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POST OFFICE RESPONSE TO WESTMINSTER HALL DEBATE
17 DECEMBER 2014
COMPLAINT AND MEDIATION SCHEME
January 2015
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PURPOSE AND STRUCTURE OF THIS PAPER
1. During the WH debate on 17"" December a number of statements and allegations
were made by MPs, many of which were serious in nature, incorrect or did not provide the
full context. This note sets out the Post Office response.
2. This paper is structured into two parts. Part A provides some background to the
Complaint and Mediation Scheme (the Scheme), details of its working arrangements and
some statistics which reflect its current state of play. Part B provides Post Office’s response
to the various statements and allegations made during the course of the debate.
3. In reading Part B, it should be noted that Post Office cannot and will not comment
publicly on individual cases within the Scheme because applicants are assured of
confidentiality under the terms of the Scheme and in any event Post Office cannot and
would not make public statements which discloses personal information about individuals
without their consent or attempt to subvert the Scheme through, in effect, public mediation
or adjudication in the absence of full disclosure of the facts and proper process. It is hard to
see how cases could be successfully resolved under such circumstances.
4, Post Office has remained completely committed to its responsibilities to the Scheme
and the Applicants in by adhering, rigorously, to the obligations of confidentiality agreed to
by all. These are continuing obligations and it will not depart from them now.
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PART A: BACKGROUND TO THE COMPLAINT REVIEW AND MEDIATION SCHEME
What were the circumstances giving rise to the Scheme’s establishment ?
5. The Complaint Review and Mediation Scheme (the Scheme) was established to help
resolve the concerns of Subpostmasters regarding the Horizon system and other associated
issues.
6. Post Office has been determined to ensure that Horizon, together with its associated
processes, operates effectively, reliably and fairly so that Subpostmasters can have
confidence in the system. It is in its own interests to do so, with 78,000 people using the
system to process six million transactions for customers every working day.
7. However, a number of Subpostmasters have alleged that Horizon has failed to
operate in this way, and/or supporting processed were flawed, causing them detriment.
8. To address these concerns, In June 2012, and in collaboration with the Justice for
Subpostmasters Alliance (JFSA) and a group of MPs led by the Rt Hon James Arbuthnot MP,
Post Office appointed independent forensic accountants, Second Sight, to investigate.
Following a year’s work with a number of Subpostmasters, Second Sight published an
Interim Report on 13 July 2013, a copy of which may be found at:
http://www. postoffice.co.uk/post-office-statement-horizon
9. Post Office’s response to Second Sight’s report was to establish the Scheme in order
to provide an avenue for any Subpostmasters with concerns to raise them directly with Post
Office. The Scheme, developed jointly by Post Office, Second Sight and the JFSA as the way
of continuing investigations that Second Sight had already begun into individual cases,
provided any other Subpostmasters with a relevant complaint to make an application to the
Scheme with a view to resolution. The Scheme was open to both serving and former
Subpostmasters as well as to counter clerks employed by Post Office.
10. The Scheme is supervised by a Working Group comprising of representatives from
Post Office, Second Sight and the JFSA. The Working Group's role is to ensure the Scheme is
run in a fair and efficient manner and to make decisions on how particular cases should be
managed. To ensure its impartiality, the Working Group has an independent Chair, Sir
Anthony Hooper.
How the Scheme works
11. In an initial application process, Subpostmasters with a complaint were invited to
submit details of their case to Second Sight. The Working Group’s role at this juncture was
to make a recommendation as to whether or not the case should be investigated.
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12. On acceptance into the Scheme proper, Applicants were given the opportunity to
apply for a funding contribution of £1,500 +VAT, payable by Post Office, so that they could
appoint a professional advisor to assist with setting out the detail of their complaint. Having
done so, that complaint was passed to the Post Office for comprehensive investigation. It is
important to bear in mind that, except in a small number of cases where an applicant had
not previously raised the issue with Post Office, this further detailed examination of all the
available facts follows the investigation which took place at the time of the original incident.
13. When Post Office has completed this fresh investigation, its results, together with all
supporting documents, are passed to Second Sight. It is then for Second Sight to complete
their own analysis and review of all the material before completing a draft report which
includes a preliminary recommendation to the Working Group on that individual case’s
suitability for mediation.
14, The applicant is provided with the Post Office and Second Sight reports to comment
on before Second Sight complete a final report which is considered by the Working Group to
decide whether it should be recommended for mediation.
