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IN CONFIDENCE - BRIEFING FOR CHIEF EXECUTIVE
Issue
1. Your forthcoming telephone conversation with James Arbuthnot MP (JA) to discuss his concerns
about the Scheme.
Recommendation
2. That you reassert Post Office’s (PO) support for the original aims of the Scheme and:
Give JA an opportunity to explain the nature of his concerns which he has indicated will likely call
into question PO’s good faith towards the Scheme;
Firmly rebut the charge, underlining the unusual lengths to which PO has gone to respond to the
concerns of Justice for Subpostmasters Alliance (JFSA), MPs and Applicants to the Scheme;
Place on record PO’s own concerns over the effect that JFSA’s refusal to participate fully in the
business of the Working Group, evident breaches of confidentiality in relation to its workings, and
the inadequacy of Second Sight’s case reviews is having on the credibility of the Scheme and the
confidence placed in it by PO [and Sir Anthony Hooper];
e Make clear that, while PO remains committed to a thorough investigation of the concerns raised by
Applicants in each and every case, it cannot be expected to accept responsibility for matters in
circumstances where there is no evidence that it is at fault; and
e Indicate that, should those in whose interests the Scheme was principally established (JFSA and its
members) no longer feel it is capable of meetings their needs, this is something upon which PO will
need to reflect very carefully.
3. While the conversation also represents an opportunity to appeal to JA to bring pressure to bear on
JFSA to engage with the Scheme constructively, it is not clear that doing so would have the desired effect or
that, even if it did, that would necessarily be in PO’s best long term interests.
4. A speaking note and question/answer brief from which you may wish to draw are at Annex A and B
respectively.
Background/Argument
Case Profile and Cost
Ss. PO has been investigating Applicants’ cases afresh for some 2 years. In the cases investigated to
date, the accumulated evidence broadly points to 3 scenarios — cases in which losses have occurred through
accounting and other errors by staff in the relevant branch, those in which errors have been exacerbated by
false accounting, and those involving theft.
6. Over 90 investigations have been completed. An investigation in all 54 remaining cases is
underway and this process will be completed on or by 22 December 2014.
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7. The cost to PO of this process to date is £3.4 million. A further £4 million is currently forecast to be
spent, producing a total of £7.4 million. As an absolute average, this means that each of the 136 cases in the
Scheme will cost PO just shy of £55,000. These figures do not include any payments PO may make to
Applicants in the Scheme.
The integrity of Horizon
8. In not one of the cases investigated so far has a fault with the Horizon system been established.
That said, we are being extremely careful to avoid any sense of complacency and we will apply the same
rigour in investigating the remaining cases as we have to date.
9. However, PO is entitled to take the view that in the absence of evidence to the contrary, the
presumption must be that the system is working as it ought to. To start from a contrary position, whereby
PO must prove the system’s reliability, goes against both common sense and established practice. Bluntly, it
is not PO’s job to prove that Horizon did not cause the losses incurred by Applicants to the Scheme, but for
Applicants to provide evidence that it did.
Current Challenges
10. Beyond the very significant resource impact that providing all Secretariat functions to the Scheme
adds to what is already a major undertaking, PO faces a number of additional challenges:
« Breaches of confidentiality/media: PO has, at all times, been keen to ensure that the business of the
independent Working Group should be confidential, not least given the sensitivity of much of the
relevant material. That is in line with its terms of reference, agreed to by all parties, and highlighted
as the only legally binding obligation on participants to its work. It has unfortunately become clear
that that confidentiality has been breached. One example is the recent article in Private Eye which
contained details of the Working Group’s decision making process which it would be impossible for
that publication to have guessed at correctly. Moreover, suggestions have been made, including by
JA, that should PO not take a particular course of action, the media might be called upon
presumably in an attempt to place it under some form of pressure. In the context of a Scheme
which depends critically on the confidence participants (including PO) have in it, both of these
developments are deeply damaging. PO maintains that, should any participant in the Working
Group have an issue or concern they wish to raise, the proper forum for doing so must initially at
least be the Working Group itself. That has not happened in this case which, quite apart from
legitimate concerns over confidentiality, marks a lack of professional courtesy.
© _ JESA’s non-participation: JFSA have recently adopted a policy position not to comment on, discuss
or otherwise participate in the examination of cases by the Working Group where Second Sight has
deemed these suitable for mediation. They now leave meetings of the Working Group before these
cases are discussed, depriving Sir Anthony Hooper and PO of the benefit of their input. Were this
policy position confined to a limited number of cases, one might perhaps be able to contain its
effects. However, since Second Sight have deemed well in excess of 95% of the cases they have
reviewed as being suitable for mediation (as to which see below), JFSA’s stance plainly undermines
the role of the Working Group and the successful operation of the Scheme.
