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POST OFFICE
“BLACK HAT REIVEW”
NOTE
Introduction
1.
I have been asked to review the claim made by the Claimants and identify ways in which
they could formulate their case which are likely to cause Post Office the most difficulty. Iam
asked this because the structure of the claim is confused and contains irrelevant and
hopeless elements. I also identify some obstacles which would be faced by the Claimants if
they presented their case in the way I suggest. In writing this Note I have assumed that the
reader has a good working understanding of the claims made in the action- and so do not
seek to summarise them.
Put broadly, the claim is that the deficits upon which Post Office relied to terminate the
contracts of the claimants (and which deficits (in many cases) were repaid to the Post
Office), were not real deficits at all. That they were paper deficits which arose due to a wide
range of different problems with the Post Office system of operating — the responsibility for
which the Claimants put at the door of the Post Office.
Although multifarious — and covering a broad sweep of time, the single string running
through them- and in some cases linking them, is the Post Office computer system called
“Horizon”- at least from its introduction in 2000. The Claimants allegation in relation to
Horizon is nuanced. It is not that there is a systemic problem or failure in Horizon — they
could not say this given that it worked at the material time (and still does) for many
thousands of other Postmasters. Their claim in relation to Horizon is that there were “bugs”
in the system that caused the deficits to occur.
It seems to me that based on the work done so far, that this case is unlikely to get very far
once disclosure is given their expert develops a good understanding of Horizon. This is
because the “bugs” that have been identified are very limited in scope and application and
cannot reasonably have caused the very wide range of deficits which are the subject of the
claims. At the moment paragraph 22 of the APOC simply says that, “...prior to disclosure and
expert evidence, the Claimants are unable to provide detailed particulars of bugs, errors or
defects which were or may have been the cause of any discrepancies or alleged attributed to
thei ”. Quite.
Similarly the broad claim — epitomised by paragraph 94A of APOC that, “...the Defendant
failed to provide a system which was reasonably fit for purpose” — runs into immediate
difficulties given that it was fit and clearly worked for the overwhelming bulk of Postmasters.
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But I have identified two broad elements that were I presenting their case for the Claimants
I would concentrate upon. The first of these seeks to side step the ability of Post Office to
demonstrate that its computer system operates satisfactorily (by and large)- by focusing on
the human elements of the system which are (by definition) easier to attack and more
difficult (particularly at a distance of time) to defend comprehensively. And to allege a
particular obligation directed to tailoring training and supervision to the (differing) abilities
of the whole range of postmasters that existed— good, bad and indifferent.
The second seeks to shine a bright light upon the difficulties caused by there being suspense
accounts into which miscellaneous sums of money generated by the operation of Horizon
are placed.
The first mentioned area is the non-computer aspects of the “Horizon System” . This is
subject to human intervention and the difficulties of proof one way or the other. The
Claimants are able to do this as, in effect, they contend that the “Horizon system” — includes
everything to do with it — including (a) the initial training, (b) ongoing training and (c) the
helpline. These areas, it seems, to me are more susceptible to challenge and perhaps
harbour more risk for Post Office in this litigation than the actual Horizon computer system
itself — if early indications on the Horizon system prove to be correct. I explain my reasoning
and the way I would present the case on this basis below.
The second mentioned area is the suspense account(s) — into which, as I understand it sums
inexplicably produced by the Horizon system are put when there is no other place for them.
As I understand it, it is very often difficult to determine from where such (surplus) sums are
derived- or why. This then opens up, forensically, the operation of the Horizon system — and
whether a system that can inexplicably produce surpluses can also (equally inexplicably)
produce deficits. And then there will be a desperate attempt by the Claimants to draw a line
between the two - to ask the question whether the “deficits” relied upon are “real” deficits
if the entire workings of the system are not assured. Again, I expand on this below.
The Horizon System
10.
11.
The initial selection of candidates for Postmaster appointments, their initial training,
ongoing training, and helpline are all matters which were in the direct control of Post Office.
This became more important when Horizon was introduced in 2000 — when it is said that a
more complicated computer based system was introduced (in place of the mainly paper
one) and was imposed upon Postmasters.
My sense, in reading through the materials is that the work of a Postmaster involved a
significant number of interactions with the Horizon computer system and the delivery of an
increasing number of (it will be said -complex) products alongside the normal post office
business of post and paying benefits etc. And all of this through the Horizon system. The
interaction of the main Horizon system with other products was not always seamless and
there was a need for thoroughness and attention to detail to operate them accurately.
Examples are the lottery, foreign currency exchange and cash point facilities. It is the case
that the operation of these various facilities through the Horizon system required a
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13.
14.
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competent operator if mistakes were not to be made- and one who was computer savvy — at
least from 2000.
Put broadly, the reason for deficits is likely to arise from two main causes —and there may be
some overlap:
(1) Theft of monies — deliberate unadulterated fraud. I suspect that this will represent a
minority of claims.
