, which would have the same effect as adding it to the cash on hand, negating the shortage. With permission, the facility could be used legitimately to hold discrepancies for up to 8 weeks, usually whilst awaiting an error notice. The facility was replaced by the debt resolution process.”
Now, the debt resolution process, I think we’ll come to it in a moment but just to be clear, are you talking about the process that existed when transaction corrections came in and there was the option to settle centrally?
Alan Lusher: Paragraph 111 refers to the process before, before that –
Mr Stevens: Yes.
Alan Lusher: – and then – unclaimed payments and uncharged receipts before and then the settle centrally process after.
Mr Stevens: After. So we’re singing from the same hymn sheet there.
Alan Lusher: Good.
Mr Stevens: You say, as I said, the facility could be used legitimately to hold discrepancies. Why did you use the word “legitimately” there?
Alan Lusher: It wasn’t uncommon to find the system used without the permission which was necessary.
Mr Stevens: In what circumstances would it be used without permission?
Alan Lusher: We’re talking before the IMPACT?
Mr Stevens: Yes, before IMPACT?
Alan Lusher: So unclaimed payments, uncharged receipts weren’t – I don’t know the extent to which they were monitored but the subpostmaster would have the ability to use those, whether he had permission or not, and so that was – that would be one of the things that the Audit Team would be looking out for, unauthorised use of, almost certainly, the unclaimed payments table, being shortages rather than surpluses in the uncharged receipts.
Mr Stevens: Let’s come to the permission aspect and we’ll turn to a document POL00088867. Thank you.
At the top of this document, we see it’s “Liability for Losses Policy”, “Version Control” says “1.7 September 2003” but, if we look over the page, it appears that it was a later version “2.0 July 2004”, so this would have been in place when you were Contract Adviser starting in 2005.
Could we turn to page 5, please. The first two sentences:
“The subpostmaster’s contract requires that losses are made good without delay. Immediate settlement is therefore the expected contractual norm.”
Do you accept that isn’t strictly in accordance with what the contract says? The contract, as we covered this morning, it refers to the subpostmaster’s carelessness, negligence or errors?
Alan Lusher: Yes, I do accept that.
Mr Stevens: Again, this document would be used presumably by Contracts Advisers when considering how to deal with losses?
Alan Lusher: Yes.
Mr Stevens: Paragraph 2 concerns the suspense account. It says:
“Under circumstances where the exact cause of the loss is known and a compensating error is expected to be returned, losses may be held in the suspense account, with authority, providing that the agent has completed their own investigation and is able to show that an error notice is likely to be issued for that loss or an element of the loss (ie the agent must be able to detail a specific error that occurred for a specific client on a specific date and be able to provide documentary evidence eg from the Horizon transaction log).”
So, in order for permission to be given under this policy, would you accept that the subpostmaster has to be able to prove, with a significant amount of precision, that there has been a known error in the account?
Alan Lusher: Yes.
Mr Stevens: So earlier in your evidence, when you referred to the suspense account being used for dispute resolution, it’s not the case that the SPM could simply say, “Hang on a minute, I dispute these figures, I want to use the suspense account while this is being investigated”? In order to get permission to use it, the subpostmaster has to have had done a significant amount of investigative work already?
Alan Lusher: There’s a dichotomy there which I can’t resolve.
Mr Stevens: Sorry, what is a dichotomy?
Alan Lusher: The – on the one hand, we’re seeing here that the error must be specified and, on the other, I believe that the dispute resolution process allowed for an investigation. An investigation is not necessary if a loss can be proved. That’s the dichotomy. Is that helpful, sir?
Mr Stevens: In terms of who would give the permission, that wouldn’t be you, would it, to give permission to use the suspense account, as a Contract Adviser?
Alan Lusher: No.
Mr Stevens: As we see in the next paragraph, it refers to the NBSC, and the last sentence in that again, it says:
“If there is no clearly defined evidence of a known error (and, therefore, no error notice likely to be issued), authority will not be given.”
Alan Lusher: That’s very clear, isn’t it?
Mr Stevens: If we go just further down this page, it goes on to say:
“To give authority to hold losses within the suspense account, even with evidence of the error, is against the principle of right first time. Granting authority to hold amounts in suspense should, therefore, always be considered to be the exception rather than the norm. Agents are expected to address the underlying cause of misbalancing and must expect that any subsequent errors of a similar nature will be referred to the retail line for corrective action.”
Does that fairly summarise how the suspense account was seen by the members of the Post Office – or its use, I should say, the use of the suspense account?
Alan Lusher: Yes, and clearly “right first time” refers to making no errors, that there should be no errors at all and, if there are subsequent errors, then a report for corrective action would be in line.
Mr Stevens: Please turn to page 8 of the same document. Thank you. It refers to “Horizon Issues”:
“If an agent feels that an error has occurred via the Horizon system, it is essential that this be reported to the Horizon System Helpdesk.”
Pausing there, that’s the Helpdesk that was run by Fujitsu at the time; do you agree?
Alan Lusher: I don’t know.
Mr Stevens: “The HSH will only consider the incident for further investigation if the branch has evidence of a system fault. If no evidence is available, the case will not be investigated and the agent will be held responsible for making good the loss.
“System faults are very rare and are normally identified after a full investigation has been undertaken. All known system errors are managed through Network Support Problem Management. Access to Problem Management is via the NBSC. If the agent feels that the issue is not being resolved, they should flag the issue up with NBSC. If a known system error has caused a shortage, the agent should be given authority to hold the loss in suspense until the system error has been reconciled and an error notice issued.”
The point that system faults are very rare and are normally identified after a full investigation – or at least that they’re very rare – that’s consistent with your evidence earlier that, as a Contract Adviser, you and others didn’t think it was possible that discrepancies would be caused by Horizon; is that fair?
Alan Lusher: Yes, that’s correct.
Mr Stevens: Did you have any involvement at all in how Fujitsu – sorry, I’ll rephrase that.
Were you aware of how Fujitsu, through the Helpdesk, investigated potential discrepancies in branch accounts?
Alan Lusher: No, sir.
Mr Stevens: So if there was a bug, error or defect in the Horizon system, which wasn’t a known error, not known to the NBSC, do you accept that the subpostmaster is effectively reliant on either the Horizon System Helpdesk or the NBSC identifying that error and they can’t identify it themselves?
Alan Lusher: Yes, that’s what it says down here, yes.
Mr Stevens: If they can’t identify it themselves, the subpostmaster can’t prove that there’s a known error or an error and has to make good the loss themselves?
Alan Lusher: That’s correct too. I wasn’t very involved in this process but I’m just drawing the logic from what you’ve read out there in section 6.
Mr Stevens: You weren’t involved in the process but, at the time, did you consider that situation to be fair?
Alan Lusher: My involvement was to report any issues with the Horizon system. We looked at the case of Rivenhall, where that’s what – exactly what I did, to report the problem there to Andy Winn and Andy, in NBSC, would have had access to the Horizon System Helpdesk, and so on, to report onwards.
So my involvement was very limited. As to whether I think the system was fair, um … harsh but, in the light of information received subsequently, like in the last few years, as a result of the Inquiry, clearly it’s not as fair as I thought it was at the time.
Mr Stevens: So we’ve discussed the Helpdesk and how, in some ways, if you’re relying on the Helpdesk to find an error, or the subpostmaster is as well, that’s one element. You’ve also referred to Andrew Winn, Mr Winn. In your statement – sorry, that document can come down now, thank you.
In your statement, at paragraph 21, which is at page 7, you say:
“When there were unexplained accounting shortages, team members would often liaise with the Accounting Department at Chesterfield, or other departments to establish whether error notices were due to be issued. The system of rectifying errors could be slow and several weeks may elapse before a discrepancy could be corrected in the account. On occasions when there were a number of errors in the system, it became complex and sometimes almost impossible to pinpoint the cause of a discrepancy.”
Was it of concern to you that the Post Office back office staff would sometimes struggle to pinpoint the cause of a discrepancy and yet the Post Office expected subpostmasters to identify and evidence the calls themselves.
Alan Lusher: I don’t think the Post Office staff had difficulty in identifying individual errors. The difficulty which I referred to here is when there are number of errors in a sub office account, it becomes – it can become quite a complex matter to unravel the situation. It may take time to do that.
Mr Stevens: We then come to the involvement of Mr Winn, as you say, in paragraph 22:
“Either the Audit or the Contract Team could refer disputed errors to the Accounting Team based in Chesterfield who had access to the Horizon system and were very helpful in resolving errors and latterly had a champion for difficult cases – Andy Winn.”
Alan Lusher: Mm.
Mr Stevens: When you say Andy Winn was a “champion”, what do you mean by “champion”?
Alan Lusher: If there was a difficult accounting matter to be dealt with, Andy Winn was the expert and had access to all the systems available to resolve any enquiries.
Mr Stevens: So if there was an unexplained discrepancy and a subpostmaster was suggesting that it was related to Horizon or caused by Horizon, would Andy Winn be the go-to man?
Alan Lusher: Yes.
Mr Stevens: Did you see him as a safeguard to ensure that discrepancies in difficult cases were fully investigated?
Alan Lusher: I saw him as the expert.
Mr Stevens: Sorry?
Alan Lusher: As the expert.
Mr Stevens: The expert.
Did you hear the evidence of Andy Winn to this Inquiry on 3 March?
