IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
BETWEEN:
POST OFFICE LIMITED
- and -
LEE CASTLETON
Claim No. HQ05X02706
Claimant/Part 20
Defendant
Defendant/Part
20 Claimant
BRIEF TO REPRESENT THE CLAIMANT AT THE HEARING TO SET ASIDE
DEFAULT JUDGMENT ON THE COUNTERCLAIM ON 27 JANUARY 2006 AND TO
ADVISE GENERALLY
Richard Morgan
Maitland Chambers
7 Stone Buildings
Lincoin’s Inn
London WC2A 3SZ
Bond Pearce LLP
Ballard House
West Hoe Road
Plymouth
PLi 3AE
Ref: SJD3/348035.134
29 November 2005
1A_1095147_1 1
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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
BETWEEN:
POST OFFICE LIMITED
- and -
LEE CASTLETON
1A_1095147_1 2
Claim No. HQ05X02706
Claimant/Part 20
Defendant
Defendant/Part
20 Claimant
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1
Index
Counsel is sent copies of the following:-
Statements of Case
Tab I Document Date
1 Claim Form 25 May 2005
2 Acknowledgement of Service 13 June 2005
3 Defence and Counterclaim 15 August 2005
4 Reply to Defence and Defence to Counterclaim 15 November 2005
Orders and Judgments
5 Order of Master Fontaine 4 October 2005
Judgment for Claimant 9 November 2005
(sealed 10.11.2005)
Judgment for Defendant 9 November 2005
(sealed 17.11.2005
Notices
6 Notice of Issue 9 June 2005
Notice that Acknowledgment of Service has been filed
14 June 2005
Notice that a Counterclaim has been filed
5 September 2005
Notice of the Allocation to the Multi-Track
14 September 2005
Application Notice and draft Order
17 November 2005
Witness Statements
7
Witness Statement of Stephen John Dilley and Exhibit
18 November 2005
Draft Witness Statement and Exhibit of John Jones
Undated
Allocation Questionnaires
9
Claimant’s Allocation Questionnaire
7 September 2005
10
Defendant’s Allocation Questionnaire
6 September 2005
Defendant's Expert’s reports
11 I Expert’s Report of Andrew Richardson of White & Hoggard I 18 August 2005
Accountants
12 I Expert Report of Chris Hine of Bentley Jennison 23 September 2005
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Correspondence
13
Correspondence - Interpartes Various
14
Correspondence - Client Various
15
Correspondence - Court Various
16
Internal correspondence with DEG1 Various
21
2.2
2.3
24
Background
The Defendant, Lee Castleton, was a Sub-Postmaster at the branch of the Post
Office at 14 South Marine Drive, i x
Branch”) from approximately 18 July 2003 to 23 March 2004. Mr Castleton
accepts that the express terms of his contract for services included that he
would be strictly responsible for the safe custody of cash and stock, was
“the Marine Drive
obliged to make good all losses caused through his own negligence,
carelessness, or error and losses of any kind caused by his assistants and that
his responsibility did not cease when he relinquished his appointment and that
he remains obliged to make good any losses incurred during his term of office
which subsequently came to light.
Between 18 July 2003 and 25 March 2004, net losses of £27,115.83 occurred
at the Sub-Post Office. The Defendant's case is that any shortfall is entirely the
fault of problems with Horizon Computer and Accounting System at the Marine
Drive branch and that the Post Office wrongfully terminated his Sub-
Postmaster Contract in respect of which he has suffered loss not exceeding
£250,000.
The claim was issued in the Scarborough County Court (Tab 1) and the Court
sent it to Mr Castleton by First Class Post on 10 June 2005 and therefore it was
deemed to be served on 14 June. The Defence was due for service by 11 July
(28 days later) but the Post Office agreed to a 28 days extension to allow Mr
Castleton to serve the Defence on 15 August, accordingly, he had 62 days to
file his Defence. His Defence and Counterclaim was served on 15 August (Tab
3)
On 6 September 2005, Mr Castleton sent his Allocation Questionnaire to Bond
Pearce LLP which contained proposed directions that the Post Office be at
liberty to serve a Reply to Defence and Defence to Counterclaim by 19
September, but also requested that there be a 1 month's stay to attempt to
settle the claim (Tab 10).
