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Strictly privileged and confidential
Prepared for the purposes of seeking/providing legal advice
Statement No..: First
Date Made: 12 January 2018
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ROYAL COURTS OF JUSTICE
BETWEEN:
ALAN BATES & OTHERS
Claimant
AND
POST OFFICE LIMITED
Defendant
PROOF OF EVIDENCE ANGELA MARGARET VAN DEN
BOGERD
Meeting to obtain proof of evidence took place on 12 January 2018 at Post Office
Limited's offices in Swansea.
1. I, ANGELA VAN DEN BOGERD WILL SAY as follows:
2. I am Angela Van Den Bogerd, People Services Director, of Post Office Limited
(Post Office).
3. I make this proof of evidence in support of Post Office's Defence in these
proceedings.
4. The facts set out in this statement are within my own knowledge, or if they are
outside my knowledge, I have explained the source of my information or belief.
Background
5. I started my employment with Post Office on 1 April 1985, and since that date
have worked in a number of positions including as:
51 A Branch Counter Assistant as part of the directly managed network for around 2
years. During this time I was also called upon to undertake on-site training for
newly appointed postmasters.
5.2 A Branch Manager responsible for the maintenance, day to day management and
financial performance of directly managed post offices between 1987 and 1996.
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5.3
5.4
5.5
5.6
5.7
5.8
5.9
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
A Retail Network Manager between 1996 and 2001 responsible at an area level
for the maintenance, day-to-day management and financial performance of 24
post offices: 6 main branch offices employing approx. 130 staff and 18 Sub-post
offices managed via a contract for services. As part of this role I was responsible
for interviewing the postmaster, appointing the postmaster, managing
performance through the contract for services and dealing with any contract
breaches including contract termination as appropriate.
Head of Area for the rural agency in Wales between 2001 and 2005 responsible
for the maintenance, day-to-day management and financial performance of the
rural network of 950 post offices in Wales & the Marches. Accountable through a
line management team of 18 and 950 agent sub postmasters, for the delivery of
post office services to quality and efficiency standards.
General Manager for the Community Network of post offices in UK between 2005
and 2006, responsible through a team of 9 senior managers and a field based
team of 40 managers, for the day-to-day management of 9000 rural and 500
urban deprived post offices.
As National Network Development Manager between 2006 and 2009 designed,
developed and deployed the process (known as the Network Change
Programme) to deliver 3000 changes to the post office network (2500 closures
and the establishment of 500 new type services).
Head of Network Services between 2009 and 2012 with a UK wide geographically
dispersed field team of 200 people delivered on average per year 1200 network
change projects (i.e. post office relocations, refurbishments, closures and re-
openings) across the Post Office network; in excess of 5500 financial and
compliance branch audits and interventions; new entrant training to approx. 1000
agents/franchisees and employees; and 2000 recruitment and/or contractual
interviews.
Head of Partnerships between September 2012 and August 2013, responsible for
the relationship with CWU; Unite CMA for managers and also the National
Federation of Subpostmasters.
Programme Director for the Branch Support Programme between August 2013
and March 2015, responsible for improvements to ways of working across Post
Office. In parallel, I led the investigations of mediation scheme cases and was a
member of the Working Group. At this time I took the opportunity to create a
specialist team (Support Services Resolution Team (SSRT)) to support
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
postmasters and colleagues in identifying the more complex in-branch
transactional issues and where possible resolving them.
Director of Support Services between April 2015 and December 2016,
responsible for NBSC (the Network Business Support Centre), our helpline for
postmasters; our customer helpline; the Financial Service Centre (FSC), the
Human Resources Service Centre (HRSC) and managing the Contract Admin
team.
From January 2017 until January 2018 I was the People and Change Director,
responsible for HR (HRSC) and Health and Safety and the Change Portfolio
across the organisation. Since January 2018 until present, in my role as People
Services Director I am responsible for HR services within the Finance &
Operations business unit, Health, Safety and well-being and the HR Service
Centre.
I have operated at all levels during my career — from branch level to senior
positions remaining at all times close to the operational procedures. I worked in
branch during the paper-based accounting system. When Horizon was introduced
in my role as RNM I supported this transition from manual ways of working to the
computerised system. This included supporting branches during roll-out by
visiting branches before, during and after go live. I recognised that this was a new
way of working and supported postmasters in this transitional period. I have a
very hands on knowledge of how branches worked in the paper based system,
Horizon and Horizon Online.
I have always lived in Swansea, however having been field based for the majority
of my time with Post Office I have travelled around the UK.
Location of branches
As Head of Network Services, I was responsible for the maintenance of the
network of post offices and part of that was the decision of whether a branch
should be advertised in a given situation e.g. whether a post office in a new
location (Greenfield) was warranted. Decisions were taken with input from the
Network Modelling team and the business ACCs to ensure consistency of
approach. The code of practice and consultation with consumer groups policed
any proposals.
At that time (and today) Post Office had a Government requirement that it
maintained the network at no fewer than 11,500 branches. There was certain
criteria which Post Office had to fill as part of this requirement, such as a
percentage of the population had to live within three miles of a Post Office branch
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11.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
and another percentage within one mile of a Post Office for example. That in
itself was the starting position which drove the size of the network.
Post Office also has a modelling team, which I have worked with, who use
software which analyses where would be a good location to have a Post Office
branch. Post Office would also be approached by people who were purchasing
premises and considering having a Post Office. If so, Post Office would, by
walking the ground and observing local trading patterns, consider whether the
location would be viable and a good opportunity or whether we would be
poaching business from other established Post Offices. We also had a decision
matrix to support all location decision making.
Recruitment
12.
13.
15.
16.
17.
18.
The recruitment and vacancy advertising process for appointing new postmasters
has been relatively consistent over time.
The advertisement was historically by way of a poster which would be displayed
in the branch of the postmaster vacancy and the nearest three branches.
However in the case of family transfers, providing the family member was
suitable, then no advertising was required.
Post Office later moved to advertising postmaster vacancies on our Post Office
website. There are guidelines for how long advertisements were posted for and
what was stated in them.
Post Office would advertise any vacancy for a minimum period. Depending on
whether the vacancy was advertised ‘AT’ or ‘AT or NEAR’ applicants would for
‘AT’ be accepted for the existing site only. If ‘AT or NEAR’ then Post Office
accepted applications for existing premises or suitable premises nearby.
If Post Office advertised a vacancy, it would state that we have an opportunity for
a branch and this is a contract that Post Office is willing to engage on. The
applicant can choose to engage with Post Office on the terms offered and be a
part of the Post Office franchise or they can choose not to. There is very little
room for contractual negotiation.
Post Office has previously advertised postmaster vacancies/franchise
opportunities at franchise roadshows/trade fairs. Also in the local press when
vacancies were long standing.
Some locations would only attract one applicant. It depended predominantly on
the location and the retail opportunity. Following the economic downturn in 2008,
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19.
20.
24.
22.
23.
24.
25.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
we frequently only had one applicant per vacancy. On occasions where the
applicant wasn't suitable and the existing postmaster wanted to leave the
business, it could be a difficult conversation with the postmaster but nonetheless
one we had to have.
As far as the recruitment process was concerned, Post Office operated on the
basis that its responsibility was for the sustainability of the branch going forward
and therefore assessed this through a financial and competency based
assessment process.
Sometimes Post Office came under pressure from the outgoing postmaster to
accept the applicant who had offered the highest price for that business. A
postmaster once said to me "Can you appoint that one because he's going to pay
me more" and I responded "I'll appoint the most suitable applicant as per our
recruitment process.”
As part of my role as Retail Network Manager, I interviewed prospective
postmasters. The interview was always conducted by two Post Office
interviewers. One would ask the questions whilst the other kept a note of the
answers. To ensure objectivity and probity we always interviewed in pairs. Post
Office processes had to be transparent.
As part of the application process, an applicant is required to put a business plan
together, which set out their set up and ongoing operating costs and their
projections for income generation. During my time as RNM the smaller branches
had a slimmed down version of the business plan (couple of pages); for the very
small branches no business plan was required.
The interview would last around two hours. Typically, the first part of the interview
would be asking standard questions such as "why do you want to run a Post
Office" and "what are your plans for the business?".
The second part of the interview would be the interviewers scrutinising the
applicant's business plan and assessing the financial viability of the business
proposed.
Post Office would also test the strength of that business plan around "are they
being very optimistic in terms of x, y and z ". Our questioning aimed to test
whether the applicant's business plan was built on fact rather than over optimistic
sales projections or underestimated costs. We would question "if this is your
remuneration, you've got this number of staff, what hourly rates are you paying
them?" etc. Sometimes during the interview by getting under the skin of the
business plan, the applicant would realise that their business plan wasn't as good
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26.
27.
28.
29.
30.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
or as well researched as it could be which could potentially result in less profit
than they might have expected. If the business plan didn’t demonstrate a viable
business the applicant would not be appointed.
As part of the interview process, I made it clear that I am here to help you help
yourself to make a really good business. As part of assessing their business plan,
I took a very strong interest in how the retail was operating because in some cases
that could be key to the overall viability of the business.
A "good chunk" of the interview would be going through the contractual
obligations to make sure the applicant fully understood what they were signing up
for. I would run through the key parts of the contract and explain the implications
of the clause to the applicant. They would be given lots of food for thought. Post
Office wanted to test that they were happy with what they were signing up for.
