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POST OFFICE HORIZON IT
INQUIRY
The Post Office Horizon IT
Inquiry
First Interim Report: Compensation
This Interim Report is laid before Parliament pursuant to
section 26 of the Inquiries Act 2005
Ordered by the House of Commons to be printed on 17 July
2023
HC 1749
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
Contents
Foreword 4
Introduction 7
The Three Schemes 20
(i)The Group Litigation Order Scheme (“GLOS”) 20
(ii)The Historical Shortfall Scheme (“HSS”) 41
(iii)The Overturned Historic Conviction Scheme (“OHCS”) 63
Payments Under the Three Schemes_——iCs*CéGSD
Conclusions and Recommendations 70
Appendices 81
Appendix 1: Letter from Victoria Atkins MP to the Inquiry
Chair, dated 29 June 2023 82
Appendix 2: Terms of Reference for Horizon Compensation
Advisory Board 84
Appendix 3: Horizon Compensation Advisory Board Report
of fourth meeting: 29 March, 21 April 2023 85
Appendix 4: Horizon Compensation Advisory Board Report
of fifth meeting: 14 June 2023 87
Appendix 5: Letter from DBT legal representative to Inquiry
Chair, dated 19 June 2023 90
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
Foreword
i. During Phase 1 of this Inquiry, I heard and read
evidence from a _ significant number of sub-
postmasters which demonstrated the scale of the
suffering and financial loss which so many have
endured as a consequence of the misplaced
reliance upon data produced by the Horizon IT
system. Such evidence left me in no doubt that
there was a compelling need to provide
compensation to all those who had suffered loss
and damage which properly reflected their
pecuniary and non-pecuniary losses. A very
important part of my role in this Inquiry is to
ensure that the various means which have been
devised by HM Government and Post Office
Limited (“the Post Office’) for providing
compensation to sub-postmasters are capable of
fulfilling that need.
ii. That is why I have decided to publish an Interim
Report. I am satisfied that the stage has now
been reached in the process of making
compensation payments to sub-postmasters
which demonstrates the need for a limited
number of recommendations which will, if
accepted, significantly contribute to the fair and
efficient administration of the compensation
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
schemes in existence and which are intended to
deliver proper compensation.
iii. I am very concerned to highlight two issues in
particular. First, the timescale for making
payments to sub-postmasters under the scheme
for providing additional compensation to those
Claimants who sued the Post Office in the Group
Litigation known as Bates and others v Post
Office Limited is extremely limited. Under the
legislation now in force all payments of
compensation to such persons must be made by
7 August 2024. My current view is that this will not
be achieved. Second, the Minister and the
Department for Business and Trade have recently
announced that a body known as the Horizon
Compensation Advisory Board will have a
significant role in assisting HM Government and
the Post Office in relation to the administration of
all schemes whereby compensation is payable to
sub-postmasters. The recommendations which I
make in this report are designed (a) to remove the
possibility of injustice to sub-postmasters brought
about by an artificial time limit on making
compensation payments to the Claimants in the
Group Litigation and (b) to maximise the use
made of the Horizon Compensation Advisory
Board so as to ensure that the compensation
schemes achieve their intended purpose.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
iv. This Interim Report will be laid before Parliament
and published on 17 July 2023. The conclusions
and recommendations which it contains are
based on information available to me as of 10 July
2023.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
Introduction
1. Over a period of very nearly three years,
representatives of Post Office Ltd (“the Post
Office”) and Ministers’ on behalf of the United
Kingdom Government have asserted on many
occasions that sub-postmasters? who have
wrongfully suffered pecuniary and non-pecuniary
losses as a consequence of the use made by the
Post Office of data produced by the Horizon IT
System (“Horizon”) should receive compensation
which is “full and fair’, and that such compensation
should be delivered promptly.
2. Since the settlement of the litigation between Bates
and Others _v_ Post Office Ltd. (“the Group
‘ The word “Minister” in the context of ministerial
announcements is used to mean (a) the Secretary of
State for Business, Enterprise and Industrial Strategy;
(b) the Secretary of State for Business and Trade; and
(c) other ministers within those departments or Treasury
Ministers.
2 Unless the context dictates otherwise, the term “sub-
postmaster” is used to mean those persons who are
entitled to claim compensation under the provisions of
the three schemes identified in paragraph 2 of this
Interim Report.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
Litigation”), three different means have been
devised with a view to achieving those stated aims.
Such means have all been called schemes of one
type or another and at the latest compensation
hearing convened by me on 27 April 2023 the
suggestion was made that the names given to two
of the schemes should by changed so that the
descriptions “Historical or Historic” should be
removed from the scheme names. So far as I am
aware, that has not been done formally with the
consequence that in this Interim Report I shall refer
to the three schemes by their current names or
acronyms as follows:
e The Historical Shortfall Scheme (“HSS”);
e the Overturned Historic Convictions Scheme
(“OHCS”); and
e the Group Litigation Order Scheme (“GLOS’).
3. HSS was launched on 1 May 2020. It is a voluntary
remediation scheme, properly so called, which
came into existence following the settlement of the
Group Litigation. The Deed of Settlement which
brought an end to the litigation laid the foundation
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
for the scheme.’ At the date of its publication, HSS
specified that applications for compensation should
be submitted to the Post Office by midnight on 14
August 2020. Subsequently (in the summer of
2020), the Post Office determined that the period
for the submission of applications for compensation
should be extended to midnight on 27 November
2020.
4. From its inception, the Post Office has been
responsible for administering HSS. It frankly
acknowledges that at the time it launched the
scheme it substantially underestimated the number
of likely applicants and the total amount of
compensation which would be payable to those
applicants and, in consequence, the length of time
necessary to make payments of compensation to
eligible applicants.
5. On 22 July 2021, the Minister announced that funds
would be made available to the Post Office so as to
enable the Post Office to make interim payments of
compensation of up to £100,000 per person to
those whose convictions for offences of dishonesty,
which were reliant upon evidence generated by
Horizon, had been quashed. This announcement
was made following the quashing of a number of
3 See Clauses 9.4, 9.5 and Schedule 6 of the Settlement
Deed.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
such convictions by the Court of Appeal (Criminal
Division) on appeal from the Crown Court and by
the Crown Court sitting at Southwark on appeals
from convictions at Magistrates’ Courts in England
and Wales. On 14 December 2021, the Minister
made a statement in Parliament to the effect that
the Post Office would also be responsible for
making final payments of compensation to those
whose convictions had been quashed provided
those convictions were reliant upon evidence
generated by Horizon. Payments of compensation
(whether interim or final) were to be made through
OHCS. From the outset such payments have been
determined and administered by the Post Office. To
date, at least, OHCS has never been a scheme in
any relevant sense of that word. Rather, the Post
Office and those whose convictions have been
quashed (usually, if not invariably, with the aid of
lawyers) negotiate appropriate payments of interim
and/or final compensation.* Nonetheless, it is
convenient to refer to OHCS as a scheme
throughout this Interim Report.
4 Upon announcement of this Scheme the Minister
specified that interim payments of up to £100,000 would
be payable to eligible applicants to the scheme.
Subsequently, the Minister increased the maximum
interim payment available to applicants to £163,000.
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6. In February, March and May 2022, I heard oral
evidence from sub-postmasters (and to an extent,
from family members of sub-postmasters) who had
been affected, adversely, by decisions taken by the
Post Office in reliance upon data produced by
Horizon. During the hearings, I became concerned
that some of the features of HSS and OHCS might
be at odds with the twin goals of delivering full and
fair compensation payments, promptly, to all those
entitled to such payments. Additionally, on 22
March 2022, the Minister announced that:
“The Chancellor will make additional funding
available to give those in the GLO group
compensation similar to that which is available to
their non-GLO peers.”
7. This announcement came about, no doubt,
because there had been a mounting storm of
protest from the Claimants in the Group Litigation
to the effect that they had not been compensated
appropriately and fairly under the terms of the
settlement which brought an end to that litigation.
8. Given the concerns which I harboured about the
operation of HSS and OHCS, and in the light of the
possibility of additional compensation being made
available to the Claimants in the Group Litigation, I
decided that I should (a) provide some preliminary
thoughts in writing about certain issues relating to
compensation; (b) invite written submissions on
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behalf of Core Participants on those and other
compensation issues; and (c) thereafter, hold
hearings at which oral submissions could be made
to me about such issues.° I published my
preliminary thoughts on a number of compensation
issues on 9 May 2022° and invited written
submissions upon them. I received a number of
such submissions and many of those making
written submissions indicated a wish to supplement
those submissions orally.
9. Consequently, I convened hearings at which oral
submissions were made. They took place on 6 July
and 13 July 2022. On 15 August 2022, I published
a document entitled “Chair’s Progress Update on
Issues Relating to Compensation” (“the Progress
Update’) in which I set out a number of conclusions.
10.Prior to publication of that document, I gave
consideration to whether or not I should publish an
interim report pursuant to Section 24(3) of the
Inquiries Act 2005. I decided against that course,
opting instead to publish the Progress Update and
5 The Announcement was published on the Inquiry
website on 21 March 2022.
6 The document was entitled “Provisional View of the
Chair on Compensation Issues relating to Prosecuted
Sub-postmasters’.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
to give a commitment to hold further hearings, if
necessary, in relation to compensation issues.
11.0n 22 September 2022, I gave notice to Core
Participants of my intention to hold a further hearing
in relation to compensation issues, either in late
2022 or early 2023. In advance of the hearing, I
received written submissions from Core
Participants. The hearing took place on 8
December 2022 and I published a document
entitled “Statement on Issues Relating to
Compensation” (“the January Statement”) on 9
January 2023.
12.At the hearing on 8 December 2022, I was invited
by some Core Participants to submit an interim
report pursuant to the 2005 Act. I did not accede to
that suggestion for reasons which I explained in the
January Statement, rather, I indicated that I
intended to obtain my own legal advice upon issues
relating to the bankruptcies of some sub-
postmasters and that I would hold a further hearing
to receive oral submissions about that issue (and
others) in April 2023.
13.On or about 20 March 2023, I received legal advice
from Ms Catherine Addy KC relating to a number of
bankruptcy issues. That advice has been made
available to all Core Participants and has been
published on the Inquiry website.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
14.On 27 April 2023, I held a further hearing. By notice
dated 23 March 2023, I invited written submissions
on issues relating to bankruptcy and the exemption
from taxation of compensation payments.
Additionally, I invited progress updates in respect of
payments of compensation under HSS, OHCS and
GLOS.
15.In advance of the hearing on 27 April 2023, I
received written submissions on behalf of the
Department for Business and Trade (“DBT”)’, the
Post Office, the Core Participants represented by
Howe+Co, the Core Participants represented by
Hodge Jones & Allen, and the Core Participants
represented by Hudgell Solicitors (“Hudgells”).
Counsel instructed on behalf of all those Core
Participants made oral submissions.
16.1 should also record that prior to the hearing I
received and I have taken account of written
submissions made by Mr Paul Marshall, a Barrister
who, at the time he made the submissions, acted
for 7 of the Core Participants represented by Hodge
7 The Department for Business and Trade was created on
7 February 2023 to bring together aspects of the work of
BEIS with that of the Department for International Trade.
Amongst other areas of Government work, DBT has taken
on those functions relating the Post Office which were
previously carried out by BEIS.
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Jones & Allen in their respective claims for
compensation; a letter from Freeths LLP
(“Freeths”), solicitors who act for a majority of those
persons making claims for compensation in the
GLOS; and other correspondence = and
documentation which has been generated since
the January Statement — all of which has been
provided to Core Participants and published on the
Inquiry website.
17.Following the hearing, I continued to receive written
submissions and _ correspondence. Further,
relevant ministerial announcements have been
made, no doubt in response to submissions made
at and before the hearing on 27 April 2023. The
extent, if at all, to which I have taken account of this
additional material will become clear from what
appears below.
18.The Post Office Horizon Compensation and
Infected Blood Interim Compensation Payment
Schemes (Tax Exemptions and Relief) Regulations
2023 (“the 2023 Regulations” or the “Regulations’),
came into force on 16 March 2023. Paragraph 3 of
the Regulations reads as follows:-
“3. The following compensation payments are
qualifying payments for the purpose of
paragraph 3 of Schedule 15 to the Finance Act
2020 —
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(a) Overturned Historical Conviction
compensation payments,
(b) Group Litigation Order compensation
payments, and
(c)...”
