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Strictly privileged and confidential
Prepared for the purposes of seeking/providing legal advice
Statement No.: First
Date Made: 12 January 2018
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ROYAL COURTS OF JUSTICE
BETWEEN:
ALAN BATES & OTHERS
Claimant
AND
POST OFFICE LIMITED
Defendant
PROOF OF EVIDENCE ANGELA [DO/YOU'HAVEIA(MIDDLE
NAME] VAN-DEN-BOGERD
Meeting to obtain proof of evidence took place on 12 January 2018 at Post Office
Limited's offices in Swansea.
1. I, ANGELA VAN-DEN-BOGERD WILL SAY as follows:
2. I am Angela Van-Den-Bogerd, People and Change Director, of Post Office
Limited (Post Office).
3. I make this proof of evidence in support of Post Office's Defence in these
proceedings.
4. The facts set out in this statement are within my own knowledge, or if they are
outside my knowledge, I have explained the source of my information or belief.
Background
5. I have been with Post Office for nearly 33 years. I completed by A-Levels and
had secured a place at Newcastle University to do teacher training. I had planned
to take a year out before starting university. My father was a postmaster. The
head of Post Office HR lived close to me and informed me that Post Office was
recruiting the summer I finished school. I applied and secured a role.
6. Post Office is a very good organisation to work with. I was sponsored to obtain an
NVA and NCIPD. Post Office really do invested in their employees, providing we
put the effort in.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
I started my employment with Post Office on 1 April 1985, and since that date
have worked in a number of positions including as:
a Branch Counter Assistant as part of the directly managed network between
an Area Manager in Cardiff looking after a number of directly managed (or
"Crown") branches extending into managing the agency network in around 1994.
As part of my later role as the area manager of Wales, I was responsible for
interviewing the postmaster, appointing the postmaster, managing and exiting the
contract with them and everything else in between ([pléase insert dates]);
Manager of the Training and Audit teams. I was responsible for the whole audit
training and contract function between [pléase confirm dates);
Manager of the teams that closed and maintained Post Offices, dealt with the
relocation and refurbishment of Post Offices and I was also responsible for the
Contracts team between [please Confirm dates);
Head of Sales in 2004 (ea could you give some more detail about what this.
National Network Development Manager between September 2006 and March
2006, responsible for designing, developing and deploying the process to deliver
3000 changes to the Post Office network (including 2,500 closures and the
establishment of 500 new type services) and led a field based team of c. 100
managers in the delivery of the national implementation plan;
Network Change Operations Manager between April 2009 and November 2010,
responsible for determining Post Office's strategy in respect of key network
partners and the development and implementation of the network strategy to
deliver the right size and shape Post Office network to meet future commercial
aspirations;
Head of Network Services between December 2010 and August 2012;
responsible for the provision of the network services that shaped, supported and
sustained the national network of circa 11,500 Post Offices including franchise
contract development and deployment; implementation of the annual financial
and compliance audit plan,
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Head of Partnerships between September 2012 and August 2013, I was
responsible for the relationship with CWU; Unite CMA for managers and also the
National Federation of Subpostmasters;
Programme Director for the Branch Support Programme between August 2013
and March 2015, responsible for the delivery of a high profile and politically
sensitive business improvement programme. As part of this, I was leading the
investigations and was involved with the investigations and mediation scheme
cases and part of the Working Group including setting that up;
Director of Support Services between April 2015 and December 2016,
responsible for NBSC (the Network Business Support Centre), our helpline for
postmasters; our customer helpline; the Financial Service Centre (FSC), the
Human Resources Service Centre (HRSC) and managing the Contract Admin
team.
Since January 2017 I have been employed as the People and Change Director,
responsible for HR (HRSC) and Health and Safety. I also manage the change
portfolio across the organisation.
I have always been close to the operation. I used to operate the manual
accounting system myself when I worked on the counter. I was involved when
Post Office introduced Horizon, which included supporting the agents and going
out in to the branch when it was in the difficult transition period. I have a very
hands on knowledge of how that branch works from Horizon and then Horizon
Online and then subsequently as well.
I have always lived in Swansea, however latterly my roles have been mostly field
based so I travel a lot. At the height of my network roles I would frequently travel
to Scotland, Northern Ireland, Penzance and everywhere else in between.
Location of branches
11.
12.
When I was Head of Network Services, I was in charge of making the decision as
to whether there was a role which needed to be advertised for; whether Post
Office was going to continue having a Post Office branch in a certain location or
whether or not there might need to be a new location.
At that time (and today) Post Office had a Government requirement that it
maintained the network at 11,500 branches. There was certain criteria which Post
Office had to fill as part of this requirement, such as a percentage of the
population had to live within three miles of a Post Office branch and another
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
percentage within one mile of a Post Office for example. That in itself was the
starting position which drove the size of the network.
Post Office also has a modelling team, which I have worked with, who use
software which analyses where would be a good location to have a Post Office
branch. Post Office would also be approached by people who were purchasing
premises and considering having a Post Office. If so, Post Office would consider
whether the location would be viable and a good opportunity or whether we would
be poaching business from other established Post Offices. We also had a
decision matrix to support all location decision making.
Recruitment
14.
15.
16.
17.
18.
19.
20.
The recruitment and vacancy advertising process for appointments of agents,
either new postmasters or replacements, has been relatively consistent over
time.
The advertisement was historically made on paper, which would be displayed on
a notice board in in the advertising branch and the nearest three branches.
Post Office later created a dedicated website to advertise vacancies for a certain
period of time. There are guidelines for how long advertisements were posted for
and what was stated in them.
Post Office would advertise any vacancy for a minimum period and invite
applicants, with or without premises, to apply for the role. The applicant had to
provide premises at some point to be able to continue with the application.
If Post Office advertised a vacancy, it would state that we have an opportunity for
a branch and this is a contract that Post Office are willing to engage on. The
applicant has to choose to engage with Post Office on the terms offered and be a
part of the Post Office franchise or they can choose not to. There is very little
room for contractual negotiation.
Another way in which Post Office has advertised vacancies is through roadshows
and trade fairs, which it would have a stand at.
Some locations would only attract one applicant. It depended predominantly on
the location and clientele. Following the economic downturn in 2008, we saw a
much wider spread of one to one applicants to vacancies. That became difficult if
the applicant was not suitable and Post Office knew the person currently
Operating a branch in that location wanted to leave.
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21.
22.
23.
24.
25.
26.
27.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
As far as the recruitment process was concerned, Post Office operated on the
basis that its responsibility was towards the person coming in, not the person
going out. The focus was on the viability of that business going forward.
Sometimes Post Office came under pressure from the outgoing postmaster to
accept the applicant who had offered the highest price for that business. A
postmaster once said to me "Can you appoint that one because he's going to pay
me more" and I responded "no, I'll do whatever is the right thing to do on the
day".
As part of my role as [please confirm, I used to carry out interviews of
prospective postmasters. The interview was always conducted by two Post Office
interviewers. One would ask the questions whilst the other kept a note of the
answers. It was important that two people carried out the interview, as Post
Office was vulnerable to being accused of taking backhanders or succumbing to
pressure from the outgoing postmaster. For this reason, Post Office's processes
had to be transparent.
Sometimes I would carry out "pre-site visits" if Post Office had received lots of
applicants for a post. During Cardiff Bay's regeneration in the early 1990s, Post
Office would frequently receive multiple applicants for a position. I would visit the
applicant on site and ask them to talk me through their business plans before the
formal interview. This allowed me to get under the skin of their business plans
and because of my experience operating branches, I could see some of the
potential flaws in their suggested plans. I would make suggestions and expect
them to take those suggestions on board at the interview.
As part of the application process, an applicant is required to put a business plan
together, which would include their projections for income generation and ratios.
The interview would last around two hours. Typically, the first part of the
interview would be asking standard questions such as "why do you want to run a
Post Office" and "what are you looking to achieve if you work here".
The second part of the interview would be the interviewers scrutinising the
applicant's business plan and assessing the financial viability of the business
proposed. Interviewers used to prepare the resale projections to compare the
business plan against.
Post Office would also test the strength of that business plan around "are they
being very optimistic in terms of x, y and z ". Anybody can make a business plan
work, it's just whether the figures you put in are credible. We would question "if
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30.
31.
32.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
this is your remuneration, you've got this number of staff, what hourly rates are
you paying them?" etc. Sometimes when you got under the skin of the business
plan, you would realise that the postmaster would only make £10 profit a year.
We would ask "is that really what you want to do?".
As part of the interview process, I made it clear that I am here to help you help
yourself to make a really good business. As part of assessing their business plan,
I took a very strong interest in how the retail was operating because that was key
to the whole viability of the business.
A "good chunk" of the interview would be going through the contractual
obligations to make sure the applicant fully understood what they were signing up
for. I would run through the key parts of the contract and explain the implications
of the clause to the applicant. They would be given lots of food for thought. Post
Office wanted to test that they were happy with what they were signing up for.
As I have said, part of my responsibility was or interviewing prospective
postmasters. This required me to be familiar with the contract they would be
signing up to (the Sub postmasters' Contract). I had read the contract cover to
cover when I was a branch manager. I believe the contract was not too legalistic
and could be easily read and understood by the postmasters. I understood it and
the importance of explaining it to postmasters in the interview. The contract was
part of the interview pack, so I believe that each interviewer would have gone
through the same process as me.
There are a number of areas in the contract I would always refer to in an
interview. This was partly done to protect the Post Office. I would expressly refer
to "You are expressly forbidden to use Post Office cash for anything other than
Post Office". I would give an example such as if the bread man comes in and you
have got a bill to pay, you cannot not take the cash out of the Post Office till as
this would be a breach of contract and allow Post Office to terminate the contract.