Alan Lusher: No.
Mr Stevens: When it came to discussing his time in the P&BA, where he looked at these accounting problems in branches, he agreed that his level of understanding of the role was basic and equivalent to an occasional end user. That’s, for the record, transcript page 26, line 8. He further accepted that his role required a much more detailed understanding of Horizon than he had and his evidence was that he found technology quite difficult even now.
You’ve referred to him as an “expert”. Did you understand him to have more than a basic grasp of Horizon?
Alan Lusher: Yes, sir, I did.
Mr Stevens: Did you continue to think that when you made your witness statement?
Alan Lusher: Yes.
Mr Stevens: What was the basis of that belief, that Mr Winn was a champion for difficult cases?
Alan Lusher: I don’t know. I don’t wish to guess, sir, but I think he was put forward at least as the contact within P&BA to deal with these matters.
Mr Stevens: Now, with hindsight, having heard what Mr Winn said about his own experience, as I say, it was described as basic and equivalent to an occasional end user, do you have concerns or do you see there being a problem with the way in which Mr Winn was used by Contract Adviser to deal with discrepancies – unexplained discrepancies, I should say?
Alan Lusher: The fault may be entirely mine but I am somewhat shocked to find that Andy Winn didn’t have the expertise that I considered he had, and I don’t know how other Contract Adviser regarded Andy, but it is a matter of concern to me now.
Mr Stevens: Why is it a matter of concern to you?
Alan Lusher: Because I relied on his responses and the information he provided. I, myself, am not an expert in the Horizon system, I can find my way around accounts quite well but the system itself is not an area where I have expertise and, therefore, I relied somewhat on Mr Winn to provide that gap in my own expertise.
Mr Stevens: So when we looked at the Rivenhall branch earlier and I asked about remote access, and you referred to Mr Winn and you didn’t pursue it further because of the information you were given, if, at that stage, you were aware of what Mr Winn now says of his level of expertise, would you have done anything differently?
Alan Lusher: Possibly.
Mr Stevens: What do you think you would have done differently?
Alan Lusher: I would have looked for somebody who had expertise in the system to give a definitive answer. I thought that person was Mr Winn.
Mr Stevens: Were you aware of anybody else at Post Office who may have had such expertise?
Alan Lusher: I would have hoped and expected that the gateway to that person would have been Mr Winn himself, had he not got the expertise personally, yeah.
Mr Stevens: Thank you. We then come to the IMPACT Programme and this is where we deal with the introduction of transaction corrections. The Inquiry has heard a significant amount of evidence on how that policy was developed and the settle centrally for amounts over £150.
As I understand it, you were not involved in how that policy was devised?
Alan Lusher: Not as far as I can recall, no.
Mr Stevens: I’m not going to cover with you the settle centrally issue which has been dealt with by other witnesses. What I do want to ask is about transaction corrections for under £150. So if there was a transaction correction for less than £150, the subpostmaster would simply have to accept it and they didn’t have the option of settling centrally?
Alan Lusher: Yes, I believe that’s the case.
Mr Stevens: So a person could receive several of these throughout a year, which, even though under £150, could develop into quite a substantial sum of money?
Alan Lusher: I believe that’s the case, yes.
Mr Stevens: What was the procedure for dispute resolution for those amounts?
Alan Lusher: I’m not aware of a dispute resolution process. The subpostmaster would always have the Helpdesk, NBSC could make enquiries but I don’t believe, as far as I’m aware, there was a formal process for errors under £150 or transaction corrections under that amount.
Mr Stevens: Can I turn to page 33 of your witness statement, paragraph 118, just one further point on this topic.
We were here, right in the morning, to look at paragraph 119 but it’s 118 now that I want to look at. It says:
“There was not anything to distinguish a disputed debt from an undisputed debt and I cannot see that the policy or the contract made any distinction.”
I understand you there to be referring to when a subpostmaster sought to dispute a discrepancy or a transaction correction and they settled centrally. The process is or was said to be that the enforcement procedures for recovering that debt would be paused, while the debt was resolved.
Alan Lusher: If the dispute process was invoked, yes.
Mr Stevens: In that context, could you please explain what you mean at paragraph 118, that there was nothing to distinguish a disputed debt from an undisputed debt?
Alan Lusher: Can I just read the one or two points beforehand –
Mr Stevens: Yes, of course.
Alan Lusher: – to understand the context of this?
Mr Stevens: Of course. I think it would help to start probably at the bottom of the page before – there, I think from there. Do just say when you’re ready to read on?
Alan Lusher: Thank you very much. Can I enquire of the question which was put to me to answer the point 118?
Mr Stevens: Sorry, I misheard you?
Alan Lusher: I was responding to a question to give the answer at 118 and I’m not sure what that question was.
Mr Stevens: Oh, I’m sorry. If we bring 118 back. Apologies, I misheard. Could you please explain what you mean here when you say there was not anything to distinguish a disputed debt from an undisputed debt?
Alan Lusher: I’m struggling to recognise the situation that I had in mind when I wrote that but, in terms of a settled centrally debt, then it could only – it was a figure. What it referred to, whether it was disputed or undisputed, there was nothing to distinguish between the two.
Mr Stevens: That document can come down. Thank you. Was there a risk of Post Office seeking to enforce debt that was disputed, if there was no distinction?
Alan Lusher: Under £150 definitely, and there would be enquiries ongoing to establish the reason for it, a debt in – before enforcement.
Mr Stevens: During your time as a Contract Adviser, were you aware of any subpostmaster complaints about the transaction correction process?
Alan Lusher: I can’t recall any.
Mr Stevens: Were you aware of the nature or volume of transaction corrections?
Alan Lusher: Some awareness, yes.
Mr Stevens: What was that awareness?
Alan Lusher: The transaction correction rates for some products was higher than others. The lottery, for example, attracted a lot of transaction corrections.
Mr Stevens: Were you ever concerned by the numbers?
Alan Lusher: In certain branches, it was certainly a matter of concern.
Mr Stevens: When you say in some branches, do you mean concern for the way that branch was running, rather than general concern across the Network as to how many transaction corrections were being generated?
Alan Lusher: Yes, that’s what I meant initially but there was concern in the Network about the number of transaction corrections concerned with lottery, probably the reason I remembered that one specifically. The accounting process was slightly more complex for lottery transactions.
Mr Stevens: Was there any concern or discussion, that you’re aware of, that the volume of transaction corrections was caused by the Horizon IT System?
Alan Lusher: No.
Mr Stevens: I want to move on to look at suspension and where I say suspension it’s often referred to as precautionary suspension of a subpostmaster. Can you explain what the effect of a suspension on a subpostmaster was?
Alan Lusher: Yes, when there was a suspension, then the trade at the branch would stop, as would the remuneration to the subpostmaster and, normally, there would be a search for a temporary subpostmaster to take over. If that was possible, then it could be affect very quickly so the customer base wouldn’t be affected. But sometimes it did result in the closure of a branch for a period of time while investigations proceeded.
Mr Stevens: What effect did it have on a subpostmaster’s access to premises, documents or data.
Alan Lusher: The subpostmaster didn’t have access to premises or data.
Mr Stevens: So the effect was significant?
Alan Lusher: Yes.
Mr Stevens: We don’t need to turn it up but at paragraph 145 of your statement you say that there was no right to appeal against a decision to suspend?
Alan Lusher: That’s correct.
Mr Stevens: So would you accept that the decision on whether or not to suspend a subpostmaster ought to have been taken carefully and in accordance with the contract?
Alan Lusher: Yes.
Mr Stevens: I want to first look at who made the decision. Again, we don’t need to turn it up but, at paragraph 135 of your statement, you say that:
“For a long time, the Contract Adviser would consult with a senior manager before any decision was made [as to suspension]. As awareness of Horizon difficulties increased, any such decision was taken at senior manager level.”
Let’s start with awareness of Horizon difficulties increased. Firstly, when did that occur?
Alan Lusher: I don’t know the date, sir, but I’ve referred to a continuum earlier in the day, I believe, when initially we came across the odd one or two cases and it became public knowledge then as the Inquiry started. And, somewhere along that line, there was a stage where the Contract Adviser were less involved and senior managers took control of the whole decision-making process in regard of suspension and termination of contracts.
Mr Stevens: Let’s look at a document which may assist. It’s POL00084002. This sets out for Auditors the contact points for branch suspensions. We see in the first paragraph it’s 25 September 2006. If we can go down, please.
So we see in the first column we have people identified and their contacts in the next columns, and you’re identified as first contact for Steve Gibbs and then as a “Buddy Contract Adviser” for Peter Pycock. So, at this point, would the decision here, be it that that’s the contact point as the Contract Adviser, so in 2006 is the decision with the Contract Adviser with consultation of Senior Managers, rather than it being the Senior Manager’s decision?
Alan Lusher: I believe that was the case, sir, yes.
Mr Stevens: Then there’s a continuum, you refer to. Can you recall a specific point – for example in 2009 there was a Computer Weekly article. Did you read that at the time, which –
Alan Lusher: Not aware of that, sir.
Mr Stevens: Can you help us place when you think that Horizon difficulties increased such that senior managers were involved in making the decision rather than yourself?
