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Tab 1 HIT contingency planning update
POST OFFICE LIMITED GE PAPER PAGE 1 OF 10
Strictly Confidential - Subject to Legal Privilege
Horizon Issues Trial Judgment Contingency Planning
Update
Author: Angela Van Den Bogerd Sponsor: Ben Foat Meeting date: 4 December 2019
Context
An embargoed version of the Horizon Issues Trial Judgment was received on Thursday
28 November 2019. Broadly, it has been found that the Horizon system in use today
(HNG-A) is “relatively robust”, the robustness of the previous version of Horizon Online
(HNG-X) was “questionable, and did not justify the confidence placed in it by Post Office
in terms of its accuracy” and Legacy Horizon (2000 to 2010) was “not robust”.
As part of contingency planning, we have in place capability to detect and respond to
impacts (postmaster; client; customer) should they materialise. Having planned for a
‘worst case’ scenario, our expectation now is that the post office network will continue
to operate normally and it will be ‘historic claims’ that potentially will have the greatest
impact - in the short term through an increase in postmaster queries into the Branch
Support Centre; and then how we manage/resolve claims as a result of the Horizon
Issues Judgment and the recent refusal of Post Office’s application to appeal the
Common Issues Judgment.
The purpose of this paper is threefold:
e To provide assurance that we are ready to respond to operational impacts as a
result of any immediate reaction to the Horizon Issues Judgment, including
having an extensive communication strategy in place to minimise any
reputational risk.
« To signal the anticipated ‘historic claims’ that may flow from the Horizon Issues
Judgment and the Court of Appeal’s refusal to grant Post Office permission to
appeal Common Issues Judgment.
e To set out our emerging thinking on managing and resolving such claims.
Questions addressed in this Report
1. Is the business appropriately prepared to respond to the likely reaction from the
Horizon Issues Judgment, once it is handed down?
2. What sort of ‘historic claims’ could the Horizon Issues Judgment and the recent
decision from the Court of Appeal to refuse Post Office permission to appeal the
Common Issues Judgment prompt?
3. How do we best manage and resolve the anticipated ‘historic claims’ and what are
the immediate policy decisions required?
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4. Should we announce as part of our public response to the Horizon Issues Judgment
being handed down on 16" December, our willingness to resolve issues and publicise
our approach to investigating new and historic cases?
Conclusion
1. As a result of our contingency planning, we are ready to identify and respond to the
likely immediate reactions to the Judgment and any subsequent operational impacts.
Our external and internal communication material is extensive and able to quickly
be refined to suit the need. Whilst we expect our post office network to continue to
operate normally, some postmasters may be concerned/confused by some of the
findings included within the Judgment and turn to Post Office for confirmation that
the Horizon system they are using is fit for purpose. They are likely to question the
validity of previously settled discrepancies and TCs whilst using older versions of
Horizon (pre-HNGA).
2. We anticipate ‘historic claims’, either in a piecemeal fashion or as part of a secondary
group, from:
e Current and former postmasters who have repaid/are repaying shortfalls
e Current and former postmasters who have been suspended without
remuneration
e Former postmasters questioning whether their notice period was appropriate.
3. The Horizon Judgment makes a distinction between current version of Horizon (HNG-
A) and the previous versions (Legacy Horizon and HNG-X). This is helpful as it
substantially mitigates the immediate operational risk to the network. There is merit
in applying this distinction and categorising claims that arise out of events post HNGA
going live in a branch ("new claims") and those that arise out of truly "historic"
events. The emerging thinking is that new claims are to be resolved through the
recently introduced Operations investigation processes and historic claims are
investigated by the Post Office case review team within LCG.
4. In his findings the GLO Managing Judge has consistently found Post Office to have
not been open and transparent and to have been reluctant to investigate fully the
claims that Horizon caused discrepancies. We could demonstrate that we have
listened and genuinely want to reset the balance by taking a proactive approach to
resolving new and historic claims by communicating this as part of our response to
the Horizon Issues Judgment when it is handed down on 16 December.
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Input Sought Input Received
The GE is asked to note the contents of the paper, Operations senior team
the potential impact of the anticipated ‘historic
claims’ and to advise whether they are in agreement
with the proposed approach to managing the ‘historic
claims.’
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Is the business appropriately prepared for the likely reaction from the Horizon
Issues Judgment, once it is handed down?
1. Post Office defined a set of minimum requirements which needed to be in place in
order to be ‘ready’ to respond to a potential adverse judgment, namely:
iii.