The effect of that provision is said to be that payments
made to applicants under OHCS and GLOS are
exempt from income tax.
19.Paragraph 4 of the Regulations provides:-
“4. The following compensation payments are
qualifying payments for the purposes of
paragraph 4 of Schedule 15 to the Finance Act
2020 —
(a) Overturned Historical Conviction
compensation payments,
(b) Group Litigation Order compensation
payments, and
(c)...”
The effect of that provision is said to be that
compensation payments under those schemes are
exempt from Capital Gains Tax.
20.Paragraph 5 of the Regulations provides:-
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“5. The following compensation payments are
qualifying payments for the purposes of
paragraph 5 of Schedule 15 to the Finance Act
2020 -
(a) Overturned Historical Conviction
compensation payments, and
(b) ...”
21.The effect of paragraph 5 of the Regulations is said
to be that compensation payments made under
OHCS are exempt from Inheritance Tax.
22.By letter dated 28 February 2023, I had made
enquiries of BEIS as to why tax exemptions for
compensation payments paid to applicants under
HSS and GLOS were, apparently, different from tax
exemptions available for payments made under the
OHCS. I received a response to my query by letter
dated 10 March 2023 from the recognised legal
representative of DBT. It suffices that I say that I did
not, and still do not, consider that the letter of 10
March 2023 provided a satisfactory basis for
excluding payments made under HSS from the
income tax, capital gains tax and inheritance tax
exemptions created by the 2023 Regulations for
OHCS; nor do I consider it a satisfactory basis for
excluding payments from the GLOS from the
inheritance tax exemption.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
23.Before leaving this introduction, it is as well to
remind the reader of my powers in relation to
compensation issues. Section 2 of the Inquiries Act
2005 is in the following terms:-
“(1) An inquiry panel is not to rule on, and has no
power to determine, any person’s civil or
criminal liability.
(2) But an inquiry panel is not to be inhibited in
the discharge of its functions by any likelihood
of liability being inferred from facts that it
determines or recommendations that it
makes.”
24.1 have interpreted those provisions as preventing
me from determining the amount of compensation
payable in any individual case under any of the
schemes identified at paragraph 2 above. However,
I am not inhibited by the statutory provisions from
investigating the operation, administration and
overall fairness of those compensation schemes.
That view is reinforced by a specific provision within
my Terms of Reference which provides:
“D: Assess whether the commitments made
by Post Office Ltd within the mediation
settlement — including the Historical Shortfall
Scheme — have been properly delivered.”
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25.I appreciate that neither this quotation from my
Terms of Reference nor any other part of the Terms
make any reference to OHCS or GLOS. That is not
surprising, since those schemes did not exist when
the Terms of Reference for the Statutory Inquiry
were published. In the List of Issues which was
published in November 2021 I made it clear that I
would be investigating OHCS (see issue 183). By
then, relevant Ministerial announcements had been
made about it. In the hearings in July 2022, I made
it clear that I intended to investigate GLOS as well
as HSS and OHCS and both the Progress Update
and the January Statement considered aspects of
all three schemes. Neither the Inquiry’s sponsoring
Minister, nor any Core Participant has sought to
suggest that the Terms of Reference should confine
me to investigations relating to HSS and should
preclude me from investigating OHCS and GLOS.
There appears to be unanimity of view amongst
Core Participants that the Terms of Reference
should be interpreted as permitting me _ to
investigate OHCS and GLOS as well as HSS and,
as is obvious from my conduct of the Inquiry, I am
satisfied that view is correct.
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The Three Schemes
26.I have identified the chronological order in which the
three schemes came into being above. In the Progress
Update and the January Statement, HSS and OHCS
are considered in some detail whereas at the time
those documents were published the detail of GLOS
was still emerging. Accordingly, I consider it
appropriate to begin this section by focussing upon
GLOS.
(i) The Group Litigation Order Scheme (“GLOS”)
27.As of at the date of the Progress Update (15 August
2022) this scheme was in its infancy. In oral
submissions on behalf of BEIS made on 8 December
2022, Mr Chapman provided the bare bones of the
scheme. It was intended that it would be overseen by
a distinguished advisory board. Applications for
compensation made under the scheme would be
administered by BEIS but determined by an
independent panel. Mr Chapman’s oral submissions
were predicated upon a Ministerial Statement made in
Parliament on 7 December 2022, and a document
published the same day _ entitled “Additional
Compensation for GLO Members: Scheme Process”
(which henceforth in this section I refer to as the “the
Scheme Process’). Not surprisingly, very little attention
was paid to the Scheme Process at the hearing on 8
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December 2022 given that it had been published only
1 day before the hearing. The Scheme Process was
subsequently replaced by the “GLO Compensation
Scheme Guidance and Principles” published 23 March
2023 (hereafter referred to as “GLOS Guidance and
Principles)”.
28.In the January Statement, I thought it appropriate to
stress three points.
29.First, I stressed that the Minister and BEIS had made
it crystal clear that all applications for further
compensation under GLOS had to be resolved by 7
August 2024. I wrote that the funding for payments
under the scheme had been obtained by the
Government in reliance upon statutory provisions
which dictated that the funds must be used for their
allocated purpose by that date. That appeared to have
the consequence that approximately 550 claims would
have to be considered in the course of a period of 20
months or thereabouts between January 2023 and
August 2024.2 I expressed the view that the
experiences gained in administering HSS and OHCS
would likely demonstrate how challenging this would
be.
8 The figure of 550 applications was an assumption since
there had been approximately 550 Claimants in the Group
Litigation.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
30.The next issue I highlighted related to the provision of
the reasonable costs of legal representation. I need
not repeat what I wrote at paragraphs 40 to 42 of the
January Statement.
31.My third point, in reality, was an elaboration of my first
point relating to the time available for determining all
the applications under the scheme. I wrote that there
would be available approximately 12 to 15 months to
resolve many hundreds of claims submitted under the
scheme. I stressed that BEIS should administer the
scheme in such a way that no applicant felt
pressurised into accepting an offer to avoid the
possibility that the end date for payment would arrive
yet no payment would have been received.
32.These three issues are, on any view, still live and
acknowledged by everyone to be of considerable
importance.
33. Following reorganisation of departmental
responsibilities, GLOS is now being administered by
DBT. As of 6 April 2023, the Department was aware of
377 applications to the scheme.® In a letter dated 20
April 2023 from Freeths, I was informed that they acted
for 388 individuals who were making claims in GLOS.
On 27 April 2023 Mr Jacobs, instructed on behalf of the
° See paragraph 43 of the written submissions on behalf
of DBT.
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Core Participants represented by Howe+Co, told me
that his instructing solicitors represented 60 applicants
to the GLOS. I am also aware that Hudgells and Hodge
Jones & Allen act for a small number of individuals who
are making claims under the scheme so that my best
estimate, at the moment, is that approximately 460
applications will have to be processed and determined
by 7 August 2024.1°
34.It is against this background that I turn to consider the
aspects of GLOS which have been the subject of most
debate to date.
35.1 deal first with the suggested impact of bankruptcy
upon awards of compensation under GLOS. I
understand that all save one of the insolvency
practitioners who have to grapple with this issue,
including the Official Receiver, accept that no part of
any compensation awarded to an applicant under
GLOS who has been made bankrupt would vest in
his/her estate for the benefit of creditors. That view is
10 At this stage I assume that many, if not all, of those
persons whose convictions have been quashed were
Claimants in the GLO and that they have not pursued
applications for compensation in GLOS but rather seek to
obtain “full and fair compensation” in OHCS. If that
assumption is correct, it means that all of the Claimants in
the GLO have or should have an appropriate vehicle to
“full and fair” compensation.
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The Post Office Horizon IT Inquiry: First Interim Report: Compensation — 17 July 2023
not necessarily shared by one Insolvency Practitioner
(Moore UK) who apparently considers that such
payments made to applicants, previously made
bankrupt, might fall within such a bankrupt’s estate.
36.1 asked Ms Addy KC to address this issue. Ms Addy’s
view is encapsulated in paragraph 62 of her Opinion,
in which she writes:
“Whilst I have not seen the asserted basis of the
individual insolvency practitioner’s stance, in my
Opinion, an ex gratia payment which may be
made by the Department under which the SPM
had no legal right or entitlement pursuant to a
scheme which will have come into operation only
after the bankruptcy order was made (that
necessarily being the case in the context of this
question, as the scheme has not yet been
established), would not constitute property which
would automatically form part of the estate in
bankruptcy.”
37.Ms Addy’s opinion is subject to what she describes as
two caveats — also set out in paragraph 62 of her
Opinion. I need not repeat those caveats in this report.
I say that since the view expressed by Ms Addy KC is
the prevailing view, save for that held by the one
Insolvency Practitioner to which I have referred above.
38.In any event, at paragraph 64 of her Opinion, Ms Addy
provides a practical suggestion as to how this issue
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may be resolved i.e. by DBT making an application for
directions to the appropriate court pursuant to section
303 of the Insolvency Act 1986. As of 27 April 2023
DBT, through Mr. Chapman, appeared willing to give
serious consideration to implementing Ms Addy’s
practical suggestion in the event that Moore UK
maintains its current stance. However, to date, no
unequivocal public announcement has been made by
the Minister or DBT upon this issue.
39.By virtue of the 2023 Regulations, payments of
compensation under GLOS are said to be exempt from
income tax and capital gains tax. Such payments are
not exempt from inheritance tax.
40.Until 29 June 2023, I was very concerned that, by
virtue of the Regulations, payments of compensation
under OHCS were said to be exempt from inheritance
tax yet, to my mind, no sustainable justification had
been put forward by DBT or on behalf of the Minister
for the absence of such an exemption for payments of
compensation made under GLOS or HSS.
41.However, I am pleased to report that on 29 June 2023
I received a letter from the Minister informing me that
the Government had that day published a Written
Ministerial Statement “outlining its intention to take
action to exempt compensation for postmasters from
inheritance tax (IHT). The importance of this letter is
obvious and I have reproduced it as Appendix 1 to this
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Interim Report so that there can be no doubt about its
terms.
42.Although the Regulations apparently exempt
payments of compensation under GLOS from income
tax, the terms of paragraph 4.2. of the GLOS Guidance
and Principles should be noted. Paragraph 4.2.1
states baldly that payments “under this Scheme” are
exempt from Income Tax, Capital Gains Tax and
National Insurance Contributions. However, this is
followed by paragraph 4.2.2 which commences by
informing an applicant that his/her “claimed losses
should be quantified net, i.e. after deduction of the tax
which would have been due at the time...”. The two
statements are not easily reconcilable.
43.At this point in time I am far from satisfied that those
administering GLOS and/or making assessments of
compensation thereunder are fully aware of the
difficulties that may still exist in relation to the apparent
exemption of compensation under GLOS from income
tax, in particular. In my view it will be necessary to
scrutinise with care how this exemption has been
applied in practice during the course of Phase 5
hearings.
44.There can be little doubt that the GLOS Guidance and
Principles draws significantly upon the documentation
which has been issued by the Post Office in respect of
the guiding principles to be applied in determining
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compensation under HSS. Para. 1.1.2 of the GLOS
Guidance and Principles reads:
“In awarding compensation to postmasters, the
Scheme will be guided by considerations of
fairness, in addition to applying established legal
principles and the findings from the Common
Issues Judgment and the Horizon Issues
Judgement. The Scheme aims to restore
postmasters back into the position they would
have been in had it not been for the breach of
Post Office’s contractual obligations. The
Scheme will take into account all relevant facts
and matters presented in the claim in order to
produce a fair result for the postmaster. Claims
can be made for Horizon Shortfalls and for
Consequential Losses resulting from them (the
definitions for which can be seen in 1.3).”
This general approach is very similar to that which is
articulated in HSS.
45.The GLOS Guidance and Principles adopts a similar
approach to that contained within HSS to the evidence
which an applicant is asked to provide in support of an
application. Paragraph 1.2. reads:
“1.2.1 Although it is in your interest that your
claim is well evidenced and quantified in
respect of each head of loss, the Scheme
recognises that this may not always be
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possible given the circumstances and the
length of time which has passed, and that
there will be an absence of evidence. As
such, DBT will take a proportionate and
considerate approach to the availability of
evidence albeit there will be some claims in
which expert evidence may be required and
we have made this clear in the guidance
below.
1.2.2 The evidence base for your claim should
include the Schedule of Claimant Information
(“SOCI”) submitted for the High Court case,
although the Scheme accepts that aspects of
these statements will need to be updated and
expanded upon to reflect subsequent events
or newly available information. Other
statements and supporting documentation
from that case can also form part of your
evidence base.
