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Exhibit WITN00740134
Strictly Confidential
POST OFFICE LTD BOARD SUB COMMITTEE
Initial Complaints Review and Mediation Scheme
Options for the closure/accelerated completion of the Scheme
1. Purpose
1.1. This paper has been prepared following the initial meeting of the Board Sub
Committee on the Initial Complaints Review and Mediation Scheme (the
Scheme) on 9 April 2014 and considers both options for closure of the Scheme
and for accelerating its completion. The paper summarises the options analysis
that was tabled at the last Board Sub Committee.
1.2 This paper should be read in conjunction with the papers on the future role of
Second Sight, Ex Gratia and Settlement payments and Dissemination of the
Linklaters advice and Deloitte report as the implications of decisions made on
those matters will have a bearing on the future of the Scheme.
1.3 The options in this paper are based on a theoretical analysis carried out by the
programme team. The paper is intended to stimulate discussion and to provide a
means for the Sub Committee’s views to coalesce around a particular option.
2. Background
2.1. The background to the Scheme has been set out previously and is not rehearsed
again here. It has been assumed that any proposed way forward should address
the following points:
e the cost of administering the Scheme;
e the likely timescales for concluding the Scheme; and
¢ the extent to which any changes to the Scheme are consistent with Ministerial
or other public statements about the Scheme.
3. Options for the future of the Scheme
3.1 In considering the options for the future of the Scheme it has been assumed that
continuing the Scheme as currently structured is not acceptable because it is not
delivering its aims because of:
e the delays by applicants’ advisors submitting full details of their case (CQR);
¢ the longer than anticipated Post Office investigation and legal clearance
process ;
e continued concerns about the role of Second Sight and the way they are
fulfilling that role;
¢ concerns about the costs of administering the Scheme;
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e the need to address the ‘expectations gap’ and the potential implications of
doing so.
3.2 There are three broad options for accelerating the closure or completion of the
Scheme:
¢ Closure of the Scheme with immediate effect;
¢ Continue investigating cases but bring it within the full control of the Post
Office; or
e Redefine the Scheme and the role of the Working Group.
3.3. The options are not mutually exclusive, each could be varied slightly and would
require the development of a detailed handling plan. All three options are likely
to lead to media criticism from commentators who have previously engaged on
the issue. It is envisaged that although this will be difficult it will be manageable.
All three would also involve the publication of the Linklaters’ advice and Deloittes
report which is dealt with in a separate paper.
3.4 Detailed pros and cons for each option are set out in Annex 1 together with the
actions needed to deliver them. A summary analysis follows.
Option 1: Closure of the Scheme with immediate effect
3.5 Although this option would provide the quickest and most cost effective way of
completing the Scheme, the fact that the Scheme is already underway, and
some applicants would not have received a completed Post Office investigation
make this option unappealing. Post Office could not be sure that the applications
do not contain an issue which needs to be addressed making it difficult for Post
Office to mount a robust defence of its approach.
Option 2: Continue investigating cases but bring it within the control of the
Post Office
3.6 Under this option all cases would be investigated but Post Office would take
control of all aspects of the Scheme, Second Sight’s engagement would be
ended and the Working Group disbanded. Post Office would take positive steps
to manage expectations and would set and enforce timelines for all cases. There
would be substantial time savings in the investigative process and significantly
reduced the management overhead would be reduced by allowing the Scheme
to transition into BAU.
3.7 Variations on this option, could include:
¢ Continued involvement of the Chair to provide challenge to the Post Office
investigation (which he has already, helpfully, done in a few cases) to ensure
it addresses the core issues raised in the case
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e Publication of a final report at the end of the Scheme setting out the approach,
a high level assessment of case outcomes (for example x cases investigated,
x cases mediated, x cases settled)
« Engaging a professional services provider to undertake all investigations.
3.8 This option provides best value for money whilst also being seen to “do the right
thing” for SPMRs. That said, it does not meet the Ministerial commitment about
the continuing involvement of Second Sight, although it generally meets all
others in terms of investigating cases and an element of independence through
the Deloitte report and, if agreed, the continued involvement of the Chair. The
independence of the process could be strengthened by engaging a professional
services provider to investigate cases.
3.9 This option could result in savings of c£1.4m, depending on the number of cases
reaching mediation. However that figure would be reduced should a professional
services provider be engaged (taking account of savings from reduced Post
Office investigative resource we envisage reducing the saving to c£0.5M). With
this approach it should be possible to complete the Scheme by the autumn.
Option 3: Redefine the Scheme and the role of the Working Group
3.10 As with Option 2, all cases would be investigated by Post Office but not by
Second Sight. The Working Group would continue to oversee the Scheme and
challenge the Post Office investigation results, but Post Office would have
greater role in setting timescales and making the final decision on whether or not
cases should be mediated, taking the views of the Working Group into account.
3.11 Variations on this option could include:
¢ Engaging a professional services provider to undertake all investigations.