As I have said, part of my responsibility was interviewing prospective
postmasters. This required me to be familiar with the contract they would be
entering into (the Sub postmasters' Contract). I had read the contract cover to
cover when I was a Retail Network Manager. I believe the contract was not too
legalistic and could be easily read and understood by the postmasters. I
understood it and the importance of explaining it to postmasters in the interview.
The contract was part of the interview pack, so I believe that each interviewer
would have gone through the same process as me.
There are a number of areas in the contract I would always refer to in an
interview. This was partly done to protect the Post Office but also to ensure the
applicant was aware of their obligations in entering into the contract. I would
expressly refer to "You are expressly forbidden to use Post Office cash for
anything other than Post Office". I would give an example such as if the bread
man comes in and you have got a bill to pay, you cannot not take the cash out of
the Post Office till as this would be a breach of contract and could result in Post
Office terminating the contract.
I used to work from a crib sheet which would flag the key areas of the contract for
me to discuss during the interview. I haven't got the crib sheet any longer. I
remember that it covered providing and maintaining the premises at the
postmaster's own expense, accommodation (we used to go through what that
means and how we would verify that) and personal service (which involved
explaining to the postmaster that you don't have to be there at the Post Office
premises but that does not negate your responsibility under the terms of the
contract). I would run through all of section 12 of the contract (this section
covered responsibility for Post Office cash and stock). I would also explain how
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31.
32.
33.
34,
35.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
the books were balanced and explain Post Office's approach to losses i.e. the
postmaster was responsible for all losses whether it's incurred by the postmaster
or their staff members. I would talk through the fact that if there was a loss, the
postmaster would need to make good those losses. Often the applicant would ask
more questions around that and about gains. I would also cover sick absence
and holiday substitution allowances.
I would also cover section 15 of the contract, which dealt with assistants. This
involved discussing what they were meant to do around the P250 form (which the
postmaster had to complete giving details of their assistants so they could be
vetted before being employed) and explaining the process for when they take on
new people. I always went through CRB (Criminal Records Bureau) checks for
both the applicant and if they were offered the position, their staff.
I also used to discuss the implications of the Official Secrets Act. Very often the
applicant would come from within the community and therefore we needed to
really instil in people the importance of, "this is data you cannot share". A
postmaster will see things which are confidential to the customer, such as their
account balance, the amount in their pension or National Savings, how much they
were paying into their bank account each month etc.
Incoming postmasters would often be advised by an accountant as to the best
way to pay themselves, whether through a wage or receiving the profit. From my
interview experience, the approach very much depended upon what type of
business they've had in the past, what type of business person they were and
how good their accountant was. Post Office always insisted that an applicant
couldn't bring their accountant to the interview. Post Office wanted to ensure they
fully understood their own business plan, rather than the person that put it
together. I have rejected people on the fact that they couldn't give me confidence
that they understood their business plan.
Post Office would take into consideration whether an applicant had worked for
Post Office before. However, I can recall appointing an applicant with no prior
post office experience rather than the applicant with post office experience. When
it is your own business, you the postmaster have to pay the bills, manage your
own accounts and look at your profit margin. So Post Office's assessment on who
would be the best candidate can be very different, depending on the individual
and their experience.
Sometimes, when the incumbent postmaster wants to leave, they want Post
Office to appoint their staff or their family member as the new postmaster. For
Post Office, it comes down to whether there is a good business case for this.
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36.
37.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
When I was carrying out the interviews, I did get a bit of push back around family
transfers because I carried out the interviews in the same way, despite the fact
the applicant may have already worked at that branch and was seeking to take
over that very business. However, I believe it was in Post Office's interests and
that of the applicant's to check that the applicant knew everything about the
business: I wasn't prepared to take them at face value. I just treated everybody as
individuals and went through the process.
The process was largely similar for appointing a postmaster to an existing post
office as for appointing to a new post office site. However, if an existing post office
site, there was less need for a scoping visit as often there was no refurbishment
required. If refurbishment was required, for example fitting in a new counter, one
of Post Office's team would attend the site to meet with the shopfitters and look at
their plans.
CRB checks
38.
39.
Once interviewed, Post Office would carry out checks on the applicant. We would
do CRB checks and a credit worthiness check to inform our view of financial
stability against their business plan.
Post Office also carries out CRB checks on an incoming postmaster's assistants.
This was important as this requirement is built into our contracts with clients (so
that clients can be confident about the people working in the Post Office network).
In addition, Post Office is a financial institution and needs to comply with the FCA.
Post Office is also protecting its assets and reputation by carrying out such
checks.
Contracts and legal advice
40.
41.
If they are offered the position following interview, Post Office recommends that
postmasters take independent legal advice on the terms of the contract before
they sign it. This recommendation is mentioned at interview and also referred to in
correspondence if the applicant is successful at interview. Whilst Post Office
recommends the postmaster takes legal advice, it cannot force the applicant to
take advice. Often as the applicant was moving home/purchasing a retail
business also they incorporated their legal advice into the full package of the sale
of the entire business. There were however instances when a postmaster signed
the contract and I would ask, have you taken legal advice, and the answer would
be no.
If the interviewee was offered the position, Post Office would send them a paper
copy of the contract together with the appointment papers. A bound copy of the
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42.
43.
44,
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
contract would also be present in the branch. Every postmaster therefore had a
copy of the contract. Whether or not they referred to it, is a separate issue.
An outgoing postmaster should brief the incoming postmaster. I didn't rely on this
process taking place, as I was aware that this didn't always happen. Part of this
conversation between the postmaster and the applicant should have covered the
practical operation of the contract.
If the postmaster had not completed the appointment paperwork by the time Post
Office was transferring the contract, we gave them the opportunity to do so on the
transfer day or the transfer was delayed. The postmaster's signature was required
before Post Office allowed them to take on/ over the branch and before they were
allowed to have access to Post Office cash and stock.
Once signed, the contracts with the postmasters were stored in a building in
Leeds. The appointment papers were also retained and formed part of the
postmaster’s file. The administration site in Leeds has since closed. The hard
copy files are now located in Chesterfield or archived with Iron Mountain/ Boxset.
More recently these documents are uploaded onto our electronic filing system.
Temporary subpostmasters
45.
46.
47.
Temporary Subpostmasters (often referred to as "temps") were utilised when we
had an audit situation and a postmaster had been precautionary suspended. Post
Office also used temps if, for example, a postmaster was declared bankrupt. At
some points of its operation, Post Office has had a number of temporary sub
postmasters in place.
There is a defined process for recruiting a temp. The process was not as detailed
in terms of the business plan and financial implications for the business, as the
key consideration was whether the temp could reach an agreement with the
incumbent postmaster around using the premises. Post Office has changed their
process slightly so that it also pays the temp an amount of money to pay the
suspended postmaster for the use of their premises. Under the Mains contract
Post Office has step-in rights. We have built that in to say "we will pay X amount
of money to cover the use".
We have a number of people who are repeat temps. There are some companies
Post Office engages with which have been set up to do just this temp work. If
Post Office hadn't used the temp before, they would go through an interview
process. They would be subject to the same compliance checking and training as
a postmaster.
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48.
49.
50.
51.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office sometimes faced difficult conversations where we had suspended the
postmaster and he wanted his wife or vice versa to step in as the temp. That was
always difficult. At one point there was almost an unwritten rule that we wouldn't
allow the husband or wife to take over. I challenged that and changed it so unless
the suggested temp was suspected of being involved in the situation which had
deemed suspension necessary, then Post Office should allow them to cover the
branch during the period of suspension.
The temp transfer process itself is relatively simple. Post Office will carry out a
transfer audit on site and the temp will then take over responsibility of cash and
stock. Post Office would also make sure the alarm codes had been changed and
that the temp had a full set of keys. In some cases Post Office insisted that the
locks were changed.
There were streamlined documents for the temps to sign. They were given a 7
day notice period. This short notice period gave enough time for the final audit to
be carried out before the branch was handed over again. It was sometimes the
case that the postmaster was re-instated in replacement of the temp.
If Post Office was unable to find a temp, the business was sometimes closed
whilst the suspension and investigation was on-going. If the contract was
terminated, the vacancy would be advertised.
Contact / support during ongoing relationship
52.
53.
54,
Post Office had a team which account managed a number of branches. Pre-
Horizon, these were known as “cluster offices".
The Area Manager would be responsible for the whole life cycle of the
postmaster. Over time the Area Manager position has had different names, but it
has been a similar role. Some of the names included RNM (Retail Network
Manager) and BDM (Business Development Manager). The RNM or BDM would
have a branch visiting cycle, which was usually quarterly. Area Managers knew
the branches very well due to this high level of personal contact. Over time, the
way we run our business has changed and there is no longer a planned visiting
schedule for all branches.
The essence of the Area Manager role was account managing the branches so that
they were as viable as possible for the postmaster and Post Office. Some
postmasters confused this partnership as meaning something more, such as that
this relationship means they are employees of Post Office. Clearly they are not.
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55.
56.
57.
58.
59.
60.
61.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office set the requirements of how postmasters run the branch. The contract
stipulates what the expectations of customer service is, how the premises should
be presented, opening hours and the products and services that the branch would
transact.
I was the Retail Network Manager for Cardiff and surrounding area and would
carry out quarterly visits to the branches under my remit. I had a really positive
relationship with the postmasters as I had the background experience to be able
to give them detailed support. Having worked in a branch before, I was able give
the postmaster'’s practical tips on running the branch not only at the visits, but
also on various calls with postmasters.
