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Second Sight’s Draft Part Two Mediation Briefing Report (the “Draft Report”)
Appendix to Post Office letter dated 14 August 2014
To be read in conjunction with the accompanying letter, the content of which is incorporated by
reference.
Section / Post Office comment
Paragraph
in Draft
Report
General The lack of statistical information in the Draft Report makes it difficult for Post Office to
understand how many Applicants have raised issues and whether those issues have
been fully investigated. Post Office considers this an important omission from the Draft
Report and could be misleading if an Applicant forms the view that an issue they have
raised is more or less of a common issue than it actually is.
For example, the Draft Report in several instances refers vaguely to ‘Subpostmasters’
generally, rather than ‘Applicants’ and contains no statistical data to give context or
perspective. Nowhere does the Draft Report mention the number of Applicants in total
compared to the number of Subpostmasters generally who have not complained to the
Scheme or the number of Applicants to which a particular issue applies. Rather, it
frequently refers to ‘a number’ or ‘many’ Subpostmasters raising concerns without
quantifying these terms or being clear about whether the concerns have been
investigated or whether they remain untested. In addition it is not clear whether, when
referring to Subpostmasters generally the Draft Report is referring to Subpostmasters
who are not Applicants.
The Draft Report should clearly state, at each point, the precise source of information
being relied on.
Section 2 The Contract between Post Office and Subpostmasters
Second Sight is not qualified to comment on legal matters.
Post Office has, on a number of occasions, made the point to Second Sight that their
presentation of matters relating to the Subpostmaster contract suggests a fundamental
lack of understanding of the nature of the relationship between Post Office and
Subpostmasters. For clarity Post Office asks Second Sight to note the following points:
1. The contract is an arms-length, commercial transaction between Post Office and
each Subpostmaster. The concept of freedom of contract means that
Subpostmasters can, ultimately, choose whether or not to enter the contract if they
are not happy with its terms.
2. Post Office discusses variations to the contract with the NFSP on behalf of
Subpostmasters. Indeed, in a network of several thousand Subpostmasters, it would
be impractical (and potentially unfair to certain Subpostmasters) for the contract to be
negotiated on an individual basis by each Subpostmaster before they become a
Subpostmaster.
3.__ The risk allocation under the Contract is typical of and reasonably expected in
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contractual arrangements of this kind. It is a contract of agency. Agents
(Subpostmasters), by definition, have custody and/or control over the principal's
(Post Office's) assets and interests and are engaged by the principal in order to
protect, safeguard and further the principal's interests on their behalf. In this case,
Subpostmasters are necessarily responsible for ensuring the safe-keeping and
proper accounting for the revenue generated for Post Office through the
Subpostmaster network. Accordingly, the risk allocation in the Contract properly
reflects the role the Subpostmaster plays, including the level of his or her control and
responsibility for and trust placed in him or her by Post Office with respect to Post
Office's assets. That allocation is in any event reflected in the general law e.g. in the
form of the equitable duty of an agent to account to his or her principal. The
Subpostmaster Contract therefore simply records the duties on Subpostmasters that
are already present at common law.
4. Thousands (and the vast majority) of Subpostmasters have not complained about the
allocation of risk under the contract and have been signing up to it for two decades
(and the same principles have applied for significantly longer). The issues raised in
the Draft Report represent, at best, the views of some Applicants, being a very small
proportion of Subpostmasters.
5. Unless the Draft Report can substantiate any instance in which an Applicant's entry
into the Contract was the subject of any undue influence, unconscionable conduct on
the part of Post Office or any other ‘unfair’ circumstances, then that is the end of the
matter. The contract is binding according to its terms. The concepts of fairness or
bias are not relevant.
6. Itis common for standard-form contract booklets not to be signed by agents, but for
the agent to sign another document to acknowledge receipt of the contract booklet
before taking on their role. At law, a party need not sign a set of terms and
conditions in order to be bound by them. It is perfectly acceptable for a party to sign
one document that refers to terms and conditions in another document.
