POL00063517
POL00063517
Post Office Mediation Scheme
Second Sight - Case Review Report
Case Reference: M035
Applicant: Josephine HAMILTON
Advisor: Robert Holland (James Cowper)
24 March 2015
This report and accompanying documents are confidential and are not to be disclosed to
any person other than a person involved in the processing of the Applicant’s claims through
the Scheme.
1. Introduction
POL00063517
POL00063517
1.1. This report has been prepared by Second Sight, which is the trading name of Second Sight
Support Services Limited, the company appointed to conduct an independent investigation of a
number of matters raised by Subpostmasters, or former Subpostmasters.
1.2. This report should be read in conjunction with the following:
a)
b)
c)
d)
e)
f)
the documents submitted by the Applicant and her Professional Advisor;
comments by the Applicant on the previously issued draft of this report;
Post Office's Investigation Report (‘POIR’) including attachments;
comments by Post Office on the previously issued draft of this report;
Second Sight's Briefing Report - Part One; and
Second Sight's Briefing Report - Part Two.
1.3. The Terms of Reference for Second Sight as set by the Mediation Working Group for this work
are as follows:
a)
To investigate the specific complaints raised by each Subpostmaster who has been
accepted into the Scheme with the aim of providing:
vi.
an assessment of points of common ground between Post Office and that
Subpostmaster;
an assessment of points of disagreement between Post Office and that
Subpostmaster;
where there is disagreement, a logical and fully evidenced opinion on the merits of
that Subpostmaster's complaint where it is possible to do so;
a summary of any points on which it is not possible to offer a fully evidenced
opinion due to a lack of evidence/information;
a view on whether a case is suitable for mediation; and
assisting with any reasonable requests made by the Working Group and/or Post
Office.
1.4. Second Sight has been provided with the following documents:
a)
b)
the Initial Application to the mediation scheme submitted by the Applicant;
the Case Questionnaire Response ('CQR') submitted by the Applicant's Professional
Advisor; and
Page 1
1.5.
1.6.
1.7.
1.8.
1.9.
1.10.
POL00063517
POL00063517
c) Post Office's Investigation Report (’POIR’), prepared in response to the above
mentioned documents.
The following are the issues raised by the Applicant:
a) responsibility for direct losses that total £36,644.89;
b) related accusations of false accounting and theft;
c) transactions or adjustments seemingly not entered by the Applicant or her staff;
d) transaction anomalies associated with cheques;
e) advice from Post Office's Helpline;
f) adequacy of training and support;
g) _ limitations in the Transaction Audit Trail;
h) process issues at the end of each Trading Period; and
i) other consequential losses not dealt with in this report, but which may be raised if the
case progresses to mediation.
Given that the main issue here is financial loss, this report focuses primarily on the direct losses
of £36,644.89. The other issues listed above may not be directly linked to responsibility for the
financial loss, but have relevance to an overall consideration of the case.
The Applicant was the Subpostmistress at the South Warnborough branch from October 2003
until 9 March 2006. She had worked in the branch from late 2001 (for a short while under the
direction of the manageress employed by the previous Subpostmaster) and then as an
employee until October 2003. An Audit, carried out on 9 March 2006, revealed a shortage of
£36,583.12 (later revised to £36,644.89) at which point she was suspended.
After interviewing the Applicant under caution on 5 May 2006, Post Office charged her with
multiple counts of false accounting and a single count of theft.
After several court appearances, the Applicant pleaded guilty on 19 November 2007 to the false
accounting charges, the theft charge having been removed on the understanding that she
would repay all the missing funds prior to sentencing. On 18 February 2008 the Applicant paid
£37,644.89 (the shortfall revealed by the Audit plus £1,000 in costs).
This report was originally completed in September 2014 but was not issued pending receipt
and review of documentation, relating to the Applicant's prosecution, in addition to that which
Post Office had already supplied. We have been advised by Post Office that there are no
Page 2
POL00063517
POL00063517
further documents to be provided beyond those already supplied to us as part of the
investigation and POIR production process. We comment on this in Section 6. below.
