POL00191681 - POST OFFICE LTD BOARD Update following the publication of the Interim Report on Horizon

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POL00191681
POL00191681

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POST OFFICE LTD BOARD

Update following the publication of the Interim Report on Horizon

1. Purpose
The purpose of this paper is to:
1.1 update the Board on latest events; and

1.2 request approval of the way forward approach suggested in managing the way
forward with the SS independent report;

2. Background

2.1 As the Board are aware in 2012 a decision was made following discussions with
James Arbuthnot MP (JA) to appoint independent forensic accountants (SS) to work
with Post Office in reviewing [WHAT]. They beguin’ Work immediately to!an agreed)
TOR.

2.2In November 2012 JA instructed POL and SS to work with the Justice for
Subpostmasters (JFSA) saying that SS needed to make sure that the JFSA were
‘happy’ with their work/ report. At this time a Separate agreement was entered into
between POL, SS and the JFSA with the intention of allowing subpostmasters to
reprt any concerns they had to the JFSA and/or SS.

2.3 It was agreed that an interim report was to be published in July 2013 before the
Parliamentary summer recess.

2.4 By this time SS had undertaken work on 4 cases out of 47.

2.5 This interim report was discussed with JA plus 4 other MPs on Monday 7 July when
it was subsequently released in to the public domain. Both JA and Post Office also
issued press releases at the same time (attached for completeness).

2.6 In addition JA requested that the Postal Services Minister present a statement in
the House of Commons on the following day where she was supportive of Post
Office’s stance.

2.7 Post Office has a duty to look after the public money it is entrusted with. If it
decides that money has been inappropriately taken, it can take both civil and
criminal proceedings.

2.8 Where it undertakes criminal prosecutions it does so itself without using the CPS.
In doing so it does use external lawyers to advise on the specific criminal charges
(usually theft, fraud or false accounting) and the likelihood of conviction. It abides
by the Prosecutors Code to ensure that prosecutions are proportionate and in the
public interest.

3. Current Activities already underway

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3.1 [Central point of contact: All queries from any persons thinking of challenging a
conviction are being channelled through the Company Secretarial office for the
moment.]

3.2 Press monitoring: The Comms team are monitoring and collating all press
coverage.

3.3 New expert: A new expert to give evidence on Horizon in our criminal prosecutions
has been obtained upon the recommendation from our external criminal lawyers
that this be done.

3.4 Criminal case review:

3.4.1. We have been advised by our external criminal lawyers to undertake a
review of all cases going back to the time of the migration from old Horizon
to Horizon Online (aka HNGX) — 1% January 2010 - and this has already
begun. They are essentially looking at whether or not anything in the SS
interim report should be drawn to the attention of any defendants (current or
past) and if so they will be writing to the relevant defendants providing them
with a copy of the SS interim report. We have an ongoing legal duty as the
prosecutors to do this. They are starting with the cases POL has itself
undertake since separation last year.

3.4.2 It is important to note that we believe (precise records from RM are not
available) that we will have undertaken circa 55 prosecutions a year. Our
external lawyers have advised us that they believe there will be around 5-
10% of these which may be successfully overturned and the convictions
quashed.

3.4.3 Each individual has to seek leave to appeal to the Court of Appeal if they
want to seek to overturn a conviction. The Court of the Appeal will look at
each case on its merits and will consider what evidence a person was
convicted on: for example there may be Horizon evidence but also other
paper trail evidence or even admissions of guilt. It is by no means certain
that each appeal will be successful.

3.4.4 We may also face civil suits for wrongful conviction. The consequences of
this are:

3.4.4.1 Malicious Falsehood (recover financial losses plus damages)

3.4.4.2 Defamation (damages, undertakings and an apology)

3.4.4.3 Wrongful termination of their contracts (damages).

3.4.4.4 Harassment (if we have been over-zealous in recovering debts — again
damages is the remedy)

3.4.5 If we abandon prosecutions we may also face claims for e.g. malicious
prosecution.

Post Office’s external lawyers, who act in our criminal cases, have a responsibility to
notify the defence of any new evidence, “which might reasonably be considered
capable of undermining the case for the prosecution..or of assisting the case for the
accused”. They are currently undertaking a review of our criminal cases since the
introductions of the new Horizon system this will involve RMG as pre-separation I RMG
acted as the prosecuting authority. The case review will include all cases, whether
current or those which have been resolved either by conviction or a guilty plea. Where.