For these reasons, Second Sight's lay comments on the Subpostmaster Contract will not
assist Applicants and this section should be deleted entirely.
Post Office will investigate any instance where Applicants allege that they were refused
sight of a contract or were not given the opportunity to make themselves aware of the
contents of the Contract on a case by case basis when presented with those cases.
Section 3 Automated Teller Machines (ATMs)
It is noted that a number of the points below were raised by Post Office in its previous
comments on this section of the Draft Report. These comments have not been reflected
in the Draft Report which consequentially still contains material inaccuracies and errors.
The Draft Report principally focuses on the situation whereby the amount of cash
dispensed from an ATM as recorded on Horizon by an Applicant is different from the
record kept by Bank of Ireland (BOI). Even if these accounts are (to use Second Sight's
expression) ‘out-of-sync’ this would not cause a loss to the branch.
The discrepancy between the two sets of accounts identified in the Draft Report would
only arise because an Applicant inputs incorrect figures into the account on Horizon.
Once the Horizon account is corrected (by way of a reconciliation against the BOI
accounts), the Horizon account would match the amount of cash in the ATM (assuming
no other error is present). Hence there would be no actual cash loss.
This is a critical issue that is not addressed in the Draft Report despite being raised in
Post Office's previous comments on this section. The section, as currently drafted, is
likely to give Applicants the incorrect impression that the ‘out-of-sync’ issue could be the
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cause of physical cash losses in their branch. This is not the case and such an
impression is unwarranted based upon the facts.
This section should be re-drafted where appropriate to make the above points clear.
3.3
As set out above, this paragraph is an example of one which contains no context in terms
of statistical data, e.g. numbers of Applicants raising ATM issues that specifically relate to
the matters addressed in the Draft Report.
The Draft Report should state the number of Applicants affected, etc.
3.4
This paragraph refers to ‘reports’, but it is unclear what these ‘reports’ are, specifically,
whether they are CQRs, Post Office investigation reports or something else. This should
be made clear in the Report.
Other ATMs referenced are those which relate to private arrangements with the retail
business and not Post Office and therefore not operated through Horizon. As "Other
ATMs" are not connected to an "Horizon or associated issue" the reference to “other
ATMs" should be removed.
3.5
The comment in the Draft Report that asserts that the system of operating ATMs in Post
Office's network is considered to be ‘...a more complex arrangement... than that typically
deployed by most high street and other banks...’ is unexplained, unqualified and includes
no indication of the factual or evidential source for the comment.
This comment needs to be fully explained and evidenced or should be removed.
3.6
It is not clear how many Applicants have raised what the Draft Report refers to as the “air
gap” issue. As far as Post Office is aware, no Applicant has used this phrase. Also, this
paragraph contains a quoted extract, but the source is not stated. This paragraph should
be re-drafted more precisely to address the above ambiguities.
Post Office is not responsible for an Applicant having misunderstood the instructions, and
the Applicant would be liable for any loss as a result. Section 1, Clauses 13 and 14 of
the Subpostmaster Contract make this point very clearly. Accordingly, it is not clear what
point relevant to Applicants the Draft Report seeks to make and this should be clarified or
removed in the next draft.
Alternatively, the Draft Report suggests that Helpline staff have told ‘some
Subpostmasters' the ‘out-of-sync’ issue “will sort itself out”. Post Office has not seen
(and the Draft Report does not disclose) the evidence for this statement. In any event,
even if Helpline staff have said this, the basis for the statement is correct. Ifa
Subpostmaster enters the wrong ATM cash dispensed figure on Horizon, then a
transaction correction is sent to the branch to correct this error.
The Draft Report goes on to say that following the Helpline's advice, the problem did not
sort itself out. This statement is incorrect for the reason stated above. Post Office has
not seen evidence (and none is disclosed in the Draft Report) that supports this
proposition. Post Office requests to see the evidence the Draft Report relies on to
support this conclusion and Post Office will be happy to investigate it further.