15. In cases where mediation is recommended , the case details are then passed to the
Centre for Effective Dispute Resolution (CEDR), the independent organisation providing
mediation. It is then a matter for the parties to decide whether they wish to mediate. This
is consistent with the process set out in the original documentation and agreed by the
Working Group.
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Scheme Statistics
16. During the debate, the Minister referred to a letter from the Working Group Chair,
Sir Anthony Hooper, setting out the progress of cases within the Scheme to date. This letter
has subsequently been placed in the Library of the House and contains the following
statistics in relation to the progress of cases as at 12 December 2014:
Applications to the Scheme 150
Applications rejected (ineligible) 4
Cases resolved prior to entry into the Scheme 10
Case resolved during investigation 2
Cases awaiting Working Group recommendation pending further 23
information/review by either Post Office or Second Sight
Cases recommended for mediation by the Working Group 24
Cases passed to CEDR to arrange mediation 20
Cases not recommended for mediation by the Working Group 2
Cases mediated 7
Cases where Post Office declined to mediate 2
Cases resolved prior to the mediation meeting 2
Cases with CEDR awaiting mediation (of which 3 were scheduled to take place 9
before Christmas)
Cases remaining in the Scheme 110
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PART B: QUESTIONS RAISED DURING THE DEBATE
17. As noted in paragraphs 3 and 4 above, Post Office will not breach the obligations of
confidentiality it has to Applicants in the Scheme. It is not, therefore, possible for this
document to address the specific cases raised by certain Members during the debate.
18. However, a number of statements, allegations and questions of a more general
nature were also raised and these are addressed below.
Post Office’s Approach to the Scheme
19. During the debate, the scope of the Complaint Review and Mediation Scheme and
Post Office’s approach to it were called into question. The Scheme was described as a
“sham” and Post Office was been accused of bad faith in its dealings with Members of
Parliament and Applicants to the Scheme. Post Office rejects this entirely.
20. The Scheme’s overall objective is to try to achieve the mutual and final resolution of
individual Applicants’ specific concerns about Horizon and related issues. The Scheme is
wider than just the software involved. This encompasses, as recorded in Second Sight’s
interim report, the following:
“..Horizon relates to the entire application. This encompasses the 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”
21. In a manner consistent with its determination to establish the nature and degree of
any such problems, and resolve those that emerge fairly, Post Office has:
° instigated an independent review of the Horizon System by Second Sight;
e subsequently established a complaint review and mediation scheme in
collaboration with Member of Parliament, JFSA and Second Sight;
° set up and funded a Working Group to oversee the Scheme, with an
independent Chair — Sir Anthony Hooper — and JFSA as members;
° provided funding for Scheme Applicants to obtain professional advice in
building their complaints against Post Office; and
. exhaustively re-investigated each and every case in full and subjecting this to
external review by Second Sight.
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22. To date, and after two and half years of investigation and independent review, the
facts are that Post Office has found no evidence, nor has any been advanced by either an
Applicant or Second Sight, of system-wide faults with the Horizon system causing the issues
alleged. This offers welcome reassurance to everyone who works in the Post Office
Network, all of our customers and our partners and the millions of people who support and
depend on the Post Office. Post Office has now completed its investigation of [nearly] all
cases within the Scheme.
23. Post Office continues to act in good faith in responding to the sustained questioning
of the reliability of the system upon which millions of people rely every day, including
through the independent review it itself initiated. Put simply, if there were a problem, Post
Office would want to identify it and correct it as fairly and effectively as it possibly could.
24. However, just as it would be wholly wrong for it to fail to respond to any evidence of
flaws in Horizon, Post Office cannot be expected to ignore the clear evidence that shows
the opposite.
Secrecy and the Scheme
25. During the debate, the suggestion was made that Post Office’s approach to the
Working Group, and to the mediations itself, is secretive in nature. These criticisms are
unfounded.
26. From the outset the Scheme and the work of the Working Group was intended to be
confidential. The Scheme documentation made clear to applicants that they and Post Office
must endeavour to keep details of their case confidential and that all matters discussed in
the actual mediation will be strictly confidential. This is because the cases involve sensitive
personal information which cannot be made public. This is in the interests of Applicants
themselves. That requirement for confidentiality is, however, balanced by the fact that that
Scheme and its Working Group was designed to be, and is, overseen by an independent
Chair.