¢ Allowing Second Sight to complete a thematic report at the end of the
Scheme.
3.12 Option 3 stays closest to Ministerial commitments and maintains the Working
Group and Second Sight’s involvement. Whilst it should provide a more efficient
administration of the Scheme, and a reduced role for Second Sight, the amount
saved is estimated to be less than £500k depending on how many cases
resulted in mediation. It should also be noted that option 3 would still require a
considerable amount of senior engagement in order to manage Second Sight’s
involvement.
4. Conclusion
4.1. Experience of the Working Group to date suggests that any changes to the
Scheme are likely to be met with resistance and would potentially cause some
members of the Working Group to “resign”. We are already aware that JFSA
have reservations about the way the Scheme is working and their continued
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membership of the Working Group may not, in any event, survive the first
decisions on whether cases should be advanced for mediation.
4.2. On balance we believe that the most appropriate option for the business is one
which “does the right thing” by SPMRs whilst managing down the cost, risk
exposure and senior management overhead. Subject to a satisfactory outcome
from the Deloitte assurance assessment, it is recommended that the sub-
committee authorises in the programme team to develop an implementation plan
coalesced around option 2 (or one of the other 2 options if the Sub Committee so
decide).
Chris Aujard
28 April 2014
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Options for the future of the Scheme
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Annex 1 Pros and Cons and Actions to Implement
Option 1 Closure of the Scheme
Pros
Cons
+ Quick and simple
+ Enables senior management attention
to be focused on core business.
+ Limits operating costs and financial
liabilities in the short term.
+ Could be argued that the court system
is a more appropriate forum for these
cases to be discussed.
+ Could be seen as failing to meet
commitments made to SPMR
community to properly investigate all
issues, and to give them the
opportunity to be heard.
+ Any underlying process issues may
not be uncovered, which may not be
in Post Office’s best interests.
+ Will lead to conflict with JFSA and
Second Sight and may alienate
Working Group chair
+ Likely to lead to increased
parliamentary scrutiny
+ Post Office are still committing
substantial resource to the
investigation phase
Key Actions to Implement
i. Cease all investigations (or complete those where a detailed CQR has been
received).
ii. Notify all applicants and advise them of their right to persue their complaint
through the Courts.
iii. Pay all fees incurred by applicants/advisors (in line with the Post Office
published contribution).
iv. Disband the Working Group.
v. Terminate Second Sight’s engagement (this would probably require giving
them one month’s notice).
vi. Retrieve all information currently held by Second Sight and members of the
Working Group.
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Option 2 Continue with the Scheme but bring it within Post Office control
Pros
Cons
Fairness and transparency
Continued engagement with all
stakeholders
Thorough process, consistently
applied
Minimises short term conflict
Will enable completion of the Scheme
to be accelerated
Reduces Scheme operating costs
Will lead to conflict with JFSA and
Second Sight
May alienate Working Group chair
Likely to lead to increased
parliamentary scrutiny
May damage relationships with
SPMRs impacted
Could lead to accusations of a Post
Office whitewash
+ Post Office are still committing
substantial resource to the
investigation phase
Key Actions to Implement
i.Secure Ministerial approval
ii.Secure Working Group Chair's agreement and on-going involvement
iii. Disband the Working Group
iv.Terminate Second Sight’s engagement
v.Appoint a professional services firm to act as independent investigator (if
required)
vi.Notify applicants/advisors to submit CQRs within a deadline or they will be
excluded from the Scheme
vii.Post Office continue to investigate all cases (combining investigations and
triaging cases where possible)
viii. Make no decisions on settlement/mediation until all cases have been
investigated and assessment made of issues arising across the whole
caseload.
ix.Provide all applicants with the report of the investigation report including an
assessment of the merits of the case and a proposal for next steps (e.g No
further action on the part of Post Office, offer of settlement, offer of
mediation).
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Options for the future of the Scheme
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Option 3 Redefine the Scheme and the role of the Working Group
Pros Cons
e Fairness and transparency e Operating costs remain high
e Continued engagement with all e Time to settle remains lengthy
stakeholders e High senior management overhead
e Thorough process, consistently e Investigation costs remain high
applied e Potential substantial mediation costs
¢ Minimises short term conflict given size of caseload
e Post Office likely to be pressed for
adviser costs at mediation
e Second Sight have not demonstrated
impartiality, or expert knowledge to
date
Key Actions to Implement
i.Amend the Terms of Reference of the Working Group
ii.Revise Second Sight’s letter of engagement
iii. Notify applicants/advisors to submit CQRs within a deadline or they will be
excluded from the Scheme
iv.Post Office continue to investigate all cases (combining investigations and
triaging cases where possible)
v.Make no decisions on settlement/mediation until all cases have been
investigated and assessment made of issues arising across the whole
caseload.
vi.Provide all applicants with the report of the investigation report including an
assessment of the merits of the case and a proposal for next steps (e.g No
further action on the part of Post Office, offer of settlement, offer of
mediation).
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