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POST OFFICE RESPONSE TO DRAFT PART 2 REPORT
[TO GO ON POST OFFICE LETTERHEAD]
Second Sight
By email only
[DATE]
Dear Sirs
Post Office’ s Initial Response to Second Sight’ s Draft Part Two Report ("the Report")*
Post Office is concerned that the Report is currently well below the standard we would expect of a firm of
experienced accountants and is in breach of the agreed Engagement Terms, specifically Para 5.1 of
Schedule 1. [Meeting to discuss?].
Revisions are now required and the Report should not be shared further until these are addressed
satisfactorily. If the Report is not brought up to the required standard, Post Office will need to produce a
full critique of the Report which could impact on the credibility of Second Sight's work. Post Office would
prefer to avoid this outcome and would favour greater engagement by Second Sight on the issues that
would truly benefit Applicants to the Scheme.
After an initial review of the Report Post Office is writing to set out below concerns over: the scope; the
basis for assessment; the evidence base; the lack of progress; and independence.
The agreed Second Sight Engagement Terms? include the following Clauses [Others too?]:
e Clause 2.2 - Second Sight has agreed to be a member of the Working Group whose role it is to
oversee the Scheme and to assist in investigating individual Subpostmaster complaints.
* Clause 2.3 - Post Office has engaged Second Sight to provide Services to the Working Group in
relation to the Scheme.
e Paragraph 4 of Schedule 1 - Although Post Office is engaging Second Sight, Second Sight is to act
independently in providing the Services and any assessments or opinion given by Second Sight shall
be without bias and based on the facts and evidence available.
e Paragraph 5.1 of Schedule 1 - In providing the Services, Second Sight shall act with the skill and
care of qualified experienced accountants...
Post Office considers it imperative that the focus of the Report must be on assisting Applicants to
understand the issues that may be discussed at mediation. At present, the Report contains a number of
inaccuracies that, if put to Applicants, are liable to seriously confuse matters at mediation. Point by point
comments on all assertions made by Second Sight in the Report will be provided separately [Set date?]
Second Sight, as a firm of accountants, are not qualified to opine on legal matters, including issues
concerning the "fairness" of the Contract or any criminal matters. Nor has Second Sight been engaged
under the Engagement Terms to do so, [Reference?] especially as such matters are not reasonably
related (or related at all) to issues “concerning Horizon and any associated issues" [Source?].
The basis of Post Office's relationship with subpostmasters is the Subpostmaster Contract. Post Office
acts according to its contractual obligations and requires subpostmasters to do the same. As we have
discussed previously, it is not open to Second Sight to seek to impose further duties on Post Office
beyond the Contract as there are no such additional duties on Post Office. In a number of places in the
Report, [e.g.?] Second Sight seek to retrospectively impose standards on Post Office that never existed
in reality.
1 Second Sight. Mediation Briefing Report: Part Two (5 August 2014), Provisional and draft - Not approved by POL
and not discussed by the Working Group
2 Engagement Letter in relation to the Initial Complaint Review & Mediation Scheme (1 July 2014), including
Schedule 1- Scope of Services
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Post Office considers it essential that the basis for statements / assertions made in the Report is set out
clearly to provide context for the mediator and applicants. At present, the report fails to: a) set out the
overarching methodology used; b) clearly cite the evidence upon which it is based; and c) reference the
specific sources for individual assertions made.
The Report, at numerous points, [e.g.?] implies a thorough review of the cases has been undertaken by
Second Sight. In practice, Second Sight has only fully reviewed 17 cases (i.e. prepared Draft CRRs).
Second Sight has also only seen evidence from the 150 Applicants to the Scheme, which by their very
nature are those who are dissatisfied with Post Office, whereas there are 7,000+ subpostmasters who
have not raised any complaint. If this is not made clear, there is a risk of suggesting that Second Sight's
views are well advanced when in fact they are based on very limited information.
Second Sight has been engaged continuously by Post Office since 2012 and we would have expected
that over that time they would have had sufficient opportunity to provide a more substantive analysis than
contained in the Report. In particular it is noted that a number of sections [e.g.?] of the Report raise
points that have been previously resolved (e.g. responsibility for missing cheques) or overlooks entirely
the information provided by Post Office (e.g. in respect of retract fraud). Although Post Office remains
committed to supporting Second Sight's investigations, it is frustrating to see that Second Sight is not
making use of all the information provided. This does raise questions over the cost-effectiveness of
Second Sight's engagement.