There are different ways of monitoring performance of a branch. I would have a
conversation with the postmaster about performance at the quarterly visit. At this
time we had Outlet Visit Reports to complete that included retail standards
(branch presentation); customer service and transactional accuracy. By being in
the branch, I could also physically see how they were performing.
The BDM had a certain amount of knowledge which they would use to try to
improve the performance of a struggling branch through hints and tips. The BDM
may have been required to escalate their concerns after a visit and it could be the
case that the postmaster would be deemed to be in breach of contract. If so, Post
Office would try to correct that situation with the postmaster. In some
circumstances, Post Office would deem they were in breach of their contract and
go through contractual breach procedures with them.
Postmasters were made aware of their contractual obligations through the
interview process and training. At interview I checked their understanding. Their
obligations were reinforced through the quarterly visits.
As we changed how we managed the network not all branches had frequent
visits. These branches had their obligations reinforced through the branch
standards team. Post Office has been made aware of possible breaches of
contract through the customer helpline. Everything which comes through the
helpline is recorded. This function enables Post Office to question a branch about
its day to day running if a customer has raised concerns.
If a postmaster reached out to Post Office, we, the RNMs (or similar named roles
over time) would do our utmost to support them. If they breached their contract by
default or had unexplained errors they would get more of Post Office's time. In
those instances, Post Office would sometimes proactively reach out to them.
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62.
63.
64.
65.
66.
67.
68.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Another point of contact for postmasters was (and is) NBSC, which they were told
to telephone as their first port of call. Kendra Dickinson ran the helpline function.
Her team particularly would collate this information and would for example inform
Post Office that this branch normally averages 2 calls a month and suddenly we
have got 40 calls a month. Post Office would then reach out to the postmaster
and try to ascertain whether there was a wider problem. It might be as simple as
the postmaster is on holiday and they have brought in a temp who is not quite as
familiar with the branch and Post Office processes. If that was the case, it was
likely the issues will settle down upon the postmaster's return. However
sometimes those calls would allow Post Office to identify issues we would not
otherwise have been aware of. In that sense, the postmaster can to a degree
influence the level of involvement we have in the performance of the branch, by
how informed they keep Post Office of such issues.
As Post Office has less branch face to face contact than it did historically, it is
harder to tell nowadays if there is an underlying problem or if a branch is
struggling. When I was visiting the branches as part of my role as RNM, I would
know intuitively if there was an issue, for example by looking at the stock on the
shelves in the retail side. This knowledge came from my longstanding experience
of being in the network in Post Office.
There has been a gradual change in approach as to managing the postmasters as
technology has become more advanced. It is a costly model to maintain the field
resource and frequent face to face contact with branches. Today we use technology
where we can.
Post Office has always had a sales focus. This is a win-win approach because if
the postmaster sells more they get paid more and Post Office in turn generates
more income from that branch. It was in everyone's interest to have that
approach.
There has always been a focus on how does Post Office make sure the
postmasters generate sales in the right way and ensure that they are compliant
with the regulations.
Post Office has become more focused on individual product sets, for example it
may expect an Area Sales Performance Manager to set a target across the 50
branches for which he is responsible of, for example, 2000 sales of Post Office
home phones.
Whilst the role of BDM wasn't as rounded as the role had been previously, it was
still part of the role to assist the postmaster if he/ she was in difficulty.
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69.
70.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Postmasters would sometimes contact me directly and say I have asked for help
and haven't received any. I would then get involved and escalate their complaint.
There was therefore always the mechanism there for support, providing the
postmaster told us there was an issue. Post Office weren't able to see that there
were problems in a branch from ground level, so it couldn't be proactively
identifying there were issues unless it was informed of them by the postmaster.
Post Office didn’t have a sophisticated system or level of operation to enable it to
do this without input from the postmaster or a concerned member of the public or
in some cases the client.
Around 2005/2006 Post Office became more sales focussed. It entered into a
joint venture with Bank of Ireland around that time. The emphasis was about how
we introduced the products and empowered the postmasters to sell them. It
became much more of a selling conversation. At that point some of the
postmasters would claim that it was all about sales and that Post Office was not
giving them enough support. To some degree sales are always the focus. Post
Office always had the helpline (NBSC) there to support the postmasters.
The level of support has transformed as Post Office started to segment the
network and went away from geographical considerations to types of branches.
The only physical support, as in assigning branches to Post Office individuals,
was in the large branches. Around 2,000 of the more commercial branches had
Sales Capability Managers or Sales Account Managers. There were a number of
different versions of that role. The rest of the network had pastoral support
through NBSC and the Branch Standards team.
Training
71.
72.
73.
The aim of the training is that the postmaster is equipped to do the role that they
have been asked to do. The training is offered to the postmaster as part of the
induction process.
The training offered to postmasters has changed over the years. Post Office has
continually sought to improve the quality of the training and how that training is
received.
Pre Horizon (which was introduced in 2000), the training was carried out on site
(at the branch) over a period of around two weeks, as "on the job" training. I
believe training at this time was one week for branches with no car tax and two
weeks for those that did car tax. There were two follow up balances and more if
needed. For a short while I was an on-site trainer and used to visit and train
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74,
75.
76.
77.
78.
79.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
postmasters on the manual system. It was a condition of the appointment that the
applicant attended the training course.
Post Office wanted to ensure that before the postmaster took on the appointment,
they had had the opportunity to ask questions because different branches have
different transactions, depending partly on the location of the branches and the
services and products they were responsible for. The training would therefore be
tailored in part depending on what sort of branch the applicant was going to run.
More recently, since the introduction of new contracts, different models of training
were provided to the postmaster depending on whether they were on a Mains or
Local contract. The number of days over which the training took place depended
on which model of training was provided. The training usually took place over 8 to
10 days. Both courses involved some classroom and on-site training.
When a trainer went on site, they did a transfer of a cash and stock and showed
the postmaster how to put all their cash and stock into the system. The trainer
would also run through balancing the books with the postmaster as well. Most
often, it would be the same person who would come back to carry out the transfer
audit after the applicant had completed the training.
It could be a stressful time for the incoming postmaster as they were often also
moving house as well as buying a business and entering into a commercial
transaction with the Post Office. I always stressed to them what this commercial
relationship entailed and offered suggestions on how they may want to organise
themselves in the branch. I also stressed how important it was to be "present" at
the training to equip them properly for running the branch.
We would historically offer training to not only postmasters, but also their staff if
there was space on the course. Now, it depends what type of contract Post Office
has with the postmaster. I believe under the standard Local contract the
postmaster is required to train their staff. In this situation, Post Office trains the
postmaster, and they train their staff. In the Mains contract, there is an obligation
that a number of their assistants are required to be trained by Post Office as well.
At the training sessions, I would impress on the applicants that they as
postmaster were responsible for the branch and his/ her staff and potentially liable
to Post Office under the contract for actions not only of themselves but also their
staff. I would also impress the importance of the postmaster being comfortable
that their staff were properly trained; that they were accurately declaring their
cash and that when they as postmaster signed off the cash account it was
accurate ie the amount of cash they said they had was what was in the branch.
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80.
81.
82.
83.
84.
85.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Even if a postmaster had experience with the Post Office before, it was important
that they attend refresher training as the training was always evolving. If there
was space on the course I would suggest that the postmaster bring their staff with
them to utilise the spaces on the course. With the new Mains and Local contract
the training is set out explicitly: for Mains the postmaster and up to 50% of their
Staff are invited to attend the training. For Locals if the postmaster has more than
5 staff then in addition to the postmaster sufficient spaces will be offered to train
50% of their staff.
Once the applicant has been accepted, the current position is that they will be
sent a link to the online training that they access on their own device eg lap-top.
The online training is interactive and requires user participation. Recently, Post
Office has provided online training as a precursor to classroom and on-site
training. This is a change I introduced in 2015; this approach ensures the
postmaster has a variety of methods to take in the training — on-line, classroom
and on-site.
A postmaster is now required to complete the on-line training before attending the
classroom training. This approach equips the postmaster with a certain level of
basic knowledge to process to classroom training. The classroom training is
intended to reinforce the online training, familiarise themselves with the Horizon
equipment and navigation of the screens and put into effect the practical skills, such
as working on the counter.
The postmaster is required to reach a level of competency through the online and
classroom training. The on-site training reinforces the on-line and classroom
training in the live situation. Once the training is completed the postmaster should
be sufficiently competent to run their post office effectively. If the trainer has any
concerns about the postmaster they would arrange further training for the
postmaster.
The content and set up of the training courses has changed and improved over
time. One noticeable change is that the current content combines integrated
selling techniques into the transaction.
When Post Office introduces new products or changes to products, the type of
training is determined by the type of change or the level of complexity around the
product. If a new product is introduced that is similar to a product Post Office has
already trained its postmasters to use, then Post Office wouldn't do face to face
training. Instead we would issue instructions and easy to use guides.
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86.
87.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
There have been examples where some postmasters weren't happy with the level
of training they received in relation to the ATMs. When we first introduced ATMs
into our network the training was done by the installing engineers and Post Office
issued written instructions on how to balance the ATM and how to account for the
transactions on the Horizon system. We later moved to Post Office trainers
providing training when ATMs were installed in post offices. On transfer of a post
office if there was already an ATM installed then training would be provided by the
Post Office trainer during the on-site training period.
In recent years training on certain products has also been by way of video links
(like you tube). These were typically filmed using NBSC staff.
NBSC/ Helpline
88.
89.
90.
