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Bord. hace
Telephone attendance
Client: Royal Mail Group PLC Sub Postmaster Litigation
Matter: Mr Lee Castleton Matter no: 348035.134
Attending: Conference between TB,SD, AB & RM - Counsel
Name: Adrian Bratt Location: N/A Date: 16 August 2006
Start time: Units:
Conference between Tom Beezer (TB), Stephen Dilley (SD), Adrian Bratt (AB) and RM -
Richard Morgan, Counsel.
RM - discussing the next key dates. These being Witness Statements on 15 September,
Experts’ Swapping on 13 October, Experts’ meeting on 27 October and Exchange on 10
November.
Pa
ulars of
im
RM - para 1-5 are admitted. RM would like a Witness Statement submitted by an
appropriate person to explain the structure of the Post Office business and how the sub-
postmaster and sub-Post Offices work as a matter of law. For example, a potential sub-
postmaster is identified, he owns the site he would like an explanation how the contract
works and who owns what.
TB - so effectively the Witness statement has an “idiot’s guide” to how the process works
and for example including a plan of the shop at Marine Drive and an explanation saying “this
is how it works.”
RM - referring to paragraph 6 of Particulars of Claim, the first issue £27,000 loss. This is the
core battleground. If we win here we will win the wrongful dismissal argument. We can still
win the dismissal argument if we lose on the first point, but it is more difficult.
Paragraph 7 - responsibility for the loss incurred.
Paragraph 8 - Is the Defendant liable to repay the loss.
It may have been better from the outset if we would have pleaded that he was an agent.
SJD explaining the wider picture in that Post Office Ltd (POL) was well aware that costs will
actually exceed the claim here.
RM - querying whether we should amend the Particulars of Claim.
TB - we need to ask the question of the client.
RM - with denial of paragraph 7 if we are saying there was a duty to account there was no
particular worry about the errors.
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Paragraph 8 - We are suing on the contract and effectively Castleton admits he is an agent.
What we need to say has he actually received the cash and failed to account for it and they
need to prove this under paragraph 6.
SD - we must prove the loss and show he failed to authorise it.
RM - it is either received cash which he hasn’t accounted for or disposed of stock which he
hasn’t accounted for. I need to know how the loss is made up.
SD - Castleton’s Counsel is Alex Gould.
RM - Alex Gould is at Hardwicke Buildings. If we need to amend the Particulars of Claim we
will need to amend paragraph 7 and the agency point will help here.
Defence
RM - Castleton claims he is not responsible for losses after 23.3. 2004.
SD our audit team typed the date of the audit incorrectly as 25 not 23.03.04.
TB - Chesterfield are the POL investigation section.
RM - referring to the small error of £176 from National Lottery losses. SD - if we don’t
pursue it we could damage our credibility. We don’t know how it arises, and need to bottom
this out. RM - Castleton says it is for game sales on 24 March, after he has left. Maybe still
contractually liable for it but do we want to pursue it? It is an unattractive argument. SD -
will speak to Cheryl Woodward and we also need to state that the audit report is incorrectly
dated.
RM - referring to paragraph 3 of the Defence and the £1,256.88 which has gone. We need
to amend our reply and counterclaim to acknowledge this.
Referring to paragraph 2 of the reply. We don’t admit the point and this needs taking out
effectively just tidying up. And we need to amend the claim to take it out.
RM - the allowance for the National Lottery Prize payments I don’t know that should be
there.
*SD - Action Point The issue of the National Lottery prize payments needs discussion with
Chesterfield.
RM referring to para 5 and 6 of the Defence. This seems to be the core but actually he
doesn’t think it really is. Castleton thinks his losses are illusory as a result of Horizon and
the way to disprove it is to show that there were actual losses. How this is actually disclosed
is neither here nor there. We need to show effectively from date A and date B from physical
products or physical cash that there is a discrepancy.
