THE POST OFFICE GROUP LITIGATION
Claim No. HQ16X01238, HQ17X02637
& HQI7X04248
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH D) ION
BEFORE: The Hon. Mr Justice Fraser
BET WEEN:-
ALAN BATES & OTHERS
Claimants
and -
POST OFFICE LIMITED
Defendant
[DRAFT] GROUNDS OF APPEAL
A. Request for permission to Appeal
1. Post Office seeks permission to appeal against the order on Judgment of Mr. Justice
Fraser (“the Judge”) dated 15 March 2019 on the basis that it has reasonable prospects
of success on each of the grounds set out below. The Judge [refused/accepted]
permission [on..../ all grounds}.
ie
. Post Office contends that the Judge has gone seriously wrong on law, procedure and
fact. There is also a separate appeal seeking the recusal of the Judge for apparent
bias.
3. This notice to appeal is in five parts:
Part A: Request for permission to appeal.
Part B: Request for expedition of appeal.
Part C: Procedural unfaimess grounds of appeal.
Part D: Error of law grounds of appeal.
Part E: Error of fact grounds of appeal.
4. Post Office also seeks permission to appeal the Order of the Judge dated ....refusing
its application to stay the directions contained in the Courts Order dated. .....leading
to the hearing of issues of breach and limitation listed in the Post Office Group
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Litigation listed for November 2019 (“the Further Issues Trial”), That hearing is
intended to apply the determinations of the Judge in the Judgment under appeal.
Accordingly, Post Office ~seeks an interim stay of the Further Issues Trial (and the
directions leading to it), pending appeal.
. Post Office also seeks the direction and relief at paragraph [ REF _Ref5724852 \w \h
\* MERGEFORMAT ] as to the future conduct of the Post Office Group Litigation.
. Post Office also seeks permission to serve a skeleton argument in excess of 25 pages
pursuant to CPR PD 25C paragraph 31(1)(a) having regard to the very large number
of issues covered by the appeal.
. Expedition
. Post Office also seeks expedition of this appeal on public interest grounds that:
(1) The holding of the Judge as to the implication of good faith into the law of
contract and (in particular) the broad reach of the principle as applied by him to
“relational contracts” (including to limit express rights of termination- for cause
and on notice) would, if correct, have a dramatic impact on a wide range of
contractual relationships. If wrong, it needs to be overtumed quickly to avoid
other Courts (and litigants) erroneously relying on it.
(2) The holdings of the Judge as to the operation of the Subpostmasters Contract
(“SPMC”) and the “Network Transformation Contract” (“NTC”) is not limited to
the ¢.550 litigants in this Group Litigation but also applies to 11,000 serving
Subpostmasters (“SPMs”) throughout the UK. The Judgment has a wide and
dramatic impact. In particular:
(a) the implication of “good faith” to all contractual rights in both the SPMC and
NTC;
(b) the inability of Post Office to rely on its SPMs as its common law and
contractual agents in relation to the cash and stock that they hold and handle
on its behalf;
(c) the inability of Post Office to rely on the truth of monthly Branch Trading
Statements submitted to it by SPMs;
(4) the 22 terms implied into these detailed written contracts (in particular,
implied term (m) - which effectively prevents Post Office from enforcing
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accounting shortfalls as principal and under the express terms of the
contracts);
(c) the inability of Post Office to effectively manage SPMs out of the business —
by suspending them or terminating their contracts for cause or on notice in
accordance with the express terms of the contracts.
Taken together, the dramatic changes made by the Judgment make it prevent Post
Office from effectively manage and operate its 11,000 branches nationwide.
(3) Those 11,000 branches nationwide (a) hold £643 million of Post Office cash, (b)
process 47 million transactions every week and (c) produce 286 million cash
declarations per month (on which Post Office ordinarily could rely to maintain
appropriate oversight and control of its vast cash exposure across the network).
There is a very substantial amount of public money that is, as a result of the
Judgment, under much less effective contro! than it was.
(4) The Further Issues Trial (as part of the Group Litigation) to determine issues as to
whether the duties as found by the Judge in this Judgment have been breached
(and associated issues of limitation) is listed to be heard in November 2019. In
order to avoid wasted money and huge inconvenience to the parties, this appeal
should be heard and determined before that trial is heard.
C. Procedural Unfairness
8. The Judge is the current Managing Judge of The Post Office Group Litigation. He
ordered that there be a “Common Issues Trial” which involved a number of legal
questions, primarily issues of contractual interpretation. That is the Judgment which is
the subject of this appeal. The Judge erred in law when determining those questions in
admitting and relying on extensive post-contractual evidence (evidence to which Post
Office objected). The Judge also erred in law in admitting and making findings (or
expressing concluded, and often trenchant, views) upon such evidence into the trial in
circumstances which were unfair given that:
(1) They were not part of the Common Issues Trial. They were matters properly to be
determined in the subsequent “Horizon Trial” (dealing with technical issues as to
the information technology system used in branches), the Future Issues Trial or
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further breach and damages trials to be ordered. Those issues included: training on
the Horizon system, operation of the Post Office helpline, investigations into
discrepancies in PMs’ accounts, and the suspension and termination of SPMs’
contracts.
(2) The evidence that the Judge relied upon in this regard was partial and limited.
‘They were not matters on which witness evidence or proper disclosure had been
ordered. Post Office did not bring forward evidence on what are breach issues or
disclosure in relation to them. Nor did the SPMs give such disclosure. Post Office
correctly limited its evidence to matters which would assist the Judge in
determining the terms of the contracts entered into, and did not address how the
contractual relationship in fact developed and operated over the course of different
SPMs’ engagements.
(3) The Judge roundly criticised and unfairly made adverse findings about Post Office
witnesses for nor addressing matters that were clearly outside the scope of the
‘Common Issues Trial.
(4) The Judge has made these (unfair) findings which relate to a Group Litigation
with 550 Claimants (which represent a fraction of the current 11,000 SPMs, let
alone the 35,000 SPMs who have been in place over the relevant period) and
made comments which indicate the findings that he will make in the future based
on this partial and unfairly admitted evidence from only 6 Lead Claimants. Those
Lead Claimants were not chosen to be representative of the 550, and they are not
representative. Three claims were chosen by each side to give some exemplar
factual matrix for the interpretation of the SPMC and NTC contracts and to
provide examples of those two types of contract.
(5) PO will contend that having such a large amount of irrelevant material, including
material which is post-contractual material produced with the benefit of hindsight,
unfairly brought into the trial process must necessarily have affected the holdings
and findings in his Judgment, Reliance on that material is, in many instances, the
only credible explanation for the approach taken by the Judge to interpreting the
contracts and, more generally, resolving the Common Issues.
9. Accordingly, the Judge erred in law in his approach to evidence (at paragraphs 21,
34, 54, 61 and 62) in holding that he was entitled to make findings on such evidence
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(including evidence that went to credit) that was outside the ambit of the Common
Issues Trial, was irrelevant to the issues in that trial and was therefore inadmissible.
Such findings were not necessary for the Judge to perform his judicial function in the
Common Issues Trial. It was obviously unfair for him to do so given that
(unsurprisingly) there had not been disclosure or witness evidence from Post Office
on these issues. As such, it was inappropriate for the Judge to make any findings or
comments upon this material, still less to make findings and comments upon it in the
trenchant terms that he did. This was made even worse by the fact that he is the
Managing Judge in Group litigation and that two further trials had been set down
before him where these other matters would be tried. Post Office seeks an order
quashing those findings and comments listed at schedule I hereto on the basis that
they are subject to the unfairness objection.
10. This material subject to the procedural unfairness objection was also the subject of an
application to the Judge to recuse himself for apparent bias on the basis of pre-
determination, There is a separate application for permission to appeal against the
refusal of the Judge to recuse himself as the Managing Judge in the Post Office Group
Litigation.
11, The Court of Appeal will also be asked, in the alternative to the recusal appeal, to
determine whether in light of the seriousness and extent of this procedural unfairness,
and in accordance with the overriding objective, a different Judge should be appointed
the “Managing Judge” of the Post Office Group litigation to deal with future trials, in
particular having regard to the requirements in CPR 1.1(1) and (2) to deal with cases
“justly” and “fairly”.
permission only for evidence “In respect of each Lead Claimant and in relation to the
.¢ the First CMC Order at para. 10.
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Part D: Error of law
Index
Common Issue 1: “Relational Contract”: implied duty of good faith: paragraphs [ REF
_Ref5703925 \r\h \* MERGEFORMAT J to [ REF _Ref5703961 \r\h \* MERGEFORMAT
Common Issue 2: Implied terms: (A): 22 terms implied on the basis that this was a
“relational contract”: paragraphs [ REF _Ref5703989 \r \h \* MERGEFORMAT J to [ REF
_RefS704064 \r\h_ \* MERGEFORMAT J. (B): terms implied because they were necessa
paragraphs [ REF _RefS704083 \r\h \* MERGEFORMAT J to [ REF _Ref5704157 \r\h \*
MERGEFORMAT ]
Common Issue 3: “Good faith”: implied into all discretions and powers: paragraphs [ REF
Ref3704172 \r\h \* MERGEFORMAT J to [ REF _RefS704272 \r\h \* MERGEFORMAT
}.
Common Issues 12 and 13: Obligations of SPMs as agents and nature of Branch Trading
Statement: paragraphs [ REF _Ref5704481 \r\h \* MERGEFORMAT ] to [ REF
_Ref5704485 \r\h \* MERGEFORMAT J.
Common Issue 8: Proper construction of Section 12 clause 12 of the SPMC — liability of
SPMS for losses: paragraphs [ REF _Ref5704506 \r\h \* MERGEFORMAT J to [ REF
_RefS704514 \r\h\* MERGEFORMAT J.
Common Issue 9: Proper construction of Clause 4.1 of the NTC Contract ~ liability of
SPMSs for losses: paragraphs [ REF _Ref5704534 \r\h \* MERGEFORMAT J to [ REF
_Ref5704536 \r\h \* MERGEFORMAT J.
Common Issue 16: Proper construction of Section I clause 10 (SPMC) and Part 2
Paragraph 16.1 (NTC) of provisions providing for termination on notice: paragraphs [ REF
_Ref5704568 \r\h \* MERGEFORMAT J to [ REF _Ref5704569 \r \h \* MERGEFORMAT
lL
Common Issue 15:
Proper construction of Scction I clause 10 (SPMC) and Part 2
Paragraph 16.2 (NTC) of provisions providing for termination for cause: paragraphs [ REF
_Ref5704587 \r\h \* MERGEFORMAT J to [ REF _Ref5704589 \r\h \* MERGEFORMAT
}.
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Common Issues 17 and 18: The “true agreement” argument (based on Autoclenz) on
termination under the SPMC and NTC: paragraph [ REF _Ref5704619 \r\h \*
MERGEFORMAT ].
Common Issue 14: Proper construction and terms implied into right to suspend in SPMC
and NTC: paragraphs [ REF _Ref5704643 \r\h \* MERGEFORMAT J to [ REF
_Ref5704647 \r\h \* MERGEFORMAT J.
Common Issues 5 and 6: Onerous and unusual terms in the SPMC and NTC: paragraphs [
REF _Ref5704669 \r\h \* MERGEFORMAT J to [ REF _Ref5704673 \r\h \*
MERGEFORMAT J.
Common Issues 7,19 and 20 - application of the Unfair Contract Terms Act 1977 to the
SPMC and NTC: paragraphs [ REF _Ref5704699 \r \h \* MERGEFORMAT ] to [ REF
_Ref5704709 \r\h \* MERGEFORMAT J.
Common Issue 1 - “Relational Contract”: Implied term of “good faith” [Holding:
Para.1122(1); Reasoning para.702 to 768].
12. The Judge erred in law in implying into the SPMC and NTC contracts a term of “good
faith and fair dealing” and in applying that term to every right and power vested in
Post Office within those commercial contracts. This includes the express right of
termination on notice. The Judge also relies on the implied term as to good faith to
justify the implication of 22 further implied terms, many of which are in stark contrast
to the express terms. In doing this, the Judge substantially re-wrote the commercial
bargain between the parties in favour of SPMs and against Post Office. Such approach
is unwarranted and, if correct, revolutionary in its effect upon the law of contract.
. The Judge should have held that such term is not to be implied because it was not
“necessary” applying Marks & Spencer v. BNP Paribas Securities Services Trust Co
(Jersey) Lid [2015] UKSC 72 (“Marks & Spencer”). In particular the form of SPMC
and NTC contracts under review have been in place for 20 years and have worked
perfectly well for 99% of SPMs, approximately 35,000. The Judgment represents a
dramatic and indefensible departure from the orthodoxy on contractual interpretation,
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cannot be justified on the authorities and, in particular, goes well beyond anything
that Leggatt J (as he then was) did in the Yam Seng case.
14, The Judge said of this implied term of “good faith” (at paragraph 738):
“This means that both the parties refrain from conduct which in the relevant context
would be regarded as commercially unacceptable by reasonable and honest people.
‘Transparency, co-operation, and trust and confidence are, in my judgment, implicit
within the implied obligation of good faith.”
15. The Judge erred in law because:
(1) He should have found that they were, as a matter of contractual interpretation, not
long-term contracts and not relational contracts, not least because they were
expressly terminable on 3 months (SPMC) and 6 months (NTC) written notice.
The contract may or may not turn out to be of long duration in practice, depending
‘on whether one or both parties remained happy in the business relationship or, for
whatever reason, decided instead to give notice to terminate, As such, on
execution (when the question of implied terms must be judged), what the duration
in practice would be was unknown, but the contractual term was clearly limited
by the express right to terminate on notice. In holding to the contrary, the Judge
misunderstood and misapplied the decisions he set out in paragraph 705 and 712.
