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Witness Name: Susannah Storey
Statement Number: WITN00920100
Dated: 23 May 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF SUSANNAH STOREY
I, SUSANNAH STOREY, will say as follows:
1. Iam the Permanent Secretary at the Department for Culture, Media and Sport.
2. I was previously employed by the Department of Trade and Industry, formerly
BERR (Department for Business, Enterprise and Regulatory Reform), then BIS
(Department for Business, Innovation and Skills) prior to July 2016, then BEIS
(Department for Business, Energy and Industrial Strategy) (from July 2016), and
now the Department for Business and Trade (“DBT”). I worked for the Shareholder
Executive (“ShEx”), the predecessor of UK Government Investments (“UKGI"),
initially as an SCS1/ Deputy Director from 2006, and from 2011 as an SCS2/
Director. In March 2013, I left BEIS and moved department and became a Director
within the Department of Energy and Climate Change (“DECC”), a position I held
until 2016 on a part-time basis, as part of a job-share. Between April 2012 and
March 2014, I also held the position of the first shareholder representative non-
executive director (“Shareholder NED”) on the Board of Post Office Limited
(“POL”).
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3. This witness statement is made to assist the Post Office Horizon IT Inquiry (the
“Inquiry”) with the matters set out in the Rule 9 Request dated 28 March 2024 (the
“Request’). In making this statement, I have been assisted by Eversheds
Sutherland (International) LLP, who represents UKGI, a Core Participant (as
defined in paragraph 5(a) of the Inquiry’s Protocol on Witness Statements) in the
Inquiry. I have sought to address all the matters raised by the Inquiry in as much
detail as possible, notwithstanding the passage of time since the events with which
the Inquiry is concerned. As the Inquiry will be aware, the events that I describe in
this witness statement occurred over 10 years ago and I am therefore reliant, to a
significant extent, on the contemporaneous documentation I have been able to
review, including Board minutes and Board papers. For reasons I explain below, I
have not had access to all the documents and e-mails that I would have had at the
time. I have sought to make clear in this statement where I have a direct
recollection of the matters I describe and where I am relying on the documentation
I have seen as part of this Inquiry, some of which I am not aware of having seen at
the time. I have also sought to make clear where I am applying hindsight rather
than describing my views at the time. My goal is to explain everything I can recall
as Clearly as possible to assist the Inquiry.
4. I wish to start this witness statement by acknowledging the devastating hardship
and injustice suffered by so many sub-postmasters, and the vital importance of this
Inquiry in establishing the truth and ensuring that appropriate lessons are learned.
I am grateful for the opportunity to contribute to this Inquiry by providing evidence.
I have followed the evidence given to the Inquiry closely, in particular the
heartbreaking stories told by sub-postmasters and their families. I have reflected
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very carefully on my time on the POL Board and whether there were opportunities
missed on our part to gain a better understanding of the issues relating to Horizon
and to take further action to ensure that they were properly addressed by the
company. I have provided a detailed account of those reflections in this witness
statement and I sincerely hope that they will assist both in understanding what went
so badly wrong in this case, and ensuring that nothing like this ever happens again.
Background
5. Between 1995 and 2006 I worked for Citigroup as an investment banker, joining as
a graduate trainee and specialising in UK corporate finance, advising companies
on mergers and acquisitions. In 2005, the Government was looking for private
sector, commercial skills to assist with the oversight of public sector companies
and I agreed a secondment to ShEx which started in January 2006. My
secondment was extended to a total period of 18 months, at the end of which I left
Citigroup and became a civil servant within BIS working as a Deputy Director in
ShEx.
6. As for my career after ShEx, I worked at the DECC from 2013 as Strategy Director
in a job-share until 2016 when the then Prime Minister merged that department into
BEIS. I stayed as Strategy Director at the combined department until later that year
when I went to the Department for Exiting the European Union. In Summer 2019 I
became a Director General at the Department of Digital, Culture, Media and Sport
(‘DCMS’) where I stayed until February 2023 when, as part of a Machinery of
Government Change, the Prime Minister announced the newly created
Department of Science, Innovation and Tech and the bulk of my teams and I were
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transferred there. I came back to DCMS as Permanent Secretary in the Summer
of 2023.
. In 2006 when I arrived at ShEx, it was a team in the Department of Trade and
Industry (“DTI”). My recollection is that it comprised approximately 70 or so people
and was involved with around 25 government-owned companies (including the
Royal Mail Group (“RMG”) and POL and other government arms’ length bodies).
It advised the DTI and other departments on a range of commercial matters and
acted as the shareholder representative.
. I understand that a detailed account of the structure and operation of ShEx has
been set out in the BEIS/UKGI Response to the Inquiry’s Call for Evidence and
UKGI’s Opening Statement to the Inquiry. In brief, the principal elements of the role
of ShEx in respect of the businesses within its portfolio included a range of
shareholder tasks such as appointments of Chairmen to the relevant boards,
reviewing financial and performance reports and strategic plans, engaging with the
businesses to secure government funding to deliver the policy objectives set by the
relevant Department, and in some situations, providing policy advice. This would
typically involve working closely with the parent Department (if the entity was not
in DTl) and HM Treasury, and providing advice to Ministers on a range of
commercial and policy issues relating to the businesses. At this stage, ShEx would
not automatically hold a seat on the Board of Directors of the businesses within its
portfolio and, in general terms, the model was one of a high degree of delegated
authority to the company, including for all operational matters, with often relatively
limited formal powers reserved for the shareholder (and therefore ShEx).
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9. The objectives for the businesses would be set by Ministers within the parent
Department. For DTI’s arms’ length bodies, including RMG and POL, the
Permanent Secretary acted as Principal Accounting Officer, responsible to
Parliament.
My Role in ShEx: 2006-2010
10.My initial role in ShEx in 2006 was as part of a small team focussed on the public
re-financing of RMG. The Government provided a substantial refinancing package,
amounting to £1.75 billion, to RMG in 2007. I then undertook a number of other
Deputy Director roles within ShEx including on other government owned
companies in its portfolio. In each of these roles, I would work reporting to a
Director who in turn reported to the Director General who sat on the Executive
Committee and Board of the Department.
1
=
.In around 2009, I was asked by ShEx to resume working on RMG in a role that
involved preparatory work for a possible privatisation. An independent review into
the future of postal services sector had been undertaken by Richard Hooper in
2008 (‘Modernise or Decline: Policies to maintain the universal postal service in
the UK’) and, following an update, published in September 2010 (‘Saving the Royal
Mail’s_universal_postal_ service _in_the digital age’) it became the coalition
Government's policy to sell the Royal Mail to ensure its ongoing financial viability.
POL as a vital public asset would remain owned by the Government. This involved
an initial restructuring to facilitate the sale, separating the Post Office so that rather
than being owned by RMG it would be a sister company initially, restructuring the
Royal Mail and Post Office pension funds (with the Government taking the liability
for the bulk of the very substantial deficit, c.£5bn in 2012, through a transfer of the
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assets and the liabilities to the public balance sheet). The regulation of RMG would
also move to Ofcom.
12.The objective for the Post Office at that stage was that it would continue in
government ownership but that, following a programme of investment for
modernisation of the network and the core business, the Government’s subsidy
would be reduced as the business became financially sustainable and ultimately
self-sustaining. It was intended that this should be achieved without closing
branches and was against a background of radical change in the market as many
of the services the Post Office provided in branch were going on-line. The
Government was also interested in exploring mutualisation of the Post Office. To
give a sense of scale, the Government provided £1.34bn to POL in 2010 for the
period to 2015, and in November 2013 a further £640m for the period to 2018
(announced by Jo Swinson MP on 27 November 2013). This was in addition to the
rolling debt facility (of c:£1.15bn).
13. The pre-sale restructuring in 2010-2012 was complex and included ShEx leading
the work on the drafting and passage of the Postal Services Act 2011, the work on
employee shares for Royal Mail, the work on financing POL, and the approval in
the EU of this state aid for services of general economic interest. At this stage, the
ShEx team was providing both policy advice to the Government on how they might
wish to discharge their stated objectives in relation to the RMG and POL, as well
as more traditional shareholding type functions.
14. Given the complexity of this programme of work, we were frequently in contact with
our Ministers. I can recall regular contact with Pat McFadden under the Labour
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government and, after 2010, Ed Davey and Norman Lamb as Postal Services
Ministers under the Coalition government. We also engaged the relevant
Secretaries of State and, from time to time, Ministers in other Departments,
including HM Treasury, given the implications of the restructuring and refinancing
of the businesses had significant cross-governmental implications.
Director — March 2011-March 2012
15.In March 2011, I was appointed as Director of the ShEx Royal Mail and Postal
Services (“RMPS”) team. I reported to the ShEx CEO who was a Director General
in BIS, and I recall that I had a number of direct reports including the Deputy
Director for the Royal Mail, the Deputy Director for the Postal Services Act (until
September 2011), the Deputy Director for pension restructuring and the Deputy
Director, Post Office. This role was the first time I had any real direct engagement
with POL.
16.My role was to lead the RMPS team and organise the work to ensure we could
deliver the Department's objectives and priorities in this area. I had limited
involvement in, or visibility of, the day-to-day operation of POL’s business at this
stage. The focus of my role was on the implementation of the structural
reorganisation of RMG and the management of the implications of that
reorganisation, including the very substantial financial implications. The work on
POL related matters was led at SCS1 level by Oliver Griffiths until September 2011
and then by Will Gibson until late 2013, when he was replaced by Richard Callard.
17.I should make clear that, in my role as Director of the RMPS team, I had no direct
knowledge of, or involvement in, prosecutions brought in the name of RMG (or by
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RMG for POL) and I was not aware of either RMG or POL acting as a prosecuting
authority. I note from the documentation provided to me by the Inquiry that, in late
November 2011, I was copied into an exchange of correspondence
(UKGI00001384) attaching a statement made by POL (UKGI00001385) in
response to three cases raised in the course of a BBC ‘Inside Out’ programme
which referred to criminal prosecution but made no reference to RMG and/or POL
acting as the prosecuting authority. I do not remember watching the programme
and I have no direct recollection of reading POL’s statement at the time. However,
I expect I would have looked at it given that I was copied into the correspondence,
and I would have noted the assertions made by POL that it had full confidence in
the Horizon system, that the system had been rigorously tested, and that its full
confidence in the accuracy and robustness of the system was shared by the
National Federation of Sub-postmasters (“NFSP”). As I explain below, this was the
consistent position adopted by the company in relation to Horizon throughout my
tenure on the Board.
18.I have not been provided with any other material relating to my time as Director of
the RMPS team which relates to prosecutions of sub-postmasters and I cannot
now recall receiving any such material, although it is of course possible that I may
have been copied into email traffic from the POL team in ShEx which made some
reference to the issue. I note that I would not appear to have been sent the Private
Eye article in September 2011 (UKGI00001482) and I do not recall seeing that
article at the time. I do not recall any members of my RMPS team raising any
concerns to me regarding prosecutions of sub-postmasters, nor do I recall the
issue being raised in any of my interactions with Minsters or other officials in the
Department at that time. If my team had had concerns of this nature, I feel
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confident that they would have been testing them with POL to get assurance and
they would have been raising with me and, if necessary, with our Ministers if that
assurance was not provided.
19.The same applies to civil litigation being brought by or against POL by sub-
postmasters. I have not seen any contemporaneous material to indicate that this
was an issue that was brought to my attention, and I do not recall any concerns
being expressed to me regarding the nature or extent of any civil litigation involving
POL, whether concerning sub-postmasters or at all.
20.As I have sought to explain, the work that we were undertaking in the RMPS team
during my tenure as Director was focussed on getting the companies to address
the large structural issues facing them at the time and, in particular, the
arrangements for the separation of POL from RMG. I had very little interface with
RMG and/or POL on operational issues relating to the day to day running of the
business, including any litigation in which the business might be involved, or in
which it had an interest. The only circumstances in which an operational issue of
this sort might be brought to my attention would be if it reached a threshold of
materiality, such that it needed some explicit approval from the Government or if it
might be perceived to have a significant impact on the running of the business,
whether in financial terms or otherwise. In those circumstances I would expect to
be informed and we would routinely inform Ministers of issues of this nature, as
and when appropriate. In general terms, I would have expected a large
organisation like RMG to be involved in litigation of various types and I would have
regarded the monitoring and management of litigation to fall within the delegated
operational responsibility of the business.
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21.The same applies to the operation of POL’s IT infrastructure and services. The
RMPS team did not exercise any operational oversight of POL’s IT services as far
as I know. The operation of the business IT fell within the day-to-day business of
the company led by the executives of POL and the RMPS team would only expect
to made aware of IT issues if they had a significant operational impact on the
running of the business or cost impact. I do not recall any significant concerns
regarding the operation of the Horizon system being brought to my attention during
(or before) my tenure as Director, either by RMG/POL or by other members of my
team. I have referred above to the POL statement circulated in November 2011
(UKGI00001385) expressing full confidence in the accuracy and robustness of the
system and I do not recall hearing or reading anything that was inconsistent with
those assertions.
22.As I explain below, my awareness of all these issues increased materially after I
took up my position as Shareholder NED on the POL Board in April 2012, although
it is now clear to me from the material I have seen in the course of this Inquiry that
the POL executive had significantly more information than was provided to the
Board in a number of important respects that I address later in this statement. As
a result of my appointment to the Board, from April 2012 I was given access to the
Board papers which contained considerable detail about a range of operational
issues facing the business, including IT and litigation. Part of the rationale for the
appointment of a Shareholder NED to the Board was precisely to enable that
individual to gain a greater degree of visibility of the operation of the business.
However, even after my appointment as NED, and for the reasons I explain in more
detail later in this statement, the extent to which the ShEx team with responsibility
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for POL exercised oversight over operational aspects of the day to day running of
the business remained essentially unaltered.
23.On the specific question of the appointment processes relating to POL’s Chief
Executive Officer and Chair, my recollection is that the position of Chair of the
Board of Directors was subject to Ministerial approval and that the recruitment
exercise was run by BIS / ShEx as a public appointment. My understanding is that
approval rights in relation to the Chair were conferred by the Government's Special
Share. I do not recall these rights extending to the appointment of the Chief
Executive Officer and I understand UKGI’s Opening Statement to the Inquiry has
further information on ShEx’s role in appointment processes (SUBS0000006). I do
not recall having any personal involvement in the appointment either of Alice
Perkins as Chair of the POL Board or of Paula Vennells as CEO of POL.
The POL Board and my role as NED
24.POL was owned by, and was a subsidiary of RMG prior to April 2012. As such,
POL's Board arrangements were consistent with its status as a subsidiary entity
within a larger group. At that stage, it did not have a board with a full set of
independent non-executive directors conforming to the conventional board
structure of the top company or parent company of a large commercial
organisation.
25.The decision to separate the RMG and POL businesses led to the establishment
of a new POL Board, based on best practice at the time for a large company
comprising a Chair, senior executives and a number of independent non-executive
directors. In particular, it was agreed by our Ministers that one of the non-executive
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directors should be a representative of the Shareholder, thereby providing the
Shareholder with a more direct line of sight into the company. There was also a
desire, on the part of the Government, to use the separation as a way to ensure
that POL had a more developed board to provide rigorous oversight of the
company, not least given the difficulties it was facing financially. RMG had never
had a Shareholder representative on the Board and ShEx had, from time to time,
found the relationship difficult with only limited formal levers available to it.
Accordingly, the separation process provided an opportunity to reset the
relationship with POL from the start, although, as I describe below, there remained
a significant degree of residual nervousness on the part of POL regarding what it
perceived to be the potential for conflicts of interest to arise from the presence of
a Shareholder NED on the Board, particularly when it came to funding issues.
26.The model was that the Shareholder NED would have the same powers and
responsibilities as the other non-executive directors and would participate in
collective decision making of the Board. As with any non-executive director, the
essential responsibilities were those set out in the Companies Act 2006 including
the promotion of the success of the company for the benefit of its shareholders,
having regard to the interests of its stakeholders, and exercising independent
judgment in delivering effective corporate governance. In reality, of course, the fact
that Government was the sole shareholder meant that the interests and priorities
of the shareholder included policy objectives and could be readily identified. The
position of Shareholder NED did not carry any additional powers or rights beyond
those conferred on the other non-executive directors and certainly did not carry a
tight of veto over collective decision making on the part of the Board.
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27.As to the Shareholder’s interests and priorities in relation to POL, these are set out
in the letter to the Chair from the Secretary of State Vince Cable PM dated 11
January 2012 (UKGI00041966). In summary, they included: (i) the success of the
legal and practical separation of POL from RMG following the effective date of 31
March 2012; (ii) the effective establishment of the Board and Board committees;
(iii) the financial sustainability of the company; (iv) ensuring the Post Office
restructured its pension scheme to make it sustainable; (v) identifying a potential
path to demutualisation; (vi) obtaining State Aid approvals for Government funding
of POL; and (vii) the modernisation of the business. These were all aspects of the
overarching objective for the business to be financially sustainable which, as I have
outlined above, was a very challenging one given that it was operating at a loss
and receiving huge amounts of Government funding at the time.
28. The role of Government as the sole shareholder in POL was also reflected in POL’s
updated Articles of Association (“Articles”), dated 2 April 2012 (UKGI00043216).
Those Articles provided that the Secretary of State would be a ‘Special
Shareholder’ in POL mirroring the rights that the Secretary of State had held in RM
Holdings and would have certain special rights, including the right to request
information, the right to appoint or remove the Chairman or a director (Article 70),
and the right to receive an annual strategic plan from the business (Article 72). The
formal powers conferred on the Shareholder in the event of fundamental
dissatisfaction with the strategy or operation of the business were limited and
consisted principally of the power to remove the Chair. However, the intention was
that the establishment of the Shareholder NED position would provide a more
effective means of engaging with the exercise of many of these rights and provide
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a more comprehensive line of sight into to the operation of the business at board
level.
My appointment to the POL Board in April 2012
29.At the time I joined the POL Board at its first meeting of the separate company in
April 2012, its other members were Alice Perkins (Chair) who was appointed in
Summer 2011 and became Chair in September 2011, Neil McCausland (the Senior
Independent Director) who joined in September 2011, and Virginia Holmes (Non-
executive Director) who joined on 4 April 2012, two weeks before me. Alice Perkins
had taken over from Donald Brydon who was RMH Chair and also Chair of POL
until then.
