POL00130509
POL00130509
In Strictest Confidence
POST OFFICE LTD BOARD
Initial Complaint Review and Mediation Scheme
1. Issue
1.1 This paper updates the Board on the challenges facing the Initial Complaint
Review and Mediation Scheme (the Scheme) and the steps being taken to
address them.
2. Summary
2.1 At the moment the Scheme faces a number of serious challenges that Post
Office are working hard to manage and mitigate. This paper covers the
following issues:
e Slower than expected Scheme performance
e Anincreasing expectation gap
e Ahigh cost base
e An attempt by both the Working Group and Second Sight to broaden their
scope
e General stakeholder management challenges
e A Second Sight generic report
3. Consideration
Scheme Performance
3.1 Out of an original 147 applications, 139 are still in the Scheme at various stages.
Scheme performance is slower than expected due to a number of factors —
higher than expected application numbers, more complicated legal assurance
process (particularly in respect of risks around criminal prosecution) than
originally envisaged, a need to reinforce the Fujitsu team providing data to the
investigators and a learning curve for the new investigators around the style and
approach required. Currently there are five reports with Second Sight (with four
due on 27 February), 19 are undergoing legal assurance and 18 are currently
under Post Office investigation. 64 applicants are still to submit their detailed
case questionnaires, having had funding approved.
3.2 For Post Office there is a delicate balance to be struck in terms of the
thoroughness of the quality assurance necessary to manage risk on individual
cases and more broadly, learning the lessons from early cases and the speed of
processing the reports. We have revised the initial QA process now that initial
report quality has increased and learning has increased. This has reduced the
steps required and will save a small amount time.
POL00130509
POL00130509
In Strictest Confidence
3.3 The Working Group has also decided to add a “draft report” circulation stage to
the overall process — which adds two weeks but gives Post office a right of reply
to findings in Second Sight’s reports and could add additional steps as cases
move through the process.
Increasing Expectation Gap
3.4 Our current estimate is that we will receive claims stated to be in the region of
£100M. Applying the settlement policy, Bond Dickinson has estimated the
claims to be valued at £6M. This figure comes with a significant health warning,
as it is calculated from a sample of 33 cases and generalised to a likely
population of 130. It is also not based on the merits of a claim, but instead on
the likely value of a claim should it be fully successful.
3.5 The programme team has had limited opportunity to engage with advisors on
the substance of the claims, as the advisors limit their engagement with Post
Office to administrative matters. However, we have taken every opportunity to
discuss levels of claims with Second Sight and the Working Group when
opportunity arises. It is, however, likely that the gap will remain large due to high
claims for consequential losses and potentially negotiation positioning by
advisors in terms of the level of claim.
High Resource Demands
3.6 Currently there are 22 Post Office staff investigating cases, a programme team
is occupied full time administering the Scheme and supporting the weekly
Working Group case discussions and the monthly face to face meetings. Two
sets of lawyers are engaged reviewing the cases (Bond Dickinson providing civil
and general advice and Cartwright King reviewing from a criminal law
perspective). This has led to costs to date of £1.1M and a projected cost of
around £5M, excluding settlement costs.
Working Group and Second Sight Scope
3.7 Efforts have been ongoing to agree an engagement letter with Second Sight
and Terms of Reference with the Working Group. Currently both are being
disputed in terms of scope (with JFSA and Second Sight seeking wider scope
than Post Office is comfortable with) and with Second Sight seeking to water
down the clause restricting their ability to act against the Post Office in the
future. It also appears that the Chair is amenable to a wider scope for the
Working Group.
3.8 Both issues have been escalated to ExCo, and the Chief Executive is due to
meet Second Sight and the Chair of the Working Group on Monday to discuss
these issues. Post Office has alerted BIS, and are working through a number of
scenarios to strengthen the resource available to the Scheme to ensure that
Second Sight remain engaged in the Scheme and that the Scheme completes in
a timely manner.
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In Strictest Confidence
General Stakeholder Management
3.9 The Post Office Chairman and Chief Executive have held a positive meeting
with James Arbuthnot MP. James will be holding a follow up meeting with MPs
on 24 March where Post Office will brief them on progress on the Scheme. The
professional advisors are also proving difficult to manage and there are signs
that at least some are attempting to act as a collective to challenge the timelines
and fee levels imposed by the Scheme although we do not know whether that
will materialise.
3.10 The programme team are working closely with the Communications Directorate
to plan for the Arbuthnot meeting, and have engaged the Chair of the Working
Group to deal with issues relating to the advisors.
Second Sight Reports
3.11 The Second Sight team are due to submit the first of their individual case reports
to the Working Group on 27 February. They are also working on a generic
report designed to travel with the individual reports, although it is unlikely that
will be ready for 27 February. Our working assumption is that the reports will be
critical of Post Office (whether evidenced or not) and from the time those reports
are submitted there is the potential for them to become public, and will and this
likelihood increases when the reports are presented to the applicants potentially
a week later. We are working with the Communications team in preparation for
that.
4. Conclusion
4.1 The programme currently carries a substantial level of risk which is being
managed with support of colleagues across the business, including ExCo. It will
be important to maintain this focus as we move into a critical delivery phase for
the programme.
4.2 This paper is intended to inform a Board discussion of the latest developments,
including an update from the Chief Executive following her meetings with the
Chair of the Working Group and Second Sight, and the various options for
managing the risks and issues set out above.
Belinda Crowe
20 February 2014