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2.5
2.6
2.7
The Scarborough County Court transferred the case to the Queen’s Bench
Division of the High Court and on 4 October 2005, Master Fontaine ordered
there to be a stay for 1 month for settlement (Tab 5).
At the end of September 2005, Ms Gammack, solicitor at Bond Pearce LLP who
had conduct of the claim from shortly after it was issued until the end of
September left the firm and Mr Dilley of Bond Pearce LLP took over conduct of
the file on 29 September. Regrettably, Ms Gammack did not explain to Mr
Dilley either verbally or in writing when she handed over the file that:
(a) She had failed to serve a Reply to Defence and Defence to
Counterclaim within the usual time limit, or at all;
(b) A request for Judgment in Default had apparently been made on 7
September 2005, 23 days after the Defence and Counterclaim had
been served;
(c) In a telephone conversation between Mr Turner of Rowe Cohen
(solicitors for Mr Castleton) and Ms Gammack on 15 September 2004,
Rowe Cohen allege that they informed her they had filed a Request for
Judgment in default and Ms Gammack stated that there was an
oversight in relation to the Reply to Defence and Defence to
Counterclaim, that she had not been in the office at the time when the
Allocation Questionnaire was despatched for filing and that she had
assumed that whoever had dealt with it in her absence had forgotten
to enclose the Reply to Defence and Defence to Counterclaim.
However, Ms Gammack did not make an attendance note of that
conversation although she has recorded a time entry on that day being
a telephone call with Mr Castleton’s solicitors in which the description
simply states “Mark Turner from Rowe Cohen”.
(d) Rowe Cohen state that in the telephone conversation on 15 September
Ms Gammack asked whether Mr Castleton would be prepared to grant
a retrospective extension of time for service of the Reply to Defence
and Defence to Counterclaim and they said they would seek
instructions but they did not envisage Mr Castleton would be prepared
to do so, given the dilatory way (in his view) that the Post Office had
treated his request for information and documentation.
When Mr Dilley took over the case, he made a point of asking Ms Gammack
whether there was anything urgent to do on the file but she said there was
not. The case was then stayed for a month to allow the parties to settle.
During October, Mr Dilley started to read into the case and sought instructions
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2.8
2.9
2.10
from the Post Office. Internally the matter was transferred from Cheryl
Woodward at the Post Office’s Chesterfield Office to Mandy Talbot at the
London office.
On 31 October 2005 Mr Dilley had a telephone conversation with Mr Turner at
Rowe Cohen. He wanted to know whether Instructing Solicitors had any
instructions in the light of the two experts reports that Rowe Cohen had sent to
Bond Pearce LLP on 30 September. Mr Dilley stated that he was awaiting
instructions and would revert back to him. On the same date, Rowe Cohen
solicitors wrote to Bond Pearce LLP stating that they had heard nothing from
Bond Pearce LLP in relation to their 15 September letter, but hand wrote a PS
on that letter which stated “We have now spoken since dictating this letter”.
This was a disarming comment because Rowe Cohen’s 14 September letter
sought confirmation as to whether a Defence to Counterclaim was filed and
this point was not raised at all during the telephone conversation on 31
October. Mr Dilley believed that Rowe Cohen’s letter had been superseded by
the telephone conversation that they referred to (or otherwise, why insert the
PS?).
On 10 November 2005, instructing solicitors received the Default Judgment
against Mr Castleton for an amount to be decided (Tab 5). However, on 15
November, instructing solicitors received a copy of a letter from Mr Castleton’s
solicitors to the Court dated 14 November stating that they assumed that the
Default Judgment had been generated as a result of their letter to the Court
dated 4 November (Tab 13).
