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For the attention of Rodric Williams
Solicitor, Post Office Limited
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AW
28 April 2016
Our Ref: JXH/1684/21 13618/1/KL
Dear Sirs
BATES & OTHERS v POST OFFICE LIMITED - GROUP ACTION
LETTER PURSUANT TO THE PRACTICE DIRECTION ON PRE-ACTION CONDUCT
Introduction
1. We act on behalf of the Claimants listed on the Claim Form which was issued in the High
Court, London on 11 April 2016 (Claim number HQ16X01238), a copy of which was sent to
you, not by way of service, as requested on 18 April 2016. We also act on behalf of a
substantial number of other individuals who are likely to be joined as Claimants in the action.
2. We write to you further to our recent correspondence and in the spirit of the Practice
Direction on Pre-Action Conduct (‘the Practice Direction’). We wrote to you on 19 April 2016
to explain the reasons for issuing protective proceedings, prior to sending this letter of claim.
3. You subsequently wrote on 26 April confirming, inter alia, that you were awaiting this Letter
of Claim.
4. The Post Office has dealt with Subpostmasters on the basis that Horizon (including the
computer system in Post Office branches, and all the accounting and training processes
around it) enables Subpostmasters to account accurately for the transactions they undertake
in their branch’, when in truth that was materially incomplete or inaccurate and there were
significant shortcomings and errors in that system (extending from inadequate training and
support through to inadequate consideration of the reliability of Horizon’s indications of
apparent shortfalls and failure to identify the true cause of those). As a result of Post Office’s
conduct and approach in this regard, many Subpostmasters have been subjected to unlawful
treatment by the Defendant causing them significant financial losses (including loss of their
business and property), bankruptcy, prosecutions, serving community or custodial
sentences, distress and related ill-health, stigma and/or reputational damage. The concerns
This position has been reflected in Post Office’s public statements as well as in its statements to MPs
concerned about Post Office's treatment of Subpostmasters.
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raised by MPs or former MPs such as James Arbuthnot, and by the BBC Panorama
programme provide background to this claim.
5. The proposed claim therefore concerns:
5.1. the relationship between the Post Office and its Subpostmasters (and some others,
including Crown Office employees (also described herein as ‘Subpostmasters’
unless specified otherwise));
5.2. the relative power imbalance and asymmetry of information? in the relationship as a
whole, driven by the express terms of Post Office’s standard contracts, Post Office's
operation of its business and approach to its dealings with Subpostmasters;
5.3. the vulnerability of Subpostmasters, in all the circumstances;
5.4. _ the training and support (including the helpline) provided to Subpostmasters by the
Post Office;
5.5. _ the reliability and accuracy of Horizon;
5.6. errors, problems and shortcomings in the Horizon system (including software,
hardware, training and support) causing or contributing to transaction discrepancies
and anomalies (particularly alleged “shortfalls”) or the risk thereof;
5.7. the ability of ICL/Fujitsu (Post Office’s agent) remotely to alter branch transactions
and data and Post Office’s concealment of the same from Subpostmasters;
5.8. Post Office’s approach to: consideration of alleged shortfalls and causes thereof, its
responses to Subpostmasters seeking help’, audits, investigations, referrals for
prosecution, prosecutions* and plea bargains’, seeking recovery (including through
restraint orders®) as well as the exercise of other powers of Post Office; and
5.9. issues arising from Post Office holding Subpostmasters responsible for alleged
shortfalls (according to Horizon) — with consequences ranging from making up those
shortfalls from their own savings, to distress (and related illness including attempted
E.g. information/data held by Post Office (and/or its IT provider) required by Subpostmasters to consider
and challenge alleged “shortfalls” and the relative unavailability of the same to Subpostmasters.
E.g. telling Subpostmasters that they were the “only one” experiencing problems that were in truth more
widespread, so as to cause them to doubt their own judgment, memory and competence — thereby to
induce them to be more likely to accept responsibility for alleged shortfalls.
E.g. failures to follow the requisite code of conduct, namely the Code for Crown Prosecutors or properly
to apply the requisite tests in deciding whether to bring a prosecution and if so, on what basis.
E.g. requiring, as a condition of a plea bargain, that no mention be made by the Subpostmaster of any
problems or errors in the Horizon system.
E.g. where there was no proper basis for evidence in support of a restraint order.
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suicide), bankruptcy, prosecution, convictions, recovery orders and some custodial
prison sentences.”
6. Against that background, we write this letter with a view to the parties taking reasonable and
proportionate steps to identify, narrow and resolve the legal, factual and/or expert issues, as
well as exchanging information to further the aims and objectives of the Practice Direction.
7. This letter is not a prelude to inevitable litigation. We hope that through this correspondence,
the parties will be able to understand their respective positions, make considered decisions
about how to proceed and, particularly, try to settle the issues without these proceedings
progressing (including by mediation or other ADR). This approach will support the efficient
management of proceedings if the case is not otherwise resolved and, in any event, should
help to reduce the costs of resolving the dispute.
8. In order to try to identify such common ground as there may be and to narrow the issues (so
that further informed consideration can be given to how the parties should proceed when
they take stock), we have posed a number of, hopefully helpful, questions which, for
convenience, we have listed in the Appendix to this letter, to which we invite your particular
response.
9. We recognise that some serious allegations are made below and we wish particularly to
explain the basis upon which those are made. We are obliged to identify the claims and
explain the basis of them. We therefore need to address these matters, but do not wish
them to be misunderstood. For example, the allegations of deceit explained below are made
on the basis of the second limb in Derry v Peek, confining our clients’ case in deceit to
allegations that the Post Office's misrepresentations were deceitful or fraudulent because the
Post Office did not know or believe such representations to be true and/or exhibited “wilful
blindness” or reckless indifference to the truth of those representations.
10. Against the background above, we would be grateful to receive from you answers to the
questions set out in the Appendix, as well as a constructive response to this letter more
generally, so that (in the context of matters which are serious for both the Post Office and our
clients) such agreement, or common ground as can be found, is identified at an early stage.
11. We also seek:
11.1. an assurance from you that our clients (existing, as well as proposed, claimants and
non-claimant witnesses) will not be subject to any detrimental treatment as a result of
being a claimant to this claim, or by reason of making any disclosures connected to
this claim — your letter of 26 April 2016 suggests that there is no foundation for any
suggestion that such action would be taken by Post Office and we therefore hope that
Post Office will feel able to provide such assurance;
11.2. confirmation that you have no objection to the independent investigators, Second
Sight providing information to us for the purposes of these proceedings;
7 — The Criminal Cases Review Committee is presently considering some 20 cases.
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13.
14.
11.3. clarification from you as to your position in relation to the applicability of the Official
Secrets Act (referred to in our clients’ contracts with you), and in particular whether
your position is that any of our clients or any other person (e.g. a Fujitsu employee
providing evidence in support of the claim) is in any way restricted from disclosing
information about Post Office’s conduct or wrongdoing; and
11.4. an assurance that no action will be taken by Post Office (or with Post Office’s
encouragement) against any person for any alleged breach of the Official Secrets Act
in relation to steps taken by them or disclosures connected to this claim.
We also address the need for this claim to proceed by way of a Group Litigation Order, and
seek your agreement in principle that this case is suitable to be managed as such.
We re-iterate however that we would hope that the matter may be resolved (or at the least
the issues narrowed) by mediation. We wish to stress that we are required to set these
matters out to you but do so in the hope that this correspondence will afford you the
opportunity to respond fully and allow the parties a proper opportunity to seek to resolve or
narrow the issues as we have suggested.
The structure of this letter is as follows:
Page Number
INTRODUCTION....
A. POST OFFICE'S KNOWLEDGE OF THE DISPUTE
(a) Second Sight...
(b) Mediation Scheme
Settled Cases..
)
(d) Select Committee .
) Termination of Mediation Scheme.
(f) Panorama
B. RELATIONSHIP BETWEEN POST OFFICE AND CLAIMANTS
(a) Contract framework «00.0.0...
(b) Power and vulnerability 2.0.0... ccc cecccseeesesteeseseesereeteeeeseststsesssseseteeeseee
(c) Relational contract
(d) Implied terms
Trust and confidencs
Exercise of power...
Co-operation and support...
Control of transactions
(e) Fiduciary duty............
Horizon: the accounting system
Page 5
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Agency
(f) Tort.
(g) Public functions and private duties
FACTS AND MATTERS RELIED UPON
(a) Change to Claimants’ work
(b) Training and support.
(c) Investigation
(d) Post Office’s response to shortfalls.
Requiring Claimants to make good alleged shortfalls
Encouraging Claimants to sign-off cash balances.....
Suspending and/or terminating the Claimants’ appointment...
Unfairly investigating the Claimants.......
Impeding sales and transfers of branches
Private criminal prosecutions...
(@) Criminal prosecutions ........ccccceececcccssseeeeeeseeesesesesesesensestenstsnesseesseasseseseaeseeee 27
ICL/FUJITSU
(a) Background to the Post Office/Fujitsu relationship and contracts...
(b) Helpline, significant discrepancies and the level of errors and bugs .
(c) Disclosure/retention of data
CONCEALMENT.
BREACH OF DUTY AND/OR UNLAWFUL ACTS
(a) Harassment
(b) Deceit
(c) Misfeasance in public office
Post Office's approach to investigations...
(d) Malicious Prosecution
(e) Unlawful means Conspiracy
LOSS AND DAMAGE.
(a) Financial Losses..
(b) Stigma and/or reputational damage
(c) Distress and related ill-health
(d) Bankruptcy... cee
(e) Prosecutions.
(f) Community or Custodial Sentences............
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H. ADR. 4“
42
44
45
46
PRELIMINARY ISSUES AT
N. TIMING OF RESPONSE 48
APPENDIX TO LETTER OF CLAIM: QUESTIONS AND REQUESTS FOR
CONFIRMATIONS AND/OR FURTHER INFORMATION
A. Post Office’s Knowledge of the Dispute
15. The matters at the heart of this claim are not new to the Post Office; the Post Office has been
heavily involved in such matters for a number of years. The Post Office’s involvement thus
far informs both the background to these proceedings and the context in which this letter is
written. We illustrate the extent of the Post Office's involvement in, and knowledge of, these
matters by reference to the following.
(a) Second Sight
16. Following significant pressure from a number of Subpostmasters (former and serving), and
concern from their local MPs, the Post Office Chairman and CEO met with those MPs in
June 2012, and it was agreed that external, independent investigators would be engaged to
undertake a review of a number of cases where in the main, Subpostmasters had
experienced shortfalls in their branch, and had been pursued by Post Office. These MPs
had also raised wide-ranging concerns about general unfair treatment by the Post Office.
17. Asaresult, in July 2012, at the instigation of a number of MPs, Post Office instructed Second
Sight Support Services Limited (“Second Sight”) to conduct an independent review, and
Post Office agreed to meet the cost of the same
18. A process was jointly devised by Post Office, Justice For Subpostmasters Alliance (“JFSA”)
and Second Sight, which was intended to provide Subpostmasters with a “safe” mechanism
by which they could raise concerns, which Second Sight would then investigate. A paper was
jointly produced, in which the process was set out for concerns to be raised (and investigated
by Second Sight). In that document, Post Office confirmed that any serving Subpostmasters
“should have no fears about raising any concerns over Horizon, including over victimisation
and reprisals”. Second Sight carried out extensive investigations, although progress became
hampered by constraints imposed by Post Office and by Post Office's restrictions on access
to information and documents (see paragraphs 29.1 and 30.1 below).
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19. One year later, Second Sight published their interim report (the “Interim Report”), which is
within the public domain, incorporating the preliminary results of four spot reviews which had
been proposed by the concerned MPs. Within this report, Second Sight stated that in the
course of their “extensive discussions with [Post Office] over the last 12 months, [Post Office]
has disclosed to Second Sight that, in 2011 and 2012, it had discovered “defects” in Horizon
online that had impacted 76 branches’.
20. Post Office subsequently provided a lengthy response and issued a press release in which it
stated that the Interim Report “does...raise questions about the training and support [Post
Office] have offered to some Subpostmasters and we are determined to address these
issues”.
21. In the same month, Jo Swinson MP, Minister for Postal Affairs faced questions from MPs in
the House of Commons regarding Second Sight's Interim Report and it was agreed that a
further and more detailed investigation should be undertaken. Subsequently a “Mediation
Scheme” was put in place, to which we refer below. On 3 February 2015, oral evidence was
given in the House of Commons to the Business Innovation and Skills Committee (“BIS”), by
Paula Vennells (Chief Executive —- Post Office) and Angela van den Bogerd (Head of
Partnerships — Post Office), to which we refer below.
22. It is notable that Post Office has fairly consistently refused to countenance errors in the
Horizon system causing alleged shortfalls: e.g. “Post Office Ltd is fully confident that the
Horizon computer system in its branches, and all the accounting processes around it enable
subpostmasters to account accurately for the transactions they undertake in their branch”.®
(b) Mediation Scheme
23. Following the publication of Second Sight’s Interim Report in July 2013, and in response to
further pressure from Subpostmasters and MPs, a ‘Working Group’ was formed to develop a
scheme to investigate and review cases. The Working Group comprised the JFSA, Post
Office (who instructed Bond Dickinson as its legal advisors) and Second Sight. It developed
the Initial Complaint Review and Mediation Scheme (the Mediation Scheme) and its role
was to supervise the scheme and make sure it was run in a fair and efficient manner. In
August 2013, the Mediation Scheme opened for applications.
24. During the 12 weeks that the Mediation Scheme was open to applications, a total of 150
cases were received that were accepted as being “suitable” for investigation. A small
percentage were from serving Subpostmasters, and Post Office addressed a number of their
issues separately. Subsequently these withdrew from the Mediation Scheme, leaving 136
cases to progress through to investigation and review. Sir Anthony Hooper was appointed as
Chairman of the Working Group, which held weekly meetings. Post Office produced regular
tracking status updates on each of the cases in the scheme.
