POL00113308
POL00113308
POST
OFFICE
POL00113308
POL00113308
Executive Summary
Postmasters are agents for PO. They owe fiduciary and contractual duties to PO. Funds held in branch are public monies which belong to PO. Pastmasters are contractually
responsible for lasses caused through “negligence, carelessness or error, and also for losses of al kinds caused by his assistants”
PO has established processes for investigating accounting anamalies, Consequence is usually a requirement to make good losses. In certain cases suspension, dismissal or
prosecution may also be appropriate depending on the facts ~ particularly f postmaster has sought to conceal problems. Prior to 2042, there were approximately 40
prosecutions each year
During 2012 concerns were raised in relation to a small number of cases relating to the reliability of Horizon ~ the in branch point of sale system
Second Sight appointed. Investigations followed. Scheme established in 2013 under the overview of the Working Group ~ chaired by Sir Anthony Hooper. Objective of Scheme
as to articulate then investigate individual claims about Horizon and facilitate mediation as a way of addressing concerns, Itis nota criminal case review or compensation
scheme, although very substantial claims for compensation have been made in some cases
All cases in scheme Investigated by PO, investigations reviewed by Second Sight. Reports made available to applicants for the purposes of mediation
Following criticisms of Scheme, PO stated it would make a presumption of mediation in all cases where there was no court ruling. All others considered on a case by case basis.
Investigations and Second Sight review continued as per previous process. Working Group no longer necessary and disbanded in March 2015
‘More than 40 applicants have now advised PO that they do not wish to participate in mediation pending the outcome of a government enquiry
[No evidence found of system wide/systemic problems with the Horizon software. Issues related mainly to training and support. Horizon is subject to annual audit reviews to
Industry standards
Despite significant adverse publicity, no further cases have been notified to PO. No new information has been produced by any of the journalists
(OF 136 cases in the Scheme, 43 involve criminal prosecutions. At least 10 law firms have been engaged, representing between them approximately 45% of applicants, To date,
none of the convictions have been appealed, and no civil Iitigation has been brought against PO
PO continues to offer to mediate with applicants and to engage with MPs. PO continues to observe the confidentiality undertakings it has given applicants
The Post Office has always been willing to discuss these matters. This has not been widely taken up. We have continued to make very full and public responses to allegations
‘made, providing as much detail as we possibly can without breaching the confidentiality of the people involved
Second Sight has not identified any transaction caused by a technical fault in Horizon which resulted in a postmaster wrongly being held responsible fora loss. There is no
evidence to support any of the broad allegations about Horizon. There is overwhelming evidence that the losses complained of were caused by user actions, °
including deliberate dishonest conduct
2
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Table of Contents
Background
~ Post Office & Subpostmaster Relationship
- Horizon
- Timeline of Events
The Scheme
- The Complaint Review & Mediation Scheme
- How the Scheme Worked
- Scheme Numbers
= Complaints
- Options evaluated
~ Response and Policy Stance Post March 2015
Investigations
- Role of Second Sight
- What the Post Office has done
- Feedback
Mediation
- CEDR
- JFSA Newsletter and CEDR
~ Monetary Gisinn Confidential. Subject to Legal Privilege
Options Available to Applicants
- Choices
- Legal Approaches
~ Edwin Coe LLP
- Meetings with MPs
- Costs
- Media
POL00113308
POL00113308
Background
- Post Office & Subpostmaster Relationship
- Horizon
- Timeline of Events
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
PO/SPM Relationship
Not employees but B2B agency relationship
As an agent a SPM has a fiduciary duty to PO and is contractually
“responsible for all losses caused through his own negligence,
carelessness or error, and also for losses of all kinds caused by their
assistants”.
SPMs act as custodians of public money
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Horizon
Helps monitor cash levels in branches. Post Office handles £70 billion cash and £636
million coin every year
Used successfully by 78,000 people to process six million transactions every working
day in communities throughout the UK, across 11,500 branches and by 8,000 agents
500,000 users since it was introduced in 1995, serving millions of customers
Constantly monitored and managed, with numerous checks and independent audits:
+ Emst & Young produce an annual ISAE3402 service auditor report over the
Horizon processing environment;
+ each year Bureau Veritas perform ISO27001 certification - this is the industry
standard security accreditation;
+ Information Risk Management (IRM) accredit Horizon to Payment Card Industry
Data Security Standards on an annual basis;
+ Fujitsu undertake regular industry standard testing on the system; and
+ the Post Office audit team perform risk based reviews.