Second Sight's status as an independent investigator is key to the success of the Scheme and Post
Office is not looking to fetter that independence. That does not however extend to allowing the Report to
contain material that is obviously incorrect or unsupported by evidence. Of greater concern is the fact
that Second Sight lend great weight to the anecdotal (and largely untested) evidence of subpostmasters,
whilst seemingly ignoring the factual information provided by Post Office. This risks Second Sight losing
their independence if they are not prepared to consider all sides' view equally.
Yours faithfully
Chris Aujard
General Counsel
Post Office Limited
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Appendix
Paragraph I Post Office comment
in Report
4 The Report would benefit from a contents page given that not all issues are relevant to all
cases.
1.3 After this paragraph may be a good opportunity to explain how far Second Sight's
investigations have progressed in terms of the number of cases it has reviewed.
2 See our comments above about this issue being outside of Second Sight's terms of
reference. In light of this, this entire section should be deleted. We nevertheless set out
below our specific comments on this section.
2.3 The Subpostmaster Contract sets out a two way framework of obligations. It also imposes
obligations on Post Office.
See XX below regarding subpostmasters' understanding of the contract.
24 It may also be useful to include clause 15.2 of the Subpostmaster Contract which makes
clear that subpostmasters are liable for the acts and errors of their assistants.
25 No explanation or justification is given for the view that "the terms of the contract appear
baised in favour of Post Office". To form this view an analysis is required against some
form of industry standard or benchmark. It is noted that Second Sight has no expertise in
the field of franchise contracts in order to offer this view. In Post Office's experience, the
terms of the Subpostmaster Contract are comparable to, or perhaps even more generous
than, those used by many similar businesses in the UK. This view should be withdrawn
unless it can be justified.
This paragraph goes on to state that the Subpostmaster Contract can “operate to the
detriment of the Subpostmaster". All contracts impose detriment on someone as by their
very nature, contracts impose obligations on parties. If those obligations are not complied,
then detriment consequence will flow. This point shoud be explained in more detail or
deleted otherwise it is potentially misleading.
It is not understood why Second Sight considers it relevant that Post Office is not
“prepared to vary the terms and conditions of the Standard Contract at the request of the
Subpostmaster". This point is not developed any further elsewhere in the Report. If itis
of no relevance to any conclusion, it should be deleted.
In any event, given that the Subpostmaster Contract applies to over 8,000 active
subpostmasters it would obviously be completely unfeasible to allow individual variations
to the contract. Managing 8,000 individual contract arrangements would be unworkable.
Finally, it is noted that the Subpostmaster Contract is negotiated with the NFSP and
therefore subpostmasters, through their union, do influence the contract terms.
26 The first part of this paragraph relates to subpostmasters understanding the
Subpostmaster Contract. The second part of this paragraph relates to Post Office's right
to implement new products. These two points appear independent of each other and
perhaps should be set out separately to avoid confusion.
If a subpostmaster chooses not to take legal advice on the Subpostmaster Contract before
entering into it, that is their risk to take. As a matter of law, a person is bound by a set of
contract terms even if they do not read them or understand them?. Post Office, like every
other organization in the UK, has no obligation to advise that someone takes legal advice
on a contract with Post Office. No fault can lie with Post Office in this respect. The Report
should make this point clear that the subpostmaster is liable for any misunderstanding of
his contract.
In the second part of this paragraph, the Report suggests that Post Office could implement
new products in such a way that transfers risk to the Subpostmasters.
First, section 1, clause 6 of the Subpostmaster Contract states that Post Office can only
“reasonably” implement new products. A subpostmaster will therefore not be liable where
Post Office has acted unreasonably.
Second, as explained above, the relationship between Post Office and subpostmaster is a
commercial one, where if the subpostmaster is unhappy with the risk-reward benefit of the
Subpostmaster Contract, he can, at any time, terminate the contract.
It is therefore incorrect to say that subpostmasters "have no choice other than to accept"
changes by Post Office.
3 Chitty on Contract 12-002 & Parker v South Eastern Ry (1877) 2 CPD 416
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27 This paragraph appears to relate to the issues raised in paragraph 8 and has no relevance
to the contractual issues under discussion in paragraph 2. It should be deleted.