I used to work from a crib sheet which would flag the key areas of the contract for
me to discuss during the interview. I haven't got the crib sheet any longer. I
remember that it covered providing and maintaining the premises at the
postmaster's own expense, accommodation (we used to go through what that
means and how we would verify that) and personal service (which involved
explaining to the postmaster that you don't have to be there at the Post Office
premises but that does not negate your responsibility under the terms of the
contract). I would run through all of section 12 of the contract (this section
covered responsibility for Post Office cash and stock). I would also explain how
the books were balanced and explain Post Office's approach to losses i.e. the
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36.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
postmaster was responsible for all losses whether it's incurred by the postmaster
or their staff members. I would talk through the fact that if there was a loss, the
postmaster would need to make good those losses. Often the applicant would ask
more questions around that and about gains. I would also cover sick absence
and holiday cover contributions.
I would also cover section 15 of the contract, which dealt with assistants. This
involved discussing what they were meant to do around the P250 form (which the
postmaster had to complete giving details of his assistants so they could be
vetted before being employed) and explaining the process for when they take on
new people. I always went through CRB (Criminal Records Bureau) checks for
both the applicant and if they were offered the position, their staff.
I also used to discuss the implications of the Official Secrets Act. Very often the
applicant would come from within the community and therefore we needed to
really instil in people the importance of, "this is data you cannot share". A
postmaster will see things which are confidential to the customer, such as their
account balance, the amount in their pension or National Savings, how much
they were paying into their bank account each month etc.
Depending on the applicant, I was sometimes required to delve further into the
meaning of the contract. For example, I once interviewed someone who was a
local councillor. I ran through the fact that he could not use his office and position
in the community improperly or use his positon to distribute propaganda for his
campaign.
Incoming postmasters would often be advised by an accountant as to the best
way to pay themselves, whether through a wage or receiving the profit. From my
interview experience, the approach was very much depended upon what type of
business they've had in the past, what type of business person they were and
how good their accountant was. Post Office always insisted that an applicant
couldn't bring their accountant to the interview. Post Office wanted to ensure they
fully understood their own business plan, rather than the person that put it
together. I have rejected people on the fact that they couldn't give me confidence
that they understood their business plan.
I was responsible for Post Office Development Fund. I secured some money
from the Welsh Government to invest in Post Offices, with the Fund's aim to
enable Post Office branches to remain commercially viable, for the
subpostmasters to strengthen their businesses and make them sustainable in the
long term for the benefit of the communities they serve. I used to run through
what support they may be entitled to under that Fund if it was relevant.
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40.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office would take into consideration whether an applicant had worked for
Post Office before. However, there were many occasions I can recall where out
of 2 or 3 applicants, I did not appoint the one with previous Post Office
experience. You can train someone to run a Post Office: it’s about their business
acumen and whether they are able to run a successful business. However, some
of our worst appointments have been postmasters who were ex-Post Office
directly managed people. This is because they try to run an agency branch as
they run a directly managed branch and it's not the same business. When it is
your own business, you the postmaster have to pay the bills, manage your own
accounts and look at your profit margin. So Post Office's assessment on who
would be the best candidate can be very different, depending on the individual
and their experience.
Sometimes, when the incumbent postmaster wants to leave, they want Post
Office to appoint their staff or their family member as the new postmaster. For
Post Office, it comes down to whether there is a good business case for this. The
advantage of family transfers is that Post Office doesn’t need to advertise that
vacancy so long as it is not done for any financial gain.
When I was carrying out the interviews, I did get a bit of push back around family
transfers because I carried out the interviews in the same way, despite the fact
the applicant may have already worked at that branch and was seeking to take
over that very business. However, I believe it was in Post Office's interests to
check that the applicant knew everything about the business: I wasn't prepared to
take them at face value. I just treated everybody as individuals and went through
the process.
The process was largely similar for a replacement postmaster as for a new
appointment at a new branch. However, there was less need for a scoping visit
as often there was no refurbishment required. If refurbishment was required, for
example fitting in a new counter, one of Post Office's team would attend the site
to help with the fitting arrangements. They would receive drawings and the
specific requirements of what they would need to build.
CRB checks
43.
Once interviewed, Post Office would carry out checks on the individuals
concerned. We would do CRB checks and a credit worthiness check to inform
our view of financial stability against their business plan.
Post Office also carries out CRB checks on an incoming postmaster's assistants.
This was important as this requirement is built into our contracts with clients (so
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that clients can be confident about the people working in the Post Office
network). In addition, Post Office is a financial institution and needs to comply
with the FCA. Post Office is also trying to protect its assets by carrying out such
checks.
Contracts and legal advice
45.
46.
47.
48.
49.
If they are offered the position following interview, Post Office recommends that
postmasters take independent legal advice on the terms and effects of the
contract before they sign it. This recommendation is mentioned at interview and
also referred to in correspondence if the applicant is successful at interview.
Whilst Post Office recommends the postmaster takes legal advice, it cannot
force the applicant to take advice, as it was a business to business transaction.
There were instances when a postmaster signed the contract and I would ask,
have you taken legal advice, and the answer would be no.
If the interviewee was offered the position, Post Office would send them a paper
copy of the contract together with the appointment papers. A bound copy of the
contract would also be present in the branch. Every postmaster therefore had a
copy of the contract. Whether or not they referred to it, is a separate issue.
An outgoing postmaster should brief the incoming postmaster. I didn't rely on this
process taking place, as I was aware that this didn't always happen. Part of this
conversation between the postmasters should have covered the practical
operation of the contract.
If the postmaster had not completed the appointment paperwork by the time Post
Office was transferring the contract, we had to sign the appointment letter and
contract on site on transfer day. The postmaster's signature was required before
Post Office allowed them to take on/ over the branch and before they were
allowed to have access to Post Office cash and stock.
Once signed, the contracts with the postmasters were stored in a building in
Leeds. The appointment papers were also retained and formed part of the audit
pack. The administration site in Leeds has since closed. The hard copy files are
now located in Chesterfield or archived with Iron Mountain/ Boxset. The papers
were later uploaded onto our electronic filing system.
Temporary subpostmasters
50.
Temporary Subpostmasters (often referred to as "temps") were utilised when we
had an audit situation and a postmaster had been temporarily suspended. Post
Office also used temps if, for example, a postmaster was declared bankrupt. At
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52.
53.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
some points of its operation, Post Office has had a large number of temporary
sub postmasters in place.
There is a defined process for recruiting a temp. The process was not as detailed
in terms of the business plan and financial implications for the business, as the
running of the business is still covered under the postmaster's business plan. The
key consideration was whether the temp could reach an agreement with the
incumbent postmaster around using the premises. Post Office has changed their
process slightly so that it also pays the temp an amount of money. Under the
Mains contract Post Office has step-in rights. We have built that in to say "we will
pay X amount of money to cover the use".
We have a number of people who are repeat temps. There are some companies
Post Office engages with which have been set up to do just this temp work. If
Post Office hadn't used the temp before, they would go through an interview
process. They would be subject to the same compliance checking and training as
a postmaster.
Post Office sometimes faced difficult conversations where we had suspended the
postmaster and he wanted his wife or vice versa to step in as the temp. That was
always difficult. At one point there was almost an unwritten rule that we wouldn't
allow the husband or wife to take over. I challenged that and changed it so unless
the suggested temp was suspected of being involved in the situation which had
deemed suspension necessary, then Post Office should allow them to cover the
branch during the period of suspension.
The temp transfer process itself is relatively simple. Post Office will carry out a
transfer audit on site and the temp will then take over responsibility of cash and
stock. Post Office would also make sure the alarm codes had been changed and
that the temp has a set of keys. In some cases Post Office insisted that the locks
were changed.
There were streamlined documents for the temps to sign. They were given a 7
day notice period. This short notice period gave enough time for the final audit to
be carried out before the branch was handed over again. It was sometime the
case that the postmaster was re-instated in replacement of the temp.
If Post Office was unable to find a temp, the business was sometimes closed
whilst the suspension and investigation was on-going. If the contract was
terminated, the vacancy would be advertised.
Contact / support during ongoing relationship
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58.
59.
60.
61.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office had a team which account managed a number of branches. Pre-
Horizon, these were known as "cluster offices".
The Area Manager would be responsible for the whole life cycle of the
postmaster Over time the Area Manager position has had different names, but it
has been a similar role. Some of the names included the RLM (Retail Line
Manager), RNM (Retail Network Manager) and BDM (Business Development
Manager). (Is the Area Manager another name for RLM, RNM or BDM or is it
were the roles fundamentally similar? Have we understood this correctly?]. Part
of the role of the RLM, RNM or BDM would be a visiting cycle, which was usually
quarterly. Area Managers knew the branches very well due to this high level of
personal contact. Over time, the way we run our business has changed and there
is no longer a planned visiting schedule for branches.
The essence of the Area Manager role was account managing the branches to
make them as viable as possible for the postmaster and Post Office. The
postmasters sometimes confused this partnership as meaning something more,
such as that this relationship means they are employees of Post Office. Clearly
they are not.
Post Office set the requirements of how postmasters run the branch. The contract
stipulates what the expectations of customer service is, how the premises should
be presented, opening hours and the products and services that the branch would
transact.
I was the Area Manager for Wales and would carry out quarterly visits to the
branches under my remit. I had a really positive relationship with the postmasters
as I had the background experience to be able to give them detailed support.
Having worked in a branch before, I was able give the postmasters practical tips
on running the branch not only at the visits, but also on various calls with
postmasters.