(2
Incompetence by Postmasters: where it will be said that they did not fully understand
the operation of the system- particularly the Horizon system when introduced and the
various products that were added. They started producing deficits — and then did not
know how to reconcile/deal with the problem. And then (crucially) they produced false
accounting returns to cover up / put off the difficulty.
The first of these eventualities needs little discussion- if the court determines that (any of )
the Claimants have stolen monies then such Claimants will not succeed.
The second eventuality, sets the context for where I would expect the Claimants to
concentrate their attack. Given that there are (only) 562 Claimants who allege problems
with Horizon, compared to some 60,000 users over some 11,500 branches (processing some
6m transactions a day) — the attack cannot sensibly be a wholesale broadly based one upon
the computer system or the training and helpline as a whole, given that so many users
operate the system without any perceptible problems. To get any traction, they will, it
seems to me, need to focus, more particularly, on the attributes and experiences of the 562
and identity obligations owed to persons such as them, and how those obligations have
been breached.
The basic narrative could be as follows:
(1) The Post Office had an obligation only to appoint as Postmasters persons who had the
ability, knowledge and skills to operate a complicated computer based system such as
Horizon and to ensure existing Postmasters were properly trained on it. That system is
said to have a low level of “error repelency” and it will be said is complicated and
provides plentiful opportunities for the making of manual errors when operating it - and
the various added products referred to above exacerbated matters. Furthermore, it will
be said that in the event of operator error Horizon was not user friendly, and, in
particular, the cause of errors/deficits was difficult to determine - unless caught
immediately. These features, it will be said were exacerbated by the alleged
requirement of the system that Postmasters “accept” deficits within short order — and
the advice allegedly given by the help line to that effect.
(2
In fact the Post Office appointed persons who were not suitably qualified (whether
before or after initial training) and yet such persons were allowed to operate as
Postmasters largely unsupervised.
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(3) Taken together, neither the Horizon system, the initial training, the ongoing training nor
the helpline — were such so as to deal with this deficiency which was the responsibility of
Post Office- as were (therefore) the deficits.
(4) This was exacerbated by the failure of Post Office to neutrally investigate the cause of
deficits or communicate with the Postmasters sufficiently- when they did arise and were
notified to Post Office.
16. This narrative will be underpinned:
(1) By the express terms in Part 2 of the NTC pursuant to which Post Office offers training to
the Manager and Assistants both initially and can require both the manager and
assistants to undergo further training if it, “....reasonably considers such training to be
essential Both generally and in relation to new products/processes. To similar effect
is paragraph 5 of Section 24 of the SPMC— which talks in terms of training and
“sufficient levels of operational and administrative support....”.
(2
By the express term at paragraph 1.6.1 of the NTC to provide a helpline to enable the
Operator to consult with the Post Office about the running of the Branch.
(3) By implied terms (not yet advanced):
(a) Which provide that Post Office have an obligation to provide such (initial) training,
ongoing training, supervision and operational support to match the understanding
and skill levels of the appointee. The last part is important — as clearly the training
and support provided by Post Office worked for the overwhelming majority of
people- and so it is very difficult to see how a Court could find that it was inadequate
at a general level- or not “fit for purpose”. Their present case, as pleaded, does not
begin to meet this difficulty.
(b
Such a term — as I suggest, seeks to place a duty on Post Office to assess the
different initial skill levels and attitudes of potential Postmasters and to provide a
tailored training and supervision system in response— and not simply to accept
anyone who puts themselves forward put them through basic training and then let
them lose on a system which will be presented as in effect, a dangerous one/ a trap
(financially), for the uninitiated. And, thus, to place a greater duty of training,
supervision and support upon the Post Office in respect of those that need it. It will
be said that Post Office have a choice who to appoint and to place into the position
of being responsible for what will be said to be a complicated intricate operating
system- with harsh financial results (and it will be said loss of liberty) - if they get it
wrong.
=
The existing pleaded implied terms do enter into this area but are more generic than
this — e.g. at paragraph 64 APOC “...adequate training and support” — particularly
when new services are introduced. The “adequate” does not seem to me to begin
to get into the specified duty the Claimants would need to advance if there were to
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run this point. The new implied term at 63A gets nearer to this target — but then
seeks to base itself erroneously on a “supply” under the Supply of Goods and
Services Act 1982. So thus far, this is not ground they have got into.
(d
Thus if they followed this more targeted approach, the Claimants would thereby
have — through a combination of express terms, and more focussed implied terms, a
framework to attack the experiences of individual Postmasters with respect to the
non-computer aspects of the Horizon system — i.e. training, supervision, and
support. This is Postmasters who on this basis are (basically) honest but
incompetent.
17. However, there are a number of problems with this suggested approach:
(1) The implied term suggested, would, in substance be a term requiring Post Office to save
the potential postmaster from themselves- and for Post Office to be in a position to
identify with certainty, the differing talents and susceptibilities of potential postmasters.