(2) Therefore, the rationale for such a general implied term was wholly absent:
neither party would be stuck in the relationship over a long period despite a
change of circumstances and so require the protection of general obligations as to
the behaviour expected within and in relation to the contractual relationship. The
safety valve in the event that the express terms did not work in a satisfactory
manner was termination.
(3) He found (in paragraph 728(3)) that: “the role of the SPM providing personal
service” (and if he did being entitled to a substitutional allowance) indicated this
was a “relational contract”. In fact, under the contract there was no obligation
upon an SPM to provide any personal service. Indeed, some SPMs are limited
companies.
(4) He found that the SPMC and NTC were long term “relational contracts” and that
therefore a term of good faith should be implied (see paragraph 711), rather than
focusing on the ultimate question which is whether an implied term of “good
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faith” was necessary in accordance with Marks & Spencer. Whether or not a
contract is held to be “relational” is simply one step along the road to focus
attention of the possibility of the need to imply terms under the necessary rubric in
a contract of that type. By contrast, the Judge proceeded on the false basis that if
he found a contract was a “relational contract” that sherefore the good faith term
was automatically to be implied and then applied to control and affect every right
and obligation in the contract. As such, the Judge failed to properly address his
mind to the correct question.
(5) He failed to recognise that these were commercial contracts into which an implied
term of “good faith” was not necessary and where, in fact, there was no space into
which such a broad “good faith” term could be implied given:
(a) Express terms ~ there were many detailed terms in the SPMC and NTC
regulating the contractual relationship, including the parts of the relationship
now said to be regulated by the general implied term of “good faith”. And the
Judge failed to consider (separately) how the “good faith” term was necessary
to imply into the SPMC as opposed to the NTC, bearing in mind that the two
contracts date from almost two decades apart and are very differently
structured and worded.
(b) An express legal relationship of agent and principal, with all the common law
duties inherent in such a legal relationship. At paragraph 618 the Judge holds
that agency is: “bound up (inextricably in my view) with any finding as to
whether these contracts are relational ones or not...”. The Judge nowhere
explains why or how that might be the case, but he appears to relegate the
parties’ express choice of agent and principal to some small importance,
preferring to focus instead on the ex-post imposition of a new and vastly less
certain form of legal relationship (the relational contract). Further, as set out at
paragraph [ REF _Ref5704481 \r\h \* MERGEFORMAT ] below he was
wrong in law to find, in effect, that these were not contracts of agency, despite
the express appointment of the SPM as “agent.”
(©) A fiduciary relationship (which was admitted by the Claimants and referred to
fleetingly by the Judge at paragraph 785) pursuant to which the SPM owed a
fiduciary obligation to Post Office in relation to the holding and handling of
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Post Office stock and money and the entering of transactions on the Horizon
system. The Judge made no attempt to seek to reconcile that admitted
fiduciary duty (and the express appointment of the SPM as “agent”) which
created significant duties from SPMs to Post Office with an implied (but
weaker) duty of good faith going in the opposite direction in relation to the
same subject matter, which implication the Judge held was necessary.
(a) Implied terms which the parties agreed formed part of the SPMC and NTC
contracts, namely, terms of “necessary co-operation” and under Stirling v.
Maitland - which were themselves powerful implied terms operating in close
conjunction with the express terms. The Judge did not even attempt to give
these agreed implied terms meaning and effect beyond suggesting that the
term as to necessary cooperation was somehow inadequate because it only
provided for such cooperation as was necessary (which calls into question how
any more onerous duty of cooperation could meet the test in Marks &
Spencer); see paragraph 740. He should have interpreted these implied terms
in conjunction with the express terms and only then considered what if any
(further) implied terms were necessary under Marks & Spencer. The Judge
failed to do this, despite accepting Post Office’s submission that this is what
he should do (paragraph 958). Inexplicably, he effectively dismissed the
argument as a “pleading point” (paragraphs 740 and 741). The Judge’s
reasoning on this issue is very hard to follow.
(6) Ifthe Judge had done this exercise properly or at all, he would have realised that
the suggested implied term was contrary to the express terms of the contract
and/or was not necessary.
. The Judge was wrong to hold that the commentary in Chitty (in the passage set out at
paragraph 708) was wrong. That passage of Chitty dealt with the judgment in Yam
Seng given by Mr. Justice Leggatt (as he then was) who was (rightly) exceptionally
careful in limiting the scope of the specific terms he implied by reference to an
implied obligation of “good faith.” Mr. Justice Leggatt (as he then was) carefully
narrowed the terms sought by the Claimant in that case to terms which were necessary
and in accordance with the requirements of “good faith”, This is in (very) stark
contrast to the broad brush and unprineipled approach of the Judge (applying “good
faith” controls to every important provision in the contracts, including termination on
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notice). The Judge went very much further than any Judge has previously thought
possible or desirable. His approach was contrary to the usual incremental
development of the common law.
17. The Judge also erred because his definition of what the implied term of “good faith”
entails is far too wide and uncertain. In particular, the term that he implies makes use
of the words “transparency and trust and confidence”, the former having no clear
meaning in a commercial context and the latter being erroneously imported from
‘employment law (where it has a specific meaning). Detailed commercial contracts
have been replaced by a quasi-employment relationship of ill-defined meaning and
content.
18. The Judge erred in law in reaching the holdings in Common Issue 1 in reliance upon
large quantities of post contractual evidence as to how the relationship between Post
Office and the SPMs operated in fact, using a large degree of hindsight. He also relied
upon evidence which had been introduced into the trial unfairly.
Common Issue 2:
A. Terms implied because the SPMC and NTC contracts were “relational ones...”
[Holding: Para.1122(2) and 1122(16); Reasoning paragraphs 743 to 748 and
117}.
19. The Judge erred in law in holding that his finding that the SPMC and NTC were
“relational contracts” provided a justification for implying the obligation of good faith
with a very broad brush into every right, and power and provision within each of
those contracts.
Termination on notice
20. The Judge erred in law in finding that the express provisions in the SPMC and NTC
for termination on notice (3 months and 6 months respectively) could only be
exercised “in accordance with the implied duty of good faith...” (Paragraph 1122).
21, The reasoning for this far-reaching holding is limited to the following words:
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I find that the Claimants are correct and the Post Office was required to act in
accordance with the implied duty of good faith in these contracts (as a result of their
being relational ones) in exercising power to terminate the contracts” (paragraph
1117).
22. The Judge erred in that:
(1) He failed to apply the correct test of necessity in Marks & Spencer when seeking
to apply a term of “good faith” to an express termination provision. Had he done
so, he could not have held that it was necessary.
(2) Even if this were a “relational contract” in which considerations of good faith
might play a role, to apply this concept to an express provision for termination on
notice was clearly wrong,
(3) He failed to give any, or any proper, consideration to the commercial impact of
implying good faith across the whole of these contracts with a broad brush.
(4) He failed to have any regard to legal certainty and the fact that termination on
notice provisions are very common (and contained in virtually every commercial
contract) and are expected by both parties to be enforceable in accordance with
their plain words. Subjecting such a right to an implied term of “good faith”
greatly undermined the clarity and utility of such right.
(5) He failed to have any regard to the fact that the termination on notice provisions
are, on their plain words, mutual rights and that the good faith implied term is
itself mutual . He held that only the exercise of that right by Post Office is subject
to the good faith provision. This is incoherent. It betrays an unarticulated objective
of re-balancing the commercial bargain.
(6) He failed to provide any or any sufficient reasoning for his holding.
Summary Termination
23. The Judge erred in law in finding (paragraph 899) that a summary termination under
the SPMC was subject to the implied duty of good faith. He also (implicitly) found
that the summary termination provision in the NTC contract was subject to an implied
duty of good faith. These are dealt with at paragraphs [ REF _Ret5704587 \r\h \*
MERGEFORMAT J to [ REF _Ref5704589 \r\h_ \* MERGEFORMAT J below.
[DCQC- he seems not to imply the same duty into the NTC contract ~ see: para. 904
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to 907: I suspect this is an oversight- I have assumed he has included it and
appealed on that basis).
Further Implied terms — said to be “incidents” of “good faith” implied term
24. The Judge held that it was necessary to imply (whether as implied terms or
“incidents” of the good faith implied term) into the SPMC and the NTC the further 17
implied terms set out at paragraphs 2(i) (¢ )(4)(e)(1)(g)(h))G)K)A) and (m) (ny(as
amended)(o) (as amended) (p)(q) ( ) and (s).
25. First, the Judge erred in law to imply these further 17 terms into the SPMC and NTC
contracts on the basis that they were “relational contracts”, when they were not: see
above in relation to Common Issue 1.
26. Further or alternatively, even if the contracts were “relational”, it was not necessary to
imply into the SPMC and NTC contracts the 17 implied terms. ‘The Judge’s reasoning
is at paragraph 747 and is limited to the point that because this is a “relational
contract” that therefore the 17 implied terms are to be incorporated. This is flawed
reasoning. The Judge erred in law in that:
(1) He fails to apply the correct test of “necessity” in Marks & Spencer to the 17
terms he implies into the SPMC and NTC contracts. He implies them into these
contracts on the basis that these are “relational contracts”. That is the wrong test.
A relational contract is a description that could be applied to a contract that (often)
~ but not always - contains certain features. It is not a specific established species
‘of contract known to the law (such as an employment contract) into which terms
(such as a term as to trust and confidence) can be implied in Jaw. The Judge
wrongly treated it as if it was, notwithstanding that he purported to be implying
these 17 terms in fact (see paragraph 692).
(2) This error of law (and confusion) is demonstrated by paragraph 757 where the
Judge holds that whether or not the SPMC and NTC contracts are “relational” he
would “...in any event...” imply the terms at (n) (0) (q) and (r) on the basis that
they were necessary. This shows that he was not, on his preferred approach,
applying the “necessity” test to those four implied terms or any of the other 13
implied terms considered above. This is a clear error of law. This identical error
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is evidenced by paragraphs 762 and 763 in relation to implied terms (c)(d) and
(m).
(3) The Judge apparently fails to have regard to the fact that he is implying a whole
raft of implied terms dealing with a computer accounting system that did not even
exist as at the date of execution of certain of contracts he was considering. Implied
terms in relation to something that did not exist cannot have been necessary at the
date of contracting. By way of example, the SPMC contracts of Lead Claimants
Mr. Bates and Mrs. Stubbs were entered into before Horizon was introduced.
(5) The Judge érred in law in that he provides no proper reasons for holding that the
17 implied terms or any of them are necessary, whether individually or
cumulatively. He lists them at paragraph 746 and treats them en masse without
providing any detailed reasoning or justification for their implication. He should
have considered them individually. If he held that, say, two of those were to be
implied, he should then have determined whether in light of the implication of
those two terms it remained necessary to imply the remaining 15.
(6) The Judge errs in law in that he provides no rationale or basis for holding that the
17 terms, or any of them, are necessary notwithstanding the existence of the
agreed implied terms under Stirling v. Maitland and “necessary co-operation”.
There is no consideration whatever of the impact of these agreed implied terms
(which have their own construction and effect) upon the subject areas covered by
any of the 17 implied terms.
(7) The Judge erred in law in making the findings in Common Issue 2 (above) in
reliance upon large quantities of post-contractual evidence as to how the
relationship between Post Office and the SPMs operated in fact, using a large
degree of hindsight. He also relied upon evidence which had been introduced into
the trial unfairly.
Implied term (m)
27. By way of example (under this ground of appeal), the Judge implied term (m)
(paragraph 755). The Judge held that this is to be implied into the SPMC and NTC
contracts in the form suggested by the Claimants. That term provided as follows:
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“Not to seek recovery from Claimants [of shortfalls] unless and until: (i) the
Defendant had complied with its duties above (or some of them); (ii) the Defendant
has established that the alleged shortfall represented a genuine loss to the Defendant;
and (iii) the Defendant had carried out a reasonable and fair investigation as to the
cause and reason for the alleged shortfall and whether it was properly attributed to the
Claimant under the terms of the Subpostmaster contract (construed as aforesaid).”
28. The Judge erred in law in so doing because:
(1) Given his construction of clause 12.12 of the SPMC (paragraph 646 and 653) and
his implication of the same term into the NTC (paragraph! 103), the onus is upon
Post Office (not the SPM) to demonstrate that the “losses” sought to be recovered
were caused by “...his own negligence, carelessness or error....”. In those
circumstances, to also imply this term is clearly not necessary, and the Judge was
wrong in law to have implied it.
(2) Even if the Judge had construed clause 12.12 properly (as advanced in paragraph [
REF _RefS711391 \r\h \* MERGEFORMAT ] below - such that there is no
contractual allocation of burden of proof), it would still not be necessary to imply
such a term for the following reasons:
(a) The contract works and has worked perfectly well without it for very many
thousands of SPMs over 20 years. It is a classic example of a term that would
suit one of the parties but that cannot sensibly be described as necessary for
the business efficacy of the agreement.
(b) No commercial party would ever agree to having its right of recovery (of its
money) in an agency relationship be subject to such an onerous and expensive
procedure, which makes it virtually impossible to reliably control over £600
million in funds across the Post Office network countrywide. Most shortfalls
are, for obvious reasons, not disputed: the SPM is well-placed to know or
think that the shortfall results from an error in the branch (c.g. paying too
much change to a customer or mis-keying a transaction), and Post Office will
often have no special insight whatsoever. The implied term would prevent
Post Office collecting undisputed shortfalls until it had jumped through
various hoops imagined by the Claimants and imposed by the Judge.
