POL00022186
POL00022186
Message
From: Parsons, Andrew} GRO :
on behalf of — Parsons, Andrew:
Sent:
To:
Angela Van-
cc:
Subject: RE: Project Sparrow [BD-4A.FID20472253]
Attachments: _DOC_29192839(1)_Part 2 Response.DOCX
Belinda
Please find attached my working draft of the response to Part 2. I've incorporated the key points from Linklaters in the
covering letter.
You'll see there are few issues where we need more information and I need to incorporate a number of the points that
POL have fired through in the last day or so. (It also needs a good check for typos but my eyes are getting weary!)
Happy to chat through tomorrow.
Kind regards
Andy
Andrew Parsons
Senior Associate
for and on behalf of Bond Dickinson LLP
From: Belinda Crowe [mail
Sent: 06 August 2014 21:18
To: Chris Aujard; Angela Van-Den-Bogerd; Parsons, Andrew
Cc: Belinda Crowe
Subject: Fwd: Project Sparrow
Please see below from Linklaters. My aim would be to write to SS tomorrow making as many of these points as are
relevant as a placeholder for a more detailed response later.
I would also want to make the point that SS have been engaged continuously by Post Office since 2012 and we would
have expected that over that time they would have had sufficient opportunity to provide a more substantive analysis
than contained in the report.
I would also want to make the point that the challenge over lack of facts/evidence/context is one we have made a
number of times. It is taking up considerable time and resource within Post Office to comment on and provide input into
products we are paying SS to deliver.
POL-0018665
POL00022186
POL00022186
Andy, would we be able to sit down tomorrow to draft this together?
Chris, I understand you may be picking up some emails and if so many have a view on approach.
Best wishes
Belinda
Belinda Crowe
148 Old Street, LONDON, EC1V 9HQ
From: "Swil, Jonathan"
Date: 6 August 2014
I, “Rodric Williams
‘Band, Christa"
Project Sparrow
Dear Belinda and Rodric
We have considered Second Sight's draft thematic report — part two (the final version Belinda sent us yesterday). As
discussed with Belinda, we set out some general, preliminary observations about the report and Post Office's relationship
with Second Sight. We also set out some more detailed preliminary comments on the report's content, focussing, as
requested, in particular on the section concerning the Subpostmaster contract.
e We note at the outset that the report illustrates a broader concern about Second Sight's role within the Scheme
and its relationship with Post Office. Pursuant to the engagement letter dated 1 July 2014 (the “Engagement
Terms"), Second Sight are engaged by Post Office and are paid by Post Office to provide services to the Working
Group and Post Office in respect of the Scheme. Ideally, therefore, they would only perform work when and as
required and directed by Post Office or the Working Group. Given how poor the standard of the report is (as
discussed below), and Second Sight's track record in this regard, we think now might be an appropriate time to
take as much control over Second Sight's role within the Scheme as possible. For example, ordinarily, it would
not be for Second Sight to dictate the timeframes in which responses to their reports should be received. Indeed,
in the ordinary course, in our view, the work generated by Second Sight to date, and even just this report alone,
would justify the termination of their engagement. But we appreciate that there are other considerations in this
case - such as pressure on and from the Working Group not to be seen to delay the complaint assessment
process any longer and public commitments given to persist with Second Sight - which mean Post Office does not
feel it has the flexibility it perhaps should to direct Second Sight or to take more serious steps. We think,
however, that Post Office should now seriously consider taking whatever further steps it sensibly can to “rein”
them in.