Alternatively, if this conclusion cannot be supported, it should be removed from the Draft
Report.
This paragraph does not make it clear that it is the Subpostmaster's incorrect entry of
figures into Horizon that causes any discrepancy. It also fails to explain the process for
remedying this error through the reconciliation with BOI's records and transaction
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corrections to the branch. These points should be highlighted in this paragraph or
another appropriate place in this section of the Draft Report.
It is not explained, and Post Office does not understand what is meant by ‘associated
reconciliation difficulties’. It is also unclear on what basis those difficulties are said to
have been ‘commonplace in some branches prior to the February 2008 release of the
Manual Update’. The statistical data to support this statement should be provided or this
unsupported conclusion removed.
The extract from the Operations Manual quoted in paragraph 3.14 is, presumably,
included to support the views in paragraph 3.13 but does not appear to provide material
of relevance to matters discussed in that paragraph. Their relevance should be
explained or the extracts deleted.
Post Office does not agree that the processing of ATM figures on Horizon and the
Operations Manual are unduly complex or lack clarity. The Draft Report concludes that
the extracts quoted in this paragraph are said to show ‘...how easy it might have been for
some Subpostmasters to make mistakes...’. Post Office does not agree that anything in
these extracts supports that conclusion, which is not supported by any evidence.
Again, the relevance of these extracts is unclear and Post Office considers that their
inclusion is potentially confusing. The Draft Report focuses on the ‘out-of-sync’ issue but
these extracts relate to loading cash into an ATM which is unrelated to the ‘out-of-sync’
issue.
Second Sight is asked to reconsider, and/or clearly explain, the relevance of these
extracts to Applicants.
As far as Post Office is aware, of the cases that Second Sight has fully investigated, only
two refer to the ‘out-of-sync’ issue. If that is the case Post Office considers that the Draft
Report should make that clear.
Post Office does not agree that the advice that is alleged to have been given by the
Helpline (and the Draft Report does not provide any evidence that such advice was
given) would, if given, run the risk of allowing large shortfalls to build up in any event.
The reconciliation of figures between Horizon and BO! happens within a few days of the
relevant ATM transaction and will, if necessary, trigger a transaction correction thereby
preventing the build-up of accounting shortfalls.
The Draft Report sets out no evidence that the Post Office Helpline has provided
incorrect advice. Post Office questions the value to Applicants of a conclusion which
simply says that ‘Inadequate and possibly inadequate advice ...appears to have been
frequently provided which may have resulted in...’ [emphasis added]. Furthermore, due
to the issue of transaction corrections, even where a branch's accounts have got ‘out-of-
sync’, they will have been corrected on a regular basis.
Finally, and for the reasons set out at paragraph 3 above, the ‘out-of-sync’ issue will
never cause a loss of physical cash. For the sake of clarity, Post Office does not accept
that there is any justification for a Subpostmaster knowingly to submit a false account as
such conduct conceals the true cash and stock position from Post Office and may
constitute a criminal offence.
Second Sight is asked to reconsider, and amend or supplement, this paragraph in light of
the above information.
3.19
The Draft Report contains no evidence to suggest that a power or telecommunications
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failure has caused a loss of ATM data and Second Sight, despite being invited to do so
on a number of occasions, has not provided such evidence. As per Second Sight's
recent question to us, Post Office is investigating this point further. In the meantime,
Second Sight is asked to provide its evidence on this topic to Post Office or remove the
relevant sections from the Draft Report.
3.20 It is noted that the scenario outlined in the Draft Report will not cause any loss in the
branch. If the ATM does not vend any cash, the ATM cash totals receipt will not record
any cash being dispensed. The amount of cash in the ATM will therefore balance with
the figures recorded on Horizon.