(©) By way of example, if an an SPM’s assistant loses £200 cash from the till,
resulting in a shortfall at month end, applying implied term (m) Post Office
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cannot seek to recover such funds until it has investigated the matter and is
able to demonstrate that the £200 was not lost through any other cause. This
might include any one of the potentially thousands of transactions performed
by SPMs in their branches and involving Post Office clients (e.g. Camelot for
lottery sales or Bank of Ireland for cash point services). It requires Post Office
to identify whether, by reference to its relationships with those clients, it will
ultimately suffer a “genuine loss” as a result of the shortfall in the SPM’s
branch. It does this without knowing why the branch is £200 short or even (in
many cases) when the £200 loss first arose. And this implied term places that
impossibly onerous obligation on Post Office despite the fact that the SPM is
expressly appointed the agent of Post Office and is the person in the branch
who handles all the cash and transactions and who is in a much better place to
know what happened to the missing £200.
(d) As such, the implication of such a term is so uncommercial and so contrary to
the agency and fiduciary duties placed on SPMS that it is absurd, No
commercial party in the position of Post Office would ever have agreed to it.
(3) Furthermore, the prohibition on recovering shortfalls until PO has complied
“...with its duties above (or some of them)...” is obviously unclear and
unwarranted. Those duties constituted all the other implied terms listed “above.”
That is each of implied terms (a) to (1). So following this logic, if it could be said
that Post Office was in breach of its obligations on training, it could therefore not
recover shortfalls, no matter how they were caused. Such an implied term is not
necessary. Such a prohibition on the recovery of shortfalls is obviously wrong and
so uncommercial as to be beyond coherent argument.
Implied terms (n) and (0;
29, In addition to the general grounds in relation to implied terms, the Judge erred in
relation to:
(1) Implied term (0) (paragraph 748) in which he held that the implied duty of “good
faith” meant that PO could not terminate the contract of an SPM if the Post Office
was itself also “...in material breach of duty in respect of the matters which the
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Defendant considered gave it the right to terminate....”. The Judge erred in law
because:
{a) This is contrary to the well-established principle of law that if both parties are in
repudiatory breach of contract either can accept such a breach and bring the
contract to an end.
(b) It is a mis-use and unjustified extension of the principle of “good faith” to
circumscribe the rights of Post Office in this way.
(c)Itis not necessary to do so.
(d
It is unfair and unjustified to use the mutual “good faith” term to restrict the rights
of termination of one of the parties ~ i.e. Post Office. There is no reason why, if
the Judge’s reasoning were right, SPMs should be able to terminate the contract
where are themselves in breach (e.g. by not making good shortfalls). It is an
implausible bargain.
{e) The implied term is uncertain and unworkable and would never have been agreed
to by a party in the position of Post Office.
(2) Implied term (n) (paragraph 748) in which he held that the implied duty of “good
faith” meant that Post Office could not suspend a SPM if the Post Office “...was itself
in breach of duty in respect of the matters which the Defendant considered gave it the
right to suspend”, The Judge erred in law because:
(a) It was not necessary to imply such a term.
(b) It was an unjustified extension of the principle of “good faith” to cireumseribe the
rights of Post Office in this way.
(©) Objectively, the right to suspend is there to enable Post Office to protect its stock
and money whilst it investigates any loss. It is irrelevant to that contractual
objective that the Post Office may itself be in breach of contract in respect of, say,
one of the “matters” that resulted in the suspension.
(d) A commercial party would never have agreed to such an inhibition on its right to
suspend, given that suspension is its only real way of acting urgently to protect its
cash and stock when problems emerge. The prospect of leaving a potential
fraudster or a lazy or incompetent SPM in charge of a Post Office when serious
problems emerge (because Post Office was itself in breach of contract in relation
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to one of the “matters”) is obviously wrong. So too where an SPM might have
unwittingly employed a dishonest assistant who was (unknown to the SPM)
exposing him to losses and liabilities.
(e) The implied term is uncertain and unworkable and would never have been agreed
to by a person in the position of Post Office.
B. Terms implied into the SPMC and the NTC because they are necessary [holding:
paragraph 1122(2); Reasoning paragraphs 749 to 766].
Implied term (t) (paragraph 751
30. [PO accepts on this appeal a re-cast formulation of the implied term at (t) in the
{following terms on the basis that it is necessary: (paragraph 751/752):
“that the Post Office take reasonable care in performing its functions under the
SPMC and NTC contracts which could affect the accounts of Subpostmasters”.
[Query: whether tactically giving up this implied term at this stage is a good idea
and may (together with the Agreed Implied terms) persuade the Court of Appeal to
set aside all the other nonsense ? In particular this implied term could be seen as an
incident of the Agreed Implied term of “necessary co-operation” [INSTRUCTIONS
REQUIRED]
Implied terms (a) and (b) (paragraph 749)
31, The Judge held additionally that the terms listed at Common issue 2(i)(a) (b)
(paragraph 749 -751) are to be implied into the SPMC and NTC on the basis that they
are necessary.
32. [Post Office accept on this appeal that a recast formulation of the implied terms at
(a) and (b) in the following terms on the basis that they are necessary:
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() Implied term (a): “to provide reasonable training and support if Post Office
imposed new working practices or systems or required the provision of new
services”.
(2) Implied term (b): “to ensure that the Horizon computer system was reasonably
fit for purpose.”
[DCOC: consider whether tactically giving up these implied terms in this form
at this stage is a good idea and may (together with the Agreed Implied terms)
persuade the Court of Appeal to set aside all the other “good faith” nonsense ?
Again the first of these two terms might be seen as part of the agreed
“Necessary co-operation” implied term INSTRUCTIONS REQUIRED]
33. Insofar as the Judge went beyond these re-cast implied terms (t)(a) and (b) he erred in
Jaw in that he failed to properly apply the test of “necessity” in that:
(1) He failed to consider the express terms which dealt with training and support as
they applied to implied term (a)
(2) He failed to consider the agreed implied terms of Stirling v. Maitland and
“necessary co-operation” and their impact on the subject matter of these implied
terms, before deciding whether the terms at (a) (b) and (1) were necessary.
(3) He failed to provide proper reasons as to why such terms were necessary and, in
particular, why they were necessary notwithstanding the implication of other
terms covering the same matters (specifically, the 17 implied terms referred to
above).
(4) He never stood back and considered the cumulative effect that the implied terms
would have on the nature and balance of the commercial relationship created by
the express terms.
(5) He never stood back and considered the commercial reality arising from the
cumulative effect that the implied terms would have when considered in
conjunction with his findings on agency and the Branch Trading Statement.
Judged at the inception of the contracts, the relationship created by the Judge’s
implication of terms was not only fundamentally different from that created by the
express terms but was an implausible commercial bargain,
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Implied terms (n)(o)(q)(r) (paragraph 756 to 757)
34, The Judge held additionally that, if not implied because the SPMC and NTC are
“relational” contracts, then the terms at (1)(0)(q) and (r) are to be implied into the
SPMC and NTC contracts because they are necessary.”
35. The Judge dealt with this at paragraph 759 to 761. He erred in law in that he failed to
properly apply the test of “necessity”. Specifically:
(1) He failed to consider the Agreed Implied terms of Stirling v. Maitland and
“necessary co-operation” and the impact they would have upon the relevant
subject areas before deciding whether the terms at (a) (b) and (1) were necessary.
(2) He failed to provide proper or any reasons as to why such terms were necessary.
Implied terms (c ) and (4) (paragraph 762)
36. The Judge held additionally that if not implied because the SPMC and NTC are
“relational” contracts, then the implied terms at (c) and (d) are “...plainly necessary to
give business efficacy to the contracts...”. The content of these terms is set out in
paragraph 45.
37. As to (c) Post Office accept on this appeal that the recast implied term set out below
was “necessary”:
“ Properly and accurately to effect transactions using Horizon and to maintain and
keep records of such transactions for a reasonable time.
[DCQC: I consider that we should think about not appealing on implied term (c) in
the form I have recast it and limiting our attack to (d). It will be suggested to us that
we must do the things set out in (c) (as recast) — due to the agreed “Necessary co-
operation term INSTRUCTIONS NEEDED.]
38. As to implied term (4) incorporated by the Judge, it provided:
“(d) Properly and accurately to produce all relevant records and/or explain all relevant
transactions and/or any alleged or apparent shortfalls attributed to Claimants”
39, The Judge dealt with this at paragraph 762. He erred in law in that he failed to
properly apply the test of necessity in that:
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(1) He failed to consider the Agreed Implied terms of Stirling v. Maitland and
“necessary co-operation” and the impact they would have upon the relevant
subject matter before deciding whether the terms atI (c)] and (d) were necessary.
(2) As to implied term ( c) the form of the term incorporated by the Judge was too
wide and unlimited in time.
(3) As to implied term (d) he was wrong to impose an obligation on Post Office to
produce “all relevant records” when the SPM himself has and/or has access to
records through the Horizon system, He was also wrong to impose an obligation
on Post Office to “explain” all transactions or shortfalls, when such transactions
and shortfalls originated in the branch operated by the SPM, are largely self
explanatory and, where they are not, Post Office is typically in no better (and
usually a much worse) position than the SPM himself to explain the transactions /
shortfalls in the SPM’s branch.
(4) He failed to provide proper or any reasons as to why such terms were necessary,
simply
ting the necessity of the implied term without identifying why the
contract would otherwise lack practical or commercial coherence.
40. The Judge erred in law in making the holdings in Common Issue 2 (above) in reliance
upon large quantities of post contractual evidence as to how the relationship between
Post Office and the SPM’s operated in fact, using a large degree of hindsight. He also
relied upon evidence which had been introduced into the trial unfairly.
Common Issue 3 - exercise of discretion and powers [Holding paragraph 1122(3);
Reasoning paragraph 768}.
41, The Judge erred in law in holding that all powers and discretions in the SPMC and
NTC are subject to the implied term of good faith. He failed to apply the test of
necessity under Marks & Spencer. Had he done so he would not have held that it was
necessary. In particular, the Judge:
(1) Fails to identify the “powers” and “discretions” in each of the SPMC and NTC
which are subject to the implied “good faith” term.
(2) Necessarily, therefore, he has failed to address his mind to which of those
particular other powers and discretions the implied term applies. That is a blanket
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approach and is wrong in principle, not least given that the appropriate implied
fetter (if any) on a contractual power or discretion depends on the proper
construction of the contractual provision in question,
42. One discretion or power identified by the Judge as being subject to this implied duty
of good faith is the right of Post Office to alter terms and conditions (paragraph 998).
Such a duty of good faith is not necessary; indeed, the Judge does not find that it is
necessary if (in the alternative) it is not covered as part of a “relational contract”
(paragraph 1000).
4:
. The Judge erred in law in making the holdings in Common Issue 3 in reliance upon
large quantities of post contractual evidence as to how the relationship between Post
Office and the SPM’s operated in fact, using a large degree of hindsight. He also
relied upon evidence which had been introduced into the trial unfairly.
Common Issues 12 and 13: SPM’s as “Agents” Branch Trading Statement [Holding:
paragraph 1122(12) and (13); Reasoning paragraph 782 to 853].
44, The Judge erred in law at paragraphs 819 and 1122(10) in rejecting Post Office’s case
(correctly recorded at paragraph 800) and holding that the normal common law
principles applicable to agents were somehow excluded, notwithstanding that under
both the SPMC and the NTC the SPMs were expressly appointed as “agents.”
4
. The Judge erred in law at paragraph 798 in holding (as a matter of construction) that
the only purpose and content in the express appointment of SPMs as “agent” (in both
the SPMC and the NTC) was to distinguish them from “employees”. There was no
warrant or justification for such a limitation, having regard to the factual matrix of the
appointment of SPMs. More so given that SPMs had, by reason of that appointment,
fiduciary duties in relation to the cash and stock they held on behalf of Post Office
and in relation to making accounting entries in the Horizon system. The reasoning
here is particularly hard to follow given that employment is itself'a sub-species of
agency.
46. The Judge should have held that the express contractual appointment of an SPM as
agent meant what it said and that the normal common law principles of agency
applied and provided the matrix against which the express terms of the contract were
to be construed.
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47. The Judge erred in law at paragraph 789 in holding that ...it is relevant to consider
the conduct of the parties and all the circumstances of the relationshi
determine “...the full extent of the agency”. The SPMs were expressly appointed as
agents under a commercial contract. It was therefore not relevant to consider post-
contractual matters to determine the terms or extent of that agency relationship. That
agency relationship was entered into, and its scope was set, at the inception of the
contract, and is not to be interpreted by reference to post-contractual conduct.
48. The Judge also erred in law at paragraph 1122(13) in finding that SPMs did not bear
any burden of proof relating to the Branch Trading Statement, an accounting
statement provided by the SPM to Post Office at the end of each month (or 6 weeks)
setting out the state of its accounts. It is accompanied by a declaration of truth.
49. The Judge correctly stated the principle applicable to the Branch Trading Statement at
paragraph 820, however he should have held that it would not be regarded as an
account rendered in respect of the discrepancies notified to the helpline as being the
subject of a dispute (so, to that limited extent, the account was qualified). Insofar as
he suggests otherwise, he has made an error of law.
50. The Judge erred in law paragraph 842 in holding that the Post Office cannot hold the
SPMs to the contents of Branch Trading Statements. He should have held that:
(1) In relation to Branch Trading Statements submitted to Post Office that were not
subject to a dispute (notified via the agreed contractual route of the helpline) that
this was in law an account stated so that if the SPM wished to subsequently
dispute its contents the burden was on the SPM to demonstrate the mistake. And
that the common law principles set out in paragraphs 835 to 840 applied
(2) Inrelation to Branch Trading Statements submitted to PO that were subject to a
dispute notified via the contractual route of the helpline, that this was in law an
account stated with the same result as in (1), save that, those parts of such Branch
Trading Statement that were subject to the notified dispute remained at large
between the parties and were not subject to the common law principles of account
stated.
2 See Agreed Appendix 3 to Judgment (bottom right hand box); and Agreed Appendix 4 (bottom box). See also
agreed fact 31 in the Factual Matrix document (agreed before trial).
