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Witness Name: Arthur Leslie Owen
Statement No.: WITN10340100
Dated: 9 October 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF ARTHUR LESLIE OWEN
I, Arthur Leslie Owen, will say as follows:
INTRODUCTION
1. I make this witness statement in response to the Post Office Horizon IT Inquiry’s
(the “Inquiry”) request for evidence under Rule 9 of the Inquiry Rules 2006 in
its letter to me dated 8 August 2024 (the “Request”). This statement covers my
career background, including my IT experience, my roles at Royal Mail,
including as non-executive director and interim Chairman, the corporate
structure of Royal Mail, the operation of the Royal Mail boards, the governance
and oversight of Royal Mail companies, the separation of the Post Office from
Royal Mail, including the Royal Mail IPO, responsibility for functions within
Royal Mail, my and the board of directors’ knowledge of the Horizon IT system,
audits and reviews of the Horizon IT system, and complaints by
subpostmasters.
2. I have received legal assistance from Simmons & Simmons LLP in the
preparation of this statement.
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3. I have referred to documents disclosed to me by the Inquiry and Royal Mail as
part of the Request, in the manner prescribed by the Inquiry’s Protocol on
Witness Statements updated on 24 January 2023.
BACKGROUND
4. I graduated from the University of Manchester with a degree in mathematics in
1971. I joined Sun Life Assurance Society Limited (“Sun Life”) with a view to
becoming an actuary. I qualified as a fellow of the Institute and Faculty of
Actuaries in 1975. I remained with Sun Life for 28 years in increasingly more
senior positions, becoming Chief Executive in November 1995. I played a
leading role in the initial public offering of Sun Life & Provincial Holdings in 1996.
In January 2000, at the request of AXA (the parent company of Sun Life at the
time), I became Group Chief Executive of AXA Asia Pacific Holdings Limited
based in Melbourne, Australia. During my time at Sun Life and AXA, I gained
significant experience in the full range of issues that arise in the management
of a complex financial services business. I was a director on numerous
operating, subsidiary and joint venture boards. I retired from full-time
employment in September 2006.
5. Since retiring from full-time employment, I have held the position of independent
non-executive director on a variety of boards of mainly listed companies,
including Computershare (2007 to 2018), Discovery Holdings (listed in South
Africa, 2007 to 2020), Just Retirement (2010 to 2014), Jelf Group (2010 to
2015), Royal Mail (2010 to 2019), and CPP Group (2010 to 2015). I was
Chairman of Jelf Group (September 2010 to December 2015) and (as explained
below) interim Chairman of Royal Mail (September 2018 to May 2019). I was
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also a non-executive director of an unlisted company, Coverzones Limited
(2007 to 2010).
IT EXPERIENCE
6. I have been asked to address my IT experience. During the late 1980s I had
responsibility for leading a project to resolve a set of complex issues relating to
the major IT systems in Sun Life. As part of that, I had general management
responsibility for the IT function for approximately 12 months before recruiting
a new head of IT. Whilst not being an IT professional or having any IT
qualifications, my professional experience, particularly on this project, gave me
some knowledge of and insights into IT development and IT project
management.
APPOINTMENT TO ROYAL MAIL BOARD
7. I was approached by the then Royal Mail Chairman, Donald Brydon, in early
2010 to join the board of Royal Mail as an independent non-executive director.
I had known Donald Brydon for several years during my time with AXA. My
understanding was that he was looking to strengthen the Royal Mail board by
adding someone with significant operating and general management
experience. He was looking for someone with a financial services background
in view of the challenges facing Royal Mail and Post Office Limited (“POL”) due
to the defined benefit pension scheme (which was significantly underfunded)
and the POL joint venture with the Bank of Ireland (which represented a
significant risk following the financial crisis). My recollection of the interview
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process is that I had a one-to-one meeting with Adam Crozier, then Royal Mail’s
CEO. I was also interviewed by two of Royal Mail’s non-executive directors.
ROLES HELD AT ROYAL MAIL
8. I was a non-executive director for Royal Mail from January 2010 to May 2019.
I was interim Chairman of Royal Mail from September 2018 to May 2019. I was
a member of a number of committees during my time at Royal Mail, including
the Audit and Risk Committee (“ARC”), Remuneration Committee, Nomination
Committee and Pensions Committee. I was Chair of the Nomination Committee
from September 2018 to May 2019 and Chair of the Pensions Committee from
2013 to 2019.
APPOINTMENT TO THE POL BOARD
9. I was a non-executive director of POL from October 2010 to March 2012. I
joined the POL Board at the request of Donald Brydon, Chairman of Royal Mail
and POL at the time. He wanted a nominated Royal Mail director appointed to
the POL Board. I resigned from the POL board with effect from 15 March 2012.