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Timeline of Events
Early 2012: Having been approached by a small number of mainly former Postmasters (under the banner of the JFSA), a
group of Members of Parliament, led by the then Rt Hon James Arbuthnot MP, raise a number of concerns with the Post
Office over the reliability of Horizon
July 2012: Second Sight is appointed to carry out an independent review of Post Office's Horizon computer system
July 2013: Second Sight produce an “Interim Report’ of their findings to date. Conclusions include “We have so far
found no evidence of system wide (systemic) problems with the Horizon software” but that in some individual
cases, PO might have been more supportive of SPMs
July 2013: Post Office announced three initiatives to deal with the issues raised:
1. to set up a working Group to complete the review of cases
2. that an independent figure will chair a review
3. that a new branch user forum will be established to provide a channel for sub-postmasters and others to raise
concerns and insights around business processes, training and support
August 2013: Post Office announces the Complaint Review & Mediation Scheme to provide an avenue for any Postmasters
to raise their specific concerns directly with the Post Office on an individual basis.
December 2014: Westminster Hall debate
February 2015: BIS Select Committee
March 2015: In light of criticism as to delays and lack of support for process, Post Office closes the Working Group and
announces presumption of mediation. Cases involving in a court ruling are to be considered on a case by case basis
May 2015: JFSA recommends Applicants withdraw from the Scheme, pending a Government enquiry
June 2045: Adjournment debate
July 2015: Second Sight finishes Case Reviews ©
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
The Scheme
- The Complaint Review & Mediation Scheme
- How the Scheme Worked
- Scheme Numbers
- Complaints
- Options Evaluated
- Response and Policy Stance Post March 2015
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
The Complaint Review & Mediation Scheme
The Scheme was set up in consultation with Members of Parliament (MPs), the Justice for
Subpostmasters Alliance (JFSA) and Second Sight and overseen by a Working Group chaired by Sir
Anthony Hooper, a former Court of Appeal Judge
“I am very pleased indeed with the WGs proposed processes. To my mind, it represents the very best
chance all parties - individual Subpostmasters and mistresses, and the PO have of ensuring the
best outcome for everyone. It is fair, thorough and independent”. James Arbuthnot, 27/08/2013
Commitments - a comprehensive re-investigation of complaints, an independent review of each case,
and mediation if appropriate
Applications were invited via the Post Office’s internal communications channels as well as through the
JFSA website from 27 August through to 18 November 2013. 150 applications were received, of which
43 involved a criminal conviction
No further applications have been made to or shared with Post Office
Transparency ~ progress visible to applicants, independent professional advisers, Working @
and MPs
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
How the Scheme worked (pre March 10 2015)
SPMs with a complaint were invited to submit details of their case to Second Sight. The Working Group's role at this
juncture was to make a recommendation as to whether or not the case should be investigated. Of the 150 applicants, 4
were rejected as they were ineligible according to the Scheme’s entry criteria and 10 were resolved prior to entry to the
Scheme
On acceptance into the Scheme, that complaint was passed to Post Office for comprehensive re-investigation. This
represented a further detailed examination of all the available facts including a review of the investigation which took
place at the time of the original incident
When Post Office completed this fresh investigation, its results, together with all supporting documents, were passed to
Second Sight. It was then for Second Sight to complete their own review and analysis of all the material before
completing a draft report which included a preliminary recommendation to the Working Group on that individual case’s
suitability for mediation
The applicant was then provided with the Post Office and Second Sight reports to comment on before Second Sight
completed a final report which was considered by the Working Group to decide whether it should be recommended for
mediation
In cases where the Working Group recommended mediation, the case details were then passed to the Centre for
Effective Dispute Resolution (CEDR), the independent organisation administering the mediations. Mediation is a
voluntary process, so it was then a matter for the parties to decide whether they wish to mediate. This is consistent
with the process set out in the original documentation which explained the Scheme and was agreed to by the Working
Group
From almost 50 cases recommended as suitable for mediation by the WG (prior to March 2015), Post "
Office only found 6 unsuitable as mediation was unable to provide a means for resolution of these cons EB
10
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
11
Scheme Numbers
150 - number of applications
4 — number of applications deemed ineligible by the Working Group according to the Scheme’s entry criteria
10 ~ number of cases resolved prior to Scheme entry
136 - number of cases accepted into the Scheme (43 Involve a criminal conviction, including 37 against SPMs)
87 - number of cases PO Is / has been willing to mediate
21 - number of cases mediated to date
9 - number of cases resolved at mediation to date
11 ~ number of cases unresolved at mediation (1 is not yet concluded)
59 ~ number of cases with CEDR awalting mediation to be scheduled or take place. Of which 43 have formally
suspended / withdrawn thelr case
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Complaints
Timing - process taking too long & Post Office is ".. objecting to around 90% of cases going forward to
mediation” James Arbuthnot
s; Minuted WG concerns over SS reports style and quality. WG agrees on 07/03/2014
Second Sight reports should “ensure conclusions are reasoned and supported by evidence",
What constitutes ‘evidence’?