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51, The Judge erred in law in the following holdings in this connection:
(1) That the amounts disputed by SPMs via calls to the helpline were not taken out of
the branch trading account (paragraph 831). As to this, the true position is set out
in the Agreed Appendices 3 and 4. The disputed amount was taken out of the
Branch Trading Statement because it is recorded as being in dispute. As such, it
was no longer part of the account declared to Post Office and it could not be
recovered pending resolution of the dispute, The trading statement must be set to
zero to commence the subsequent trading period (or “rollover”). Therefore, by
definition, the disputed debit from the earlier trading period cannot be part of it.
(2) That the case put by Post Office was that the “account stated” was represented by
the Branch Trading Statement even in respect of items that had been notified to
Post Office as being in dispute via the helpline (paragraph 834). In fact, the case
put by Post Office is correctly set out by the Judge himself in paragraph 829. That
is, and always has been Post Office’s case. The Judge seems to have been
confused by the mechanics relating to accounting treatment of discrepancies in
fact under Horizon, whereby:
(a) At the end of the accounting period, the “Accept now” button on the first
screen needs to be pressed irrespective of whether the SPM intends ultimately
to dispute or agree the entry - “Stage 1.”
(b) That gets to a second screen — where the options are “pay now” or “settle
centrally”. The Judge explains the “settle centrally” function at paragraph 832
= “Stage 2.”
(©) Then, even though the discrepancy has been (1) “Accepted” at Stage I and (2)
“Settled Centrally” at Stage 2, it can nonetheless be disputed by way of a call
to the helpline - “Stage 3.”
(d) Each of those three stages are part of the agreed accounting procedure. The
Judge in error seemed to want to stop at Stage 2 and conclude that SPMs had
to “accept” (small “a”) discrepancies in the Horizon system and to use this to
dilute the application of ordinary accounting principles. The helpline
procedure was part of the system provided. It was wrong and an error of law
for the Judge to hold otherwise. It was also contrary to a contradictory finding
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5.
54.
later in the Judgment in connection with other implied terms (at paragraph
778) that the helpline function was, “...an important component of branch
accounting and of the way Horizon itself...”. It was not, “...an ancillary and
separate system or process...”.
(€) Itis right that SPMs had no choice but to “Accept” (capital A) such
discrepancies on the first computer screen at Stage I, Both the Judge and
certain witnesses when asked about these matters shared this confusion
between pressing “Accept” on the first screen (merely bringing the amount
into the branch records) and substantively accepting the amount in the sense of
agreeing it as part of the account stated.
(8) It was an agreed part of the factual matrix that the only way for SPMs to
dispute discrepancies at the end of a trading period when submitting a Branch
Trading Statement was not via a button on Horizon but via the helpline.
Accordingly, the Judge was wrong to state at paragraph 35 that the parties could
“...not even agree how Branch Trading Statements were produced”. The Judge set
out at paragraph 63 matters agreed in fact but whose relevance to the Common Issues
was not agreed: paragraphs 32, 36,37 and 44 of the Agreed Matrix document. These
included the production of Branch Trading Statements and that the only way to
register disputes at the time of submitting a Branch Trading Statement was via the
helpline. The Judge erred in finding (paragraph 35) that the “truth” of these matters
was in dispute, It was not. It was not open to him to find that this was in dispute
and/or that finding is perverse. It provided no justification for exploring post-
contractual conduct and events.
. The Judge erred in law (paragraph 525) in holding that Post Office’s submissions
“amount to an attempt to give Branch Trading Statements the status of an agreed and
settled account” even in relation to items that are disputed. Those submissions were
in accordance with the orthodoxy in relation to settled accounts and were correct.
‘The Judge erred in law in making the holdings in Common Issue 12 and 13 (above) in
reliance upon large quantities of post-contractual evidence as to how the relationship
between PO and the SPM’s operated in fact, using a large degree of hindsight. He also
relied upon evidence which had been introduced into the trial unfairly.
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Common Issue 8 : SPM’s liability under the SPMC for “losses” [holding: paragraph
2211(8); reasoning at paragraph 640 to 676.
Section 12 clause 12 of the SPMC
55. The Judge erred in law in construing Section 12 Clause 12 of the SPMC as if it placed
an express burden on Post Office to demonstrate that the SPM had been negligent,
careless or had made an error before a SPM was liable for “losses”: see paragraphs
646 to 647 and 653.
5
EA
. The clause provided:
“.., The Subpostmaster is responsible for all losses caused through his own
negligence, carelessness or error, and also for losses of all kinds caused by his
assistants. Deficiencies due to such losses must be made good without delay.”
57. The Judge erred in law because:
(1) He failed to have any or any proper regard to the fact that the SPM was expressly
appointed as Post Office’s agent with possession and control of Post Office’s cash
and stock, to be traded by the SPM and by its assistants (is any).
(2) He failed to have any or any proper regard to the fact that the SPM as agent owed
fiduciary duties to the Post Office in relation to such cash and stock and in relation
to making entries in the Horizon system.
(3) He failed to distinguish between the conditions for liability for losses, on the one
hand, and any contractual burden of proof on the other. He elided one with the
other.
(4) He should have held that the contractual wording was neutral as to burden of
proof and that questions of burden of proof are part of the law of evidence and
would be needed to decided at subsequent trials on breach.
(5) He failed to have any or any proper regard to the fact that the SPM had control of
the cash and stock, of the premises and of the operation of the Horizon system at
his branch and that the Post Office had none of these advantages. A contractual
allocation of the burden to Post Office was commercially unsound and unlikely.
(6) He failed to have any or any proper regard to the difficulties faced by Post Office
in meeting any contractual burden of proof given the matters set out above.
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58.
59,
(7) He failed to have any or any proper regard to the fact that the Post Office has a
network of 11,000 SPMs countrywide which have some £640 million of cash, and
is unable to know what is going on in each branch on a day-to-day basis.
(8) He failed to have any or any proper regard to the commercial realities.
Alternatively, the Judge should have held that if and to the extent that Section 12
clause 12 implicitly allocated the burden of proof it did so by allocating it onto the
SPM to demonstrate why it was not liable under the clause:
(1) For the same reasons set out directly above at paragraphs [ REF _Ref5711391 \w
\h \* MERGEFORMAT Jf REF _Ref5714383 \w \h \* MERGEFORMAT J, [
REF _RefS714387 \n \h \* MERGEFORMAT J and [ REF _Ref5714390 \n\h \*
MERGEFORMAT J.
(2) Because this allocation is in-keeping with:
(a) SPM’s being liable for all losses caused by assistants- whether or not caused
by negligence or error. Given that liability, if the SPM is to avoid liability
under the clause, he would first need to show that the loss was not caused by
one of his assistants. If that burden is on the SPM, then it would make no
sense to then place the burden on Post Office to show that the loss was due to
negligence or error of the SPM.
(b) Section 12 Clause 17 — which permits the SPM to apply for “relief” from
“losses” — on the showing by him of reasons why he should not be liable or
fully liable for such losses.
The Judge misunderstands or mis-states Post Office’s argument (his understanding of
which is at paragraphs 669 to 675) and erred in law in construing Section 12 Clause
12 on the basis that it was capable of making SPM’s liable for “losses” or
“deficiencies” caused by a bug in the Horizon system because, in fact:
(1) such would not be “a loss”; and/or
(2) any shortfall on the account would not be a “deficiency due to such loss” (within
the meaning of the clause).
It would be an apparent loss caused by a defect or bug in Horizon, Accordingly,
properly construed the clause did not have the effect of making SPMSs liable for such
losses.
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60. The Judge erred in law in failing to separate out the question of the meaning of the
clause, on the one hand, and the incidence of the burden of proof, on the other. Post
Office made clear to the Judge that if at a subsequent trial on breach an SPM put the
accuracy of the Horizon system in issue in relation to a particular “discrepancy”, then
Post Office would have at least an evidential burden (as part of the law of evidence) to
show that the “discrepancy” or “loss” was not caused by a bug in Horizon,
61. The Judge erred in law (at paragraph 671) in finding that Post Office’s argument was
“both circular, and is an overly intricate attempt to sow confusion and obscure the
true issues in the case...”. In fact, the Judge failed to understand the argument (or at
least mis-states it). The Judge instead wrongly focused on what happened in fact (see
the fourth and final sentences of paragraph 670 and paragraph 675, i.e. Post Office
chased SPMs for payment under the clause) and upon what would be questions of
breach in order to determine a question of construction of the clause. Whether or not
Post Office was right to chase a particular SPM in relation to a particular loss under
this clause will be a matter for the trial on breach. It has nothing whatever to do with
the proper meaning of this clause. This is a simple error of law and demonstrates a
flawed approach by the Judge.
62. The Judge erred in law (at paragraph 670) in holding that Post Office argument on
this clause, “verges on misrepresenting the Post Office’s own case. It wholly ignores
that the Post Office effectively denies that there can be losses “caused by Horizon”
because it is “robust...” “, because:
(1) As the Judge correctly records at paragraph 10 it is not Post Office’s case that the
Horizon system is perfect, but that, whilst errors do sometimes occur, it is
generally a reliable system.
(2) This holding (indeed the whole of this paragraph) again confuses the meaning of
the clause (and the conditions for imposing liability), on the one hand, and the
respective positions of the parties as to whether those conditions have been met in
any particular case, on the other (which will depend on evidence and is a question
of breach). The latter is not relevant to the former.
(3) Post Office accepted at trial that if at any future breach trial a SPM disputed that
there was a “loss” or “deficiency due to such losses” (because of an alleged bug in
Horizon creating an “apparent loss/ deficiency”), that Post Office would have at
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least an evidential burden of showing that there was a real “loss” within the
meaning of the clause, and of showing that Horizon had not created an “apparent
loss/ deficiency”,
(4) Asa matter of law, such “apparent losses/deficiencies” fall outside the clause and
the SPM is not liable for them. Accordingly, the clause, properly construed is
dealing with losses other than “apparent losses”, e.g, losses caused by an assistant
mistakenly losing a packet of foreign currency. This was clear from paragraph 94
of Post Office’s Generic Defence (see further below).
(5) The final sentence of paragraph 670 and paragraph 674 illustrate this error of law
by the Judge and his confusion on this point. It is true that Post Office seeks to
use the clause to recover losses even where SPMs claim that the losses are caused
by errors in Horizon. It docs so on the basis that it does not agree with the SPM
on that evidential point and on the basis that Post Office will satisfy the evidential
burden of showing that these were “losses” within the meaning of the clause at a
trial on breach. Post Office has never, in any proceedings, argued that SPMs are
liable for apparent deficiencies or losses caused by bugs in the Horizon system.
On any view, it is wrong to use those features to construe the meaning of the
clause...
(6) The Judge had correctly recorded Post Office’s case at paragraph 651 of the
Judgment. However, he clearly misunderstands it as set out at paragraph 652 and
as confirmed by the last sentence of paragraph 653.
63. The Judge erred in law in holding that Post Office’s pleading did not reflect the case
being argued at trial (paragraph 671 to 673) and Post Office had done a “volte face”
for reasons that “..can only be guessed at...” (paragraph 676). The Judge again
disregards what was in fact pleaded. The Judge quotes paragraph 94(2) of the
Generic Defence (paragraph 673) which defines “losses” for the purposes of Post
Office’s construction of Section 12 clause 12 “...(as defined at paragraph 41 above)”:
(1) That definition (in paragraph 41 of the Defence (which the Judge does not quote
and appears not to have considered) expressly provides that “discrepancy” and
“Joss” for the purpose of Section 12 clause 12 do not include what is defined
separately in paragraph 41 as a “Horizon generated shortfall”.
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(2) The pleaded definitions define “discrepancy” in terms of the difference between
the actual cash and stock in the branch, and, what the cash and stock should be on
Horizon where that second figure is “...derived from transactions input by branch
staff into the branch’s terminals”. That definition defines a “loss” as a negative
discrepancy.
(3) Thus, the definition of “discrepancy” always exclude apparent discrepancies
caused by bugs in Horizon, as these would not be derived from transactions input
by branch staff but would result instead from a bug in the software. There was no
“...volte face” (paragraph 676).>
(4) Further, even if it were a “volte face”, the correct question is whether or not the
construction of the clause put forward by Post Office was right or wrong.
Section 12 clause 12- liability for assistants (paragraph 667)
64, The Judge erred in holding that Section 12 clause 12 only imposed liability upon
SPMs for the acts of their assistants where Post Office could show that losses were
caused by “negligence, carelessness or error” of the assistants. The Judge erred
because:
(1) He ignored the express words in the clause: “...and also for losses of all kinds
caused by his assistants.” The words “all kinds” is in obvious distinction to
“losses caused through negligence ...cte” as it applies to SPMs in the first line of
the clause. He failed to give any or full effect to the words “and losses of all
kinds”.
(2) He failed to given any or any proper consideration to the commercial reality that
SPMs decide whether to employ assistants, whom to employ and how much
training and supervision to provide to them. There was a clear commercial
rationale for the difference in treatment between losses caused by SPMs and those
caused by their assistants.
(3) He should also have found that to escape liability under the clause, the SPM
would first have to show that the loss was not caused by an assistant. If the SPM
was able to do that, then the court would need to determine on the evidence (at the
>This point was explained to the Judge and the definitions in paragraph 41 of the Generic Defence were
brought to his attention in closing: see Day
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breach trial) whether the conditions for liability of the SPM under the clause were
met.
65, The Judge erred in law in making the holdings in Common Issue 8 (above) in reliance
upon large quantities of post-contractual evidence as to how the relationship between
PO and the SPM’s operated in fact, using a large degree of hindsight. He also relied
upon evidence which had been introduced into the trial unfairly.