There are different ways of monitoring performance of a branch. I would have a
conversation with the postmaster about performance at the quarterly visit. By
being in the branch, I could also physically see how they were performing.
The BDM [can we say Area Manager to keep the terminology consistent, or is this,
Gifferent?] had a certain amount of influence, which a BDM would use to try to
improve the performance of a struggling branch through hints and tips. The BDM
may have been required to escalate their concerns after a visit and it could be
the case that the postmaster would be deemed to be in breach of contract. If so,
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66.
67.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office would try to correct that situation with the postmaster. In some
circumstances, Post Office would deem they were in breach of their contract and
go through contractual breach procedures with them. [please could you confirm)
whether these are general comments or part of the BDM's specific role?)
Postmasters understood what their contractual obligations were through the
interview process and training. Their obligations were reinforced through the
quarterly visits.
From my experience as an Area Manager, I was aware that not all branches had
frequent visits. These branches were aware of their obligations through branch
standards. Post Office were made aware of possible breaches of branch
standards through the customer helpline. Everything which comes through the
helpline is recorded. This function enables Post Office to question a branch about
its day to day running if a customer has raised concerns.
If a postmaster reached out to Post Office, we, the Area Managers, would give
them more of our time. If they breached their contract by default or had
unexplained errors they would get more of Post Office's time. In those instances,
Post Office would sometimes proactively reach out to them.
Another point of contact for postmasters was (and is) NBSC, which they were told
to telephone as their first port of call. NBSC and Kendra Dickinson's team, who
focussed on [what part of NBSC did Kendra's team sit in, we understand Kendra
has had a few roles within NBSC since 2006 and just want to make sure this
Gross references with her experience] particularly would collate this information
and inform Post Office that this branch normally averages 2 calls a month and
suddenly we have got 40 calls a month. Post Office would then reach out to the
postmaster and try to ascertain whether there was a wider problem. It might be as
simple as the postmaster is on holiday and they have brought in a temp who is
not quite as familiar with the branch and Post Office processes. If that was the
case, it was likely the issues will settle down upon the postmaster's return.
However sometimes those calls would allow Post Office to identify issues we
would not otherwise have been aware of. In that sense, the postmaster can
influence the level of involvement we have in the running of the branch, by how
informed they keep Post Office of such issues.
As Post Office has less branch face to face contact than it did historically, it is
harder to tell nowadays if there is an underlying problem or if a branch is
struggling. When I was visiting the branches as part of my role as Area Manager,
I would know instantly if there was an issue, for example by looking at the stock
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70.
71.
72.
73.
74.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
on the shelves in the retail side. This knowledge came from my longstanding
experience in Post Office.
There has been a gradual change in approach as to managing the postmasters
as technology has become more advanced. It would be a very costly model to
maintain the field resource and frequent face to face contact with branches in the
modern world.
Post Office has always had a sales focus. Part of the postmaster's objectives was
always to drive certain volumes of transactions. The target may be a rounded up
target depending on the level of business going through that branch, which a
postmaster may need to either maintain or improve.
This is a win-win approach because if the postmaster sells more they get paid
more and Post Office in turn generates more income from that branch. It was in
everyone's interest to have that approach.
There has always been a focus on how does Post Office make sure the
postmasters generate sales in the right way and ensure that they are compliant
with the regulations.
Post Office has become more focused on individual product sets, for example it
may expect [ai/Area’ Manager] to set a target across the 50 branches for which
he is responsible of, for example, 2000 sales of Post Office home phone
packages. This product based approach is an alternative to a fixed income target.
The [Area Managers’) objectives have always been linked to targets.
Whilst the role of [BDM] wasn't as rounded as the role had been previously, it
was still part of the role to assist the postmaster if he/ she was in difficulty.
Postmasters would sometimes contact me directly and say I have asked for help
and haven't received any. I would then get involved and escalate their complaint.
There was therefore always the mechanism there for support, providing the
postmaster told us there was an issue. Post Office weren't able to see that there
were problems in a branch from ground level, so it couldn't be proactively
identifying there were issues unless it was informed of them by the postmaster.
Post Office didn’t have a sophisticated system or level of operation to enable it
to do this without input from the postmaster or a concerned member of the public.
I was Head of Sales for multiple branches in about 2004. At that time Post Office
was quite sales focussed. It entered into a joint venture with Bank of Ireland
around that time. The emphasis was about how we introduced the products and
empowered the postmasters to sell them. It became much more of a selling
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
conversation. At that point some of the postmasters would claim that it was all
about sales and that Post Office was not giving them enough support. To some
degree sales are always the focus. Post Office always had the helpline (NBSC)
there to support the postmasters.
The level of support has transformed as Post Office started to segment the
network and went away from geographical considerations to types of branches.
The only physical support, as in assigning branches to Post Office individuals,
was in the large branches. Around 2,000 of the more commercial branches had
Sales Capability Managers. There were a number of different versions of that
role. The rest of the network had pastoral support through NBSC.
Training
77.
78.
79.
80.
81.
82.
The aim of the training is that the postmaster is equipped to take the role and to
do the role that they have been asked to do. The training is offered to the
postmaster as part of the induction process.
The training offered to postmasters has changed over the years. Post Office has
continually sought to improve the quality of the training and how that training is
received.
Pre Horizon (which was introduced in 2000), the training was carried out on site
(at the branch) over a period of around two weeks, as "on the job" training. I was
an on-site trainer and used to visit and train postmasters on the manual system. I
made it a condition of the appointment that the applicant attended the training
course.
Post Office wanted to ensure that before the postmaster took on the appointment,
they had had the opportunity to ask questions because different branches have
different transactions, depending partly on the location of the branches and the
services and products they were responsible for. The training would therefore be
tailored in part depending on what sort of branch the applicant was going to run.
More recently, since the introduction of new contracts, different models of training
were provided to the postmaster depending on whether they were on a Mains or
Local contract. The number of days over which the training took place depended
on which model of training was provided. The training usually took place over 8
to 10 days. Both courses involved some classroom and on-site training.
When a trainer went on site, they did a transfer of a cash and stock and showed
the postmaster how to put all their cash and stock in. The trainer would also run
through balancing the books with the postmaster as well. Most often, it would be
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83.
85.
86.
87.
88.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
the same person who would come back to carry out the transfer audit after the
applicant had passed the training.
It was often a stressful time for the incoming postmaster as they were often also
moving house as well as buying a business and entering into a commercial
transaction with the Post Office. I always stressed to them what this commercial
relationship entailed and offered suggestions on how they would want to organise
themselves. I also stressed how important it was to be "present" at the training to
equip them properly for running the branch.
We would historically offer training to not only postmasters, but also their staff if
there was space on the course. Now, it depends what type of contract Post Office
has with the postmaster. I believe under the standard Local contract the
postmaster is required to train their staff. In this situation, Post Office trains the
postmaster, and they train their staff. In the Mains contract, there is an obligation
that a number of their assistants are required to be trained as well.
At the training sessions, I would impress on the applicants that they as
postmaster were responsible for the branch and his/ her staff and potentially
liable to Post Office under the contract for actions not only of themselves but also
their staff. I would also impress the importance of the postmaster being
comfortable that their staff were properly trained and with signing off and
declaring the cash count as carried out by their staff.
Even if a postmaster had experience with the Post Office before, it was important
that they attend refresher training as the training was always evolving. If there
was space on the course I would suggest that the postmaster bring their staff with
them to utilise the spaces on the course. Post Office works on the basis that
ideally at least 50% of postmasters' staff attended the training [i8'this correct?
Can we explain more about how this works since training is only offered to
assistants if there is space?].
Once the applicant has been accepted, the current position is that they will be
sent a link to the online training through webcams, podcasts and video links. The
online training is interactive and requires user participation. Recently, Post Office
has provided online training as a precursor to classroom and on-site training. This
is a change I suggested as it became apparent over a number of years that there
is a lot to take in for postmasters and this approach ensured the postmaster has a
variety of methods to take in the training.
A postmaster has to pass the online training before they are offered classroom
training. This means that a postmaster has to have a certain level of basic
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89.
90.
91.
92.
93.
95.
96.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
knowledge to process to classroom training. The classroom training is intended to
reinforce the online training and put into effect the practical skills, such as
working behind the counter.
The postmaster is required to pass both the online and classroom training before
they are allowed to work in the branch. When I was in training role, I used to use
the analogy of learning to drive a car. In that scenario, you had to pass both the
theory and practical test before you could be let loose on the roads.
The content and set up of the training courses has changed and improved over
time. One noticeable change is that the current content has a greater sales focus.
In the future, it is likely to be a condition of appointment that everybody who
carries out Post Office transactions has to pass the Post Office training.
When Post Office introduces new products or changes to products, the type of
training (if any) is determined by the type of change or the level of complexity
around the product. If a new product is introduced that is similar to a product Post
Office has already trained its postmasters to use, then Post Office wouldn't do
face to face training. Instead we would issue instructions and easy to use guides.
For example some products like the lottery, Post Office provides face to face
training when it goes live. This training is provided by Camelot.
I am aware of examples where an ATM was installed in a branch and the
Subpostmaster was told to stock it and use it prior to Post Office training being
given. Some Subpostmasters weren't happy with the level of training they
received in relation to the ATMs. If it is something like an ATM, which can be
quite involved, and Post Office are about to change some of the ways of
operating it, Post Office would provide face to face training. In addition, Post
Office would issue instructions and provide an instruction manual. Historically this
would be in paper form in the operations manual. Now it would be provided on
Horizon.
If Post Office is introducing a new product, for example a new bill payment client
where even though the client is new the product is the same as one Post Office
already has, Post Office wouldn't provide face to face training. Instead, it would
issue instructions and provide easy to use guides.