In the same vein, we also suggest re-approaching the Chairman of the Working Group to seek his support to help
control Second Sight, or at least letting him know what Post Office intends to do so that he is kept abreast of its
position and a mature dialogue with him can be established on this issue. Again, we appreciate this may be
difficult to achieve in practice given the position the Chairman has taken to date, but suggest it may well be worth
another attempt, in light of the quality of this report, the harm it might cause to Post Office's position if published to
Applicants in its current form and the prospect of the present difficulties with Second Sight persisting in future.
e The report is well below the standard we would expect of a firm of “experienced accountants” engaged to prepare
an independent, evidence-based report. As with Second Sight's previous work-product, the report largely fails to
draw conclusions from any of the issues which it identifies and seeks to explore, and those conclusions it does
draw do not appear to be based on any facts or evidence available to Second Sight. It also opines on issues and
facts on which Second Sight are not qualified to opine, or are not reasonably within their remit i.e. because they
POL-0018665
POL00022186
POL00022186
are not sufficiently connected with Horizon. Plainly, the report does not serve Post Office's interests. From a
wider perspective and perhaps more importantly, the report does nothing to advance the Applicants’ positions
either or assist the satisfactory operation of the Scheme. It will create even more unrealistic expectations and
make settlement or other resolution of claims even harder. This point should be made clear to the Working Group,
and the Chairman in particular, in order to ensure that to those whose opinions matter, if and to the extent it is not
finalised in an acceptable form, the report reflects much more poorly on Second Sight than it does on Post Office.
e We think that in replying to Second Sight initially, the Post Office should stress that the report should not be sent
to any Applicant unless and until the Post Office has approved it. We understand that nonetheless, the Working
Group may allow the report to be sent to each Applicant as part of the package of documents they receive after
Second Sight assess their case. In that case, it goes without saying that Post Office should make every effort to
have the report sufficiently amended such that it is in a more acceptable form. If the report is not finalised in a
form acceptable to Post Office, we understand Post Office intends to prepare a document responding in detail to
the report which will be sent to Applicants at the same time as the report. We agree with that approach.
« In order to respond properly to the report, we suggest Post Office first deal with points in the report which are
based more soundly in fact and which appear (at least on their face and even if outside the scope of Second
Sight's engagement) to be the more reasonable areas of complaint — e.g. the operation of ATMs or sale of lottery
tickets after hours. We suggest if a reasonable explanation cannot be given for these points in the first instance,
Post Office should volunteer to do more work itself to determine the facts behind these issues.
Section 2 of the report - the Subpostmasters’ contract
To give context to Second Sight's commentary on the Subpostmasters’ contract (the “Contract’), and the report
generally, we have identified the following key provisions of the Engagement Terms.
Clause 2.1 — the Scheme has been set up to resolve Subpostmasters’ concerns about “Horizon and associated issues”.
Clause 2.2 ~ Second Sight is a member of the Working Group whose role it is to oversee the Scheme and assist
investigating individual complaints.
Clause 2.3 — Post Office has engaged Second Sight to provide Services to the Working Group in relation to the Scheme.
Para 1 of Sch 1 (Scope of Services) — this defines the Services Second Sight are engaged to provide. These are: serving
as a Member of the Working Group, advising, as requested by Post Office or the Working Group, on the format style and
content of documents submitted by Post Office and/or Subpostmasters during the Scheme, investigating specific
complaints raised by each Subpostmaster and assisting with reasonable requests made by the Working Group or Post
Office.
Para 2 of Sch 1 - Second Sight must conduct the Services in furtherance of the objectives of the Scheme as set out by
the Working Group.
Para 4 of Sch 1 - Second Sight is to act independently in providing the Services and assessments or opinions it gives
shall be without bias and based on the facts and evidence available.
Para 5.1 of Sch 1 — in providing the Services, Second Sight shall act with the skill and care of qualified experienced
accountants and it is acknowledged that matters relating to criminal law and procedure are outside SS's scope of
expertise and accordingly SS shall not be required to give an opinion in relation to such matters.
As a general comment, we do not think that Post Office should be overly defensive about the contract. There are several
good reasons why it is reasonable and, indeed, typical of contracts of its kind and why concerns raised by Second Sight
as to its “fairness” are groundless. In particular, the following could be said in response to what Second Sight say in
section 2:
1 Second Sight, as a firm of accountants, are not qualified to opine on legal matters, including issues concerning the
“fairness” of the Contract or any criminal matters. Nor have they been engaged under the Engagement Terms to
do so, especiaily as such matters are not reasonably related (or related at ail) to issues “concerning Horizon and
any associated issues”. Accordingly, any assertions they make or conclusions they draw on this issue
necessarily carry little or no weight.
