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Post Office Board Agenda (CCRC meeting)
I Thursday 19 November 15.00-16.30hrs I Le Microsoft Teams
I 2020 I Meeting/ Finsbury Dials
© Tim Parker * Ken McCall (SID) Ben Foat (General Counsel) * Richard Taylor (Group Corporate
(Chairman) Affairs and Communications
Director)
* Nick Read (CEO) © Zarin Patel (NED) I © —Rodric Williams (Head of Legal I # Veronica Branton (Company
~ Dispute Resolution & Brand) Secretary)
¢ Tom Cooper (NED) I ¢ CarlaStent(NED) I Richard Watson (General ¢ Sir David Calvert-Smith (QEB
Counsel - UKGI) Hollis Whiteman)
Lisa Harrington * Alisdair Cameron I ¢ Brian Altman QC (2 Bedford * Zoe Johnson QC (QEB Hollis
(NED) (CFO) Row) Whiteman)
Alan Watts (Herbert Smith * Declan Salter (GLO Director)
Freehills)
© Nick Vamos (Peters & Peters I © Lucie Lambert (Deputy General
Solicitors LLP) Counsel - UKG!)
Richard Bussell (Linklaters)
Apologies: N/A
Join Microsoft Teams Meeting
+44 20 3443 6234 United Kingdom, London (Toll)
Conference ID: 682 666 328#
snda Item _ Co n a :
1 Welcome and Conflicts of Interest Noting Chairman
2. Minutes and Matters Arising Approval Chairman
05 November 2020
3. Update from Directions Hearing Noting Brian Altman QC
and Zoe Johnson
Qc
4. Timetable for further Board decisions Noting Nick Vamos
5. Update on potential future appeals Noting Nick Vamos
6. Funding / Historical Shortfall Scheme Approval Al Cameron
7. Any Other Business Noting All
STRICTLY CONFIDENTIAL
49 No
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POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
MINUTES OF A CCRC MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON THURSDAY 05,
NOVEMBER 2020 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ BY CONFERENCE CALL AT 15.00 HRS*
Present:
Tim Parker Chairman (TP)
Ken McCall Senior Independent Director (KM)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Zarin Patel Non-Executive Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Alisdair Cameron Group Chief Finance Officer (AC)
Nick Read Group Chief Executive (NR)
In attendance:
Sarah Koniarski Senior Assistant Company Secretary (SK)
Ben Foat Group General Counsel (BF)
Rodric Williams Head of Legal — Dispute Resolution & Brand (RWI)
Declan Salter GLO Director (DS)
Richard Watson General Counsel ~ UKGI (RW)
Lucie Lambert Deputy General Counsel — UKGI (LL)
Alan Watts Herbert Smith Freehills (AW)
Zoe Johnson QC QEB Hollis Whiteman (ZI)
Nick Vamos Peters & Peters Solicitors LLP (NV)
Brian Altman QC 2 Bedford Row (BA)
Apologies: Sir David Calvert-Smith (QEB Hollis Whiteman)
*All participants joined via a Microsoft Teams Meeting Call
Agenda Item Action
1. Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Directors declared that
they had no conflicts of interest in the matters to be considered at the meeting in
accordance with the requirements of section 177 of the Companies Act 2006 and the
Company's Articles of Association.
2. Minutes and Matters Arising
The Board APPROVED the minutes of the Board meeting to discuss the CCRC cases held on
22" October 2020.
The Board NOTED the action log.
Matter Arising - Public Inquiry: Nick Read provided an update on the Post Office Horizon IT
Inquiry chaired by Sir Wyn Williams. POL? had received an eighteen-page document on the
plan and approach that Sir Wyn would be taking to the inquiry. Nick, together with Declan
Salter and Alisdair Cameron, had reviewed and shared their preliminary observations, noting
that detailed analysis would follow in due course. It was thought that the earliest date POL
would be required to give evidence in person would be May 2021; although Sir Wyn had
indicated that he would be taking calls for evidence from December 2020 onwards. A further
update was expected in mid-November, setting out the approach to evidence gathering and
1 Participation in the meeting was entirely via Microsoft Teams from participants’ personal addresses. In such circumstances
the Company's Articles of Association (Article 64) require that the location of the meeting be deemed as the chairman's
location. However, it was not deemed appropriate to record personal addresses on the Company record. As such, the
Registered Office is recorded as the meeting location.
? Post Office Limited
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witness statements. Regarding timelines, the plan had indicated that Sir Wyn would draft
his final report in August 2021. Information gathering had already begun and Declan Salter
was overseeing the submission of artefacts. Nick Read would keep the Board briefed on
exchanges with Sir Wyn and any material developments.
Update on the Court of Appeal Criminal Division Proceedings and Preparation for
Directions
Nick Vamos provided an update on the Court of Appeal Criminal Division Proceedings. On
Friday 6" November 2020 POL would serve two documents in advance of the directions
hearing scheduled for the 18"* November. The documents comprised a position statement
on disclosure (which the court had requested) and a response to the Aria Grace argument.