This was shortly before the formal separation of Royal Mail and POL. I resigned
because I was asked by the Shareholder Executive (“ShEx’) to continue on
either the Royal Mail or POL board (but not both) in order to ensure that there
was no conflict of interest in my duties to either company after separation.
SINCE LEAVING ROYAL MAIL
10. After stepping down from the Royal Mail board in 2019, I remained as a non-
executive director on the board of Discovery Holdings until early 2020. Since
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that time I have been fully retired. I spend some time chairing a small charity.
MY ROLE AND ROYAL MAIL’S CORPORATE STRUCTURE
11. I have been asked by the Inquiry whether I consider there is any difference
between the responsibilities of a director of a company solely owned by HM
Government and a company with a wider shareholder base. I do not believe
there is any such difference. It may be that a 100% shareholder has additional
reporting or management information requirements, but the statutory and
professional responsibilities of directors do not differ. The responsibilities of
directors are extensive and are governed by legislation (including the
Companies Act 2006), corporate governance codes and professional conduct
codes. Royal Mail and POL directors would therefore have had oversight
responsibilities in relation to the activities of the companies, which would include
oversight of criminal prosecutions, civil litigation, IT, accountancy systems and
compliance with the Race Relations Act 1978 and Equality Act 2010.
12. Whilst directors have overall responsibility for the governance and oversight of
all the company’s activities, non-executive directors cannot, and do not, have
the same detailed knowledge of or involvement in the business as members of
management. Non-executive directors rely upon a variety of other structures to
assist in the exercise of this responsibility, including: management structures;
periodic reporting; board and other committees (including risk and audit);
external auditors; and reviews, both internal and independent, carried out at the
request of the board.
13. Responsibility for monitoring the Horizon IT system (“Horizon”), criminal
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prosecutions and civil proceedings would lie with operational management at
POL on a day-to-day basis, with oversight from the POL board and board
committees. There would be higher level oversight from the Royal Mail board
and board committees (including the ARC), internal audit and risk functions.
When I joined the Royal Mail board, the Managing Director of POL attended
Royal Mail board meetings. This was initially Alan Cook, then David Smith, who
was replaced by Paula Vennels in October 2010. There was always a short
paper on POL matters included in the Royal Mail board papers, and the POL
Managing Director would report on POL’s performance at Royal Mail board
meetings. POL’s risk and other reports were included in the papers submitted
to the Royal Mail ARC. I am aware that Royal Mail’s CEO and Chairman would
report to the Department of Business and ShEx, but I was not involved in this
reporting.
My responsibilities as a non-executive director of Royal Mail and POL included
exercising oversight over Royal Mail and POL’s management in the exercise of
their responsibilities. This involved reading reports from the various business
functions and external advisors, asking questions, and relying on my knowledge
and experience to make an assessment of the reports I received and the
effectiveness of senior management. It is not a non-executive director's role to
have day-to-day involvement in the management of the company.
I was involved in the oversight of the group Legal, IT, Security and Investigation
departments to the extent that these departments made reports to the Royal
Mail and/or POL boards whilst I was a member. Issues from these areas of the
business would be escalated and discussed at board level. I make reference to
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a selection of these reports in this statement. I am not aware of the existence
of a ‘problem management team’ and I did not receive reports from any such
area of the Royal Mail or POL business.
I received legal reports and reports from the Company Secretary whilst I was a
director of the Royal Mail and POL boards. These covered matters including
criminal prosecutions, investigations, thefts, fraudulent bulk mailing, ongoing or
proposed litigation, and attacks on staff. There were legal issues in different
parts of the business all the time. Royal Mail was subject to a lot of organised
criminal activity, for example the fraudulent printing of stamps, and bulk mailers
failing to declare the true number of letters being sent. My recollection is that
these reports included brief reference to shortfalls in branch accounts but no
indication that issues with Horizon were the cause. POL had historically been
subject to a consistent level of theft and fraud by subpostmasters, which is why
I understood that POL conducted investigations and had the power to conduct
private prosecutions.
I also recall receiving updates on Horizon at POL board level. From my
professional experience, I know that bugs, errors and defects (“BEDs”) in IT
systems are common. I do not recall any discussions of material BEDs in
Horizon that would affect the integrity of prosecutions being brought by POL
against subpostmasters.
Policies relating to Security, Crime and Investigation, and Prosecution for the
Royal Mail group (including POL) were periodically reviewed by the Royal Mail
board. However, I was not involved in and have no detailed knowledge of: (i)
the policies and procedures followed by the Royal Mail or POL businesses
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when pursuing civil actions; (ii) the conduct of audits of subpostmasters’ branch
accounts; (iii) practices and policies adopted by the business in investigating
and bringing criminal prosecutions; or (iv) the distribution of information relating
to the reliability of Horizon.