Scheme and Second Sight’s scope and purpose:
“Issues relating to Post Office's prosecution policy, and the conduct of any prosecution, fall outside our terms of
reference.” Second Sight, M039 Final CRR Para 5.9
“Post Office has stated that this subject [prosecution policy] is outside the scope of our investigation. We
strongly disagree with this view.” Second Sight, Part 2 Report Paragraphs 25.21- 25.24
"Some people have been jailed when it is obvious a complex computer system is at fault....Ministers must act to
ensure victims get compensation. Alan Bates Daily Mirror 16/8/2013
“The whole point of the scheme-it is not purely the software that we are talking about. Everyone seems to
homing in on the computer system. It is about the support package that works with it. It is the training and the
lack of investigation”. Alan Bates BIS Select Committee 03/02/2015 9%)
12
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
13
Options evaluated
Dissatisfaction with the Scheme laid bare (BBC media coverage, MPs withdrawing
support, Westminster Hall Debate, JFSA refusing to take any meaningful part in the
WG, BIS Select Committee, CCRC etc) a discussion about the relative merits of a
number of options for the future of the mediation Scheme before coming to a view on
the best course of action to take, taking all equities into account. These included:
+ Mediate all cases or all cases apart from criminal cases
+ Payout or pay-to-litigate
+ End the Scheme, mediate cases with merit, defend remaining claims as business
as-usual
+ Seek to maintain the status quo
14
Response and Policy Stance Post 10 March 2015
+ Post Office announces a presumption in favour of mediation.
This brings an end the role of the Working Group which
previously recommended whether a case is suitable to go to
mediation or not
+ Confirms cases involving a previous court ruling (e.g. a
conviction) looked at on a case by case basis
+ Accelerates process and admits bulk of cases to mediation
* May 2015: JFSA recommends Applicants withdraw from the
Scheme, pending a Government enquiry
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
POL00113308
POL00113308
15
Investigations
- Role of Second Sight
- What the Post Office has done
- Feedback
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Role of Second Sight
The basis of Second Sight's initial engagement in 2012 was reflected in a document for SPMs entitled ‘Raising
Concerns with Horizon’, and included the requirement to “Consider and advise on whether there were any
systemic issues and/or concerns with the Horizon system including training and support processes, giving
evidence and reasons for the conclusions reached.” This scope of work expressly did not extend to
investigating or commenting on any individual concerns raised.
The purpose of Second Sight’s engagement by Post Office changed fundamentally following the establishment
of the Scheme in 2013. Whereas Second Sight had previously been concerned with reporting to Post Office
about the workings of Horizon as a system (and not individual concerns), its remit was now to focus on the
individual complaints about Horizon in the Scheme. In doing so, they were to investigate, as forensic
accountants, the specific issues raised by each Applicant concerning Horizon or associated issues, and report
on these to Post Office and the Applicant for the purposes of mediation. Second Sight were engaged “to act
with the skill and care expected of qualified and experienced accountants; it is acknowledged that matters
relating to criminal law and procedure are outside Second Sight’s scope of expertise and accordingly shall not
be required to give an opinion in relation to such matters”. Second Sight Engagement Letter, 1 July 2013
March 2015: the Working Group is closed and Second Sight is given notice. Second Sight is re-engaged to
enable them to complete their review of the remaining cases. Again Second Sight is to “restrict its comments
to those topics on which it has sufficient knowledge, experience and expertise... matters such as the standard
Subpostmasters contract and prosecution issues are outside of Second Sight's expertise”. Second Sight
Engagement Letter, 10 March 2015
July 2015: SS submits its last CRR to PO and its engagement ends. .
