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22 August 2006 Bond Pearce LLP
Ballard House
West Hoe Road
Plymouth PL1 3AE
Tel: I GRO
Fax:
Geoff Porter Dx 8257 Piymouth
BDO Stoy Hayward
DX 2008 Southampton
Our ref:
S3D3/KAK2/348035.134
Your ref:
Geoff Porter
Dear Geoff,
Post Office Limited -v- Mr Lee Castleton, Claim number HQ05X02706
14 South Marine Drive, Bridlington, Y015 3DB
Accountancy Expert’s Report
I refer to our recent telephone conversation.
(1) Background
We act on behalf of the Post Office Limited (the P.O). From approximately 18 July 2003 to 23 March
2004, Mr Castleton was a Sub Postmaster at 14 South Marine Drive, Bridlington, YO15 3DB (the Marine
Drive branch). His contract provides (and this point is not contentious) that:
(a) He was strictly responsible for the safe custody of cash, stock of all kinds and property of the P.O,
whether held by himself or by his assistants and was obliged to keep them in a place of security.
(b) He was responsible for maintaining a standard of security sufficient to enable him to meet such
obligations for the safekeeping of the P.O’s cash and stock placed in his care;
(c) He was responsible for and was obliged to make good without delay, all losses caused through his
own negligence, carelessness or error and also losses of any kind caused by his assistants; and
(d) His financial responsibility (for example, to make good losses) did not cease when he relinquished
his appointment and he remains obliged to make good any losses incurred during his term of office
which subsequently came to light.
Pursuant to his contract and position as the P.O’s agent, he dealt with financial transactions between the
P.O and its customers and was obliged to keep true and accurate records of all such transactions and to
account to the P.O for all monies the subject of such transaction and to deliver up to the P.O the proper
balance from time to time resulting from such transactions.
(2) The P.O’s Claim
The Post Office claims that between 18 July 2003 and 25 March 2004, net losses of £27,115.83 occurred
at the Sub Post Office. Mr Castleton was suspended on 23 March 2004 and dismissed on 17 May 2004.
The Post Office has now issued a claim against him to try and recover these net losses. Mr Castleton has
issued a Counterclaim claiming wrongful termination of his contract. Following disclosure the P.O will only
be pursuing the sum of £25,858.95 plus interest and costs, rather than £27,115.83. This is to reflect the
repayment by a customer (Dorothy Constable) of the sum of £1,256.88 in January 2005.
(3) Mr Castleton’s Defence and Counterclaim
Mr Castleton’s defence is that the apparent shortfalls are nothing more than accounting errors arising from
the operation of the Horizon computer system and that the PO wrongfully terminated his Sub Postmaster
contract in respect of which has suffered loss not exceeding £250,000.
Bond Pearce LLP, a Limited Liability Partnership, Registered in England and Wales number 0C331430.
Registered office! Bristol Bridge House 138-141 Reddiff Street Bristol BS1 6B). VAT number GB143 0282 07.
A list of members of Bond Pearce is open for inspection at the registered office. Regulated by the Law Society. www.bondpearce.com
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(4) The Horizon Computer system
We are instructed that each counter position in a P.O branch has a computer terminal, a touch sensitive
screen, a keyboard, barcode scanner and printer. The system records all transactions input by the counter
clerk working at that counter position. Each clerk logs on to the system by using a series of passwords.
The transactions performed by each clerk, and the associated cash and stock level information are
recorded by the computer system in a stock unit. Once logged on, any transactions performed by the
clerk must be recorded and entered on the computer and are accounted for within the user's allocated
stock unit. The Marine Drive branch where Mr Castleton was the sub postmaster has 2 counter positions
whose transactions are combined together and recorded as 1 shared stock unit. This means that all the
cash and stock is contained on 1 balance sheet as opposed to having a separate stock and cash balance
for each terminal.
P.O branches operate double entry accounting. Apart from APS, every transaction recorded by the clerk on
to their computer has a corresponding physical document, such as a TV license counter foil, savings bank
deposit and withdrawal slips or cheques. The P.O maintains that this is fundamental, because it means
that even if Mr Castleton did experience problems with computers at the branch and even if they recorded
losses erroneously (which is denied), this would have been picked up when the information Mr Castleton
recorded into his computer did not correspond with the paperwork he sent each day to the Processing
Centre and an error notice would have been generated.
(5) Mr Castleton’s specific allegations and the P.O’s view
IT Problems
Mr Castleton’s allegations about the Horizon computer system are set out in more detail in the further
information of the defence and part 20 claim (copy enclosed). In summary, he alleges that the two
computers in his office were not communicating properly, the screen was freezing, sometimes the screen
would go blank, the card swipe would not read, the Horizon system rolled over cash figures and failed to
record transactions. The P.O maintain that irrespective of whether Mr Castleton did experience those
computer problems, it would not have caused the losses.
Inconsistencies between transaction logs and cash accounts
Mr Castleton’s latest allegation is set out in his solicitor’s letter dated 25 July 2006 and is basically that the
Horizon transaction logs are inconsistent with the Final cash accounts for week 42. We would like you to
review this and consider whether there is any merit in his assertions in your report.