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4. Proposed Way Forward Actions:

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4.1[A central contact point for all claims that come to us] Post Office will
undoubtedly receive a number of communications from sub postmasters or ex sub
postmasters who are aggrieved as to how they were treated, we need to deal with
these properly, I would suggest by internally investigating the case and then inviting
the sub postmaster to come in and discuss their case. This process will need to be
carefully managed as again these could give rise to additional claims.

4.2 The Working Party (& the conclusion of the SS investigation and report)

4.2.1 We will establish a ‘working party (to include the JFSA) to complete the
review process and look at the thematic issues which have emerged
(particularly with regard to training and support);

4.2.2 Following the meeting with JA and the MPs and the comments made in the
House it is clear that SS will have to continue to be involved in this matter
our suggestion is that we use them to give evidence to the working party.
(NEED TO CHECK HOW ACCEPTABLE ). In addition following our
ministers statement in the House it also seems that we will need an
independent chair for this group.

4.2.3. Timing, it was stated that the final SS report would be concluded by the
Autumn so it essential that no time is wasted over the summer in setting up
the working party as described in 3.1 above. That working party could focus
on the 20 spot reviews that SS have completed but not delivered to Post
Office.

Post Office is obliged to continue working through cases which have been generated
through MPs (and others may be added to that list) and to the JFSA cases.

New MP cases may come through the JFSA or JA and we need to determine whether
they should form part of the SS work, if so question whether these could be completed
within the autumn deadline

To gain agreement form JA and JFSA as to how the working party is going to operate
so that it can start to meet quickly. This will cover the 20 spot reviews where SS have
already prepared them.

Some of the MPs cases (approximately half) have no evidence and notwithstanding that
SS have tried to contact the sub postmasters involved and therefore it will not be
possible for those cases to be reviewed. This has not yet been broached with the
relevant MPs although JA is aware.

4.3 An independent review to consider a “safety net” option

4.3.1 To conduct a review as to how Post Office might set up an independent
safety net to adjudicate in disputed cases in the future.

4.4 The Branch User Forum
44.1 to set up a ‘Branch User Forum’ involving sub-postmasters and other

relevant stakeholders to provide feedback on our training and support
processes on an continuing basis.

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44.2 These actions have been broadly agreed with JA and JFSA although both of
those parties were pushing for more specific undertaking especially with
regard to cases where Post Office had brought a criminal prosecution and
for the independent adjudicator to be an “ombudsman”.

4.5 Budgeting

4.5.1 The activity to deal with this matter will need to be properly funded and
budgeted for. At present it is estimated that this will cost somewhere in the
region of [X] but there is clearly a lot which would change.

4.5.2 Secondly there is the possibility the Post Office might end up having to pay
out compensation if legally that was the position it found itself in. In this
case a fund will also need to be budgeted for and it may not be an
insignificant sum.

4.6 Options on “Claims”
4.6.1 Two Options: Two approaches to this logically present themselves:

4.6.1.1 A Reactive approach - we wait for any criminal cases to be overturned
and for claims for compensation to be made. We then decide whether to
settle or fight these on probably a case by case basis.

4.6.1.2 A Pro-active approach — where following the publicity in the wake of the
SS interim report Post Office could proactively invite sub postmasters
and former sub postmasters to contact us to raise issues. There is a
material and significant risk in the Pro-active approach, not least
because it will lead sub postmasters to expect compensation and whilst
we may have to pay compensation if we are found to be in the wrong
(wording) these claims could be considerable eg excluding the criminal
cases, loss of business/ home/ marriage breakdown/ ill health.

4.6.2 Recommendation: The recommendation is to adopt the Re-active
approach and assess individual claims on their merits as and when they
arise. Where it is considered that there is little chance of success for the
defendant that Post Office should defend the claim. This could give rise to
the accusation that Post Office is being “bullying and unsympathetic”. There
is clearly a balance which is required with regard to legal costs and paying
compensation to defendants and a policy will need to be developed.

5. Next steps

5.1 Implement the agreed way forward following the Board meeting to which this paper
relates.

6. Risks/Mitigation

7. Conclusion

8. Recommendations
The Board is asked to:

8.1 note the update and actions set out above;

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8.2 approve expenditure of £m; and

8.3 delegate authority to X to WHAT.

Susan Crichton
10" July 2013

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