16
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
What the Post Office has done
Consistent with its determination to establish the nature and degree of any such problems, and resolve those that emerged
fairly, Post Office:
+ instigated an independent review of the Horizon System by Second Sight
+ subsequently established the Scheme in collaboration with JFSA and Second Sight
+ set up and funded a Working Group to oversee the Scheme, with an independent Chair - Sir Anthony Hooper ~ and
JFSA and Second Sight as members
+ provided funding for Scheme Applicants to obtain professional advice in articulating their complaints against Post
Office
+ established a 20 strong team dedicated to re-investigate every case in full
+ produced over 130 investigation reports on individual cases in the Scheme and
+ provided Second Sight with tens of thousands of pages of information to inform their investigation over the past 3
years.
‘After 3 years of investigation and independent review, the facts are that Post Office has found no evidence, nor has any
been advanced by either an Applicant or Second Sight, which suggests that Horizon does not accurately record and store
branch transaction data or that it is not working as it should.
“Our investigations have shown that the majority of branch losses were caused by errors made at the counter”
Second Sight, Part 2 Report 09/04/2015
17 @
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
18
Feedback
All cases comprehensively re-investigated by Post Office and reviewed by Second
Sight
“The Post Office has done a very thorough job of investigation” Kay Linnel, BIS
Select Committee 03/02/2015
“We wish to place on record our appreciation for the hard work and professionalism
of Post Office’s in-house team of investigators, working for Angela Van Den Bogerd,
Post Office’s Head of Partnerships. Our work would have been much harder and
taken much longer without the high quality work carried out by this team. We have
also received excellent support from the administrative team set up by Post Office
to support the Working Group” Second Sight, Part 2 Report 09/04/2015
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
19
Mediation
- CEDR
- JFSA Newsletter and CEDR
- Monetary Claims
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
CEDR
The Centre for Effective Dispute Resolution (CEDR) was engaged to provide independent mediation services for the Scheme. The
arrangements put in place by CEDR, and agreed by the Working Group, are in line with CEDR's own Code of Conduct and the European
Code of Conduct for Mediators which the Civil Mediation Council requires all UK providers to observe in order to maintain accreditation
The reason independent, well established and reputable mediation experts were appointed to conduct the mediations was specifically to
ensure that mediations are undertaken in line with best practice
"Mediation is a process generally conducted by parties in dispute with assistance of an independent skilled neutral, with the aim of
reaching a negotiated binding resolution of a dispute, if terms of settlement can be found that are acceptable to the parties to the
dispute. Acceptability will turn on what each party thinks are their interests, and in the context of a potential legal case will also turn
on parties’ perceptions of their rights, as well as their sense of the other process and outcome options available if no settlement can
be reached. Entry to the process can be on an ad hoc individual basis, by court direction, by contract, or under the terms of an
industry or group scheme as in this Scheme. Most mediations take place within a day, after summaries of the case have been
submitted in advance to the independent mediator. CEDR’s general caseload covers a wide range of civil and commercial disputes
from commercial contractual claims through to administering the Court of Appeal mediation scheme
Mediation differs from arbitration or adjudication in that the mediator works with parties to help them find an acceptable agreement.
The neutral does not make an award based on the arguments and evidence provided. Mediation can be more flexible than binding
determination methods, both in how the process is run, and in terms of the remedies that may be available by agreement as against
awards made under principles of law or evidence. (It is important here to note, that in situations of contested evidence such as exists
in relation to the Scheme, adjudication or arbitration of individual cases may not be particularly consistent across cases nor
satisfactory to at least one of the parties.)” John Munton, Director of Dispute Resolution Services, CEDR Report 31/07/2015
20
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
JFSA Newsletter & CEDR
“FSA is recommending that all Applicants should now defer attending any mediation meetings until such
time as a true and honest scheme is in operation, and no longer an exercise in highly paid lawyers dancing
on the head of a pin”. JFSA May 2015 Newsletter
“Of those few mediation meetings that we are aware of taking place, we are being told by Applicants that
these meetings are worse than disastrous as Post Office does not understand what a mediation meeting is
all about, and is treating it as an opportunity to blame individuals, pointing out it is all their fault (where
have you heard that before?)”. JFSA May 2015 Newsletter
“In terms of the mediations themselves it is clear from the reports that the Post Office has a willingness to
explore the options, express empathy and have constructive dialogue with the subpostmasters. However,
the Post Office have also made clear that their approach to mediation requires applicants to bring ‘credible’
specific claims or information of special personal circumstances justifying a negotiated resolution, rather
than negotiations premised on alleged general problems of the Horizon system or of the Post Office
contractual arrangement as such”. CEDR Report 31/08/2015
a @
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
22
Monetary Claims
c.£1.28m - Total losses across all branches in Scheme
>£65m - Total compensation claimed by Applicants (where it is
quantified)
£13m - Single largest individual claim
20% - involve claims for compensation in excess of £1m (where it is
quantified)
26 cases have, to date, been resolved either through mediation or other
routes (e.g. mid scheme, prior to mediation etc.). Of these cases, 14
have involved ex gratia payments, totalling £131,000. The range of
payments made is £461 to £50,000.