To have a monitoring capability in place, in order to quickly identify impacts
across the network.
Capability is in place and rehearsed to monitor and report twice daily on the
following: unplanned branch closures, postmaster sentiment, cash declarations /
branch conformance, media articles, customer complaints, Branch Support
Centre (BSC) call volumes, relationship/client reaction, postmaster resignations.
i. To have response processes in place that will minimise any disruption to
customer service, with a particular focus on vulnerable customers.
« New processes have been designed or existing response processes enhanced
to ensure impacts can be managed coherently. For example, a virtual team
has been established to coordinate and mobilise Comms, Supply Chain, Area
Managers and Branch Support — should branches refuse to open.
e Where additional resource may be required (e.g. BSC), surge resourcing
plans are in place.
To have a rapid response team capability in place and rehearsed, able to
implement response measures and react to a rapidly evolving and unpredictable
situation.
A cross-functional strategic Crisis Management Team is stood up, rehearsed and
able to respond to a range of scenarios as well as managing more complex
strategic challenges, with the appropriate MI feeds and escalation points to the
GE.
. To have a communication strategy in place, designed to protect stakeholder
confidence in the Post Office.
This is in place and will look to quickly move the story from criticisms of historic
practices to communicating forward-looking proposition to postmasters designed
to improve their commercial and day-to-day lives.
. Avery high level view of how Post Office’s response is included at Appendix 1. Our
view of the likelihood of each these risks crystallising has not changed since receiving
an embargoed version of the Judgment and we believe that we are ready to identify
and respond to the likely immediate reactions to the Judgment.
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What sort of ‘historic claims’ could the recent decision from the Court of Appeal
to refuse Post Office permission to appeal the Common Issues Judgment the and
Horizon Issues Judgment cause?
1.
Justice Coulson’s refusal to grant Post Office permission to appeal Justice Fraser’s
interpretation of the postmaster contract, means that this interpretation stands as
law. As such, a number of terms are implied - because they are consequential on
the finding of a relational contract and or because they are necessary to give
business efficacy.
2. Of the various terms implied, those which will give us the greatest issues are:
While in principle agents can be responsible for losses, POL bears the onus to
prove that there has been a loss (can only recover a ‘true’ loss — that is a
physical loss of cash or stock, or a real financial loss e.g. payment to a client),
and that it was caused by the fault of a postmaster or his / her assistant.
We must be able to demonstrate that we carried out a reasonable and fair
investigation into the loss (proportionate to amount lost) as to the cause and
reason for any alleged shortfall and whether it was properly attributable to
the postmaster.
Branch Trading Statements cannot be relied upon as an account where there
are matters in dispute. The Judgment does not address the status of the
account where there is no dispute. This may give us operational issues going
forward.
Whilst the right to suspend postmasters remains, there will be certain process
changes that will be required. The key, resolved, issue was that we could not
withhold payment while a postmaster was suspended. There is also a
requirement to investigate prior to any suspension.
Limits on termination rights - contractual notice periods are expressed as
‘not less than’ 3 or 6 months. The Judge has determined that we therefore
have a duty to consider the appropriate notice period in each case; and we
cannot act arbitrarily or capriciously, or where we are in breach in respect of
matters which gave us right to suspend / terminate.
We retain the right to amend contracts unilaterally but all amendments must
be reasonable.
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3. Though the Operations team do not expect these terms to impact on Branch
Analysis, Audit or Security Operations; the concern which is held is that ‘historic
claims’ (particularly in respect of the below) could follow - either in a piecemeal
fashion of as part of a secondary group:
e From current and former postmasters who have been suspended without
remuneration and or repaid shortfalls; and
*« From former postmasters questioning whether their notice period was
appropriate.
How do we best manage and resolve the anticipated ‘historic claims’ and what are the
immediate policy decisions required?
1. 33 historic claims have been received by the Operations team since Common Issues
Judgment in March 2019. The agreed view of Operations and Legal is that:
o We should split the 33 historic claims into two buckets. Claims that arise out
of events after the introduction of HNGA at a branch ("new claims") and those
that arise out of truly "historic" events.
o New claims are managed by Operations through their new investigation
processes. Lawyers may need to input into some final decisions.
o Historic claims to be investigated by Case Review team within LCG. Lawyers
then to input with final decisions to be escalated to a decision group
(members TBC) for approval.