® Letter from Post Office's then Managing Director, Paula Vennells, of 19 December 2011 in response to
a Parliamentary question from Mike Weir MP.
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25. Following personnel changes at Post Office it became evident, during January 2014, that
Post Office was attempting to redefine the brief of the Working Group and the scope of the
work of Second Sight — narrowing and confining both.
26. The JFSA remained sceptical about Post Office's involvement in the Mediation Scheme and
wrote to the Minister in April 2014 setting out its concerns.
27. As part of the Mediation Scheme, an independent Professional Advisor assisted an applicant
to produce a report of their case. Post Office then produced its own report of that case, and
both reports were sent to Second Sight for analysis and investigation, before it too produced
a report based on its findings. As part of the Second Sight case report there was a decision
by Second Sight as to the suitability of that case for sending to mediation.
28. Angela van den Bogerd claimed that “thousands and thousands of pieces of evidence [were
produced] in support of each of the cases’, in the evidence that she gave to the Select
Committee (described below). However, not all of these cases reached a final conclusion
prior to Post Office terminating the Scheme in March 2015 (see below).
29. When Second Sight was appointed by the Post Office at the request of Members of
Parliament, it was on the basis of:
29.1. Unrestricted access to documents held by Post Office (including documents subject
to confidentiality and legal professional privilege); and
29.2. No limitation in the scope of work determined necessary by Second Sight.
30. Notwithstanding the above:
30.1. Second Sight “experienced significant difficulty in obtaining access to a number of
documents [they] believe are necessary for the purposes of [their] investigation,
notwithstanding Post Office’s commitment to make requested documents available
and
30.2. Second Sight was concerned that some decisions to prosecute may have been
contrary to the Code for Crown Prosecutors but Post Office stated that this was
outside the scope of Second Sight’s investigation - a view with which Second Sight
“strongly disagree”."°
31. Ina letter dated 17 March 2015 the Chair of the Select Committee, expressed his concerns
as follows:
“During our evidence session, Post Office assured us that individuals who had
previously pleaded guilty to charges arising from information provided by Horizon
were eligible for mediation. The letter sent by Post Office to Jo Swinson MP on 9
® Briefing Report — Part Two (9.4.2015) §2.1
* Briefing Report — Part Two (09.04.2015) § 25.24
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March would appear to contradict the evidence given to the Committee on this
matter, and we wish to have clarification on this.” [Emphasis in the original letter]
32. The approach taken by the Post Office to Second Sight’s investigation, in limiting the scope
of Second Sight’s investigation and in the subsequent termination of the Mediation Scheme
(preventing the Working Group, including the JFSA representatives and Sir Anthony Hooper
from seeing Second Sight’s Briefing Report), is a source of real concern, beyond the
underlying substantive matters of concern and trains of further enquiry that Second Sight had
by that stage identified.
(c) Settled Cases
33. A limited number of cases which progressed through the Mediation Scheme were settled
between Post Office and the Subpostmasters. In addition, we understand that a number of
other Claimants settled outside of the mediation process. Those agreements were reached
on a confidential basis. However, it is apparent that the Subpostmasters did not have the full
information or evidence available to them (which was only available to the Post Office), when
forming their decision to settle their claims. The relevant Claimants will invite the court to
infer that the Post Office must have known that they were entering into such agreements on
a factual basis that was materially incomplete and thereby misleading. Those
Subpostmasters would not have entered into those settlement agreements, upon the terms
which they did, had they been aware of the full factual matrix. Therefore, those settled cases
do and will form part of these proceedings and we will request that the Court sets such
settlements aside accordingly, on the grounds of misrepresentation amounting to deceit.'*
(d) Select Committee
34. On 3 February 2015, as the Mediation Scheme was ongoing, Paula Vennells, Chief
Executive of Post Office and Angela van den Bogerd, Head of Partnerships at Post Office
gave oral evidence before a Select Committee, attended by Secretaries of the CWU, Alan
Bates, Kay Linnell and lan Henderson of Second Sight.
35. As part of her evidence, Ms Vennells stated that the Mediation Scheme was set up “with the
ambition to find out exactly what those [136 SPMs joined into the scheme] are concerned
about, because it is of concern to me, and the Post Office that we do that.” She went on to
state that Post Office had “investigated every single case in the most thorough detail. Post
Office have been rigorous about this.”
36. Post Office was therefore, on the face of it, fully aware of the detail and nature of each of the
claims in the Mediation Scheme, albeit serious concerns were raised by the Committee and
"Derry v Peek second limb deceit, as explained above. The affected Claimants will contend that they did
not enter into the settlement agreements “with [their] eyes wide open” as the Court of Appeal
contemplated in Hayward v Zurich Insurance Co pic [2015] EWCA Civ 327 and the asymmetry of
information between the parties and the surrounding circumstances justify the setting aside of the
settlement agreements. The scope of the settlement agreements will also be in issue: Bank of Credit
and Commerce International SA (in liquidation) v Ali and others [2001] 1 All ER 961.
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Chair regarding Post Office’s “culture of denial” and “obstructive” behaviour in failing to
provide documentation requested by Second Sight. Furthermore, Second Sight made it
abundantly clear that they had serious concerns over the fact that they had seen no evidence
that Post Office’s investigators were ever trained or prepared to consider that Horizon was at
fault. (The apparent exclusion of the possibility of errors generated by Horizon, or the
practice of disregarding the same, is a central feature of this case.)
37. As stated above, following the evidence given to the Select Committee, the BIS Committee’s
Chairman wrote to the (then) Minister, Vince Cable, regarding the Mediation Scheme. Within
this letter Mr Bailey raises concerns over Post Office’s handling of the Mediation Scheme,
not least because of the lack of information that was provided to Second Sight, hindering
their investigation. We note from this letter that Mr Bailey requested that a full set of
documents which Second Sight had provided to Post Office (before being forced by Post
Office to destroy any further record of them), be copied and provided to BIS. We will look
forward to receiving a full set of these documents in response to this letter, as part of the
exchange of relevant documents below.
38. Post Office subsequently terminated the Mediation Scheme (as explained below) and issued
a press release to that effect. In June 2015 there was a further, televised debate led by
James Arbuthnot MP at Westminster Hall, to which the Post Office responded in a 15 page
public statement.”
(e) Termination of Mediation Scheme
39. Shortly after Post Office gave evidence in the BIS hearing, the Mediation Scheme was
unilaterally terminated by Post Office without prior discussion with the Working Group. As far
as the Claimants are aware, even Sir Anthony Hooper was not consulted prior to the decision
to terminate the Scheme or to terminate his engagement to Chair the Working Group. The
engagement of Second Sight was also terminated by giving Second Sight one month's notice
- this was despite the assurance given in a letter to JFSA by the Minister, that “Second Sight
were not employed by Post Office” which had at the time conveyed the impression that
Second Sight would be free to pursue their role to its conclusion without control or
impediment from Post Office.
40. The termination of Second Sight’s appointment in March 2015, meant that the last report
produced by Second Sight was the “Part Two Briefing Report’, which formed part of a
background briefing pack for independent CEDR mediators. It summarised the main issues
which applicants to the Mediation Scheme had raised, and Second Sight's findings (thus far)
on those issues. It also set out, amongst other things, a full list of questions to which Post
Office had failed to respond. However, Second Sight’s work was still not complete at that
time.
41. The timing of Post Office’s decision to terminate the Mediation Scheme was not only
significant in following the evidence given at the BIS hearing (above) but in immediately
2 On any view, it is clear that Post Office should have a fairly deep and thorough understanding of the
concerns and complaints of Subpostmasters, by way of general background to these proceedings.
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preceding the provision of Second Sight’s “Part Two Briefing Report’, to the Working Group
for consideration and discussion: the Briefing Report was due to be provided to the Working
Group the day after the Mediation Scheme was terminated, so that terminating the Scheme
prevented its provision to the Working Group members.
42. Asa result of Post Office terminating the Scheme, a number of cases were left unresolved.
This compounded the frustrations of the Subpostmasters affected who had already suffered
ill-treatment at the hands of Post Office and it made a mockery of their participation in the
Scheme up to that point.
(f) Panorama
43. Between October 2014 and July 2015 BBC Inside Out and The One Show reported on some
individual cases in which Subpostmasters had experienced shortfalls and had been pursued
by Post Office as a result.
44. In July 2015, Panorama screened a programme entitled “Trouble at the Post Office”. As part
of this documentary, the BBC interviewed a number of Subpostmasters and an ex-Fujitsu
employee. This programme had the knock-on effect of a number of articles being generated
in journals such as ‘Computer Weekly’. Points arising from the Panorama programme
included:
44.1. lan Henderson, of Second Sight, describing a failure on the part of the Post Office to
properly investigate cases where problems had occurred with Horizon. He likened
the Post Office’s approach to one of “institutional blindness”.
44.2. lan Henderson further attested to a disclosure by the Post Office of ‘two software
bugs that have had quite a significant impact on a number of branches and it took, in
one case, over twelve months for those bugs to be detected and for the
consequences to be appreciated.”
44.3, James Arbuthnot MP (as he then was) spoke of an “abuse of power” on the part of
the Post Office, describing the Post Office as a “big organisation, bullying individuals
with no ability to cope, in ways which sometimes see them sent to prison, made
bankrupt, lose their livelihood...”
44.4. Richard Roll, a Fujitsu computer technician between 2001-2004, stated that there
were “a lot of errors, a lot of glitches coming through” with the Horizon system. He
also stated that, contrary to the Post Office's assertions, financial records were
changed remotely without the Subpostmasters’ knowledge; he contended “we went in
through the backdoor and made changes... if we hadn't done that, then the counters
would have stopped working.”
44.5. Charles McLachlan, the expert witness for the defence in the prosecution of Seema
Misra, stated that he had spoken to one of the Post Office's investigators and he was
told that “as a matter of policy, [Post Office Investigators] would never consider an IT
error, a computer error, as the source of the discrepancy.”
44.6. The programme described a meeting that took place between the Post Office and
Fujitsu just before the trial of Seema Misra. The minutes in respect of that meeting
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45.
46.
47.
warn of “another computer bug that could cause a loss of confidence in the Horizon
system if widely known; the bug made money disappear”. This minute went on to say
that this bug could “impact upon ongoing legal cases where branches are disputing
the integrity of Horizon Data”. The bug did not affect Seema Misra’s branch, but it
was evidence that there were problems with Horizon, and the same was never
disclosed to Charles McLachlan during Seema Misra’s trial or indeed to the court.
We are not aware of any such bug having been disclosed to any Subpostmaster to
whom shortfalls have been ascribed by Post Office.
The Post Office published a response to the Panorama programme on its website. The
response included the following statements:
45.1. The Post Office “wholly rejects extremely serious allegations repeated in BBC's
Panorama programme of 17 August 2015. The allegations are based on partial,
selective and misleading information.”
45.2. “There is no evidence that faults with the computer system caused money to go
missing at these Post Office branches”.
45.3. “The Post Office has always taken its duty to act fairly, proportionately and with the
public interest in mind extremely seriously.”
45.4. “In the rare instances that prosecutions are undertaken, the Post Office follows the
Code for Crown Prosecutors (the same code as the Crown Prosecution Service).
The Code requires a prosecution to have sufficient evidence and to be in the public
interest, both of which are kept under review right up to and including any trial. It
means that there must be sufficient evidence for each charge — if a theft charge is
brought, there must be sufficient evidence for a realistic prosecution of a conviction
for theft.”
45.5. “The Post Office has a continuing duty after a prosecution has concluded to disclose
any information that subsequently comes to light which might undermine its
prosecution or support the case of the defendant and continues to act in compliance
with that duty.”
45.6. “There is also no evidence of transactions recorded by branches being altered
through ‘remote access’ to the system. Transactions as they are recorded by
branches cannot be edited and the Panorama programme did not show anything that
contradicts this.”
There is, plainly, a clear conflict between the impression given by those appearing on the
Panorama programme and the wholly unnuanced position advanced by Post Office, which
invites conclusions that Horizon is entirely error free (at least in so far as such errors could
have any financial implications for Subpostmasters) and Post Office's approach and conduct
has been perfect. Neither of those conclusions is accepted, for the reasons set out in this
letter.
It is however clear that Post Office must be very familiar with the issues raised in these
proceedings and have looked into them extremely carefully, in order to be able to make
statements (above) which appear to give such an unequivocal impression of the position.
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B. Relationship between Post Office and Claimants
(a) Contract framework
48. The Subpostmasters were engaged on standard form contracts, the true construction and
effect of which will be a common and central issue in these proceedings."
49. Given that these contracts are entirely under the control of the Post Office, we would be
grateful for a clear explanation of how the Post Office understands they were amended, from
the 1994 contract which pre-dated the introduction of Horizon.
50. We would hope that agreement can be reached, as far as possible, on which standard
contracts were in force during which periods, and what the express terms of those contracts
were — we would hope that this would not be controversial.
51. Against the background of such agreement, we would then wish to try to reach agreement as
to the terms and duties of the Post Office which were implied into those contracts, or arose
from the relationship created by them and their operation. For example:
51.1. acommon issue will be whether or not the contracts were relational contracts (as we
explain at paragraph 55 on page 15 below);
51.2. another common issue is likely to be the extent to which a narrow fiduciary duty arose
on the Post Office properly to execute, effect, record and account for transactions of
or attributed to the Subpostmasters (as we explain at paragraph 66 on page 18
below);
51.3. you will also see that we contend that, in any event, there were relevant implied terms
in the standard contracts between the Claimants and the Post Office (as we explain at
paragraph 59 to 65 from page 16 below); and
51.4. where the Post Office acted as investigators", the duties of its officers in discharging
that role will also be in issue.
