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Annex A
DRAFT — NOT POLICY - IN COMMERCIAL CONFIDENCE
Proposition to Board — Sparrow ‘Reset’
1. Background
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1.2
1.3
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Post Office, in its role as Secretariat, has sought to administer the Scheme as efficiently and
fairly as it possibly can and, in its role as a Party in each dispute, has at all times acted in good
faith, paying particular attention to the obligations of confidentiality which binds all parties
involved in the business of the Working Group. Despite incurring direct financial costs to date
of £5m, and diverting other scare resources away from strategic priorities for the business, it
has been a highly frustrating exercise which has failed, in large part, to meet the expectations
of relevant stakeholders or to draw a line under this issue which might enable Post Office to
move forward.
This is not the product of poor execution or lack of positive effort on the part of Post Office,
but is instead simply reflective of the erroneous assumption which underpins the approach of
Applicants and their supporters — that is, that Post Office is responsible, if not through Horizon
then in other ways, for the difficulties they have experienced and/or the losses they have
incurred. This has been exacerbated by the completely unjustified raising of expectations by
Applicants’ professional advisers, the JFSA and MPs over what the Scheme can, and in their
minds should, deliver in terms of significant compensation payments and/or Post Office
support in efforts to have criminal convictions overturned.
Post Office has, in the process, sustained significant reputational damage. Even if the net
volume of media interest has remained relatively low, negative public perception around this
issue is pretty firmly entrenched. Even in circumstances where Post Office might be free of its
obligations of confidentiality and be in a position to share more balanced factual information
about the Scheme and the cases in it, the lazy but media-friendly David and Goliath
characterisation of this story would likely retain much of its appeal.
Against this backdrop, it would be easy to forget that there are some very real positives to
have emerged from this exercise.
Now all the cases in the Scheme have ben comprehensively re-investigated, Post Office can be
satisfied that the Horizon platform, which is critical to its entire operation across the network,
operates extremely reliably. There is, quite simply, no evidence whatever of a systemic flaw in
the system. This is extremely positive news for the business.
1.6
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Moreover, with the exception of a small number of cases in which Post Office might have done
more to support individual SPMRs (whether by being more timely in providing additional
training, in responding to enquiries or correspondence and the like), the investigations paint a
largely favourable picture of Post Office’s engagement with the individuals running its
network.
2. Challenges
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2.2
2.3
2.4
In accordance with the Board’s mandate, Post Office has adopted an approach towards the
individual complaints in the Scheme in which it accepts its shortcomings where these have
been apparent but defends its interests robustly in cases where it is clear that it is neither the
cause of, nor otherwise responsible for, the difficulties and/or losses experienced by
Applicants. To do otherwise would, of necessity, have produced yet more negative outcomes
in terms of legal risk, substantial further cost and financial exposure, as well as promoting
opportunism and eroding confidence across the network.
This approach has been hugely frustrating for JFSA whom, in the absence of evidence of a flaw
in Horizon, have sought to broaden the scope of the Scheme, actively solicited media interest
and mounted a political campaign to bring further pressure to bear on Post Office to change
tack. In addition, they have also instructed a firm of solicitors, Edwin Coe LLP, to raise the
temperature still further while ostensibly maintaining their support for the Scheme. The truth
is that this apparent support is conditional on the Scheme producing the results they favour,
results which the available evidence simply does not support. The message is clear: find in our
favour or face litigation. Taken together with their longstanding lack of meaningful
participation in the business of the Working Group, these developments do nothing but
undermine the ability of the Scheme to reach an equitable conclusion in individual cases or as
a whole.
A further challenge for Post Office in all of this is the clear lack of impartiality and
professionalism being shown by Second Sight in the performance of their work. To date,
Second Sight have determined that only 2 cases are unsuitable for mediation where any
reasonable and objective assessment of the evidence would lead to very significantly higher
number. In many cases, Second Sight offer no suggestion or judgment as to what may have
happened in any given case, and ignoring what evidence there is, simply recommend
mediation on the less than compelling grounds that mediation might offer the parties
‘closure’.
Evidence has now emerged of Second Sight’s deliberate distortion of their own findings to
support a recommendation that a case be mediated when their own internal analysis
demonstrates, without equivocation or ambiguity, that the relevant Applicant is wholly
responsible for the losses they incurred. To compound this further, this came to light ina
chain of emails between Second Sight and one of the Applicant’s professional advisers in
which Second Sight seek to provide reassurance that their findings in the case would meet
with the professional adviser’s approval. This is represents a quite inappropriate degree of co-
operation, to say the least, between Second Sight and those with a clear stake in the Scheme.
2.5
2.6
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2.8
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Lastly, and presumably discouraged by the lack of evidence of a flaw with Horizon, attempts
by Second Sight to broaden the remit of the Scheme continue apace, most recently through an
inordinately lengthy and irrelevant list of questions for Post Office to answer, an approach
which closely reflects the wishes of JFSA and MPs.
However, by far the biggest challenge facing Post Office is the simple fact that the Scheme has,
in effect, been hijacked. It seems clear that, should the Scheme not come to the conclusion
that Post Office, whether through Horizon or otherwise, is responsible for the difficulties and
losses of Applicants and that Post Office is responsible for wrongful convictions, it will
continue to be labelled as a sham by JFSA and MPs.