The Reply to Defence and Defence to Counterclaim was sent by fax and DX to
the Court and Mr Castleton’s solicitors on 15 November. Excluding the time for
the stay (because that halts the proceedings for settlement), it was served
within 67 days of service of the Defence to Counterclaim, which is just 4 days
longer than it took the Defendant to file the Defence and Counterclaim. As the
Reply was filed by fax probably after close of business, permission needs to be
sought to file it out of time on 16 November.
On 17 November, the Court sealed a copy of the Default Judgment dated 9
November in favour of the Defendant on the Counterclaim. There is a technical
argument that the Reply to Defence and Defence to Counterclaim was filed
before the Default Judgment was sealed, but as the Default Judgment is dated
9 November, instructing solicitors believe that little will turn on this argument.
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3.1
Application to Set Aside Default Judgment
Instructing solicitors have issued an Application to set aside the Default
Judgment which will be heard on 27 January 2006 at 10.30 a.m. Instructing
solicitors believe that the judgment in default on the Counterclaim should be
set aside given that:
(a)
(b)
There is a good reason for the Post Office to be allowed to defend the
Counterclaim in accordance with CPR 13.3 (b) because the Claim and
Counterclaim are intertwined. It would be inconceivable if the Trial
Judge finds that Mr Castleton has failed to account for over £27,000,
but the Post Office nevertheless has to pay Mr Castleton damages for
wrongful termination, because of the Default Judgment on the
Counterclaim; and
There is a bona fide Defence to the Counterclaim that appears to, at
a minimum, have a real prospect of success in accordance with CPR
13.3(a). This is set out in more detail at paragraph 16 pages 3 to 5 of
the Witness Statement of Mr Dilley (Tab 7) and in the draft Witness
Statement of Mr Jones (Tab 8).
The key points are as follows:
(i) Fujitsu Services (“Fujitsu”) examined the Horizon Computer
System used by Mr Castleton at the time. Fujitsu were
responsible for designing, implementing, and operating the
Horizon System on behalf of the Post Office. They concluded
that there was no evidence whatsoever of any system problem.
Instructing Solicitors have asked Fujitsu to prepare a formal
report (tab 14, letter dated 18 November 2005).
(ii) There was a fair dismissal process: Mr Castleton was
suspended on or about 23 March 2004 following large
unexplained losses that had been reported over the preceding
12 weeks. An audit took place on 25 March 2004. On 26 April
2004, the Post Office wrote to Mr Castleton and asked him to
explain why his contract should not be terminated summarily
given that there was a shortage of £25,758.75 reported over
the preceding 12 weeks. On 10 May 2004, Mr Castleton was
interviewed and given an opportunity to explain why his
contract for services should not be terminated. On 17 May
2004, Mr Castleton’s contract was summarily terminated. Mr
Castleton was given the opportunity to appeal which was dealt
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3.3
4.1
with by a completely different person (Mr Jones) at the Post
Office to the person who dealt with the dismissal. Mr
Castleton’s appeal was unsuccessful.
(iii) Crucially, between weeks 42 and 49 the Marine Drive Branch
ordered significantly more cash from the Post Office than had
normally been the case. Mr Castleton stated at his appeal
hearing that he felt that he only ordered what was required. Mr
Jones who conducted the appeal informed Mr Castleton that for
the entire period, the actual cash usage for transactions at the
branch did not differ from week to week and that he only
actually needed to order between £200,000 and £265,000 in
cash. Instead, Mr Castleton had ordered £305,000 or which
only £20,000 had been returned.
Mr Jones’ analysis of the increases in cash ordered by the
branch demonstrated that he did not need to order these
excessive amounts of cash, because the extra cash was not
required to service the transactions that were being performed.
Significantly, the orders for extra cash were always in weeks
where there was reported to be a significant loss at the branch.