It may be that the customer's bank has incorrectly debited the customer's account but
that is an issue between the customer and their bank. Although Post Office will provide
information to assist the customer in resolving the issue, so long as the Subpostmaster
has accurately recorded the cash dispensed figure from the ATM receipt on to Horizon,
this discrepancy will not be passed to the branch.
The Draft Report should clearly explain how this scenario impacts on branch accounting
or it should be deleted as it will not assist Applicants.
3.23 Retract fraud cannot cause a loss to a Subpostmaster where they have followed the
correct accounting procedure. Post Office has explained this issue to Second Sight on a
number of occasions (including providing Second Sight with a written briefing focussing
just on this issue). As yet, Second Sight has not notified Post Office of any flaw in Post
Office's position and Post Office considers that the Draft Report should set out the
information that Post Office has provided and, if appropriate, the reasons why Second
Sight does not accept Post Office’s explanation.
It is accepted that other forms of third party theft or fraud are still under consideration.
However, these issues were only raised with Post Office recently and have not been
*...discussed at length with Post Office’. The Draft Report should reflect this.
Section 4 Motor Vehicle Licences
Second Sight has not raised these issues with Post Office previously. Having undertaken
a brief review of those CQRs that have been identified as raising MVL issues (in the
Thematic Issues Report), Post Office cannot identify a case raising the complaint
described in this section. We ask that the Second Sight identifies the cases raising this
allegation so that Post Office may investigate them further and then revert to Second
Sight as appropriate so that the Draft Report can provide an informed and substantiated
position which will assist Applicants.
Section 5 National Lottery
The Draft Report does not make it clear that prior to 2012, discrepancies on scratch card
activations were a result of Subpostmasters failing to 'rem in’ stock to Horizon. This was
not a problem with Horizon but an error generated in branch by branch staff. This applies
similarly to discrepancies with Lottery sales. The Draft Report should reflect this.
5.5 For this paragraph to be of any assistance to recipients of the Draft Report, Post Office
considers that data is required on the number of incidents reported and whether those
incidents have been investigated, along with the conclusions of those investigations.
5.6 Post Office does not understand what this paragraph is referring to and suggests the
‘complication’ raised in this paragraph should be explained in more detail. The Draft
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Report should be amended accordingly.
5.7 Post Office considers that cross-referencing to an example of a specific case in Second
Sight’s Interim Report of 8 July is of little use to Applicants unless supported by a
reasoned explanation as to how / why it is applicable to them.
It is not clear whether the Draft Report is referring to a thematic issue or a specific case.
If the former, the Draft Report should draw out the thematic issue (if any) rather than
focus on the specific case.
Section 6 Training, Support and Supervision
6.2 The reference to the training being ‘rated’ as poor suggests that some form of statistical
survey has been conducted. As far as Post Office is aware, this has not happened, but
considers that the Draft Report should provide evidence which substantiates this
assessment.
The last two sentences require clarification as to whether these points reflect (i)
Applicants’ submissions to Second Sight or (ii) Second Sight's findings — in the latter
case Post Office considers that further detail is needed to explain and justify those views.
6.3 &6.4 The Draft Report states that as some branches ‘only started making mistakes after the
new system was launched’ then that indicates that some Applicants or their staff were
‘insufficiently trained...'. Post Office considers that this statement is logically flawed
and factually incorrect.
First, the Draft Report presents no evidence that branches made fewer errors before,
rather than after, Horizon was introduced. Transaction records are not available for the
period before Horizon was introduced and therefore there is no way to test that
proposition. Although some Applicants may state this anecdotally, it requires them to
recall events from over 14 years ago. It is not clear how many investigations Second
Sight has completed on cases raising Lottery issues, and Post Office asks that
statements such as ‘...heard many examples...’ are substantiated.
Second, Post Office does not train branch staff — this is a responsibility accepted by each
Subpostmaster (see Section 15, Subpostmaster Contract). There could be many cases
(indeed, conceivably the majority of cases) where a Subpostmaster was adequately
trained but failed to adequately or at all pass on this training to their staff and that failure
has caused the relevant mistakes. The Draft Report omits this point, despite
acknowledging at paragraph 6.8 Subpostmasters' responsibility for training and
supervising their staff.
