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Witness Name: David Smith
Statement No: WITN05290200
Dated: 07/02/2023
POST OFFICE HORIZON IT INQUIRY
SECOND WITNESS STATEMENT OF DAVID SMITH
1, DAVID SMITH, will say as follows:
INTRODUCTION
1. This statement is in response to the Rule 9 request dated 23 January
2023. It is in relation to Phase 3 of the Horizon IT Inquiry and in particular
the Operation; training, assistance, resolution of disputes, knowledge and
rectification of errors in the system and to Phase 4 and in particular action
against Sub-postmasters and others; policy making, audits and
investigations, civil and criminal proceedings, knowledge of and
responsibility for failures in investigation and disclosure.
LEGACY HORIZON
2. ! was asked to explain the purpose of Horizon Data Integrity report dated
02/10/2009 ]FUJ00080526] and my role in reviewing it. I cannot be
completely sure but I believe this document was produced as a follow up
to a telephone conversation I had with Gareth Jenkins. I had been asked
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to meet with Ernst & Young Partners in the light of articles appearing in the
media where a group of sub-postmasters were asserting that Horizon was
creating false office balances. The sub-postmasters had no hard evidence
that Horizon had produced false balances but there were suggestions that
power interruptions might have been the cause. In preparation for the
meeting with Ernst & Young I wanted to ensure that the recall I had of the
process around audit files and the way in which Horizon dealt with
transaction recovery was accurate. I believe that I asked Gareth to
document the verbal briefing he gave me. I would not have reviewed the
document which I would have retained in case I needed to refer to it ata
later date.
. I was asked to explain my relationship with Gareth Jenkins and what I
thought of him. Whilst I knew of Gareth Jenkins the call referred to above
was the only interaction with him that I can recall. He may have been
present in larger meetings at which I was an attendee, but I couldn’t put a
face to the name. So, I knew of him by reputation only — that reputation
was of someone respected for their technical knowledge of the Horizon
system.
. I cannot recall how I understood the “without prejudice” mark up of this
document and the reference to “legal case” at page 5.
. I was asked to explain whether I understood from this report that there
were no issues with Horizon’s data integrity. That was not the question I
asked Gareth to brief me on and I would, therefore, not have understood
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the document in that context. I would add that I understand data integrity
to be a wider issue than the areas covered in this document.
. I was asked to consider Fujitsu Testing Approach for the Horizon System
dated 15/08/2003 [FUJ00001817] and Fujitsu Services Horizon Generic
Release Acceptance Process dated 13/09/2004 [FUJ00001889] and to
explain the testing process for Legacy Horizon after the roll out. The
second document describes the approach to contractual Acceptance to
which testing is an important feed but which I would not term part of the
testing process per se.
. The former document is a detailed description of the testing process jointly
agreed between POL and Fujitsu. In practice it applied from the S60
Release onwards although the POL process was based on that developed
for S50. This document and the joint working behind it was part of a
substantial piece of joint work defining the processes through the entire
development lifecycle. POLs input to this initiative was enhanced by the
experienced contractors/consultants that it engaged to supplement its own
resources across the project disciplines both to lead activities and to
transfer skills.
. I was asked to explain my involvement in overseeing the testing process. I
chaired a weekly meeting called the Automation Working Group. All
Release and project managers would attend or their delegate. They would
have previously tabled a progress report raising issues and risks and
reporting on solutions or the actions being taken to arrive at solutions. This
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progress reporting would include testing wherever a release/project had
reached that stage of development.
9. I also chaired monthly Release joint progress meetings with Fujitsu
attended by their SI Director Peter Jeram. This meeting would review the
progress with testing when the development had reached that stage and
ensure that appropriate actions were in place to address any areas of
concern.
10. Over time the organisation I was head of expanded the number and range
of projects it managed. As the organisation evolved so did I and I became
less hands on. The chair roles described above passed to my direct
reports. I introduced a weekly direct reports meeting which focused on
progress reporting. Any significant issues with testing would be surfaced at
this meeting.
11. There were two other types of meeting which where dependant on the
outputs of the testing process. The first of these were Acceptance Boards.
Any gaps in planned testing coverage or significant levels or severity of
outstanding faults would be exposed in these meetings. The practice was
to hold rehearsal meetings before the Board proper and thus allow a
further opportunity for the oversight of the testing process. Acceptance
was important to Fujitsu as part of the payments due to them would be
retained against it being granted and to POL because the new software
could not be released into the Network without it. I did not routinely attend
these meetings but would certainly have been updated on any significant
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issues either through formal reporting processes or directly by Release
Managers.
