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GROUP EXECUTIVE
Postmaster Litigation
Author: Jane MacLeod / Rodric Williams Sponsor: Jane MacLeod Meeting date: 16 May 2016
Executive Summary
Context - Bates & 90 Others v. Post Office Limited
1. On 11 April 2016, 91 (mostly former) postmasters issued a High Court Claim
formally starting a court case against Post Office (the “Claim”).
2. The Claimants have until 11 August 2016 to “serve” the Claim Form, which will
trigger Post Office’s obligations to respond to the Claim through the Court. We
have however been provided with a copy for information only.
3. The Claim Form contains very little information. However, on 28 April 2016 the
Claimants’ solicitors (Freeths LLP) sent a 53-page “Letter of Claim” setting out
the allegations in more detail (the “Letter”). Court Protocol requires us to
respond to the Letter before the Claim passes to the Court for formal case
management.
4. The Claim potentially poses significant legal, financial, operational and
reputational risk to Post Office.
5. This paper:
- summarises the status of and next steps in the Claim;
- provides an initial overview of timing and costs; and
- sets out a proposal for managing Post Office’s defence of the Claim.
Questions addressed in this report
« What are the Claimants alleging?
« What process will the Claim follow and over what time frame?
« What are the estimated costs of responding to the Claim?
« What are Post Office’s objectives for the Claim?
« Who are the stakeholders and how should the Claim be managed?
What are the Claimants alleging?
7. The Letter sets out the bases on which the Claim will be made. Despite its
length, there is nothing new or surprising in the Letter, and it does not set out
how much the Claimants are claiming or how they propose calculating that
amount.
8. Much of the Letter focuses on technical points of law, with the main focus being
the relationship between Post Office and postmasters, seeking to place greater
responsibility on Post Office for branch accounting difficulties.
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9. Apart from some generalised statements, there is no allegation that there is a
systemic failure in the Horizon software. Rather, the Letter claims that because
Horizon has the potential to cause discrepancies in branch accounts, Post Office
should not have relied on it so heavily and done more to investigate it as a
possible source of branch shortfalls.
10. Other familiar allegations include poor training/support, the ability of Fujitsu to
alter remotely branch transactions, inadequate investigations of shortfalls,
improper criminal prosecutions, and putting undue pressure on postmasters to
make up shortfalls.
11. The Letter asks Post Office to agree to deal with the Claim under a “Group
Litigation Order” (“GLO”) so the issues common to the Claimants can be
efficiently managed through the Court.
What process will the Claim follow and over what time frame?
The Letter
12. The Letter asks Post Office to agree in principle to a GLO by 12 May 2016, and to
respond to all other issues in the letter by 29 May 2016.
12.1. A Letter of Claim should be responded to within a “reasonable time”,
which should be no more than 3 months in very complex cases. That period
is reasonable here given the issues raised in the Letter, which took Freeths 5
months to prepare.
12.2. There are practical and tactical implications for agreeing to a GLO which
will substantially influence the way the Claim proceeds. For example, Freeths
may not be able to fund the litigation if we can show the individual claims are
not sufficiently common for a GLO. Equally, an early favourable ruling on an
issue we want to treat as common (e.g. the effect of a criminal conviction or
limitation period) could reduce the number of claimants and thus the
economic viability of the litigation.
12.3. Post Office is therefore entitled to know more about the Claim and the
Purported common issues before making any decision about a GLO.
13. We therefore propose working to a 28 July 2016 deadline to provide our
substantive response to the Letter. We have informed Freeths of this timeframe
and why it is reasonable, and in the meantime will seek clarification in relation to
a number of issues, including the specific issues they want to deal with under a
GLO, and the scope of the document disclosure they want Post Office to provide.
14. Freeths have questioned whether Post Office would be prepared to mediate these
claims. At this stage it is not possible to form a view as to whether mediation
would be viable in some or all of the cases, however we will keep under constant
review whether options to mediate or settle would provide a better outcome for
Post Office.
The Claim
15. Freeths need to decide by 11 August 2016 whether to serve the Claim Form and
start the formal Court procedures.
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16. Set out at the Appendix to this Report is an “Estimated Litigation Timetable”,
which sets out the main steps in standard litigation through to trial, assuming the
Claim Form is served during August 2016.
17. The Court’s procedures are designed to examine the issues rigorously, and
accordingly take time. Assuming that this case follows standard procedures, the
Claim might not come to trial until November 2018. Whether or not the Claim
proceeds under a GLO could impact substantially this timeframe, e.g. the
standard timetable may not start to run until the GLO issues are finalised, which
could take some months, or the litigation may not proceed at all if no GLO is
made.
18. The Court’s procedures provide for regular assessment of the Claim and the risks
and benefits of continuing with it, which ensures that the vast majority of cases
are settled before trial.
What are the estimated costs of responding to the Claim?
19. Legal costs and expenses are a central feature of Court litigation due to the
resources it consumes and the “loser pays” presumption which requires the
unsuccessful side to pay a substantial portion of the successful side’s costs
(typically 65% to 90%).
20. The Court actively manages costs as a claim progresses. Central to this is the
“Precedent H” procedure which requires parties to set out at an early stage all
anticipated costs through to trial (typically after “Statements of Case” - stage 3
in the Estimated Litigation Timeframe).