Nick Vamos confirmed receipt of the final provisional grounds of appeal submitted on behalf
of the appellant in the Hussein case. This had completed all outstanding responses, being
one of three cases opposed by POL. The appellant’s submission had asserted that the
Horizon evidence was essential to her case and should have been considered.
Nick Vamos recalled for the Board the referral made by Mr Justice Fraser to the Director of
Public Prosecutions regarding the evidence given by Fujitsu employees in the Crown and
High Courts. Nick advised that the senior lawyer at the Court of Appeal had contacted him
to enquire whether the Metropolitan Police Service was actively investigating the referral.
Nick had explained that he did not know, as he had no direct involvement other than to
respond to document access requests. Nick had sought to assist the court by providing the
relevant contact details for those managing the referral at the Met. In parallel, the Police
had been in contact with the Criminal Case Review Commission to enquire as to the number
of cases in which the Fujitsu witnesses (Jenkins and Chambers) had given evidence. Nick had
been asked to assist with the query and would keep the Board informed of any further
developments, should they arise, in relation to the referral.
The Board NOTED the update.
POL’s Response to Whether the Court of Appeal Criminal Division Should Hear Argument
on Limb 2 in Unopposed Cases
The Board was asked to consider whether the Court of Appeal Criminal Division should hear
arguments on wide-ranging, systemic second category abuse of process in the cases of
Misra, Felstead and Skinner. These cases had been uncontested on the basis of first category
abuse where POL had decided to concede on limb one grounds but not limb two.
Papers had been circulated in advance of the meeting and Brian Altman summarised the key
points. Aria Grace Solicitors, representing the appellants, had made lengthy applications to
the Court of Appeal citing that the court should hear wide-ranging, systemic arguments
extending to limb two. This was despite the likelihood that the court would find the
convictions in these cases unsafe on the grounds of limb one abuse. Aria Grace had served
successive documents, seeking to revise their supporting arguments.
The Registrar of the Court of Appeal had asked POL to provide written submissions by
6" November 2020 on whether the court ought to proceed to consider a second, opposed,
ground of appeal (i.e. limb two abuse) where the court was already satisfied that convictions
were unsafe on one (uncontested) ground (i.e. limb one abuse).
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Brian Altman explained that the question posed by the court amounted to a matter of
procedure and the extent of the court’s remit. POL was not being asked to comment on the
merits of any systemic limb two arguments. Rather, it was being asked to respond to the
question; where convictions had been demonstrated to be unsafe (in these instances on the
grounds of limb one abuse) should the court nonetheless continue to hear arguments on
limb two which, if successful, would lead to exactly the same outcome. POL was required to
express a view on the question asked by the court and could not remain neutral on
procedure.
Brian Altman recalled for the Board the Criminal Procedure Rules which stipulated that the
court must always give effect to the “overriding objective” to deal with cases “justly”. All
parties were required to help the court to further the overriding objective. Dealing with a
case justly included ensuring that it was dealt with efficiently, expeditiously and
proportionately; that expenses were saved and that appropriate resources were allotted to
the case, taking into account the need to allot resources to other cases. In regard to this
latter point, the court would be cognisant of the needs of other appellants. Brian Altman
observed that no other appellants, whose cases were uncontested, had sought to argue
additional wide-ranging, systemic limb two grounds of appeal. They had all invited the court
to quash the convictions on limb one grounds and, in four cases, on case-specific limb two
grounds. Brian Altman reminded the Board that the sole question for the court to determine
was whether a conviction was unsafe. This was the statutory test under the Criminal Appeal
Act 1968. The court would not be interested in how unsafe a conviction might be and if the
court were to decide that the three convictions were unsafe, on the grounds of limb one
abuse, it could resolve not to hear arguments on limb two. Taking into consideration the
overriding objective, Brian Altman submitted that it would not be an effective use of court
time to expend resource listening to arguments, which, if successful, would lead to the same
outcome. Brian Altman reasoned that in addition, there would be no public interest in the
Court of Appeal hearing the arguments on wide-ranging, systemic (limb two) abuse when
the appeals were unopposed on limb one grounds, and there were other forums in which
these questions could be assessed, the Public Inquiry being an example. Brian Altman shared
a quote from the Aria Grace appellants’ grounds of appeal, which was common to all of their
submissions, “subject to the court’s decision on this appeal under the first category of abuse
of process, there is a question as to whether the court should determine the appeal on the
second category of abuse of process where not necessary for the purpose of quashing the
appellant’ convictions.” This excerpt indicated that Aria Grace Solicitors had recognised that
it was not necessary for limb two arguments to be progressed in order to have their clients’
convictions quashed under limb one.
Brian Altman observed that only the Aria Grace Solicitors had expressed an interest in
pursuing these arguments. No other appellants, whose cases were uncontested, had sought
to amplify nor argue additional grounds of appeal regarding wide-ranging, systemic second
category abuse. In the event of the court agreeing to hear such arguments, however, they
would be forced to participate, resulting in as many as 38 appellants making these
arguments to the court.