91.
92.
Around 1995 the Post Office started to centralise the business. As part of this, in
around 1999, Post Office set up the Network Business Support Centre (NBSC)
helpline. This is the corporate helpline for postmasters and Post Office
employees which was firstly implemented on a regional basis and later
centralised. There is also a customer helpline, which is currently an automated
system.
The postmaster's point of contact changed from their regional helplines to the
NBSC helpline. This was a period of transition for the postmasters. It was
important however that they used the helpline as Post Office wanted a record of
the calls reporting issues so that we could understand trends in the volume of
calls and also the type of calls.
One of the purposes of the helpline was to give greater visibility of what the
queries were, which would allow Post Office to produce trend analysis at a
national level to ascertain whether there are particular things taking place that are
not just one offs. If, for example, Post Office brought a new product in and the
helpline received a large number of calls, Post Office could consider whether the
training had not landed properly; or that the product design is not quite right. The
helpline enabled Post Office to do that forensic analysis and the root cause
analysis.
Even if the postmaster was to get hold of me as an RNM, I would inform them that
they needed to go through NBSC. I would inform them that the contact at NBSC
would then page the relevant RNM or BDM and ask the person to contact the
postmaster. We were always contactable as the second tier of support.
The postmaster's call would be logged on the NBSC system. If that call was not
returned by the RNM/ BDM, the only way Post Office would know would be if that
4A_38847158_1 16
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93.
94.
95.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
same contact got back in touch with NBSC again. Overall though I think the
system worked pretty well and that most RNM/BDMs followed up the calls.
Any issue in branch is reported to NBSC. NBSC correlates this information so that
Post Office can understand the scale of the issue. If the Helpline advisor was
unable to deal with that issue, they would tell the postmaster who they needed to
contact.
If the RNM/ BDM was on annual leave, Post Office had a buddy system. There
was always someone the postmaster could get hold of if they needed to.
After NSBC was implemented, Post Office informed the applicants at interview
and training that NBSC was their first port of call for any query.
Horizon
96.
97.
98.
99.
100.
Horizon is the Post Office's accounting computer system, provided by Fujitsu. As
a computer program Horizon does exactly what Post Office asked it to do when
we built it. It is fit for purpose. I have every confidence in the system.
I describe Horizon to new users as a big calculator. It processes the data exactly
as it is input. The Horizon user just needs to remember what they need to do to
initiate transaction (eg scan the barcode; put the card in the pin-pad or touch the
screen) on the Horizon system and then follows the screen.
The system was tested before it was implemented. Part of this was questioning
“what if this happens; what do you do." That thinking process is built into Horizon.
Horizon records every keystroke. Post Office keeps that information for 7 years,
which enables it to go back and extrapolate that data. It is not an easy process to
do this as this information is archived. When Horizon was built Post Office did not
anticipate it would need to analyse the data on such as large scale as has been
required as a result of this dispute.
The contract Post Office has with Fujitsu evidences that Post Office did not
expect to be required to analyse the data very often. The contract only permits so
many enquiries a month. If there are more queries than provisioned for in the
contract for that month, it becomes very expensive. The cost would also increase
depending on the volume of data required, for example the difference between
two months of data or two years. The data retention function was built into
Horizon to ensure we kept transaction records, but Post Office never expected to
be routinely extracting data from the archived data.
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101.
102.
103.
104.
105.
106.
107.
108.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Sometimes it was not cost effective for Post Office to provide all of the data to the
branch requesting the same. For example, a branch might request the data for 7
years which would cost many times more to get the data than the value of the
loss particularly when the loss was small. There have been cases where Post
Office have pushed back in such circumstances as it was not a commercial
resolution to the loss.
The postmaster in a number of cases has requested all of the data in what
appears to be a last hope attempt at identifying the issue, rather than because
there is some evidence that there is an issue to be searched for and addressed.
However in a couple of instances I have felt that we should have been more
receptive to providing the Horizon data.
The ability of the branch to access Horizon data has changed over time. Data was
available to be accessed in branch for 42 days when Horizon was introduced; this
later changed to 60 days.
Post Office's security team would request and use the data extraction function as
part of its investigation into a shortfall at a branch, or a similar issue. The security
team would analyse the raw data to assess what happened at that branch. This
was a labour intensive task. This data would sometime be provided to the
Contracts Advisers if they were considering a potential contract breach...
People expect the system to be fast and have the same reactivity as Google. One
of the issues is that users try to compare it to a system we don't have or what
idealistically the system would be. There is a mis-match between expectation and
reality.
In my view the weakness with the Horizon system is that it is a bit "clunky" to use.
It's not always easy to locate the information you want from the system.
The Horizon system requires the user to read the screen and follow the prompts.
It appears that some users don't know how to use Horizon as well as they should
or they have developed bad habits and do not use the system in the correct way.
Unfortunately it is possible for the user just to hit a button and move on the
screens without reading the prompts and trying to shortcut the process. If this
happens the user may have input incorrect information into the system eg
processing a deposit as a withdrawal or vice versa and this could be difficult or in
some instances impossible for the user to realise or remember they've done this.
As with any IT system, there are instances where the system or the screen goes
down. The system was built recognising that sometimes connectivity could be
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109.
110.
111.
112.
113.
114.
115.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
lost, that a power line would go down or the communication could be faulty.
Recovery steps have been built into Horizon to counter this risk.
If power or the connection was lost whilst serving a customer and the Horizon
user was part way through a transaction, there are prompts built in to address
that. For example, the customer might have given the postmaster money but the
postmaster may not have completed the transaction on Horizon. If this is the
case, when the system comes back up, it asks the postmaster questions to
establish at what point he/she was at when they lost power. For example, "Have
you given money to the customer? Have you taken money from the customer?"
Depending on how the user answers these prompts, would result in Horizon
either rejecting the transaction or completing the transaction.
I am aware there have been reports made that there were errors with Horizon and
bugs which affected the system. I was involved with the communication of what
those issues were to the affected branches.
Post Office did not notify the whole network of reported issues if they were
isolated incidents. I think there were around 20 branches affected by the reported
issues out of 11,500 branches. If the Post Office did flag an issue, the Helpline
would tend to see a flurry of activity regarding that issue which the call centre
would deal with.
I have also been involved with managing how errors or bugs are communicated to
the media.
There have been some software changes to Horizon since it was implemented in
2000. Post Office has moved from Horizon to Horizon Online. Prior to the online
facility the information would be extracted from the branch overnight. The key
difference between Horizon and Horizon Online is that Horizon Online is a live
record of the transactions carried out by the branch.
The hardware is the same as when Horizon was first implemented in 2000. It is
only recently being refreshed. There has been some refinement around the
screen (which has been touch screen from the start), the usability in terms of how
the screens are set up and how many screens you need to go through to sell a
stamp, for example. Horizon has been improved to try to make it quicker and
easier to use, but in essence it has until recently been the same program built on
the same platform.
The Horizon user uses the keyboard to type in numbers and words, such as the
number £1,000. They also have use of scanner and touch screen. The hardware
has a card swipe functionality and a pin pad for customer use.
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116.
117.
118.
119.
120.
121.
122.
123.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
When the Horizon system was installed there were Post Office teams on site to
make sure the implementation process went smoothly. The branch network also
had a central coordinator in the office who would field the calls from the
postmasters whose branches were being trained on Horizon.
Horizon relies on the individual using it to input the correct information. The
training tried to address and mitigate the possibility of human errors.
Post Office supported the postmaster with balancing the accounts whilst
transferring from the manual system to Horizon during site visits. Some site visits
I arranged during Horizon's implementation phase lasted until early hours of the
morning. From my experience I was able to share best practice tips with
postmasters on how to organise themselves in branch in their transition from
manual working to processing transactions and producing their cash account on
the Horizon system.
Some postmasters were very competent with the manual system but had trouble
with Horizon at first. They needed to follow computer prompts and input certain
data into Horizon. There is a customer basket called a "stack". The prompts
would tell the postmaster, or whomever was operating Horizon to, for example,
take £x from a customer or pay £x to a customer. When they ended the session
the stack should have been zeroed. The postmaster could then start the next
transaction. In the mediations I dealt with there were postmasters who were
forgetting to zero the stack at the end of a transaction. .
The system has functions built in to tell the user to physically "take £20 to
customer" or "give £20 to customer". It is then up to the user to follow the
prompts.
Horizon is also colour coded, for example the icons for banking deposit and
withdraw, in which one is red and one is green.
A change made to Horizon to reduce human error was rather than typing in the
customer's account number and sort code, the Horizon user would swipe the
customer's card which brought up the relevant account details. This has been
more recently updated to the customer inputting their pin number. This reduces
the data the Horizon user needs to input, lessening the risk of a typographical
error.
The system has changed in this way over time. I cannot recall when all of the
changes were made.
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124.
125.
126.
127.
128.
129.
130.
131.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
One of the issues which changes to the system cannot address, is when its users
operate Horizon “on autopilot". This is where the user will just click through the
screens without properly taking notice of the prompts and checking the data entry
for errors at that point in time.
One of the areas where we saw autopilot in practice resulting in irrecoverable errors
was with MoneyGram. This is an instant transfer of money from one country to
another. For example, a customer may be sending money abroad to their family.
Once the transaction is processed, the money can be withdrawn abroad within a
matter of minutes. There is very little room for calling back an incorrect transaction.