27. In addition, the confidentiality of cases mediated as part of this Scheme is common
to all mediations, not just those in this specific Scheme. CEDR is providing the mediation for
the Scheme. The arrangements are in line with CEDR's own Code of Conduct and the
European Code of Conduct for Mediators which the Civil Mediation Council requires all UK
providers to observe in order to maintain accreditation.
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28. The reason for appointing an independent and reputable firm of mediation experts
was specifically to ensure that the mediations are undertaken in line with best practice. As
part of the mediation process, offered by CEDR and accepted by the Working Group, all the
parties — Post Office being only one — are required to sign a mediation agreement which
binds them to confidentiality for very good reason. A letter from CEDR setting this out was
also placed before the House by the Minister and is attached to this report.
29. Accordingly, it is simply wrong to suggest that Post Office is in some way being
secretive in respect of mediations. Instead, it is simply respecting the obligations it has in
handling individuals’ sensitive personal data generally, and the agreement signed on
entering mediation as required by CEDR in particular.
Exclusion of Cases from Mediation
30. During the debate, Post Office was also accused of using the Scheme and the
Working Group to exclude some 90% of cases from mediation in circumstances where this
had been understood would be the exception. Post Office also rejects these claims.
31. For the reasons already made clear, Post Office is limited in the details that it can
share on the Working Group’s discussions. However, the statistics on page [X] of this
document demonstrate that suggestions that Post Office is seeking to exclude 90% of cases
from mediation are wholly inaccurate. In fact, of the 24 cases in which the Working Group
has recommended mediation to date, Post Office has declined to mediate just 2,
representing a percentage figure of just 8%.
32. Despite the arguments that have been advanced by some, it was never envisaged
that all cases would automatically proceed to mediation between Post Office and
Applicants. Mediation is one of the possibilities that may occur at a later stage of the
process. However, this would follow the re-investigation and independent external review
of each and every case, discussions in the Working Group and its recommendation, or
otherwise, that a case might be suitable for mediation.
33. Post Office considers every case on its merits and mediation is, by its very nature, a
consensual process designed to reach resolution through compromise. In circumstances
where no evidence has emerged through the process to suggest that Post Office has any
responsibility for a loss in branch, the need for compromise and therefore for mediation
does not arise. However, where a case does reveal a genuine element of doubt, and is
therefore potentially capable of being resolved through compromise, Post Office will
mediate and has already done so in a number of cases.
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34. In doing, Post Office takes a positive approach to seeking a mutually agreeable
resolution, What it cannot do is to ignore the facts and evidence to emerge from the
various investigations in order to satisfy a pre-determined and understandably subjective
view of what ‘ought’ to have been revealed by them.
35. Lastly, Post Office completely rejects all accusations that it seeks to ‘bully’ Applicants
at mediation: every mediation is conducted by an experienced and entirely independent
mediator appointed by CEDR.
Exclusion of Cases involving Criminal Convictions
36. The accusation has also been made that Post Office is seeking to exclude all cases
involving criminal convictions. In fact, the reality is that Post Office is considering every case
on its merits. All and any information which Post Office has as a result of these fresh
investigations is shared with Applicants. Moreover, it is under a positive duty immediately to
disclose any information that would assist a convicted Subpostmaster or undermine a
previous prosecution.
37. However, and as was made absolutely clear at outset of the Scheme, mediation is
not a process capable of overturning a conviction. Convictions can only be overturned
through established Court processes, as recognised by JFSA who advised their members
involved in the Scheme that:
“Did you have a court finding against you? — If yes, and although this Scheme will consider
that to some degree (READ THE PACK) [sic], we, JFSA also recommend that you should enter
a parallel scheme with a firm of criminal lawyers who will look into your case with a view to
consider using the appeals court to overturn the findings against you. ”
38. To date no evidence has been identified by Post Office as part of its reinvestigation
of each and every case, nor advanced by Second Sight or an individual Applicant, to suggest
that the conviction of any Applicant to the Scheme is unsafe.
39. As noted above, had any such evidence come to light, Post Office would be under a
duty to disclose it immediately. Post Office takes these responsibilities very seriously. Post
Office has written to everyone who has suggested that they have or have seen evidence
that a conviction is unsafe and asked them to disclose that evidence so that it can be acted
on. To date no-one has provided that evidence. It is irresponsible for critics of Post Office
or of the Scheme to make statements of this nature without providing Post Office with any
evidence to support those serious allegations.
