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OVERTURNED HISTORICAL CONVICTIONS
POL / BEIS OHC OPERATIONS AGREEMENT
Purpose
1. This document sets out a common understanding between Post Office Limited (POL) and
the Department for Business, Energy & Industrial Strategy (BEIS) of how compensation for
Overturned Historical Convictions (OHC) will be delivered.
Roles of POL and BEIS
2. POL and BEIS have a shared objective to see each postmaster, branch manager and/or
assistant (each referred to as a “postmaster” and collectively as the “postmasters”)
receive swift and fair compensation for credible claims against POL for malicious
prosecution and/or breach of contract and/or unjust enrichment in relation to postmasters
who: i) have their criminal conviction/s overturned following the “Common Issues” and
“Horizon Issues” judgments issued in the Post Office Group Litigation and/or the Hamilton
& Ors v. Post Office Limited judgment issued by the Court of Appeal (Criminal Division); or
(ii) were prosecuted but not convicted of offences connected to the Horizon IT system
(‘Horizon’) and suffered detriment in respect of the actions of POL.
3. The POL CEO is POL's Accountable Officer’. As such, the POL CEO is responsible for
observing the principles set out by HM Treasury in Managing Public Money regarding any
settlements agreed and ensuring that those settlements represent Value for Money (“VfM”)
to the taxpayer, including with regard to fairness, consistency and minimising litigation costs
for POL and postmasters, on both an individual and programme-wide basis.
4. POL and BEIS and their respective agents will work collaboratively on an Alternative
Dispute Resolution strategy (the “ADR Strategy“) designed to avoid further litigation
between POL and postmasters where possible. Ensuring so far as possible that
postmasters receive compensation for OHCs without having to litigate is a priority for both
organisations, though it is recognised other types of adjudicative mechanism (e.g.
arbitration, expert determination) may be required to resolve some issues. This will help
resolve the issues raised by Horizon quickly, ensure affected postmasters receive fair and
timely compensation and contribute to restoring POL’s reputation as a business of national
importance. It is also acknowledged, however, that neither POL nor BEIS can prevent
claimants going to court should they so wish.
5. In delivering compensation for OHCs:
e POL has responsibility for the design and implementation of the ADR Strategy
(including for interim payments), development of a strategy in relation to the
settlement of individual claims in line with legal principles, delivery of full and final
settlements of individual claims, oversight and reporting on OHC progress,
management of cash flow and accurate forecasting of spend to BEIS;
‘https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874283,
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e BEIS has responsibility for the funding, agreeing key decisions in relation to POL’s
ADR Strategy as outlined under The Agreed Process, and monitoring POL’s progress;
and
¢ POL and BEIS agree to work collaboratively to progress claims expeditiously and
avoid undue delay.
6. Approval points and responsibilities have been set out in the flowchart in Annex A to reflect
how the above roles interact with the decisions to be made.
The Agreed Process
7. In July 2021, Ministers approved POL’s proposal to issue interim payments of up to £100k
to postmasters (fulfilling certain criteria) whose Horizon-related convictions have been
quashed. The governance and control arrangements for these payments are outlined in the
Interim Payments Funding Commitment Letter. The relevant section can be seen at Annex
B.
8. The governance and control arrangements for the final settlements or other payments with
postmasters are set out in this OHC Operations Agreement and underpin the ADR Strategy
provided by POL to BEIS, including the supporting documents as noted below.
9. POL and BEIS have agreed the following approach to resolving OHC claims:
9.1 ADR Strategy
POL have submitted to BEIS an ADR Strategy which BEIS has confirmed is consistent with
the objectives set out in the POL OHC Full Compensation Business Case (the Business
Case). The ADR Strategy sets out how POL and its legal advisers intend to approach the
first stage of the settlement process with claimants.
