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Witness Name: Ken McCall
Statement No.: WITN10020100
Dated: 10 June 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF
KEN MCCALL
1, Ken McCall, will say as follows:
INTRODUCTION
1. I am a former Independent Non-Executive Director ("NED") of Post Office
Limited ("POL") and held the position of Senior Independent Director ("SID")
between 21 January 2016 and 25 January 2022.
2. 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 5 April 2024
(the "Request"). I instructed Latham & Watkins (London) LLP to assist me in
preparing this statement.
3. I have addressed the questions in the Request honestly and to the best of my
recollection, knowledge and belief. However, the matters covered by the
Request go back up to eight years and, in places, I have found it difficult to recall
exact details, dates and the sequence of events. Furthermore, a number of the
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questions relate to the period when POL was dealing with unprecedented
operational challenges caused by the Covid-19 pandemic, including the periodic
and partial closure of, up to 3,000-4,000 branches, as well as the aftermath of
Bates & Others v Post Office Limited (the "GLO Proceedings"), and I have
found it particularly hard to recall events during this period. My recollection has
been partly helped by the documents provided by the Inquiry.
4. In total, the Inquiry has provided me with 91 documents (consisting of 1,713
pages). Those documents which I expressly refer to in this statement are listed
in the Schedule.
BACKGROUND
5. I started my career working for TNT, an international mails, express and logistics
company headquartered in the Netherlands. My first roles at TNT were based
in the UK and I worked in five different locations before moving to the
Netherlands. I eventually became Chief Executive Officer ("CEO") for Asia, the
Middle East, Africa & India, and then CEO for China, during which period I spent
10 years living in Singapore and 4 years in Shanghai.
6. In 2007, I left TNT to join DHL, where I held various management roles in the
Express division for the UK and Europe. In 2010, I then moved to Europcar
Group, which provides car and van rental, ride-hailing and other mobility
services. I became Deputy Group CEO in 2016 and held this position until March
2019. Again, given the international nature of Europcar Group's business,
I spent a great deal of time living and working overseas. In particular, during my
tenure as Deputy Group CEO, I would typically work at least four days each
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week in continental Europe, mostly in Paris but also in Germany, Italy and
Belgium.
While at Europcar Group, I held a non-executive position at listed fashion
retailer SuperDry, where I was a member of the Audit and Remuneration
Committees.
POL CORPORATE GOVERNANCE AND ROLE AS A NED
Appointment as a NED
10.
In the second half of 2015, I was approached by an executive search firm about
the possibility of joining the board of POL (the “"Board"). My second term as a
NED at Superdry was due to end in 2016 and I was looking for a new non-
executive opportunity. I believed the role at POL would play to my strengths in
logistics, networks and distribution.
I do not recall there being a formal application process. After expressing an
interest in the role, I attended an interview with POL's then-Chairman,
Tim Parker. Mr. Parker explained that he was refreshing the Board and that he
wanted to recruit individuals with specific skills. We discussed my career history,
in particular my experience in parcels and mails, and Mr. Parker indicated that
I would be a good fit for POL.
I attended a further interview with Baroness Neville-Rolfe, who was, at the time,
the Parliamentary Under-Secretary of State for the Department for Business,
Innovation and Skills ("BIS") and the government minister responsible for POL.
I understood that POL was already interested in appointing me and this second
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interview was to 'rubber stamp' the decision. The interview took place at the BIS
offices at 1 Victoria Street and I was accompanied by Richard Callard, the Board
representative for UK Government Investments ("UKGI"). The interview lasted
between 45-60 minutes. Like Mr. Parker, Baroness Neville-Rolfe asked me
various questions about my previous experience: all generic questions that
I would expect to be asked in any interview.
Neither interview involved any substantive discussion of POL's business and
operations, or any challenges facing POL. At that time, I had no knowledge of
the Horizon IT system ("Horizon"); any bugs, errors or defects affecting
Horizon; any issues with Horizon's integrity; any complaints about Horizon; or
the ability of Fujitsu employees to alter transaction data without the knowledge
or consent of sub-postmasters ("SPMs"), and none of these matters were
brought to my attention during the recruitment process. I am now aware that,
when I was recruited to join the Board, there were already allegations of
problems with Horizon in the public domain, including reports in the national
press.
I regret not carrying out more thorough due diligence on POL before I was
appointed to the Board. The diligence I did carry out was limited to trying to
understand POL's place in the parcels market and its cooperation with
Royal Mail. I would ordinarily have carried out greater financial diligence to
ascertain, for example, the levels of cash and leverage in the business but that
information was not publicly available. Perhaps naively, I did not think it
necessary to undertake significant research on what I perceived to be a trusted
institution that had been around for hundreds of years and was owned by the
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UK government. Looking back today, I cannot be certain why I was not aware
of public reports of problems with Horizon. I suspect the main reason was that,
as explained above, I was spending a large proportion of my time outside the
UK for work and so I was not following UK news as closely.
I do not specifically recall when I found out about the existence of complaints
from SPMs about Horizon. I believe it would most likely have been in mid- to
late-2016, in the early stages of the GLO Proceedings. I also do not remember
exactly when I became aware that Fujitsu was able to remotely access and alter
transaction data in Horizon. However, I have been referred to an email I sent to
Veronica Branton, the Company Secretary, on 22 April 2020 where I state that
I recall learning about remote access shortly before the second judgment in the
GLO Proceedings (POL00104107). On this basis, I expect I became aware of
remote access in November or December 2019.
Role and responsibilities as a NED
14.
15.
I was formally appointed to the Board on 21 January 2016. My role and
responsibilities as a NED of POL were set out in my appointment letters.
I received one letter dated 2 December 2015 for my first term (POL00362996)
and one dated 22 January 2019 for my second term (POL00363008). At a high
level, my role as a NED was to be part of a board developing POL's strategy to
achieve financial self-sustainability and to work with the management team to
deliver that.
As the SID, I had certain additional responsibilities. In particular, I led an annual
evaluation of the Chairman's performance and produced a formal feedback
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16.