With regard to his counter claim and the wrongful termination the Particulars of Claim have
gone further saying there wasn’t a loss and there were procedural irregularities although any
procedural irregularities won't stop wrongful termination if the breach of contract is so
serious to allow it.
RM would like to come back with a properly pleaded Defence to the Counterclaim ie. The
contract was lawfully terminated etc. This would make the focus of the whole dispute into
whether there was a loss or not.
RM - Did we support the application for the transfer of this case to the High Court?
*SD - must check this.
RM - I think this would be better off in the Chancery/Commercial list of the Central London
County Court. We should write to the other side and explain issues of proportionate use of
High Court time and effectively use our letter as a shield to the Judge.
SD - this would have settled without the computer/Horizon issue and the subsequent sub-
Post Master’s bloggers website.
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RM - We run the risk of a full High Court Judge Hearing this and it is make a capping order
with respect to costs.
SD - Castleton has disclosed no evidence of loss. Under the contract we can terminate for
whatever issue on 3 months’ loss therefore this caps any liability we have for termination.
Our part 36 accounts for his wrongful termination. We suggested mediation before
disclosure but the other side were not prepared to.
Replies to the Defence
RM - This needs to be amended to pick up the points. We need to make sure we are raising
all grounds of liability that can be raised with respect to the loss.
SD - look at the lottery and £1,200 point. If we can prove a loss we can win on our claim
and defeat the counterclaim. Key question effectively is the unauthorised loss of £26,000.
RM - we need to sequence carefully and need to get the forensic accountant in to determine
how much money should have been received, how much was actually received, effectively
shows as a loss and compare this to this cash declaration. Once this is produced the IT
expert could confirm the balancing exercise on the accounts.
SD - with regards to issues of screen freezing and the PC’s not communicating this would
not make a difference to the figures on the system. End of March 04 the audit was a
physical stock take and thus whatever the PC says there is a physical loss.
RM - It is very obvious one would declare a loss and then say that is what the PC told him to
say. RM then questioning how is the cash handled and how is cash transferred in and out of
the sub-Post Office branches for example by Securicor and asking what is a cash account.
SD - We have disclosed our version of remittances but he hasn't disclosed his version.
RM - We need to set out what documents should have been kept with respect to
remittances.
SD - referring to the sub-Postmasters’ obligation each day with respect to reporting
requirements. SD then explaining the Horizon terminal and 2 tills and that Castleton didn’t
find out which till was losing the money although every transaction is recorded electronically.
SD then explaining the check issue point. SD stating that we haven’t got every giro receipt
he produced but we have Horizon’s log of every giro receipt he produced, which we know is
correct as there are no error notices to accompany it. He is supposed to check the Horizon
report matches what he sends off and with respect to cash he must declare how much cash
he has he must count it but the centre would not know if Castleton was wrong without an
audit. Castleton didn’t actually need the volume of cash to service the transactions he did.
RM - Castleton took over the business in June 03 when he started he had x-stock and y-
cash. Was there an audit when he started?
(*SD would need to ask that question of Post Office Ltd).
RM - saying for example at the start he had had say cash of £100 and stock of £500. At the
end of him term he had cash of £200 and stock of £300, and in between he had stock in of
£1,000 and cash in of £5,000 so overall he had stock out of x and cash out of y. Therefore
we add these figures up from Horizon records can we not prove it that way? Castleton may
say he entered the wrong figures in the giro books.
SD - when he gets a stock delivery he must enter it into the system what you have been
delivered and an error notice is generated if there is a difference. SD referring to the email
from Graham Ward of 21 June 2006.
RM - we need to find out how they account for what stock leaves the centre.
(*TB - we need someone to explain the Stock despatch and REM in process, and that there
were no error notices generated).
RM - yes, the operation computer system is important only after the witness evidences and
the experts sort out the physical evidence of the ins and outs.