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It is recognised and expected that POL’s ADR Strategy will change over time as feedback
is received from negotiations with claimants and their advisors. POL'’s ADR Strategy will
be developed in consultation with BEIS, and appropriate assurance will be sought by POL
with regard to its approach to OHC claims (see Assurance section).
The ADR Strategy located at Annex E has been approved by POL’s Historical Remediation
Committee (“HRC”) and BEIS. Any material amendments to the ADR Strategy must be
agreed between POL and BEIS.
9.2 OHC Principles
POL’s legal representatives have prepared a set of “Principles” incorporating provisions
reflecting legal advice provided to BEIS covering the legal issues which relate to the OHC
claims and the various heads of loss likely to be claimed (available in Annex C). The
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Principles will be used by POL’s legal representatives to assess and quantify OHC claims
and make a rational and reasoned settlement recommendation to POL in each individual
case. The Principles located at Annex C have been approved by the POL HRC and BEIS.
Any amendments to the Principles must be agreed between POL and BEIS.
The Principles will inform the proposed settlement ranges, methodologies or formulae that
will be used in discussion with claimants’ legal representatives. This will ensure that the
assessment of each case is as far as practicable standardised against the Principles.
9.3 The SAR
The Principles provide the basis on which POL’s legal representatives will prepare a
Settlement Advice and Recommendation note ("SAR"), subject to having received sufficient
information from the claimant and POL. The SAR will apply the Principles to the facts and
evidence of an individual claim so as to provide:
e a rational and principled assessment of the claim by head of loss based on the
evidence the claimant has provided and/or could reasonably be expected to
provide (including orally), applying lessons learned from previous OHC cases
and/or the Historical Shortfall Scheme where appropriate;
* arecommended settlement range based on that assessment;
e astrategy in relation to the opening position and upper limits in the negotiation; and
¢ an opinion with supporting commentary as to whether settlement within that range
represents a better outcome than resolving the claim through litigation or other form
of dispute resolution (e.g. arbitration, expert valuation), taking into account any
other factors which support settlement (e.g. the impact on POL's reputation, future
claimants’ faith in the OHC ADR process).
Given funding for settlements will be provided by BEIS, there is a shared expectation that
BEIS will scrutinise at least the Initial Cases (as set out below) closely to “test” how the
Principles and SARs are proposed to be applied to live cases, and to build confidence in
those assessments, recommendations and outcomes. BEIS has the right to access and
review all SARs subject to the provisions of the Data Sharing Agreement between POL,
UKGI and BEIS in respect of OHC claims to be entered into on or around the date of this
version of the Operations Agreement (“DSA”).
BEIS will not be asked to approve the fact-specific recommendations made in the SARs.
Instead, BEIS will need to be suitably assured (see Assurance section) that claims have
been assessed by subject matter experts (including POL’s legal representatives) who have
made their recommendations by reference to the appropriate considerations (i.e. the
Principles and wider ADR objectives), and that based on the information provided to BEIS
by POL, claimants have been treated fairly.
9.4 The Initial Cases
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To ensure a shared understanding of the practical application of the Principles to individual
cases, BEIS will scrutinise and retain full approval rights over an initial tranche of cases
(the “Initial Cases”). As part of this process, POL will present BEIS with SARs for the Initial
Cases setting out how its legal representatives have reached their recommendation in each
case.
The Initial Cases will need to be sufficient in number to provide BEIS with a benchmark
against which future cases will be judged. POL and BEIS will assess whether sufficient
cases have been provided for this benchmark 6 months after the first of the Initial Cases
has been presented, or after 20 Initial Cases have been presented, whichever occurs first.
BEIS will ask POL to continue to present additional Initial Cases should it not be possible
to define appropriate criteria to establish delegation categories for subsequent cases at this
stage (see Subsequent Cases section).
