12 July 2024 – Richard Callard
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(9.45 am)
Mr Beer: Good morning, sir, can you see and hear us?
Sir Wyn Williams: Yes, I can, thank you.
Mr Beer: Thank you very much, may I call Richard Callard, please.
Sir Wyn Williams: Yes.
Richard Callard
RICHARD JOHN CALLARD (sworn).
Questioned by Mr Beer
Mr Beer: Good morning, Mr Callard. My name is Jason Beer, as you know, and I ask on behalf of the Inquiry. Can you tell us your full name, please?
Richard Callard: Richard John Callard.
Mr Beer: You’ve made a long statement, 163 pages, excluding the exhibit sheets, dated 14 June 2024. The URN for that is WITN00140100. If we can have that up on the screen, please, and look at the bottom of page 23. Right at the bottom, thank you.
Do you see the last line on the page, going into the next page? It currently reads:
“By this time, Jenny Willott MP had replaced Jo Swinson MP whilst Jo Swinson MP was on maternity leave.”
Is there a correction you’d like to make to that sentence?
Richard Callard: Yes, please. I realised, after I read Jo Swinson’s witness statement, that she had returned from maternity leave in June. So it should read that by this time Jo Swinson had returned from maternity leave.
Mr Beer: If you could just angle those microphones and just move forward a little bit. Thank you very much.
So the sentence should read “By this time Jo Swinson had returned from maternity leave”?
Richard Callard: That’s correct.
Mr Beer: Thank you. If you can turn, please, to page 173; is that your signature?
Richard Callard: It is.
Mr Beer: With that correction brought into account, are the contents of the witness statement true to the best of your knowledge and belief?
Richard Callard: Yes, they are.
Mr Beer: Thank you. You can put that to one side, thank you. Can I start with your background, please. In summary terms is this right: you qualified as a chartered accountant in 2001 and joined Arthur Andersen, as it then was, in 2002?
Richard Callard: That’s correct.
Mr Beer: You joined the Shareholder Executive, ShEx, as we’re going to call it, initially on secondment in March 2007 and then permanently from March 2009?
Richard Callard: That’s correct.
Mr Beer: You started to lead the ShEx Post Office Team in January 2014 and were appointed as the Shareholder Non-Exec Director for the Post Office in March 2014?
Richard Callard: That’s correct.
Mr Beer: So you had two roles: Head of the Shareholder Team within ShEx and the Shareholder NED for the Post Office?
Richard Callard: Yes, that’s correct.
Mr Beer: You held the Post Office Board role until March 2018, and the Head of the Shareholder Team role for Post Office until May 2018?
Richard Callard: That’s correct.
Mr Beer: You remain an Executive Director of UKGI, the successor organisation to ShEx?
Richard Callard: That’s correct.
Mr Beer: Thank you. Can I start then by asking you some questions about the role you performed as a Non-Executive Director, as a NED?
Richard Callard: Mm-hm.
Mr Beer: These questions are based on what you say in paragraphs 8, 13 and 14 of your witness statement. There’s no need to turn them up.
You say that when you started working at the Post Office as a Non-Executive Director, you first had no experience as a NED; is that right?
Richard Callard: That’s correct.
Mr Beer: You, second, had little knowledge of the Post Office?
Richard Callard: I suppose I’d had a two-month run-in as the other Shareholder Team, noting that I’d been on paternity leave as well, but yes.
Mr Beer: Third, you say that you found your new role as Head of the ShEx Team for the Post Office overwhelming, in particular because that role had been split previously between two people?
Richard Callard: That’s correct.
Mr Beer: Did you ever raise your concerns about your capacity or capability to undertake the role of a Non-Executive Director on the Post Office Board?
Richard Callard: No, because, to start with, I thought I’d see how it went and if I could manage. I was doing 50 per cent – theoretically, 50 per cent of my time on the Green Investment Bank shareholding, 50 per cent of my time on the Post Office shareholding and then the Non-Executive role was a sort of – I’m not sure whether it was considered part of the 50 per cent of the Post Office. But the way UKGI and ShEx works is that you tend to have a – everybody has quite full workload, so whilst I say it was overwhelming, it was, but I think it was more about the sheer number of issues that were on the agenda, as opposed to the level of workload.
Mr Beer: Having taken on the role for which you had no prior experience, did you receive any relevant training or mentoring?
Richard Callard: Not particularly. I went on a course with regard to being a NED and, clearly, I’d picked up snippets and experience from other people but there was nothing particularly formal to start with.
Mr Beer: Even though you were new to the role of a Non-Executive Director –
Richard Callard: Yeah.
Mr Beer: – at this early stage, did you at least know that the core part of a role of a Board would be to provide appropriate challenge to the thinking and strategic of the executive of a company?
Richard Callard: Yes.
Mr Beer: Did you understand that the Non-Executive Director, the NED’s role, within that function, was in particular to provide independent oversight –
Richard Callard: Yes.
Mr Beer: – and a constructive challenge to the Executive Directors?
Richard Callard: Yes.
Mr Beer: When you took up the role, did you have any understanding or recognition of the risk inherent in an organisation dealing with longstanding challenges that they – or the organisation – may develop entrenched views, sometimes called groupthink?
Richard Callard: Well, I’d certainly heard of groupthink, and clearly there’s always a bit of history, but I don’t think I had any specific worries about that in that sense. There was – when I joined, although Post Office is, I don’t know, 300-odd years old, it had only just come out from under Royal Mail and had a relatively new Board, which it never had before, so everybody on that Board was pretty new to Post Office.
Mr Beer: Does it follow that you didn’t regard it as a particular function of your job as a Non-Executive Director to be alive to that risk of ingrained thinking or groupthink, and be the one that ought to identify it and challenge it?
Richard Callard: I don’t recall thinking that way specifically. So – but I was aware that that is what my role was and I did ask questions about a whole range of topics as part of my role.
Mr Beer: You do mention in your witness statement that you asked questions over the years that you fulfilled the function of NED, but in your witness statement, you don’t appear to identify any point at which you provided any significant challenge to the Executive; would you agree?
Richard Callard: No, I wouldn’t agree with that.
Mr Beer: Which were the occasions when you significantly and directly challenged the Executive?
Richard Callard: Are you talking about Horizon specifically or generally?
Mr Beer: Horizon specifically?
Richard Callard: Well, I think I asked questions around whether people had appealed because I couldn’t understand why people – if there’d been miscarriages of justice, why people hadn’t appealed.
Mr Beer: Just stopping there, isn’t that a request for information rather than a challenge to the approach or direction that the company was taking?
Richard Callard: Yes, I suppose you’re right. Yeah.
Mr Beer: I’m thinking about challenging and saying “What you’re doing, in my view, is wrong, it’s the wrong path to take. I would vote for … I suggest you do X”?
Richard Callard: I suppose when I got there, I inherited a position which was relatively – I felt relatively established. There had been – you know, Second Sight had been appointed at sometime in 2012, they had then produced a report in July ‘13. I thought Post Office’s response to the findings of that report, in terms of setting up a Business Improvement Programme, setting up a Mediation Scheme, where individual cases would be looked at and also looking at prosecutions, was a reasonable response to the information that was being received at the time.
So I was relatively satisfied with what was going on at that point. And I also received – the information I was getting from the team I inherited was similar. So I’m not sure I felt the need to directly challenge in that way because there was quite a bit of work and investigation already ongoing, in terms of individual cases within the Mediation Scheme being investigated and, periodically, we then – you know, there was things around Deloittes, there was Linklaters, et cetera, and I also volunteered to join the Sparrow subcommittee because I was quite clear that ministers would want to understand what was going on.
So whilst I didn’t – I can’t think of any examples that were directly challenging, I felt that was a reflection of the fact that, at the time I joined, I didn’t feel I particularly needed to.
Mr Beer: So was that state of being relatively satisfied or being in a state of relative satisfaction one that continued for the entirety of your role as a NED?
Richard Callard: No, I think if you – we were continually worried about the issue of Sparrow, as I’ll probably call it throughout today –
Mr Beer: I’m looking – sorry to speak over you, Mr Callard. You’ve mentioned asking for information. You said you were worried or concerned.
Richard Callard: Yeah.
Mr Beer: I’m asking, was there any occasion when you actively challenged the Executive?
Richard Callard: There will have been but I can’t remember specific examples. But at the Sparrow subcommittee, that is where the forum would be to ask specific questions of the Executive. A lot of those were focused around how – or by the time I got there, because of what – the information, I understood it to be around the system itself, it was around how we deal with the problems at the Mediation Scheme was happening. On reflection, knowing what I know now, I probably should have asked more probing questions about the specifics of the IT itself but, as I say, the position I inherited felt a relatively good position, even though the Mediation Scheme itself was starting to somewhat go awry.
Mr Beer: Did you see your role as the ShEx representative on the Board to be to represent the interests of taxpayers?
Richard Callard: Yes, I think so. It was to represent – the role of a Shareholder NED, to my mind, is one of – aside from being an independent NED in its own right, it also has an overlay of bringing a Government perspective to the Board and bringing the Board’s perspective to the Government, so that they can understand each other better.
Mr Beer: You tell us in your witness statement, it’s paragraph 39, that you did not see the responsibilities of the Board of Directors as being fundamentally different in Post Office to those that would ordinarily apply to the Board of a large company, simply by virtue of the fact that the company was wholly owned by the Government. Can I ask, given that the Post Office was effectively spending public funds, did you not consider that there was a greater accountability on Post Office than in the case of a private commercial entity?
Richard Callard: I suppose we view, almost in some respects, somewhat neutral about who owns the business itself. But we do feel accountable to taxpayers in terms of how money is spent and what it goes on. That is not to say that we don’t want the money to be spent, it’s more about value for money. Are you getting what you are paying for? So we do did have – I did have in mind an eye to things like costs but also –
Mr Beer: That would apply in a – sorry to speak over you again.
That would apply in a straightforward commercial company?
Richard Callard: Yes, and I don’t really see there’s a – you know, it wouldn’t be that different to a commercial company. The part – the way ShEx works is to almost treat its businesses to the extent it can as commercial entities because that’s what we want them to be. Now, they’re in ShEx or UKGI because there’s something – you know, they can’t quite be commercial. So in Post Office’s case, for example, they have to keep open 3,000 branches that would otherwise be unviable but, otherwise, we want them to operate like a commercial entity and, through ShEx, that’s the kind of the sort of culture we’re trying to bring.
Mr Beer: So you could have been selling oil or making microchips, it didn’t matter that this was public money being spent, in the provision of a public service?
Richard Callard: Well, of course it matters and you always have an eye to the fact that you’re ultimately responsible through to Parliament that – so you want to make sure it gives an extra angle, as it were, when you’re looking at a business case about money, that you know that the money you’ve got to get won’t otherwise go into a hospital or a school. So there is that angle.
So we do – you do – one does think of the taxpayer and that is the added angle that you bring, I suppose, as a Non-Exec, a Shareholder Non-Exec because you’ve got to think about the wider position of the Department and the wider priorities.
Mr Beer: Can I turn to potential conflicts of interest. In paragraphs 10, 16, 63, and 317 to 19 of your witness statement, you discuss the potential conflict of interest which the Post Office Board perceived to exist between the Post Office, on the one hand, and the Government, as Post Office’s shareholder on the other, and you give a specific example of Board discussions of Government funding levels as posing a problem?
Richard Callard: Yeah.
Mr Beer: You indicate that you were conscious of the potential for you personally to be placed in a position of conflict of interest and, therefore, decided to absent yourself from certain parts of certain Board meetings –
Richard Callard: Mm.
Mr Beer: – particularly when funding was discussed, agreed?
Richard Callard: That’s correct.
Mr Beer: Can you explain what specifically the perceived conflict was, please, in relation to the Post Office’s funding?
Richard Callard: So, as a Non-Executive Director, you are there to promote the interests of the company and I suppose, in a crude way, the more investment that you get, the better it is for the company. With your Civil Service hat on, clearly you’re there to look after public funds. You want to make sure that the right amount of money goes to the Post Office, or any other business that you look after, and you’re also very conscious that there is limits on the level of taxpayer funding that can go to the Post Office, as I say.
And so those two things somewhat conflict. Not all the time but they do somewhat conflict when the Board is making decisions about what it’s applying to the Government for and I remember, it was one particular Board meeting, it was a strategy away day where they proposed – Post Office proposed a number which I thought was just far too big, and I said so. And, as a team, the Shareholder Team, a lot of our efforts over the course of the next 12 to 18 months were around pushing that figure down in one direction and yet, at the same time when we went to the Department, explaining to the Department why we needed – why Post Office needed that investment.
And so you’re trying to bring down their expectations and get comfortable with the level of funding that, as a Shareholder Team, you think Post Office needs for what it wants to do, whilst, at the same time, going into bat with the Department to say “We think you need to provide X hundred million to Post Office to provide them” –
Mr Beer: When you said that number is too high, which hat were you wearing? Were you –
Richard Callard: Well, I often, in Boards, would say which hat I was wearing, I’d specifically say, and I think I –
Mr Beer: So on that occasion –
Richard Callard: So on that occasion I think I will have said, “Look, this number is too high for Government”. But no one is countenancing that –
Mr Beer: Why were you entitled to say that, if you thought that there was a conflict of interest in representing Government’s views on funding issues within the Board?
Richard Callard: Sorry, I don’t quite understand the question.
Mr Beer: Yes. You told us that there was a conflict of interest –
Richard Callard: Yes.
Mr Beer: – on occasions –
Richard Callard: Yes.
Mr Beer: – in particular in relation to funding –
Richard Callard: Yes.
Mr Beer: – because the Board’s overall aim – this is describing things in very generic terms – would be to secure from Government the highest level of funding that was possible?
Richard Callard: Yes.
Mr Beer: That would not –
Richard Callard: Within reason.
Mr Beer: Yes. That would not necessarily be Government’s number 1 choice or priority?
Richard Callard: Yeah, yeah.
Mr Beer: When you said in a Board meeting “That number is too high”, were you saying that as the Government’s representative?
Richard Callard: Yes, and I would probably be saying it as well as a Shareholder NED – I suppose knowing – understanding the Government context. So whether I actually said, “I’m putting my government hat on”, specifically, but I just felt that the – I wanted to set expectations that that figure felt quite high. Now –
Mr Beer: So hold on –
Richard Callard: – I didn’t see that was a conflict in saying that at the time. There was lots of discussions about funding within the Post Office Board. I only – I think I recused myself from two discussions. Now, the reason why I recused myself in those particular discussions was because I could tell – (a) I could pick up the feeling from the Board but the discussion that was going to happen then was more about the tactics and – of the Board as to what they’re going to do, given that Government is not giving them the money that they wanted, and I don’t think they felt comfortable and I didn’t feel comfortable in discussions around “Okay, so what’s our next move with Government”.
You know, I didn’t feel comfortable being in that discussion and I don’t think they felt me being comfortable there because they weren’t sure what I would take back to the Department. There was plenty of discussions we did have when I was in the room, about funding, about what is this money for, what is the business case for, is this the right direction, et cetera. So I apologise if I’ve given you the impression that I was never in the room of the Board for funding discussions. There were plenty of funding discussions but there were some specific times that I recused myself because I wasn’t comfortable being there and the Board wasn’t comfortable with me being there.
Mr Beer: Can you give us any other examples of specific areas where the Board considered there to be a conflict of interest or potential conflict of interest in you acting both as a Board member and also as a member of the Shareholder Executive?
Richard Callard: Not particularly to be honest. I mean, some members – I was first Shareholder NED that was also part of the Shareholder Team so my predecessor, Susannah Storey, had been separate to ShEx. Although she was – had been a ShEx person she was ex-ShEx, so I remember there was a bit of discomfort when I first joined and I think there was a concern about the sharing of Board papers and those sorts of procedural issues, which I suppose you could say is some sort of conflict.
I’m not sure they wanted – Boards tend to be very sensitive about –
Mr Beer: Specifically, Mr Callard, did you or any other Board members perceive any conflict or potential conflict in relation to Horizon issues on any occasion?
Richard Callard: No, I don’t think so.
Mr Beer: Did you feel constrained in any way in disclosing information by reason of your signature of NDAs, non-disclosure agreements?
Richard Callard: No, because the NDA agreement was specifically, I think, worded to allow me to share Board papers with my team and others in Government, if I felt it appropriate.
Mr Beer: So the NDAs did not inhibit your ability to relay any matters of concern about Post Office to Government?
Richard Callard: No.
Mr Beer: You tell us in paragraph 42 of your witness statement about circumstances in Board meetings where you spoke with your “NED hat on” or your “Government/shareholder hat on”, as you described –
Richard Callard: Yeah.
Mr Beer: – and you say you might, for example, state that you agreed with the Board’s course of action, given what you knew from Board discussions and your responsibilities as a NED to the company –
Richard Callard: Mm-hm.
Mr Beer: – but would make it clear that ministers might not necessarily agree?
Richard Callard: Yeah.
Mr Beer: What did you understand, in your words, your responsibilities as a NED to the company to mean?
Richard Callard: So you’re there to promote the success of the company. So if I can give an example that might demonstrate that. So there were – for example, there were redundancy programmes periodically to be done in the Post Office to make them more efficient, so, for example, in the cash supply chain, which was felt to be over-manned, and so as a NED, I was quite content, having looked at the business case for it, for those redundancies to go thorough. But, clearly, redundancies are a politically sensitive matter, so I would say “Well, as a NED, using my independent judgement, I would agree with this change but what we do need to do is inform the Minister because it could have political ramifications. It’s not that they’ll say no but I need to warn them and we need to just make sure there’s no objection”.
Mr Beer: You give examples in your witness statement where you might be wearing two hats –
Richard Callard: Yeah.
Mr Beer: – and had to make clear that fact, as including issues of executive remuneration, mutualisation –
Richard Callard: Yeah.
Mr Beer: – funding, pension changes and Sparrow?
Richard Callard: Yeah.
Mr Beer: In what ways did you believe your duties as a Director were not or may not have been aligned with the interests of the Government, its sole shareholder, in relation to Sparrow?
Richard Callard: It’s less about not being in line, it’s just not really understanding the ministerial position and going back for clarification. So I’m thinking specifically around some of the decisions at the Sparrow subcommittee were looking at, say, towards the start of June and the end of April, where there were worries and concerns about the investigations into each case of mediation not proceeding quick enough and sort of almost getting stuck with Second Sight, because they were only two people versus the investigatory team at Post Office that had 20.
And so the options that were put forward by the Executive and discussed by the subcommittee, it was acknowledged that, to the extent that the Board decided to do something, you’d have to go back to ministers, particularly given the Parliamentary undertakings they had made about Second Sight, for example, to say “Well, you know, we would need ministerial consent or whatever to take a course of action”.
So whilst I could, as a NED, say, well, I think this is perhaps the right way forward because clearly X and Y is happening and this looks like the right course of action, I don’t know how a minister feels about that. They may say yes, they may say no to it, so we’ve got to be live to that sort of thinking, so that’s what I meant by that particular example.
Mr Beer: You tell us in paragraph 61 to 62 of your witness statement that you shared the vast majority of information that you received in your capacity –
Richard Callard: Yes.
Mr Beer: – as a Shareholder NED with the Shareholder Team, without restriction. Correct?
Richard Callard: Yes.
Mr Beer: Did you take the same approach, ie sharing the vast majority of information, in relation to ministers and civil servants outside of ShEx?
Richard Callard: No, not in that way because the stuff you get through from – Board packs would be 150 to 250 pages. You wouldn’t share those with the Minister. They have –
Mr Beer: Did you consider there to be a restriction of a different kind in sharing information that you learned in your capacity as Shareholder NED outside of the ShEx team?
Richard Callard: No, I never felt there was things that I couldn’t tell ministers if I felt it appropriate to do so.
Mr Beer: So you were able, you thought, to show Board papers to ministers and civil servants outside of ShEx, if the occasion arose?
Richard Callard: If – I mean, I very rarely shared Board papers outside of ShEx because I never felt there was a need to. What we would do, if there was something to be said, we would put that into a some sort of submission or some sort of email and circulate it, rather than actually sharing the paper itself.
Mr Beer: So never mind how the information was conveyed, you considered yourself able to inform ministers and civil servants outside of ShEx of the substance and detail of Post Office Board decisions without restriction?
Richard Callard: Yes, whether I did or not, it comes down to my judgement at the time and what the matter is and what I think people’s views are, but, yes, I never felt I couldn’t share the gist of it and the content of it. I wouldn’t necessarily share the papers themselves.
Mr Beer: You said that you shared the vast majority of information you received –
Richard Callard: Yeah.
Mr Beer: – in your capacity. Can you give us some examples of information that didn’t fall within the vast majority?
Richard Callard: I was largely thinking there of pensions, the pensions subcommittee. So when I first joined Post Office I was asked to go on the pensions subcommittee, which was looking specifically at closing the defined benefits pension scheme, because a deficit was emerging. There was no one on my team particularly at that point that really understood pensions. I’d dealt with pensions under Royal Mail, so I don’t recall particularly sharing – until we got to the point where there was going to be an announcement about it – particularly sharing any pensions subcommittee –
Mr Beer: That wasn’t because of a restriction though, that was just because the –
Richard Callard: Yes, the –
Mr Beer: – circumstances didn’t warrant it?
Richard Callard: Quite.
Mr Beer: So information could be shared, in your view –
Richard Callard: Yes.
Mr Beer: – that you learnt in your capacity as Shareholder NED through attending meetings, through reading Board papers –
Richard Callard: Yeah.
Mr Beer: – and otherwise –
Richard Callard: Yeah.
Mr Beer: – without restriction, with ministers and civil servants?
Richard Callard: Yeah. I would filter that but yes.
Mr Beer: But the filter you applied was not because of any restriction?
Richard Callard: No, it’s to do with my judgement and what I think people know and what I felt was relevant.
Mr Beer: You tell us in paragraph 69 of your witness statement that you found it difficult to identify the correct balance when it came to the appropriate level of Government engagement on the Horizon issue. What did you mean by that?
Richard Callard: I think – sorry, without seeing the paragraph, um, I think the position I inherited –
Mr Beer: We can look at the paragraph to help.
Richard Callard: Oh, I can just look –
Mr Beer: Page 35.
Richard Callard: Page 35, thank you. I should have brought my –
Mr Beer: It will come up on the screen, page 35.
Richard Callard: I think I explain it in the paragraph.
Mr Beer: Just wait for it.
Richard Callard: Sorry.
Mr Beer: It was the sentence which I just read in the first line:
“In general terms, I found it difficult to identify the correct balance when it came to the appropriate level of Government engagement on the Horizon issue.”
Richard Callard: Yeah, yeah, so not unlike other arm’s-length bodies I’ve dealt with prior to that and was dealing with at the time, you know, there’s a balance between operational independence of that body, because it’s a specialist body, and the desire sometimes of ministers and of Government to intervene and do things. And I think on Sparrow that was a particularly difficult one because you had some very difficult stories, it was in the news a lot –
Mr Beer: Sorry, what do you mean you had some very difficult stories?
Richard Callard: Oh, sorry, well, the position of subpostmasters as articulated by the story, you know, the – their experiences that were in the news, were obviously very distressing and there’s a natural inclination, I think, of Government and particularly of ministers to want to do something. But on the flipside, there is a business there which is operationally – maybe operationally independent but also specialist, it is – it’s business. And the – trying to think about what ministers or what civil servants like me could actually do, given it was quite a sort of technical topic, it’s quite a difficult balance.
And, I think, throughout my time, it was a constant balance between trying to keep at arm’s length and – from it because, realistically, there was not much that I didn’t think there was much that the ministers could realistically do, whilst at the same time trying to make sure that the Post Office are doing the right thing and understanding what’s going on at their end. And I just found that quite a difficult balance, I think in part because we never quite – you know, sadly, and I regret it – we never quite got to the bottom of whether there was a – where the problem was.
There were lots of investigations and each time there was an investigation, it came back that there wasn’t really an issue and there were investigations throughout my time, there’s the Mediation Scheme, there was the Parker Review and then the litigation. And throughout that, particularly to the litigation, we weren’t really getting any particular news that there was a particularly identifiable issue with Horizon which caused losses to subpostmasters and, without that link, it’s very difficult to then do something.
Mr Beer: Do you think, Mr Callard, that’s a result of not looking hard enough because now you’ve looked at some of the papers themselves, ie you’ve looked at all of the Second Sight Reports, you’ve looked at the Parker Review itself –
Richard Callard: Yeah.
Mr Beer: – rather than a letter summarising it –
Richard Callard: Yeah, yeah.
Mr Beer: – you’ve looked in detail at the Deloitte reports –
Richard Callard: Yeah.
Mr Beer: – rather than summaries of them –
Richard Callard: Yeah.
Mr Beer: – and you’ve discovered a whole host of information that puts an entirely different complexion on things?