Alan Lusher: I can share a little confusion, rather than help you, but it may help if I do that, in that on occasions when my line manager, in the period of interest, was Lin Norbury, on occasions when she was on leave, I would stand in for her and deal with enquiries from Contracts Advisers concerning suspensions. I remember being surprised when a particular Contract Adviser phoned in to question her or to bounce the ideas around about a suspension and asked for the opinion of that Contract Adviser and the response was “Well, that’s the decision at your grade, not at my grade”. So it was quite clear that that Contract Adviser considered that the decision was at senior manager level.
Mr Stevens: So when do you think that conversation would have happened? Was that in 2006 or later in the –
Alan Lusher: Later. 2008/9, something of that order. But I was surprised by that. So it was clear that there was some confusion.
Mr Stevens: Why do you link a shift to Senior Management making this decision to awareness of Horizon difficulties?
Alan Lusher: It was at a time when there was a reduction in the number of criminal prosecutions and the business, in areas above my pay grade, were concerned about the Horizon situation and, therefore, decided to, you know, narrow the field of decision making in any matters relating to Horizon.
Mr Stevens: So do you think that would have been around the time of the Second Sight investigation, 2012 through to 2015, that period?
Alan Lusher: Yeah, could well be, yeah.
Mr Stevens: Just to confirm I heard correctly, that was a decision from senior management to effectively –
Alan Lusher: Yes.
Mr Stevens: What did you think of that decision? Did you think that you or Contract Managers were not capable of making a decision on suspension?
Alan Lusher: Yes, there was an element of that, especially Contracts Advisers, some of whom had been in post for some considerable time and seemed a little bit undermined. But, at the same time, it is what the business decided, so the decisions went to higher grade.
Mr Stevens: When was the decision to suspend usually taken?
Alan Lusher: Normally it would be taken following an audit or during the process of an audit.
Mr Stevens: On the same day?
Alan Lusher: Yes.
Mr Stevens: We don’t need to turn it up but in paragraph 138 of page 39 of your statement, you say you don’t believe there was any process for the subpostmaster to make representations about the decision but it would often be the case that the Contract Adviser would speak to the subpostmaster at the time of the audit.
Is that based on your practice or –
Alan Lusher: Yes.
Mr Stevens: – are you aware that – sorry, was that a “yes”?
Alan Lusher: Yes, that is what I would do, yes. I would always try to speak to the subpostmaster to establish the situation.
Mr Stevens: Was there variance in that practice with other Contracts Advisers?
Alan Lusher: Well, there may have been, I can’t speak for them all but it would seem sensible procedure to me.
Mr Stevens: At page 8 of your witness statement, paragraphs 24 and 25, or paragraph 25 in particular, you say towards the end:
“Suspension wasn’t an exercise in assigning blame, it was done simply to control risk and gather information until such time as the issues could be explained and rectified.”
What do you mean by suspension wasn’t an exercise in assigning blame?
Alan Lusher: Perhaps we should regards suspension as a stopping the risk to funds. It wasn’t unknown for a suspension to last for a very short period of time. Investigations could be made and, you know, within a day or two the contract could be reinstated. And so the suspension itself was, as you referred to earlier, a precautionary suspension, pending investigation.
Mr Stevens: When you say that it’s to reduce risk, is that, what, a risk of a subpostmaster absconding with more money?
Alan Lusher: Yes.
Mr Stevens: Are there any other risks?
Alan Lusher: Yes. We referred colloquially to office accounts sometimes being in a muddle and sometimes as a result of a fiddle. In other words, an office account can quickly get into a situation where nobody is quite sure whether – you know, whether further errors are coming or whatever and they needed a little bit of time, a breathing space, to resolve the error notice coming through and it may be that what appeared to be a significant audit shortage could disappear because errors had been identified, and so that was the – one purpose of a precautionary suspension.
And if things did resolve themselves, so that there was no discrepancy left, then a decision would be made on whether the subpostmaster was sufficiently competent to continue in office or whether the risk to funds would be too great or whether this was, perhaps with a new subpostmaster, a case where additional training and support would resolve the situation.
Mr Stevens: So the question I asked was about risk, and one of them was about absconding with money the other you refer to the accounts themselves, and –
Alan Lusher: Yeah, one was about a fiddle, as I referred to.
Mr Stevens: A fiddle, yes.
Alan Lusher: Which, obviously, I mean the various activity within the accounts, perhaps, theft or whatever. On the other was the muddle, which is where investigations – you know, that’s a risk, a muddle is still a risk because there may be a loss of control of the accounts and displaying incompetence of the subpostmaster.
Mr Stevens: But at the time of the suspension, the audit has been carried out so there’s an independent record of what’s in the Post Office and the data is, for all your concern, is on Horizon. So what is the additional risk that you’re trying to identify that requires the suspension of a subpostmaster in relation to a fiddle or muddle of the accounts?
Alan Lusher: The risk is that there may be errors in the system which are not apparent at the time of the audit.
Mr Stevens: Can we look at the contract, please, the relevant contract. It’s POL00082751, page 90, please. This is, I should say, the Subpostmasters Contract, as you’ll see from the screen.
Alan Lusher: Thank you.
Mr Stevens: Thank you. If we could go to the bottom of the page, please. It says that:
“A subpostmaster may be suspended from office at any time if that course is considered desirable in the interest of Post Office Counters Limited in consequence of his: (a) being arrested, (b) having civil or criminal proceedings brought or made against him, (c) where irregularities or misconduct at the office(s) where he holds appointment(s) have been established to the satisfaction of Post Office Limited, or are admitted, or are suspected and are being investigated.”
So, as we see here, it says, “A subpostmaster may be suspended”. So do you accept that the clause said that the Post Office had an option to suspend, if suspension was considered desirable for one of the reasons stated?
Alan Lusher: Yes.
Mr Stevens: It didn’t have to do so?
Alan Lusher: I accept that, yes.
Mr Stevens: So this clause envisages that, where there is a discrepancy, for example, raised, someone at Post Office will consider all the facts and consider whether it is desirable to suspend the subpostmaster?
Alan Lusher: Yes.
Mr Stevens: That person should consider all the relevant factors and dismiss or not consider any irrelevant ones?
Alan Lusher: Logic would dictate so, yes.
Mr Stevens: They should make that decision in good faith?
Alan Lusher: Yes.
Mr Stevens: In this case, the Post Office entrusted that decision – well, it’s unclear – either to Contract Managers or at some point a mixture of Contract Managers and senior management?
Alan Lusher: Yes, that’s right.
Mr Stevens: Please can we bring up POL00089004. Thank you. It’s not necessarily easy to tell from this but it’s understood that this is a pocket-sized booklet. You’re nodding; do you recall being given this?
Alan Lusher: Yes.
Mr Stevens: At page 2, it’s titled “Managing Agents Contracts, Guidelines for the Line Manager”. Line Manager, we’ve been using the term “Contract Adviser”, would this be used by Contract Advisers?
Alan Lusher: The booklet was designed for Contract Managers or Contract Advisers or whatever they were called at the time, yes.
Mr Stevens: It’s design is to be a reference book for Contract Advisers to use in how to apply Post Office policy?
Alan Lusher: Yes.
Mr Stevens: Did you use it?
Alan Lusher: Yes, it was available to me, yes.
Mr Stevens: It was available to you but would you use it as a reference guide?
Alan Lusher: Yes, I would.
Mr Stevens: Can we turn to page 67, please, towards the bottom of the page. This a section on “Precautionary Suspension”, and it says that:
“This course of action is considered appropriate in the interests of Post Office Network when:
“(a) The subpostmaster is arrested.
“(b) The subpostmaster has civil or criminal proceedings brought against them.
“(c) There are irregularities or misconduct at the post office or where grounds exist to suspect dishonesty.”
There are two additional points there we don’t need to go into. If we can just go back up to have the original part of the text on the screen, please. This is different from the contract, isn’t it, because it’s saying that suspension is appropriate when one of these factors is set out, not that it may be appropriate if considered desirable?
Alan Lusher: If you – you’ve displayed the two different wordings there, yes.
Mr Stevens: So did Contracts Advisers see suspension as always appropriate when one of these conditions was met?
Alan Lusher: I would have given them a suspension consideration when – and, obviously, if a subpostmaster had been arrested then, yes, a suspension would be necessary but, if there were concerns – please, can we go to page 68? Would that be possible, please?
Mr Stevens: Sorry, yes, of course. If we could go to the next page, please.
Alan Lusher: Yeah, where there are – suspecting dishonesty. But I would give suspension consideration, rather than saying “Yes, we will suspend”.
Mr Stevens: What would you take into account, then? If you’re making this decision, what would you take into account?
Alan Lusher: The experience of the subpostmaster, the size of the discrepancy, any admissions. Those are examples that spring to my mind now.
Mr Stevens: Would you ever consider if there was evidence of actual theft or just if it was a discrepancy enough?
Alan Lusher: A sizeable – evidence of theft can only be an admission, I think. I’m not sure what other evidence of theft could be provided.
Mr Stevens: We’ll come to that when we look at investigations in a bit more detail, what evidence there could be. Let’s have a look at another document. It’s POL00086116, please.
Now, in your witness statement, you describe this as an aide memoire. Do you recall when this document was made or when you started using it?
Alan Lusher: No, I’m afraid I don’t recall when the thing was made but it was a useful document.