1.2.3 The Post Office is undertaking a
comprehensive programme of disclosure on
terms discussed with your legal advisors.
Any evidence obtained by the Scheme from
The Post Office will be shared with you at the
earliest opportunity.
1.2.4 You should use any remuneration
information provided by The Post Office as
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evidence. If you need additional information
relating to your tax records to support your
claim, you may also wish to seek evidence
from HMRC. You can ask your legal advisor
to do this on your behalf with your signed
consent (a digital signature is acceptable).
1.2.5 If you feel that you are unable to engage with
this process, you can simply submit your
documentation from the High Court, including
your SOCI to the Scheme. This may not
produce the optimal outcome but will still
allow your claim to be considered.”
To repeat, these provisions are similar to principles
which have been formulated and applied in HSS.
46.Section 2 of the GLOS Guidance and Principles deals
with eligibility for making claims. It is sufficient to point
out that eligibility depends upon an applicant being a
Claimant in the Group Litigation and also being a party
to the Settlement Agreement which brought that
litigation to an end. It is clear from Section 2.1.3 that
those whose convictions have been quashed are
expected to pursue applications for compensation
through OHCS.
47.Section 3 of the GLOS Guidance and Principles
provides that “an Independent Advisory Board has
been established to advise ministers on how best to
manage delivery of the Scheme” (“the Independent
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Advisory Board”). This feature was foreshadowed in
the Scheme Process and was, initially, intended to be
unique to GLOS. No independent advisory board with
an identical or similar function existed in HSS and
OHCS at the time such a board was constituted in
GLOS.
48.The GLOS Guidance and Principles contemplated that
the Independent Advisory Board would consist of four
members — two academics and two parliamentarians.
The academics chosen were Professor Christopher
Hodges and Professor Richard Moorehead; the
parliamentarians were the Right Honourable Lord
Arbuthnot and the Right Honourable Kevan Jones MP.
There can be little doubt about the fact that each of
those persons has the requisite skill, knowledge and
interest in the subject matter to perform their intended
function of advising Ministers on how best to manage
delivery of the scheme.
49.It is clear from available documentation that the
Independent Advisory Board met on a number of
occasions prior to 27 April 2023. By 29 March 2023 the
Independent Advisory Board had become the Horizon
Compensation Advisory Board (where appropriate
hereafter referred to either with its full title or as “the
Board’) and on that date and on a further occasion on
21 April 2023 the thorny issue of “compensation
bands” was the subject of discussion and
recommendation to the Minister — as to which see
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paragraph 59 below. The members of the Board were
supported at their meetings by senior officials in DBT.
50.In their written submissions of 6 April 2023 Messrs
Chapman and Henderson informed the Inquiry that
“the remit of the GLO Compensation Advisory Board
[had] been extended to include the Department's
oversight of HSS and OHC” and justified the change.
The rationale for the change was said to be to “ensure
a holistic view of all compensation schemes and [to]
aid in the consistent treatment of postmasters
regardless of what scheme or programme they [were]
in.” In his oral submissions on 27 April 2023 Mr
Chapman developed this theme by submitting:-
“The Department already had_ extensive
measures in place to ensure that postmasters in
similar situations were given similar treatment,
regardless of the particular scheme under which
they fell. It has now created an_ internal
programme board to provide additional
assurance and it has extended the remit of the
GLO advisory board to include the Department’s
supervision of the scheme delivered by the Post
Office.”
51.1 now have access to an undated document entitled
“Terms of Reference for Horizon Compensation
Advisory Board”. I have attached the same to this
Interim Report as Appendix 2. The document should
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be read as a whole in order to understand, fully, the
Terms of Reference of the Board.
52.It is worth stressing now that the Horizon
Compensation Advisory Board’s aim “is to help DBT to
ensure fair and prompt compensation to postmasters
affected by the Horizon scandal and related issues.”
However, the Terms of Reference make it clear that it
is not intended that the Board will consider individual
cases for compensation.
53.Section 3 of the GLOS Guidance and Principles also
identifies that DBT has appointed the legal firm,
Addleshaw Goddard “as external legal advisors” to
advise DBT on individual cases. It has also appointed
Dentons “as Alternative Dispute Resolution experts
who will be independent claims facilitators
Supporting the progress of claims and will provide
arrangements for making relevant papers transparent
to all parties’. Dentons are charged with the task of
procuring “an independent panel comprising legal,
accounting, medical and retail experts and a senior
lawyer (probably a KC or retired High Court Judge)
who will, when required, undertake ‘exceptional review
of cases”. This person is given the title ‘The Reviewer’
in Section 3.
54.Paragraph 3.3.3 provides that once an application or
claim is submitted, it will enter “the claims facilitation
process conducted by Dentons and a named claims
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facilitator will be appointed to the case”. Paragraph 3.4
is headed “Assessment of Claim’. Paragraph 3.4.1
makes clear that consequential loss claims will be
assessed against established legal principles (which
are set out in paragraph 4.3 of the document) as well
as being informed by considerations of fairness in all
the circumstances. It is to be noted, however, that the
assessment at this stage will be undertaken by DBT
with advice from Addleshaw Goddard — see paragraph
3.4.2. It is also clear from paragraph 3.4 as a whole
that it is for DBT to formulate an offer in settlement in
respect of the claim and that the offer will be
communicated to an applicant on behalf of DBT by
Addleshaw Goddard.
55.Paragraph 3.5 describes the process which will occur
in the event that an offer made on behalf of DBT is not
an offer to pay the full claim made by an applicant.
Essentially, the first step in the process is for Dentons
to seek to promote “common understanding and
agreement between the parties’ — see paragraph
3.5.1. In the initial stages, they may do that by:
i. requesting further information from an
applicant’s legal advisor;
ii. recommending that expert evidence is
sought;
iii. encouraging the applicant or DBT to revise
their positions; and / or
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iv. referring a case to the independent panel for
a first or final assessment.
56.Paragraph 3.5.5 provides that if the Claims Facilitator
judges that it would assist the parties’ progress
towards agreement, they can decide to put the case to
the Independent Panel for a first assessment; by
paragraph 3.5.8, if the Claims Facilitator judges that
agreement between the parties is unlikely to emerge,
despite the recommendations of a first Panel
assessment, they can decide to put a case to the
Panel for a final assessment.
57.What happens if an applicant is unhappy with the final
assessment of the Independent Panel? That is
governed by paragraph 3.6 and it is necessary to set
out the provisions within that paragraph in full:-
“3.6.1 If you believe that there has been a
manifest error or irregularity in the Panel’s
final assessment of the claim, you can refer it
for exceptional review. DBT will have the
same rights to seek exceptional review of the
case on the grounds of manifest error or
irregularity. This power would allow DBT to
challenge if it believed that the Panel had
departed from the established framework for
assessing claims which is intended to
achieve consistency and fairness when
making offers to Sub-Postmasters.
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3.6.2 Any such application must be made
within 15 working days of the communication
of the Panel’s final assessment. Any case
submitted for review should:
(i) identify the alleged manifest error or
irregularity,
(ii) set out what the final assessment should
have concluded in the absence of such an
error or irregularity; and
(iii) provide reasons for this view.
3.6.3. The Reviewer will consider the case,
alongside any comments on it which s/he will
invite from the Panel or the other party. S/he
may uphold the Panel’s decision or in the
event of finding that there has been a
manifest error or irregularity make a revised
award of compensation. The Reviewer’s
decision will be sent to you and your legal
advisor and to DBT and Addleshaw Goddard,
together with a written explanation. The
Reviewer's finding will be the final stage to
reach agreement between you and DBT on
your claim. DBT will not consider any further
offers or changes to the offer after this.”
58.Many parts of sections 4 and 5 of GLOS Guidance and
Principles are very similar in concept to provisions
found within HSS. Section 4 consists of a number of
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what are described as key principles, e.g. provisions
relating to such matters as the burden of proof and
Section 5 is a guide to the nature and type of claims
which can be made within GLOS. Additionally,
however, it contains indications, in the form of bands,
as to the likely awards of compensation for non-
pecuniary losses occasioned by an applicant being
held liable wrongly for Horizon shortfalls. In Section
5.9.5, bands are set out as to likely awards of
compensation for stigma/damage to reputation; at
paragraph 5.10.6, there are bands relating to personal
injuries; at paragraph 5.11 there are bands relating to
harassment and at paragraph 6.12.2 there are bands
for distress and inconvenience.
59.The bands described briefly above did not meet with
approval from those representing sub-postmasters. In
summary, the recognised legal representatives of sub-
postmasters considered the bands to be unrealistically
low. In consequence, the bands were the subject of
detailed discussion within the Horizon Compensation
Advisory Board, as I indicated at paragraph 49 above.
Awritten report of that detailed discussion is attached"
as Appendix 3. Following its detailed discussion, the
Board agreed to recommend to the Minister that the
11 Horizon Compensation Advisory Board Report of fourth
meeting held on 29 March 2023 and 21 April 2023.
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GLOS Guidance and Principles should be revised as
follows:
e “the bands were not limits but indicative
guidance to claimants, their lawyers and the
Independent Panel.
e each case would be decided on its merits.
e the figures for each band were derived from
decisions made by the HSS Independent
Panel on HSS cases where there was good
reason to expect cases were generally less
serious. The more serious cases were likely
to still be going through dispute resolution.
The GLO Compensation Scheme expects to
find some cases where the facts of the case
would demand awards significantly higher
than the upper figure for the top band.
e ifaclaimant’s compensation cannot be agreed
through the Alternative Dispute Resolution
process, they have the right to have it
considered by the Independent Panel
including a KC and other experts.
e as for other aspects of compensation, where
the Principles and Guidance set out bands,
decisions would be taken by the Independent
Panel based on the facts of each case looked
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at ‘in the round’ and guided by considerations
of fairness’.
60.1 am pleased to report that on 26 April 2023, the
Minister made a statement in Parliament accepting the
recommendations made by the Horizon
Compensation Advisory Board as to how the bands
should be interpreted and indicated that DBT would
publish a revised version of the GLOS Guidance and
Principles in due course.
61.1 am also pleased to report that the fifth meeting of the
Horizon Compensation Advisory Board took place on
14 June 2023. Minutes of the meeting are attached at
Appendix 4 to this Report. Self-evidently, at its
meeting, the Board grappled with a number of issues
which have exercised those representing sub-
postmasters in the quest for compensation which is full
and fair.
62.As I have said, the vast majority of applicants to GLOS
are represented by Freeths. In their letter of 20 April
2023, Freeths raise a number of issues relating to the
operation scope and administration of GLOS.
63.First, they assert:-
“The August 2024 deadline for the resolution of
payment of all claims in the GLO Scheme remains
a serious project risk. We shall continue to
progress matters as_ rapidly as_ possible.
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However, we reiterate our view that there needs
to be very close monitoring of the need for
Government to initiate whatever process is
necessary to extend the final deadline, should
that become necessary.”
64.Second, they complain that the Post Office is failing to
disclose documentation relevant to the individual
applications for further compensation in a_ timely
fashion. They make the fair point that the historical
documents held by the Post Office are essential to
reviewing and evaluating cases. The Post Office has
been working to a period of 32 weeks to produce
documents in any given individual case. Freeths
argue, with considerable force, that such a timescale
would make it virtually impossible for all applications to
the scheme to be fully and properly assessed by 7
August 2024.
65.Third, Freeths suggest and assert that:
“The way in which claims will be assessed in the
GLO Scheme when documents are missing will
be of fundamental importance to the fair operation
of the Scheme. In our view, the approach taken
by DBT and its lawyers should be monitored very
closely to ensure that postmasters will not be
prejudiced by the absence of documents. In
many cases, Post Office removed all documents/
records from Post Office branches at the time that
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the postmaster was terminated/suspended. _ It
would be inherently unjust and abhorrent if post
masters were now to be penalised financially by
reason of Post Office’s conduct either in removing
documents historically or failing to produce
documents now for the purpose of the Scheme.
The evidential ‘benefit of the doubt’ should be with
postmasters in the GLO Scheme where there are
documentary gaps by reason of Post Office not
being able to locate/ produce documents in time
for DBT to fully and fairly assess claims.”
