Post Office Group Litigation
Confidential and legally privileged advice
Do not disclose, forward, scan or copy
DRAFT Mitigation Actions
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WOMBLE
BOND
DICKINSON
This mitigation paper should be read alongside the Risk Assessment Table that explains the risks associated with the issues to be decided by the Court at the
trial in November 2018.
This paper groups those risks under 4 headings:
A. Recovery of losses
B. Training and support for subpostmasters
C. Suspension and termination of subpostmasters
D. Business transformation
It sets out the mitigation actions that could be undertaken by reference to four categories of change:
Contractual L
Horizon lon Yas
Operational 6)
Communications
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3. Comins
A. Recovery of losses
Risk: Post Office is unable to recover shortfalls in branches unless it can prove a Subpostmaster is at fault.
Risk Assessment Issues: 1, 12, 13, 17 18 and 19
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TYPE OF PROPOSED CHANGE ADVANTAGES DISADVANTAGES / CHALLENGES RECOMMENDATION:
CHANGE ACTION NOW?
Contractual Amend wording of Reduces likelihood of the Until the Judgment is delivered, it is not possible I No to implementing contract
Subpostmaster contracts to
make clear that spmrs remain
responsible for shortfalls.
Judge reaching a finding that
would prevent recover of
shortfalls from spmrs.
to draft a perfect clause that covers all
eventualities. The judge could find that there is
an overarching point of law that supersedes any
contractual change.
Significant resources needed to roll outa
contractual variation to all branches.
If done before trial:
e Leading Counsel have advised that
this would seriously undermine Post
Office's case at trial.
e The amendment may be ineffective
as Post Office's power to vary
contracts is a point of dispute in the
litigation.
NFSP could lobby Govt to intervene and prevent
Post Office from moving to the new contract as
they will claim that it adversely affects the value
of existing spmr businesses.
Network numbers under threat/decline as a result
of a lack of new spmr applicants due to the new
contract terms.
amendments. Counsel
strongly advises against
making contractual changes in
advance of the judgement
being issued.
Recommended action ahead
of November judgement:
1. Prepare the suggested
contractual
amendments with a
view to implementing
them, if necessary,
once the Judgment is
issued.
2. Design and fully scope
associated
implications of end to
end approach to
terminate existing
contracts with agents
and re-contract with
them on the varied
ones.
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Contractual Change to new franchise All financial risk placed on See comments above. No. As above.
a nalbhsy Could lead to significant downsizing of network.
Small / rural branches likely to be more
impacted.
Horizon Blind cash declaration required I Greater visibility of losses in I Cost of Horizon system change and associated I Yes. Recommendation is that
so to reduce risk of false branches for Post Office, training for branches and support functions. this proposed change is
accounting. thereby reducing build-up of scoped further to determine
large losses that need to be system and operational
recovered. feasibility and associated
costs.
Operational Introduce as best practice a This type of investigation Increase in SSRT headcount to do the Yes. Approach recommended
Horice based investigation approach will piece together I investigations determined by the volume of as best practice with
approach as per Sparrow/ what has or rather what has _I investigations required. implementation subject to cost
Support Services Resolution not happened in branch ina - See v benefit analysis.
Team(SSRT) ie. end to end timely manner with a high I aaa oe ec Teed cea Shs I Recommendation is that this
from issue/discrepancy being degree of accuracy so Post consequence no in-branch checks and investigation approach is scoped, costed
flagged/identified to findings of I Office can establish whether I is gone by the branch as it is today and implemented asap.
investigation being produced there has been a shortfall
and shared with spmr/branch. _I and, in many cases, its likely I In light of success in Court, spmr refuses to
Full root cause analysis done root cause: eee
by SSRT when a branch flags a I By sharing the investigation
discrepancy. findings with spmr/branch,
Post Office can reach a final I
position more quickly
resulting in increased
recovery of losses from
spmrs by showing that they
are at fault
Operational Closer monitoring of cash Identify losses earlier and at I Significant increase in headcount needed at Yes. Recommendation is that
declarations and trading
statements.
a lower level so that they
can be stopped.
Chesterfield and likely some system change
needed to ensure data is available for analysis.
this proposed change is
scoped further to determine
system and operational
feasibility and associated
costs.
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Operational Increase in branch audits.
Identify problems earlier so
to reduce losses.
Correct bad practices in
branches that are leading to
losses.
Increase in audit team headcount determined by
the volume of branch audits required.
No. BAU has already
implemented an increased
branch audit schedule.
Recommendation is to monitor
impact of new approach to
assess whether change
reduces losses.
Operational Set up independent
ombudsman review process
over disputes about losses.
Brings disputes to a
conclusion.
Avoids further spmrs joining
litigation.
No guarantee that an Ombudsman would agree
with Post Office on the root cause of a loss.