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review. I describe this process in more detail at paragraph 60 below in relation
to the 2019/20 review cycle. In line with the UK Corporate Governance Code,
I was also expected to act as a sounding board for the Chairman and an
intermediary for the other NEDs.
I have been asked to summarise my views on the responsibilities of a board in
the operation of a government-owned company, both in general and in relation
to certain matters specified by the Inquiry, namely: IT, accounting systems, civil
litigation and compliance with the Equality Act 2010. In any company, whether
government-owned or not, there is a fundamental distinction between the
executive management and the NEDs which is relevant to a number of the
questions I have been asked by the Inquiry. Our role as non-executives on the
board is to help determine the company's future direction and strategy. In other
words, we are focused on what the company might look like in several years’
time and how we can create a sustainable and future-proof business. We are
entirely distinct from the executive management, who have to be integrated in
the granularity of their respective business units.
In relation to IT matters, a non-executive board will concentrate on issues such
as system security, cyber risk and possible concerns about the future direction
of technology. In POL's case, as I describe in more detail at paragraph 29 below,
this involved extensive consideration of how to upgrade and modernise
outdated IT infrastructure and renegotiate very onerous outsourced contracts.
The board will not consider the specifics of individual bugs or defects, which is
generally the responsibility of the specialists in the IT team, save to the extent
that those bugs or defects have a material impact on the day-to-day running of
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the company. Equally, in relation to accounting matters, a non-executive board
and, in particular, the members of its audit committee, will get into the detail of
the company's accounting practices and will help to make sure that its external
auditors are comfortable that the figures in its financial results are accurate.
However, their remit is not to monitor the error rate of the accounting system
branch-by-branch or transaction-by-transaction.
Typically a non-executive board would have high-level oversight of the conduct
of any civil litigation brought by or against the company but only if and when it
became material. Each company will have its own materiality threshold and
unless a civil claim met that threshold, I would not necessarily expect the board
to be made aware of it or updated on its progress. I would also expect the board
to consider topics such as equality, diversity and anti-discrimination proactively
and at a similarly high-level. For example, at POL there was a desire to get the
right balance on the Board and ensure gender diversity, and if external search
agencies were ever engaged to recruit new NEDs, we required them to provide
a diverse list of candidates. I recall that the Remuneration Committee
("RemCo") also spent time looking at the gender pay gap at POL and
considering the results.
I have been asked to summarise my views on the responsibilities of a board of
directors specifically in connection with the bringing of private criminal
prosecutions. It is difficult for me to express any firm views on this subject
because, other than POL, to my knowledge none of the companies I have
worked for have brought private prosecutions. When I joined POL, I did not have
any knowledge of the private prosecutions it had brought against SPMs for
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offences such as theft, fraud and false accounting. Though I cannot recall
exactly, I believe the first time I became aware of these historic prosecutions
was in April 2016 when a letter of claim was served on POL that would
eventually develop into the GLO Proceedings. I do not recall any active criminal
prosecutions at POL during my time on the Board. My understanding is that,
since around 2015, POL had not commenced any new criminal prosecutions
related to Horizon and this policy remained in place throughout my tenure. It is
possible that POL still carried out private prosecutions unrelated to Horizon, but
I do not recall any specific cases. I would not necessarily expect to have been
made aware of isolated criminal prosecutions at Board meetings, unless they
were sufficiently large or serious to be escalated.
POL corporate structure and POL Board
20. When I joined the Board, POL was owned by the UK government through UKGI
and BIS, which later became the Department for Business, Energy and
Industrial Strategy ("BEIS") and I understand this is now the Department for
Business and Trade. For consistency, I refer to this government department as
BEIS in the remainder of this statement.
21. UKGI had a representative on the Board and I understand this was common
practice across all of its investments. When I was first appointed, the UKGI
representative was Richard Callard and in 2018 he was succeeded by
Tom Cooper. The role of the UKGI representative was to oversee the Board
from UKGI's perspective as shareholder and brief UKGI on the performance of
the business. UKGI would then share these updates with BEIS and the postal
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22.
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minister. I recall finding it unusual that POL essentially reported to both UKGI
and BEIS, whereas I understood most other government investments reported
to only one of the two.
Given that the government owned and partly funded POL, it exercised
significant influence over POL's finances. POL periodically prepared a funding
plan in cooperation with UKGI, who could advise on how various proposals
might land with the government. I recall the funding plan being prepared every
three years, but there are references in some of the documents provided to me
by the Inquiry to five-year and even one-year plans. Having considered these
documents, I would say that the funding plan was usually a three-year plan but
that the government may sometimes have stipulated a different timeframe.
The funding plan comprised, in part, a 'network subsidy payment’ to support the
provision of services of general economic interest by otherwise loss-making
branches, often in more rural areas. I recall that the network subsidy payment
was approximately £200 million per year when I joined the Board and it had
declined to £50 million per year when I left. The remainder of the funding plan
was equivalent to a capital expenditure budget to support investments POL
wished to make in its business, such as modernising its IT systems. I also recall
funding being sought from the government for redundancy payments in
connection with a restructuring programme, and for payments to SPMs under a
financial redress scheme set up in 2020, which I discuss further below at
paragraph 54.
I was never directly involved in submitting funding plans to BEIS for approval as
Al Cameron would predominantly take this forward in his role as Chief Finance
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24,
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and Operations Officer ("CFOO"), together with Paula Vennells as CEO.
The funding plans would come to the Board in various iterations for approval
and, once finalised, the Board would approve submission of the final version to
UKGI for their comments and then to BEIS.
I recall two occasions when I had to meet directly with BEIS to discuss RemCo
matters. On one of those occasions, the RemCo had recommended a 2-3%
base salary increase for the CEO and CFOO in line with the wider employee
increase and inflation, which BEIS considered for around 10 months and then
ultimately rejected. On the other occasion, the RemCo had proposed changes
to the comparator group against which the salaries of POL's executives were
benchmarked. Previously, this group comprised only large banks or financial
institutions which the RemCo believed was wholly unrealistic. We suggested a
more representative group which I can see from the minutes of the Board
meeting on 24 November 2016 (POL00027185) was 40% mails, 40% social
purpose and 20% financial services (including mostly challenger banks).