The leadership style at the Royal Mail board was open. The Chairman, Donald
Brydon from 2009 to 2015, encouraged open discussion and expressions of
opinion. He made sure to involve all directors. Regular reports were submitted
by the senior executives responsible for the key business areas covering the
financial and operating performance of the group, specific issues and strategic
initiatives. Reports would also be submitted from the Chairs of the ARC,
Pensions Committee and other board committees. Usually the senior executive
or non-executive director responsible for a particular board paper would attend
the meeting to present and answer questions.
When I first joined the Royal Mail board, there were several experienced non-
executive directors who I believed did have a level of IT knowledge and
experience that I would have expected. However, I was surprised at the lack of
IT knowledge and experience in middle and senior management. I queried this
and was informed that, following the outsourcing of the group’s IT function to
International Computers Limited (subsequently Fujitsu) some years earlier, the
individuals involved in IT middle and senior management had transferred out of
the company. I, and other non-executive directors, expressed concern at the
lack of knowledge and oversight of the key Royal Mail IT systems within middle
and senior management, and a process was started to recruit experienced
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senior IT staff and project managers to provide improved input to, and oversight
of, the IT systems managed by Fujitsu.
When I first joined the POL board, there were also several non-executive
directors who I believed did have a level of IT knowledge and experience that I
would have expected. However, I observed the same issue regarding a lack of
IT knowledge and experience within POL’s middle and senior management.
I do not know how the POL board operated prior to me becoming a director in
October 2010. As mentioned above, I was put forward by Royal Mail to join the
POL board as a non-executive director in the run up to POL’s formal separation
from Royal Mail when it would become a fully independent company. I had had
more contact with POL than the other non-executive directors due to my
involvement in the pensions scheme and the Bank of Ireland joint venture.
During my brief period on the POL board it operated broadly in the same way
as the Royal Mail board.
I had sufficient time to carry out my responsibilities as a director of the Royal
Mail and POL boards in full. My attendance at board and committee meetings
was published in annual reports and I rarely missed a meeting in my nine years
at Royal Mail. I was assiduous in reading board materials and I think my
colleagues and management on the boards of both companies would say that
I was always a challenging and active contributor in board discussions.
On joining the Royal Mail group, I was made aware that Royal Mail and POL
had the power of prosecution due, I understood, to the ongoing level of attacks
on postmen and shortfalls in Post Office accounts. I was not briefed at the
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27.
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outset on the risks and/or compliance issues that could arise from the
prosecution of subpostmasters or the pursuit of civil litigation to recover alleged
shortfalls. My understanding of the risk and compliance issues facing Royal
Mail, and later POL, developed as my knowledge of both businesses
developed.
In relation to the Horizon system, the POL board discussed issues with Horizon
in the context of Ernst & Young's (“EY”) audit for 2010/2011. I refer to this in
more detail at paragraphs 37 to 47 of my statement.
In my view, Royal Mail and POL’s overall corporate governance, board and
management structures were appropriate to enable me to fulfil my
responsibilities as a non-executive director. These structures were very much
in-line with what I had experienced elsewhere in my earlier management and
non-executive director roles.
Whilst I was a board member, I believe (based on my experience of other
organisations) that the Royal Mail and POL boards exercised appropriate
oversight over the key business areas and the potential risks and compliance
issues that could affect the business. Reports were escalated to the board and
were challenged by board members. Board members could and did ask senior
management to provide additional information or take action. Where actions
were to be taken by senior management the outcome was reported back to the
board.
I resigned from the POL board in March 2012, at the time of its separation from
Royal Mail. I had no involvement in, responsibility for, or oversight over POL’s
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activities after this date. Following separation POL was solely and directly
owned by HM Government. Royal Mail went on to list the majority of its shares
on the London Stock Exchange on 15 October 2013 and was fully privatised in
October 2015 (at which point it ceased to be owned by HM Government).
30. I cannot comment on the adequacy of HM Government's oversight over Royal
Mail and POL prior to September 2018 as this is outside my knowledge. Royal
Mail and POL’s Chairman and CEO were generally responsible for relationships
with HM Government. For the most part, I believe oversight was exercised by
ShEx through discussions with the Chairman and CEO of Royal Mail and the
POL Managing Director / CEO. I became Chairman of Royal Mail on an interim
basis in September 2018, nearly six years after its separation from POL and
three years after it was fully privatised. HM Government was therefore not
exercising oversight over Royal Mail whilst I was Chairman.