30.My letter of appointment as Shareholder NED is at (UKGI00017300). It was
envisaged that my term of appointment would be three years, and would be
unremunerated. That is to say, it was intended that I would take on this
responsibility as part of my civil service employment. My powers and duties as a
NED were defined generally as ‘such powers and...such duties as are appropriate
to your role as a Non-Executive Director of the Company’, and I was expressly
reminded that it would be my responsibility to ‘withdraw from any discussion where
you have any interest that may, or may be perceived to, influence your judgment.’
3
.I believed in the important role of the Post Office in our society and I was committed
to the separation of the company as a positive step. That said, I do not recall direct
knowledge of the decision-making process that led to my appointment as
Shareholder NED and the precise reasons why I was considered to be the most
suitable person for the role. The ShEx team was small and as Director of the
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RMPS team, once the decision was taken to have a POL NED, I believe the
working assumption was that I would undertake that role as part of my ShEx job.
As I understood it at the time, each of the other non-executive directors were picked
for their specific skills to meet the business’ needs. In my case, I had relevant
experience a result of the work I had done on the separation, in the course of which
I had gained an understanding not only of the current perspective of the
Government in relation to RM and POL but also the market dynamics. I had also
met the Chairman and Chief Executive and I knew the Chairman and Chief
Executive of RMG. For my part, although I had not previously acted as a NED, I
did have experience of the operation of, and interface with, boards of large
companies both in my previous career as an investment banker and from my work
in ShEx.
32.As noted in the POL Summary presentation prepared by ShEx in February 2012
with which I have been provided by the Inquiry (UKGI00018222), I was on
maternity leave at the time of my appointment as Shareholder NED. My maternity
leave commenced in March 2012 and ran to March 2013, when I returned to my
new role at the DECC. As I recall, the terms of my maternity leave were standard
for the Department such that I was technically required to limit any working hours
to 10 ‘keeping in touch’ days although in practice I suspect that the time I used,
during the period April 2012 to March 2013, for attending POL Board meetings,
reading Board papers and correspondence, and having meetings with POL and
ShEx officials, extended far beyond this limit.
33.1 do not know what, if any, role my maternity leave played in the decision to appoint
me as Shareholder NED but, in practical terms, it inevitably meant a degree of
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separation from my former team in ShEx and from the regular interaction with
Ministers which had been part of my day-to-day work in ShEx. When I went on
maternity leave in March 2012, Roger Lowe was appointed as Director of RMPS
in my place, and Anthony Odgers took over from him in December 2013.
Operation of the Board
34.At the time of my appointment the Board was not complete and was engaged in
setting up its new sub committees and working processes now that it was a stand-
alone board. Further non-executive directors were appointed later: Alasdair
Marnoch joined the Board in May 2012 (who chaired the Audit and Risk Committee
once that started to function later in 2012); and Tim Franklin, (who went on to focus
on mutualisation), joined in September 2012. On the executive side, the Board
members at the outset were Paula Vennells, Chief Executive, and Chris Day,
Finance Director. Alwen Lyons also attended Board meetings as Company
Secretary. Other executive team members would come to the Board fairly regularly
to deal with specific issues.
35.The Board was in effect “brand new’ in April 2012. In particular, all the NEDs (and
the Chair) were only recently appointed when I joined. Accordingly, the Board did
not have an established institutional culture and there was inevitably a sense,
particularly in the early stages, of the Board seeking to get to know each other, and
for the NEDs, developing an understanding of the business as well as establishing
Board processes and getting to know the executive team and the business. There
was a hugely complex agenda facing the business at this time for all the reasons I
have described already and, in the first year in particular, we were focussed on
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getting to grips with a whole series of significant and pressing issues, as outlined
in the Secretary of State’s letter to the Chair to which I have referred above
(UKGI00041966).
36.My recollection is that the Board would typically meet around eight times a year,
with an annual Board Strategy Day — usually offsite — and ad hoc additional single-
issue meetings, which would sometimes take place as a conference call.
37.Before each meeting the directors would receive a pack of Board papers. This
pack would typically arrive at least a few days advance of the meeting; I generally
felt that this provided sufficient time to read and consider them and if necessary to
talk to some of the executives or other NEDs before the meeting, with the exception
of the first meeting. The papers would typically include the agenda for the
forthcoming meeting (which would be set by the Chair), the minutes of the last
meeting (to be agreed by the Board), written update papers, reports, and any other
documents that we would be required to note but which did not form part of the
formal discussion. Later during my tenure, POL introduced electronic board papers
where the papers would be uploaded before the meeting and there was also a
separate area or electronic ‘reading room’ where some background papers would
be uploaded. The papers would sometimes include a CEO’s report, which the CEO
would address at the meeting by way of giving an overview of the more operational
aspects of the business which were delegated to the executive team to lead.
38. Over time, a number of Board sub-committees were established to facilitate more
in-depth consideration of specific issues including: the Audit and Risk Committee
(“ARC”) chaired by Alastair Marnoch; the Pension sub-committee chaired by
Virginia Holmes; the mutualisation sub-committee; the remuneration committee,
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the nominations committee and, from early 2014, the Project Sparrow sub-
committee, which was established to consider and oversee the complex issues that
arose after the Second Sight interim report in 2013 and were by then deemed
sufficiently significant that they needed their own committee separate from the
ARC. Some of these committees already existed in the pre-separation structure.
For example, I note that there was an ARC before Alastair Marnoch joined the
Board, but we were keen to enhance the status of the ARC as part of ensuring best
practice in corporate governance terms.
39. I served on the ARC from its initial establishment until March 2013 (when I returned
to work then at DECC). I note from the material provided to me by the Inquiry that
the first separate meeting of the ARC took place on 13 November 2012
(POL00021430), although I note that the ARC’s sign-off of the Annual Report and
Accounts was incorporated in the full Board meeting on 23 May 2012
(POL00021507) as it had not yet met as a stand-alone sub-committee. As far as I
can tell from the documentary record, I attended two meetings of the ARC (in
addition to ARC contributions to full Board meetings of the type I have just
described). As in any company, the ARC had a significant role in overseeing the
usual areas for audit and risk committees including financial control and accounting
issues (including undertaking the assurance work necessary for the Board to sign
off the Annual Report and Accounts) as well as exercising oversight of organisation
management of key risks. By way of example, the February 2013 ARC meeting
minutes shows consideration of POL’s annual risk management strategy,
identification and monitoring of the key material risks for the business, and POL’s
“Speak Up” (Whistleblowing) policy (UKGI00042822). In addition to the Chair
(Alasdair Marnoch) and other NED representatives, ARC meetings would be
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attended by the relevant members of the executive team and internal audit and
external auditors (Ernst &Young) at key points in the financial year.
40. The reason for my decision to step down from the ARC, which is recorded in the
minutes of the Board meeting of March 2013 (UKGI00018098), was simply that I
did not consider that I had the time / capacity to remain on numerous sub-
committees following my return from maternity leave and the start of a new and
demanding role at DECC. As reflected in my exchange of correspondence with
POL on 28 March 2013 (UKGI00017360), at the time I thought it was sensible for
me to prioritise my continued membership of the Pensions Sub-committee as
pensions-related matters were a particular focus of attention for the government in
light of the need for POL to have a sustainable pension scheme. The pension
scheme was work I had been engaged on prior to my appointment as Shareholder
NED and the only NEDs on that sub-committee were Virginia Holmes (Chair) and
me whereas the ARC had three other NEDs already (Alasdair Marnoch, Tim
Franklin and Neil McCausland).
41.1 also served on the Mutualisation Sub-committee which, as the name suggests,
was intended to oversee work undertaken to analyse the Government's desire for
the potential for ownership of POL’s business to be transferred to a mutual
structure, and the available evidence indicates that I attended four meetings of this
committee during my tenure.
42.My recollection is that the Board meetings were formal and orderly. At the time, I
recall that we were able to engage in frank and robust discussions about a range
of significant and difficult issues. I also recall that the Chair was keen to ensure
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properly robust challenge from the NEDs. My perception was that the new NEDs
did not hold back in this regard, and there were a number of discussions which I
expect the executive found challenging, including for example in the aftermath of
the interim Second Sight report. At the end of the first year, in the summer of 2013,
we undertook a formal board effectiveness review consistent with good practice for
corporate governance at the time. The report, which was prepared by the Chair, is
annexed to the agenda for the 16 July 2013 Board meeting and was also sent to
ShEx. It provides a contemporaneous view of the Board’s perception of its
operation at that time and, from my perspective, the headline comments made by
the Chair reflected the general view of the Board as whole, including the following:
“The creation of a new PO Board has gone remarkably well in a very difficult
context and challenging environment. The Board is maturing. It has come a long
way since autumn 2011 and is operating very well (8 out of 10). We can be pleased
where it has got to and the Shareholder should be pretty pleased. The issue now
is how to make it even better.” (POL00099210)
43.In general terms the relationship between the executive and the Board was positive
and constructive. The Board or individual members did, from time to time, express
its dissatisfaction with the papers from or discussion with the executive (again, the
events surrounding the publication of the interim Second Sight report provide a
clear example) and, as I explain below, there came a point when I started to have
some doubts about the ability of the executive team to deliver on the remedial work
that had been identified following the Second Sight interim report. However, at the
time, I did not perceive there to be any lack of trust between the Board and the
executive, nor did I have any sense then on the part of the Board that the executive
was withholding significant information (deliberately or otherwise) or presenting a
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misleading picture regarding the operation of the company or the control
environment. My view remains that a relationship of trust is a fundamental
requirement for the effective operation of a Board and, indeed, good corporate
governance more generally, and if the Board had perceived that to be lacking then
I would have raised that as a significant concern which needed to be resolved, and
I have no doubt my fellow non-executive directors would have done so as well. As
with any Board we, the NEDs, were aware that we were only ever sighted on a
very small fraction of the material relating to the day-to-day operation of the
business, and relied on the executive to bring to our attention significant issues,
whether operational, financial, or reputational, however difficult they may be.
44.Our fundamental assumption was that we were being given a true and accurate
picture of the operation of the business by the executive and I am quite confident
that if we had ever suspected otherwise we would have said so. I considered the
Chair and NEDs to be open minded and ready to challenge the executive and,
again, I think the position is well summarised in the Chair's report of the Board
Effectiveness Review: “The Board has got better as it has matured. People have
become feistier; they are challenging but very respectful of each other and of the
business. Board members come well prepared; they are good at listening....The
Board is quite different from a year ago. It is stimulating, vibrant, pro-active and
searching for solutions in its determination to fix the business.” (POL00099210)
45.I discussed my sense of the executive team and the Board’s functionality fairly
regularly with the Chair, as we were both keen to ensure there was constructive
challenge and I felt the other NEDs, as they came to be appointed, brought more
of this. We also had non-executive only meetings with the Chair from time to time
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for issues that were better discussed without the executive. We were seeking to
ensure good corporate governance consistent with the best practice of the day and
I note for example, the reference in the minutes of the ARC meeting of 13
November 2012 to a full analysis of POL’s compliance with the UK Corporate
Governance Code being underway and the expectation on the part of the ARC that
‘there appeared to be nothing which would prevent the Post Office confirming that
it upheld the principles of the Code, even if some of the detailed recommendations
would not be applicable to a Government-owned organisation” (POL00021430). I
also note that a ‘Corporate Governance Review’ drafted by the Company Secretary
was included in the Board pack for the January 2013 meeting which provided an
update on the work being undertaken in this regard (POL00021510).
Relationship with the shareholder
46.1 was the first Shareholder NED to sit on the POL Board and I was conscious, from
the outset, that POL (consistent also with RMG’s position) was very sensitive about
what it saw as potential ‘interference’ from the Shareholder in the running of the
business with a direct seat on the Board. Prior to this point, the general approach
would have been that the relevant Secretary of State would meet the Chair and the
Chief Executive perhaps annually, the Postal Services Minister would meet the
company’s leadership team much more frequently, and there would be very regular
contact between the Post Office executive and ShEx (certainly monthly and often
daily), so there was a significant degree of contact between the company and the
Shareholder. All of these interfaces continued when I was a NED but having a
Shareholder representative on the Board as well was perceived as a significant
step change.
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47.I have had sight of relevant ShEx documentation in respect of this matter, and note
a briefing to the Secretary of State dated 30 September 2011, which sets out the
ShEx view of the Chair's concerns as regards a Shareholder NED joining the POL
Board (UKGI00041959). These concerns were: (i) whether it would be compatible
with the Government's vision for a future mutualisation; (ii) whether it would “in
some way prevent Government insulation from the impact of operational
decisions”; and (iii) one Board member having expressed a reluctance to serve on
a Board with a ShEx appointee as NED (although the reason for this reluctance is
not explained). The briefing provided responses to these points, and in relation to
the second concern noted that: “/n reality, the impacts of many operational issues
in POL already lead to pressure on the Department, at both official and Ministerial
level. We do not see that a ShEx Board member would materially change the
position.” The briefing also emphasised that ShEx practice was to take Board seats
in its portfolio assets unless there were compelling reasons not to, and that this
was standard practice in other areas where shareholders owned a significant
proportion of the relevant business.
48. In addition, I note a letter dated 25 October 2011 from the Secretary of State to
the Chair (UKGI00042610) confirmed the decision to have a Shareholder NED,
and added that “any Shareholder Executive appointee would be subject to the full
range of legal duties applicable to other directors. So there would be no risk that
such an appointment would lead to any diminution of the arm’s length relationship
between the Government and the Business’. A letter from the Secretary of State
to the Chair dated 11 January 2012 (UKGI00041966) confirmed that “As we have
discussed, and as referred to in my letter of 25 October last year, I expect a
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Shareholder Executive official to take a position on the Post Office Ltd Board from
the point of operational separation from Royal Mail’.
49. My recollection is that there was also a distinct nervousness on the part of the POL
Chair as regards the extent to which having a Shareholder NED might give rise to
a conflict of interest on certain issues, particularly in respect of the provision of
public funding to the business.
50.1 was also conscious of the fact that my position as a newly-appointed Shareholder
NED was a novel one and that there was some uncertainty as to the nature and
extent of my remit at the outset. To address this uncertainty and the concern as to
a potential conflict, it was necessary for me to confirm to the Board the position as
to my role and responsibilities concerning these issues at the Board meeting on 23
May 2012 (UKGI00019348). Despite this explanation, this continued as a theme
through my tenure as Shareholder NED and I did not routinely share Board papers
with ShEx as it had been agreed as part of the attempt to reassure the Chair as to
the role of Shareholder NED that I would not do so.
5
.I am reminded from a review of email correspondence that even this relatively
limited and informal level of contact with the Shareholder Team was a cause of
concern to POL, which persisted through 2012. For example, I note that there was
an email exchange between Will Gibson and me at the end of November 2012 in
which we refer to the dissatisfaction on the part of the Chair of the POL Board that
I was discussing POL matters with Mr Gibson (UKGI00017356). I considered it
important that I maintained a line of communication with the Shareholder Team and
I explained my position to the Chair who, as far as I am aware, provided some
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reassurance to the Chief Executive. I do not consider that these concerns
significantly compromised my ability to act as an effective shareholder NED and I
never consciously refrained from expressing my views for this reason, but I was
always conscious of these concerns on the part of the business and the need to
make my own judgement as to how to manage them.
52.My maternity leave arrangements between March 2012 and March 2013 and,
subsequently, my transfer to a different department (DECC), inevitably also meant
that I was separated from the Shareholder Team in practical terms because I was
not physically co-located with the team. This separation was made more acute by
the fact that I was on a different IT system from the Shareholder Team. The BIS
departmental policy was that women on maternity leave could not use their work
IT (computer, mobile phones / devices or email accounts) and so notwithstanding
the fact I was undertaking a civil service role to which I had been appointed by the
Department, I was required to use my home phone and personal email (which is
why my email address has a different surname in some of the correspondence).
While this level of separation may have gone some way to mitigating the sensitivity
felt by POL around the creation of the Shareholder NED position, because I was
simply not in the flow of work from ministers and the department and Shareholder
Team’s advice, it presented some practical challenges in terms of maintaining an
effective flow of information to the Shareholder Team and from them to me.
53. The onus was on me to find a practical way around this and I achieved this
primarily through making arrangements for in person meetings and discussions
with ShEx — both with my line managers Stephen Lovegrove and then Mark
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Russell, and with Will Gibson and Richard Callard, the Heads of the POL
Shareholder Team. For example, my recollection is that Mr Gibson and I would
exchange emails mostly to set up calls to discuss Board meetings both before and
after, and we would frequently meet in person. I note that there are a number of
examples of this sort informal of correspondence in the documentation provided to
me by the Inquiry (UKGI00017340, UKGI00017341, UKGI00017347). These were
important interactions and their primary purpose was to enable me to understand
what was on the government's agenda, the Minister's priorities and any
departmental focus areas at that time, and for me to keep Mr Gibson up to date
with issues being considered and debated by the Board.
54.As I was not part of the Shareholder Team directly and was not involved in the day-
to-day interaction between the Shareholder Team and Ministers in this period, I did
not routinely take part in the drafting of submissions to Ministers on POL-related
issues or their sign off; nor did I assist with the preparation of Ministerial statements
or answers to Parliamentary questions. To the best of my recollection, I only
attended one meeting with the relevant Minister, Jo Swinson, in February 2013,
and only ever as an additional attendee alongside the POL Chair and CEO and
core Shareholder Team. However, there were frequent meetings between the
Minister and the Shareholder team, and between the Minister and the POL Chair
and/or Chief Executive, and I have now seen a large volume of correspondence
and associated documentation relating to this contact of which I was not aware at
the time. The level of contact I had with Ministers during my tenure as Shareholder
NED was in marked contrast to the very regular meetings I had with Ms Swinson’s
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predecessor, Ed Davey and Norman Lamb, during the period 2011-12 when I was
working in the Department on RMG and POL-related issues.
Knowledge of Horizon-Related Issues at Appointment
55.As I have explained above, I had very limited knowledge of POL’s operational
business prior to my appointment as Shareholder NED, having been focussed on
the high-level issues surrounding separation of the business from RMG. As well
as various ShEx in-person briefings before I started, I received some limited
induction into my role from POL itself, which largely focused on an introduction to
POL as a business. I was sent some hard copy documents for this purpose, which
I reviewed and which gave me an insight into the financial position of the company
in particular. As a new Board, we also went on a number of visits to Post Offices.
