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. > POST OFFICE BOARD PAGE 1 OF 10
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Author: Ben Foat/Rodric Williams ‘Sponsor: Ben Foat Meeting date: 29 October 2019
Executive Summary
the Homer Issue anol He
Context fst st te 2 panier hg the Gul Issug i
(ok. I Thi ing undertaker-aheadt Pe
{ug off ‘sj zon-issues Trial (i) the status Of the HIS Gnu p
‘ao Court Group _Litigation;and_(ii-—preparations for-mediation-scheduted-for27-and28 heal,
wy November2649. An update on Post Office’s operational responses to the Commo che
vor Issues Judgmen,handed down on 15 March 2019 will be addressed in a separate Board,
yet Paper. Con ev lO
be ound tar n. Hovigor ‘f “At ? J
Common-tssuesstudgment-on-t2 November 2018; wittr its tecision,to-feltew_short!
— eurogeurnwt” los conbarced Farley
ners * sek Wane Ts WOE Bn
t t Te-Horizer- judg:
2. What is the update on the High Court Group _titigation? <>
3. IWhat is being ‘done to prepare for mediation and settlement?
a. What is being done to analyse each individual Claimants’ claim?
b. What might be driving the Claimants’ perspective on quantum?
c. Would it be more cost effective to settle the claim or litigate and lose?
d. What is being done to map out the route for shareholder approval of any
settlement?
e. Who will attend the mediation for Post Office?
4. What are the next steps?
woohoo aleode fe
Conclusion hat quo does Wot Fanon
As matters currently stand: are Conhw oy Mylan,
«The Horizon judgment “will not be handed down until! the-end of October at the
earliest. It is possible that the KEL Disclosure d Vo delays this.
Ce the hy Wier fa we ach dy Tre
queshon - c ew bo
eB 2 Renan on oh tae HL”
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ingency
ith-e-Rapid Resp ay tood up to. manage the execution
+ cesses which the plan is reliant upon
are-now-bemig Tialised, baselined and stress tested -to-understand_what level of
uplif-against-basetine tevets these-processes amd tiie business can withstands}}
& Mediation to explore settlement wi jaimants has been scheduled for 27-28 .
whe November 2019. This could be postponed if the Horizon judgment is delayed, ukuck I$
Nevertheless, further work is being done to refine the analysis of the Claimants’ mcieasosly
2
claims and quantum, and to put in place arrangements to share information with, ld
and obtain approvals,from,our shareholder concerning settlement. tho
. We are also preparing for’the Court of Appeal hearing on 12 November 2019, and
to receive on 25 October 2019 the Claimant’s formal claims for the third, “Further FY Axcess
Issues” trial scheduled for March 2020. werden,
fot - ¥anork re Queshenss Courcluncens
Input Sought Input Received
+ 1. The Board is asked to note the 2. This paper has been prepared with
H - updates provided in this paper. the assistance of external legal alla nd
counsel.
Th Boout “ oahech ba
ayprenel poviele settewwnk vange ,
The Board ig reminded to exercise caution when communicating about potential levels Mann
of settlement. Communications about settlement should therefore only be held orally,
but if that is not possible, advice should be sought from Post Office’s lawyers.
, , new pag Z
Contingency Planning C ®opak stouta ones now
(7
[I[MARK/ANGELA - PLEASE UPDATE THE TEXT BELOW, WHICH WAS USED IN THE
SEPTEMBER 2019 REPORT]]
Not underestimating the potential operational, reputation and commercial implications
a negative outcome of the Horizon Issues Trial could have for the Post Office, we
engaged Deloitte (the risk advisory team which has relevant experience in crisis
preparedness and response work) to work with key business area owners to prepare an
effective immediate and short-term response to stakeholder reaction to the Judgment.
The work to date has included:
¢ defining worst-case, medium-case and best-case scenarios
¢ identifying the key stakeholders (Postmasters, Government & Regulators,
Commercial & Retail Partners and Customers)
¢ identifying potential stakeholder reaction to the trial outcome and assessing the
operational, reputational and commercial impact of those reactions
* preparing the business response to those likely impacts by identifying and impact
assessing business as usual processes; introducing new impact detection
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processes (eg branch closure monitoring); designing new processeS where BAU
processes were not adequate for the worst-case scenarios; and pitting mitigation
plans in place where possible to minimise the impact.