POL had two wholly owned subsidiaries: Post Office Management Services
Limited, which was an insurance broker, and Payzone Bill Payments Limited,
which provided bill payment services. POL also had a 50/50 financial services
joint venture with the Bank of Ireland. I am not aware of any changes to POL's
corporate structure during my time on the Board. I recall that POL's telecoms
business was sold in March 2021, but I understand this did not have any impact
on the corporate structure outlined above.
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26.
27.
28.
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The Board met every month as a minimum, but meetings could be, and were,
held more frequently if required. In particular, I recall a large number of
additional meetings being held when the Board met to review historic
convictions of SPMs for theft, fraud or false accounting that had been referred
to the Criminal Cases Review Commission ("CCRC"), which I describe at
paragraph 67 below. In addition, there was an annual Board strategy meeting
which lasted two to three days. The topics discussed at these strategy meetings
varied year-on-year but were always ‘big picture’ topics related to the business,
such as whether POL should continue to be in the insurance and telecoms
sectors, or how it could improve the profitability of its banking business. Board
meetings generally took place in person between 08:30 and 17:00 at POL's
headquarters in Finsbury Dials. If a meeting had to be convened at short notice
for an urgent decision, the Board would instead meet remotely via conference
call. In line with government guidance at the time, Board meetings were also
held remotely during the peak of the Covid-19 pandemic.
Mr. Parker, as Chairman, would lead the meetings. Mr. Parker was inclusive
and open, ensuring that no one person dominated a meeting, but was equally
very focused, which was important for a business as broad and complicated as
POL's. I always felt there was a constructive atmosphere around the Board
table.
The agenda for each meeting was determined by the Chairman, the Company
Secretary and the CEO. They all typically attended each meeting, together with
the NEDs, the CFOO and any members of the executive management team
who were delivering updates. Occasionally external parties such as POL's
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lawyers, auditors, management consultants and other professional advisors
would also attend if their input was sought on a particular issue. In advance of
each meeting, a Board pack was circulated via a secure online platform.
The Board pack comprised 'pre-read’ materials including minutes from the
previous meeting, proposed Board resolutions, financial results and the CEO
report, which was a summary of day-to-day business updates and current
projects. We might also be provided with reports from a particular business unit
that would be presenting at the meeting and these reports were sometimes
supplemented by slides on the day.
Board meetings featured business-as-usual updates from various teams within
POL, which normally included the IT team led by Chief Information Officer
("ClO") Rob Houghton. Mr. Houghton was extremely competent, and the Board
had great respect for him. The Board would generally expect updates on any IT
issues which had disrupted POL's network and business, such as any major
systems outage. When I joined the Board, there were also frequently updates
on wider, ongoing projects to modernise POL's IT infrastructure and renegotiate
legacy IT contracts. It appeared to me that when POL separated from Royal
Mail in 2012, POL inherited IT systems and contracts that were onerous and
required re-negotiating. The UK is the only country to my knowledge that has
broken up its national post office into two parts. POL and Royal Mail were
previously a fully integrated business with one set of systems which I expect it
would have been very challenging to split apart. As a result, the IT systems POL
had in place when I joined in 2016 were in need of updating. Equally, certain of
POL's IT functions appeared to have been outsourced to third-party providers
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30.
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on terms that left POL paying considerably more than the Board believed it
should have been.
None of the Board members was an IT specialist, although I recall that Shirine
Khoury-Haq and Lisa Harrington both had prior experience working in the IT
and technology sectors. Indeed, I myself had Board responsibility for the
business priorities of the IT function at Europcar Group. We understood the
fundamentals of how POL's various systems operated and I recall, for example,
attending a demonstration of how the Horizon system worked at the POL head
office. The Board also recognised when it was appropriate to take expert advice
on IT matters and I recall POL hiring external IT consultants to review its IT
strategy. I have been provided with a copy of the Board minutes for
23 November 2017 (POL00021552), which note that IT consulting firm Actinista
had carried out a review of POL's IT strategy and presented to the Board on
their findings.
The General Counsel ("GC"), originally Jane MacLeod and later Ben Foat,
would provide updates at Board meetings on behalf of the legal team as and
when required. To the best of my recollection, these updates were generally
verbal. However, I have been referred to two briefing papers shared following
the first judgment in the GLO Proceedings but prior to POL's application to
recuse Judge Fraser (POL00111876, which is undated but appears to have
been shared in advance of a Board meeting on 12 March 2019, and
POL00103473, which is also undated but appears to have been prepared for
the Board meeting on 20 March 2019), I have also been referred to some email
correspondence briefing the Board on major developments in the litigation (for
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example, POL00103412, sent on 8 March 2019, and POL00043341,
comprising emails sent on 28 November 2019, 29 November 2019 and 9
December 2019). As well as this, I believe I saw some technical reports on, for
example, property leases, but I do not otherwise recall reports or information
packs being shared with the Board that were ‘legal’ in nature.
The Board had several subcommittees, namely the Audit, Risk and Compliance
Committee ("ARC"), the RemCo and the Nominations Committee ("NomCo").
The purpose of each subcommittee was defined in its terms of reference.
In general terms, the ARC focused on POL's financial reporting and its risk
management systems; the RemCo made recommendations as to executive
remuneration; and the NomCo made recommendations to appoint individuals to
the Board and its subcommittees. In early 2018, the Board also established the
Postmaster Litigation Advisory Board Subcommittee ("GLO Subcommittee") to
receive legal advice in relation to the GLO Proceedings, which I return to in more
detail below.
The ARC met once every two months. Its membership changed over the six
years I was at POL; it was chaired by Carla Stent and I recall that Mr. Callard,
Mr. Cooper, Mr. Parker, Ms. Khoury-Haq and myself were all members at some
point. The RemCo met four times a year. I chaired the RemCo and I recall
Mr. Parker, Mr. Cooper and Ms. Harrington being members. The NomCo met
on an ad-hoc basis as required, but not less than once a year. All of the NEDs
were members and we usually met immediately after a scheduled Board
meeting.
