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CONFIDENTIAL AND LEGALLY PRIVILEGED be
POST OFFICE GROUP LITIGATION ed
Steering Group Meeting: 14 February 2017
DECISION: Does Post Office agree with the recommended strategy set out in this paper?
41. STATUS UPDATE AND FUTURE ACTIONS
The parties and the Court have now agreed the terms of the Group Litigation Order (GLO). A copy of the
agreed GLO accompanies this paper. The President of the Queen's Bench Division of the High Court is
required to approve the GLO but this should be a formality and no substantive changes are anticipated.
The key actions ordered by the Court for the next 8 months are summarised in the table below. During
that time, the Claimants will, collectively and individually, set out their claims in more (but not full) detail in
formal Court documents. This will lead to a procedural Court hearing, called a Case Management
Conference (CMC), in late October 2017.
At the CMC, the Court will decide the priority in which particular issues or certain cases should be
resolved. Broadly speaking, the Court has two options. It can select a particular legal issue that has a
wide application to lots of cases and hear that issue in isolation (eg. the true legal meaning of the
postmaster contract). Alternatively, it may select a small number of “lead cases" that are broadly
representative of the issues affecting a wide number of Claimants and then conduct a trial of those lead
cases, whilst pausing all other cases.
There will likely be a material disagreement between the parties as to the correct approach, with both
pushing for issues and a process that favours them. The Court's desire will be to adopt a course of
action that promotes the overall resolution of the litigation with the minimum amount of effort.
After having decided on a strategic approach, the Court will then order a new timetable of actions leading
up to the next major milestone (which will likely be a substantive Court hearing sometime in 2018).
28 February 2017 Explanation of the claims of assistants and crown employees I Claimants
2 March 2017 First Group Register to be provided Claimants
23 March 2017 Generic Particulars of Claim to be served Claimants
20 June 2017 Schedules of Information to be provided in respect of current I Claimants
198 Claimants
18 July 2017 Generic Defence to be served Post Office
26 July 2017 Close of GLO window (last date for adding new Claimants) Claimants
6 September 2017 Last date on which a Schedule of Information for each Claimants
individual Claimant should be served
20 September 2017 Generic Reply to be served Claimants
Not before 18 CMC Both parties
October 2017
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2. RECOMMENDED OBJECTIVE
We recommend that Post Office's objective for the next 8 months should be to manage the litigation in
such a way so as to push the Court towards selecting, at the CMC, the issues and cases that favour Post
Office (the Target Issues). At this stage, we consider those Target Issues to be:
1. Limitation —- Around 50% of the Claimants are, on face value, time-barred. Freeths are arguing
that limitation deadlines should be extended due to Post Office concealing relevant facts.
Resolving the limitation questions in Post Office's favour could lead to a large number of claims
being struck out.
2. Recoverable losses — The Claimants allege that Post Office was not entitled to terminate
postmasters' appointments on 3 months' notice and on this basis they are expected to advance
significant claims for long term loss of earnings and investment. If the Claimants lose this point it
will likely limit any losses to 3 months in most cases, thereby significantly reducing the amounts.
potentially due in compensation and making settlement easier.
3. Criminal cases — Around 33% of the Claimants are subject to criminal convictions. If the CCRC
does not overturn those convictions, those Claimants' claims may be struck out.
4. Focussing on lead cases that favour Post Office. For example, Alan Bates' case engages
both issues 1 and 2 above. He is also the symbolic leader of the litigation. Defeating his claim
will shake the confidence of the entire group. See further below on selecting lead cases.
By contrast, we anticipate that Freeths will look to identify strong lead cases (ie. ones without time bars
or criminal issues) and / or focus on what they will contend is the "true legal" meaning of the Postmaster
Contract.
3. RECOMMENDED STRATEGY
In addition to handling day to day matters with Freeths and using correspondence to focus attention on
the Target Issues, we recommend that Post Office undertakes the following actions.
1, Lead cases: At the CMC, Post Office may need to identify its preferred lead cases and
challenge the Claimants’ chosen cases. To do this, Post Office needs to understand the basic
factual position of each case so that the pros and cons of the case can be assessed. 88 of the
198 current Claimants have been through the mediation scheme and so there is no need to
investigate those cases further. The remaining Claimants, plus any new Claimants who join the
Group, should be investigated. That investigation could include:
e Gathering core documents (contracts, NBSC and HSD call logs, Horizon data, audit
reports, branch correspondence, contract advisor files and security team files). This
should be done in any event with the duty to preserve documents.
e Categorisation of cases (criminal, time-barred, method of termination, etc.).
e Producing a mini factual chronology of key events for each case.
e Quick assessment of the cause of any shortfall (if possible).
This exercise should allow likely contenders for lead cases to be identified and then those cases
can be subjected to a deeper review in preparation for the CMC.