Ultimately, the response from Day One (the day the judgm is handed down) will be
determined by what the Horizon Issues Trial Judgment {the Judgment) actually says
and how our stakeholders react to it. The output of our“work ahead of the Judgment is
the Operational Response Plan (available in the“‘reading room’) which details the
business response to stakeholder reaction to the Judgment with the ultimate aim of
continuing to maintain business operations“and provide service to our customers as
normally as possible. This is underpinned’ by a Communication Strategy and extensive
Comms collateral designed to addres$ worst, medium and best case scenarios‘. This
material has been prepared with bdsiness area owners, undergone legal review by WBD
and HSF and is currently undergoing a further ‘tone’ review by Lexington.
A Rapid Response Team (RRT) has been established to manage the stakeholder, and
execute the Post Office, response to the Judgment. The RRT will be invoked on Day One
(preparatory sessions already completed) and will run daily (until deemed no longer
required) to edordinate and manage the organisation-wide response to the Judgment,
escalating Vey decisions to the Group Executive as appropriate, collating and
distributing business impact information and providing daily update briefings.
Sak
Litigation Update
Horizon Judgment
4 informed the parties that his judgment on the
Horizon Issues Trial was “unlikely to be distributed before the end of the month”. A
2019.( 7 late from the court will be provided during the week commencing 21 October
So
te Hoe Conrseec cf plaws tate loon developed te vesprol
a quagquysot , Ther delails d] Wich ote
Horizon Issues ie. KeL Disclosure ek oer w Me Seyi 60 -Opersilend
As reported to the Board on 3 October 2019, Post Office failed to disclose all potentially r-
relevant Known Error Log entries (KELs) prior to the Horizon Issues Trial. Post Office
disclosed only final versions of the KELs,-“and not any previous versions, acting on
incorrect information from Fujitsu that previous versions were no longer available. wa 4
2019.
The Court and the Claimants were notified of this on 3 October 2019, and urgent steps
(on which the Board has received separate updates) have been taken to correct the
position. [LUPDAFE-AS-MATTERS-BEVELOP We will understand better the impact this
may have on the litigation once we have completed the reviews now underway of the
additional KELs (e.g. as to whether the versions are materially different), received
responses to our notification from the Claimants and/or Court, and,¢ considered _the
Horizon judgment itself. ye te
1 E.g, wide-spread, coordinated branch closures across the network; increased non-compliance with branch cash
declarations; adverse impact on trading relationships with commercial partners; loss of stakeholder trust in Post
Office.
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Malig a clan Aw wah FT oxysiing, fom this
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PRIVILEGED & CONFIDENTIAL —- DO NOT FORWARD OR SHARE ane ¢ ) ti
This\development could however delay receipt of the draft judgment (which could in “gon I
turn delay mediation scheduled for 27-28 November2019). It could also influence the
Judge while drafting his Horizon judgment and ahead of future trials which will consider ves
for limitation/time-bar—purpos: whether Post Office concealed known issues with es
Horizon Pie Khe neck obvsixo rm eel
Ts Whe chore ewe we
clea, alewt a joni
Tt
Common Issué
The Court of Appeal vi hear Post Office’s application for permission to appeal the
Common Issues Judgment on 12 November 2019, with judgment on the application to (j
follow shortly after.
by 18 Octob 2019. Purest pre Te ed tris onl
eee ve Choweoh an tue Borol yaa
pet heawe
Third / Further Issues Trial pvude ;
The next step ahead of the “Further Issues” trial scheduled for March 2020 is for the} 3 poor
Claimants to file “Particulars of Claim” (PoC) formally setting out the legal basis for their, ial ae)
claims for financial compensation. ,
i
The Court has ordered the PoC to be filed by 25 October 2019. The Claimants may sun
however seek an extension of time so that they can reflect in the PoC the Horizo a
judgment’s findings. There is also a Case Management Conference before the Co [i
scheduled for 7 November 2019 at which any issues with the PoC could be raised’ As
matters stand however, Post Office has been ordered to file Defences formally replying
to the PoC by 25 November 2019.
As part of its ongoing review of all 551 individual cases, Post Office is identifying criteria
for selecting “Test Claimants”. These Claimants would then be used as cases
representative of the wider claimant group in an as yet unscheduled trial on breach (ite.-
whether Post Office acted wrongly), causation (i.e. did that breach cause the Claimant’s
harm), and limitation (i.e. is a Claimant’s claim time-barred). The parties will,each
propose criteria on 25 November 2019, which will then be discussed with the Managing
Judge at a Case Management Conference scheduled for 4 December 2019.