This was an area particularly open to fraud risks. To counter this risk, there are
security checks built into the transaction eg typing in ID reference. Post Office also
implemented a prompt that informs the user that they would never be asked to carry
out the transaction over the telephone, such as where the user would receive a call
purporting to be from a Post Office "engineer" carrying out some "tests of the
system" but it is in fact a fraudster and the "test" transaction is a fraud.
Post Office can see where a postmaster has used Horizon to tell them how much
their discrepancy is before they make a cash declaration. This can sometimes
raise suspicions as they are carrying out the process the wrong way around. You
should be checking cash and stock first, not asking the system what the
discrepancy is and then declaring you have enough cash to balance.
Instruction manuals are stored on Horizon Online. Before Horizon, there was a
hard copy Operations Manual in branch.
A Horizon user can use Horizon Online to search the Operations Manual,
although there isn't a search engine function per se. The Horizon Online help
function is not very easy to navigate, as the Operations Manual was simply
copied and pasted into this online system.
Due to the Horizon Online help system being clunky, Post Office still receives a
high volume of calls into NBSC regarding this issue. This is something Post Office
is looking to address.
Post Office is looking to simplify its transactions well enough that a Horizon user
ideally would not need Horizon Online help. When Post Office designs a
transaction product, it tries to build it so that one click of a button on the screen
will automatically take the Horizon user where they needed to go.
Post Office will never be able to remove the risk of human error, but it has sought
to reduce the risk of that as much as possible by automating processes and the
transfer of information where possible. For example, using barcodes to pull
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132.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
information directly into the Horizon system and sending transaction
acknowledgements to branches rather than them having to manually input the
data into the Horizon system.
Gayle Peacock (Head of Branch and Customer Support) is leading on the new
case management system that will go into support contact centres. This means
Post Office will get better information, which in turn enables Post Office to assess
what that information is telling it. Post Office can then be more proactive in what
support it provides to branches.
Dealing with problems in branch/ shortfalls
133.
134,
135.
Audits
136.
137.
138.
A postmaster will declare a discrepancy on a branch trading statement. At that
point it is declared as a loss or gain. The postmaster then has the opportunity to
dispute the discrepancy and ask Post Office to investigate by contacting NBSC.
If the postmaster had asked Post Office to investigate, Post Office would not
usually seek to recover the loss then. The loss goes into the postmaster customer
account and is put on hold until investigations are complete. The SSRT usually
helps with these investigations.
Sometimes a postmaster would raise a shortfall directly with us. Other times,
audits identified shortfalls.
Post Office used to have separate audit and training functions, so they ran as
separate teams. These teams were later merged. When I took over the Audit and
Training team in about 2009, they were already multi skilled for both the training
and audit functions and have continued to be so. The audits were and are still
carried out by the audit and training team.
The audit is not an audit in the traditional sense as carried out by accountants. It
is a detailed check of cash, cheques, stock and vouchers on site. The auditors
would use audit tools such as p32/FAT tool (accessed on the auditor's laptop) and
guidance notes when carrying out the audit. It was a process driven approach.
The postmaster is not given advance notice that the auditors will be attending.
The lead auditor would have a conversation about what would happen on the day.
Around 2011 we introduced a document which explained what would happen in
the branch on the day of the audit. This document was shared across the network
to help make the audit process transparent. It explained that if a discrepancy was
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139.
140.
141.
142.
143.
144.
145.
146.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
discovered on the day of the audit, the postmaster would have the opportunity to
discuss it with Post Office.
The branch is closed for the audit. The auditor talks through with the postmaster
what is going to happen. The lead auditor asks the postmaster to add them to the
system so that they can call off the reports they need to do the audit. If the
postmaster is absent and there is no-one with manager access then the auditor
global password is used. This is recognisable by the "*" and initials of the auditor
followed by "1" usually.
Post Office would always inform the postmaster this is what it was going to do.
For example, when checking the cash the auditor would request that the
postmaster observes and checks what they are doing and would always
recommend that they do so.
A postmaster is asked sign the auditor's findings. The auditor will discuss any
findings at that point in time so the postmaster is completely clear on the audit
output. A copy of the audit report is sent to the branch. The content of the audit
reports has changed over the years. The report is now automated. It is called a
Financial Audit Tool report, internally known as a "FAT" report.
When I was involved with the audit team between 2009 — 2012, it was carrying
out around 5000 audits a year. These were broken down into random audits, risk
based audits, special audits, branch transfer and compliance audits.
Around 100 random audits are carried out each year.
The "risk based audits" were for branches which had been identified using a risk
model. The risk based audit system generates a list of between 50 and 100
branches that are potentially at risk of carrying a loss/funds at risk. That list forms.
a schedule of audits that Post Office carries out on a monthly basis.
There are a number of factors that would deem a branch to be an "at risk branch".
For example where Post Office knows how much working cash should be in the
branch when it has considered the number of deposits and withdrawals (this is
called their overnight cash holding target) and the branch is holding more than
that. In that example, Post Office would investigate why. It might be that they are
just holding too much cash and Post Office will ask them to send it back or it
might be that they appear to be holding more in their accounts because they
actually physically haven't got as much as they tell Post Office they have.
There are also "special audits" which were carried out when something doesn't
feel quite right. This isn't through the profiling system. It may be from a
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147.
148.
149.
150.
151.
152.
153.
154.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
conversation somebody might have with a postmaster or some intelligence Post
Office has received from a third party or client. These audits are arranged within
24 to 48 hours due to the urgent nature of the circumstances which has deemed it
necessary to carry out an almost instant audit.
Another type of audit is carried out when there was a transfer from one branch to
the next. Post Office would carry out an audit at that time to enable the hand over
process.
Due to the wide range of skills, the Audit and Training team were able to help with
shortfall queries. They had a very good working knowledge of how the whole
thing came together and were very competent users of Horizon. The team
understood not just the numbers but also the transactions to get to those
numbers.
The Audit and Training team could identify where postmasters could be hiding a
loss and would work together with the Support Services Resolution team to
identify where that loss may be hidden. An example the team dealt with (although
the figures I give are made up) was where a postmaster declared that they had
£40,000 in the ATM, when actually they only had £20,000 in the ATM. This was a
way to hide the loss as the ATM was separate to the branch's main cash.
Post Office stores audit data so that it can analyse what the trend has been over
the years in terms of the number of audits carried out. From this data, it can be
seen what the average loss level for each of those audits is. Post Office can also
sort this data by type of audit.
The format of the audit report and audit tool has changed slightly but the basic
things checked have remained fundamentally the same.
The way we produce the report has changed due to Horizon. When Post Office
operated using a manual system, it produced a handwritten paper report. We now
use an electronic version which shows the cash count and stock and some
narrative.
If there is a large loss, the auditor would tell the postmaster that they will need to
take advice from the Contracts Adviser. The postmaster would then have a
telephone discussion with the Contracts Adviser to discuss the loss.
The process was that the Contracts Adviser would gather more facts and
evaluate the loss. Often, the Contracts Adviser would explain to the postmaster
that they needed time to investigate the loss. They may say "I will come back to
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155.
156.
157.
158.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
you because I am considering whether I need to precautionary suspend you or
not".
The Contracts Adviser will then carry out their investigation. This is usually on the
day of the audit but in exceptional circumstances can be later. Depending on the
level of loss and what they find, the Contracts Adviser will then seek authority
from their manager to take the recommended decision as to whether to suspend
or not.
There is a process map which contains clearly defined steps, the process and
what the consideration points are in terms of coming to a decision on whether the
Contracts Adviser should precautionary suspend the postmaster or not. If the
postmaster is suspended, the process map also covers whether the postmaster
should be reinstated or have their contract terminated.
The Contracts Adviser will need to record the decision rationale. A series of
letters will be sent to the postmaster during this time inviting them to a meeting;
keeping them updated of the investigation and the outcome.
If a subpostmaster doesn't agree with the outcome, there is an appeals process.
There is an appeals process documented in the subpostmaster Contract. There
isn’t an appeals process as part of Mains and Locals but the postmaster can
request an audience with a senior manager if they feel they have something they
want to discuss. I have attended such meetings myself before.
Why should the postmaster be responsible for the loss?
159.
160.
161.
162.
When Post Office enters into a contract with a postmaster it provides them with a
starting amount of cash, stock and all the equipment. It also gives the postmaster
practical training around how to carry out transactions and how to balance the
branch.
Post Office engages them to run that branch. They are on site. The postmaster or
their staff carry out transactions with Post Office customers, with Post Office cash
and stock.
Post Office will also know what button they have pressed through Horizon, but
only the Horizon user will know why they have pressed the button and whether it
was the right button to press.
Post Office can review the Horizon logs to ascertain whether or not a transaction
or pattern of behaviour looks normal. Post Office considers it normal behaviour to
count the cash and enter onto Horizon as you count your cash. Then the Horizon
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163.
164.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
user presses the button that tells you what your discrepancy is. If the stock unit is
an individual stock unit the amount of discrepancy will automatically present. In
the case of shared stock units then the branch user is required to request a
variance check (the cash declaration is mandatory daily process but the variance
check is not mandatory). If there is a discrepancy, it is normal to go back in and
check it and then to make some adjustments because you've found a mistake
somewhere. It is not normal behaviour to say how much am I out before I make
my account declaration. This could suggest falsifying the accounts. There were
instances where a postmaster may be less than £50 out and would think "I am not
going to bother looking for that amount. I will accept this position and make good
the loss".