28 If subpostmasters are unaware that Post Office Investigation Division (now known as the
Security Team) does not have a mandate to provide general investigative support, then
this is a product of them not correctly reading the Subpostmaster Contract. The
Subpostmaster Contract states clearly (at section 19, clause 12) that:
“The main job of the Investigation Division is to investigate, or help the Police 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".
Again, the Report should make clear that a misunderstanding of the security team's role is
the fault of the subpostmaster.
As to the comment that there is "no general investigative function readily available as
POID only seems to have a mandate to act (though it is not required to act) where
criminality is suspected", this comment does not relate to contractual issues and should be
moved to section 22.
In any event, this comment is incorrect. As described in section 3 of the Briefing Report —
Part One there is significant apparatus at Post Office for investigating issues faced by
subpostmasters. Due to the range of issues that could arise, this is broken down in to a
variety of departments, services and processes. However, in simple terms, if a
subpostmaster wishes to have a disputed transaction or error investigated, they should
raise the issue with NBSC who will then escalate it to the appropriate department within
POL for further investigation.
29 Seek comments from security / Jarnail.
2.10 Second Sight's conclusion that "often" subpostmasters are not given a copy of their
contract needs qualification. The Report should state the number of cases investigated in
relation to this issue by Second Sight and the number of cases in which it has been found
that the Subpostmaster Contract was not provided.
2.11 At law, a party need not sign a set of terms and conditions in order to be bound by them. It
is perfectly accept for a party to sign one document that refers to terms and conditions in
another document.* This paragraph therefore provides no assistance and should be
deleted. Allowing this paragraph to remain in the Report risks a subpostmaster believing
that there is some fundamental problem in them not having signed a copy of the
Subpostmaster Contract.
2.12 Subpostmasters will have also have retained a signed copy of their appointment and
therefore are equally at fault if a copy of that appointment is not available.
3 It is noted that a number of the points below were raised by Post Office in their previous
comments on this section of the Report. These comments have not been reflected in the
Report even though they highlighted some material inaccuracies and errors.
The Report principally focuses on the situation whereby the amount of cash dispensed
from an ATM as recorded on Horizon by a subpostmaster is different from the record kept
by Bank of Ireland (BOI). Even if these accounts are (to use Second Sight's expression)
“out of sync" this would not cause a loss to the branch.
The reason for the discrepancy between the two sets of accounts, as set out in the Report,
is that the account on Horizon would be incorrect due to the subpostmaster inputting
incorrect figures. Once the Horizon account was corrected (by way of a reconciliation
against the BOI accounts), the Horizon account would match the amount of cash in the
ATM. Hence there is no cash loss.
This is a critical issue that is not addressed in the Report despite being raised in Post
Office's previous comments on this section.
Post Office is gravely concerned that this section, as currently drafted, will give Applicants
the impression that the "out of sync" issue could be the cause of physical cash losses in
their branch when this is, without any doubt, not the case.
3.3 For the reasons set out above, the complaints highlighted by Second Sight in this section
should be quantified and put in context eg.
4 Chitty on Contract 12-013
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. The number of Horizon users
. The number of ATMs across the network (by reference to the timing of the
complaint/s)
. The number of applications received in the Scheme
. The number of those applications referring to ATM related issues
. The number of applications fully investigated by Post Office and reviewed by
Second Sight, and
The number of those cases which have raised ATM issues
3.4 ANGELA — are there any "other ATMs" other than BO! and HANCO?
This paragraph refers to "reports" — this should precisely state the name of the document
eg. Case Questionnaire Responses.
3.5 It is not understood on what basis the Report finds that the system of operating ATMs in
Post Office's network is considered to be “a more complex arrangement than that
deployed by most high street and other banks’.
3.6 The number of Applicants raising the "air gap" issue should be quantified. As far as Post
Office is aware, no Applicant has used this phrase.
Also this paragraphs contains a quoted extract but the source is not stated.
3.11 To the extent that a subpostmaster misunderstood the instructions, this was their fault and
they are liable for any loss as a result. Attention is drawn to Section 1, Clauses 13 and 14
of the Subpostmaster Contract that makes this point very clearly.
Alternatively, the Report suggests that the out of sync issue "will sort itself out". Post
Office has not seen Second Sight's evidence for this statement. In any event, this
statement is correct. If a subpostmaster has entered the wrong ATM cash dispensed
figure on Horizon, then a transaction correction will be sent to the branch to correct this
error.
