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Annex A: Options for Ministers to consider
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Option
Advantages
Risks
1: Challenge the POL Chair and Board
to change their litigation, consider
opportunities for early settlement and
put in place an action plan.
SoS/Kelly Tolhurst could express their
dissatisfaction with the current status of
the litigation at a meeting with POL
leadership, following on from the Chair's
recent reply to Kelly’s letter. Ministers
could provide clear guidance to POL to
pursue early settlement of the case
(either after the Horizon case or after the
Court of Appeal).
e Provides clear guidance to POL on the
action the department wants them to
take.
e Begins the process of bringing the
litigation to a close as soon as is
possible.
e Making such a challenge would not
raise shadow director risks.
e Avoids adding more uncertainty and
delay by recruiting and embedding
new leadership.
e Risk that the Department's position is
leaked, which will weaken POL’s hand
in any settlement negotiation leading
to a more costly settlement.
e The relationship between the SoS and
the Board is set out in governance
arrangement (Articles of Association).
These enable the SoS to question and
challenge but there is a risk if SoS.
strays beyond the confines of the
Articles of Association and appears to
direct or instruct and the POL follows.
This could be considered as acting as
a shadow director. This only really
becomes critical in the event of
insolvency which is low in these
circumstances.
e Should POL feel they have to
implement SoS's view and settle
quickly at all cost this could increase
the likelihood of POL seeking BEIS
funding for settlement costs.
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Providing guidance to the Board has a
low risk of Ministers being regarded as
a shadow director
2: Commission POL to carry out a
project on how to structure and
operate a settlement — including a
fund which would subsequently
assess claims and award
compensation according to pre-
agreed criteria
Sends a clear signal on the direction of
travel for the settlement of the litigation
and would be a practical step towards
taking this forward.
Would begin to establish how any
settlement would be funded and the
potential costs to POL and BEIS
involved.
This is work that POL should be
undertaking as part of their settlement
strategy in any regard, so lessens the
risk of accusations of shadow
directorship.
None.
3: BEIS Ministers to state publicly that
they want to see justice resulting from
litigation for claimants with valid
claims
One opportunity for this would be the oral
evidence session for the BEIS Select
Committee inquiry on 25 June.
This would reinforce messages
already delivered through the ‘Dear
Colleagues’ letter and enable Ministers
to demonstrate that they are
sympathetic to the plight of
postmasters.
This would give Ministers the
opportunity to clarify their position on
litigation publicly.
It would require careful wording to
avoid the risk of BEIS being in public
conflict with POL potentially leading to
a higher financial settlement.
POL might believe that they are being
told to settle at all cost and act
accordingly.
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4: Challenge Post Office to announce
that it is taking on board some of the
legitimate criticisms in the judgments
to date and is taking action to address
them.
Statement could be made at the
conclusion of the Horizon trial (for
example).
Clear statement of a change of
strategy by POL and acceptance of
fault in some areas.
Will encourage Claimants and could
lead to a higher pay-out.
5: Put UKGI lead legal counsel (or
another legal adviser) on the POL
litigation sub committee as director or
observer
This would give Ministers additional
assurance that the POL litigation
strategy because it would be actively
scrutinised and challenged by
government legal advisors.
Ministers would have direct legally
qualified feedback from the litigation
sub-committee in addition to feedback
from the shareholder NED.
Shadow director risk if the appointee
gives instructions to the sub-committee
Director would have legal obligations
to act in interests of the company
6: Invite Nigel Boardman, chair of the Would give Ministers an additional e None
BEIS Audit and Risk Committee, to independent view of POL’s handling of
carry out some independent due the litigation and their ability to deliver
diligence on POL’s litigation strategy. any new litigation strategy.
We have informally taken soundings
from Nigel and he would be willing to
carry out this role.
7: Put in place clear information- This would emphasise the importance I ¢ None.
sharing arrangements through the
proposed Framework Agreement with
POL
of POL sharing information with
Ministers and BEIS in a timely way,
reflecting Government's shareholder
role.