POL’s legal representatives will provide the SAR to POL's Historical Matters Unit (“HMU”)
who will conduct an initial review. The SAR will then be provided to BEIS who will raise with
POL any comments on or challenges to the SAR before it is submitted to POL’s HRC, so
that BEIS's views are reflected in the SARs and/or the HRC’s discussion of them. POL will
also upon receipt provide the “QC opinion” (defined below) to BEIS as prepared in
accordance with the Assurance section below.
Once BEIS’s comments on the SAR and the QC opinion have been received, POL will seek
the final decision on the settlement mandate sought through each SAR from POL’s HRC.
The POL HRC will then submit its final decision to BEIS for ratification. To promote swift
resolution of OHC claims, BEIS will provide its confirmation to POL within 5 working days
of receipt of the request from HRC for BEIS approval.
Only once BEIS is satisfied that a sufficient number of Initial Cases have been considered
and settled so that delegation categories for subsequent cases can be defined, and is
confident that the assurances that have been put in place (see Assurance section) are
operating effectively will it “step back” from scrutinising Initial Cases.
9.5 Subsequent Cases
After the Initial Cases, individual cases will be assessed by POL and its legal
representatives and will be categorised according to whether authority to provide
settlement mandates is delegated to (i) POL's Management, (ii) POL's HRC or (iii) POL's
HRC with the approval of BEIS. The criteria for determining the categories cannot be
conclusively defined as at the date of this version of the Operations Agreement given the
relatively few cases that have come forward, and the limited information provided to date
by the claimants to substantiate their claims. POL and BEIS will have a greater
understanding of the appropriateness of these categories after the Initial Cases are
complete and will work to define the criteria against which cases are assessed at this point.
These criteria will be kept under review, and, subject to the DSA, BEIS reserves the right
to review individual SARs on a sample basis at any point.
BEIS will receive regular updates consolidating the progress of all cases through
assessment, governance and negotiation, with the overall potential financial impact of
these claims tracked against an agreed model for OHC Cash Forecasting. This reporting
will assist with the identification of cases to be escalated to the HRC and, if appropriate,
BEIS. Further detail can be seen under Monitoring Arrangements.
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9.6 Unsuccessful Mediation / Settlement Discussions
There is no guarantee that settlement discussions or mediation between POL and
postmasters’ legal representatives will result in a settlement agreement, as both are
voluntary processes.
If settlement cannot be agreed within an approved mandated range, a revised SAR will be
prepared reflecting what was learned from the negotiations with the claimant and seeking
POL’s instructions on next steps, e.g. whether the range should be increased to secure a
reasonable settlement, or whether the claim should proceed to mediation (with or without
a revised settlement mandate), some other dispute resolution process (e.g. arbitration or
expert determination) or potentially even to litigation (e.g. if the claimants’ expectations are
unreasonably high).
Subject to the commitment under the OHC Funding Commitment Letter, BEIS’s approval
will be required in relation to proposed next steps, including any proposal to increase
quantum, for all of these cases until such time as BEIS and POL agree criteria to determine
which cases require BEIS’ approval.
Given the potential financial and reputational implications, BEIS expects POL to review its
ADR Strategy regularly, and to seek appropriate external assurance and consult BEIS.
Value for Money Analysis
10. As part of the SAR, POL will provide BEIS with a VIM analysis — at both an individual case
level and programme wide taking into account any precedents set by a case. VfM
judgements should consider both financial costs and the successful delivery of the
programme objectives. As such VfM judgements on cases should take into account the
broader success of the ADR strategy and the merits of proceeding with the proposed
approach instead of proceeding with any alternative options for that individual case
including the costs of litigation.
11. It is understood that POL has provided BEIS with an estimate of OHC settlement costs
with which BEIS has sought funding from HM Treasury of up to £780m (including interim
payments) based on the estimated number of postmasters convicted since the introduction
of the Horizon system (including those prosecuted by other, non-POL prosecutors).
12. POL should establish strong controls on the level of spend on legal advisers for OHC
Claims to ensure that the costs incurred in connection with cases are reasonable in amount
and proportionate to the matters in issue, including the objectives for the programme as a
whole.