KNOWLEDGE OF THE INTEGRITY OF HORIZON
31. IMy knowledge of the Royal Mail group’s IT systems developed over time
through reports submitted to the Royal Mail board and its committees. This
included occasional reporting on Horizon, particularly regarding stability and
Fujitsu’s lack of SAS70 accreditation, as I address further below. In my
experience, all IT systems have a level of BEDs and I do not recall being given
any evidence to suggest that the level of BEDS in Horizon was unusual. I had
no knowledge of complaints relating to BEDs.
32. I had no knowledge of Fujitsu employees’ ability to alter transaction data or data
in branch accounts. However, the ability of IT service providers to remotely
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access systems was not uncommon based on my professional experience of
IT systems generally. My knowledge of some of these issues did increase
during my short time on the POL board as further described below (see
paragraphs 38 to 47). As a non-executive director on the Royal Mail and POL
boards I did not have, and would not have expected to have been given, training
on the Horizon system.
I have been asked by the Inquiry to comment on the nature and extent of my
knowledge of a report prepared by Rod Ismay (Head of Product & Branch
Accounting, Post Office) titled “Horizon - Response to Challenges Regarding
Systems Integrity’ dated 2 August 2010 [POL00294837]. I did not see a copy
of this report before it was provided to me by the Inquiry and had not heard
about it until the Inquiry process commenced. The report precedes my
appointment to the POL board and, although I had been a member of the Royal
Mail board for six months by August 2010, I do notbelieve it came to the Royal
Mail board. If it had come to the board, I would have read it.
Reading the report now, I do not think that I would have accepted the reasons
provided then for not commissioning an independent review into Horizon,
particularly that any report would need to be disclosed in legal proceedings.
That is not an acceptable reason for not carrying out a review.
Towards the end of my time on the POL board, I have a strong recollection of
becoming aware of an increase in the number of criminal prosecutions
undertaken by POL following the implementation of Horizon. It was not clear to
me what had caused this uptick in prosecutions, but I thought it was possible
that it could be related to the introduction of Horizon. This prompted me to
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request that an independent review be done and this sentiment was echoed by
the other board members. I think this occurred at the March 2012 meeting,
which I will refer to later in this statement (at paragraphs 60 to 61). I remember
leaving the meeting, and the POL board, understanding that an independent
review would be undertaken. However, I have not been able to find
documentary support of my recollection in the papers provided to me by the
Inquiry or Royal Mail.
AUDITS AND REVIEWS OF THE HORIZON IT SYSTEM
36. The Inquiry has asked me to comment on a meeting of the Royal Mail ARC on
13 May 2010. I note that the minutes of the Royal Mail ARC meeting held on 13
May 2010 [RMG00000004] show that I was in attendance at that meeting but I
was not a member of the ARC at that stage. The minutes record (at ARC 10/28)
that the ARC noted a paper setting out details of an Internal Audit & Risk
Management Department Plan for 2010/2011. I have not been provided with a
copy of that paper. In relation to the audit plan, the minutes record “a significant
allocation of activity to POL recognised the importance of continued risks facing
this business, including FSA compliance, agents remuneration, the Horizon
payment system, and cash logistics security’. I do not recall the discussion on
these matters at the meeting or why Horizon would have been considered by
Internal Audit to have been a continued risk to POL. The paper suggests that
there were issues and shortcomings in POL across several areas.
37. Alison Duncan, a partner from EY, introduced the Audit Results Report for the
year ended 27 March 2011 at an ARC meeting on 20 May 2011. I attended that
meeting. It can be seen from the Royal Mail ARC meeting minutes dated 20
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May 2011 [RMG00000005] that Alison Duncan explained that significant control
weaknesses in POL had been identified as part of the audit process. Those
weaknesses were said to reflect the need for improvement by Fujitsu, the
supplier of Horizon, and also a change of approach on the part of POL in relation
to the management of the Fujitsu contract. The minutes recorded that POL had
not been demanding SAS70 audit assurance from Fujitsu. SAS70 refers to an
auditing standard for governance and controls adopted by companies providing
services to others.
I have also seen minutes of a POL board meeting which took place a week
later, on 27 May 2011 [POL00021499]. EY’s concerns about a number of
matters including Fujitsu’s managed service and POL’s oversight and
assurance of key activities were recorded. During the next POL board meeting
on 4 July 2011, the minutes of that board meeting [POL00021500] recorded
that I emphasised that the advantage of asking Fujitsu to comply with SAS70
audits was that POL could rely on and be assured about Fujitsu’s controls.
I have been asked by the Inquiry to comment on EY’s audit for 2010/2011 and
the nature and extent of my involvement in that. I did not have any direct
involvement in the conduct of the audit. I was involved in my capacity as a non-
executive director of the board. My knowledge is, therefore, based on my
recollection of information that I received as a member of the Royal Mail and
POL boards. Those recollections have been supplemented by copies of
minutes of board meetings at which briefings were provided on EY’s audit work.