2 The Contract is essentially an arms-length, commercial transaction. 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
POL-0018665
POL00022186
POL00022186
terms. Post Office should confirm whether it is aware of any instances of Subpostmasters somehow being
prevented from seeking legal advice before becoming Subpostmasters. No doubt this is unlikely and if true, a
fare exception.
3 We understand that a body representing Subpostmasters, the NFSP, negotiated the terms of the Contract on
behalf of Subpostmasters. Indeed, in a network of several thousand Subpostmasters, it is reasonable to expect
the contract to have been negotiated in that way. It would be impractical and potentially unfair to certain
Subpostmasters for the Contract to be negotiated on an individual basis by each Subpostmaster before he
becomes a Subpostmaster.
4 The risk allocation under the Contract is typical of and reasonably expected in contractual arrangements of this
kind. Itis 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 his behalf. In this case, Subpostmasters are necessarily responsible for
ensuring the safe-keeping and proper accounting for the revenue generated for Post Office throughout the
Subpostmaster network. Accordingly, the risk allocation in the Contract properly reflects the role the
Subpostmaster plays, including the level of his control and responsibility for and trust placed in him 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 principal.
5 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. The issues raised by Second Sight represent the views
of a very small, self-selecting proportion of Subpostmasters, if they represent the views of any at all.
6 Unless Second Sight 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 the concepts of fairness or bias are legally meaningless in this context. Further, Second Sight should be
asked to explain what they mean by “bias” in this context, or for that matter, what they mean when they say that
appropriate risk mitigation measures may not have been implemented by the Subpostmasters. It is not clear to us
what they mean by these things.
7 The “fairness” or otherwise of the risk allocation under the contract is, we assume, not the subject of any specific
complaint within the Scheme. If that is the case, it is not a matter which falls for consideration in the Scheme or in
any work-product Second Sight should be preparing.
8 Post Office should investigate Second Sight's allegations as to the terms of the Contract not being brought to the
attention of Subpostmasters adequately or at all. Second Sight refer to an “Acknowledgment of Appointment”
letter. Post Office should confirm the process for signing up Subpostmasters to the Contract and where possible
refer and explain in their response to Second Sight all steps that are taken, including the acknowledgement letter,
to bring the terms to their attention before they commence their role.
The report generally
As discussed with Belinda, we suggest that a detailed response to the report should be prepared in due course after full
consideration and investigation of the relevant factual issues it seeks to raise. We are not able in the time available to set
out a comprehensive commentary on the report, nor do we have access to the facts to do so, but make these brief
observations at this juncture. We do not suggest these points be shared with Second Sight at this stage, i.e. while they
are unallied to substantive responses to the factual points Second Sight raise.
a) The report in several instances refers to “Subpostmasters” generally rather than “Applicants”. It fails to draw
conclusions in many places, thus leaving unhelpful ambiguous and speculative assertions on which readers are then left
to draw their own conclusions. It lacks examples or statistics to substantiate the largely speculative conclusions it does
draw. These matters suggest to us and would suggest to any reasonable reader, that the report is not intended to reflect
only the specific subject matter of complaints made in the Scheme and that Second Sight have a wider agenda. They also
suggest the report is largely not or not adequately based in fact and the available evidence, as the Engagement Terms
require.
b) As mentioned, the report refers to several matters outside the expertise of “qualified experienced accountants” or
matters which are expressly out of scope. See e.g. section 2, references to high street banks’ usage of ATMs (3.5),
opinion as to “system design error” with respect to automatic transaction reversals in Horizon (10.3), criminal issues such
as sections 13 (Pensions and Allowances) and 22 (Post Office investigations).