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* Second Sight’s reports: these reports are based on an independent review of all the material
available to PO as a result both of its initial, and now fresh, investigation of each case. Second Sight
almost invariably conclude that the question of responsibility for the losses in branch (i.e. whether
the Applicant or the PO is responsible) is suitable for mediation. As noted above, none of the cases
re-investigated to date have produced evidence of a fault with Horizon, or that PO was otherwise
directly responsible for those losses. Legitimate questions over the adequacy of training provided
by PO may arise ina tiny minority of cases and PO has already embarked on a review of its practice
in this regard. In contrast, and in most cases, Second Sight appear simply to ignore the weight of
evidence (or the totality of evidence) which points to a clear finding that the Applicant was
responsible for the losses, preferring instead to leave the question open and recommend
mediation. This is at its most egregious where Second Sight refuse to acknowledge the
responsibility of Applicants even in cases where the Applicant has admitted to, and/or been
convicted of, theft. In recent discussions with the Working Group Secretariat, Second Sight have
indicated that they have been working on the basis that all cases would proceed (‘be nodded
through’) to mediation by virtue of having been accepted into the Scheme and that this was all
parties’ understanding of the process (presumably including PO). Leaving aside the obvious
question as to what Second Sight actually consider their role to be if a decision to mediate all cases
had already been taken prior to the conclusion of their case reviews, this mistaken belief may be
responsible for their near default finding of suitability for mediation. Needless to say, this
represents a serious problem for PO.
e Expectations gap: the Scheme, originally designed to resolve concerns around the reliability and
performance of Horizon, is in practice more often than not being used by Applicants as a vehicle for
making very substantial claims against PO for losses it is alleged to have caused. While the case in
which the Applicant is seeking £13 million may represent the extreme end of the spectrum, claims
in excess of £1 million are common. In addition, and despite strenuous efforts to head the problem
off, a number of Applicants with criminal convictions appear to consider the Scheme as being
capable of providing them with an alternative platform from which to appeal those convictions.
These wholly disproportionate claims (on any reading) and inappropriate/unrealistic expectations
of the Scheme will only fuel the already pronounced sense of dissatisfaction, no matter how
misdirected, felt by Applicants towards PO.
e The appropriateness of mediation: Second Sight’s near default recommendation to mediate, even
where there is no evidence to question the original finding that Applicants were responsible or
liable for the losses in individual branches, inevitably places PO in a highly invidious position. Partly
given their number, it is all too easy to characterise PO’s view that these cases are not suitable for
mediation as being self-serving and high-handed. However, in the absence of any evidence that it
caused losses (in contrast to often substantial and/or conclusive evidence pointing to responsibility
resting with the Applicant), it is manifestly right and reasonable for PO to adopt this view and act
accordingly. To ignore the evidence in these cases would, in effect, be tantamount to asking PO to
accept responsibility for events which simply did not take place. That perverse outcome would also
have a hugely detrimental and significant downstream effect on the integrity of the PO Network as
a whole in effectively sending a message that it pays, quite literally, to make wholly
unsubstantiated or opportunistic claims that PO is responsible for losses suffered in branches up
and down the country. In the vast majority of cases, PO would be quite happy to sit down and
speak with Applicants to give them a further opportunity to speak to the PO directly and to explain,
where it is possible to do so (false accounting by its nature frustrates this process), how losses
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occurred. A conversation of this nature would be considerably more appropriate than mediation,
not least since each mediation costs PO in the region of £34,000.
11. While not all of these issues need necessarily be raised in your conversation with JA, it is important
to recognise that they are far from superficial or capable of a quick fix.
Asilver lining ?
12. With that in mind, you may wish to consider whether, in the light of the concerns being expressed
on all sides, this is the appropriate juncture for PO to look again privately at alternative ways to address,
fairly and thoroughly, the concerns of Applicants to the Scheme. This would, naturally, be done ona
contingency basis, with proposals being brought to the Board only if and when a reasonable judgment is
made that the Scheme in its current form will not meet its original purpose or will only do so at
disproportionate cost. While this thinking is not directly relevant to your conversation with JA, this advice
would have been incomplete without recognising a development of this sort representing a credible future
change of direction for PO.