Should we announce as part of our public response to the Horizon Issues Judgment
handed down on 16" December, our willingness to resolve issues and publicise our
approach to investigating new and historic cases?
1. In order to set up a process for investigating these and future ‘historic claims’ which
is capable of resolving issues complained of, thought must be given to its
governance, resourcing and Post Office overarching approach. For example:
o Will all current and former postmasters be eligible to bring a ‘claim’ regardless
of whether, for example, it may be time barred, they have signed a prior
settlement agreement (e.g. as part of NT) or been subject to a criminal
conviction?
o Will the ‘scheme’ be advertised and potential applicants (e.g. Postmasters
who have previously been suspended without remuneration or who have
repaid shortfalls) be written to; or will a reactive approach be adopted?
2. Although it is advisable to wait until January / February next year before making
final decisions to avoid risk of setting precedents in case there is a flood of claims
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off the back of the HIT judgment (and refusal from the Court of Appeal), Post Office
does need to prepare for how it will respond to enquiries from the media and or
Parliament.
3. A workshop between Legal and Ops is scheduled for later this afternoon (4
December 2019) to begin the thought process necessary to appropriately ‘frame’
any ‘historic claims’ investigation process. This will be brought back to GE for
approval along with estimates of the potential liability.
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8
Appendix 1 Operational Response Plan
The Response Plan is a live document detailing how Post Office will detect, mitigate and respond to immediate business impacts with the processes upon
which it is reliant, embedded within it. The table below provides an aggregated view of how Post Office will respond to the most significant potential impacts
which could occur across the network following receipt of an adverse Judgment.
‘ouat
Key responses
Key commu
ation-based responses
Impact
I
Coordinated or * Monitor HORice log-ins _I If closed branch is located near to I « Inform customers through social media/email
widespread branch * Supply chain reports I alternative branches/services: I teams to redirect them to nearest available
closures impacting * Area Manager reports * Redirect customers to nearest branch _—I_ services
* NBSC reports (hiring taxis / minibuses if required) and I + Area managers to engage postmasters to
I customers [/ikelihood I
thought to be low]. I Customer complaints team
reports
update Post Office website so customers
know which post offices are open
1
I
I
I determine length of closure expected
I
I Inform supply chain to increase cash
I
I
I
I
(temporary or long-term) and request re-
opening
°
I This data is compiled into a
I single report, including
I baseline unplanned branch
I closures and removing I If closed branch has no Post Office branch I
I planned or scheduled branch I (or Payzone outlet for bill payments) within I
I closures. I 3 miles but is nearby to competitors:
I I* Redirect customers to alternative
I
orders to nearby branches who remain
I
I
open and may receive increase in footfall I
I
I
I providers/competitors I
6LIZL/PC
I I If closed branch is the only branch/service I
I I within 3 miles: I
I I* Consider deployment of pop-up post
office (where available) to region in I
order to provide continuity of service to I
vulnerable customers for SGEIs I
Consider deployment of vans (where I
available) if location is within distance of I
current van routes I
I calls for or enforced
« Media coverage and/or * Legal team have separate approach to I « Core response communication playbook will be
I immediate legal, I demands from key manage requests to settle / historic used to defend Horizon and remind
I operational, or I stakeholders etc claims I stakeholders of why Horizon fundamentally
I does work
I
I
I
I
I
I
I
I
I
I
L
[governance reaction I
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8
Impact I How will we detect this?
‘ouat
Key responses Key communication-based responses
(e.g. settlement, requesting immediate
independent inquiries I settlement / Inquiry
etc). [likelihood thought I» Judge makes comment on
to be medium/ high]. I specific bugs, known errors
or technical issues
* IT response team set-up to respond to,
escalate and fix specific technical I
challenges that may be raised in I
Judgment. Any issue will automatically be I
I
« ‘New Normal’ messaging to be used to
demonstrate the positive and tangible changes
being made by the business
raised as P1 and escalated to Fujitsu
+ IT Team to have reviewed all processes
to ensure they are appropriately I
documented, including the ‘bug’
identification, escalation and
communication process and pro- active
scanning for issues process.