It is clear that the Scheme is being pulled away from anything approaching a resemblance to
its initial function — to examine individual complaints about Horizon and associated issues and
seek, where possible, to resolve these fairly. In circumstances in which only one outcome is
acceptable to one of the parties to the Scheme, irrespective of the evidence or otherwise to
support it, the Scheme represents little more than a rather large stick with which to beat Post
Office.
As noted in previous advice, there are no circumstances in which Post Office emerges from
this process in a positive light, no matter how objectively unfair that reality is. It is for this
reason that the Sub Committee is invited to adopt the following recommendation.
3. Decision point
3.1
3.2
In circumstances where the atmosphere is so febrile, confidentiality so regularly disregarded,
the participation of JFSA so conditional, Applicants’ expectations so misguided and the lack of
impartiality on the part of SS pretty conclusively established, it is hard to see how the Scheme,
in its current guise, can continue to function. [DN: not wedded to this at all]
Post Office has little option but to force the issue with members of the Working Group. The
Sub Committee is invited to endorse an approach whereby Post Office uses the next meeting
of the Working Group on 14 January 2012 as a final attempt to get the Scheme ‘back on track’
by seeking to gain acceptance of and adherence to:
* the Scheme and its processes as originally designed (by all);
* the Scheme’s proper scope (Horizon and associated issues only);
«the need to remove the threat of litigation made plain by JFSA’s instruction of Edwin
Coe LLP;
* the need to respect obligations of confidentiality and actively to promote this to
individual applicants; and
e (crucially) the principle that evidence must drive its recommendations and
conclusions.
3.3
3.4
3.5
3.6
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There is no escaping the fact that this is an exceptionally tall order. There would appear to be
very little to be gained from a JFSA/MP perspective in participating in the Scheme on these
balanced terms since it will not produce the pre-determined outcomes they seek.
That said, providing this final opportunity to address these issue sensibly is important since it
is a further demonstration of our genuine attempts to resolve Applicants’ complaints and may
offer us some further protection against possible attempt to challenge, perhaps by way of
Judicial Review, any subsequent decision we may need make about the future of the Scheme.
The risk of a successful challenge of this nature has already been assessed as being low —
recent legal advice suggests that this step will likely reduce it still further.
While it is highly unlikely that JFSA and its supporters will agree to a ‘reset’, continuing on the
same trajectory as presently, in other words seeking to muddle along as we currently are, is
not a realistic option. Post Office has, to date, been extremely accommodating in relation to
Scheme. Regrettably this approach has not produced the sort of dividend one might normally
have expected it to in terms of any sort of recognition for our efforts: instead, it could be
argued that our goodwill has to a certain extent been exploited. [DN: too emotive?]
An attempt to maintain the status quo will entail, inter alia:
« the continuation of a process conducted in the public eye, with every unpopular
decision of Post Office being questioned and/or challenged in the media and in
Parliament, with obligations of confidentiality preventing Post Office from making any
sort of effective rebuttal;
e the publication by Second Sight, likely to coincide with the run-up to the General
Election, of their further report which, judging from their performance to date and the
questions they have put to Post Office to inform its content, is near certain to place
further unsubstantiated ‘charges’ at Post Office’s door and broaden, quite
unjustifiably, the lines of enquiry it will be expected to address;
* —asubstantial risk of increased scrutiny in Parliament, perhaps through the Business,
Innovation and Skills Select Committee, bringing with it an inevitable and unwelcome
increase in the involvement and concern of Ministers in respect of this issue, when we
need them to be focused on other matters of commercial importance to Post Office;
* anextremely lengthy process given that there remain 100 cases in the Scheme; the
process of moving cases through the Working Group, attempting to challenge
recommendations of mediation by Second Sight no matter how absurd, and
scheduling and conducting mediations is certain to take much of 2015;
* pressure to allow new cases in the Scheme, some of which are likely to be entirely
opportunistic (there is already evidence of this happening);
4. What if ?
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poor results in terms of public perception since mediation can only resolve those
complaints in which the Applicant has both a legitimate claim and is prepared to settle
on reasonable terms. This is a tiny fraction of the cases in the Scheme since virtually
all complaints include thoroughly exaggerated claims for consequential loss,
effectively negating the likelihood of a resolution being achieved. Post Office will be
accused of bad faith in respect of each ‘failure’ to reach a conclusion which is
satisfactory from an Applicant’s point of view and/or that of JFSA and the MPs; and
no meaningful reduction in the risk that Applicants, individually or as a group, will
resort to litigation in order to pursue their claims against Post Office.
4.1 Insummary, Post Office now has the opportunity it has been seeking since the Summer to
bring matters to a head. Post Office should express itself as being prepared to stand by the
Scheme if, and only if, it operates as it was intended to, with other Parties displaying the same
degree of fairness and responsibility as it has shown. If those terms (which had previously
been agreed to on all sides) are no longer acceptable to JFSA, Post Office should indicate
explicitly, that it will need to reconsider the future of the Scheme.
4.2 Contingency plans are being developed which:
would move the governance and management of the Scheme in-house (ending SS’
current role and dissolving the Working Group);
might include the retention of an independent oversight function in the interests of
transparency and public confidence (though not by Second Sight); and
provide for negotiations with individual applicants, where it is fair and reasonable to
do so, in order to try to resolve their complaints.
4.3 Detailed proposals will be brought to the Board if, and when, it becomes necessary.