Third, as drafted the Draft Report appears to suggest that Post Office has an obligation to
train all Subpostmasters until they are fully competent on the Horizon system. This is not
correct. Post Office is only is required to provide relevant training materials and
processes to a Subpostmaster (and update them as necessary) in order to allow the
Subpostmaster to carry out the required training of their assistants. If following the
provision of those materials and processes, the Subpostmaster is not competent in their
duties, there are a number of support mechanisms for them to utilise (NBSC, Post Office
managers, etc.) and they can request further training. Post Office does not consider that
the fact that an Applicant has made errors is evidence that Post Office did not meet its
duties to provide training materials and processes.
These paragraphs should be deleted or re-phrased to make clear the source of the views
expressed eg. they are the anecdotal and untested opinion of Applicants in CQRs (in
which case, it should state the number of Applicants holding these views).
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6.5 The Draft Report does not state the number of ‘examples’ from Applicants about this
issue nor does it state whether those ‘examples’ have been investigated. It is noted that
training records prior to approximately 2007 are not available due to Post Office's
standard document retention policies. It is therefore difficult to form a considered view on
how training may have been delivered in specific cases before this time, given it would
necessarily be based on the recollection of a small selection of Applicants for a period of
more than two decades. To the extent that Second Sight feels there is sufficient evidence
on which to form a fully justified view, the Draft Report should explain that view citing the
relevant evidence.
6.7 The Draft Report provides no evidence to support the bald assertion in this paragraph
about the knowledge of Post Office's auditors, investigators and line managers. Post
Office considers this conclusion to be incorrect. Evidence substantiating the assertion
should be provided or this conclusion withdrawn.
6.8 Post Office considers the possible implication arising from the last sentence of this
paragraph is misleading. Post Office has no obligation, less still the ability or reasonable
opportunity, to monitor the quality of training provided to assistants by Subpostmasters.
This position is clearly explained in the Subpostmasters Contract. Accordingly, the
inclusion of this paragraph may mislead Applicants. The Draft Report should therefore
clarify the basis on which this statement has been made or it should be deleted.
6.9 Post Office's business model is not an ‘Horizon or associated issue’ and is out of scope
of the scheme and Second Sight’s engagement: it should be deleted.
In any event, the point made in this paragraph ignores the fact that Post Office has
successfully traded and grown its business over many years. Please also see the
response to section 2 above.
Section 7 The Helpline
This paragraph of the Draft Report repeats a number of the allegations raised by
Applicants. However, it does not address the fact that the call logs for calls to NBSC.
have been provided to Second Sight in nearly every case investigated and the Draft
Report does not set out evidence or analysis to suggest whether those allegations are
correct or support a conclusion of a general failing as opposed to mistakes in individual
cases. The Draft Report should reflect this.
Section 8 Limitations in the Transactional ‘Audit Trail’
This section appears to be premised on the fact that a branch has made an error that
needs investigating. Post Office considers it to be a critical point that the error originates
from the Subpostmaster or his or her staff (and therefore incumbent on them to resolve or
draw to Post Office's attention), and this should be stated.
Data that isn’t available even on the day of the transaction
81-88 The issues raised in this paragraph have not been put to Post Office previously. We are
considering these points are will revert separately with our comments. The Draft Report
should record that Post Office is investigating this new issue.
Data that was at first available, but after 42 days (later extended to 60 days) is no
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longer available
8.9 The statement that if a TC is over 42 days old, the Subpostmaster has no choice but to
accept it is incorrect.
The nature of the evidence needed to review or challenge a TC is very product specific —
therefore this issue lends itself to product specific analysis and not a general view across
all branch accounting.
