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Case No, CRI 01947
IN THE BLACKPOOL COUNTY COURT
BETWEEN:-
POST OFFICE COUNTERS LIMITED Claimant
and
MRS JULIE WOLSTENHOLME Defendants
ADVICE ON EVIDENCE AND QUANTUM
1. I am asked to advise in proceedings arising out of the termination of the sub-
postmaster contract of Mrs Julie Wolstenholme. The facts are well known to those
instructing me and to the client. I propose therefore only to set out a short summary.
FACTUAL BACKGROUND
2. In November 1999, Julie Wolstenholme became sub-postmistress at Cleveleys
modified sub-post office. She entered into a standard modified sub-postmasters’
contract. Mrs Wolstenholme actually took over the sub-post office from her father
who had run it for a long time previously.
3. In about February 2000, a computer system known as “Horizon” was installed at post
offices across the country, including that at Cleveleys.
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The Horizon computer system did not operate smoothly at all times, and a support
help line was set up manned by personnel from the company which supplied the
system.
Mrs. Wolstenholme claims that she had enormous difficulties with her computer
system, and that it frequently malfunctioned, causing inaccuracies in stock and other
figures to arise. She claims that she repeatedly contacted both the helpline and the Post
Office about problems that she was encountering, but little effective was done to assist.
In November 2000, Mrs Wolstenholme became so disillusioned with the computer
system that she decided to stop using it. This was in breach of her obligations to the
Post Office and she was duly suspended.
Prior to this point, a number of errors and/or deficiencies had arisen in relation to Mrs
Wolstenholme’s Post Office accounts. Mrs Wolstenholme had repeatedly been asked
to repay these deficiencies pursuant to her contract with the Post Office. She had
refused, claiming that all the deficiencies and apparent errors were caused by the
computer system, not by anything within her control.
Following a series of correspondence between Mrs Wolstenholme and the Post Office,
her contract was finally terminated by letter dated 19” January 2001. This letter
purported to give three months notice of termination, but expressed the contract as
coming to an end on 28" February 2001.
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Notwithstanding repeated attempts by the Post Office, Mrs Wolstenholme refused
either to pay to the Post Office the monies that it claimed she owed or to return
equipment which belonged to the Post Office. Ultimately, the Post Office was required
to commence proceedings on both heads.
Mrs Wolstenholme has defended the proceedings, claiming that the computer system
installed by the Post Office was defective and this was, in fact, the cause of the losses
recorded within her accounts. Further, Mrs Wolstenholme puts the Post Office to strict
proof of the losses it claims. Finally, Mrs Wolstenholme counterclaims for damages in
respect of: wrongful termination of her contract; breach of her human rights; a claim
under the Commercial Agents (Council Directive) Regulations 1993; a claim for
breach of the implied term to provide a computer system fit for its purpose.
The trial of this matter is now about one month away. A joint computer expert’s report
has been obtained. This report concludes, from the limited records available, that the
computer system installed by the Post Office did appear defective. There is a very
limited amount of documentation available in respect of the detail of calls made by Mrs
Wolstenholme and problems with her computer at the relevant time as well as in
relation to the errors and losses which built up in her Post Office records. This is
because these records were destroyed about 18 months after events occurred.
Recognising the weakness of its position, the Post Office has made a payment into
court of £25,000.
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13. I am asked to advise in relation to quantum and evidence. I am asked to take into
particular account that the Post Office is anxious for the negative computer experts’
report to be given as little publicity as possible.
ADVICE
14. I shall address the issues of this case in the following order:
(i) The case brought by the Post Office against Mrs Wolstenholme and the issues
of evidence that it raises.
(ii) Mrs Wolstenholme’s contractual claim for failure to give notice.
(iii) I Mrs Wolstenholme’s contractual claim alleging breach of an implied term to
provide a computer fit for its purpose.
(iv) I Mrs Wolstenholme’s Human Rights Act claim.
(v) Mrs Wolstenholme’s Commercial Agents Regulations claim.
THE POST OFFICE CLAIM AGAINST MRS WOLSTENHOLME
15. Part of the Post Office’s claim relates to the collection of equipment from Mrs
Wolstenholme’s premises. I understand this has largely been dealt with. Insofar as it
remains extant, it is a simple case for the Post Office to prove precisely what has and
has not been collected, and I see little justification for Mrs Wolstenholme refusing to
deliver up such equipment.
16. The more difficult part of the Post Office’s claim is in relation to the alleged losses
lying in Mrs Wolstenholm’s Post Office account. The evidential difficulty is that the
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primary evidence by which such losses could be established and calculated no longer
exists. The Post Office will be forced to rely upon secondary evidence as to what such
primary evidence would have shown. A further difficulty is that caused by Mrs
Wolstenholme’s allegation that the inaccuracies are the result of the defective
computer system, which, in turn, undermines the reliability of the secondary evidence
relied upon.