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34.
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There was no formal, ‘dotted line' reporting between executive management
and the Board. Executive management reported to the Board through Board
meetings and subcommittee meetings. For example, as Chairman of the
RemCo, I worked closely with the group people director at RemCo meetings;
and the CFOO reported to the Chair of the ARC at ARC meetings. If a member
of the executive management team who was due to provide an update at a
Board meeting was unable to attend, typically another member of their team
would attend in their place.
I have been asked to confirm the extent to which myself or the Board dealt with
or had oversight of the "problem management team" and the "security and/or
investigation department" at POL. I do not recall ever hearing about a "problem
management team" during my time on the Board. Although I do not remember
having any direct contact with a “security and/or investigation department",
I was aware that POL had internal investigators who would have looked into
shortfalls at branches. The only discussions I recall about investigations were
in relation to historic cases, for example, in the context of the GLO Proceedings
and the Board's review of cases referred to the CCRC. As I have already noted,
I believe POL did not commence any new criminal prosecutions related to
Horizon during my time on the Board. It is possible that investigations into
shortfalls were still being carried out, even if no prosecution was ultimately
brought, but I do not recall being made aware of any current investigations.
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OVERSIGHT OF THE CONDUCT OF THE GLO PROCEEDINGS
36.
37.
I have been asked to provide my account of how the Board oversaw POL's
conduct of the defence in the GLO Proceedings. I recall the GLO Proceedings
beginning to 'snowball', and the Board had to quickly react and change how it
exercised oversight. By way of illustration, having reviewed the documents
provided by the Inquiry, it appears that when POL first received a letter of claim
in the GLO Proceedings on 28 April 2016, there were 91 Claimants
(UKGI00006685, an email from Ms. Vennells to myself and others on 2 May
2016) but by at least 24 May 2018, this figure had grown to approximately 560
Claimants (POL00021555, minutes of a Board meeting on 24 May 2018).
I recall the Board being advised that the claim was funded by a litigation funder
and that their model would be to move quickly to get other Claimants involved.
Initially, Ms. MacLeod delivered updates to the full Board on the status of the
GLO Proceedings, which soon became a standing agenda item. These updates
were necessarily limited to high-level news and ‘headlines': how many
Claimants had joined the claim; whether there was going to be a class action;
and similar key issues and milestones. From a very early stage there was a
huge amount of detail in the GLO Proceedings that the Board would not have
time to review, and it was not the Board's role to do so. Looking at the Board
minutes I have been provided with by the Inquiry, the notes of Ms. MacLeod's
updates appear quite light. It is not clear to me now why the Chairman did not
request more detail in the minutes. What I do recall is that the Ms. MacLeod
was very preoccupied with preserving legal privilege and it is possible the
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minutes were deliberately succinct for that reason. With the exception of the
documents noted at paragraph 31 above, I do not recall being provided with
written reports or briefing papers regarding the GLO Proceedings.
As the GLO Proceedings gathered pace, and the volume of updates increased,
it became clear we needed a sub-group who could have primary oversight of
the litigation. It would be unwieldy to continue to discuss the full details with the
whole Board; we needed a smaller team that could get on a call quickly if there
was an urgent update. In this sense, the decision was driven by functionality.
I have been provided with the minutes of a Board meeting on 29 January 2018
(POL00021553) at which the Board resolved to establish the
GLO Subcommittee. Its members were Mr. Parker, as Chairman, myself as SID,
and Mr. Cooper as UKGI representative, and it was regularly attended by the
CEO, the CFOO and the GC. The full Board continued to receive updates on
the GLO Proceedings, but the GLO Subcommittee went into greater detail.
I should also note that the ARC had oversight of the accounting treatment of the
GLO Proceedings, including POL's legal costs and any award of damages or,
in the event, payments under a settlement agreement.
Ms. MacLeod, as GC, had day-to-day conduct of the GLO Proceedings. At both
Board level and GLO Subcommittee level, Ms. MacLeod was the ‘glue’ that
connected POL to its legal advisors. Initially, these were barristers Anthony de
Garr Robinson QC and David Cavender QC (both now KC), and law firm
Womble Bond Dickinson. I recall POL seeking advice from a number of other
eminent barristers over the course of the GLO Proceedings, including Lord
Grabiner, Lord Neuberger and Helen Davies QC (now KC), and two other major
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40.
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City law firms, Norton Rose Fulbright ("NRF") and Herbert Smith Freehills
("HSF").
The Board and the GLO Subcommittee were very active in participating in
meetings, and questioning and challenging the advice we received until we were
satisfied with the proposed strategy. We genuinely thought POL was employing
the best possible people and receiving the best possible guidance.
My recollection is that POL was not reticent to spend money to try to make sure
it was taking the right approach. Although Board members could and did ask
questions, it would have been very hard to depart from the advice of who we
perceived to be some of the most senior and experienced lawyers in the country.
I have been referred to the minutes for the Board meeting of 30 October 2018
(POL00021558) which include a note that "[t]he claimants' IT expert had found
that Horizon was not a robust system but this assessment was founded on
identifying a large number of small problems with the system which our expert
was confident could be rebuffed". I cannot recall this exact comment.
I remember that the Claimants in the GLO Proceedings alleged there were
problems with Horizon, although it was perhaps not emphasised to the Board
that there were a “large” number. I do not believe the Board took any specific
action in response to the Claimants’ expert evidence at this stage. I now realise
that, by this time, several reports had been commissioned by POL into possible
issues with Horizon and I have been provided with copies of certain reports
dating back to 2013. Except as set out in this statement, I had no knowledge of
any of those reports until they were provided by the Inquiry. I certainly had no
knowledge of those reports at the time of the 30 October 2018 meeting and so
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the findings of the Claimants' expert would have been, to me, just an isolated
comment. It may have been different if this was already a consistent theme
repeated in Board meetings over a longer period but, at this point, it does not
appear that it was. My understanding was that the GLO Proceedings were well-
established and the question of whether there were problems with Horizon
would all play itself out in that litigation. The Claimants' expert evidence
supported their case, POL's expert evidence supported its case, and the judge
would have to decide which he preferred.