or
Areas managers will escalate challenging
questions/queries to the comms team for a
formal response
Area managers equipped to reassure
postmasters on Horizon I
NBSC equipped to reassure and I
manage/triage queries from postmasters
* NBSC surge resource plan invoked to
increase tier 1 headcount by a maximum
of c.30 people. This will mean more
NBSC call handlers can manager tier 2
calls
Area managers are equipped with
information regarding Horizon
troubleshooting if Postmasters have
concerns on reconciling. This will reduce
the burden on NBSC as Postmasters can
use the guide to self-diagnose
Significant increase in I + NBSC call volumes
I postmaster queries, I © Area Manager - sentiment
I questions and claims —I_— monitoring and queries
I into branch support
I centre. [likelihood
thought to be high]. I
1
I
I
I
I
I
I
I
I
I I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
6LIZL/PC
Retail partners refuse I
* Relationship manager * Legal team have specific response I + Relationship managers and GE to be equipped
to sell products or I alerts RRT / GE process to address contractual issues I with Horizon defence messaging detailing the
operate Post Offices. I» Corporate affairs raised by this scenario I accuracy of the specific reconciliation process
Commercial clients * Communications team * If required, branch closure response I with each commercial partner.
terminate contracts.
[likelihood thought to be
T
I
I
I
I
I process will be invoked to provide I
low]. I I
I
I
1
I
I
continuity of services where required
Long-term strategic engagement required to
manage commercial partner/client
I expectations and future relationship with Post
I I Office
i I I
‘ 1 I
Prolonged top tier I + Corporate affairs * Comms team to continue to monitor and I All colleague comms to provide reassurance I
negative media I - Communication team manage story. Appropriate spokesperson used. I
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Impact
coverage extending
beyond initial news
moment to human
interest stories.
[likelihood thought to be
low/medium]
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How will we detect this?
Strictly Confidential
Key responses
Key communication-based responses
I» Response will focus on strategy for people to
“maintain confidence” in the Post Office
I» New Normal’ messaging to be used to
highlight the major changes underway at the
Post Office
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es from 4 December 2019
Subject to legal privilege
GE Tactical meeting - 4 December 2019
GE:
Nick Read, Owen Woodley, Shikha Hornsey (item 1), Ben Foat, Lisa Cherry (item 1)
Apologies: Al Cameron, Debbie Smith
Other attendees:
Veronica Branton
Angela Van Den Bogerd (item 2)
Tim Perkins (item 2)
Nick Beale (item 2)
1.1 Mediation - Ben Foat
Two elements to the settlement:
Financial — no further offers made (the claimants were at £65m and we were at £40m, plus the
£5.5m of costs we had already been required to pay by the Managing Judge). There were still
matters to be debated and the mediation would resume on 5 December 2019.
Non-financial — BF would circulate a note of the list of non-financial issues under discussion; he had
sought feedback from those in the business responsible for these operational areas to get a view on
feasibility of implementation. We were engaging on all of the 15 issues. Action: BF
List of measures sought by the claimant:
1. Statement acknowledging previous treatment of Postmasters. This would be a two way
statement so would acknowledge the cooperation of the current leadership team at POL and
we would seek to draw a line under the position of the past.
2. Emergency funds — ability for those claimants in immediate financial distress to able to access
money. We were comfortable with this proposal as long as it formed part of the overall
settlement and the fund was not administered by us.
3. Support programme for Subpostmasters who were in a similar position to the claimants. This
was a more difficult issue for us to deal with. We said we could talk through how we are and
would be providing additional support to Subpostmasters to make operating a Post Office
simpler and easier. We had confirmed that we would comply with the Common Issues
judgment and had run through our preparations for this
4. Amnesty for shortfalls. This posed difficulties for us. We did not know how many
Subpostmasters might report shortfalls or what the sums involved would be. The duty of good
faith was mutual and we would want to reserve our position if there were real capability and
trust issues in connection with any Postmasters reporting historic shortfalls
5. Agreement not to enforce Subpostmaster debts in advance of the settlement. We had
confirmed that we would not seek to do so
6. Agreement to expunge disciplinary records. Subpostmasters were not employees and we did
not keep disciplinary records. POL only held information about when individuals were/ had
been Subpostmasters. This issue had been raised because the reputation of a number of the
claimants had been tarnished. We could provide a purely factual reference for these individuals
but they could also refer back to our jointly agreed statement which would reference historic
failings
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7. Support programme for claimant Subpostmasters in post — this would include help for those
who would like to exit the business post settlement. We should be able to commit to being
able to help this category of claimant Subpostmasters them in some way
8. Consultation request — the claimants were keen to be consulted on and feed in their views
about Post Office on an ongoing basis. We were happy to listen to these views but would not
bind ourselves to implementing any proposals. We had asked how the claimants envisaged this
consultation process working. We already had stakeholder consultation groups and our
consultations had to be representative and not limited to 555 individuals
9. Mental health support for the claimants — this issue had the potential to link into Starling and
workers’ rights claims. It might be possible to treat this in the way proposed for emergency
funds where a portion of money was carved out from the settlement for the claimants to
administer. The sum proposed could be the tip of the iceberg of claims in this area. BF would
like to explore costs on this further and get some quotes from our broker
10. Agreed approach on the CCRC (this relates to the convicted claimants). We could seek to settle
a civil case but not the criminal cases. We could not be seen to undermine the criminal
convictions but could say that we would be taking external QC advice on this issue and would
act on that. The claimants were seeking assurance that we would not make things difficult for
them if they sought to overturn their cases
11. Bankruptcy issues — we were comfortable with the claimants’ proposals
12. Outstanding charges — there had been discussions on this issue and we could reassure the
claimants that we would not pursue outstanding charges once a settlement had been reached
13. Agree escalation routes for disputes - we were happy to for mediation and arbitration to be the
first steps in any dispute rather than going through the courts. It was noted that we adopted
this approach with NESP in practice but is was not a formalised process.