Assurance
13. As set out above, the SARs will be prepared in accordance with the Principles and
recommend settlement ranges that are fair, take into account VfM and so far as possible
are consistent between claimants. As also set out above, POL and BEIS need to be
assured that claims have been assessed by subject matter experts, who have made their
recommendations by reference to the appropriate considerations, and that claimants have
been treated fairly.
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14. Accordingly, after an initial review by the POL’s HMU, POL will seek assurance on the
SARs as follows:
« For the Initial Cases, POL will contract at its expense with a QC or suitably qualified
legal professional (the “QC”) to provide his/her opinion as to whether the SARs (or
any revised SARs) reflect the appropriate considerations set out in the ADR Strategy
and Principles documents, take into account VfM, and treat claimants fairly and (so
far as is possible) consistently.
« The QC may also be asked to give his/her opinion as to whether additional
professional expertise (e.g. on valuation or other expert matters) could be used to
facilitate a resolution of the case (with any such appointment to be agreed between
BEIS and POL).
e Each party will have full access to the QC opinion and will, where they have legitimate
concerns regarding it, be able to: clarify and/or raise further questions in relation to it
and seek assistance with such other matters as may reasonably be required, such as
when the Principles are updated. Where legitimate concerns have been raised by
BEIS regarding the QC opinion, any further instructions to the QC incorporating those
concerns (i.e. clarifications sought or further questions asked) should come from POL
as the instructing client.
e For Subsequent Cases, POL may continue to obtain QC opinions over the SARs as
necessary for assurance purposes, applying lessons learned from the Initial Cases
and depending on the extent to which POL and BEIS are comfortable that the
settlement process is operating effectively.
15. More widely, POL will maintain an appropriate three lines of defence model to manage its
risks and plan its approach to assurance, covering both legal and operational elements of
the OHC process including HMU. POL will provide BEIS with a monthly copy of its risk
register and the findings of any assurance conducted.
16. POL will provide sufficient information to enable BEIS to monitor POL’s management
information and the findings of POL’s assurance work to help develop and plan BEIS’s
assurance requirements. BEIS will coordinate its assurance plans with POL and will agree
the requirements for POL’s three lines of defence (such agreement not to be unreasonably
withheld or delayed). POL will provide access to POL’s internal audit team or other
providers of assurance as necessary.
17.To the extent permitted under the DSA, BEIS reserves the right to undertake an
independent audit from time to time of OHC settlement offers to ensure the Principles are
being applied fairly and consistently, for example if BEIS is required to do so by the
Government Internal Audit Agency (“GIAA”) or National Audit Office (‘NAO”).
Monitoring Arrangements
18. Monthly Monitoring: POL will provide regular updates on progress in negotiating and
settling the claims by way of extending the existing monthly interim payments monitoring
meeting and Management Information (“MI”) pack to include case progress and
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settlement information for OHCs. The extended MI pack will be agreed between POL
and BEIS. Monitoring information will be reviewed and may change from time to time as
POL’s ADR strategy develops.
19. Quarterly Monitoring: POL will meet with BEIS's senior board on a quarterly basis,
including the BEIS Senior Responsible Officer, to provide an update on OHC progress and
outlook for expected cashflows and costs.
20. This meeting will be a systematic review for BEIS and will provide the opportunity for BEIS
to pause OHC funding if VfM can no longer be established until such time that these issues
are resolved.
21. Should BEIS take the decision to pause funding as above, BEIS and POL will agree an
action plan to resolve the issues identified with the aim of restarting progress (or implement
an alternative solution if one is identified) as soon as BEIS is satisfied that the issues have
been addressed.
22. POL and BEIS will agree a financial model with an initial cost estimate covering both
settlement and programme costs (including spend on legal advisers). This should be
updated with information from negotiations and settlements. This model should support
high level financial forecasts, manage programme costs and to help assess SARs. The
initial cost estimate will be used as a baseline for monitoring going forward. This will be
updated from time to time.