(6) Documents enclosed
We enclose with the hard copy of this letter the following:
(a) Document numbers 1 to 57, 60 to 64, 78 to 83 and 86 to 88 from the P.O’s disclosure list (and a
copy of that list which is a useful index). This includes financial documents such as electronic
Transaction logs, product codes, event logs, giro receipts, balance snapshots and cash accounts as
well as P.O witness statements of Mrs Oglesby, Mrs Rose and Mr Jones;
(b) 2 information sheets given to sub post-masters, which explains the daily procedures and reports
and the balance procedure. We are instructed that similar sheets would have been given to sub
postmasters at the time when Mr Castleton was sub postmaster at the Marine Drive branch.
(c) Stock Remittances schedule. This is a record of what the P,O say they sent to the Marine Drive
branch,
(d) Spreadsheet with errors from 2003 - 2004 brought to account by Marine Drive
(e) Letter dated 25 July 2006 from Mr Castleton’s solicitors to Bond Pearce setting out their latest
allegations about transaction logs being inconsistent with cash accounts.
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(7) Accountancy Report and timetable
Please could you review the enclosed documents investigate and prepare a formal Accountancy Report
dealing with whether in your expert opinion, the P.O did suffer losses of £25,858.95. We want the focus
of the Accountancy Report to deal with the issue of whether the losses can be proved arithmetically.
You may require further information or wish to discuss this matter with other parties. If you do need this
please could you make any requests through us. Please could you also let me have a look at your draft
report before submitting the final version.
The trial is due to start some time during the week commencing 4 December 2006. It will probably start
on 4 December and last 5 to 8 days, but could start as late as the 8 December and finish on the 19
December at the latest.
We are awaiting Court approval of the following timetable but it will probably be:
(a) Experts to simultaneously serve their reports by 4pm on 13 October 2006; and
(b) Each parties’ experts to meet by 27 October 2006 to identify points on which they are agreed and
not agreed and by 10 November to produce a joint statement of the issues on which they agree or
disagree.
The author of the Accountancy Report will then be called as an expert witness to give evidence at trial in
London in December, so they need to have previous experience of giving evidence and be comfortable
with being cross examined.
As discussed, please provide us with quotations for preparing the Reports for carrying out work so that we
can obtain P.O sanction to instruct you.
(8) Duty to the Court
As a result of the instruction you may be asked to give evidence before the Court. Whilst the PO will be
liable to pay your fees, in preparing your Report and giving evidence, your over riding duty will be to help
the Court on the matters within your expertise.
You agree to meet the requirements of the Civil Procedure Rules Part 35 Practice Direction (copy enclosed)
and that your Report will:~
1. Be addressed to the Court and not to the Post Office (but it should be sent to Mr Dilley of this firm).
2. Confirm that you understand your duty to the Court and that you have complied and will continue to
comply with that duty;
3. Contain a statement setting out the substance of all material facts and instructions (whether written or
oral) on the basis on which your Report is written. This statement should summarize the facts and
instructions given to you which are material to the opinions expressed in the Report or upon which
those opinions are based and if any of the facts are within your own knowledge which they are;
4. Contain a chronology of the relevant events;
5. Contain a Statement of Truth in the following form:
“I confirm that insofar as the facts stated in my Report are within my own knowledge I have made
clear which they are and I believe them to be true and that the opinions I have expressed represent
my true and complete professional opinion”.
6. You should not that proceedings for contempt of Court may be brought against you if you make a false
statement and Report verified by a Statement of Truth without an honest belief it was true;
7. Contain a declaration that the Report has been prepared in accordance with the Code of Guidance on
Expert Evidence (enclosed).
8. Give details of your qualifications;
9. Give details of any literature or other material which you rely on in making the Report;
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10. So who carried out any test or experiment which you use for the Report and whether or not the test or
experiment has been carried out under your supervision;
11. Give the qualifications of the person who carried out any such test or experiment;
12. Where there is a range of opinion on the matters dealt with in the Report - sub-paragraph 11.1
summarises the range of opinion.
13. Give reasons for your own opinion.
14. Contain a summary of the conclusions reached including any qualifications to the same;
Given the fundamental importance of meeting these requirements, you should endeavour in your Report
to be not only accurate but complete. You should mention all matters which you regard as being material
to the opinions you express and draw the Court's attention to any matter to which you are aware which
might adversely affect the validity of those opinions. This applies in relation to the factual matters to which
you refer and also to the opinions which you express,
You should not include in your Report anything that is suggested to you by anyone without forming your
own independent view.
If, on reading the Report of any other expert in this matter, or for any reason, you consider, at any stage,
that any existing report of yours requires correction or qualification you will immediately notify us in
writing of that fact.
(9) Duty to the Post Office
In performing all your duties for which the client will pay, you will owe a duty to the client to act with the
professional standards of skill, care and diligence adhered to by experienced and competent consultants
acting as expert witnesses.
You will take reasonable care of any documents, materials or samples sent to you by the clients and shall
return them immediately (together with any copies taken) to the clients upon request.
In complying with your duties to the Court, you will not, without having first obtained prior written
approval of the client, divulge to any third party any information relating to the dispute.
You confirmed that you:
1. Are an independent party and not the P.O’s employee or agent;
2. Know of no reason why you should not act as a witness for the P.O in relation to the dispute; and
3. Will advise us in writing immediately if any conflict between your interests and the P.O’s interests
should arise in relation to the dispute.
I look forward to hearing from you as soon as possible.
Yours sincerely
Stephen Dilley
Solicitor
for and on behalf of Bond Pearce LLP
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