Richard Callard: Yes, it does. So, clearly, I was not curious enough. I think that’s probably self-evident but, as I said, there was always some form of investigation going on, there’d been 18 months’ of investigation before I got there, and I think that the problem I’d sort of had in some respects was that – and you can see this in some of the papers by the time we get to December ‘14/early ‘15, and that represents what, about two years’ worth of investigation, what we’re getting back is that there isn’t an issue with the IT, and so you get to the point, well, every time we do review it says there isn’t something there and you’re almost in the zone of trying to prove a negative, that there isn’t a problem and I never thought that was ever going to be very easy to get to, which is why I thought we always need to – it needs to go to court because –
Mr Beer: That view might be said to be fatalistic.
Richard Callard: Quite possibly but I mean –
Mr Beer: Does that fairly represent –
Richard Callard: I’m not sure what you mean by fatalistic, in that sense, sorry?
Mr Beer: Ie this needs to be litigated by the parties and a truly independent view taken by a member of the judiciary?
Richard Callard: Well, it wasn’t that it needed a truly independent view because I thought we’d had – we were getting independent views through from the likes of Second Sight and I’m sure we’ll probably come on to their reports in due course. It was more about how do you – my thoughts about going to court was more about how do you draw a line under it because when you’ve got a very committed set of people in the form of the JFSA, who are certain that there is a problem, and yet the investigations done by Post Office, Second Sight and others, and including things around like the Cartwright King review, et cetera, are saying there isn’t a problem, you know, you’ll never be able to meet in the middle.
So the court – my views about the court were less about there being independent scrutiny; it was more about, if the court says – you know, says what it says, then there’s nowhere else for either party to go, it kind of arbitrates, and I always felt that I couldn’t really arbitrate in my position.
Mr Beer: Can I ask you to slow down a little bit in your answers, even though they’re very long, the shorthand writer is struggling to take down each of the words that you say.
Richard Callard: Okay.
Mr Beer: Do you consider, standing back, that you showed undue deference to what Post Office was telling you?
Richard Callard: I think on reflection, I think you probably do have to draw that conclusion. I would say, though, that the stuff that we got, the – the information that we got through from Post Office was often quite comprehensive and full and analytical. So when I look at things like the response to the Panorama programme, the response to the debates, that they put out in public as well, the response to the Second Sight Part Two report, the slide shows – the 30-page slide show they prepared for Baroness Neville-Rolfe, for example – it was always quite comprehensive and analytical and I thought well thought through.
So I may have shown too much deference but what I perceived at the time was quite comprehensive answers coming my way. It wasn’t a sort of one-line brush-off.
Mr Beer: You said earlier that you think that you, looking back, are guilty of a lack of curiosity.
Richard Callard: Well, yes, I think – it’s self-evident there was a lack of curiosity because, obviously, there was a problem and I didn’t get to it. So I accept that. But I think that there were times where, you know, I – I think we were curious, clearly not curious enough but, as I say, we were getting a lot of information from Post Office, and it was pretty comprehensive and analytical and looked well thought through.
So you draw a degree of assurance from that.
Mr Beer: Can I take you to some documents that may help us to understand the relationship between you and Post Office in the provision of information to outside sources. Can we start, please, by looking at POL00100581. Thank you. If we look at the bottom of page 1, please, we’ll see an email from Peter Batten to Belinda Crowe, copied to you. Peter Batten was a member of the Shareholder Executive; is that right?
Richard Callard: Right.
Mr Beer: Was he somebody who reported to you?
Richard Callard: Yes.
Mr Beer: He emails you and Belinda Crowe on 23 April 2014 and says:
“Hi Belinda
“Many thanks for your time. Please see attached two draft letters, one that we are proposing to send to Alan Bates, and one to Sir Anthony Hooper (on the assumption that the JFSA is unable to provide a reason for us not to forward the letter).
“We’ve included the final paragraph on the letter to Sir Anthony as a means of giving Jenny a future hook into the process (for example in the event that she feels she needs to intervene). I would be grateful for your views on the benefits of including this hook, versus the risks of perceived in infringement on Sir Anthony’s independence.”
If we go to the top of the page, we can see that Ms Crowe of the Post Office replies:
“Grateful if we could have a word about handling. (I have also left you a message).
“Having had a good opportunity to look at the letter I think that it contains some very significant points which have to be addressed by both Post Office and the Chair of the Working Group.”
Just on a point of process or understanding how ShEx worked, is it right that it will be normal that ShEx would run drafts of letters that it proposed to send out through the Post Office?
Richard Callard: Not always, no. So it depends on the – very much depends on the context.
Mr Beer: So, looking at this exchange, why was ShEx saying “Is it okay, essentially, if we say what we want to say”?
Richard Callard: Because – so we’d received a letter from Sir Alan Bates, I think, on 16 April. Going back to my point in my witness statement about feeling the points of tension between intervening or not intervening, we were very aware that the Mediation Scheme was independent, we understood Sir Anthony Hooper to protect his independence very closely. So I think Sir Alan Bates’ letter was, I think, encouraging us to intervene. We didn’t want intervene because we felt the Mediation Scheme should play out and we wanted to tell Sir Anthony Hooper.
The reason why we ask Belinda is because she was administering and leading the Working Group’s operation, and knew, I think, knew Anthony Hooper best, so we wanted her view as to how he would perceive the letter and how best to handle it with him.
Mr Beer: Did you ever do things the other way round, ie write a draft letter to Sir Alan or to Sir Anthony or any of the subpostmasters and say, “We’re proposing to say this to the Post Office, is it okay if we say it”?
Richard Callard: No.
Mr Beer: So the Post Office were the source of your information and vetted your letters?
Richard Callard: No. They didn’t vet the letters. I think we were very sensitive about the Mediation Scheme because this is, what –
Mr Beer: April.
Richard Callard: – April ‘14. You know it’s starting – well, it’s definitely started to unwind in the sense that we’ve got this letter from Sir Alan Bates. But it feels to us the only way to really, still, to resolve a lot of the concerns, and everybody had agreed, I think – this is before my time – the Government would just stay out of the Mediation Scheme to the extent possible. So we saw Belinda as a sort of route to test how the Working Group, in particular Sir Anthony Hooper, would want to deal with the situation.
Mr Beer: Thank you can we look at some other examples, UKGI00002467. Look at the foot of the page, which is the start of the chain. Melanie Corfield sending within the Post Office a letter, a Sparrow letter, to Mark Davies. Then scrolling up, 9 September, Mark Davies sending that letter to you:
“Here you go. Let me know what else you need (indeed, does this do enough for you)?”
Then scroll up a little. You say:
“Sorry, is there also an example of the inaccuracies etc I could use to illustrate the issue?
“Cheers, and sigh …”
He replies:
“Report claims power loss can lead to data loss and thus real loss for [subpostmaster]. Strongly refute that.”
Richard Callard: Yeah.
Mr Beer: So is the context here that – in fact, you tell us the context?
Richard Callard: So I think the context is that the Second Sight – the first draft of the Second Sight Part Two review is out, and I think we were providing advice to Jo Swinson. I think – well, we asked Post Office – I’m not sure whether we’d asked Post Office to provide a letter to Jo Swinson or whether they’d volunteered one. They would share a draft with me, essentially to check whether it’s intelligible and the like, and I think it said at the top of the letter, you know, there are various inaccuracies in the letter – sorry.
The letter was saying that there was inaccuracies in Second Sight’s Report and I thought “Well, if I just – I need to have an answer as to what – an example of what those are because Jo Swinson will ask, so can you give me an example to substantiate what you’re saying, please, Mark?”
Mr Beer: So why would you go to the Head of Media and Communications for this issue?
Richard Callard: Well, because that team would write the letter because it comes from Melanie Corfield, who was his – one of his team, and say –
Mr Beer: So this is about a draft letter from –
Richard Callard: From –
Mr Beer: – from Post Office to the Minister –
Richard Callard: To the minister, I think, yeah –
Mr Beer: – and you’re intervening and saying it needs beefing up?
Richard Callard: Well, they’re writing to us to say “This is what we’re going to send”, and they would often do that and we would often ask to do that because I think, sometimes, going back to my role as interpreter, sometimes what they thought was clear wouldn’t necessarily be clear to Government. So they sort of sent it through – it was customary for them to send something like that to us, not always, to get my view on it and I – you know, where I’m saying there, you know, “Your letter is not clear enough can you give an example, so that when Jo inevitably asks me ‘What does Post Office mean by inaccuracies in the report’, I can say ‘Well, what they mean is this’”.
So it’s trying to pre-empt the question, as it were, that I know I’m going to get from ministers because their letter isn’t sufficiently clear.
Mr Beer: So are you here performing the role of a Post Office NED –
Richard Callard: No.
Mr Beer: – in seeking to –
Richard Callard: No.
Mr Beer: – put the company’s best case to the Minister?
Richard Callard: No, I’d say this is – I mean, clearly there’s a Venn diagram of it but I’d say I’m a Shareholder Team here, looking at what sort of communications the Post Office is sending to the Minister and sort of giving them a few hints and tips that it might be beneficial if they could make it a bit clearer before it goes or I think probably what’s going on here is that they’ve either possibly sent it already and I’m trying to get ready to anticipate the questions I’m inevitably going to get from the Minister.
Mr Beer: Can we move forwards, please, to December UKGI00002726. This is an email from you to Belinda Crowe and Patrick Bourke forwarding a draft speech, I think, of the minister –
Richard Callard: Yeah.
Mr Beer: – in readiness for the WHD, the Westminster Hall Debate –
Richard Callard: Yeah.
Mr Beer: – that I think was to take place on 17 December 2014. You say:
“… thanks for your respective emails. I will take a look and amend Jo’s speech accordingly but given that I’m about to get in a car for a couple of hours to drive back home I thought this might be expedient to get this off to you now to do a sweep of things we shouldn’t say. I hope I haven’t gone too far – the problems is that ideally we wouldn’t be having these debate, but as we are Jo has to be able to say something reasonably concrete in response to the accusations.
“Thanks to both of you for your help …”
So you’re asking them to vet the Minister’s speech it, is that right, “to do a sweep of things we shouldn’t say”?
Richard Callard: Yes. The context, I would say there, is that (a) when it comes to Parliamentary debates, there was always very close – a close relationship between Post Office and the ShEx Shareholder Team because the Post Office is at the operational forefront. So to give a non-Sparrow example, you know, a constituency matter around a closure proposal – excuse me, sorry.
A debate around a closure of a particular constituency, Post Office, or redundancies in the supply chain or industrial action, that kind of thing, Post Office can’t speak to Parliament, it has to be the Minister. We would therefore verify things and share information and get information from the Post Office to be able to facilitate that debate and I think what I’m saying there is “Here’s the speech, is there anything in there that we are saying that is sort of either factually wrong”, or whatever. So it wasn’t be unusual –
Mr Beer: So would you routinely seek advice or input from the Post Office on letters to be sent by ShEx?
Richard Callard: Well, this is – this could – this is about the speech?
Mr Beer: I’m talking about –
Richard Callard: Letters –
Mr Beer: – looking at the run of things –
Richard Callard: Oh, I see so not necessarily. No. Most of the time our letters wouldn’t be run past Post Office, although that said, we would have standard stock responses for things like a Post Office closure –
Mr Beer: Okay, I’m going to have to try and –
Richard Callard: Speed me up?
Mr Beer: No, definitely not speed you up!
Richard Callard: Sorry.
Mr Beer: Ask you to try to constrain your answers –
Richard Callard: Okay.
Mr Beer: – more directly to the questions I’m asking.
Richard Callard: I’m just – sorry, yeah, fair enough. I’m just saying it’s not unusual, it was standard practice to share some things with Post Office. Usually, they were standard texts which we wouldn’t have to share with Post Office because we already had a shared agreement as to what we were saying.
Mr Beer: On debates?
Richard Callard: On debates we would usually share that sort of text and indeed they would come in and talk to the Minister about the debate. It was very close because they’re at the forefront of the operational side of things, which is, generally speaking, what the debates are concerned with.
Mr Beer: What steps did you take, if any, to verify the lines given to you by Post Office?
Richard Callard: I think it depends on the line. So we wouldn’t just – if they made a change, we wouldn’t just accept it. The lines and the speech would be our speech but we’re checking what their – whether they’ve got any views on it.
Mr Beer: How would you seek to verify the lines that the Post Office was giving to the Minister to take either in his speech or in correspondence?
Richard Callard: Well, we wouldn’t always verify it because it depends on what it was. If –
Mr Beer: On the occasions on which you did seek to verify it, how would you go about that?
Richard Callard: I don’t know, to be honest. I suppose a lot of it would be just probing and asking a sort of second level or third level question, in response to what they’ve said, to sort of try and understand the response. I mean, there would be rarely sort of backing documentation to this sort of stuff. It would be a view where you’d be asking “Are you sure? You say this but how about that?”
Mr Beer: Can we move forward, please, to January 2015 and look at UKGI00002996. If we scroll to the bottom of the page, please. An email from you to the “Swinson MPST”, is that a generic email address for Jo Swinson’s office?
Richard Callard: That’s her office.
Mr Beer: Private office, is it?
Richard Callard: Yes, it goes to four or five people who are in her office.
Mr Beer: You say “Alysa”, who presumably is someone in her private office; is that right?
“… further to my updates on the Horizon scheme, note it looks as if BISCom are inviting [subpostmasters] and [Post Office] to sessions on 3 February. I suggest that Jo stays clear of this if she can given that this is an independent scheme, but I suppose she might inevitably be drawn in.
“I haven’t talked to [Post Office] about this yet so will keep you posted. I would be grateful if you could provide us with Jo’s views following my email of yesterday as clearly this may have handling implications for [Post Office], although instinctively it feels that the more conciliatory we are on this, the more the JFSA get to try and widen the scope of the scheme to find a smoking gun which does not exist.”
Then you forward this up to the page to Laura Thompson, what role did she perform?
Richard Callard: She had just joined the team.
Mr Beer: The ShEx team?
Richard Callard: Yes, taking over from Peter Batten, who was the prior person looking after Horizon for me.
Mr Beer: Saying that she:
“Better get up to speed on Horizon!!! So far we have not been sucked in, but it’s probably only a matter of time.”
Is that how you viewed matters at the time?
Richard Callard: Well, you could feel the pressure building. We’d spent a year trying not to – to keep this as an operational matter for Post Office and the pressure was building that we might be required to intervene.
Mr Beer: What do you mean by the suggestion that the JFSA were trying to find a smoking gun which does not exist?
Richard Callard: By that time, a lot of the mediation investigations had been done. We hadn’t heard of any specific problem with Horizon that caused losses to subpostmasters, and there was a – there was a– Second Sight were expanding their scope of work, and I thought that might be because they hadn’t found the issues they were expecting to find with the Horizon scheme and therefore they’d be widening their scope because they hadn’t found the smoking gun, which is the bug that creates the losses.
Mr Beer: The words that you use appear to suggest, would you agree, that you had formed the view that there would be no smoking gun found in relation to problems with Horizon system?
Richard Callard: I think by that time I probably had. At least on the balance of – strongly on the balance of probabilities that that is the – that’s the view I’d taken.
Mr Beer: Did that mindset pervade your thinking and affect your actions –
Richard Callard: I think –
Mr Beer: – not only has one not been found, one will not be found?
Richard Callard: Yeah, because over the – I think that’s probably right. Over the course of time, the longer – you know, another year had gone by of investigations. In particular, investigations of people’s cases that had said there is a problem, been looked at by Post Office, looked at by Second Sight, we hadn’t heard of a particular bug causing the loss. So my emerging conclusion was, yes, there isn’t an issue and it did colour my view, going forward from around that point.
Mr Beer: Why were you so sure that the smoking gun did not, in fact, exist?
Richard Callard: Well, as I say, there’d been, I think, by that point almost two and a half years of investigation, including by Second Sight, and they hadn’t found – and they’d looked at –
Mr Beer: “Including by Second Sight”, who had been the other investigation?
Richard Callard: Well, by Post Office, so Post Office had looked, and –
Mr Beer: How had they looked?
Richard Callard: Well, sorry?
Mr Beer: What investigation had they conducted?
Richard Callard: Oh, well, so as part of the Mediation Scheme, Post Office had a team of 20 people that would be looking at the each individual case. That case was referred to Second Sight to also investigate. So you’d had two sets of investigations with the first –
Mr Beer: Is that how you viewed it? There were two investigations going on here?
Richard Callard: Yeah, that’s how I viewed it. There were two investigations going on, one of which is independent, the latter one, Second Sight. I, you know, trusted the first one, the investigations done by Post Office and –
Mr Beer: Why were you so credulous when it came to reassurances from Post Office and yet so disbelieving of what the subpostmasters and the MPs were telling you?
Richard Callard: Because I suppose it’s from the point of view that I was looking for a bug in the Horizon system that created losses, with a direct link, I thought that’s what everybody was looking for, rightly or wrongly. That’s what I was sort of looking for.
Mr Beer: Just stop there. Why were you looking for that?
Richard Callard: Right, because that’s what I thought the case was about, that there were – and it’s often even said now in the media today, there are bugs in Horizon. I thought we were looking for bugs in Horizon that, therefore – that were unknown to Post Office and that they were causing losses to the subpostmasters. I was looking for a causation of – finding an unknown bug that hadn’t been previously known about that caused the loss at the subpostmaster end.
And, by this stage here, in February ‘15, as I – I’d understood that that sort of investigation had been going on in one form or another for two and a bit years if not two and a half. So over that time, that’s what gave me – I won’t say confidence but it gave me the feeling that there wasn’t a smoking gun knocking around and that’s why, rather than the JFSA widening the scope, that’s why I felt that Second Sight really were seeking to widen the scope because they hadn’t found any particular problems with the individual cases where they were saying there was an issue.
Mr Beer: Can we turn to the issue of obtaining information from the Post Office and look at UKGI00002292, an email from you to Peter Batten of 1 May 2014.
Richard Callard: Yeah.
Mr Beer: If we just scroll down a little bit, thank you. In the last paragraph – I’m going to skip over the substance if I may – you say:
“… I hope I haven’t crossed a line by saying Tim mentioned you were worried that I apportioned some blame to the team for the press notice stuff.”
So I think this part is about a press notice. I’m not sure exactly what it’s about. You continue:
“I just want to be clear that I don’t at all – it has however taught me a lesson that I need to push harder on [Post Office] to get things done, I have been too reliant on their promises to deliver, which has been an error on my part. We do however need to be realistic as well – our view and their view will often be different …”
Richard Callard: Yeah.
Mr Beer: “[And we’re going to have to] pick our battles.”
Richard Callard: Yeah.
Mr Beer: What’s the context of this; can you remember?
Richard Callard: I honestly can’t remember. I think it’s something to do with number 1 about – because it’s a press notice: Mark Davies and I think Becky Barrow was a journalist of some description. But I honestly can’t remember the –
Mr Beer: You said that you had been too reliant on Post Office’s promises to deliver.
Richard Callard: Yeah.
Mr Beer: Other than in this context, was that a theme of your work over the four years that we’re looking at?
Richard Callard: Um –
Mr Beer: Did you feel that you were over-reliant on them?
Richard Callard: That I was overreliant? Well, I was reliant on them, I don’t think I was overreliant on them. I mean, it depended on what the issue was. But in terms of comms, which I think this is about, it’s about relying on them to do it in a way that we felt appropriate, I think. I can’t really remember, I’m afraid.
Mr Beer: Can we turn to POL00158108, please, and look at page 3, please. Scroll down. Keep going.
Yes, we can see this is signed off by Neil Hayward –
Richard Callard: Yes.
Mr Beer: – Group People Director. Do you remember the function that he performed?
Richard Callard: Yes, he was People Director, like HR Director.
Mr Beer: If we go up, please, and keep going. Thank you. Just a little bit further. I think we can see from the reply here that I think Mr Hayward’s email went to, amongst others, Paula Vennells?
Richard Callard: Yes.
Mr Beer: Okay, if we scroll back down to the beginning part of his email. So February ‘14:
“[For your information] – I recently met with Richard [that’s you] during his induction and mine to the Post Office.
“He provided me with some insight on the things that interest him … I thought I should share what I learnt …”
Scroll down, please:
“The Post Office is hugely politically important. Whilst it is probably the third biggest of the [around] 20 or so businesses being managed through Shareholder Executive, it carries the highest profile. Everything that we do has the potential to create issues for ministers. This is partly why he/they will always ask us detailed questions. He also explained that [the] Treasury applies pressure to ensure that the investment in the Post Office is doing what we/they said it would do.”
Would that record of what you were said to have said be accurate –
Richard Callard: I can’t really remember but –
Mr Beer: – ie the content?
Richard Callard: Yeah, that’s probably something I might well have said.
Mr Beer: If we scroll up to page 1, please. Ms Vennells’ reply:
“… see the note below.”
She’s forwarding this to Alice Perkins. Scroll down to the direct reply, she says:
“Richard [that’s you] asks the right questions.”
Then in the next paragraph:
“Richard has the job of making sure the Government gets a return … We are in the delivery phase and (within BIS) he is accountable. We need to make him comfortable and confident that we will deliver what we set out to.”
Then scroll on a little bit, please, three paragraphs from the bottom there:
“Richard’s scope has not yet picked up Sparrow or Business Transformation. It will as he is attending next week’s Board meeting. But as this is the case, I suggest we leave them off the ShEx review agenda as he will be well briefed by then.”
So looking at this exchange generally then, at the time that you joined Post Office as a NED and took over as the lead on the ShEx team, was it the case that Post Office carried the highest profile amongst all of the businesses managed by ShEx?
Richard Callard: I think so, yes.
Mr Beer: How did the political importance of the Post Office impact on the nature and extent of ShEx’s and ministerial interest in Post Office?
Richard Callard: Sorry, can you explain the question? Sorry.
Mr Beer: Yes. How did the political importance of the Post Office, which is explained or described in this exchange here, impact on the nature and extent of ShEx’s involvement in or oversight of Post Office? Did make it different from any of the other 19 businesses?
Richard Callard: No, it’s not a question of degree but there was always interest, politically, both from ministers but because of interest in Parliament and the media around what Post Office was doing, whether it be its Network Transformation, whether it be putting Crown Offices into WHSmith. Anything and everything always seemed to create a lot of media attention and Parliamentary attention, which just meant there was a lot of scrutiny.
Mr Beer: Mr Hayward said that you wanted to get underneath the surface a bit, you’ll remember, in that email?
Richard Callard: Mm-hm.
Mr Beer: What did you do to get under the surface a bit –
Richard Callard: Well –
Mr Beer: – in practical terms?
Richard Callard: In practical – well, we were on the phone to Post Office and emailing Post Office practically every day about every different, you know, overwhelming number of issues. So anything from tearing apart their funding plan to understanding the latest they were having with a particular issue. So it was a constant stream of areas that we would discuss with them, from industrial relations to closing the pension scheme, to particular constituency – sorry, particular Post Office closures or changes.
There were very – there was a mix of very macro and micro issues constantly coming our way that we were interested in and we would go and ask them questions, we would go and visit them, we would get on the phone, we would send them emails and we would try and get satisfied with what they are telling us.
Mr Beer: Was there a document which told businesses which ShEx managed and oversaw what Government expects of it?
Richard Callard: I’m not sure there was. I mean, there are framework agreements and articles of association and those sorts of constitutional structures, and there are Chairman’s letters or letters to the Chair and those sorts of things. So it depends on the company.
Mr Beer: Could we look, please, at UKGI00044314. This is part of the ShEx handbook; do you remember that?
Richard Callard: Only vaguely. I remember it being written when I arrived in 2007.
Mr Beer: Was it not a document which, being a handbook and everything, that people might have recourse to?
Richard Callard: Not particularly, no. I don’t recall it really being – out of the first few months of it being in existence, it didn’t really get, from memory, really get rolled out. I mean, when I saw it, I was like “Oh, I remember what that was”, but I don’t recall it particularly being rolled out as something that everybody had as a handbook.
Mr Beer: Was it, even when limitedly rolled out, something which businesses which ShEx managed were directed to or given a copy of?
Richard Callard: I don’t think so. I think it was internal but I don’t know for sure. I mean, it may well have been at the time.
Mr Beer: Can we look at page 3 please. This is in the section of “Corporate Governance”. If we scroll down, please. Just go back to page 2, please, and then page 3., and scroll down, and over the page. Thank you.
The heading, “What Government expects of its businesses”.
Richard Callard: Yes.
Mr Beer: In order for this to be effective, presumably the business would have had to have been given this?
Richard Callard: I can see why you’d say that. I’m not sure if it ever was and I think that would be more around the idea that the Shareholder Team would – this is what the Shareholder Team should expect of its business in –
Mr Beer: But you don’t tell the business about it?
Richard Callard: But I don’t think you tell the business about it, no.
Mr Beer: That seems slightly odd, if I may say so, Mr Callard?
Richard Callard: Yes, but I think you’re placing reliance on a single internal document that was done in 2007, which by 2014 things had moved on. I mean –
Mr Beer: Was this updated then?