Funding and Cost Sharing Arrangements
23. Funding and cost sharing arrangements regarding the delivery of compensation for OHCs,
including interim payments, will be set out in the relevant Funding Commitment Letter.
24. The process relating to BEIS’ reimbursement of full and final settlement payments is set
out in the BEIS Reimbursement Process diagram found at Annex D.
Review Points
25. The operation of The Agreed Process and Monitoring Arrangements will be reviewed in
Summer 2022 by the BEIS Senior Responsible Officer (on advice from officials) and
thereafter as reasonably required by BEIS.
Data Sharing
26. The data sharing and protection arrangements between POL and BEIS regarding OHCs
are set out in the DSA.
27. The process by which POL will share SARs with UKGI/BEIS is set out below:
(a) POL’s legal representatives will prepare a SAR in each case and this will be shared
with POL;
(b) UKGI/BEIS will provide POL with a list of individuals who need to view the SAR;
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(c) POL will present the SAR in accordance with the DSA to the nominated UKGI/BEIS
individuals by Quatrix or some other secure system, marked “legally privileged and
confidential” and “this document contains personal data’;
(d) Other than for agreed legal advisers, UKGI/BEIS must obtain consent from POL if it
intends to share the SAR more widely with any other individuals;
(e) If POL consents, UKGI/BEIS can share the SAR on the same basis and subject to the
same principles as contained in the DSA, including but not limited to the duty to keep
its contents confidential;
(f) Once an individual case is settled UKGI/BEIS will take all appropriate steps to delete
all copies of the SAR from its computer systems and securely dispose of any physical
copies of the document which were created, in accordance with the retention policies
of UKGI and BEIS respectively. UKGI/BEIS will take all appropriate and reasonable
steps to see that any copy of the SAR shared with any other individuals are similarly
destroyed. Should UKGI/BEIS require access to the SAR in future it may request
copies from POL.
Other
28. The OHC Operations Agreement is considered a ‘live’ document that will be updated
from time to time as needed. Any amendments must be approved by both POL and BEIS
respectively and recorded in writing.
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ANNEX A: Full and Final Settlements — Process Flowchart
Process flow.pptx
ANNEX B - Extract of Governance and Controls section from Interim Payments
Funding Commitment Letter
Governance and controls:
It is expected that the process for payments including assessment of the Criteria, will be
assessed and approved by the Post Office Board or the relevant subcommittee — in this case
the Historical Remediation Committee (HRC) — prior to the submission to BEIS for the
release of funding.
Interim Payments of up to £100,000 per affected postmaster will be made by the Company
in accordance with the Criteria. Interim Funding in respect of each Interim Payment will be
made to the Company promptly once a confirmation has been made to BEIS that the Criteria
have been met and an assessment has been done on the affected postmaster's case.
The Company will provide BEIS with a monthly forecast report containing management
information and a breakdown of the Interim Payments that the Company forecasts will
become payable by it to affected postmasters in the forthcoming monthly period (the
“Monthly Report’).
The Company will meet with the BEIS Senior Responsible Officer (SRO) and working-level
officials monthly, or more frequently if required, to discuss progress made on compensating
affected postmasters.
The status of compensation for affected postmasters will also be a standing agenda item at
Quarterly Shareholder Meetings.
Governance arrangements will be kept under review and updated from time to time to take
account of any developments in the Company's negotiations with postmasters and their legal
representatives.
Any funding provided by BEIS to the Company is subject to meeting the arrangements set
out in this document and BEIS reserves the right to pause funding under this funding
commitment if the Company fails to meet any of the conditions (as determined by BEIS
acting reasonably) set out pending further discussions.
ANNEX C: P. ples
ANNEX D: BEIS Reimbursement process
ANNEX E: ADR Strategy
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