Board Meeting - Group Litigation, 12.30 pm, 20 March 2019
Present: Other attendees:
Tim Parker (Chairman) (by telephone)
Company Secretary)
Ken McCall (Chairman for the meeting) Mark Davies (Group Director Communications)
Tom Cooper Veronica Branton (Head of Secretariat)
Tim Franklin Ruth Cowley (Norton Rose Fulbright)
Shirine Khoury-Haq Glenn Hall (Norton Rose Fulbright)
Carla Stent
Alisdair Cameron
Apologies:
Tim Franklin, Paula Vennells.
1.
Conflicts of Interest
Potential conflicts of interest were noted in relation:to Tim Parkeriin his role as
Chairman of the HM Courts and Tribunal Service.
Potential conflicts of interest were noted in relation to Tom Cooper in his role as
UKGI Director, which as an executive part of government, should not be involved in a
decision which related to the judiciary.
Article 82 of PO Limited’s Articles of Association permitted the Board to authorise a
director in relation to any matter the subject of a conflict. The Board determined
that Tim Parker and’'Tom Cooper should be involved in the Board discussions but
they would not be party to the decision on whether or not to seek the Judge’s
recusal, when sought.
Ken McCall feported,that had spoken to Tim Franklin the previous evening and that
he and Jane MacLeod and had received his views in writing.
It was reported that Paula Vennells could not participate in the call but had been
updated on thediscussions.
Summary of discussion with Lord Grabiner
JM reported that Lord Grabiner had given an overview of his opinion on the
Common Issues Judgement and how it impacted on the current and prospective
trials on a telephone call earlier that day. Lord Grabiner had noted that the Judge
had received several warnings about allowing inadmissible materials but had chosen
to do so and as such had behaved improperly and was wrong as to the law. It was an
unusual case and which was unusual procedurally.
The test for recusal on grounds of apparent bias was through the eyes of a
reasonable observer. We would only need to argue apparent bias rather than actual
bias, although grounds existed to argue the latter. There was no practical alternative
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Jane MacLeod (Group Director Legal, Risk and Governance and
Actions
to recusal and the risk of not seeking it was that the Court of Appeal (CoA) would ask
why we had not sought for the Judge to recuse himself. Lord Grabiner agreed that
there was a risk that the Judge would be emboldened if we lost the recusal
application but his position was already clearly indicated by his Judgement and the
damage from this had already been inflicted.
It was noted that we had not sought Lord Grabiner’s view on what his reaction be if
he were counsel for the other side.
Lord Grabiner’s views would be provided in writing.
Introduction from Norton Rose Fulbright
Norton Rose Fulbright had been engaged to provide an independentilegal view on
the case and Ruth Cowley would also be giving a view on our contractual, position in
light of the Judgement.
Glenn Hall was a corporate lawyer with significant experience in mergers and
acquisitions. He had worked for the firm for 20 years but had been)special adviser to
Greg Clark, Secretary of State BEIS, for the last couple of years, before re-joining
Norton Rose Fulbright recently.
Ruth Cowley specialised in commercial litigation and.had been,at the firm for nearly
20 years.
Discussions on appeal, recusal and case management
The paper setting out the backgrotind to récusal and other issues which had been
circulated on 19 March 2019 was usedhas the reference point for the discussions on
recusal and appeal. Each director’s view was sought and a number of issues were
highlighted:
¢ if the trials continued to be heard by a judge who had such a strong views on the
conduct of Post Office Limited and the reliability of its systems the potential costs
surrounding the,case would begin to grow. The pool of individuals seeking
compensation would increase as PO Limited was found to be in breach of
contract in relation to Post Masters and the action we had taken against them
where losses had been discovered. Existing and new agents’ perception of PO
Limited would be damaged
* there was a significant potential liability which was very hard to quantify because
of the terms which the Judge had found could be implied into contract and the
unfairness shown by the Judge in accepting inadmissible evidence to which PO
Limited had not been able to respond
¢ irrespective of whether the Judgement was in our favour we wanted to make
sure that any individuals who were found to have been treated unfairly had
restitution
* the consequences of losing on the reliability of the Horizon System were very
serious. The Board needed to see the potential range of penalties at different
trial stages to provide a roadmap
¢ there would be an upper limit on the claims that would be payable to the current
pool of claimants even if we lost on every point. However, a Judgement from
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© second trial which undermined the reliability of the Horizon System could
destabilise the business as it runs today. We would lose our ability to manage
our cash supplies if the ruling was that our systems could not be relied upon
© a follow on question to whether the Horizon System was reliable was how we
treated discrepancies in the System and if we were treating Post Masters fairly
where this happened today. It was noted that the system had changed
substantially in last 10 years. It was reported that most discrepancies were due
to human error, such as incorrect cash counting or putting a decimal point in the
wrong place. There was a team in Chesterfield which helped to identify these
errors and liaised with Post Masters and the banks. It was recognised that we
could improve our processes and be more transparent but if we were getting
banking transactions wrong routinely, we would know this because the banks
and their customers would be complaining. This was accepted to’be the case but
it was AGREED that the Board should have the facts and figures to beable to
verify that position
® we now had the opportunity to think more strategically about this case andthe
final outcomes sought.