12. The ultimate decision whether to release new software into the network
was a business decision. This was taken at a Release Authorisation Board
which I normally chaired, although very much in a non-voting capacity, my
role being to lead the meeting through the process. The Fujitsu release
would be just one input as invariably other systems changes would be
involved and business as usual departments would also have deliverables
that required “green” status for the release to be approved. The practice
was to hold rehearsal meetings in advance of the decision point and thus
surface early any potential no-go issues. This would include the progress
with testing of Horizon.
THE NEXT GENERATION
13.I was asked to consider Post Office Ltd Board minutes dated 13/10/2004
[POL00021485], Post Office Ltd, Horizon Next Generation Release
Authorisation AG3 Joint Board Meeting minutes dated 28/10/2010
[FUJ00097 159] and Project Initiation Document for Post Office/Fujitsu IT
Roadmap Feasibility Study dated 11/11/204 [POL00030559].I am asked to
explain what the Horizon Next Generation business case was and what it
involved.
14. The business case was to extend the contract with Fujitsu on new terms
until March 2015 and to replace the existing system. The project
authorised sum was around £125 with annual savings of the order of
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£55m. The baseline for evaluating the proposition was the existing
contract terms and so the savings were roughly evenly split between a
reduction in monthly charges and the avoidance of baked in cost
increases.
15. Pages 71 to 99 of the document The Story of Horizon and Horizon Online
dated 02/07/2010 [FUJ00098040], which was written by me, gives an
account of the events leading up to the business case and its approval. It
was written in 2010 when my memory of events was considerably fresher
than it is today.
16.1 was asked to explain my role in the development of Horizon Online. Mark
Burley was the POL Programme Manager for HNGX. As such he
managed Fujitsu’s performance on a day today basis. Mark reported
progress to me via weekly direct reports meetings, our monthly one to one
meetings and more or less daily as issues arose.
17.HNG X dominated my meetings with the Fujitsu Account Manager of which
there were no less than six during my tenure. Initially the focus was
commercial and specifically about getting the right financials and solution
on the table. Once a deal was in place and the development proceeded
the focus changed to the concern that Fujitsu were not on top of the plan
nor being open about the true state of progress. Twice during
development, I asked for independent reviews of progress. I also
negotiated revised terms which included, inter alia, that benefits due to
POL were tied to the original delivery date in the contract irrespective of
when the new system was actually delivered.
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18.1 was asked to explain what the Joint Board was and who made up its
membership. This Joint Board’s focus was the fitness of the solution to
proceed to the next stage of implementation. I have little recollection of the
detail of these meetings or indeed if I attended all of these as a matter of
routine. However, these meetings operate at a level of considerable detail
reviewing outstanding issues and faults and assessing whether these
tepresent an obstacle to progress and if not under what conditions. I do
not recall the exact role of this board in the decision process but from the
POL point of view that decision rested with its own Release Authorisation
Board consisting of senior representatives from across the directorates.
19.Membership of the Joint Board was made up of senior representatives of
Development (Programme Management) and Service Management from
both Fujitsu and POL. The list of attendees and those tendering apologies
probably defines in detail the full list of those invited and their roles.
HORIZON ONLINE
20.1 was asked to consider various Post Office Ltd and Fujitsu meeting of
minutes for Horizon Next Generation Joint Progress Meetings
[FUJ00092617, FUJ00092754, FUJ00092898, FUJ00093056,
FUJ00094192, FUJ00094359, FUJ00094472, FUJ00094484,
FUJ00097159], Fujitsu RMGA Internal Programme Board Presentation
dated 11/02/2010 [FUJ00092960] and Acceptance report for HNG-X
Acceptance Gateway dated 23/02/2010 [POL00032999]. I was asked to
comment on the issues, errors, and defects that I was aware of in Horizon
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Online. I have little or no recollection of these and any comments I would
make would be a repeat of what is contained in the above documents.
Many, if not all, of the items in these documents were “headlines” with
considerable detail lying beneath them.
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.I was asked to set out set out my views, at the time, as to whether Horizon
Online was fit for purpose. My knowledge of the progression of the
implementation of Horizon comes to and end on 31% March 2010 and I
consider events and knowledge accumulated after this date essential to
forming an informed answer to this question and indeed some subsequent
questions. It is also the case that my recollection of the events during the
crucial first quarter of 2010 quarter is not at all good.
22. The above documents provide evidence of rigorous process and that the
solution was in a fit state for roll out to commence. It would have been
remarkable had roll out progressed without the emergence of some faults.