The Report goes on to say that following the helpline's advice that the out of sync issue
“will sort itself out", the problem was not sorted. This statement is incorrect for the reason
stated above. Post Office has not seen evidence in any case examined that supports this
proposition. Second Sight is asked to adduce to Post Office the evidence it relies on to
support this conclusion.
3.12 This paragraph should make clear that it is a subpostmaster who has input the incorrect
figure into Horizon.
This paragraph fails to go on to explain the process for remedying this error through the
reconciliation with BOI's records and transaction corrections to the branch.
3.13 It is not understood what is meant by "associated reconciliation difficulties”. This needs to
be defined.
It is also unclear on what basis those difficulties are said to have been “commonplace in
some branches prior to the February 2008 release of the Manual Update”. It would be
helpful if second Sight could include the statistical data to support this statement otherwise
this statement may mislead Applicants into believing this issues was more widespread
than it actually was.
3.14 The extract from the Operations Manual quoted in paragraph 3.14 is stated to support the
above views but in fact provides no material of relevance to matters discussed in
paragraph 3.13.
3.15 Furthermore, Post Office does not agree that the extracts from the Operations Manual
quoted in paragraph 3.16 are unduly complex. The Report concludes that these extracts
are said to show “how easy it must have been for some Subpostmasters to make
mistakes” but Post Office cannot see anything in these extracts to support this view.
Even in the event that such extracts did demonstrate how mistakes may easily have been
made (which is not accepted), it is the subpostmasters’ responsibility to ensure they
understand the instructions, since they are responsible for losses arising as a result of any
misunderstanding/mistakes.
The selection of these extracts are also somewhat confusing in that the MBR focuses on
the "out of sync" issue but these extracts relate to loading cash into an ATM which is
unrelated to the “out of sync" issue.
3.17 Of the cases that Second Sight has fully investigated, only 2 refer to the out of sync issue.
The Report should make clear therefore that Second Sight's finding is based on only a
very limited sample of cases.
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3.18 It is incorrect to say that the advice that is alleged to have been given by the Helpline
would, if given, run the risk of allowing large shortfalls to build up in any event. The
reconciliation of figures between Horizon and BOI happens within a few days of the ATM
transaction and will, if necessary, trigger a corrective transaction correction thereby
preventing the build-up of accounting shortfalls.
For the reasons stated above, there is no evidence that the Post Office Helpline provided
incorrect advice. The conclusion drawn in this paragraph is therefore unsustainable.
Furthermore, due to the issue of transaction corrections, even where a branch's accounts
have got “out of sync, they will have been corrected on a regular basis.
Finally, and most crucially, the out of sync issue will never cause a loss of physical cash
therefore there is no pressure to falsely account.
For the sake of clarity, Post Office does not accept that there is any justification
whatsoever for a Subpostmaster to submit a false account which is a criminal offence.
This paragraph, as currently drafted, appears to suggest that committing a criminal offence
could be justified. Second Sight are asked to expressly confirm in the Report that they do
condone such criminal behaviour.
3.19 Post Office has seen no evidence to suggest that a power or telecommunications failure
has caused a loss of ATM data. Second Sight is asked to provide this evidence to Post
Office or delete this paragraph.
3.20 Post Office is not aware of any instances in those cases where it has completed its
investigation "where a cash withdrawal cannot be completed due to a problem occurring
during a transaction". ANGELA IS THIS CORRECT?
The number of "reported instances" of this issue should be quantified along with a
statement as to whether those reports have been investigated.
It is noted that this scenario will not cause any loss in the branch. If the ATM does not
vend any cash, the ATM cash totals receipt will not record any cash being dispensed. The
amount of cash in the ATM will therefore balance with the figures recorded on Horizon.
It may be that the customer's bank has incorrectly debited the customer's account but that
is an issue between the customer and his bank. So long as the subpostmaster has
accurately recorded the cash dispensed figure from the ATM receipt on to Horizon, this
discrepancy will not be passed to the branch.
Given that Second Sight's scope of work is looking at the impact on subpostmasters, this
issue should be removed from the Report or the above explanation should be included.