21. The Court’s processes also require a fair amount of “front end loading”, meaning
significant costs are incurred at the beginning of a claim to narrow down the
issues and save costs overall.
22. The Claim has the potential to consume substantial resources. We estimate that
responding to the Letter in a robust and proportionate manner will incur external
legal costs at approximately the same rate as during the Sparrow Mediation
Scheme, i.e. £30,000 to £50,000 per month for the next three to six months.
More detailed costings will be provided and updated as the Claim progresses.
23. Should the matter proceed to a full trial, Legal costs and expenses for the Claim
could easily exceed £1million, particularly if the performance of the Horizon
system itself becomes a key issue. By way of reference, Post Office successfully
defended at trial a 2006 “Horizon”-related claim brought by one former agent,
the costs of which exceeded £300,000.
What are Post Office’s objectives?
24. The Claim challenges a critical part of Post Office’s business - how we engage
with our postmasters, and how we allocate risk and responsibility for the Post
Office transactions, cash and stock they handle.
25. Even though most of the Claimants are former postmasters, the Claim raises
issues in respect of current and future b.a.u. activities (e.g. those concerning
branch accounting, agent contract management, and current and former agent
debts) because it concerns the core branch accounting principles and systems,
including Horizon, currently in use.
26. We therefore see two main objectives in responding to the Claim:
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26.1. Proportionately manage Post Office’s legal defence.
26.2. Protect the Network going forward so that Post Office and current agents
have confidence in our systems.
Stakeholders and Managing the Claim
27. In terms of substance, the Claim impacts a variety of functions across Post Office
including from Network (Contract Advisor teams, NBSC, Branch Support
Programme), the HR Advice Centre, Finance and the FSC, and IT (including our
relationship with Fujitsu).
28. Management of the Claim will involve support from among others, Legal, Comms
(internal, external/media, public affairs), and Finance (defence cost
management).
29. To defend the Claim, the Legal team will need input and decision-making from
each (and at times all) of these groups.
30. Other stakeholders will be interested in the Claim, e.g. BIS and the NFSP.
However, the involvement of external stakeholders should be limited to
appropriate updates provided as part of an agreed communications plan so as to
maintain legal privilege and confidentiality in the legal advice we receive and the
strategy and tactics adopted in our defence of the Claim.
31. We therefore propose to manage the defence of the Claim as follows:
- It be treated as a new “project”, distinct from Legal b.a.u. and the previous
Mediation Scheme activity.
- A sponsor from the business is appointed to provide business leadership on
the “project”. We believe that because of the issues raised, this should be a
SLT member from Network.
- Day-to-day management of the Claim be handled by Post Office Legal (which
may require additional resource) with support from external solicitors Bond
Dickinson.*
- A Steering Group be formed of representatives from each of the business
sections identified above which will:
° have one person with overall responsibility for decision making;
° support and instruct the Legal team in its management of the Claim;
° inform the communications plan to be managed by the Comms
Team;
° report to GE and other senior management as required; and
° monitor and control expenditure.
to P
Claim
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POST OFFICE PAGE 5 OF 6
Input Sought
GE is requested to:
1. note the content of this paper;
2. endorse the Claim Management proposal outlined above.
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POST OFFICE
Appendix - Estimated Litigation Timetable
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Step
Estimated
completion
date
Proportion
of overall
work
1. Pre-Action Correspondence: Initial investigations into alleged
issues and correspondence between the parties to establish the
basis for the claim and the defence
August 2016
5%
2. Claim Form served: Legal proceedings are formally begun with
service of the Claim Form on Post Office
August 2016
3. Statements of Case: Each party produces formal Court
documents setting out their legal positions. The SPMRs will produce
a Particulars of Claim. Post Office will then produce a Defence.
The SPMRs will then file a Reply to the Defence.
January 2017
10%
4. Case Management: The Court orders the steps to be undertaken
before trial and a timetable for their completion. This may require
multiple short Court hearings.
April 2017
5%
5. Formation of the Group: The SPMRs will apply for formal
recognition that their claims form a Group Action. The Court will
define the issues common to the Group and set a deadline by which
further Claimants may join the Group.
June 2017
5%
6. Disclosure: All parties are required to search for relevant
documents and provide those documents to the other parties.
November 2017
25%
7. Witness statements: All parties must draft and exchange
statements setting out the evidence to be given by each of its
witnesses.
March 2018
15%
8. Expert evidence: Parties commission experts to investigate and
report on technical issues (eg. Horizon). Reports are exchanged
and meetings held between experts to narrow the points of
disagreement.
July 2018
15%
9. Trial: A trial will likely take several weeks and require several
months of preparation.
November 2018
20%
10. Judgment. It will likely take a Judge several months to consider
the case and draw up the judgment.
February 2019
Notes
Step 5: Formation of the Group could occur at an earlier stage and possibly before Step 3: Statements of
Case. This depends on how the SPMRs wish to proceed.
The above timetable assumes that all points of dispute will be considered in one single trial. It is possible
that certain discrete or preliminary points may be dealt with separately at an earlier stage. If there
are any preliminary hearings these will likely occur before Step 6 and will the delay the above
timetable by 3 - 6 months.
Following Step 10: Judgment, there is the possibility of an Appeal and there will also be costs proceedings.
These could take a further 6-12 months.
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