The nature, however, of a number of faults that surfaced when live running
commenced did cause me concern. Unfortunately, I remember the
concern but not the events. My recollection is that these were not fully
explained at the time I left. So, to summarise whilst the rigorous process
followed prior to entering pilot evidenced fitness for purpose there were
unanswered questions hanging over the solution at the time I left the Post
Office
23.1 was asked to describe the process of Acceptance of Horizon Online and
any issues you saw with Acceptance at the time. The process of
Acceptance would have been based upon the document FUJ00001889
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(mentioned at paragraph 6 above). I believe POL00032999 is evidence of
this process being followed. A significant issue with the Acceptance
process, which I would define as one that caused lack of confidence in the
process, would have been a major issue. I can recall no such issue.
24.1 was asked to explain whether I felt that Fujitsu adequately disclosed the
information the Post Office needed to evaluate the system. The evidence
the Post Office needed to evaluate the system was laid out contractually
as per the generic approach to Acceptance, FUJ00001889. Any deficiency
in this evidence would have been disclosed in the Acceptance report —
POL00032999. The question arises, however, as to whether there is
evidence that lies outside POL’s requirements and whether this was
disclosed. The fact that such evidence exists is acknowledged at the foot
of Page 9 of the Acceptance report. This note also discloses the
mechanism by which this information would be shared. There was nothing
to suggest, at the time I left, that Fujitsu had failed to disclose relevant
information. I cannot, of course, comment on anything that may or may not
have surfaced after I left the Post Office.
PILOT OF HORIZON ONLINE
25.1 was asked to consider an email dated 32/03/2010 from Gavin Bounds to
Dave Smith, Andy McLean, Nick Gittens and Mark Burley re HNGX data
centre continuity [FUJ00095048]. I was asked to explain the issues that
were encountered in the pilot of Horizon Online. As explained above I
have little or no recollection of the issues that arose during pilot. The Joint
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Progress Meetings minutes do refer to a number of issues, but I cannot
elaborate further on the minutes. The emails which form FUJ00095048
were exchanged on my last day of service. It is clear from the e mails that
branches were impacted and it is clear that the Post Office believed that
the solution specified should not have been impacted in the way it was by
the storm. I would not have dismissed this as a one off incident caused by
a freak storm as root cause analysis might have exposed a wider
vulnerability. I had of course left the Post Office before this analysis was
available.
26. I was asked to explain whether I felt that HNG-X was in a fit state to roll
out. Had I felt that the solution was not fit to roll out prior to roll out
commencing I would have expressed that view to the business. I repeat
that I was concerned about the accumulation of issues that arose during
pilot. There is evidence in FUJ00094484 that there were issues that had
the potential to delay further progress. Minute 145.04 refers to an issue
that required business agreement to a workaround otherwise a Hot Fix
would be required. Minute 145.14 relates to High severity Security
incidents which would prevent further progression if not fixed. My email in
FUJ00095048 refers to confidence being low. With my recall of events
hazy to say the least and my understanding of the various issues as a
result minimal it would be quite wrong of me to make judgements in
retrospect.
INVOLVEMENT IN PROCEEDINGS AGAINST SUBPOSTMASTERS
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27.I was asked to consider an email dated 22/11/2005 from Mandy Talbot to
Tom Breezer and Stephen Dilley re Lee Castleton papers and next steps
[POL00070492].
28. It was towards the end of 2004 (not completely sure about this) when
completely out of the blue I received a telephone call from Mandy Talbot.
She explained that she worked for the Group Solicitors team and had
recently been assigned to POL cases. She was dealing with a civil case
referred to as Cleveleys which the Post Office was on its way to losing.
She was most concerned that this would create a precedent which could
be used in future cases. She wanted to know if I could suggest a way to
retrieve the situation.
29. The defendant and Post Office had agreed to jointly appoint an expert.
This expert reported back to the court that Horizon could have caused the
cash discrepancy. The only way to counter this, in my view, was to
demonstrate that Horizon had not created the discrepancy and the only
way to do that was the audit file. Unfortunately, Cleveleys dated back to
the very early days of Horizon when the audit trail was retained for a short
period of time. The audit trail was no longer stored, and the case was lost.
30.My exchange with Mandy led me to discussions with the Post Office
security team member who looked after audit trail based investigations.
Security led on criminal cases. Where a Sub-postmaster pleaded not guilty
and used Horizon as part of their defence security would extract the audit
file to prove the Horizon balance. All cases pursued on this basis were
found in favour of the Post Office. Through my exchange with security, I
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learned that both Fujitsu and Transaction Processing would support the
effort in court in these cases.