3.23 Retract fraud cannot cause a loss to a subpostmaster where they have followed the
correct accounting procedure. Post Office has explained this issue to Second Sight on a
number of occasions (including providing Second Sight with a written briefing focussing
just on this issue). As yet, Second Sight has not identified any flaw in Post Office's
position. The reference to retract fraud should be removed or explained in detail as per
the information provided to Second Sight.
It is accepted that the other forms of third party theft or fraud are still under consideration.
However, these issues were only raised with Post Office last week and have not yet been
discussed. It is therefore misleading to suggest that these matters have been "discussed
at length with Post Office". The inference being that Post Office has had time to address
these issues and yet had been unable justify its position when in fact these matters have
only recently been raised.
4 Need input from POL on this topics which has not been raised by SS before
5 The Report should make clear that prior to 2012, discrepancies on scratchcard activations
were a product of the subpostmaster failing to rem in stock to Horizon. This was not an
error by Horizon but an error generated purely in branch by branch staff. This applies
similarly to discrepancies in Lottery sales.
5.3 This paragraph should make clear that the error and transaction correction being referred
to relates to activation issues and not sales.
5.5 The number of reports from Applicants about this issue should be quantified along with a
statement as to whether those reports have been investigated.
56 The "complication" raised in this paragraph should be explained in more detail. Post Office
does not understand what this is a reference to and so it is unlikely that Applicants will
understand this either.
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5.7 AP TO RE-REVIEW SS INTERIM REPORT
6.2 The reference to the training being "rated" as poor suggests that some form of statistical
survey has been conducted. As far as Post Office is aware, this has not happened.
The final sentences need to be clarified as to whether these points are (i) Applicant's
submissions to Second Sight or (ii) Second Sight's findings — in which case much further
detail is needed to explain and justify those views.
64 The Report states that as some branches "only started making mistakes after the new
system was launchea" then that indicates that some subpostmasters or their staff were
"insufficiently trained". This statement is logically and factually incorrect.
First, there is no evidence that branches made less errors before Horizon than after.
Transaction records are not available for the period before Horizon and therefore there is
no way to test the above proposition. Although some Applicants may state this
anecdotally, this is based on recalling events from over 14 years ago. It is also noted that
Second Sight has only completed its investigation into a small sample of cases.
Second, Post Office does not train branch staff — this is the responsibility of the
subpostmaster (section 15 Subpostmaster Contract). It could well be the case that a
subpostmaster was adequately trained but failed to pass on this training to his staff.
Third, this approach assumes that Post Office had an obligation to train all subpostmasters
until they were fully competent on the system. This is not correct. Post Office only had to
provide reasonable training to a subpostmaster [IS THIS CORRECT — THERE IS
NOTHING IN THE CONTRACT]. If following that training, the subpostmaster was not
competent in his duties, there were a number of support mechanisms for him to utilise
(NBSC, line managers, etc.) and he could request further training. The fact that a
subpostmaster was making errors is therefore not evidence that Post Office did meet its
duties to provide training.
65 The number of "examples" from Applicants about this issue should be quantified along with
a statement as to whether those reports have been investigated. It is noted that training
records going back before approximately 2007 are not available due to retention policies. It
is therefore impossible to form a view on how training may have been delivered in specific
cases before this time.
67 No evidence is provided at all to justify the view given in this paragraph about the
competence of Post Office's auditors, investigators and line managers.
The Report also does quantify how many of Post Office's staff this applies to.
For the record, Post Office considers this conclusion to be incorrect.
68 This paragraph is incorrect. Post Office had no obligation to monitor the quality of training
provided to assistants by subpostmasters. This position is clearly explained in the
Subpostmasters Contract.
6.9 The fact that Post Office has successfully traded and grown its business over the last 20
years proves that Second Sight's statement about Post Office's business model is
incorrect.
For the reasons stated above, this paragraph is out of scope and should be deleted.
7 This section of the Report repeats a number of the accusations raised by Applicants to the
Scheme. However, it does not address the fact that the call logs for calls to NBSC have
been provided to Second Sight in nearly every case. In the cases that Second Sight have
reviewed, they have not identified one proven example of the poor advise cited in this
section [TO BE DOUBLE CHECKED]. Based on Second Sight's own findings, the
conclusions in this section are shown to be incorrect.
8 This section is premised on the fact that a branch has made an error that needs
investigating. This critical point, being that the error originates from the subpostmaster or
his staff, needs to be stated.