1.11. Post Office says that it now believes that "operational errors" are "the most likely cause of
the shortfall" and points to the likelihood of these having included "mishandling cash, mis-
keying transactions into Horizon, cheque remittance errors, etc’. In addition Post Office
expresses its view that false accounting would also have been a significant factor in increasing
the shortfall because it delayed the discovery and correction of those operational errors.
2. Points of common ground between the Applicant and Post Office
2.1. It is common ground that the Applicant told Post Office's investigators that all the branch staff
had always used the same Horizon system ID and password, this being a clear and serious
breach of Post Office's Standard Operating Procedures.
2.2. It is also agreed that Post Office was aware that there were issues and problems at the branch
and that the Applicant had also told a representative of the National Federation of
Subpostmasters that there were some problems at the branch.
3. Points of disagreement between Post Office and the Subpostmaster
3.1. The Applicant does not deny the likelihood, suggested by Post Office, that the shortfall was
generated by operational errors made at the counter, but she believes that Post Office bears
some responsibility for those errors, because:
a) inher view it had not trained her adequately;
b) — she had come to distrust the Helpline, because following its advice in the past had
sometimes resulted in the doubling of her shortages;
c) _ it had failed to react to her calls for help;
d) _ it had failed to notice and correct systemic errors (such as the use of a common system
ID and password for all staff, although Post Office stresses that these were her
responsibility to manage); and
e) the Horizon system, and its associated operating procedures, failed to prevent, detect
or help her to mitigate those errors, notwithstanding the impact of any false
accounting.
4. Where there is disagreement, a logical and fully evidenced opinion on the merits of that
Subpostmaster's complaint where it is possible to do so
4.1. Post Office's records indicate that the Applicant made comparatively few calls to the Helpline to
seek support. The Applicant comments that the difficulties she encountered in being able to
Page 3
4.2.
4.3.
44.
45.
4.6.
47.
POL00063517
POL00063517
get through to the Helpline on many occasions, and particularly when new products and
procedures were introduced, would have distorted any statistics on this matter.
The Applicant’s failure to use the Helpline when problems occurred resulted in the Post Office
having no knowledge of those problems. The false accounting by the Applicant compounded
this situation, ensuring that Post Office was ignorant of the rising shortfall.
The Branch's use of only one system ID and password (shared by the Subpostmistress and all
her staff) is a fundamental operational error that may have been inherited from the time of the
previous Subpostmaster and his manageress.
From the evidence provided it would appear that the Applicant had a weak grasp of the way
that transactions were meant to be processed and how some important aspects of the system
were meant to work.
In support of this opinion the Applicant told us, in response to our further enquiries, that she
and her staff:
“occasionally got seriously confused when handling complex transactions, getting them
wrong and then trying to correct the error and making even more mistakes".
She also said that:
“the real difficulty was that, unlike in pre-Horizon days, when a paper audit trail could later
be ticked off, it became very difficult to isolate errors that they had made".
and, as a further example, where her customers had used credit or debit cards to pay for
Premium Bonds or other products (or to withdraw cash), she said:
“although those customers received a paper receipt, we received nothing (unless we
specifically printed out an extra copy of the receipt, which of course we did not always
remember to do)"
“this made life very difficult when trying to identify errors”.
In our view, this suggests that the Applicant, and consequentially also her staff, had been
inadequately trained from the outset. We believe that Post Office should therefore bear some
responsibility for errors made as a result of this Applicant's inadequate training. Post Office's
view is that the Applicant was provided with adequate training and support and that staff
training was her responsibility.
When making subsequent enquiries, the Applicant also told us about a series of cheques, given
to the branch by a named customer in payment for goods and services received in the branch,
that had never cleared through his bank account.
Page 4
4.8.
4.9.
4.10.
POL00063517
POL00063517
We have been able to verify this allegation with the customer and have established that some
of these cheques were issued in breach of the relevant code of practice, and would not have
been accepted by the clearing bank. Other cheques, appear to have been lost for some other
reason, possibly due to handling errors in the branch. It is clear that this particular customer
did obtain goods and services without paying for them and that this has contributed to the
overall loss. There may be other customers who have benefited in a similar way. This topic is
dealt with in more detail in our Briefing Report - Part Two.