In the early part of my tenure I also requested meetings with the executive team
on specific issues that were coming up at the Board in order to gain a better
understanding of the operational context. For example, I wrote to Alwen Lyons on
11 May 2012 asking for a briefing on legal and compliance issues
(UKGI00017336), and I also recall receiving a briefing on IT related issues, at my
request, from Lesley Sewell (which, from recollection, was also attended by
Virginia Holmes).
56.1 note that I was copied into email correspondence attaching POL’s statement in
response to the Inside Out programme and the three cases to which it referred but
as I have set out above (UKGI00001384), I do not recall receiving any other
material relating to prosecutions of sub-postmasters, or which expressed concern
about the reliability of the Horizon system more generally as part of my role as
Director of the RMPS team.
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57.1 have been asked a number of questions relating to my knowledge of POL’s IT
provision in general, and the Horizon system in particular, at the time of my
appointment. I recall being aware of the existence of the Horizon system at the
time of my appointment as Shareholder NED and I had a general, high-level
understanding that it was the system operated in branches across the country. I do
not have any recollection at that stage of expressly considering the operation of
Horizon in the context of the prosecution of sub-postmasters but it would have been
self-evident that, if the prosecution included reliance on accounting information
drawn from the branch computers, the data would likely be drawn from the Horizon
system. I do not recall being aware of concerns regarding remote access to the
Horizon system until many years after I had left the Board.
58.1 do not now have any express recollection of being aware that Fujitsu was the IT
contractor responsible for the Horizon system when I started as a NED, but it is
entirely possible that there would have been reference to this fact at meetings I
had attended in my capacity as the Director of the RMPS team in ShEx, or in
documents that passed across my desk in that capacity, and I had a general
awareness that Fujitsu was a supplier of IT services to the public sector at the time.
The choice of IT contractor, and the detail of the contractual relationship, would
have been regarded as ‘business as usual’ issues for the company to deal with and
it did not form any part of ShEx’s role to oversee decisions such as choice of IT
contractor, which would have been subject to established public procurement
procedures in any event. It is likely that there would have been some engagement
between DTI and RMG when the original contract was entered into in 1999 given
its scale but that was long before my time in post. Given the delegated authorities,
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when I was on the Board, I have been reminded that any spend over £50m required
authority from the Shareholder at that time, and I assume that the Horizon contract
would have crossed whatever the relevant threshold was back when it was
introduced.
59.1 do not recall being conscious of any specific concerns regarding the nature of the
relationship between POL and Fujitsu at the time of my appointment. I have some
recollection, at a later stage of my tenure, of there being a degree of concern
expressed to the effect that it would be expensive for POL to replace Fujitsu as a
principal IT contractor and I am reminded by the material provided to me by the
Inquiry that there was a significant piece of work being undertaken by POL during
2012 to review its IT infrastructure and what was described as the ‘evolution of
Horizon’ (see, for example, the series of papers on IT related issues included within
the September 2012 Board pack) (POL00103348).
60.My understanding was that this programme of work was being driven by a
perceived need to update the company’s IT infrastructure generally, and this was
a theme that came to the Board in a number of different papers in terms of
considering the forward-looking strategy for IT. For example, it was described in
the September 2012 ‘Information Technology and Change Transformation
Programme Update’ as the need "to deliver the significant business and
technological transformation which underpins the strategic priorities of Post Office
for the next three years” (POL00103348).
6
=
.I am reminded by an email from Tim Franklin to Alwen Lyons dated 22 July 2013
which I have been shown as part of this Inquiry (POL00099418) in which Mr
Franklin refers to the IT Transitional Services Agreement and expresses the view
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that Horizon is a complex Fujitsu proprietary system and any move other than
renewal would "present unacceptable risk”. While I do not now have any direct
recollection of this email at the time reading the email now it would appear that he
considered that replacing Fujitsu as POL’s IT services provider would mean having
to replace the entire Horizon system and that this placed Fujitsu in a very strong
negotiating position.
62.1 do not recall receiving any ‘technical reports’ concerning the operation of the
Horizon system in my capacity as a Shareholder NED, other than the brief
references to the operation of the system in the Second Sight interim report. As I
have described, we did receive a number of papers concerning POL’s IT
infrastructure and the proposals for its evolution, some of which were quite
technical in nature including in relation to normal risk management areas such as
disaster recovery (which came to the ARC), but they did not address the operation
of the Horizon system itself as far as I am aware.
63. The various streams of IT related work that were brought to the attention of the
Board during my tenure were often complex and detailed. They included the need
to renew the Fujitsu contract, issues relating to ensuring the resilience of POL’s IT
infrastructure and what was needed to make it resilient in light of the anticipated
future development of the business, whether to outsource some IT services to India
(the Towers strategy), and the approach to the end of the transitional services from
RMG which had been put in place at separation. My recollection is that part of the
skillset for the new NEDs (particularly Neil McCausland, Alasdair Marnoch and Tim
Franklin) was their IT expertise. I did not have this background and, as I have said
above, I recall requesting some additional briefing from Lesley Sewell at some
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point in 2012. The briefing I received was POL’s IT infrastructure and operation in
general and I do not recall it addressing specifically the technical operation of
Horizon, or concerns relating to its accuracy and/or integrity.
64.As to my understanding of the risks and/or compliance issues which could arise
from POL’s reliance on data generated by Horizon, I was aware at a general level,
that the Horizon accounting system was integral to POL’s network and so it would
have been apparent to me, had I had cause expressly to consider the issue, that
deficiencies in the data produced by Horizon could have implications for the
business at a financial level, and might also give rise to compliance issues.
However, I would also have been aware that as a financial / accounting system, it
would have been subject to external audit assurance as part of the financial
accounts and that any material issue would have been flagged to the Board
because without this, it would not have been possible to sign off the accounts on
an unqualified basis, which is what happened in 2012 and 2013. At this stage, I do
not recall making any link in my mind between the issues of the reliability of Horizon
data and the soundness or otherwise of prosecutions of sub-postmasters.
65.1 do not recall being told anything, at the time of my appointment, about POL’s role
as a prosecuting authority or about any history of concerns relating to the operation
of the Horizon system. I also cannot recall this issue being apparent in the
allocation of responsibilities on separation of the businesses and all the legal work
that went into that process; nor do I recall seeing any reference to it in the
organisation’s structure charts that I saw as part of my induction at POL. I became
aware of these issues, over time, through my attendance at Board meetings and
in the circumstances I describe below.
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66.As far as I am now able to recall, my awareness, at the time of my appointment as
Shareholder NED, regarding civil claims being threatened by sub-postmasters was
limited to the information contained in the first significant litigation report (“SLR”),
dated March 2012, and sent to me as part of the Board pack for my first Board
meeting as a NED in April 2012. The SLR (UKGI00018251) appears to have been
included with the Board papers but ‘below the line’ and for noting only (i.e. not for
discussion by or at the Board). As I have explained, the Board papers would include
papers that were intended to form the basis of discussion by the Board and papers
which we were requested to note for information but not usually discussed. The
first SLR I saw contained reference to ‘Horizon claims’ and recorded that
notification of five claims had been received, one of which had been struck out.
67.At the time, I expect that I noted the SLR, as requested. It consisted of summary
details of various types of litigation, including employment-related disputes, of a
type which seemed to me to be the sort of matters which could be expected to
arise in the ordinary course of business for a large organisation such as POL with
thousands of staff and a very wide variety of commercial activities and on which
the executive would be leading. The way this issue was presented, below the line
simply as a matter to note at the end of the meeting, made it clear that the POL
executive did not regard it to be particularly significant at this stage and the Board
was not being invited to treat it as such.
68. It follows that I do not recall having any particular concerns about the merits of
these civil claims at the time of my appointment. The information contained in the
SLR was to the effect that four of the threatened claims had yet to be issued, and
the one that had been issued had been struck out. Moreover, and as far as I can
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recall, no concerns were being expressed by the POL executive that the claims
might have merit, or otherwise indicate systemic faults with the Horizon system.
69.1 have been asked by the Inquiry to address a series of questions concerning the
way in which any concerns I may have had regarding a number of issues relating
to the operation of Horizon developed over the course of my tenure as Shareholder
NED. I have also been asked to address the steps that I took to satisfy myself that
these concerns were being adequately addressed by POL and my perception of
the adequacy of the Board’s oversight of the measures taken by POL, including
the engagement of Second Sight and the establishment of the mediation scheme.
Inevitably, my perception of the issues relating to Horizon and the measures being
taken by POL to address them developed over the course of the two years I spent
as the Shareholder NED and so I have sought to address these questions by
providing a chronological account of my tenure which deals with the issues raised
by the Inquiry at the various points at which they came to the attention of the Board.
70. Before turning to the detail of the chronology, I hope it may assist if I make clear
that throughout the entirely of my tenure as Shareholder NED the consistent and
unequivocal message given to the Board by the POL executive was that it had
complete confidence in the accuracy, integrity and robustness of the Horizon
system. A number of reasons were given in support of that position including the
vast number of transactions performed by the system, the confidence in the system
expressed by the NFSP, and the ‘rigorous testing’ to which the system had been
subjected. It was robustly and consistently asserted and that any concerns being
expressed about the operation of the system being fundamentally flawed were
unjustified. I have already made reference to the POL response to the Inside Out
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=
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programme in November 2011 which made all these points in forceful terms, and I
recall the same line being repeated in a number of further occasions while I was
on the board, both in the course of oral updates given to the Board, in documents
circulated in advance of Board meetings and in correspondence. Simply by way of
example, I note the following extract from an email sent to the Board by the Chief
Executive following the appointment of Second Sight in June 2012
(POL00096692): “The Post Office continues to have absolute confidence in the
robustness and integrity of its branch accounting processes. Over the past ten
years, many millions of branch reconciliations have been carried out with
transactions and balances accurately recorded by more than 25,000
subpostmasters. The Post Office has no hesitation in agreeing to an external
review of these few individual cases that have been raised with us by a number of
MPs.”
. This essential position remained unaltered throughout my tenure. In particular, it
did not change following production of the Second Sight interim report. Purely by
way of example as to the message being presented to the Board as regards the
interim findings of Second Sight, I have seen the speaking notes prepared for the
1 July 2013 update to the Board on the Second Sight investigation, which provided
the following explanation in relation to the references by Second Sight to two
anomalies with the Horizon system (POL00098878): “This is a red herring. In both
cases the errors were picked up and either have been or are in the process of
being addressed with the affected sub-postmasters; a comprehensive audit has
been performed to check there weren't further cases we weren't aware of; and new
procedures are being put in place to ensure such anomalies are spotted at an early
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Stage in the future.” Those notes are consistent with the message I recall being
given to the Board at that time, and until I left the Board in March 2014.
Chronology — Second Sight and Mediation
72.I deal below with the chronological detail of my tenure as POL Shareholder NED,
with particular regard to Horizon-related issues. The narrative is structured
primarily around the Board meetings I attended during that period as this was the
principal forum for my interaction with the company and it was through Board
papers and oral briefings to the Board by POL Chair, Chief Executive and
management that I became aware of the concerns relating to Horizon and the steps
being taken by POL to address those concerns. It is important to note, however,
that during my tenure as Shareholder NED I had numerous meetings and calls with
others, including the POL executive team and members of the ShEx Shareholder
team which would not necessarily have been routinely minuted. I have excluded
the vast bulk of all the other issues the Board was considering and doing during
this period as I understand the focus of the Inquiry’s questions to be on the Horizon
issues and the Board’s knowledge of, and response to, those issues.
73.Before I go into the chronology, and as I explain in this section of my witness
statement, the Board was provided with updates concerning ongoing prosecutions
in the form of SLRs which were included from time to time in the Board packs, for
the Board to ‘note’. These SLRs provided short and impersonal summaries of the
prosecutions limited, for the most part, to the procedural progress of the case and
(if applicable) the outcome. I am now acutely aware of the devastating impact of
these prosecutions (and many others like them) on the sub-postmasters involved
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and their families and I wish to make clear that in providing the Inquiry with an
accurate account of the sparse and anodyne information regarding these
prosecutions with which the Board was provided I have not lost sight of the
enormous distress and suffering that lies behind each one of these cases.
January 2012 Board meeting
74.1 note that the minutes of the January 2012 POL Board meeting (POL00021503)
record that I attended for part of the meeting but not as a Board member. This was
before the establishment of POL as a separate public corporation and before my
appointment as the Shareholder NED. I have no direct recollection of this meeting,
but it would appear from the minutes that the purpose of my attendance was only
to address the issue of remuneration and it is likely that my attendance was limited
to this part of the meeting alone. I do not recall any discussion of Horizon-related
issues during my attendance at this meeting and I am confident that I would not
have been involved in any such discussion had it taken place.
18 April 2012 Board Meeting
75.On 18 April 2012, I attended my first Board meeting following my appointment as
Shareholder NED to the POL Board. The minutes record (UKGI00018112), that
Paula Vennells reported that she had met with the CEO and Vice-Chairman of
Fujitsu. I cannot now recall the detail of the update, but I do not recall any specific
reference to Horizon as part of this update and I note that there is nothing in the
documentation I have reviewed to indicate that Ms Vennells’ report of her meeting
related to any concerns regarding the integrity of the Horizon system. It appears to
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have consisted of a general operational update given the contract needed to be
extended or renewed within the next few years.
76.The minutes also record that the Board was asked to note the SLR, dated March
2012, to which I have referred above. As I have explained, my recollection is that
it was through the inclusion of this paper in the Board pack, which the Board was
invited to note, that I was first informed that POL was involved in civil litigation which
included allegations of defects with the Horizon system. I do not recall any
discussion of the SLR at the Board meeting and I note that there is no record of
any such discussion in the minutes.
23 May 2012 Board Meeting
77.On 23 May 2012, I attended my second meeting of the POL Board. I have reviewed
the minutes of that meeting (UKGI00019348) and I note that I provided the Board
with an explanation of my role and responsibilities as the Shareholder NED at this
meeting. My recollection is that this was necessitated by a degree of uncertainty
and concern on the part of POL as to my remit and status and I sought to provide
a degree of reassurance by setting out the position concerning information sharing
and potential conflicts, particularly given the on-going work on the POL financing
(eventually agreed and announced in November 2013). Despite the reassurance I
sought to provide at this meeting the concerns regarding my appointment and the
potential for conflict persisted, at least to some extent, and I am reminded of the
exchange of correspondence I had with Will Gibson (UKGI00017356) in which I
tell him that Alice Perkins had spoken to me at length about POL’s concern that I
was maintaining contact with ShEx, which I continued to regard as essential.
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78. Towards the end of the meeting, as part of ‘Any Other Business’, Paula Vennells
and Alice Perkins reported to the Board that they had met two Members of
Parliament, James Arbuthnot and Oliver Letwin to discuss concerns expressed by
a number of their constituents regarding the integrity of the Horizon system. As far
as I recall this was the first I had heard of this meeting. We were also informed that
the business had agreed to engage a forensic accountancy firm to investigate the
system and “give further comfort to those concerned about these cases’. Save for
the references to Horizon in the November 2011 ‘Inside Out’ statement and the
March 2012 SLR, which I have described above, this is the first time I recall as a
NED becoming aware that there were significant concerns on the part of some sub-
postmasters regarding the integrity of the Horizon system, and the first occasion
on which I had heard directly from the POL executive about this issue. To the best
of my recollection, it was also the first time that we had discussed the engagement
of Second Sight to undertake the investigation. It may be that ShEx had some
involvement in the decision to commission Second Sight but I have no memory of
being aware of that at the time and I note that there was no Board paper informing
the Board of the MP’s concerns, or POL’s intended response, circulated prior to
the meeting.
79.At this initial stage, my reflection is that it seemed to me that the issue was being
dealt with appropriately and with seriousness by POL not least given the Chair’s
direct involvement and the impression I gained from the CEO and the Chair was
that POL had the matter in hand. Given that concerns had been raised by two
Members of Parliament, it was obviously appropriate that they be investigated and
taken seriously and, from my perspective, the engagement of forensic accountants
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to undertake an investigation appeared to be an appropriate response by the
business. At this stage I was not aware of the extensive background to the issue,
including the fact that POL itself had acted as the prosecuting authority in a large
number of criminal cases involving the Horizon system.
80.Although I do not now specifically recall receiving it, I expect that my overall
impression that the business was taking proactive steps to address any potential
concerns in relation to the integrity of Horizon was reinforced by an email that I
received from Paula Vennells on 21 June 2012 (POL00295355), drawing attention
to potential press coverage in connection with POL’s decision to appoint forensic
accountants to investigate. In that email, Ms. Vennells confirmed that the
appointment of external investigators was a “deliberate decision by us to be utterly
transparent and hopefully to close down what has become a bandwagon based on
no fact’ [sic]; and that, “[w]hatever the review finds, good or bad, we will respond
to it’.
8
=
.I also note that this meeting included a presentation by Alisdair Marnoch in his
capacity as Chair of the ARC and with Chris Day to the effect that the sub-
committee had reviewed the annual report and audited accounts (UKGI00019348).
There was no suggestion that the auditors had identified any material reportable
issues relating to Horizon, or that this represented a significant risk to the business
of which the Board should be aware.
4 July 2012 Board Meeting
82.The July Board meeting was preceded by a Board strategy ‘away day’ which ran
across 19 and 20 June 2012. The principal topic of discussion was mutualisation,
the Government having recently published its response to the consultation on the
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mutualisation of the Post Office. I do not recall there being any consideration of the
integrity of Horizon or any update on the progress of the Second Sight investigation
of which the Board had been informed at the previous meeting.
83.However, the Board was provided with a brief update during the meeting on 4 July
2012 (POL00021508). Specifically, we were told by the Chair that there was a
meeting taking place that day between Second Sight and Mr Arbuthnot, and that
the Board would be kept informed. I do not recall having any concerns arising from
this update although it would have been interesting to me that there were further
meetings with these stakeholders. At this stage there had been no indication of any
issues or concerns arising from the Second Sight investigation, which had only
recently been commissioned. Apart from the reference to the meeting between Mr
Arbuthnot and Second Sight, I do not recall there being any further information
provided to the Board concerning the integrity of the Horizon system and other
references to IT-related issues in the minutes of this meeting (including to Horizon)
were part of the general strategic planning for updating POL’s IT infrastructure.