The Claimants’ primary submission is that they should be construed as we indicate below. However, to
the extent the Post Office seeks to rely on particular contract terms in response to this letter of claim or
subsequently, in justifying its conduct towards the Claimants, we will respond further as to the proper
construction, enforceability (including under the Unfair Contract Terms Act 1977, ‘UCTA’) and true effect
of the said terms, such as the provisions purporting to render the Subpostmasters legally responsible for
the cash and stock entrusted to their care and any losses that may occur through negligence,
carelessness or error. Not only did Post Office contract on its own standard terms, for the purposes of
section 3 of UCTA but it is unclear how those terms were sufficiently drawn to the attention of
Subpostmasters. There is a clear line of authority (e.g. Interfoto Picture Library Ltd v Stiletto Visual
Programmes Ltd [1987] EWCA Civ 6) holding that an onerous or unusual contract term on which a party
seeks to rely must be fairly brought to the notice of the other party if it is to be enforced ~ putting in
issue the practice of the Post Office generally in seeking to draw any such terms (as the Post Office
may rely upon) to the attention of Subpostmasters, when they were accepting appointments. It
presently appears to us that this line of authority would only be relevant if the other matters contended
for by the Claimants (e.g. relational contracts, fiduciary duty and implied terms) were unsuccessful.
Page 14
(b)
52.
53.
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Power and vulnerability
Post Office's standard form contracts (“Contracts”) were replete with power and discretion in
the hands of the Defendant. They and the true agreement between the parties fall to be
considered in the context of the relative bargaining position of the parties'®, Post Office's
powers and ability to prosecute Subpostmasters and the asymmetry of information is referred
to above.
By way of illustration of the relationship between Post Office and Subpostmasters, the
Subpostmasters’ standard form contract (version dated September 1994) included the
following terms:
53.1.
53.2.
53.3.
53.4.
53.5.
53.6.
53.7.
Section 1, paragraph 5 “..Retention of the appointment as Subpostmaster is
dependent on the sub-office being well managed and the work performed properly to
the satisfaction of Post Office Counters Ltd.”°
Section 1, paragraph 6 “The Subpostmaster is informed at the time of his
appointment of the classes of business he is required to provide. He must also
undertake, if called upon to do so later, any other class of business not required at the
time of his appointment but which Post Office Counters Ltd may subsequently and
reasonably require him to do....”
Section 1, paragraph 7 “/f Post Office Counters Ltd alters the services to be provided
or withdraws a service the Subpostmaster has no claim to compensation for any
disappointment which may result from the change.”
Section 1, paragraph 8 “The terms of the appointment of Subpostmaster do not entitle
the holder to be paid ... compensation for loss of office.”
Section 1, paragraph 18 “Changes in conditions of service and operational
instructions, including those which are agreed with the National Federation of
Subpostmasters, will appear from time to time in Counter News or by amendment to
the Contract. Such changes and instructions are deemed to form part of the
Subpostmaster’s contract.”
Section 1, paragraph 19 “All instructions received from the Regional General
Manager should be carried out as promptly as possible.”
Section 12, paragraph 4 “The Subpostmaster must ensure that accounts of all stock
and cash entrusted to him by Post Office Counters Ltd are kept in the form prescribed
by Post Office Counters Ltd. He must immediately produce these accounts, and the
whole of his sub-office cash and stock for inspection whenever so requested by a
person duly authorised by the Regional General Manager.”
4
15
16
See also the duties when acting in a prosecutorial role at paragraph 102 on page 26, below.
Autoclenz v Belcher [2011] UKSC 41, [2011] 4 All ER 745, [2011] IRLR 820, [2011] ICR 1157.
Post office changed its name from Post Office Counters Limited on 1 October 2001
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53.8. Section 12, paragraph 12 “The Subpostmaster is responsible for all losses caused
through his own negligence, carelessness or error, and also for losses of all kinds
caused by his Assistants. Deficiencies due to such losses must be made good
without delay.”
53.9. Section 12, paragraph 13 “The financial responsibility of the Subpostmaster does not
cease when he relinquishes his appointment and he will be required to make good
any losses incurred during his term of office which may subsequently come to light.”
53.10. Section 15, paragraph 10 “In cases where an Assistant is accused or suspected of
dishonesty or any other offence such as wilfully delaying postal packets, the
Subpostmaster must report the particulars to the Regional General Manager as soon
as possible and await instructions. ....”
53.11. Section 19, paragraphs 4, 5 and 6: “A Subpostmaster may be suspended from office
at any time if that course is considered desirable in the interests of Post Office
Counters Ltd in consequence of his: (a) being arrested, (b) having civil or criminal
proceedings brought against him, (c) where irregularities or misconduct at the
office(s) where he holds appointment(s) have been established to the satisfaction of
Post Office Counters Ltd, or are admitted, or are suspected and are being
investigated”, “Where a Subpostmaster is suspended his remuneration in respect of
any period of suspension will be withheld so long as such suspension continues; “On
the termination of the period of suspension whether by termination of contract or
reinstatement, the Subpostmaster’s remuneration in respect of the period may, after
consideration of the whole of the case, be forfeited wholly or in part...”.
54. There were also onerous provisions in that contract by which the Post Office required
Subpostmasters to sign Official Secrets Act declarations, and purported to impose onerous
non-disclosure obligations upon them, under threat of criminal sanctions, addressed in detail
at section K ( Official Secrets Act) below.
(c) Relational contract
55. The contractual relationship between the Subpostmasters and the Post Office was a long
term relationship to which the parties made a substantial commitment. It required a high
degree of communication, co-operation and predictable performance, based on mutual trust
and confidence. In all the circumstances, they were relational contracts imposing obligations
of good faith on the Defendant (including duties of fair dealing and transparency, trust and
confidence and co-operation).
56. The contract included an implied duty of good faith, and was a ‘relational’ contract - per Mr
Justice Leggatt in Yam Seng Pte v International Trade Corp [2013] EWHC 111 (QB), at
paragraph 143.
57. The requirements of the duty of good faith and implied terms above required the parties to
communicate effectively and cooperate with each other in performance of the contract
between them. In particular, they required Post Office:
57.1. properly to execute all transactions which the Claimants effected;
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57.2. properly to account for, record and explain all transactions and any alleged shortfalls
which were attributed to the Claimants;
57.3. to co-operate with Claimants in seeking to identify the possible or likely causes of any
such shortfalls and/or whether or not there was indeed any shortfall at all;
57.4. to disclose possible causes of the appearance of alleged shortfalls (and the cause
thereof) to the Claimants candidly, fully and frankly;
57.5. to make reasonable enquiry, undertake reasonable analysis and give fair
consideration of the facts and information available as to the possible causes of the
appearance of alleged shortfalls (and the cause thereof);
57.6. not to conceal known problems, bugs or errors in or generated by Horizon that might
have financial (and other resulting) implications for Subpostmasters;
57.7. not to conceal from the Claimants the ability remotely to alter data or transactions
upon which the calculation of the branch accounts (and any alleged shortfalls)
depended; and
57.8. properly and fairly to investigate any such alleged shortfalls; and
57.9. not to seek recovery from Subpostmasters unless and until:
57.9.1. Post Office had complied with the duties above; and/or
57.9.2. the existence, cause and reason for any alleged shortfall has been
established after reasonable enquiry and analysis, and fair
consideration, such as to provide a rational and considered basis for
asserting Post Office’s entitlement to make such recovery.
58. The test of good faith is objective in the sense that it depends not on either party's perception
of whether particular conduct is improper but on whether in the particular context the conduct
would be regarded as commercially unacceptable by reasonable and honest people in all the
circumstances (Yam Seng, at paragraph 145). The incidents of the implied terms above are
reasonably well established and we hope that agreement might sensibly be reached as to
the content of Post Office’s obligations to Subpostmasters.
(d) Implied terms
Trust and confidence
59. In all the circumstances, the Contracts (i.e. the standard form contracts for Subpostmasters
and Crown Office employees, and others held accountable by Post Office), included an
implied term of trust and confidence
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Exercise of power
60. There is a body of authority which shows that a power conferred by a contract on one party
to make decisions which affect them both must be exercised honestly and in good faith for
the purpose for which it was conferred, and must not be exercised arbitrarily, capriciously or
unreasonably (in the sense of irrationally): see e.g. Abu Dhabi National Tanker Co v Product
Star Shipping Ltd (The Product Star) [1993] 1 LI Rep 397 , 404; Socimer International Bank
Ltd v Standard Bank London Ltd [2008] 1 LI Rep 558 , 575-7."”
61. By analogy with the employment context, the landmark decision of the Supreme Court in
Braganza_v BP Shipping Limited,"* significantly modified the justiciability of decisions by
employers (and by analogy, the Post Office) upon which entitlement to certain benefits
depends — in favour of employees rather than decision-makers. Braganza is of particular
significance where an employer exercises a discretion in its own favour, against the interests
of an employee, or has the power to do so. The Claimant will contend that the principles in
this case apply with equal vigour in the relationship between the Post Office and the
Claimants.
Co-operation and support
62. There were also implied terms imposing obligations on the Post Office:
62.1. to provide adequate training and support to our clients (particularly if and when the
Post Office imposed new working practices or systems or required the provision of
new services); and
62.2. to co-operate with the Claimants in seeking to identify the cause of any alleged
shortfalls, or otherwise to investigate, rectify or mitigate the same;
62.3. to take reasonable care in performing its functions and/or exercising its functions
within the relationship, particularly those which could affect the accounts (and
therefore liability to alleged shortfalls) of our clients.
63. These implied terms meet both the business necessity and obviousness tests (which are of
course alternatives) and are well established implied terms in such relationships or materially
similar ones. They meet these tests because:
63.1. the contracts would lack commercial or practical coherence were such terms not to be
implied;
63.2. any reasonable person in the position of the parties at the time that they were
contracting would have agreed such terms “went without saying”.
64. Further, in many respects the contracts between the Post Office and the Subpostmasters
were akin to employment contracts, not least the degree of control in the hands of the Post
1
: paragraph 146 of Yam Seng above
"8 [2015] UKSC 17, [2015] 1 WLR 1661, [2015] IRLR 487, [2015] ICR 449, 165 NLJ 7646, (2015) Times,
06 April, [2015] All ER (D) 185 (Mar)
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Office and requirements for personal service,’® and authorities as to the implication of terms
in the employment context are relevant by analogy.
Control of transactions
65. In the context of imposing and providing Horizon (and/or introducing new or changed
services), and through Horizon effecting transactions for which the Claimants were or could
be said to be responsible, it was an implied term that the Post Office would:
65.1. properly execute all transactions which the Claimants carried out;
65.2. properly account for, record and explain all transactions and any alleged shortfalls
which were attributed to the Claimants; and
65.3. properly, even-handedly and fairly investigate any such alleged shortfalls.
(e) Fiduciary duty
66. As noted above (at paragraph 52 above), the Post Office's standard form contracts
(“Contracts”) were replete with power and discretion in the hands of the Post Office.
67. Relationships in which a fiduciary obligation have been imposed generally possess three
broad characteristics:
67.1. The fiduciary has scope for the exercise of some discretion or power.
67.2. The fiduciary can unilaterally exercise that power or discretion so as to affect the
beneficiary's legal or practical interests.
67.3. The beneficiary is peculiarly vulnerable to, or at the mercy of, the fiduciary holding the
discretion or power.
68. Each of these characteristics is well grounded in the relationship between the Post Office
and the Subpostmasters, and in all the circumstances it is likely that a fiduciary obligation will
be held to exist on the facts of this case.
Horizon: the accounting system
69. As a further or alternative basis for such an obligation on the Post Office, the Post Office
undertook to provide and manage the accounting system on behalf of the Subpostmasters, in
circumstances which gave rise to a relationship of trust and confidence, thereby meeting the
classic test outlined by Lord Justice Millett in Bristol and West Building Society v Mothew
Section 1, paragraph 5 of the contract states that the Subpostmaster is not obliged to attend the sub-
office personally, but the contract is otherwise clear that a Subpostmaster has obligations which are
personal, e.g. requirements in relation to Assistants (Section 1, paragraph 15), requirement to provide a
substitute (Section 4, paragraph 8), obligations in relation to production of accounts (Section 12,
paragraph 4).
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[1998] Ch 1: “A fiduciary is someone who has undertaken to act for or on behalf of another in
a particular matter in circumstances which give rise to a relationship of trust and confidence.”
70. Post Office’s fiduciary duties arise by reason of the relationship between Post Office and
Subpostmasters and in particular, the extent to which Post Office effected, recorded and
managed the reconciliation of transactions affecting the businesses of the Subpostmasters in
the following circumstances:
70.1. Post Office requires Subpostmasters to establish themselves effectively as a
separate businesses, yet Subpostmasters are the Post Office's agents in some
respects;
70.2. Post Office effects, records and manages the reconciliation of transactions affecting
such businesses, as aforesaid;
70.3. accordingly, Post Office keeps the underlying transaction data in respect of the
business of each Subpostmaster;
70.4. Subpostmasters bear the risk of making good any deficiencies resulting from error or
carelessness for which they are contractually responsible; and
70.5. Subpostmasters are therefore vulnerable to any failure by Post Office properly to
discharge its duties set out above.
71. In the circumstances, Post Office undertakes to act for or on behalf of Subpostmasters in the
particular matters identified above, in circumstances which give rise to a relationship of trust
and confidence.
72. Such a duty is narrow and based upon the fact that the Post Office is the custodian/fiduciary
for the specific functions above, including properly accounting to Subpostmasters in respect
of transactions effected by them. This includes duties of recording transactions and
accounts properly, maintaining records properly as well as promptly and candidly making
transactional records available to Subpostmasters, where an alleged discrepancy or shortfall
is identified.
Agency
73. By reason of the agency relationship between the Claimants and the Defendant and/or in all
the circumstances (and having particular regard to the Defendant imposing and undertaking
to provide the system by which transactions were effected, recorded and reconciled and the
vulnerability of the Claimants to the exercise of power by the Defendant in this and other
respects), the Defendant owed the Claimants a fiduciary duty properly to execute all
transactions which the Claimants effected, and properly to reconcile, account for, record and
explain all transactions and any alleged shortfalls which were attributed to the Claimants.