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
23
Options Available to Applicants
- Choices
- Legal Approaches
- Edwin Coe LLP
- Meetings with MPs
- Costs
- Media
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Choices for Applicants
24
Those with a conviction can seek leave to appeal or refer cases
to the Criminal Cases Review Commission. 16 Scheme
applicants and 4 non Scheme Applicants have applied to the
CCRC and PO is co-operating fully
In cases which have not been subject to a court ruling,
Applicants have been invited to mediate with Post Office,
independently facilitated by CEDR
If they do not wish to do so, or remain unsatisfied having done
so, litigation is available (funding and limitation period issues
can be overcome)
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
25
Legal Approaches
Shoosmiths
Edwin Coe LLP -
Coomber Rich Solicitors
“We are now beginning the process of considering whether there can
be any appeals against conviction which would obviously be on a case
by case basis”. Coomber Rich Solicitors , 2013
Of 136 cases in the Scheme, 43 involve criminal prosecutions. At least
10 law firms have been engaged, representing between them
approximately 45% of applicants. To date, none of the convictions have
been appealed, and no civil litigation has been brought against PO.
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Edwin Coe LLP Press Release
9 December 2014
Subpostmasters go to law
Justice for Subpostmasters Alliance which is fighting for the rights of Subpostmasters who have been accused of false
accounting and sometimes prosecuted for fraud have turned to David Greene of Edwin Coe LLP, the UK's leading class
action firm, to pursue their rights against the Post Office. The move follows the announcement today that the MPs, who
have been backing a mediation scheme to resolve the Issues, have lost falth In the mediation scheme run by Post Office
Ltd.
David Greene, senior partner of Edwin Coe LLP sald:
“The Alliance backed the mediation scheme in good faith but it has failed them. As stated by James Arbuthnot, leader of
the group of over 140 MPs, it has ended up mired in legal wrangling, with the Post Office objecting to most of the cases
even going into the mediation that the scheme was designed to provide. A mediation process requires two to tango but the
Alliance feels that the Post Office is not joining the dance.”
“Subpostmasters want to resolve their complaints. With great hesitation they conclude that if the mediation process is not
going to work they will have to resort to the court. They have sought to avoid this but it now appears inevitable. Many of
the Subpostmasters have lost everything. We are now exploring their options to bring this to a speedy conclusion and
achieve the justice the Subpostmasters deserve.”
END ©
26
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
27
Meetings with MPs
Standing offer to meet any MP with a constituency case
Several have taken place - including Daniel Kawczinsky,
Matt Warman, Jonathan Djanogly, Andrew Griffiths (all
Conservative); Albert Owen (Labour)
And some have not - Andrew Bridgen, Ranil
Jayawardena (both Conservative)
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
Costs
".. and someone had to pay for it. I wasn't going to, the Government wouldn't have forked out money
from somewhere else to do so, and the Post Office offered to do so despite the risk involved to their
reputation. That does contrast (well, IMHO) with the cover ups we've seen elsewhere in the public
sector”. James Arbuthnot, 2013
To date, Post Office has spent c.£8.4m in relation to these complaints
On acceptance into the Scheme proper, Applicants were given the opportunity to apply for a funding
contribution of £1,500 +VAT and expenses, payable by Post Office, so that they could appoint a
professional advisor to assist with setting out the detail of their complaint. Post Office further agreed to
provide each Applicant up to £1,250 + VAT and expenses towards costs of a professional advisor in
preparing for and attending mediations. To date, Post Office has spent c.£350k on providing funding for
independent professional advice to applicants.
28 @
Confidential. Subject to Legal Privilege
POL00113308
POL00113308
29
Media
BBC The One Show
Today Programme and BBC Local Radio
Panorama
Print and specialist press including Computer
Weekly
Confidential. Subject to Legal Privilege