84.1 can see from the minutes of the meeting that the Board was again invited to note
the SLR, without discussion. As before, I would have read the SLR as one of the
Board papers provided in advance of the meeting and I would have noted the
summary information it contained regarding the various pieces of litigation in which
the company was involved at the time, including the five Horizon-related claims.
19 September 2012 Board Meeting
85. In early September 2012 Jo Swinson MP was appointed as Parliamentary Under-
Secretary of State for Employment and Postal Affairs replacing Norman Lamb and
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I understand that she had a meeting with Alice Perkins and Paula Vennells on 18
September 2012, the day before the next Board meeting. I did not attend that
meeting and, to the best of my recollection, I did not meet Ms Swinson before
February 2013.
86.The pack of Board papers for the meeting on 19 September 2012 contained a
paper providing a ‘Horizon Evolution Update’ (POL00103348). This paper was
forward-looking and concerned the future of POL’s IT provision; it did not touch
upon issues surrounding the integrity of the Horizon system. I do not recall there
being any discussion regarding the integrity of the Horizon system at this meeting.
87.1 see that the Board were asked to note the SLR, dated 12 September 2012
(POL00103348). This continued to contain reference to the five Horizon-related
claims that had been summarised in earlier iterations of the report but also now
included a reference to media reporting that a firm of solicitors, Shoosmiths, had
been consulted on a further 85 cases, although POL had yet to be notified of any
further claims. I do not recall any discussion of this aspect of the SLR by the Board
at the September 2012 meeting and the minutes do not record any such
discussion. By this stage, the forensic accountants’ investigation had been
commissioned and we had received repeated reassurance from the POL executive
that the matter was being taken seriously. My recollection is that the Board was
content, at this stage, for the Second Sight investigation to run its course.
88.1 also note that the SLR now also included, for the first time in my experience, a
section entitled ‘Principal Criminal Cases Brought By Post Office Limited’ (Part B).
As at the previous two Board meetings, the Board was simply requested to note
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this report and, as the minutes reflect, it was not a subject for discussion.
Accordingly, whilst I would have looked at the report, I would not have spent a long
time studying it or thinking about its potential implications at the time. As I have
explained above, I do not recall being aware at this stage that the Post Office had
adopted the role of prosecuting authority itself; nor did I have any awareness of the
historic background as to how it had undertaken that role. Although I cannot now
recall exactly what I understood by this list of 11 criminal cases, I expect my
assumption would have been that potential offences had been identified by POL,
reported to the police, and that prosecutions had followed in the usual way.
23 October 2012 Board Meeting
89.My involvement with POL prior to the next Board meeting, on 23 October 2012,
consisted primarily of work relating to the financial sustainability of the business,
and my attendance at the meeting of the Pensions Sub-Committee on 11 October
2012. There was a significant amount of correspondence generated during this
period but neither strand of work engaged with Horizon-related issues.
90.It would appear from the minutes (POL00027610) that there was no further
discussion at the Board meeting concerning the integrity of the Horizon system,
the concerns raised by Mr Arbuthnot and Mr Letwin earlier in the year, or the
ongoing investigation by Second Sight. My understanding at this stage was that
the Second Sight investigation was underway and progressing as intended.
21 November 2012 Board Meeting
91. The November 2012 Board meeting was preceded, on 13 November 2012, by the
first stand-alone meeting of the ARC, chaired by Alasdair Marnoch. I attended that
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meeting which was primarily concerned with the establishment of the sub-
committee. I do not recall there being any discussion of the integrity of the Horizon
system at that meeting and I note that there are no references to this issue in the
minutes (POL00021430).
92.At the meeting of the full Board, on 21 November 2012, the Board was again
provided with, and invited to note, an SLR, dated 14 November 2012
(POL00107831). Part A of the report provided a limited update on the progress of
the Second Sight report and recorded that Second Sight were now reviewing up to
16 cases involving allegations that Horizon had caused sub-postmasters to
experience losses. It also noted that POL was actively considering proposals from
the JFSA to develop a “no blame” framework within which sub-postmasters could
raise concerns with Horizon which would be considered by Second Sight. The
Board was asked to note the report, which I assume I would have considered to
provide a broadly reassuring picture. The engagement between POL and the JFSA
appeared to be a positive development and although the summary indicated an
expansion in the scope of Second Sight’s investigation the total number of cases
remained relatively low.
93. It appears that there was no material change to the criminal prosecution section of
the SLR, which again provided brief summaries of 10 cases. Of those 10 cases we
were informed that six had been resolved by guilty pleas, there had been one
conviction, and three remained outstanding. As before, no information was
provided as to the nature of the defences (if any) that were being advanced and
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there was no reference to the integrity of the Horizon system being called into
question.
94.Other than being invited to note the SLR and the update regarding the Second
Sight investigation, I do not recall the Board being provided with any further
information about any concerns regarding Horizon at this meeting, and the minutes
would indicate that the issue was not discussed at the meeting. To the best of my
recollection the Board was aware that the investigation by the forensic accountants
was ongoing and we were awaiting its outcome.
95.By this stage, approximately six months had elapsed since we had been informed
that expert forensic accountants had been engaged by POL to investigate the
concerns that had been expressed regarding Horizon. We had subsequently been
informed that Second Sight had engaged with relevant stakeholders including Mr
Arbuthnot and the JFSA, and that POL was seeking to establish a ‘no blame’
framework under which individual sub-postmasters could present their concerns to
Second Sight. As far as I can recall, my general impression was that this work was
being undertaken appropriately. We were dealing with a raft of issues of existential
significance to the business and, in light of the information available to us at the
time, I do not recall that the NEDs were being given reason to believe that there
being any cause for concern as to the conduct or progress of the Second Sight
investigation.
23 January 2013 Board Meeting
96.At the 23 January 2013 Board meeting I see that the Chief Executive provided the
Board with an update concerning the work being undertaken by Second Sight as
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part of ‘Any Other Business’ (POL00021510). We were informed of the timeline,
namely that a cut-off date had been given to the JFSA and individual sub-
postmasters to bring forward any cases or concerns that they wished to be included
in the investigation, and that Second Sight hoped to complete their work by
summer 2013. We were also told that, “to date there was no evidence to suggest
fault.” The Second Sight investigation was plainly taking longer than I had initially
envisaged and providing an extended period for sub-postmasters to submit cases
for consideration by the investigators seemed to me to be an appropriate way to
proceed.
97.The Board was also invited to note the SLR, dated 16 January 2013
(POL00340162). The update concerning the Horizon civil claims broadly echoed
the Chief Executive's update to the Board. I do not recall any specific discussion
about the contents of this SLR at the Board meeting.
February 2013 Meeting with Jo Swinson MP
98.In February 2013, I recall that I attended a meeting with Jo Swinson MP, together
with Alice Perkins and Paula Vennells. I have not seen any minutes of this meeting.
However, I do not recall a discussion of concerns regarding the integrity of the
Horizon system during that meeting.
20 March 2013 Board Meeting
99. Prior to the March 2013 Board meeting I attended my second standalone (and, as
far as I can recall, final) ARC meeting (UKGI00042822). The Board was seeking
through the ARC to improve the business’s risk management framework and we
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set out a process by which the business would identify the key (5-10) material risks
facing the business for consideration by the Board. The meeting went on to
consider a number of specific risks identified by the executive that that stage,
including a number of financial and commercial risks none of which related to the
integrity of the Horizon system, and I do not remember there being any discussion
of Horizon, or the ongoing Second Sight investigation at that meeting. As to future
governance arrangements, it was agreed at the meeting that: “Policy breaches
identified by management and any oversight processes should be notified to
internal audit. The Head of Internal Audit would report any significant policy breach
to the Committee.”
100.At the meeting of the Board, on 21 March 2013, I informed the Board that I had left
my role in BIS to take up the position of Director of Strategy and Change at the
DECC on a part-time basis as a job-share. I explained that the move would not
affect my position on the board of POL, but that I would step down from the ARC.
I have dealt with the reasons for this decision above.
101.1 note from the minutes that there is no record of any discussion of Horizon-related
issues at this Board meeting and I do not recall any such discussion taking place.
I have no direct recollection but I assume that, in light of the previous update to the
effect that the Second Sight investigation was expected to conclude in the summer,
the Board was content to await the completion of the investigation and the
production of the report.
102. As usual, the Board was invited to note the SLR (UKGI00018254), which contained
an update regarding Horizon-related claims to the effect that the Second Sight
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investigation was underway; a deadline of the end of February had been set for the
notification of additional claims to Second Sight; and Second Sight were reviewing
the material they had obtained thus far and were seeking input from both POL and
the JFSA. I do not now recall seeing anything in this update which gave me any
cause for concern. The criminal prosecutions section of the SLR continued to refer
to the 10 most significant criminal cases and provided the same level of summary
detail as to the status of those prosecutions.
9 April 2013 Board Meeting
103.1 have reviewed the minutes of the April 2013 Board meeting and it appears that
there was no discussion of Horizon-related concerns. I do not recall any such
discussion taking place and I would not necessarily have expected the Board to be
pressing for an update at this point for the reasons I have already explained: we
had been told that the investigation was progressing with the input of the relevant
stakeholders and a report was expected by the summer.
104.As reflected in the minutes, the focus of the meeting was on the very significant
challenges faced by the business at this point, a little over a year post-separation.
As noted in the minutes (POL00021512) of the part of the meeting concerned with
Network Transformation, the CEO and CFO explained to the Board that POL was
at ‘crisis point’ and changes needed to be made in order to prevent widespread
branch closures in the future. My recollection is that it was far from clear at this
stage how POL would be capable of meeting its obligations to become a viable and
financially sustainable business.
5 May 2013 — Briefing to Jo Swinson
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105.1 understand now that on 5 May 2013, Jo Swinson MP received a briefing from
POL. I was not present at that meeting and nor was involved in the preparation of
the briefing. I do not know what was discussed and whether the Minister was
provided with any information concerning Horizon and the ongoing investigation by
Second Sight. The same applies to a further such meeting which I now understand
to have taken place on 11 July 2013 with Vince Cable, the Secretary of State. I
see now that there were a series of further meetings with Jo Swinson that summer,
which I expect were focussed on the strategic plan, funding and mutualisation and
network transformation.
21 May 2013 Board Meeting
106.1 attended the next meeting of the full Board on 21 May 2013. As the minutes
reflect, the Board wanted to receive an update on the progress of the Second Sight
investigation, which we had previously been told was expected to be complete by
the summer of 2013. We were also aware that it had now been two months since
the deadline for submission of new cases to Second Sight had expired.
Accordingly, the Board directed that a written update be provided by POL to inform
the Board of the progress of the Horizon investigation. The action was assigned
to POL’s General Counsel, Susan Crichton (POL00021513).
107.1 cannot now recall whether there was anything that prompted the Board to require
a written update at this meeting beyond the passage of time since the last oral
update provided by the CEO at the January 2013 Board meeting, and the minutes
of the meeting do not assist in this regard. In any event, I think it was appropriate
for the Board to seek an update at this stage as it had now been a year since we
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had been told that Second Sight had been commissioned to conduct an
investigation and we probably wanted more detail as the regular updates had been
process focused and we had seen no substance.
108.An SLR, dated 15 May 2013, was provided for the Board to note (UKGI00018260).
The report explained that POL was cooperating with Second Sight’s investigation
by providing background data and “explanations to discrete issues raised”. That
seemed appropriate as far as it went but, as I have explained above, the Board
wanted to be provided with a more detailed update. The section of the SLR
concerning criminal prosecutions was in standard form and provided no details of
any defences raised or the extent to which the integrity of the Horizon system was
being relied upon, or called into question, in any of the prosecutions.
109.As I have noted above, the meeting also included a presentation by the Chair of
ARC concerning the Annual Report and Audited Accounts, which had been
reviewed by the ARC, and which did not contain any reference to reference to
concerns relating to Horizon.
1 July 2013 Board Meeting
110.On Monday 1 July 2013, I joined an ad hoc, single issue Board meeting which took
place by conference call in light of what turned out to be the significant urgency of
the subject matter (POL00021515). As far as I recall, no papers were provided for
the Board to consider in advance of the meeting, and we were simply sent an
agenda (UKGI00017289).
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111. The only item of business that day was the Second Sight work and we received an
oral update from the Chief Executive. We were informed that an interim report by
Second Sight was to be presented to MPs on 8 July 2013. Critically, we were told
that there were no systemic issues found with Horizon, which was consistent with
what the executive had been telling the Board from the outset. However, numerous
areas had been highlighted for improvement and it was also explained that two
historic anomalies had been identified which had been dealt with and had not
caused any losses to sub-postmasters. I remember also that at the time there was
a strong focus on the need to address the issue of training for sub-postmasters
that Second Sight flagged. In process terms it was also made clear to the Board
by the executive that they were not very impressed with the report. In particular,
we were informed that it was not as factual as POL had expected, and the Chief
Executive was worried that the report could generate ‘loose language’ at the
forthcoming meeting with MPs.
112.As far as I recall, this update was provided in the form of an oral briefing from the
Chief Executive rather than by way of a written report from the POL General
Counsel (as had been agreed at the previous Board meeting). I expect this was a
reflection of the urgency as I note it was now getting very close to when the Second
Sight interim report was eventually published and I would assume there was a
serious concern about the Board not being sufficiently sighted. We were being told
that the interim report was being presented to MPs in a week, so there was very
little opportunity for us to do anything about it. I cannot recall if we raised concerns
about the failure to provide the written update we had commissioned at the May
meeting but I recall being concerned about the lack of notice provided to the Board
of the presentation of the interim report: we had asked for an update on 21 May
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and we were now being told that the report was going to be presented to MPs in a
few days’ time. That concern was compounded by the fact that we were also being
told by the Chief Executive that there were inaccuracies and deficiencies in the
report.
113.In light of the fact that the Board had been told that POL executives considered
there to be material inaccuracies in the report, it asked POL to, “challenge Second
Sight to ensure changes were made to the report where possible..., and to prepare
their communications to combat any inaccuracies” (POL00021515), although we
had not yet seen the report itself. I was concerned, as was the rest of the Board,
at the prospect of a report being presented to MPs, and potentially placed in the
public domain, which was inaccurate.
114. My sense now is that as a Board we would have wanted to see the Second Sight
draft as swiftly as possible, but it is apparent from the minutes that it was envisaged
that there was to be some further interaction between POL and Second Sight
regarding the drafting of the report over the course of the following week, with a
view to producing an updated version. It is not clear from the minutes of the 1 July
call whether the Board pressed the executive for a copy of the draft report at that
stage. If we did not, it may have been at least partly due to the reassurance
provided by the Chief Executive to the effect that there was nothing of significant
concern in the report. In this regard I note that an email update was prepared for
the Board by the Chief Executive on 4 July 2013 regarding the Second Sight report
in which it was stated that that, “we understand that they have not found any
evidence yet of systemic issues with the Horizon system (and it should be noted
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that this is based on a detailed review of their four “best” cases in terms of
compelling evidence)” (POL00099003).
115.In the event, the Second Sight interim report was provided to the Board as an
attachment to an email sent on 8 July 2013. The covering email informed us that
the attachment was the ‘final draft’ and that it was subject to an embargo until 6pm
that day. I do not now recall precisely when I read the report following receipt of
this email, but I expect it would have been relatively shortly after it arrived. I note
that there appears to be a copy of the Second Sight interim report within the Board
papers circulated in advance of the meeting on 16 July 2013, and I have also seen
an email from Alwen Lyons, the Company Secretary, dated 14 July 2013
(POL00192017), instructing that a copy of the report in a file of Horizon related
papers in the electronic ‘Reading Room’ and so it may be that I reviewed the report
more than once.
9 July 2013
116.On 9 July 2013, Jo Swinson MP made a statement in Parliament about Horizon
(UKGI00001822). She informed Parliament about the publication of Second Sight’s
interim report and outlined that the report had found no systemic issues. To that
extent the statement was consistent with the briefing given to the Board by the
Chief Executive at the 1 July meeting. The Minister explained that the report made
no comment about the safety of historic convictions and noted that, even had the
report done so, the Government could not intervene in the legal process to review
or appeal convictions. She made clear that despite the Government’s
shareholding, POL operated at arm's length. She welcomed POL’s future initiatives
to deal with the issues raised by the report.
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117.1 do not recall knowing when we had the Board call on 1 July that the Minister was
planning to make a statement to Parliament about it and indeed the Shareholder
Team may not have given her advice on this until they and she had seen the report.
I was not involved in the preparation of the statement. I also do not now recall
receiving any advance notification of what she was going to say although I assume
I did speak repeatedly to Will Gibson in the days leading up to the publication of
the Second Sight interim report and the Minister’s statement given the Board’s and
ShEx’s concerns about this issue. I do not recall having any information or insight
concerning the Second Sight interim report which ShEx did not have and I have
seen from documents provided to me for the purposes of preparing this statement
that, as I would have expected, there was significant engagement between ShEx
and POL on this issue. The Shareholder Team would have provided the Minister
with support in preparing the statement (and I believe that an embargoed copy of
the report may have been provided shortly before the Ministerial statement for this
purpose), but I was not asked for any input into that process.
118.I have been asked a number of questions by the Inquiry concerning my perception
of the concerns raised by the JFSA and MPs concerning the integrity of Horizon,
whether I considered POL was taking these concerns sufficiently seriously, and the
steps I took to satisfy myself that the concerns were being properly investigated at
the time. I hope it may assist if I address those issues as matters stood at this point
in the chronology.
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119.As I have explained, the first time I was informed of the concerns being expressed
by MPs concerning the integrity of Horizon was at the May 2012 Board meeting.
At the same time, I was informed (along with my fellow non-executive directors)
that Second Sight had been commissioned to undertake an independent, forensic
investigation and that POL was confident it would demonstrate that there were no
systemic issues with Horizon. Thereafter the Board received updates as to the
progress of the investigation, including engagement with stakeholders and the
steps that were being taken to encourage sub-postmasters to report any concerns
they might have. I do not recall at any stage prior to 1 July 2013 being told that the
Second Sight report was expected to be critical, whether in respect of the integrity
of Horizon or at all. As far as I was concerned it was for Second Sight to reach an
independent assessment of the issue and I had an open mind as to what the
outcome might be.