Mr Stevens: If you can’t remember when it was made or was a useful document, assume it was – let’s just take a hypothetical date and it was made in 2008. If it was made in 2008, would it effectively set out what you would have done as a Contract Adviser before that date? So it wasn’t setting new practice, it was just setting down –
Alan Lusher: No, not setting new practice. This was to bring together the wisdom of the time, and the information in the contract and other guidance given.
Mr Stevens: So when you say drew together the wisdom, this was effectively the thinking of senior management and Contracts Advisers?
Alan Lusher: Yes.
Mr Stevens: If we could go down, please, towards the bottom, under the bold text, it says:
“If in any doubt, make decision to suspend and carry out further investigations.”
So presumably you adopted that approach as a Contract Adviser?
Alan Lusher: Yes, as I referred to earlier, reinstatement of the contract could be swift if investigations proved fruitful.
Mr Stevens: Yes, but during that time, when this decision to suspend is made, the subpostmaster is without remuneration – yes –
Alan Lusher: Yes, yes.
Mr Stevens: – and locked out of the premises?
Alan Lusher: Yes, yes, yes.
Mr Stevens: So is another way of saying this that a Contract Adviser should suspend a subpostmaster unless they are sure that the subpostmaster did no wrong or that suspension was desirable?
Alan Lusher: That would logically follow.
Mr Stevens: Why was the burden of proof put on the subpostmaster like that?
Alan Lusher: The issue would only arise when a significant – normally when a significant audit shortage had been identified, so that, at that stage – and surely it would be fair for the subpostmaster to provide some kind of explanation.
Mr Stevens: Well, earlier we referred to the fact that, if a discrepancy had been caused by a bug, error or defect in the Horizon IT System, the subpostmaster wouldn’t be able to show that?
Alan Lusher: Yes, I agree with that.
Mr Stevens: The contract said that the subpostmaster was only responsible for losses caused by carelessness?
Alan Lusher: I agree with that too, sir.
Mr Stevens: So, again, why did the fact that a discrepancy may have been over a certain amount mean that the subpostmaster bore the burden of proof in persuading a contractor beyond doubt that they hadn’t done anything wrong?
Alan Lusher: Hadn’t done anything wrong? I mean, it’s carelessness, negligence or error. The suspension just allowed time for that investigation to take place.
Mr Stevens: If you could go up, please, to look at some of these factors. The first refers to where there’s been an admission or suspected misuse of funds or admission of inflation of cash or stock; if misuse is admitted the amount is irrelevant.
As a Contract Adviser, would you take into account an explanation from the subpostmaster, for example if they said, “Well, I’ve inflated the cash or stock because I’ve got these unexplained discrepancies for which I just have no explanation, I think it’s the Horizon IT System”?
Alan Lusher: Yes, if there’s no explanation and there’s a shortage in the account, then suspension, I think, would be appropriate to enable investigation to take place.
Mr Stevens: So in those circumstances, just spend, okay.
We’ve then got (2) if there’s a discrepancy identified, and we’re back to this figure of £1,000 “a guiding figure for suspension is where a discrepancy is in excess of £1,000”. Again, why was that seen to be a significant figure for suspensions?
Alan Lusher: I think I said before that I’m not sure why the figure of £1,000 was arrived at but a smaller figure would – you know, we need to recognise that a suspension was an expensive process, as well as causing great difficulty to the subpostmaster. So for smaller sums, then probably not appropriate.
Mr Stevens: Well, when you compare a company the size of the Post Office and what effect a £1,000 discrepancy would have on it, compared to the effect of a subpostmaster and effectively no remuneration, do you think that £1,000 was too low, rather than too high?
Alan Lusher: Certainly on the low side. But that’s the figure that was produced for us and that’s the figure we worked to.
Mr Stevens: Why was the size of branch relevant?
Alan Lusher: Some of the branches of the Post Offices were major high street stores with very high level of turnover, and so on, and some of them were very, very tiny sub offices in the countryside, possibly only open for a few hours a week. So that would certainly be taken into account.
Mr Stevens: But in which way? So, if it was a smaller sub post office, would that be more or less likely to result in a suspension?
Alan Lusher: All the factors have to be taken into account, not just the size of the branch.
Mr Stevens: Well, is it the fact that the size of the branch was taken into account for the Post Office considering its own turnover, in the sense of a bigger branch being suspended would result in Post Office’s turnover –
Alan Lusher: Yes, that would certainly be a consideration. There would be more inconvenience to the public and, as you say, less turnover for the Post Office than a larger branch. So one would want to avoid termination of a large branch if possible.
Mr Stevens: So a smaller branch would be more likely to be suspended on these guidelines?
Alan Lusher: Yes.
Mr Stevens: What was the relevance of settling the debts centrally, both the proportion and frequency?
Alan Lusher: I referred to a model before and, if a subpostmaster was incompetent, then it could result in frequent debt being settled centrally and frequent transaction corrections, as stated here. So it would be an #indication that something was not quite right with the accounting at the branch.
Mr Stevens: The final one, the subpostmaster’s ability or willingness to make good the loss. Well, firstly, why was the subpostmaster’s ability to make good the loss relevant to whether or not they would be suspended?
Alan Lusher: Well, again, if there was a question of incompetence, then the debt could increase over a period of time and a suspension would prevent that increase in debt.
Mr Stevens: The willingness, would someone who was more willing to make good the loss be less likely to be suspended?
Alan Lusher: Yes.
Mr Stevens: So does that mean someone who was disputing the loss be more likely to be suspended?
Alan Lusher: Yes.
Mr Stevens: There’s no reference here to whether or not there was evidence of the subpostmaster calling the NBSC or the Fujitsu Helpdesk. Was that ever considered by Contracts Advisers?
Alan Lusher: Just the frequency of calls to the NBSC for help, do you mean?
Mr Stevens: Well, if they were calling for help with Horizon saying, “I’ve made regular – each week I’m getting problems and I’m calling the Helpdesk and I’m not getting any assistance”, would that be taken into account?
Alan Lusher: Yes, I recall information being available which indicated the number of calls to the Helpdesk. I think that information was generally used for risk analysis to decide for which branches to audit, one of the elements there.
Mr Stevens: So that’s used for audit but, when you’re considering whether or not to suspend someone, would you –
Alan Lusher: If that information was available, that’s certainly something that would be taken into account, yes.
Mr Stevens: So why isn’t it written in this list?
Alan Lusher: I can’t answer that.
Mr Stevens: Number 3 concerns absentee subpostmasters, which we don’t need to consider. Then we’ve got 4:
“Gain opinion from auditor.”
Could you just flesh that out for us?
Alan Lusher: Yes.
Mr Stevens: What would be being sought?
Alan Lusher: In principle the Auditor was there to provide the numbers and purely the facts. But they were at the office and they may have gained an impression that the subpostmaster was, for example, trying to cover something up or being difficult in one way or another. So the Auditor may think “Oh, there’s something really wrong here”, or they may equally find that the subpostmaster was floundering in a muddle and indicate that way.
And that would just be a bit of helpful information in decision making.
Mr Stevens: Finally:
“Consider potential future risk to Post Office Limited funds if the subpostmaster is left in post.”
What sort of points would you be considering there, as distinct from what’s gone before?
Alan Lusher: I think it refers to the level of competence of the subpostmaster. So if the subpostmaster is incompetent, then Post Office funds would be at risk if allowed – if the office was allowed to continue.
Mr Stevens: Did you ever consider alternatives to suspension, such as more frequent visits or advice and input from the –
Alan Lusher: Oh, yes.
Mr Stevens: – Network Support Agents?
Alan Lusher: Yes, definitely, and, even after suspension, then reinstatement would, you know, often then require additional training, additional support of one way or another.
Mr Stevens: Can you ever recall a time when you didn’t suspend a subpostmaster and, instead, put in place an alternative in place of suspension?
Alan Lusher: I can’t recall a specific occasion, sir.
Mr Stevens: Can you recall an occasion when you were faced with a subpostmaster who had a discrepancy in excess of £1,000 and you decided not to suspend them?
Alan Lusher: Well, again, I can’t remember a specific case but we are dealing with more than 10 years ago.
Mr Stevens: Thank you.
Sir, that’s probably a good time to take the afternoon break as I’ll be going on to another topic.
Sir Wyn Williams: Again, I was struggling to unmute myself but I agree.
Mr Stevens: Thank you, sir, would 3.20 work?
Sir Wyn Williams: Yes. Sure.
Mr Stevens: Thank you, sir.
(3.04 pm)
(A short break)
(3.20 pm)
Mr Stevens: Good afternoon, sir, can you see and hear me?
Sir Wyn Williams: Yes, I can, thank you.
Mr Stevens: Thank you.
Mr Lusher, I’m now going to go on to discuss termination. We discussed the effect of suspensions before the break. The effect of termination is obvious. It brings, well, the post office element of the subpostmaster’s business to an end. So, again, presumably you accept that that is a very significant decision to make?
Alan Lusher: Absolutely.
Mr Stevens: The difference between the precautionary suspension and the termination is you have time to investigate?
Alan Lusher: That’s right.
Mr Stevens: Who carried out that investigation?
Alan Lusher: If there was a potential for a criminal investigation to take place, then the main investigation was taking place – took place by the Investigation Team themselves and, if not, the Contract Adviser would interview the subpostmaster and establish – well, that was before termination, clearly – establish whether to terminate, or reinstate, or reinstate with conditions.