In view of the negative expert’s report in this case regarding the computer system in
place, Mrs Wolstenholm’s suggestion that the errors that arose were the result of
defects in the computer system must be taken seriously. It is sufficient to place genuine
and significant doubt on the evidence relied upon by the Post Office. In my opinion, to
dispel that doubt and to persuade a Court that its claim was justified, the Post Office
would need to be able to produce to the Court sufficient original evidence in support
of its claim. It is unable to do so. I therefore conclude that the Post Office’s claim
against Mrs Wolstenholme in respect of losses on her account would be likely to fail.
I am reinforced in this view by a Court of Appeal decision on a very similar, if not
identical, issue in the case of Post Office Counters Limited v Mahida [2003] EWCA
Civ No.1583. In that case, the Court of Appeal held that in the absence of providing
the original documents, such as dockets, foils and summary forms, in support of the
claim made, the Post Office’s case could not succeed. I can see nothing significant in
the facts of Mrs Wolstenholme’s case that distinguishes it from the case of Mahida.
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19. Further, for the Post Office to have a chance of succeeding in its monetary claim
against Mrs Wolstenholme, it would also need evidence of the following:
(i) clear proof that the secondary evidence provided by the Post Office had to be
or was extremely likely to be, correct;
(ii) clear evidence that the computer problems reported by Mrs Wolstenholm
would not or could not have had any impact on the losses and figures
contained within her accounting system;
(iii) ideally, clear evidence to counter the criticisms made by the computer expert in
this case.
20. On my understanding of this case, I do not anticipate that such evidence will be
available.
MRS _WOLSTENHOLME’S CLAIM FOR WRONGFUL TERMINATION OF HER
CONTRACT
21. Given the lack of evidence in support of the Post Office’s position on losses, and also
the strong evidence suggestive of serious failures in the computer system installed at
the Cleveleys’ premises, the suggestion that Mrs Wolstenholme was in serious or
repudiatory breach of her sub-postmaster agreement appears unsustainable. In the
circumstances, there would appear not to have been grounds for summary termination
of that contract. Accordingly, pursuant to paragraph 9(1)(m) of the Contract, Mrs
Wolstenholme was entitled to a minimum of three months notice of termination.
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In the letter of termination sent by the Post Office to Mrs Wolstenholme, three months
notice was purportedly given. This can be treated as further evidence in support of the
proposition that Mrs Wolstenholme was not in fact in breach of her contract and/or
that such breach was not relied upon to effect a summary determination of the
contract.
Unfortunately, Mrs Wolstenholme was not in fact given the full three months notice to
which she was entitled. As the date of the letter of termination was 19" January 2001,
termination of Mrs Wolstenholme’s contract should not have occurred prior to 19
April 2001. If three months notice was to be construed as three months from receipt of
the written notice, that time could be extended by a few days.
In her Particulars of Claim, Mrs Wolstenholme claims that her period of notice should
have expired on 22™ April 2001. This does not seem unreasonable.
In the circumstances, Mrs Wolstenholme’s breach of notice claim appears likely to
succeed.
The next issue is as to the level of damages that Mrs Wolstenholme might receive as a
result. At paragraph 17(4) of her counterclaim Mrs Wolstenholme claims loss of wages
from the date of her resignation until 22" April 2001. It is my understanding that Mrs
Wolstenholme has, indeed, received no wages or remuneration for all of this period.
Mrs Wolstenholme treats this as a five-month period, and calculates her remuneration
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per month in the sum of £5,000. Having seen a “Pay Advice” for Mrs Wolstenholme
dated 31° August 2000, which shows a net payment of £5,537.65, the figure
contended for by Mrs Wolstenholme does not seem inaccurate.
My one reservation is in relation to sums for which credit should be given. For
example, no account appears to have been made in respect of tax. However, given that
Mrs Wolstenholme was not an employee, but was to be treated for tax purposes as a
separate trading entity, she was unlikely to be taxed on the full sum as set out on the
Pay Advice referred to. I have seen Mrs Wolstenholme’s profit and loss account
figures for the period ending 31 December 2000, and her net profit (at £23,929)
appears to be significantly lower than what she was in fact paid by the post office
(£80,531). Whilst, therefore, it would be appropriate to take some account of taxation,
it would be inappropriate to calculate tax on the full sum received from the Post
Office.
Insofar as Mrs Wolstenholme made savings by not having operated the Post Office
during the period in question, the Post Office should also receive appropriate credit.