66.Freeths also “record their concern over the GLOS
Scheme document’.’? First, they complain of a lack of
consultation as to the bands of likely awards of
compensation for non-pecuniary loss. Second, they
complain that, in some instances, unduly narrow
definitions have been adopted: in particular, attention
is drawn to the fact that all consequential losses must
flow from a “Horizon shortfall’, whereas Freeths had
suggested the broader proposition that such loss
should flow from a “Horizon issue”. Freeths suggest
that monitoring occurs to ensure that definitional
issues do not impede the aim of providing full and fair
compensation to the applicants. Third, Freeths
highlight the fact that many cases which they are
12 I understand that to be a reference to GLOS Guidance
and Principles.
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handling will require expert evidence and they are at
pains to point out that there is scope for considerable
disagreement between DBT and themselves as to the
need for such evidence and to the cost thereof.
67.In his oral submissions on 27 April 2023 on behalf of
the clients of Howe+Co, Mr Jacobs associated himself
with those who envisaged difficulty in making all
payments under the Scheme by 7 August 2024.
Additionally, he advanced detailed arguments
demonstrating that disclosure of documents by the
Post Office at the rate proposed by the Post Office
would make completion of the scheme by the
proposed date extremely problematical. In these
circumstances, Mr Jacobs submitted that there should
be a second tranche of interim payments made to all
applicants under the scheme as a means of alleviating
the hardship and/or distress caused by continuing
delays in providing final compensation.
68.Mr Henry KC aligned himself with Mr Jacobs’
suggestion that there should be a second tranche of
interim payments to all those entitled to a further
payment under GLOS.
(ii) The Historical Shortfall Scheme (“HSS”)
69.HSS is a voluntary remediation scheme which came
into existence following the conclusion (and in
consequence of) the Group Litigation. I described its
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main features in detail in the Progress Update — see
paragraphs 13 to 63. For the sake of convenience, I
repeat a number of its features in the following three
paragraphs.
70.From its inception, HSS had specific eligibility criteria.
It was open only to applicants who were or had been
in direct contractual relations with the Post Office. The
applications made by such persons had to relate to
shortfalls which had arisen in respect of “Previous
versions of Horizon (sometimes referred to as Legacy
Horizon, Horizon Online or HNG-X)”’. Only certain
categories of persons were entitled to bring a claim on
behalf of others, e.g. it was necessary for a personal
representative to make an application on behalf of a
deceased person. The applicant had to agree to be
bound by the Terms of Reference of the scheme.
71.The eligibility criteria also contained specific
exclusions. Claimants in the Group Litigation were
excluded from being eligible to seek compensation
under HSS, as were all persons (whether or not they
had been Claimants in the Group Litigation) who had
been convicted of criminal offences relating to their
time at the Post Office. As at the opening date of the
scheme, persons were not eligible for compensation if
they had entered into any settlement agreement with
the Post Office other than as part of the “I/nitial
Complaint Review and Mediation Scheme” which had
commenced in 2013, or as a result of “Network
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Transformation or other Scheme’. However, after the
scheme had been open for some time, the provision
which excluded persons who had entered settlement
agreements with the Post Office was changed so that
the only operative exclusion related to persons who
had entered into settlement agreements after 16
December 2019 (the date of the Horizon Issues
Judgement handed down by Fraser J).
72.\n its original form the scheme was open only to those
who made an application for compensation by Friday
14 August 2020. However, that was not a cut-off date
set in stone. Applicants who did not submit an
application by 14 August 2020 would not be eligible to
join the Scheme “unless Post Office agree[d]
otherwise”. As I have said the Post Office amended the
scheme in the summer of 2020 so as to provide a
closing date of midnight on 27 November 2020 and the
provision which apparently conferred upon the Post
Office a discretion to accept an application after the
closing date remained in place.
73.Under HSS the Post Office makes offers in settlement
to applicants. However, in all substantial cases, at the
very least, such offers are put forward following an
independent appraisal of the value of each individual
claim by an Independent Advisory Panel. The Post
Office is not bound to accept that valuation; however,
there has, as yet, been no suggestion that offers have
been made to applicants which are lower than the
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valuation placed upon any individual claim by the
Panel.
74.1 am informed by the Post Office that as of midnight on
27 November 2020, the Post Office had received
2,417 eligible applications for compensation. As of 27
April 2023, offers in settlement had been made to all
but 21 of those applicants i.e. offers had been made to
2,396 applicants. As at the same date, offers had been
accepted by 1,979 applicants and compensation
actually paid in 1,940 cases.
75.lf my arithmetic is correct there were 438 applications
for compensation still to be resolved as of 27 April
2023. The Post Office accept that these 438 cases are
difficult to resolve and that many of them have now
entered the dispute resolution processes contained
within HSS. The resolution process will, no doubt, be
assisted by the fact that many of the applicants whose
cases remain to be resolved are now legally
represented and that there is said to be a more
streamlined process for determining appropriate legal
fees thereby facilitating the obtaining of advice and
assistance. That said, it is of concern to me that,
apparently, a significant number of complex cases
remain to be resolved between 30 months and three
years after they were first submitted to the Post Office.
I do not resile from the view I expressed in the
Progress Update that there is a balance to be struck
between speed of decision-making and ensuring that
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offers made are full and fair. Nonetheless, I am left with
the distinct impression that the most complex cases
have not been addressed as speedily as might have
been the case. No doubt, a definitive view will emerge
when I receive written and oral evidence during Phase
5 of the Inquiry.
76.Notwithstanding the closure of HSS at midnight on 27
November 2020, the Post Office continued to receive
applications for compensation — referred to in the
written and oral submissions as “late applications’. As
at the hearing which took place on 13 July 2022, the
Post Office had received 186 such applications. Yet,
notwithstanding the passage of approximately 20
months, the Post Office had not determined,
definitively, whether to accept into HSS some or all of
those late applications. I have never been satisfied
with this state of affairs. At paragraph 7.3 of the
Executive Summary of the Progress Update I wrote:
“I know of no proper explanation for the delays in
determining whether those applications which
were made after 27 November 2020 should be
rejected or accepted in the Scheme. The delay in
determining many if not all of these applications
is wholly unacceptable, and, in my view, it
remains largely unexplained.”
77.In October 2022, both the Post Office and BEIS made
public statements which suggested that Jate
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applications would be accepted into the scheme.
However, in my view, there was insufficient clarity as
to whether it was necessary for “late” applicants to
explain the reasons for their delay in making an
application for compensation. That lack of clarity
subsisted as of 8 December 2022 when a further
hearing relating to compensation issues took place
and, as of that date, the number of late applications
had grown to more than 200.
78.In the January Statement, I dealt with the issue of late
applications at paragraphs 13 to 17. In paragraph 17,
I expressed the view that:-
“... fairness now demands that an unequivocal
statement to the effect that all applications
received by POL but made after 27 November
2020 will be accepted into the HSS provided all
the eligibility criteria set out in the HSS are met:
i.e. no application already received by POL will be
refused on the basis that it was made after 27
November 2020.”
79.On 2 March 2023, the Post Office and DBT agreed that
late applicants would not be required to provide a
reason for their late submission. That decision was put
into effect immediately in that the HSS website was
updated on 2 March 2023 to remove the requirement
to provide a reason for a late application, as was the
Q&A document for new applicants. At paragraph 51 of
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its written submissions dated 6 April 2023, the Post
Office wrote:-
“Accordingly, Post Office wishes to make clear
that no application to the HSS received after 27
November 2020 has been or will be determined
to be ineligible only on the basis that the applicant
did not provide an adequate reason for the
lateness of the application.”
80.As of 6 April 2023, the Post Office had received a total
of 245 late applications. Of those, 213 had been
assessed for eligibility and 189 applications had been
determined as eligible within the Scheme. 32
applications had not been assessed by 6 April. Each
of the 24 applications which had been assessed as
ineligible had failed to satisfy all the necessary
eligibility criteria; no application had been rejected
because it had been made after midnight on 27
November 2020.
81.By 27 April 2023, the number of late applications had
risen to 263. 242 of those applications had been
assessed for eligibility; 214 had been found to satisfy
the eligibility criteria of the Scheme and 28 had been
determined as ineligible. 21 applications remained to
be assessed.
82.Offers of compensation had been made to 27 “late”
applicants as of 27 April 2023. At least 13 such offers
had been accepted since Leading Counsel informed
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me that payments of compensation had been made to
13 “late” applicants.
83.It follows from the above that as of 27 April 2023 there
were something like 230-250 late applications to be
determined and that there may yet be significantly
more. I say that because Leading Counsel for the Post
Office also informed me that discussions were taking
place between DBT and the Post Office about a
closing date for HSS. She confirmed to me that the
scheme would not close prior to 31 March 2024.
During the course of exchanges with Leading Counsel,
I indicated my approval to her of that course of action.
84.Following the hearing on 8 December 2022 and when
I published the January Statement I was concerned
about how (a) compensation was being assessed
within HSS in respect of those applicants to the
scheme who had been made bankrupt or were subject
to the terms of an Individual Voluntary Arrangement
(IVA) and (b) how that compensation was being
apportioned between applicants to the scheme and
their trustees in bankruptcy.'* For that reason and
encouraged to do so by many of the Core Participants
(including the Post Office and BEIS) I obtained my own
legal advice from Ms Addy KC.
13 I was equally concerned about those issues in respect
of OHCS and GLOS.
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85.In her Opinion, Ms Addy KC addresses in detail a
number of questions which were posed to her in her
instructions. I do not propose to reproduce or
summarise those questions and Ms Addy’s views upon
them. The questions which she was asked to consider
were formulated after taking into account written
submissions from Core Participants. Ms Addy’s
instructions, those written submissions and her
Opinion have been published on the Inquiry’s website.
86.Between paragraphs 31 and 50 of her Opinion, Ms
Addy KC provides an analysis of a number of issues
which may arise in respect of applicants to HSS who
were made bankrupt. As it happens, save in one
respect which I will identify below, the views which she
expresses in relation to those issues are similar to
those set out in the written submissions of the Post
Office dated 6 April 2023 — see paragraphs 9 to 16
thereof. Further, her views are in accord with the
information provided to me in a letter dated 21 April
2023 on behalf of the Insolvency Service. I proceed on
the basis that save in respect of the discrete issue
identified below at paragraph 89 the main principles
relating to the assessment of compensation under
HSS in respect of those who are and/or have been
made bankrupt and/or are subject to an IVA are not in
dispute.
87.That view is reinforced by the fact that the written
submissions filed on behalf of Core Participants, who
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are also applicants to HSS, did not contain any
substantial differences of view to those expressed by
Ms Addy KC in paragraphs 31 to 50 of her Opinion. Not
surprisingly, in those circumstances, none of the oral
submissions made on behalf of the Core Participants
who are or were sub-postmasters took issue with Ms
Addy’s views.
88.While, therefore, the assessment of compensation in
individual cases, in respect of applicants to HSS who
have been and/or are still bankrupt, may require
recourse to the dispute resolution procedures within
HSS, the legal principles upon which the assessment
of compensation should be made are essentially
agreed save for the discrete issue to which I now turn.
89.This discrete issue relates to the assessment of
awards of general damages for the injury to credit and
to the reputation of applicants who demonstrate that
there is a causal link between the conduct of the Post
Office and their bankruptcy. Ms Addy’s views as to an
appropriate award in those circumstances are
developed, in particular, in paragraphs 48 and 49 of
her Opinion, and on one view of her analysis she
contemplates that awards might reach figures of the
order of £300,000.
90.In the written submissions on behalf of the Post Office,
it is asserted that such a sum would be too high. In her
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oral submissions, Ms Gallafent KC expressed the
same view.
91.As I have been at pains to point out in the Progress
Update and the Introduction to this Interim Report, it is
not for me to determine individual heads of claim in
respect of applications to HSS (or, for that matter,
either of the other two schemes). In HSS, there are
clearly defined dispute resolution procedures which
will enable the issue of an appropriate award for loss
of credit and reputation to be determined in
accordance with the commitment by the Post Office
and BEIS / DBT to provide compensation which is “full
and fair’.
92.In summary, I am satisfied, on the basis of the written
material provided to me and the oral submissions
made on 27 April 2023 that the principles upon which
compensation should be assessed in respect of
applicants who have been and/or are still bankrupt are
now (or at least should be) well understood. Of course,
there may yet be differences of view as to an
appropriate assessment of compensation in individual
cases which may require resort to the dispute
resolution processes within HSS.