Mr Stevens: Right at the beginning of your evidence, when we discussed when an Auditor might involve the Investigation Department, you referred to the £1,000-figure as being indicative of whether it may be referred to the Investigation Department or not and we went to the Suspension Guidelines, which use the same figure.
In most cases that you dealt with of suspension and termination, was the main investigative work done by you or someone in the Investigation Team?
Alan Lusher: The Investigation Team made their own decision as to whether they would be involved in the investigation, with a view of criminal prosecution and, if they did, then they had the trump card. And so the Contract Adviser would – if there was a criminal prosecution to take place, then the Contract Adviser would terminate the contract.
Clearly, the business wouldn’t want to reinstate a contract when the business was going to proceed to prosecution. If the Investigation Department decided not to investigate, looking for criminal prosecution, then the Contract Adviser would conduct the full investigation.
Mr Stevens: I want to look at one of the situations where there was an investigation, one of the case studies that the Inquiry will be looking at in much more detail in due course. It’s involves the prosecution of Suzanne Palmer, who is a Core Participant and sits within this room. Can we go to the investigation report that was prepared, it’s POL00053007. Can we zoom out, thank you. Do you recognise this type of document?
Alan Lusher: Yes, this is a report from the Investigation Department.
Mr Stevens: When would you come across these in your practice as a Contract Adviser?
Alan Lusher: It would be presented probably to the termination of the contract and after suspension.
Mr Stevens: Would this be a significant document that you would take into account as part of the decision as to whether or not to terminate the contract?
Alan Lusher: Yes, that’s right.
Mr Stevens: We see designated prosecution authority towards the bottom, Tony Utting. Did you work often with Mr Utting?
Alan Lusher: Mr Utting was part of the Investigation Team. I wasn’t but I certainly recognised the name and I believe Lisa Allen produced this report and, again, she was an Investigator who produced this and a number of other reports which I saw.
Mr Stevens: You’re referred to as the “Discipline Manager”.
Alan Lusher: Mm, odd title.
Mr Stevens: Sorry, I spoke over you, then?
Alan Lusher: I spoke over you, sir, but just to say it’s an odd title, “Discipline Manager”. We talked about employment law and contract law before.
Mr Stevens: Yes, we said exactly that, disciplinary procedures. The fact your title was Discipline Manager suggests that this was seen as a disciplinary procedure; do you agree?
Alan Lusher: It was a contractual matter that I was dealing with, it was a criminal matter that the report was dealing with.
Mr Stevens: Can we go to page 6, please. We see this is a document by Lisa Allen, so she’s the investigation manager, on 20 February 2006. To what extent, if at all, would you have had any input into Lisa Allen’s investigation?
Alan Lusher: I believe on this occasion the auditors found a discrepancy, a deficiency, in the office accounts and it just happened that on the day Lisa Allen, the Investigator, was available, and so – I believe she went to the office on the day and completed the report. I can’t be certain it was on the day but I think it was or possibly the next day.
Mr Stevens: In preparing this report and you made the decision to suspend on 3 February and subsequently made the decision to terminate, as part of the process of determining whether or not you would terminate Mrs Palmer’s contract, how often, if at all, did you speak to Ms Lisa Allen?
Alan Lusher: The information that I would need from the report was whether there was going to be a criminal prosecution. I don’t recall speaking to Lisa Allen in 2006. I may or may not have spoken to Lisa about the report.
Mr Stevens: So what you said there was “The information that I would need from the report was whether there was going to be a criminal prosecution”.
Alan Lusher: Yes.
Mr Stevens: If there was going to be a criminal prosecution, would you effectively see that as it has to be a termination?
Alan Lusher: Yes.
Mr Stevens: Why?
Alan Lusher: It would be – for Post Office Limited to be pursuing a criminal prosecution and then reinstating a contract, would seem to be incongruent, silly.
Mr Stevens: Did you ever question decisions as to whether or not to prosecute?
Alan Lusher: They were made at a very high level and I wouldn’t have questioned them, no. It wouldn’t be Lisa’s decision.
Mr Stevens: It says, the third paragraph up:
“A discipline report has been forwarded to Alan Lusher.”
What was a discipline report?
Alan Lusher: I believed that refers to this report.
Mr Stevens: That document can come down. The Inquiry has seen evidence of very significant discrepancies being reported and investigated, upwards of £100,000. As part of your investigation, did you ever investigate whether there had been an actual loss, such as by trying to trace where allegedly lost money had gone?
Alan Lusher: We’re not talking about Suzanne Palmer –
Mr Stevens: No, sorry, I’m talking generally.
Alan Lusher: – because her’s were nothing like so large. You’re asking if investigations were made when very large sums went missing?
Mr Stevens: No. Well, let’s not limit it to large sums. As part of your investigation, did you ever try to trace where allegedly lost money had gone? So there was a discrepancy on Horizon but did you try to see if, for example, you could trace where the money had gone, maybe into the subpostmasters’s bank account or into a safe at home?
Alan Lusher: Limited attempt. The investigation Team would go into much more detail.
Mr Stevens: When you say “limited attempts” by yourself, what would those limited attempts be?
Alan Lusher: It would be asking the subpostmaster where the sums of money had gone. There wouldn’t be any detailed investigation beyond that, I don’t believe.
Mr Stevens: What if they said, “I don’t know because I haven’t stolen them?”
Alan Lusher: I wouldn’t be in the business of accusing anybody of stealing money. I would be in the business of finding that there was a deficiency in the account, which could possibly warrant suspension and/or termination.
Mr Stevens: As part of your investigation, would you ever request audit data or ARQ data from Fujitsu?
Alan Lusher: You referred to ARQ data this morning. I can’t quite remember what it was because I’d never heard of it before. But no, is the answer to the question, I would never refer to Fujitsu for information.
Mr Stevens: Why not?
Alan Lusher: I didn’t have the avenue through which to do that.
Mr Stevens: Did you think it would have helped you, if you’re trying to determine the cause of a discrepancy, to be able to see the more detailed audit data collected by Horizon?
Alan Lusher: Yeah, potentially could, yes.
Mr Stevens: In relation to who made the decision to terminate, you say a similar thing, that initially a Contract Adviser with input from a senior manager, and over time that changed; are the timings the same as for with suspension?
Alan Lusher: The Contract Advisers had a monthly appraisal meeting with the Senior Managers and, on each occasion, any cases such as these suspensions, terminations, would be discussed, and so the opinion and guidance of the senior manager would always be in the decision-making process.
Mr Stevens: But in terms of when the actual decision making went to the senior managers, rather than in consultation with, did that transfer about the same time as for suspension?
Alan Lusher: Probably yes, possibly earlier.
Mr Stevens: We’ve discussed that subpostmasters aren’t employees but, often in an employment context where there’s an allegation of misconduct of some sort, you may expect to see an investigating officer and a separate decision maker; would you agree with that?
Alan Lusher: I don’t know, I haven’t dealt with such things.
Mr Stevens: Can we please turn in your witness statement to page 39, paragraph 141. Thank you. You say:
“At interview, evidence would be heard from the SPM and the Contract Adviser.”
Who would hear the evidence?
Alan Lusher: The Contract Adviser would put forward the evidence that they had, the subpostmaster would put forward evidence that they had, and the Contract Adviser, often with the assistance of the friend, member of the Federation of SubPostmasters, normally very helpful – then the Contract Adviser would arrive at a decision jointly or with senior management, subsequently.
Mr Stevens: So the Contract Manager does the investigation or it may be the Investigation Department, there’s then the meeting, the Contract Manager puts forward all the evidence and then the Contract Adviser again or Manager makes a decision. There’s no separation between investigation and decision making?
Alan Lusher: That’s right.
Mr Stevens: Do you see a problem with that?
Alan Lusher: The Senior Managers are always involved in that decision-making process.
Mr Stevens: How does that address the problem with the Investigator making a decision on their own investigation?
Alan Lusher: I didn’t say I found that to be a problem, did I?
Mr Stevens: Okay, you don’t consider it to be a problem; is that your evidence?
Alan Lusher: No, I don’t see that as a problem.
Mr Stevens: So during an interview were there ever occasions when a subpostmaster may criticise the extent of the investigation and say more evidence is needed?
Alan Lusher: It may have been the case, I can’t recall.
Mr Stevens: If such a criticism was made, would you feel that you, as a Contract Adviser who’s done the investigation, would you feel that you would be able to impartially assess that, whether the investigation itself was adequate?
Alan Lusher: If there was something specific that the subpostmaster wished to raise, then that could be a new avenue of investigation, which the Contract Adviser could then explore.
Mr Stevens: How often in your experience did a subpostmaster raise a new area of investigation and that was then followed, following an interview?
Alan Lusher: Can’t recall any specific occasions, sir.
Mr Stevens: I want to briefly look at appeals and at paragraph 146 and 147 of your statement, please it’s page 40, you say that:
“The SPMs did, however, have the right to appeal a decision to terminate their contract. Appeals were heard only by especially trained senior managers.”
You say you recall taking notes but you didn’t actually conduct an appeal yourself.
Alan Lusher: Appeals had to be heard by Senior Managers and I never achieved that status, sir.
Mr Stevens: In paragraph 150, you refer to being consulted on revisions to appeals policies and to arranging training.