EY performed an annual audit across the Royal Mail Group including POL, until
the separation in April 2012. The audit included reviewing relationships with
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providers of outsourced services such as Fujitsu.
I had no reason to think that the findings set out by EY in their management
letter for the year ended 27 March 2011 dated August 2011 and which was
addressed to POL [POL00030217] were unreasonable, incorrect or
inappropriate. It is not surprising to me that there would have been issues with
a computer system, and I do not think I would have been surprised at the time.
I do not recall seeing anything which raised red flags in relation to the audit. I
understood the importance of having appropriate controls in place for any large
organisation and had a general understanding of SAS70 from roles on other
boards. Having SAS70 accreditation was a valuable and important step to
improve the overall risk controls around Horizon and POL’s contractual
relationship with Fujitsu. I supported that at the POL board.
EY’s management letter addressed to POL for the year ended 27 March 2011
sets out detail on the weaknesses identified by EY [POL00030217]. My
knowledge of actions taken to address issues regarding Horizon identified in
EY’s management letter was based on reports to the board and discussion at
board meetings (both POL and Royal Mail). I do not recollect seeing or being
briefed on the details of the implementation of actions to address the issues
regarding Horizon identified in the management letter, and cannot comment on
their adequacy.
In the management letter for the year ended 27 March 2011 [POL00030217],
EY observed that Fujitsu did not have SAS70 accreditation and that this did,
and would continue to, mean that EY would have to carry out additional audits
of Fujitsu controls etc, and that the costs of these would then be reflected in the
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POL audit fee. The Board discussed this and was of the view that Fujitsu, as an
IT service provider to a range of clients, should have SAS70 accreditation and
that this would give POL additional assurance regarding Fujitsu’s internal
controls and assurance processes. This view in and of itself had nothing to do
with costs but was based on the desirability of strengthening assurance for POL
on the controls / processes relating to Horizon.
The discussion on costs related to the costs of the SAS70 accreditation process
itself, where it was noted that Fujitsu should bear these as a service provider
with multiple clients each of whom could then place appropriate reliance on their
controls and assurance processes. Directors, including myself, observed that it
was in their experience normal that service providers like Fujitsu would have
SAS70 accreditation and that it would have been inappropriate for individual
clients to bear these costs. It can be seen from minutes of an Royal Mail ARC
meeting on 8 December 2011 [RMG00000003] that Fujitsu did commit to
covering the cost to implement a SAS70 compliant approach for EY’s next audit
(ARC11/54). The ARC was satisfied with the actions recommended by EY.
As set out above (at paragraph 37), EY introduced their Audit Results Report
for the year ended 27 March 2011 at a meeting of the Royal Mail ARC on 20
May 2011 (Royal Mail plc ARC minutes of 20 May 2011 [RMG00000005)). The
minutes record that POL had established an IT Audit & Control Board to
manage contract governance going forward. The minutes state that I noted that
the POL board had not been made aware of that and I asked in future that the
board be kept fully up to date on all such initiatives.
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46.
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EY’s audit was also discussed at the POL board meeting held on 27 May 2011
[POL00021499]. The minutes record that the board noted that activity had
already commenced to remedy the issues identified by EY, including the
establishment of the Post Office IT Audit & Control Board. In the following POL
board meeting on 4 July 2011 [POL00021500], Paula Vennells confirmed that
the new Board would address all issues and actions from the SAS70 audit.
I did not have any involvement in the Post Office IT Audit & Control Board. I
understood that this was a management committee that would not have formally
reported to the board. At the time of these meetings, I thought having such a
committee was a positive step for management and oversight of IT governance.
I have been provided with copies of a draft and final version of an assurance
review prepared by Internal Audit & Risk Management: (a) Draft Report 11/005
Review of Key System Controls in Horizon Assurance Review, Post Office
dated February 2012 [POL00029114]; and (b) Review of Key System Controls
in Horizon, Post Office dated March 2012 [POL00030482]. I do not recall
receiving either of these documents before they were provided to me by the
Inquiry and I have no knowledge of them. I note that I am not included on the
distribution lists of either document and from those lists it is not clear to me that
the assurance review was presented to the POL board. If it was, that may have
occurred after I left the board in March 2012. It is possible that the assurance
review was carried out by Internal Audit & Risk Management in conjunction with
the new IT Audit & Control Board.
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COMPLAINTS BY SUBPOSTMASTERS
48. I have been asked by the Inquiry to set out the nature and extent of my
knowledge of, and involvement in, investigating and/or responding to
complaints concerning Horizon, or criminal or civil proceedings brought by POL.
I did not have any involvement in those matters. As a non-executive director on
the POL board for 17 months, my knowledge of those matters was not detailed.