The Marine Drive Branch never ran out of cash. If the Horizon
system had been incorrect_and_ the cash shortfalls merely
theoretical_(i.e. computer_generated, which is what Mr
Castleton alleges), rather than actual, there would always have
been_sufficient_cash_in the Marine Drive Branch to_meet_its
requirements and no need to order extra cash. It was only the
ordering of the extra cash that ensured the branch was always
able to remain trading. Mr Castleton was unable to explain why
he needed actual additional cash or where that additional cash
had gone if there was only a computer generated, theoretical
shortfall.
Instructing solicitors will also seek to obtain Witness Statements from Helen
Hollingworth, the inspector who carried out the audit at the Marine Drive
Branch on 25 March 2004 and Catherine Oglesby, the Retail Line Manager who
dealt with Mr Castleton’s dismissal.
closure
Mr Castleton’s solicitors allege that the Post Office removed various documents
from the Marine Drive branch when they carried out their audit. They state
that amongst these documents were daily balance snapshots and that the Post
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4.2
4.3
44
5.1
5.2
5.3
Office ought to produce these because they will show that the weekly cash
accounts produced by Horizon are inaccurate.
Instructing Solicitors have asked the Post Office to supply all the documents
that they have removed and whether they believe they would have removed
the daily balance snapshots. Certainly, some daily balance snapshots were
removed and have been supplied to Mr Castleton. Instructing Solicitors have
recently received further documentation (not enclosed) from the Post Office
which is being reviewed to ascertain whether these are duplicates of earlier
documents or new documents.
Mr Castleton has obtained two “experts” reports (Tabs 11 and 12) which
conclude that the Post Office Horizon System, despite the suspense account
entry, has failed to recognise the entry on the daily snapshot and that Mr
Castleton’s Defence “Appears to hold potential merit based on the limited
documentation” they have so far reviewed. Mr Jones believes those reports
have no credence because if there was a computer error, the Marine Drive
branch will not have needed to have ordered and used extra cash.
Significantly, it is clear from both Mr Castleton’s experts’ reports that neither
expert had been the majority of the documents that Bond Pearce LLP sent to
Mr Castleton’s solicitors as long ago as 16 February 2005. For example, Bond
Pearce LLP sent to them 14 weeks worth of cash accounts, 12 weeks worth of
Giro receipts and 12 weeks worth of declared cash receipts. Bentley Jennison
state that they have only seen a cash account for 1 week i.e. week 49. It is
interesting that Bentley Jennison were only given a tiny fraction of the receipts
that the Post Office has disclosed to Mr Castleton. Unsurprisingly, his “experts”
have asked for more information to be able to form a firmer view. This is a
point we intend to raise with Mr Castleton’s solicitors in correspondence, once
we have bottomed out the position on the daily balance snapshots with the
Post Office.
Brief and Instructions
Counsel is briefed to represent the Post Office at the Hearing to set aside
Default Judgment on 27 January 2006.
Counsel is also instructed to assist and advise with the preparation for that
Hearing and to comment on draft evidence of Mr Jones and any other evidence
he believes would be appropriate.
Instructing solicitors would like to have an urgent telephone conference with
Counsel once he has reviewed the papers to discuss the case.
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5.4 Once Counsel had had an opportunity to review the papers, please could his
Clerk contact our Mr Dilley, solicitor (Plymouth Office) on telephone number
Pe
or Mr Tom Beezer (Partner) on telephone number
GRO to arrange a convenient time for Counsel to discuss the matter in a
phone conference.
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Claim No. HQO5X02706
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
BETWEEN:
POST OFFICE LIMITED Claimant/Part 20
Defendant
- and -
LEE CASTLETON Defendant/Part 20
Claimant
BRIEF TO REPRESENT THE
CLAIMANT AT THE HEARING TO SET
ASIDE DEFAULT JUDGMENT ON THE
COUNTERCLAIM ON 27 JANUARY
2006 AND TO ADVISE GENERALLY
BOND PEARCE LLP
Ballard House
West Hoe Road
Plymouth PL1 3AE
“BX 8257 Plymouth
Ref: SJD3.348035.134
Solicitors for the Claimant/Part 20
Defendant