Given POL's size and prominence, the GLO Proceedings inevitably led to
concerns being raised by journalists and MPs about Horizon and about the
historic treatment of SPMs. The media and public relations aspect of the GLO
Proceedings was, so far as I can recall, overseen by a small group of individuals
including Mark Davies as Communications Director, Ms. Vennells as CEO, and
Ms. MacLeod as GC. I believe that Mr. Cooper would have also provided input
if there was a government dimension because he served as POL's interface
with UKGI and BEIS. In some instances, the Chairman may also have been
consulted on, and asked to be involved in, external communications. As a
government-owned company, my expectation would be that the government as
shareholder would ultimately determine what, if any, public announcements or
comments POL made during the course of the GLO Proceedings. Mr. Davies
would provide updates to the Board on particularly significant media coverage,
but the Board would not generally be asked for their views on POL's response
(if any).
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COMMON ISSUES JUDGMENT
Response to the Common Issues judgment
43. The GC briefed the Board via email of the outcome of the first, ‘Common Issues'
trial ("CIT") on 8 March 2019 (POL00103412). I can recall being shocked at
losing so badly when the advice from POL's barristers had consistently been
that we had the better of the arguments on most of the 23 separate issues under
consideration. Against that very clear and confident advice, it was almost
inconceivable that we had lost on all material points. I also did not appreciate,
and I do not believe the Board as a whole appreciated, how great an impact the
CIT could have on POL's day-to-day operations. The GC had presented the CIT
as a purely technical case about legal definitions. As a result, it was not given
the attention it perhaps deserved and I do not believe the Board properly
understood the contractual issues in dispute at the time which, in hindsight, was
an error. In reality, the CIT was a pivotal case, the outcome of which required
POL to completely re-think its relationship and contractual arrangements with
the SPMs.
44. The judgment in the CIT kick-started a series of radical changes at POL and the
Board very quickly turned its attention towards the workstreams that needed
addressing. I can recall eight or nine workstreams in total, which I believe were
overseen by Dan Zinner with support from Amanda Jones and Julie Thomas.
The most urgent workstream was updating the SPM contracts to take account
of the criticisms made by Judge Fraser in the CIT judgment, not least because,
as I recall, we had around 30-60 new SPMs due to sign on shortly. There was
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45.
46.
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always a live pipeline of new potential SPMs who POL recruited to take over
branches from those who had, for example, retired, and making sure the new
contracts were compliant with the CIT judgment was a very high priority.
I also remember various initiatives aimed at improving SPM engagement and
support, such as organising elections for two SPM NEDs. This was a Board-
driven idea to try to replicate the European structure of having a workers' council
and to ensure SPMs' views on product strategy, operations and engagement
were being heard. There was already the ‘National Federation for
SubPostmasters' but this was flawed to an extent because it was funded by
POL. We also established the ‘Branch Hub', which was essentially a
communications tool to get updates and messages to the SPMs quickly.
We could give them a heads-up to "watch out for this" or "be careful because
we've seen a rise in that". The logic was to try to help SPMs move forward and
make sure they were getting the support they needed as soon as possible.
The telephone helplines were available if a problem could not be resolved
through the Branch Hub but hopefully the call volumes would be lower and
waiting times would be shorter. Overall, Branch Hub was intended to provide
the SPMs the opportunity to solve problems faster and online.
The Board took the post-CIT remediation work very seriously and we agreed
that a status update on each workstream would become a regular agenda item
at Board meetings (see Board minutes from 28 January 2020 (POL00021573)).
We were almost fanatical about making sure a clear record was kept of how the
criticisms in the CIT judgment were being addressed and we were regularly
pushing for answers on progress. Of the Board minutes provided to me by the
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Inquiry, I believe the minutes from the Board meetings on 26 May 2020 and
27 October 2020 (POL00021583 and POL00021600) capture this point
particularly clearly. In the 26 May 2020 minutes, there is a record of a discussion
about improved training for SPMs and I recall pressing for concrete details.
What training would be provided? Over how many days? We needed to tie our
general commitment to training to the specifics. In the 27 October 2020 meeting,
I expressed a broader concern that POL needed to be able to track and
ultimately sign off that all of our processes had changed as required by the CIT
judgment, and I recall this concern was shared by the rest of the Board
(POL00021600). During this period, the Board was almost stepping into the
shoes of executive management but we absolutely believed the remediation
exercise had to be done methodically and in detail.
Recusal application
47. I have been asked to provide a detailed account of POL's decision to issue an
application for Judge Fraser to recuse himself from the GLO Proceedings. In the
immediate aftermath of the CIT judgment, I recall that the Board and the GLO
Subcommittee took extensive advice from the senior barristers and former
judges mentioned above, namely Mr. Cavender QC, Lord Grabiner and
Lord Neuberger, about the possibility of applying for recusal. We were still being
advised by Womble Bond Dickinson and we also engaged NRF to provide a
second opinion. The crux of our legal advice was very clear: we had "no
alternative" but to pursue a recusal application.
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48. The Board was told that there were a number of significant concerns with
49.
Judge Fraser's approach to the CIT judgment which, together, indicated his
‘apparent bias’ towards POL. I cannot remember exactly what all of these
concerns were. So far as I recall, and having considered the papers provided to
me by the Inquiry, I believe it was a combination of: (a) the supposedly harsh
and heavy-handed language used in the CIT judgment against POL
("haphazard", "lackadaisical", etc.); (b) calling into question the reliability of POL
witnesses who would appear in later trials; (c) admitting evidence that our
barristers believed was inadmissible and that we had tried to strike out; and
(d) taking an issue that affected one SPM or a small group of SPMs and
generalising it across the whole of POL. The overall message to the Board was
that Judge Fraser's conduct and language were totally unacceptable.
Our barristers advised that Judge Fraser was approaching the case from the
perspective that POL were the 'bad guys’ and he had already pre-judged the
outcome of future trials. On that basis, if we did not apply to recuse him,
our legal advice was that those future trials would fall apart and we would lose
comprehensively.
