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Horizon Litigation: facts of the case, including relevant background, for BEIS
Permanent Secretary Alex Chisholm
Background
1.
Transactions at the post office counter are undertaken on the Horizon system,
which is used by c50,000 people per day across the network, and which POL
estimates has been used by around half a million employees, agents or
employees of agents since it was introduced in 1999.
In 2012 a small number of (mostly former) subpostmasters, under the banner of
the “Justice for Subpostmasters Alliance” (“JFSA”) and with support from some
MPs led by then-MP (now Lord) James Arbuthnot, claimed POL’s Horizon IT
system had caused losses (shortfalls in physical cash against cash holdings
recorded on Horizon) which they had had to make good. In some cases they had
been prosecuted for these losses (usually for false accounting, theft or both) while,
in other cases, they claim that it led to financial hardship, bankruptcy or
consequential, personal losses ranging from divorce to suicide.
An independent firm of forensic accountants, Second Sight, were commissioned to
examine the system for evidence of flaws which could cause accounting
discrepancies. Second Sight's initial report in June 2013 found no evidence of
systemic flaws in Horizon. A final report in 2015 did find that in some cases POL
could have provided more training and support to some subpostmasters, though
Post Office disputes many of Second Sight's findings.
A complaint review and mediation scheme (“the scheme”) was established in
2013, with JFSA involvement, to work through 150 applications in an effort to
understand and ideally resolve the individual disputes. This included specific
investigation into each of the 136 individual cases accepted into the scheme (the
other 14 having been capable of summary resolution). As before, no evidence of
systemic flaws in the system was found; rather the investigations (by Second Sight
and Post Office) found that the main reason for losses in the majority of cases was
“errors made at the counter” by the subpostmaster or their staff. To date, UKGI
and BEIS have not been privy to the details of individual cases, as POL considers
these to be confidential between POL and the individuals.
The scheme was closed in early 2015 once all 136 applicants had received
reports from POL and Second Sight into their individual complaints. The JFSA
however was not satisfied with the outcomes from the scheme, with many
applicants seeking substantial sums in compensation which were not forthcoming,
and others seeking to overturn criminal convictions which the scheme could never
provide.
None of the scheme applicants convicted of an offence have appealed their
conviction or their sentence.' However, since the scheme launched, 33
*. On 14 August 2017 Post Office did however receive notice from the Criminal Appeal Office that a former
subpostmaster is seeking permission to appeal his 25 September 2008 conviction on 11 counts of theft
following losses of £208,000 at the Post Office branch where he had been subpostmaster. The appellant did
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individuals with convictions have applied to the Criminal Cases Review
Commission (CCRC), whose review process has now been going on for around
three years. BEIS/UKGI have disclosed information to the CCRC, as required to
do by law, for their investigations, as has POL. POL do not know when the CCRC
will reach a decision in any of the cases.
7. There has been significant lobbying by the JFSA of Parliament and through the
media, although this has not altered POL’s position which is that these are
individual disputes which are now best resolved through the Court’s processes.
Nature of the Complaint
8. In recent years, the focus of the complaints by subpostmasters has shifted from
issues with the IT system, to the alleged “unfairness” of the contract between POL
and subpostmasters. These allegations are now being progressed in the High
2
Court “Post Office Group Litigation”.
9. The litigants are claiming that their written contract did not reflect the true nature of
the POL-subpostmaster relationship. While they accept that there was a
principal—agent relationship in force, they nevertheless maintain that the
relationship was a closer one akin to an employment relationship and, as such,
they are trying to shift the burden of responsibility for explaining accounting losses
from subpostmasters to POL. Linked to this, they are also seeking to establish
that the contract implies other terms that further shift the burden of responsibility
onto POL — for example, that POL had an obligation to provide sufficient training to
Subpostmasters to help them avoid accounting errors.
10. There are now around 561 Claimants in the case. The common features of the
Claimants are that most were engaged on Post Office's standard contract terms
and all will have used the Horizon system. Post Office denies that the contracts
should be interpreted as contended by the Claimants, and also contends that
many Claimants do not have standing to bring claims because they are time-
barred, an abuse of process due to pre-existing criminal convictions, or have
already been resolved, with signed settlement agreements in place.
Measures taken by POL
11.POL considers that it has undertaken a significant amount of work ever since the
claims were first raised to establish the nature of the issues raised by the
subpostmasters. In addition to the scheme, which was entirely funded by POL,
and paying for the Second Sight forensic investigation (whilst also reinvestigating
each case itself), POL has taken and continues to take privileged legal advice
from Leading Counsel and engaged Dr Robert Worden of Charteris Consulting Ltd
not apply to the scheme or to the CCRC, and is not a Claimant in the Post Office Group Litigation. This matter
currently rests with the Court for a decision.
2 Bates & Others v. Post Office Limited, High Court of Justice, Queen’s Bench Division, Claim No’s
HQ16X01238, HQ17X02637, HQ17X04248.
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as its experienced expert IT witness. This advice is being kept under continuous
review by POL’s senior management.
The Litigation Process
12. Post Office has engaged two QCs and are being advised by Womble Bond
Dickinson, a major transatlantic law firm.
13. The claim was served on Post Office on 5 August 2016. Several procedural
hearings have been held since then. The first substantive hearing (“Common
Issues Trial”) will commence on 5 November 2018 for four weeks. The Common
Issues Trial will principally look to determine the true meaning and effect of Post
Office's standard contracts. Six Lead Claimants have been selected to assist with
this. The “Horizon Issues Trial” will then be held in March 2019 to look in detail at
the specific technical issues claimed in relation to Horizon, which will be
determined with the assistance of expert evidence. Further trials will then be
needed to resolve other issues, including whether Post Office has breached any of
its obligations, and if so, the damage caused by such breach.
14. The nature of the claims include claims for loss of future earnings, other business
losses, reputational damage and emotional harm. Although some Claimants have
provided some indicative claim values, these are incomplete, inconsistent,
possibly duplicative and prone to inaccuracy, and Post Office has raised its
concerns in this regard with the Court. The Claimants have not yet formally
articulated the quantum of their aggregate claims and Post Office does not expect
that they will do so until after judgment is received on the Common Issues trial,
later in November/December 2018.
15.To date, there have been no settlement discussions between the parties. The
Court has ordered the parties to attend mediation after receipt of the judgment on
the Common Issues Trial.
16.POL is currently seeking security for its costs, such that they have assurance that
should they win the case they can seek to recover costs from the Claimants. Both
parties have filed cost budgets with the Court, with the estimated litigation costs for
each side up to the end of the Horizon Issues Trial being in the region of £13m
(inclusive of all costs incurred to date).
17. The Claimants’ action is being funded by a private equity firm, Therium, who
specialise in legal claims. If this follows a traditional litigation funding model,
Therium will take a cut of any compensation awarded to the Claimants. The
specific funding arrangements in place for this litigation are however privileged to
the Claimants, and therefore not available to POL at this stage of the proceedings.
Ongoing Work and Next Steps
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18.POL has established a board sub-committee to consider the issues as they arise
on behalf of the board. The schedule for both the sub-committee meetings and
board meetings has been synchronised to the Group Litigation Timetable so that
POL and its advisors can provide regular updates at critical junctures in the trial
process.