120.In general terms, therefore, it seemed to me that POL were taking the issue
seriously, by commissioning and (as far as I was aware) facilitating an independent
investigation by forensic accountants. I recall being aware that the Chair herself
was heavily involved in the process of commissioning the investigation and that
she had discussed the issue with Mr Arbuthnot. The means by which I sought to
satisfy myself that the concerns were being properly investigated was by
considering updates as to the progress of the investigation and, in May 2013,
commissioning (along with the rest of the Board) a written update from POL’s
General Counsel. Up until July 2013 I considered this to be an adequate and
appropriate way for the issue to be investigated, and the level of oversight
exercised by the Board to be sufficient.
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121. The events surrounding the presentation of the interim Second Sight report in early
July 2013 inevitably caused me to reassess the position. I was very concerned to
discover that a report was shortly to be presented to MPs containing significant
criticisms the detail of which the Board had received no prior notification. I was also
concerned to hear that POL was concerned about the accuracy and/or quality of
the independent report it had commissioned to provide reassurance on this
important issue, again without any prior indication that this would be the case. Most
significantly, I saw from the report itself (POL00031813), when it was finally
circulated to the Board, that although its findings were said to be preliminary, they
contained both the statement that there were no systemic issues and a number of
significant criticisms of POL, including reference to the presence of ‘bugs’ and/or
defects in the Horizon system and shortcomings in the training given to sub-
postmasters. Accordingly, my view at the time was that this issue had been poorly
handled by POL, and my recollection is that this view was shared by the rest of the
Board, along with the view that there needed to be prompt and extensive action on
the part of POL to address the issues that had been raised and to help the Board
reach a view on the underlying issues.
122. After 8 July there was a period of intense activity through the Summer of 2013 in
relation to this issue as the Board sought to get more clarity on the key issues. I
turn now to describe the action taken by the Board in response and my perception
at the time of the adequacy of the measures put in place by POL to address the
concerns raised by the Second Sight interim report.
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16 July 2013 Board Meeting
123.I attended the meeting of the POL Board on 16 July 2013. The CEO provided the
Board with a further oral update on Horizon. I do not have a full recollection of the
update but I note now from the minutes (POL00021516) that the briefing was
expressed in generally positive terms, explaining that the business had been
praised in Parliament for commissioning an independent review and that no
systemic issues with Horizon had been found. Notwithstanding there being some
doubts about Second Sight’s Interim report, and noting that it was interim at this
stage, the Board was taking its content very seriously.
124. However, the minutes also make clear that, notwithstanding this positive message
from the CEO, the Board raised a concern about whether the Second Sight findings
left the business open to claims of wrongful prosecution. In response to this query,
the CEO explained to the Board that RMG had historically acted as the prosecuting
authority through a specialist criminal team forming part of the business, and that
they had been the prosecuting authority at the time of many of the cases within the
review. She further explained that POL was a prosecuting authority and brought
its own prosecutions, but that, since the separation of POL from RMG, the General
Counsel had proposed that prosecutions would be brought through the CPS.
125. To the best of my recollection, this was the first time that I became aware that POL
was able to act (and was in fact acting) as a prosecuting authority itself and I
remember being uncomfortable about this when I first discovered that fact. Even
so, I would have assumed that POL was exercising any role it undertook properly
and I did not know what if any other organisations had this sort of function.
However, I found it very difficult to understand why this had not been brought to
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our attention before. As I have explained above, the summary reports of the most
significant criminal prosecutions contained in the SLRs provided to the Board did
not make any reference to the identity of the prosecuting authority and I had
assumed that these were conventional prosecutions brought by the Police and the
CPS.
126.As can be seen from the minutes, the Board expressed strong views that the
business had not managed the Second Sight review well (POL00021516). The
minutes are always written in rather bland language and I think the reference in the
minutes to the Board expressing ‘strong views’ on the subject is a reflection of the
level of frustration. As I recall, there were a number of overlapping concerns but
the primary issue, at least as far as I was concerned, was that, for over a year, the
Board had repeatedly been reassured that a thorough, independent review by
forensic accountants was ongoing; that the executive team was confident that there
was no systemic / significant issue with Horizon; and now, in marked contrast, the
position we found ourselves in by mid-July 2013 was one in which an interim report
had been produced which still said that there were no systemic issues but was also
significantly critical in several respects, and further, which we were told by POL
was of poor quality.
127.My recollection is that I was frustrated that there was not a clear position and by
the lack of clear information flow from the executive and that this frustration, which
was shared by other members of the Board was reflected in our direction, recorded
in the minutes that in future, papers provided by POL, “needed to be clear, not
overly optimistic, and commercially focussed so questions of fact would not be
necessary’; and further, “The Board asked for earlier warning when risks and
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issues arise to ensure that they were not ‘blindsided’.” (POL00021516) I do not
recall the Board feeling that it had been deliberately misled by the executive, which
would clearly have been very serious indeed, but rather that we were concerned
that we were not being provided with sufficiently clear, objective information and
supporting facts to enable us to gain a proper understanding of the issue.
128.In light of these concerns, and in addition to its general expression of
dissatisfaction, the Board directed a number of urgent actions. The Chair requested
that POL’s General Counsel provide an analysis of the process to date so that the
Board could better understand the deficiencies in the way the matter had been
handled. The CFO was tasked to ensure that POL’s insurers were notified of
Second Sight's findings. I also recall Alasdair Marnoch as ARC Chair offered to
take a more direct lead on Board oversight of the work done by the company to
address the concerns revealed by the report.
129.IIn addition, the Chief Executive was informed that the Board expected to be
informed promptly as to her proposed way forward in light of the criticisms made
by Second Sight and the further work that was clearly required. In this regard, we
had already received an outline update from POL’s General Counsel, dated 12 July
2013 (POL00099218), which provided a brief summary of the background, a list of
activities currently underway and a set of ‘proposed way forward actions’. These
included the proposed establishment of a working party (to include the JFSA) to
complete the review process and look at the thematic issues emerging from the
interim report and the establishment of a mechanism described as an ‘independent
safety net’ to adjudicate on disputed cases. My recollection is that the Board made
clear that it urgently required a fully worked up set of proposals.
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130.As to my thoughts concerning the substance of the Second Sight report, it is hard
to be definitive now but I think that they are accurately reflected in the minutes of
the Board meeting. As I recall, we were surprised and concerned by the criticisms
that the report contained. I also think there was a degree of concern that, after an
investigation that had been ongoing for more than a year (as we understood it), the
report was light both on detail and clear conclusions, although I did note that the
findings were expressed to be preliminary and that Second Sight had made clear
that considerable further work was required.
131.In addition to the Horizon update provided by the Chief Executive, the Board was
also asked to note an SLR, dated 11 July 2013 (POL00027548). That report again
asserted that Second Sight had found “no systemic problems with Horizon”, but
explained that POL was now conducting a review of the criminal and _ civil
proceedings issued against sub-postmasters, where issues with Horizon had been
raised, to establish which cases may have been vulnerable to challenge. In light of
what we had learned from the Second Sight interim report, a review of both criminal
and civil cases seemed to me to be appropriate, particularly in view of the fact that,
as I had now been informed, POL/RMG had acted as prosecuting authority in the
criminal cases.
132.On 26 July 2013, POL’s General Counsel produced an update for the Board
concerning the measures that the company proposed to take in response to the
Second Sight report (POL00298004). Four ‘key workstreams’ were identified,
described as: (i) completing the review of cases started as part of the Second Sight
investigation, with the aim of seeking some form of resolution; (ii) meeting our duty
to review cases that have been subject to criminal prosecution; (iii) identifying
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improvements in the training, support and other processes related to the Horizon
system and branches, including a new Branch User Forum for sub-postmasters to
provide direct feedback on the way they were trained and supported; and (iv)
meeting our commitment to review how an independent safety net could be
introduced to help resolve disputed cases with sub-postmasters in the future. The
update went on to set out a relatively detailed account of the way in which POL
intended to take forward these workstreams. In addition, the paper noted that “in
response to the Board’s request for a post-mortem [at the 23 July 2013 Board
meeting], Internal Audit has now been tasked with carrying out a review of our
response to the Second Sight investigation, reporting to the ARC. The terms of
reference will be agreed with the Chair of ARC over the coming weeks.”
133. My general impression at this stage was that POL appeared to be taking the issues
raised by Second Sight seriously and had identified an appropriate programme of
work to start addressing those issues. The proposals in the 26 July 2013 update
were significantly more developed than those outlined in the 12 July 2013
document and given that we were only a little over two weeks beyond the
publication of the report I considered that this demonstrated a reasonable degree
of urgency and focus on the part of the business, at least at this stage. I was
conscious that it would be an important part of the Board’s function going forward
to monitor and oversee this work to ensure that it was carried out effectively and
the momentum was maintained.
134. In addition to the engagement at Board level with the work being done to address
the issues identified Second Sight I can now see from the contemporaneous
documentation that there was a significant degree of activity on the part of POL,
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NEDs and the Chair in relation to this issue, including engagement with
stakeholders including the JFSA and Mr Arbuthnot. ShEx was also actively
engaged. I do not recall being aware of all of the detail or extent of this activity at
the time but I did have the general impression that it was being taken seriously and
a significant amount of work was being done across the board.
25 September 2013 Board Meeting
135.At the Board meeting on 25 September 2013, and at every board thereafter in my
tenure, the Board received an update from the Chief Executive on Horizon-related
issues by reference to the list of actions produced in late July by POL’s (then)
General Counsel to which I have referred above. The Chief Executive explained
that POL had established an independent mediation scheme, run by the Centre for
Effective Dispute Resolution (“CEDR’), and the intention was for this scheme to be
overseen by a working group with an independent Chair. She informed the Board
that she had met with Sir Anthony Hooper to discuss the possibility of him acting
as the independent Chair, and that the meeting had been positive (POL00021518).
136. In response to the Inquiry’s question, I can confirm that I have no connection either
by birth or marriage to Sir Anthony Hooper.
137.In advance of the meeting, the Board had also been provided with a paper
concerning ‘Project Sparrow’ (the project name given by POL to the workstream
relating to the resolution of Horizon-related issues), dated September 2013, drafted
by POL’s General Counsel, Susan Crichton (POL00304636). I infer from the
documents that this paper was the response to the direction that the Board had
given at the last meeting for Ms Crichton to provide an analysis of the process that
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had been undertaken to date and the plan for how the concerns relating to Horizon,
which clearly remained unresolved, would be definitively addressed. That paper
also referred to the July 2013 action list, and included confirmation of the
commencement of an initial mediation scheme which had been launched on 27
August 2013 and was envisaged to run until the end of March 2014.
138. The Project Sparrow paper also addressed the issue of criminal prosecutions and
provided an update on the review to which reference had been made in the July
2013 SLR. The Board was informed that an external firm of solicitors had been
appointed to undertake the review and that it had undertaken an initial sift of cases,
leading to a number of cases being discontinued and the Second Sight report being
disclosed in a number of other cases. The paper further explained that a meeting
had taken place with Brian Altman QC who was going to be commissioned to
undertake a review of POL’s conduct of prosecutions. There was also some
information about the associated administrative arrangements including budget
and proposed next steps.
139.Some further information concerning POL’s proposed way forward was set out in
the SLR, which explained that the Second Sight investigation was still underway
and POL was actively co-operating with that investigation. The SLR also explained
that, in respect of criminal prosecutions, "POL is not issuing any new criminal
summons pending the instruction of a new independent expert who can give
evidence to support the Horizon system. The process of identifying this expert is
underway.”
140. The Project Sparrow paper, the SLR, and the Chief Executive’s update to the Board
set out between them what appeared to be a fairly extensive package of measures
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and actions which had been either implemented or were in train. In summary, and
based on the information provided to the Board at this stage:
a. A mediation scheme had been established and 23 submissions had been
received from sub-postmasters (POL00304636);
b. CEDR had been appointed to provide a panel of independent mediators
(POL00304636);
c. Sir Anthony Hooper had been approached to act as the independent Chair
of the Horizon Working Group overseeing the mediation process
(POL00021518);
d. A firm of solicitors, Cartwright King, was undertaking a review of criminal
prosecutions with the result that, thus far, four cases had been discontinued
and the Second Sight report had been disclosed to defendants’ legal
representatives in nine cases (POL00304636);
e. Brian Altman QC had been instructed to oversee the review of prosecutions
and advise in relation of POL’s disclosure obligations (POL00304636);
f. All criminal prosecutions had been paused pending the instruction of an
expert to provide an analysis of the Horizon system per an SLR dated 16
September 2013 (UKGI00018245);
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g. A programme for the future conduct of the necessary work had been
established, together with a budget which was to be monitored
(POL00304636).
141.My view at this point, which I believe was shared by the Board as a whole, was
that the work undertaken by POL in the two months or so since the 16 July 2013
Board meeting was extensive and reflected the very clear expectation we had set
at that meeting that the issue of understanding the integrity of the Horizon system
needed to be taken very seriously alongside the concerns over prosecutions and
training for sub-postmasters. It was plainly important that any mediation scheme
was fully independent and I was pleased to see that CEDR and Sir Anthony Hooper
were to be involved in that aspect of the process. I was also encouraged by the
appointment of an external firm of specialist solicitors and a QC to deal with the
prosecutions issue.
142.I nevertheless remained concerned about the issues raised by the Second Sight
report and the fact that there was a detailed programme of work underway was
obviously no guarantee that these issues were going to be satisfactorily resolved.
Will Gibson was shortly to depart on paternity leave and I recall flagging my
concerns to Mark Russell, the ShEx Chief Executive, at around this time and I was
pleased that he agreed to attend the next meeting of the POL Board.
3
>
October 2013 Board Meeting
143.1 attended the 31 October 2013 Board meeting. My recollection is that I was
accompanied by Mark Russell, the Chief Executive of ShEx who attended at least
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part of the session. During the meeting, the role of ShEx, the Business and the
Board was discussed particularly relating to the post-funding period (the funding
settlement was announced on 27'" November 2013). The issue about the
relationship between those parties had been long running, and I think that the
departure of Will Gibson from the Shareholder Team had prompted the Chair to
seek a discussion including with Mark Russell about his replacement and how the
relationship with the shareholder team would work going forward.
144.From the minutes of the meeting, I can see that, during her report, the CEO
updated the board about the progress of Project Sparrow and the appointment of
Sir Anthony Hooper (POL00021519). The CEO's written report dated 24 October
2013, included within the Board pack, also provided an update on Project Sparrow
(POL00021519), including the information that there were likely to be 150 cases
considered for possible mediation. The report also included reference to the
ongoing work in respect of prosecutions being undertaken by Cartwright King and
Brian Altman QC, and indicated that a paper would be submitted to the 27
November 2013 meeting of the ARC regarding prosecutions.
145. The Board papers also included the ARC Briefing Book for the Half Year ended 29
September 2013 (UKGI00018126). This repeated POL’s assertion that the Second
Sight interim report had identified “no systemic problems with Horizon itself’, as
well as providing an update on the mediation scheme and the review of criminal
prosecutions. I see now that the Briefing Book also noted that no claim had been
brought against POL in the civil courts, and no appeal had been made to the Court
of Appeal in relation to any conviction.
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146.As usual there was an SLR included in the Board papers, which the Board was
invited to note. This contained no additional information regarding the ongoing
Horizon-related work. The number of criminal cases included in the prosecutions
section of the SLR had fallen to four.
147.1 was not present for the whole of this Board meeting. I was exceptionally busy at
this time in my day job at DECC undertaking a major piece of work to take £50 off
all domestic energy bills’. I have no recollection of any discussion of Horizon-
related issues during the part of the meeting that I attended. I expect that I read
the papers circulated in advance of the meeting in the usual way and so would
have been aware of the updates in respect of both the mediation scheme and the
prosecutions review set out in the Chief Executive’s report. On the face of it, the
extensive programme of work that had been commissioned following the Second
Sight interim report appeared to be progressing as planned and there were no
indications, at this early stage, that the mediation scheme was running into any
significant difficulties.
27 November 2013 Board Meeting
148. There was a Board meeting on 27 November 2013 which, as far as I recall, I did
not attend given my work at DECC conflicted on that day. Although I plainly would
have wished to attend, as I have explained above, this was a particularly busy time
for the Government on energy policy. I expect that I would have reviewed the Board
pack circulated in advance of the meeting, but given my competing professional
commitments at the time I may not have done so until shortly before the following
Board meeting, which I did attend in full (POL00021520). It was becoming clear to
1 Government action to help hardworking people with energy bills - GOV.UK (www.gov.uk)
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me by this stage that I simply did not have enough time to devote to my role as
POL Shareholder NED alongside my other professional commitments working for
a different Secretary of State/Department. I made this clear to ShEx and asked
them to start the process of arranging for my replacement, which took place early
the following year, 12 months before the expiry of my three-year term of
appointment.
149.1 have reviewed the minutes of the meeting and the Board papers circulated in
advance. I note that the Board received a written progress report on Project
Sparrow from the interim General Counsel, Chris Aujard, who had taken over from
Susan Crichton who had now left the business (POL00027482). The paper
informed the Board that the mediation scheme had received more applications than
anticipated and the cost would therefore be increased. It also noted that a paper
reviewing the prosecutions policy was presented to the ARC on 18 November
2013.
150. The minutes of the meeting also record that the Board asked for an analysis of the
risk to the business posed by the Horizon-related issues to be produced by POL’s
General Counsel and also asked to be kept regularly updated (POL00021520).
There was also a discussion about the future of prosecutions, during which it was
explained that the business was reviewing its approach to acting as a prosecuting
authority.
151.The Board pack included a further paper from Chris Aujard which highlighted the
risk to the business posed by allegations relating to Horizon, noting that such
allegations might raise issues surrounding the robustness of POL’s core systems,
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which, among other things, might damage public and Government confidence
(POL00027483).
152.In general terms, the Board papers and minutes of the meeting indicate that
addressing the Horizon-related issues, in respect of both the mediation scheme
and the review of prosecutions, was being treated as a high priority by both the
business and the Board, which was clearly appropriate. There was an early
indication of potential concern regarding the mediation scheme I see now with the
reference to more claims having been received than anticipated and the need for
additional funding but, otherwise, both workstreams appeared to be progressing
broadly as planned.