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40. Post Office wishes to correct media reports suggesting that all Applicants to the
Scheme have a criminal conviction: this is not the case and these gross inaccuracies in
reporting do the majority of Applicants a considerable disservice.
Extension of the Scheme beyond Horizon
41. Suggestions have been made that the Scheme ought now to encompass issues
beyond those for which it was established. Post Office cannot allow its scope to be extended
retrospectively in an attempt to find alternative issues simply because no evidence of flaws
with the Horizon system has been found.
42. In this regard, a degree of focus was placed on the contractual arrangements
between Post Office and its network of [DN: NEED A NUMBER] Subpostmasters, with one
Member suggesting during the course of the debate that Second Sight had told him that:
“in [his] view, a person would have to be an economic and legal illiterate to be willing to
sign [the contract]”.
43, Leaving aside the fact that Second Sight are engaged to provide impartial advice to
the Working Group and have neither the mandate nor expertise to make such an
assessment, such a suggestion does a huge disservice to the thousands of hardworking and
diligent people working as Subpostmasters. To paint these people, who operate perfectly
successfully within the terms of the contract offering vital services within the Communities
they serve, as being economically or legally ‘illiterate’ is of highly questionable judgment.
44, The terms of the Subpostmasters’ contract are broadly similar to those used in
franchising arrangements by other organisations across the UK and reflect well established
legal principles. This is the basis on which Post Office and thousands of Subpostmasters
have successfully conducted business for decades. The terms of the Subpostmaster contract
are drawn up jointly by the Post Office and the National Federation of Subpostmasters,
which represents the majority — 80% - of our independent agents. Subpostmasters are
independent business people, with a similar position to franchisees, and may therefore
obtain legal advice as they see fit on any aspect of running their business, including self-
evidently in respect of the decision to enter into a contractual relationship with Post Office
itself.
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Remote and Malicious Access to Branch Accounts
45. During the debate it was suggested that Subpostmasters’ accounts can be amended
remotely, in Horizon, without their or their staff's knowledge. There is no functionality in
Horizon for either a branch, Post Office or Fujitsu (suppliers of the Horizon system) to edit,
manipulate or remove a transaction once it has been recorded in a branch’s accounts. It is
possible for Fujitsu to view branch data in order to provide support and conduct
maintenance but this does not allow access to any functionality that could be used to edit
recorded transaction data.
46. Post Office can send transaction acknowledgements (TA) or transaction corrections
(TC) to branches. TAs are used to record transactions that have been processed in branch
through other systems (e.g. the sale of Lottery products on the Camelot terminal) and TCs to
correct errors made by branches. Both TAs and TCs need to be accepted by a user logged
into the branch Horizon terminal before they are recorded in the branch accounts. They are
therefore fully visible to each branch.
47. There also is no evidence of malicious remote tampering and the suggestion made
during the Debate that a secretive team at a Post Office location is engaged in this sort of
activity is, naturally, flatly denied.
Post Office’s Approach to Prosecutions
48. When confronted by criminal conduct within its network, Post Office can exercise
the statutory right to bring a private prosecution open to all persons in England and Wales
under the Prosecution of Offences Act 1985, or by supplying evidence to the national
prosecutors in Scotland and Northern Ireland (where a private prosecution cannot be
brought). This is the same as for any other individual or organisation. We take these
responsibilities very seriously.
49. All cases of potentially criminal conduct are thoroughly investigated and decisions
about appropriate courses of action are taken on the basis of the available facts and
evidence. The serious decision to prosecute a Subpostmaster or employee, in the very small
number of instances where this in fact occurs, is always taken following numerous checks
and balances and Post Office is confident that its approach is fair, proportionate and fully
compliant with legal requirements. When Post Office decides to prosecute a case, its
conduct of the prosecution is scrutinised by defence lawyers and ultimately by the Courts
themselves.
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50. In deciding whether a case is suitable for prosecution, Post Office considers (among
other factors) whether it meets the tests set out in the Code for Crown Prosecutors. That
Code is issued by the Director of Public Prosecutions and followed by Crown Prosecutors.
Post Office does not have to inform the CPS that a private prosecution has commenced, but
the CPS can take over a private prosecution if circumstances warrant. Like the CPS, Post
Office keeps cases under continuous review all the way up to and during any trial, and can
effectively stop a prosecution by “offering no evidence” where appropriate.