Recently, training has also been by way of webcams.
NBSC/ Helpline
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97.
98.
99.
100.
101.
102.
103.
104.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Around 1995 the Post Office started to centralise the business. As part of this, in
around 1997, Post Office set up the Network Business Support Centre (NBSC)
helpline. This is the corporate helpline for postmasters and Post Office
employees which was firstly implemented on a regional basis and later
centralised. There is also a customer helpline, which is currently an automated
system.
The postmaster's point of contact changed from their Area Manager to the NBSC
helpline. This was a period of transition for the postmasters. It was important
however that they used the helpline as Post Office wanted a record of the calls
reporting issues.
One of the purposes of the helpline was to give greater visibility of what the
queries were, which would allow Post Office to produce trend analysis at a
national level to ascertain whether there are particular things taking place that are
not just one offs. If, for example, Post Office brought a new product in and the
helpline received a large number of calls, Post Office could consider whether the
training had not landed properly; or that the product design is not quite right. The
helpline allowed Post Office to do that forensic analysis and the root cause
analysis.
Even if the postmaster was to get hold of me as an RNM, I would inform them
that you need to go through NBSC. I would inform them that the contact at NBSC.
would then page the relevant RNM or BDM and ask the person to contact the
postmaster. We were always contactable as the second tier of support.
The postmaster's call in would be logged on the NBSC system. If that call was
not returned by the RNM/ BDM, the only way Post Office would know would be if
that same contact got back in touch with NBSC again. Overall though I think the
system worked pretty well and that most RNM/BDMs followed up the calls.
If there was an issue with Horizon which is reported by a postmaster, NBSC
correlates this information so that Post Office can understand the scale of the
issue. If the Helpline contact was unable to deal with that issue, they would tell
the postmaster who they need to contact.
If the RNM/ BDM was on annual leave, Post Office had a buddy system. There
was always someone the postmaster could get hold of if they needed to.
After NSBC was implemented, Post Office informed the applicants at interview
and training that NBSC was their first port of call for any query.
Horizon
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105.
106.
107.
108.
109.
110.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Horizon is the Post Office's accounting computer system, provided by Fujitsu. As
a computer program Horizon does exactly what Post Office asked it to do when
we built it. It is fit for purpose. I have every confidence in the system.
I describe Horizon to new users as a big calculator. It processes the data exactly
as it is input. The Horizon user just needs to remember what transaction needs to
be done and follow the screens.
The system was stress tested before it was implemented. Part of this was
questioning "what if this happens, what do you do..". That thinking process is built
into Horizon.
Horizon records every keystroke. Post Office keeps that information for 7 years,
which enables it to go back and analyse that data. It is not an easy process to do
this. When Horizon was built Post Office did not anticipate it would need to
analyse the data on such as large scale as has been required as a result of this
dispute.
The contract Post Office has with Fujitsu evidences that Post Office did not
expect to be required to analyse the data very often. The contract only permits so
many enquiries a month. If there are more queries than allocated for that month,
it becomes very expensive. The cost would also increase depending on the
volume of data required, for example the difference between two months of data
or two years. The data retention function was built into Horizon as a fool proof
mechanism, but was one that Post Office never expected to use to a great
extent.
Sometimes it was not cost effective for Post Office to provide all of the data to
the branch requesting the same. For example, a branch might request the data
for 7 years which would cost say £400, in relation to a £50 loss. (Are these figures’
just examples or close to the truth? I'm just thinking it might be better to say it
would cost many get the data than the value of the loss,
Darticllarly when the loss was'small] There have been cases where Post Office
have pushed back in such circumstances as it was not a commercial resolution to
the loss.
The postmaster in a number of cases has requested all of the data in what
appears to be a last hope attempt at identifying the issue, rather than because
there is some evidence that there is an issue to be searched for and addressed.
There are however some cases where I've thought "no you (Post Office) should
have got the data on that one".
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112.
113.
114,
115.
116.
117.
118.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
The ability of the branch to access Horizon data has changed over time. The
branch has access to the data from either the last 42 or 60 days. This is why Post
Office saw such an increase in data requests during the build up to this dispute.
Post Office's security team would request and use the data extraction function as
part of its investigation into a shortfall at a branch, or a similar issue. The security
team would analyse the raw data to assess what happened at that branch. This
was a labour intensive task. This data would sometime be provided to the
Contracts Advisers if they were looking into a branch.
People expect the system to be fast and have the same reactivity as Google.
One of the issues is that users try to compare it to a system we don't have or
what idealistically the system would be. There is a mis-match between
expectation and reality.
The biggest weakness in Horizon is that it is a bit "clunky" to use. It can be
difficult to locate the information you want from the system and the way it is
integrated isn't very logical.
Another weakness is that it relies on the user reading the screen and following
the prompts. A large number of users don't know how to use Horizon as well as
they should. Post Office has seen many instances where Horizon users have
developed bad habits and do not use the system in the correct way. Unfortunately
it is possible on a busy day for the user just to hit a button and move on the
screens without reading the prompts and trying to shortcut the process. If a user
was to shortcut the process it can be very difficult, if not impossible, to reconcile.
As with any IT system, there are instances where the system or the screen goes
down. The system was built knowing that sometimes Post Office could lose
connectivity, that a power line would go down or the communication could be
faulty. Recovery steps have been built into Horizon to counter this risk.
If the Horizon user carried out a transaction reversal or if they lost power or
connection whilst serving a customer and they are part way through a
transaction, there are prompts built in to address that. For example, the customer
might have given the postmaster money but the postmaster may not have
completed the transaction on Horizon. If this is the case, when the system comes
back up, it asks the postmaster questions to establish at what point he/she was at
when they lost power. For example, "Have you given money to the customer?
Have you taken money from the customer?". Depending on how the user
answers these prompts, would result in Horizon either rejecting the transaction or
completing the transaction.
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119.
120.
121.
122.
123.
124.
125.
126.
127.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
There is therefore a way to use Horizon should such an issue happen. I found it
very telling as to the competence of a postmaster if that individual or their staff
were unable to handle such situations on Horizon.
I am aware there have been reports made that there were errors with Horizon and
bugs which affected the system. I was involved with the communication of what
those issues were to the affected branches.
Post Office did not notify the whole network of reported issues if they were
isolated incidents. I think there were around 20 branches affected by the reported
issues out of 11,500 branches. If the Post Office did flag an issue, the Helpline
would tend to see a flurry of activity regarding that issue which the call centre
would deal with.
I have also been involved with managing how errors or bugs are communicated
to the media.
There have been some software changes to Horizon since it was implemented in
2000. Post Office has moved from Horizon to Horizon Online. Prior to the Online
facility the information would be extracted from the branch overnight. The key
difference between Horizon and Horizon Online is that Horizon Online is a live
record of the transactions carried out by the branch.
The hardware is the same as when Horizon was first implemented in 2000. It is
only recently being refreshed. There has been some refinement around the
screen (which has been touch screen from the start), the usability in terms of how
the screens are set up, the figures and how many screens you need to go through
to sell a stamp, for example. Horizon has been improved to try to make it quicker
and easier to use, but in essence it is the same program built on the same
platform.
The Horizon user uses the keyboard to type in numbers and words, such as the
number £1,000. The hardware has a card swipe functionality.
When the Horizon system was installed there were Post Office teams on site to
make sure the implementation process went smoothly. The branch network also
had a central coordinator in the office who would field the calls from the
postmasters whose branches were being trained on Horizon.
Horizon relies on the individual using it to input the correct information. The
training tried to address and mitigate the possibility of human errors. I created a
training document which is around 50 pages on how to use Horizon. [Can'
have a copy of this?]
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128.
129.
130.
131.
132.
133.
134.
135.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office supported the postmaster with balancing the accounts whilst
transferring from the manual system to Horizon during site visits. Some site visits
I arranged during Horizon's implantation phase lasted until 2/ 3 o'clock in the
morning. I had lots of tips of the trade which I would share with postmasters to
help them with the order in which they balanced the books using the new Horizon
system.
Some postmasters were very competent with the manual system but had trouble
with Horizon at first. They needed to follow computer prompts and input certain
data into Horizon. There is a customer basket called a "stack". The prompts
would tell the postmaster, or whomever was operating Horizon to, for example,
take £x from a customer or pay £x to a customer. When they ended the session
the stack should have been zeroed. The postmaster could then start the next
transaction. In the mediations I dealt with there were postmasters who were
forgetting to zero the stack at the end of a transaction.
If the user is putting in a numerical amount, say £100, they have to type both the
numbers and also the sum in words. The double entry is to reduce the risk of an
error. The prompt will also ask the user "Are you sure?".
The system has functions built in to tell the user to physically "take £20 to
customer" or "give £20 to customer". It is then up to the user to follow the
prompts.
Horizon is also colour coded, for example the icons for banking deposit and
withdraw, in which one is red and one is green.
Acchange made to Horizon to reduce human error was rather than typing in the
customer's account number and sort code, the Horizon user would swipe the
customer's card which brought up the relevant account details. This has been
more recently updated to the customer inputting their pin number. This reduces
the data the Horizon user needs to input, lessening the risk of a typographical
error.
The system has changed in this way over time. I cannot recall when all of the
changes were made.
One of the issues which changes to the system cannot address, is when its users
operate Horizon "on autopilot". This is where the user will just click through the
screens without properly taking notice of the prompts and checking the data entry
for errors at that point in time.
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136.
137.
138.
139.
140
141.
