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BOARD
Postmaster Litigation
Author: Jane MacLeod / Rodric Williams Sponsor: Jane MacLeod Meeting date: 17 May 2016
Executive Summary - Subject to Legal Privilege
Context - Bates & 90 Others v. Post Office Limited
1. On 11 April 2016, 91 (mostly former) postmasters issued a High Court Claim
formally starting a court case against Post Office (the “Claim’”).
2. The Claimants have until 11 August 2016 to “serve” the Claim Form, which will
trigger Post Office’s obligations to respond to the Claim through the Court. We
have however been provided with a copy for information only.
3. The Claim Form contains very little information. However, on 28 April 2016 the
Claimants’ solicitors (Freeths LLP) sent a 53-page “Letter of Claim” setting out the
allegations in more detail (the “Letter”). Court Protocol requires us to respond to
the Letter before the Claim passes to the Court for formal case management.
4. The Claim potentially poses significant legal, financial, operational and reputational
risk to Post Office.
5. This paper:
- summarises the status of and next steps in the Claim; and
- provides an initial overview of timing, costs and affected stakeholders.
Questions addressed in this report
« What are the Claimants alleging?
« What process will the Claim follow and over what time frame?
e What are the estimated costs of responding to the Claim?
« What are Post Office’s objectives for the Claim?
« Who are the stakeholders?
What are the Claimants alleging?
6. The Letter sets out the bases on which the Claim will be made. Despite its length,
there is nothing new or surprising in the Letter, and it does not set out how much
the Claimants are claiming or how they propose calculating that amount.
7. Much of the Letter focuses on technical points of law, with the main focus being
the relationship between Post Office and postmasters, seeking to place greater
responsibility on Post Office for branch accounting difficulties.
8. Apart from some generalised statements, there is no allegation that there is a
systemic failure in the Horizon software. Rather, the Letter claims that because
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Horizon has the potential to cause discrepancies in branch accounts, Post Office
should not have relied on it so heavily and done more to investigate it as a possible
source of branch shortfalls.
Other familiar allegations include poor training/support, the ability of Fujitsu to
alter remotely branch transactions, improper criminal prosecutions, and putting
undue pressure on postmasters to make up shortfalls.
What process will the Claim follow and over what time frame?
The Letter
10.
11.
The Letter asks Post Office to respond to the issues raised and agree in principle
to a “Group Litigation Order” (“GLO”) so issues common to the Claimants can be
efficiently managed through the Court.
10.1. There are practical and tactical implications for agreeing to a GLO which
will substantially influence the way the Claim proceeds. For example, Freeths
may not be able to fund the litigation if we can show the individual claims are
not sufficiently common for a GLO. Equally, an early favourable ruling on an
issue we want to treat as common (e.g. the effect of a criminal conviction or
limitation period) could reduce the number of claimants and thus the economic
viability of the litigation.
10.2. Post Office is therefore entitled to know more about the Claim and the
purported common issues before making any decision about a GLO.
Freeths have questioned whether Post Office would be prepared to mediate these
claims. At this stage it is not possible to form a view as to whether mediation
would be viable in some or all of the cases. However we will keep under constant
review whether options to mediate or settle would provide a better outcome for
Post Office.
The Claim
12.
13.
14.
15.
Freeths need to decide by 11 August 2016 whether to serve the Claim Form and
start the formal Court procedures.
Set out at the Appendix to this Report is an “Estimated Litigation Timetable”, which
sets out the main steps in standard litigation through to trial, assuming the Claim
Form is served during August 2016.
The Court’s procedures are designed to examine the issues rigorously, and
accordingly take time. Assuming that this case follows standard procedures, the
Claim might not come to trial until November 2018. Whether or not the Claim
proceeds under a GLO could impact substantially this timeframe, e.g. the standard
timetable may not start to run until the GLO issues are finalised, which could take
some months, or the litigation may not proceed at all if no GLO is made.
The Court's procedures provide for regular assessment of the Claim and the risks
and benefits of continuing with it, which ensures that the vast majority of cases
are settled before trial.
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What are the estimated costs of responding to the Claim?