Also, in many cases, the evidence required from the branch to dispute a TC would not be
on Horizon but kept in the branch records. For example, if a TC is generated because
the ATM cash dispensed figure in BOI's records did not match Horizon's records, a
Subpostmaster need only submit the ATM receipt to prove that he or she had keyed in
the correct number and the TC would be reversed. As branches are required to keep the
ATM receipt in branch, contesting this type of TC can occur long after 42 days.
Post Office is prepared to investigate any product-specific allegation that there is an
insufficient audit trail for branches to investigate TCs. However, the general conclusion in
this paragraph is (in light of the above example) incorrect. To be of assistance in
resolving Applicants' issues, it is recommended that this paragraph would benefit from a
product-by-product approach.
Data that isn’t available after suspension
8.10 This paragraph raises issues that are specific to individual cases. Post Office cannot see
a general thematic issue here. If there is no thematic issue, then there is no need to
include this section in the Draft Report, rather it should be addressed on a case by case
basis.
Section 9 Transactions not entered by the Subpostmaster or their staff
9 The question of transactions being recorded in a branch's accounts after an Applicant
has been suspended has, as far as Post Office is aware, only arisen in one case. This
was dealt with comprehensively in Spot Review 6 and shown to be for valid reasons.
The Draft Report offers no evidence of this happening inappropriately in any other case.
The Draft Report should therefore explain how this issue affects Applicants generally or
this section should be removed.
Section 10 I Automatic Transaction Reversals
10.2 ‘Ghost’ transactions are defined by in the Draft Report as ‘...genuine transactions that for
some reason appear multiple times in the Horizon records’. This is not the same as an
‘Automatic Transaction Reversal’ which is the title of this section of the Draft Report.
These appear to be two separate issues, which should be dealt with independently.
Post Office is not aware that Second Sight has presented any evidence of a ‘Ghost’
transaction ever having occurred. Without substantiating evidence, references to ‘Ghost’
transactions appear to be nothing more than speculation at present and if this is the case
the Draft Report should make this clear to avoid potentially misleading the reader.
Spot Review 1 is cited as an example of an ‘automatic transaction reversal’. This phrase
has been coined by Second Sight and Post Office considers it to be misleading as it
suggests that Horizon will undertake transaction reversals automatically without any user
input. As explained in detail in Post Office's response to Spot Review 1, the reversal of
transactions in that Spot Review were caused by the relevant Subpostmaster cancelling
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the basket of transactions he or she was conducting for a customer. The Draft Report
should therefore explain how this issue is applicable to Applicants generally or it should
be removed.
10.3 For the reasons stated above and in Spot Review 1, the conclusion that the allocation of
a Subpostmaster's user ID to reverse transactions through the recovery process is a
‘system design error’ is incorrect. The transactions are allocated to the user logged on to
the terminal and who actions the recovery process. Second Sight either needs to fully
explain and evidence why, in its opinion, Post Office's response to Spot Review 1 was
incorrect or remove this conclusion.
Section 11 Cash and Stock Remittances (‘Rems’) in and out of the branch
11.3 The issues raised in this paragraph have not been put to Post Office previously. We are
considering these points and will revert separately with our comments. The Draft Report
should be amended to reflect this.
Section12 I Missing Cheques
Post Office has explained in its response to Spot Review 12 that Subpostmasters will not
be liable for cheques lost in transit. Post Office considers it necessary for the Draft
Report to reference this for completeness. The other issues with cheques (mutilated
cheques and bounced cheques) were only recently raised with Post Office by Second
Sight and are currently under investigation.
The Draft Report should be amended to reflect this.
Section 13 I Pensions and Allowances
Post Office has fully addressed this issue in its written briefing to Second Sight on P&A
Fraud, the content of which, and Second Sight's opinion thereon, is not reflected in this
section. Post Office would like to understand on what basis Second Sight have not
included an assessment of that information against any evidence it holds. If Second
Sight has any further questions on this topic, Post Office would be happy to address
them.