21 January 2014 Board Meeting
153. The early indications of concern regarding the capacity of the mediation scheme
to deliver an efficient and acceptable resolution of claims made by sub-postmasters
based on alleged deficiencies with the Horizon system had increased significantly
by the time of the next Board meeting on 21 January 2014. The Chief Executive
provided the Board with an update and informed us that Project Sparrow was
taking longer than expected. This was clearly a concern although I note from the
minutes that the Chair was reassured by Sir Anthony Hooper’s governance of the
process, which she thought would give the business the best chance of reaching
a final resolution of the issue (POL00021521). It was agreed that the ARC would
consider an update on Project Sparrow at its February 2014 meeting, which would
include a piece of work on lessons learned, along with a paper dealing with the
prosecutions review. The full Board made clear that it wanted to be sighted on all
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the papers presented to the ARC on the issue and asked for an update to be
provided at the next full Board meeting.
154.In the Chief Executive’s report, which formed part of the Board pack circulated in
advance of the meeting, we were informed that the mediation scheme had closed
to new cases on 18 November 2013 having received 147 cases. However, it
appeared as though unfortunately the scheme was making slow progress in
dealing with the cases that had been submitted (UKGI00017290). The Chief
Executive’s report referred to only 27 full questionnaires having been submitted for
the investigation by the Post Office. It was anticipated that the majority of cases
would be reviewed by the second quarter of the financial year 2014/15, but it was
not at all clear how many cases would have been through mediation by that point.
Overall, the report suggested that the mediation scheme was looking likely to be a
far more protracted and difficult process than the Board had been initially led to
believe, with a combination of higher volumes and slower progress.
155. My recollection looking back was that I was troubled by the lack of progress, with
the mediation scheme in particular. From my perspective, there had been an
encouraging degree of activity in July and August 2013 in response to the Second
Sight interim report concerns, including the establishment of the mediation scheme
and yet now, over six months later, limited progress seemed to have been made
and, as it appeared, we were no closer to achieving a mutually satisfactory
resolution of the sub-postmasters’ concerns. However, whilst I would certainly have
wanted to see better progress, I was conscious of the fact that the mediation
scheme had been set up to be an independent process with independent oversight
by the Working Group and direct intervention by the Board would not have been
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appropriate. As far as I could tell, the principal reason for the apparent delay was
the receipt of more claims than initially anticipated and, from my perspective, it was
important that the process was thorough and comprehensive in addressing the full
range of claims.
26 February 2014 Board Meeting
156.1 was accompanied to the February 2014 Board meeting by Richard Callard who
had been appointed as my successor as Shareholder NED (POL00021522). The
purpose of Richard Callard’s attendance at the meeting was to introduce him to the
Board and to enable him to gain an early understanding of the issues facing the
business in order to achieve as smooth a handover as possible. He had been the
SCS1 / Deputy Director on the Shareholder Team since Autumn 2013 taking over
from Will Gibson and so had an appreciation of the issues generally but I was keen
that he came to see the Board and Alice Perkins agreed.
157.This full Board meeting was preceded by a meeting of the ARC, conducted by
conference call and attended by the full Board. The meeting included presentation
of a paper on the POL prosecution policy. This was obviously an important issue
that was now high on the Board’s agenda and I deal with in further detail below in
response to the Inquiry’s questions relating specifically to prosecutions.
158. The second significant event which took place at this meeting was that the Board
was informed that the mediation scheme was facing increasing challenges and that
resolution of all the claims that had been notified to the scheme remained a long
way off. The reasons for this were summarised in a paper prepared by Belinda
Crowe dated 20 February 2014 (POL00027452), which informed the Board that
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the scheme was proceeding more slowly than expected, and that an ‘increasing
expectation gap’ was developing between POL and the sub-postmasters as to the
level of redress under the scheme. We were also told that there were issues with
cost, ‘general stakeholder management’, and the scope of Second Sight’s remit.
159. The Board was concerned by this update. There appeared to be very little control
being exercised over the duration of the process and the cost of compensation,
and there seemed to be no clear path to a successful resolution of the claims. By
this stage the mediation scheme had been in existence for six months and very
little seemed to have been achieved.
160.The Board remained conscious of the fact that the mediation scheme was an
independent process being overseen by the Working Group, but we nonetheless
wanted to gain a better understanding for ourselves of the nature of POL’s
contractual relationship with sub-postmasters and the extent of its potential liability
for any Horizon-related losses. Accordingly, the Board resolved to commission its
own independent legal advice on POL’s position in order better to understand
POL's potential exposure and provide a better understanding as to how the
mediation process might realistically be taken forward. Linklaters LLP was
commissioned to carry out this piece of work. I was pleased with the proposal to
involve Linklaters since, as I confirmed in an email at the time, I felt that POL should
be taking a “belt and braces” approach to the issues being considered as part of
Project Sparrow (UKGI00045509).
161. The SLR contained no additional information of any significance, and there was no
change to the section concerning the Horizon litigation. It was noted that there were
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now only five criminal prosecutions before the Court, three of which were
concerned with post-conviction financial recovery only.
26 March 2014 Board Meeting
162.The Board meeting of 26 March 2014 was my final Board meeting as the
Shareholder NED and I note that the minutes record my departure and the thanks
I was given for my contribution to the Board (POL00021523). I was again
accompanied by Richard Callard as part of the handover between us.
163. Project Sparrow was at the top of the agenda and Christa Band, from Linklaters,
presented the advice which the Board had commissioned in February. The advice
itself was included within the Board pack circulated in advance of the meeting
(POL00030724) and comprised a detailed analysis of POL’s legal liability to pay
compensation on the basis that the Horizon system was not responsible for
discrepancies or losses. The Project Sparrow update paper (POL00105529)
prepared by POL included in the Board pack also made clear that: “In preparing
their advice Linklaters have, in effect, made the working assumption (which we
believe to be correct) that there is nothing ‘wrong’ with the Horizon system.”
164. The Linklaters advice was helpful as far as it went but it was obvious that it left
unaddressed the fundamental question of whether the assumption that the Horizon
system was not responsible for discrepancies and losses was sound. This had not
been fully resolved by the Second Sight interim report either. I therefore agreed
with the decision of the Board, and as suggested in the Linklaters advice, that a
further piece of work was needed to interrogate this assumption and that further
work should be commissioned by the Board to address this separate question
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(POL00021523). I note that the scope of the further work was set to include: (i)
how the system works; (ii) the data integrity aspects of the system; (iii) all audits
and tests carried out on the system; and (iv) a response to the most significant
thematic issues identified by Second Sight. My understanding is that Deloitte was
commissioned to undertake this further piece of work and it would be crucial, but I
had left the Board by the time it was completed.
165. Aside from the Linklaters report, the general impression that the mediation scheme
was running into intractable difficulties remained. The Chief Executive’s update
(POL00030724) indicated that there remained a fundamental mismatch between
the expectations of at least some of the sub-postmasters involved in the process
and POL’s understanding of the extent of its liability. We were also informed that
Sir Anthony Hooper had expressed some concern regarding the quality of Second
Sight’s report in individual cases. In general term the mediation scheme seemed
to be no closer to delivering successful resolution of individual cases than it had a
month earlier.
Reflections on Project Sparrow and Mediation Scheme
166.1 have been asked a number of questions by the Inquiry concerning Project
Sparrow and the Mediation Scheme, most of which I have addressed in the
chronological account I have set out above. In summary, I considered that the
programme of work established by POL in the immediate aftermath of the Second
Sight interim report, which included the establishment of the mediation scheme
with the oversight of the independent working group, was an appropriate and
proportionate means of addressing sub-postmaster concerns regarding the
integrity of Horizon and would provide an independently managed process within
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which those concerns could be aired and addressed. I do not have any express
recollection of receiving this correspondence at the time, but I note that I was
copied into to a note from the Chief Executive in late August 2013 in which she
reported that POL has shared the mediation scheme with Mr Arbuthnot and “he
was happy to endorse this as a way forward” (POL00027792). I expect I would
have drawn some reassurance from this, along with the reports that we received
to the effect that, at least at the outset, the process was supported by the JFSA.
167. The updates we received as to the establishment and operation of the scheme did
not give rise to any significant cause for concern until early 2014 when it started to
become clear that the scheme seemed increasingly unlikely to deliver the mutually
satisfactory resolution it was intended to achieve.
168.When those questions and concerns started to emerge the Board took action to
better understand the nature of the problems and the potential way forward by, in
the first instance, commissioning a report from Linklaters and, subsequently, a
further piece of work by Deloitte to address the background to, and validity of, the
fundamental concerns with the system that were being expressed regarding the
integrity of Horizon. Given that the mediation scheme had been set up as an
independent process, I considered that this represented an appropriate level of
proactive engagement on the part of the Board.
169.On the specific issue of the number of requests for compensation made within the
mediation scheme, I do not recall developing any particular concerns in this regard.
In the November 2013 update prepared by POL’s General Counsel
(POL00027482) the Board was informed that 140 applications had been received,
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of which 82 had been approved, 9 had been rejected and 49 were awaiting
determination. That figure was materially higher than the 64 cases referred to in
the Chief Executive's October 2013 update (POL00027136) but I do not recall any
concerns being raised about this increase at Board level, save for the issues raised
by POL concerning the increased expense of the scheme. From my perspective it
was important that the mediation scheme was as comprehensive as possible. In
general terms, it was troubling that so many sub-postmasters had a grievance with
POL that required resolution but that served to reinforce the importance of the
mediation scheme and the other aspects of the work that were being undertaken
as part of Project Sparrow.
Conduct of Private Prosecutions
170.As I have explained above, I have no recollection of being aware that POL acted
as a prosecuting authority itself in cases involving sub-postmasters and Crown
employees at the time of my appointment as Shareholder NED in April 2012, and I
believe that the first time I became aware of POL’s role as a prosecuting authority
was when the Chief Executive explained POL’s prosecutorial function to the Board
during the course of the July 2013 Board meeting (POL00021516). Prior to that
point, my assumption as a non-lawyer had been that references to prosecutions
that I had seen in the documents sent to me (including the SLRs) were to
prosecutions brought in the conventional way, involving the Police and the CPS. I
also had no sense of how POL executed its responsibilities within the context of
these prosecutions.
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171.Accordingly, my awareness of the fact that POL had acted, and continued to act,
as a prosecuting authority coincided with POL’s proposal to undertake a
‘Prosecution Case Review’, as described in the update by POL’s General Counsel
provided to the Board in late July 2013 (POL00298004). In particular, the Board
was informed that POL was undertaking a case-by-case assessment of whether it
had discharged its disclosure obligations in past prosecutions with the assistance
of an external law firm, Cartwright King; and that Brian Altman QC had been
instructed to exercise independent oversight of the review process and make
recommendations regarding POL’s future prosecution strategy. So, whilst I was
concerned to learn that POL had previously acted as a prosecuting authority itself,
and troubled by the fact that I had not previously been aware of this important
information, it seemed to me as though a robust process had been instituted to
ascertain whether POL had complied with its obligations in this regard.
172.To be clear, my understanding throughout the period between the Second Sight
interim report and my departure from the Board 8 months later was that the issue
as far as past prosecutions was concerned, and the focus of the review that had
been commissioned by POL, was on the question of whether POL had discharged
its disclosure obligations and, in particular, whether there may be a need to
disclose the Second Sight interim report to the defence representatives in a small
proportion of cases (repeatedly said to be about 5%). As a non-lawyer I did not
draw a clear link in my mind between ensuring POL met its disclosure obligations
and unsafe convictions based on false or misleading evidence, and I do not recall
the issue ever being expressed to me in those stark terms.
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173. I do not now recall any specific occasions on which I expressed my concerns
regarding POL’s role as a prosecuting authority to officials in ShEx although the
issue would likely have arisen during the course of one or more of my
conversations with Will Gibson, Mark Russell and Richard Callard during the latter
part of 2013 and the early part of 2014, especially given that Richard Callard came
to the February and March Board meetings. I do not remember being conscious of
knowing more about this issue than my ShEx colleagues, and I have described
above the means by which the information came to me from updates provided by
the POL executive in the aftermath of the Second Sight report. I did not have any
dialogue with Ministers on this issue not least because of the structural separation
but also because my perspective would likely have been that in order to advise
ministers in more detail than what they already knew, ShEx would need more
robust information which at that point we did not have as far as I was aware.
174.I am not aware of the extent to which ShEx briefed Ministers on the issue of
prosecutions following the Second Sight interim report. Given the prominence of
the report, including the fact that it had prompted a Ministerial statement in
Parliament (which only happened a small number of times in two years), I expect
both ShEx and POL provided full updates to the Department concerning the work
that was being undertaken by the company in response to the report as it
developed.
175.As to the steps that I took in my capacity as Shareholder NED to satisfy myself that
POL had acted in accordance with its legal obligations in bringing past
prosecutions, I (along with the rest of the Board) noted that a review of past
prosecutions by external lawyers that had been commissioned by POL, with
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independent oversight by a senior QC, as set out in the early update from POL’s
General Counsel in late July 2013. I see now that I was also aware from the same
update that POL was engaging with the Criminal Cases Review Commission
(CCRC), and that part of Mr Altman QC’s remit would include overseeing POL’s
response to questions posed by the CCRC (POL00298004). It seemed to me that
this constituted a robust process of review incorporating specialist expertise. This
process of review was still ongoing by the time I stepped down from the Board in
early 2014 and so I did not form any concluded view as to its adequacy, but as far
as I can recall I had no reason to believe that the review process was not
proceeding effectively prior to my departure.
176.As I have explained above, the clear expectation on the part of the Board, which
was also reflected in the risk management framework set by the ARC, was that the
executive would have been responsible for the detail of this process and would
proactively bring to the Board’s attention any significant issues which had the
potential negatively to impact the business, financially, reputationally or in terms of
compliance. That would obviously include any information that indicated POL might
have acted as prosecuting authority in securing unsafe convictions or any other
failure to comply with legal obligations which should have been communicated up
the line of responsibility to the CEO and Board, as well as being put on the relevant
risk registers, and flagged to internal audit and ARC as part of the control
environment. I deal below with a number of the specific documents that were not
provided to the Board relating to this issue but, in general terms, I have no
recollection during my tenure of the Chief Executive, the General Counsel (or any
other POL executive) saying directly to the Board that the business was at risk of
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being found to have been responsible for serious miscarriages of justice in criminal
prosecutions based on Horizon data.
177.As to whether I considered it appropriate for POL to continue to act as a
prosecuting authority after I became aware of its role in July 2013 my views are
accurately reflected in the contemporaneous correspondence surrounding the
review of POL’s prosecutorial policy undertaken in the aftermath of the Second
Sight report.
178. The update from POL’s General Counsel in late July 2013 informed the Board that
POL intended to review its ‘future prosecutions strategy’ and that it would invite Mr
Altman QC to make recommendations in this regard. In her report to the Board
dated 24 October 2013 (POL00027136), the Chief Executive provided an update
to the effect that POL intended to submit a paper to the November 2013 ARC
meeting ‘reviewing our overall policy for investigating and prosecuting future cases’
to be informed by a separate report being prepared by Mr Altman. I do not recall
the detail of that paper and, as I have explained above, I was not a member of the
ARC by this stage and I did not attend the November 2013 full Board meeting.
However, I was sent, and did review, an updated ‘Prosecutions Policy’ paper
prepared by POL’s General Counsel and dated 7 February 2014 (POL00030716).
179. The February 2014 papers states that it had been prepared for consideration by
the ARC but it was circulated to the full Board and I do recall receiving it at the time.
The paper outlined three broad options which were, in summary: (a) preserving the
status quo in relation to POL’s prosecution policy; (b) adopting a modified policy
focussed on high value cases and incorporating a number of procedural
safeguards, including all prosecutions to be conducted through an external law
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firm; and (c) ceasing all prosecuting activities and leaving any future prosecutions
to the police and CPS. The paper strongly recommended the second of these
options.
180.1 note that I was sent a copy of the paper on 7 February 2014 and that I wrote to
the Chair copying the other board members on 10 February 2014 expressing the
view that option (c) (ceasing prosecutorial activity) should be explored further
(POL00027687). I could not understand why it was necessary for POL to act as a
prosecuting authority itself, and why it was considered to be sufficiently different
from other comparable organisations to require such an approach. I also wanted
to gain a better understanding of how the rate of prosecutions brought by POL
compared with prosecutions relating to other organisation, and I observed that I
found the prosecution statistics for POL to be ‘surprising’.
181.At this stage I wanted to understand the context and how POL compared with other
organisations when it came to prosecution rates and whether there were any
particular reasons why there might be a higher rate of prosecutions arising in the
context of POL’s business. I do not recall that I had formed any views as to what,
if anything, the statistics relating to POL prosecutions might indicate as to the
conduct of those prosecutions.
182.I note that my email expressing these views was written shortly after an email from
the Chief Executive, dated 9 February 2014 (POL00027692) in which she explains
that ‘the key difference is one of scale’, and that there are a number of reasons,
specific to POL’s business, why it was appropriate for it to take a different approach
to bringing prosecutions as compared to other organisations which might be
thought to be comparable. I cannot now recall precisely what I thought when I saw
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this correspondence but the contents of my email to the Chair the following day
would suggest that I did not find the Chief Executive’s explanation to be sufficient,
and I wanted more information.
183.In the event, the decision taken at the February 2014 Board meeting was to
endorse POL’s recommendation of option (b), a modified prosecution policy
focussed on higher value cases with a number of additional procedural safeguards.
From recollection, my position had not changed between my email of 10 February
2014 and the Board meeting on 26 February 2014. I still did not consider that I had
a clear understanding of why it was necessary for POL to act as a prosecuting
authority and I thought that cessation of all prosecutorial activity should remain on
the table for further consideration. However, I did not hold any form of veto over
collective Board decision making and it is clear that the majority of the Board
disagreed and chose to endorse option (b).
184. Whilst I considered that the issue required further thought, it was clear that there
were benefits to option (b), at least compared with the status quo. I took some
reassurance from the plan to delegate the conduct of future prosecutions to an
external law firm, and I noted that the new policy would be kept under close review.