93.1 am also satisfied that there is now a clear
understanding as to the circumstances in which some
part of the assessed compensation under HSS (or
interim payment, as the case may be) should be
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payable to a Trustee in Bankruptcy as opposed to an
applicant.
94.1 should not leave the issues of bankruptcy/IVA as they
arise in the HSS without providing some statistical
information. In the written submissions provided by the
Post Office, I was told that there were 63 applications
submitted prior to midnight on 27 November 2020 in
which a Trustee in Bankruptcy had an interest in the
compensation payable to an applicant. There were
three cases in which there had been no determination
as to whether the Trustee had such an interest.
Additionally, there were two cases in which it had been
determined that an IVA Supervisor had an interest in
the compensation payable. When Ms Gallafent KC
addressed me orally on 27 April 2023, one of the three
unresolved cases had been determined.
95.In 59 of the 63 cases in which bankruptcy is a factor,
the Trustee in Bankruptcy is, in fact, the Official
Receiver. In the letter of 21 April 2023, on behalf of the
Insolvency Service (mentioned at paragraph 86
above), there is no suggestion that the information
provided by the Post Office and summarised by me in
the preceding paragraphs is in any way inaccurate.
96.Bankruptcy arises as a potential issue in some of the
“late applications” received after midnight on 27
November 2020. In its written submissions, the Post
Office informed me that amongst the late applications
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there were 22 in which a potential issue arose relating
either to bankruptcy or IVA. As of 6 April 2023, it had
been determined that in some of those cases the
Trustee in Bankruptcy had an interest in either part or
the whole of the compensation payable. As of 27 April
2023, no significant progress had been made in
resolving the undetermined cases. There was no
suggestion by Ms Gallafent KC, however, that there
was a Significant prospect of a dispute arising in
relation to these unresolved cases.
97.Finally, in respect of insolvency issues, I should add for
completeness that Ms Addy’s opinion and the
submissions made by Core Participants also raised
such issues as annulment of bankruptcy and
rescission of bankruptcy in individual cases. I
understand that if any applicant for compensation
under HSS wishes to pursue an application to the
Court for annulment or rescission of bankruptcy,
appropriate funds will be made available by the Post
Office to pursue such an application, provided only, of
course, that the sums paid for legal expenses are
reasonable.
98.1 turn next to the issue of taxation of compensation
payments made (or to be made) under HSS. As I have
said the 2023 Regulations came into force on 16
March 2023 and the relevant parts are reproduced at
paragraphs 18 to 20 above.
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99.In written submissions on behalf of DBT dated 6 April
2023, Counsel for the Department (Messrs Chapman
and Henderson) sought to justify the exclusion of
payments made under HSS from the Regulations
exempting such payments from Income Tax, Capital
Gains Tax and Inheritance Tax. As with the letter of 10
March 2023 (see paragraph 22 above) I am
unpersuaded by arguments deployed on behalf of
DBT.
100. However, no useful purpose would be served by an
analysis of the written submissions presented on
behalf of DBT since, in his oral submissions, Mr
Chapman no longer sought to justify a difference of
approach in relation to taxation as between applicants
to HSS, on the one hand, and applicants to OHCS and
GLOS on the other. For the avoidance of any doubt as
to what was said, I quote verbatim from the relevant
part of the transcript (pages 10 — 14) of the hearing on
27 April 2023 as to the exchanges between Mr
Chapman and myself:-
“MR CHAPMAN: _! want to ensure that the
Inquiry fully understands the position.
Now at the time the HSS was set up
and, as you know, and as we
discussed at previous compensation
hearings, it was set up on_ the
assumption — an assumption which
turned out to be incorrect — that a
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relatively small number of applications
would be made and that that relatively
small number of applications would be
to a relatively small value.
SIR WYN WILLIAMS: Yes.
MR CHAPMAN: That has proved not to be
the case but that assumption has
affected the way in which the taxation
consequences were understood.
Now the Department recognises that
because of that there is potential
unfairness to those within the HSS of
a non-exemption for tax and it has
looked, together with HMRC and The
Treasury, at the possibility of
exempting payments within the HSS
from tax, in the same way as the other
schemef[s]. The problem — and that is
a suggestion that you yourself made,
sir, in a previous hearing. The
essential problem with that is that a
number, a large number of payments
have already been made and in order
to -— if those payments’ were
retrospectively to be exempted from
tax — it would make the — or place the
recipients of those payments in a
substantially advantageous position,
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as compared to recipients’ of
payments under the other schemes.
As is clear, as I have made clear
previously, and as I'll go on to make
clear, one of the Department's
objectives is to ensure reasonable
parity as between the different
schemes.
SIR WYN WILLIAMS: Yes.
MR CHAPMAN: What the Department is
obviously keen to avoid is a situation
where an exemption for the HSS
payments is put into effect because
that would, in order to achieve parity,
involve retrospectively recalculating
the payments and, in some cases, in
order to ensure parity, seeking to or
potentially seeking to recoup some of
the payments and that is something
that, for obvious reasons, it wishes to
avoid. But it does have — HMG, the
Government, does have a solution to
this. The Government will support the
Post Office with funding to make
additional payments to Post Masters
in the Historical Shortfall Scheme to
ensure that compensation is not
unduly lost to tax. So there are
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various ways of skinning the cat, but
the Government, the Department,
concluded that that is the best — in
practice — the best way of doing it.
The implementation of these
payments is complex, and_ the
Department will announce further
details as soon as possible. But the
outcome of that would be_ that
recipients of compensation under the
Historical Shortfall Scheme are in
exactly the same position in relation to
tax as recipients of payment under the
other schemes were tax is exempted.
SIR WYN WILLIAMS: Well, speaking — obviously
having heard what you’ve said for the
first time, speaking therefore to an
extent without having thought it
through, it’s obviously highly desirable
that parity is achieved in this way, and
I don’t suppose that will be
controversial by any right thinking
person. My concern is simply to
ensure that the Department actually
tells us what it’s going to do— and! am
not trying to be unduly difficult — but
sooner rather than later, because
these things are taking time, Mr
Chapman.
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MR CHAPMAN: The Department gets that; it
understands that loud and clear.
SIR WYN WILLIAMS: Alright, so I was going to
ask you and Ms Gallafent to give me a
tutorial in the assessment of damages
and the impact of tax upon it, but am I
now to understand that that is
unnecessary because, one way or
another, every applicant to whichever
scheme will in the end be treated in
the same way, in practice?
MR CHAPMAN: In practice, in outcome, yes.
SIR WYN WILLIAMS: In outcome, which is what
presumably they are concerned
about?
MR CHAPMAN: That’s what matters, as far
as the Department is concerned yes.”
101. On 19 June 2023 the Minister made an
announcement in Parliament seeking to give effect to
Mr Chapman’s submissions at the hearing on 27 April
2023. The announcement contained the following
summary:
e Postmasters in the Historic Shortfall Scheme
(HSS) will receive top-ups to their compensation,
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to ensure that the amount they receive is not
unduly reduced by tax.
e HSS claimants will also be able to claim up to
£300 for independent advice on filing their tax
returns.
e Government has introduced the top-ups to
ensure that postmasters receive full and fair
compensation.
102. On the same date the recognised legal
representative of DBT wrote to me as I had suggested
would be appropriate at the hearing on 27 April 2023.
I attach the letter as Appendix 5 to this Interim Report.
103. I understand why, in this letter, what might be
described as a pragmatic approach to dealing with
exemptions from income tax for those who have been,
and will be, compensated under HSS is advanced.
Clearly the vast majority of applicants to HSS have
been paid compensation under the scheme and
precise calculations of additional sums to ensure
precise exemption from tax liability may be very
difficult to achieve in individual cases. I say now,
however, that my primary concern is that all recipients
of compensation from each scheme are treated
equally in terms of their exemption from tax and until I
receive evidence as to how this has been managed in
practice (as I will in Phase 5 of the Inquiry) it is difficult
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to draw any definitive conclusions from the written
material so far provided by DBT and its lawyers.
104. I turn, finally, in this section to note some of the
additional points which were made in written and oral
submissions on behalf of some former and current
sub-postmasters who are also Core Participants.
105. Howe+Co act for 157 former and/or current sub-
postmasters who are Core Participants of the Inquiry
(although, as I understand it, they are currently acting
for only 10 of those in pursuing claims for
compensation within HSS). In written and oral
submissions made since compensation issues have
been under the spotlight, they have repeatedly
asserted that HSS has been operated so as to cause
undue delay with consequent significant and
unwarranted anxiety to their clients. In the written
submissions sent to me in advance of the hearing on
27 April 2023 (paragraphs 98 to 100 thereof)
Howe+Co suggest that unwarranted obstacles are
placed in the way of obtaining expert evidence; that
there is ongoing disquiet about the level of fees
payable in respect of obtaining expert evidence and
the process for determining such fees is slow and
cumbersome. A specific complaint is raised about the
computation of loss of earnings claims. By reference
to a particular individual case (Ms Fiona Elliott),
Howe+Co question the efficiency of those involved in
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constituting the panels who recommend offers in
settlement.
106. I am invited to investigate the process by which
panels are constituted, why delays in assessments by
panels have occurred and why applicants to HSS are
expected to apply for prior authorisation of expert
witnesses. I assume that the invitation to investigate is
an invitation to obtain evidence in relation to these
issues in Phase 5.
107. Hudgells represent 125 applicants within the HSS.
Many, if not all, of those persons are not Core
Participants of the Inquiry. Most of the Core
Participants represented by Hudgells are persons who
were wrongly convicted of criminal offences and/or
were Claimants in the GLO and, in consequence, they
are not eligible for compensation under HSS.
108. Intheir written submissions of 6 April 2023 Hudgells
acknowledge that “there are some encouraging
matters to report’ relating to HSS — see paragraph 22
thereof. Interim payments were being made on a
regular basis (at a level of up to 80% of any offer made
by the Post Office under the Scheme). All the
applicants for whom Hudgells were acting who had
sought expert evidence were afforded the opportunity
to obtain such evidence. Although there had been a
delay in agreeing a costs matrix which included
provision for expert fees, such a matrix was close to
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being adopted formally. In written submissions,
Hudgells’ primary concern was that a number of
applications had been determined at a level which was
not “full and fair” — a concern previously expressed
both in writing and orally at hearings with a good deal
of vigour.
109. Hodge Jones & Allen act for 10 persons who have
been designated Core Participants.
110. I received written submissions from Mr Henry KC
and Ms Page, dated 6 April 2023, which relate to
compensation issues. However, these submissions
did not touch upon individual applications to HSS.
When I was addressed, orally, by Mr Henry KC on 27
April 2023, he did not make any observations about
individual applications to HSS. I received written
submissions from Mr Marshall on 24 April 2023, but
they were not specific to any individual within HSS."4
111. Insofar as Mr. Henry KC, Ms Page and Mr Marshall
criticise the operation of HSS in their submissions,
they do so on grounds which are very familiar and
about which they harbour considerable concern —
14 This is not a complaint by me. I have made it clear that
it is not for me to determine individual applications for
compensation and so I would not necessarily expect
specific submissions about individual applicants from Mr.
Henry KC or Mr. Marshall.
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namely that HSS lacks true independence and
transparency.
(iii) The Overturned Historic Conviction Scheme
(“OHCS’)
112. As I have said, OHCS is not a_ voluntary
remediation scheme. When the Deed of Settlement
was concluded which brought an end to the Group
Litigation, it was recognised that there would be
Claimants within that litigation whose convictions for
criminal offences might be quashed. The Deed of
Settlement preserved the rights of that category of
Claimant to bring proceedings against the Post Office
for malicious prosecution. Primarily, at least, OHCS is
a vehicle for providing “full and fair compensation” for
those whose convictions have been quashed and who
have claims for malicious prosecution (whether
preserved by the Settlement Deed or on account of a
cause of action for that tort which can be pursued).
113. As of 27 April 2023, the convictions of 86 persons
have been quashed.
114. The Progress Update describes the process by
which interim payments are considered and paid
following the quashing of convictions. As of 27 April
2023, interim payments had been made to 80
applicants: one applicant did not wish to receive an
interim payment and three applications for interim
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payments had been refused (but see paragraph 117
below).