Immediate needs
13. Returning to the here and now of your conversation with JA, it is plainly difficult to know exactly
what may transpire. The suggestion would be to keep the conversation out of the detail and seek to
refocus his mind on the big picture of the situation:
e There is a strong sense that the starting point for people involved in this process is that PO and the
Horizon system are or somehow simply must be at fault
e That does not do them any credit — fair-minded people keep an open mind and do not rush to
judgment
e Post Office has gone to extraordinary lengths to address the concerns of Applicants, the JFSA and
MPs, and has devoted considerable resources in doing so in the face of significant business
challenges and competing priorities
© Ithas, at all times, acted fairly, responsibly and maintained the confidentiality of the process to
maximise the chances of the Scheme’s success
e — Itis far from clear what those who are now critical of PO’s handling of this issue would have us do.
14. You may consider that, given the obvious sensitivity of the discussion as well as the possibility of JA
seeking to explore the detail of certain cases and our response to them, it would be helpful for Chris Aujard
or Rod Williams to be available.
Patrick Bourke
26/10/14
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ANNEX A
CONFIDENTIAL - PV conversation with JA
Getting off on the right foot — we want to appeal to the statesman in him/explain why we are acting in
good faith but not give ground.
e Iunderstand you wanted to raise concerns about the way on which the Scheme is progressing and, as
ever, I am ready to try to address them
* In doing so, I do just want to underline that I consider it extremely important that all parties approach
these issues in a fair minded and balanced way -I am sure you would agree
e [You have held public office and also, I am sure, in your role as Chair of the Defence Committee
understand that there are two sides to every story and each side can make a compelling case
* So you will know from your own experience that ill/partially-informed public debate while enquiries
and investigations are continuing can undermine the process and outcomes]
Post Office approach to Scheme
* POhas gone to very great lengths to respond to the concerns of Justice for Subpostmasters Alliance
(JFSA), MPs and Applicants to the Scheme and I am sure that you would acknowledge that
* We have now completed our investigation over 90 cases. Cumulatively these reports run to over 1000
pages and reviewed almost 2000 evidence documents
e Individual reports can be from 5 to 30 pages with anything between 5 and 80 documents provided to
each applicant (depending on the age of the case)
© Happy to confirm that Post Office remains committed to investigating all cases within the Scheme,
treating every case on its merits and playing a full and constructive part in the business of the WG
e It is costly and resource intensive but we are determined to persist so that we can say that we have
thoroughly investigated the concerns raised by the applicant — we have even provided funding for
applicants to engage an adviser to articulate their claims.
* lam not sure we could have done much more
Limits
Of the cases we have thoroughly investigated to date, not one of them shows that Horizon is
responsible for the losses incurred in those branches
* But we are categorically not being complacent about this and the remaining 50 or so cases will be also
comprehensively investigated — it is in both Applicants’ and PO’s interest that they should be
« However, and while PO remains committed to a thorough investigation of the concerns raised by
Applicants in each and every case, it does not follow that PO should act against its own interests
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© Inparticular, it cannot be expected to accept responsibility for matters in circumstances where there is
no evidence that it is at fault - I am sure that you would agree that this is a reasonable stance for us to
take
e If not, I am unclear what it is precisely you feel that PO ought to be doing?
e I suspect that JFSA may be frustrated that after 2 % years Second Sight have not unearthed evidence of
the problems with Horizon they thought existed - I think that frustrates Second Sight too. I understand
that may give them handling difficulties.
¢ Frankly I am concerned applicants may have had their expectations built up to expect large sums in
compensation. But this is not, and never has been a compensation Scheme.
PO’s own concerns
e It is a matter of concern to me that JFSA have adopted a policy of not participating in the business of
the Working Group where Second Sight have deemed a case suitable for mediation
e This deprives PO (and Sir Anthony Hooper) of the opportunity to discuss, with JFSA, the detail of pretty
much all cases since Second Sight have only deemed 1 case to date as being unsuitable for mediation
e JFSA failure to engage fully with the business of the Working Group is clearly likely to undermine the
Scheme
e In addition, it is unfortunate that other Members of the Working Group appear to have chosen not to
respect the confidentiality of the process we all agreed to and sought to raise their concerns with
external audiences, without the courtesy of bringing these issues to the attention of the Working Group
and Sir Anthony
e Inline with the commitments it made, PO has gone to great lengths to preserve the confidentiality of
the Scheme and avoided providing the media with any comment - it is entitled to expect other
participants to honour theirs - that they have not done so it regrettable
e The reason we have resisted media approaches is that playing matters publicly which will be at the
heart of mediation discussions will undermine the ability to reach a solution.
Food for thought
e In circumstances where PO has demonstrably gone the extra mile in addressing the concerns you and
others had, I am obviously disappointed to learn of your concerns
e However, I am clear that PO has, at every stage of the process, acted in good faith in taking forward the
work of the Scheme and I must reject any suggestion to the contrary
¢ Naturally, if those in whose interests the Scheme was principally established no longer feel it is capable
of meetings their needs, this is something upon which I will need to reflect very carefully.
