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Scenario One — Post Office
Take Control
2 June 2014
DRAFT NOT POLICY
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Companies Act Section 172 — Directors Duties
In making decisions about the future direction of the Company Directors must have regard to Section 172 of the
Companies Act — ahead of other factors like negative PR. S 172 is set out below for reference:
(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other
matters) to—
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.
(2)Where or to the extent that the purposes of the company consist of or include purposes other than the benefit
of its members, subsection (1) has effect as if the reference to promoting the success of the company for the
benefit of its members were to achieving those purposes.
(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in
certain circumstances, to consider or act in the interests of creditors of the company.
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Sparrow — why change? @
Since 2012 Post Office spent several £MM. The scheme is based on a premise that there is no
problem with Horizon. Our view has been re-affirmed. Now have:
¢ Linklaters report
¢ Deloitte report
« JFSA and Second Sight — harder line — regularly escalating to Ministers
* Investigated 26 cases — no evidence to suggest a problem with Horizon
* Second Site report of poor quality and inflammatory and will become public
* Taking up ever more senior management time and threat to the business model
+ Prospect of sustained media and stakeholder activity (possibly to tie into election sensitivities)
* Controversial cases and high profile decisions on a monthly basis, plus one off hit a end
* Due to CFAs increasing likelihood of sub-postmasters entering detrimental financial arrangements
* No evidence found (important for reputation of business, strategy and subpostmaster confidence
in the business)
Therefore: Duty to the business and duty of care to the applicants.
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Sparrow — why change? @
Risks (Current arrangements):
i. Number of dissatisfied applicants increases throughout the life of the Scheme.
ii. I Scheme costs continue to rise
ii. I Diverting management time from core business
iv. Scheme damages credibility of Post Office
v. IFOlat scheme end re: cost compared with settlement levels
vi. No proactive line of defence
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Sparrow — communications recommendation @
Proposal: We publish a report in July on Horizon and the Mediation Scheme, including the Linklaters
letter and the Deloitte report. We disband the working group and end Second Sight involvement.
Pledge to investigate all the cases.
Narrative: As a responsible business the Post Office is committed to listening and learning from its
people. As such in 2012, following allegations raised with us by some subpostmasters, we set up an
inquiry into the Horizon computer system. We appointed an independent firm, Second Sight, to lead
this inquiry.
In the two years since the inquiry began there has been no evidence of deficiencies with the Horizon
system. Indeed, Second Sight found no systemic issues in its report in 2013. It has since been
investigating cases and this work supports this finding.
We have also commissioned Deloitte to examine the Horizon system further and received assurance
around the integrity of the system, which deals with xxx million transactions every xxx.
As part of our commitment to investigate cases raised with us by a small number of subpostmasters
we set up a Mediation Scheme in order to offer an opportunity for them to have their cases heard. At
the same time we launched a Branch Support Programme to find ways of improving the support we
offer the subpostmaster community.
Having investigated xx of the xx cases submitted, it has now become clear that few of the cases
submitted to us revolve around the Horizon computer system. The mediation scheme will not
therefore work in the interests of those who have submitted cases.
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Sparrow — communications recommendation @
We have therefore decided to move to a new approach.
We will investigate all cases and provide applicants with a report of their investigation to help them
understand what happened in their case.
When all investigations are completed we will consider what action is appropriate in individual cases
and what improvements can be made in the light of any findings.
This is consistent with the approach we have taken with the Second Sight Interim Report through our
Brach Support Programme.
We will publish a report when all investigations have been completed.
