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From: Andrew Parson:
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Attachments: Draft Order - Third CMC Order.DOCX; _LETTER_38095241(1)_Freeths - Stage 2 Disclosure.DOCX;
_DOC_38090054(1)_Claimant_s Request for Stage 2 Disclosure - POL comments.DOCX;
_LETTER_38084988(1)_Freeths - Security for Costs 11 Feb 2018.DOCX; image1f717b.PNG; image65e91b.PNG;
imagecd33df.PNG
Rodric, Mark
Please find below a number of points on which I would welcome your comments / approval. I do not believe that any of
these matters require approval by the PLSG because they are either (i) the implementation of decisions already made by
the PLSG or (ii) requirements of the Court. I would be happy to update the PLSG on these matters at the meeting on
Wednesday but our time is very limited before the next CMC and we would like your urgent instructions on the below
during the course of tomorrow if possible.
I'm available at 10:30 tomorrow morning if that would be a good time to speak. I'm then out until about 4:30pm but you
may speak to the following if I'm not around:
e Amy -— Model C disclosure
e Emma - Security
e Jonny — Horizon issues
All of the points below have been approved by Counsel.
Security for Costs
Attached is a response to Freeths recent letter on Security. Freeths' letter raises no new info that changes the position on
security so our advice is that Post Office should push forward with the security application at the end of this week unless
we hear anything new from Therium before then.
Freeths have requested that Post Office agrees to a Costs Management Order before requesting security for its costs. A
CMO can cover a number of things but in the majority of cases it means Costs Budgeting. This is a process where we
submit a budget for Post Office's litigation costs to the Court for approval. The Court usually holds a hearing where the
budget is examined line by line, the other party argues that the budget should be revised down and the Court approves
the revised budget. There is an assumption that a party cannot recover more costs than set out in the approved
budget. If the shape of the litigation changes or the assumptions in the budget change, a party needs to apply to the
Court to revise its Cost Budget. Costs Budgeting is mandatory in most cases, save for those where the claim is for more
than £10m.
There are a number of points to consider in the current litigation.
1. If we are correct about the need for security, then POL's costs will effectively be capped at the level of security
anyway. A CMO would only materially change POL's cost risk if the security application is not made.
2. The judge is going to have to conduct a quick review of POL's costs budget as part of the security
application. We are therefore going to be subject to some level of cost scrutiny anyway.
3. lam concerned (and so are Counsel) about the amount of work needed if we have costs budgeting. Every time
the judge makes a new direction, we would need to revise the costs budget. In this litigation that could be quite
unwieldy as we have changes of direction at nearly every CMC. I think this will hit POL harder than the Cs, given
that Post Office will carry the bulk of the work on disclosure and expert evidence.
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4. From a neutral / objective standpoint, it's difficult to see why cost budgeting is needed. The value of the
Claimant's claims is £200m+. It would require some massive spending, way higher than current predictions, for
us to reach a level where costs were disproportionate.
5. There may be some advantage in Cost Budgeting if it helps control the Cs costs. They have so far spent double
what Post Office has spent (£2.7 v £4.5m) but, interestingly, they have not provide us with a cost update in the
last 2 months, even though they are required to update us every time they spend another £250k. Either Freeths
have forgot to update us or they have significantly slowed their rate of spending.
Unless a CMO would be useful in controlling the Cs costs, we see little reason to support cost budgeting. We therefore
need sight of the Cs future costs in order to be able to judge the merits of a CMO.
I've also had a call this morning from Freeths on a without prejudice basis. In essence, they are prepared to put up a
bond as security if we agree to cap the costs that Post Office can recover from the Claimants. They are worried that our
costs will get too high and want some control over them. They would also like us to explore this possibility before issuing
our application for security.
Counsel and I are not minded to hold up our application for security. Freeths have dragged their heels on this for a long
while. Also, getting security in place will be tricky — Therium will need to fund it, the insurers will need to put up the bond,
the terms of the bond will need agreeing and we'll have to complete some form of costs budgeting process in order to
establish the security level. I can see that getting dragged out for weeks if not months.
We also don't see why Costs Budgeting needs to precede the security application. The Court can decide the principle of
whether security should be ordered and make an interim assessment on the level of that security, which can be revised
later if Costs Budgeting is adopted.
Our recommendation therefore is that we issue the security application, but ask for a hearing date no sooner than 6
weeks. This gives us time to explore Freeths' proposal, but creates a time pressure so that this does not get dragged out.
I should be grateful if you could approve the attached letter which implements this recommendation.
Model C Disclosure
We have reviewed the Claimants’ requests for Model C disclosure. They are, in effect, still seeking massively wide
disclosure that goes far beyond the Common Issues for November and far beyond admissible factual matrix. The
attached Model C table includes our comments on each request (which has a few points in yellow that need finalising
tomorrow).
We recommend that Post Office opposes nearly all these requests, save for those that are sufficiently narrowly defined
that giving them would be easy. We believe that it is important that Post Office adopts a consistent approach. If we
oppose certain categories of documents on the grounds that they are inadmissible, then we need to oppose all similar
documents save where there is an obvious reason not to do so — which leads to a large number of requests being
opposed. We should also keep in mind that Post Office's original Model C proposal was drafted very generously and in
places went beyond admissible factual matrix, so the Cs are already getting more than they are strictly entitled to.
Counsel and I have a fair degree of confidence that the Court will be with us on this approach so long as we continue to
constructively engage with Freeths.
We have prepared the attached draft letter to Freeths explaining this position. We should be grateful for your comments
on / approval of this letter.
March 2019 issues
Please find attached a draft Order that we wish to send to Freeths setting out our proposals for the March 2019 trial.
Our approach has been to stick rigidly to only issues that are purely technical in nature, in line with the Judge's comments
at the last CMC. We expect Freeths to take a wider approach and seek to pull in issues like training on Horizon and
support in using Horizon. We do not believe the Judge will support that idea. We also do not believe that this is an area
where we should play tactical games in trying to shape the issues to POL's advantage. That will be seized upon by the
Claimants and could lead to criticism from the Judge.
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The list of issues Counsel currently proposes is in Schedule 3 to the draft Order. Having reviewed the pleadings, this list
represents all the purely technical Horizon issues in dispute. We are going to run this list passed Fujitsu tomorrow and
Counsel is going to consider whether this list could be cut down / refined.
The draft Order also sets out our proposed directions to the March 2019 trial. These split out into four phases:
1. Phase 1 (now to May 18) is briefing the experts on Horizon and getting them to refine the issues in dispute into
proper technical questions.
2. Phase 2 (May 18 to August 18) is an open period in the timetable into which further directions can be fit. It may
be that there should be further disclosure or orders for the inspection of Horizon by experts.
3. Phase 3 (August 18 to October 18) — the experts produce their principal reports into Horizon.
4. Phase 4 (December 18 — February 19) — supplemental reports are produced in light of anything coming out the
Common Issues trial.
To accommodate this, we do need to move the March 2019 trial back by two weeks. Despite the Judge's comments at
the last CMC, I doubt he would consider this to be an unreasonable request, even if he did not agree to it.
There is no doubt that this timetable will require a considerable amount of work and it will require us to work in parallel to
the Common Issues trial. That will be challenging but there is no realistic alternative to this.
Subject to any further comments from Fujitsu or Counsel, we should be grateful for your approval to send this draft Order
to Freeths for their comments.
Kind regards
Andy
Andrew Parsons
Partner
Womble Bond Dickinson (UK) LLP
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