The knowledge that I had during that time was limited to matters put before the
POL board at meetings.
49. The Inquiry has provided me with copies of six sets of minutes for POL board
meetings for the period during which I was a member of the board. From those
minutes, it is clear that information was provided to the board on criminal and
civil proceedings at the meeting of the POL board on 12 January 2012 (Minutes
of POL board meeting held on 12 January 2012 [POL00021503)). I attended
that meeting.
50. Shortly before that time, I read an article in Private Eye about claims being
brought against POL by subpostmasters concerning failures of Horizon. I recall
raising the article at a board meeting, and the minutes record that I did that at
the meeting on 12 January 2012. I asked whether there was any substance to
the claims.
51. The Inquiry has provided me with a copy of a chain of emails between Donald
Brydon, Paula Vennells, Moya Greene, Paul Murray and Alice Perkins with the
subject “Class Action”, dated 29 September 2011 [POL00405910]. In the chain,
Donald Brydon emailed Paula Vennells and referred to an article which had
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appeared in Private Eye that week about a class action by subpostmasters
suggesting that it may be appropriate to have an explicit litigation or legal report
in the POL board papers in the future. I believe that Donald Brydon was
referring to the same article that I had read. He also asked whether an
independent audit of Horizon had ever been carried out. In her response, Paula
Vennells stated that POL had taken a decision several months ago to have
Horizon and Horizon Online independently verified by an external systems
auditor. She indicated that this process was underway and the results would be
available at the end of the month. Paula Vennells sent that chain on to me and
others stating “Fyi. Susan will provide a background brief’.
Susan Crichton (Head of Legal) briefed the board at the meeting on 12 January
2012 on challenges to the integrity of Horizon brought by subpostmasters. She
explained that the system had been audited by Royal Mail Internal Audit and
their reports had been reviewed by Deloitte. She told the board that the audit
report was very positive. She also stated that POL had won every criminal
prosecution in which it had used evidence based on the integrity of Horizon. As
mentioned previously (see paragraph 50), I recall reading the Private Eye article
and the fact that this raised concerns with me, and I raised this at the board
meeting. I was satisfied at this stage with Susan Crichton’s response, given her
assurances regarding the Intemal Audit review, Deloitte’s review and the fact
that prosecutions were almost always successful.
The minutes of the 12 January 2012 meeting also record that Susan Crichton
suggested that she clear the audit report with the external lawyers and, if it was
possible to give the report privileged status, would circulate it to the board. I
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54.
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understand that she was referring to the report prepared by Internal Audit on
Horizon which had apparently been reviewed by Deloitte. I do not know the
reasons for her comments on privilege and could only speculate.
My knowledge of complaints and proceedings was based on and derived from
the papers which were provided to the board, which I always read — for
example, a one-page paper that Susan Crichton prepared for the meeting in
January 2012 (Post Office Ltd Board, “Significant Litigation Report’, Susan
Crichton, January 2012 (POLB(12)13) [POL00095595]). Information was
provided in that paper about civil proceedings brought by subpostmasters
against POL for wrongful termination of their contracts based on failings with
Horizon. Susan Crichton stated that a large number of claims might be received,
possibly between 55 and 150, according to press reports. However, the
considered legal view was that the claims were unlikely to succeed.
A separate paper dated January 2012 was also provided to the POL board
which summarised commercial litigation claims in excess of £500,000 and/or
claims with wider significance for the business (“Post Office Limited Litigation
Matters - Commercial Litigation” (POLB (12)23) [POL00095835]). The paper
provided high level information on five claims brought by former
subpostmasters against POL which were being defended by POL, although for
one of the claims, it appears that papers related to the relevant branch had been
destroyed.
Shoosmiths LLP appeared to be acting for the claimants and the paper
recorded that Shoosmiths LLP had asserted they had consulted on a further 85
cases. I do recall this paper but I do not believe that there was any detailed
Page 20 of 31
57.
58.
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discussion by the board of individual cases. If these matters were discussed at
the board, it would have been in the context of Susan Crichton’s broader
briefing on Horizon matters.
I note from the papers provided to me by the Inquiry that a similar paper which
summarised Horizon claims was provided to the POL board in February 2012
(‘Post Office Limited Matters -— Dispute Resolution” (POLB (12)42)
[POL00096033)). It does not appear from the minutes of the board meeting that
month that an oral update on those matters was provided (POL, minutes of
meeting held on 9 February 2012 [POL00027579]). I do not recall any
discussion of Horizon claims at that meeting.