3
=
. The obvious way forward was for the audit trail approach to be extended to
civil cases and this I recommended to Mandy. In the course of our
discussions two other areas for consideration arose. The first was the lack
of a database of all cases being pursued through the courts. The second
was the idea that the Post Office’s case would be strengthened by the
injection of an independent witness into proceedings. This latter idea was
never fully articulated nor was it obvious how this might happen - a Post
Office appointed independent witness didn’t sound particularly
independent.
32.A meeting was convened of all those involved in pursuing cases through
the courts. The proposal to extend the use of the audit trail was to be put
to this meeting. I didn’t attend this meeting personally, my commercial
manager attended on my behalf as he would have been the person to take
action were a way forward agreed. The proposition was supported by the
meeting who turned to security expecting them to pick up the extra activity.
Security responded by pointing out that they were contractually limited to
one hundred inquiries per annum and had neither budget nor manpower to
extend their existing reach. My commercial manager would have advised
the meeting of the expected cost of additional inquiries. The line
representatives resolved to go away and attempt to get budget allocated
for the task.
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33.1 was asked to explain whether I remembered the meeting with Mandy
Talbot, Litigation Team Leader at the Post Office in November 2005 to
discuss the “Castleton” case. I don’t recall the meeting at all. I do recall
being kept abreast with the progress of this criminal case where the audit
trail was a central part of the Post Office’s case. Mandy was pleased with
the outcome and in particular the judges words — see POL00090575. After
Castleton I don’t recall any further activity on this matter until the second
half of 2009.
34.1 was asked to explain my involvement in these types of proceedings,
typically. I was never personally involved in proceedings against Sub-
postmasters. Neither was I asked for or gave advice to either Security or
line teams pursuing Sub-postmasters through the courts.
35.1 was asked if I was provided with the spreadsheet of “all Horizon related
cases” referred to in the email. I don’t recall having received this.
36.1 was asked to explain what I thought about the integrity. Horizon is one
element of an end to end process designed to maintain accounting
integrity for Sub-postmasters, clients and ultimately customers. The
declared cash balance is subject to change as a result of back office
checks designed to correct errors no matter how they are created. My
confidence in this end to end design was reinforced by the fact that
whenever a Sub-postmaster had cited Horizon as part of their defence in
pleading not guilty the Post Office, using the audit trail, had always
prevailed.
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37.1 was asked to explain what steps, if any, I took in light of the Castleton
case. I took no action as I was not involved in any way in the prosecution.
Exchanges between myself and Mandy Talbot were for the purpose of
briefing me on progress of the case.
INTEGRITY OF LEGACY HORIZON SYSTEM
38.1 was asked to consider document Horizon Integrity - Dave Smith
[POL00090575]. I was asked to explain why I wrote this slide show. There
was growing interest in the assertion being made by a group of sub-
postmasters that Horizon was the cause of errors in their calculated office
cash balance. This attracted the interest of Group Public Relations who
were concerned about this and were trying to get some traction with senior
Post Office management in framing a response. I can’t be sure but I think
it was they who convened a meeting to bring interested parties together to
discuss the situation and frame a response. This meeting fell sometime
between the last week in February and the first week in March (1 am
certain of this as I was in Mexico during this period and have date stamped
photos).
39.1 prepared this document as an input to that meeting. In my last few days
at the Post Office, I used a version of this document to urge my Director to
raise this matter with colleagues. I will have previously briefed him on this
matter and as both Service Management and Security reported to him he
was well placed to gain others input.
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40.1 was asked to explain what I meant by “in order to win the argument we
4
have to focus it on what actually happened and not allow others to conduct
the debate around speculation about what might have happened”. What
did you consider had “actually happened”.
. Firstly, my reference to “what actually happened” meant using the audit
trail to reconstruct the office balance and prove that in fact Horizon had not
caused an error in the office balance. I had a further discussion with the
security lead on audit trail. He confirmed that all cases where the audit trail
had been put to use had been found in the Post Offices favour. He also
mentioned that in a number of cases disclosure to the defence of the
intention to extract the audit file and the use to which it was put caused the
Sub-postmaster to change their plea from not guilty to guilty.