The Chairman noted that Counsel’s advice on procedure was clear and asked whether there
were any contrary arguments, or wider implications, which the Board ought to consider. The
Chairman added that the Board was mindful of its duty to assist the court to ensure that
cases were conducted in accordance with the overriding objective. In parallel, the Board was
sensitive to public perception around POL’s response which might, in extremis, be distorted
and perceived as an attempt to avoid accepting wider responsibility for the unsafe
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convictions, or to unfairly restrict examination. Brian Altman did not think so, particularly as
the court had invited POL to respond on a point of procedure. The court, having had regard
to its statutory objective, would look to agree a proportionate and common-sense approach
towards managing the cases. Zoe Johnson concurred, emphasising that these were three
unopposed cases where the outcome would not change, a critical factor in the rationale for
POL’s proposed response to the court. Further, both the CCRC limb two reasons and the
appellants’ limb two grounds of appeal were not case-specific but wide-ranging, systemic.
In examining these grounds, the court would need to review a considerable amount of
evidence which would be time-consuming and costly but lead to the same outcome. Zoe
Johnson supplemented that the disclosure process would be ongoing, and should the court
wish to explore the wide-ranging issues, it would have a vehicle to do so in the contested
cases. Further, there remained opportunities for the arguments to be heard in other forums,
including submissions to the Public Inquiry, or the High Court.
The Chairman invited questions from the Board. Zarin Patel asked what would happen if,
upon completion of the disclosure exercise in February 2021, the Board should find that
there were signs of systemic abuse. Brian Altman answered that it would be dependent on
the Court of Appeal, however, the purpose of disclosure was to allow the appellants an
opportunity to review and make their arguments. Brian Altman recalled that in each of the
respondents’ notices POL had acknowledged that there was an ongoing process and that
the Board was interested in anything which the process might reveal about systemic limb
two abuse of process. To date, none of the appellants had directly addressed this in their
grounds of appeal.
Lisa Harrington asked whether there was any insight on Aria Grace’s motives for pursuing
the limb two arguments in the cases which were uncontested on limb one grounds. Brian
Altman tendered that the appellants’ representatives may have been endeavouring to build
a platform for the High Court and a malicious prosecution claim. Unlike Aria Grace Solicitors,
the other firms were thought to be “keeping their powder dry” and avoiding the Court of
Appeal ruling out limb two abuse of process. It was sensed that there was some frustration
within the firms representing the appellants that their approaches were not aligned. Aria
Grace had limited experience of the criminal courts and were working as part of a team that
included barrister Paul Marshall, a commercial and regulatory practitioner. The appellants’
team had approached the criminal proceedings in a characteristically commercial manner.
POL was under a duty of obligation to make a post-conviction disclosure (PCD) to all
appellants, including those whose cases were opposed (and, in due course, potential future
appellants) irrespective of the court’s decision. Tom Cooper asked how the PCD exercise
related to the “Southwark Six” whose historical convictions were expected to be overturned
in the near future. Tom Cooper sought clarification that if their convictions were overturned,
the Southwark Six would be excluded from the PCD exercise. Responding, Brian Altman
confirmed that their convictions had not yet been overturned and he was awaiting a
response from Southwark Crown Court. Brian Altman advised that if they were to file a claim,
their respective applications would need to be considered through the ordinary processes
of civil disclosure.
The Board AGREED the following submissions which would be filed and served on behalf of
POL:
(i) That the court should not consider a second ground of appeal in the circumstances for
the following reasons:
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- If, having received and applied the fresh evidence, i.e. the two High Court
judgments, the court is satisfied a conviction is unsafe it must be quashed.
- Once the court is satisfied a conviction is unsafe, it has answered the sole question
asked of it.
= Itwould be contrary to the overriding objective for the court, having decided that a
conviction was unsafe on uncontested grounds, to proceed to consider further
contested grounds of appeal because it would involve the court hearing a
considerable amount of evidence which would be time-consuming and costly and
would lead to the same outcome: i.e. the convictions are unsafe.
- No other appellants whose cases are uncontested currently seek to amplify or argue
additional grounds of appeal regarding wide-ranging, systemic second category
abuse. However, if the court did agree to hear such arguments they would be
forced to join in, resulting in as many as 38 appellants making these arguments to
the court.
- There is no public interest in the court making a ruling on wide-ranging, systemic
second category abuse when the appeals are unopposed and there are other
forums in which these questions may be properly assessed (e.g. in any malicious
prosecution claim and/or the Government inquiry).
