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Mr J Dionne
Chief Technical Officer
The Insolvency Service
The Insolvency 16" Floor, 1 Westfield Avenue
7 Stratford
Service E20 1HZ
http:/Awww.gov.uk/insolvency-service
Sir Wyn Williams
Chair of the Post Office Horizon IT Inquiry
By email:
posecretariat@postofficehorizoninquiry.org.uk
[GRO]
[GRO] insolvency.gov.uk
21 April 2023
Dear Sir Wyn Williams
Post Office Horizon IT compensation and bankruptcy
Further to the Inquiry hearing on 8 December 2022, and recently published Opinion
from Catherine Addy KC (‘Counsel’) on the impact of bankruptcy on the payment of
compensation, I thought it would be helpful to set out the Official Receiver’s position as
trustee and how the Insolvency Service has, within the confines of the law, assisted
individuals who have been subject to bankruptcy orders.
To provide some context, the Official Receiver, when acting as trustee, is an
independent officeholder, akin to a private sector insolvency practitioner; however,
Official Receivers are also civil servants under the employ of the Insolvency Service.
The Insolvency Service has been supported by legal advisors and it is reassuring that
the steps taken by the Official Receiver are consistent with Counsel's Opinion, as I set
out later in my letter.
As Counsel has highlighted, the impact of bankruptcy on the compensation schemes is
extremely complex but I would like to reassure the Inquiry that a dedicated team (“the
Team”), set up specifically for this matter, has worked hard to understand the schemes
and support the affected individuals during this extremely difficult time. The Team
continues to ensure that compensation, which is due to affected postmasters, is paid
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over in a timely manner, as well as keeping individuals informed of the status of their
cases where legal issues have taken time to resolve.
Historical Shortfall Scheme (“HSS”)
The Team has worked closely with the Department of Business and Trade (“DBT”), UK
Government Investments and Post Office Limited (“POL”) colleagues to understand the
nature of the scheme.
Identifying the cadre of affected individuals (numbering 65), our dedicated GOV.UK
page details how individuals affected should contact the Insolvency Service if they had
been subject to bankruptcy orders in England and Wales and what they should do if
they had been subject to insolvency in devolved administrations.
As trustee, the Official Receiver must act in accordance with their statutory duties and
the right to compensation under the HSS is an asset in the bankruptcy proceedings in
these 65 cases; however, the Team has worked with POL to understand the
apportionment of the compensation awarded between financial (for example, loss of
earnings) and personal loss (damage to reputation).
I note Counsel agrees with our approach (paragraph 15 of the opinion), that
compensation for financial losses vests in the bankruptcy estate and compensation
awarded for personal loss is due to the individual.
Once offers of compensation are made by POL, the Official Receiver’s office has been
contacting the former postmasters to help them understand the offers and the impact of
their historic bankruptcy. This includes directing them to independent legal advice and
exploring how, in appropriate circumstances, the individual might apply for the
annulment of the bankruptcy order.
To assist affected individuals, this position has been published on GOV.UK.
The Official Receiver, as trustee of the bankruptcy estates, acting in accordance with
their statutory duties must distribute realised assets for the benefit of creditors.
However, to minimise the impact on the compensation awarded for financial losses, the
Official Receiver has engaged with creditors to establish if they wish to waive their
claims to the compensation in these bankruptcies.
In the event there is a surplus from the vesting compensation, following the payment of
any statutory costs of the bankruptcy and any claims from creditors that wish to receive
a distribution from the compensation, the balance of funds will be repaid to the former
bankrupts.
There are some remaining matters which the Team is working with POL on; including
annulment applications where POL was the petitioning creditor for bankruptcy and/or
where POL has submitted a claim in the proceedings.
I note both matters were raised in Counsel’s Opinion and the Team will continue to
work with POL in order to progress such matters.
Group Litigation Order
Legal advice received concluded that in cases where former postmasters were
previously subject to a bankruptcy order and were discharged, neither the interim
payment nor any future payments under the scheme were due to the bankruptcy
estate. In the small number of cases where the Official Receiver is trustee, waivers
have been signed (as requested by DBT) to any compensation, which will be paid in full
to the former postmasters. This position aligns with the opinion expressed by Counsel
(paragraph 62).
Whilst legal advice was ongoing regarding the status of those formerly subject to
bankruptcy orders in making claims in the compensation process, and not wishing to
delay compensation being paid, the Official Receiver supported annulment applications
in three cases, progressing these in a timely manner. The applications were successful
and annulment orders were granted, resulting in the interim payment being able to be
paid directly to these former postmasters prior to December 2022.
The Team continues to work with the scheme administrators, DBT, to ensure these
payments are made without delay to the former postmasters.
Overturned Historical Convictions
The Team has worked closely with colleagues in DBT and solicitors that represent the
former postmasters.
In cases where former postmasters were previously subject to a bankruptcy order and
are now discharged, neither the interim payment, nor any future payments under the
scheme, are due to the bankruptcy estate. This aligns with the opinion expressed by
Counsel (paragraph 59).
The Official Receiver has additionally signed waivers to assist with payments being
made to the former postmasters without further delay.
I trust outlining the Insolvency Service’s position for each of the schemes assists the
Inquiry in understanding the complexity of the insolvency matters and the impact on the
Horizon IT compensation schemes. However, if the Inquiry requires any additional
clarification, I would be happy to assist further.
Yours sincerely
[GRO]
Mr J Dionne
Chief Technical Officer