Richard Callard: I don’t know, I don’t think it was. For example, it doesn’t mention – and it’s on page 2, it doesn’t mention having a Shareholder NED because time had moved on. So I think this – I don’t know what happened to it, to be honest.
Mr Beer: I’ve been looking for a document that emanated from Government that would be passed to a business, telling the business what it, Government, expected of it –
Richard Callard: Yeah.
Mr Beer: – in terms of general principles –
Richard Callard: Yes.
Mr Beer: – of governance, and this is the closest I’ve been able to find. You say that this would have been an internal document, even though it set out expectations of businesses managed by ShEx and may not have been passed to them?
Richard Callard: Well, I can’t remember what happened to that document. Clearly, times have moved on but I think the stuff there, looking at it, is stuff that you would expect a business that you are the shareholder of to be doing anyway.
Mr Beer: So:
“Businesses” –
Richard Callard: Should be open – honest, open – sorry.
Mr Beer: – “should seek – an honest, open and ongoing dialogue with the Government as shareholder. They should clearly communicate the plans they are pursuing and the likely financial and wider consequences of those plans.”
Principle 1.
“Principle 2. Businesses should operate a ‘no surprises’ policy ensuring that the Government as shareholder is informed well in advance of anything potentially contentious in the public arena.”
Richard Callard: Yeah.
Mr Beer: Then:
“Principle 8. Businesses should have and continue to develop coherent strategies for each business unit. The approach to reviewing strategy should be a dialogue between the Board and the shareholder.”
Richard Callard: Yes.
Mr Beer: You say that these are essentially – have I got you right – so obvious that a business ought need to be told about them? (sic)
Richard Callard: Yes, I guess so. I mean, I don’t – you know, I was – at this time, when this came out, I was an assistant director. So I don’t know quite what happened and why this sort of phased away and I’ve no idea what happened to Principles 3, 4, et cetera. But yes, I think you’d expect, and we would expect as a shareholder team, business to – businesses to operate that. That’s kind of the culture that we would expect a business would have and that we would operate, and then – on the understanding of.
Mr Beer: So when you joined in 2014, were you aware of any of the following: that the Post Office had known about a whole series of bugs, errors and defects in Horizon that had existed right from its inception since 2000?
Richard Callard: No.
Mr Beer: That that included the Falkirk bug from 2006?
Richard Callard: I think what I understood was the Second Sight advice, which had two bugs, mentioned two bugs –
Mr Beer: One of which was Falkirk –
Richard Callard: Right, okay.
Mr Beer: – is that right?
Richard Callard: I can’t remember, I’m afraid. So I knew that there was – the position I understood, as I came into the role, was that there was no systemic failures, given there’s probably a discussion about what that really means, and then there were two known bugs. But my understanding was that those – that the losses caused by those bugs had been corrected by Post Office and the subpostmasters didn’t lose out. So that was my understanding of the extent of bugs.
Mr Beer: Were you ever told that it, the Post Office, was in possession of expert reports as a result of civil litigation that it had engaged in, in 2004 and 2006, which challenged the proposition that Horizon was robust?
Richard Callard: No.
Mr Beer: Were you ever told about the previous acquittals of subpostmasters, each of whom had raised the defective operation of Horizon as part of their defence. The names included: Suzanne Palmer, Maureen McKelvey and Nichola Arch?
Richard Callard: No.
Mr Beer: Would you expect to be briefed about that kind of thing?
Richard Callard: Yes.
Mr Beer: By whom?
Richard Callard: Anybody that was talking to me about Sparrow.
Mr Beer: I mean, they were issues that were relevant to – or they were matters that were relevant to issues in the Group Litigation –
Richard Callard: Right.
Mr Beer: – would you agree?
Richard Callard: Well, yes, they’re certainly relevant.
Mr Beer: Whether Horizon was robust and whether subpostmasters had been liable under their contracts for alleged shortfalls. To whom do you attribute responsibility for the Government not being informed of such matters?
Richard Callard: That’s hard to say because those matters are quite historical. So I don’t know who would be – whether it would be the Legal Team that should have that on file and should tell people about it.
Mr Beer: Was ShEx ever made aware of the Simon Clarke Advice in relation to the credibility of the Post Office’s main expert witness, Gareth Jenkins?
Richard Callard: No, the first time I learnt about the Clarke Advice was in the sort of fallout of the GLO, I think.
Mr Beer: Sorry, you learnt about I in the context of the GLO?
Richard Callard: Yes, when it got raised in the GLO, that there was advice – the Clarke Advice, that was –
Mr Beer: Can you tell us a bit more about that?
Richard Callard: Oh, well, it was just – I think –
Mr Beer: Because, as far as we know, the outward-facing disclosure of the Clarke Advice didn’t occur until November 2020, in the context of the criminal appeals?
Richard Callard: Okay, so maybe when I say GLO, I mean the legal cases that happened after me. Sorry, I don’t mean specifically – well, I – I don’t understand the nuances between the different cases but, as part of the findings against Post Office, I heard about the Clarke Advice, but that’s the first time I’d heard about it.
Mr Beer: You’ve seen it now?
Richard Callard: It was in my bundle.
Mr Beer: Yes. Is that the kind of, in the light of the questions that you were asking and the things that the Post Office was saying publicly, is that the kind of document that you would have expected to have been provided with or the contents summarised to you?
Richard Callard: Yes, and I would expect the Board to have been provided – before I got there, the Board to have been provided with it immediately, given the Board then was looking at prosecutions and the safety thereof.
Mr Beer: Of course, the duties set out here, or the expectations set out here, cut both ways, don’t they? There was a duty on ShEx to exercise a degree of professional curiosity and scrutiny; is that right?
Richard Callard: Yes.
Mr Beer: You said that you accept personally that, on reflection, you were insufficiently curious?
Richard Callard: Yes, I think that’s self-evident because I didn’t get to the bottom of it.
Mr Beer: Is that the basis on which you say you were insufficiently curious, ie that, in fact, there were things that you did not discover, or is it a more nuanced reflection on what you, in fact, did or didn’t do?
Richard Callard: Well, I think that it’s – it’s probably both. I mean, clearly I’m one part of this but I – it’s difficult to know what to ask, if you don’t know about it. So you can’t go and ask “Well, is there any evidence that you’ve got that prosecutions aren’t safe?”, when it’s been present to Board before you’ve got there that prosecutions are safe and that was set out by an independent firm and a KC.
You take – you have to take assurance from the independent advice that’s been given to a Board before you get there.
Mr Beer: When you were first appointed as Shareholder NED, what was your understanding of Post Office’s investigatory and prosecutorial functions?
Richard Callard: There’d been quite a comprehensive discussion in the February Board about the new Prosecution Policy and that paper contained a reasonable amount of detail about the history, in addition to the forward look about the new policy. So I was aware quite early on that Post Office bought prosecutions, I don’t think I understood the nuances of that, of being prosecutor, victim, investigator.
Mr Beer: In your witness statement you say – and for the note it’s paragraphs 273 and 329 – that you understood that there had been a review in 2013 by Cartwright King and Brian Altman QC which had been reassuring, and:
“The comfort I took from what I understood to be a thorough review by Cartwright King and Brian Altman QC was clearly misplaced. I had never heard directly from any of the affected subpostmasters on the issue of past prosecutions.”
You say that you and the Board were not provided with a copy of Mr Clarke’s Advice of 15 July 2013.
At the time that you were told about the Cartwright King review, did you understand that, to an extent, it was marking its own homework, ie reviewing prosecutions which it itself had brought?
Richard Callard: I don’t think that occurred to me. I mean, I learnt of it in the first Board that I observed – I wasn’t a member and I was still getting to grips of all of the things of Post Office. I wouldn’t have thought too deeply about that paper.
Mr Beer: So is the comfort that you took, hearing the words that a firm of solicitors and a QC have undertaken a review, and the outcome of it was reassuring –
Richard Callard: Well, I –
Mr Beer: – is that as far as it went?
Richard Callard: Well, I took comfort from the Board. I mean, the Board that I’d joined had had that advice, was broadly comfortable with it and whenever – you know, the focus of the Board thereafter tended to be around the Mediation Scheme, not past prosecutions. So I didn’t just take comfort from the paper that I read; I took comfort from the fact that the rest of the Board – it didn’t seem to be an issue that the rest of the Board were vexed about, so I took my lead from that.
Mr Beer: Did you ever receive any copies of legal advice that Post Office obtained during your time either as Shareholder NED or as ShEx?
Richard Callard: I can’t remember. I may have done but I can’t think of any instances.
Mr Beer: So you can’t recall any instances where you actually read the advice, rather than what Post Office said was in the advice?
Richard Callard: I can’t think of any instances. Not saying there weren’t any, but –
Mr Beer: Did you ever request any copies of the primary material itself, ie what the actual lawyer actually said?
Richard Callard: Well, I can’t think of an instance that – outside of the Sparrow situation – where there was legal advice. Hold on, sorry. Wait a minute. I may have seen some in relation to the procurement – reprocurement of Fujitsu. I guess the Linklaters advice of March ‘15 is legally privileged. I mean – so yes – so I will have seen some.
Mr Beer: Was there a prohibition, to your understanding, on Board members seeing the legal advice itself?
Richard Callard: Not that I understood but I’ve since seen evidence from others, such as Tim Parker, where that has happened. I didn’t understand there to be a prohibition.
Mr Beer: Was that ever the subject of discussion, ie Board members saying, “We actually want to see what is said by our legal adviser, rather than what somebody says the legal adviser has said”?
Richard Callard: I don’t recall that ever being discussed.
Mr Beer: Thank you.
Sir, it’s just after 11.05, I wonder whether we can take our first morning break until 11.20 past, please?
Sir Wyn Williams: Yes, of course.
Mr Beer: Thank you very much, sir.
(11.08 am)
(A short break)
(11.20 am)
Mr Beer: Good morning, sir, can you continue to see and hear us?
Sir Wyn Williams: Yes, thank you.
Mr Beer: Mr Callard, can you move right forward and aim both microphones at your mouth, please. I’ve been told that those listening online have sometimes encountered difficulty in hearing you.
Richard Callard: Right.
Mr Beer: Thank you. Is it right that one of the key roles of ShEx was to identify risks in relation to each of its assets?
Richard Callard: Yes.
Mr Beer: Is it right that ShEx maintained a monthly risk register?
Richard Callard: For each asset, yes.
Mr Beer: Is it right that the completion of that risk register on a monthly basis didn’t simply entail recording the business’s own assessment of risk but was in fact ShEx’s own assessment of the risk?
Richard Callard: That’s right.
Mr Beer: As the person who led the Post Office Shareholder Team, was it ultimately your responsibility to ensure that the risks were (a) properly recorded –
Richard Callard: Yes.
Mr Beer: – and (b) adequately assessed?
Richard Callard: Yes.
Mr Beer: Was it, therefore, your responsibility to ensure that you and your team had sufficient information in order properly to record and assess risk?
Richard Callard: Yes.
Mr Beer: Can we look at some examples across the years, please, starting with 2014, by looking at UKGI00002515.
This is the risk register for 13 February 2014. So, just for some context, that is seven or eight months after the publication of the Second Sight Interim Report and, as we now know, at a time when the Post Office was aware of problems connected with Mr Jenkins’ evidence in criminal prosecutions and at a time when advice was being sought externally from the likes of Cartwright King and Brian Altman KC.
Richard Callard: Could you just scroll down? I was looking at this last night, so –
Mr Beer: To which line?
Richard Callard: Well, where you are now. I’m not sure whether it – because the date should be in the top right-hand corner, where it says, “TBC”.
Mr Beer: If we go to title and guide, so bottom left.
Richard Callard: Yeah. It’s just the reason why I’m saying that is because the person that’s got the – one of the risks around the Post Office Card Account is Leonie Lambert, who joined the team at the end of 2014.
Mr Beer: So what’s the point that you’re making –
Richard Callard: Well, because you’re saying that it’s a February ‘14 and I’m saying it’s probably eight months beyond February ‘14.
Mr Beer: So –
Richard Callard: Or –
Mr Beer: – this is a document that UKGI sent us?
Richard Callard: Yes.
Mr Beer: It’s got on it, can you see, “Last updated 13 February 2014”. Can you see that? Third box down, “Last updated” –
Richard Callard: Yes, I can. Yes, I can.
Mr Beer: Are you saying that’s wrong?
Richard Callard: I’m not sure but I know there was a different person – if we’re dealing with February ‘14 there was a different person in charge of some of those risks at the time, so I’m not entirely sure of the date. So the risks though broadly are probably similar to what they were in February ‘14.
Mr Beer: So if we go back to risk register, thank you, and can you point to the person –
Richard Callard: So Government digital transformation, that was Leonie Lambert, and the Post Office Card Account, risk 6, Leonie Lambert. She joined the team, I think, towards the back end of 2014. It was, prior to that, Katrina Lidbetter that would have looked after those things, she was there as the Government Services person when I joined the team.
Mr Beer: So what does that mean for us then –
Richard Callard: Well –
Mr Beer: Hold on.
Richard Callard: Sorry.
Mr Beer: We shouldn’t rely on the dates on the UKGI risk registers as being true?
Richard Callard: To be honest, I don’t know, actually, what it means. All I was saying was, because you were putting it in the context of it’s February and it’s X number of months after Second Sight. I’m saying it’s not. I think it’s actually perhaps a little bit beyond that. So that’s all I’m saying. In case you –
Mr Beer: Yes, I mean, I’m not challenging you.
Richard Callard: Yes.
Mr Beer: I’m seeking to understand what reliance this Inquiry can place on UKGI’s documents. I mean, if we look, for example, at line 7, if we scroll down, there’s an entry there with – and the third part of column B – just one to the left if you put the cursor one to the left, that’s it – can you see it says “13 February 2014, terminated 1 October 2014”, which tends to support the point that you’re making.
Richard Callard: Yes, yes.
Mr Beer: So –
Richard Callard: I don’t know –
Mr Beer: – how should we treat these documents?
Richard Callard: Well, I don’t know. I can only imagine that 13/02 in each of those is the date that risk was created.
Mr Beer: Going back to “Title and guide”, page 1?
Richard Callard: Yes, I noticed. Yeah, I get that.
Mr Beer: That says, “Last updated”.
Richard Callard: I know.
Mr Beer: Because, obviously, the risks changed sometimes?
Richard Callard: Yes, no, I get that entirely but I’m just pointing out that what date that document comes from. I think “last updated” – I don’t recall us ever really updating the first page because the interesting bits are on the second page.
Mr Beer: So where it says, “Last updated”, you don’t recall that ever being updated?
Richard Callard: No, I don’t – in fact, I’m not sure whether they even come around with that “Title and Guide” page on any more. They just come around as the risk register.
Mr Beer: Just going back to the risk register, then, please?
Richard Callard: Sorry, if I’m causing some confusion.
Mr Beer: No, it’s not. It’s just the extent to which we can place reliance on the documents that are given to us. We shouldn’t treat this as a document which accurately records the risks as the ShEx saw them on 13 February 2014?
Richard Callard: Yes.
Mr Beer: Some of the text may have been inserted after that date?
Richard Callard: And the ratings may have moved around a bit.
Mr Beer: Given that this was done on a monthly basis, if we look for the March one, oughtn’t that to be the place to update it, rather than updating the February one?
Richard Callard: Well, I – this is probably the – you know, this is, I would imagine it has been updated in March and April and February and – until we get to October, and then this is the October view, as it turns out to be.
Mr Beer: I see.
Richard Callard: Yeah.
Mr Beer: So we should search through the document and look for the latest date that there’s an entry on it and we could say confidently that it has been amended at least at that time?
Richard Callard: I’ve seen plenty of risk registers that are in my bundle which have the top right date put on them and that’s what should have happened, I don’t know why it wasn’t – why it happened. I mean, these risk registers came in around about February, which is why all those entries are created then, I think. So people were still getting used to populating them and possibly didn’t populate the top right-hand …
Mr Beer: Was the purpose of the risk register to act as a tool to provide a snapshot of known risks, to provide a tool to ensure prompt oversight and discussion of risk management on an ongoing basis and then to provoke action as a result?
Richard Callard: Yes, it provided an opportunity for the team to think about risk and to communicate risk sort of into the centre of ShEx.
Mr Beer: Is that right, an opportunity to consider risk and to communicate what the risk was, rather than do anything about it?
Richard Callard: Well, inherently, we were doing stuff about all of these risks. I mean, we wouldn’t write risk down and then not deal with it (unclear) steps to deal with it.
Mr Beer: So the act of assessing and then recording the risk was a tool to ensure action was then taken?
Richard Callard: Yes, because what you would tend to do on these sorts of risk registers, the risk would stay the same. The mitigations would move around a little bit, but generally speaking the change would be in the far right-hand column of “Current status”, which is essentially saying this the latest and it would either set out what we’ve done or what is happening.
Mr Beer: Can we look at lines 55 to 57, please – thank you – and risk number 11, which is Project Sparrow. Mr Batten’s name underneath it, is that the lead on the risk or the owner of the risk?
Richard Callard: He’s the – essentially, the person leading the work on it so if there was ever a Sparrow issue I would turn to him and ask him to do the work, in the same way, if it was the Mail’s contract above, I’d ask Tim to do that.
Mr Beer: If we look under Sparrow, it’s quite difficult to read because the words “Page 2” are printed over the top of it, but just reading along all of lines 55 to 57, so the entirety of the risk numbered 11, there doesn’t appear to be anything that addresses that one of the risks that had arisen was that Post Office may have prosecuted individuals wrongly on the basis of data which lacked integrity, does there?
Richard Callard: No, that’s right. It doesn’t.
Mr Beer: If we look at the fourth column along, so – I’m sorry – the fourth one with writing in it, which I think is column K.
I’m so sorry, I mean column F. Thank you. That’s the one.
Can you see that the type of risk is recorded?
Richard Callard: Yes.
Mr Beer: It’s record as being a reputational risk, a finance risk and a people risk. It doesn’t record the existence of a legal risk. Do you know why that would be?
Richard Callard: I don’t. Is legal an option?
Mr Beer: I don’t know.
Richard Callard: Well, the dropdown box would tell you.
Mr Beer: Well, ought it to be an option?
Richard Callard: Well, if that was – I suppose so, yes.
Mr Beer: And –
Richard Callard: Although – sorry – the risk register would often be about the risk to ShEx, as much as the risk to the –
Mr Beer: Well, I was going to come to that question ultimately, in a moment –
Richard Callard: (Unclear)
Mr Beer: – but you might as well address it now as you’ve mentioned it. Which organisation did the risks recorded on this document relate to?
Richard Callard: The risks should relate to ShEx. What would often – and UKGI. What would often happen is that inherently the risk to the organisation would sort of creep in and it would get conflated because, if something at the organisation goes wrong then, essentially, ShEx has to deal with the fallout of that. So, in this case, it might have reputational risks for both Post Office but also for – largely for ShEx, in terms of having to deal with the issues that are involved with it.
Mr Beer: If you just look at the next column along, sort of G, H, I and J, which is the RAG rating boxes; can you see those?
Richard Callard: Yes.
Mr Beer: The probability of the risk eventuating, the impact of the risk if it does happen, and therefore the rating of the risk, can you see that this risk rating rates Project Sparrow overall as having a risk rating of 9, which I think is the lowest or one of the lowest risks identified in this document?
Richard Callard: I can see the – a 9, yes.
Mr Beer: Did that reflect the contemporaneous assessment of the risk to both ShEx and to the Post Office that Project Sparrow was low risk?
Richard Callard: I think that it reflects, yes, where we had got to in terms of our thoughts around the investigations that had happened by that point but it’s also put in – it’s relative to other risks which we perceive to be higher. So, for example, 10, above it, is perceived to be very high because there were existential threats perceived to Post Office in its relationship with Royal Mail, which it was – which it was very reliant on.
Mr Beer: I think what’s supposed to happen is each numbered risk is then meant to be translated into a box or a circle –
Richard Callard: Yeah.
Mr Beer: – that appears on the heatmap; is that right?
Richard Callard: I think at that stage we used to summarise the top six, so you’d only put the top six circles on.
Mr Beer: I was about to say: is that why Project Sparrow doesn’t even make it on to the heatmap?
Richard Callard: Yes, because there are six other risks perceived to be higher.
Mr Beer: So risk 11 doesn’t make it on to our heatmap at the top there?
Richard Callard: That’s correct.
Mr Beer: Would you agree there appears to be no mention, either in the text or otherwise, of the possibility that the Post Office may have prosecuted individuals and those prosecutions may have resulted in unsafe convictions?
Richard Callard: Yeah, well, on reflection, yes, that should have been –
Mr Beer: There’s no risk mentioned that Horizon might lack data integrity, which could undermine the functioning of the business, is there?
Richard Callard: No, and I think that that’s – well, I can speculate why that is but, no, I agree.
Mr Beer: In fact, Sparrow is perceived not to pose any legal risk to the Post Office or ShEx. Such risk as it does pose is reputational, financial and people. In column E, the risk recorded is reputational and brand risk due to a perception; is that how things were seen?
Richard Callard: Well, because it’s – the impact of risk, it’s talking about the risk of the Working Group failing.
Mr Beer: Do you think the things that I’ve mentioned counters omissions?
Richard Callard: On reflection, knowing what I know now, yes, I would agree.
Mr Beer: Do those omissions reflect a rather cursory and limited nature of the assessment of risk being undertaken?
Richard Callard: No, I disagree with that.
Mr Beer: The Post Office had focused significant attention on Horizon issues during the work of Second Sight, hadn’t it?
Richard Callard: It’s what, sorry? Say that again?
Mr Beer: The Post Office had focused significant attention –
Richard Callard: On the –
Mr Beer: – on Horizon, in the course of the work of Second Sight –
Richard Callard: That’s correct.
Mr Beer: – and, at this time, was still undergoing a review of past criminal convictions? As I’ve said, it had taken advice and was taking advice from Brian Altman and Cartwright King.
Richard Callard: I had understood that they were over by then, I think.
Mr Beer: I see. So do you think that’s why they’re not mentioned?
Richard Callard: So yes. So I think, on entering the business in around about February, from my perspective there has been a review by Second Sight with an Interim Report that says there’s no systemic failures in Horizon. Stemming from that, the business has responded with a business improvement programme, a review –
Mr Beer: Sorry, just stopping there, you framed the Second Sight Interim Report of 8 July as a report which said there are no systemic problems in Horizon –
Richard Callard: I did. I was –
Mr Beer: – is that how you saw it?
Richard Callard: I saw the – yes, the position that I felt that I inherited was that there had been a report which said there was no systemic failures within Horizon, but the business’s response to that, nevertheless, was to review the safety of prosecutions – Cartwright King – to set up a business improvement programme to deal with some of the issues around training, and also to set up a Mediation Scheme to investigate the individual cases that postmasters still had with Horizon.
But by, certainly this time, if this is around about October ‘14, you know, there had been quite a lot of investigation by Second Sight, and by Post Office, into the safety and integrity of Horizon, and therefore – and I – as I said before, I hadn’t seen any evidence that directly linked bugs – new bugs – any bugs in Horizon to losses that hadn’t been compensated for –
Mr Beer: I see. So the fact that the possibility that the Post Office may have wrongfully prosecuted individuals or that Horizon lacked data integrity, was such a remote possibility that it needn’t even be recorded on a risk register?
Richard Callard: I think that’s probably right. We felt that the bigger risk was the blue blobs that are there, plus, in terms of Project Sparrow specifically, we were looking to – for Post Office to sort this out via the Mediation Scheme and the Mediation Scheme was not going very well, and that felt to be the bigger risk. The other risks that you’ve just cited there were felt to have been – wrongly, as it turns out – were felt to have been dealt with, which is why they would be very low probability and so probably not on there.
Sir Wyn Williams: Sorry to interrupt but item 11 is the identification of a topic which might give rise to a risk, all right? Is that a fair way of starting that?
Richard Callard: Yeah, well – yes, so you identify a risk.
Sir Wyn Williams: Yes, so what, in terms of this risk register, do you understand Project Sparrow to be?
Richard Callard: I understand it to be the – essentially, the progress of the Mediation Scheme to bring resolution to both subpostmasters and Post Office in the remaining 136 – or not remaining, but the 136 cases where subpostmasters came forward and had an issue with the working of Horizon.
Sir Wyn Williams: Right. So if we understand Project Sparrow in the – what I’ll call for these purposes the narrow sense of the Mediation Scheme, to my way of thinking, at least, what follows kind of makes sense because you’re assessing the risks associated with that scheme. What’s lacking, I think, from this register, it might be argued, is any recognition of any kind of any other potential risk arising from the use of Horizon.