At the heart of Post Office's relationship with postmasters is trust. Post Office
trusts the postmaster to give it the right information and supports the postmasters
with its systems and training. Post Office will build its processes to try and see
where it is not getting that accurate information. Post Office can't possibly say it is
better placed than the postmaster to know what is going on in that branch.
The relationship needs to be mutual for it to work. Post Office is not dishonest.
We and postmasters need to have confidence and trust in each other. We are a
financial institution and are held in very high regard. We are probably the most
trusted brand in the country and Post Office holds that very dear. Post Office's
reputation is partly why it has survived as long as a business.
Implied terms
165.
166.
167.
I understand that the Claimants in this litigation have tried to argue a host of
implied contractual terms. It is a commercial issue as to whether or not Post
Office should agree to incorporate new terms into the contracts with postmasters.
I have already explained that there was very little scope for negotiation on the
terms of the contracts used with postmasters.
There is already a clause in the contract which states that Post Office will provide
training and support. Under the new contracts the incoming postmaster is
required to attend the training to secure the appointment, which is a reasonable
request. I consider the Post Office does provide adequate training and support.
In relation to the proposed implied term that Post Office should provide an
adequate system reasonably fit for purpose including any or adequate error
repellency, this is something I consider Post Office provides. Horizon is fit for
purpose. I have used the system and consider it to be adequate. Horizon has the
functionality it was intended to deliver. It is however possible for the individual
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168.
169.
170.
171.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
inputting information to make an error and the system requires human input. It
does properly and accurately record transactions effected by Horizon.
In relation to a branch vacancy, the contract would be offered on a "take it or
leave it" approach. An applicant can choose to do business with us or choose not
to. It would not be viable to operate bespoke contracts across Post Office's vast
network. Operationally, commercially and legally, it was important for the
branches (which are effectively franchises) to operate from predominately the
same contract.
Operationally, the contracts had to be standardised for the Post Office and
branches to be able to operate as effectively and efficiently as possible. This was
to the benefit of the postmasters as it helped keep Post Office's cost base in
check. Post Office needs to ensure it is generating enough revenue to make
reasonable commission payments to postmasters. Standardisation is the best
way to be able to do that. If everyone operates in the same way, Post Office does
not need build in additional costs for variances.
Commercially Post Office restricts a franchise's products and services in line with
client agreements which in some cases restrict their products and services to
certain branches. Post Office is also able to restrict the franchise's ability to sell
certain products in its retail remit. For instance, Post Office has an exclusive
contract with Royal Mail to transact mail and parcels through our Post Offices.
There is therefore a clause in the contract which states a postmaster cannot enter
into a private arrangement with another mail company, such as CollectPlus, to
transact from the premises, as that is a breach of our contract with Royal Mail.
Legally, when Post Office enters into its contracts with our clients, these terms
have to be carried across into the "franchise" contracts. For example, a client
Post Office contract may cover how many branches would sell that product and
the way that the client wanted that product to be sold. Post Office is doing
business on behalf of its clients and is under its own contractual obligations that it
must apply otherwise it will be in breach of its client contracts. Each of the
products and services Post Office operates on behalf its clients comes with
specific requirements on how it is transacted. A number of them would have
financial regulation. On our counter service products, for example dangerous
goods, there are a number of requirements that we have to adhere to. The
contracts therefore contain a clause to ensure that we pass on that obligation to
the postmaster. These must be standard obligations to ensure consistency
between contracts.
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172.
173.
174.
175.
176.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Although there is no specific obligation in the contracts, Post Office does properly
and accurately obtain and record all transactions effected through Horizon. It
retains this information for 7 years.
I understand postmasters have claimed that Post Office should properly and
accurately produce all relevant records and/or to explain relevant transactions
and/or any alleged or apparent shortfalls (GPOC 64.3). On the whole, Post Office
is unable to do this due to the high level of cost, resources and time required to
be commercially effective. What Post Office does do, if a postmaster has raised
an issue, is investigate and pull up reasonable, relevant information. Such a term
could not be implied into the contract. Under the distribution of responsibility
under the contract, it is not Post Office's responsibility to carry out this function.
This is the case even with our employees. Providing a postmaster adheres to
their contractual obligations, we wouldn't expect them to have many causes to
request such information.
Post Office does cooperate in seeking to identify the possible likely causes of any
alleged or apparent shortfalls and/or whether or not there was indeed any shortfall
at all (GPOC 64.5 and GPOC 64.11). A shortfall would come as a result of an
error or an inter business loss. I have seen claims where postmasters have said
there was a glitch in Horizon. Post Office is aware of a couple of issues with
Horizon, which have already been disclosed. If Post Office does see a genuine
"glitch", it will not just deal with that one, it will also investigate whether this has
caused a problem somewhere else. If there was an issue, Post Office would
reach out and put it right. We would inform those affected about what the issue
was and what we were doing about it. Post Office does not, as alleged, conceal
known problems or errors in or generated by Horizon that might have financial
and other implications (GPOC 64.8).
Post Office cannot disclose possible causes of apparent or alleged issues
experienced by individuals "candidly fully and frankly" without breaching
confidentiality (GPOC 64.6). If there was a system error, all of those affected
would be informed. An alleged shortfall might not actually be a shortfall. It
wouldn't assist the affected postmaster to share this information with others nor
those not affected without establishing if it is or isn't a shortfall. In addition, it
would also be a breach of confidentiality to share with others the extent to which
other subpostmasters are experiencing issues relating to Horizon as this may be
due to the user's ability or competence (GPOC 64.9).
Postmasters have argued that Post Office should have a duty to automatically
seek to identify shortfall causes. I don't agree with that at all. If it was Post Office's
responsibility, what is the role of the postmasters? Managing the accounts is part
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
of their role. The postmaster is responsible and therefore there are certain things
that a postmaster needs to do before they come to us for help. Of course if the
postmaster contacts Post Office with an issue they can't resolve, we will assist as
best we can.
177. Post Office cannot allow branches to continue to operate in total oblivion. This is
why we require them to inform the Post Office if they have made a loss. We
cannot imply such a term and be responsible for identifying the postmaster's
cause of the shortfall. Post Office does not have the level of sophistication in its
systems to offer this. To do it would be so costly that it would make the
commercial relationship unsound.
178. Post Office cannot physically be present to help determine the cause of the loss if
caused by the human element. This would require, as a minimum, CCTV in every
one of those premises with a view of every part of that building with 24/7
continuous monitoring. Commercially Post Office couldn't afford it. This way of
operating would cost more money than Post Office was making out of that
operation. No business would do this.
179. Post Office does make reasonable inquiry, undertake reasonable analysis and
carry out an investigation if there is cause to (GPOC 64.7). It gives fair
consideration for factual information available as to possible causes of the
appearance of shortfalls in a commercial manner.
180. Alleged shortfalls do represent a genuine loss to Post Office. For the postmasters,
it can be a paper loss (GPOC 64.12). However, we have to settle with the client
and if the client expects to get £100,000 worth of payment and we are only giving
them £90,000, the client will pass on to Post Office the £10,000 difference. As
Post Office is liable to make good its losses to its clients, it is only reasonable that
postmasters are also responsible if they have incurred that loss. The postmaster
has done something that has created that loss and should make that good. In
every case I have seen the postmaster's loss has caused Post Office loss
somewhere along the line.
181. The Claimants have argued there needs to be an implied term that Post Office
should carry out a reasonable and fair investigation as to the cause and reason
for the alleged shortfall and whether it was properly attributable to the postmaster
under the terms of the contact (GPOC 64.7). I consider it to be the postmaster's
responsibility to carry out an investigation to establish the cause of the loss until
they get to the point where they have exhausted what is within their gift to do.
4A_38847158_1 29
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182.
183.
184.
185.
186.
187.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
I consider Post Office exercises its powers, contractual or otherwise, honestly and
in good faith for the purpose of which is was conferred.
I do not consider that Post Office has taken steps which undermine the
relationship of trust and confidence. If anything, I think Post Office has gone the
other way to try to build the relationship of trust. The way we changed the policy
towards suspension is evidence of that, as set out below. Post Office has
continually looked to improve the way it operates and understands the human
element of the outcomes of investigations, suspensions and terminations (GPOC
64.13, 64.14 and 64.15).
There are things Post Office does which are not in its contracts, such as setting
up the Support Services Resolution team to address postmasters' concerns
(Shirley Hailstones and Kath Alexander lead this team). I set that team up in 2015
off the back of my involvement in the mediation scheme as I felt NBSC alone
might be a bit too broad to provide support to postmasters. This new team can
help sort a problem on the phone and talk to a postmaster to resolve the issue if
NBSC cannot help. This service isn’t in the contract but is an improved way of
working and supporting the postmasters, which Post Office has put in place now
to rebuild the relationship of trust.
Post Office has addressed a number of the implied terms the Claimants have
raised, as can be evidenced with how the result of the investigation is
communicated to the postmaster and the depth of information assessed before a
decision is made to end the contractual relationship with a postmaster. This has
improved over the passage of time and Post Office is much more inclined to go
the extra mile to explain a decision to a postmaster rather than simply rely on the
contract.
If Post Office ran its franchises under an onerous contract which contained all the
terms the postmasters say should be implied, Post Office would not be able to
operate anymore. It would be impossible to operate using such a business model
as Post Office would not be financially viable. An element of reasonableness has
to come into it because if a term is not reasonable, commercially Post Office
cannot operate.
If Post Office made changes to the contract terms and conditions, it would inform
the postmasters in writing. Post Office wasn’t always obliged to consult with the
postmaster before changes were made, but we would usually notify them.