2. Remote access: The alleged concealment of "remote access" is one of the key grounds on
which Freeths are looking to extend the usual limitation deadlines. Post Office should press on
with getting Fujitsu on board with the litigation and then concluding the work started by Deloitte
This needs to be concluded by no later than the end of April 2017 (see "Resourcing" below).
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3. Burden of proof: If the Court decides to focus on the Postmaster Contract, a key issue will be
burden of proof. In many cases it is not possible to determine the root cause of a shortfall. This
then gives rise to a question of who is responsible for the shortfall where the root cause is not
known. This is a mixed question of fact and law and one on which we recommend that
Counsel's written advice is obtained.
4. Disclosure: Further disclosure should be voluntarily given to Freeths for the following reasons:
a. Giving disclosure on the above Target Issues should make it easier for a Court to select
those issues at the CMC.
b. Freeths are hiding behind the lack of disclosure to avoid explaining weak points in their
case. The lack of clarity allows them to keep unmeritorious claims alive.
c. We believe that Freeths are struggling to cope with the volume of work and extra
disclosure makes their job more difficult. Work pressure drives a greater prospect of a
good settlement.
The areas where further disclosure could be given are set out in Schedule 1.
5. Prepare for Post Office's Defence: There are number of points in the draft Particulars of Claim
to which Post Office will need to respond in due course. Post Office's Defence needs to be
signed by a Statement of Truth and can only be amended with the consent of Freeths or the
Court. Post Office should ensure that it has sufficient evidence to support any position adopted
in the Defence. It is therefore recommended that Post Office collates documents and / or takes
witness statements on the issues in Schedule 2, being issues which have so far garnered little
attention or on which the position remains unclear.
6. CCRC: Freeths are intending to stay the "criminal cases" until the CCRC review is complete.
Post Office has so far adopted a supportive but passive approach to the CCRC. This should
shift towards gently pressuring the CCRC to conclude its review sooner given it is now affecting
the Group Litigation.
7. Settlement: It is not recommended that Post Office offers any form of settlement at this stage.
Post Office should however make clear to Freeths that it will not entertain any settlement
involving payment to convicted postmasters. This may help dissuade those with convictions
from joining the litigation as well as causing division inside the group of Claimants. See
Schedule 3 for more detail.
8. Communications: Post Office should maintain its current approach of not engaging in media
commentary. However, like in the mediation scheme, Post Office should consider directly
approaching any live postmasters who are Claimants with a view to resolving their issues without
the need for litigation.
4. RESOURCING
Based on the above recommended strategy, we anticipate the following resourcing requirements.
e The investigation of individual cases in order to identify or challenge possible lead cases (action
1 above) will require significant resource from both Post Office (in terms of accessing documents
and assessing information eg. Kath / Shirley) and Bond Dickinson (reviewing evidence and
analysing legal issues). Further work is needed to draw up an outline process for these
investigations and map out resourcing requirements.
e The total number of claims will be unknown until end of July 2017. Also, Freeths may withhold
details of any new claims until the last deadline, being 6 September 2017. If Freeths do delay
the new claims, this could lead to a very intense period of work in September and October in the
lead up to the CMC. Sufficient resourcing needs to be available in this period, particularly from
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the Steering Group / senior management as long-term tactical decisions may need to be made
on short notice.
e Inorder to investigate the matters raised under point 5 above, we will require access to a small
number of staff at Post Office. The taking of witness statements tends to cause a short-term but
material disruption to day to day activities. With careful handling, this should be manageable.
« Tony Robinson QC is in a major trial from June to August 2017 which will make him extremely
difficult to contact during this period. Post Office will therefore have to have its Defence
materially complete by mid-May at the latest (despite the Court deadline not being until July).
This drives the need to complete action points 2, 3 and 5 above by the end of April as these
actions will feed into the Defence.
e In addition to the above, there will continue to be day-to-day correspondence with Freeths
regarding a number of side issues. We also anticipate that there will be ongoing
correspondence about Claimants who are still in post and who are subject to contractual action
by Post Office (eg. audits, suspensions, terminations, etc.). At present there are approximately 1
— 2 substantial letters per week. This can be largely handled by Bond Dickinson but will require
regular instructions from Rodric.
5. OTHER ISSUES TO BE CONSIDERED AT ALATER DATE
For the sake of completeness, we note that the following issues are likely to need addressing during the
next 8 months however no action is required on them at this stage.
1. Security for Costs — Should Post Office keeping pushing for security against its legal costs?
2. Second Sight — Should Freeths be allowed to contact Second Sight?
3. Counterclaims — To what extent does Post Office wish to advance counterclaims?
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Schedule 1: Further Disclosure
Category of
documents
Reason
Action
Contracts of
Claimants
Requested by Freeths / Will force Freeths
to plead more accurately
Work already underway
Further info on the 3
bugs disclosed to
ss
Requested by Freeths / Goes to limitation
points on concealment
Ask FJ if they have any further
information
Schedule of
software
architecture since
launch in 1999
Requested by Freeths
Ask Fi if they have a Horizon
architecture diagram.