Civil liability - Southwark Appeals/ Mediation Options
Declan Salter provided a verbal update on the mediation approach to the “Southwark Six”
Crown Court cases which were expected to be successful in overturning their historical
convictions. It was not yet known at what point a judgement on their appeals would be
handed down. DS and AB thought it likely that all six would subsequently bring a claim
against POL for malicious prosecution. All six cases had settled in the GLO settlement. Declan
Salter recommended that consideration be given to pro-actively initiating a dialogue with
the claimants’ solicitors (in the event that their convictions were overturned) referencing
POU’s previously stated intention to avoid extending litigation for those Postmasters whose
cases were overturned; and asking them to set out their grounds for a malicious prosecution
claim. Declan Salter suggested that opening up the lines of communication and having sight
of their grounds would be incredibly helpful in assessing the merits of those claims at the
earliest opportunity. Thereafter, mediation could be offered, although this would not entail
an obligation to reach a settlement deal. An alternative option was to do nothing and await
the claimants’ next steps.
In accordance with a matter arising at the last meeting, Tom Cooper had met with Declan
Salter and Rodric Williams to discuss the mediation proposal. It was acknowledged that
there remained a risk that the claimants would be supported by funders in due course,
meaning it could become increasingly expensive to agree a settlement. Notwithstanding
this, Tom Cooper was mindful that such engagement might perpetuate a misconception
regarding POL’s mind-set on the validity of any claim. Tom Cooper had been unpersuaded
that there were compelling reasons to reach out at this point. The Board had previously
expressed that it was cautious to avoid creating precedents and there needed to be greater
certainty that future settlement agreements were watertight. The Chairman invited
discussion and there was a shared consensus that the Board had not yet been fully briefed
on the possible grounds for malicious prosecution claims, adding to the sense that it was too
early to take a position. The Board agreed that there had not been a persuasive argument
to reach out to the claimants and agreed to await contact initiated by the claimants.
The Board NOTED the update.
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POST OFFICE LIMITED BOARD MEETING
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Civil liability — funding
Alisdair Cameron provided an update on funding and the proposed letter of comfort. Alisdair
had attended a quarterly shareholder meeting earlier in the day where a number of work
streams had been agreed. Discussion had ensued on the controls which could be embedded
to provide improved assurance and work was ongoing to map these out. An upcoming
meeting to discuss the funding agreement had been scheduled with the Minister and Tom
Taylor (UKG! Deputy Director Group Finance) which would be attended by the Chairman,
Alisdair Cameron and Nick Read.
The Board NOTED the update.
Any Other Business
There being no further business the Chairman declared the meeting closed at 15:35 hours.
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Post Office Limited Board CCRC Actions as at 10.11.2020
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7. Historical Management of the Group
Litigation Order (GLO)
a)
Ben Foat advised that it would possible to access
Jane McLeod's emails to enable us to see timelines
and where decisions had been taken. The Board
APPROVED this approach.
Ben Foat
b)
The Board asked that a list of the documents shared
with the Board on the mediation and the GLO
should be provided.
Veronica Branton
c)
Itwas also requested that the Chairman advise the
Board on his recollection of discussions with
management on what matters relating to the
mediation should be discussed at Board,
Tim Parker
d)
Kate Emanuel was asked whether any further
information needed to be disclosed to CCRC, for
example, the Deloitte report. She agreed to double
check with the PCDE team.
Kate Emanuel
e)
Ben Foat and Kate Emanuel would liaise on how to
scope and carry out this work and would revert to
the Board with the findings. The proposed timeline
was two weeks.
Ben Foat and Kate
Emanuel
f)
2. Minutes and Matters Arising
a)
That the information and advice provided by
Fujitsu to Post Office and the timeline for this,
would be set out and technical advice
procured, if required.
Regular updates on Project Brisbane would be
provided and the information that was
laccessible now, such as papers and minutes,
jould be reviewed.
Kate Emanuel
Alan Watts/ Kate
Emanuel
These actions feed into Project Brisbane,
updates on which are coming back to the
Board meetings on the CCRC cases.
The work on Horizon integrity was
included on the agenda for 18% June 2020.
Phase 2 of Project Brisbane was circulated
on 24* July 2020.
The work on from the Board Pack review
was circulated on 6* May 2020. The work
on Horizon integrity was included on the
agenda for 18" June 2020. Phase 2 of
Project Brisbane was circulated on 24”
July 2020.
Open and
ongoing
Open and
ongoing
)
Rodric Williams should be asked about the
governance structure and processes in place
because he had been involved in supporting
Kate Emanuel/ Ben
Foat
To be included within Project Brisbane.
Phase 2 of Project Brisbane was circulated
on 24" July 2020.
Open and
ongoing
Strictly Confidential
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Post Office Limited Board CCRC Actions as at 10.11.2020
Post Office during the GLO.
{To update the Board following the conversation I Alan Watts
ith POL stakeholders on the exit and
negotiation strategy with Fujitsu.
I Beare ( et . ao
8.