However, I do not have within my papers sufficient evidence of such outgoings to be
able to calculate appropriate figures. This is a matter which should be addressed with
Mrs Wolstenholme in correspondence, and, in the absence of co-operation, by way of
application to the Court.
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It may be that the Post Office considers that taking such further legal steps might not
be cost effective in this matter where it appears that there is little prospect of recovery
of any legal costs. That is of course a matter for the Post Office’s consideration.
There are further matters which might give rise to compensation arising out of
termination of Mrs Wolstenholme’s contract. In general, these would arise if Mrs
Wolstenholme could demonstrate that, by reason of the premature termination of her
contract, she suffered specific loss over and above that which would have occurred
had contractual termination taken place in the ordinary way. For example, if Mrs
Wolstenholme were to prove that the early termination of her contract deprived her of
a sale of the business and goodwill to a third party, she could include this in her claim
for damages. At present, no such claim has been brought.
However I have seen some reference in correspondence from Mrs Wolstenholme to
the cost of dealing with Employment Tribunal claims brought by ex-employees of the
Post Office. I have no detail of these claims, and I would hope that they must be weak
given the strong case of redundancy that Mrs Wolstenholme would be able to advance.
However, if, for reasons which I do not know, Mrs Wolstenholme were to be found
liable for these claims, and if that liability could be linked to the early termination of
her contract, then it is arguable that such liability might also be included in her claim
for compensation against the Post Office. At present, I can only speculate on this issue,
and I have seen no further documents or evidence to support the contention.
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In her counterclaim, Mrs Wolstenholme does, however, claim the sum of £82,500 in
relation to “ingoing” that she claims she paid to the Post Office. I am informed that no
such payment was ever made, because Mrs Wolstenholme took over as sub-postmaster
of the Cleveleys office in the context of a family transfer which gave rise to no such
payment. This appears to be borne out by the documentary evidence. I would therefore
expect Mrs Wolstenholme’s claim on this to fail unless she can prove with appropriate
evidence that such payment was made.
Mrs Wolstenholme has also referred, in correspondence, to the purchase price that she
alleges she paid to her father for the sub-post office. On balance, I do not consider that
the Post Office should be liable for this sum. It does not seem to constitute reasonable
reliance expenditure, but, rather, is the result of a commercial and speculative risk
undertaken by Mrs Wolstenholme at her own volition. To pay a substantial sum of
money for a business which is entirely reliant upon the continuation of a contract with
the Post Office which is terminable upon 3 months notice, is a substantial risk. It was,
however, a risk undertaken by Mrs Wolstenholme without advice or representation
from the Post Office. For that reason, I do not consider that the Post Office should be
held liable.
Furthermore, on my understanding of the facts, the Post Office was not made aware of
any payment having been made by Mrs Wolstenholme to her father at the time of
contracting. Accordingly, upon breach of the contract between the Post Office and
Mrs Wolstenholme, losses claimed in respect of the alleged purchase price would not
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have been within the reasonable contemplation of the Post Office at the time of
originally entering into the sub-postmaster contract. The damages claimed, therefore,
ought be considered too remote to be recoverable.
Mrs Wolstenholme also claims loss of the opportunity to earn income from related
activities in her post office premises. This does appear a legitimate head of claim for
which the Post Office could be held liable. However, I have seen no evidence of what
such earnings were prior to Mrs Wolstenholme’s suspension or the termination of her
contract. It is therefore not possible at this stage to assess the level of any such
compensation.
I enclose in my papers as a useful parallel a decision from the Court of Appeal in
respect of damages to be claimed arising out of wrongful summary determination of a
sub-postmaster contract: the case of Moeze Lalji v Post Office Limited [2003] EWCA
Civ No.1873.
BREACH OF IMPLIED TERM IN RESPECT OF COMPUTER
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Mrs Wolstenholme claims that there was a breach of an implied term that she be
provided with a computer system that was fit for its purpose. This term has not been
admitted by the Post Office, and there is a case for arguing that any such term should
only extend as far as the obligation to take reasonable steps to provide a computer
system that was fit for its purpose. The basis for implying either term would be that it
was necessary for the purpose of giving the sub-postmaster contract business efficacy
and/or as representing the obvious but unexpressed intentions of the parties.
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Turning to the value of this claim, it is difficult to identify specific loss that a breach of
either implied term has in fact caused Mrs Wolstenholme. I have seen little evidence of
such loss. Arguably, the only loss such a breach seems likely to have caused is, on Mrs
Wolstenholme’s case, to have incurred the “false” liabilities recorded in her Post Office
accounts. On the assumption that the Post Office’s claim for recovery of these losses
either fails or does not proceed, then Mrs Wolstenholme will not have suffered this
loss.