Post Office also observes that it is hard to see how this Section in its current form would
assist an Applicant who has raised in their application an issue relating to “Pensions and
Allowances”. It only alludes to outstanding questions relating to convictions. As stated
above Post Office has already provided extensive briefing on this issue and, as also
mentioned, Second Sight have accepted that matters relating to criminal law and
procedure are outside their expertise. Second Sight also appears to have identified
‘Pensions and Allowances’ as a thematic issue as far back as November 2013, so Post
Office would have expected the Draft Report to contain more detail about the progress
Second Sight have made investigating this issue.
The Draft Report should therefore explain how this issue is applicable to Applicants
generally or it should be removed.
Section 14 I Post Office’s Data Retention Policy
This section does not appear to raise any thematic issue that would affect branch
accounting or impact on Horizon. If Second Sight wishes to comment on the availability
information this may be better addressed in the introduction to the Draft Report as part of
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Second Sight's methodology.
Post Office acknowledges that because of its retention policy some information will no
longer be available. That fact was also acknowledged in the Scheme documentation.
However, Post Office does not consider this to be a ‘Horizon or associated issue’. In any
event, any reference to the appropriateness of retention policies would require an
analysis of the various legal and regulatory regimes around data retention which the Draft
Report does not provide.
Section 15 I Surpluses
15.2 The statement that Post Office ‘does not seem to regard surpluses as worth the same
degree of attention as shortages’ is demonstrably incorrect. If Post Office discovers a
discrepancy, whether it be a shortage or surplus, it generates a transaction correction.
Where discrepancies are discovered in branch, it is up to the Subpostmaster to dispute
the discrepancy with Post Office (by contacting the NBSC). As may not be surprising,
Subpostmasters typically dispute shortages more than they do surpluses. Likewise with
transaction corrections, Subpostmasters tend to dispute debits more than credits. It
therefore follows and is not surprising that Post Office spends more time investigating
shortages than surpluses. If a Subpostmaster does not dispute a surplus (or a shortage)
it is reasonable for Post Office to assume that the discrepancy has been validly attributed
to an error in the branch.
A full explanation with supporting evidence for Second Sight's opinion should be
presented in this paragraph if it is to remain in the Draft Report.
15.4 Post Office considers that the view expressed in this paragraph, which is unsupported by
any evidence, is incorrect. It should be noted that, despite having been engaged by Post
Office for two years investigating Horizon, Second Sight is yet to identify a system-wide
flaw that would undermine Post Office's confidence in the system.
A full explanation with supporting evidence for Second Sight's opinion should be
presented in this paragraph if it is to remain in the Draft Report.
15.5 The logic applied in the analysis in this paragraph appears to overlook the fact that
surpluses can be generated in two ways. The branch could be holding too much cash.
This could be done simply by handing over insufficient cash to a customer. A surplus
could also be generated by inputting the incorrect transaction details into Horizon despite
the branch holding the correct amount of cash. It is equally possible that a branch would
understate the value of a transaction as overstate it. The Draft Report should be
amended to reflect this.
15.6 Subpostmasters can effectively hold surpluses in suspense by "settling centrally” any
surplus. Indeed a number of Subpostmasters regularly do this. This information should
be provided in the Draft Report.
15.7 Post Office is not aware of any financial institution that runs an agency model like Post
Office, so unless the Draft Report provides a legitimate basis for this comparison it should
be removed. For example, high street bank branches are directly owned and run by the
bank: they are not contracted out to third party agents.
15.8 The scenario described in this paragraph would never occur and should therefore be
removed. If the Applicant has removed a surplus due to an error then they will be holding
the cash to make good any later transaction correction related to that error.
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15.9 It is incorrect to say that Post Office ‘...never has to bear the cost of...’ discrepancies.
Post Office has given Second Sight numerous examples of where Post Office bears the
cost of an error (for example in relation to missing cheques). This paragraph should be
re-drafted to address the above.