I was asked to chair the Board meeting on 20 March 2019 (POL00021563)
where the Board discussed and voted on recusal because Mr. Parker had
declared a conflict of interest. As Chairman of the HM Courts and Tribunals
Service, he felt it was inappropriate to participate in a decision to recuse a judge.
I recall Mr. Cooper also declared a conflict of interest because, as the
representative for UKGI, part of the executive branch of government, he
believed he should not be involved in a decision relating to a member of the
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50.
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judiciary either.
There was a thorough debate and the Board unanimously supported the recusal
application, including Tim Franklin who could not attend the meeting but had
shared his views with me the previous day. To my knowledge, none of the Board
had been in this situation before and, although recusal was a ‘nuclear option’,
all we could do was look at the situation objectively in light of the barristers’
opinions we had received. Given the rock-solid advice from Lord Neuberger and
Lord Grabiner that POL had "no alternative” other than applying to recuse Judge
Fraser, recusal appeared to be the only logical way forward.
After Judge Fraser rejected the application for recusal, I understand POL
applied for permission to appeal that decision from the Court of Appeal. I do not
remember any Board or GLO Subcommittee meeting where appealing the
recusal decision was specifically discussed or authorised. However, when the
Board debated the original recusal application, as far as I can recall, there was
an expectation that Judge Fraser would not agree to recuse himself and we
would have to appeal. In that sense, the decision to appeal may have been
almost automatic and would have been taken for the same reasons and on the
basis of the same legal advice as I have already summarised.
FOLLOWING THE GLO PROCEEDINGS
Horizon Issues Judgment
52.
I have been referred to an email on 28 November 2019 from Mr. Foat, who by
that time had succeeded Ms. MacLeod as GC, briefing the Board on the
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outcome of the second, ‘Horizon Issues' trial ("HIT") (POL00043341). I do not
recall that losing the HIT came as a surprise to myself or the Board. In contrast
to the CIT judgment, the legal advice we received before the HIT judgment was
much more pessimistic given that we had lost the recusal application. It was
clear Judge Fraser had a strong view and, for the same reasons we applied to
recuse him, such as his criticism of POL's witnesses, we did not expect his
findings in the HIT to be favourable to us.
At this stage, remediation work to address the issues raised in the CIT judgment
was in full swing. These workstreams would have had to carry on full steam
ahead regardless of the outcome in the HIT. The CIT judgment was what had
fundamentally reshaped POL's relationship with SPMs, whereas the HIT was
more about the robustness of previous iterations of Horizon.
Financial redress schemes
54.
After the GLO Proceedings had concluded, POL established a compensation
scheme known as the Historical Shortfalls Scheme ("HSS"). I understand that
the exact eligibility criteria evolved over time, but the HSS was primarily set up
for SPMs who experienced shortfalls at their branches that may have been
caused by Horizon but who had neither received a criminal conviction, nor
participated in the GLO Proceedings and resulting settlement. The motivation
for setting up the HSS was a desire to provide financial redress to SPMs, while
acknowledging that there was no way to undo the pain and suffering that had
been caused. I definitely recall a moral intention to accept that POL had been
in the wrong and try to put things right as quickly as possible.
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55. Despite the Board's best intentions, I remember there being very considerable
delays to paying out compensation under the HSS for a number of reasons.
To start with, the Board had not anticipated the volume of applications that the
HSS would receive. We had estimated a few hundred claims but within the first
few months we had received over 2,000. We did the best we could to manage
the applications that were coming in, including creating a new unit headed by
Declan Salter that gave regular updates to the Board.
56. It soon became clear that many of the claims were also very complicated.
No two applications were the same and compensation had to be assessed on
a case-by-case basis. The unfortunate reality was that often SPMs had not just
lost money from making good shortfalls in their branches; the size of some
alleged shortfalls had led to a significant impact on their personal and
professional lives, such as marriage and/or family breakdowns or the loss of
another business. The level of compensation had to take account of this bigger
picture and the Board was concerned we did not have the necessary expertise
to make these decisions. A panel of experts was appointed to decide on each
claim and the appointment process was coordinated by HSF to ensure
independence from POL. Although I believe this was the right approach to take,
it took time to get those experts up to speed.
57. The single biggest reason for the delay in paying out compensation under the
HSS was ultimately funding. As the volume of applications kept rising,
eventually we realised POL was not going to be able to pay out itself and it
would need government assistance. The Board had originally hoped to be able
to pay out de minimis claims under £20,000. The advice of the independent
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experts was that it would likely cost more to investigate these claims than to pay
them, and by paying them we could ensure that at least some applicants got
closure. However, the aggregate numbers soon became very substantial and
I recall the Board taking insolvency advice on directors’ duties from lawyers at
NRF and Linklaters. We were advised not to start paying applicants because
we did not believe we had the money to finish. I have been referred to a number
of Board minutes from around this period, including the minutes from the
meeting of 27 October 2020 (POL00021600) which make the point clearly that
we were very concerned not to enter the territory of wrongful trading.
The Board, through Mr. Cooper and Mr. Cameron, tried desperately hard to get
a letter of guarantee from the government committing to fund the HSS payments
through to conclusion. I remember we received a letter expressing the
government's support for POL in very general terms but it did not categorically
agree to cover the amounts we expected POL would have to pay out in
compensation and, as a result, the auditors would not accept it. From the
27 October 2020 Board minutes (POL00021600), it appears that the
government wanted the HSS liabilities to be quantified more accurately before
agreeing to provide any funding. There was also a strong focus by the
government on being able to demonstrate that the payments made under the
HSS represented ‘value for money' to the taxpayer, as is evident from the
minutes from the Board meeting of 7 December 2020 (POL00021604), but
meanwhile, the Board's hands were tied. This, in a nutshell, was the 'Catch 22'
situation the Board found itself in with regards to the HSS and it was the source
of most of the delays.
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59. For completeness, I was also aware of a separate financial redress scheme
specifically relating to historic issues with how stamps were accounted for. I do
not recall any specific details, other than that the issues were quite technical
and complex. In any event, I believe the HSS was by far the primary
compensation scheme, while the stamps scheme was much smaller.