Alternatively, Mrs Wolstenholme might, at trial, seek to argue that, were it not for the
defects in the computer system, relations between the parties would never have broken
down, and her contract, accordingly, would not have been terminated. This is a more
general claim, and involves essentially valuation of the loss of a chance to continue to
do business. The value of such a claim would be calculable by reference to Mrs
Wolstenholme’s annual profits for a reasonable period, and applying a percentage to
represent the value of the lost chance. It is very difficult to predict what approach a
court might take in assessing such a claim, given its speculative nature. However, if
the court were sympathetic to Mrs Wolstenholme, if she succeeded on this point, the
loss could be fairly substantial given her annual profits were apparently in excess of
£25,000.
It is in relation to the possibility of such a claim being advanced by Mrs Wolstenholme
that the form of any implied term in respect of the computer system becomes
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important. If the term extended simply to the Post Office taking all reasonable steps to
provide a computer system fit for its purpose, then the fact that the system provided
may have been defective on occasion does not necessarily indicate a breach of this
term. However, evidence would need to be adduced, on behalf of the Post Office, that
reasonable steps were indeed taken. For this reason, I consider it would be advisable
to seek to introduce, on behalf of the Post Office, further evidence setting out further
detail as to: support provided in respect of the computer system installed; and attempts
made to rectify defects identified. This evidence might be from an appropriate
employee within the Information Technology part of the Post Office business, and/or
from an appropriate employee from the suppliers of the computer system itself.
Further, in relation to the strength of this aspect of Mrs Wolstenholme’s claim, it is to
be noted that, in view of its rather speculative nature, it will be open at trial to argue
that it is too remote to be recoverable.
THE COMMERCIAL AGENTS REGULATIONS CLAIM
42.
Mrs Wolstenholme claims that she is constituted the agent of the Post Office pursuant
to the Commercial Agents (Council Directive) Regulations 1993. There has been no
detailed response to this suggestion made in the statements of case lodged by the parties.
However, it is my understanding that Mrs Wolstenholme was acting as an agent for the
Post Office in the provision of services not in the sale of goods. If this is the case, then
the Commercial Agents Regulations do not apply, as they extend only to agents who
negotiate for and represent principals in the sale of goods. I am not aware of any authority
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to the contrary that suggests that sub-postmasters are commercial agents within the sense
of the Regulations.
43. However, if this understanding is incorrect, and the Regulations do indeed apply, Mrs
Wolstenholme is likely to have a significant claim for compensation arising out of
termination of her agency under Regulation 17. There is not a great deal of case law
on how to determine the appropriate level of such compensation, and, as can be seen
from decisions returned with my papers, no consistent approach has yet been achieved.
One possibility, however, which has been adopted by the High Court on at least one
occasion is to take the French method of awarding two years gross receipts. [See the
cases returned with my papers of Barret McKenzie v Escada (UK) and Ingmar GB
Limited v Eaton Leonard Inc.I
44. Obviously, if Mrs Wolstenholme were to be awarded two years’ receipts, this would
be a very significant sum indeed. It is therefore important to attend any relevant
hearing of this matter prepared to deal robustly with the Commercial Agents’
argument. Also, if considered necessary by those instructing me, some consideration
might be given to the possibility of seeking to adduce some short additional evidence
setting out the ambit of activities undertaken by Mrs Wolstenholme for and on behalf
of the Post Office. I would anticipate that the possibility of one of its subpostmasters
being found to be an agent within the Commercial Agents Regulations would be a
serious matter for the Post Office.
THE HUMAN RIGHTS CLAIM
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Mrs Wolstenholme claims that the Post Office was a public authority for the purposes
of the Human Rights Act 1998. She claims interference with her property, namely her
remuneration and her goodwill in her business, along with an alleged breach of the
right to a fair hearing.
I have not been able to find any precedent case law dealing with the issue of whether
the Post Office, or more specifically Post Office Counters Limited, constitutes a public
authority as defined at Section 6 of the Human Rights Act. At Section 6(3)(b) of the
Act, a “public authority” is defined as “any person certain of whose functions are
Junctions of a public nature”. In my view, it does appear possible to characterise Post
Office Counters Limited as a public authority within this definition.
Having said this, however, it is more difficult to see the breaches of human rights
alleged. If it is indeed a breach of Mrs Wolstenholme’s human rights to interfere with
the remuneration that she earned in her capacity as sub-postmaster, it is difficult to see
how such a contract could ever be lawfully terminated. This is clearly an absurd
proposition, and it applies equally to the notion of loss of goodwill.