115. In the Progress Update, I described how Lord
Dyson had been engaged by Hudgells and the Post
Office to carry out what was described as an early
neutral evaluation of the likely award of damages for
non-pecuniary losses should the persons whose
convictions had been quashed bring civil proceedings
for malicious prosecution before the courts. A number
of applications for non-pecuniary loss (ten in number I
believe) were considered in detail by Lord Dyson who
provided an opinion as to the likely individual
evaluations of those cases should they be heard in
court by a High Court Judge. The evaluations of such
claims were not binding upon the Post Office and
Hudgells’ clients but it was always anticipated that they
would be highly influential both as stand-alone
assessments and as important guides to awards in
other similar cases. In the main, that anticipation has
turned out to be well founded.
116. As of 6 April 2023, 53 persons represented by
Hudgells had settled their claim for non-pecuniary
losses. When Ms Gallafent KC addressed me on 27
April 2023, she told me that the Post Office had
received 69 claims for non-pecuniary losses and had
made offers in respect of 67 of those claims. 55
applicants had accepted the offers made with the
consequence, presumably, that negotiations were
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ensuing in 12 more. The impression I gained was that
all offers had been made to applicants represented by
Hudgells, but that may not be strictly accurate.
117. The progress towards reaching agreement in
respect of the pecuniary claims of those whose
convictions have been quashed is in stark contrast. As
of 6 April 2023, a total of 11 applications had been
presented by Hudgells to the Post Office. Of those 11
applications, four have been settled; two of the four
were cases in which interim payments had been
refused; four applications were in negotiation following
offers in settlement; and Hudgells were expecting
offers in settlement in the three other cases.
118. By 27 April 2023, applications had been made to
the Post Office by 14 applicants; 11 of the applications
were fully particularised but, according to Ms Gallafent
KC, three were not. My understanding is that no
settlements of pecuniary losses had taken place
between 6 April and 27 April 2023.
119. In the Progress Update, I expressed the non-
controversial view that the process of making final
payments of compensation to persons whose
convictions had been quashed was in its early stages.
Ten months has now elapsed and, although many
payments have been made to applicants in respect of
non-pecuniary losses, the number of payments made
in respect of pecuniary losses is small.
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120. The Progress Update encouraged the parties to
engage in contingency planning with a view to avoiding
a State of affairs arising whereby negotiations between
the parties became bogged down with the
consequence that the only alternative routes for
resolving disputes were either mediation, binding
arbitration or litigation. I encouraged the parties to
consider a formal remediation scheme in respect of
applicants to OHCS.
121. Itis clear from the oral submissions made to me by
Mr Moloney KC and Ms Gallafent KC on 27 April that,
albeit belatedly in my view, Hudgells and the Post
Office had begun the process of formulating written
principles by which pecuniary losses are to be
assessed under OHCS. Mr Moloney KC suggests that
there has been undue delay on the part of the Post
Office in reaching this point, but he expresses
optimism that principles will be agreed which can then
be used as the building blocks for determining final
payments of many of the applications for
compensation for pecuniary losses. In his oral
submissions, he went so far as to say that he was
optimistic that many, if not all, of the applications made
to the Post Office will be determined by the end of this
year.
122. Itis also right to observe, however, that Mr Moloney
KC frankly indicated that there are applicants to OHCS
who would wish to defer the assessment of a final
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award of compensation until all the evidence gathering
in the Inquiry has been undertaken and perhaps even
until after I have published my final report. It is also
worth observing that although Hudgells currently
represent the vast majority of applicants to OHCS who
have presented claims, there remains the possibility of
many more claims in the future and the possibility that
future applicants will be represented by lawyers other
than Hudgells and Leading and junior Counsel
instructed by Hudgells. Self-evidently, in these
circumstances, all lawyers who represent applicants to
OHCS should be fully consulted about the principles
by which pecuniary losses are to be assessed.
123. Applicants to OHCS have always enjoyed the most
significant of the tax exemptions which have been
conferred upon recipients of compensation under the
three schemes identified in paragraph 2 above.
Compensation payments under OHCS are exempt
from income tax, capital gains tax and inheritance tax.
As I have already noted it remains to be seen how
DBT/the Minister/the Post Office proposes to achieve
at least reasonable parity so far as tax liability and/or
tax exemption is concerned as between the recipients
of compensation from the 3 schemes -— see, in
particular, paragraphs 39 to 43 and 98 to 103 above.
124. I turn, finally, to the impact of bankruptcy upon
compensation payments under OHCS. When he
addressed me on 27 April 2023, Mr Moloney KC
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informed me that bankruptcy issues relating to his
clients who are applicants in OHCS had been
resolved. He was not contradicted either by Ms
Gallafent KC or by Mr. Chapman. Obviously, that is
very welcome so far as it goes.
125. I am aware, however, that there are applicants to
OHCS who were made bankrupt and who are not
represented by Hudgells. Further, applicants may
come forward in the future who are represented by
lawyers other than Hudgells. Obviously, fairness
demands that the impact of bankruptcy upon
compensation payable to such persons should be the
same as the impact upon the clients of Hudgells.
126. It was, I believe, in this context that during the
course of his oral submissions Mr Moloney KC
suggested that what he described, compendiously, as
“stigma damages” for bankruptcy should be the
subject of neutral evaluation by a suitably qualified
independent lawyer of stature along the lines of the
early neutral evaluation which was conducted by Lord
Dyson in relation to non-pecuniary losses for malicious
prosecution.
127. Mr. Moloney KC was the last of the advocates for
the Core Participants to make oral submissions at the
hearing on 27 April 2023. In consequence his
suggestion that there should be a further neutral
evaluation was not debated by the advocates for other
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Core Participants. That said, I can readily foresee that
the issue of compensation for the stigma of being
made bankrupt over a range of cases is likely to be
difficult to resolve especially when such compensation
is inextricably linked with related heads of non-
pecuniary loss. Further, the appropriate level of
compensation will have to be considered under all 3
schemes and, in consequence, consistency of
approach and fairness as between the applicants to
the three schemes are crucially important. In
consequence I have reached the clear conclusion that
this suggestion is at least worthy of detailed
exploration — as to which see paragraph 146 below.
Payments Under the Three
Schemes
128. As of 6 April 2023, the Post Office had paid out to
applicants to HSS approximately £62m, including
interest and the deduction of withheld tax. It had paid
out £18.04m in compensation to applicants to OHCS
by the same date.
129. As of 6 April 2023, DBT had paid interim
compensation under GLOS in the approximate sum of
£19m.
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130. Additionally, the Post Office and DBT will have
incurred, and will continue to incur, very substantial
sums in relation to the administration of the three
schemes (primarily fees to their own advisors) and
sums payable to the lawyers who represent the
applicants to the schemes. I have not sought up-to-
date information about this expenditure for inclusion in
this Interim Report. On any view, however, the
expenditure incurred will be of the order of many tens
of millions of pounds.
Conclusions and
Recommendations
131. At the commencement of this Interim Report, I
thought it appropriate to stress that Ministers and
representatives of the Post Office have asserted,
unequivocally, that “those wronged as a consequence
of decisions taken on the basis of data produced by
Horizon should receive compensation which is full and
fair’. In my view, that has been a constant which
should have permeated and still should permeate all
decision making relating to the assessment of
compensation for each applicant in the three schemes.
132. It would be tempting for some to be sceptical about
whether this can be achieved. As I wrote in the
Progress Update, a commitment to _ provide
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compensation which is full and fair is not the traditional
stance taken by a defendant in our adversarial system
of civil litigation.
133. In some of his legal analysis, Mr Marshall has gone
so far as to suggest that there are and always have
been legal impediments to DBT and the Post Office
providing “full and fair compensation”. I do not agree.
The Post Office has but one shareholder; that
shareholder is ultimately controlled by HM
Government, many different Ministers of which have
provided unequivocal commitments to the effect that
applicants for compensation will receive compensation
which is full and fair. Duly authorised members of the
Board of the Post Office have repeatedly committed to
providing compensation to all applicants which is full
and fair. I do not consider that there is any valid legal
reason why DBT and the Post Office cannot give effect
to the commitments which they have made. Certainly,
if they seek to resile from such commitments they
should provide a full a detailed justification for such a
change of heart and, no doubt, any such purported
justification would be subject to the most anxious
scrutiny and, in all probability, withering criticism.
134. The commitment to provide compensation which is
full and fair must apply with equal force to the
compensation payable under all three schemes. The
object of each scheme is to put the sub-postmaster
into the position in which he/she would have been had
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he/she not been the victim of unlawful tortious
behaviour and/or the position in which they would have
been had the various breaches of contract which they
may prove had not occurred. It is incumbent upon all
those involved in administering the three schemes
and, in particular, in formulating offers in settlement
under each scheme, to give full weight to those basic
principles.
135. DBT has thought it appropriate to create the
Horizon Compensation Advisory Board to advise
Ministers on how best to manage delivery of
compensation under all 3 schemes. While it might be
thought that I have been hesitant about supporting the
creation of such a board lest it leads to undue delay —
see paragraph 52 of the January Statement — I have
no doubt that its composition is such that the risk of
delay associated with its work will be minimised.
136. In any event, given that the Horizon Compensation
Advisory Board now exists the opportunities arising by
virtue of this development must be maximised. The
Board as constituted will, no doubt, be capable of
assisting DBT to ensure that full and fair compensation
is delivered under all schemes as envisaged. Where
the payment of compensation promptly is an
imperative (i.e. under GLOS) the Board can provide
additional assistance in driving forward the making of
payments. Further, the existence of the Board should
go a significant way, in my opinion, to allay the fears of
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those who are dubious about the sufficiency of
independence safeguards within each scheme. That is
of particular importance in relation to independence
safeguards within GLOS for two reasons. First, the
dispute resolution procedures are much less robust
within GLOS than the fall-back dispute resolution
procedures in HSS (compare sections 3.5 and 3.6 of
the GLOS Guidance and Principles with the dispute
resolution procedures in HSS described in the
Progress Update at paragraphs 29 and 30). Second,
GLOS provides no route to a resolution of disputes in
a court of law whereas, of course, both HSS and
OHCS permit applicants for compensation to resolve
their disputes in the courts. The Horizon
Compensation Advisory Board can have an extremely
important safeguarding role.
137. I wish to stress, too, that, in my view, it is implicit in
the concept of helping DBT to ensure the payment of
full and fair compensation that the Horizon
Compensation Board will take active steps to monitor
whether compensation is being paid which is full and
fair. I do not regard that as being inconsistent with the
Board “not considerfing] individual cases” for
compensation. Quite the contrary; without such a
monitoring role the Board’s ability to assist would be
curtailed severely. However, if I am wrong about that,
the words "The Board will not consider individual
cases for compensation” (paragraph 4 of the Terms of
Reference for Horizon Compensation Advisory Board)
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should be removed from the Terms of Reference or
paragraph 4 should read:-
“4 The Board will not determine individual cases for
compensation but it may monitor and examine the
detail of individual cases so as to ensure that full and
fair compensation is being paid to all applicants in all
schemes.”
138. On the basis of the limited information currently
available to me, I see no reason why the personnel
chosen to constitute the Board should not have
sufficient capacity to discharge their Terms of
Reference. Subject only to the practicalities involved,
it would appear good practice for the same advisory
personnel to be involved in each scheme. Additionally,
the Board should, in the interests of openness and
transparency produce written reports of its meetings
and, in those reports set out its view upon whether
compensation payments to applicants to each scheme
are full and fair. In the event that the members of the
Board consider that its personnel should be increased
in size, further suitable individuals should be
appointed.
139. Accordingly, I recommend:
e Recommendation 1: The Horizon Compensation
Advisory Board should not be prevented from
monitoring individual cases in which compensation
has been or is to be determined by paragraph 4 of
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its Terms of Reference. It must be one of the core
duties of the Board that it monitors whether
compensation payments are full and fair.
e Recommendation 2: The Horizon Compensation
Advisory Board shall produce written reports in
respect of each of their meetings in relation to each
of the three schemes and publish the same within
21 days of the date of each meeting.
e Recommendation 3: The Horizon Compensation
Advisory Board shall, as part of its advisory role,
consider whether, in its view, full and fair
compensation is being paid out to applicants under
the three schemes and shall advise the Minister
and the Post Office accordingly at three monthly
intervals.
e Recommendation 4: If the Horizon Compensation
Advisory Board as_ constituted consider it
necessary, the number of persons appointed to the
Board should be increased so as to ensure that the
Board has sufficient capacity to perform the
functions set out above.
