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Group Litigation
Author: Jane MacLeod Meeting date: 18 March 2019
Strictly Confidential and Subject to Legal Privilege
Executive Summary
Context
The decision in the Common Issues Trial was formally handed down on Friday 15 March
2019. As the Board has previously been advised, Mr Justice Fraser has found against
Post Office on the majority of issues. Post Office is considering appealing this decision,
and in addition the Board is being asked to consider whether Post Office should make
an urgent application for the Mr Justice Fraser to recuse himself on the grounds of
potential bias.
Questions this paper addresses
. Should we appeal the Common Issues Judgment?
. Why would we consider an application for the Judge to recuse himself?
. What are the risks & benefits of such a proposal?
. Should we consider changing our legal advisers?
Conclusion
1. Work is underway to prepare for an Appeal, however my initial recommendation -
supported by the views from David Cavendar QC and Lord Neuberger QC, is that
we should appeal the Common Issues judgment. The grounds for appeal will
include whether the Judge has correctly applied the law in relation to contractual
interpretation; and whether in his conduct of the trial there has been a "procedural
unfairness".
2. In addition the Counsel team recommend that we bring an application for Mr
Justice Fraser to recuse himself on the grounds of bias given the material risks to
the outcomes of the Horizon, third, and fourth trials.
3. Such an application is not without significant legal and reputational risk. However
on balance, my view is that the risks of not making the recusal application
(particularly the risks in relation to the successful prosecution of the Horizon and
subsequent trials) seem to outweigh the risk of the application itself, although the
Board may weigh the reputational issues differently.
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4. I recommend that any recusal application should be undertaken by Lord Grabiner
QC; that the Appeal should be undertaken by David Cavender QC supported as to
advice and strategy by Lord Neuberger QC; that we retain David Cavender QC and
Antony de Garr Robinson QC in relation to the third and fourth trials; and that we
retain Womble Bond Dickinson as instructing solicitors given the very real risks of
changing firms midway through a very tight trial timetable.
Input Sought
The Board is asked to consider and approve the proposed Recusal application, and
endorse the proposals in relation to the appointment of Counsel and instructing
solicitors for each of the subsequent stages of the litigation.
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The Proposal
Background
5. Post Office welcomed the making of the Group Litigation Order in 2016 as providing
an opportunity for the allegations made around Horizon to be considered and
resolved through a Court process. As has been stated frequently, the case
represents the culmination of a series of campaigns by disaffected postmasters
and others (including a number of MPs on both sides) who believe that Post Office
wrongly attributed branch losses to those postmasters and that as a result, they
suffered financial and reputational harm. A theme of these campaigns was that
flaws in Horizon (the in-branch point-of-sale IT system) were the cause of these
losses.
6. This is also stated in the recent Common Issues Judgment:
“the Claimants’ case is that the Horizon system contained, or must have
contained, a large number of software coding errors, bugs and defects, and as a
result of this threw up apparent shortfalls and discrepancies in the accounting of
different branches. Alleged shortfalls in the Claimants’ financial accounting with
the Post Office are said, on the Claimants’ case, to have been caused by these
problems with the way the Horizon system operated, the training that was
provided to use it, and also a general failure of the Horizon helpline.” (paragraph
7)
7. Post Office position is now, and has always been:
e there is no evidence that suggests that there are systemic problems with
Horizon nor have we seen any evidence to suggest a technical fault in Horizon
resulted in a postmaster wrongly being held responsible for a loss;
e we accept that in individual cases, Post Office may not have met its own
standards as to the training it provided, the service or information provided
through the Helpline, or how it otherwise engaged with individual
postmasters.
8. The Group Litigation was structured to address these questions through a series
of trials:
e The Common Issues Trial (held in November) which was to address questions
of contractual construction in relation to the contracts between Post Office and
postmasters;
. The Horizon trial (currently underway) which was to test whether Horizon was
indeed robust;
e The third trial (November 2019) which has now been agreed will address
questions of limitation and calculation of damages, and
e A fourth trial (likely to be in April 2020) which will examine issues of breach,
causation and loss.
9. As the Board is aware, the judgment in the Common Issues trial has now been
handed down, and the Judge is very critical of Post Office - both as to our historic
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operations and behaviours, and our conduct of the case. He has also been very
critical of Post Office witnesses who he characterises as ‘extraordinarily partisan’.
Should we Appeal?
10. Post Office’s legal team (including myself) recommend that Post Office seriously
consider appealing the judgment. Work is underway to assess the options, and a
more considered view will be discussed at the Board meeting on Monday 25 March.
However the most likely grounds are:
e I Whether the Judge has correctly applied the law in relation to contractual
interpretation when considering the meaning of the Postmaster contracts; and
e I Whether in his conduct of the trial there has been a "procedural unfairness".
The Common Issues Trial was meant to be about contractual interpretation.
In law, what occurs after a contract is formed cannot be relevant to an enquiry
as to what the contract means. Yet Mr Justice Fraser makes wide findings of
fact on post-contractual matters which then influence his findings as to the
meaning and effect of the contract.
Why would we consider an application for the Judge to recuse himself?
11. Additionally, the language used in the Judgment and the findings as to fact and as
to the credibility of witnesses, suggest that the Judge may be biased against Post
Office. The legal team have therefore recommended that Post Office consider
whether an application should be made for the Judge to recuse himself on the
grounds of bias.