74. Any terms relied upon as negativing duties owed by Post Office will be said to be unfair for
the purposes of UCTA.”°
® See e.g. Chitty (at 31-126); Bowstead & Reynolds (at 6-030 and 6-058-059).
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75.
76.
(g)
77.
78.
Further or alternatively, the relationship amounted to an accounting relationship so as to give
rise to such duties.
Tort
The Defendant also owed the Claimants a duty of a care in tort in exercising its functions and
powers within its relationship with the Claimants
Public functions and private duties
Section 19, paragraph 14 of Sub-Postmaster standard form contract provides as follows:
“Although they comprise the minority of all Investigation Division crime investigations,
there are many cases where the possibility (or even direct suspicion) arises that
persons employed on Post Office business may be involved. Officers of the
Investigation Division conduct interviews about these suspected offences and they are
required to observe the same code of conduct when obtaining evidence as that laid
down for Police Officers ...” [emphasis added]
In response to the Panorama programme, the Post Office publicly stated as follows:
“The Post Office does not prosecute people for making innocent mistakes and never
has” [...]
“The Post Office has always taken its duty to act fairly, proportionately and with the
public interest in mind extremely seriously. The Prosecutions it brings are scrutinised
by defence lawyers before they advise their clients and are, ultimately, ruled upon by
the courts.
If money is missing from a Post Office branch and the fact that cash is missing has
been dishonestly disguised by falsifying figures in the branch accounts, the Post Office
is entitled to take action and does so based on the facts and circumstances of that
specific case. Though rare, where there is evidence of criminal conduct, a decision
may be made to prosecute.
Prosecutions are brought to determine whether there was criminal conduct in a branch,
not for the Post Office’s financial considerations.
Post Office prosecutors are all experienced criminal lawyers, many of whom have
significant experience in prosecuting for both Post Office and the Crown Prosecution
Service. In the rare instances that prosecutions are undertaken, the Post Office
follows the Code for Crown Prosecutors (the same code as the Crown Prosecution
Service). The Code requires a prosecution to have sufficient evidence and be in the
public interest, both of which are kept under review right up to and including any trial.
It means there must be sufficient evidence for each charge - if a theft charge is
brought, there must be sufficient evidence for a realistic prospect of a conviction for
theft.
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A charge upon which there is no evidence will inevitably fail. It is the duty of the
defence lawyers to identify to the court where there is insufficient evidence to sustain a
charge. If the court agrees then the Judge must dismiss that charge.
The Post Office takes extremely seriously any allegation that there may have been a
miscarriage of justice. We have seen no evidence to support this allegation. The Post
Office has a continuing duty after a prosecution has concluded to disclose any
information that subsequently comes to light which might undermine its prosecution or
support the case of the defendant and continues to act in compliance with that duty.”
C. Facts and Matters Relied Upon
(a) Change to Claimants’ work
79. The claims herein arise following the Defendant's introduction of a new electronic point of
sale system known as “Horizon” in or around 1999/2000 and changes (including new or
changed services) introduced by the Defendant thereafter. The name Horizon relates to the
entire application. This encompasses software, both bespoke and software packages, the
computer hardware and communications equipment installed in branch and the central data
centres. It includes the software used to control and monitor the systems. In addition,
testing and training systems are also referred to as Horizon.’' Issues experienced by the
Claimants in relation to Horizon extended to the Defendant's audit and investigative
processes in respect of the same, as well as the Defendant's general behaviour towards the
Claimants when problems arose.
80. Horizon itself significantly changed how the Claimants were required and able to work in their
branches and significantly limited their ability to access, identify, obtain and reconcile
transaction records and themselves investigate any alleged shortfalls.
81. By way of example”, issues arose in relation to transaction types where Horizon produces,
at the end of the day, only an aggregate amount and volume for that day's transactions.
These transaction types are those where customers have paid for goods by debit or credit
card. In the event of an end-of-day discrepancy for one of these transaction types, and
without the benefit of disaggregation of a total amount into its constituent transactional
components, the Claimants found it difficult, if not impossible, to identify the individual
transactions that had brought about the discrepancy. Typically, a Claimant would need to
find items:
81.1. that should have been, but were not, included in the aggregate total; or
81.2. amounts that had been incorrectly entered, such as £50.00 entered as £500.00, or a
withdrawal processed as a deposit; or
2! This definition was provided by the Post Office's Information Manager in May 2011 — see Second
Sight’s Interim Report into alleged problems with the Horizon system of July 2013 at §1.6.
2 See Briefing Report- Part Two (9.4.2015) at §13.4-13.8.
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81.3. amounts that formed part of the aggregate total, but should not have been included in
that total or at all.
82. It was only by finding these errors and omissions that Claimants could begin the process of
correction, reduction or mitigation of losses from alleged shortfalls. This may sometimes
have involved attempting to contact the relevant customer, however in order to do this the
Claimant required the name and details of the relevant customer. Prior to the introduction of
Horizon by the Defendant this was a simpler process, as the paper dockets, retained to
evidence each transaction, provided this information. This is only one example of the
significant changes to the Claimants’ work that were brought about by the introduction of
Horizon and, indeed, the inferior functionality of Horizon in comparison to the previous
manual system that was in place.”*
83. A further specific example of a significant change to the Claimants’ work took place in 2005,
when the Defendant awarded a contract to Bank of Ireland to provide Automated Teller
Machines (“ATMs”) in its branches. This led to the following additional work having to be
undertaken by the relevant Claimant, all of which involved Horizon:
83.1. Each day, a Subpostmaster was required to print from the ATMs a “totals receipt” that
provides the number and value of withdrawal transactions. The data from this receipt
must then be manually input into Horizon by the Subpostmaster or branch staff.
83.2. In respect of retracted transactions, the retracted cash must be physically removed
from the ATM by the Subpostmaster, counted, and the amount also recorded in
Horizon so that the customer's account could be re-credited.
83.3. Once a week, the Subpostmaster should remove and count all the cash in the ATM
and manually record this figure in Horizon.
84. Notwithstanding several Claimant complaints to the Defendant regarding ATM shortfalls (for
which the Claimant would later be held accountable), and the possibility of external theft-
related cash disappearances in respect of ATMs, the Defendant simply accepted as correct
whatever Bank of Ireland reported as having been dispensed by each branch's ATM, without
immediately and thoroughly investigating each material shortfall reported by Claimants. The
Defendant's investigation processes, more generally, are dealt with below.
(b) Training and support
85. From the introduction of Horizon and throughout, the Defendant failed to provide adequate
training and support to the Claimants. The duration of basic training varied widely over the
years and in 1998-2010 many Claimants received two or fewer days’ training and were
simply handed Operating Manuals for self-study and to train their counter staff.* Some then
received two to three days’ training at their branch.
3 Briefing Report- Part Two (9.4.2015) at §13.8
* Briefing Report- Part Two (9.4.2015) at §11.5
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86. The basic training provided was predominantly sales focused and weak in regard to End of
Day, End of Week and, in particular, End of Trading Period, balancing.” Indeed, little or no
coverage was provided of how to deal with: (i) discrepancies, both surpluses and shortfalls;
(ii) how to identify the root causes of recurring problems; or (iii) how to deal with Transaction
Corrections.”®
87. Subpostmasters were also responsible for training and supervising their own staff as the
Defendant had no contractual responsibility to train branch staff, other than in its Crown
Offices. As stated above, the Defendant provided Subpostmasters with what it deemed to be
relevant training materials, but it did not operate an effective quality control function in order
to ensure that this further training was properly delivered.2” We understand that some of the
training manuals were stored on the Horizon system itself and could therefore not be
accessed in the event of the system crashing. On some occasions, Subpostmasters were
placed in other branches to train newly appointed Subpostmasters and/or agency
replacements, in circumstances in which the instructing Subpostmaster had only had their
own initial training and was provided with no further or adequate training properly to equip
them to train others.
88. The Defendant also set up a telephone Helpline (the “Helpline”), known as the Network
Business Support Centre (“NBSC”) which was the first port of call for post office branches if
they had a query or needed help. According to Post Office, this service could “support
postmasters with a wide range of issues such as providing assistance with transactions
carried out through Horizon, navigation, how to address and deal with mistakes, and any
issues arising out of the weekly branch trading statement.’*°
89. There was also a resource known as the Horizon Service Desk (“HSD”) which dealt with
technical queries. According to Post Office “The HSD deals with technical issues concerning
Horizon, for example, if Horizon appears to be ‘offline’ or there are log-in issues. In the event
that a technical issue cannot be resolved over the telephone, the HSD can request an
engineer to attend the branch to investigate the issue further.”
90. The Helpline however sometimes failed to provide proper or adequate information,
assistance and/or support when contacted, particularly where alleged shortfalls were
concerned. Specific criticisms include:
90.1. difficulty in contacting the Helpline due to its limited availability;
90.2. unhelpful, script-based, responses;
%5 Briefing Report- Part Two (9.4.2016) at §11.2
As you are no doubt well aware, Transaction Corrections are, (as defined in Briefing Report — Part
One), an electronic accounting adjustment issued by Finance Services Centre Chesterfield which
corrects previous errors in branch. This has an impact on the branch balance and would cause a
discrepancy for the value issued.
Briefing Report- Part Two (9.4.2015)at §11.7.
See paragraph 114 of Post Offices report entitled “Factfile”,
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90.3. instructions received during one call that are later, sometimes months later,
countermanded in another; and
90.4. incomplete and/or misleading information being given as to:
90.4.1. the likely cause of any alleged discrepancy or shortfall;
90.4.2. the Subpostmasters’ being “the only one” experiencing problems, which
the claimants now know to be untrue (see also paragraph 139 below).
91. There are several cases in which advice provided by a Helpline operator to a Claimant
resulted in an instant and significant increase in a discrepancy on the branch's account, on
the system, while the Subpostmaster was still on the telephone to the Helpline. The advice
provided by Helpline operators in relation to shortfalls frequently tended to be: “don't worry
about it, it will sort itself out”. However, often discrepancies would not sort themselves out,
nor was there any indication provided by the Helpline operator as to how long one should
wait before realising that a problem that had not sorted itself out and would probably then not
do so, nor how one was supposed to balance the books during the intervening period.” This
was compounded by statements that the transaction data was only retained by Post Office
for a limited period of time
(c) Investigation
92. It is evident that when financial, accounting and other alleged errors or failures arose,
including or resulting in alleged shortfalls in branch accounts, the Defendant did not
investigate the existence or causes of the alleged shortfalls fairly, properly or at all.
93. As set out above in relation to the contract between the Defendant and the Claimants, the
express terms of the contract do not provide an automatic entitlement to investigative support
to the Claimants when problems arise. Further, the express terms of the contract do not
provide an entitlement for the Claimants to be provided with data held by the Defendant, with
the exception of data routinely made available to the branch by Horizon.
94. Therefore, the contract, and the Defendant's purported exercise of its contractual powers,
placed the Claimants in a difficult position. This is because the Defendant generally insisted
on losses being made good, with the Claimant not necessarily entitled to receive all of the
information and explanations necessary to establish the cause of the loss.”
95. One would reasonably have expected that when Post Office detected significant or repeated
errors, shortfalls or frauds, that it would undertake investigative and analytical work to
determine whether its Standard Operating Procedures, its hardware or software, or its
employee/agent training and support procedures (or changes to the same), might have
* Briefing Report- Part Two (9.4.2015) at §12.3
%° Briefing Report Part Two (9.4.2015) at §3.8
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caused or contributed and whether improvements might reduce the likelihood and/or
seriousness of future recurrence.*'
96. In not fully investigating errors, even where it is obvious that some of those errors have been
systematically repeated in a branch, the Defendant was not taking ‘ownership’ of finding
ways to reduce or mitigate these errors; this led to a situation whereby Claimants were
bearing the cost of apparent losses caused by errors and fraud that could have been
designed out of the system, or where improved operational procedures and training could
have reduced the incidence and severity of errors.”
97. When faced with requests from the Claimants for investigative help, these requests were
often refused. There was little clarity in Post Office’s standard contracts as to its obligations
to investigate, as illustrated by Section 19, Paragraph 12 of the Standard Contract, which
states that:
“The main job of the Investigations Division is to investigate, or help the Policy to
investigate criminal offences against the Post Office, British Telecommunications and
the Department of National Savings”.
“The investigation Division does NOT enquire into matters where crime is not
suspected”.
98. The Claimants will contend that Post Office was under a duty to make proper enquiries, as
explained in this letter, prior to alleging (implicitly or expressly) that any supposed shortfall is
the responsibility of the Subpostmaster. Thereafter, it has a duty properly and fair-mindedly
to investigate and to exercise all its functions in accordance with the obligations set out in
this letter.
99. Despite that contention, it is noteworthy that, notwithstanding the use of this double-negative
(quoted above), Post Office's established practice indicates that the above paragraph does
not mean that the Investigation Division can necessarily be expected to carry out
investigative work even where crime is suspected. This has led to situations where some
Claimants have found that even where one or more of their employees has been suspected
— both by themselves and Post Office — of having stolen branch funds, no investigative work
was carried out.** This left the Claimant with an apparent contractual responsibility to repay
the resultant alleged loss, but with no help from the Defendant in recovering any of the stolen
money from those who had taken it.*®
100. The failure of the Defendant to investigate and correct material discrepancies appears to be
a feature of the Defendant's business model. In light of the express terms of the contract
*! Briefing Report- Part Two (9.4.2015) at §21.1
* Briefing Report- Part Two (9.4.2015) at §21.3-21.4.
8 Briefing Report- Part Two (9.4.2015) at §25.10
* Briefing Report — Part Two (9.4.2015) at §25.12-25.13.
ied Briefing Report — Part Two (9.4.2015) at §25.14.