Common Issue 9 : SPM’s liability under clause 4.1 of the NTC for “losses” [Holding:
paragraph 2211(9); Reasoning at paragraph 677 to 689].
Clause 4.1 of the NTC Contract
66. The Judge erred in law in finding that “....the NTC imposes a very wide liability
which requires no fault on the part of the SPM” (paragraph 221 1(9)). The wording of
the clause is set out at paragraph 678 of the Judgment. Whilst it is a differently
worded clause to that contained in the SPMC at Section 12 Clause 12, the Claimants’
and Post Office’s position was that, in effect, it was very similar in its practical
operation, The Judge was wrong in law to reject those contentions because:
(1) Leaving aside criminal activity (which is expressly excluded under both
contracts), it is difficult to imagine how there could be any loss or damage to
“stock or cash” within the custody and control of the SPM without fault or
“error” (using the wording of Section 12 clause 12), on behalf of the SPM or his
assistant(s),
(2) Accordingly, in its effect, the practical difference between section 12 clause 12
SPMC and clause 4.1 NTC would not be as dramatic as held by the Judge. The
constructions are different, but the practical effects are similar.
(3) Indeed, it is striking that this meaning (as implicitly requiring fault or error) was
the construction the Judge gave to another contractual document (the ARS 43)
which provided the SPM was “. personally responsible for all losses or gains.....”.
The Judge held (paragraph 601) that as a matter of construction that this provision
only applied to “... losses caused by fault on the part of the SPM.”
(4) The Judge should have taken the same approach to clause 4.1 of the NTC.
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(5) The Judge should have found that the main difference between the effect of the
two clauses is in the arguments on burden of proof, clause 4.1 of the NTC
incontrovertibly placing the burden of proof on the SPM to show that any given
loss was not due to his error.
67. The Judge erred in law in making the holdings in Common Issue 9 in reliance upon
large quantities of post contractual evidence as to how the relationship between Post
Office and the SPMs operated in fact, using a large degree of hindsight. He also relied
upon evidence which had been introduced into the trial unfairly.
Common Issue 16 - termination on notice of the SPMC and NTC [Holding: paragraph
2211(16); Reasoning at paragraphs 892 to 899].
The SPMC
68. The Judge erred in law in finding that Section I Clause 10 of the SPMC: “....may be
determined by [Post Office] on not less than 3 months’ notice” ~ was not a legal right,
but instead introduced a discretion which had to be exercised by Post Office in “good
faith”, such exercise said to include a range of factors, including whether the SPM
lived at the premises, period of service and many other factors.
69. The Judge was wrong in law because the word
.not less than” in termination
provisions are a legal device of longstanding to avoid the problems that had been
historically experienced in giving notice which had to end on a precise date. Such
wording is used in a large number of commercial contracts, and it would be shocking
(to the parties to those contracts) if the “not less than” wording was regarded as
creating a discretion to which a Braganza type duty could be attached. This is a
simple error of law.
70. The Judge should have held that the provision meant what it said: 3 months written
notice would always be sufficient, although longer notice could of course be given at
will. The Judge’s reasoning that the words “not less than” would be deprived of
meaning unless they create a discretion as to how much notice to provide is wrong.
Those words have a clear and well-known meaning and effect.
7
. The Judge was wrong to imply an obligation of good faith into the express rights of
termination on notice.
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72. The Judge also failed to have any regard to the fact that termination on 3 months’
notice was a mutual right under this clause and that the implied duty of good faith was
said to be mutual. Thus, it would be very peculiar if, despite those two elements of
mutuality, the SPM could give 3 months’ notice as he liked (and however
inconvenient for Post Office) but if Post Office wishes to give an SPM notice of
termination, it is inhibited from doing so in its own interests and has to exercise the
right as though it were a discretion.
The NTC
73. The Judge erred in law in finding (paragraph 901) that the words “...not less than 6
months” mean anything different to “at least 6 months’ notice”. The same points as to
the origin of the “not less than” formulation and its meaning effect, set out above in
relation to the SPMC apply equally here.
74, The same point set out above at paragraphs [ REF _Ref5720230 \w \h \*
MERGEFORMAT J and [ REF _RefS720231 \w \h \* MERGEFORMAT ] as to
such words not introducing a discretion or power applies equally here.
7
. The Judge was wrong to imply an obligation of good faith into the express rights of
termination on notice.
76. The same point set out above at paragraph [ REF _Ref5720172 \w\h \*
MERGEFORMAT J as to the Judge’s failure to take into account the mutuality of the
termination provision applies equally here.
77. The Judge erred in law in making the holdings in Common Issue 16 (above) in
reliance upon large quantities of post contractual evidence as to how the relationship
between PO and the SPM’s operated in fact, using a large degree of hindsight. He also
relied upon evidence which had been introduced into the trial unfairly.
Common Issue 15: termination for cause under the SPMC and the NTC [Holding 2211
(15); Reasoning at 896 to 899
The SPMC
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78. The Judge correctly finds (paragraph 898) that the proper construction of Section 1
7
8
9,
0.
clause 10 of the SPMC limits the ability of Post Office to terminate the contract of a
SPM to the commission of a repudiatory breach.
The Judge erred in law by implying into this clause a duty upon Post Office to act in
good faith when operating this clause (paragraph 899). The test for repudiatory
breach is an objective one. There is no warrant for introducing a subjective element
which will introduce uncertainty into the contract, and to do so is not necessary,
whether or not it is a “relational contract”.
The Judge erred in law in making the holding in paragraph [ REF _Ref5720332 \w \h
\* MERGEFORMAT ] (above) in reliance upon large quantities of post contractual
evidence as to how the relationship between Post Office and the SPM’s operated in
fact, using a large degree of hindsight. He also relied upon evidence which had been
introduced into the trial unfairly.
he NTC
81. The Judge correctly finds (paragraph 907) that the proper construction of clause 16.2
8
Common Issue 17 and 18 — termin:
s
of the NTC limits the ability of Post Office to terminate the contract of a SPM in the
commission ofa repudiatory breach.
. To the extent (which is unclear) the Judge intended his holding at paragraph 899 to
apply to both the SPMC and NTC contracts, he erred in law. The test for repudiatory
breach is an objective one. There is no warrant for introducing a subjective element of
“good faith” which will introduce uncertainty into the contract, and to do so is not
necessary, whether or not it is a “relational contract”.
. The Judge erred in law in making the holdings on Common Issue 15 (above) in
reliance upon large quantities of post contractual evidence as to how the relationship
between Post Office and the SPM’s operated in fact, using a large degree of hindsight.
He also relied upon evidence which had been introduced into the trial unfairly, 2
mn: the “true agreement” argument based on
Autoclenz (Reasoning — in the alternative- paragraph 925).
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Commented [D1]: Our submissions on this were not
absolutely clear ~ we could argue that the requirement for a
“material” breach means less than repudiatory breach may
suffice (as this argument is favoured by Lewison)..
DCQC: think given where we are I would favour not taking
this point ~ but I am open to persuasion.
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84, The Judge erred in law in holding (at paragraph 925) that if the point arose for
determination (in the alternative) that he would have held that that the “true
agreement” principle applied to the SPMC and NTC and that he would have
disregarded the express written terms of those contracts governing termination and
substituted a longer period of notice ~ up to 12 months (or longer for the SPMC). He
erred because:
(1) The principle in Autoclenz is a truly exceptional one, and it has no application to
commercial, business-to-business contracts. The principle is limited to “sham”
contracts (and contracts that, although not shown to be shams in the strict legal
sense, do not amount to any genuine record of the parties’ agreement). It has been
properly limited to employment contracts and, in particular, the true status of
employees or workers under such contracts.
(2) There was no evidence whatever of another practice or “true agreement” to
replace the express agreement set out in the express terms of the SPMC and NTC.
There was no evidence to justify a finding of a period of notice of 12 months or
any other period. Such holding would have been perverse. In fact, the Claimants
led evidence that Post Office did in fact terminate contracts in accordance with the
express contractual rights.
Common Issue 14 ~ suspension [holding: paragraph 1122(14); reasoning paragraph 872
to 878, paragraph 881 and 885]
The SPMC
85, The Judge held (paragraph 873-875 and 878) that the right of Post Office to suspend
PMs had to be shown to be necessary and in accordance with the implied term of
good faith, and also on the basis that the power to suspend was not a “right” but a
discretion (paragraph 878).
86. The Judge erred in law in each of those three respects, because:
(1) The wording of Section 19 clause 4 of the SPMC is that a SPM may be suspended
at any time if:
“that course is considered desirable in the interests of [Post Office] in
consequence of his: (a) being arrested (b) having civil or criminal proceedings
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87,
88.
89,
brought or made against him (c) where irregularities or misconduet at the office(s)
where he holds appointment(s) have been established to the satisfaction of [Post
Office), or are admitted, or are suspected and being investigated.”
(2) Post Office conceded at trial (paragraph 313 of its Opening) that the reason for
suspension would need to be “reasonably and properly related to one or more
grounds for suspension.”
(3) There is no requirement or warrant to interpret this clause as meaning that
suspension must be necessary and nor are there grounds to imply such a
requirement. To do so contradicts the plain words of the clause.
(4) There is no justification for implying a term of good faith into this right of
suspension (paragraph 885). No such implication is necessary.
(5) There are no grounds for treating the contractual right to suspend as if it were a
discretion and/or introducing public law concepts to govern its exercise.
The Judge should have held that in exercising this right Post Office (as it conceded)
would need to ensure that the decision to suspend was “reasonably and properly
related to one or more grounds for suspension.”
The Judge also erred in law in holding (paragraph 881) that the power to suspend was
also subject to the further caveat that Post Office was not entitled to use the power to
suspend in any case where it was itself, “...in material breach in respect of the matters
which the Defendant considers give it the right to suspend”. The Judge found that this
caveat arose “...as a matter of construction of the clause in its commercial
context....”. This is not a proper construction of the contract. There are no words in
the SPMC which the Judge construes to reach this result. It is re-writing the contract
to accord with the Judge’s view as to fairness.
. Commercially, this caveat is unwarranted. The right of suspension is just that — it has
suspensory effect ~ seeking to freeze the positions of the parties (and securing the
cash and stock) whilst any deficiencies or conduct issues can be investigated. That
might well be to the SPM’s advantage if one of his assistants is, unbeknown to him,
stealing from him. The fact that the SPM and Post office are also in dispute about
deficits and discrepancies (in a manner which might arguably put Post Office in
material breach of its obligations), is no reason to prevent Post Office exercising the
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right of suspension. It is again re-writing the contract to accord with the Judge’s view
as to what would be fair.
The NTC
90. The Judge held that, despite the different wording of Part 2 Paragraph 15.1 of the
NTC dealing with suspension, the result was the same (paragraph 872).
9
. The Judge further held (in common with the corresponding provision in the SPMC)
that the right to suspend had to be exercised in accordance with the implied term of
good faith (paragraph 885), and also on the basis that the power to suspend was not a
“tight” but a discretion (paragraph 878). The Judge erred in each of those two
respects, because:
(1) The express term limits Post Office exercise of this right to those, “..where
[Post Office] considers this to be necessary in the interests of [Post Office] as
aresult of.
..-” one or more of the grounds set out in the clause.
(2) There is no justification for implying a term of good faith into this right of
suspension (paragraph 885). It is not necessary to do so.
(3) There are no grounds for treating the contractual right to suspend as if it were
a discretion and/or introducing public law concepts to govern its exercise.
92. The Judge should have held that in exercising this right Post Office (as it conceded)
would need to ensure that the decision to suspend “.. reasonably and properly related
to one or more grounds for suspension.”
9
. The Judge also erred in law in holding (paragraph 881) that the power to suspend was
subject to the further caveat that Post Office was not entitled to use the power to
suspend in any case where it was itself, “...in material breach in respect of the matters
which the Defendant considers give it the right to suspend”. The Judge found that this
caveat arose, “...as a matter of construction of the clause in its commercial
context....”. This is not a proper construction of the contract. There are no words in
the NTC which the Judge construes to reach this result. It is re-writing the contract to
accord with the Judge’s view as to what would be fair.
9.
£
. The point as to commerciality in paragraph [ REF _Ref5721055 \w \h \*
MERGEFORMAT J above applies here also.
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95, The Judge erred in law in making the holdings on Common Issue 14 (above) in
reliance upon large post contractual evidence as to how the relationship between Post
Office and the SPMs operated in fact, using a large degree of hindsight. He also relied
upon evidence which had been introduced into the trial unfairly.
Common Issues 5 and 6 — onerous and unusual terms [holding: paragraph 1122(5) and
(©; reasoning paragraph 1007 to 1047]
Part 2 paragraph 4.1 of the NTC (liability for losses)
96. The Judge erred in law in finding (paragraph 1007) that Part 2 paragraph 4.1 of the
NTC was onerous and unusual. Even on the Judge’s “strict liability” interpretation of
that clause, it is not onerous and unusual.
97. On the proper construction of that clause (see: paragraph [ REF _Ref5704534 \w \h
\* MERGEFORMAT J above), it is not onerous and unusual because liability under
it can only be anticipated where there is some error on the part of the SPM or an
assistant, which makes it very similar in practical effect to Section 12 Clause 12 of
the SPMC (a clause that the Judge did not hold to be onerous and unusual). The
concept used in the clause may approach strict liability, but that concept is not
onerous or unusual when applied to the anticipated factual circumstances of its
operation (i.c. given that a loss cannot arise without some type of error, strict liability
is not materially different from fault-based liability).