81-88 Further comments from POL on this section would be welcomed
8.9 The statement that if a TC is over 42 days old, the subpostmaster had no choice but to
accept is incorrect. Each TC will be accompanied with a supporting explanation and
evidence. The nature of this evidence is very product specific - Second Sight's approach
of dealing with this issue in general is, by its nature, prone to inaccuracy.
In many cases, the evidence required from the branch to dispute a TC would not be on
Horizon but kept in the branch records. For example, if a TC was generated because the
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ATM cash dispensed figure BOI's records did not match Horizon's records, a
subpostmaster need only submit the ATM receipt to prove that he had keyed in the correct
number and the TC would be reversed. As branches are required to keep the ATM receipt
for 2 years, contesting this type of TC can occur long after 42 days.
Post Office is prepared to investigate any product specific allegation that there is an
insufficient audit trail for branches to investigate TCs. However, Second Sight's general
conclusion in this paragraph is (in light of the above example) incorrect.
8.10 This paragraph raises issues that are specific to individual cases. There is no general
thematic issue here that warrants being the Report. This paragraph should be deleted.
9 The question of transactions being recorded in a branch's accounts after a subpostmaster
was suspend has, as far as Post Office is aware, only arisen in one case. This was dealt
with comprehensively in Spot Review 6 and shown to be for valid reasons. Unless Second
Sight has evidence of this happening inappropriately in another case, this issue has been
resolved and should be removed from the Report.
NEED TO DISCUSS WITH RODRIC AS THIS CROSSES WITH A PIECE OF WORK HE
IS DOING WITH FJ AND DELOITTE
10.2 A "ghost" transactions are defined by Second Sight as "genuine transactions that for some
reason appear multiple times in the Horizon records". This not the same as an "Automatic
Transaction Reversal" which is the title of this section of the Report. This appears to be
two separate issues that should be dealt with independently.
For the sake of clarity, Second Sight has presented no evidence of a "ghost" transaction
ever having occurred. References to ghost transactions are at present is nothing more
than speculation and should not be included in the Report unless there is some evidence
to support them. It would be misleading to suggest to Applicant that this may be an issue
when it is entirely unsupported by any evidnce.
Spot Review 1 is cited as an example of an “automati transaction reversal". This is phrase
coined by Second Sight and is misleading as it suggests that Horizon will undertake
transaction reversals automatically without any user input. As explained in detail in Post
Office's response to Spot Review 1, the reversal of transactions in that Spot Review were
caused by the Subpostmaster cancelling the basket of transactions he was conducting for
a customer.
10.3 For the reasons stated above and in Spot Review 1, the conclusion that the allocation of
the subpostmaster's user ID to reversed transactions through the recovery process is a
“system design error” is incorrect. The transactions are allocated to the user logged on to
the terminal and who actions the recovery process.
10.5 AP TO SPEAK TO CK ABOUT THE HR REPORT
11.3 NEED ROD ISMAY'S VIEW ON HOW LOST OR INCORRECT REMITTANCES ARE
HANDLED.
12 Post Office has explained in its response to Spot Review 12 that subpostmasters will not
be liable for cheques lost in transit. This conclusion should be explained in the Report and
not left as an open issue.
The other issues with cheques (mutilated cheques and bounced cheques) were only
recently raised with Post Office by Second Sight and are currently under investigation.
13 Post Office has fully addressed this issue in its written briefing to Second Sight on P&A
Fraud. This issue should either be deleted entirely or explained using the information
provided by Post Office so that Applicants are aware that P&A losses are not the result of
any error in Horizon or Post Office's processes. If Second Sight has any further questions
on this topic, Post Office would be happy to address them.
14 I SUGGEST THAT WE DON'T OFFER ANY COMMENT ON THE RETENTION POLICY
ISSUES AS POL'S RETENTION POLICIES ARE INCONSISTENT
15.2 The statement that Post Office "does not seem to regard surpluses as worth the same
degree or attention as shortages" is demonstrably incorrect.
If Post Office discovers a discrepancy, whether it be a shortage or surplus, it generates a
transaction correction.