Alan Lusher: Yes.
Mr Stevens: Why were you consulted on appeals policy if you weren’t running appeals yourself?
Alan Lusher: I think for a time – this was when I was termed, I believe, a Commercial Contract Adviser and not doing the ordinary role of a Contract Adviser. But, at the time, the appeals were almost all heard by just one Appeals Manager, Andy Bayfield, and the decision was taken that a panel should be established, as had previously been the case, I believe, some years prior.
Is the connection satisfactory, sir?
Mr Stevens: I think –
Sir, can you see and hear us?
Sir Wyn Williams: Yes.
Mr Stevens: I think it may have just been the screen.
The Witness: The screen went off.
Sir Wyn Williams: Currently on my screen, I’ve got, just so everybody knows, I’ve got the witness statement at paragraph 150.
Mr Stevens: Yes, sorry, that can come down. Thank you, sir.
Alan Lusher: Sorry, the question was why did I become involved in a revision of appeals process when I wasn’t involved in appeals.
Mr Stevens: Yes.
Alan Lusher: And the answer is that, at the time when I was a Commercial Contract Adviser, just one person, Andy Bayfield, was concerned with conducting all appeals throughout the country and the decision was taken to form a panel of Appeals Manager with specific training, in order to alleviate the workload. And I was asked, really – I think the policy was just a question of pulling together whatever had been there before into a consolidated piece of work and then assisting with the training of the new Appeals Managers.
I think my experience as an auditor was quite useful in that, just to help to train the Appeals Managers.
Mr Stevens: Are you aware of how frequently appeals would be allowed?
Alan Lusher: Yes, I think there was – in the pack, there was some statistics which indicated in the order of 35/40 appeals a year, if my memory serves me, but that was from the pack which was provided to me.
Mr Stevens: Well, if it’s from the pack, we can consult the documents in due course but, from your memory, you don’t have a recollection of how many appeals were allowed, as in initial decisions overturned?
Alan Lusher: Oh, I see what you mean. Decisions overturned, I don’t really recall that number. There were some but not very many.
Mr Stevens: In practice, was allowing an appeal frowned upon within the Post Office?
Alan Lusher: Oh, no.
Mr Stevens: Why do you say that?
Alan Lusher: From a Contract Adviser perspective, the – an appeal would be welcome because that would give the – somebody else the opportunity to review the entire case. The appeal was not based on the Contract Adviser’s investigations, or findings but there was a completely fresh rehash of the case from stage one, always conducted by a Senior Manager.
Mr Stevens: I’ve got three disparate topics now. One of them is back to the prosecution of Mrs Palmer. There’s going to be more questions coming but I’m only going to focus on one particular element. Firstly, could you just briefly say overall what your role was in that prosecution?
Alan Lusher: I had no role in the prosecution, sir.
Mr Stevens: If we can turn, please, to POL00052988. This is a letter dated 8 November 2006. It’s from Miss J Andrews in the Criminal Law Division, and addressed to, we see, Investigation Team but “cc Lisa Allen”. It refers to Post Office v Palmer with a pre-trial review on 8 December. If we could just move down slightly, please. Thank you.
The third paragraph says:
“The witnesses required to give evidence at Trial are Peter Riches, Alan Lusher, Anil Chowdhry and Nick Kerr.”
Do you recall giving evidence in the trial?
Alan Lusher: No. I did not give evidence at the trial.
Mr Stevens: Did you give a witness statement?
Alan Lusher: I may well have done. I cannot recall.
Sir Wyn Williams: I think the reality is that you must have done because a witness order or a request that somebody gives evidence must be preceded by a witness statement in a criminal case.
Alan Lusher: Thank you, sir. In that case, I must have done.
Mr Stevens: That document can come down. Can we please then go to POL00052997. It’s a letter dated 19 January 2007, again to the Investigation Team, cc Lisa Allen, but at the bottom, we see that it’s from Jarnail Singh. Did you work with Jarnail Singh at all or do you know who he was?
Alan Lusher: I may have been aware of him at the time, sir, and it’s clear that he’s on the Criminal Law Division, so not really closely related to the contract issues.
Mr Stevens: The letter refers to receiving:
“… a letter from the Defence Solicitors with regard to disclosure of any Post Office accounting records that show Mrs Palmer did periodically repay the Post Office large sums of money representing scratchcard receipts. They inform me that Prosecution Counsel gave an indication on 8 December 2006 at Court and we asked the Investigation Officer and his understanding was that such records did exist. However no such records have been disclosed. Could you please look into this and let me have your response urgently.”
Can you recall ever being approached to provide documents in relation to this case, in particular, accounting records?
Alan Lusher: No, I can’t, and the request would have gone to the Accounting Department, rather than to myself, I believe.
Mr Stevens: Thank you. Now, the second topic I had, if you bear with me, sir, I need to open the [draft] transcript.
Thank you, yes, this morning, I asked you questions about where assurance came in respect of Horizon’s reliability, and we had a discussion and you referred to senior management, et cetera. Reading from the [draft] transcript, the question I asked was:
“When you say you were advised by Post Office Limited, who in particular assured – gave you that assurance?”
I’ll then read your answer back to you. You said:
“Well, the discussion came up in team meetings on a fairly regular basis, not exactly sure of the dates, but the first inklings of activity in 2004/2005, something like that, right through to the end there, was kind of a continuum of all things. The pressure got increased, as it were. Initially there’s not too much consideration given to it …”
This is the part I want to ask you about:
“… but latterly the Post Office does [inaudible] a statement to read out with application interviews which the Legal team had prepared to assure people that the Horizon system was sound, and so, you know, latterly, given …”
Then it breaks off. Your reference there to a statement to read out with application interviews, which the Legal team had prepared to assure people that the Horizon system was sound, could you please just expand on what that was?
Alan Lusher: One of the key jobs of Contract Adviser was application interviews for new subpostmasters and, as part of the interview process, a document had been prepared by the Legal team either to read out to refer to or I believe to actually hand to the applicant at some stage during the interview process.
Mr Stevens: Do you recall what that document said?
Alan Lusher: Not specifically but it was to give assurance that the Horizon system was sound.
Mr Stevens: Do you remember when that was – can you be precise as to when that document was brought in?
Alan Lusher: I can’t be precise but on the continuum we’ve referred to it as, you know, 2012 or thereafter.
Mr Stevens: Can you remember who precisely instructed you to use that document?
Alan Lusher: Well, the instruction came through my line manager but it was produced, I believe, by the Post Office solicitors.
Mr Stevens: Who was your line manager at that time?
Alan Lusher: Lin Norbury.
Mr Stevens: It was Lin Norbury. Thank you.
The final question then I have, please, or set of questions sorry, could we turn up POL00041476, and if we could go to the last page, please, page 4. So this is an email from you to Paul Inwood on 14 June 2017. We don’t have the attachment but it says:
“Hi Paul
“I would appreciate advice on the best way to proceed with this case.”
Why would you have approached Paul Inwood in these circumstances?
Alan Lusher: The email is copied Lin Norbury, my immediate line manager and Paul Inwood was, I believe, involved in putting together contracts but also had a close interest in the Horizon Issues. We note that this is much later in 2017, much later on my continuum –
Mr Stevens: Continuum, yes.
Alan Lusher: – when there was general concern in the business about the Inquiry and Horizon difficulties.
Mr Stevens: Could we go over the page, please, to Mr Inwood’s response – thank you. Just to see, for the chronology purposes, he responds asking for more information. The actual content of advice is not necessary for the question I’m going to ask. What I want to ask is your email, which is immediately above. This is from you back to Paul Inwood on 31 August. You say you have made enquiries with Angela van den Bogerd, having no recollection, et cetera. Your penultimate paragraph says:
“Please advise whether I should proceed with this case differently in any way because of the implication of problems with the Horizon system.”
Now, were you requesting whether you should do something differently because of the ongoing litigation concerning Horizon at that point?
Alan Lusher: Yes.
Mr Stevens: Why did you think it necessary to ask whether you should proceed with the case in a different manner?
Alan Lusher: You’ll forgive me if I pronounce the name wrong but Pentyrch is an office, I believe, in Wales and I live in Norfolk. The case was passed to me to deal with, kind of specially, because there was concerns around the Horizon system, I believe, which had been brought up by the subpostmaster in this case. So, in a way, I was just the lowly Contract Adviser dealing with the regular letters to be sent in this case but took advice from, you know, very senior managers, obviously Paul Inwood carried the case forward to a senior legal expert in the business, and so I was just merely doing, as it were, the donkey work to start the process on this case.
Mr Stevens: So, in practice, around this time when the Group Litigation was ongoing, if you had a query as Contract Adviser which raised a Horizon issue, it would be normal practice to raise that up to senior management for guidance on what to do?
Alan Lusher: I do want to say I wasn’t working as a kind of ordinary Contract Adviser in that time from – it was about 2010 onwards but, on odd occasions, was asked to deal with specific cases and when Horizon was mentioned as an issue, then, certainly the matter would be referred to senior managers and lawyers.
Mr Stevens: Thank you. That concludes all the questions that I have.
Sir, there are questions from two Core Participants.
Firstly, Mr Enright for Howe+Co.
Sir Wyn Williams: Over to you, Mr Enright, and I can see that Mrs Palmer is with you so give her my regards.
Mr Enright: I will do, sir, thank you.