140. Given the lapse of time between the hearing on 27
April 2023 and the date hereof, it is at least possible
that steps will have been taken to resolve the
difference of view as between Moore UK and
applicants to GLOS as to whether any part of the
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compensation payable to applicants who have been
made bankrupt vests in the estate of a bankrupt sub-
postmaster. If, however, that issue has not been
resolved, I recommend:
e Recommendation 5: DBT shall take such steps
as are necessary within 28 days of the date hereof,
to seek appropriate directions under section 306
Insolvency Act 1986 so as to enable a court to
resolve the difference of view between DBT and
Moore UK and/or it shall take all appropriate steps
(including providing appropriate legal funding) so
as to enable a sub-postmaster to seek appropriate
directions under that section.
141. I am not currently persuaded that I should
recommend that those administering the GLOS should
make further interim payments to applicants to the
GLOS regardless of whether an applicant can
demonstrate there is a need for such payments. As I
recommend below there is a clear imperative to ensure
that all payments of compensation under GLOS are
made either by 7 August 2024 or by such further date
as is provided for by legislation. I can envisage
scenarios in which the making of further interim
payments without investigating the circumstances of
individual cases has the effect of reducing the
possibility of final payments of compensation being
made as soon as is reasonably possible.
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142. There is still a lack of clarity as to the basis upon
which tax is payable (or not payable as the case may
be) under the various schemes. It is not possible to
reach conclusions about equality of treatment as
between applicants to the 3 schemes (especially in
relation to liability for or exemption from income tax on
compensation payments) without receiving evidence
as to how, in practice, this issue is determined under
the schemes. While the letter of 19 June 2023 from the
recognised legal representative of DBT to me goes
some way to re-assuring me that the applicants to the
various schemes will be treated equally and fairly I am
not yet convinced that is so.
143. Accordingly, I recommend:
e Recommendation 6: DBT shall publish in as
much detail as it reasonably can and as soon as it
reasonably can, its proposals for ensuring that
applicants to all schemes are treated equally and
fairly so far as their liability to or exemption from
income tax, capital gains tax and inheritance tax is
concerned as the same relates to compensation
payments under each scheme.
144. On any reasonable view, there is a clear and real
risk that final compensation payments under GLOS will
not be delivered to each applicant by 7 August 2024.
Despite the well-expressed intentions of DBT to make
all payments of compensation by that date, that must
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be so. Indeed my current, strongly held view, is that the
scheme administrators will be unable to deliver
compensation payments to all applicants to GLOS by
7 August 2024. I do not consider that recommending
the publication of a timetable for completing the
making of payments under the scheme will achieve its
intended purpose of ensuring that all payments are
made and that they are all full and fair. Further, there
is no reasoned justification for limiting the time
available for making compensation payments under to
GLOS to 7 August 2024. That date represents an
entirely artificial cut-off point. Accordingly, I
recommend:
e Recommendation 7: HM Government shall bring
forward and use its best endeavours to ensure that
legislation is enacted so as to allow payments of
compensation under GLOS to be made to
applicants after 12 midnight on 7 August 2024 if
that proves to be necessary.
145. I accept the view of the Post office and DBT that
there must be an endpoint after which no further
applications for compensation to HSS should be
entertained. Accordingly, I recommend:
e Recommendation 8: No_ applications for
compensation to HSS shall be entertained after
such date as shall be agreed by the Minister/ DBT,
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the Post Office and the Horizon Compensation
Advisory Board.
146. In my view, the applicants to the 3 schemes who
are pursing compensation for being made bankrupt
are very likely to benefit from an early neutral
evaluation of the likely awards of compensation for
non-pecuniary loss. I base that view primarily on the
largely successful outcome of the early neutral
evaluation undertaken by Lord Dyson in relation to
non-pecuniary compensation for malicious
prosecution. It also seems inherently probable that an
early neutral evaluation would prove to be successful
if undertaken by a distinguished lawyer who would
inspire confidence on the part of both the Post Office
and DBT on the one hand and those seeking
compensation on the other. I appreciate, however, that
this issue was not addressed by anyone at the hearing
on 27 April 2023 apart from Mr Moloney KC and that,
in those circumstances it may be thought precipitous
to make a specific recommendation in relation to his
suggestion. That said the suggestion clearly requires
proper consideration in early course by all concerned
including the Horizon Compensation Advisory Board.
147. The criticisms which I make in the Progress Update
and the January Statement of the delays which have
occurred in the administration of the schemes for
delivering compensation remain justified. My definitive
view upon whether the schemes have delivered
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compensation which is full and fair must await my
investigation under Phase 5 of the Inquiry.
I Sir Wyn Williams I
Sir Wyn Williams
17 July 2023
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Appendices
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Appendix 1: Letter from Victoria Atkins MP to the Inquiry Chair, dated 29 June 2023
HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ
Sir Wyn Williams. 29 June 2023
Dear Sir Wyn,
I am writing to notify you that the Government has today published a Written
Ministerial Statement outlining its intention to take action to exempt compensation for
postmasters from inheritance tax (IHT).
am aware that the Post Office Horizon scandal has had a devastating impact on the
lives of many postmasters since it began over 20 years ago. The Government is deeply
concerned about ensuring the fair treatment of this group. The tax treatment of
payments made under the Horizon Shortfall Scheme (HSS) and the Group Litigation
Order (GLO) scheme is of vital importance to ensure fair compensation, and a key part
of this is the consistency of such treatment with other historic compensation schemes,
and the principles behind such decisions.
The Government has already announced its decision that payments made under the
GLO scheme and payments to postmasters with overturned convictions will not be
liable for Income Tax and that top-up payments will be made to ensure that the
compensation of those on the HSS is not unduly reduced by tax.
As the Government has stated previously in correspondence to your inquiry, payments
made to victims under the HSS and the GLO scheme are designed to compensate
primarily for financial losses rather than non-pecuniary damages, unlike those made to
postmasters with overturned convictions. Historically, IHT exemptions have not been
provided for schemes of this nature where they are designed to put individuals back
into the financial position they would have been otherwise.
However, the Government recognises the egregious nature of the Post Office Horizon
scandal and the impact on those affected by it. We have also taken note of the
discussion at the Horizon Inquiry’s recent hearing on compensation. The Government is
therefore announcing today that it will not collect any IHT that may arise in relation to
payments made to victims under the HSS and the GLO scheme. This exemption
recognises the unusual nature of the HSS and GLO scheme.
The Government will legislate to exempt these payments from IHT in due course, but to
ensure that recipients have certainty over their tax position prior to legislation being
introduced, from today HM Revenue and Customs (HMRC) will not collect any IHT in
relation to payments made up to the date the legislation comes into force. Any IHT paid
by the personal representatives of estates who did not previously qualify for relief from
IHT on HSS and GLO scheme payments will now be entitled to a refund from HMRC.
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We are grateful for your continued engagement in these issues and for your leadership
of the crucial work being undertaken by the Horizon IT Inquiry.
Yours sincerely,
VICTORIA ATKINS MP
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Appendix 2: Terms of Reference for Horizon Compensation Advisory Board
8
Department for
Business & Trade
Terms of reference for Horizon Compensation Advisory
Board
1. The Board's aim is to help DBT to ensure fair and prompt compensation to postmasters
affected by the Horizon scandal and related issues.
2. Itwill advise DBT ministers on how best to manage the delivery of the GLO Compensation
Scheme announced in December 2022, with the aim of ensuring that it:
provides fair compensation to GLO postmasters;
does so promptly — and certainly before the deadline of August 2024; and
does so consistently with the expectations of Parliament that public money is.
spent in line with the Accounting Officer’s duties
3. It will advise DBT ministers in respect of DBT’s oversight of other strands of Horizon-
related compensation by the Post Office, including the Historical Shortfall Scheme,
arrangements for compensation in respect of overtumed historic convictions and
compensation for postmaster detriment.
4. The Board will not consider individual cases for compensation.
5. The Board should:
be provided by DBT with information it requests as necessary to discharge
its functions;
review regular reports from DBT on the overall progress of cases within the
various strands of compensation;
regularly review an issues list setting out unresolved policy or process
questions (notably those relating to the maintenance of faimess between
postmasters in different compensation strands) and a timeline for their
resolution;
consider such issues in accordance with that timeline;
be consulted on guidance or equivalent documents relating to the various
strands of compensation, and any subsequent changes to them;
monitor the overall progress of all compensation strands, ensuring that
processes are working well and identifying any blockages; and
provide updates to the Accounting Officer and/or Minister if it believes that
to be necessary.
6. Its membership will comprise:
Professor Christopher Hodges (Chair), Emeritus Professor of Justice
Systems at the University of Oxford and an expert in Alternative Dispute
Resolution;
Lord Arbuthnot and Rt Hon Kevan Jones MP, Parliamentary campaigners in
support of postmasters; and
Professor Richard Moorhead, Professor of Law and Professional Ethics
leading the University of Exeter's Post Office Project
7. DBT officials will attend as observers.
8. DBT Ministers will revise these terms of reference as they see necessary.
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Appendix 3: Horizon Compensation Advisory Board Report of fourth meeting: 29 March, 21 April 2023
#8
Department for
Business & Trade
Horizon Compensation Advisory Board
Report of fourth meeting: part I, held on 29 March 2023
Members present: Lord Arbuthnot; Kevan Jones MP; Prof. Richard Moorhead.
Apologies: Prof. Christopher Hodges (Chair)
Also present: Rob Brightwell; Eleanor Brooks; Eleri Wones; Elena Michael (all DBT).
Development of bandings for GLO scheme
1. The minister had asked the Board to consider recent public comments about the bandings for
awards set out in the scheme’s Principles and Guidance in respect of issues such as reputational
damage.
2. DBT described the way in which bandings for selected heads of loss in the Principles and
Guidance had been prepared. Freeths, as part of their contract with the Department, had been
asked to identify and give anonymised details of ‘moderate’, “serious” and “severe” cases which
could serve as benchmarks for the GLO scheme. The Department's lawyers had developed an
upper and lower figure for the cases described for each band based on awards made to claimants
by the Independent Panel for the HSS: those awards had in turn been based on legal principles
and the Independent Panel's obligation to secure fair settlements. Given the pace at which the
scheme had been developed, there had not been time to consult claimants’ lawyers on the figures
attached to each band.
3. DBT noted that those figures were advisory and did not impose limits on compensation. The
guidance required that each case should be considered on the basis of its individual facts. The
independent Panel would be under an obligation to secure fair settlements. Board members
pointed out that the guidance did not make these points sufficiently clear. They were concerned
that claimants and their lawyers might be inhibited from making full claims, and that the Panel
might not be clear about the flexibility available to it. They were also concerned about the way in
which the figures had been derived, and wanted more information.
4. In the light of the Board's discussion it was agreed that DBT would provide further information
about the way in which the figures had been set. Board members would speak to lawyers
representing claimants in the GLO and HSS schemes. The meeting would reconvene when this
additional information was available.
Report of fourth meeting: part Il, held on 21 April 2023
Members present: Prof. Christopher Hodges (Chair); Lord Arbuthnot; Kevan Jones MP; Prof.
Richard Moorhead.
Also present: Carl Creswell; Rob Brightwell; Beth White; Eleri Wones; Joshua Scott (all DBT).
5. The Board reconvened to discuss additional information provided by DBT and the results of
Board members’ discussions with claimants’ lawyers.
6. The Board agreed to recommend to Minister Hollinrake that the scheme's Guidance and
Principles should be revised to make clear that:
. the bands were not limits but indicative guidance to claimants, their lawyers and the
Independent Panel
. each case would be decided on its merits
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. the figures for each band were derived from decisions made by the HSS
Independent Panel on HSS cases where there was good reason to expect cases were
generally less serious. The more serious cases were likely to still be going through dispute
resolution. The GLO Compensation Scheme expects to find some cases where the facts of
the case would demand awards significantly higher than the upper figure for the top band.
: if a claimant's compensation cannot be agreed through the Alternative Dispute
Resolution process, they have the right to have it considered by the Independent Panel
including a KC and other experts
. as for other aspects of compensation, where the Principles and Guidance set out
bands, decisions would be taken by the Independent Panel based on the facts of each case
looked at “in the round” and guided by considerations of fairness
7. Board members wanted to understand the legal rationale and case law on which they had been
based as they were aware of case law which might suggest significantly higher indicators, such as
serious defamation cases. The Board therefore agreed to hold discussions with members of the
HSS Independent Panel with a view to confirming the way in which the figures had been devised
and used; and securing greater transparency about those issues.