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8: Go public with a stronger SoS
statement than in option 3, giving SoS
view against POL
Would enable Ministers to
demonstrate their support for the
postmasters’ cause.
Would be inconsistent with BEIS
position taken thus far that this is an
operational matter for POL. Would
bring further pressure on SoS to take
action when the only legal power he
has is to appoint/remove directors.
There is a significant risk that putting
the Department on the opposite side to
POL could hamper POL’s ability to
achieve a reasonable settlement with
the claimants and lead to an increased
pay-out.
Invites speculation/criticism that POL
is out of control in the handling of the
case and one of SoS’s few levers is to
criticise POL in public.
Given a SoS public statement POL
may feel they need to settle at all cost.
9: Change Chair/Board
Provides a clear signal of the
dissatisfaction you have with the way
the litigation has been handled to date,
and an opportunity to bring in new
leadership with a clear steer on the
direction Ministers want them to take.
Begins the process of resolving the
litigation, though the time required to
make changes will slow this down
initially.
POL has already changed the
management team by replacing the
Company's Chief Counsel and
fundamentally changing the legal
team. Further changes to the
leadership team will risk disrupting the
progress POL have been making in
other areas of the operation of the
business, including transforming the
business from loss making to returning
a profit for the first time in 16 years.
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Ultimate responsibility at the company
for the litigation rests with the Chair.
Replacing the Chair needs to be seen
against the background that he is
generally viewed as having done an
excellent job in steering the Company
through its transformation over recent
years.
BEIS Ministers have appointed many
of those currently in post on the board,
with the Chair having been
reappointed only last year. (See Annex
B for further background on the level of
churn in POL at senior levels.)
Risk of legal challenge (and
associated cost) from those who have
been dismissed from the board if they
feel they have been dismissed unfairly.
This risk is considered low.
10: Change management team
Provides a clear signal of the
dissatisfaction you have with the way
the litigation has been handled to date,
and an opportunity to bring in new
leadership with a clear steer on the
direction Ministers want them to take.
Begins the process of resolving the
litigation, though the time required to
make changes will slow this down
initially.
Ministers only have the power to
appoint the two Board level members
of the management team, the CEO
(where a recruitment is ongoing) and
the CFO, so cannot make wholesale
changes to the management team.
POL has already changed the
management team by replacing the
Company's Chief Counsel and
fundamentally changed the legal team.
Further changes to the leadership
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team will risk disrupting the progress
POL have been making in other areas
of the operation of the business,
including transforming the business
from loss making to returning a profit
for the first time in 16 years.
Ultimate responsibility at the company
for the litigation rests with the Chair.
Replacing the management team
would therefore have less impact on
the litigation than replacing the Chair.
Risk of legal challenge (and
associated cost) from those who have
been dismissed from the leadership
team if they feel they have been
dismissed unfairly. This risk is
considered low.
11: BEIS to take shared responsibility
for the litigation by instructing
BEIS/UKGI legal advisors to play an
active role in development and
delivery of the litigation strategy,
working directly with POL’s legal
advisors, in consultation with POL
BEIS would have control of the
litigation strategy and action taken
Likely to significantly damage the
relationship between the department
and POL, displaying a lack of trust in
POL’s ability to deliver.
Ministers would be directly responsible
for the conduct of the claim and
compensating claimants. Ministers
could no longer argue it is an
operational matter for which POL is
responsible. Political pressure for a
generous settlement would increase.
Taking this action would likely to
become known to the claimants which
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would weaken POL’s negotiating
position in any settlement discussions
leading to a higher pay-out in
compensation.
Serious questions over the
feasibility/legality of this option. It
would require POL’s agreement and
ongoing cooperation as POL would
have access to all the information on
the cases including the involvement of
their employees. POL would have
limited incentive to cooperate and
might ask BEIS to fund any settlement
in exchange for handing over conduct
of the case. External legal support
would be required as BEIS/UKGI
Legal would not have the necessary
litigation expertise or capacity.