STRICTLY CONFIDENTIAL & SUBJECT TO LEGAL PRIVILEGE
BRIEFING NOTE ON THE CURRENT STATUS OF CLAIMS INVOLVING HORIZON
Overview
Post Office Ltd (POL) uses the Horizon system to provide
support for its over the counter products and services
throughout its network of 11,500 branches. POL continues to
receive challenges to the Horizon system. It is commonly
alleged that (a) Horizon contains inherent defects resulting
in transactions being misstated and that the system creates
losses which are not the result of genuine accounting errors
and (b) the associated processes are insufficiently robust to
enable subpostmasters to reconcile errors.
There are no reported cases where data stored on the Horizon
system has been found to be an inaccurate record of actions
taken in branch. There are currently five civil claims by
former subpostmasters in respect of Horizon. Only one of these
cases is the subject of actual litigation.
POL has rigorously tested the Horizon system, using
independently assured processes and it has been found to be
robust. Horizon has been in successful operation for in excess
of 10 years across the Post Office® network (upgraded in 2010)
and during that time in excess of 20,000 subpostmasters have
used it to successfully perform millions of financial
reconciliations. The National Federation of Subpostmasters has
also expressed its full confidence in the accuracy and
robustness of Horizon.
Information regarding the involvement of James Arbuthnot MP in
this issue is set out in the Appendix to this document.
Challenges to the Horizon system
Subpostmasters have contractual liability for losses and are
required to make good losses. It is a common tactic for
subpostmasters who are accused of stealing from POL to assert in
response that those losses are not genuine but are the result of
an unspecified error with Horizon in order to avoid liability.
The Justice For Subpostmasters Alliance (JFSA), which was set up
in 2009 to represent the interests of alleged “victims” of the
Horizon system. The JFSA has been in communication with the
Department for Business, Innovation and Skills regarding the
operation of Horizon.
The integrity of Horizon has been the subject of considerable
media interest, including two features in the BBC’s “Inside Out”
programme (aired in February 2011). Articles criticising Horizon
have also appeared in Private Eye and Computer Weekly,
The integrity of Horizon has been the subject of legal challenge.
In the case of Post Office Ltd v. Lee Castleton, the Court ruled
that the losses claimed were real deficiencies and that the
POL00107701
POL00107701
Horizon system provided irrefutable evidence that Mr Castleton
had failed to properly manage the branch.
Horizon has also been the subject of a number of requests for
information under the Freedom of Information Act.
Current (potential and live) litigation involving Horizon
There are currently five claims by former subposmasters. These
claims arise out of the termination of the subpostmasters’
appointments following the identification of discrepancies
between the branch accounts and the actual cash position in
branch.
Each has made a claim for wrongful termination of contract based
on (a) alleged failings in Post Office Ltd’s internal processes
(i.e. the mechanisms in place which enable subpostmasters to
check discrepancies and a lack of adequacy training and support)
and (b) inherent defects in the Horizon system. These allegations
are also used to support claims for negligence, breach of duty
and misfeasance in public office. Each claims damages in the sum
of circa £150,000.
The number of potential cases remains unclear. Articles in the
press suggest that Shoosmiths had consulted on 55 cases, with a
further 150 cases pending.
Status of the current claims
Letters before action were received in respect of four of the
five claims in August and September 2011. These claims remains at
the pre-action stage (i.e. there are no live court proceedings)
Post Office Ltd has responded robustly to the initial allegations
made in each of those cases and liability has been strongly
denied.
The approach to date has been to deny liability at a ‘high level’
rather than seek to respond to the claims on a point-by-point
basis. This strategy has been based on the fact that the claims
are so wide ranging that it is almost impossible to deal with
them, and would be very expensive.
Two of the subpostmasters have already admitted to and been
convicted of false accounting and, therefore, can have no claim
for wrongful termination of contract in those circumstances. A
third has admitted to false accounting (but was not convicted)
and liability has been denied on the same basis. The fourth claim
has been denied on the basis that it has been made out-of-time
and, therefore, the subpostmaster is prevented under the
Limitation Act from progressing the claim further. It may be that
if one or more of the subpostmasters decides to continue to
pursue their claim(s) it will be necessary for Post Office Ltd to
respond on a substantive basis.
POL00107701
POL00107701
The last correspondence regarding these four claims was in
December 2011. Since that date, Legal Services are not aware of
any further steps having been taken in order to progress the
claims.