. Potential claims against Fujitsu
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late from
THE QUEEN v JOSEPHINE HAMILTON AND 40 OTHERS
DIRECTIONS
1. The cases of all appellants whose appeals are uncontested on ground 1, but contested
on ground 2, will be listed on 17 December 2020 (with a time estimate of one day) for
the hearing of submissions on the following questions of principle:
a. Is each appellant entitled as of right to argue ground 2?
b. Ifnot, on what principles should the court act in deciding whether to permit
argument on ground 2
i
Any party who wishes to make submissions at that hearing must no later than 4pm on
Friday 11 December 2020 file a skeleton argument. The court will invite HM
Attorney General to consider appointing an advocate to the court to make
submissions.
3. The prosecution must complete disclosure by 5 February 2021.
4. Any appellant who wishes to add to the reasons of the CCRC for referring the cases
on grounds I and 2 must do so no later than 4pm on Friday 11 December 2020.
5. Any response which the respondent wishes to make to such additional reasons must
be served no later than 4pm on Friday 8 January 2021.
6. The appeals of all appellants other than Stanley Fell, Neelam Hussain and Wendy
Cousins will be listed for final hearing on 22 March 2021
7. The appeals of Stanley Fell, Neelam Hussain and Wendy Cousins will be listed to
follow the hearing of the appeals of the other appellants.
8. The time estimate for the hearings referred to in paragraphs 6 and 7 is 4-5 days.
9. The applications by the appellant Seema Misra to argue additional grounds of appeal
will be heard at the outset of her appeal.
10.
The parties must file skeleton arguments and an agreed bundle by 4pm on Friday 12
March 2021.
11. The 3“ and 6" judgments of Fraser J may be referred to at the hearing, but it will be
for the court hearing the appeals to decide whether to receive the judgments as fresh
evidence pursuant to s23 Criminal Appeal Act 1968.
12. The application of the appellant Wendy Cousins for an extension of her representation
order is granted to permit the instruction of an expert witness on the issues of:
a. The mechanisms in place in branch and within the system of collection by
Royal Mail, and
b. The potential for Horizon errors to have been responsible for apparent cash
and giro transactions which in fact were never established by Post Office
Limited to be such.
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13.
. If any appellant wishes to reply on expert evidence, it must be served no later than
4pm on Friday 12 February 2021. Any respondent’s expert evidence in reply must be
filed no later than 4pm on Friday 26 February 2021. The expert witnesses must meet
and prepare a joint memorandum, setting out their points of agreement and
disagreement, by no later than 4pm on Friday 12 March 2021.
14. Any appellant who will or may wish to give oral evidence in support of his or her
appeal must no later than 4pm on Friday 12 March 2021 make an application on Form
W with a witness statement.
15. All documents ordered to be filed must be provided both in hard copy and in
electronic form.
16.
So far as practicable, all hearings will be listed before the present constitution of the
court, and in any event before Holroyde LJ.
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POST OFFICE LIMITED
BOARD REPORT
Title: Business Case for HSS Meeting Date: I 17 November 2020
. . Al Cameron - Group Chief
Author: Sponsor: Finance Officer
Input Sought
The purpose of this paper is to seek Board approval for a business case for HSS.
Update on Funding
On 30 October, the Chairman wrote to our Minister requesting a financial guarantee on HSS,
enabling us to start payments. The Chairman, CEO and CFO had a call with the Minister and
various BEIS and UKGI officials on 12 November.
The Minister said that the Government would have to help fund HSS. However, before this
could be confirmed, HMT approval was needed for two different elements of the Government
accounting: AME, which gives cover for BEIS to raise a financial provision; and DEL which gives
approval for the liability to be discharged and payments made. The business case for AME was
nearing completion and no help was required from POL: it has to be submitted by 25 November.
It was agreed that POL should submit a business case for DEL which could be appended to a
submission by BEIS. The form of the business case was agreed with UKGI and BEIS officials
and comments have been received from HMBU, Linklaters, HSF, UKGI and BEIS. The intention
is that the DEL case will also be submitted by 25", although this is not a deadline and BEIS
approvals may take longer. UKGI requested that the case should be approved by the Board
before submission. Timing of any HMT approval is uncertain.
The Minister supported the idea of an early comfort letter for POL. In the absence of any
“guarantee” it is not clear that the wording will enable the Board to overcome the caution
recommended by Linklaters and start payments under HSS.
BAU funding is expected to be confirmed next week, although separation from HSS, the level
of haircut, the contractual commitments and final linkages with Telco decisions are not. The
requested change in definition of security headroom has been refused.
Board approval
The Board is asked to approve the HSS business case for submission to BEIS. This has been a
real-time and iterative discussion with UKGI and BEIS and further comments may be brought
to the Board meeting. If appropriate, we can schedule a further discussion at the Board next
week, although clearly any delay is unhelpful.
Confidential
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Strictly Confidential
The Post Office Historical Shortfall Scheme
Business Case submission to BEIS” - DRAFT
Executive Summary
The purpose of this paper is to gain BEIS and HMG support for distinct funding
for the Historical Shortfall Scheme (HSS), enabling early payments to be made.