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between the Defendant and the Claimants, and the asymmetry of information and power in
the relationship, there appears to be little commercial incentive for the Defendant to establish
the root causes of discrepancies because the burden of cost (and risk) is being carried in
most instances either by Subpostmasters, in respect of shortfalls, or by the customers, in the
case of surpluses.*°
(d) Post Office’s response to shortfalls
101. Post Office's responses to the discovery of shortfalls included:
Requiring Claimants to make good alleged shortfalls
101.1. The Defendant controls the Horizon infrastructure, including back-office accounting
and reporting functions. A consequence of this is that the Defendant may hold a
Subpostmaster accountable for shortages that they are unable to fully investigate due
to a lack of access to data. The Subpostmaster, therefore, has very limited options in
these circumstances and often has to make good losses even where the underlying
root cause has not been established or properly understood.°”
Encouraging Claimants to sign-off cash balances
101.2. Encouraging Claimants to sign-off cash balances without being able to satisfy
themselves that they were accurate and/or exercising undue or unreasonable
pressure or influence on Claimants to do so. Indeed, as set out above, a frequently
recurring response by Helpline operators in respect of shortfalls was “dont worry
about it, it will sort itself out’.**
Suspending and/or terminating the Claimants’ appointment
101.3. There are also several instances in which Claimants were subject to pressure from
the Defendant to resign from their post.
Unfairly investigating the Claimants
101.4. The unfairness of such investigations is evidenced by the following:
101.4.1. The Defendant excluded from consideration the known risk®, if not
likelihood, of errors in or related to the Horizon system. The Defendant's
°° Briefing Report — Part Two (9.4.2015) at §19.6
*” Briefing Report — Part Two (9.4.2015) at §13.2.
38 Briefing Report — Part Two (9.4.2015) at §12.2.
*° Specifically, in relation to ‘Horizon Online’, two internal memoranda, entitled ‘Correcting Accounts for
“lost" discrepancies’ (seemingly produced by Fujitsu) and ‘Receipts/Payments Mismatch issue notes’
(seemingly prepared by the Defendant for its legal team), deal with a Horizon ‘bug’ that had existed, it
seems from the inception of Horizon Online. It appears that this ‘bug’ caused some branches’ surpluses
or shortfalls to disappear when being transferred to the Local Suspense Account.
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(e)
102.
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instructions to (and its training of) its investigators seems to have
disregarded the possibility that the Horizon system could ever be in any
way relevant to their investigations.” Instead, the Defendant's
investigators seem to have defaulted to seeking evidence that would
support a charge of false accounting, rather than carry out an
investigation into the root cause of any suspected problems.*' The
approach and purpose of these investigations was never communicated
to the Claimants.
101.4.2. I The Defendant prevented or impeded the Claimants’ reasonable access
to relevant data, information and documents. The Claimants’ ability to
investigate transactional discrepancies, or to defend themselves, was
often thwarted because, following their suspension (usually on the day of
an Audit), they were, as a matter of the Defendant's policy, denied
access to their branch. In many instances, the Defendant's investigators
also removed records, often including personal documents such as
diaries in which the Claimants’ had: (i) noted problems which had
occurred; (ii) to whom they had reported those problems; (iii) what
advice and instructions they had received; and (iv) what had resulted
from following that advice or instructions.“*
Impeding sales and transfers of branches
101.5. Unreasonably acting so as to prevent or inhibit the Claimants from preserving,
realising or recovering the value of their businesses including their capital
investments. For example, there are several instances of the Defendant not
responding to or rejecting the applications of prospective purchasers of branches to
become Subpostmasters, with the resultant delay leading to the collapse of sales
and/or reduction of sale prices.
Private criminal prosecutions.
101.6. This is dealt with in detail immediately below and gives rise to potential liability for
misfeasance in public office and malicious prosecution, where the relevant elements
of those torts are established on the facts.
Criminal prosecutions
The Defendant's policy or practice was usually to bring private criminal prosecutions against
Subpostmasters rather than to report the matter to the Police and then allow the Crown
Prosecution Service (“CPS”) to prosecute.”
Briefing Report — Part Two (9.4.2015) at §25.16.
Briefing Report - Part Two (9.4.2015) at §25.3
Briefing Report — Part Two (9.4.2015) at §13.15.
Briefing Report — Part Two (9.4.2015) at §25.17.
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103. By bringing private prosecutions, the Defendant became responsible for ensuring that its
lawyers adhere to the Code for Crown Prosecutors which includes ensuring that any cases
that it brings to the Courts passes the tests that the CPS itself would apply. These include
determining whether it has sufficient evidence to provide a realistic prospect of conviction
against each suspect on each charge; a case which does not pass this evidential stage must
not proceed, no matter how serious or sensitive it may be.“ By itself determining whether or
not proposed prosecutions satisfied these tests, when the Defendant had its own private
interest in the consequences of the prosecution, the Defendant had an actual or potential
conflict of interest such as to accentuate the importance of the proper application of such
tests and to require anxious scrutiny of the basis upon which they were to be judged to be
satisfied. The Defendant ran the risk of being accused of circumventing those checks and
balances that a separate and independent body would otherwise have carried out.
104. Notwithstanding the above, there are numerous instances in which criminal charges, such as
theft, were brought in circumstances where it appears that the Defendant's primary
motivation was a desire to recover financial losses. In some of these cases those criminal
charges do not appear to have been supported by the necessary degree of evidence and
were dropped prior to trial, often as part of an agreement to accept a guilty plea to a charge
of false accounting, so long as the Claimant agreed to repay all of the missing funds.*® On
occasion, the claimant was required, as part of the plea bargain, not to mention potential
errors or bugs in the Horizon system.
105. A specific example of the above is found in the case of Ms Josephine Hamilton. In the case
of Ms Hamilton, the Defendant submitted several documents to Second Sight in the course
of the Mediation Scheme entered into between the parties, which included a Post Office
Investigator's Report, dated 17 May 2006 (the “Investigator’s Report”), that included the
following statements:
“Having analysed the Horizon printouts and accounting documentation I was unable to
find any evidence of theft or that the cash figures had been deliberately inflated. ...
The prepared statement seems to intimate that she didn't receive adequate training at
the time and that the manuals were old and out of date. It also suggests that she didn't
receive any training in respect of other matters."
106. The Investigator’s Report also refers to Ms Hamilton having mentioned a £1,500 error, which
she said had doubled to £3,000 when attempts were made to correct it, and another error of
£750°°. The Investigator’s Report further refers to Ms Hamilton saying that "The Post Office
systems are shambolic" and that all the branch staff used the same Horizon User ID, citing
lack of training as the reason for that. In the opinion of Second Sight, the Defendant's own
investigator had found no evidence of theft. Further, the investigator would have been aware
of the endemic User ID and password sharing which was taking place at Ms Hamilton’s
See the Code for Crown Prosecutors at 4.4.
48 Briefing Report — Part Two (9.4.2015) at §25.21
In fact, Ms Hamilton followed instructions given to her by the helpline, and having taken the steps as
instructed, the error doubled
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branch, which would have been relevant to Ms Hamilton's defence.” Despite this, the
Defendant's ‘Case Closure Report’ shows, as the “Prosecution Outcome’: “Single theft
charge removed after undertaking from defence counsel that all monies owed to Post Office
would be repaid prior to sentencing”.
107. The case of Ms Hamilton demonstrates:
107.1. That the Defendant, acting in its capacity as a prosecutor, realised that there may
have been insufficient evidence to support a charge of theft, but proceeded with it
nonetheless.
107.2. The offer by the prosecution to remove the charge of theft appears to have had the
effect of putting pressure on Ms Hamilton to plead guilty to the false accounting
charges that it had also brought, even though the prosecution may have realised that
a charge of theft was likely to fail unless further evidence was later discovered to
support that charge.
107.3. The threat of proceeding with a charge of theft may have been used to put pressure
on Ms Hamilton to agree to repay the losses and to avoid the custodial sentence
normally associated with a conviction for theft.
107.4. The purpose of proceeding with a charge of theft may have been intended primarily to
assist in the recovery of losses, rather than in the interests of justice.
The above factors (i.e. paragraph 107) are not unique to Ms Hamilton’s case.
108. Further, it is of note that in the case of Ms Hamilton, part of the agreement to remove the
charge of theft included a demand that no mention would be made in Court of alleged
problems with Horizon.
109. Another example of a case in which the Defendant acted unreasonably in purported exercise
of its prosecutorial powers is found with Mr Darren King. Following the termination of Mr
King's engagement with the Defendant he was interviewed by a member of the Defendant's
security team. Subsequently, the Defendant applied for a Restraint Order pursuant to
section 41 of the Proceeds of Crime Act 2002 (“POCA”). Section 40(2) provides conditions
for the exercise of the Crown Court's powers under section 41, which include:
“(a) a criminal investigation has been started in England and Wales with regard to an
offence, and
(b) there is reasonable cause to believe that the alleged offender has benefited from
his criminal conduct.”
110. A witness statement in support of the Defendant’s application for a Restraint Order was
provided by a Mr Dave Posnett, a Financial Investigator employed by the Defendant, and is
dated 3 June 2013. At paragraph 7 of his statement, Mr Posnett sets out the financial affairs
of Mr King, which include:
47
See Second Sight - Case Review Report (24 March 2015) in respect of Josephine Hamilton at §4.10
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110.1. Mr King is the joint owner of a property with his partner. The property had an
outstanding mortgage with Santander of approximately £59,677. There was also a
further advance with Lloyds TSB and an outstanding balance of £41,340. It was
calculated that there was available equity of around £20,642.
110.2. In addition to the above, Mr King had access to: (i) a Lloyds TSB Business Account,
which was overdrawn by more than £1,800; and (ii) a Santander Store Card
(Halfords) with a credit limit of £550.
111. Mr Posnett’s conclusion, at paragraph 8 of his witness statement, was that “/ believe that
KING has a criminal lifestyle through having committed a criminal offence.” Mr Posnett
appears to base this solely on Mr King admitting in an interview to falsifying accounts. In
light of the evidential test set out in the Code for Crown Prosecutors at 4.4, and the test
provided by Section 41 of POCA, it is simply untenable to suggest that the Defendant
satisfied itself to the requisite standard that an application for a Restraint Order was
warranted and necessary; given the financial affairs of Mr King, as set out by Mr Posnett,
there was no reasonable basis on which to conclude that Mr King was leading a “criminal
lifestyle” or that he had benefited from his general alleged criminal conduct.
D. ICL/Fujitsu
(a) Background to the Post Office/Fujitsu relationship and contracts
112. The introduction of the Horizon system followed the infamous 1996-1999 Pathway project,
aimed at computerising the nation’s post offices. It was reported, and subsequently
confirmed by the Comptroller and Auditor General, that up to £1bn of tax payers’ money was
wasted on the aborted attempt to introduce a swipe card system.
113. Quoting an extract from the 2001/02 Royal Mail Group Report and Accounts:
“Responsibility for the liabilities of the Horizon ICL/Pathway Project was transferred from the
Government to the Post Office in 1999. This results in a one-off payment by the Group for
costs incurred by ICL of £550m, a write off of £571m in the 1999-2000 Accounts and the
incurrence of substantial ongoing maintenance costs. By the time the contract terminates in
2005, aggregate contract costs are expected to amount to some £1bn.”
114. When the Horizon system was introduced, in 1999/2000, there were approximately 18,000
post office branches of varying types.
115. ICL Group, which we understand to have been the original contracting party with Post Office,
was ultimately acquired by the Fujitsu Group.
116. We are not privy to the contractual terms as between Fujitsu and Post Office, either in
respect of the original roll out of the Horizon system, nor in relation to contracts for the
operation, maintenance and ongoing development of the system. Such contractual
arrangements will be sought in these proceedings, to the extent that they are relevant to the
issues in dispute.
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117. We understand, although are not in a position to verify, that the contractual framework
between Post Office and Fujitsu included a liquidated damages mechanism, whereby Fujitsu
were required to pay to Post Office a fixed sum of money on each occasion that a transaction
failed to process in a branch, by reason of faults, bugs or errors in the Horizon system. We
also understand that the consequential financial exposure to Fujitsu was very significant,
although we are unaware of the extent to which payments were required to be made by
Fujitsu to Post Office in respect of such issues.
118. We understand that Post Office is able to retrieve a certain amount of Horizon transaction
data under the terms of its contract with Fujitsu, but there is a limit to the data that can be
retrieved without triggering further payments. “® Post Office therefore have a financial
incentive to refrain from providing Subpostmasters with Horizon transaction data.
(b) Helpline, significant discrepancies and the level of errors and bugs
119. The presence and function of the Post Office Helpline is well documented. The
ineffectiveness of the helpline is a recurring feature in the case of the Claimants for whom we
act. We address elsewhere in this letter fundamental issues arising out of statements and
representations made by the Post Office Helpline. However in the context of Fujitsu, we
understand that the Fujitsu technical team in Bracknell, Berkshire (which numbered circa. 30
plus people) was engaged full time in resolving and “fire-fighting” software issues and
queries. The Fujitsu software team routinely received calls and queries that the Post Office
Helpline had been unable to resolve, which is unsurprising given that a large proportion of
the significant issues would require a great deal of time and expertise by the Fujitsu software
engineers. It is unsurprising that the Post Office Helpline was ineffective in the vast majority
of cases where transaction issues and anomalies had arisen. It appears that the Fujitsu
team were routinely encountering software bugs and defects, which needed to be resolved
on an ongoing basis. This culminated in frequent and regular corruption or interference with
transaction data. Again, determining the nature of the problem, and then rectifying the
consequential software issue, and “rebuilding” transaction data in the branch, was a very
specialist task that was carried out by the Fujitsu IT specialists.
120. It was often not clear to Subpostmasters how discrepancies and apparent shortfalls in
branches had come about — not least as it might result from hardware errors, connectivity
errors or software or system errors. Hence, these would routinely have to be analysed by
Fujitsu IT specialists, who would need to work through vast numbers of transactions and
search through hundreds of thousands of lines of coding, to establish the likely cause of the
problem. The issue would often be one of a coding error, which would be flagged to the
Fujitsu software developers, who would then work on a fix. Such system and software
problems regularly affected transaction data and the proportion of network branches affected
by this (as well as by other issues such as connectivity errors) will be in issue in these
proceedings.
