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Draft read out note of POL meeting in HoC on 17" October 4-4:45pm
Attendees (as per briefing)
Introductions
Perm Sec
e Legal case
¢ PO settlement considerations
¢ =Communications
¢ Impact on PO (no money set aside)
Paula Vennells (Chief Exec, POL) [PV]
Context — tone empathy but honesty
Postmasters many lost jobs, valued staff, corporate vs individual but cannot allow dishonesty
Thousands operated under system for decades since claims come through
Improvements to be made
Oops for GLO means can get resolution for ongoing
Common issues trial — if adverse finding, then appeal as important for PO to get right
If mediation and settlement, then PO open to conclude
Jane MacLeod (Group Director Legal, Risk and Governance, POL) [JM]
141 applied to go through mediation scheme
Many refused as JFSA wanted to settle, so some did not accept;
Perm Sec
Would mediation be reconsidered?
JM
Many be extended period of mediation from May?
PV/JM
Elaborate main strands to PO preparations: Resolution — Operation — Comms
Contingencies depends on outcome of common issues trial
Most important is that PO continues to service community and manage
Digitalisation will also improve service further
Comms — will be noisy, depends on other news issues; has been around but depends
November common issues trial may be affected
PO approach to when to comment - only no bias unchallenged, so balance is not to fuel the fire; so
no comment whilst in legal process until decided
Unions kept close; may want to use to advantage
Manage internal comms tightly as these soon become external
Resolution and court cases
Perm Sec
Unfair Contract Terms Directive risk?
JM
Contract issues? Legal categorisation PO and agents? Line is relational contract
Separate line in judicial cases. Is this the appropriate construction?
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Key question is whether the contracts should it be construed with implied terms for duties of PO to
postmasters.
2 terms implicitly addressing issues according to PO (not the claimed 21 terms) — may concede on
two
Some implied terms go to heart of principal-agency construction
The judge comes from a construction background so may be helpful to PO argument
Advice unlikely to change agency-principal law
Perms Sec.
If discussion important to understand implications of case outcomes; need to see Counsel advice
Gareth Evans (BEIS Legal) — needs to see risk assessment; not clear from paper Counsel advice
JM — may interim merits opinion updated over summer; Counsel confirm stronger/better but
haven’t given % because of complexity of issues; believe strong case but comes to interpretation of
contract and approach judge takes
Perm Sect. aware of another Magnox case — happier to settle than Govt/ different incentives; so
experience is to look at same info and draw own conclusions
PV
Happy to share information from Counsel
Jane will give liaise with legal?
The external challenge on advice provided will be welcome
Perm Sec Gareth and Richard looking at it from govt. side (TLA also with time if needed)
Just need to see how to coordinate
Privilege issues also being considered
Kelly Tolhurst (KT)
Important to have access so as to answer questions
Odds against us being a case of big against
Perm Sec BEIS orals — will be noise, lots o f history/emotion; so answering quesitons important as
govt embarrassment
Daily responsiveness by PO needs to be coordinated
Gavin speak to Comms to give quick response
Yesterday nothing tabled for PO but there were 5 questions
Don’t want to have govt manage on spot so PO will want to support comms
KT
Additional funding requirements?
Would PO have enough to cover? Important that dept is aware as could be significant?
Potential liability
Alisdair Cameron, Group Chief Financial Officer, POL [AC]
Three strands of concern for PO
- Funding of network
- Cost of trial
- Potential claims
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Difficult to put price/figure
AC
3m trial (2 QCs) this year, more next budget ((financial yer so March))
Already suffering financial suffering, already seeing losses from postmaster theft (5m this year,
last2m); could hae been hgher so being managed; being spotted 81%
In horizon and being managed; mre in fraud analysis team
Can move resource to manage
Network/potential claims? No value;
Settlement £3m?
JR
Case management — hedge fund want to cover at least x3 based on internal rate of return but
estimate
Common issues trial about contract construction; horizon in March
Quantification in to damages claim no assessment
Could win on material points, but could lose on payments on suspension; so always
AC
Would not ask BEIS for more but would fund additional claimants (could be more than 3m) but
would manage it
May not be able to keep up network or banking (as shut branches), but ...
No provision for this — supplementary estimates can on ly be made na month?
If to settle in March for a hurry e.g.? could for 3m; if for less 5m in exec team/if above need board
approval
Perm Sec
PO considered whether provision should be made?
AC
View no as no expectation of loss, needs to go through three trials to quantify
Perm Sec: networks
AC
Burden of proof with Postmasters
Perm Sec
If turned over if PO had to prove loss?
AC
Business model thrown out?
May be able to identify where postmaster has got themselves in a muddle; different if they are
stealing//but would first have to prove
Not prosecuting that is why losses arising
Without judgment don’t have means
With judgement can change contracts
CCTVs? Behind counter — so other measures can be in place
Perm Sec — retrospective aspect if judge decides should not have been operating as PO have (going
back over 20 years!!!)
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May be unaware
AL
% bn transactions (costs...)
May not always be postmaster actions/losses
Most likely difficulty with network numbers
5m? how many postmasters? Al — 111 PO shut which drove the loss, mainly because of theft? Could
be lost out of control, not clear exactly — but mostly theft
Network size? 11, 566 currently, growing over year irrespective closures; 11,500
not striking at heart of the business model
Perm Sec: Operation contingencies?
PV
Related to possible outcomes; depends e.g if contracts changed how much that wold affect
Worst case scenario but most postmasters honest
Risk been manged over yers because not able to prosecute
2—5m increase, processing 6obn case round the country so proportional
JR
Criminal Cases review comm — will wait for case plays out.
Litigation and CCRC both looking at horizon
CCRC been working for 3 yrs and investigations coming to close % nxt year but surprising decision
before court case
Tom UKGI
Working capital facility increase as result of trial?
AL-— looking over next 3 years closing banks means more cash so looking at (200m) working capital
facility being reviewed
Public Spending review post 2021 when funding runs out — can manage but of course if moves to
tens of millions different
Perm Sec
Cabinet been asked to look at this so pp! have access at local level
Would be ideal if Banks should pay for that responsibility
KT: Banks should be paying for PO services; risk no social responsibility
When is this being renewed?
PV want to send this review shortly
Perm Sec: Important for HMT and DWP — joined up discussion, PO also keen
Conversation with BOE note circulation scheme — keen to be paid based on number of places
funding, rather than amount
KT
Speaking for SoS if there are problems political pressure must be exerted
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Important to have information/proposal and ammunition to defend it
AL
Consideration being given to the impact on banking
* Price paid to PO
* Security cash flow
e Balance sheet funding
The last two elements not necessarily covered by BOE
KT keen to understand more — receive more information
Briefing paper can be sent (Cabinet paper good start but maybe for Minister more; also info being
put together on PO role in banking....)
Keen to that banks take responsibility and held responsible for corporate social role
Perm Sec summary
Agreed next steps/key outcomes of meeting:
1. Share legal advice with govt (mindful of any legal privilege)
2. govt ongoing comms (briefing) — Gavin - speaking to BEIS, Comms, UKGI tomorrow
3. Draft paper for Cabinet on strategic issues
4. Follow up meeting with ministers and briefing Gavin prepare for someone to take this on as
potentially onerous
KT/Perm Sec: Maybe dear colleague letter? when something to say ....positive news would be good
AL
Meeting chief cashier in next few weeks.
Perm Sec reiterated that it is important to share info possible; use dept; Gavin’s team sponsoring
this...