12. We have sought preliminary advice from Lord Neuberger QC on the question of
appeal and recusal: his opinion is attached. Additionally, as Lord Neuberger (being
a former Supreme Court Judge) cannot appear before the Court, we have taken
the precautionary step of instructing Lord Grabiner QC who would argue any
recusal application. Womble Bond Dickinson (‘WBD’) have prepared a note of
advice (also attached) which has been reviewed by David Cavendar QC and, at the
time of writing, is under review by Lord Grabiner. As will be seen from that note,
the legal team recommend making the application for recusal, and I support that
recommendation.
What are the risks & benefits of such a proposal?
Benefits
13. As set out in the WBD note, the reason for taking such a material step is to ensure
that Post Office receives a fair trial - particularly as regards the Horizon trial which
is underway and where we have some of the same witnesses giving evidence as
for the Common Issues trial.
14. While a successful appeal would go some way to mitigating the legal impacts of
the Common Issues trial, the timing of the appeal is such that the Horizon trial will
have been finished, and arguably the Third Trial (on limitation and damages) could
also proceed under the oversight of Mr Justice Fraser ahead of the appeal. If we
believe that the Judge is biased against Post Office, then potentially the outcome
of both of these trials is at risk if we do not seek to have him recused.
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15. As pointed out in Lord Neuberger’s opinion, there are also risks of not proceeding
with the recusal application to the extent that perceived bias underpins the
arguments for procedural and actual unfairness in the conduct of the case.
16. The risks of an adverse outcome on the Horizon trial are significant as they would
undermine the confidence of not only postmasters, but also upstream government
and other clients such as Banking Framework participants and bill pay clients.
While this is a risk of the Horizon trial in any event, the approach of the Judge to
Post Office witnesses and his apparent view that Post Office conceals information
about Horizon operational issues, increases that risk considerably.
Risks
17. There are both legal and reputational risks of proceeding with the application for
recusal. The legal risks (an unsuccessful application, which would further
antagonise the Judge, and material costs) are described in the WBD paper.
18. However there are significant reputational and stakeholder risks and these need
to be set against the legal benefits. Challenging a judge for bias — particularly in
these circumstances, will be seen as very aggressive behaviour by Post Office and
will play directly into the criticism that Post Office is oppressive in its behaviour
towards postmasters and in its conduct of the case, and will be construed as
running counter to the recent messaging following the judgment that ‘we are
listening’. It could potentially have much greater media coverage than the
judgment; will be heavily criticised by the CWU and vocal postmaster bodies, and
will drive further parliamentary activity from MPs of both parties.
Who will Represent Post Office in the ongoing legal actions?
19. As flagged above, we have instructed Lord Neuberger to provide us with
preliminary advice in relation to the appeal and recusal options, and have retained
Lord Grabiner who would conduct any application for recusal. This was to avoid
any impression that the application was being driven by a disgruntled advocate.
20. There are different options available in relation to an appeal:
e The normal practice on an appeal is for the same counsel (in this case David
Cavendar QC) to undertake the appeal as he prepared and presented the case
at first instance, conducted the trial whose judgment is being appealed, and
ise most familiar with the evidence presented, the process followed, and the
legal arguments put forward which together underpin the appeal rationale.
e _In our situation, we propose that this be supplemented by Lord Neuberger QC
who will be able to provide a unique insight into the thinking of the Court of
Appeal in relation to the developing trends for contractual interpretation.
e An alternative option is to instruct completely new counsel, however this has
the disadvantage of them not being familiar with the case or its background
(eg in our case there were a number of decisions made in case management
hearings that will be material) or the issues that occurred at trial.
21. Consideration should also be given to representation at the third and fourth trial.
Preparation for the third trial is underway and this will focus on limitation of losses
and basis of damages . Depending on the decision on representation for the
Appeal, and the timing of an Appeal:
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e Trial 3 and 4 could be led by either David Cavendar or Antony de Garr
Robinson (and the other would then be appointed for Trial 4 in March 2020).
This is our preferred option as these trials build on the knowledge and strategy
developed in the Common Issues Trial, and to a lesser extent, the Horizon
Trial.
e Alternatively, we could appoint a new trial team for trials 3 and 4, who would
bring a fresh perspective, however they would be at a disadvantage in terms
of timing and preparation.
22. The litigation strategy is firmly led by the external counsel team. WBD do the ‘leg
work’ to support this. I am aware that board members have queried whether WBD
remain the right firm given that they have been involved in these issues since the
beginning. Nevertheless this gives them a very deep understanding of the history,
the individual cases and the political sensitivity. I have queried privately with the
Counsel team whether they are properly supported by WBD, and have had
confirmation of this. No matter what firm we instruct, there will be some degree
of criticism, however WBD are a good match for Freeths, and bringing in a ‘Magic
Circle’ firm would only reinforce the ‘David v Goliath’ impression. While it would
be possible to bring in a new firm of solicitors, I would be reluctant to do this now
given the tight timeframes and the potential impact on the agreed trial strategy
and the ability to properly support the Counsel team.
23. We have recently re-tendered the legal panel and Norton Rose have been
appointed - not having had any previous engagement with Post Office. We have
instructed them to support the BAU rectification work which will assist in bringing
them up to speed on our more operational and contractual issues.
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