48 “Supplementary existence from Post Office Limited” to BIS — paragraph 66.
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121. We further understand that the Fujitsu IT specialists were able to remotely access data at a
branch level, and make changes to data/transactions where required. This is in direct
contradiction to the denial by Post Office that such actions are or have been possible.
122. As indicated above, other causes of problems included transaction data being lost by reason
of data transfer or connectivity issues, and also hardware issues, each of which could and
did translate into shortfalls being indicated on the Horizon system, when in fact there was no
actual “shortfall” at all. It is salient to observe that Post Office's approach to alleged shortfalls
appears to have proceeded upon a presumption which was effectively or practically
irrebuttable (or unreasonably difficult for Subpostmasters to rebut) that such a shortfall did
indeed exist.
123. The fact that the Post Office Helpline was inundated with calls, which were often transferred
to Fujitsu when it became apparent that Post Office was unable to solve them, and that
around 30 Fujitsu employees were working around the clock to attempt to fix bugs in the
system, begins to highlight the enormity of the problems which were experienced by
Subpostmasters, and by Post Office and Fujitsu in their attempts to fix them. Yet during this
time, Post Office employees were informing individual Subpostmasters that they were the
“only one” experiencing problems, and Post Office deliberately or by omission failed to
thoroughly investigate these problems.
(c) Disclosure/retention of data
124. It is assumed that Fujitsu retain documentation relevant to its contractual arrangement with
Post Office and, in particular, records of errors within the Horizon system. We understand
that Fujitsu maintained a ‘Known Error Log’ for Horizon and that such reports will have been
provided to Post Office. Please see the list of the categories of documents relating to Fujitsu
referred to below, that we request disclosure of.
E. Concealment
125. Throughout, the Defendant concealed material facts from the Claimants, and the Claimants
were thereby misled about a number of matters, including: (i) the reliability of Horizon (and
the extent of errors in, and generated by, Horizon); (ii) the ability of the Defendant and/or its
IT provider (ICL and, later, Fujitsu) to remotely alter transactions without the knowledge of
Subpostmasters; and (ili) the Defendant's approach to, and underlying purpose in,
investigating shortfalls. (iv) The scale of the impact on the branch network, particularly the
large number of branches affected.
126. The Defendant's awareness of issues with the Horizon system is evidenced by, inter alia:
126.1. the volume of complaints and issues raised by Subpostmasters relating to alleged
“shortfalls” and Horizon since its introduction; and
126.2. specifically, in relation to ‘Horizon Online’, two internal memoranda, entitled
‘Correcting Accounts for “lost” discrepancies’ (seemingly produced by Fujitsu) and
‘Receipts/Payments Mismatch issue notes’ (seemingly prepared by Post Office for its
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legal team), which deal with a Horizon ‘bug’ that had existed, it seems, from the
inception of Horizon Online.
127. Notwithstanding this knowledge, the Defendant concealed these and other material facts in
49
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the following ways:
127.1. The view of Second Sight in its report was that the Defendant's instructions to (and its
training of) its investigators seems to have disregarded the possibility that the Horizon
system could ever be in any way relevant to their investigations.” Further, the view
of Second Sight was that the Defendant's investigators seem to have defaulted to
seeking evidence that would support a charge of false accounting, rather than carry
out an investigation into the root cause of any suspected problems.”
127.2. Helpline operators persistently told Subpostmasters that they were the ‘only one’
experiencing the issues with Horizon that they were reporting. It is inherently unlikely
that such a statement would have been disseminated with such frequency without a
level of coordination between the Defendant and Helpline operators.
127.3. The Defendant has acted obstructively in failing to disclose relevant information and
documents” to both Subpostmasters querying shortfalls for which they are
purportedly held liable and Second Sight in carrying out its independent investigation
into Horizon. With regards the latter, Second Sight commented:
“We have experienced significant difficulty in obtaining access to a number of
documents we believe are necessary for the purposes of our investigation,
notwithstanding Post Office's commitment to make requested documents available to
us. The documents requested from Post Office fall into three main categories:
a) the complete legal files relating to investigations or criminal prosecutions
commenced by Post Office that relate to Applicants;
b) the complete email records relating to a small number of Post Office employees
working at the Bracknell office of Fujitsu in 2008; and
c) detailed transactional records relating to items held in Post Office's Suspense
Account(s) and to disputed transactions in a number of third party client accounts
held by Post Office.’**
“When we started our work on these important matters in July 2012, we believed
that there was a shared commitment with Post Office to “seek the truth”
irrespective of the consequences. This was reflected in us being provided with
Briefing Report — Part Two (9.4.2015) at §25.16
Briefing Report — Part Two (9.4.2015) at §25.3
This includes, but is not limited to, transaction information, data or documents reasonably required by
Subpostmasters to consider and respond to alleged “shortfalls”. In many cases, requests for such
information, data or documents were refused (i.e. concealed).
Briefing Report — Part Two (9.4.2015) at §2.1
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128.
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unrestricted access to highly confidential and sensitive documents, including
legal advice relating to individual cases. This position was recognised and well
received by other stakeholders, including the Rt. Hon. James Arbuthnot MP and
the JFSA.
However, as time progressed, and particularly in the last 18 months, it has been
increasingly difficult to progress our investigations due to various legal challenges
by Post Office. There have been considerable delays in receiving responses to
requests for information and legal issues have been raised, such as Data
Protection and Legal Privilege, as being the reason various documents could no
longer be provided to us,
We found that types of document previously provided to us without restriction,
were no longer being provided. Some of these documents were also not being
provided to Post Office's in-house team of investigators.
We can only conclude that this represented a policy decision by Post Office at a
senior level, possibly based on legal advice. We consider this regrettable,
particularly in the light of assurances previously provided to ourselves, MPs and
the JFSA."°
127.4. There is also the matter of the Defendant and/or Fujitsu's ability to remotely alter
transactions without the knowledge of Subpostmasters. The Defendant's stance on
this has consistently been that it is not, and never has been, possible for anyone to
access Branch data and amend live transactional or stock data without the knowledge
of Subpostmasters or their staff. However, following its investigation and review of
various internal memoranda, Second Sight determined that, in 2010 at least, “it was
possible for Fujitsu/Post Office to directly amend branch data without the knowledge
of the relevant Subpostmaster.”™
A specific example of the Defendant concealing material facts is illustrated by the case of
Seema Misra. Seema Misra was prosecuted by the Defendant on charges of false
accounting and theft. She pleaded guilty to the false accounting charges but not guilty to the
charge of theft. Part of her defence involved questioning the integrity of the Horizon system.
As stated above, it was uncovered by the BBC Panorama programme that:
128.1. Charles McLachlan, the expert witness for the defence, stated that he had spoken to
one of the Post Office’s investigators and he was told that “as a matter of policy, [Post
Office Investigators] would never consider an IT error, a computer error, as the
source of the discrepancy.”
128.2. The programme described a meeting that took place between the Post Office and
Fujitsu just before the trial of Seema Misra. The minutes warn of “another computer
bug that could cause a loss of confidence in the Horizon system if widely known; the
bug made money disappear”. This minute went on to say that this bug could “impact
Briefing Report — Part Two (9.4.2015) at §26.1-26.4.
Briefing Report ~ Part Two (9.4.2015) at §14.15.
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upon ongoing legal cases where branches are disputing the integrity of Horizon
Data”. The bug did not affect Seema Misra’s branch, but it was evidence that there
were problems with Horizon, and the same was never disclosed to Charles
McLachlan during Seema Misra’s trial.
129. In the premises, it is evident that the Defendant deliberately committed breaches of duty in
circumstances in which the same was unlikely to be discovered for some time by the
Claimants and thereby deliberately concealed the facts involved in that breach of duty.
F. Breach of Duty and/or Unlawful Acts
130. By reason of the Defendant’s said conduct, the Defendant is liable to the Claimants for:
breach of express and/or implied contractual terms; breach of duties of care in tort; breach of
fiduciary duty; unjust enrichment; harassment under the Protection from Harassment Act
1997; negligent misstatement; misrepresentation; deceit; unlawful means conspiracy;
malicious prosecution; misfeasance in public office; breach of the Claimants’ rights under
Articles 6 and 8 ECHR and/or Article 1 of the First Protocol contrary to section 6(1) of the
Human Rights Act 1998; and/or procuring a breach of those rights and their common law fair
trial rights.
131. It is noteworthy that in respect of the same transactions carried out by Crown Office
employees as opposed to Subpostmasters, Crown Office employees are entitled to all of the
relevant information underlying transactions. This is striking, and a potential yardstick for
what might be reasonable in the context of fiduciary and implied obligations owed to
Subpostmasters (as well as commercially acceptable for other purposes, above).
132. By way of amplification of the foregoing, we set out the following:-
(a) Harassment
133. Protection from Harassment Act 1997 (the “Act”).
Prohibition of harassment.
1(1) A person must not pursue a course of conduct—
(a) which amounts to harassment of another, and
(b) which he knows or ought to know amounts to harassment of the other.
(2) For the purposes of this section, the person whose course of conduct is in question
ought to know that it amounts to harassment of another if a reasonable person in
possession of the same information would think the course of conduct amounted to
harassment of the other.
Offence of harassment.
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2(1) A person who pursues a course of conduct in breach of section 1 is guilty of an
offence.
(2) A person guilty of an offence under this section is liable on summary conviction to
imprisonment for a term not exceeding six months, or a fine not exceeding level 5 on
the standard scale, or both.
Civil remedy.
3(1) An actual or apprehended breach of section 1 may be the subject of a claim in civil
proceedings by the person who is or may be the victim of the course of conduct in
question.
(2) On such a claim, damages may be awarded for (among other things) any anxiety
caused by the harassment and any financial loss resulting from the harassment.
Interpretation of this group of sections
7(1) This section applies for the interpretation of sections 1 to 5A
(2) References to harassing a person included alarming the person or causing the
person distress
134. Ferguson v British Gas Trading Ltd [2010] 1 WLR 785. In this case, a utility company made
repeated and unwarranted demands for payment of bills threatening disconnection, legal
proceedings and being reported to credit rating agencies — demands and threatening letters
which had been computer generated. The judgment provides helpful guidance and repays
reading in full. At paragraph 40, the court observed that “/t is to be noted that the Act does
not provide any defence for "accidental" harassment ... one cannot think of any policy reason
why big corporations should be exonerated for conduct which, if carried out by an individual,
would amount to harassment.”
135. For the avoidance of doubt, the threshold requirements necessary for Post Office to establish
a defence under section 1(3) (a) or (c) of the Act are not met by Post Office’s conduct in this
case.
(b) Deceit
136. The ambit of the tort of deceit is well known. Since Derry v Peek, it has been clear that the
tort of deceit:
136.1. requires that a sufficiently clear representation be made of fact or law, which is false;
136.2. requires the absence of an honest belief in the representation made; and
136.3. may be established (as to the absence of honest belief) by inference from the
unreasonableness of the grounds of such belief.
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137. As Lord Herschell said in Derry v Peek, although an unreasonable belief does not itself
amount to dishonesty, there may be cases where "the fact that an alleged belief was
destitute of all reasonable foundation would suffice of itself to convince the court that it was
not really entertained, and that the representation was a fraudulent one."
138. One of the striking features of this case, noted above, is the skewed approach to
investigating these cases, in that PO investigators appear to have both:
138.1. systematically excluded the possibility of any Horizon errors in their investigations;
and
138.2. told Subpostmasters who raised the possibility of Horizon errors or difficulties that
they were individually ‘the only one’ having any such difficulty with the system.
139. We understand that the latter statement (i.e. that they were ‘the only one’) was fairly
consistently disseminated to Subpostmasters experiencing difficulties with Horizon and
would appear to have been made in circumstances where it appears overwhelmingly unlikely
that the Post Office could properly have honestly maintained a belief in the truth of that
statement.
140. If Post Office investigators were actually instructed by their management to exclude from
consideration the possibility of any error in the Horizon system and did so consistently (i.e.
regardless of indications to the contrary or ignoring the obvious possibility of indications to
the contrary had they enquired into the Horizon system) the position is even more serious for
two reasons:
140.1. first, there appear to be free-standing implicit but false representations inherent in
Post Office’s conduct as investigators (and perhaps in statements made in the course
of carrying out such investigations); and
140.2. second, the deliberate decision of the Post Office to exclude from consideration and
investigation any possible errors in the Horizon system indicates that the consistent
‘only one’ representations made by investigators were also made systematically and
deliberately.
(c) I Misfeasance in public office
141. The rationale for the private law remedy afforded by the tort of misfeasance in public office is
that “in a legal system based on the rule of law executive or administrative power ‘may be
exercised only for the public good’ and not for ulterior or improper purposes'’.®°
142. The allegation made by the Claimants in the present case is one of misfeasance in public
office by untargeted malice, which is established upon proof of damage caused by the act of
a public officer, where he so acts knowing or being subjectively reckless as to the fact that he
55 Three Rivers DC v Bank of England (No.3) [2003] 2 A.C. 1, 190 per Lord Steyn
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has no power to do the act complained of and that it will probably injure the Claimant.® , In
order to establish liability under this tort by reason of untargeted malice, a claimant is
required to prove that the public officer acted in a state of mind of reckless indifference to the
illegality of his act and its consequences. A knowing excess of power in that sense is
essential.
Post Office's approach to investigations
143. In the present matter, the Post Office, in investigating alleged shortfalls appearing on branch
accounts (with a view to prosecution), seem to have defaulted to seeking evidence that
would support a charge of false accounting, rather than carry out an investigation into the
root cause of any suspected problems.*” This tied in with the Defendant's policy or practice,
which was usually to bring private criminal prosecutions against Subpostmasters rather than
to report the matter to the Police and then allow the CPS to prosecute.* The possibility of
errors arising from Horizon appears to have been deliberately excluded from consideration
and the focus was on recovery of sums from Subpostmasters rather than proper
investigation and consideration of the facts identified and data revealed by such
investigation.