HSS was agreed as part of the settlement of the Group Litigation (GLO) in
December 2019. The intention is to enable Postmasters who were not part of
GLO to have claims for shortfalls and related compensation settled more quickly
and cost effectively than through a second, group action lawsuit.
The Board would like to start making payments, especially de minimis payments
where the cost of investigation exceeds the claim. The value of early payments
is to settle claimants who are increasingly frustrated at perceived delays and
uncertainty. As the anniversary approaches, this may become a public story.
The alternative is not a cheaper scheme: it is another group action lawsuit, with
the costs of law firms and litigation funders added to the claims.
HMG approval is required before payments can start. In addition, POL’s legal
advice is that it should be extremely cautious making any payments until POL
can be confident that it can complete the scheme. This requires HMG funding,
separate and in addition to the BAU funding already requested.
POL will provide for HSS in December 2020 or January 2021 as estimates of the
cost become more compelling. This will trigger net liabilities with potentially
serious commercial consequences.
Controls over decision-making, value for money, fraud and reporting are
essential and proposals have been summarised in this submission. POL will
continue to work with BEIS/UKGI to ensure they are fit for purpose.
It has been difficult to estimate the claims to be paid, with initial estimates
woefully short. There have been far more applications than expected.
POL is seeking HMG approval to start offering payments under the HSS,
recognising that:
e¢ The amount and nature of the spend will exceed the Board’s authority
e The settlements will have to be predominantly funded by HMG
e The extra cost to HMG to 31 March 2022 is expected to be less than £300m.
This is not permission for POL to spend £300m: it is financial cover for future
decisions.
e HMG support is conditional on the controls over eligibility, fraud and reporting
being maintained and enabling BEIS’s preferred engagement in the process.
Post Office Historical Shortfall Scheme 1 18 November 2020
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Strictly Confidential
Business Case
Context
POL has been in discussions with UKGI and BEIS for some time on future funding
and plans. It understands that HMG considers that:
e POL’s commitment to free, national access to cash is important;
e Post Offices are critical to the levelling up agenda;
e POL is expected to continue to pursue trading improvements to become
commercially sustainable;
e there is no intention for Post Office Limited to become insolvent; and
e the historical claims from Postmasters should be resolved and eligible claims
met.
The GLO was settled in December 2019. As part of that settlement, which BEIS
approved, POL agreed to set up a scheme for Postmasters who had not taken
part in the GLO but have similar claims. This is the HSS.
Separately, 47 convictions have been referred by the Criminal Case Review
Commission (“CCRC”) to criminal appeal courts. In 44 cases, POL did not oppose
the appeal. A further 842 private prosecutions brought by Post Office before
2014 could also be appealed, with the potential for compensation claims to
follow (“Overturned Convictions”).
We have no agreed funding beyond 31 March 2021. For BAU, funding has been
requested and a determination for 2021-22 is expected shortly. The request
included cover for the legal costs associated with HSS. For HSS compensation,
funding is expected to be requested by BEIS both for AME and DEL in the next
few days. Overturned Convictions costs are unclear and therefore, no funding
request has yet been made.
The purpose of this paper is to gain BEIS and HMG support for distinct HSS
funding, enabling early payments to be made.
The Historical Shortfall Scheme
The purpose of the HSS is to settle eligible claims quickly and without the need
for a second, group action lawsuit. This should reduce costs by avoiding the legal
fees and funder costs that consumed a large part of the GLO settlement. The
decision to accept offers made by POL, following the HSS independent panel
adjudication, is for the claimants. Law firms are already challenging the
scheme’s approach to compensation as part of a tactic to undermine the
claimant's confidence in HSS.
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The structure of the scheme is in place, including a team separated from POL's
BAU operations into the Historical Matters Business Unit (HMBU). It is led by
Declan Salter, a new recruit reporting to the CEO.
Claims are checked and assessed by HMBU staff and POL’s external lawyers. An
Independent Panel has been formed to adjudicate. The majority of these claims
are either unquantified or only partly quantified. As at 16 November 2020, 2,382
The Panel has started its work. Both it and the Board has agreed that it would be
sensible to make immediate payments totalling c. £2.5m to settle claims that fall
below £8,000 on the grounds that the cost to investigate and adjudicate would
be disproportionate.
The expectation is that 70% of offers will be made by end August 2021 and the
vast majority by end March 2022.
Recognition of Liabilities
POL must recognise a liability for HSS when it is probable, requiring both a past
event that triggers likelihood and a sensible estimate of the cost.
In discussions with its independent auditors, PwC, POL considers that the past
event was agreeing to set up the scheme in December 2019. When the Panel
has reviewed enough cases, the HMBU can extrapolate.
POL will therefore provide for the estimated settlement of HSS in its December
or January management accounts and for its Annual Report for 2019-20 and
2020-21. Net assets at end of October were £60m and are forecast to decline
over the second half of the year with judgements to be made on the carrying
value of businesses disrupted by CV-19. Any substantial provision for HSS
compensation will result in POL having net liabilities.