Sometimes the changes were woven into remuneration negotiations with the
National Federation of Subpostmasters, the recognised representative body.
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Contractual breach / performance issues
188.
189.
190.
191.
192.
193.
194.
195.
196.
If a postmaster made a complaint which was governed by the contract, Post
Office's approach is to strictly interpret and apply the contractual provisions.
Postmasters are contractually liable for their branch's losses. If they have any
accounting queries, they are aware they should contact NBSC and the process
which is followed after such a declaration.
If the postmaster makes a gain, the approach was "you can withdraw them but
bear in mind if you have a gain, like when you have a loss, then it’s due to an
error". Post Office would recommend that the money be kept to one side as
typically that money would be required at a later stage to balance the branch
account should the error be found.
Signing off false accounts is dishonest and harms Post Office. It is a criminal
activity. Unfortunately some people haven't regarded it as such. This is clearly
not the case.
At the very grass roots level, signing off an account and declaring that I, the
postmaster, have £100,000 here when they don't is clearly wrong. They are ina
position of trust, not just with Post Office in terms of the trust that we put in the
branch, but also due to their position in their community. There is a certain status
that goes with being a postmaster and it is held in very high regard.
We, on behalf of our clients, trade on our reputation of trust and integrity. When I
have had conversations with postmasters regarding false accounting, sometimes
they don't see it as being wrong let alone a criminal activity until I tell them what
the consequences could be.
We didn't prosecute all individuals who falsely declared their accounts. Post
Office didn’t always explain its decisions in detail at the time. This was partly
because Post Office wasn’t obliged to do so and we didn’t see that as our role to
do so.
My view was that if we could give the explanation then we should. It could help
people understand what had happened, why it shouldn't have happened and the
consequences. From my first working group discussions with the JFSA (Justice
for Subpostmasters Alliance), I agreed that giving an explanation and allowing the
individuals to get some kind of closure on the incident was necessary.
I take this dispute very seriously. It is difficult because I have a responsibility to
protect Post Office and as part of that, need to address postmasters' breaches of
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197.
198.
199.
200.
201.
202.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
contract. This doesn’t mean that I don’t treat the postmasters as human beings, it
doesn’t mean I don't give then the respect that goes with that and it doesn’t mean
I need to be aggressive in any way. I did however need to be assertive in my
position.
There are guidelines which we followed in deciding whether or not Post Office
was going to press ahead with a prosecution. Typically the decision would be
made following an audit review that identified a discrepancy. The Contract
Advisers then need to make a decision following their investigation on whether or
not to terminate the contract. Sometimes it is done in parallel with criminal
proceedings.
Post Office has terminated contracts independently from any criminal
investigation. We inform the postmaster at the relevant time. Post Office may then
separately take the decision to initiate criminal proceedings which is subject to a
separate review.
The decision to initiate criminal proceedings is not taken lightly and that would
always be done in conjunction with General Counsel and the Security team. At its
height over the last 10 years Post Office in 2012 brought 42 prosecutions against
postmasters which is a fraction of the Post Office population.
Most of our postmasters are very honest people. Our postmasters are a
representative population of the UK make-up, in terms of all ages and
nationalities etc. As a result, you would expect to have some kind of
representation of people who get themselves in to difficulty. I genuinely believe
that no one comes in with a view to steal from Post Office. Circumstances happen
and postmasters find themselves in a situation where they have easy access to
money. With external pressures, they may be tempted in that way and there are
some very sad situations where these pressures have overtaken people. When
people stop seeing Post Office money as just paper i.e. the product, and start
seeing what they can buy with that money e.g. a new car, that is potentially when
we have a problem.
The process for dealing with a breach of contract or suspected misuse of cash
has been the same for a long period of time. Post Office has however reviewed its
mitigation circumstances criteria to take into account lessons learnt.
The way investigations were carried out has changed over time. Historically
where there were losses the investigation was carried out by the Security
Investigation team. Most often, issues would come up as part of an audit. The
Security team would then carry out an initial fact find. The Contract Adviser would
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203.
204.
205.
206.
207.
208.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
assist this part of the investigation and deal with the review of the contract in light
of the fact finding exercise. That process has been the same for a long time.
To enable the Contracts Advisers to be able to carry out the investigation
function, they were trained on Horizon and what certain products were and what
the product's functionality was to assist in their review of whether the contract had
been breached.
From my experience in the mediations, the Contracts Advisers typically had
progressed to management through the branch route and therefore had a very
good understanding of how to use Horizon on a day to day basis. However,
sometimes if they had been outside of a branch role for a number of years they
were less familiar with how things worked.
I believe Post Office had built a very good level of skillset in terms of where to
look for discrepancies, how to build that case and do a thorough root cause
analysis. It is one thing to be able to analyse that money has gone missing. It is
quite another task to be able to explain why that money has gone missing, when
and how.
From my experience working in the branch and working with postmasters, I
understood that it was important that where possible we explain to the postmaster
what we can see and what we can use the data to tell us. The process of
elimination helped take everything else out of the equation.
Part of the reason for this dispute is that a number of people don't know what
happened or why there was a discrepancy. As a result, they look to Post Office to
explain it. In some cases we can and in some cases we can't. There have been
numerous occasions when I have seen the explanation provided to the
postmaster and seen the reality of the penny dropping and the explanation
sinking in.
There has clearly in some cases been a breakdown of trust between Post Office
and its postmasters. Postmasters often work with close family and friends, and
trust these people with their lives. They do not believe such people would do
anything to harm them. Postmasters believe they are running a tight ship and
cannot possibly lose money. They believe their team are really careful, that they
do not make mistakes and follow protocol, such as searching in their branch for
the cash when they have a loss. . If they convince themselves of these things, the
only thing left is to blame the Horizon system which they do not have in depth
knowledge of.
Suspension and termination
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209.
210.
211.
212.
213.
214.
215.
216.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
The way Post Office has dealt with suspension has changed over the years.
Historically Post Office operated a black and white policy; this was before I was
responsible for the Contracts team. If a postmaster had an audit, and the
postmaster had a significant loss (thousands rather than hundreds), the default
position was to suspend whilst we investigated.
When I became involved, in around 2013-2014, I changed the policy so that
suspension was the last part of the equation.
The change in policy meant Post Office did more investigation in advance and on
the day. Post Office would only suspend a postmaster if it was absolutely
necessary. The default position changed to keep the postmaster in post unless
we had good reason not to. A good reason to suspend was narrowed to situations
where Post Office had a large loss or other identified area of risk e.g. significant
reputational damage.
Post Office has a very well documented approach that it goes through when
considering whether to terminate a contract or suspend a postmaster. There are a
number of decision points and standard correspondence, within which Post Office
would refer specifically to the section and the paragraph of the contract it believed
had been breached to suspend the postmaster.
The process of dealing with a potential termination took a significant period of
time to run through. We would review a certain amount of information and hold an
interview with the postmaster. Post Office would consider mitigation
circumstances and do all it could to ensure that it was making the right decision
on the facts it was presented with.
Before reaching a conclusion, Post Office would check it had properly applied the
contract. It would give the matter its due consideration and sufficient weight and
would not make a hasty decision, as it takes suspension and termination very
seriously.
When we precautionary suspend a postmaster, no matter how hard Post Office
tries to keep it under wraps and not let customers know, it would usually become
known in the community. Post Office would always argue that a precautionary
suspension whilst we investigate doesn’t imply anything, however it is aware of
circumstances where a temporary suspension has caused reputational damage to
the postmaster. Post Office recognises that reputational damage can be
significant when you are running a small business.
The significant change in Post Office's default position around 4 years ago
demonstrates how seriously Post Office regards suspension and termination.
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217.
218.
219.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office has data on how many postmasters it didn't precautionary suspend,
which evidences the effect of the change of default position.
If we didn't precautionary suspend a postmaster, we would expect them to make
good the loss. Post Office wants to keep someone in post where possible. It
creates a bigger problem for Post Office if it has to suspend or terminate a
contract with a postmaster and fill that position. It costs the Post Office more to
terminate and rehire a postmaster than it does spending some time with the
existing postmaster trying to resolve a contractual issue.
There are remedy periods in the Mains and Locals contracts. It can be more of an
elongated process to deal with contract breaches within those contracts.
Remuneration
220.
222.
223.
224.
Post Office offers different remuneration levels for different types of products and
types of contracts. Each product and service attracts a certain level of
commission or remuneration.
Different model types would be paid different amounts, for example a Mains
contract is different to a Local contract because there are different obligations in
how they operate.
Post Office remuneration has declined over the years. The volume of transactions
in some instances has generally remained steady but the amount of profit for
those transactions has decreased. Post Office's margins have been reducing over
the years. This meant Post Office had to review how it paid postmasters and the
profitability of their post office is linked to the remuneration Post Office can offer
its postmasters.
Part of the reason for implementing Horizon and updating the training to be more
sales focussed was to encourage postmasters to sell as many products and
services as they could, to generate more income for them.
Post Office has to be able to look to its central cost base and consider how it can
reduce its costs by working smarter. The centralised network business support
centre (NBSC) helped reduce base costs as it enabled Post Office to analyse the
information it was receiving and form a more holistic view of the business. The
centralised NBSC flagged issues of contentions and points for improvement. This.
is something Post Office continues to focus on today, which I think is very
important.
Subpostmasters as employees
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225.
226.
227.
228.