144. As set out above on page 28, by bringing private prosecutions, the Defendant became
responsible for ensuring that its lawyers adhere to the Code for Crown Prosecutors which
includes ensuring that any cases that it brings to the Courts passes the tests that the CPS
itself would apply. These include determining whether it has sufficient evidence to provide a
realistic prospect of conviction against each suspect on each charge; a case which does not
pass this evidential stage must not proceed, no matter how serious or sensitive it may be.®®
145. Further, in every case where there is sufficient evidence to justify a prosecution, prosecutors
must go on to consider whether a prosecution is required in the public interest. Indeed, it has
never been the rule that a prosecution will automatically take place once the evidential stage
is met.
146. By itself determining whether or not proposed prosecutions satisfied these tests, when the
Defendant had its own private interest in the consequences of the prosecution, the
Defendant had an actual or potential conflict of interest such as to accentuate the importance
of the proper application of such tests and to require anxious scrutiny of the basis upon
which they were to be judged to be satisfied. The Defendant ran the risk of being accused of
circumventing those checks and balances that a separate and independent body would
otherwise have carried out.
Broadly affirming the analysis of Clarke J in Three Rivers, at first instance
‘7 Briefing Report — Part Two (9.4.2015) at §25.3.
°° Briefing Report — Part Two (9.4.2015) at §25.17.
5° See the Code for Crown Prosecutors at 4.4
Ibid. at 4.7-4.8.
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147. The details set out above in Section C indicate quite clearly that the Defendant has acted ina
manner that was motivated by an improper private purpose, namely the recovery of financial
losses from Subpostmasters, in circumstances where, contrary to its express responsibilities
pursuant to prosecutorial guidelines, it proceeded with prosecutions in which there was
insufficient evidence to substantiate the bringing of criminal charges. The cases of Ms
Josephine Hamilton and Mr Darren King (described above), are two specific illustrations of
this point.
148. The Defendant, in acting as a private prosecutor, must have been aware of the relevant
guidelines and the inadequacy of the evidence before it in each individual case or,
alternatively, it turned a blind eye to the same and recklessly failed to make such inquiries as
an honest and reasonable body would make as to: (i) the lawfulness or validity of its acts;
and (ii) the probable consequences of these acts for the Subpostmaster in question or for the
class of Subpostmasters as a whole of whom the relevant Subpostmaster was a member. At
best, the Defendant, in failing to properly investigate the extent of the faults with Horizon and
potential causation in individual cases, took means not to know the unlawfulness of its acts.
At worst, the Defendant was aware of the extent of such faults and proceeded regardless, in
full knowledge of the unlawfulness of its acts.
149. For the avoidance of doubt, in so taking these actions, the Defendant acted in the knowledge
that its acts would probably injure the Claimants. As a direct result of the Defendant's policy
on private prosecutions and the unlawful exercise of its prosecutorial powers, the Claimants
suffered from a wide range of foreseeable, and indeed intended, consequences, including: (i)
financial losses; (ii) restraint orders; (ili) community service sentences; and (iv) custodial
sentences, both suspended and served.
150. To the extent that the acts complained of above are said to have been undertaken by
employees of the Defendant and/or individuals contracted by the Defendant, the Defendant
is vicariously liable for the same as it is inherently unlikely that such individuals would have
been on a frolic of their own’ in performing their duties in such a manner. The circumstances
described above are indicative of the implementation of policies that were put in place by the
Defendant, and as such these actions were effectively authorised by the Defendant.
(d) Malicious Prosecution
151. A claim for malicious prosecution may be brought in respect of civil as well as criminal
proceedings: Crawford Adjusters and others v Sagicor General Insurance (Cayman) Ltd and
another [2013] UKPC 17.
152. The elements of malicious prosecution overlap with those of misfeasance in public office, in
the context of the criminal prosecutions, restraint orders and civil recovery proceedings
(including bankruptcy petitions).
(e) Unlawful means Conspiracy
153. On present evidence, and subject to the disclosure of further relevant documents, it would
appear that there was a conspiracy between the Defendant and its directors and/or
investigators and/or Helpline operators and/or Fujitsu in relation to concealing the faults of
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154.
the Horizon system and simply recovering its losses directly from its Subpostmasters where
possible. This view is evidenced by:
153.1. The Defendant's apparent policy of excluding from consideration the known risk, if not
likelihood, of errors in or related to the Horizon system. The Defendant's knowledge
in this respect would have been informed by, inter alia: (i) the volume of complaints
and issues raised by Subpostmasters relating to Horizon since its introduction; and (ii)
specifically, in relation to ‘Horizon Online’, two internal memoranda, entitled
‘Correcting Accounts for “lost” discrepancies’ (seemingly produced by Fujitsu) and
‘Receipts/Payments Mismatch issue notes’ (seemingly prepared by the Defendant for
its legal team), which deal with a Horizon ‘bug’ that had existed, it seems, from the
inception of Horizon Online.
153.2. Notwithstanding this knowledge, Helpline operators persistently told Subpostmasters
that they were the ‘only one’ experiencing the issues with Horizon that they were
reporting. It is inherently unlikely that such a statement would have been
disseminated with such frequency without a level of coordination between the
Defendant and Helpline operators.
153.3. Further, the view of Second Sight in its report was that the Defendant's instructions to
(and its training of) its investigators seems to have disregarded the possibility that the
Horizon system could ever be in any way relevant to their investigations.
153.4. Additionally, the view of Second Sight was that the Defendant's investigators seem to
have defaulted to seeking evidence that would support a charge of false accounting,
rather than carry out an investigation into the root cause of any suspected problems.
Another indication of this conspiracy is the specific case of Ms Josephine Hamilton, in
which: (i) Second Sight formed the view that there was insufficient evidence to
support a charge of theft, but such charge was used to put pressure on Ms Hamilton
to agree to repay the losses and to avoid the custodial sentence normally associated
with a conviction for theft; and (ii) a plea agreement was made on the proviso that
Horizon would not be mentioned in Court.
153.5. There is also the matter of the Defendant and/or Fujitsu’s ability to remotely alter
transactions without the knowledge of Subpostmasters. The Defendant's stance on
this has consistently been that it is not, and never has been, possible for anyone to
access Branch data and amend live transactional or stock data without the knowledge
of Subpostmasters or their staff. However, following its investigation and review of
various internal memoranda, Second Sight determined that, in 2010 at least, “it was
possible for Fujitsu/Post Office to directly amend branch data without the knowledge
of the relevant Subpostmaster.”
In all the circumstances, our clients infer, and will invite the court to infer, that the Defendant
formulated and implemented a policy or practice, or otherwise encouraged a common
approach, in conjunction with its directors and/or investigators and/or Helpline operators
and/or Fujitsu, to cover up any issues with Horizon and pursue Subpostmasters directly
without proper and fair consideration the possibility of errors generated by Horizon or
otherwise not properly attributable to the Subpostmasters or any relevant fault (i.e. by them
or for which they should properly be held responsible).
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G. Loss and Damage
(a) Financial Losses
155. The Claimants have typically sustained financial losses arising from making up alleged
shortfalls from their own resources and losses consequential thereon. In some cases, they
have ultimately lost their business, property and livelihoods.
(b) Stigma and/or reputational damage
156. Those who have been accused of dishonesty or excluded from their branch (or subject to
similar treatment by the Post Office) have suffered stigma and/or reputational damage.
(c) Distress and related ill-health
157. Many Claimants suffered distress and some of them ill-health as a result of the conduct of
the Post Office, with some attempting to commit suicide.
(d) Bankruptcy
158. As the Post Office will know, some Claimants were made bankrupt on the basis of or as a
result of alleged shortfalls.
(e) Prosecutions
159. As noted above, several Claimants were prosecuted and 20 cases are presently before the
Criminal Cases Review Committee.
(f) Community or Custodial Sentences
160. Some Claimants suffered community or custodial sentences.
H. ADR
161. Notwithstanding the establishment of, and your subsequent termination of the Mediation
Scheme for affected Subpostmasters, our clients nonetheless regard this claim as suitable
for mediation.
162. Our clients are willing to enter into mediation after close of pleadings and before the very
substantial costs of standard disclosure are incurred.
163. However, our clients are also prepared to consider the timing of any mediation in the light of
any reasoned response from your clients on that point and are broadly prepared to mediate
at any stage of the proceedings, subject to trying to avoid wasting costs and court time by
doing later rather than sooner.
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164. We would refer you to Burchell v Bullard & Ors [2005] EWCA Civ 358 (8 April 2005), in which
the Court of Appeal decided that the unreasonable refusal of an offer to mediate before court
proceedings had started could merit a sanction against the refusing party in costs. Our client
has taken this into account in suggesting mediating at this early stage.
165. Importantly, in Burchell, the Court of Appeal also concluded that the refusing party cannot
rely on its own obstinacy or view of the merits as a basis for refusing to participate in a
mediation or saying the mediation would have had no reasonable prospect of reaching a
settlement. The refusing party may not even be able to rely on its solicitor's or expert's advice
either in seeking to excuse such a position, where the result shows that mediation ought
reasonably to have at least been attempted.
166. We set these matters out now so that you have every opportunity to consider whether or not
you are prepared to attempt to resolve this case by mediation, which we contend is an
eminently sensible and appropriate course.
167. We therefore look forward to receiving your considered response to this invitation to mediate.
5 Disclosure
168. We now invite you again to confirm that you will undertake to preserve relevant documents,
notwithstanding your recent refusal to provide such confirmation prior to receipt of this letter.
169. We request the following disclosure:
(1) Contractual documents between Post Office and Subpostmasters and Crown Office
employees governing those relationships since 1998
(2) Contractual documents between Post Office and ICL/Fujitsu (including but not limited
to any service level agreements and/or side letters), applicable from 1999 to date
(3) Any documents containing or referring to non-contractual understandings, practices,
policies, guidance or memoranda relating to the relationship between Post Office and
ICL/Fujitsu and/or ICL/Fujitsu’s performance of its role for the Post Office
(4) Operations manual(s) for Horizon from 1999 to date
(5) Schedule of Horizon updates, modifications and software versions since installation
and the issues which each of the versions addressed
(6) Schedule of software architecture since launch in 1999 / 2000
(7) Post Office internal notes, memoranda, correspondence, emails and_ briefing
documents regarding errors, “bugs” or problems in the Horizon system
(8) Post Office internal notes, memoranda, correspondence, emails and_ briefing
documents regarding the Helpline support in dealing with shortfalls showing in the
system
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(9) Post Office internal notes, memoranda, emails and briefing documents relating to the
risk or likelihood of Horizon issues causing transaction shortfalls or discrepancies in
branches.
(10) Horizon “cheat sheet” which was provided to some Subpostmasters by Post Office to
reduce the need to make calls to the Helpline
(11) Course materials for Horizon training, from 1999 to date
(12) “Knowledge Base” database of guides and manuals used by helpline staff since 1999
(13) Helpline logs and any internal related records for the claimants listed in the schedule to
the Claim Form.
(14) Audit guidelines since 1998, including any revisions to date
(15) Investigation guidelines since 1998, including any revisions to date
(16) Transaction logs and information on the sums held in the respective suspense
accounts, relating to the alleged shortfalls for the Claimants listed in the schedule to
the Claim Form
(17) Notes of audits and investigations and copies of the individual case reports and
decision reached by Post Office in suspending and/or terminating those
Subpostmasters listed in the Schedule to the Claim Form (where applicable)
(18) Records or transcripts of interviews for each of the claimants listed in the Schedule to
the Claim Form
(19) Internal memorandum generated in around late 2000 regarding problems with Giro
Bank deposits
(20) Documents concerning referral for prosecution, including but not limited to meeting
notes confirming decision to prosecute and the policy documents relied upon in doing
so, for those claimants listed on the Claim Form who were prosecuted
(21) Documents relating to termination of Mediation Scheme
(22) The ‘known error log’ kept by Fujitsu and provided to Post Office as referred to above,
and all correspondence relating to the same
(23) Internal memoranda from Fujitsu and PO referred to by Second Sight as identifying a
‘Horizon bug’ with Horizon Online
(24) Email correspondence between Fujitsu and Post Office in 2008, as requested by
Second Sight and which Post Office failed to provide copies of.
(25) Copies of the email data supplied by Post Office to Second Sight in May 2013 (as
referred to at paragraph 50 of the Executive Summary to Post Office document entitled
“Complaint Review and Mediation Scheme”)
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(26) A copy of the witness statement from the member of staff who worked at the Fujitsu
site at Bracknell (as referred to at paragraph 51 of the Executive Summary referred to
at item 25 above).
(27) A copy of the written paper (relating to suspense accounts) produced to Second Sight
in July 2004, together with the subsequent paper, both referred to at paragraph 53 of
the Executive Summary referred to at item 25 above.
(28) Copies of all documents provided by Post Office to the CCRC to date
(29) Documents relating to POL's disclosure to Second Sight that, in 2011 and 2012, it had
discovered “defects” in Horizon online that had impacted 76 branches (as referred to at
paragraphs 6.4 - 6.6 inclusive of Second Sight’s Interim Report)
(30) Second Sight’s main report at paragraph 14.8 refers to an internal memorandum from
October 2008, which Post Office disclosed, including the remark “Fujitsu have the
ability to impact branch records via the message stored but have extremely rigorous
procedures in place to prevent adjustments being made without prior authorisation —
within [Post Office] and Fujitsu”. Please provide a copy of this memorandum
(31) Second Sight go on to state at paragraphs 14.10 to 14.12 of its final report “in our
Interim Report we referred to software bug in Horizon that had impacted a small
number of branches. We have recently discovered two further documents that describe
in more detail how Post Office handles this issue. In both of these documents a
process is described that involves directly altering branch data.” The first document to
which Second Sight refer is named “Correcting Accounts for “lost” Discrepancies” and
was created by a senior engineer at Fujitsu in September 2010. The second is entitled
“Receipts/Payments Mismatch issue notes” which appears to be a minute of a joint
Post Office and Fujitsu meeting held in August 2010. Please provide copies of these
documents.