GLO project review
8. DBT presented progress on the GLO scheme.
9. They reported that the Post Office was recruiting additional staff to ensure that information
relevant to GLO claimants was disclosed as quickly as possible. There was no issue about
meeting the costs of this work but the pool of people with the necessary skills was limited. The
Post Office would deal with cases in the order requested by the scheme — and, in practice,
determined by claimants’ lawyers — so that complex claims could be submitted without delay. DBT
had commissioned the development of a timeline for the whole scheme. This would be discussed
with claimants’ lawyers and reported to the next meeting.
10. Dentons and Addieshaw Goddard were both now firmly in place as claims facilitators and legal
advisors to DBT respectively. DBT was working with them to develop processes and governance
so that claims could be dealt with fairly and quickly.
Revised terms of reference
11. The Board welcomed the expansion of its Terms of Reference to cover DBT’s oversight of the
compensation schemes being delivered by the Post Office. [Note: these are being published in
parallel with this report].
Controls to assure fairness between schemes
The Board noted the arrangements which DBT had in place to ensure that claimants were treated
in a similar way no matter which scheme applied to them. These included a new Programme Board
of officials focussed on ensuring fairness across schemes.
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Appendix 4: Horizon Compensation Advisory Board Report of fifth meeting : 14 June 2023
LI
Department for
Business & Trade
Horizon Compensation Advisory Board
Report of fifth meeting held on 14 June 2023
Members present: Prof. Christopher Hodges (Chair); Lord Arbuthnot; Kevan Jones MP;
Prof. Richard Moorhead.
Also present: Carl Creswell; Rob Brightwell; Eleanor Brooks; Beth White; Eleri Wones (first
part of meeting) (all DBT).
Fairness of the HSS
1. The Advisory Board agreed that
‘* Fair compensation should be delivered that puts victims in the position that they would have
been in if the scandal had not occurred and properly reflects the significant harms that had
been visited on their lives and reputations.
«Legal or other related costs should be reimbursed in full, so that compensation payments
were fully compensatory.
2. Itrecognised that Government already subscribed to those principles. Its concern was that they
should be effectively implemented, and that postmasters and others should have confidence
that they were being applied fairly. Officials informed the Board that Ministers would shortly be
announcing their intention to fund top-ups to HSS payments to address the issue relating to
tax. [Post-meeting note: announcement to Parliament is here].
3. The Board noted that offers had been made to 99.3% of postmasters who had originally
claimed under the HSS, and that 82% of these offers had been accepted. However there had
been public comment about the outcomes and handling of a number of cases perceived to
have been unfair. Some of these had not yet completed the dispute resolution process within
the HSS.
4. The Board have had a discussion with KCs from the HSS Independent Panel. The KCs had
explained that the Panel had adopted a practice of ‘acting as advocates for claimants’ where it
could see matters within a claim that were not addressed in the options presented by HSF,
rather than as wholly disinterested arbiters, and had adopted a presumption in favour of
applicants if there was a shortfall and no other explanation.
5. The Advisory Board believed that the Panel had been guided by principles of independence
and professionalism, and by legal precedent so as to seek consistency between awards, in
reaching decisions in individual cases.
6. The Board noted the difference in process between the HSS and GLO schemes. Under the
HSS, the independent Panel recommended an offer. If the offer was not accepted there was a
dispute resolution process managed by the Post Office, including referral back to the
Independent Panel and then with independent mediation as a final stage. By contrast in the
GLO scheme an initial offer was made by DBT followed, if necessary, by independently
facilitated discussions. Only if these did not produce agreement was a case referred to an
independent Panel. There was provision for review by a senior legal figure in the event of
manifest error or irregularity. A broadly similar sequence was being envisaged for the new
arrangements for compensation for overturned convictions.
7. The Board also noted the different remuneration arrangements for representation and the very
high levels of cases without representation in the HSS scheme.
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8. In the Board's view, having an independent Panel (and, if necessary, the Reviewer) in place at
the end of the process to make final decisions on individual claims increased the trust which
could be placed in the final settlement.
9. The Board noted that given the history of mistrust in the Horizon scandal born of adversarial
litigation, many postmasters would lack confidence in the fairness of any compensation
delivered under the auspices of the Post Office or its legal advisors. They also noted concems
about the administration of HSS, including issues in respect of the application form.
10. They concluded that if the Scheme was to be seen to be fair, individuals who were unhappy
about the settlements which they had received needed to have recourse to an assessment
which was wholly independent of the Post Office. This should come at the end of the process,
‘on similar lines to the role of the GLO Independent Panel. They recommended that the
Minister should consider how such an appeal process could be introduced. It should
focus on assessing whether settlements were fair based on the evidence provided,
whilst allowing consideration of elements of a claim which had been missed or not
included on the original form.
11. The Panel discussed the differences in the extent and timing of legal advice in the schemes,
which tended to suggest there may be merit in the concerns that unrepresented claimants have
been disadvantaged under the HSS scheme. The Board noted that the HSS had been
established under schedule 6 of the agreement between the Post Office and JFSA which had
settled the GLO case. DBT's understanding was that, in the light of their members’ difficult
experiences in the High Court and elsewhere, the JFSA had argued for a process which did not
expect postmasters to take legal advice in making applications. The Post Office had, however,
provided support with the costs of legal advice to help claimants consider compensation offers.
The HSS Panellists had also explained that they took the approach of scrutinising HSS.
applications with a view to identifying any heads of loss that had not been explicitly included.
Nonetheless, claimants’ lawyers had suggested that claimants who were unrepresented may
have received smaller awards than those who had engaged legal advice.
12. The Board noted that many of the concerns about the fairness of settlements related to the
overall treatment of individual postmasters by the Post Office over many years. They noted that
the HSS had paid careful attention to legal principles and precedents in respect of loss of
reputation, stigma, distress and inconvenience and related heads of loss, but that this had led
to potential differences between different claimant groups. However they believed that the facts
of some Horizon cases went beyond those of precedents, for instance in respect of damage to
reputation irrespective of prosecution given the impact of any branch intervention or civil action,
the prominence within the community of many postmasters, the length of time during which the
individual suffered damage, and the consequences for family members and family unity. If such
cases were decided by the Courts, there were good reasons for thinking that judges may well
create new, more generous precedents, especially given the egregious and bullying behaviour
of the Post Office during the course of the scandal — behaviour whose impact was increased by
virtue of the Post Office's credibility as a Government-owned organisation. They were also
concerned that the operation of some rules of thumb in the scheme (such as the 26 month
guideline on termination and the starting points for assessing reputational harm) risked
unfairness to some claimants.
13. The Board was therefore not convinced that the application of existing principles and
precedents would lead to consistently fair results. They noted that postmasters who had been
prosecuted by the Post Office would receive exemplary damages. Whilst such damages were
intended to punish the Post Office, they also had the effect of acknowledging the sustained
personal impact which its actions had had on individuals. They recommended that the
appeal process recommended above should put particular weight on securing a fair
outcome in respect of the issues described in the preceding paragraphs.
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Overturned convictions
14. The Board noted that of about 900 people prosecuted by the Post Office in 2000-2015, to date
only 86 convictions had been overturned. More were in the process of appealing and the Post
Office had recently written to a further group to indicate that it would not oppose their appeals.
15. In the Board's view, postmasters would inevitably distrust any action of the Post Office or its
advisors in reviewing cases, even if this were done with the utmost professionalism.
16. The Board believed that the criteria set by the Court of Appeal for Horizon cases were too tight,
and that a significant number of miscarriages of justice could be outstanding. They also
believed that the Court of Appeal’s judgment was based on a limited understanding of the
extent of problems with financial systems in the Post Office and with the extent of wrongdoing
lying behind the “affront to public justice” finding. This led to a much wider and higher level of
concern about Post Office prosecutions (and their review) with a number of critical documents
not apparently disclosed and available to the Court.
17. The Board recognised that Government cannot challenge the decisions of the Courts. They
agreed that their Chair should write to the CCRC and its equivalents in other nations to
strongly encourage it to propose a wider set of criteria in the light of the full range of
cases prosecuted by or on behalf of the Post Office.
18. They also agreed to recommend that the Minister should
a. consider whether the Government or Post Office could do more to encourage
postmasters to appeal their convictions;
b. arrange that a review of all Horizon prosecutions be undertaken, by a team
independent of the Post Office and without any prior involvement, to identify
appeals that should be reviewed as unsafe, based on a presumption of
innocence; and
¢. encourage the Post Office, when considering which potential appeals meet the
Court of Appeal’s criteria, to only resist appeals in which there remained
substantial evidence wholly free of taint.
19. They agreed to look further at the issue of cases not yet appealed.
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Appendix 5: Letter from DBT legal representative to Inquiry Chair, dated 19 June 2023
a
Government
Legal Department
bwgov.ukigld
By email only to:
SolicitorfGRO}
[GRO]
Our ref: 22013328/PBJ/JD3
19 June 2023
Dear Sir Wyn
Horizon IT Inquiry — tax treatment of Historical Shortfall and Group Litigation Schemes
‘At the compensation hearing on 27 April, DBT's Counsel provided an update to the Inquiry on the tax issue that
has arisen on the Historical Shortfall Scheme, noting that the Department would shortly bring forward details on
its plans to provide Post Office with funding to make additional payments to ensure that compensation is not
unduly lost to tax.
‘The Department has today published a Written Ministerial Statement outl
statements.parliament.uk/written-statements/detail/2023-06-19/hows860.
ig these plans ~ https://questions-
Further to your request in the hearing that it would be helpful to receive a written summary of what the
Department is seeking to achieve in relation to these steps on compensation taxation, the Department has
provided the following details:
‘The Department is announcing on 19 June 2023 that it will provide an estimated £26m of funding to
make additional payments to postmasters in the Historical Shortfall Scheme to ensure that
compensation is not unduly lost to tax
To calculate top-up payments for tax precisely would require specific information from postmasters on
both their current and previous eamings. The Department's view is that this would be an arduous and
lengthy process to administer and more importantly, arduous for postmasters to engage with.
Top-up payments will therefore be calculated so that no postmaster pays more than the basic rate of
tax on their compensation. This is in line with the intention to restore the postmaster to the position they
‘would have been in if they had kept their jobs and received remuneration and paid tax in the normal
way. It will be assumed that the taxable elements of the compensation will be subject to the additional
rate of tax (45% in England, Wales and Northern Ireland, 47% in Scotland). The top up payment will
Gary Howard - Head of Division
Fiona Montgomerie - Deputy Director, Team Leader Planning, Infrastructure & Environment
el
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then be for the difference between the compensation taxed at the additional rate and the compensation
taxed at the basic rate. These additional payments will be exempt from Income Tax, Capital Gains Tax
and National Insurance contributions.
For example, if the taxable amount of compensation was £100,000, Post Office will assume that, due to
the postmaster’s other earnings, this will be taxed at 45%. Our intention is for the recipient to be treated
as if they were taxed at the basic rate (20%). The top up would therefore be for £25,000 - the difference
between £45,000 of assumed income tax and £20,000 of income tax. This example is for illustrative
purposes and does not account for any allowances that the postmaster may have, including the
termination allowance
Further to this, for taxable interest applied to non-taxable heads of loss (e.g. Horizon shortfalls), a
different approach will be taken. We don't think it is right that this element of compensation should be
taxed and therefore we will issue a top up payment which will cover any subsequent tax bill to the
postmaster. Top ups will be calculated to account for the difference between the additional rate of tax
and 0% to mitigate the impact of tax entirely. In the above example, this would mean a £45,000 top-up
(assuming all the £100,000 is interest on non-taxable heads of loss). This is consistent with the OHC
and GLO, where the tax exemption means that interest applied to non-taxable heads of loss is also
exempt from Income Tax, Capital Gains Tax and National insurance contributions.
In practice, postmasters are unlikely to be paying tax on all compensation received at the additional
rate, so the top-ups will more than cover the impact of any losses to tax. However, this approach is the
‘most proportionate in the context, where postmasters have already faced long delays in receiving the
compensation due and where imposing an additional burden to the postmasters to provide further tax
information is undesirabl
Every postmaster enrolled in the scheme will benefit from the additional payments. The Department
continues to seek fair treatment for those affected across the various post office schemes, including
corporate entities.
Additionally, all claimants involved in the scheme will be able to access funding for independent tax
advice of up to £300 to support them in filing their tax returns.
‘Should further detail of the relationship between taxation and compensation be helpful, the Department would
be happy to provide this.
Yours sincerely
[GRO]
Peter Johnson
For the Treasury Solicitor
D [GRO]
E [GRO]
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