Outcome still dependent on Judge's findings on
reliability of Horizon and legal responsibility for
losses.
No. Recommendation is to
wait for the judgement.
Communicate to branches
common types of user error.
Communications
Improved practice in
branches, leading to
teduced losses.
Potential to highlight problems and increase
complaints from spmrs.
Negative media coverage around a
communication looking to blame users for errors.
No. Recommendation is to
wait for the judgement.
Communications I Communicate to branches that
Post Office is appealing any
adverse Court decision and that
the decision should not be
followed until the appeal is
heard.
Spmrs may continue to pay
shortfalls.
Negative media coverage if Post Office is seen to
be ignoring a Court decision.
No. Dependent on judgement.
Communications I Communicate (in conjunction
with the NFSP) that if spmrs do
not pay losses the network is
not viable so they should keep.
paying losses.
Spmrs may continue to pay
shortfalls.
Negative media coverage.
No. Dependent on judgement.
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B. T ing and su) for postmasters
Risk: Post Office is legally obliged to provide a high-standard of training and support and perfect accounting system.
Risk Assessment Issues: 1, 4, 5, 11 and 14
TYPE OF PROPOSED CHANGE ADVANTAGES, DISADVANTAGES / CHALLENGES RECOMMENDATION:
CHANGE ACTION NOW?
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/No. Recommendation isto
I wait for t judgement.
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c. Suspension and termination of subpostmasters
Risk: Post Office's rights to suspend are fettered and it can only terminate on 12 months' notice.
Risk Assessment Issues: 20, 21, 22 and 23
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suspensions.
More investigative work done in
advance of audit.
suspensions are valid.
TYPE OF PROPOSED CHANGE ADVANTAGES DISADVANTAGES / CHALLENGES RECOMMENDATION:
CHANGE ACTION NOW?
Contractual Amend wording in This change would likely See points above at A contractual changes No to implementing contract
Subpostmaster Contracts to future proof Post Office's . ¥ amendments. Counsel
make clear Post Office's rights I termination and suspension These terms hegee ae challenged as unfair strongly advises against
snies : : under the Unfair Contract Terms Act. Post Office i 6
on termination and suspension. I rights. Gannob contact cut of this nek Sea Ieeue 416 making contractual changes in
s advance of the judgement
The Claimants also argue that the standard being issued in November.
contract is a "sham" in relation to termination
rights. This argument cannot be mitigated
through a contract change.
Horizon None
Operational Introduce more rigorous Reduction in number of Potential slowdown in commercial transfers and I No. This is a complex piece of
recruitment and on-boarding terminations needed adverse impact on whitespace network work and not a quick fix
processes. especially within first 1-2 extension. therefore recommendation is
years of appointment. May decrease network numbers. to wait for the judgement.
Operational Stricter processes around Greater assurance that Increase in headcount for pre-audit Yes. Assessment is that this
investigations.
The potential for an extended suspension
process may leave high-risk spmrs in branch for
longer.
is likely to go against PO.
Recommendation is that this
approach is scoped, costed
and implemented asap.
I Communication
None
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D. Business transformation
Risk: Post Office's rights to vary its contracts and operational practices are curtailed.
Risk Assessment Issues: 6, 7, 8, 9,10, 15 and 24
Its exercise of contractual powers are fettered.
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TYPE OF PROPOSED CHANGE ADVANTAGES DISADVANTAGES / CHALLENGES. RECOMMENDATION:
CHANGE ACTION NOW?
Contractual Amend wording in Increased clarity for both See points above at A contractual changes. No to implementing contract
Subpostmaster Contracts to parties. . : amendments. Counsel
make clear that Post Office is We Gone gee Eile strongly advises against
free to exercise discretions and hice? Gee Issue 16 making contractual changes in
powers as it sees fit. y % advance of the judgement
being issued in November.
Contractual Change to franchise model The change of relationship See points above at A contractual changes No to implementing contract
to a purely commercial ce ols amendments. Counsel
franchise model would allow ue oe ee Retwork strongly advises against
Post Office to freely operate y . making contractual changes in
as a commercial business, advance of the judgement
with less risk of spmrs being issued in November.
claiming special protections
I
Horizon None
I Operational More detailed explanations and I Greater assurance that Post I Increased cost of change. No. Recommendation is to
justifications will be required for I Office is acting within its ae Q wait for the judgement.
any contractual and operational I powers. Delay in implementing changes.
paige Reduces chance of changes
being disputed
Operational Increased and/or earlier Enhanced level of buy-in Increased cost of change. No. Recommendation is to
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involvement of NFSP in
contractual and operational
changes.
from spmrs to changes due
to greater involvement from
NFSP.
Delay in implementing changes.
wait for the judgement.
Communication
Increase communication
around the benefits of changes
to the network.
Reduces chance of changes
being disputed.
Cost of increased communications.
No. Recommendation is to
wait for the judgement.
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