~-This.will.trigger breach clauses in a number of commercial agreements including
I Redacted juarantee of POL's borrowings from Bank of England and its foreign
“-currency agreements wil
hese uncertainties will be apparent
to major banks with whom’ POL Must ré-negotiate the Banking Framework in the
first half of 2021.
If Government agreed to fund HSS compensation then, subject to that
commitment being sufficiently certain, POL could create a matching accounting
asset, removing the impact of HSS on future net liabilities.
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EIS is considering a letter of comfort as an interim measure, stressing its
support for POL. As it will be short of a guarantee on HSS, this is not expected to
benefit the net liability position or enable the Board to approve HSS payments. It
may reassure third parties, although commercial partners tend to assume
Government support and may find the caveats more worrying than helpful.
Quantification and uncertainty
POL's track record in estimating costs and claims relating to the Postmaster
litigation is poor, significantly under-estimating both.
HSF was more effective in estimating the 2019 settlement value.
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Looking forward:
e Estimates will improve with the closure of the scheme to new applicants on
27 November 2020, as claimants provide more information about their
claims, and on extrapolations from early Panel determinations.
e No estimates have been included for any subsequent or parallel group action.
e The full, ultimate quantum is uncertain and will be kept under continuous
review and reporting to the Board, UKGI and BEIS.
Early Decision
Given that estimations of the costs of HSS will improve over time, it would be
easier to postpone any Government commitment to bear those costs. However,
POL does not have the balance sheet to support HSS costs. POL’s BAU funding
submission demonstrated that, as a result of both the GLO and CV-19, it needs
additional financial support without HSS.
On 7 November, Minister Scully confirmed that BEIS understood the scale of
HSS is such that it is unaffordable to POL and that HMG funding will be required.
A guarantee could not be provided however until a business case was in place.
The value of an early decision is to enable the scheme to start making
payments, especially de minimis payments. This will reassure claimants and
increase the chances of HSS succeeding.
While there has not been public attention on the lack of payments so far,
individual claimants are becoming increasingly upset and aggressive, suspecting
that they will be let down.
The anniversary of the agreement to set up HSS is 10 December 2020,
potentially generating media and political interest. If payments cannot be started
after a year, more bad publicity may be generated for both POL and HMG,
undermining efforts to “move on”.
The alternative is not a cheaper scheme: it is another group action lawsuit, with
the costs of law firms and litigation funders added to the claims.
Controls
This does not and must not mean that offers are made without the right process
and controls over: decision making and value for money; fraud; and reporting.
Decision-making and value for money
POL is seeking BEIS approval to start making payments under the scheme,
recognising that the cost is of an unusual nature requiring approval and will also
exceed POL's £50m delegated authority.
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In discussion, the principle proposed is that BEIS approvals should not fully wait
until the Board has approved spend in the usual way. Rather, BEIS should be
engaged as the scheme proceeds so that it can take a view of precedent setting
decisions throughout the process. POL and the HMBU will manage this better if a
single member of the BEIS team takes this role and is responsible for bringing in
other BEIS officials as appropriate. POL will work with officials to develop these
processes.
Beyond that, formal delegated authorities will operate through HSS, as follows:
Ee el idl a
De Minimis - Quantified Ca. £2.5m
Cases <£50k <£50k a a
Cases <£500k <£500k a a
Legal Costs De Minimis Ca, £0.2m a a
Legal Costs Other Ca. £2.4m a a a
Cases <£5m <£5m a a a
Cases >£5m >£5m a a a a
Interest Rate Ca,£150m a a a a
Total Settlement Value < £320m a a a
Cap (Inc. Int and legal)
HSSAC is the HSS Approvals Committee. HMC is the Historical Matters Committee.
The purpose of the scheme is to attempt to settle as many claims as possible,
minimising the cost and liabilities from an adverse outcome on a future lawsuit
and the POL resource and costs associated. The decision to promote the HSS in
December 2019 was premised on it being better than the alternative and that
remains the case. The greater up take in applications creates an opportunity to
increase the numbers of claims that can be closed through HSS.
Value for Money will be delivered if the cost of HSS is less than the total cost of
a lawsuit. This should be the case as there will be much less need to cover the
costs of funders and a reduced cost for lawyers.I
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Fraud
The eligibility of each claim is considered by an HMBU claims assessor using POL
data for the contract, service dates, remuneration and criminal convictions.
These assessments are reviewed by POL experts and HSF. 79 claims have been
identified as ineligible to date.
Identity checks will be completed by HMBU staff before payments are made (see
Payments below).
Fraudulent claims should therefore be protected against.