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SD - recent point was raised with regards to week 42 transaction log and this not marrying
with the cash account. POL are currently asking Fujitsu the questions. Cash account is
produced by Castleton based on system information. Any weakness for us is one where we
say we need all the giro receipts as the system has the information but we must be sure that
information is correct.
TB - isn’t he asking us to explain both ends of the transaction he controls.
SD - showing Rowe Cohen’s latest letter.
TB - I will push Mandy Talbot on the RC letter. We also need to know what RC mean by
“manual reconciliation”.
SD - There has been no on site visit with respect to the IT facilities although the hard drive
has been changed and broadband installation has occurred although the broadband was not
switched on until after Castleton left.
RM- we need to explain each day’s processes and this might be primary evidence by way of
schedules. I prefer to know the experts’ answer before we ask the question.
RM - the PC expert must understand how Horizon works and how the events complained of
could give rise to errors.
*Is it suggested that it is a hardware fault or software fault. We need to ask Rowe Cohen
this question.
TB - is it worth a Part 18?
SD - the Part 20 Reply would provide a mention of screen freeze and non-communication.
RM — how do we know what physical equipment was actually used.
*Have the actual machines changed between May 03 and now and, if so, how?
TB - The expert would need to see those terminals and would need to see a log of software
upgrades from May 03 to July 04 and explain what these upgrades did.
RM - Someone from Fujitsu needs to explain the physical makeup of that branch and the
software configuration. Do we know who set up marine drive?
*SD - we can ask that question.
RM - Can we tell for example at week 43 which physical goods the cash discrepancy relates
to.
RM looking at the final cash account for week 49 and stating that line 50 says he has
£72,000 with everything else being stock. Item number 3L refers to 10. Is it £10 worth or
10 cards?
*SD - We don’t know that one.
RM - Table 5 is a total of 93 - how does he calculate the shortage.
Payments total is 172 and the balance due to the Post Office is 97.
SD - we need to get someone to explain how the shortage is calculated.
RM - how the figures inputted by machine or by him? If he has to count cash and stock at
the end of each week this should give him an indication of what has happened in between.
Although he made good an 11,000 pounds shortfall in week 39.
RM - someone needs to explain the voucher side of giros etc and the cash count figure input
process.
RM - referring to witnesses for him: Helen H, Cath Oglesby, Ann Chambers, John Jones,
Ruth Simpson and Greg Booth, Cheryl Woodward and Castleton’s assistant. (She needs to
be interviewed or at least asked to be interviewed). RM referring to the auction house run
by Castleton and stating that we need disclosure on that. RM referring to personnel from
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Chesterfield and Girobank who will explain how the process works and each step and they
will need real accounting credentials and would need to be the person who was physically
doing the job. They will need to know the physical aspects and what happens to deposit
slips, cheques etc. RM also questioning are there any other categories we should look for for
the loss other than the Giro, the National Lottery and Chesterfield. RM stated that we need
to ensure Cath Oglesby’s evidence is correct with respect to no losses. Need to check the
new sub-postmaster loss, we need to check the hardware and software upgrades if there are
any.
SD - discussing other potential witnesses being Miss Morgan, Davlynn Cumberland and Anita
Turner. Data was sent to these people for checking. RM stated that we will need statements
from these people if the Post Office wants a Rolls Royce job on this one. SD also referring to
Gareth Jenkins.
RM - referring to the cash declarations in SD’s exhibits page 7. He doesn’t understand the
figures these need explaining and these are repeated in the email of 22 March. He does not
understand the 1*t page of the audit report and what is the purpose, why is it set out like
that.
John Jones
This statement was the basis of the wrongful dismissal claim. RM questioning why he did not
want it recorded. SD not knowing.
Referring to para 8 page 2. Do we need to re-exhibit and referring to para 14 at page 4 is it
NBSC or NSBC? Also, if they carry out tests they must have had concerns what were the
concerns and what did you do.
*RM- we need to know what sort of security or protection Marine Drive had on its dial up
internet. Was it password protected? Can Fujitsu get in and change the raw data after
Castleton inputted this?