Part 2 paragraph 13.1 of the NTC (reimbursement of PO for losses)
98. The Judge erred in law in finding (paragraph 1007(2)) that Part 2 paragraph 13.1 of
the NTC was onerous and unusual. It is a standard provision to provide that SPMs are
liable for: “..all losses, claims, demands . ....cincurred by [Post Office] as a
result of ....any negligence or breach of the Agreement by [SPM] or its
Personnel......”. The Judge’s reasoning at paragraph 1011 would, if correct, result in
many standard commercial terms being considered onerous and unusual because they
provide for a “potentially very wide liability” (not least where the contractual liability
is broadly consistent with what the common law would impose).
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Provisions permitting PO to withhold payments to a suspended SPM (paragraph 1023).
(1) Section 19, Clauses 5 and 6 of the SPMC.
(2) Part 2 Paragraph 15.2 and paragraph 15.3
99. The Judge erred in law in holding that each of these provisions was onerous and
unusual. In particular:
(1) The Judge failed to recognise (paragraph 1024) that Post Office had effectively
conceded (in the pleadings and at paragraph 430 of its written closing) that the
power to withhold remuneration from SPMs following a suspension, “...should
not be exercised dishonestly or in an arbitrary, capricious or irrational manner”.
That was the version of the term that the Judge should have focused his attention
upon when deciding if it was onerous and unusual
(2) Had the Judge realised that the right to withhold remuneration following a
suspension was not unbridled he would not have reached this conclusion. He
would have found that such clause was not “onerous and unusual”.
Provisions permitting PO to terminate SPMs on 3 months written notice
100. The Judge erred in law (paragraph 1039) in finding that if the 3 months”
written notice termination provision took effect in accordance with its terms (i.e.
absent the “good faith” implied term) that it would then be onerous and unusual. In
fact, a termination on notice provision is almost always contained within any
‘commercial contract of this nature and, as is customary, the right was mutual. There is
nothing onerous or unusual about a mutual right to terminate on notice, especially
where the contractual relationship requires close cooperation and one or other of the
parties may have good reasons to terminate in the absence of breach (e.g. a desire on
the part ofan SPM to cease trading or a desire on the part of Post Office to rationalise
its network of branches).
Provisions entitling PO to recover losses from SPM in NTC: Part 2 paragraph 4.1 and 13.1
101. The Judge erred in law (paragraph 1060 and 1061) in finding that the
provisions in the NTC entitling Post Office to recover losses from the SPM were
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onerous and unusual, in the alternative event that the signature of the SPM on the
NTC did not constitute sufficient notice (the Judge rightly held that signature was
sufficient). In fact, they are ordinary terms to be expected to be included in a
commercial agreement of this type between an agent and his principal.
102. The Judge erred in law in making the holdings on Common Issues 5 and 6 (above) in
reliance upon post contractual evidence as to how the relationship between Post
Office and the SPMs operated in fact, using a large degree of hindsight. He also relied
upon evidence which had been introduced into the trial unfairly.
Common Issues 7, 19 and 20 — application of Unfair Contract Terms Act (“UCTA”)
[holding: paragraph 1122(7)(19) and (20); reasoning paragraph 1063 to 1110.]
Not Post Office’s standard terms of business
103. The Judge erred in law in holding (paragraph 1075) that the SPMC and NTC were
Post Office’s “written standard terms of business” for the purposes of UCTA, in that:
(1) He failed to correctly identify what the “business” of Post Office was beyond that
it includes “running a large number of branches”.
(2) He was wrong to (impliedly) conclude that the “business” of Post Office was
engaging SPMs.
(3) He was wrong to distinguish Commerzbank AG v Keen [2006] EWCA Civ 1536.
(4) He should have held that the business of Post Office, for the purposes of UCTA,
was the selling of postal, financial, insurance and foreign curreney and associated
products (akin to a bank) to members of the public nationwide,
(5) Post Office can determine how to structure and manage that “business”. Post
Office chose to do so by appointing agents under the terms of SPMC and the
NTC. Doing so does not make such appointments the Post Office’s “business” for
the purposes of UCTA. It merely indicates the manner in which it chose to
structure and operate that business,
(6) Thus, the Judge ought to have held that neither the SPMC nor the NTC were
subject to the terms of UCTA.
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Relevant terms did not entitle Post Office to render “substantially different” performance to
that reasonably expected of it
104. The Judge erred in law in holding that the provisions of the SPMC and NTC set out at
paragraph 1084 entitle Post Office to render a contractual performance “substantially
different” from that which was reasonably expected of it, or in respect of the whole or
part of any part of its contractual obligation to render no performance at all.
105.In particular the Judge misapplied s.3(2)(b) of UCTA:
(1) The clauses dealing with the SPM’s liability for losses (SPMC Section 12 clause
12, and NTC Part 2 paragraphs 4.1 and 13.1) set out the conditions under which
SPMS are liable for losses in the PO branch that they run. They are to do with the
SPM’s performance, not Post Office’s performance, Still less are they about Post
Office rendering contractual performance “substantially different” to that
reasonably expected. The Judge reasons that Post Office would be “entitled to
claim payment” under these clauses, but that in itself shows his approach to be
wrong: Post Office is claiming payment (performance) from the SPM, rather than
itself performing any obligation.
(2) The clauses dealing with termination of the SPM’s contract on written notice
(SPMC Section I clause 10 (3 months); NTC Part 2 paragraph 16.1 (6 months))
set out the rights of both parties to terminate the contract on notice. They are not
to do with Post Office’s performance under the contracts; they are to do with the
duration of the contractual obligations owed in each direction. Still less are they
about the Post Office rendering contractual performance “substantially” different
to that reasonably expected (not least given that there can be no reasonable
expectation that a contract terminable on notice will not be so terminated).
(3) The clauses dealing with suspension of SPMs (SPMC Section 19 clauses 5 and 6;
NTC Part 2 paragraphs 15.2 and 15,3) set out the rights of Post Office to suspend
SPMs in certain defined circumstances. They are nothing to do with Post Office
rendering contractual performance “substantially different” to that reasonably
expected.
(4) The clauses dealing with alterations to contract terms (SPMC Section I clause 18;
NTC Part 2 paragraph 1.1 and Part 5 paragraph 1.3) set out the right of Post Office
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to dictate the content of the contract and operational instructions and has nothing
to do with Post Office performing the contract.
[DCOQC Query: I have not included under this heading PO ability exclude
compensation for loss of office: as that seems to me to be more arguable as
being covered by s.3(2)(b) of the Act ~ and including it might weaken the clarity
of the point here ? INSTRUCTIONS NEEDED].
Application of test of reasonableness under s.11(1) UCTA
(a) Responsibility for losses
106. The Judge erred in holding (paragraph 1102) that:
(1) Part 2 Paragraph 4.1 of the NTC contract (which made SPMs responsible to Post
Office for losses at their branches) and:
(2) Part 2 Paragraph 13.1 of the NTC contract (which requires SPMs to reimburse
Post Office for losses at their branches)
failed the test of “reasonableness” in s.11(1) of UCTA.
107. The Judge erred in law in relation to both such clauses because:
(1) They are ordinary terms to be expected in an agency agreement, making the agent
(who also owes fiduciary duties in relation to its holding of cash and stock)
responsible for losses and for reimbursement to its principal for such losses
(2) Even if the Judge were correct that Part 2 Paragraph 4.1 of the NTC should be
construed as imposing strict liability on SPMs, in the context of this relationship,
where the SPM has complete custody and control of the branch and of the cash
and stock, any losses which the SPM did suffer must necessarily result from his
“fault” or “error”, other possible causes such as third-party criminal acts (e.g. theft
from the branch) being expressly excluded. An agency branch cannot make losses
by properly executed transactions.
(3) And as regards losses caused by bugs in Horizon, the parties contended that such
losses would not be covered by the clause. Reasonableness must be judged in light
of that fact.
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[DCOQC: I assume that we do not want to appeal the holding at 1107 that new terms
introduced by PO under its unilateral power to alter contractual terms are subject to the
test of reasonableness ? This still leaves open the point that we do take in relation to this
that neither the SPMC nor the NTC are subject to UCTA. INSTRUCTIONS NEEDED.]
(b) Suspension
108. The Judge erred in law in holding (paragraph 1107(5)) that the provisions of the
SPMC (Section 19 clauses 5 and 6) and the NTC (Part 2 paragraphs 15.2 and 15.3)
dealing with suspension fail the test of reasonableness in s.11(1) UCTA.
109. The Judge erred because he failed to apply the test to the correctly worded clause. The
Judge failed to recognise that Post Office had conceded (at paragraph 430 of its
written Closing) that the power to withhold remuneration from SPMs following a
suspension, “...should not be exercised dishonestly or in an arbitrary, capricious or
irrational manner”.
110. That was the version of the term that the Judge should have focused his attention upon.
when deciding if it satisfied the test of “reasonableness”. He failed to do so.
111. Had the Judge realised that the right to withhold remuneration following a suspension
was not unbridled, he would not, or should not, have reached this conclusion. He
would, or should, have found that such clause did not fail to meet the test of
reasonableness within the meaning of s.11(1) UCTA.
(©) Termination
112. The Judge erred in law in holding at paragraph 1107(6) (in the alternative) that the
rights of termination on notice under the SPMC (Section I clause 10) and under the
NTC (Part 2 paragraph 17.11) failed to meet the test of reasonableness under s.11(1)
UCTA because:
(1) As to the NTC provision ~ there is nothing unreasonable in a mutual right of 6
months’ written notice to terminate which can only be given after the effluxion of
the first year of the agreement, Indeed, the Judge held (paragraph 1040) that such
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a clause was nof onerous and usual for that reason. The Judge was wrong to find
(and provides no reasoning) to justify his holding that a right that was (a) mutual
and (b) not onerous and unusual was nonetheless not reasonable within the
meaning of s.11(1) UCTA.
(2) As to the SPMC provision — the same considerations apply in that the right was a
mutual one (albeit that the term was for 3 months’ notice that could be given by
either party at any time).
(d) Exclusion of damages for loss of office
113. The Judge erred in law in holding (paragraph 1107(7)) that the exclusion of the right
to damages for “loss of office” in the SPMC (Section 1 Clause 8) and in the NTC
(Part 2 paragraph 17.11) failed to meet the test of reasonableness under s.11(1) UCTA
because clauses limiting or excluding losses for breach of contract are common place
in commercial contracts and there was nothing unreasonable about the exclusion in
this case.
114. The Judge erred in law in answering Common Issue 20 (which asked whether claims
for damages were limited to the period of notice under the contracts) by holding
(paragraph 1110) that claims for damages were not limited by such notice provisions.
This is contrary to a basic proposition of law that for the purposes of the calculation of
damages the contract breaker is assumed to have exercised his rights in a way to
minimise his liability for such losses. Accordingly, the Judge ought to have held:
(1) On the Judge’s construction of the 3 month notice provision (SPMC) and the 6
month notice provision (NTC) such clauses are valid and enforceable, albeit
subject to the “good faith” caveat. He ought therefore (on that basis) to have held
that the claims to damages were limited to such notice periods as provided for
under the SPMC and NTC, There could be no objection, on that basis, to damages
being expressly limited by the contract in the same way as the common law would
limit them (i.e. to the notice period under the contract).
(2) On the Post Office construction of those clauses (that they mean what they say)
the Judge held that he would strike them down as being onerous and unusual
and/or unreasonable under UCTA. Even in this eventuality, a reasonable period
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of notice would be implied and shat reasonable period would provide a cap on the
damages claims under the common law, and the Judge should have so held.
(3) The Judge should have held that (assuming that it was not excluded) any claim for
damages was limited to the express periods of notice, i.e. 3 months (SPMC) and 6
months (NTC).
115.The Judge erred in law in making the holdings on Common Issues 7,19 and 20
(above) in reliance upon post-contractual evidence as to how the relationship between
Post Office and the SPMs operated in fact, using a large degree of hindsight. He also
relied upon evidence which had been introduced into the trial unfairly.
SPMC - Holdings on effect of contractual documents sent to SPM’s — “notice”
116. The following holdings of the Judge as to the legal effect of documents sent to those
SPMs operating on the SPMC were wrong in law.
Mr. Bates - paragraph 94 and 103
117. The Judge erred in law in finding that someone in the position of Mr. Bates did not
have sufficient notice that his appointment as a SPM by Post Office was subject to the
terms of the standard “Subpostmaster Contract.” In particular:
(1) Paragraph 6 of Mr. Bates “Conditions of Appointment” contained the following
words:
“You will be bound by the terms of the standard Subpostmasters Contract for
services at scale payment offices, a copy of which is enclosed”.
(2) Beneath paragraph 6 was the following declaration, which Mr. Bates signed and
dated:
“[ fully understand and accept these conditions and agree to avail myself of the
pre-appointment introductory training”.
(3) Whether or not the “Subpostmasters Contract for services at scale payment
offices” was or was not included in the envelope, someone in the position of Mr.
Bates had sufficient notice of the terms of the Subpostmasters contract. The Judge
should have so found.
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118. The Judge erred in law and/or in fact in holding at paragraph 91 that, “a reasonable
diligent person in receipt of the documents that Mr. Bates says he received with the
Letter of Appointment could quite easily have mistaken the reference to the “Standard
Subpostmaster Contract” as being with the 2 page document entitled “CRAIG Y DON
~ CONDITIONS OF APPOINTMENT”, or the 4 page document entitled
“CONDITIONS OF APPOINTMENT FOR CRAIG Y DON SUB POST OFFICE”.
The Judge erred because:
(1) The reference at paragraph 6 of Mr. Bates “Conditions of Appointment” (4 page
document) containing the words: “by the terms of the standard Subpostmasters
Contract for services at scale payment offices, a copy of which is enclosed” was
obviously talking about a document other than the “Conditions of Appointment”
themselves, as it purported to “enclose” the relevant document.
(2) The two page and four page “Conditions of Appointment” documents referred to
by the Judge are in the relevant respects identical, save for an extra single
paragraph (paragraph 13) at the end of the 2 page document. Accordingly, the
reasonably diligent person would nos think that the “Subpostmasters Contract” —
“a copy of which is enclosed” -was merely another (almost identical) version of
the “Conditions of Appointment”.