In respect of the claim for a right to a fair trial or hearing, there was no trial or hearing,
there was simply a termination of a contract as contemplated by the parties in the very
terms of the contract that was brought to an end. If that were done in an unlawful
manner, Mrs Wolstenholme would always have recourse to the Courts, by which she
would be afforded the right to a fair hearing. She does not, therefore, appear to have
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been deprived of the right to a fair trial or hearing, and I accordingly do not see what
damage or compensation flows from that part of her claim.
CONCLUSIONS
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50.
SL.
On the basis of the above, it can be concluded that the Post Office claim against Mrs
Wolstenholme will fail, save for the return of the equipment which she has possibly
retained. Her claim against the Post Office in respect of failure to give proper notice is
likely to succeed. What is the appropriate course of conduct in the circumstances,
particularly given the desire of those instructing me and the Post Office to avoid, if
possible, publication of the negative experts’ report in the public arena?
I know those instructing me have made a substantial payment into Court, and I have
already discussed with those instructing me the advisability/possibility of increasing this
sum by, perhaps, an additional £10,000. However, it seems from Mrs Wolstenholme’s
stance that no payment into Court will be accepted unless it is considerably larger.
From this, one can assume that by making sensible payments into Court, the Post
Office is unlikely to prevent this matter from going to trial, and some other approach
would have to be taken to try to control what occurs in the trial process.
In the circumstances, it seems that one method by which seems the Post Office might
best achieve its objectives could be by making careful admissions within the Court
proceedings. This is a matter which I have already discussed with those instructing me,
but I can set briefly out a possible approach.
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To illustrate, the Post Office could formally abandon its claim against Mrs
Wolstenholme and formally admit her claim of wrongful termination of her contract.
The matter could then proceed to a more limited hearing to deal specifically with the
remainder of her counterclaim. This could possibly be addressed by way of preliminary
hearing on specific issues identified in my discussion above. Eg. the absence of loss in
relation to the implied term concerning the computer equipment; the inapplicability of
the Commercial Agents Regulations; the absence of breach of Human Rights. All could
be relatively shortly dealt with. None of these points require publication of the negative
experts’ report.
A further possibility — although one which would of course require careful consideration
by the client — might even be to admit the breach of the implied term alleged. However,
this would be a rather more dangerous course, as it exposes the Post Office to the
possibility of the claim for loss of the chance to make profits, identified above. The
preferable course, in my view, would be to seek to focus on the issue in respect of the
appropriate contractual term to be implied, and then to argue the point on absence of
loss.
The opportunity for taking these points will of course be the dates already listed for
trial. The issues for the client and those instructing me are the additional evidence
raised above and the question of how the trial should be approached. Again, I have
already discussed this with my instructing solicitor. Having considered the matter
further, my view is that the most appropriate course would be for these matters to be
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raised at trial following appropriate application having been made in respect of any
further evidence and/or changes to the statement of case put forward by the Post
Office. With careful case management, the issues identified could then be isolated at
trial and dealt with as deemed fit by the trial judge. I consider that it would be
appropriate to provide advance notice to Mrs Wolstenholme and the Court as to the
issues that the Post Office sees as requiring determination.
I did consider the possibility of making a formal Part 25 (summary relief) application.
However, in view of the proximity of trial, the fact that Mrs Wolstenholme is not
legally represented, and the additional cost that such application would doubtless
incur, I have reached the view that this would not be the best way forward.
On a final note, in assessing the level of compensation appropriate in this case, those
instructing me should note that I have not dealt with the question of interest. In
particular in respect of payments withheld from Mrs Wolstenholme by the Post Office,
interest should be calculated from the mid-point at which such payments were due.
I trust this Advice is of assistance to the client and those instructing me. In respect of
further evidence to be adduced, and amendments to the Post Office’s statement of
case, I can, of course, be contacted in Chambers. For the purpose of amending the
Post Office’s statement of case, I would be grateful if a copy of the original could be
emailed to me.
S. A. Brochwicz-Lewinski
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9 St John Street
Manchester M4 4DN
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26" July 2004
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Case No. CR1 01947
IN THE BLACKPOOL COUNTY COURT
BETWEEN:-
POST OFFICE
COUNTERS LIMITED Claimant
-and -
MRS JULIE WOLSTENHOLME Defendants
ADVICE ON EVIDENCE
AND QUANTUM
DX: 14427 MANCHESTER 2
Messrs Weightman
41 Spring Gardens
Manchester
M2 2BG
Ref: NK/SJH/KH/14845.1
Solicitors for the Claimant
MH/159931