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PTC Summer-Christmas Run up to election
(Sep-Dec) (Jan-May) __
+ Write to all apps / PAs about + All cases investigated by POL + All investigations reviewed together
infg charge a0d pioress + Decision taken on outcome
ay I New deadlines (Cah + Decision and report released to all
FA @ + LLand Deloitte applicants at the same time
s c + WG face to face + Mediate a small number of cases
@ * AIlCQRs submitted before (30)
summer recess * Scheme Closes
+ Allegation of white wash by + Possible regional stories
FOL * FOl on cost
BS) + 1-2 days media coverage
Ro) (poss BBC, Computer Weekly
2 and regionals) which will
include quotes from JFSA,
MPs and Applicants
+ Attempt urgent question by * MPs may raise individual case with
JA PV / Minister
o + JA calls for meeting with + Possible debate
= ace + PQoncost
+ MP letters to PV and Minister
+ MPs likely to escalate to
minister
+ JFSA will go to the press ° JFSA/ SS counter report (possible
i F court case would hade media
SS will contact MPs with a implications
report
CF may get involved
+ NFSP will need to be
engaged
Stakeholder
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Stakeholder
Key Message
Rebuttal from Stakeholder
Minister /
Richard Callard
Value for money
Right thing for the business and delivering strategy including mutualisation
Value for Money
LL and Deloitte independent assurance
Duty of care to existing subpostmasters
If we continue the next 9 months will be littered with local negative stories /
letters from MPs
Protection against SS quality of work
NFSP involvement
SAH Our decision to make; we need to put applicants and business first
We have listened, given time and we need to act now
We understand your view
No criticism of you
How do we handle this in a way that helps you?
At end of day it’s a decision we need to take
Rationale for decision:
ss
JFSA
James Face to face meeting (AP and PV) — use letter as basis Role of SS and JFSA
Arbuthnot Play back concerns in last letter — you’ve been chasing about progress, I share
your concerns and now I am taking action
We are concerned about applicants which is why we are making the changes
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Stakeholder Key Message Rebuttal from Stakeholder
Other MPs engaged Write to MPs with a constituent in the
case
All cases still live so we must be mindful
of that and keep information confidential
We are committed to investigating cases
Professional Advisors Timescale of when to get CQRs in (4
weeks)
Letter to all
Applicants Timescale of when to get CQRs in (4 weeks)
Change in process to ensure timely
investigation of their case
Other Stakeholders (consumer futures,
NFSP)
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Annex: Stakeholder Engagement Timeline — what happens when?
Initial Complaints Review and Mediation - Stakeholder Engagement Timeline - What happens when? (v0.2) DRAFT
‘aag_[ Sep] 08
‘Stakeholder Outcome desired teed I Wes 9-12 I wks 13-46] wis 17-231
Option Agreed Option agreed
ublic Announcement End of CR submission
(8oard) (in) ‘an
SoS. Devinee Cable MP I Supportive Maria
Minister - 10 Swinson MP_I Supportive Alice / Paula ia
Bis [Minister Jenny willott MP I Supportive Alice / Paula {
f Shex. Stephen Lovegrove _I Informed Martin
: She: Richard Calla MP I Suporte Paula Ir i
Tames Arbuthnot MP are Paula i
wes [ wPewith eases Informed Paula
MPs without afer ‘are Paul af ii
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Executive Supportive chee cal i iE
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Tony Hooper Supportive Chris. ia
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‘Other advisor Informed I ohne 7]
[ese [ supportive [Angela [TTT
other
a [consumer Futures [aware [Angelo CCC
DN: to confirm timing of contacts
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Announcement —
» & stakeholder Transition Business as usual
management I
Programme
closure
End of CQR All cases Mediation Scheme
submission investigated complete closed
Brief WG members __ implementnew Embed new process as day- _ Redeploy resource
- separately : governance to-day routine
- Disband we arrangements
Terminate SS
engagement
- CEO to call JA Implement new
Comms to manage investigation timescales Manage completion of Prepare Public
media PR responses & processes ‘ Scheme Statement
“Notify applicants & —
advisors by letter
Post-completion review
Case categorisation & of Scheme
Implement deadline assignment
process on CQR —
submission
Prepare programme
Settle cases as appropriate closure report
Mediate cases, by exception Document all learnings
=
2
(a
g
°
n
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=
Ps
o
<x
:
Press Release 4. Full set of CQRs” . All investigation reports . Handover of closure
oe . ¢ complete report
2. All settlements complete 2. Learnings transferred
Deliverable
All mediation cases Approved Public
complete : Statement
DRAFT Implementation timeline should Option 2 be endorsed. Plan does not represent agreed Post Office policy.