229.
230.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
I consider the contract with postmasters is a contract for services, rather than a
contract of employment. I recognise some of the reasons why subpostmasters
want to be granted employee status.
Postmasters operate as franchisees of Post Office. I was always keen to ensure
applicants realised this from the outset and understood the contract. This is why I
gave so much attention to the meaning of the contract when I carried out
interviews and why Post Office recommended the applicant take independent
legal advice before entering the contract.
The way the relationship operates also indicates that postmasters are not
employees of Post Office. Contracts with the individuals were always offered on
the understanding that they were self-employed and that the main provisions of
the contract were non-negotiable.
Post Office employees and postmasters and their staff had access to the same
products, system, equipment, helpline and general communications with Post
Office. Post Office gave postmasters everything that they would need to be able
to run the branch properly, in accordance with the contract and standards that we
set. The postmaster is then responsible for running the business on our behalf
under the terms of the contract. The key distinction between the franchises and
the Crown/directly managed branches was the way the contract worked and the
distribution of responsibility for the franchise.
Overall the content of the training Postmasters and Crown/managed branch
employees received was the same. It could vary slightly due some of the
restricted products like car tax and passports. Once the training was completed,
the way employees and franchisees were managed was different. For example,
an employee would have to declare a branch loss over a specific sum and this
would be assessed as part of the employee's performance review. It could be
escalated to a disciplinary and eventually to being dismissed. In contrast, if a
postmaster had a loss which was not made good, the contract could be
terminated. There was no disciplinary or performance review process, as they
were not employees.
Postmasters were not entitled to the same holiday, sickness absence and
maternity pay as Post Office employees. Postmasters, under the SPSO contract,
instead are able to claim holiday and sickness substitution allowance and
maternity to help cover their absence from the branch. The holiday and sickness
contribution is worked out on a two year cycle.
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232.
233.
234,
235.
236.
237.
238.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office recognised that it would be good for the business for the postmaster
to take a break from running the business by having a holiday. Post Office
therefore considered it to be goodwill gesture to give the postmaster some
financial contribution to assist them in doing that, partly to encourage them to take
a break as it recognises we all need a holiday or to take time out sometimes.
It was in Post Office's interest to make a financial contribution to keep the branch
open. It is not payment in the same way as an employee would be entitled to if
they wanted annual leave. Post Office did not cover the full cost of the postmaster
taking holiday. Instead, it made a contribution towards it, which is why it's an
allowance.
It is the same with sick substitution. Post Office recognises that we all get ill at
some point. Post Office considered that taking off the pressure financially should
a postmaster be ill could potentially aid their recovery and as with holiday cover
contributions, enable the branch to remain open. Post Office therefore offers a
contribution for them enabling someone to come into branch and cover the work
when they weren't able to do that.
Some postmasters chose never to take the contribution, either because they
didn't put in a claim even though they had time off, or were never sick. Some
people never take time away from their small businesses as they feel integral to
its success.
The more recent contracts, such as the Mains and Locals contracts, do not
contain an allowance for holiday and sickness substitution as we contract on a
company to company basis.
Postmasters have to carry out their own tax returns, which points to the fact that
they are not employees. They also have to do tax returns for the retail side of their
business.
A number of Subpostmasters I appointed or worked with relished the way the
relationship worked and the level of autonomy granted as a franchisee. For
example, some postmasters were very good businessmen/ women. They would
sell on the business with the goodwill element and hold onto the freehold and
enter into a lease with the new postmaster. It was their own business. They
would do this multiple times over. The goodwill element of the post office was at
some point I recall as high as one and a half times remuneration, so this was a
commercially sound plan.
The success of a postmaster very much depends on the type of individual they
are. Some absolutely relished the fact that they are independent business people.
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239.
240.
241.
242.
243.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
They tended to be the better postmasters because they come in with the attitude
that "I am here as my own boss, I want to be able to have the influence of running
my own business and have my destiny in my own hands". Such postmasters
would see Post Office as the umbrella under which they operated as a franchise
banner. We also had postmasters at the opposite end of scale. The undertone
was that they wanted to be employed with the security and benefits they thought
this offered.
I am aware that there are some things which may not traditionally be seen as
things which point towards self-employment, such as PAYE and NI contributions.
Post Office in some instances deducts PAYE and NI contributions at source.
Postmasters elect through their agreement with HMRC as to whether these
payments are deducted in this way or whether they are responsible for paying the
same.
There are some other things in the subpostmaster contract you wouldn't perhaps
expect to see, such as allowing the postmaster to attend Territorial Army training.
Post Office also makes "small offices payments" to some of the smaller post
offices that do not have the constant flow of business in relation to their opening
hours. In these branches, remuneration worked out on the whole as less than
national minimum wage based on the number of hours the branch was open. The
purpose of the Small Office Payment is to assist subpostmasters at smaller
branches with the financial consequences of the National Minimum Wage
legislation applying to any staff they might employ to help them run their post
Office. It is not intended that these payments would mirror the National Minimum
Wage or cover all financial circumstances that a subpostmaster may have.
I was very aware of the cost to Post Office of this policy when I was Head of Area
for Wales, because in some of the rural communities in Wales the postmaster
would have a small foot-fall and so would often require "small offices payments".
The cost of this policy to the Post Office was I believe to be a few million back
then. It is approximately £1.3 million per year now.
Post offices sometimes struggled in rural communities. I used to attend public
meetings at which we discussed with the community the possibility of the Post
Office closing down. Some options were reducing the opening hours if the branch
didn't have the business for the operating hours. This could be attractive to
potential postmasters whilst at the same time help reduce Post Office "small
offices payments".
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244.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
I think the reason behind offering these extras was because of the ethos of Post
Office. There is also an argument that in situations where the postmaster was
struggling, Post Office offered goodwill gestures such as the "small offices
payments" to stop the branch closing down and to maintain Post Office presence
within that community.
Practical Arrangements
245.
246.
247.
248.
249.
250.
251.
Having a Post Office element to a business creates a halo effect on that business’
retail. It increases that business’ foot-fall. This is one of the reasons why
traditionally the Post Office counter was at the back of most branches. The
customer would get their cash from the post office counter and then do their
shopping as they walked through the shop.
The only way Post Office can measure foot-fall in a branch is through its
transactions. Historically, in Post Office's directly managed network, it used door
counters so it could track each time a customer stepped through the door. The
Horizon data tells us customers have come and carried out a transaction.
However, there might be people that come in to ask a question. This is not
recorded through the Horizon system and so that part of the foot-fall isn’t counted.
We expected the applicant to provide their own premises from which to operate a
Post Office. They had to meet certain conditions in terms of size, so that Post Office
could fit a counter in and make sure it was secure. It would do all the security checks
and make sure that the Post Office element itself was secure and alarmed.
Post Office had specifications on the thickness of the walls, the quality of the door
and how many mortice locks. Post Office's security team would also consider how
to separate the Post Office counter from the domestic premises (if any).
The postmasters' premises are assessed to ensure they can operate out of them;
that the premises are kept in good order and that they have liability insurance in
place. This forms part of the contractual relationship with the postmaster and will
be flagged to them in an interview.
Post Office's interest in the premises is establishing whether the postmaster
owned or leased them and whether they have a license to trade from them. Post
Office would require the postmaster to evidence that they have a legal
arrangement to operate from there. This formed part of the recruitment process.
Not all postmasters live on the premises. Post Office did not restrict who lived in
the property or worked in the premises save for standard checks and staff CRB
checks.
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252.
253.
254.
255.
256.
257.
258.
Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
Post Office also needed to reduce the risk of a "tiger kidnapping". Postmasters
are at risk to this crime (albeit a very low risk in later years) as they have access
to large amounts of cash, often work with close family members who will not raise
the alarm to protect the hostage meaning the police could not be notified until
after the event. The first consideration is always to protect the Postmaster and
his/ her staff whilst in the Post Office. Post Office offered guidance on the obvious
security points and referred the postmasters to the Security Manual which is part
of the appointment pack.
Post Office historically charged an introductory fee, licence fee or franchise fee
when an incoming postmaster began to operate a new branch. The rationale for
charging this fee was that there was an inherent commercial benefit to a retailer in
operating a Post Office branch. Obviously, incoming postmasters traded under
Post Office's brand and they often received additional foot-fall, however in my
view the basis of the fee was never really explained well enough internally or
externally. The fee was a bone of contention for a number of people.
At present Post Office does not charge introductory fees, or licence fees.
The circumstances when introductory payments were applicable were set out in
an ACC but in essence if the postmaster was buying the business as a going
concern, which we called "commercial transfer", Post Office wouldn't charge a
fee. If it was a Greenfield site, a new business and there was no commercial
transfer Post Office would charge the equivalent of 3 months remuneration. For
Franchise contracts the fee was calculated on the number of counter positions.
Rather than paying the equivalent of the 3 months remuneration up front the
postmaster was able to have a 25% reduction in the remuneration arrangement
for the first year.
The incoming postmaster would be sent the contract, the conditions of
appointment letter and the addendum. The addendum might state "these are the
conditions on your appointment that you have to do", which would be things like
“you are required to replace the counter screen".
Post Office influences the retail side of the business, as it has restrictions on what
can be sold in the branch to tie in with Post Office products and services.
STATEMENT OF TRUTH
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Claim No: HQ16X01238, HQ17X02637 & HQ17X04248
I believe that the facts stated in this proof of evidence are true.
Signed:
Date: 22"¢ May 2018
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