Paragraph 18 page 5 - this needs qualifying. What is he saying and so what if it is foreign
currency? Why is there foreign currency?
Para 23 - where is the analysis.
RM - I want to get the with statements further along the track now and need to see
everything warts and all now.
Cath Oglesby
Paragraph 10 - Need to explain the operations and suspense account and the process what
is done, why it is done and what effect it has.
Paragraph 40 - I do not understand the use of the word “needed”.
RM states that he paid out £92,000 in cash but he had £97,000 and it reads as if he had
more cash. Does it need to be the other way around? The whole paragraph needs clarifying.
RM week 47 needs to be looked at.
Paragraph 40 doesn’t make any sense to RM at all. 40(d) should this be 78,103? RM
doesn’t understand how it works at all. It must be written in very basic careful terms and
must be accessible for the Judge.
Paragraph 13. This needs clarification what report, what period and the reference to
technical jargon ‘REMd’ in.
Paragraph 20 - RM - it would be nice if we could read an explanation of yes this is how I did
it. This is the approach that is proportionate referring to the example of one week if you
want the lot I can acquire it for you.
With regard to the broadband we need to explain what actually happened with the
connection. Is there a hardware and software firewall? Was it physically plugged in but not
activated? It was switched on 21 April 04 and installed on 20 January 04.
SD referring to Castleton’s lawyers calling Lee Castleton, Lisa Castleton and Christine Train.
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There followed some discussion about the level of the trial listing being 5 days or 9 days. RM
says that we need to increase the number of witnesses on the AQ and also extend the time-
estimate of the trial.
RM stating that it should be stated to POL that this is madness and we could settle with a
drop hands and the confidentiality clause. We will all need to readdress the estimate of costs
with the Court.
We need to send a letter to Rowe Cohen detailing amendments to Particulars of Claim, new
witnesses, new costs estimate, time extension, and the move of Courts. SD needs to speak
to RM before next Friday.
RM referring to the instructions to experts stating that SD shouldn’t refer to Without
Prejudice documentation and they need to give him a clear idea of what to do. As far as
accountancy experts are concerned it is effectively a vouching exercise. Do we know the
answer to the question before we ask it. RM questioning as to whether the Post Offices have
accountants who could do this. RM asking can we speak to Kath Oglesby and how we would
go about the vouching exercise from the raw data. We need raw evidence in place before we
compile a report.
We could send preliminary instructions to BDO for IT and Accountancy just asking on the loss
side of things the opening stock, the closing audit and the stuff in between and ask them to
give an opinion as to whether the loss is real or not. With regard to the IT side of things
they need to do a physical examination to the PCs and we will give them all the Witness
Statements with respect to the software upgrades etc. SD needs to write 2 letters to the
Experts.
RM -with respect to the Horizon and software we need to send a letter to RC, possibly
explaining that we don’t understand the allegations on the software points and suggesting a
sequential exchange of reports on IT. We need to say to BDO machines are here, these are
the allegations, go and inspect them, what further information do you need and tell them to
go to Manchester for a familiarisation session.
Tell Rowe Cohen, that would be of great assistance to both experts to go to Manchester
together and conduct the site inspection at the same time.
TB - it is a crucial point that we concentrate on the physical items in order to bring back
from the Horizon to the double entry bookkeeping and double document book keeping point.
RM - I would also like to know if it is a genuine one off and I would like to know if the
number of allegations and the number of paper cases that have occurred. Other than the
Bhajaj and the Bilkhu cases how many other allegations have been made and how many
have come to trial and the outcomes of those. These need to be of a particular issue of
persistent shortfalls allegedly attributable to the computer system.
RM - I need to meet someone from POL in September and before the trial to go through the
accounts.
RM - Basically the witness order should be that in which they have become involved and I
would like to see the witnesses before their Witness Statements are finalised.
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