142.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
One of the areas where we saw autopilot in practice resulting in irrecoverable
errors was with MoneyGram. This is an instant transfer of money from one
country to another. For example, a customer may be sending money abroad to
their family. Once the transaction is processed, the money can be withdrawn
abroad within a matter of minutes. There is very little room for calling back an
incorrect transaction. This was an area particularly open to fraud risks. To
counter this risk, there is a ceiling on [HOW many transactions/ total amount of the!
transactions] a (branch// User] can carry out per day. Post Office also
implemented a prompt that informs the user that they should never be asked to
carry out the transaction over the telephone, such as where the user would
receive a call purporting to be from a Post Office "engineer" carrying out some
“tests of the system" but it is in fact a fraudster and the "test" transaction is a
fraud.
Post Office can see where a postmaster has used Horizon to tell them how much
their discrepancy is before they make a cash declaration. This can sometimes
raise suspicions as they are carrying out the process the wrong way around. You
should be checking cash and stock first, not asking the system what the
discrepancy is and then declaring you have enough cash to balance.
Instruction manuals are stored on Horizon Online. Before Horizon, there was a
hard copy Operations Manual in branch known as the "bible".
A Horizon user can use Horizon Online to search the Operations Manual,
although there isn't a search engine function per se. The Horizon Online help
function is not very easy to navigate, as the Operations Manual was simply
copied and pasted into this online system.
Due to the Horizon Online help system being clunky, Post Office still receives a
high volume of calls into NBSC regarding this issue. This is something Post
Office is looking to address.
Post Office is looking to simplify its transactions well enough that a Horizon user
would not need Horizon Online help. When Post Office designs a transaction
product, it tries to build it so that one click of a button on the screen will
automatically take the Horizon user where they needed to go.
Post Office will never be able to remove the risk of human error, but it has sought
to reduce the risk of that as much as we possibly can. I have been doing a piece
of work on that recently with Jane McLeod (General Counsel) as Post Office is
putting in new system now called Dynamics.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
143. Gayle Peacock (Head of Branch and Customer Support) is acting on the new
case management system that goes into support contact centres. This means
Post Office can get better information, which in turn enables Post Office to
assess what that information is telling it. Post Office can then be more proactive
in what support it are giving to the postmasters.
Dealing with problems in branch/ shortfalls
144. A postmaster will declare a discrepancy on a branch trading statement. At that
point it is declared as a loss. The postmaster then has the opportunity to dispute
the loss and ask Post Office to investigate.
145. If the postmaster had asked Post Office to investigate, Post Office would not
usually seek to recover the loss then. The loss goes into the suspense account
and we put it on hold, this can be either for a couple of months or in some cases,
over a year. There is a mechanism that Post Office has built into its approach
that allows the postmaster time, either to work it out themselves or to work with
us on it.
146. Sometimes a postmaster would raise a shortfall directly with us. Other times,
audits were used to identify shortfalls.
Audits
147. Post Office used to have a separate audit and training functions, so they ran as
separate teams. These teams have now been merged as one team. When I took
over the Audit and Training team in about [até], they were multi skilled for both
the training and audit functions for the duration of my time there, which was
around about five years until about [date]. The audits were carried out by the
audit and trainers team.
148. The audit is not an audit in the traditional sense as carried out by accountants. It
is a detailed check of cash and stock on site. The auditors would use guidance
notes when carrying out the audit. It was a process driven approach.
149. The postmaster is not given advance notice that the auditors will be attending,
but would be given a document which explained what would happen in the
branch on the day of the audit. This document was shared across the network to
help make the audit process transparent. It explained that if a discrepancy was
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150
152.
153.
154,
155.
156.
157.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
discovered on the day of the audit, the postmaster would have the opportunity to
discuss it with Post Office.
The branch is closed for the audit. The auditor will talk through with the
postmaster what is going to happen. The postmaster is asked to call up all the
reports that the auditor needs, as we want them to go into the system.
Some postmasters don’t know how to bring up the reports required. This may be
because they do not want the auditor to find something untoward, or because
they have not been hands on and do not know how to operate Horizon. If the
postmaster is not there, Post Office has to get a onetime password for Horizon so
that it can access their system and documents.
Post Office would always inform the postmaster this is what it was going to do.
For example, if we are checking the cash Post Office will say to the postmaster "
would you like to be here with me to count the cash" and would always
recommend that they do.
A postmaster has to sign the auditor's findings. The auditor will discuss any
findings at that point in time so the postmaster is completely clear on the audit
output. The postmaster will also be given a copy of that report. The content of
the audit reports has changed over the years. The report is now automated. It is
called a "FAT" report [is this correct?].
When I was involved with the audit team around [dat
around 5000 audits a year. These were broken down into random audits, risk
based audits, special audits, branch transfer and systematic branch audits.
it was carrying out
Around 100 random audits are carried out each year.
The "risk based audits" were for branches which had been identified using a risk
model. The risk based audit system generates a list of between 50 and 100
branches that are at risk. That list forms a schedule of audits that Post Office
carries out on a monthly basis.
There are a number of factors that would deem a branch to be an "at risk
branch". For example where Post Office knows how much working cash should
be in the branch when it has considered the number of deposits and withdrawals
(this is called their overnight cash holding target) and the branch is holding more
than that. In that example, Post Office would investigate why. It might be that
they are just holding too much cash and Post Office will ask them to send it back
or it might be that they appear to be holding more in their accounts because they
actually physically haven't got as much as they tell Post Office they have.
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158.
159.
160.
161.
162.
163.
164.
165.
166.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
There are also "special audits" which were carried out when something doesn't
feel quite right. This isn't through the profiling system. It may be from a
conversation somebody might have with a postmaster or some intelligence Post
Office has received from a third party. These audits are arranged within 24 to 48
hours due to the urgent nature of the circumstances which has deemed it
necessary to carry out an almost instant audit.
Another type of audit is carried out when there was a transfer from one branch to
the next. Post Office would carry out an audit at that time to enable the hand
over process.
Due to the wide range of skills, the Audit and Training team were able to help
with shortfall queries. They had a very good working knowledge of how the whole
thing came together and were very competent users of Horizon. The team
understood not just the numbers but also the transactions to get to those
numbers.
The Audit and Training team could identify where postmasters could be hiding
money and would work together with the Support Services Resolution team to
identify where money may be hidden. An example the team dealt with (although
the figures I give are made up) was where a postmaster said that they have got
£40,000 in the ATM, when actually they only had £20,000 in the ATM. This was a
way to hide money as the ATM was separate to the postmaster's accounts.
Post Office stores audit data so that it can analyse what the trend has been over
the years in terms of the number of audits carried out. From this data, you can
see the average loss level for each of those audits. Post Office can also sort this
data by type of audit.
The format of the audit report has changed slightly but the basic things issues
checked have remained fundamentally the same.
The way we produce the report has changed due to Horizon. When Post Office
operated using a manual system, it produced a pencil report. We now use an
electronic version which shows the cash count and stock.
If there is a loss over £1,000, the auditor would tell the postmaster that they've
got a loss and the auditor will need to take advice from the Contracts Adviser.
The postmaster would then call the Contracts Adviser to discuss the loss.
The process was that the Contracts Adviser would gather more facts. Often, the
Contracts Adviser would explain to the postmaster that they needed time to
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167
168.
169.
170.
171.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
investigate the loss. They may say "I will come back to you because I am
considering whether I need to precautionary suspend you or not".
The Contracts Adviser will then carry out their investigation. Depending on the
level of loss and what they find, the Contracts Adviser will then seek authority
from their manager to take the recommended decision as to whether to suspend
or not.
There is a process map which contains clearly defined steps, the process and
what the consideration points are in terms of coming to a decision on whether the
Contracts Adviser should reinstate the postmaster or terminate the contract.
The Contracts Adviser will need to record the decision rationale. A series of
letters will be sent to the postmaster during this time keeping them updated of the
investigation and the outcome.
If a subpostmaster doesn't agree with the outcome, there is an appeals process.
There is an appeals process document in the subpostmaster Contract. There
isn’t an appeals process as part of Mains and Locals but the postmaster can
request an audience with a senior manager if they feel they have something they
want to discuss. I have attended such meetings myself before.
The reason there is no appeal process in the Mains and Locals is because the
appeals process is in the quasi employee territory, which Post Office wanted to
distance itself from. The Federation of Subpostmasters hate it. Post Office has
therefore implemented a different process where the postmaster has the right to
request a meeting. Any issues raised by the postmaster would be given the same
consideration as they would if the issues were raised through the formal appeal
process.
Why should the postmaster be responsible for the loss?
172.
173.
When Post Office enters into a contract with a postmaster it provides them with a
starting pot of cash, stock and all the equipment. It also gives the postmaster
practical training around how to carry out transactions and how balance the
books, so the postmaster should always end up in the starting position.
Post Office engages them to run that branch. They are on site. The postmaster or
their staff carry out transactions with Post Office customers, with Post Office
cash and stock.
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174.
175.
176.
177.
178
179.
180.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office will also know what button they have pressed through Horizon, but
only the Horizon user will know why they have pressed the button and whether it
was the right button to press.
Post Office can see through Horizon whether or not a transaction or pattern of
behaviour looks normal. Post Office considers it normal behaviour to count the
cash and to put it into the machine as you count your cash. Then the Horizon
user hits the button that tells you what your discrepancy is. If there is a
discrepancy, it is normal to go back in and check it and then to make some
adjustments because you've found a mistake somewhere. It is not normal
behaviour to say how much am I out before I make my account declaration. This
would suggest falsifying the accounts. There were instances were a postmaster
may be less than £50 out and would think, I am not going to bother. I will just take
it and just adjust it.