Richard Callard: Yes, and I would agree with you, and the reason for that is because we thought that, of the things we were seeing, either the risk was so small, you know, it didn’t really warrant a – either it wasn’t there or it didn’t warrant an entry because the probability of it occurring was below 1 out of 5. So if the –
Sir Wyn Williams: Effectively, you’re telling me that the wider risks which are being put to you by Mr Beer, in your mind or in ShEx’s mind, or UKGI’s mind, actually didn’t qualify as a risk sufficiently important to put on this register?
Richard Callard: I think that’s right, given what we knew at the time and the information we –
Sir Wyn Williams: Yes, I follow that’s your reason –
Richard Callard: Yes.
Sir Wyn Williams: – but I just wanted to understand in my head –
Richard Callard: Yeah, no, no –
Sir Wyn Williams: – just before – have I got it right?
Richard Callard: Yes, I think so. Yes. So we were very much focused on the Mediation Scheme and trying to get that to be successful and for Post Office to make sure it runs –
Mr Beer: Can we move forward, please, a year to February 2015, UKGI00003427. If we can just go to the “Guidance”, please, the “Guidance” tab.
Richard Callard: It’s different.
Mr Beer: Yes, it’s changed in nature. If we go back to the risk register?
Richard Callard: The top right-hand date is now correct.
Mr Beer: Yes, February ‘15, 28 February 2015. On this occasion shall we treat that as being a true date?
Richard Callard: Yeah, I think we probably should.
Mr Beer: So just to put this in context, 28 February ‘15, this was couple of weeks after Paula Vennells and Angela van den Bogerd had appeared before Parliament, the Select Committee, on 3 February 2015. I think also by this time, the relationship between Second Sight and Post Office had deteriorated still further; is that fair?
Richard Callard: Yes, that’s fair.
Mr Beer: If we go to – thank you, we’re there – 55 to 57, Project Sparrow described in the same way, “Owner has changed”. Should we understand, following the Chairman’s questions, the reference to Project Sparrow in the same way as you described it in relation to the previous spreadsheet, namely in the narrow sense of referring to the conduct of the work arising from Second Sight’s Interim Report and the operation of the Working Group?
Richard Callard: No, I think I’m – Sparrow, as you’ve seen me use today, became a sort of catch-all term for anything to do with Horizon. So I would imagine that might have – the term “Sparrow” might have widened out. It wasn’t specifically focused on the Mediation but that probably was our focus still at the time.
Mr Beer: Do we understand the identity of the risk differently, in the use of the words “Project Sparrow” on this spreadsheet?
Richard Callard: I think it’s an evolution of where we were from the prior spreadsheet. So –
Mr Beer: So does this refer Project Sparrow now to wider issues, the bigger issues, as the Chairman described them?
Richard Callard: Well, yes, in the context of having a Mediation Scheme which is clearly not working very well and a situation where there is more pressure on Post Office and the Government because of that fact.
Mr Beer: We’ll see that the risk rating in columns G, H, I and J has not changed at all.
Richard Callard: Yes.
Mr Beer: Can you see that?
Richard Callard: I can.
Mr Beer: Again, I think it doesn’t even make on it onto the heatmap?
Richard Callard: No.
Mr Beer: Had the risk therefore really remained unchanged since February 2014, or October 2014?
Richard Callard: We’re clearly saying that it has stayed the same. I think by the time I arrived in – and got to grips with Sparrow in February and March, it was already the case that the Mediation Scheme was in trouble and so I would imagine the risk – my perception of risk hadn’t really changed over that period of time, even though, you know, the circumstances possibly had.
Mr Beer: If we look at the final column, column Q:
“JFSA are increasing the profile of this issue, including them and Post Office going to BISCom in February. We’ve managed to keep ministers distanced from this at the moment but we are seeing increased correspondence in this area, risk level remains the same for now, given ministerial distance.”
Who had managed to keep ministers distant from the Horizon issues at the Post Office?
Richard Callard: Well, by distant what I think we mean is it’s an operational matter for Post Office.
Mr Beer: So in the arm’s length sense, the arms had got longer?
Richard Callard: Well, the arms had stayed the same length, I would say.
Mr Beer: Well, I think over time you’ll see sometimes the arms get longer when it suits Government and then get shorter when it doesn’t?
Richard Callard: I’m not – well, you see ministers wanting to do that and often our advice would be, no, it’s an arm’s length – it is an operational matter for the business, they’re best placed to deal with it, in our view, rightly or wrongly, and that was the advice we gave.
Mr Beer: So who had managed to keep ministers distanced?
Richard Callard: Well, I suppose it’s a combination of factors but yes, it’s our team in the sense that –
Mr Beer: How are they –
Richard Callard: Well, in the sense that where there was inbound correspondence we would say that’s a matter for Post Office and we would ask Post Office to deal with it so –
Mr Beer: You would roll out the “It’s an arm’s length – an ALB situation, it is an operational matter”?
Richard Callard: Well, yes, because we felt that it was an operational matter. We had obviously been involved – or there’d been due based I think in December ‘14 with Jo Swinson so they had been involved a little bit more but, generally speaking, our position was still that it was an operational matter for the business and that was the best place to sort it out.
Mr Beer: If there was limited risk and the risk remained unchanged, why was there a need to keep the issue away from ministers?
Richard Callard: Well, because the position of – that I inherited hadn’t changed in that sense. There was still – it was an operational matter for the business, there was lots of stakeholder correspondence and Parliamentary activity about it but, you know, in essence, it wasn’t all that different to the position I’d started with.
Mr Beer: That last column tends to suggest that a function or a primary function of this risk register is about the risk that the Post Office posed to Government, rather than the risk that the Post Office posed either to itself or to the public.
Richard Callard: Well, perhaps there’s an element of that because, as I said, it was a ShEx risk register, rather than a Post Office risk register, but we were always mindful – my job as a civil servant, with my civil servant hat, on is to try and deal with and protect ministers from undue – or even due, sometimes – criticism. This was an operational matter for the business, that was the position that was established with ministers, even before I joined, and that was what I was trying to do.
Mr Beer: Was thought ever given to maintaining a risk register that recorded the risks that the Post Office posed to itself or to the public?
Richard Callard: No, because we’d see that as being a thing for the Post Office to do.
Mr Beer: Did you ever ask to see Post Office risk registers?
Richard Callard: I – not specifically but I think they would have been – come out in part of the Board pack. When I joined the ARC I would have seen but I’d taken assurance that the ARC, that I didn’t sit on initially, would be dealing with that side of things.
Mr Beer: Can we move forward, please, to 2016. UKGI00006622. This top right is 29 February 2016, so a year further on. If we look, please, at lines 40 to 42, we can see Project Sparrow.
Richard Callard: Yeah.
Mr Beer: If we go across to columns G to J, we can see that the risk has increased very substantially –
Richard Callard: Yeah.
Mr Beer: – both in terms of probability and impact, to a risk rating of 20. Highlighted in red, under column K:
“Responsibility rests with Post Office to manage both the Mediation Scheme and the stakeholders generally. Post Office Chair undertaking review with independent QC.”
That’s a reference to the Parker or Swift Review:
“We are managing ministers’ involvement with the intention of keeping the issue independent of Government.”
Then far right column, in Q:
“Post Office Chair wrote to Baroness Neville-Rolfe with an update on his review, meeting scheduled for end of April. Baroness Neville-Rolfe keen to update Lord Arbuthnot, so need a public line. CCRC conclusion is not imminent and no news about JFSA plans for class action. All mediations now completed. CEDR due to issue final summary shortly.”
This records that the intention was to keep the issue independent of Government. Was that your understanding of ShEx’s – your – intention at the time.
Richard Callard: Yes, and we – when the new Government came in, in May ‘15, we tested that position about whether it’s an operational matter with ministers, to which they agreed.
Mr Beer: So it was understood that the Chairman, Tim Parker, was undertaking a review with an independent QC, the CCRC’s conclusion was imminent and mediations were completed. In those circumstances, what had happened to increase the risk assessment?
Richard Callard: Well, the mediation had now completed but there was still significant stakeholder issues. It hadn’t put the matter to bed and the Mediation Scheme clearly didn’t offer a way through.
Mr Beer: So in what sense did that increase the risk to ShEx?
Richard Callard: I suppose we’d hoped the Mediation Scheme would put the matter to bed and it would be resolved. It clearly wasn’t. We had a minister who was very interested in the topic and we had to find a way to provide reassurance and continue to look at the issues to understand why those issues, that JFSA were saying still existed, still existed because it hadn’t been dealt with by the Mediation Scheme, so there was a higher risk.
Mr Beer: Under column P, and if we just scroll up to the top, we’ll see that that is an additional column for mitigating actions. Back down, please.
It’s recorded that further mitigating actions are to:
“Ensure that the Post Office is proactively managing interest and noise and is aware of ministers’ expectations. Manage interests and wobbles from ministers or the centre, including preparing fallback options if current arm’s-length position becomes untenable.”
There’s quite a lot in there.
Richard Callard: Yeah.
Mr Beer: Firstly, what is meant in your mind by the word “noise”, in this context?
Richard Callard: I think it’s shorthand for anything that is, you know, inbound correspondence, Parliamentary questions, potential debates, Select Committees –
Mr Beer: Does it indicate things without substance?
Richard Callard: No, it’s just a shorthand word of saying – well, I suppose it means criticism. It means that everything that was going on at the time, it’s a very shorthand word and I think it’s one of those words that people within Government would understand and would use.
Mr Beer: “Manage interest and wobbles from ministers or the centre …”
Richard Callard: Yes.
Mr Beer: Were those emerging?
Richard Callard: Well, Baroness Neville-Rolfe was very keen to – was very interested in the topic, and –
Mr Beer: That’s slightly different from a wobble?
Richard Callard: It is but it was about whether she felt comfortable or not with what was taking place. So periodically I think she did and periodically I think she didn’t. So at the time, I think, she’d commissioned Parker, she was sort of happy with that approach, we were waiting for Mr Parker’s review. But then, you know, there was lots of noise and she would respond to that, and there’s a temptation for her to want to get more involved. And, of course, our position, as we agreed with ministers, was that it was an operational matter for Post Office.
Mr Beer: But a fallback was to be prepared if the current arm’s-length position became untenable?
Richard Callard: Yes, I’m –
Mr Beer: So that indicates, does it not, Mr Callard, that it’s a matter of choice for Government, whether an arm’s-length relationship was maintained with the Post Office or not?
Richard Callard: Yes, it is.
Mr Beer: So the length of the arms can vary according to Government’s desire?
Richard Callard: They can, yes. They can.
Mr Beer: Why was it now being contemplated that the arms might get shorter?
Richard Callard: Well, I think, due to the passage of time and no one has been satisfied – nobody from the JFSA has been satisfied with the results so far, I think we are waiting for – well, this implies we’ve already got Mr Parker’s letter but, anyway, you know, it – you know, the position is just sort of still evolving, I suppose.
Mr Beer: Can we move forward to 2017, please. UKGI00007578. This is January 2017. Just click on the guidance tab, please. Thank you.
Back to risk register, please. If we go to lines 85 to 87, thank you. Under column D:
“Civil litigation and/or Court of Appeal processes judged that Post Office has acted inappropriately or illegally. Even absent such a finding, ongoing risk that they continue to be perceived to have acted in that way.”
E:
“Potential for significant compensation claims, if civil or criminal courts rule against Post Office. More likely however, and certainly in the short-term, is that this continues to be a significant distraction and cost to the business as they defend their actions.”
The risk has seemingly now dropped back down to 12.
Richard Callard: Yeah.
Mr Beer: Column K:
“Post Office have external legal advisors employed on the civil litigation including a QC. They continue to update UKGI through the Board and directly on key stages but this is a legal matter and distinct from Government.”
Then:
“UKGI have briefed minister Margot James and will keep ministers and SpAds updated at this point. BEIS Legal are also up to speed and contributing to any advice to ministers, maintaining a position that the Government will not comment on an ongoing legal issue.”
Then there’s some detail as to court hearings.
“No timeline yet on when the CCRC review will be complete.”
So I think this now recognises, we can see from column F, that there is a legal risk to presumably both the Post Office and ShEx?
Richard Callard: Yes.
Mr Beer: But the risk –
Richard Callard: Well, I’m not sure the risk is legal to ShEx but the risk itself is legal in nature.
Mr Beer: Okay. So this column, who does it – who is the – who are the words relating to?
Richard Callard: Well, this is it. It tends to get conflated, as I’ve said in my witness statement, as to exactly who the risk pertains to but the nature of the risk itself is legal, and its reputational, and its financial.
Mr Beer: The risk has reduced from 20 back down to 12.
Richard Callard: Mm-hm.
Mr Beer: Why was that, given litigation was afoot?
Richard Callard: I think, in part, it goes to whose risk it is and I think Government’s position is that it is a matter for Post Office and it’s somewhat – actually, as a team leader, I felt it slightly more out of my hands then because it’s a court process and I always thought that court was where this was supposed to be. So I perceived the risk to be lower for the team and, therefore, for ShEx because it was – there was a separate process, which I would hope brings resolution, and it also led to less public correspondence and debate, because it was with the courts. So everything had died down.
Mr Beer: How much reliance, Mr Callard, should we really place on these risk registers, given that the words “Project Sparrow” can refer to different things, and that depending on it seems, the attitude of the person writing the document, the risk can relate to either the Post Office or to ShEx, or a bit of both, but it doesn’t say?
Richard Callard: Yeah, well, I think these things are a guide to make the team think – to make – to inform people who are reviewing the team and to feed up to the centre. So I’m not sure how much reliance you can place on an internal risk register. This is just a – to get a snapshot at the time of how the team is feeling about the variety of risks that are with it.
Mr Beer: There’s no, for example, record of the fact that Swift had reported there were eight recommendations and the extent to which those recommendations had been implemented?
Richard Callard: Well, I hadn’t seen Swift at that point and I was unfair of Swift’s findings.
Mr Beer: So that’s why it’s missing?
Richard Callard: Well, I’ve got a letter from Tim Parker, which I’m not sure if we’re going to come to but the letter, I feel, was different to the Swift Report.
Mr Beer: Very much so.
Richard Callard: So I’m relying on the letter here, which is why, I suppose, the context is also – with litigation, I thought our – the Parker letter essentially informs my stance on litigation because I think Post Office is in perhaps a better position than it actually is, which might explain why the risk has gone down because we’ve done Parker. Parker is essentially – well, it’s not done but it’s given us some assurance and I think we are approaching litigation in a relatively stronger position than, of course, Post Office was.
Mr Beer: It records that BEIS Legal were involved and up to speed.
Richard Callard: Yeah.
Mr Beer: What were they up to speed with?
Richard Callard: So when the Freeths litigation was launched we wrote to – emailed BIS Legal to notify them, I think – I haven’t got my timeline with me but we had meetings with them, they were aware that it was going on. We introduced them to Post Office and they met Post Office, I think, at our offices. And so they were patched in and they were generally copied into any submissions and updates that we did. So they were aware of what was going on.
Mr Beer: Did they review any of the legal advice that was given to the Post Office?
Richard Callard: I don’t think so, no.
Mr Beer: Thank you can we move forward, lastly, then to 2018.
Before we look at that, you tell us in paragraph 325 of your witness statement that, by the time of your departure from the Board in March 2018, you expected the GLO claim to fail –
Richard Callard: Yeah.
Mr Beer: – and you expected that the outcome of the litigation would be an endorsement of the integrity of the Horizon system. Correct?
Richard Callard: Yes.
Mr Beer: Can we look, please, at UKGI00007995. Scroll to the top. We can see this is 10 April 2018. So around the time of your handover to Mr Cooper; would that be right?
Richard Callard: He would have been in place for about three months by then, it was sort of parallel running, but yes.
Mr Beer: So it was in the course of parallel working –
Richard Callard: Yes.
Mr Beer: – and, therefore, handover to him. Can we see on the heatmap that the top rated risk, I think, is risk 12.
Richard Callard: Yes.
Mr Beer: If we go to risk 12, please. It’s Project Sparrow under your name.
Richard Callard: Mm-hm.
Mr Beer: Had you taken over responsibility for this risk?
Richard Callard: I think – so Laura had gone and we were waiting for a new colleague to come in and take over from her, so the reason why it’s in red is because that’s a change so it’s new text compared to the previous risk register. So I was probably between team members.
Mr Beer: We can see columns D and E are essentially the same as previously in the previous year; can you see that?
Richard Callard: Yes.
Mr Beer: We can see in columns F to J that the legal risk and reputational risk are 4 and 5, albeit the score hasn’t been uprated to presumably 20; can you see that?
Richard Callard: Yes, it’s – yes, you have to widen the column but then it would be a 20, yes.
Mr Beer: Oh, it is, yes.
Sir Wyn Williams: I take it that the rating is simply 4 times 5?
Richard Callard: Yes.
Sir Wyn Williams: Is there any magic about that or –
Richard Callard: No, it’s just that you can’t – the column and the spreadsheet in this particular instance is not wide enough to put 20.0, if you widen the column, you’ll see it.
Sir Wyn Williams: Not that, I mean, in terms of achieving a rating, is it sort of commonplace to just multiple –
Richard Callard: Yes.
Sir Wyn Williams: – the probability with the impact?
Richard Callard: I think so. I’ve seen other risk registers like that, yes.
Sir Wyn Williams: All right. Fine.
Mr Beer: K, essentially the same, but:
“UKGI seeking to put a protocol in place” –
Richard Callard: Yes.
Mr Beer: – “to ensure Permanent Secretary remains up to date.”
Column P:
“UKGI have briefed minister and will keep ministers and SpAds updated at key points. BEIS Legal are up to speed”, et cetera.
Then, lastly:
“Post Office are preparing for a security of costs hearing, which may trigger negative press but which could lead to the case being dropped. Post Office preparing for the first main hearing in November. UKGI is sighting Permanent Secretary, BEIS, on the issue and establishing disclosure protocol”, et cetera.
So now project Sparrow is the top-rated risk within the whole of ShEx, yes?
Richard Callard: If you say so. But not for the whole of ShEx but for the whole of the Post Office team –
Mr Beer: Yes, for the Post Office team?
Richard Callard: Yes – well, if you tell me – if you say so because I can’t see the rest of the scores but, yes, I take your word for it.
Mr Beer: So it’s the top-rated risk –
Richard Callard: Yes.
Mr Beer: – with the highest probable impact rating, yes?
Richard Callard: Yes.
Mr Beer: Even with all of the mitigations listed?
Richard Callard: Yes.
Mr Beer: How was that so, given that you say that you were confident that you expected the claim to fail and the outcome of the litigation would be a full endorsement of the integrity of the Horizon system?
Richard Callard: So I think it was due to the fact that we were having problems around the information protocol – sharing protocol. So I think it’s possibly – I mean, I haven’t seen how this risk has evolved between the last risk register you’ve shown me and this one but I think it’s partly two things: (1) difficulty with the information sharing protocol by that point because we were still waiting to get that agreed with Post Office and I think, secondly, there’s perhaps just a little bit of suddenly – for two years it’s been all very procedural and not much happening and, suddenly, I think there’s an email in my pack somewhere where I say to people – well, actually it’s just getting closer and this is why we’re focusing more on it.
So it’s much more in our mind, it’s much more serious now than 18 months ago when there was lots of procedural hearings – or not procedural hearings but procedural discussion.
Mr Beer: But you thought the claim was going to be roundly dismissed, and –
Richard Callard: Yeah.
Mr Beer: – integrity of Horizon upheld?
Richard Callard: That’s what I – yes.
Mr Beer: But now this seems to have switched back to be looking at a different issue, namely the information management protocol –
Richard Callard: Yes.
Mr Beer: – and the risk that that created?
Richard Callard: Mm-hm.
Mr Beer: What about, using the Chairman’s words of earlier, the bigger issue, namely that the Horizon system may be proved to lack integrity, which may have a consequence, in fact, on criminal convictions?
Richard Callard: Quite. But I hadn’t really seen any – so during that two years’ worth of discussion about the litigation case, over those two years we weren’t getting any information from the GC that the risk of the case itself had gone up. There was no – we were told there was nothing new particularly in the claims and, of course, we hadn’t seen the Swift Report so I was unsighted on some of those issues that were in that, which is why I was of the view I stated in my witness statement about the underlying status of Horizon.
The risk here, I think, represents increasing tension, as Board members transition, as we’re trying to get an information sharing protocol in place and Post Office not being very cooperative, and the risk ultimately getting nearer and people thinking “Ooh, hang on”, I think, probably. So I think that’s what – that is what explains the change in risk rating.
Mr Beer: So can I summarise your answer, and tell me if I’m incorrect: the risk of the Post Office losing the claim and that having an impact on the integrity of Horizon, and the possibility of that having an impact on criminal convictions, was such a low risk that it didn’t even deserve to be included on a risk register?
Richard Callard: Well, clearly it should have been. But no, it wasn’t. We were very much focused on the litigation and I suppose, inherently, the risk you’ve just set out is kind of in that risk somewhere, even if it’s not –
Mr Beer: Where is it –
Richard Callard: Well, it’s not explicitly set in that risk, it’s –
Mr Beer: This seems to be about process issues –
Richard Callard: Yes.
Mr Beer: – satellite issues –
Richard Callard: Yes.
Mr Beer: – that are bolt-ones to the main issue?
Richard Callard: No, I’m –
Mr Beer: I’m asking: why do we never see, in any of these, an assessment of the big issue or the main issues?
Richard Callard: Yes, it’s a good question and I think, as I’ve said in my witness statements, you know, on reflection we should have got a merits opinion and all those sorts of things and been more proactive and –
Mr Beer: But why didn’t you?
Richard Callard: I suppose – why didn’t I? Because, generally speaking, Government’s position, up until – well, not this point but prior to late ‘17, had always been to be quite hands-off and leave it as a matter for courts and the arm’s-length body. It wasn’t until the Magnox study that – lessons learned that UKGI did, where they were involved in another case where it was stated they should be more proactive, so I think –
Mr Beer: But, Mr Callard, even if the Government’s attitude is that this is an arm’s-length body, the matters concerned are operational in nature and there’s an element to which we, Government, should not get involved because there’s either an independent Mediation Scheme or litigation –
Richard Callard: Yeah.
Mr Beer: – there’s still a risk to the, perhaps, existence of the Post Office or the proper functioning of the Post Office, if things go badly in the course of those mediations or –
Richard Callard: Yes, but –
Mr Beer: – litigation. Why do we see none of that recorded?
Richard Callard: Because I don’t – I didn’t see anything that changed my – the information that I was getting didn’t change my view that, essentially, there hadn’t been an issue with Horizon found which causes losses to subpostmasters. So I hadn’t seen any new information and, when I asked about that and when Jane MacLeod gave her updates at Board about those sorts of things, there was never any discussion that, “Oh, by the way, we found an issue about balancing transactions as set out in the Swift Report”.
So my view on the technicalities and merits, I suppose, of what I understood – I mean, merits not in a legal sense – but my understanding of what had been found, say, one to two years prior hadn’t changed. So I didn’t think the risk – the underlying point that you’re saying that there was an underlying problem with the – with Horizon, I didn’t think that risk had particularly changed –
Mr Beer: Isn’t there a –
Richard Callard: – which is wrong. I accepted that that’s wrong.
Mr Beer: Even if that was your view, ought it to have been recorded?
Richard Callard: On reflection, yes. But my point here is that the risk register is a sort of – it’s not a formal – to my mind, anyway, it’s not a formal record as such. You know, it’s – although it obviously goes up to the – to ExCo and the Board, it was – from my perspective, it was more a sort of record – or a way of encapsulating the risks as we saw it as a team. And inherently in those risks, there are lots of other issues behind them that we may be working on and dealing with, which are not set out specifically in that wording.
Mr Beer: Thank you.
Sir, can we take the second morning break. It’s just coming up to 12.20 so 12.30, please?
Sir Wyn Williams: Yes, certainly.
Mr Beer: Thank you, sir.
(12.18 pm)
(A short break)
(12.30 pm)
Mr Beer: Good afternoon, sir. Can you see and hear us?
Sir Wyn Williams: Yes, thank you.
Mr Beer: Thank you.
Mr Callard, can we turn to reporting to ministers, please, as a topic, and start by looking at POL00065473. If we go to page 5, please.
If we scroll down, please. We’ll see this is an email there, if we stop there, from Jane MacLeod. If we scrolled up we would see that it was to Paula Vennells on 2 April 2015. You’re not included on the distribution list but there’s a comment made about you which is why I’m asking you. It says:
“We [Jane MacLeod] are meeting with Laura tomorrow …”
That’s Laura of the ShEx, yes?
Richard Callard: Yes.
Mr Beer: “… so we can review where we’ve got to. Laura and Richard Callard are briefing [Lady Neville-Rolfe] on Tuesday on another matter, and Laura is concerned that Sparrow will come up.”
Do you see that?
Richard Callard: Yes.
Mr Beer: So we’re mid-2015, a prospective briefing of Baroness Neville-Rolfe by you and Laura, and it’s recorded by Jane MacLeod that Laura was concerned that Sparrow would come up. Why would ShEx be worried that Project Sparrow would come up in a discussion with the Minister?