Some updates were provided to the Royal Mail board on civil claims. My
recollection is that this was first brought to my attention in the October 2011
report by Royal Mail's Company Secretary on a number of matters, including
material litigation (Royal Mail Holdings plc Board, Company Secretary's Report,
October 2011 [RMG00000126]). It was raised again at a Royal Mail ARC
meeting held in November 2011 (Royal Mail Holdings plc ARC minutes 17
November 2011 [RMG00000007)), where it was stated that “Horizon claims
were a contingent liability which was considered remote’. I have seen from
documents provided to me by the Inquiry that the Royal Mail ARC was provided
with an update on challenges to Horizon at a meeting held on 8 December 2011
(Royal Mail Holdings plc ARC minutes 8 December 2011 [RMG000000003)).
The paper dated December 2011 and presented to the Royal Mail ARC
addressed Horizon controls and POL’s relationship with Fujitsu and provided a
brief summary of subpostmaster challenges to Horizon (“Update on Post Office
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59.
60.
61.
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Limited Horizon Controls and Relationship with Fujitsu’ [RMG00000083)). The
Committee noted that POL had dismissed and prosecuted a number of
subpostmasters and Crown staff following financial losses in branches. A small
number had defended those prosecutions and claims by POL for civil recovery
of funds on the basis of faults with Horizon.
I have been asked by the Inquiry to what extent I or Royal Mail became involved
in (a) the response to MPs, such as Lord Arbuthnot and Oliver Letwin MP, who
raised concerns about Horizon; (b) the investigation by Second Sight into the
Horizon IT System; (c) the Initial Complaint Review and Mediation Scheme; and
(d) the review of past convictions of subpostmasters for theft, false accounting
and offences under the Fraud Act 2006, including the CCRC’s investigation.
[had no involvement in any of those matters. However, I was aware that James
Arbuthnot MP, now Lord Arbuthnot, had met with Alice Perkins (Chairman,
POL) (as is recorded in the minutes of the POL board meeting held on 15 March
2012 [POL00021505)). Alice Perkins noted that she hoped that she could find
a way to convince Lord Arbuthnot and other MPs that the Horizon system was
not at fault. It was noted that it might mean looking at a further independent
study of the issues. As mentioned in paragraph 35 above, I remember saying
at this board meeting that an independent review into Horizon should be carried
out and that this was agreed by Alice Perkins and the board.
It is possible that the minutes of the March 2012 meeting noted that there might
need to be a further independent study of the issues because I had raised that
point then. I called for that to occur because, by that stage, there had been the
Private Eye report and POL understood there might be 55 to 150 claims brought
Page 22 of 31
62.
63.
64.
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by former subpostmasters, and the board was also being told that an MP was
questioning the integrity of Horizon. As mentioned above (paragraph 35), I also
recall being made aware of an increase in the trend of prosecutions in recent
years. That raised a concern with me that the increase in prosecutions could be
as a result of issues with Horizon. My recollection was that the board and Alice
Perkins agreed that an independent review should be carried out. The March
2012 meeting was the last meeting of the POL board that I attended. I do not
know what steps were taken to progress the review after that date.
I do not recall whether Royal Mail was involved in discussions with Lord
Arbuthnot or other MPs and I do not believe Royal Mail was involved in Second
Sight’s investigation, the Initial Complaint Review and Mediation Scheme, or
the review of past convictions of subpostmasters. However, I do recall that I
later asked Jon Millidge (the Group HR Director and Company Secretary)
whether he knew or had heard about the conclusions of Second Sight’s
investigation. I recall that he said that no evidence of systemic issues with
Horizon had been found. I do not recall when that conversation took place, but
it was not at a board meeting.
I have not discussed any of the matters set out above with HM Government
Officials. Aside from Jon Millidge, I remember that Orna Ni Chionna, another
non-executive director of Royal Mail, called me to speak about Horizon. I
believe this to have been around May 2022 when Inquiry hearings commenced.
I have been asked by the Inquiry to what extent I or Royal Mail investigated
complaints raised by current or former subpostmasters concerning Horizon
independently of POL. I did not have any personal involvement in any
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investigations and do not know to what extent Royal Mail investigated any
complaints raised.
SEPARATION OF POL AND ROYAL MAIL
65. Royal Mail and POL formally separated on 1 April 2012. My involvement in the
detail of the separation of Royal Mail and POL was limited. As mentioned earlier
in this statement, I was nominated by Royal Mail to be a non-executive director
on the POL board. As I was also a Royal Mail board member, I was not involved
in discussions regarding the commercial arrangements between the two
companies given the conflict of interest.
66. To my knowledge, there were no discussions involving the board (I am not
aware of any involving management) regarding where responsibility would sit
for Horizon, the investigation and prosecution of subpostmasters, the pursuit of
civil claims, or past liabilities. It seemed obvious that matters relating to the POL
business would sit with POL.