Whatever issues may have arisen in the past, which I understood to be still under
investigation, the procedure going forward appeared to be reasonably robust in
ensuring that POL discharged any relevant duties as a prosecuting authority. I do
not recall being made aware any prosecutions pursued by POL under the new
policy between the February 2014 Board meeting and the end of my tenure as
Shareholder NED the following month.
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185.I have been provided by the Inquiry with a number of documents relating to the
work commissioned by POL in the aftermath of the Second Sight report relating to
the review of past prosecutions and the formulation of a new prosecutorial policy. I
have been asked in each case whether I saw the document in question, what action
I took in response to the risks and/or compliance issues they raised, and whether
I think they ought to have been communicated to me (if they were not). I address
each in turn.
186.1 do not recall seeing the advice from Simon Clarke of Cartwright King dated 2
August 2013 (POL00006799) in which he advises POL as to its disclosure
obligations in the context of the operation of the ‘central hub’ set up to manage
Horizon-related disclosure and. in particular, the extension of disclosure obligations
to information which is not written down. I have also reviewed the Board materials
relating to this point in the chronology and I cannot find any reference to this advice
being sent to the Board.
187.Reading this document now, with the benefit of hindsight, I can certainly see that it
is troubling that, given POL’s role as a prosecuting authority, individuals within the
organisation appeared to have a basic misconception of the nature and extent of
criminal law disclosure obligations, such that they needed to be advised of these
matters by Mr Clarke in relatively robust terms. I am also troubled by the reference
to a disclosable document having been ‘shredded’. Even if it was thought
unnecessary for the Board to have been provided with the full advice I certainly
think that the fact of Mr Clarke’s advice, and the reasons why it had been necessary
for it to be given, should have been brought to the Board’s attention. It seems to
me that a potential failure on the part of the business to comply with its disclosure
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obligations to the Court in respect of criminal cases where it has acted as
prosecuting authority falls squarely within the scope of significant reputational
and/or compliance issues that should be reported to the Board. I do not know why
this was not done.
188.1 also have no recollection of being sent the Interim Review prepared by Mr Altman
QC, dated 2 August 2013, whether in my capacity as Shareholder NED or
otherwise (POL00006583). I have also been unable to find any reference to the
provision of this document in the Board materials and associated correspondence.
The Board was made aware, in late July 2013, that Mr Altman QC had been
instructed to provide independent oversight of the review process (POL00298004)
but I do not think we were provided with anything in writing from Mr Altman QC. I
note that there is a brief summary of Mr Altman QC’s ‘initial advice’ in the Project
Sparrow update provided to the Board in September 2013 (POL00304636) by
which the Board was informed that he had emphasised that any new, potentially
disclosable information be collated and passed on to the external form of solicitors
on a regular basis. I have no direct recollection of seeing that summary at the time
but it would inevitably have struck me as sensible and appropriate advice.
189. As to whether I consider that this initial review should have been sent to the Board
I would not have regarded that to be necessary unless it revealed some
fundamental problem with the review, or the manner in which it was being
conducted, which does not appear to be the case. As I have sought to explain
above, the Board’s perspective was that a review had been established, and was
operating under independent oversight. We would certainly have wanted to be
informed of any adverse findings identified by the review, and of any significant
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issues regarding the conduct of the review itself, but this document does not
appear to contain any information of that nature and I think it is unlikely that it would
have prompted any action on the part of the Board.
190.1 do not recall seeing Mr Altman QC’s ‘General Review’ of the past prosecutions
review process dated 15 October 2013 (POL00006581) and I have not been able
to find any record of the Board being provided with this document. I see that in the
Chief Executive’s report to the Board prepared for the purposes of the October
2013 Board meeting, the Board was informed that Mr Altman QC had reached the
conclusion that POL’s overall process for reviewing past prosecutions was
‘fundamentally sound’ and I expect that the Board would have been reassured by
that report, which may provide at least a partial explanation as to why the Board
would not appear to have called for a copy of the review itself.
191.As to whether Mr Altman QC’s review (POL00006581) should have been provided
to me (and the Board) at the time my view is largely the same as the one I have
expressed above in relation to his initial review, produced two months’ earlier.
Whilst it was important to know that the review was being conducted under
independent oversight, and to be kept up to date with its progress, I would not have
regarded it as necessary for the Board to receive copies of legal advice produced
in the course of that process, unless that contained significant adverse findings or
revealed fundamental problems with the operation of the scheme. If the report to
the Board that Mr Altman QC had found the review process to be ‘fundamentally
sound’ had been an accurate summary of his material conclusions then I would
regard that as being sufficient in terms of keeping the Board up to date.
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192. However, I have now read the review in full and I see that the update given to the
Board was not an accurate summary of his material conclusions. In particular, at
paragraphs 136-156, I note that Mr Altman QC refers to the expert evidence of
Gareth Jenkins and, in the course of doing so, cites advice on the same topic by
Mr Clarke dated 15 July 2013 (WITN06740105). Both Mr Clarke’s advice and Mr
Altman QC’s analysis of it strike me as profoundly concerning as they appear to
indicate that Mr Jenkins gave flawed and potentially misleading evidence to the
Court concerning the integrity of the Horizon system. I would certainly have wanted
to know about this issue at the time, and I am confident that my colleagues on the
Board would have wished to know about it as well. I have no doubt it would have
prompted the Board to ask for further information as to the implications of these
concerns regarding Mr Jenkins’ evidence and what POL intended to do about the
issue. I do not know why this information was not brought to the Board’s attention
and I have no doubt that it should have been.
Resignation from the Board
193.As I have sought to explain, my decision to step down from my position as
Shareholder NED in March 2012, a year before the expiry of my three-year term,
was simply due to the demands of my new role at DECC and the fact that I was
finding it increasingly difficult to devote sufficient time to POL. This was an unpaid
role for a different department.
194.I have described above my perceptions of the various strands of work that were
being undertaken by POL in relation to Horizon at the time of my departure but, in
summary:
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(a) The Board had commissioned Deloitte to provide an empirical analysis of
whether there were in fact systemic issues with Horizon.
(b) The review of past prosecutions being conducted by Cartwright King under the
oversight (as I understood it) of Mr Altman QC was ongoing and the Board had
not been informed of any significant issues or concerns arising from that review,
at least by that stage. I have made the point that we were not aware of the
concerns regarding the evidence of Mr Jenkins, and that we certainly should
have been, but I was not aware of that omission at the time and, in broad terms,
my impression was that POL had identified an appropriate process for the
review of past cases which had been independently assessed as
‘fundamentally sound’, and the work was ongoing.
(c) There had been review of future prosecutorial policy leading to the adoption of
‘option (b)’, which included a_ significantly enhanced set of procedural
safeguards, including the use of external lawyers and a regular programme of
review. I was in a minority on the Board as regards my view on ceasing
prosecutorial activity entirely, but I saw no fundamental difficulty in waiting to
see how the new policy operated in practice.
(d) There had been very limited movement in relation to the civil claims brought by
sub-postmasters during my tenure, with the SLRs repeatedly telling broadly the
same story in relation to the small number of claims that had either been
brought or threatened.
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(e)I have dealt above with my perception of the mediation scheme and the
concerns felt by the Board as to the future progress of the scheme and the work
commissioned by the Board to try and find a way forward. It was clear that the
mediation scheme was running into significant difficulty and I was far from
confident that it was going to be capable of achieving a satisfactory resolution
in the large number of cases that had been identified. I hoped that the work
commissioned by the Board at the March 2014 meeting (which became the
Deloitte review) would help in providing some independent analysis of the
concerns relating to Horizon.
195. ln summary, therefore, my perception at the time of my departure was that the key
tisks lay in getting to the bottom of the issues raised by the Second Sight interim
report; the future conduct of the mediation scheme and whether a mutually
acceptable way forward could be found that would enable the scheme to operate
effectively; and in the outcome of the ongoing review of past prosecutions, the
findings of which had yet to be presented to the Board.
196. The principal means by which I sought to brief my successor, Richard Callard,
about these potential risks, along with other relevant aspects of the role was to
obtain permission for him to accompany me to my last two Board meetings in
February 2014 and March 2014 so that he was part of the Board discussions
relating to the Horizon-related issues, and had access to the relevant Board
papers. I recall that we had a number of other discussions by way of hand-over
and I remember, in particular, that we agreed on the importance of him sitting on
the newly-established Sparrow sub-committee and ARC.
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197.As to whether I consider, on reflection, that I had sufficient information to assess
the risks facing POL at the time of my departure, I think that, by March 2014, the
Board was in possession of a relatively large amount of information concerning the
issues and workstreams that had been set in train by the Second Sight interim
report. I think we were well sighted on the progress of the mediation scheme and
the difficulties that it was encountering, to the extent that was realistically possible
given the independent nature of the scheme. There was clearly a long way to go
in getting to the bottom of the concerns relating to the integrity of Horizon, and it
was for this purpose that Deloitte had been engaged. On the past prosecutions
issue it is now clear that there was a large volume of material that was not shared
with the Board including the important Gareth Jenkins material I have referred to
above. On the future prosecutions policy, we had given the matter careful
consideration and a detailed set of new procedures had been formulated and
approved. In summary, therefore, the answer must be that I think we had sufficient
information to assess some risks but not others and that the risks relating to
Horizon integrity and past prosecutorial conduct were still inadequately
understood.
198.In general terms, when it comes to information flow into the Board on Horizon-
related issues, there is a distinction to be drawn between the periods before and
after the publication of the Second Sight interim report in July 2013. Prior to that
point the Board had very little information concerning any Horizon-related issues,
save for the fact of Second Sight’s engagement and the summary detail contained
in the SLRs. When Horizon issues were raised they tended to be raised orally and
as an item of ‘any other business’. By contrast, after July 2013, it is clear that the
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volume of information relating to Horizon increased dramatically and included
regular written updates.
199.While it would have been unusual and I do not recall the board meeting
stakeholders systematically given the need to delegate to the executive and not
cut across them, with the benefit of hindsight I think that it could have been of
potential value for the Board to have heard directly from key stakeholders, perhaps
including Second Sight and the JFSA. That might have given us a better insight
into the nature and scale of the concerns relating to Horizon along with some of
the historical background, which would have been of particular value to me given I
was part of a new board with no collective memory except for what the executive
told us or shared with us. In particular, it might have prompted the Board to have
the information from which to feel the need to ask more challenging questions
about the conduct of past prosecutions earlier and having looked back at the
contemporaneous documentation I think this is an issue which should have
received closer attention from the Board in late 2013 / early 2014. We were told
that there was a review of past prosecutions underway and that was clearly
appropriate as far as it went, but in light of what I know now it is clear that I had no
real appreciation of the scale of POL’s past prosecution activity and the implications
for many hundreds of sub-postmasters, and that is something that I very much
regret.
General Reflections
200. The Inquiry has asked me to reflect on my time as Shareholder NED and to set out
whether there is anything I would have handled differently with hindsight in relation
to the Horizon IT systems and its associated issues, with particular regard to: (i)
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the information I provided to officials and government ministers; (ii) the extent to
which I (and ShEx) maintained effective oversight of POL; (iii) how POL handled
challenges to the integrity of Horizon; (iv) POL’s approach to prosecutions and its
disclosure obligations; and (v) whether there were missed opportunities on the part
of the Board to uncover and expose the failings of Horizon.
Information to Officials/Ministers
201.Having carefully reviewed the contemporaneous documentation for the purposes
of preparing this statement I have not identified any instances where I obtained
important information regarding Horizon which I was not able to pass on to the
Shareholder Team, nor I have I seen anything to contradict the assumption I had
at the time that ShEx and Ministers were aware of the steps being taken by POL
to address the Horizon-related issued raised by the Second Sight interim report
(indeed sometimes the ShEx team appears to have had more information relating
to these issues than the Board) and that there was regular communication between
ShEx and the department on these issues. Notwithstanding the practical difficulties
caused by my maternity leave and, later, my move to a different department, I
maintained a very regular dialogue with my ShEx colleagues throughout my period
as the shareholder NED and when I obtained significant relating to the business of
which I thought they should be aware I passed it on.
202. I have described how ministerial briefing fell outside the scope of my role during
this period but my understanding at the time, which would seem to be borne out by
the contemporaneous documentation, was that ShEx also had a full shareholder
team working on POL, which was in regular dialogue with the department and
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actively involved in briefing Ministers. I was also aware, in general terms of
significant engagement between the POL executive and both ShEx and the
Department and I have no recollection of any concerns being raised with me to the
effect that the information I provided to ShEx was inadequate or that ShEx was
finding itself unable to keep Ministers adequately informed of the issues relating to
Horizon and the steps being taken by POL to address them.
203. Ona personal level the fact that I was obliged to take on the Shareholder NED
role at a time when I was on maternity leave, and then to continue the role after I
had taken up a new and demanding position in a different department, posed
significant challenges and I had to work hard to ensure opportunities to speak to
my ShEx colleagues, as the contemporaneous correspondence demonstrates. I
have no doubt that the model ShEx adopted for my successor, Richard Callard, of
combining the roles of head of the Shareholder Team and Shareholder NED, and
the provision of POL Board papers directly to the Shareholder Team was an
improvement in that it established a more efficient and streamlined procedure and
open lines of communication. The same applies to Mr Callard’s direct contact with
Ministers and departmental officials as the Board member.
204. In short, therefore, I consider that, within the constraints in within which I was
obliged to work as the first Shareholder NED, which had to take account of the
considerable reservations on the part of POL as to whether there should be a
Shareholder NED at all, I did an effective job of providing information on Horizon
(and other issues) to ShEx and I am not aware of any significant information
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relating to Horizon of which I became aware as a NED and which did not come to
the attention of ShEx.
Effective Oversight of POL
205. For the reasons I have sought to explain, I am not best placed to provide an
assessment of ShEx’s oversight of POL during my tenure as Shareholder NED
given that I was not part of the Shareholder Team within ShEx during this period
and I was both physically and institutionally separated from it. My perspective of
ShEx’s oversight functions is drawn primarily from the ad hoc contact I was able to
maintain with members of the team, including Will Gibson, and from being copied
in, from time to time, to correspondence relating to POL. The general impression I
gained was that ShEx was actively engaging with POL and was well sighted on the
steps that the company was taking to address Horizon-related issues, particularly
after the publication of the Second Sight interim report and the increased focus on
Horizon that it generated. However, I am not in a position to assist the Inquiry with
a detailed assessment of precisely what was done by ShEx in this regard, or how
effectively it was done.
206. By way of general reflection on ShEx’s role during this period, I would observe
that the Shareholder had limited formal powers in relation to the company. I have
described the powers set out in the Articles and they did not include any
mechanism for dictating how it should deal with a particular operational issue. It
was important, therefore, for ShEx to maintain regular engagement with the
company in order to understand how the executive were dealing with significant
issues and, where necessary, to provide its input. In general terms, my impression
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was that this was being done and that meetings and discussions were taking place
on a relatively regular basis but, for the reasons I have explained, I was not directly
involved in that process.
207. As to my personal position as Shareholder NED, I reflect that when the Board
was established in 2012, we took significant steps (from a low base) to build the
governance and drive the processes and culture of the organisation towards best
practice. On separation, we had an active phase of corporate governance with
renewed processes, new Board committees and challenging scrutiny of the
executive in a way that had not happened before at POL. Significant progress was
made in this regard, which is reflected in the Board Effectiveness Review, and I
think we came a long way in a relatively short space of time. In particular, the very
robust response of the Board to the Second Sight interim report in July 2013, which
saw the Board expressing its strong dissatisfaction and demanding the urgent
production of a programme of remedial work, shows a Board that was prepared to
be proactive and challenging and hold the company to account. I think the same
applies to the Board's decision to commission its own advice in relation to Horizon,
from Linklaters and Deloitte, once it started to become apparent that the Mediation
scheme was running into significant difficulty. We also gave robust consideration
to the new prosecutions policy and whilst I ended up in the minority when it came
to the decision as to whether POL should continue to prosecute at all, I felt that the
issue was subject to detailed and rigorous scrutiny by the Board.
208. However, and with the benefit of hindsight and having considered the evidence
to the Inquiry to date, it is now apparent to me that my ability, and that of my fellow
NEDs to maintain effective oversight of POL in relation to Horizon was hampered
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by the lack of reliable and objective information we were given as to the nature and
extent of the issues. We were, despite best efforts, given repeated assurances
from the executive and the business that turned out not to be entirely correct, and
we were also given incomplete information by the executive team at critical points
in this process. By way of example, I would say that firstly, at separation and when
we started as a new Board, we were not given anything like the level of clarity on
this issue as we should have been from RMG which had been managing this IT
system and the prosecutions since 1999 nor from those POL staff involved; and
while from July 2013, the level of Board’s direct oversight of Horizon increased
significantly and the Board received regular and relatively detailed updates on the
work being undertaken in response to the Second Sight interim report at every
meeting after this, I mow know from my preparation for this Inquiry, that at precisely
the time when the executive should have been at their most open with us as a
Board because of our questions and concerns, there was important information
that we did not see. In respect of the past prosecutions issue, in particular, it is
quite clear that the Board was not provided with important documentation
(including the material relating to Mr Jenkins’ evidence) and that we never received
a clear and frank account of the nature and scale of the risk that POL had acted as
prosecuting authority in a large number of prosecutions that might now prove to be
unsafe.
POL’s Handling of Challenges
209. As to how POL handled challenges to the integrity of the Horizon IT system by
sub-postmasters and Crown Office employees, Members of Parliament and the
press, I have sought to set out my reflections on this issue in the course of the
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chronological account I have provided above, as my impression of the POL
executive performance in this regard changed over time.
210. In general terms, I think the chronology of my tenure as Shareholder NED can
be divided into two distinct periods, in respect of this issue at least. From April 2012,
when I first learned directly as a non-executive Board member of the concerns
being expressed by MPs on behalf of a number of their constituents until July 2013,
when the Board was informed of the impending publication of the Second Sight
interim report, the essential picture being presented to the Board was that concerns
had been raised by MPs on behalf of sub-postmasters, POL was taking the
important step of instructing an independent firm of specialist forensic accountants
to investigate, and there appeared to be a desire to resolve this. The investigators
were engaging with relevant stakeholders including MPs and the JFSA, and a
report was awaited which was expected to provide reassurance as to the integrity
of the system. We took comfort from the impression that the Horizon issue was
being treated seriously by the business; we also did not have significant external
audit or other red flags that led us to take more action sooner, and we were
repeatedly told by the executive that there were no systemic issues with Horizon.