Richard Callard: Can you just clarify what month this was?
Mr Beer: August 2015.
Richard Callard: August. I don’t think we were. We saw Baroness Neville-Rolfe almost weekly on other matters, usually being the Investment Bank, and I don’t think we were particularly concerned if it came up.
Mr Beer: Was there any sense that you, ShEx, had to formulate lines with Post Office before briefing ministers?
Richard Callard: No, not necessarily but we would check with Post Office whether they are factually accurate, for example, and we would ask – I mean, no doubt what Laure is meaning here is “No doubt Baroness Neville-Rolfe may well ask about Sparrow, what’s the latest?”, depending on what was happening around that time. I think if it’s August ‘15, I think they were about to – Jane MacLeod and Paula Vennells were due to meet Baroness Neville-Rolfe on 6 August, I think, so it could have been in preparation for that.
Mr Beer: To what extent did you and ShEx adopt Post Office lines when reporting to the minister?
Richard Callard: We would report our own lines but they would be sometimes similar to Post Office lines because they would be based on what we understood the facts to be from Post Office.
Mr Beer: Would you sometimes, in agreement with the Post Office, keep information from the Permanent Secretary or the Minister?
Richard Callard: No. Not on – not with the express intent of withholding it.
Mr Beer: Would you decide when it was necessary to provide the Minister with information in your own judgement?
Richard Callard: Yes. Yes, that’s up to us to decide.
Mr Beer: You would draw that as a distinction between keeping information from the Minister?
Richard Callard: Yes, because you don’t want to go to a minister half-cocked, if you don’t understand the full facts, for example.
Mr Beer: In your witness statement at paragraph 67 – maybe we should turn it up, please. It’s page 34 of your witness statement, fourth line of paragraph 67. You say:
“As to Horizon I also felt I had been doing a reasonably good job of preventing the Minister from being criticised publicly in relation to Horizon, which I saw as part of my role …”
Just stopping there, do you mean part of your role as a NED?
Richard Callard: No, as part of my – my role as a civil servant is to deal with and protect ministers from undue, or sometimes due, criticism.
Mr Beer: How did that sit with your role as a NED where –
Richard Callard: Well, no, that was my – with my civil servant hat on.
Mr Beer: What about if you needed to as part of the Board?
Richard Callard: Needed to what, sorry?
Mr Beer: Say that “We have suggested X or Y to the Government and they have failed to deliver”?
Richard Callard: Sorry, I don’t quite understand.
Mr Beer: Yes. You were part of a Board –
Richard Callard: Yes.
Mr Beer: – of a company –
Richard Callard: Yes.
Mr Beer: – that might not always agree with what the Government was doing –
Richard Callard: Yes.
Mr Beer: – in relation to that company?
Richard Callard: That’s correct.
Mr Beer: Where did your loyalty sit in that situation?
Richard Callard: Well, that’s when it gets quite difficult and you try and make the case of Government to the Board. So, for example, that happened quite a lot around mutualisation and those sorts of issues back in 2014.
Mr Beer: You continue:
“… and that’s what I was referring to when I said we had ‘kept a lid’ on things.”
That’s in an email that we’re going to look at in a moment.
Richard Callard: Yes.
Mr Beer: “As I explain further below, our overarching approach in relation to Horizon was that this was an issue for [Post Office] to address and there was no real role for Government to play, particularly in the absence (as we understood it) of any evidence of a fault with Horizon that might have caused losses in branch accounts.”
That overarching approach – ie that Horizon was an issue for Post Office and not for Government – how long did that overarching approach last?
Richard Callard: I think it lasted throughout my tenure. I’d inherited it, we’d reconfirmed it in 2015, when the new Government came in, and it sort of continued through to when I left.
Mr Beer: Knowing what you know now, do you consider that the overarching approach was an appropriate one?
Richard Callard: It’s – I sort of wrestle with this a little bit. I’m not sure because I’m not quite sure what else Government could do to insert itself into the situation and to have essentially resolved the situation. I’m not sure what Government could have done, so I’m not sure what I would have suggested.
Mr Beer: Can we go, please, to the email, UKGI00006454, an email from you to Tim Parker of 18 January 2016, second paragraph:
“The underprovisioning of subpostmasters compensation issue has worried [Baroness Neville-Rolfe], perhaps disproportionately so.”
Just stopping there, the underprovisioning of compensation to subpostmasters, is that a recognition by you that, in fact, subpostmasters had been underprovisioned in terms of compensation?
Richard Callard: This is an entirely separate matter where the business had misstated its accounts, it had made a mistake in its accounts. The provisioning is about compensation to subpostmasters as part of the Network Transformation programme. They hadn’t pulled up through the right figure and the accounts were wrong and Baroness Neville-Rolfe was very worried about that, naturally.
Mr Beer: Is that established by the fact that the subject of this is RemCo?
Richard Callard: Possibly because it might be that look, there’s been a bit of a mess-up there, what are we doing about it? But I’m not quite sure why it’s about RemCo. Yeah, well in the bottom of that second paragraph, “I would be happy to share drafts” …
Mr Beer: So this isn’t to do with Horizon?
Richard Callard: No, this is about retrospective action, why has there been an accounting problem? And it was – we had to – the business had to restate its annual accounts, which is obviously wrong and embarrassing, because it pulled the wrong figures through from its account – from its underlying source documentation from a spreadsheet.
Mr Beer: Can we see also from the third paragraph from the bottom that you deal separately with the issue of Sparrow?
Richard Callard: Yeah.
Mr Beer: Does that help to establish that the second paragraph is about the issue that you’ve mentioned, rather than compensation to subpostmasters for –
Richard Callard: Yes.
Mr Beer: – Horizon issues?
Richard Callard: Yes, I think so because I’m also saying that it’s also about Sparrow, in addition to what we’ve just talked about in the second paragraph.
Mr Beer: You say, in any event, that you have sought to keep a lid on it, in the first line of the second paragraph. In what way had you sought to keep a lid on that issue –
Richard Callard: Um –
Mr Beer: – even though it’s a separate issue?
Richard Callard: I think that means just having dealt with it. So I think Baroness Neville-Rolfe was very worried about the mistake in the accounts, I thought perhaps disproportionately so because the submission I’d put to her about it consisted of two things: one was a cost overrun on IT, which was real money, and this, which was just an accounting error and it hadn’t actually meant subpostmasters hadn’t received the compensation they wanted, it was just that Post Office hadn’t forecast properly in their accounts what it was but underlying that they knew what they would have to pay.
So of the two errors that I reported to her around that time, one was a real cash cost and one wasn’t. This one wasn’t, hence my “disproportionately so” comment.
Mr Beer: So, so this is a reflection, albeit on a separate issue, of you acting in a way that either gave or withheld information from Baroness Neville-Rolfe; is that right?
Richard Callard: Well, I didn’t withhold the information from her, no. This is saying I’ve given her a submission about what’s gone wrong. Of the two issues, she reacted to one of – this issue rather more strongly than the other issue, which surprised me, because the other issue was about real money and real cost overrun. This was just an accounting error that had no cash implications.
Mr Beer: I think you do agree, however, that you, on occasion, got the balance wrong in making decisions as to whether or not ministers should or should not be provided with information?
Richard Callard: Probably.
Mr Beer: I think it’s in your witness statement –
Richard Callard: I’m sure it is.
Mr Beer: – at page 36. It reads to me as a bit of an admission?
Richard Callard: Okay, well, I’m not saying –
Mr Beer: Page 36 of your witness statement – it’ll come up on the screen – paragraph 70.
Richard Callard: Ah yes.
Mr Beer: Page 36, paragraph 70:
“Whilst I did my best to do so, my job is subjective and I acknowledge there were times when I got the balance wrong, and one example is provided by an email exchange in March 2015 where I agree with other members of the Shareholder Team that there were dangers in the Minister, Jo Swinson, receiving a copy of the Second Sight thematic report.”
Then you give the reference:
“In essence I agreed with the advice of Laura Thompson that ‘The Minister and Government should maintain its independence here’, and I expressed that view in an offhand reply that it would be ‘bonkers’ for the Minister to compromise that independence, which we had considered a key part of the scheme, by receiving the report in circumstances where she might then be required to express a view and potentially take a side.”
So this is you essentially saying that you acknowledge that you got it wrong in trying to dissuade the Minister from seeing the Second Sight report, the thematic report?
Richard Callard: Yes, I think my concerns were legitimate but, you know, on reflection, yes, you probably should see it – one should see it.
Mr Beer: You explain it as an attempt to draw the right line by letting the Post Office have the freedom to deal with operational matters, essentially?
Richard Callard: Basically because, if she receives that report – we spent quite a long time, and my predecessors as well, in maintaining this operational independence line. Once the report’s received, she has to take a view on it and that’s going to be very difficult for her, potentially.
Mr Beer: But, at this point, Second Sight had been sacked in controversial circumstances?
Richard Callard: I am not sure I’d agree with that particular characterisation of it.
Mr Beer: What had happened?
Richard Callard: So the way – the Mediation Scheme – this is by March 2015 – the Mediation Scheme was progressing and Post Office had done all of its investigations into the cases. Second Sight were retained to finish their investigations into those cases and to report their thematic – to produce their thematic report. So I guess it was controversial. It was received controversially but, to my mind, it was the conclusion of the Mediation Scheme and that was that, essentially. Because I knew that it would create tension.
Mr Beer: In what way would the Minister, having a copy of the Second Sight Report, involve her in operational matters?
Richard Callard: Well, if she had a copy of the report she’d have to read it. If she reads it, she’s then got to take a view and she either has to decide –
Mr Beer: Why does she have to take a view?
Richard Callard: Well, I suppose she doesn’t but if she’s asked by –
Mr Beer: No, no, that’s a fundamental part of your answer: if she reads a document, she has to take a view.
Richard Callard: Well, there’d been a number of difficult Parliamentary debates where she’d managed them very well. If she reads the report, someone will say to her “Well what do you think of this? Is there a case here to be dealt with or is there not?” And the way – this was a very polarised topic – whichever answer she gave, people would find fault with it, which I thought, as a person trying to keep her away from criticism and trying to protect her, I thought –
Mr Beer: So Mr Callard, if a document addresses a difficult issue about which there is more than one view, that means the Minister shouldn’t see it because she might have to take a view about it?
Richard Callard: No, that’s not what I’m saying. I’m saying that there was a risk that that’s what she ends up being asked to do and that, because we’d agreed that this was an operational matter and that was the agreed position, which she had agreed as part of – before I’d even got there, it was an extension of that position, or a continuation of that position. I’m trying to flag to her the risk that, if you, essentially, break that position, then you’re exposed to risk. And she – and sorry, to finish off, she basically overruled me, which I’m saying, on reflection, was right.
Mr Beer: Doesn’t your approach show a fundamental conflict within the ALB model between the wishing to be seen as independent, on the one hand, and yet, if advice like this is given and acted upon, oversight cannot be exercised in any meaningful anyway?
Richard Callard: Sorry, can you just repeat the two …
Mr Beer: Yes. Government wished to be independent –
Richard Callard: Yeah.
Mr Beer: – and seen to be independent of the Post Office –
Richard Callard: Yes.
Mr Beer: – and leave operational matters –
Richard Callard: Yes.
Mr Beer: – to the Post Office.
Richard Callard: Yes.
Mr Beer: Did that approach mean that it could never, effectively, exercise any oversight?
Richard Callard: I don’t think it means never but I think what we’re trying to get at here is that they are best placed to deal with it because, as I said before, it’s quite hard to understand how Government would insert itself into this situation to resolve it.
Mr Beer: Had you not been overruled, Government would never have seen the report?
Richard Callard: Possibly not, no.
Mr Beer: Can we look, please, at what another Minister says, Jo Swinson says, about information that was not provided to her, by looking at the document itself, to start with. UKGI00002439. This is just a covering email to the attachment because the attachment isn’t dated, so I’m using this to date the attachment. It’s an email from you, again to the Swinson generic address. Yes?
Richard Callard: Yes.
Mr Beer: It’s –
Richard Callard: Ah, right, yes, sorry.
Mr Beer: – addressed to Claire.
Richard Callard: Yes.
Mr Beer: Can you help us identify who that would have been within –
Richard Callard: She would have been –
Mr Beer: – the private office?
Richard Callard: – a private office person. Yes.
Mr Beer: “Thanks for the discussion today – very helpful. I have attached the note I mentioned – Alice saw the first iteration …”
Who would that be?
Richard Callard: Alice Perkins.
Mr Beer: Okay.
“… I have just sent this second iteration to her and thought it might be expedient that you see it sooner rather than later. I would be grateful if you could flag any potential ‘red [flags]’ in here.
“… this is not a speaking note as such, it’s too long for that. It’s something to get thoughts in some sort of order and give you the general gist of our arguments.
“If you do have a word with Jo prior to the meeting I would be grateful for any readout …”
Can you give us the context to this, please?
Richard Callard: So we were preparing for a meeting with Jo Swinson – “we” being, I think, Mark Russell, my CEO, and I. We had provided advice to both Jo – sorry, both Jenny Willott and then Jo Swinson about the replacement of the CFO. Ministers had rejected that replacement – a replacement on the basis that they were happy with the salary and sort of golden handshake but they’d objected to the payment of notice for the exiting CFO. So –
Mr Beer: That’s Mr Day?
Richard Callard: Mr Day, yes. So, on the basis that they rejected that, Mark and I thought we should go and see Jo Swinson to try and change her mind because it was very important to get a new CFO and that’s obviously very difficult, going to see a minister to ask them to change their mind when they’ve already opined.
Mr Beer: Thank you. Can we look at the attachment, please. UKGI00002440. Just look at the top half of the page. So you said in the covering email – this isn’t a speaking note but it’s the gist of your arguments, your arguments being ShEx’s arguments?
Richard Callard: Well, it’s my argument, it’s my note but, essentially, yes, what I was planning to say and it’s a way of getting my thoughts in order by writing it down.
Mr Beer: “Opening gambit
“As you know ShEx and the Board are clear that the current CFO [that’s Chris Day] is not the right person to take the company forward given the challenges it faces.”
Skipping over.
“You know all that and on reflection we should have approached you earlier … we want to explain to you why we need to come and see you on this, and why Alice and the chair of the RemCo want to meet you and Vince.”
That’s Vince Cable, yes?
Richard Callard: Yes.
Mr Beer: “The difficulties on the CFO front have brought forward the concerns that the Board (and ShEx) has about the CEO …”
That’s Paula Vennells, yes?
Richard Callard: Yes.
Mr Beer: “… which you need to be aware of, and which puts the appointment of a new CFO in a wider context.
“The Board’s concern over the performance of the CEO has been growing for some time, and has only recently got to the point where it feels it needs to act in due course.”
I’m going to ask you this afternoon about some questions concerning Paula Vennells’ position within the company and what action you and others took about it.
Richard Callard: Okay.
Mr Beer: “But this leaves the Board in a difficult place – removing a CEO without a confident CFO capable of holding the fort is a big risk. This makes replacing the CFO all the more important …
“We need to obtain a strong CFO and give them time to get their feet under the table before acting on the CEO. Without replacing both of them, the plan is at significant risk.
“[It] is extremely sensitive and highly confidential.”
Then you sort of ask yourself a question, the type of which you would imagine a minister to ask you; is that right?
Richard Callard: Yes.
Mr Beer: And give yourself the answers?
Richard Callard: Mm-hm.
Mr Beer: “Why haven’t you told me about the CEO before? Why didn’t it form part of the CFO advice?”
Richard Callard: Yeah.
Mr Beer: Pregnant in those questions is the truth, is that right, that you hadn’t told the Minister about any concerns involving the CEO before then?
Richard Callard: No. She’d been – I suppose the worries about Paula had been growing since I joined in January/February. Jo Swinson had been on maternity leave for most of that time. Mostly I didn’t have a conversation with her replacement, Jenny Willott either but, no, as I say here, somewhere, this has kind of grown over time and it’s kind of starting to crystallise now.
Mr Beer: So you hadn’t told the Minister, whether in the person of Jo Swinson or her replacement about any concerns about Paula Vennells before this point?
Richard Callard: No, because as I say in the first bullet of that section, it’s a very dangerous and destabilising thing to do because, in the second bullet, your relationship with her is already irrevocably damaged and I think in the early times often my tenure I didn’t have enough evidence to substantiate any worries. And this is double edged: if I tell ministers early irrevocably damage and put doubt in their mind about their relationship with their CEO, which, if I’m wrong, is hard to unwind, so you have to be quite sure of your ground.
Mr Beer: In the third bullet point you say:
“The Board has been monitoring the situation for some time but until recently we felt the balance of risk pointed towards keeping Paula in place …
“There are number of reasons why the balance has changed:
“Efforts to improve her performance have failed.
“The Board is increasingly frustrated with the lack of progress on various areas, primarily the lack of ‘grip and pace’ applied to revenue growth, cost cutting, specific business areas like Horizon, and the strategy in general …”
Richard Callard: Yeah.
Mr Beer: Can I ask you now, before we get to the questions specifically about Ms Vennells this afternoon, what was the Board’s concern at this point specifically over her approach in relation to business areas like Horizon?
Richard Callard: I think it was a reflection of the fact that the business – the response to the Second Sight Interim Report seemed to be along the right lines, in terms of a Mediation Scheme, et cetera, but it had been rather badly managed, to the point where, a year on, you know, it’s actually a cause of great difficulty and, whilst I don’t think she was personally responsible for that, it was a reflection of the lack of general grip that we felt she might have on the business because things like the terms of reference with Second Sight, I don’t think, had been agreed, I think the Mediation Scheme had been announced hastily, and it was things like that that made us doubt that –
Mr Beer: You say:
“This crystallised … at the June away day, where Paula Vennells very much sat back and let her team lead – she acts more like a [Non-Executive Director] than someone who leads from the front.”
Richard Callard: Yes.
Mr Beer: Was that your own view or the view of the entirety of the Post Office Board?
Richard Callard: I think most of us felt like that, particularly – you talk about, in here, you know, it started to crystallise – the Board’s view crystallised during that time because, during those discussions, she tended to ask the questions of the people who were presenting the strategy when, actually, as an Executive leading, it’s her strategy too and she should be putting the case forward.
Mr Beer: If we go over the page, please.
“What is wrong with the CEO?
“It’s about ‘grip’ and ‘pace’.
“[She] has many strengths, but given [Post Office Limited’s] increasingly competitive environment and strategy it must implement, we need stronger leadership and vision. We need a better grip on the detail, we need more traction on the ground to deliver cost savings and revenue growth at pace.
“A number of examples include …”
Then the third bullet point:
“Issues like the Horizon Mediation Scheme and financial services have required significantly more oversight by the Board than one might expect as things haven’t been gripped (to the point where the Board have set up subcommittees when it should be Paula or the CFO).”
Is that a reference to a Litigation Subcommittee?
Richard Callard: No, that’s the Sparrow Subcommittee of 2014, which was set up to essentially give the Board more bandwidth to think about how to deal with the emerging problems with the Mediation Scheme.
Mr Beer: Was it the Board’s view that that ought to have been led by the CEO and/or the CFO?
Richard Callard: Well, I think the Board’s view is that we shouldn’t have had to get to that point where we’re setting up a committee to deal with it.
Mr Beer: Scrolling down:
“Would a new CEO require higher remuneration?”
Answer:
“Yes …
“What have you done to put measures in place to improve her performance?
“Alice has spent an enormous amount of time coaching, mentoring and monitoring Paula.
“… Alice has significant NED experience …
“Paula responded to initial efforts … but this has levelled off and is ultimately about character and aptitude.
“Why are we paying her big bucks if she is not performing?
“Her base pay is in the bottom quartile of a cross-section of CEOs.”
Over the page. Again, a question that you thought Jo Swinson might ask you:
“I remember Alice asking to increase Paula’s pay?
“At that point she was doing well, responding to coaching Alice and the Board were giving …”
Third bullet point:
“Since that point:
“Paula has proactively said to Alice she wants to say to see transformation through …”
Then a challenge:
“Don’t see how this has anything to do with the CFO?”
Scroll down please, some questions about the CFO. Over the page. Lastly:
“Ministers have made their decision!
“This is of great concern to the Board, who are personally responsible to you and the Secretary of State for the successful running of the business, and it’s their view that a change is needed.
“You are effectively saying you don’t have confidence in their judgement on these matters, which is a very difficult position for the non-executives and Chair to be in.”
So “The ministers have made their decision”, what does that refer to?
Richard Callard: That refers to – pretty sure it refers to they were not prepared to pay Chris Day’s exit payment, which meant we couldn’t, as a Board, move Chris on because he hadn’t performed so badly that he could be fired, so – and we had Al Cameron waiting in the wings and we wanted to bring him in. He wasn’t going to wait forever but ministers had made the decision they didn’t want to pay that exit payment and we were trying to persuade her to change her mind at this point.
Mr Beer: Did you present to Jo Swinson your case in accordance with this non-speaking note?
Richard Callard: I think I probably did so. I recall the meeting was supposed to be for half an hour and it lasted 90 minutes, or something like that. It was quite a long meeting and, given the volume of stuff in there about the CFO, I think I probably would have done. We were essentially in the position of where we were sort of trying to throw the kitchen sink at this to get ministers to change their mind because that’s very hard to do.
Mr Beer: Is it fair to say that a part of ShEx’s approach was specifically, as the CEO, Paula Vennells’ lack of grip and pace over Horizon issues?
Richard Callard: I don’t think Horizon was the lead thing, that was indicative. I think it was more around the strategy. So it mentioned on the first page that strategy, the sort of revenue growth, cost reduction, those sorts of things, and the general kind of NED-like stance that she would take.
Mr Beer: By “NED-like stance”, do you mean an outsider?
Richard Callard: Well, kind of asking the same – a Board asking similar questions that a NED might ask when, actually, other Chief Executive’s that I’ve seen operate come in, and they almost present their colleagues’ sort of individual strategies and they take the lead and it’s them telling the Board what’s going on, rather than asking questions of her team.
Mr Beer: Can we look at what Jo Swinson says about this, WITN10190100, at page 21, please, paragraph 45 onwards. I’m going to read between paragraphs 45 and 47 so you get the complete context:
“I have been shown by the Inquiry an undated briefing note [that’s the document I’ve just shown you, the one ending in 440]. It seems to have been attached to an email of 20 August 2014 [the email I showed you]. I understand, seeing it now, that this appears to have been written by [you] as points or prompts for Alice Perkins in advance of a call schedule between her and me, to help her try to convince me to ask the Treasury for permission to recruit a new CFO, Alisdair Cameron, on a very high salary to replace Chris Day …”
Is that right? Was that the purpose of the document?
Richard Callard: My understanding of the document – well, no, so my understanding of the document is that it was speaking note for me when I was accompanying Mark Russell to talk to Jo Swinson about this, and that it wasn’t to persuade her to pay a high salary. That had been, I think, not agreed but not objected to. What had been objected to was the exit payment. I think it was “payment for failure”, she used the term of. It’s the exit payment that was objectionable to I think Jenny Willott and then Jo, not the salary.
Mr Beer: She continues:
“In the light of Government finances at the time and the austerity measures in place, any appointment using public money to a role above a certain level of remuneration required Treasury approval. I did not see this document at the time, indeed it was not something ever designed for me to see, as the covering email and the contents of the note made clear (eg the fact that the note is structured as a series of responses to questions I might ask). It seems that Richard Callard was asking my private office for advice on how Alice Perkins could make the points in the note to me in a way that would be was persuasive, and he anticipated I would not be happy (‘I would be grateful if you could flag any potential “red [flags]” in here’).”
Is that right: you were asking her private office on how Alice Perkins could make points in a way that might land?
Richard Callard: No, I think I’m asking how – I think I’m saying to the private office “I’m going to say this stuff, is there anything” – clearly there probably will be red – you know, difficult pushback because Jo Swinson was very hot on executive pay. I think what I’m saying in my message to private office, was “This is broadly what I’m going to say can you – you know Jo better than I do, can you flag?”
Mr Beer: So it’s about you speaking to the Minister rather than Alice Perkins?
Richard Callard: That’s how I interpret it.
Mr Beer: On to paragraph 46, please:
“I was shocked to read this note. It seems to show Mr Callard, a ShEx official, who was one of the key officials who was supposed to support me in my Ministerial role with regard to Post Office matters, instead using his Departmental position, access and contacts to work on behalf of [Post Office] to seek to persuade me to do what [Post Office] wanted, contrary to wider Government policy on pay restraint. It also makes clear that he had deliberately kept me in the dark about the concerns that ShEx had about Paula Vennells’ performance.”
Just stop there, then. Firstly, were you using your Departmental position, access and contacts to work on behalf of Post Office in a way that was contrary to Government policy on pay restraint?