Where discrepancies are discovered in branch, it is up to the subpostmaster to dispute the
discrepancy with Post Office (by contacting the NBSC). As may not be surprising,
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Subpostmasters typically dispute more shortages than surpluses. Likewise with
transaction corrections, subpostmasters tend to dispute debits more than credits. It is
therefore fair to say that Post Office spends more time investigating shortages and
surpluses but this because the target of those investigations are driven by subpostmasters
and not Post Office. If a subpostmaster does nto dispute a surplus (or a shortage) it is fair
for Post Office to assume that the discrepancy has been validly attributed to an error in the
branch.
15.4 The view expressed in this paragraph, which is entirely unsupported by any evidence, is
incorrect.
It should be noted that, despite having spent two years investigating Horizon, Second
Sight has yet to identify a system wide flaw that would undermine Post Office's confidence
in the system. An approach that therefore looks to human and procedural errors before
system errors is justified.
However, Post Office never goes as far as to say Horizon is blameless. Indeed, as noted
in Second Sight's interim report, Post Office has proactively identified and corrected
historical issues with Horizon.
15.5 The logic applied in the analysis in this clause overlooks the fact that surpluses can be
generated in two ways.
The branch could be holding too much cash. This could be done simply by handing over
insufficient cash to a customer which is as likely as handing over too much.
A surplus could also be generated by inputting the incorrect transaction details into
Horizon despite the branch holding the correct amount of cash. It is equally viable that a
branch would understate the value of a transaction as overstate.
15.6 Subpostmaster can effectively hold surpluses in suspense by settling centrally any surplus.
Indeed a number of subpostmasters regularly do this.
15.7 No financial institution runs an agency model like Post Office so this analogy is inaccurate.
For example, high street bank branches are directly owned and run by the bank, they are
not contracted out to third party agents.
15.8 The scenario described in this paragraph would never occur. If the subpostmaster has
removed a surplus due to an error then they will be holding the cash to make good any
later transaction correction related to that error.
15.9 It is incorrect to say that Post Office "never has to bear the cost of" discrepancies. Post
Office has given Second Sight numerous examples of where Post Office bears the cost of
an error (for example in relation to missing cheques).
15.10 This paragraph appear to duplicate paragraph 8 above and should be moved or deleted.
16.1 This paragraph is a repetition of the issues in paragraph 8 above. It is however noted that
this type of error begins with a mistake by the subpostmaster in incorrectly recording a
deposit rather than a withdrawal and therefore the subpostmaster is liable for this mistake.
16.2-16.3 I The issues raised in these paragraphs were only raised with Post Office recently and are
currently under investigation. As yet, Post Office has not completed its investigation into
any case that alleges this problem. The Report should make clear that this point is still
under investigation.
16.5-16.10 I Angela — can we discuss a possible response to the green giro issues.
17 Second Sight suggests that Horizon is not fit for purpose because it is not sufficiently error
repellent. The errors in question are those caused in branch by subpostmasters and their
staff. As the Subpostmaster Contract clearly states, Subpostmasters are liable for these
errors.
For the reasons stated above, any analysis beyond this point is beyond Second Sight’s
terms of reference.
Nevertheless, Post Office notes that:
. Second Sight has not identified an example where Post Office could have
reasonably made the system more error repellent;
. There is no explanation for Second Sight's assumption that the system must have
a "high degree of error repellency"”
° This assessment has not been made against any industry or technical benchmark;
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. This conclusion is formed after Second Sight has only investigated a small number
of cases.
18 Angela — this is connected the giro issues above — can we discuss.
19 As Second Sight note, the issue of one-sided transactions is still under investigation.
However, the Report states definitively that one sided transactions have occurred (see
paragraph 19.1). So far only one case raising one-sided transactions has been
investigated (M014) and this was proved to be a temporary processing issue at the
customer's bank rather than any issue with Horizon. The Report should therefore not state
that one-sided transactions have occurred as this has not yet proved and may be not be
correct.
This section should be carefully re-phrased as a hypothetical issue rather than an actual
issues until more evidence is available.
20.4 As far as Post Office is aware the issue of duplicate postage labels being produced has
only been raised in one case. This was dealt with in Spot Review 10 which shows that the
Applicant's recollection of this issue was incorrect. Unless there are more cases on this
subject, this issue has been resolved and need not been referred to in the Report.
22 Second Sight is not qualified in any way to comment on Post Office's prosecution
processes. This section is out of scope and should be deleted.
For the record, Post Office considers Second Sight's findings in this section is be wholly
inaccurate.
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