EVALUATION OF POL CHAIRMAN
60. I have been asked to consider the POL Chairman's Feedback Report for
2019/20 (POL00104173). As noted at paragraph 15 above, part of my role as
SID was to lead an annual review of the Chairman's performance and prepare
a formal feedback report. I do not recall when exactly POL00104173 was
prepared, and there is no date on the face of the document. My solicitors sought
to clarify the date of the report with the Inquiry but it was not possible to confirm
precisely when it was created. I believe it is likely to have been prepared in the
first quarter of 2020 because this aligns with POL's financial year-end in late
March.
61. The report was prepared in a similar way each year based on feedback shared
by the other NEDs. I first asked the NEDs to complete a questionnaire
evaluating the Chairman's performance against several metrics. I reviewed the
questionnaires and then met with the NEDs as a group to give them the
opportunity to share any additional thoughts, usually just before or after a Board
meeting. I believe I would have called anyone who was not able to attend.
After I had canvassed all of the NEDs, I collated their feedback into a draft report
and shared it with the group for any final comments. Once finalised,
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62.
63.
64.
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the Company Secretary sent the report to UKGI on my _ behalf.
My understanding is that UKGI would then review the report before sharing it
with the Minister for BEIS. Meanwhile, I arranged a meeting to discuss the
feedback in person with the Chairman.
As is described in POL00104173, the feedback for the 2019/20 review cycle
was very positive. Mr. Parker was regarded as a good Chairman with strong
leadership skills who ran Board meetings effectively. The only area for
development that I can recall was a suggestion that Mr. Parker could try to
encourage NEDs with relevant expertise on a particular matter to speak up in
Board meetings before he offered his own view. In my experience, this is
relatively common feedback for a Chairman.
At some point during the Board's review of CCRC cases, which I cover in more
detail below at paragraph 67, I received a telephone call from Mr. Cooper
regarding a Deloitte report that Mr. Parker appeared to have commissioned but
had not shared with the Board. I believe this call is most likely to have taken
place in April 2020 because I refer to finding out about the report in an email
Isent to Veronica Branton, the Company Secretary, on 22 April 2020
(POL00104107). I do not recall Mr. Cooper mentioning a project name at the
time, or describing the contents of the report, but I now believe that Mr. Cooper
was referring to ‘Project Bramble’.
Having considered the documents shared with me by the Inquiry, I understand
that Mr. Parker commissioned a prior and separate report by Jonathan Swift QC
(now KC) and Christopher Knight ("Swift Review"). I have been provided with
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65.
66.
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a copy of (what I understand to be) the Swift Review dated 8 February 2016
(POL00006355). The Inquiry has referred me to an email from Mr. Cooper to
myself and others on 30 July 2020 attaching the Swift Review and a letter from
Mr. Parker to Baroness Neville-Rolfe from 2016 (UKGI00012155). I do not recall
this email or the background to it, and I do not recall having heard of the Swift
Review until I was asked to participate in the Inquiry.
I received Mr. Cooper's call at around 08:00 and I was standing outside HSF's
offices in London, where a CCRC case review meeting was due to take place.
I recall Mr. Cooper asking me whether I thought any action should be taken
against Mr. Parker. Although I do not remember my specific words, I believe
I would have said that the Board needed to speak to Mr. Parker about the report
and give him an opportunity to explain himself before we considered any further
actions. Shortly after the call with Mr. Parker, I rang Ms. Stent, who was en route
to HSF's offices at the time, and I met her outside when she arrived. I relayed
what Mr. Cooper had told me and asked for her thoughts, and I remember she
agreed that we needed to ask Mr. Parker why he did not share the report and
give him an opportunity to explain.
During the CCRC review meeting, which Mr. Parker attended, the Board raised
the subject of the Deloitte report and why it had not been shared. The tone of
the meeting was not one of anger but definitely puzzlement. Mr. Parker's
explanation was that he had been advised that the report was legally privileged
and should not be shared with the Board, and he had followed that advice.
My view at the time, which I believe was shared by others on the Board, was
that Mr. Parker had made an error of judgment but I could understand why and
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I appreciated it might have been difficult to challenge the legal advice he was
given so early on in his tenure. Overall, I believed Mr. Parker had done a good
job as Chairman of POL and it was not proportionate to, for example, remove
him from his position because of this issue alone.
GENERAL
Review of past criminal convictions
67.
68.
Starting in approximately April 2020, a large number of ad-hoc Board meetings
took place to consider past convictions of SPMs for theft, fraud or false
accounting that had been referred to the CCRC. I do not recall the exact dates,
however I have been referred to an email from Veronica Branton on 22 April
2020 attaching "CCRC papers for tomorrow" (POL00104107). It appears from
this email that the CCRC review meetings were ongoing by 22-23 April 2020
and that is consistent with my recollection of the call with Mr. Cooper regarding
the Deloitte report taking place before a review meeting slightly earlier in April.
I have also been referred to minutes from a CCRC Board meeting on 7 January
2021 (POL00021606), which suggests that the review of CCRC cases
continued until at least early 2021.
The CCRC revew meetings were attended by the full Board and took place at
HSF's offices in London. The key question for the Board was whether POL
should support or oppose each SPM's appeal against their conviction.
My recollection is that we considered between 40-50 cases. I have been
provided with minutes from GLO Subcommittee meetings in 2018 noting that,
at this stage, 33 SPMs had applied to the CCRC (POL00006764 and
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69.
70.
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POL00006754) but I believe the number of applications increased between
2018 and 2020.
The supporting documentation for each case varied significantly. Some cases
had tens of pages; others had next to nothing. Myself and the rest of the Board
were deeply troubled that POL appeared not to have done its job of properly
investigating each case and backing up its charges with adequate evidence.
We went one-by-one and considered every case very thoroughly, allowing it all
the time it took. I felt as a member of the Board it was my duty to go through
each individual case for someone who had gone to prison and possibly lost their
home or had a breakdown in their marriage or family. As an officer of POL, I felt
that giving each case the time it deserved was the least I could do and I believe
the rest of the Board shared this sentiment. The review process was taken very
seriously and the Board had to reach a unanimous decision on every case.