16. The Court actively manages costs due to the resources litigation consumes and the
“loser pays” presumption which requires the unsuccessful side to pay a substantial
portion of the other side’s costs (typically 65% to 90%). The Court’s processes
also require “front end loading” where significant costs are incurred at the
beginning of a claim to narrow down the issues and save costs overall.
17. We estimate that responding to the Letter in a robust and proportionate manner
will incur external legal costs at approximately the same rate as during the Sparrow
Mediation Scheme, i.e. £30,000 to £50,000 per month for the next three to six
months. More detailed costings will be provided and updated as the Claim
progresses.
18. Should the matter proceed to a full trial, Legal costs and expenses for the Claim
could easily exceed £1million, particularly if the performance of the Horizon system
itself becomes a key issue. By way of reference, Post Office successfully defended
at trial a 2006 “Horizon”-related claim brought by one former agent, the costs of
which exceeded £300,000.
What are Post Office’s objectives?
19. The Claim challenges a critical part of Post Office’s business - how we engage with
our postmasters, and how we allocate risk and responsibility for the Post Office
transactions, cash and stock they handle.
20. Even though most of the Claimants are former postmasters, the Claim raises issues
in respect of current and future b.a.u. activities (e.g. branch accounting, agent
contract management, and debt recovery) because it concerns the core branch
accounting principles and systems, including Horizon, currently in use.
21. We therefore see two main objectives in responding to the Claim:
21.1. Proportionately manage Post Office’s legal defence.
21.2. Protect the Network going forward so that Post Office and current agents
have confidence in our systems.
Stakeholders
22. The Claim will have a wide impact on Post Office, affecting Network, Finance and
the FSC, IT (including our relationship with Fujitsu), HR, Legal and
Communications, each of which will help inform Post Office’s defence.
23. Other stakeholders will be interested in the Claim, e.g. BIS and the NFSP.
However, the involvement of external stakeholders should be limited to appropriate
updates provided as part of an agreed communications plan so as to maintain legal
privilege and confidentiality in the legal advice we receive and the strategy and
tactics adopted in our defence of the Claim.
Input Sought
The Board is requested to note the content of this paper.
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Appendix - Estimated Litigation Timetable
Step Estimated Proportion
completion of overall
date work
1. Pre-Action Correspondence: Initial investigations into alleged August 2016 5%
issues and correspondence between the parties to establish the
basis for the claim and the defence
2. Claim Form served: Legal proceedings are formally begun with August 2016
service of the Claim Form on Post Office
3. Statements of Case: Each party produces formal Court January 2017 10%
documents setting out their legal positions. The SPMRs will produce
a Particulars of Claim. Post Office will then produce a Defence. The
SPMRs will then file a Reply to the Defence.
4, Case Management: The Court orders the steps to be undertaken April 2017 5%
before trial and a timetable for their completion. This may require
multiple short Court hearings.
5. Formation of the Group: The SPMRs will apply for formal June 2017 5%
recognition that their claims form a Group Action. The Court will
define the issues common to the Group and set a deadline by which
further Claimants may join the Group.
6. Disclosure: All parties are required to search for relevant November 2017 25%
documents and provide those documents to the other parties
7. Witness statements: All parties must draft and exchange March 2018 15%
statements setting out the evidence to be given by each of its
witnesses.
8. Expert evidence: Parties commission experts to investigate and July 2018 15%
report on technical issues (eg. Horizon). Reports are exchanged
and meetings held between experts to narrow the points of
disagreement.
9. Trial: A trial will likely take several weeks and require several November 2018 20%
months of preparation.
40. Judgment. It will likely take a Judge several months to consider I February 2019
the case and draw up the judgment.
Notes
Step 5: Formation of the Group could occur at an earlier stage and possibly before Step 3: Statements of
Case. This depends on how the SPMRs wish to proceed.
The above timetable assumes that all points of dispute will be considered in one single trial. It is possible
that certain discrete or preliminary points may be dealt with separately at an earlier stage. If there
are any preliminary hearings these will likely occur before Step 6 and will the delay the above
timetable by 3 - 6 months.
Following Step 10: Judgment, there is the possibility of an Appeal and there will also be costs proceedings.
These could take a further 6-12 months.
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