The Applicant believes that some cheques were lost in transit and recalls at least one incident
where a pouch containing cheques was found in the road outside the branch. Post Office has
procedures in place to deal with incidents of this type and say that, providing the correct
procedures are followed, this should not give rise to a loss at the branch.
The documents submitted by Post Office include a Post Office Investigator's Report, dated
17 May 2006 (see Post Office Document 012) that includes the following statements:
“Having analysed the Horizon printouts and accounting documentation I was unable to find
any evidence of theft or that the cash figures had been deliberately inflated.”
and:
“The prepared statement seems to intimate that she didn’t receive adequate training at the
time and that the manuals were old and out of date. It also suggests that she didn’t receive
any training in respect of other matters."
The Report also refers to the Applicant having mentioned a £1,500 error, which she said had
doubled to £3,000 when attempts were made to correct it, and another error of £750. No
dates are supplied in respect of those alleged errors. The Report also refers to the Applicant
saying that "The Post Office systems are shambolic" and that all the branch staff used the
same Horizon User ID, citing lack of training as the reason for that.
In our opinion, the fact that Post Office’s own investigator had found no evidence of theft as
well as the endemic User ID and password sharing in the branch (which meant that it would
not have been possible to link any loss or theft to a named individual) would have been
relevant to the Applicant's defence. No more detailed investigation was carried out by Post
Office until it was preparing its POIR.
Post Office's 13 June 2006 'Case Closure Report' (see Post Office Document 16) shows, as the
"Prosecution Outcome": "Single theft charge removed after undertaking from defence
counsel that all monies owed to Post Office would be repaid prior to sentencing".
4.11. As described in Section 6 below, we have not been provided with the complete legal files,
which would enable us to investigate this matter in more detail. However, on the basis of the
limited documents made available to us, we consider it to be possible (though it is clear to us
that Post Office does not) that:
Page 5
5. Asummary of any points on which it is not possible to offer a fully evidenced opi
a)
b)
c)
qd)
e)
POL00063517
POL00063517
the Prosecution realised that there may have been insufficient evidence to support a
charge of Theft, but proceeded with it nonetheless;
the offer by the Prosecution to remove the charge of Theft may have been used to put
pressure on the Applicant to plead guilty to the False Accounting charges, even though
the Prosecution may have realised that a charge of Theft was likely to fail unless
further evidence was later discovered to support that charge;
the threat of proceeding with a charge of Theft may have been used to put pressure on
the Applicant to agree to repay the losses and to avoid the custodial sentence normally
associated with a conviction for Theft;
the purpose of proceeding with a charge of Theft may have been intended primarily to
assist in the recovery of losses, rather than in the interests of Justice; and
part of the agreement to remove the Theft charge included a demand that no mention
would be made in Court of alleged problems with the Horizon computer system.
jion due to a
lack of evidence/information
5.1. Due to the length of time that has elapsed since the events of 2003 - 2006, very few of the
documents relating to the matters raised have been retained, or made available to us.
5.2. It is therefore not possible to provide an evidence based opinion on a number of matters raised
by the Applicant.
6. Limitation in scope of work performed
6.1. In preparing this report we requested access to the complete legal and prosecution files and
associated documentation held by Post Office. In our opinion, access to this material was
needed in order to properly understand the actions that were taken when investigating this
matter and considering whether to prosecute the Applicant. Because of that request, the
finalisation of this report was postponed.
6.2.
6.3.
We have now been advised by Post Office that, after making due enquiry, "there were no
more documents to be provided".
Post Office’s position is that it will not provide us with access to the complete legal files we
have requested, as it is not prepared to waive Legal Professional Privilege. Accordingly, the
statement "there were no more documents to be provided", may indicate that Post Office
holds further relevant documents, but that it is not prepared to release those documents to
us. In the light of this position, we have completed our report based on the documents that
were made available to us.
Page 6
POL00063517
POL00063517
7. Is this case suitable for mediation?
7.1. In our opinion this case is suitable for Mediation and that the following issue should be
considered:
a) whether Post Office or the Applicant is responsible in part or in whole for the overall
loss of £36,644.89.
Page 7