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POST OFFICE LIMITED BOARD MEETING I
Strictly Confidential and Subject to Legal Privilege
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON 20
MARCH 2019 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 12.30 PM
Present: Other attendees:
Tim Parker (Chairman) (by telephone) Jane MacLeod (Group Director Legal, Risk and Governance
and Company Secretary)
Ken McCall (Chairman for the meeting) Mark Davies (Group Director Communications)
Tom Cooper Veronica Branton (Head of Secretariat)
Shirine Khoury-Haq Ruth Cowley (Norton Rose Fulbright) I
Carla Stent Glenn Hall (Norton Rose Fulbright) I
Alisdair Cameron
Apologies:
Tim Franklin, Paula Vennells. I
1. Conflicts of Interest Actions
A conflict of interest was noted in relation to Tim Parker in his role as Chairman
of the HM Courts and Tribunal Service.
A conflict of interest was noted in relation to Tom Cooper in his role as UKGI
Director, which as an executive part of government, should not be involved ina
decision which related to the judiciary.
Article 82 of PO Limited’s Articles of Association permitted the Board to
authorise a director in relation to any matter the subject of a conflict. The Board
determined that Tim Parker and Tom Cooper could be involved in the Board
discussions but should not participate in any decision on whether or not to seek
the Judge’s recusal.
Ken McCall reported that had spoken to Tim Franklin the previous evening and
that he and Jane MacLeod had received his views in writing.
It was reported that Paula Vennells could not participate in the call but had been
updated on the discussions.
2. Summary of discussion with Lord Grabiner
JM reported that a call had been held with Lord Grabiner QC earlier in the day
which a number of Board members had attended. Lord Grabiner had reviewed
the Common Issues Judgment and understood how it impacted on the current
and prospective trials. He had noted that the Judge had received several
warnings about allowing inadmissible materials but had chosen to do so and as
such had behaved improperly and was wrong as to the law. It was an unusual
case which was unusual procedurally.
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The test for recusal on grounds of apparent bias was considered from the
perspective of a reasonable observer. We would only need to argue apparent
bias, although Lord Grabiner believed that grounds existed to argue actual bias.
In his view there was no practical alternative to an application for recusal, and
the risk of not making the application was that the Court of Appeal (CoA) would
ask why we had not sought for the Judge to recuse himself. Lord Grabiner
agreed that there was a risk that the Judge would be emboldened if we lost the
recusal application but his position was already clearly indicated by his
Judgment and the damage from this had already been inflicted.
The Board requested that Lord Grabiner’s views be provided in writing. JM
3. Introduction from Norton Rose Fulbright I
The Board was advised that Norton Rose Fulbright had been engaged to provide
independent advice to the Board on the case as well as to provide assurance on
the steps being taken to address the operational and contractual issues raised
by the judgment.
Glenn Hall was a corporate lawyer with significant experience in mergers and
acquisitions. He had worked for the firm for 20 years but had been special
adviser to Greg Clark, Secretary of State BEIS, for the last couple of years, before
re-joining Norton Rose Fulbright recently.
Ruth Cowley specialised in commercial litigation and had been at the firm for
nearly 20 years.
4. Discussions on appeal, recusal and case management
The paper setting out the background to recusal and other issues which had
been circulated on 19 March 2019 was used as the reference point for the
discussions on recusal and appeal. Each director's view was sought and a
number of issues were highlighted:
«if the trials continued to be heard by a judge who had such strong views on
the conduct of Post Office Limited and the reliability of its systems, the risk
of an adverse outcome increased, as would the pool of individuals seeking
compensation. Existing and new agents’ perception of PO Limited would be I
damaged ij
«there was a significant potential liability which was hard to quantify because
of the terms which the Judge had found could be implied into contract and
the unfairness shown by the Judge in accepting inadmissible evidence to
which PO Limited had not been able to respond
¢ irrespective of whether the Judgment was in our favour we wanted to make
sure that any individuals who were found to have been treated unfairly had
restitution
© the consequences of losing on the reliability of the Horizon System were very
serious. The Board needed to see the potential range of penalties at
different trial stages to provide a roadmap
¢ a Judgment from the second trial which undermined the reliability of the
Horizon System could destabilise the business as it runs today. Our ability
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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential and Subject to Legal Privilege
to manage in branch cash could be adversely impacted if the ruling was that
our systems could not be relied upon
a follow on question to whether the Horizon System was reliable was how
we treated discrepancies in the System and if we were treating Postmasters
fairly where this happened today. It was noted that the system had changed
substantially in last 10 years. It was reported that most discrepancies were
due to human error, such as incorrect cash counting or putting a decimal
point in the wrong place. There was a team in Chesterfield which helped to
identify these errors and liaised with Postmasters and the banks. It was
recognised that we could improve our processes and be more transparent.
However, if we were getting banking transactions wrong routinely, we
would know this because the banks and their customers would be
complaining. This was accepted to be the case but it was AGREED that the
Board should have the facts and figures to be able to verify that position
we now had the opportunity to think more strategically about this case and
the final outcomes sought.
Information and discussions requested
1.
To provide a phased plan (e.g. over 30/60/90 days) covering the
operational,
financial and reputational issues we would be addressing. It was reported
that this work was underway and that a paper covering these issues should
be circulated by the end of the week. The executive would need to make
proposals on any operational changes, such as the liability clause in NCT
contract
We needed a clear view on whether the Horizon System worked properly
today. We had to be able to defend against others’ doubts of the reliability
of the System. This meant that we needed to be able to validate the
system error rate and what was acceptable in other industries with
transaction volumes of similar scale e.g. banks. It was reported that we
could provide sensible information about today’s system but it was much
more challenging to go back in time
A summary of previous investigations into Horizon and the related issues
would be made available.