Richard Callard: I don’t think so because we were – many were very clear in the submission to ministers about what that pay is and they had already opined on it. Pay – senior executive remuneration is one of the most difficult bits of the Shareholder Executive/UKGI job because our assets have to fish in the private sector market and you want to get the best CEO that you can do, and CFO, which is what we’re trying to do here. The Shareholder Executive was aligned with the Board in terms of trying to get a new CFO in, and it didn’t seem to us value for money that you wouldn’t pay – I can’t remember what the exit payment was – but that you wouldn’t pay something in the very, you know, tens of thousands to remove Chris Day, if you could bring in a CFO who may save multiples of that money over the course of the next few years in implementing Post Office’s strategy.
Mr Beer: Is it right that you deliberately kept from her – ie kept her in the dark – concerns that ShEx had about Ms Vennells’ performance?
Richard Callard: I think I explained that in the note, that, basically, you have to wait until you’re sure. We weren’t sure until the June away day and it’s damaging to put doubt in Jo Swinson or many minister’s mind about that before you are sure, and also, frankly, she wasn’t – wasn’t around until the end of June, back to the end of June.
Mr Beer: This was sent to her private office but wasn’t ever intended for her to see?
Richard Callard: It wasn’t intended for her but I wasn’t hiding anything because otherwise I wouldn’t send it to her private office. In fact, I say, I think, at the bottom of that email “If you do talk to Jo about it, I mean, don’t show the note but you can share the sentiment of the note and let me know if there’s any red flags coming back”.
Mr Beer: So was this you attempting to pitch your argument in the best way possible by testing the water with private office before speaking face-to-face with the Minister?
Richard Callard: Yes, because the private office understand what – they know their ministers pretty well and so will have a sense of what they’re going to react to and how they’re going to react. So I think there’s other instances in my timeline where I sort of share things with private offices to say “How will this float? I’m trying to get your approach on how do I pitch this, given the objective I’m trying to achieve”. I’m trying to get their advice.
Mr Beer: Lastly, before the lunch break, can we look at second passage in Ms Swinson’s witness statement, page 52, paragraph 128. Ms Swinson says:
“I do wish I had asked to meet with Second Sight, though I am pretty certain if I had that ShEx would have told me that this was not possible due to operational independence. I feel let down by a failure of briefing from ShEx. Richard Callard was on the Board and knew what was going on for months with steps towards sacking Second Sight and the closure of the Working Group, but he did not tell me. I was repeatedly advised in briefings that it was an operational matter, so not one for me to be involved in, but looking back it was not clear that the [Post Office] Board or anyone else was conducting an adequate oversight function.”
Did you discuss with the Minister whether she should meet with Second Sight?
Richard Callard: I may have done but I can’t recall.
Mr Beer: Can you therefore not recall whether you gave advice to, or not to, meet with Second Sight?
Richard Callard: Yeah, correct. I can’t remember.
Mr Beer: Did you keep the Minister informed of what she describes as the steps towards the sacking of Second Sight?
Richard Callard: Well, I think she says elsewhere in her witness statement that I showed her a Board paper, I think, and there is – I can’t remember it now but there is stuff in my chain where you can see that this decision is coming, and we appreciate it’s a very difficult decision. So I don’t think the submission being put to her on that – I think it’s 4 March 2015 – it shouldn’t have come as a complete surprise because we were essentially giving her some information that that was what was going to be coming her way.
Mr Beer: Thank you.
Sir, it’s 1.10 now I wonder whether we might break until 1.55.
Sir Wyn Williams: Yes, fine.
Mr Beer: Thank you very much, sir.
(1.11 pm)
(The Short Adjournment)
(1.55 pm)
Mr Beer: Good afternoon, sir. Can you see and hear us?
Sir Wyn Williams: Yes, I can, thank you.
Mr Beer: Thank you, sir.
Mr Callard, good afternoon. I want to continue, if I may, the topic of briefing or providing information to ministers and whether there was any manoeuvring going on within ShEx in the provision of information to ministers. Can I start, please, with UKGI00002288. If we look at the bottom email first, just to get the sense of it, if we scroll up a little bit, please, thank you. 30 April 2014, from the private office of Jenny Willott, with the subject “Jo Swinson transition from maternity leave”, and then there’s an update that follows:
“… some plans in train to support Jo Swinson’s return from maternity leave.”
Then if we go to the top email, please, you forward that to some members, I think, of the ShEx team –
Richard Callard: Right.
Mr Beer: – and say:
“Peter [Peter Batten]. See below, please can you start putting some thought into this. Clearly we will have our priorities to discuss, but you will have a better idea of what her priorities might be than I will, as we will have to address those as well. We might also want to think about how many sessions we might need – eg I want to get her in the right place on Sparrow!”
What place did you want to get the Minister in on Sparrow?
Richard Callard: I think that’s a reference to the fact that I haven’t really, at that point, dealt with Jo Swinson at all; I think I probably had one or two meetings with her, by that point, before she left for maternity leave. And I think –
Mr Beer: What place did you want to get her to?
Richard Callard: Oh, I’m sorry. I suppose I needed her to understand that over the five months she’s been away the Mediation Scheme hasn’t progressed very well and there are a lot more problems, and I suppose I’m trying to explain to her that that might require some difficult decisions going forward.
Mr Beer: If that was your intention you would have said, “I want to provide some information about what has gone on in the last five months”, whereas you say, “I want to get her in the right place”. That suggests you want to move her to a position or position her in relation to Sparrow; do you agree?
Richard Callard: I can see why you think that and I quite possibly did want to get her in the right place, I –
Mr Beer: What was that place?
Richard Callard: I think that’s getting her ready to understand that there may be some difficult choices coming because the Mediation Scheme that she left, I think, had been running, you know – there was optimism that it might work by, you know, November/December. By the time we’re in the end of April, it’s really not in the good place at all. We’ve had a letter from Sir Alan Bates on 16 April, clearly expressing unhappiness with it. The subcommittee of the – the Sparrow Subcommittee, which I’ve just joined, is already thinking about how to deal with the sort of Second Sight problem of this, you know, capacity to get cases through to the Working Group.
She needs to understand that and she needs to understand that there may be a difficult decision coming up.
Mr Beer: To what place did you want her to be in?
Richard Callard: Well, I didn’t want her to be in a particular place, I just wanted her to understand that things hadn’t gone very well and there may be difficult decisions to come up.
Mr Beer: Is that all we’re to read into “getting the Minister into the right place”?
Richard Callard: Yes, I think so.
Mr Beer: Did you ever try and manoeuvre ministers into a position?
Richard Callard: I’m not quite sure what you mean by “manoeuvre” but –
Mr Beer: Persuade, cajole, by the provision or non-provision of information?
Richard Callard: As a civil servant, you are constantly tying to provide advice, the best advice you think in your judgement, to ministers and you provide information on that basis and advice on that basis, whether that’s manoeuvring or not, manoeuvring makes it sound rather sinister. It’s not, you’re just giving the best advice, as you see it, based on the information that you’re getting at the time.
Mr Beer: When you are getting the minister in the right place are you acting as the Post Office NED?
Richard Callard: No, I’m acting as –
Mr Beer: Got a different hat on, on this occasion?
Richard Callard: Yes, because I’m talking to my team and saying “Look, can you put together some thoughts on the transition, please, got to get priorities discussed. Peter knows her better than I do because I’ve only met her once or twice because she left on maternity leave. I’m asking you to think about how many sessions we might need across the Post Office portfolio, including there’s a tough, you know, there’s now a tougher gig on Sparrow than you left it”.
Mr Beer: Can we move forward to a different Minister and a different time, UKGI00005261, and start with page 2, please. Scroll up, and again please. Thank you.
4 August 2015, “Sparrow catch-up”. You’re emailing Paula Vennells’ Executive Assistant, Ms O’Farrell and you copy in Laura Thompson, Tom Wechsler and Mark Davies, and you say:
“Hi Avene – we had a catch-up with Lady Neville-Rolfe today about Sparrow. Paula is seeing her Thursday morning first thing (ish) and I thought it might be worthwhile me having a chat with Paula for five minutes over the phone tomorrow if there is time – I appreciate it’s her first day back but grateful if we could find a slot, it’s worth her being aware of [Baroness Neville-Rolfe’s] mood and position (not that there’s too much to worry about)”, et cetera.
Then scroll up, please. Mark Davies emails three minutes later saying he’s added Jane MacLeod in:
“… it would be good to catch up on this: we are meeting with Paula tomorrow to discuss the meeting so if it isn’t possible for you and Paula to speak before then, can we (myself or Jane) grab a word?”
Your reply to Mark Davies:
“… Sure, happy to chat”, et cetera.
Why did you consider it appropriate to advise the Post Office of the Minister’s mood and position in advance of them meeting with her?
Richard Callard: Because ministers and the likes of Paula Vennells would only see – meet each other occasionally. So when that happens, you want it to be as effective as possible on both sides, so that what’s discussed is what each party wants to be discussed. It’s a bit like a high-level diplomatic meeting, almost. So you want both sides to be relatively well briefed so that the – that Paula and Jane, who were taking Baroness Neville-Rolfe through quite a detailed picture on Sparrow, answer the questions that I understand BNR has at that point, to make sure that it’s a good use of everybody’s time. That’s not unusual in Government.
Mr Beer: Did you make the Minister aware that you intended to forewarn Paula Vennells of her, the Minister’s, mood and position in advance of the meeting?
Richard Callard: I’m not sure if I did but, as an experienced minister, I would expect BNR to think that would be – that would –
Mr Beer: Ie you would tip off the Post Office as to what the Minister was thinking before she met the Post Office?
Richard Callard: Well, “tipping off” is perhaps the wrong phrase but, yes, I would make sure –
Mr Beer: Tell them about her mood and position?
Richard Callard: Yes, because I want them to address it. This is an opportunity for – it was quite a key meeting, if I recall. It was a 30-page slide show, I think they had, and this was a key – and Baroness Neville-Rolfe is pretty new in role, and this is a key opportunity for both to meet each other and to understand one of the issues that’s really bothering the Minister, and the best way to deal with that is to explain to Post Office what it is that the Minister is worried about, not that there is much that she’s worried about, as I say down there.
It’s to make an effective use of time and it’s not dissimilar to approaches, I think, across Government, otherwise you get meetings where people talk at cross purposes and it’s a waste of time.
Mr Beer: Which hat were you wearing: the NED hat or the other one?
Richard Callard: I think I am wearing my shareholder hat here. This is not dissimilar to what I’ve done on other assets and not dissimilar to what my colleagues do on other assets.
Mr Beer: Did you think you were in a conflicted position here at all?
Richard Callard: Not in this particular instance, no.
Mr Beer: So did you speak with Mark Davies or Jane MacLeod or Paula Vennells?
Richard Callard: I can’t remember. I may well have done.
Mr Beer: So you didn’t ask the Minister whether she was content for you to share information about her position to the Post Office senior executives before they met?
Richard Callard: I doubt I did. I would expect her not to have worried about that because she wants the answers to her questions. If I’m ensuring that she gets those answers from the people she is meeting, that is a good use of everybody’s time.
Mr Beer: In fact, she says – I’m not going to display it on screen but it’s paragraph 102 of her witness statement at WITN10200100 – this is email chain:
“… seems to me to be clear evidence that the ShEx, whose role it was to provide me and other ministers with the objective and impartial advice to scrutinise Post Office’s actions and hold it to account, was in fact taking steps to provide advance warning to Post Office about my concerns and intended direction of travel. I cannot see any good reason for them to have done so and am sadly driven to the conclusion that ShEx …”
On this occasion, it’s you.
Richard Callard: Yeah.
Mr Beer: “… and Post Office, perhaps inadvertently, were working together to try to deflect me and that ShEx were not giving me the independent and impartial advice that I needed.”
Is there any substance in her criticisms of you?
Richard Callard: I don’t think so. I’m saying below that I don’t think there’s much to worry about, at that point. All I’m trying to do is do what other people do, and we’ve done on other assets and my colleagues do, is to make sure that it’s the best use of time.
Mr Beer: So Baroness Neville-Rolfe has got the wrong end of the stick here when she says that it appears that ShEx were working together to deflect her, and you were failing to give her impartial and independent advice?
Richard Callard: Well, in my view, in this meeting, she has got the wrong end of the stick because, actually, this meeting is an opportunity for Post Office to directly, so it’s don’t take my word for it, as it were, Minister, it’s a chance for Post Office to directly present to the Minister for her to make an assessment. I’m just asking Post Office to make sure that they address the very things that she is worried about. Not that I think she’s got a great deal of worries because, as I said, there’s not much to worry about.
Mr Beer: At the time, did you know or did you have any suspicion that she may not have trust the advice she was getting from you and other members of ShEx?
Richard Callard: No, I didn’t have a reason to believe that.
Mr Beer: Can we look at UKGI00005195, please, an email to you from Laura Thompson of the 3rd – so in the run-up to the meeting on the 6th – 3 August 2015:
“Just spoke to Harriet.”
Can you recall who that would be?
Richard Callard: I think she’s another person in private office.
Mr Beer: Private office. Okay:
“She thinks [Baroness Neville-Rolfe] wants a senior official outside of ShEx and not including whoever we get from Legal but is going to go back with the proposal that just three of us plus Legal and see what the Minister says.”
Did you, therefore, in fact, know that Baroness Neville-Rolfe wanted, I think, attendance from somebody or advice from somebody out side of ShEx.
Richard Callard: Yeah, I did know because I had that email.
Mr Beer: Yes.
Richard Callard: I don’t think I would equate that with the last email about briefing – ensuring Post Office come armed with the answers that Baroness Neville-Rolfe –
Mr Beer: Do you know why Baroness Neville-Rolfe wanted somebody from outside ShEx to help her?
Richard Callard: I think this goes to the shareholder versus policy role, where, at the time, we were both policy officials and shareholder role officials, and I think quite sensibly she’s identified that sometimes those things can clash. I think what we’re saying here is she’s expressed a request for that, we’ve said well, we do both roles at the moment.
Mr Beer: Were you involved in formulating that pushback to the Minister?
Richard Callard: Er –
Mr Beer: “No, you shouldn’t get somebody from outside ShEx”?
Richard Callard: No, I don’t think so.
Mr Beer: That’s just Laura Thompson’s view.
Richard Callard: Yes, I don’t know what the email down – well, the email below possibly is that’s where the request comes and Laura is responding to that request by phoning private office and then relating to me what that conversation was. But I mean, asking us to recommend someone else, well, we had legal coming and I’m not sure who else in the Department would be able to give her the advice she needs because we dealt with Post Office policies.
Mr Beer: Is this kind of thing a concern where your Minister is saying, “I want a senior official outside your organisation”?
Richard Callard: Yes, I suppose so but I guess I didn’t understand quite the nature of her concerns and I wasn’t sure what to do about it, to be honest, because Legal –
Mr Beer: Did she –
Richard Callard: Sorry, Legal were coming, we were taking a – we’d end up taking a more senior person from the Shareholder Executive along, in the form of Anthony Odgers, I think. But also I knew that in that meeting, which is the internal meeting on 4 August, I knew that Special Advisors were coming as well as BIS Legal. So there were a range of people that were they’re. I probably didn’t think it was necessary because there were so many other people there, it wasn’t just ShEx.
Mr Beer: Who wins today here, ShEx or the Minister?
Richard Callard: Well, if the Minister has got issues on that front and she isn’t happy with Laura’s proposal, because private office are saying, “I’ll take that back to the Minister”, then she’s more than welcome to go to the Permanent Secretary and say “I’m not happy”.
Mr Beer: Do you remember what happened: did ShEx in fact prevail and she only got advice from ShEx?
Richard Callard: I don’t think it’s a case of prevailing. I think we’ve said “Well, we can’t give you advice as to who else you should have”, we turned up at the meeting as planned. I don’t recall anybody who was –
Mr Beer: Outside of ShEx?
Richard Callard: Oh, no, well, there was BIS Legal, there was Special Advisers, they’re both outside of ShEx.
Mr Beer: Does this happen often, that ministers indicate that maybe they’re not trusting the advice they’re getting?
Richard Callard: I think – not that I’m particularly aware of, no.
Mr Beer: Did it cause you any concern?
Richard Callard: No, it perhaps should, on reflection, have caused me more concern than it probably did.
Mr Beer: Can I turn to a different type of concern, namely concerns over Paula Vennells. Can that document come down from the screen, please, and can we look at your witness statement, please, paragraph 49, which is on page 23. Paragraph 49, please. You say:
“I recall that, at the start of my tenure … there were some concerns about [Ms Vennells’] suitability as CEO. These were initially explained to me by my team and, as far as I can remember, these concerns crystallised during an away day in June 2014, at which [she] was felt by many members of the Board [including me] to be overly passive and acting more like a NED than a CEO in the way she interacted with member of her team who came to present an item on the agenda.”
That’s essentially what you’ve told us a couple of times already today.
Richard Callard: Yeah.
Mr Beer: “A contemporaneous summary of the Board’s concerns is set out in a note that I prepared in August 2014, ahead of a meeting with the Minister, which I shared with the Minister’s office and which Alice Perkins had also reviewed.”
We have looked at that one earlier, the one in the informal –
Richard Callard: Yes.
Mr Beer: “By this time, Jenny Willott MP had replaced Jo Swinson MP whilst Jo Swinson MP was on maternity leave. The concerns were” –
Richard Callard: And we corrected –
Mr Beer: – “summarised in the following terms”, and then there’s a quotation from the document we’ve looked at.
Richard Callard: Apologies, but we’ve corrected that line at the start –
Mr Beer: Exactly.
Richard Callard: Yeah.
Mr Beer: To what extent were those concerns that you express in this paragraph discussed and shared with Alice Perkins?
Richard Callard: By this time, which relates to the meeting we were preparing for with Jo Swinson, that had been discussed with Alex – definitely discussed with Alice Perkins, because it was – I think there’s been growing rumblings in the Board up until about a June away day, and then the June away day happen and that kind of crystallised everything, combined with the CFO issue, meant that there was active discussions going on.
Mr Beer: For how long had those concerns been held?
Richard Callard: By me or by –
Mr Beer: Yes, by you.
Richard Callard: Well, it’s difficult to say, because I was – I got briefings from the team very early on but hadn’t obviously formed – had the chance to form my own judgement –
Mr Beer: So the note is August ‘14, you began in early ‘14?
Richard Callard: In January ‘14, yes. So I guess they built over time, and then you take soundings from other NEDs and you get a sense of it and you’ve seen – one has seen by that time performance in Board and that sort of thing, so it sort of grows and then these things tend to have an event that crystallises consensus at a Board, if you see what I mean.
Mr Beer: Was that a unanimous or majority view held on the Board, in particular that Ms Vennells was “overly passive and acting more like a NED than a CEO”?
Richard Callard: I think so, yes.
Mr Beer: Unanimous or majority?
Richard Callard: To be honest, it’s not one of those things that you hold a vote on but I don’t think there were any dissenting voices in that sense.
Mr Beer: Can we look, please, at UKGI00006547. Scroll down, please. Thank you. We’re now in spring 2016, and can you see an email exchange concerning Post Office Limited’s IT renewal –
Richard Callard: Yes.
Mr Beer: – including you or members of ShEx speaking?
Richard Callard: Yes.
Mr Beer: If we scroll up, please. Further exchange. This is about a different issue, not Horizon, correct?
Richard Callard: I think it concerns Horizon in the sense of a renewal of the contract, yes, but not –
Mr Beer: But with Fujitsu but not –
Richard Callard: But it’s not a Sparrow thing –
Mr Beer: Right. Then scroll up. Mr Russell says to you that he mentioned that issue with Howard:
“As I was doing so, Paula ambushed us.”
You reply:
“Told you, there’s something ‘Teflon’ about her.”
Richard Callard: Mm.
Mr Beer: What did you mean by that?
Richard Callard: As I tried to explain in my witness statement, I think what I mean there is that the issue around the reprocurement hadn’t been handled very well, was going to cost quite a bit of money and Mark’s having the conversation with Howard Orme, who was the CFO of BIS, the Department at the time. And Paula obviously bumped into them, because I think sometimes she was in the building, and I’m not sure why I say “Teflon”, I think it’s something to do with, well, perhaps she’s almost oblivious to the fact that there’s a conversation going on in the Department about a failed procurement that’s going to cost some money and –
Mr Beer: Mr Callard, “Teflon” doesn’t usually refer to somebody who is oblivious. “Teflon” usually describes somebody who manages to avoid criticism, to keep a good reputation, even after they have done something wrong.
Richard Callard: Yes, but –
Mr Beer: They are impervious to blame or criticism and nothing sticks?
Richard Callard: Well, kind of, it’s just – I don’t know how he – how she met them but, yes, she would come up and I guess she’s approached them and not necessarily acknowledged that there’s as much of an issue as she might need to appreciate –
Mr Beer: You’re speaking more generally here that there’s something Teflon about her, ie criticism never sticks, correct?
Richard Callard: Possibly. That’s possibly what I –
Mr Beer: Was that your view?
Richard Callard: I think that’s quite a harsh view, I think I’m just speaking off the cuff here that –
Mr Beer: Sometimes when we speak off the cuff it reveals our true thoughts, doesn’t it?
Richard Callard: Yes, possibly it does.
Mr Beer: So why had this situation been allowed to carry on, that somebody who was “Teflon”, ie criticism never stuck, they were impervious to blame or criticism, they maintained their good reputation, even though they had done something wrong –
Richard Callard: Well, I don’t think she’d done something necessarily wrong it’s just that something hadn’t – she’s the CEO of an organisation that the procurement hadn’t panned out as it should have done and it ended up costing some money. It’s not necessarily her fault and I think the person who was in charge of IT ended up leaving the business. As CEO, you know, she ultimately bears responsibility for that but, at the same time, yes, she’s almost sort of oblivious to that in the way she’s approached Mark and Howard.
Mr Beer: So you saying that you meant “Teflon”, in the sense of oblivious?
Richard Callard: In the sense of it’s sort of water off a duck’s back, I suppose.
Mr Beer: I think it’s right that, right from the early days of your involvement in ShEx, ShEx’s Risk and Assurance Committee had expressed concerns about the continued suitability of Ms Vennells as CEO, hadn’t they?
Richard Callard: Well, we’d taken that to the Committee to discuss but, yes.
Mr Beer: Can we look at the record of the Assurance and Risk Committee, UKGI00042124. If we look at the title at the top, this is a Risk and Assurance Committee of who, of what?
Richard Callard: Of ShEx. It’s the ShEx Internal Risk and Assurance Committee.
Mr Beer: What was the purpose of the ShEx Risk and Assurance Committee?
Richard Callard: Well, it’s to consider risks possibly in more depth. I think the background to this was that we had done one of our sort of – some sort of portfolio review or something in January where we’d raised this and they’d asked us to do a deep dive on the options around the Chief Executive and these are the notes of that discussion.
Mr Beer: How frequently did the ShEx Risk and Assurance Committee meet?
Richard Callard: I don’t know. This was – I think a sort of outcome of an initial – of a portfolio review, which is a quarterly thing that we tend to do at ShEx or did at ShEx.
Mr Beer: Did the risk registers that we looked at earlier feed into the Risk Committee?
Richard Callard: Possibly, and the management and the quality of management was on the risk register.
Mr Beer: I meant did the risk registers get taken to the Risk and Assurance Committees?
Richard Callard: I don’t know because I wasn’t on the Risk and Assurance Committee. I’d only appear when it was a specific – specific to the – a particular risk that I was managing –
Mr Beer: You’re the presenting team here?
Richard Callard: Yes, I’m presenting to a committee who are considering our position and whether we’re dealing with it properly.
Mr Beer: You were also an author or a signer-off of the risk registers?
Richard Callard: Yes.
Mr Beer: Did you know whether or not the documents you were writing or signing off got sent to the Risk Committee?
Richard Callard: I can’t remember whether I knew that or not but I knew that they would go to a risk team who would consider it, and then the summation of the – all of the risk would then go, most likely, to a Risk and Assurance Committee but they’d go to ExCo, the Executive Committee.
Mr Beer: If we scroll down, please. Paragraph 2:
“RC [you] set out that advice from the recent ShEx Annual Review of [Post Office] was to consider the continued suitability of the current CEO.”
So there’d been a ShEx-wide annual review of Post Office; is that right?
Richard Callard: So yes, there’d be quarterly reviews and then there’s a one-off annual review, where the team presents to a set of peers, who kind of review what we’re doing, and so risks across Post Office, and the issue of Post Office would be presented to the – risks and other issues would be presented to the – to a team of peers at an annual review and a quarterly review.
Mr Beer: “There has been a general consensus that there is an issue with the leadership of Post Office, however there has only been anecdotal evidence.
“3. As the new Executive Director in ShEx for [Post Office] [you] would now like to investigate this further and is carrying out initial discussions with the Chair and other [Post Office] NEDs. The committee suggested that [you] continue to have regular catch-up meetings with the NEDs as a matter of course.