This is the root of the trust element of the relationship. It is not commercially
viable for Post Office to have eyes on the ground. Post Office trusts the
postmaster to give it the right information and supports the postmasters with its
systems and training. Post Office will build its processes to try and see where it is
not getting that accurate information. Post Office can't possibly say it is better
placed than the postmaster to know what is going on in that branch.
The relationship needs to be mutual for it to work. Post Office is not dishonest.
We and postmasters need to have confidence and trust in each other. We are a
financial institution and are held in very high regard. I think we are probably the
second most trusted brand in the country and Post Office holds that very dear.
Post Office's reputation is partly why it has survived so long as a business.
Implied terms
I understand that the Claimants in this litigation have tried to argue a host of
implied contractual terms. It is a commercial issue as to whether or not Post
Office should agree to incorporate new terms into the contracts with postmasters.
I have already explained that there was very little scope for negotiation on the
terms of the contracts used with postmasters.
There is already a clause in the contract which states that Post Office will provide
training and support. Under the new contracts the incoming postmaster is
required to attend the training to secure the appointment, which is a reasonable
request. I consider the Post Office does provide adequate training and support.
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182.
183.
184.
185.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
In relation to the proposed implied term that Post Office should provide an
adequate system reasonably fit for purpose including any or adequate error
repellency, this is something I consider Post Office provides. Horizon is fit for
purpose. I have used the system and consider it to be adequate. Horizon has the
functionality it was intended to deliver. It is however possible for the individual
inputting information to make an error and the system requires human input. It
does properly and accurately record transactions effected by Horizon.
In relation to a branch vacancy, the contract would be offered on a “take it or
leave it" approach. An applicant can choose to do business with us or choose not
to. It would not be viable to operate different contracts across Post Office's vast
network. Operationally, commercially and legally, it was important for the
branches (which are effectively franchises) to operate from the same contract.
Operationally, the contracts had to be standardised for the Post Office and
branches to be able to operate as effectively and efficiently possible. This was to
the benefit of the postmasters as it helped keep Post Office's cost base low. Post
Office needs to ensure it is generating enough revenue to make reasonable
commission payments to postmasters. Standardisation is the best way to be able
to do that. If everyone operates in the same way, Post Office does not need build
in additional costs for variances.
Commercially Post Office restricts a franchise's products and services around
those it knows they are able to sell. Post Office is also able to restrict the
franchise's ability to sell certain products in its retail remit. For instance, Post
Office has an exclusive contract with Royal Mail to transact mail and parcels
through our Post Offices. There is therefore a clause in the contract which states
a postmaster cannot enter into a private arrangement with another mail company,
such as CollectPlus, to transact from the premises, as that is a breach of our
contract with Royal Mail.
Legally, when Post Office enters into its contracts with our clients, these terms
have to be carried across into the "franchise" contracts. For example, a client
Post Office contract may cover how many branches would sell that product and
the way that the client wanted that product to be sold. Post Office are doing
business on behalf of its clients and is under its own contractual obligations that it
must apply otherwise it will be in breach of its client contracts. Each of the
products and services Post Office operates on behalf its clients comes with
specific requirements on how it is transacted. A number of them would have
financial regulation. On our counter service products, for example dangerous
goods, there are a number of requirements that we have to adhere to. The
4A_37960799_3 28
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186.
187.
188.
189.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
contracts therefore contain a clause to ensure that we pass on that obligation to
the postmaster. These must be standard obligations to ensure consistency
between contracts.
Although there is no specific obligation in the contracts, Post Office does properly
and accurately obtain and record all transactions effected through Horizon. It
retains every keystroke for 7 years.
I understand postmasters have claimed that Post Office should properly and
accurately produce all relevant records and/or to explain relevant transactions
and/or any alleged or apparent shortfalls (GPOC 64.3). On the whole, Post Office
are unable to do this due to the high level of cost, resources and time required to
be commercially effective. What Post Office does do, if a postmaster has raised
an issue, is investigate and pull up reasonable, relevant information. Such a term
could not be implied into the contract. Under the distribution of responsibility
under the contract, it is not Post Office's responsibility to carry out this function.
This is the case even with our employees. Providing a postmaster adheres to
their contractual obligations, we wouldn't expect them to have many causes to
request such information.
Post Office does cooperate in seeking to identify the possible likely causes of any
alleged or apparent shortfalls and/or whether or not there was indeed any
shortfall at all (GPOC 64.5 and GPOC 64.11). A shortfall would come as a result
of an error or an inter business loss. I have seen claims where postmasters have
said there was a glitch in Horizon. Post Office is aware of a couple of issues with
Horizon, which have already been disclosed. If Post Office does see a genuine
"glitch", it will not just deal with that one, it will also investigate whether this has
caused a problem somewhere else. If there was an issue, Post Office would
reach out and put it right. We would inform those affected about what the issue
was and what we were doing about it. Post Office does not, as alleged, conceal
known problems or errors in or generated by Horizon that might have financial
and other implications (GPOC 64.8).
Post Office cannot disclose possible causes of apparent or alleged issues
experienced by individuals "candidly fully and frankly" without breaching
confidentiality (GPOC 64.6). If there was a system error, all of those affected
would be informed. An alleged shortfall might not actually be a shortfall. It
wouldn't assist the affected postmaster to share this information with others nor
those not affected without establishing if it is or isn't a shortfall. In addition, it
would also be a breach of confidentiality to share with others the extent to which
other subpostmasters are experiencing issues relating to Horizon as this may be
due to the user's ability or competence (GPOC 64.9).
4A_37960799_3 29
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190.
192.
193.
194.
195.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Postmasters have argued that Post Office should have a duty to automatically
seek to identify shortfall causes. I don’t agree with that at all. If it was Post
Office's responsibility, what are we paying the postmasters to do? Managing the
accounts is part of their role. The postmaster is responsible and therefore there
are certain things that a postmaster needs to do before they come to us for help.
Of course if the postmaster contacts Post Office with a serious issue, we will
assist as best we can.
Post Office cannot allow branches to continue to operate in total oblivion. This is
why we require them to inform the Post Office if they have made a loss. We
cannot imply such a term and be responsible for identifying the postmaster's
cause of the shortfall. Post Office does not have the level of sophistication in its
system to offer this. To do it would be so costly that it would make the
commercial relationship unsound.
Post Office cannot physically be present to help determine the cause of the loss
if caused by the human element. This would require, as a minimum, CCTV in
every one of those premises with a view of every part of that building with 24/7
continuous monitoring. Commercially Post Office couldn't afford it. This way of
operating would cost more money than Post Office was making out of that
operation. No business would do this.
Post Office does make reasonable inquiry, undertake reasonable analysis and
carry out an investigation if there is cause to (GPOC 64.7). It gives fair
consideration for factual information available as to possible causes of the
appearance of shortfalls in a commercial manner.
Alleged shortfalls do represent a genuine loss to Post Office. For the
postmasters, it can be a paper loss (GPOC 64.12). However, we have to settle
with the client and if the client expects to get £100,000 worth of payment and we
are only giving them £90,000, the client will pass on to Post Office the £10,000
difference. As Post Office is liable to make good its losses to its clients, it is only
reasonable that postmasters are also responsible if they have incurred that loss.
The postmaster has done something that has created that loss and should make
that good. In every case I have seen the postmaster's loss has caused Post
Office loss somewhere along the line.
The Claimants have argued there needs to be an implied term that Post Office
should carry out a reasonable and fair investigation as to the cause and reason
for the alleged shortfall and whether it was properly attributable to the postmaster
under the terms of the contact (GPOC 64.7). I consider it to be the postmaster's
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196
197.
198.
199.
200.
201.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
responsibility to carry out an investigation to establish the cause of the loss until
they get to the point where they have exhausted what is within their gift to do.
I consider Post Office exercises its powers, contractual or otherwise, honestly
and in good faith for the purpose of which is was conferred.
I do not consider that Post Office has taken steps which undermine the
relationship of trust and confidence. If anything, I think Post Office has gone the
other way to try to build the relationship of trust. The way we changed the policy
towards suspension is evidence of that, as set out below. Post Office has
continually looked to improve the way it operates and understands the human
element of the outcomes of investigations, suspensions and terminations (GPOC
64.13, 64.14 and 64.15).
There are things Post Office does which are not in its contracts, such as_ setting
up the Support Services Resolution team to address postmasters' concerns
(Shirley Hailstones' team which Kath Alexander used to work in). I set that team
up in [please insert date] off the back of my involvement in the mediation
scheme as I felt NBSC alone might be a bit too broad to provide support to
postmasters. This new team can help sort a problem on the phone and talk to a
postmaster to resolve the issue if NBSC cannot help. This service isn’t in the
contract but is an improved way of working and supporting the postmasters,
which Post Office has put in place now to rebuild the relationship of trust.
Post Office has addressed a number of the implied terms the Claimants have
raised, as can be evidenced with how the result of the investigation is
communicated to the postmaster and the depth of information assessed before a
decision is made to end the contractual relationship with a postmaster. This has
improved over the passage of time and Post Office is much more inclined to go
the extra mile to explain a decision to a postmaster rather than simply rely on the
contract.
If Post Office ran its franchises under an onerous contract which contained all the
terms the postmasters say should be implied, Post Office would not be able to
operate anymore. It would be impossible to operate using such a business model
as Post Office would not make any money. An element of reasonableness has to
come into it because if a term is not reasonable, commercially Post Office cannot
operate.
If Post Office made changes to the contract terms and conditions, it would inform
the postmasters in writing. Post Office weren't always obliged to consult with the
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202.
203.
204.
205.
206.
207.
208.
209.
210.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
postmaster before changes were made, but we would usually notify them.
Sometimes the changes were woven into pay negotiations.