Questioned by Mr Enright
Mr Enright: Mr Lusher, I am David Enright and I’m the recognised legal representative for 156 subpostmasters and managers, including Ms Palmer who sits beside me. I saw you looking earlier. Do you remember Ms Palmer?
Alan Lusher: I do indeed.
Mr Enright: You were Ms Palmer’s Contract Manager?
Alan Lusher: I’m not certain –
Mr Enright: You were Ms Palmer’s Contract Manager, correct?
Alan Lusher: I’m not certain whether I was her designated Contract Manager but I definitely dealt with the case.
Mr Enright: You dealt with the case?
Ms Palmer appeared before the Inquiry on 23 February 2022 and she referred to you in her evidence. Did you watch her evidence then or later?
Alan Lusher: No.
Mr Enright: Did you watch the evidence of any of the postmasters who gave Human Impact evidence?
Alan Lusher: No, I haven’t done so, sir.
Mr Enright: Okay. Ms Palmer also produced and provided a witness statement to this Inquiry, and I’d like to take you to two paragraphs of that statement. I’d be very grateful if we could bring up WITN02240100. This is the witness statement of Ms Palmer. If you’d be kind enough to take us to page 12, I’m looking at paragraph 55, Mr Lusher. Ms Palmer said in her statement:
“I also attended an interview with Alan Lusher (Contracts Manager) in or around March 2005. I went through everything with Alan, and explained my accounting process. He could see that had done it incorrectly but this was naivety of the system rather than malicious. Alan tried to stop the prosecution but explained that the decision to prosecute most made by a separate team.”
So Ms Palmer says that you understood her position and tried to help her. Do you remember this?
Alan Lusher: I certainly remember the interview, specifically because Ms Palmer was extremely upset at the time, at the prospect of losing the office.
Mr Enright: So you met her because you remember her being deeply upset?
Alan Lusher: Yes, yes, yes.
Mr Enright: Did you promise to help her in any way?
Alan Lusher: I would have promised to do anything that was within my power to assist her and ensure that justice was carried out fairly.
Mr Enright: Do you recall saying to her that you understood, you could see there was a muddle here, there was naivety here, there was not criminality here?
Alan Lusher: I wouldn’t go that far, sir, no.
Mr Enright: Okay. So you didn’t do anything to try to stop her prosecution then, I take it?
Alan Lusher: The decision on whether to prosecute or not was not at all within my remit, sir.
Mr Enright: All right. You’ll, of course, recall, certainly having heard the evidence, that Ms Palmer was prosecuted by the Post Office, was tried on three counts of false accounting? You shake your head –
Alan Lusher: Yes, I’ve seen the evidence. Yes.
Mr Enright: Do you recall that a jury acquitted her on all counts in January 2007?
Alan Lusher: I have heard that that was the case, sir, yes.
Mr Enright: Okay. I’d like to go to paragraph 14 of her witness statement, it’s at page 14 of that statement I’m looking at paragraph 68, and this what Mrs Palmer says she did immediately after being acquitted:
“I called Alan Lusher the day that the verdict was handed down and told him that I was found not guilty. He was really pleased with this. However, I had been through months of hell, and even though I was proved innocent the Post Office took away my job, my income, my business and my future.”
So the questions I have for you are these: were you happy that Mrs Palmer was acquitted?
Alan Lusher: Yes, sir, I was.
Mr Enright: Do you remember that phone call when she rang you to tell you?
Alan Lusher: Yes, I do recall.
Mr Enright: Given that, did you escalate Ms Palmer’s position with Post Office after her acquittal to see what could be done about reinstating her after she had been acquitted of any wrongdoing?
Alan Lusher: Did I escalate?
Mr Enright: Yes.
Alan Lusher: Yes, I referred the matter to my line manager. I believe when I first hesitated, when you asked me if I was Ms Palmer’s Contract Manager, it’s because the branch is quite a long way from where I live and was most probably within the area of another Contract Adviser, but we worked, you know, in teams, so if the other Contract Adviser’s workload was heavy, I would take on a case, and my line manager at the time, Lin Norbury, I believe, referred the matter after we’d heard about the not guilty verdict to a Contract Manager who looked after the area, Carole Ballan.
Mr Enright: What was the name of that person?
Alan Lusher: Carol Ballan.
Mr Enright: Thank you. Did you discuss this matter with Carol?
Alan Lusher: Um –
Mr Enright: You must have, obviously because you raised it with her.
Alan Lusher: I raised it with Lin Norbury, my line manager, who was also the line manager of Carol Ballan.
Mr Enright: Did you give a recommendation about what should be done after she had been acquitted of all charges?
Alan Lusher: The criminal case had been put forward, been challenged in court, clearly found not guilty, but the contract had already been terminated at that stage.
Mr Enright: We’re not entirely clear whether you were her Contract Manager or not. It does appear that you were. Wasn’t it part of your job as a Contract Manager to intervene when the Post Office got it wrong? Shouldn’t you advocate for someone who had been wrongly prosecuted and found not guilty?
Alan Lusher: The Investigation Team would be at least as responsible to admit that they’d got it wrong, if that was the case.
Mr Enright: I appreciate what they may or may not have done but I’m talking about you, as her Contract Manager. You know, a manager is not all about negative, a manager is also about positive –
Alan Lusher: Yeah, of course. We’re dealing with 2006 and I don’t recall the specific conversations around this part. I mean, there are elements of the case – you know, I was asked to deal with another case with Ms Palmer, so I’ve been familiarised with the case over the recent years. But I don’t recall specific detail from 2006.
Mr Enright: I want to ask you one further question on that because you have said you remember the name of the person who you raised it with it, so you do remember Ms Palmer being acquitted. You do remember raising it with your line manager.
Alan Lusher: Yeah, yeah.
Mr Enright: Did you advocate for Ms Palmer? Did you suggest she should be reinstated?
Alan Lusher: I wouldn’t have suggested that she be reinstated.
Mr Enright: Well, Ms Palmer was acquitted of all charges bought against her by the Post Office and yet she lost her livelihood, her home and her reputation. Is there anything you’d like to say to her today?
Alan Lusher: I’m very, very sorry that things have panned out how they have for Ms Palmer. I certainly remember her being a particularly pleasant person, easy to deal with and I also remember thinking specifically that the interview which we referred to, had that been an application interview, she would have been a very good candidate to be a subpostmistress, and that’s the truth, sir. I’m very sad for the way things have turned out for you.
Mr Enright: Thank you very much, Mr Lusher.
Sir Wyn Williams: Who else wants to ask Mr Lusher questions?
Mr Stevens: Ms Page from Hodge Jones & Allen.
Questioned by Ms Page
Ms Page: Thank you, sir.
Mr Lusher, I ask questions on behalf of another group of subpostmasters and there’s just one document that I’d like to take you to. It is POL00029677. While it’s coming up, Mr Lusher, it is a – well, here it is. It’s the Detica NetReveal review of “Fraud and Non-conformance in the Post Office”. This took place on 1 October 2013. Did you hear anything about that or know anything about that?
Alan Lusher: I’ve read this report and I can’t be sure. I believe I was invited to give information to one of the researchers before the report was produced.
Ms Page: You didn’t read it at the time, though, or did you?
Alan Lusher: Oh no, this wouldn’t have been presented to my level. This would have been for board level, I guess.
Ms Page: What I’d like to do is just look at the bottom of page 33 and going into page 34. So just pausing there, this the bottom of page 33, and this is about sub post office branch behaviour in relation to what the report terms non-conformance, and we can see that there’s a breakdown of various different types of sub post offices and the percentage of them which fail audits.
So we can see there that offices with no DVLA applications failed 23 per cent of the time, which is relatively high but, if we go all the way down to the bottom where they have no additional services, no ATM, no Camelot, no DVLA, no automated payments, et cetera, there’s just a 1 per cent failure rate; do you see that?
Alan Lusher: Yes. It would be helpful if we could decide what a failed audit means.
Ms Page: Well, it says here at the top:
“SPMR failure rates appear to be very much determined by which services they do not offer. Removing the ATM reduces the risk of SPMR being suspended, as does the presence of Lottery tickets …”
So I think what it’s referring to is when an audit leads to suspension.
Alan Lusher: Okay.
Ms Page: Does that make sense?
Alan Lusher: Yes, it does, yeah.
Ms Page: We then go over the page and it talks about multiple sub office behaviour, and what it says is:
“Multiple sub post offices are by far the weakest performers in terms of conformance. Once again, the absence of the ATM appears to reduce the risk, however, the failure rate is still considerably above the average, which is about 14%.”
Then it says that there’s, in the –
Alan Lusher: Ah –
Ms Page: Sorry.
Alan Lusher: May I just interrupt?
Ms Page: Certainly.
Alan Lusher: Sorry to interrupt, but the title of this paragraph is “Multiple sub post office behaviour” and multiple subpostmasters, to me, means the branch is operated by the Co-op or One Stop.
Ms Page: Exactly.
Alan Lusher: But the cluster name is MSPO_3 and that’s a modified sub post office contract and I wonder whether we could just clarify whether we’re referring to the post offices under the modified contract or multiple sub post offices.
Ms Page: In the context of the report it’s pretty clear they’re talking about multiples, which is really why I draw it to your attention because it is one of the areas where you ended up doing a lot of work, isn’t it?