“4. [You] also highlighted that there have been issues between the Minister and the [Post Office] CEO.”
Then forward to 5:
“The leadership role is in question due to the lack of delivery of the current [Post Office] transformation plan. This is their first CEO role and [Post Office’s] objective of being commercially sustainable is currently being achieved. That said, the Network Transformation is slower than expected but this is not necessarily a fault of the CEO, further investigation will confirm.”
Then over the page to 8:
“The Board has been in place for 16 months now and their view on the CEO performance is mixed. The Chair (who is also in her first Chair role) [that’s Alice Perkins] is still making a view. It has been suggested that an independent Board review takes place. The committee agreed that this would be a good idea and confirmed that this should be an independent review.”
Did that happen?
Richard Callard: I can’t remember.
Mr Beer: What would an independent Board review of the CEO’s position consist of?
Richard Callard: I would imagine – I don’t actually know, to be honest, I think it’s probably a specific conversation amongst NEDs to say what is our position.
Mr Beer: What steps in the absence of an independent Board review – and we’ve seen none – did ShEx take to quantify or evaluate whether there was any merit in the anecdotal evidence that is mentioned in this note?
Richard Callard: So I think that, after this meeting, the idea was to go and talk to the NEDs in more detail, and I think it ultimately culminates in a desktop study we asked a recruitment firm to do, to see if there were any other alternative candidates that would be better than Paula, because it’s one thing to say we’re unhappy with the performance or – not necessarily unhappy with the performance but we may think there may be someone better out there, but the idea is to go and find out. So later on, I think it crystallised around the June away day, by July we’re in a position where we’re commissioning, or seeking to commission, Egon Zehnder, who are recruitment consultants, to do a desktop review who was out in the market for slightly more remuneration than Paula.
Mr Beer: The answer essentially, do I summarise correctly, came back no one, for the allegedly low pay?
Richard Callard: Correct. The – it felt that the – it would be quite hard to persuade ministers to part with Paula in return for the cohort of people that had come through – more expensive cohort of people had come through. It would just be more of a risk than keeping Paula in place.
Mr Beer: Essentially, did this issue continue to fester, ie concern –
Richard Callard: Yeah.
Mr Beer: – amongst the Board about Ms Vennells but no concrete action taken?
Richard Callard: Well, we took action in the sense of doing that summary on behalf of the Board, and Alice, as I understood it, continued to mentor her up until that point. So it’s one of those things with Non-Executives, there’s sort of rumblings and side conversations, and then it sort of meets with a crescendo and then action is taken, which is where we got to with Egon Zehnder. I mean, my position at this point was – look, my view is that the CEO role of Post Office is very, very difficult. It’s not just a single business; it’s a conglomerate of different sorts of businesses, plus it’s a government-owned business as well, so it’s highly political. It’s very hard to find anybody that would run it really well, to be honest, in my view.
And, you know, as a new person to the job – and I can’t remember what date this is – I might not have even seen her perform at a Board by that point. So I was still early days forming a view and, really, a lot of this was coming from my team, who I trusted and who I’d worked next to for quite some time, so I knew that they were good. But I was having to rely on the team and wanting to take time to form my own judgement.
Mr Beer: Thank you. Can we turn to a separate topic, namely your perception of the extent of issues or problems with Horizon.
Richard Callard: Yeah.
Mr Beer: Can we turn to paragraph 69 of your witness statement, please, which is on page 35. You say:
“In general terms, I found it difficult to identify the correct balance when it came to the appropriate level of Government engagement on the Horizon issue. On the one hand I thought it was clear Government should not intervene directly in the Mediation Scheme or court proceedings, but on the other this was clearly a matter of public concern, often raised in Parliament and the media, with which Ministers were required to engage. There was also the general point that, from my perspective, it was difficult to see what the Government could realistically be expected to do in response to the concerns that were being raised in the apparent absence of a problem with Horizon, the stated decisions of numerous different criminal proceedings …”
Just stopping there, what do you mean by the “stated different decisions of numerous different criminal proceedings”.
Richard Callard: I guess, rightly or wrongly, I took assurance from the fact that the courts convicted people beyond reasonable doubt. I assume that’s quite a high bar and – because there had been prosecutions by POL but, at the same time, there had been – it’s the court that convicts, so I took a degree of assurance that the courts had looked at the evidence being put forward and, nevertheless, had seen to convict, either by a jury –
Mr Beer: Did you know how many cases had been taken to trial, rather than guilty pleas for false accounting in exchange for dropping a theft charge?
Richard Callard: No, I didn’t. I knew there was around about 50 prosecutions a year.
Mr Beer: Did you know the proportion of those where the court had, in fact, tried the issues?
Richard Callard: I didn’t, but I knew that some people had pleaded guilty, and –
Mr Beer: So did you take assurance from that?
Richard Callard: Yes, I did in some respects but, also, I knew that not everybody had pleaded guilty and the court still found fault and I think when I asked the question about when you plead guilty, I was told, rightly or wrongly, that the evidential basis still needs to be there for the court to accept that plea.
Mr Beer: Is that right; who told you that?
Richard Callard: I can’t remember.
Mr Beer: Was it a lawyer?
Richard Callard: It might have been. I don’t know. I can’t remember.
Mr Beer: Why were you asking whether there needed to be –
Richard Callard: I think it was –
Mr Beer: – proper – hold on – whether there needed to be a proper evidential basis for a court to approve of a guilty plea, irrespective of the plea of the defendant?
Richard Callard: Because I think it was in response to the point around people had been pressured to plead guilty. So I was wanting to – it was part of my trying to understand the extent to which one can simply pressure someone to plead guilty, regardless of the evidence that’s there.
Mr Beer: You continue:
“… and the unequivocal assertions by [Post Office] that the issue had been exhaustively investigated and no evidence of any problem had been found. I thought the Government was in a difficult position in relation to this issue and it was part of my job as a civil servant to help ministers steer a path through these competing considerations.”
What was your perception of the reliability of Horizon based upon?
Richard Callard: It was based upon the fact that, throughout my tenure, there was some sort of investigation going on, be it the Mediation Scheme, be it the Parker Review or under the auspices of the litigation. The fact that there had been the Second Sight interim report that preceded me by six months and the Mediation Scheme was ongoing at that point, there had also been the Cartwright King/Altman Advice, which, although it’s not necessarily about Horizon per se, is in – is about the safety of convictions and the evidence presented, and so that gave me – that gave me reassurance.
And then also, I suppose it’s – the information we continued to get from Post Office was in a similar vein and when we probed, we would get, you know, quite detailed information, as I’ve said, around things like the response to the Part Two Second Sight Report, the response to Panorama, responses to debate – the points raised in debates would be quite comprehensive, quite well articulated and, ultimately, I suppose, no one seemed to have come forward, given Second Sight had looked at all this, I didn’t feel that they had articulated a clear link between a fault with Horizon that could explain the losses that subpostmasters were suffering. That’s kind of what I felt I needed to understand and see.
Mr Beer: I think you accept that the Deloitte Zebra Report was in part to the contrary effect: it revealed some relatively fundamental problems?
Richard Callard: Yes, I agree entirely, and I –
Mr Beer: Just stopping there, that’s not a document you ever read?
Richard Callard: I read the first one from 30 April.
Mr Beer: Yes.
Richard Callard: I can’t recall whether I read the Board Briefing from 4 June. If I did read it, I didn’t understand the significance of it but, reading it now, it feels like I should have had understood the significance of it, which leads me to believe I may not have read it either way, I regret that, for some reason, that wasn’t taken to Board, it wasn’t considered and it should have been, because that is, I think, one of the key bits in my timeline where we might have changed path.
Mr Beer: The other key bit would presumably be, in your mind, Jonathan Swift’s advice?
Richard Callard: Well, the Parker Review, yes.
Mr Beer: Yes.
Richard Callard: I mean, I think –
Mr Beer: Well, in particular the advice?
Richard Callard: Well, if I’d seen the advice and known what the advice said, then, yes, I think that would have led to a different path as well.
Mr Beer: So why is it that the two documents that would have led to a different path are the two documents that you didn’t read or see?
Richard Callard: Well, the Deloitte one remains a bit of a mystery. I don’t know why I didn’t look at that or the rest of the Board consider it, and that’s one of my – probably my biggest regret on this whole thing. With Swift, it sounds a bit daft but I never really – I didn’t really think at the time that there was a Swift Report. What I was interested in was the Parker Review, or the Parker view. Swift contributed to that but, as I understood it, Tim Parker was also talking to Second Sight, he talked Lord Arbuthnot, he was talking internally, and so what we wanted was the Chair’s view, not a QC’s – not the QC’s view of it. We wanted it to be Mr Parker’s view.
Mr Beer: So it’s coincidental, but for different reasons, that two revelatory documents, the second Deloitte Zebra Report and Jonathan Swift’s advice didn’t operate on your mind to potentially lead to a different outcome?
Richard Callard: That’s correct, I missed the Deloitte report but I wasn’t informed that the Swift Report even existed and I had a letter that I found reassuring from Tim Parker, which didn’t point to the issues that were being raised or at least not all of them, the important ones, in the Swift Report.
Mr Beer: Thank you. Can we look at UKGI00019720, please. Thank you. If we scroll down, please, an email from Laura Thompson to three members of ShEx, including you, “Readout from [Jo Swinson’s] office on Sparrow”:
“Just had a chat with Claire …”
Would that be Claire –
Richard Callard: In Swinson’s office, I think, probably.
Mr Beer: Another –
Richard Callard: Another –
Mr Beer: Private office?
Richard Callard: I suppose it’s the same Claire as the Claire before.
Mr Beer: Thank you.
“Apparently Jo wasn’t overly happy with it – she feels she wasn’t fully aware that [Post Office] were terminating Second Sight’s contract, or that the publication of the Second Sight Report was so imminent. I explained … that the original advice did say that ‘this means POL will be terminating their engagement with [Second Sight]’ and the Second Sight Report was never due to be published and attempts to portray it as such are misleading.
“We are probably going to have to go chat to on Monday to cover off these points, before she’ll sign the letter …
I think there might be merit in sending Arbuthnot and Bates …”
I think that’s Mr James Arbuthnot –
Richard Callard: Yes.
Mr Beer: – and Mr Bates:
“… a holding reply if we are not going to be able to reply until next week. I’ll talk to private office about that when I hear back from Tara.”
Then scroll up, your reply:
“Not sure I want to provide an interim reply to Bates and Arbuthnot. It would imply we are thinking about things (as opposed to just taking some time to reply).
“Jo clearly didn’t read the [submission]! Think we need to stiffen resolve on Monday. Aside from giving Jo Hamilton wads of cash [with a little bag of money] and a full apology, which this doesn’t warrant, then this won’t go away in the nice way Jo wants it to.”
Does this email exchange disclose your true views about Horizon here, that you thought this was a case of subpostmasters unjustifiably after wads of cash.
Richard Callard: Well, I address this in my witness submission where I apologise to Ms Hamilton, and I’m very sorry –
Mr Beer: Of course, everyone does –
Richard Callard: Yes, I know –
Mr Beer: When their emails are brought up, they always apologise.
Richard Callard: Yes, of course they do. Yes, of course they do. As I explain this, I wasn’t singling Ms Hamilton out, I was making the point around hers was the more high-profile case. What I’m trying to get at here is that I was referred to earlier about the tough decisions that ministers will have to make. As far as I’m concerned by March ‘15, we had still not – I have still not seen a clear link with a bug in Horizon that generates a loss to a subpostmaster. I’ve just not picked that up from the Mediation Scheme or anything from Second Sight and, without that, I feel that it’s very difficult to provide compensation to subpostmasters without that level of evidence.
And what I’m talking about, in terms of stiffening resolve, is that we put up what I thought was a very clear submission on 4 March about how the closure of the Working Group but the continuation of the Mediation Scheme would work, including the arrangements around Second Sight, to which Jo Swinson’s office is expressing surprise at, when I thought it was very clear in the submission what the arrangements were.
Mr Beer: Does this disclose a dismissive attitude towards the plight of individuals by you?
Richard Callard: Possibly. I think it discloses my view that, from what I’m hearing from Post Office, consistently, and what I’m not hearing – and I’m not hearing from Second Sight are a particular clear link between the Horizon IT System and losses being incurred by subpostmasters. There doesn’t seem to be a link and, therefore, I’m sceptical of that position of the JFSA.
Mr Beer: Do you think that you, like perhaps others within the Post Office Executive themselves, had rather forgotten that, behind the campaign, lay individuals whose lives had been destroyed by the impact of their criminal convictions?
Richard Callard: I hadn’t forgotten that but I wasn’t really sure what to do about it because I couldn’t – as I’ve explained elsewhere, I wasn’t sure how Government – what Government could do to intervene.
Mr Beer: As the Shareholder NED, ought yours to have been the role that retained an independent and enquiry mind?
Richard Callard: Well, I – what I was trying to do was make sure that Post Office looked at the issues seriously and, as far as I was concerned, that’s what the Mediation Scheme, the Cartwright King review, the initial Second Sight review, had done, and also, actually, Deloitte review, where we’d listened to Gareth James, I think his name was, who came to Board. And so all of that led me to believe – wrongly – that there wasn’t an issue, and that – and the steps taken by Post Office had been reasonable.
Mr Beer: Can I turn, lastly, to the Magnox report by looking at UKGI00009275. You’ll see this is a draft dated 25 October 2017 and, if we just scroll up to see the badge and the title, it’s described as an “Initial review into UKGI’s role in the competition, award and challenge of the Magnox/RSRL decommissioning contract”. Can you tell us what this document is? It’s not the Magnox report itself?
Richard Callard: No, I think what this is is a sort of lessons learnt document, commissioned by UKGI in response to a procurement within the Nuclear Decommissioning Authority that went wrong.
Mr Beer: In brief, that procurement had gone wrong, and then the litigation involving the –
Richard Callard: Yes.
Mr Beer: – assessment of the procurement had gone wrong too?
Richard Callard: Yes, so I think this was largely about the latter part, I think, possibly.
Mr Beer: You tell us in your witness statement – it’s paragraph 307, no need to turn it up – that you were aware of the lessons learned from this review?
Richard Callard: Well, belatedly, but – well, I don’t know when I learnt of the lessons of the review. This is from October ‘17, which is towards the end of my tenure and its draft. I’m not quite sure how of the findings got to me more formally. I remember some sort of seminar at UKGI, where they were sort of unveiled, I think. But I don’t know when that was.
Mr Beer: Can we look, please, at page 26 of UKGI’s review and under the heading “General lessons learned”, if we can scroll down, please, to 4.12:
“The general recommendations below are made …”
Then, if we go over the page, please, the first bullet point of substance on that page is the recommendation that:
“Where large legal risks are involved, UKGI should ensure that an asset’s board has direct access to legal advice and to the in-house Legal Team. Legal advice should not be relayed to the board by the Executive Team, as it was in this case. Misunderstanding/ misconstruing legal advice was a material factor which explained why the [Nuclear Decommissioning Authority] Board was slow to respond in both the litigation and the consolidation. Ensuring that an asset’s board is provided with the opportunity to discuss and challenge legal risk directly with a General Counsel would mitigate this risk, as would ensuring that the General Counsel reports directly to the CEO.”
Then if we scroll down, please, two bullet points from the bottom:
“In holding the [Nuclear Decommissioning Authority] Board to account, UKGI should utilise its own board and its in-house legal function on consideration of risks. To assist and develop its role in holding an asset’s boards to account, UKGI could make more use of the UKGI internal risk management process to encourage discussion and debate of the major identified and horizon risks being faced by the assets it manages, especially by drawing on the expertise of the UKGI Board and the UKGI in-house legal colleagues.”
If we go back, please, to page 25. Under “Lessons learnt during litigation”:
“Steps that UKGI can take to mitigate/address the underlying failings which caused this issue going forward:
“[1] Government should be made aware of and approve key steps in substantial litigation. To ensure the appropriate level of challenge and oversight of any future large-scale litigation the NDA and other assets face in the future, UKGI should recommend that framework documents with assets require immediate notification of, and Government approval for, litigation above an identified threshold of ‘substantial’ liability by reference to each asset’s risk profile.”
Then the last bullet point that we can see, as this is displayed:
“Where a substantial legal challenge is mounted against an asset, UKGI should assure itself of the asset’s internal legal capability.”
Then scrolling down, last bullet point:
“Where the stakes are high, source more than one external legal opinion. UKGI should insist that the asset consider more than one external legal opinion to ensure that legal advice and identified risks are thoroughly tested. Further, it should ensure that any opinions and their authors appear before the asset’s board so that the board is able to take strategic decisions with proper calibration of legal risk.”
Penultimately:
“Legal strategy and mitigation of risk must be challenged. Throughout, the NDA Executive Team portrayed the litigation as a ‘try-on’ and entirely without merit … litigation is universally recognised to be uncertain, even a small risk of a very significant setback requires mitigation. UKGI should ensure a full discussion of the legal strategy to ensure risk mitigation has been fully considered.”
To what extent were those recommendations carried into effect from October 2017 by UKGI?
Richard Callard: So I’m not sure whether, as I said, when I would have learnt of those recommendations because this is a draft document, and so I’m not sure when those were released but, by January 2018, the Board is putting a Litigation Subcommittee in place and we’re in discussions with Post Office about the information-sharing protocol.
Mr Beer: When, to your knowledge, were any of the recommendations, as a result of the Magnox Inquiry carried into effect by UKGI?
Richard Callard: To be honest, I don’t know but it was – by being on the subcommittee – that was – I wasn’t on the subcommittee, Tom Cooper – sorry, if I could step back. Tom Cooper, by this time, at least not quite October but by the end of 2017, had joined and I was working in parallel with him. He was observing the Board so he was going to – we ended up nominating him to go on the Litigation Subcommittee, rather than me, given that I was stepping down in March.
So much of this would have been dealt with via the Litigation Subcommittee, and we were putting in place the information-sharing protocol so that we could – and I remember there was exchanges in my timeline around getting second opinions, et cetera, so we were in discussions with Post Office on doing that sort of thing.
So we did, towards the end of 2017, into early ‘18, the shareholder team took steps to implement this and the General Counsel at the time was also heavily involved.
Mr Beer: So all of these recommendations ought to have been acted upon or either accepted or rejected and, if accepted, carried into effect –
Richard Callard: Yes.
Mr Beer: – by the time of the first hearings in the Group Litigation?
Richard Callard: Which were in November ‘18?
Mr Beer: Slightly earlier than that.
Richard Callard: Oh, okay, right. So yes, they may well have been but I stepped down in March ‘18 date. The subcommittee – the Litigation Subcommittee of the board was sort of ramping up, as it were, and Tom was sat on that, not me. We were getting updates. So they may well have been. I was less sighted on that because Tom and I were sort of transitioning over.
Mr Beer: Thank you.
So is your essential answer on that: this is more for Mr Cooper to answer for than you?
Richard Callard: Yes, I think so. I was involved with sum of it, and – but yes, it’s probably more for Tom than me.
Mr Beer: Thank you very much, they’re the only questions I ask, Mr Callard.
Sir, there are some questions from Core Participants.
Sir Wyn Williams: Mm-hm.
Mr Beer: I wonder whether we might take the break now for ten minutes until 3.05 and then recommence then.
Sir Wyn Williams: Yes. Sure.
Mr Beer: Thank you very much.
(2.54 pm)
(A short break)
(3.05 pm)
Mr Beer: Sir, can you still see and hear us?
Sir Wyn Williams: Yes, thank you.
Mr Beer: Thank you. Sir, we’ve got three sets of questions of about ten minutes each.
Sir Wyn Williams: Okay.
Mr Beer: Starting with Ms Patrick, then Mr Jacobs and then Mr Henry.
Sir Wyn Williams: Very good.
Questioned by Ms Patrick
Ms Patrick: Good afternoon, Mr Callard. My name is Angela Patrick, I act for a number of subpostmasters who were prosecuted and who have since had their convictions overturned, including Mrs Hamilton.
I want to ask you about two things. First, one document, and then a few questions about your role.
First, if we could look at POL00162786, I’d be grateful. Thank you. Can you see that there now, Mr Callard?
Richard Callard: I can, yes.
Ms Patrick: If we could start by scrolling to halfway down page 2, please. We can see here there’s an email from Melanie Corfield circulating a press announcement from the JFSA. Can you see that?
Richard Callard: Yes.
Ms Patrick: I don’t want to look at the detail. You see there’s a big headline “JFSA prepares for Group Litigation against Post Office”, November 2015. The original email isn’t sent to you but if we can scroll up to the top of page 1, we can see it eventually is forwarded to you, and there’s some exchanges.
Richard Callard: Yes.
Ms Patrick: You are engaged earlier but I just want to look at this top part. You’re replying, at that time, to Mr Davies, Ms Thompson and Mr Bourke, and you say:
“Seriously though, do you know how many legal firms they have had – would be good to take the lines with ministers that this is yet another sabre rattle, and that once legal firms get into the evidence they pull away.”
Richard Callard: Mm-hm.
Ms Patrick: Was this another example of a frank conversation with colleagues, Mr Callard?
Richard Callard: This one actually is a “Seriously though, do you know how many legal firms they’ve had?” Because I’m about to provide advice to ministers and, if I’m a minister, I would want to know – I’d be concerned about litigation and if there had been, you know, attempts before that had failed, I might take a different view of the litigation that’s now in front of me than if that hadn’t have happened. I did – I did bear in mind that there’d been Shoosmiths, there’d been Edwin Coe and others.
Ms Patrick: Okay. “Another sabre rattle”.
Richard Callard: Yes.
Ms Patrick: Had you convinced yourself that all lawyers would think that the subpostmasters simply had no case?
Richard Callard: By “sabre rattle”, I mean, it’s another – so by the time the – it’s November ‘15, so the Mediation Scheme had come to an end and, essentially, I think, you know, there was a – the Post Office was essentially disengaged, in that sense, because the Mediation Scheme had completed.
Ms Patrick: Can you just pause there for a minute and look at this. Look at the language you use.
Richard Callard: Yes.
Ms Patrick: After “sabre rattle”:
“… and that once legal firms get in to the evidence they pull away.”
You were asking for essentially that view to be confirmed, weren’t you?
Richard Callard: Well, I was asking to – the reason why I was asking, because it goes down to others before them, as it were, I’m saying “Seriously though, Mark, please, can you tell me how many times litigation had been attempted”, because it’s relevant when briefing the minister to know how many times that had been attempted because she may draw the conclusion that once, you know, you get into litigation, you know – the Shoosmiths –
Ms Patrick: Mr Callard, can I ask you to stop there?
Richard Callard: Okay.
Ms Patrick: “Would be good to take the line with ministers”.
Richard Callard: Mm-hm.
Ms Patrick: You’re asking Mr Davies to confirm that’s the case, aren’t you?
Richard Callard: Well, essentially, because I do think it’s perhaps another case where it might not come to anything because the evidence I had seen to that point, no one has shown me a causality between a bug in Horizon causing a loss to subpostmasters. I hadn’t seen anything like that and so, therefore, I’m saying that’s the sort of message I might use to convey to ministers because it’s relevant.
Ms Patrick: That sounds perfectly reasonable, Mr Callard, but look at this message:
“Do you know how many legal firms they have had …”
Richard Callard: Yes.
Ms Patrick: There’s no question mark after that, is there?
Richard Callard: Well –
Ms Patrick: It’s a statement, isn’t it?
Richard Callard: Well, I can see why you think that but it’s a very quick email so I’m not putting a question mark at the end because I then say it would be good to take the line with ministers that –
Ms Patrick: Just pause there. Can I ask if the Document Manager for today could scroll down so I can see the message that I wasn’t going to read but let’s turn it up. Mark Davies – you can see there, I think, on your screen at the bottom, your first reply to Mark Davies, which you send on 20 November at 8.32. Richard Callard wrote:
“Oh joy, normal service resuming then!”
Richard Callard: Yeah.
Ms Patrick: “This is not saying that they have launched a class action though is it, they are just ‘preparing’.”
Richard Callard: Mm-hm.
Ms Patrick: “And what happened to the other solicitors they signed up – it wasn’t Freeths.”
Richard Callard: Yes.
Ms Patrick: This is a frank conversation between colleagues, isn’t it, Mr Callard?
Richard Callard: Well, it is but I’m asking a – sort of making a genuine point there because the previous – I think it was Edwin Coe that had been mentioned the previous firm involved and that had come to nothing and I’d read the article that said they’re preparing, they’d not actually launched, right? That’s correct, is it? You know, I’m trying to remind myself of what the other legal firms that had been involved, what they were called.
Ms Patrick: The first line was a statement, Mr Callard.
Richard Callard: Yes, certainly, it is.
Ms Patrick: You were saying your view that all lawyers will see they’ve got no case when they look at the evidence. That was your view you’d taken, wasn’t it?