1.2 Work flowing from the Common Issues trial judgment
BF noted that even if we could reach a settlement and avoid further trials a great deal of work would
be needed to operationalise the Common issues trial judgment and to respond to the Horizon Issues
trial judgment. The provision of assurance to Subpostmasters and the courts was discussed. It was
AGREED that internal audit would need to be involved and that we would also need an external third
party to assess progress so that we not “marking our own homework”. The legal team would need to
translate what the requirements meant in practice and that would need to be implemented
operationally. Updates to the Postmaster Litigation Subcommittee and Board would need to shift
focus to operational issues.
1.3 Horizon Issues trial judgment
It was noted that it was positive that the current system was regarded as robust but difficult that
previous versions of the system were not regarded as robust. This meant that we were likely to
receive additional claims. We would need to use the CLIVE system to assess such claims and this
would be a major piece of work.
1.4 Tomorrow’s mediation:
- Agreement of the 15 issues
- Further discussions on the financials
- Discussions were likely to run into Friday. There was a question of what Government would
wish us to announce in advance of the general election but both the claimants and POL
would want to make the announcement to be made as soon as possible. Patrick Bourke
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would be talking to BEIS. The communications strategy for Friday was being worked
through. There would need to be clear water between a settlement announcement and the
embargo on the Horizon judgment being lifted.
- Embargo on Horizon judgment would end on 16 December 2019.
1.5 Further issues
We would be starting the future funding discussions with Government. The settlement would drive
costs and we would need think through how this affected our funding proposals. We would need to
review the change programme for GLO following the decisions on appeal, the Horizon Issues trial
judgment and mediation to make sure we were adequately resourced for the work required.
2. Horizon planning
The Horizon Issues trial judgment had been positive in finding the current Horizon system reasonably
robust but had found previous versions of the system not to be robust. It was not thought that the
judgment would have a significant impact on how the network operated but could drive historic
claims.
We anticipated claims from Subpostmasters who had been suspended without pay now that our
application to appeal the Common Issues trial judgment had been declined. We were working
through the numbers involved but these could amount to circa £30m over a 20 year period. It was
recognised that we needed to be open and transparent in communicating our approach to
addressing these historic claims but needed to set realistic expectations on how they would be
processed. We would need to revisit whether there were sufficient funds in the budget and whether
we had the right capacity and capabilities within the teams to meet claims coming through. It was
noted that the tone of communications would be critical.
The teams would be working through requirements flowing from the Common Issues trial judgment
including creating new contracts and all the processes that would stem from this change. The legal
team would be translating the rulings into the operational outputs required.
It was noted that Andy Kingham held weekly calls with the area managers and involved the
operations teams. There was a mechanism for questions to be submitted which were responded to
each day. It was AGREED that the communications to the field teams and the operations team on
the mediation and the Horizon Issues trial judgment needed to be in writing and not by conference
call alone to ensure consistent messaging.
The rapid response team would be in operation from 16 December 2020.
Nick Read, Ben Foat and Patrick Bourke would be working through the stakeholder and
communications activities that needed to take place in the run up to 16 December 2019 and the
sequencing of these. Ideally a settlement would have been announced in advance of the Horizon
Issues trial judgment being published. Our communications and stakeholder engagement were going
to be critical.
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