Information and discussions requested
1. To provide a phased plan (e.g. over 30/60/90 days) covering the operational,
financial and reputational issues we would be addressing. It was reported that
this work was underway andithat a paper covering these issues should be
circulated by the end of the week. The executive would need to make proposals
on any operational changes, such as'the liability clause in NCT contract
2. We needed a clear view on whether the Horizon System worked properly
today. We had be able to defend against others’ doubts of the reliability of the
System. This meant'that we needed to be able to validate the system error
rate and what was,acceptable in other industries with transaction volumes of
similar scale é.g. banks. It was reported that we could provide sensible
information about today’s system but it was much more challenging to go back
in time
3. The outcome of the Deloitte work on the Horizon System that Tim Parker had
commissioned when he became Chairman would be circulated
TC would like to discuss the figures included in the paper with the executive.
5. We needed to demonstrate a cultural shift in how we managed the case in
future. It was vital that we avoided any potential to be criticised further for our
behaviour
6. We needed to carry out a critical analysis of ourselves. For example, what did
we need to do to be the right partner for Post Masters?
7. We needed to make sure that the written legal advice aligned with the verbal
advice received.
Decisions
Ken McCall asked whether the Board thought that it had received sufficient
information to take a decision on recusal and appeal. Directors confirmed that while
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Exec
Exec
Exec
TC/ Exec
Exec
JM
there was further information they would wish to see, as discussed and requested
for subsequent discussion, the information already received was sufficient to allowa
decision to be reached on recusal and appeal.
Norton Rose Fulbright’s input was also sought, accepting that RC and GH had been
given limited time to review the case. RC noted that from a legal perspective,
recusal was seeking to stem the flood of taint on future trials. There were no other
options to achieve this end and it would be difficult, if not impossible, to seek recusal
at a later stage. GH noted that from a broader director perspective there were risks
of action and risks of inaction against the background of where we were today.
There would be consequences financially, operationally and from a reputational
perspective; however, there was a greater upside in making the application for the
recusal versus the risks of that application failing. There were risks of incremental
damage if we were to lose the recusal application but damage had already occurred
because of the initial Judgement. The final outcome with a different judge ought to
be better from a reputational, financial and operational perspective..This did not
underplay the fact that an application for recusal was unusual and could attract
attention. It was also difficult to take a decision seeking the judiciary to rule against
one of their own. However, the position was unusual because the Judge was
hearing a series of trials.
Mark Davies’ view was sought from a communications and stakeholder perspective.
He thought that there was a high degree of probability of an adverse outcome on
the Horizon trial with the current judge. Weneeded to take the right steps to
protect the business long term, notwithstanding that this was/likely to generate
some adverse publicity in the short or. medium term,
The following points were made ifliconsidéring whether to make a recusal
application and seek leave to appeal:
e it was a balanced decision, notwithstanding the legal advice, because we could
not be sure of succeeding with the recusal application or of securing a judge
that recognised thémerits of our case. However, we could still manage the
narrative on what we wanted to do with the business even if we lost the
recusal.application. The strength of the legal advice and possible upsides of
success tipped the balance in favour of recusal and we should pursue leave to
appeal
* we had. received three legal views each of which supported making an
application for recusal and seeking leave to appeal. The Judge’s views and the
reputational damage caused by these pushed us towards seeking recusal and to
appeal
¢ the Horizon trial could be enormously damaging and pose an existential risk to
the business
¢ the only argument of force against recusal was the near term reputational
impact if we lost and the risk of further alienating the Judge; however, the
Judge’s views were already pronounced and losing the recusal application
could either embolden him further or make him more alert to charges of bias
e — the case had not garnered significant attention thus far, possibly because it was
focussed on technical systems issues
® we needed to take action in the long term best interests of the business. This
was not confined to the current group of claimants and their case.
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JM
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AC and JM confirmed that they recommended applying for leave to appeal and the
Judge’s recusal from a legal perspective.
After careful consideration of all the arguments, each Director present and
participating in the decision, supported a RESOLUTION of the Board that an
application should be sought for the Judge to recuse himself from the case, and,
should he not elect to do so, to submit this application to the Court of Appeal. It was
further agreed that leave to appeal should be sought. Ken McCall reported that Tim
Franklin shared the view that an application for recusal should be made as well as
seeking leave to appeal.
The Board RESOLVED that Lord Grabiner should be briefed to prepare the recusal
application.
JM reported that we had sought clarification on the timescales for appeal and it
seemed likely that we would have until 16 May 2019 to lodge an appeal. A
significant amount of work would be entailed in preparing the appeal and a decision
would need to be taken on who should carry out the appealwork for us.
We did not have to notify that we would be seeking leave to appeal.at the same
time as making the recusal application. Court was not sitting next week and it was
not clear therefore when the Judge would take the decision as to whether to recuse
himself. We thought it likely that he would decline to recuse himself and that the
case would go to the CoA. At this point a decision was likely to be taken quickly
because the Horizon trial was underway. We would seek for the Horizon trial to be
adjourned at the same time as the lodging the recusal application.
The options for appeal we discussed. David Cavendar could conduct the appeal for
us or we could appoint a new QC. There were advantages and disadvantages
associated both with retaining counsel or appointing new counsel. The executive’s
recommendation was to use David Cavendar but to draw on Lord Neuberger’s
expertise in the background. That was an option acceptable to both counsel. JM
TC suggested that we ask Norton Rose Fulbright to consider the options and discuss
these further at the Board Meeting on 25 March 2019.
The needito’avoid language that could be perceived as strident or arrogant was
raised. It was reported that recusal was largely a written process and was couched
in legal language. Lord Grabiner would stand up in Court to make to case to recuse.
The arguments would be forceful but would be legally grounded.