Richard Callard: It was because I hadn’t seen any evidence of causality between Horizon faults and losses. I hadn’t seen any evidence of that, even though Second Sight had researched it for two and had a half years and –
Ms Patrick: Okay –
Richard Callard: I’m sorry –
Ms Patrick: We –
Richard Callard: – and my experience was that there had been failed attempts at litigation.
Ms Patrick: Okay, well, let’s move on. The second issue I wanted to ask you about was some general questions about your role and the factors that were operating at the time you were in post. They’re very basic questions, I think. Horizon was a business-critical system for the Post Office, wasn’t it?
Richard Callard: Yeah.
Ms Patrick: At the time you were in post, something the Government wanted to explore was mutualisation for the Post Office. You’re nodding but, for the transcriber, you have to say “yes” or “no”.
Richard Callard: Yes, sorry, I was looking – up until about – during the Coalition Government, yes.
Ms Patrick: But yes. It was a goal for Government to reduce the public subsidy which the Post Office relied upon?
Richard Callard: Yes.
Ms Patrick: These were goals which the Board and the Executive at the Post Office were working towards?
Richard Callard: Yes.
Ms Patrick: They were shared goals which you would have understood as important with both of your hats on?
Richard Callard: Yes.
Ms Patrick: If Horizon could not be relied upon, that would that have jeopardised the Government’s financial goals for the Post Office, wouldn’t it?
Richard Callard: Yes.
Ms Patrick: Is there a danger that you focused too much on financial implications for the Government in your role as Shareholder NED?
Richard Callard: Not with regard to Horizon. No.
Ms Patrick: Those financial goals, weren’t those what you were primarily concerned with?
Richard Callard: I was certainly concerned with financial performance and financial goals, and reducing the subsidy that taxpayers were putting in to the Post Office. But that doesn’t translate and wasn’t a primary concern with regard to Horizon.
Ms Patrick: While you were looking at that, did you simply fail to see the Government interest, the public interest, in the broader sense of making sure that the innocent people, the innocent people that were involved here, were not prosecuted or being prosecuted in our country?
Richard Callard: Prosecutions had – you know, were obviously a concern, that stopped before I got there. And I thought that –
Ms Patrick: Can I stop you there for a moment, Mr Callard. I wasn’t asking you what – I was simply saying prosecutions had stopped but was there not a wider governmental or public interest in understanding whether a body that was wholly owned by the State had been responsible for the unlawful and unfair prosecution of innocent people under its charge?
Richard Callard: Yes, and the measures that we were getting Post Office to take, including the Second Sight reviews and other reviews, including the Cartwright King/Altman review of prosecutions I thought were proportionate responses to the concerns being addressed.
Ms Patrick: Mr Beer has asked you a series of questions today and I think you’ve accepted that you could have been more curious?
Richard Callard: Yes, I have.
Ms Patrick: I want to ask you: did the awful, potentially awful financial implications for the Government of these subpostmasters simply being right blind you to the potential that all of these ordinary, decent people, supported by politicians of real conviction, might just be right, and what you were being told by the Post Office could be wrong?
Richard Callard: The – my position was not informed by the financial ramifications of us being wrong. I would have just dealt with that, like every other financial ramification that we had from failed procurements to incorrectly stated accounts, to overruns in Network Transformation. So the financial considerations, we were clearly worried it –
Ms Patrick: Is it possible that the fact that the failure of Horizon would mean that mutualisation would simply not be possible, is it possible that might have made you a little incurious?
Richard Callard: No, not at all. The mutualisation agenda was clearly one that would take quite some time and mutualisation was recognised as only being able to happen once financial sustainability had been achieved. So you can’t be a mutual unless you’re making profits and you’re financially sustainable. So it was not an immediate – it wasn’t an immediate term goal because it was clear that it would take some time for mutualisation to take place and no designs as to what mutualisation really means or would look like had really been thought through by that point. So there was a complete disconnect in my mind between mutualisation and the Horizon issue. It just wasn’t relevant.
Ms Patrick: Thank you, Mr Callard. I have no further questions for you.
The Witness: Thank you.
Sir Wyn Williams: Mr Jacobs?
Questioned by Mr Jacobs
Mr Jacobs: Hello, good afternoon. Can you hear me?
Richard Callard: Yes.
Mr Jacobs: Thank you. I act for a large number of subpostmasters and postmistresses, represented by Howe+Co.
I want to ask you about something that arises from paragraph 156 of your statement, which we don’t need to turn up for now and we will look at the underlying document. So the document is POL00138251. This in relation to your first attendance at a Sparrow Subcommittee meeting on 9 April – waiting for it to come up on the screen.
Can we scroll down, please, or pause before we do that. We can see the attendees at that meeting are Alice Perkins, the Chief Executive, and you attended as well, with Angela van den Bogerd, Chris Aujard and Belinda Crowe. Was your role there as the Shareholder Non-Executive Director?
Richard Callard: Yes.
Mr Jacobs: Is that what you were doing at that meeting?
Richard Callard: Yes.
Mr Jacobs: Okay. Can we scroll down, please, to the body of the document. Keep going further, please. This is the document that was provided to you and in bold type at the second paragraph it says:
“The scheme [and this is the Initial Complaint Review and Mediation Scheme] was established in August 2013 to resolve complaints in respect of the Horizon system, on the basis that [in bold type] there were no systemic problems with Horizon.”
Now, were you aware that that statement was not true?
Richard Callard: In what sense?
Mr Jacobs: That the scheme was not established to resolve complaints on the basis that there were no systemic problems with Horizon?
Richard Callard: Sorry, is your question that – was I aware that the scheme was established on the basis that there were no systemic faults?
Mr Jacobs: That that was actually false?
Richard Callard: Oh, well, I wasn’t aware at the time that that was false; I had the Second Sight Interim Report in my mind that said exactly that.
Mr Jacobs: Well, there was a document, and we don’t need to call it up, but it was a document entitled “Post Office overview of the Initial Complaint, Review and Mediation Scheme”, for the record that’s POL00022120. It makes no mention of the fact that the scheme was established on the basis that there were no systemic problems with Horizon and it actually says that Second Sight will determine individual cases and will seek to look at whether there was a problem with Horizon or any associated issue that had an impact on subpostmasters.
So it was very much the remit of Second Sight, at all stages – and Ian Henderson gave evidence to this effect – to look for systemic problems with Horizon.
Richard Callard: I mean, my interpretation of the Mediation Scheme and the investigations involved with it was that the Interim Report had found there were no systemic failures but there were, nevertheless, subpostmasters who said there is still a problem. So I thought a sensible reaction to that, which pre-dates me, is that each individual case should be investigated by Post Office, then Second Sight and then go to the Working Group for potential mediation. I wasn’t really concerned about systemic failures in that sense because I thought, well, a very sensible way to look for problems with the system is to – rather than look top-down is to look at the things that people are saying, and investigate those individually.
And they may find problems with either are systemic or aren’t systemic, it doesn’t really matter. They will find – if they find a problem, that’s good because then it will explain the loss.
Mr Jacobs: But that statement in bold type is not true and didn’t it strike you as odd that the Sparrow Subcommittee is saying that a scheme, which is to include a Second Sight investigation on the Horizon issue in individual cases, wouldn’t consider whether there was a problem with the Horizon system?
Richard Callard: Well, I didn’t interpret it that – in that way. I think that – I took the wording in bold just as a re-assertion of the Executive’s point of view, that that’s what Second Sight had found nine months prior, and that was that. I didn’t really – I don’t think I would have read it that way or scrutinised it to that extent.
Mr Jacobs: Can I just ask you to bring the microphone closer, we have number of clients who are following remotely who can’t hear you. Thank you.
Richard Callard: Sorry.
Mr Jacobs: So when Mr Warmington gave evidence in June, he criticised the fact that the whole scheme was predicated on the principal subject of the investigation of Second Sight’s investigation and the Post Office being the paymasters, and what we see here in this document is the Sparrow Subcommittee taking what is understood, probably incorrectly, to be the interim findings of Second Sight and translating that into the whole scheme, when the whole scheme did not operate on that basis.
My question to you is: isn’t that an example of the sort of abuses that are inherent in a scheme where the subject of an investigation is the paymaster? Do you accept that –
Richard Callard: I can see why –
Mr Jacobs: – that was an issue –
Richard Callard: – there might be a conflict in that sense but I got the very strong impression that Second Sight were quite independent and went about what they wanted to go about without really worrying about what Post Office – who was doing the paying. And what I thought was happening was that Post Office investigate, Second Sight investigate, and that’s exactly what was needed. I’m not sure that I felt that the fact that the Post Office were paying for Second Sight, though, was a consideration for the Non-Executive – as a Board member, it’s clearly a consideration, just like the internal costs for Post Office were a consideration. But I don’t recall taking decisions at the subcommittee on the basis of cost and costs alone.
Mr Jacobs: Mr Callard, as the Shareholder Non-Executive Director, are you concerned that at your first Sparrow Subcommittee meeting, which you attended as the Government representative, the representative of the owner, you were told in a document something that was plainly untrue; doesn’t that worry you?
Richard Callard: Well, I didn’t see it as untrue at the time. If you’re talking about the paragraph – the sentence with the bold –
Sir Wyn Williams: Well, I think I’ve got this point.
Mr Jacobs: Yes, I was going to ask my final point about curiosity and whether he asked about this at the time. Perhaps if I could just conclude with that?
Sir Wyn Williams: Well, I’m pretty sure he didn’t, Mr Jacobs.
Mr Jacobs: Very well.
The Witness: Yes, because I don’t recognise that –
Mr Jacobs: Very well.
I don’t have any further questions. Thank you.
The Witness: Thank you.
Sir Wyn Williams: Mr Henry?
Questioned by Mr Henry
Mr Henry: Thank you, sir.
Pannell Kerr Forster, Arthur Andersen and Deloitte specialised in government and infrastructure. What was your knowledge of IT systems before you became Shareholder NED?
Richard Callard: Very limited.
Mr Henry: Very limited. So it never occurred to you that Horizon’s failures did not have to be system-wide; they could be intermittent, sporadic, random glitches. It never occurred to you that those intermittent bugs could be capable of causing losses for a small cohort of subpostmasters?
Richard Callard: It did occur to me, which is why I was reasonably comforted by the investigations into each individual case. So Interim Report says no systemic errors, that’s – get that. But then, Post Office is still looking at the individual cases where, as I said, I wasn’t really – I didn’t get hung up on the word “systemic”. If there’s an error, what I hoped would be found – or not found, either way – is a clear error in Horizon that could be shown to cause a loss, whether it’s systemic or not or repeats or not.
Mr Henry: You had a growing number of subpostmasters who were complaining but bugs, errors and defects – using their own language – but that they were getting losses?
Richard Callard: Mm-hm.
Mr Henry: You did not get a grip on that, did you?
Richard Callard: I was looking for Post Office to get a grip on that and what I understood the Mediation Scheme and the investigations were about were about exactly that: understanding what had happened at that particular – for that particular subpostmaster, which was investigated by Post Office and then investigated by Second Sight. So, to my mind, those instances where it might be just single one-off were being investigated and, if there was a problem, I hoped, with the combination of Post Office and then Second Sight looking at it, that that error would be found.
Mr Henry: We’ve heard that, at the end of this sorry tale in 2019, Tim Parker said that 959 people had been prosecuted on Horizon evidence. Did you ever ask for data and statistics to explore the percentage of subpostmasters who were being prosecuted apparently on the basis of dishonesty?
Richard Callard: That figure was provided at the first Board I observed in February 2014.
Mr Henry: Did it not occur to you then that this is extraordinarily high?
Richard Callard: Well, I didn’t consider it extraordinarily high. I reflect, in hindsight, that I –
Mr Henry: Why didn’t you?
Richard Callard: Well, hang on –
Mr Henry: It’s vastly over the normal norm of dishonesty in a business.
Richard Callard: Sorry, the percentage that I understand was 0.1 per cent, which I should have benchmarked but it felt very low because the Post Office is vast. And so there’s – well, you’ve heard the 68,000 users, et cetera, et cetera. The way I had it in my mind with regard to the Mediation Scheme was that there were 136 subpostmasters, which spread over 14 years’ worth of Horizon’s existence was 10 a year, versus 68,000 users. And, in fact, there had been over almost 500,000 users over those 14 years. So that figure didn’t seem high to me.
Mr Henry: But there were much more than 10 being prosecuted per year.
Richard Callard: Oh, sorry, I was talking about the – yes, you’re right.
Mr Henry: There were 40/50 people being prosecuted –
Richard Callard: 40/50, yes, which is less than 0.1 per cent. So that didn’t strike me as being particularly high. In retrospect, I should have benchmarked it.
Mr Henry: Can I move on to the second point. Prior to becoming the Head of the Shareholder Team and the Shareholder NED for the Post Office, you were part of the Royal Mail Shareholder Team. So you were aware of the background of the conjoined asset, weren’t you?
Richard Callard: Yes.
Mr Henry: Were you part of the Royal Mail Shareholder Team during the flotation?
Richard Callard: Yes. I had two specific roles in that.
Mr Henry: Right. So what did you know, at that stage, about the risk of wrongful prosecutions for which the Royal Mail Group would have been held responsible and unjust civil liabilities foisted on the subpostmasters; what did you know, at that stage, in the run-up to the flotation?
Richard Callard: I knew nothing about that because I was looking after the State Aid application to relieve the pension fund and I was dealing primarily with the set-up of the Employee Share Scheme.
Mr Henry: In your career, however – you are capable of expressing an opinion on this – the risk surrounding or emanating from the postmasters’ legals actions, their complaints, ought to have been unequivocally stated pre-flotation, shouldn’t they?
Richard Callard: It depends, I suppose, where the liability for those – for that action, where that lies, whether it was – because there was a lot of work to be done around how one separates Royal Mail and Post Office.
Mr Henry: Take it from me that the liability would have lain with Royal Mail Group. That is not in contention.
Richard Callard: Okay.
Mr Henry: Now, that ought to have been unequivocally stated pre-flotation, shouldn’t it?
Richard Callard: I don’t know the listing rules, I’m afraid. So I don’t know.
Mr Henry: Well, can I ask you, please, about this. Mr O’Sullivan was questioned about a document, the minutes of a Shareholder Executive Board Meeting, from 13 March 2013, and various risks related to the RMG flotation were discussed but nowhere at all did the ShEx Board recognise the risk that Horizon prosecutions were, or may have been, wrongful and presented a risk to the flotation. Can you think of an explanation for that: that the SPMs’ wrongful prosecutions and unjust civil liabilities escaped the ShEx Board’s attention?
Richard Callard: No, I suppose it depends on the – it was before my time on Post Office. It depends on what ExCo were being told by the Shareholder Team at the time.
Mr Henry: So it would have depended upon that?
Richard Callard: Well, yes, because –
Mr Henry: Right. Right.
Do you accept, having reflected on your evidence and what has been put to you today, that in your twin roles as head of the Shareholder Team and Shareholder NED for the Post Office, you lost all objectivity?
Richard Callard: I don’t think I lost all objectivity. I think what I was doing was looking at the evidence that was being presented to me, which included that it had been looked at by Second Sight and the likes of Deloitte, which I accept I missed, and making a judgement.
Mr Henry: You say you don’t agree that you lost all objectivity, but do you believe that your objectivity was markedly compromised?
Richard Callard: I’m not sure that I do.
Mr Henry: Well, let me put it to you that Sparrow was a cynical containment strategy – that’s what it was – and, in fact, in internal documents by the Post Office, it has even been referred to as a “containment strategy”, and you were part of that?
Richard Callard: No, I wasn’t, and the discussions I was party to at the Board, it was very clear that the Non-Executive Directors clearly wanted to understand whether their Electronic Point of Sale System was safe or not.
Mr Henry: Can I take you to UKGI00019859. You did not write the email that I’m going to take you to initially, which is from Tim McInnes.
Richard Callard: Yes.
Mr Henry: But he is writing about a meeting with Baroness Neville-Rolfe and he states – I’m not going to read out the whole thing but, in general, there is a certain tone of derision towards the Minister. But let’s go to the second bullet point:
“As she has mentioned before she thought that Horizon was another example of a Government IT debacle and that innocent subpostmasters were the victims. Clearly this is wholly untrue in two respects, probably untrue in a third.”
Then:
“When Paula/Al were explaining things she jumped to an understanding and it was difficult to bring her back from that first impression/correct her.”
Then I omit words but you can read for yourself the remaining bullet points.
Richard Callard: Mm-hm.
Mr Henry: Can I go to your response at the top, please. What did you mean by “Positively Wilcox-ian”?
Richard Callard: If you look at the first bullet point below, “There’s clearly still some confusion about what is Royal Mail and what is Post Office”. Baroness Wilcox was our Lords Minister, and we often had to – well, we had to explain the difference between Royal Mail and Post Office, as indeed we do with most people, including myself, before I joined Government. People aren’t clear.
Mr Henry: I see. So that’s that they’re both peas of the same pod; Tweedledum and Tweedledee; they make the same mistake?
Richard Callard: No – well, we’re making the same mistake because, before I joined ShEx, I didn’t know the difference between Royal Mail and Post Office, to be honest.
Mr Henry: The Minister, however, got it right, didn’t she –
Richard Callard: She did.
Mr Henry: – over that bullet point?
Richard Callard: Yeah.
Mr Henry: But the whole team was there. It was you, it was James – is it Baugh –
Richard Callard: Baugh.
Mr Henry: – Michael Dollin, Laura Thompson – who obviously had very close contact. This reflected the groupthink, didn’t it, that Horizon is safe, these postmasters are on the take, or attempting to be on the take?
Richard Callard: This is by what, June ‘15? By that point, there had been almost three years of investigation into Horizon and I’m –
Mr Henry: I’m asking you about the groupthink.
Richard Callard: Okay.
Mr Henry: I’m asking you about whether this reflects a cynical, close-minded approach to the postmasters.
Richard Callard: I think it reflects the data points that we’d received, and the consistent reassurances that we’d had from Post Office, and our understanding of the things we’d read from Second Sight and the things I’d seen from Deloitte by that point.
Mr Henry: So you were looking at it at a very high level as befits, I suppose, your training as an accountant, that it was the data; the humans who were expressing this sorrow, they didn’t count?
Richard Callard: Well, they do count, of course they do. But I can only see the – I’m asking – well, I can only judge it based on the data that I’m seeing –
Mr Henry: I see.
Richard Callard: – after three years of investigation.
Mr Henry: Can I go to another document, please, which is UKGI00019531. Could we scroll up, please. This is “Sparrow Questions”, and we can see that it’s in December ‘14:
“… Patrick [it must be a reference to Bourke] is holding the pen on this …”
Then can we scroll further up, please, from you, yes. Do you see the pro-penultimate paragraph which begins “I would be happy to discuss these”, and then it says:
“Even if we don’t speak publicly of some of the questions needed in here, we still need the answers to provide Jo privately with the confidence to rebut James Arbuthnot’s claims. Although we have kept her sighted on the scheme, there has clearly been a limit to what we could tell her given confidentiality reasons to date.”
Richard Callard: Yes.
Mr Henry: Here, the Minister is being used as a cannon to fire your cannonballs, isn’t she, even though she isn’t fully in the picture?
Richard Callard: No, what this is a reference to is the confidential nature of each mediation. It was agreed that details of each mediation would be kept confidential because they related to very personal circumstances, and Government’s point of view was always “We didn’t really want to go into that”.
So the reference here is “we [can’t] speak publicly”, is that where there are questions – or where there are points made by James Arbuthnot in the debate forthcoming, we cannot rebut those or respond to those using specific examples of specific cases because they are confidential but it may be that in private we can explain those to Jo, so she understands when she stands up and has the confidence.
Mr Henry: You wanted short and punchy rebuttal of James Arbuthnot. That’s what this email says, doesn’t it:
“It would be helpful if answers are short and punchy …”
Richard Callard: Of course because –
Mr Henry: Well –
Richard Callard: – you have to have short and punchy responses in a debate. But that’s just the way lines are written.
Mr Henry: You have constantly, throughout my questions, talked about, you know, that you were relying on Second Sight and you were taking comfort from Second Sight, et cetera, et cetera, et cetera. I suggest that that’s rank hypocrisy: you wanted to get rid of Second Sight, didn’t you, Mr Callard?
Richard Callard: I felt that they were holding up the Mediation Scheme’s work because there were two of them versus 20-odd investigators at Post Office. So that’s why, in the Sparrow Subcommittee, we were looking at those sorts of things, because we were getting inbound letters from, for example, Sir Alan Bates, saying it’s not going quick enough. Meanwhile, from our perspective, Second Sight aren’t getting through the cases.
Mr Henry: In fact, actually, nobody could have been prouder than you when the mediation was brought to an end and Second Sight were terminated; isn’t that right?
Richard Callard: Well, mediation wasn’t brought to an end.
Mr Henry: Well –
Richard Callard: Well, hang on. So it’s always mischaracterised as the Mediation Scheme was stopped. The Working Group, which was there to triage cases into mediation, was disbanded because there was the presumption of mediation, which is, as I understood it, a position that James Arbuthnot and Sir Alan Bates had been calling for.
Mr Henry: Right. Well, let me rephrase it and, by the way, when you said that Second Sight, there were only two of them, they had more people working on it, and you, of course, as well, were short resourced and so, therefore, other people had to be brought in.
But let me go to my last document and I will finish on this. It’s UKGI00003792. Second Sight have been terminated. It’s been managed well in the house. There hasn’t been too much fallout, if any at all, in the media following Prime Minister’s Questions.
We can go through the whole of this but I’m sure you’re familiar with this email chain, so I’m going to take it going straight to the top, after Alice Perkins saying that Alwen Lyons, Neil McCausland, et cetera, et cetera, Alasdair Marnoch, Mark Davies, et cetera, have all done a brilliant job, “Mark and Jane … brilliant job”, so Mark Davies and Jane MacLeod, et cetera, et cetera, you write to Laura Thompson, your colleague, and say:
“Let’s just say that we are the unsung heroes!”
Your smug satisfaction that you had got rid of Second Sight and that you had managed it so well in Parliament –
Richard Callard: Well –
Mr Henry: – isn’t that right?
Richard Callard: I’d say there’s two points on that. The first one is Second Sight were retained to finish investigating all of the cases in the Mediation Scheme and they were also retained to finish off and publish their Part Two Report; so that’s the first point. The second point is this was an off-the-cuff remark to Laura about how Alice was thanking Mark for all the work he was doing in managing the media and Parliamentary scrutiny that this was going to get and didn’t thank or didn’t consider the fact that Laura had been working long hours in the background at the Government end. And that was not a unusual occurrence where, you know, we’d be the first to get moaned at by Post Office but we wouldn’t get thanked.
Mr Henry: I’m not concerned so much at Mrs Perkins’ lack of politeness or consideration towards either you or Ms Thompson. It’s reflecting, is it not, the fact that this was your agenda, the two of you, “Let’s just say that we are the unsung heroes”?
Richard Callard: It’s –
Mr Henry: That you were an integral part of the agenda to get rid of Second Sight?
Richard Callard: A decision had been made to – in an effort to speed up mediations that there be a presumption of mediation, which –
Sir Wyn Williams: I think I’ve got this point as well, gentlemen. All right?
Thank you very much, Mr Henry.
Questioned by Sir Wyn Williams
Sir Wyn Williams: I’ve got one question for you, or it may be more than one.
Did I hear you correctly tell Mr Henry that at either the first or one of the first Sparrow Subcommittee meetings there were, you were actually provided with the information that there had been 950, or thereabouts, prosecutions in reliance upon Horizon data?
Richard Callard: No, what I said was that there’s a Board paper – the Board – the first Board I observed was in February ‘14. The first item in that Board was a paper on the new prosecutions policy. In that paper there was some history and I think the statistic in there was that there were 50 – generally speaking, 50 prosecutions a year, which equated to 0.1% of the users of Horizon, or something like that.
Sir Wyn Williams: I just want to be clear because did that paper acknowledge, either expressly or impliedly, that the 50 prosecutions per year were in reliance upon Horizon?
Richard Callard: I don’t know. I think it was –
Sir Wyn Williams: Right, okay.
Richard Callard: I think it was just about prosecutions generally and what Post Office – following the Cartwright King review, where Altman had said it’s anachronistic to bring your own prosecutions, the Board that I was to join was reconsidering that policy.
Sir Wyn Williams: All right. That’s fine. Thank you very much.
I think that brings an end to the questioning, does it not, Mr Beer?
Mr Beer: Yes, it does, sir.
Sir Wyn Williams: So thank you, Mr Callard, for your very detailed witness statement and for answering questions during the course of the day. The Inquiry and I are very grateful that you have done that.
The Witness: Thank you.
Mr Beer: Sir, I think it’s 12 noon on Monday, with Sir Stephen Lovegrove.
Sir Wyn Williams: That’s my understanding, too. So we’ll adjourn until then.
Mr Beer: Thank you, sir.
(3.48 pm)
(The hearing adjourned until 12 noon On Monday, 15 June 2024)