The Board took the approach that where a case was in any way related to
Horizon, we should support that individual appeal. In other words, if there was
any doubt at all as to whether Horizon had been involved, we gave the person
challenging their conviction the benefit of the doubt. Lawyers at HSF facilitated
an open discussion on the merits of each case. I recall there were some
differences of opinion among the Board members in relation to borderline cases
where Horizon was not expressly referred to in the supporting documents but
we considered that, in the circumstances, it may have played a role. I also recall
a handful of cases which were totally unconnected to Horizon and, in these very
few cases, the Board declined to support the SPM's appeal.
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71. I am aware that there was also a separate disclosure review exercise taking
place in relation to past criminal prosecutions and I recall that Peters & Peters
and Sir David Calvert-Smith were actively involved. I remember there being
conference calls where Sir David Calvert-Smith and Nick Vamos, a partner at
Peters & Peters, would provide updates to the Board.
Professional career since leaving POL
72. 1 stood down from the Board on 25 January 2022 at the end of my second term.
On 6 July 2020, I was appointed to the board of a listed global supply chain and
logistics company and I have continued in this NED role since leaving POL.
Reflections
73. When I joined POL, the Board was still relatively new and, to my knowledge,
none of the NEDs had been in post at the time when the ‘legacy’ Horizon system
was in operation and the private criminal prosecutions were still ongoing. I can
recall feeling as though we had been left holding the baby and we had to decide
what to do with it based on our limited background knowledge. We took the
criticisms of POL in the CIT and HIT judgments very seriously, we accepted that
POL had been seriously in the wrong in the past, and we relentlessly pushed
executive management for updates on the various remediation workstreams
until we were satisfied they had been comprehensively addressed.
74. Learning about the experiences of SPMs who had been held responsible for
shortfalls and the impact that it had on their lives was emotional, especially the
review of past criminal cases. When the Board got to the truth that POL did not
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do its job investigating cases properly, we tried desperately hard to try to fix
what we could, and I felt a moral obligation to get compensation paid to anyone
who had been affected as quickly as possible. It was extremely frustrating that,
on one hand, the Board, did not have the funds to make HSS payments itself
without the risk of wrongful trading and yet, on the other hand, faced significant
delays in getting a letter of guarantee from government. It is very troubling to
me that there are, as I understand it, some cases where compensation has still
not been paid.
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Statement of Truth
I believe the content of this statement to be true.
Signed: i
Dated: (0 uw! 2¢
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Index to First Witness Statement of Ken McCall
URN
Document Description
Control Number
POL00104107
Email from Ken McCall to
Veronica Branton, Tom
Cooper, Tim Parker and
others re: PDF of CCRC
Papers dated 22 April 2020
POL-0103690
POL00362996
Letter to Ken McCall from
Alwen Lyons re: letter of
appointment dated 02
December 2015
POL-BSFF-0191029
POL00363008
Letter to Ken McCall from
Jane MacLeod re: letter of
re-appointment as Senior
Independent Director dated
22 January 2019
POL-BSFF-0191041
POL00027185
Minutes of POL Board
meeting held on 24
November 2016
POL-0023826
POL00021552
Meeting minutes: minutes
of Board meeting held on
23 November 2017
POL0000085
POL00111876
Postmaster Litigation
Judgement - Board call -
setting out the key finding
of Justice Fraser's
Common issues
Judgement held on 12
March 2019
POL-0109447
POL00103473
Post Office Limited, The
Board of Directors
Discussion Paper - The
Background to Recusal
and other issues dated 20
March 2019
POL-0103056
POL00103412
Email chain from Ken
McCall to Jane MacLeod,
Tim Parker, Carla Stent
and others re: Postmaster
Litigation dated 8 March
2019
POL-0102995
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RN
Document Description
Control Number
POL00043341
Emails between Ben Foat,
Tim Parker, Tim Franklin
and others RE: GLO - High
Level Review Embargoed
Horizon Judgment -
Section M dated 28
November 2019, 29
November 2019 and 9
December 2019
POL-0039823
10.
UKGI00006685
Email from Richard Callard
to UKGI POL Team and
Claire French
(Communications) re
Sparrow update/media
coverage dated 2 May
2016
UKGI017499-001
11.
POL00021555
Meeting Minutes: minutes
of meeting held on 24 May
2018
POL0000088
12.
POL00021553
Meeting minutes: minutes
of board meeting held on
29 January 2018
POLO000086
13.
POL00021558
Post Office Ltd Board
Minutes dated 30 October
2018
POL0000091
14.
POL00021573
Meeting minutes: minutes
of Board meeting held on
28 January 2020
POL0000106
15.
POL00021583
Meeting minutes: minutes
of Board meeting held
remotely on 26 May 2020
POL0000116
16.
POL00021600
Meeting minutes: minutes
of Board meeting held on
27 October 2020
POL0000133
17.
POL00021563
Meeting minutes: minutes
of Board meeting held on
20 March 2019
POLOO00096
18.
POL00021604
Meeting minutes: minutes
of Board meeting held on 7
December 2020
POL0000137
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URN
Document Description
Control Number
POL00104173
Post Office Ltd Chairman
Feedback Report for
UKGI/BEIS for 2019/2020
POL-0103756
20.
POL00006355
Review on behalf of the
Chairman of Post Office
Ltd concerning the steps
taken in response to
various complaints made
by sub-postmasters dated
8 February 2016
POL-0017623
21.
UKGI00012155
Email from Tom Cooper to
Tim Parker, Ken McCall,
Carla Stent and others re:
Chairman's review report
dated 30 July 2020
UKGI022952-001
22.
POL00021606
Meeting minutes: minutes
of meeting held on 7
January 2020
POL0000139
23.
POL00006764
Meeting minutes of the
Postmaster Litigation
Subcommittee of POL held
on 26 March 2018
POL-0018022
24.
POL00006754
Meeting minutes of the
Postmaster Litigation
Subcommittee of POL held
on 15 May 2018
POL-0018012
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