TC would like to discuss the figures included in the paper with the
executive.
We needed to demonstrate a cultural shift in how we managed the case in
future. It was vital that we avoided any potential to be criticised further
for our behaviour.
We needed to carry out a critical analysis of ourselves. For example, what
did we need to do to be the right partner for Postmasters?
We needed to make sure that the written legal advice aligned with the
verbal advice received.
Decisions
Ken McCall asked whether the Board thought that it had received sufficient
information to take a decision on recusal and appeal. Directors confirmed that
while there was further information they would wish to see, as discussed and
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Executive
Executive
Executive
Todo: TC/
Executive
Executive
JM
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POST OFFICE LIMITED BOARD MEETING {
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requested for subsequent discussion, the information already received was
sufficient to allow a decision to be reached on recusal and appeal.
Norton Rose Fulbright’s input was also sought, accepting that RC and GH had
been given limited time to review the case. RC noted that from a legal
perspective, recusal was seeking to stem the flood of taint on future trials.
There were no other options to achieve this end and it would be difficult, if not
impossible, to seek recusal at a later stage. GH noted that from a broader I
director perspective there were risks of action and risks of inaction against the
background of where we were today. There would be consequences financially,
operationally and from a reputational perspective; however, there was a
greater upside in making the application for the recusal versus the risks of that
application failing. There were risks of incremental damage if we were to lose I
the application for recusal, but damage had already occurred because of the I
initial Judgment. The final outcome with a different judge ought to be better
from a reputational, financial and operational perspective. This did not
underplay the fact that an application for recusal was unusual and could attract I
attention. It was also difficult to take a decision seeking the judiciary to rule
against one of their own. However, the position was unusual because the Judge I
was hearing a series of trials. I
I
Mark Davies’ view was sought from a communications and_ stakeholder
perspective. He stated that we needed to take the right steps to protect the
business long term, notwithstanding that this was likely to generate some
adverse publicity in the short or medium term. t
The following points were made in considering whether to make a recusal
application and seek leave to appeal:
e it was a balanced decision, notwithstanding the legal advice, because we I
could not be sure of succeeding with the recusal application. However, we
could still manage the narrative on what we wanted to do with the I
business even if we lost the recusal application. The strength of the legal I
advice and possible upsides of success tipped the balance in favour of
recusal and we should pursue leave to appeal
* we had received three legal views each of which supported making an I
application for recusal and seeking leave to appeal. The Judge’s views and
the reputational damage caused by these pushed us towards seeking I
recusal and to appeal I
* — the Horizon trial could be damaging and pose risk to the business if the trial I
continued to be heard by the current judge
e — the only argument of force against recusal was the near term reputational I
impact if we lost and the risk of further alienating the Judge; however, the
Judge’s views were already pronounced and losing the recusal application
could either embolden him further or make him more alert to charges of
bias
© — the case had not garnered significant attention thus far, possibly because
it was focussed on technical systems issues
e we needed to take action in the long term best interests of the business.
This was not confined to the current group of claimants and their case.
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AC thought that a decision on recusal was balanced, notwithstanding the legal
advice, because we needed to consider whether a successful application would
result in a more balanced hearing of the case, although he noted that it would
stem the immediate risk posed by the current judge continuing the hear the
Horizon trial.
JM confirmed that from a legal perspective she recommended applying for
leave to appeal the Common Issue Judgment and seeking the Judge’s recusal.
After careful consideration of all the arguments, each Director present and
participating in the decision, supported a RESOLUTION of the Board that an
application should be sought for the Judge to recuse himself from the case, and,
should he not elect to do so, to submit this application to the Court of Appeal.
It was further agreed that leave to appeal the Common Issues Judgment should JM
be sought. Ken McCall reported that Tim Franklin shared the view that an
application for recusal should be made as well as seeking leave to appeal.
The Board RESOLVED that Lord Grabiner should be briefed to prepare the
recusal application.
JM reported that we had sought clarification on the timescales for appeal and it
seemed likely that we would have until 16 May 2019 to lodge the application
for leave to appeal. A significant amount of work would be entailed in preparing
the appeal and a decision would need to be taken on who should carry out the
appeal work for us. I
We did not have to notify that we would be seeking leave to appeal at the same
time as making the recusal application. Court was not sitting next week and it I
was not clear therefore when the Judge would take the decision as to whether I
to recuse himself. We thought it likely that he would decline to recuse himself
and that the case would go to the CoA. At this point a decision was likely to be
taken quickly because the Horizon trial was underway. We would seek for the
Horizon trial to be adjourned at the same time as the lodging the recusal
application.
The options for appeal were discussed. David Cavender could conduct the
appeal for us or we could appoint a new QC. There were advantages and I
disadvantages associated both with retaining counsel or appointing new
counsel. The executive’s recommendation was to use David Cavender but to
draw on Lord Neuberger’s expertise in the background. That was an option
acceptable to both counsel.
TC suggested that we ask Norton Rose Fulbright to consider the options and
discuss these further at the Board Meeting on 25 March 2019.
The need to avoid language that could be perceived as strident or arrogant was I
raised. It was reported that recusal was largely a written process and was
couched in legal language. Lord Grabiner would stand up in Court to make to
case to recuse. The arguments would be forceful but would be legally grounded.
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Chairman
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