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CONFIDENTIAL AND LEGALLY PRIVILEGED
POST OFFICE GROUP LITIGATION
Steering Group Meeting: 11 September 2017
LITIGATION STRATEGY OPTIONS.
Bond Dickingow
This paper sets out the strategic options for the future management of the Post Office Group Litigation. It summarises the advice provided in the Steering
Group paper presented on 11 September 2017.
Our recommended approach is Option 2 combined with Option 3.
OPTION
BENEFITS
RISKS
1. Focus on Horizon
Push the Court to address at an early
stage whether Horizon is robust and
accurately records branch transactions.
Recommendation: We do not believe it
is possible to address this issue without
first establishing Post Office's legal
obligations in relation to Horizon (see
Option 2).
e Asuccessful Court decision on this issue would lessen
the strength of all Claimants’ claims (though not as
much as Option 2 — see below).
e Horizon is the high profile issue that attracts the media
attention — a successful result would reduce media
noise / chatter in the network.
e Losing this point is not fatal to Post Office's overall
legal case as it may still be successful on the
contractual issues (Option 2) and / or on the facts of
any individual case.
e Losing this point is unlikely to cause an existential
problem for Post Office. It will however create the
need to rapidly fix any identified problems in Horizon
(or migrate to a new system) and that will come with a
significant cost and create major short-term
commercial problems.
e The Claimants cannot just point the finger at
Horizon with no legal basis for their complaints.
They need to ground their claims in the postmaster
contracts by showing that there was some legal
obligation on Post Office to maintain Horizon to a
certain standard. Without clear legal obligations, a
Court cannot determine whether Horizon meets
those obligations. We therefore do not believe that
a Court will be attracted to tackling this issue at an
early stage.
* The above issue also means that we do not know
exactly what disclosure and evidence is required,
which could lead to very wide disclosure being
given at a very high, and potentially wasted, cost.
Expert evidence on Horizon will also be very
expensive. This lends weight to tackling another
issue first.
2. Focus on contractual issues
Push the Court to address at an early
stage whether the postmaster contract is
fair and whether it supports Post Office's
current operating practices.
« Asuccessful Court decision on this issue would
seriously undermine all Claimants' claims.
e Moreover, it would establish the principle that Post
Office's contracts are fair and support the way Post
Office has been operating for the last 20+ years.
e Having established this principle, it will be easier to
settle the claims without opening the floodgates to
« The Claimants’ arguments on the postmaster
contracts are not without merit. There is a chance
that they might be successful, in which case Post
Office would be left in a very difficult commercial
position (see our previous advice on possible worst
case outcomes and the possibility of an existential
crisis for Post Office).
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Recommendation: This is our
recommended approach in conjunction
with Option 3.
claims / complaints from other postmasters.
On Post Office's best case it accepts that it had
some responsibilities to support postmasters, albeit
to a lower standard than that sought by the
Claimants. Winning the contractual arguments will
therefore not determine the whole litigation but will
leave the Claimants with much more difficult claims.
There are dozens of sub-issues that are connected
to the postmaster contracts. There is therefore
unlikely to be a binary win/lose outcome, with Post
Office being successful on some points and losing
others.
3. Focus on weak claims
Ask the Court to strike out Claimants who
are facing legal and procedural
problems, such as their claims being out
of time, having previously signed
settlement agreements or generally
having very weak claims on their own
facts.
Recommendation: We do not believe
that a Court would focus on these
satellite issues in insolation as this would
not tackle the major issues at the heart of
litigation. They could however be
addressed in conjunction with Option 2.
A successful result on these satellite points could see
over 200 of the 522 Claimants being struck out. This
would make settlement easier / cheaper.
It sends a message to the Claimants that Post Office
will not allow weak and poorly presented claims to
survive in this litigation.
Some early victories might shake the confidence of the
Claimants and their litigation funder.
The Claimants are trying to portray themselves as
having been oppressed by Post Office. Getting some
of the weakest and most unattractive claims in front of
the Court at an early stage, especially those where
there is clear theft or dishonesty, might re-balance the
Court's views on the general fairness of Post Office's
position.
The downside with this approach is that it is
piecemeal. It will require lots of satellite issues to
be run in parallel. The Court may not want to do
this as it may see it being very burdensome for the
Court to manage (and Judges are very
conscientious about the use of Court resources).
It may also cause Post Office to incur costs on
matters that only have a micro effect on the overall
dynamic of the litigation.
It will not give Post Office a victory on a key point of
principle and so may not quell media noise or
complaints from other postmasters.
4. Settle now
Try to agree a settlement now that closes
down the litigation at an early stage.
Recommendation: This option is not
recommended as it would result in Post
Office having to pay significantly over the
An immediate settlement avoids the possibility of an
adverse Court decision under Options 1 and / or 2.
Asettlement avoids further legal costs (though these
are anticipated to be considerably less than the
amount of a settlement at this stage).
The claims have not yet been fully valued but early
indications place the valuation at around £100m.
This figure is however open to a large margin of
error and we believe it to be highly inflated. A
settlement now, without proper challenge to these
figures, would lead to a much higher settlement
number.
Asettlement now would undoubtedly cost more
than £21m as that is the litigation funder's share of
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odds.
the winnings. The settlement would need to be
more than this for the Claimants to receive any
money.
Drawing the above two strands together, we cannot
see a viable settlement being reached in the short-
term without Post Office paying out at least £40m.
Settling now without any Court decision in Post
Office's favour may give the impression that Post
Office has a weak legal position. This may
encourage new claims against Post Office or give
postmasters an excuse to run up losses in
branches.
A number of the Claimants have been prosecuted
and are looking for their convictions to be
overturned. A settlement with these Claimants
would cause their convictions to become unsafe.
Not settling with these Claimants may make
settlement as a whole impossible.
5. Attrition
Stretch out the litigation process so to
increase costs in the hope that the
Claimants, and more particularly their
litigation funder, decide that it is too
costly to pursue the litigation and give up.
Recommendation: This option is not
recommended as we believe the
pressure on, and cost to, Post Office
would become unbearable before the
Claimants gave up.
This approach avoids tackling at an early stage the
issues in Options 1 and 2 and therefore delays (but
does not avoid) the risk of an adverse Court decision.
In effect, this approach would mean agreeing with the
Claimants' current case management proposals which
set the litigation on a long course with no objective in
mind. This would limit arguments at the CMC.
The Claimants' litigation funder, Therium, is an
experienced funder with deep pockets. It will be
prepared for a long piece of litigation. So long as it
believes the merits of the case are favourable, it
can be expected to fund the litigation.
Over time the litigation will become more disruptive
to Post Office's business as more operating
practices are put under the spotlight and then have
to be overseen by lawyers in order to avoid
problems in the litigation process.
Although media reporting on this matter is presently
low key, there is increasing chatter in the network
and a feeling that the litigation may start to
dissuade individuals from being postmasters. This
will increase as the litigation continues without a
result in Post Office's favour.
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