(3) Such a “reasonably diligent” person would realise that the two page and four page
documents were practically the same document, as Mr. Bates in fact accepted that
he did (a piece of evidence ignored by the Judge)
(4) The Judge should have held that:
(1) someone in the position of Mr. Bates was given sufficient notice of the terms
of the Subpostmasters Contract by receipt and signature of the “4 page”
Conditions of Appointment.
(2) The holding in (1) applied whether or not such a person had also been sent the
“2 page” (almost identical) “Conditions of Appointment” in error.
119. The Judge erred in law by failing to find that (in any event) Mr. Bates’ conduct after
appointment, including expressly referring to, operating under and relying upon the
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detailed terms of the SPMC over the following 4 years, resulted in him being bound
by its terms.
Part E: Error in fact
120. The findings of fact set out in Part E were not open to the Judge on the evidence
and/or are perverse. Those findings set out below and marked with an ** indicate
when same finding is also attacked on the unfaimess ground in Schedule 1.
(a) Receipt by Mr. Bates of a copy of the SEMC
121. The finding (paragraph 91) that Mr. Bates did not receive a copy of the SPMC on 31*
March 1998 at the time he was appointed a SPM, was not open the Judge on the
evidence and/or is perverse because:
(1) The events occurred 21 years ago. The witness cannot sensibly have any memory
of whether he actually received the document on that day. Any assessment on the
balance of probabilities should be based on other evidence/documents and the
inherent probabilities. It is the Judge’s interpretation of the wording/effect of those
documents which grounded his finding, and the Court of Appeal is in as good a
position as the Judge to interpret those documents.
(2) Post Office’s position was that it had a good system for sending out documents at
this time and the SPMC would have been included with the letter of appointment.
‘And the Court heard direct evidence trom Mr. Williams to the effect that the small
team working for him at that time — who performed this task - were reliable.
(3) The position of Mr. Bates
that he got a copy of the SPMC in response to a
query he raised about by letter of 4 August 1998 about holiday allowances. The
crucial point about that written query is that it was written 5 months after he was
appointed as SPM and betrayed a detailed knowledge of the actual provisions of
the SPMC and in particular clause 4.1 dealing with “holiday substitution
allowance.”
(4) The only rational explanation is that the writer of that letter (set out below) had
received a copy of the SPMC by the time he wrote it, for two reasons: (1) he
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actually says in the letter that he had “...consulted” his contract (2) the
description set out below is only consistent with having seen the contract:
~....[ consulted my contract, Section 4 ~ “Absence on holiday ~ holiday
substitution allowance” and unless it is hidden away elsewhere in the contract
then there is no mention at all about outstanding holiday being lost ifnot taken
within a holiday cycle. The whole section on holidays is not only very wordy but
is extremely vague in its content , and would certainly not win any awards with
the Plain English Campaign” (emphasis added).
(5) The Judge held (paragraph 91) that Mr. Bates cou/d have written that letter based
onan earlier document (entitled “SERV 135”) that he had been sent in May 1998
~on “handover day”. But that explanation was not open to the Judge, as the
SERV 135 only contained the heading and very brief summary of the provision
and could not rationally have justified the words underlined extracted from that
letter (above); nor does the Judge explain any basis upon which it could have done
so. It also ignores the fact that Mr. Bates did not consider the SERV 135 to be his
contract (and could not sensibly have done so given its content). The letter makes
no sense on any basis other than that contended for by Post Office.
(6) The Judges, alternative holding, “...even if he did, this post-dated contract
formation” entirely misses the point, Mr. Bates did not suggest that he got the
contract sometime between being appointed on 31% March 1998 and August 1998
when he wrote the letter. If Mr. Bates had the contract on 2% August 1998 (which
he clearly did), the likelihood was that he got it with the letter of appointment on
31 March 1998 as set out in the “Conditions of Appointment” which he dated
and signed,
(7) That conclusion was also supported by three other considerations, all of which
were ignored by the Judge:
(a) The specific evidence of a reliable system of sending out copies of the SPMC
from this particular area at the material time, which evidence was not
undermined in cross-examination. The unsurprising evidence was that whether
or not an envelope contained an SPMC would be readily ascertainable to the
operative sending it out. The difference between an envelope containing a few
pages and an envelope containing those few pages plus the many pages of the
SPMC would be obvious to even the most careless employee.
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(b) The fact that the contractual documents alerted the recipient (in this case Mr.
Bates) to the fact that the letter intended to include a copy of a standard
contract — with the result that, if it were missing, someone like Mr. Bates (who
the Judge accepted was a “details man”) can be expected to have chased it up
if he was not sent a contract, both in terms of the contents of the letter and
more generally. Mr. Bates never suggested he did so, supporting the inference
that he did not do so because he had no need to because he was sent the
document at that time.
(©) The fact that, in subsequent and sometimes ill-tempered correspondence with
Post Office, Mr. Bates never once complained that he had not been provided
with his contract at the outset. In light of the content and tone of that
correspondence, the inescapable inference is that Mr. Bates would have raised
this complaint if it had been a good one.
(8) For all those reasons, the conclusion reached by the Judge about Mr. Bates’
receipt of the SPMC on his appointment was on the facts not open to him and/or is
perverse.
e and its behaviour (and those of its witnesses) which
(b) Findings adverse to Post Offi
were unjustified and unwarranted
122. The following findings by the Judge were not open to the Judge on the evidence
and/or are perverse. They are relied upon by the Judge to justify his
reasoning/conclusions and/or are relied upon by the Claimants to seek indemnity
costs, and so are directly in issue for those reasons.
(i) That the case of Post Office was subject to a “volte face”
First alleged volte face
123. The Judge erred in fact in finding at paragraph 834 that Post Office: (1) had
performed a “volte face” in relation to the operation of the accounting system and (2)
directly contrary to the case that was originally put
had behaved in a way that is,
to the Lead Claimants in cross-examination”. He erred because neither conclusion
was available to him on the evidence and/ or they are perverse. The Judge made a
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number of allied findings on this subject at paragraphs 227-230, 251, 271-272, and
298-301, which are challenged on the same basis.
124. The case for Post Office was that the manner in which discrepancies and transactions
corrections were dealt with was: (a) that they first had to be “Accepted” at Stage I of
the process (2) they could then at Stage 2 be paid or “settled centrally” (which did not
involve paying them immediately), They could then be disputed (even if paid) by
registering a dispute via the helpline in which case any recovery of them was put on
hold (and they did not need to be paid). Each of these three processes needed to be
viewed as part of a single system of dealing with disputed items. Stages I and 2
happened on the Horizon computer itself, and Stage 3 was via the helpline. This was
agreed as a fact by the Claimants and Post Office in the factual matrix document at
paragraph 32,36,37, and 44 in advance of trial. The only dispute was the relevance of
such facts.
125. The Judge in the references above sought to draw some distinction between Stages I
and 2 which were carried out on the computer and Stage 3 which was done on the
helpline. This was clearly wrong.
126.It also contrasted markedly with his finding at paragraph 778 (when dealing with
implied terms) which described the helpline as: “not an ancillary and separate system
or process; it was an important component of branch accounting and of the way
Horizon itself....”.
127. The Judge also sought to suggest (paragraph 301) that “settle centrally” “...was used
by the Post Office for the majority of the Common Issues trial at least as though it
was synonymous with disputing a transaction correction in some way.....”. That
finding was not available to the Judge on the evidence and/or is perverse. Indeed, that
perversity is demonstrated by the cross-examination he quotes in paragraph 299
which clearly accepts that “settle centrally” does nor involve disputing the transaction.
128. The Judge never understood this point properly or at all, as evidenced by the findings
in the paragraphs listed above. The Claimants also agreed the process outlined above;
the parties had no problem agreeing the operation of the system in Appendices 3 and
4, The only issue between the parties was whether Post Office followed this agreed
process as regards disputed debts in relation to Mrs. Stubbs and perhaps Mr. Abdulla,
but even that is a question of breach and so was not before the Court.
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129. The Judge has sought to justify the admissibility and commenting upon large
amounts of disputed evidence by reference to this apparent “volte face” or confusion.
In fact, if there was a confusion, it was that of the Judge alone, and in the event was
capable of simple agreement (see paragraphs 271 and 272).
(1) The accounting procedure was never an issue before the Court. There had
been no disclosure on the issue and Post Office did not lead evidence on it.
The Post Office case was limited to existence of accounting duties and the
ability to dispute debts via the helpline (which was common ground). The
Judge misunderstood the cross-examination of Mr. Abdulla. The point put to
him in cross-examination was that despite having to “Accept” the
discrepancies at the first stage and either pay or “settle centrally” at the second
stage, the SPM always had the contractual option of disputing such matters by
phoning the helpline ~ which had the effect of putting the payment obligation
in relation to such sums on “hold”, That is and always was common ground,
(2) The Judge has misconstrued the cross-examination of Mr. Abdulla in the
extract at paragraph 227. In particular, the Judge failed to understand that the
line of questioning was directed to the fact that whatever the process at the
first stage of dealing with discrepancies (in particular pressing a screen with
the word “Accept” on it to move through to the next screen), the SPM was still
able to dispute the discrepancy by telephoning the helpline. The position
taken by Mr. Abdulla (which was wrong) was his suggestion (end of
paragraph 227) “...even if itis in dispute, you cannot roll over until you have
sorted it out before branch transfer period”. There was, on the agreed facts, no
need to sort out the dispute prior to rollover. The Judge simply failed to
understand this ~ see the end of paragraph 230.
Second alleged “volte face”
130. The Judge erred in fact in finding at paragraph 676 that Post Office had radically
changed its case and performed a “volte face” on its construction of Section 12 clause
12. Such finding was not open to the Judge on the facts and/or was perverse. In
particular:
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(1) This finding is contrary to the finding of the Judge at paragraph 651 that “Upon
consideration, however [Post Office’s case] had not changed at all”.
(2) This finding demonstrates that the Judge failed to understand the Post Office case
and failed to understand why, therefore, he was right to think that the case had not
changed from the pleading (see: paragraph [ REF _Ref5723984 \w \h \*
MERGEFORMAT J above), the written opening or the oral opening. In particular,
the Judge failed to understand the difference between the legal conditions
necessary for liability (on the one hand) and the evidence necessary to establish
liability (and from where and which party that evidence would come) on the other.
(3) Post Office’s case was consistent and was as follows:
(a) The Horizon system was reliable and robust but was nor infallible (as is
obvious from, amongst other things, the simple fact that Post Office admitted
bugs that had caused shortfalls). The Judge at times acknowledges this in the
Judgment but then seems to forget it: sce paragraph 652, contending that Post
Office’s case was that “...such a shortfall cannot and does not exist, hence
there is no such thing”. (This is to be contrasted with the finding at paragraph
10 that: “Post Office’s position in this litigation is not quite that it is
impossible for Horizon to ever generate any errors......”).
(b) That “apparent losses’ deficiencies” caused by a bug or error in Horizon are
not (and are clearly not) “losses caused through his own negligence
carelessness or error...” within the meaning of Section 12 clause 12. This is
the liability question.
(©) That, when considering whether a given deficiency is caused by an error by a
SPM or is in fact an “apparent deficiency” caused by a bug or error in
Horizon, Post Office”
case was that they would rely on Horizon as being
generally reliable and therefore unlikely to be the cause of a given deficiency.
This is the evidential question. This has nothing to do with the meaning of the
clause, It is a question about evidence and the role of Horizon in that
evidential debate.
(4) The Judge’s repeated error (see paragraphs 653 and 670) and his invective
(paragraph 670) was borne out of his failure to understand the argument, and in
particular to differentiate stage (b) (above) conditions for liability and (c) evidence
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available to prove liability. It also arises from seeking to construe the contract by
reference to post-contractual conduct and events.
(ii) Relevance of evidence/ findings sought**
131. The Judge erred in fact in finding (paragraph 21) that Post Office wanted “...findings
on that only if they were in the Post Office’s favour. This is a peculiarly one-way
approach by any litigant”, This finding was not available on the evidence and/or was
perverse, because:
(1) Post Office made abundantly clear from at least the time it filed Defences to
individual claims that post-contractual evidence and the full accounts of the
SPMS’ experience of operating branches were not relevant to the Common Issues
trial dealing with issues of construction of the SPMC and NTC and related issues.
There was nothing one-sided about that simple (and correct) proposition of law.
(2) That position was re-asserted at the application to strike out large parts of the
witness evidence served by the Claimants and dealing with post-contractual
matters.
(3) That position was maintained in Post Office’s written opening, oral opening,
written closing and oral closing. Post Office made clear to the Judge in its final
oral submissions [Day 14 page 36 to page 39] that he should not make findings
‘against the SPMs based upon allegations put to them about false accounting, on
the basis that this was post-contractual and would be the proper subject matter of
later trials. It is perverse for the Judge to accept Post Office’s warning against
making findings against the Lead Claimants about these matters (and he is careful
to make no such findings) while criticising Post Office for adopting a one-sided
approach.
(4) During oral closing, the Judge ordered Post Office to provide a summary of its
position on the findings that he was entitled to make. Post Office provided such a
summary ~ no fair reading of that document is consistent with a conclusion that
Post Office only wanted findings in its favour. Post Office’s position was
principled and correct.