POL-0018665
POL00022186
POL00022186
c) The report refers to matters that have little or nothing to do with the subject matter of the Scheme — i.e. Applicants’
concerns with the functioning of Horizon and associated issues. See e.g. the contract commentary in section 2, ATMs
(section 3), Motor Vehicle Licences and the misprinting of bar codes (section 4), cash and stock remittances (section 11),
Post Office's data retention policy (section 14), cash withdrawals accidentally processed as deposits and other counter
errors (section 16).
We are happy to comment on and otherwise assist Post Office with the preparation of the proposed detailed response to
the report. Please do let us know how we can help or if you have any questions or comments about the points above.
Kind regards
Jonathan
From: Rodric Williams:
Sent: 01 August 2014 17:17
To: Swil, Jonathan
Cc: Belinda Crowe; David Olivei==
Subject: Project Sparrow
Jonathan,
We have not yet received Second Sight’s “Part Two” report, but will forward this to you as soon as it comes in.
I do however attach an email containing a pdf of the first draft of this report, Section 2 of which sets out SS’s
“commentary” (for want of a better word) on the standard subpostmaster contract.
As we discussed yesterday, could you please help us prepare a form of challenge to SS’s commentary on Section 2,
which ideally would compel SS to either remove or neutralise that section from the Report, or failing that, provide a
response to the commentary which could be read alongside it.
In case it assists, I also attach an email with the Engagement Letter we have with SS. Para 5.1 of the Schedule may
provide a bit of a hook — if SS are required to “act with the skill and care expected of qualified and experienced
accountants”, to me that means they have agreed not to stray into other areas of expertise, e.g. contract law.
With thanks for your assistance,
Rodric
Rodric Williams I Litigation Lawyer
148 Old Street, LONDON, EC1V 9HQ
@postotficenews
This email and any attachments are confidential and intended for the addressee only. If you are not the named recipient,
you must not use, disclose, reproduce, copy or distribute the contents of this communication. If you have received this in
error, please contact the sender by reply email and then delete this email from your system. Any views or opinions
expressed within this email are solely those of the sender, unless otherwise specifically stated.
POL-0018665
POL00022186
POL00022186
POST OFFICE LIMITED is registered in England and Wales no 2154540. Registered Office: 148 OLD STREET,
LONDON EC1V 9HQ.
Any business communication, sent by or on behalf of Linklaters LLP or one of its affiliated firms or other
entities (together "Linklaters"), is confidential and may be privileged or otherwise protected. If you receive it in
error please inform us and then delete it immediately from your system. You should not copy it or disclose its
contents to anyone. Please be aware that messages sent to and from Linklaters may be monitored for reasons of
security, to protect our business, and to ensure compliance with legal and regulatory obligations and our internal
policies. Emails are not a secure method of communication, can be intercepted and cannot be guaranteed to be
error free. Anyone who communicates with us by email is taken to understand and accept the above.
Linklaters LLP is a limited liability partnership registered in England and Wales with registered number
0C326345. It is a law firm authorised and regulated by the Solicitors Regulation Authority (www.sra.org.uk).
The term partner in relation to Linklaters LLP is used to refer to a member of Linklaters LLP or an employee or
consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications.
Please refer to www. linklaters.com/regulation for important information on our regulatory position. A list of
Linklaters LLP members together with a list of those non-members who are designated as partners and their
professional qualifications, may be inspected at our registered office, One Silk Street, London EC2Y 8HQ and
such persons are either solicitors, registered foreign lawyers or European lawyers.
JOH RII IOI AIO IDO IODA IOI OID IOI III ISO III DIDI IOI III AA
This email and any attachments are confidential and intended for the addressee only. If you are not the named recipient,
you must not use, disclose, reproduce, copy or distribute the contents of this communication. If you have received this in
error, please contact the sender by reply email and then delete this email from your system. Any views or opinions
expressed within this email are solely those of the sender, unless otherwise specifically stated.
POST OFFICE LIMITED is registered in England and Wales no 2154540. Registered Office: 148 OLD STREET,
LONDON EC1V 9HQ.
Nease consider the envirounent! £
POL-0018665