51. Once a decision has been made to prosecute, the Post Office has a duty to disclose
the evidence against the suspect. Post Office completely refutes the allegation that it has
put pressure on Defendants to plead guilty, sometimes to lesser offences. This is
completely untrue. Any decision by a defendant to plead guilty is made after he has had the
opportunity to take legal advice and consider all the evidence against him.
Statute of Limitation
52. Limitation periods for bringing legal actions are a long and firmly established part of
the law. The periods, currently established by the Limitation Act 1980, balance the interests
of the claimant (who may need time to bring a claim) and the defendant (who must be
protected from stale claims, e.g. because relevant materials are no longer available).
53. The limitation defence is available to all defendants, no matter how strong the claim
they are asked to answer. Post Office, uniquely among defendants, should not be
prevented from exercising this legal right.
54. The Scheme does not affect postmasters’ legal rights, including the right to start
Court proceedings if they believe their case has merit. Many of the complaints in the
Scheme are very old, with the typical 6 year limitation period expiring well before the
Scheme was established. Many postmasters received advice on their complaints before the
limitation period expired, and Post Office has paid for postmasters in the Scheme to receive
support from professional advisors who can help with any limitation issues. [DN: Is this last
sentence problematic ?]
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Training and Support for Subpostmasters
55. Post Office disagrees with the contention made during the debate that the training,
help and support provided to Applicants was inadequate. Thousands of Subpostmasters, in
receipt of the same training and support as Applicants to the Scheme, have been operating
the Horizon system successfully for years. Post Office provides comprehensive training,
both in the classroom and onsite, and follow-up support and visits are also offered to those
who may benefit from them or who request them. In addition, our helpline is available to
support Subpostmasters in addressing any queries, alongside providing a service for
technical enquiries. If these are not resolved quickly, further expertise is available, including
visits to Post Offices as necessary.
56. Like any other responsible organisation, Post Office always strives to improve its
training and support and has undertaken further initiatives since the publication of Second
Sight’s report in 2013. Post Office created a new Branch User Forum as a way for
subpostmasters and others to raise issues and insights around business processes, training
and support, to feed directly into the organisation’s thinking at the highest level. One of the
tasks for this forum is to review support processes and training to ensure they meet the
standards expected of, and by, Post Office.
57. In addition, making better use of technology will enable Post Office to enhance the
effectiveness of the support it offers in a value for money way. The training of new
Subpostmasters is an area that Post Office has recently reviewed and identified that by
using modern technology a proportion of the existing classroom training could be delivered
on-line.
58. As a result new Subpostmasters and their staff will be able to access on-line training
at a time and from a location that is convenient for them. The duration of the on-site
training remains unchanged. An added benefit is that this on-line training will be accessible
to the whole network not just new Subpostmasters. Technology has also been used to
reduce ‘paperwork’ and administration time within the support team. The overall impact of
these changes means that less people are needed to deliver an enhanced level of support to
the network.
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Options for Subpostmasters in the event of an accounting discrepancy
59. Post Office rejects entirely the suggestion that Subpostmasters have ever been
instructed to adopt behaviours and practices that would go against company policy and
could even potentially constitute criminal activity. Post Office wishes to make it clear that
there are no circumstances capable of justifying the criminal offence of rendering a false
account.
60. If Subpostmasters face accounting losses, they have a clear choice to accept these on
the basis that they are responsible for them or, instead, dispute them for further
investigation. This does not affect their ability to continue trading and thousands are
operating successfully on this basis. It is categorically untrue to suggest, as it was during the
debate, that any Subpostmaster must commit a crime in order to continue trading.
Treatment of Cases Outside the Scheme
61. During the debate the issue of late applications and the potential for new cases was
raised. The Scheme opened to applications on 27'" August 2013 and closed on 18""
November 2013 in line with the process designed and agreed with JFSA. The Scheme was
advertised within the Post Office Network and on JFSA’s website.
62. While the Scheme is closed to new Applicants, Subpostmasters and/or their
Members of Parliament may, of course, raise any concerns direct with Post Office at any
time which will investigate the issues raised as part of its normal business. There have been
avery small number of cases raised with Post Office since the Scheme closed. In each case,
Post Office has offered to investigate the individual’s concerns and this has been generally
welcomed.
January 2015