4 => You worol fo ethan’ seh
Mediation / Settlement Update Wong cu Tha careonl he A
wg
om
At its September 2019 meeting, the Board appfoved the) appriad to agpran cin art
outlined in the paper prepared for that meeting. The Board also raised a number of ub au.
further matters, which are addressed below. vet
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Managing messages coming out of Mediation
The Board enquired about the extent to which we could manage the messages coming
out of a settlement, and noted that BEIS input should be sought if we were considering
the use of confidentiality agreements.
° This advice will necessarily be provisional given that the Horizon judgment and the outcome of the appeal application
are not yet known.
Fahen
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Mediation is a confidential process where the parties should be free to explore
settlement with the mediator and each other without fear of their discussions becoming
more widely known. Mediation cannot work without confidentiality.
Mediation is also a consensual process where the parties agree the terms of settlement
where one is reached. Settlement agreements can and routinely do impose
confidentiality obligations (with consequences for breach), which may be accompanied
by a statement which the parties agree can be made pyle. These terms will be subject
to negotiation along with all other s: BEIS’s input on any such terms
can therefore be si art of the information shering and segs ont process.
{FOL well coup with The Law Soely fridays on i
Post Office Mediation RepresentatWves dectbl, eth,
Beyond ensuring that attendees are properly authorised, there are no nae as to who I
can attend mediation for a party. As matters stand, it is proposed that the key Post I
Office representatives at mediation will be CEO Nick Read¥}(who will make introductory I
commercial remarks), General Counsel Ben Foat, and Algn Watts of HSF.? Others from
Post Office's operations and legal teams will be available on the day to assist as
required, either in person in breakout rooms or "Ae, ‘ ;
IN ~t0- mit ore a we
Consistent with the mediation strategy outlined at the September 2019 Board meeting, The o
, we do not recommend there be any shareholder representation at the mediation. BF
However, as noted above arrangements will be finalised to keep shareholder 4;
coir
representatives informed of progress in the mediation.
Next Steps
An overview of the main court and settlement-related activity in the Group Litigation
through to October 2020 is set out in the “Group Litigation Timetable” at Appendix 1.
Between now and the end of November 2020 we are preparing to:
* resolve the KEL Disclosure issues ccclublvas) anor! FTA + (ousilention alla RT
a
* receive the Horizon judgment; atu heat :
e attend mediation on 27-28 November 2019, whic includes finalising in advance
the protocol for shareholder settlement authorisation if required;
¢ attend the Court of Appeal on 12 November 2019 for the hearing on permission
to appeal the Common Issues Judgment;
* respond to the Claimants’ Further Issues trial PoC due on 25 October 2019; and
¢ identify “Test Claimant” criteria by 25 November 2019.
Tue operacnoinal reaper b Me CIT ano HIT b
? As noted in the September 2019 Board Report, both Ben and Alan have extensive experience of commercial mediation.
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=
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=
1. Group Litigation Timetable
Oct Nov Dec Jan Feb March I April May June Tuly Aug Sept ‘Oct
2019 2019 2019 2020 I 2020 2020 2020 2020 2020 2020 2020 2020 2020
Common Oral File additional documents with Court as required for appeal if Likely window for Court to hear appeal if permission
Issues Appeal permission permission is granted. is granted.
hearing Note: Court vacation August & September so unlikely
(12 Nov) appeal will be heard in these months.
Horizon Issues Likely window for Horizon I — Hearing on costs of
Trial Issues Judgment Horizon Issues trial
Further Issues I Costs cmc I Statement I Pretrial Further Likely window for Hearing on costs of
Trial Budgets (7 Nov) of Review Issues Further Issues Judgment I Further Issues Trial
(2 Oct) Assumed I (23 Jan) Trial (2-20
Defences I “Facts Mar)
Discussion I (25 Nov) (2 Dec)
Reports
(16 Oct) cc (4
De
Costs eo)
Managemen Replies (9
t Dec)
Conference
(23 Oct)
Particulars
of Claim (25
Oct)
Trial 4 Agree test Likely window for Trial 4
case
selection
criteria (27
Nov)
Settlement Without I Mediation Window for possible
Prejudice second mediation
Lawyers I (27-28 Nov)
meeting
(10 Oct)
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