Known Error Log
Requested by Freeths / Goes to limitation
points on concealment
Discuss with FJ whether this could
be disclosed.
NBSC call logs with
Claimant
Easy to identify and provide / helps prove
that issues were not concealed
Identify and disclose call logs.
Contract Advisor
correspondence
with Claimant
May help show that Claimants knew of
issues at an early stage and therefore
issues were not concealed
Identify and disclose
correspondence.
FSC investigations
of matters (Andy
We understand that Andy Winn was the
principal investigator of accounting issues
Extract Andy's emails from archives
and review for disclosure.
Winn emails) at FSC for a long period of time.
Disclosing his emails may show that Post
Office was not concealing issues.
Mass Mass communications to branches may Identify whether a record of these is
communications to
branches re Horizon
problems
prove that branches knew of Horizon
issues and show that issues were not
concealed.
kept and if so collate documents for
disclosure.
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Schedule 2: Evidence needed for Post Office's Defence
Paragraph Issue
in draft
GPOC
12 What was the pre-Horizon accounting system?
15 Can a postmaster dispute a Transaction Acknowledgement?
30 What are Post Office's investigation processes when a shortfall arises?
36 Are shortfalls caused by Post Office's suspense accounts?
64.5 Are postmasters able to access information whilst suspended?
66.4 Is there any type of accounting error by a postmaster that would not cause a real-loss to
Post Office?
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Schedule 3: Settlement
Issues
Does Post Office wish to try to settle at this stage?
Will Post Office maintain its previous stance on not settling with convicted postmasters?
Background
It is open to Post Office at any time to make a settlement offer or to invite Freeths to mediate. The
Courts actively encourage settlement and a refusal to consider settlement or engage in mediation may
be seen as unreasonable conduct and can lead to costs penalties.
The corollary of the Court's approach is that by making an early settlement offer (that is refused by the
Claimants), Post Office may secure some protection against having to pay the Claimants’ legal costs
should it lose at trial.
Freeths expressed a willingness to mediate in their Letter of Claim but nothing much has been said on
this topic since that letter some 10 months ago.
In the course of preparing for the GLO, we discovered information that suggests that Freeths and their
litigation funder will be taking the first £21m of any compensation recovered from Post Office.
Recently, Freeths wrote to prospective Claimants stating:
"You will receive more information about [compensation] at a later stage, however, a key point to
note is that the funding structure is such that all money recovered on individual claims (including
yours) will be pooled into one fund, and at the very end of the case a calculation will be done to
establish what money (if any) is left over to pay a proportion to each Claimant. That proportion
will be on a pro rata basis."
Pooling the damages in this way could make settlement difficult if Post Office maintains its previous
stance that it cannot, directly or indirectly, pay compensation to those with criminal convictions without
risking the safety of those convictions (as per Cartwright King's previous advice).
Advantages of opening up a settlement dialogue now
1. The litigation could be settled early thereby saving significant legal costs.
2. We may learn more about Freeths' / the Claimants' expectations for settlement.
3. Post Office looks reasonable in the eyes of the Court.
Disadvantages of opening up a settlement dialogue now
1. The claims are not yet valued so it is difficult to see how the litigation could be settled at this
stage.
2. Offering some form of settlement now may only encourage Claimants to pursue the claims
further.
3. Offering settlement whilst the Group is open to new Claimants may encourage more Claimants
to join the litigation.
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Recommendation
The chances of reaching a successful settlement at this stage are slim but proposing some form of
settlement dialogue would encourage the Claimants. It is therefore recommended that Post Office does
not offer any form of settlement at this point but waits until the claims are valued and the Group is closed
to new Claimants. A mediation in November 2016 following the CMC would be a reasonable objective.
If Post Office maintains its position that it will not compensate convicted postmasters under any
circumstances, it would be beneficial to write to Freeths now making that position clear for the following
reasons:
1. It would drive a wedge through the Group with around a third of Group being denied any
possibility of settlement. This would place Freeths in a difficult position given that they have a
professional duty to act in the best interests of each Claimant and each individual Claimant's
interests cannot be subjugated to the interests of the wider group.
2. It may discourage other convicted postmasters joining the Group if they have no prospect of
settlement and may therefore be forced to give evidence on their previous misconduct.
3. There are legitimate reasons for Post Office adopting this position so it would be a reasonable
step to make Post Office's position clear at an early stage. Indeed if this red-line is not disclosed
and it later collapses settlement discussions, it might be seen as unreasonable conduct by Post
Office.
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