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132. The Judge can therefore have been in no doubt that the position of Post Office
was that evidence deployed in witness statements and/or obtained in cross-
examination on irrelevant matters that were not before the court should not be taken
into account by the court for any purpose (irrespective of which party would benefit
from the finding). The only point in the Common Issues trial to which credit was
relevant was whether or not the four SPMs on the SPMC contract were giving honest
and reliable evidence as to whether or not they had been provided with a copy of that
contract on appointment (and other contractual or pre-contractual documents). Post
Office made the point that, in fairness to the SPMs who gave evidence, answers about
irrelevant matters such as how shortfalls arose in their branch (which in two cases
were suggestive of dishonesty on the part of the SPMs) should or go to or against
their credit, This was because these matters were not properly before the Court on the
Common Issues trial, and there had been no disclosure or evidence from Post Office
on these matters. Post Office made clear that it was testing this irrelevant material to
ensure that the Court was not left with a false impression by reference to it, and in
circumstances where the Claimants resolutely refused to articulate a proper or any
basis as to its relevance. Post Office was concerned that the Judge appeared to be
interested in the inadmissible and irrelevant evidence, and the Judgment shows that
Post Office was right to have that concern. It cannot properly be criticised for its
approach.
ii idence Beal
133. The Judge erred in fact in finding (paragraphs 373, 376 and 544) that Mr. Beal was
seeking to mislead the Court with his evidence that, from his perspective, the
introduction of the NTC contract did not change the core principles of the contractual
relationship, including that SPMs were liable for losses. This finding was not
available on the evidence and/or was perverse:
(1) Mr. Beal is not a lawyer and (when asked by Claimants’ counsel) his view as to
the difference between the liability clauses in the new NTC contract and the old
SMPC was wholly irrelevant.
(2) Mr. Beal’s answer was in the manner of a concession to the Claimants, given that
it was their pleaded case that the two clauses should be read as if they meant
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exactly the same thing. The Judge must, therefore, logically have considered that
Mr. Beal was deliberately “misleading” the Court in order to support the
Claimants’ case. That is not a plausible hypothesis.
(3) Itis at least arguable, as set out above, that a “fault” or “error” caveat to clause 4.1
of the NTC would not make any substantial difference to its effects in practice. It
is certainly a rational view for a lay person to hold that the NTC and the SPMC
liability provisions are very similar in their effects. A lay person is far more likely
to hold a view as to a term’s practical effects than he is to hold a view as to its
proper construction (and any views on the latter point are wholly irrelevant). To
find, in effect, that Mr. Beal cannot honestly have believed the two clauses to both
give effect to the core principle that SPMs are liable for losses was not available
on the evidence and/or was perverse.
(iv) Evidence of Mrs. Van Den Bogerd**
134. The Judge erred in fact finding at paragraph 416 that Mrs. Van Den Bogerd’s view
(that, “although a number of cases do have some features in common, Post Office’s
assessment is that each case is demonstrably different and influenced by its own
particular facts....”) was an entrenched refusal to “consider to be the common themes
connecting all these claims......”. This finding was open to the Judge on the evidence
and/or is perverse because:
(1) The Judge had only seen the facts of the 6 Lead Claims. There are in fact some
550 claims the facts of which he is largely unaware. The witness having been
involved with the Second Sight investigation and reports and more, generally,
involved with SPM claims for many years had a much broader understanding of
the whole population of claims than the Court.
(2) The complaints of the Lead Claims and of the balance of the other 550 in fact vary
a great deal. Practically the only thing they have in common is that they involve
disputed losses and an allegation that Horizon was in some way involved in those
losses. But those losses arise in a multifarious array of products and situations.
(3) The Judge compounded this error when returning to this theme (at paragraph 546),
ignoring the fact that the witness had accepted that “...a number of cases do have
some features in common...”.
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135. The Judge erred in fact in finding (paragraph 418) that the witness was trying to
islead” him when asked about detailed points of loss involved in the case of Mr.
Abdulla. Such finding was not open to the Judge on the evidence and/or is perverse,
because:
(1) The witness did not come to court to deal with the accounting details and losses of
any particular Claimant. Her evidence was generic in nature as is appropriate in a
case involving issues of construction and law.
(2) The question she was asked about Mr. Abdulla was wholly irrelevant to the trial
and should not have been asked.
(3) The witness was shown a detailed excel spreadsheet dealing with Mr. Abdulla’s
losses in the course of her cross-examination [Day 8 page 45 line 15]. She was
then asked detailed questions about various entries on that spreadsheet and what
they meant ~ all of which was wholly irrelevant ~ but in which the Judge made
clear he was interested, She said in relation to one detailed question about
whether entries were made in error:
..L am not sure it does, actually because when it says the other two you referred
me to on row 61 says it will be dispatched within 7 days and the other one says the
same, so I am not sure they were actually dispatched, so... have just seen this
cold, so I don’t know what is behind it so I can’t really comment further than that.
IT would need to understand what was actually dispatched...”
(4) It is therefore clear that what the witness had come to “cold” was the detailed
spreadsheet. She said as much later in her oral evidence when it was put to her
that she had not come to Mr. Abdulla’s case cold because she had given a witness
statement for the Horizon Trial in which she addressed his shortfalls: “No, I did
know what was in the witness statement — you asked me to look at the screen and
tell you then, so that is why I was reading, because I would need to follow through
to see whether they were dispatched, is what I said” [Day 8 page 60 lines 16-20].
‘The Judge ignores this explanation and states that her explanation had been that
her evidence “that she was coming to the matter cold was a ‘a mistake’”
(paragraph 418, emphasis added). In fact, the “mistake” to which Ms Van Den
Bogerd referred was the suggestion that she had come to the specific spreadsheet
cold (as it was one she had referred to in her Horizon Issues witness statement):
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(Day 8 page 109 line 19) to (Day 8 page 110 line 3). The Judge’s approach to the
evidence here was perverse.
(5) The witness cannot reasonably be expected in a trial on points of construction to
have to deal with (irrelevant) detailed points of accounting and to deal the content
of Excel spreadsheets on the hoof. It was not open to the Judge to charge the
witness with seeking to mislead him by saying that she was coming to the
spreadsheet cold, and he was wrong to do so.
136. The Judge erred in fact in finding (paragraph 425) in regard to her witness statement
. The Judge said this in
that she was “an extremely poor judge of relevance.
relation to the evidence in her witness statement dealing with the difficulties with
Horizon over the years (paragraph 420). The finding was not open to the Judge on the
evidence and/or was perverse because:
(1) The matters relating to the performance of Horizon were outside the matters to be
determined at the Common Issues Trial, and so the Judge should not have been
surprised that her witness statement did not deal with them. The witness herself
made clear in her statement that she was not addressing the allegations about
defects in Horizon: “I do not take into account in what I say here the Claimant’s
allegations regarding defects in Horizon because I understand that these are not
within the scope of the Common Issues Trial” (fn 22).
(2) The Judge failed to have any regard to her (unsurprising) answer in re-
examination that she had been advised by lawyers as to the proper scope of her
witness statement [Day 9 page 73].
(3) Itis perverse to criticise a witness for failing to give evidence that would have
been irrelevant and inadmissible.
(v) Redaction. ycuments
137. The Judge erred in fact in finding (paragraphs 560(5) and 561) as regards the
redaction of emails concerning the termination of the appointment of Mr. Bates that “I
do not consider that [sic] they can be a sensible or rational explanation for any of [the
redactions”. As was pointed out to the Judge (on receipt of the draft Judgment), these
were Mr. Bates’ documents (rather than documents from Post Office), and these
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copies were obtained by him under a Freedom of Information request and had the
criticised redactions in them when he received them years before these proceedings
and when he disclosed them in the action. As pointed out to the Judge this was
nothing to do with Post Office. In those circumstances his finding that there cannot
be “...a sensible or rational explanation for any of them”, was not available on the
evidence and/or is perverse, particularly given that an explanation which was both
sensible, rational (and correct) had been given to the Judge when suggesting
corrections to the drafi judgment.
(©) Post Office conduct in the litigation
(i) Timely resolution
138. The Judge erred in fact in finding:
(1) (paragraph 14) ~ that Post Office has “...resisted timely resolution of this Group
Litigation whenever it can... A good example of this is the fact that for these
‘Common Issues , the Post Office submitted in paragraph 24 of its Opening
Submissions that the six Lead Claimants cases should not be treated as
representative of the other Claimants,
(2) (paragraph 544) - that Post Office was determined to make the resolution of the
dispute, “...as difficult and expensive as it can.”
139. The finding on “timely resolution” was not open to the Judge on the facts and/or is
perverse because:
(1) Post Office has always been keen to have a timely resolution of this dispute. It has
not always agreed with the Judge about how the dispute should be managed and
has sought to insist, for example (unsuccessfully) at the outset that proper
pleadings on the matters in dispute would be required. The Judge is wrong to
equate a difference about how a case is managed with an attempt to delay it. This
is wrong and unwarranted. Post Office has never before sought to appeal the case
management rulings of the Judge, even though they have disagreed with many of
them, so as to avoid delay, not cause it.
(2) The Common Issues themselves were first identified by Post Office, and Post
Office invited the Court to order a trial of them. The Claimants initially proposed
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a trial of Common Issue I (relational contract) alone and only later agreed that the
trial should include the further issues identified by Post Office (with minor
drafting changes). [CONFIRM]
(3) Both the Claimants and Post Office have been overniled by the Judge even where
they agreed on a sensible course of action, the Judge declaring (for example) “..L
am going to disappoint you both...” [ref]. A good example concerns the Horizon
Issues Trial, which neither side thought was a good idea to have been held at the
time and in the manner that the Court directed. This was not because Post Office
was seeking to delay matters, It was because Post Office wanted the actual
disputes between the parties determined in an efficient and costs effective matter.
The Claimants sought to have the Horizon Issues Trial held significantly later than
that ordered by the Court.
(4) Indeed, in a letter dated ........December 2017 that Post Office wrote to the
Claimants and subsequently showed the Court, Post Office set out a long term
plan for a more substantial trial to determine the matters in issue between the
parties, which it has urged the court to adopt at numerous CMCs. The Judge has
refused to make such an order. At the last CMC the Judge finally accepted Post
Office’s proposal to start looking into the claims of the other 550 claims.
(5) The example the Judge gives regarding “representative” claimants is simply
wrong. The Lead Claimants are just that: they are not “Test Claimants” within the
meaning of CPR Part 19; nor are they “representative” of the other 550 odd
claimants. The six were chosen — 3 by each party simply to cover the SPMC and
NTC contract periods. The point was made to try to emphasise to the Court that
the Lead Claimants were merely exemplar and were not chosen to be typical or
representative.
(6) For the Judge to hold against this background that Post Office was secking to
avoid timely resolution of this dispute is perverse.
140. The finding on “difficult and expensive” was not open to the Judge on the facts and/or
is perverse:
(1) For all the reasons set out at paragraph 139 above.
(2) This is a difficult case and needs intelligent and thoughtful case management.
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(3) No grounds or particulars of this finding are given:
DCQC 10" April 2019
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Schedule 1
Particulars of findings subject to procedural unfairness
Operation of Horizon
1. Paragraphs 106 (second sentence), 141, 217(2)-(4), 301, 436, 515(1) and (2), 525
(sentence beginning “These submissions also ignore...”), 541, 543, 564, 567, 569(33),
(34), (35: last sentence), (40), (42), (50), (51), (52), (59), (61), (67), (76-77.
penultimate sentence), 806, 819, 852, 1115, 1116 (second and third sentences), and
1118,
2. Grounds: These were matters which were not properly before the Court at the trial of
the Common Issues. Consequently, neither factual findings nor comments should
properly have been made about them. They fall to be quashed and o be determined by
the Court at a later trial, the parties having provided relevant disclosure and produced
relevant witness evidence.
Operation of accounts/investigations/ debt collection
3. Paragraphs 107 (second sentence), 108 (second sentence), 109, 115, 116, 146, 148
(second and third sentences), 153 (first sentence), 158, 165 (fourth sentence onwards).
166 (penultimate and final sentences), 167, 169, 170 (first sentence), 172 (save the
final sentence), 208, 217(1)-(2) and (5)-(6), 218, 219 (first and second sentences),
222, 223, 249, 250, 252, 263, 264, 302, 303, 304, 309, 310, 311, 313, 328, 462, 483,
515(3) to (5), 519, 557, 560(2), 723(1), and 824.
4. Grounds: These were matters which were not properly before the Court at the trial of
the Common Issues. Consequently, neither factual findings nor comments should
properly have been made about them. They fall to be quashed and to be determined by
the Court at a later trial, the parties having provided relevant disclosure and produced
relevant witness evidence.
Operation of helpline
5. Paragraphs 149, 151, 152, 204, 206, 208, 248 (second sentence onwards), 249, 274,
303, 357, 421, 422, 556, 558, 569(37), and 826 (second half, from “This is to deal
with...” onwards).
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6. Grounds: These were matters which were not properly before the Court at the trial of
the Common Issues. Consequently, neither factual findings nor comments should
properly have been made about them. They fall to be quashed and to be determined by
the Court at a later trial, the parties having provided relevant disclosure and produced
relevant witness evidence.
Effectiveness of training
7. Paragraphs 104, 105 (third sentence), 142, 193, 246 (second and third sentences), 247
(third sentence onwards), 297 (first three sentences), 346, 349, 352, 437, 492,
569(70), and 955.
oo
8. Grounds: These were matters which were not properly before the Court at the trial of
the Common Issues. Consequently, neither factual findings nor comments should
properly have been made about them. They fall to be quashed and to be determined by
the Court at a later trial, the parties having provided relevant disclosure and produced
relevant witness evidence.
Suspension
9, Paragraphs 253, 318, 358, 359, 360, 473 (final sentence), 479, 480, 514, 515, 516,
517, 560(1), 723(3), 886, and 1117 (first four sentences).
Grounds: These were matters which were not properly before the Court at the trial of
the Common Issues. Consequently, neither factual findings nor comments should
properly have been made about them. They fall to be quashed and o be determined by
the Court at a later trial, the parties having provided relevant disclosure and produced
relevant witness evidence.
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