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ANNEX 2
Q&A
Q: By allowing applications into the scheme you set a clear expectation that they would be mediated. If
Second Sight say the case is suitable for mediation why are Post Office not just agreeing to that?
The Scheme ToRs say (not published and confidential):
The role of the Working Group is “To review at each stage Applicants’ cases that may not be suitable for
the Scheme and to decide whether and/or how those cases may proceed”.
The Scheme must provide a mechanism to investigate proportionately and effectively an Applicant's
concerns.
Where appropriate, the Scheme must offer a reasonable forum, by way of mediation or through direct
discussions, for an Applicant and Post Office to seek a resolution of that Applicant's legitimate concerns.
The Scheme will be funded predominantly by Post Office and must therefore ensure value for money for
taxpayers.
The Scheme published documentation (Page 8 Q&A)says:
“the WG may consider that some cases are not suitable for mediation...”
JFSA and Post Office each have a vote on whether a case is suitable the Chair has a casting vote.
It was never envisaged or stated that all cases would automatically pass to mediation. The Chair has agreed
that — he ruled on the fact that the WG has a role to play in deciding whether a case is suitable for
mediation.
PO never suggested any eligible case at any stage, accepting all for investigation even where there
appeared to be little substance to the cases. WE have investigated everything.
It is disappointing that JFSA have chosen not to assist the Chair are choosing not to take part in the majority
of the discussions.
We look at every case on its merits. Where we think a case is suitable for mediation we will mediate.
Mediation is a consensual process and designed to get agreement and compromise. It would be wrong for
PO to mediate where neither the applicant, PO nor Second Sight have found evidence to suggest that
Horizon was at fault or POL was responsible for any losses. That is not a matter for compromise.
Q: This is about giving closure and a chance to be heard to people who have been through a terrible
time. Why are you denying them that?
Every case is thoroughly investigated and Applicants are given a full report. PO is prepared to discuss and
explain why the losses occurred if the applicant would like that but that is not mediation. We have done so
in a number of cases and resolved them prior to mediation.
However, despite the lack of evidence, some applicants are making claims running to several million
pounds against the Post Office, suggesting they are looking for more than “closure” and that the gap in
expectations is too great for mediation to be effective.
Post Office cannot and will not accept responsibility for losses when there is no evidence that we were
responsible.
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Q: Even where the Working Group has agreed that a case should be mediated, Post Office has chosen not
to mediate (in at least 2 cases). Why?
We continue to look at each case on its merits. There are instances where PO considers it is inappropriate
for a case to be mediated despite the decision of the Working Group.
Mediation is a consensual process and it is open to either party not to take part — including the applicant.
Q: Are you refusing to mediate all criminal cases?
We are considering every case on its merits.
However mediation cannot overturn a conviction and if an applicant considers their prosecution unsafe
they need to appeal that.
To date we have seen nothing in the cases we have investigated that suggests any conviction is unsafe. If
we did we would make the appropriate disclosure. We take our responsibilities in that regard very
seriously.
Q: Why is Post Office deploying a team of lawyers to every meeting. It’s unnecessary and suggests Post
Office is hostile to mediation.
Post Office’s input to the Scheme properly sits within the responsibilities of our General Counsel. This does
not imply a legalistic approach or any hostility to mediation. The Post Office’s representation on the
Working Group is drawn from senior staff, some but not all of whom are lawyers.
The fact that PO, and the Chair for that matter, is asking Second Sight to provide evidence to support a
conclusion that that PO may be responsible for the loss does not mean that we are being legalistic.
Q: I have heard that the Chair is treating the Working Group like a Courtroom. Is there anything you can
do to change his approach?
It is disappointing that confidentiality around the Working Group’s meetings appears to be being broken —
PO has taken great pains not to do that.
If WG members are concerned about the way the Scheme is working and the WG business is being
managed that is a matter for the Group in the first instance.
I should stress that Sir Anthony was nominated by JFSA and his appointment approved by all members of
the Working Group.
Although I do not wish to break confidentiality but I understand from my team that Sir Anthony has been
painstakingly fair and that all parties, including Post Office, have come under some forensic questioning to
justify their position on cases.
Q: JFSA and Second Sight are losing faith in POL and the whole process. They may walk away. What
would you do then?
Post Office entered in to this Scheme in good faith. It was designed collaboratively with JFSA and Second
Sight. It would be wrong of me to intervene if some members are not happy with the outcomes.
Having designed a formal and independent structure for dealing with these complaints I need to let that run
its course.