Exaggerated claims will be received and judgements will be made to restrict
these without creating so much work and delay that the scheme fails. This is an
area where we expect BEIS to be involved, helping us to ensure that offers
made respect the independence of the Panel while being:
°
e Follow agreed approaches on fraud risk, unquantified claims and
unsubstantiated claims. The HSS may permit claims to be accepted and paid
with a lower standard of proof than may be necessary to substantiate a legal
claim in Court. However, it should be noted that the claimants would likely
have the benefit of a disclosure exercise if they were to pursue their claim
through the Courts which may enable them to further substantiate their
claims. If more certainty is required then it would be necessary to go through
a Court process with the cost implications discussed above. As set out above,
there will be measures in place to prevent and minimise fraudulent or
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exaggerated claims and the overall view is that these measures, along with
the other speed and cost efficiencies of HSS, significantly outweigh any
remaining risk of fraudulent/exaggerated claims.
« Have BEIS engagement when precedent setting or when offers are
individually significant (to be defined).
Reporting
The HMBU will report to each Board meeting. To ensure transparency and
minimise surprises, the HMBU will also agree monthly reporting with UKGI and
BEIS. This will include both the month-end position and any changes in the
month for:
e« The value and number of applications
The progress of applications through the process
A comparison with milestones (see below) and other targets
Costs incurred and costs to complete
Latest estimates/forecasts of costs and timescales
Details of any developments of a second group action lawsuit
Details of any coverage or public comment.
On a quarterly basis, this will be summarised and discussed at POL’s Quarterly
Shareholder Review.
Payments
It would not be sensible to try and forecast the flow of payments across the
period to March 2022. It is recommended that the HMBU reporting of offers and
payments to UKGI and BEIS enable a monthly drawdown of funds into a
separate bank account controlled by HMBU for the purpose of settling HSS
claims only. However, POL is open to open mechanisms that suit HMG.
The HMBU intends to make agreed payments directly into the claimants’ UK
bank accounts in weekly batches. This would only be done after the HMBU has
verified the details including seeing a recent bank statement and performing an
independent bank account and name verification check. If the latter is not
possible, details will be confirmed with the applicant by telephone.
Moral hazard
There has been concern raised with POL that it should not be allowed to simply
pass the problem to HMG. In addition, POL should have “skin in the game”,
incentivising it to ensure value-for-money.
In the 2018-21 funding period POL has funded all of the GLO costs. This will end
up exceeding budget by more than £100m. No additional money has been
requested in the period. In addition, POL has been asked to retain legal spend
going forward in BAU. It is therefore clear that POL has had and will have
material financial skin in the game.
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In addition, we will work with BEIS and UKGI to agree a further sharing as part
of the overall settlement. POL will incur costs related to 2020-21. There has also
been discussion of what happens to the proceeds of any sale of the Telco
business. The suggestion is that any sale proceeds plus capital investments
avoided less the cash earnings forecast in our plans for 2021-24 could be
shared.
POL is understandably concerned that the combination of shared funding, BAU
haircuts and other changes have a cumulative impact, changing the contractual
commitments POL can make and its ability to achieve shared goals.
Exit strategy
The scheme has already closed for most applicants. A few applications continue
from (i) the 6,000 former PMs who were provided with the information about the
scheme in August 2020 and (ii) where, in special circumstances, certain
situations (including CV-19) might have a reasonable explanation for delay.
The scheme aims to close completely on 27'* November 2020. Further
information on types of loss were sent to all applicants at the end of September
2020 which gave individuals the opportunity to amend their application if
necessary. This window also aims to close on 27" November 2020.
It is the HMBU’s intention to work towards a position where offer letters can be
issued for c.70% of claims by end August 2021. Higher-value and more complex
cases will inevitably take longer.
HMBU does not expect to need the independent panel after December 2021. The
appeal and mediation process will extend beyond this and there is no way to
determine how many individuals will take these options. It is reasonable to
assume that many will seek a settlement higher than the initial offer. An end
date of March 2022 may be a sensible forecast at this stage but as elsewhere,
the timetable will evolve.
Milestones
The key milestones are:
1. The c.250 Shortfall-only, fully-quantified De Minimis claims will be sent offer
letters in 2020, assuming HMG support and approval in December 2020.
2. The c.250 Shortfall-only, partly-quantified De Minimis claims will be fully
quantified and sent offer letters in January 2021.
3. 70% of claims will be made an initial offer by end August 2021.
These milestones will be assessed and reported on monthly by the HMBU to POL
Board, UKGI and BEIS.
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External analysis
No other third-party assessments are currently assumed to be appropriate.
However, HMG does have expertise in managing such situations. HMBU will be
seeking to engage officials to ensure we benefit from relevant experiences. POL
would be grateful for BEIS support in identifying and contacting such people.
The ask
POL is seeking HMG approval to start the HSS scheme, recognising that:
e The amount and nature of the spend will exceed the Board’s authority
e The settlements will have to be predominantly funded by HMG
e The extra cost to HMG to 31 March 2022 is expected to be less than £300m.
This is not permission for POL to spend £300m: it is financial cover for future
decisions.
e HMG support is conditional on the controls over eligibility, fraud and reporting
being maintained and enabling BEIS’s preferred engagement in the process.
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