Contractual breach / performance issues
If a postmaster made a complaint which was governed by the contract, Post
Office's approach is to strictly interpret and apply the contractual provisions.
Postmasters are contractually liable for their branch's losses. If they have any
accounting queries, they are aware they should contact NBSC and the process
which is followed after such a declaration.
If the postmaster makes a gain, the approach was "you can withdraw them but
bear that in mind because if you have a gain, like when you have a loss, then it's
usually because you've made an error". Post Office always used to recommend
the postmaster put that money in an envelope and keep it in the safe, because
typically that money would be required at a later stage to balance the books down
to nil again.
Signing off false accounts is dishonest and harms Post Office. It is a criminal
activity. Unfortunately some people think that it is white collar crime and
therefore it doesn’t count. This is clearly that is not the case.
At the very grass roots level, signing off an account and declaring that I, the
postmaster, have £100,000 here when they don't is clearly wrong. They are in a
position of trust, not just with Post Office in terms of the trust that we put in the
branch, but also due to their position in their community. There is a certain status
that goes with being a postmaster and it is held in very high regard.
We, on behalf of our clients, trade on our image of trust and integrity. When I
have had conversations with postmasters regarding false accounting, sometimes
they don’t see it as being wrong let alone a criminal activity until I tell them what
the consequences could be.
We didn't prosecute all of the individuals who falsely declared their accounts.
Post Office didn’t explain all of its decisions at the time in the detail that it could
have. This was partly because Post Office wasn’t obliged to do so and we didn’t
see that as our role to do so.
My view was that if we could give the explanation then we should. It helped make
people understand what had happened, why it shouldn't have happened and the
consequences. From my first working groups with the JFSA (Justice for
4A_37960799_3 32
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211
212.
213.
214.
215.
216.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Subpostmasters Alliance), I agreed that giving an explanation and allowing the
individuals to get some kind of closure on the incident was necessary.
I take this dispute very seriously. It is difficult because I have a job to do to
protect Post Office and as part of that, need to address postmasters' breaches of
contract. This doesn’t mean that I don’t treat the postmasters as human beings, it
doesn’t mean I don’t give then the respect that goes with that and it doesn’t mean
I need to be aggressive in any way. I did however need to be assertive in my
position.
There are guidelines which we followed in deciding whether or not Post Office
was going to press ahead with a prosecution. Typically the decision would be
made following an audit review. The audit is done. You then have the Contract
Advisers who make a decision on whether or not to terminate the contract.
Sometimes it is done in parallel with criminal proceedings.
Post Office has terminated contracts independently from any criminal
investigation. We inform the postmaster at the relevant time. Post Office may
then separately take the decision to initiate criminal proceedings which is subject
to a separate review.
The decision to initiate criminal proceedings is not taken lightly and that would
always be done in conjunction with General Counsel and the Security team. At its
height, there were around 200 instances of false accounting a year, which was
around 10% of the Post Office population.
Most of our postmasters are very honest people. Our postmasters are a
representative population of the UK make-up, in terms of all ages and
nationalities etc. As a result, you would expect to have some kind of
representation of people who get themselves in to difficulty. I genuinely believe
that no one comes in with a view to steal from Post Office. Circumstances
happen and postmasters find themselves in a situation where they have easy
access to money. With external pressures, they may be tempted in that way and
there are some very sad situations where these pressures have overtaken
people. When people stop seeing money as just money or just as paper, and
start seeing it as a new car, that is when Post Office had a problem.
The process for dealing with a breach of contract or suspected misuse of cash
has been the same for a long period of time. Post Office has however reviewed
its mitigation circumstances criteria to take into account lessons learnt.
4A_37960799_3 33
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217.
218.
219.
220.
222.
223.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
The way investigations were carried out has changed over time. The historic
investigation was carried out by the Security Investigation team. Most often,
issues would come up as part of an audit. The Security team would then carry out
an initial fact find. The Contract Adviser would assist this part of the investigation
and deal with the review of the contract in light of the fact finding exercise. That
process has been the same for a long time.
To enable the Contracts Advisers to be able to carry out the investigation
function, they were trained on Horizon and what certain products were and what
the product's functionality was to assist in their review of whether the contract
had been breached.
From my experience in the mediations, the Contracts Advisers typically had
progressed to management through the branch route and therefore had a very
good understanding of how to use Horizon on a day to day basis. However,
sometimes if they had been outside of a branch role for a number of years they
were less familiar with how things worked.
I believe Post Office had built a very good level of skillset in terms of where to
look for discrepancies, how to build that case and do a thorough root cause
analysis. It is one thing to be able to analyse that money has gone missing. It is
quite another task to be able to explain why that money has gone missing, when
and how.
From my experience working in the branch and working with postmasters, I
understood that it was important that where possible we explain to the postmaster
what can see and what we can use the data to tell us. The process of elimination
helped take everything else out of the equation.
Part of the reason for this dispute is that a number of people don't know what
happened or why there was a discrepancy. As a result, they look to Post Office to
explain it. In some cases we can and in some cases we can't. There have been
numerous occasions when I have seen the explanation provided to the
postmaster and seen the reality of the penny dropping and the explanation
sinking in.
There has clearly been a breakdown of trust between Post Office and its
postmasters. Postmasters often work with close family and friends, and trust
these people with their lives. They do not believe such people would do anything
to harm them. Postmasters believe they are running a tight ship and cannot
possibly lose money. They believe their team are really careful, that they do not
make mistakes and follow protocol, such as checking the bins for stashes of
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
cash. If they convince themselves of these things, the only thing left is to blame
the Horizon system which they do not have in depth knowledge of.
Suspension and termination
224.
225.
226.
227
228.
229.
230.
The way Post Office has dealt with suspension has changed over the years.
Historically Post Office operated a black and white policy, before this was part of
my role. If a postmaster had an audit, and the postmaster had a loss of more
than £1,000, the default position was to suspend whilst we investigated.
When I became involved, in around 2013-2014, I changed the policy so that
suspension was the last part of the equation. I also suspended postmasters as
part of my role.
The change in policy meant Post Office did more investigation in advance and on
the day. Post Office would only suspend a postmaster if it was absolutely clear
cut. The default position changed to keep the postmaster in post unless we had
good reason not to. A good reason to suspend was narrowed to situations where
Post Office had a very large loss.
Post Office has a very well documented approach that it goes through if it is
going to terminate a contract or suspend a postmaster. There are a number of
decision points and standard correspondence, within which Post Office would
refer specifically to the section and the paragraph of the contract it was relying on
to suspend the postmaster.
The process of dealing with a potential termination took a significant period of
time to run through. We would review a certain amount of information and hold
an interview with the postmaster. Post Office would consider mitigation
circumstances and do all it could to ensure that it was making the right decision
on the facts it was presented with.
Before reaching a conclusion, Post Office would check it had properly applied the
contract. It would give the matter its due consideration and sufficient weight and
would not make a hasty decision, as it takes suspension and termination very
seriously.
When we precautionary suspend a postmaster, no matter how hard Post Office
tries to keep it under wraps and not let customers know, it would be picked up in
the community. Post Office would always argue that a precautionary suspension
whilst we investigate doesn’t imply anything, however it is aware of
circumstances where a temporary suspension has caused reputational damage to
4A_37960799_3 35
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231
232.
233.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
the postmaster. Post Office recognises that reputational damage is significant
when you are running a small business.
The significant change in Post Office's default position around 4 years ago
demonstrates how seriously Post Office took suspension and termination
Post Office has data on how many postmasters it didn't precautionary suspend,
which evidences the effect of the change of default position.
If we didn't precautionary suspend a postmaster, we would expect them to make
good the loss. Post Office wants to keep someone in post where possible. It
creates a bigger problem for Post Office if it has to suspend or terminate a
contract with a postmaster and fill that position. It costs the Post Office more to
terminate and rehire a postmaster than it does spending some time with the
existing postmaster trying to resolve a slight contractual issue.
In the Mains and Locals contracts, there are periods of remedy in there. It is an
elongated process to terminate those contracts.
Remuneration
235.
236.
237.
238.
239,
Post Office offers different remuneration levels for different types of products and
types of contracts. Each product and service attracts a certain level of
commission or remuneration.
Different model types would be paid different amounts, for example a Mains
contract is different to a Local contract because there are different obligations in
how they operate.
Post Office remuneration has declined over the years. The volume of
transactions has generally remained steady but the amount of profit for those
transactions has decreased. Post Office's contracts and margins were squeezed
during the 2008 crash. This meant Post Office had to review how it paid
postmasters and the profitability of Post Office is linked to the remuneration Post
Office can offer its postmasters.
Part of the reason for implementing Horizon and updating the training to be more
sales focussed was to encourage postmasters to sell as many products and
services as they can, which in turn will generate more income for them.
A manager's role is based on objectives and they would have a great influence
on implementing those objectives at the branch level. Post Office's strategy was
to ensure that the postmasters were incentivised to perform in their role.
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240.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office has to be able to look to its central cost base and consider how it can
reduce its costs by working smarter. The centralised network helped reduce base
costs as it enabled Post Office to analyse the information it was receiving and
form a more holistic view of the business. The centralised network flagged issues
of contentions and points for improvement. This is something Post Office
continues to focus on today, which I think is very important.
Subpostmasters as employees
241.
242.
243.
244,
245.
I consider the contract with postmasters is a contract for services, rather than a
contract of employment. I recognise some of the reasons why subpostmasters
want to be granted employee status.
Postmasters operate as franchisees of Post Office. I was always keen to ensure
applicants realised this from the outset and understood the contract. This is why I
gave so much attention to the meaning of the contract when I carried out
interviews and why Post Office recommended the applicant take independent
legal advice before entering the contract.