The Chair as well as the CEO and other executives were engaged directly with
managing the Second Sight process which at the time I thought was a positive
sign.
211. However, from July 2013 onwards it was clear that the issue was far more
serious, complicated and intractable than the Board had been led to believe. I
recall the Board’s profound dissatisfaction at that state of affairs, as expressed at
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the 16 July 2013 Board meeting. At our request, there was an extensive degree of
activity from POL in the immediate aftermath of the Second Sight interim report
which, at the outset, appeared to provide a realistic way forward and a viable
means of addressing the issues relating both to claims for compensation and the
review of prosecutions. That programme of work appeared to remain on track until
late 2013 when it started to become apparent that the mediation scheme, in
particular, was running into significant difficulties. As I have sought to reflect in my
account above, I think that the updates the Board was receiving on the Horizon-
related work in late 2013 and into 2014 started to reveal that the POL executive
was struggling to deliver on the programme of work that had been established in
the aftermath of the Second Sight report and that, in particular, its plan for a
mediation scheme to resolve the dispute with sub-postmasters was not working.
212. It is very difficult for me to identify, even now, the reasons for this and I am not
in a position to judge the extent to which the POL executive was genuinely
committed to a resolution of the issues that had been raised and approached the
process with a suitably open mind. From my perspective, with the benefit of
hindsight and taking into account all that I have read in preparing for this Inquiry, I
reflect now that POL’s ability to adequately handle these challenges was hampered
by at least three issues. The first was, executive capability. We, the Chair and
NEDs, felt at the time that the executive team needed to build its capability. This
was usual for a business in transition and which had come from a subsidiary status.
My recollection is that we discussed this as a Chair and NED group but we felt at
the time, on the balance of risks that we knew about then, that we needed to
continue to support the status quo and coach and support the CEO and her team.
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213. Secondly, I consider, with the benefit of hindsight, that there was insufficient
expert IT advice coming to the Board on the operation of the Horizon system. In
spite of the Second Sight interim report and some of the NEDs having experience
of IT, I think the Board should have acted sooner to commission our own expert
advice on the operation of Horizon and we should identified a need for the work
being done to update POL’s IT systems to look backwards at historical concerns
with Horizon as well as forwards at how the IT infrastructure should be updated to
support the development of the business. I think the Board’s decision to
commission the Deloitte review so as to gain a better understanding of the issues
being raised regarding the integrity of Horizon was sensible and appropriate, but I
think more should have been done to bring relevant IT expertise to the Board at an
earlier stage. I recognise that even today getting c-suite IT and cyber expertise is
hard, and in 2012 even more so; but there is no doubt that the questions around
the nature of the system could have had more insight from more expertise.
214. Thirdly, and with the benefit of hindsight, I would like to highlight cultural issues
which appear to me to have been problematic in POL. All corporate governance is
about processes and also people and culture and POL was no different. It was
moving towards greater maturity in this regard and there was considerable effort
including by the Chief Executive to improve and develop the culture right across
the organisation. But I feel concerned now about whether there was a persistent
failure from some in the executive team to approach these issues with a sufficiently
open mind. I acknowledge that aspects of these issues had perhaps been building
up throughout the decade since 1999 when Horizon was rolled out and overseen
by RMG, and it is hard to unpack problems from before many of the executive were
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even in post; but notwithstanding this, was there sufficient curiosity from and
oversight by various executive teams? This makes me reflect that despite our
attempts as a Board to drive positive changes in the culture, the behaviour of the
executive team contributed to the fact we were not able by March 2014 to have
seen this issue entirely for what it actually was.
215. Whether there was a deliberate attempt on the part of the POL executive to
present the Board with a misleading or sanitised picture relating to the extent of the
Horizon-related issues and the action being taken by the Board to address those
issues I am not in a position to say. We certainly did not feel at the time that we
were being given a deliberately misleading picture, and if we had this would
obviously have been extremely serious. I have referred above to the direction in
the July 2013 Board minutes to stop presenting the Board with overly optimistic
papers which needed to be ‘fact-checked’ but the perception, at least on my part,
was that the papers were lacking quality rather than credibility. However, there is
no doubt that there was important information relating to Horizon that the Board
was not shown or told about (and I have given examples above, including the
material relating to past prosecutions), and it is also clear that the unequivocal
assertions made by the POL executive as to the integrity of Horizon, established
by ‘rigorous testing’ were overstated. At the very least I think this reveals a
defensive and closed mindset on the part of the executive.
POL’'s approach to prosecutions/disclosure
216. The Inquiry asks me to reflect on POL’s approach to prosecutions and
disclosure to sub-postmasters and Crown Office employees convicted on the basis
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of Horizon data. I have dealt with this issue at some length above and my
overarching reflection is that POL’s handling of this issue was inadequate. I do not
consider that the Board was properly briefed on the historical background to this
issue when it was formed. I think it is profoundly unsatisfactory that I (and, as far
as am aware, some or all of the other NEDs) only learned of POL/RMG’s historic
role as a prosecuting authority when it was explained to us by the Chief Executive
in July 2013. I think that there was a serious failure to provide the Board with key
documents relating to the past prosecutions review started in July 2013, including
the advice from Mr Clarke on disclosure obligations and Mr Jenkins’ evidence. And
I think that there was a persistent failure to give the Board a true and frank account
of the nature and scale of the issue and the risks that it posed for the company.
217. As for the actions of the Board in relation to this issue, in light of the information
that we did have, I regret now that the Chair and I did not push harder for ‘option
(c)’, to cease all future prosecutorial activity, in the course of the debate on
prosecutions policy. I also consider, with the benefit of hindsight, that the Board
could have been more proactive in relation to the past prosecutions review
between July 2013 and March 2014. Having reviewed the contemporaneous
documents it seems to me that whilst a good deal of attention was paid to the
mediation scheme and the future prosecutions policy which I have covered above,
less attention was paid to the past prosecutions review, with the Board largely
noting the updates provided as to the commissioning of the review and the
independent oversight of the process. This was because, simply put, at the time
the understanding based on the information that had been provided was that there
were no systemic issues with Horizon. And whilst I have explained that I do not
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think it was necessary for the Board to see every document relating to this process
I am now very conscious that I did not have a clear understanding of the scale of
the past prosecutions issue going right back to long before separation. Having
listened very carefully to the heartbreaking evidence given by so many sub-
postmasters to this Inquiry, I very much regret the missed opportunity on the part
of the Board to focus more intensely on the issue of past prosecutions and to obtain
a better understanding of the implications of the concerns relating to Horizon for
those prosecutions.
Missed Opportunities
218. Finally, as to whether opportunities were missed by the Board to uncover and
expose the failings of the Horizon during the March 2012 to March 2014, period I
have obviously reflected very carefully on this issue. I do continue to think we were
robust in our scrutiny and challenged the executive when we had the information
to enable us to do so. And while there were numerous proactive steps that I have
detailed in this document my view now is that it is impossible not to feel now that
more should have been done, even if the signs at the time did not point us to that
place given the assurances we were being given. For example, had the Deloitte
report been commissioned alongside or in place of the Second Sight report in
Spring 2012, could things have moved faster? I think it might also have been
possible for the Board to gain a clearer understanding of the issues if, in this
instance, it had heard directly from Second Sight, the JFSA and/or the external
lawyers conducting the review of historic prosecutions, even if that meant taking a
specific decision to cut across the conventional approach of delegation to the
executive and relying on them to draw significant issues to the attention of the
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Board in an accurate and frank manner. The fact the Chair and CEO were directly
engaging gave us some comfort but there was plainly more information it would be
useful for us to know as a Board and so I think that more direct engagement with
the individuals I have listed would have been beneficial.
219. It has also struck very forcefully, having heard the compelling and distressing
accounts that sub-postmasters have given to this Inquiry that the Board would have
benefitted greatly from hearing directly from those affected by the Horizon issue
we were attempting to grapple with at the time. Again, this would not necessarily
have been a conventional approach for a Board in 2012 but we were seeking to
engage directly with sub-postmasters on other issues, including mutualisation of
the business and in setting up the Branch User Forum in 2013, and from my point
of view I now think it would have been better if I had heard more from them directly
at the time. In particular, this might have prompted the Board to ask more
challenging questions about the conduct of past prosecutions earlier and having
looked back at the contemporaneous documentation I think this is an issue which
should have received closer attention from the Board alongside everything else in
late 2013 / early 2014. We were told that there was a review of past prosecutions
underway and that was clearly appropriate as far as it went, but in light of what I
know now it is clear that I had no real appreciation of the scale of POL’s past
prosecution activity and the implications for many hundreds of sub-postmasters,
and that is something that I very much regret.
220. Let me close by saying that I hope this Inquiry can get to the bottom of what
happened and I stand ready to assist the Inquiry in any way that I can. I hope that
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the Inquiry will achieve the resolution that sub-postmasters and Crown employees
affected by these issues so greatly deserve.
Statement of Truth
I believe the content of this statement to be true.
Signature GRO
Date 23/05/2024
Page 102 of 108
Index to First Witness Statement of SUSANNAH STOREY
No.
Document Description
Inquiry URN
Inquiry Control
Number
Email chain from Katharine
Wilson (ShEx) to Will Gibson
(ShEx), Jane Hoy (ShEx),
Mike Whitehead (ShEx) and
others re Horizon computer
system
UKG100001384
UKGI012198-001
Post Office Statement re: the
Horizon computer system
[BBC Inside Out]
UKGI00001385
UKGI012199-001
Email from ShEx to unknown
(redacted) cc ShEx and Will
Gibson RE: JFSA_ and
Private Eye
UKGI00001482
UKGI012296-001
Opening Statement on
behalf of UK Government
Investments
SUBS0000006
SUBS0000006
Chair's letter to Alice Perkins
from Vince Cable
UKGI00041966
UKGI050861-001
Articles of Association of
Post Office Limited
UKG100043216
UKG100043216
Letter of appointment from
Alwen Lyons to Susannah
Storey - Non-Executive
Director of Post Office -
Susannah Storey
UKGI00017300
UKGI028258-001
Post Office Ltd -
Shareholder Executive: POL
- Summary
UKGI00018222
UKGI028229-001
Minutes of the Audit, Risk
and Compliance Sub-
Committee held on 13!
November 2012
POL00021430
POL-0018060
10.
Meeting minutes: minutes of
a Board meeting held on 234
May 2012
POL00021507
POL0000040
11.
Minutes of the Audit, Risk
and Compliance Sub-
Committee held on 13!
February 2013
UKG100042822
UKGI051717-001
12.
Meeting Minutes: minutes of
a Board meeting held on 20"
March 2013
UKGI00018098
UKGI028105-001
13.
Email — from Susannah
Hooper to Gill Catcheside cc
Alwen Lyons re: POL
Committees
UKGI00017360
UKGI027367-001
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14.
Board Effectiveness Review
by Alice Perkins, July 2013
POL00099210
POL-0098793
15.
Meeting minutes: minutes of
a Board meeting held on 234
January 2013
POL00021510
POL0000043
16.
Briefing for Edward Davey
MP for meeting with Alice
Perkins on 19'" October
2011
UKGI00041959
UKGI050854-001
17.
Letter from the Secretary of
State to Alice Perkins
UKG100042610
UKGI051505-001
18.
Meeting minutes: minutes of
a Board meeting held on 234
May 2012
UKGI00019348
VIS00013159
19.
Email correspondence
between Susannah Hooper
and Will Gibson re: Our
favourite subject in relation
to POL
UKGI00017356
UKGI027363-001
20.
Email thread from Will
Gibson to Susannah Hooper
RE: Building a Mutual Post
Office govt response
29.6.12
UKGI00017340
UKGI027347-001
21.
Email from Susannah
Hooper to Will Gibson re:Re
UKGI00017341
UKGI027348-001
22.
Email — from Susannah
Hooper to Lowe Roger. Re:
Pol
UKGI00017347
UKGI027354-001
23.
Email from Susannah
Hooper to Alwen Lyons cc
Paula Vennells
UKGI00017336
UKGI027343-001
24.
Post Office Ltd Board
Meeting Agenda of 19/09/12
and Relevant Reports
POL00103348
POL-0102931
25.
Email from Neil Wilkinson to
Lesley J Sewell. Re: Update
after Tuesday's Board
meeting
POL00099418
POL-0099001
26.
March 2012 — Significant
Litigation Report
UKG100018251
VISO0011650
27.
Email from Paula Vennells to
Alasdair Murdoch, Virginia
Holmes, Susannah Hooper
and Neil McCausland re:
Final versions of press
releases
POLOOO96692
POL-0096275
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28.
Notes for Board update on
Second sight Investigation,
1st July 2013
POL00098878
POL-0098461
29.
Meeting minutes: minutes of
a Board meeting held on 12""
January 2012
POL00021503
POL0000036
30.
Meeting minutes: minutes of
a Board meeting held on 18"
April 2012 - Mails and Eagle
re. Update
UKGI00018112
UKGI028119-001
31.
Email from Paula Vennells to
POL Board. Re: News
coverage
POL00295355
POL-BSFF-
0133405
32.
Meeting minutes: minutes of
a Board meeting held on 4""
July 2012
POL00021508
POL0000041
33.
Meeting minutes: minutes of
a Board meeting held on 23"
October 2012
POL00027610
POL-0024251
34.
November 2012 Significant
Litigation Report
POL00107831
POL-0106070
35.
January 2013 Significant
Litigation Report
POL00340162
POL-BSFF-
0165883
36.
Significant Litigation Report
dated 13" March 2013
UKGI00018254
VISO0011653
37.
Meeting minutes: minutes of
a Board meeting held on 9"
April 2013
POL00021512
POL0000045
38.
Meeting minutes: minutes of
a Board meeting held on 21°
May 2013
POL00021513
POL0000046
39.
Significant Litigation Report
dated 15" May 2013
UKGI00018260
VIS00011659
40.
Meeting minutes: minutes of
a Board meeting held on 1%
July 2013
POL00021515
POL0000048
41.
Post Office Ltd Board
Meeting Agenda for 1% July
2013 - by teleconference
UKGI00017289
UKGI028247-001
42.
Email from Martin Edwards
to Paula Vennells re Board
email
POL00099003
POL-0098586
43.
Email from Alwen Lyons to
Alice Perkins, Neil
McCausland, Paula
Vennells and others re
Horizon - Telegraph article
and update on media
POL00192017
POL-BSFF-
0030080
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coverage following Horizon
report
44.
Post Office - Horizon
System. Statement by Jo
Swinson, Parliamentary
Under Secretary of State for
Employment Relations and
Consumer Affairs
UKGI00001822
UKGI012636-001
45.
Interim Report into alleged
problems with the Horizon
system V.24
POL00031813
POL-0028715
46.
Meeting minutes: minutes of
a Board meeting held on 16"
July 2013
POL00021516
POL0000049
47.
Update following the
publication of the Interim
Report on Horizon
POL00099218
POL-0098801
48.
Significant Litigation Report
dated 11" July 2013
POL00027548
POL-0024189
49.
Update on the work
programme arising from the
Horizon Report
POL00298004
POL-BSFF-
0136054
50.
Meeting minutes: minutes of
a Board meeting held on 25"
September 2013
POL00021518
POL0000051
51.
Project Sparrow Board
paper Sept 2013 by Susan
Crichton
POL00304636
POL-BSFF-
0142686
52.
Significant Litigation Report
dated 16" September 2013
UKGI00018245
VISO0011644
53.
Meeting minutes: minutes of
a Board meeting held on 31*t
October 2013
POL00021519
POL0000052
54.
Post Office Limited. Audit,
Risk and Compliance Board
Sub-Committee Briefing
Book — Half Year ended 29"
September 2013
UKGI00018126
UKGI028133-001
55.
Meeting minutes: minutes of
a Board meeting held on 27"
November 2013
POL00021520
POL0000053
56.
Post Office Limited - Board
Paper — Project Sparrow
Update by Chris Aujard
POL00027482
POL-0024123
57.
Post Office Ltd Board — Risk
Management Update
November 2013
POL00027483
POL-0024124
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58.
Meeting minutes: minutes of
a Board meeting held on 21°
January 2014
POL00021521
POL0000054
59.
Post Office Ltd Board —
Chief Executive’s Report
UKGI00017290
UKGI028248-001
60.
Meeting minutes: minutes of
a Board meeting held on 26""
February 2014
POL00021522
POLO000055
61.
Initial Complaint Review and
Mediation Scheme paper
prepared for the Post Office
Ltd Board by Belinda Crowe
POL00027452
POL-0024093
62.
Email from Susannah Storey
to Alice Perkins re: Quick
one
UKGI00045509
UKGI054505-001
63.
Meeting Minutes: minutes of
a Board meeting held on 26"
March 2014
POL00021523
POL0000056
64.
Board papers: Papers of a
Board meeting held on 26!"
March 2014
POL00030724
POL-0027206
65.
Paper on the _ Initial
Complaint Review and
Mediation Scheme by Chris
Aujard
POL00105529
POL-0105096
66.
Email from Alwen Lyons to
the POL Board re. Board
note from Paula as promised
POL00027792
POL-0024433
67.
POL Board -—- _ Chief
Executive's Report
POL00027136
POL-0023777
68.
Post Office Audit, Risk and
Compliance Committee,
Prosecutions Policy
Appendix A, Chris Aujard,
February 2014
POL00030716
POL-0027198
69.
Email from Susannah
Hooper to Alice Perkins,
ccling Larissa Wilson, Tim
Franklin, Alasdair Marnoch
and others, re: ARC
Teleconference
POL00027687
POL-0024328
70.
Email chain from Alwen
Lyons to Paula Vennells and
Chris Aujard re: ARC
Teleconference
POL00027692
POL-0024333
71.
Advice on Disclosure and
the Duty to Record and
Retain Material
POL00006799
POL-0017591
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72. I Interim Review of CK I POL00006583 POL-0017668
Processes by Brian Altman
Qc
73. I Review of PO prosecutions I POLO0006581 POL-0017666
by Brian Altman QC
74. I Appellants’ note for I WITNO6740105 WITN06740105
directions hearing on
18/11/20 in Hamilton & Ors -
disclosure of Clarke advice
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