In relation to the fifth claim, court proceedings were commenced
in June 2011. Post Office Ltd succeeded in having the claim
struck out. The subpostmaster subsequently applied for permission
to appeal that decision, which was refused. The subpostmaster has
the option of requesting that the refusal be reconsidered at an
oral hearing. Post Office Ltd has yet to receive notification
that a request has been made.
Prepared by Legal Services
12 March 2012
APPENDIX ONE
Involvement of James Arbuthnot MP - Conservative MP for North
East Hampshire
James Arbuthnot was Opposition Chief Whip throughout the 1997
Parliament, who made a comeback as a Shadow Minister for two
years, and finally opted for the more rarefied life of the
committee corridor in 2005.
POL00107701
POL00107701
In June 2011, he became the first member of the current
Parliament to announce that he would stand down at the next
election.
Post Office related information
His constituency contains 19 Post Offices® including 1 Post
Office Local - Bramley.
October 2007 - campaigned against Post Office® closures in
Hampshire. There were 2 Post Office® closures in 2008 under the
Network Change programme. There were also 2 Post Office® closures
in 2005 under Urban Reinvention.
April 2009 - backed a report by the National Federation of Sub
Postmasters (NSFP) calling for "bold and decisive" action to
reverse the continued decline of the UK’s post office network.
December 2009 - attended a meeting with senior Post Office Ltd
officials to discuss the Horizon system following claims by
subpostmasters in his constituency that losses were due to the
system (Odiham and South Wanborough Post Office® branches). The
functionality of the system was explained at a high level and
Post Office Ltd was robust in its position on the integrity of
the system.
A representative from the NFSP also attended and was also very
supportive in terms of the integrity and robustness of Horizon.
Although the Post Office Ltd and the NFSP representatives were
quite clear in terms of the system and processes, the general
sense was that Mr Arbuthnot remained sceptical on this issue.
October 2011 - From James Arbuthnot’s website; -
“James fights for local postmistress
James has been involved in a long-running campaign for fair
treatment of Post Office staff following allegations of fraud.
Private Eye No. 1298 reports the case of Jo Hamilton from South
Warnborough, whose conviction for false accounting James
continues to oppose.
The magazine reports, ‘James Arbuthnot, expresses a widely-held
view when he says: “I find it very difficult to believe that all
these sub-postmasters and sub-postmistresses are suddenly found
to be dishonest, if the alternative is that it may be a public
sector computer system which has gone wrong. We’ve heard of that
before.”
POL00107701
POL00107701
January 2012 - wrote to the Minister and Moya Greene on concerns
over the closure of Odiham Post Office due to ‘irregularities’
and questioned the Horizon system.
The response (from Paula Vennells) explained that a temporary
subpostmaster had been put in place at Odiham and that the branch
had only been closed for a few days. She apologised for the
inconvenience. She explained that Post Office Ltd could not go
into the specifics of individual contractual cases and
highlighted the huge volumes of transactions managed by the
Horizon system and that Post Office Ltd had no reason to doubt
the integrity of the system. This correspondence is included at
the end of this brief.
27 February 2012 - we understand that Mr Arbuthnot chaired a
meeting at Portcullis House to discuss the Horizon system, and
presumably wider JFSA claims. Norman Lamb was invited, but BIS
declined the invitation.
Post Office Ltd has not had any feedback from this meeting.
Historically, Post Office Ltd is aware of two cases in Mr
Arbuthnot’s constituency where there has been an allegation
against the Horizon system —- outlined below;
e South Warnborough. Josephine Hamilton’s contract as a
subpostmistress with the Post Office was terminated in 2006
after a loss of £36,644.89 was discovered during an audit
at her branch in South Warnborough. She agreed to repay the
money. She pleaded guilty to 14 charges of false accounting
at her trial at Winchester Crown Court in February 2008.
She was sentenced to 12 months community service and
received a supervision order
e Odiham - Raised the case of Mr David Bristow, Subpostmaster
at Odiham, who was claiming that the Horizon system was
responsible for losses at the branch. The case of Odiham
involved significant losses (£42K). Errors at the branch
were fully investigated and there was nothing to indicate
system problems. The termination of the Subpostmasters
contract was progressed in January 2009 at which point he
tendered his resignation and a temporary agent was put in
place (Note: The most recent correspondence on Odiham - Jan
2012 - included at the appendix deals with a separate
recent case against the temporary subpostmaster at Odiham
Mr Paul Kemp.)
The most recent general development of which Post Office Ltd is
aware is that JFSA has asked for a meeting with Norman Lamb - as
the new Minister - to express their concerns
POL00107701
POL00107701
POL00107701
POL00107701