The way the relationship operates also indicates that postmasters are not
employees of Post Office. Contracts with the individuals were always offered on
the understanding that they were self-employed and that the main provisions of
the contract were non-negotiable.
Post Office employees and postmasters and their staff had access to the same
products, system, equipment, helpline, support structure and general
communications with Post Office. Post Office gave postmasters everything that
they would need to be able to run the branch properly, in accordance with the
contract and standards that we set. The postmaster is then responsible for
running the business on our behalf under the terms of the contract. The key
distinction between the franchises and the Crown and directly managed branches
was the way the contract worked and the distribution of responsibility for the
franchise.
Postmasters received the same training as employed Crown employees and
managed branch employees. Once the training was completed, the way
employees and franchisees were managed was different. For example, an
employee would have to declare a branch loss over a specific sum and this would
be assessed as part of the employee's performance review. It could be escalated
to a disciplinary and eventually to being dismissed. In contrast, if a postmaster
had a loss which was not made good, the contract could be terminated. There
was no disciplinary or performance review process, as they were not employees.
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246.
247.
248.
249.
250.
251.
252.
253.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Postmasters were not entitled to the same holiday, sickness absence and
maternity pay as Post Office employees. Postmasters instead are given holiday
and sickness absence [and maternity?) contributions to help cover their absence
from the branch. The holiday and sickness contribution is worked out on a two
year cycle.
Post Office recognised that it would be good for the business for the postmaster
to take a break from running the business by having a holiday. Post Office
therefore considered it to be goodwill gesture to give the postmaster some
financial contribution to assist them in doing that, partly to encourage them to
take a break as it recognises we all need a holiday or to take time out sometimes.
It was in Post Office's interest to make a financial contribution to keep the branch
open. It is not payment in the same way as an employee would be entitled to if
they wanted annual leave. Post Office did not cover the full cost of the
postmaster taking holiday. Instead, it made a contribution towards it, which is why
it's an allowance.
It is the same with sick substitution. Post Office recognises that we all get ill at
some point. Post Office considered that taking off the pressure financially should
a postmaster be ill could potentially aid their recovery and as with holiday
contributions, allow the branch to remain open. Post Office therefore offers a
contribution for them allowing someone to come in and pick up the work when
they weren't able to do that.
Some postmasters chose never to take the contribution, either because they
didn't put in a claim even though they had time off, or were never sick. Some
people never take time away from their small businesses as they feel integral to
its success. Sometimes, those that never took the time away from the business
are the ones that Post Office had suspicions about, as it raised a concern as to
why the postmaster never wanted somebody else to see the ins and outs of their
business.
The more recent contracts, Mains and Locals contracts, do not contain holiday
and sickness absence contributions.
Postmasters have to carry out their own tax returns, which points to the fact that
they are not employees. They also have to do tax returns for the retail side of
their business.
A number of Subpostmasters I appointed or worked with relished the way the
relationship worked and the level of autonomy granted as a franchisee. For
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254.
255.
256.
257.
258.
259.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
example, some postmasters were very good businessmen/ women. They would
sell on the business with the goodwill element and hold onto the freehold and
enter into a lease with the new postmaster. It was their own business. They
would do this multiple times over. Post Office used to trade about two and a half
times remuneration, so this was a commercially sound plan.
The success of a postmaster very much depends on the type of individual they
are. Some absolutely relished the fact that they are independent business people.
They tended to be the better postmasters because they come in with the attitude
that "I am here as my own boss, I want to be able to have the influence of
running my own business and have my destiny in my own hands". Such
postmasters would see Post Office as the overarching bit under which they
operated, as a franchise banner. We also had postmasters at the opposite end of
scale. The undertone was that they wanted to be employed with the security and
benefits they thought this offered.
I am aware that there are some things which may not traditionally be seen as
things which point towards self-employment, such as PAYE and NI contributions.
Post Office deducts PAYE and NI contributions at source. Postmasters elect as
to whether these payments are deducted in this way or whether they are
responsible for paying the same.
There are some other odd things in the relationship, such as allowing the
postmaster to attend Territorial Army training.
Post Office also makes "small offices payments" which effectively top up a
postmaster who has not made minimum wage. I do not agree with this policy and
can see why it could cause confusion around a postmaster's employment status. I
believe this was implemented by Mike Granville at the time when the national
minimum wage was prevalent in the press and this was a policy consideration to
protect against possible reputational damage.
The "small offices payment” policy was for small branches, where there is not a
lot of business coming through. In these branches, remuneration worked out on
the whole as less than national minimum wage based on the number of hours the
branch was open. Small offices payments are not offered on a contractual basis.
I was very aware of the cost to Post Office of this policy when I was Head of Area
for Wales, because in some of the rural communities in Wales the postmaster
would have a small foot-fall and so would often require "small offices payments".
The cost of this policy to the Post Office was around £1.7 million for my area.
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260.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
There is a practical problem with Post Offices that were struggling in rural
communities. I used to attend public meetings at which we discussed with the
community the possibility of the Post Office closing down. Some options were
reducing the opening hours if the branch didn't have the business for the
Operating hours, which would help reduce Post Office "small offices payments".
What it really boiled down to was that the loss of the branch would impact the
sale value of the residential properties in the area and their ability to sell their
property.
I think the reason behind offering these extras was because of the ethos of Post
Office. There is also an argument that in situations where the postmaster was
struggling, Post Office offered goodwill gestures such as the "small offices
payments" to stop the branch closing down and to maintain Post Office presence
within that community. As far as I am aware this reasoning isn't documented
anywhere.
Practical Arrangements
262.
263.
264.
265.
Having a Post Office element to a business creates a halo effect on that
business' retail. It increases that business' foot-fall. This is one of the reasons
why a Post Office counter is at the back of most branches, as the customer will
have to walk past the business' retail section first. I recall one instance where a
Post Office counter helped increase retail turnover in a branch in Tottenham in
North London by 25%.
The only way Post Office can measure foot-fall in a branch is through its
transactions. Historically, in Post Office's directly managed network, it used door
counters so it could track each time a customer stepped through the door. The
Horizon data tells us customers have come and carried out a transaction.
However, there might be people that come in to ask a question. This is not
recorded through the Horizon system and so that part of the foot-fall isn’t
counted.
We expected the applicant to provide their own premises from which to operate a
Post Office. They had to meet certain conditions in terms of size, so that Post
Office could fix a counter in and make sure it was secure. It would do all the
security checks and make sure that the Post Office element itself was secure and
alarmed.
Post Office had specifications on the thickness of the walls, the quality of the
door and how many mortice locks. Post Office's security team would also
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266.
267.
268.
269.
270.
271.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
consider how to separate the Post Office counter from the domestic premises (if
any).
The postmasters' premises are assessed to ensure they can operate out of them;
that the premises are kept in good order and that they have liability insurance in
place. This forms part of the contractual relationship with the postmaster and will
be flagged to them in an interview.
Post Office's interest in the premises is what is the postmaster's ownership of the
premises and/ or do they have a licence to trade from it. Post Office would check
the permission from the licensing staff, what grade it is, and whether the
postmaster can show it evidence that they have a legal arrangement to operate
from there. This formed part of the recruitment process.
Not all postmasters live on the premises. Post Office did not restrict who lived in
the property or worked in the premises save for standard checks and staff CRB
checks.
Over the years Post Office have changed their premises policy. At one point
Post Office insisted as a term of appointment that there was a secure door
between the Post Office and domestic premises. We also considered how Post
Office secured the counter itself.
Post Office also needed to reduce the risk of a "tiger kidnapping". Postmasters
are at risk to this crime as they have access to large amounts of cash, often work
with close family members who will not raise the alarm to protect the hostage
meaning the police will not be notified until after the event. The aim was to
protect Post Office, its reputation and to protect the Postmaster and his/ her staff
whilst they were in the Post Office. The policy did not extend to their domestic
lives. Post Office did give them advice on where they should keep their keys so it
wasn't obvious to criminals. Post Office offered guidance on the obvious security
points and referred the postmasters to the Security Manual which is part of the
appointment pack.
Post Office historically charged an introductory fee, licence fee or franchise fee
when an incoming postmaster began to operate a new branch. Post Office did not
quantify what the postmaster got for this fee. Obviously, incoming postmasters
were allowed to trade under Post Office's brand and they often received
additional foot-fall, however the basis of the fee was never really explained well
enough internally or externally. The fee was a bone of contention for a number of
people.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
272. At present Post Office does not charge introductory fees, or licence fees. I don't
think Post Office is ever going to be able to get back to charging introductory
fees or franchise fees unless it actually completely remodels its business model.
273. _ If the postmaster was buying the business as a going concern, which we called
“commercial transfer", Post Office wouldn't typically charge a fee. If it was a
greenfield site, a new business and there was no commercial transfer Post Office
would charge 1.5 % remuneration. This was paid when the postmaster sold the
business on.
274. The postmaster had a 25% reduction in remuneration arrangement for the first
year. Sometimes the postmaster was charged the introductory fee of 1.5%. The
postmaster also had a 25% reduction applied for the first year. That policy was
short lived and stopped many years ago (either late 1980s or early 1990s).
275 The incoming postmaster would be sent the contract, the conditions of
appointment letter and the addendum. The addendum might state "these are the
conditions on your appointment that you have to do", which would be things like
“we want you to replace the counter screen".
276. Post Office influences the retail side of the business, as it has restrictions on
what can be sold in the branch to tie in with Post Office products and services.
STATEMENT OF TRUTH
I believe that the facts stated in this proof of evidence are true.
Signed:
Date:
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