(32) A schedule or list of all documents delivered up by Second Sight to Post Office and BIS
as requested, on or following the termination of Second Sight's contract.
J. Non Victimisation
170. A number of our clients, and in particular those who are currently serving Subpostmasters,
are concerned about the potential for their contracts to be terminated by the Post Office, or
some other action to be taken to their detriment as a result of their becoming claimants in this
claim.
171. The Post Office has gone to great lengths to prevent any criticism of Horizon being made
publicly, for example, by the terms of plea bargains preventing any reference to such
problems being ventilated in open court. There is clearly very considerable sensitivity to
such criticisms being made publicly.
172. The information disclosed to you in these proceedings includes protected disclosures,
protected by the Public Interest Disclosure Act provisions inserted into the Employment
Rights Act 1996.
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173. In your letter dated 26 April, you imply (but do not expressly) state that Subpostmasters
currently have no reason to be concerned about the issues we have raised.
174. Against that background, we seek an assurance from you that no claimant, or other witness
or other person who may provide assistance in relation to this litigation (e.g. an ex Fujitsu
employee) will be subjected to any pressure or other detriment by reason of being a party to
these proceedings or assisting the claim in any way.
K. Official Secrets Act
175. The standard form Sub-Postmaster contract we have seen states that all Subpostmasters
Paragraph 1 of Section 16 of the standard form Sub-Postmaster contract provides as follows:
“The unauthorised disclosure, or use directly, of any information or document which
has come to the knowledge of a Subpostmaster or Sub-Office Assistant through the
work of his Sub-Office legislation or the Official Secrets Act (see paragraph 3).”
176. The clause is apparently intended to impose onerous duties, but as any lawyer will
recognise, it is incoherent and unenforceable. We invite you to agree to the unenforceability
of this clause. If you contend that the clause is enforceable, please can you clearly set out
your case as to the meaning of this clause and how it applied to Subpostmasters?
177. Paragraph 3 of Section 16 states that all Subpostmasters (and Assistants) are required to
sign a Personal Declaration which “...brings to [their] notice ... their obligations under the
Official Secrets Acts...". and that a further declaration is required on termination of
appointment “..as a reminder that the provisions of the Official Secrets Acts continue to
apply to him after he has left in respect of all the information which he has acquired or to
which he has had access by virtue of his appointed position as Subpostmaster”. Personal
Declaration P13 (at the Appendix) includes the statement that “It is illegal to disclose official
information without authority. A person engaged in Post Office work must not disclose any
information which he/she obtains as a result of that work, unless he/she has written
permission to do so.”
178. The drafting of the contract accordingly suggests to Subpostmasters that the disclosure of
any information at all which they have come to know during their engagement would render
them liable to prosecution. Please confirm that this is not in fact the Post Office’s position as
a matter of law.
179. Please can you also state whether the Post Office has ever taken any steps for alleged
breach of the Official Secrets Act by a Subpostmaster or any other person, and if so in what
circumstances? At present we are unclear as to what acts a Subpostmaster might take which
might cause the Post Office to allege a disclosure of information amounting to a breach of
the Official Secrets Act.
180. We note that the Official Secrets Act is further relied upon in the contract at Section 19,
paragraph 19, to prevent communications about Investigation Division interviews (i.e.
interviews with Subpostmasters who are being investigated by the Post Office). Please can
you explain in what circumstances a friend who attended such an interview would breach the
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Official Secrets Act by communicating facts about it? As matters stand it appears that the
Post Office's reference to the Official Secrets Act is in reality driven by a desire to protect its
own interests, but we invite your explanation before reaching any concluded view.
181. There are other ill-defined but apparently serious obligations in Section 16, but of further
particular concern is paragraph 11, which provides as follows:
“No Subpostmaster may, without permission, make an official document or a letter from
the public, or any other document which may come into his hands officially, the subject
of legal proceedings.”
182. The prospect of this clause preventing or inhibiting litigation against the Post Office is clear.
It purports to impose imprecise, wide ranging and onerous obligations of non-disclosure on
Subpostmasters, without proper basis or rationale. We invite you to confirm that you agree
this clause is not enforceable.
183. Our clients rely on these clauses set out above as further evidence of the imbalance of
power between the parties and the vulnerability of the Subpostmasters, as referred to at
section B above.
184. In light of the existence of these clauses, it is necessary for us to seek your assurances that
no claimant, or other witness or other person who may provide assistance in relation to this
litigation (e.g. an ex Fujitsu employee) will be subject to any allegation, claim or proceedings
for breach of the Official Secrets Act, breach of contract relating to disclosure of any
information or document, or any claim on any other basis arising out of their use or
disclosure of documents in or related to this litigation.
185. We put you on notice that if you do not give the assurances we seek above it is likely we will
make an application for declaratory relief in these respects.
tL. GLO
186. There are 91 claimants identified on the claim form as issued, and we anticipate several
hundred more will join, as we are already in receipt of instructions from that number. It may
be that numbers will rise further once this litigation becomes more widely known about,
particularly if the assurances as to non-victimisation we have sought above are given by you.
187. If these claims were to be pursued individually in separate courts, the process would be
unwieldy and unsatisfactory, cause unnecessary legal and expert fees to be incurred, and
result in an undue burden on court time and resources. No doubt a particular consideration
for you as Defendant would be the need for the same witnesses to attend multiple hearings
to repeatedly give the same oral evidence. The risk of inconsistent judgments on issues
which are common to multiple claims, and the consequent appeals therefrom, would be most
unwelcome to all concerned.
188. CPR 19.11 provides that the court may make a Group Litigation Order where there are likely
to be a number of claims giving rise to the GLO issues. GLO issues are defined by CPR
19.10 as “common or related issues of fact or law”
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189. We consider it is clear that the conditions for a GLO are satisfied - there are many common
or related issues of fact and law, as exemplified by the preceding sections of this letter. It is
both necessary and appropriate for a GLO to be made, and it would be most expedient for a
GLO to be made at an early stage.
190. There will be very real benefits to all parties if a GLO is made at an early stage, not least:
190.1. the court’s comprehensive case management powers, including management by a
single Managing Judge throughout the life of the case, assisted as necessary by a
Master and/or a costs judge (CPR 19.13 and PD19B);
190.2. the establishment of a Group register;
190.3. parties can rely upon Group statements of case (with schedules or questionnaires in
individual cases);
190.4. there can be a trial of common issues and test claims; and
190.5. the effect of a judgment or order in the GLO is binding on all parties to all other claims
on the group register unless the court orders otherwise (CPR 19.12(1)(a));
191. We intend to make an application for a GLO and seek your agreement in principle to such an
application. If you do not agree please can you explain why not, and realistically how you
otherwise suggest these claims could be managed independently.
192. If you agree in principle to a GLO, we will engage with you further as to the initial
identification of common issues (which will necessarily need to be refined as the litigation
progresses), and initial directions for management of these claims, including the
establishment and publication of a Group register, and the form and timing of Group
Particulars of Claim.
M. Preliminary Issues
193. The court's case management powers include under CPR 3.1(i) the power to “direct a
separate trial of any issue”, which co-exist with the management court's case management
powers under CPR Part 19 and the Practice Direction thereto. We consider that if this case
is not initially capable of resolution, it may well be that a preliminary issues hearing to resolve
particular issues of fact or law will increase the prospects of early settlement, or in any event
result in a more streamlined and effective trial.
194. It will be necessary to consider the identification of preliminary issues further in light of your
response to this letter, including the Appendix, by which we seek to narrow the issues
between us. By way of example, if you agree that the contract between the Post Office and
Subpostmasters was a relational contract there will be no need for a determination of that
issue; but if you do not, we will be likely suggest that the issue be determined as a
preliminary issue.
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N. Timing of Response
195. We look forward to receiving responses to this letter, as follows:
195.1. within 14 days, in relation to your agreement in principle to the management of this
claim by way of a Group Litigation Order; and
195.2. within 30 days in relation to all other issues.
Yours faithfully
Freeths LLP
Please respond by e-mail where possible
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Appendix - page i
APPENDIX TO LETTER OF CLAIM: Questions and requests for confirmations and/or further information
Question Page Paragraph I Response
(1) Please provide an assurance that our clients (existing as well as I 45 174
proposed Claimants) will not be subject to any detrimental
treatment as a result of being a Claimant to this claim, or by reason
of making any disclosures connected to this claim — in the light of
your letter of 26 April 2016 indicating that there is no foundation for
fear of such action by Post Office.
(2) Please confirm that you have no objection to Second Sight
providing information to us for the purposes of these proceedings.
(3) Please clarify your position in relation to the applicability of the
Official Secrets Act, and in particular: (i) whether your position is
that any of our clients or any other person (eg a Fujitsu employee
providing evidence in support of the claim) is in any way restricted
from disclosing information about the Post Office's conduct or I 45 175
wrongdoing; and (ii) whether you agree that Paragraph 1 of Section
16 of the Standard form contract is unenforceable. If you contend
that it is enforceable, please clearly set out your case as to the
meaning of this clause and how it is applicable.
(4) Please provide an assurance that no allegation, claim, or
proceedings will be taken against any person for any alleged 45 175
breach of the Official Secrets Act in relation to steps taken by them
or disclosure connected to this claim.
Appendix - page ii
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Question
Page
Paragraph
Response ~
(5)
Please also state whether Post Office has ever taken any steps for
alleged breach of the Official Secrets Act by a Subpostmaster or
any other person, and if so, in what circumstances.
45
179
(6)
Please can you explain in what circumstances a friend who
attended an Investigation Division interview would breach the
Official Secrets Act by communicating facts about it?
45
180
™
Please confirm that Paragraph 11 of Section 16 of the Standard
form of contract is unenforceable.
46
182
(8)
Please confirm that you provided to the Business Innovation and
Skills Committee, a full set of the documents which were returned
by Second Sight to you.
10
37
(9)
Please explain how the Post Office understands that the standard
form contracts were subsequently amended, from the 1994
contract, which pre-dated the introduction of Horizon.
13
49
(10)
Please confirm if you accept that the contract between Post Office
and the Subpostmasters was and is a relational contract. If not,
please explain.
15
55
(11)
Please confirm if you accept that there was an implied term of trust
and confidence, within the standard form contracts for
Subpostmasters. If not, please explain.
16
59
Appendix - page iii
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Question
Page
Paragraph
Response
(12)
Please confirm if you accept that there was an implied term within
the standard form contracts for Subpostmasters that Post Office
would exercise its powers power honestly and in good faith for the
purpose for which such powers were conferred. If not, please
explain.
17
60
(13)
Please confirm if you accept that there were implied terms within
the standard form contracts for Subpostmasters imposing
obligations on the Post Office to provide adequate training and
support and to cooperate with the Subpostmasters in seeking to
identify the cause of any alleged shortfalls. If not, please explain.
17
62
(14)
Please confirm if you accept that there were implied terms within
the standard form contracts for Subpostmasters that the Post Office
would (i) properly execute all transactions (ii) properly account for,
tecord and explain all transactions and alleged shortfalls and (iii)
properly, even-handedly and fairly investigate any such alleged
shortfalls. If not, please explain.
18
65
(15)
Please confirm if you accept that the Post Office owed the
Subpostmasters the limited fiduciary duty set out in the main body
of this letter. If not, please explain.
18
66
(16)
Please confirm if it is correct that some Subpostmasters were
required, as part of a plea bargain in criminal proceedings, not to
mention potential errors in Horizon publicly, including to the court.
If not, please explain whether any materially similar or related
undertakings were required.
28
104
Appendix - page iv
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Question
Page ©
“Paragraph
Response
(17)
Please confirm whether Post Office agrees with Second Sight’s
finding that it is (or was) possible for Fujitsu/Post Office to directly
amend branch data remotely, without the knowledge or
involvement of the relevant Subpostmaster. If it is agreed that
Second Sight's finding is correct, please confirm why it is that Post
Office previously denied this assertion. If it is not agreed, please
explain.
34
127.4
(18)
Please confirm whether Post Office accepts that errors, bugs or
other issues which have occurred in the Horizon system since 1999
have caused apparent “shortfalls” and/or other transaction
anomalies and/or discrepancies at branch level.
21
79
(19)
Please confirm: (i) why it is that minutes of a meeting were not
disclosed to Charles McLachlan (the expert witness for Seema
Misra during her criminal trial) which warned of a computer bug that
could cause a loss of confidence in the Horizon system by making
money disappear and that it could impact upon ongoing legal
proceedings; and (ii) whether those minutes have ever been
disclosed to any Subpostmaster in the context of investigation into
an alleged shortfall or an enquiry by a Subpostmaster about any
such alleged shortfall.
34
128
(20)
Please confirm: (i) if Post Office investigators were instructed to
exclude the possibility of any Horizon errors in their investigations
and if so, why; and (ii) if they were not so instructed, what
instructions (or guidance or similar) they were given with regard to
the possibility of Horizon errors.
40
154
Appendix - page v
POL00025511
POL00025511
Question
Page
Paragraph
Response
(21)
Please confirm if instruction(s) or guidance was given to any Post
Office personnel (or helpline personnel providing any information to
Subpostmasters) that they should inform individual Subpostmasters
that they were the only one experiencing Horizon related problems,
or words to that effect.
33
127.2
(22)
Please state whether Post Office has ever disclosed any
information after a prosecution has concluded, in pursuance of its
continuing duty to disclose any information that subsequently
comes to light which might undermine its prosecution or support the
case of the defendant and if so, provide details of that information
and state in how many cases it has done so.
12
45.5
(23)
Please confirm whether in principle you are willing to mediate at
this stage.
42
167
(24)
Please confirm if you agree in principle to our proposed GLO
application and if not, why not.
47
191