And to do so both during formal training and on the job training in branch — when (in the
latter case) Post Office would not be present. In particular, it seems to me that such a
term could only place a duty on Post Office to behave “reasonably” in this regard. I do
not know the details of the training and whether there is a “pass” or “fail” and/or a
marks system- but I suggest that this is looked at. At all events, I very much doubt Post
Office would appoint a post master to that (permanent) position if, having completed
training, they did not think that he/she was up to the job. But, what such an implied
term would require would be a nuanced response by Post Office to training- further
training and supervision/helpline, depending upon the sophistication of the Postmaster
—as demonstrated during the training period. So, nota one size fits all approach —
where, by definition, some get left behind and are subjected to the vicissitudes of the
system.
(2
Such an implied term — would more naturally fit in the employer/employee context (e.g.
not over-promoting an employee to a position of stress or difficulty for which he/she
was not capable) — rather than an arm’s length/commercial franchisee type relationship
(such as the present) — where the business of Postmaster is very often run alongside
other businesses such as the sale of stationary etc. However, it could (at a stretch) come
within the widely stated “relational contract” rubric advanced by the Claimants, and is
an area where I think we need to be diligent when reviewing the materials. Further, an
attempt might be made to fit such a term within the Stirling v. Maitland /necessary co-
operation implied terms- that we accept. Indeed, I note that at paragraph 3(a) of our
current draft Response to the Claimants recent RFI we accept that the generic implied
term about “adequate training” (paragraph 64.1 APOC) is within the Stirling v. Maitland
implied term. We need to be diligent to ensure that we only ever accept an obligation to
provide a “reasonable” training regime — and nothing more individualised or tailored.
(3
Finally, the obligation to train and supervise sub postmasters is expressly placed upon
the Postmaster — see e.g. Section 15 SPMC. But, I suppose it could be said that if the
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20.
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training of the Postmaster was not appropriate — in breach of contract — then it is
inevitable that the training of sub-postmasters would necessarily also be sub-standard.
Therefore, when it comes to causation — it will be said — that it does not matter whether
it was the Postmaster or the sub-master that was responsible for the relevant deficit
caused by any alleged failure in training.
A further significant problem with this type of analysis results from the deliberate misstating
of accounts by Postmasters- which I understand happened in many cases. The problem they
have is this. If they were to run a case that Post Office should have identified that these
particular individuals (Claimants) needed more training and supervision and a more helpful
(user friendly) helpline — than the majority (who had no problems) — then they run into a
serious difficulty when they start to misstate accounts. It might be thought to be one thing—
to suffer from difficulties from failure to comprehend / understand training provided — it is
quite another to react to that by misstating accounts. Not only is this dishonest— but it has
the dual effect of:
(a) Masking the lack of understanding of the system by the Postmaster—on an ongoing
basis. This prevents Post Office from being made aware of the difficulties being suffered
by the Postmaster — and from being able to provide such support/re-training that might
be appropriate.
(b) Deprives — through the effluxion of time — and numerous subsequent transactions — of
the evidence from which the original error/problem could have been discerned- again
on an ongoing basis.
These points have a direct impact on:
(1) Causation for the deficits — on an ongoing basis — and on one view, the true cause of the
loss.
(2) At the very least — provides the grounds for contributory fault/loss to be argued.
I would expect a court to be underwhelmed with the point the Claimants make that they
were obliged or pressurised into submitting false accounts/ false declarations of cash/stock-
in the absence of compelling evidence to that effect. However, if the Claimants come across
as clueless and untrained — then they might start to get the Court to, at least listen seriously,
to these points.
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The suspense account
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15.
16.
17.
The Claimants case on the suspense account is presently contained in two paragraphs —
paragraph 38 and 39 AGPOC. And as yet is undeveloped. They simply say that there were
suspense account containing unattributed surplus’s — which they say included surplus’s
generated from branch accounts. That these surpluses represented (at least in part) the
shortfalls suffered by Claimants (on their branch accounts) with the result that the
“shortfalls” in their branch accounts did not represent “real” losses to Post Office.
As I understand it there are a number of different suspense accounts, into which,
unallocated sums produced by the Horizon system are put. And, that it is very often difficult
to determine from where such surpluses have come.
I would expect the Claimants to seek to open this up — once they have a better idea of the
scope/size of this problem and its likely cause(s) — with the assistance of their expert. This
then opens up, forensically, the operation of the Horizon system more generally — and the
Claimants will be asking whether a system that can inexplicably produce surpluses can also
(equally inexplicably) produce deficits.
Whatever the niceties of burden of proof/pleadings — this is an area where we can expect a
good deal of probing once their existing attack on the Horizon system per se, fails to
generate results. In a sense, they will try and put us in a positon where we have to
demonstrate that no part of the amounts in the suspense account(s) correlate to the
shortfalls suffered by the Claimants in their branch accounts. This is, as I understand it, likely
to be difficult.
David Cavender Q.C.
18 January 2018