Alan Lusher: Indeed, yes.
Ms Page: We can see that because below there’s also a reference to chain franchise behaviour and so that’s a different form again, isn’t it, where you have chain franchise; is that right?
Alan Lusher: Yes, that’s something different.
Ms Page: So just to return back to the paragraph dealing with multiples, we can see that there’s a description of “High stock discrepancy, Unpaid cheque [transactions]”, and that’s, I think, a type of failure and we see that 50 per cent of the multiples are failing in that regard.
Then when we have multiples which do everything, 36 per cent are failing; and then when we have no ATM, 21 per cent are failing; all of which are higher than the failure rates that we saw with reference to single subpostmasters.
Were you aware that multiples were much more prone to non-conformance and failure of audits than single subpostmasters?
Alan Lusher: No, I wasn’t aware. Multiple sub post offices, if there was an audit discrepancy, then with an independent subpostmaster, we follow the procedure which we have discussed at length today of suspension and interviews and terminations, and so on. But with the multiple partners, then they themselves would deal internally with issues at branch, so they may choose to terminate the employment contract of their manager, for example, and replace them with somebody else, or come to whatever arrangement they chose. So that the issue wouldn’t be so onerous on the Contract Adviser to deal with.
Ms Page: No. It appears, doesn’t it, from what Detica NetReveal have found, is that multiples were given really rather more latitude than single subpostmasters in terms of non-conformance?
Alan Lusher: By the Post Office.
Ms Page: Yes?
Alan Lusher: Yes, I’d say that’s the case. But by the operators themselves, the multiple partners, then they dealt with matters in their own way.
Ms Page: Well, yes, they did, and what it looks like is that they didn’t deal with it in a way that produced the same levels of conformance that subpostmasters produced?
Alan Lusher: From these figures, it would seem that what you say is correct.
Ms Page: So what we perhaps might draw from this is a culture in the Post Office which took advantage of a power imbalance between the Post Office and the subpostmaster, in comparison to a more bilateral less imbalanced relationship between the Post Office and chains like the Co-op.
Alan Lusher: I accept that the – because of the figures in front of me, the effect of action taken by the multiple partners was less effective, can’t be disputed because of the figures you present or the figures that are presented in this report. But, in terms of favouritism or a different approach from the Post Office, the mechanisms of the approach were different, as I explained, but not a matter of favouritism, I wouldn’t have said.
Ms Page: Can I just ask, very briefly, one more thing. That document can come down. This is just a question that arises from the document you’ve seen already, on a different subject, the emails about the Post Office at Rivenhall and the exchange that you had with Mr Winn, who informed you that Fujitsu had the ability to impact on branch records via the message store. Were you aware that that email exchange became a point of focus during the Second Sight investigation?
Alan Lusher: I haven’t followed the investigation closely.
Ms Page: Did anyone talk to you about it during the Second Sight investigation?
Alan Lusher: No.
Ms Page: Thank you. Those are my questions.
Questioned by Sir Wyn Williams
Sir Wyn Williams: Thank you, Ms Page.
I do have a few questions to ask you, Mr Lusher.
Could we have Mr Lusher’s witness statement on the screen at paragraph 66, just so we can look at the contractual provision again. Paragraph 66 is on page 19. If you scroll up, there we are, that’s fine.
You’ve very properly set out in paragraph 66 that your understanding is summed up by the contractual provision which you then cite, yes?
Alan Lusher: Yes, sir.
Sir Wyn Williams: Mr Stevens showed you a number of documents or at least some documents – don’t let’s exaggerate it – which tended to suggest that the subpostmaster was responsible for all losses, full stop, so to speak, and so there was a difference between the strict contractual provision and some of the documents produced by the Post Office, yes?
Alan Lusher: Yes, that’s quite true, sir.
Sir Wyn Williams: Right. Now, what I want to ask you about is your knowledge of what happened in practice. Can I take it – and we’ll pick up the train, so to speak, when the Auditor has reported to the Contract Adviser that there’s a loss showing at a particular branch, all right?
Alan Lusher: Mm-hm.
Sir Wyn Williams: So a decision has to be made by the Contract Adviser as to suspension or not, and I take it that the Contract Adviser would be asking himself the question: is the subpostmaster responsible for this loss? There might be two ways of looking at that: (1) strictly in accordance with the contract; or (2) in accordance with what some policy documents might describe as the responsibility for loss. So two questions. First of all, when you were a Contract Adviser, did you address that issue?
Alan Lusher: It’s difficult to remember any specific examples, sir, but my intention would always be to be as fair and as just as possible with a subpostmaster. It was rare, in the circumstance that you referred to, an audit taking place, it was rare to come across a loss which wasn’t caused by carelessness, negligence or error, or by an assistant. The only examples I can usually – I could usually remember would be in terms of robbery and burglary.
Sir Wyn Williams: Yeah, I understand that, but what I’m trying to get at is: were you applying a test, which, in effect, was the postmaster is responsible for all losses or were you applying a test which was that he was responsible for losses if he was careless, negligent or in error?
Alan Lusher: The second is definitely the case, sir. I would refer to the contract: carelessness, negligence, or error.
Sir Wyn Williams: So you personally would always go on the contractual basis? Is that what you’re telling me?
Alan Lusher: Yes, sir, it is.
Sir Wyn Williams: Right. Now, the other question I want to ask you in relation to that is, in your mind, was it for the Post Office to prove that he was careless, negligent or in error, or was it for the subpostmaster to prove that he wasn’t?
Alan Lusher: The Post Office would go some way to investigate the situation, so that the Contract Adviser – me myself, sir – would be confident, to some degree at least that there was carelessness, negligence or error. The case would then be rest to the subpostmaster for him to prove otherwise. If the investigation revealed that there was – the loss was not caused through carelessness, negligence or error, then there would be a reinstatement.
Sir Wyn Williams: Yes, but we haven’t got to that point yet because I’m talking about the situation where you know from the Auditor that there is a loss and now you’re deciding whether to suspend or not.
Alan Lusher: Okay.
Sir Wyn Williams: My understanding is this all happens very quickly – on the same day, usually. So there hasn’t been an investigation; there’s simply been an audit. So in your mind, if you can try and think back and be as objective as possible, to repeat, were you thinking to yourself “Well, the Post Office has got to prove that he was careless, negligent or in error”, or were you thinking, “It’s for him to establish that in any subsequent investigation?” – (Audio disruption) – I’m sorry, in any subsequent investigation?
Alan Lusher: Yes. When the auditor would phone through with the information that a loss had been discovered, then that loss would be taken as a true situation of accounts.
Sir Wyn Williams: Yes.
Alan Lusher: And a suspension would, you know – could follow at that stage.
Sir Wyn Williams: Right.
Alan Lusher: And, thereafter, that’s where I described the investigation taking place and then the subpostmaster, often with a friend from the Federation, and the Contract Adviser getting together to establish facts.
Sir Wyn Williams: Yes, but so that I understand the nature of that subsequent investigation, you would be provided with what? That’s not really helpful to you.
Alan Lusher: Well –
Sir Wyn Williams: You, first of all, get what sort of documentation relating to the loss as found by the Auditor?
Alan Lusher: Certainly, the audit report would be a key part of the documentation received and then there may be subsequent enquiries made to establish, for example, were accounting documents relevant in the particular case, training records and – I’m just trying to think – any other information that was available from the office records at the time?
Sir Wyn Williams: Right, but am I correct in thinking that the first time you get the subpostmaster’s full explanation of why he thinks that a loss has occurred is at the interview that you’ve described occurring?
Alan Lusher: At the time of the audit, I would always want to speak to the subpostmaster to establish whether there was an immediate response to that question.
Sir Wyn Williams: So are you saying that you would speak to the subpostmaster, if you could, on the day of the audit –
Alan Lusher: Yes.
Sir Wyn Williams: – to get an explanation and then, subsequently, he having been suspended, there then will be what I’ll call a secondary process, in which you’re deciding, in effect, whether to lift the suspension or terminate the contract and, at that stage, he would have another opportunity to give his version of what he thinks had occurred?
Alan Lusher: Yes, that’s quite right, sir. The initial questions would be over the phone at the time of the audit and the secondary investigation you referred to would be after there’d been time to gather together documents, information, and so on.
Sir Wyn Williams: Right. So at that secondary investigation – let me ask you the same question that I asked you in relation to the day of the audit. At that secondary – or at that meeting or following that meeting, when you were making a decision, were you saying to yourself “It’s for the Post Office to demonstrate that this postmaster had been careless, negligent or in error”, or were you saying to yourself, “He’s got to demonstrate that he hadn’t been careless, negligent or in error”?
Alan Lusher: The second, sir. The subpostmaster would be required to come up with evidence that he hadn’t been careless, negligent or in error.
Sir Wyn Williams: Thank you. Yes, that’s very helpful. Thanks very much.
Sorry for prolonging your stay in the witness box but thank you for making your witness statement and thank you for giving evidence before me today.
The Witness: Thank you very much, sir.
Sir Wyn Williams: So Mr Stevens, we recommence tomorrow morning at 10.00, yes?
Mr Stevens: Yes, for Alison Bolsover.
Sir Wyn Williams: Thank you very much.
Mr Stevens: Thank you.
(4.22 pm)
(The hearing adjourned until 10.00 am the following day)