42. Secondly this refers to the fact that, with the exception of Castleton, I did
not know the detailed background to the cases of the small group of Sub-
postmasters who first raised the issue. I had assumed that they all had
been pursued through the courts. This understanding changed, at least in
one case, when I was asked to support the Chairman of the Welsh Postal
Board in a meeting with the MP to whom Mr Bates had written raising the
issue of Horizon. To say we received a hostile reception would be an
understatement. However, between the Chairman and the retail line
representative the MP listened to a very detailed description of the history
of the Post Office’s interaction with Mr Bates. The MP completely changed
his stance. From my point of view I learned that understanding what had
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happened with each complainer would be an important consideration in
defending the Post Office position.
REFLECTIONS
43.1 was asked what, if anything, I think I would have done differently with the
benefit of hindsight, who I thought was responsible for the Post Office
scandal and what I thought the Post Office could have done differently?
44. The events on which I have been asked to comment happened
somewhere between 13 and 26 years ago. My recall of much of this is at
best hazy and were it not for the documents I have been asked to consider
I would have had very little to say. The documents which I have been
asked to consider are but a small selection of the documentation that I
know existed at the time. Many of these documents refer to issues in
headline terms and give little information about the issue to which they
refer. I also have no knowledge of how the Post Office handled this matter
after I left its employ.
45. Given these circumstances I do not believe I could give a properly rounded
and considered answer to the above questions based on all the facts
necessary to do so.
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Statement of Truth
I believe the content of this statement to be true
Dated: 07/02/2023
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Index to Second Witness Statement of David Smith
URN
Document Description
Controi Number
FUJ00080526
Fujitsu Report: Horizon Data
Integrity v1.0 dated
02/10/2009
POINQ0086697F
FUJ00001817
Fujitsu Services and Post
Office: Testing Approach for
the Horizon System (v.1.0)
dated 15/08/2003
POINQ0007988F
FUJ00001889
Fujitsu Services: Horizon
Generic Release Acceptance
Process (V.1.0) dated
13/09/2004
POINQOO08060F
POL00021485
Post Office Limited Board
Minutes of 13/10/2004
POL0000018
FUJ00097 159
Post Office Ltd, Horizon Next
Generation Release
Authorisation AG3 Joint
-I Board Meeting minutes of
28/01/2010
POINQ0103330F
POL00030559
Project Initiation Document
for: Post Office/Fujitsu IT
POL-0027041
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Roadmap Feasibility Study
(V.4.0) dated 11/11/2004
FUJ00098040
Presentation on Horizon and
Horizon Online dated
02/07/2010
POINQ0104211F
FUJ00092617
Meeting minutes of Horizon
Next Generation Joint
Progress/Release dated
14/01/2010
POINQ0098788F
FUJ00092754
Meeting minutes of Horizon
Next Generation Joint
Progress/Release dated
28/01/2010
POINQ0098925F
10
FUJ00092898
Meeting minutes of Horizon
Next Generation Joint
Progress/Release dated
04/02/2010
POINQO099069F
11
FUJ00093056
Post Office Meeting minutes
re Horizon Next Generation
Joint Progress/Release dated
11/02/2010
POINQ0099227F
12
FUJ00094192
Post Office Meeting minutes
re Horizon Next Generation
POINQ0100363F
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Joint Progress/Release dated
18/02/2010
13
FUJ00094359
Post Office Ltd Horizon Next
Generation Joint Progress
Meeting 147 Minutes of
04/03/2010
POINQ0100530F
14
FUJ00094472
Post Office Ltd and Fujitsu
meeting minutes for Horizon
Next Generation Joint
Progress Meeting 148. Dated
11/03/2010
POINQ0100643F
15
FUJ00094484
Post Office Ltd and Fujitsu
meeting minutes for Horizon
Next Generation Joint
Progress Meeting 149 dated
18/03/2010
POINQ0100655F
16
FUJ00097159
Post Office Ltd, Horizon Next
Generation Release
Authorisation AG3 Joint
Board Meeting minutes of
28/01/2010
POINQ0103330F
17
FUJ00092960
Fujitsu RMGA Internal
Programme Board
POINQ0099131F
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Presentation dated
11/02/2010
18
POL00032999
Acceptance Report for HNG-
X Acceptance Gateway 3
(v.2.0) - APPROVED dated
23/02/2010
POL-0029934
19
FUJ00095048
Email from Gavin Bounds to
Dave Smith, Andy McLean,
Nick Gittens and Mark Burley
re: HNGX Data Centre
continuity issue dated
31/03/2010
POINQ0101219F
20
POL00070492
Email from Mandy Talbot to
Tom Beezer and Stephen
Dilley re: Lee Castleton
papers and next steps dated
22/11/2005
POL-0067055
21
POL00090575
Horizon Integrity - Dave
Smith
POL-0090096
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