15.10 This paragraph appears to duplicate paragraph 8.1 above. Post Office repeats its
comments above here.
Section 16 I Cash withdrawals accidentally processed as deposits and other counter-errors
that benefit customers at the expense of the Subpostmaster
Cash withdrawals accidentally processed as deposits
16.1 This paragraph appears to be a repetition of the issues in section 8. It is however noted
that this type of error would begin with a mistake by the Applicant who incorrectly records
a deposit rather than a withdrawal and therefore the Applicant would be liable for this
mistake. In order to provide Applicants with a complete picture, the full context in which
this error arises should be described in the Draft Report (eg. that it begins with a user
error).
Other counter errors that benefit customers at the expense of the Subpostmaster
16.2 - 16.3 The issues raised in these paragraphs were only raised with Post Office recently and are
currently under investigation. As yet, Post Office has not completed its investigation into
any case that alleges this problem. The Draft Report should be amended to reflect this.
16.5- 16.10 I These paragraphs of the Draft Report are copied from the CQR on case M038. Post
Office is working on its investigation into this case which will be provided to Second Sight
shortly. The Draft Report should therefore explain how this issue is applicable to
Applicants generally or it should be removed.
Section 17 I Error and fraud repellency
17 The Draft Report suggests that Horizon is not fit for purpose because it is not sufficiently
“error repellent". The errors in question are those caused in branch by Applicants and
their staff. As the Subpostmaster Contract clearly states, Subpostmasters are liable for
these errors. For the reasons stated above, any analysis beyond this point is beyond
Second Sight's engagement and should not be included in the Draft Report.
Nevertheless, Post Office notes that:
«The Draft Report has not identified an example where Post Office could have
reasonably made the system more error repellent;
e There is no explanation for the assertion that the system must have a ‘high degree of
error repellency’;
e This assessment has not been made against any industry or technical benchmark;
e This conclusion appears to have been formed after investigation of only a small
number of cases and without reference to the vast majority of Subpostmasters (and
the millions of transactions they have successfully processed) who are not Applicants
and do not appear to be suffering from errors which Post Office is allegedly
responsible for having failed to ‘repel’.
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e The Draft Report fails to take a holistic view of error prevention in that it overlooks the
various support processes in place for Subpostmasters to correct errors after they
have occurred (eg. NBSC), and the steps taken to continually upgrade and improve
the Horizon system, processes and user experience.
Section 18 I Giro transactions
The issues raised in this section have not been put to Post Office previously. We are
considering these points and will revert separately with our comments. The Draft Report
should be amended to reflect this.
Section 19 I One-sided transactions
As the Draft Report notes, the issue of "one-sided" transactions is still under
investigation. However, the Draft Report appears to state definitively that one-sided
transactions have occurred (see paragraph 19.1). As far as Post Office is aware, only
one case raising one-sided transactions has been investigated (M014) and this was
proved to be caused by a temporary processing issue at the customer's bank rather than
any issue with Horizon. If this section, as it appears to be, is based on a hypothetical
issue rather than an actual issue at this stage, Post Office considers that the Draft Report
should make this clear to avoid confusion.
Section 20 I Hardware issues
20.4 As far as Post Office is aware the issue of duplicate postage labels being produced has
only been raised in one case. This was dealt with in Spot Review 10 which shows that
the Applicant's recollection of this issue was incorrect. Second Sight either needs to fully
explain and evidence why, in its opinion, Post Office's response to Spot Review 10 was
incorrect or remove this part of the Draft Report. Also, the Draft Report should explain
how this issue is applicable to Applicants generally or it should be removed.
Section 22 I Post Office Investigations
Second Sight have acknowledged that they are not qualified to comment on Post Office's
prosecution processes. Further, this matter is not a ‘Horizon and associated issue’ nor
within the scope of the Scheme. For the record, Post Office considers the Draft Report
findings in this section to be wholly inaccurate.
For all the above reasons, this section should be deleted.
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