67. The Inquiry has asked me to consider an email chain between Alice Perkins,
Paula Vennells and Martin Edwards dated 12 July 2013 with the subject of
“Donald Brydon call” [POL00191953]. In the chain of emails, Martin Edwards
stated “8. Second Sight - Susan briefed Jon M on Monday and shared our
press statement. He was relaxed, clearly just saw it as our problem.” I assume
that “Jon M” is a reference to Jon Millidge.
68. I did not see the Second Sight interim report and do not know whether anybody
else at Royal Mail saw it. I do not recall it being brought to the Royal Mail board
or discussed in board meetings. As set out above, I have a recollection of
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speaking to Jon Millidge about the outcome of Second Sight’s investigation and
recall that he indicated that no systemic issues had been identified.
69. By July 2013, the separation of POL and Royal Mail had taken place, so the
Second Sight investigation and issues around Horizon more broadly fell outside
of Royal Mail’s remit. However, there continued to be reputational risks for
Royal Mail as I refer to below (see paragraphs 71 to 74).
70. I have been asked by the Inquiry about my knowledge of (a) Simon Clarke’s
advice on the use of expert evidence relating to the integrity of the Fujitsu
Services Ltd Horizon System of 15 July 2013 [POL00006357]; (b) Simon
Clarke's advice on disclosure and the duty to record and retain material of 2
August 2013 [POL00129453]; and (c) Deloitte’s Project Zebra briefing dated 4
June 2014 which followed and was further to their report “Horizon: Desktop
review of assurance sources and key control features” dated 23 May 2014,
responding to five specific matters identified by POL as critical to POL’s legal
position [POL00028069]. I had left the POL board prior to the creation of those
documents and did not see, or have any knowledge of them, when they were
prepared. I have only become aware of them as a result of the Inquiry.
ROYAL MAIL’S PROSPECTUS
71. In September 2013, HM Government announced that there would be an initial
public offering of Royal Mail’s shares and the prospectus was published on 27
September 2013. I have been asked to comment on two documents provided
to me by the Inquiry, an email chain between ShEx and Freshfields Bruckhaus
Deringer LLP dated 18 September 2013 with the subject “Prospectus —- POL
Page 25 of 31
72.
73.
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comments” [UKGI00002054] and an email chain between Martin Edwards,
Paula Vennels and others dated 20 September 2013 with the subject
“Prospectus update” [POL00381747]. The emails indicate that I wanted to
include a reference to Horizon in the IT risks section of Royal Mail's listing
prospectus. It appears that there was pushback from POL and the ShEx POL
team on any wording relating to Horizon being included in the prospectus.
Whilst I do not recall raising the point that Horizon be referred to in the
prospectus, I do not dispute that it is something I did raise given my recollection
of the trendline of prosecutions and that an independent review of Horizon was
being carried out. I did not believe that issues with Horizon would have posed
a financial risk to Royal Mail, but I recall believing that there may be a material
reputational risk to Royal Mail if it turned out that POL were prosecuting
subpostmasters wrongly. I thought that this could result in reputational damage
to Royal Mail due to its previous ownership of POL.
I note that whilst no specific reference is made to Horizon in the Royal Mail
prospectus, the following wording is included, which in effect includes the risk I
had raised:
“The Group faces a number of risks arising out of its relationship with
POL... There remains a perception on the part of some customers of the
Group and some members of the general public in the UK that the “Post
Office” and “Royal Mail” are the same entity. Any failure or disruption in
the Post Office branch network, and any commercial decisions taken by
POL, could therefore adversely affect the reputation and brand of the
Group.”
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74. I was not sent the emails referenced in [UKGI00002054] or [POL00381747]
and I do not recall seeing them before they were provided in the Request. I do
not think it was appropriate for POL or the ShEx POL team to aggressively push
for changes to the wording in Royal Mail’s prospectus as it was Royal Mail’s
responsibility to ensure that the prospectus listed all the material risks relevant
to Royal Mail’s business. However, there were a number of people advising on
the content of the prospectus including lawyers, bankers, auditors, Royal Mail
board members and senior executives. It is highly likely that it was thought, on
balance, taking into account the views of all these parties, that Horizon did not
pose a material risk to Royal Mail’s business warranting a specific mention in
the prospectus.
GENERAL
75. I have been asked to reflect on my time at Royal Mail and POL and whether I
would have handled anything differently in hindsight. Given the information that
I received at the time, together with the management assurances given, I do
not think that there was anything I could have done differently. As soon as I
formed a concern about a possible correlation between the uptick in
prosecutions and the implementation of the Horizon system I pressed for an
independent review and understood that this was agreed by the POL board.
Page 27 of 31
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76. I do believe the Second Sight review should have been handled differently.
Second Sight should have been able to carry out a proper independent review
that reported directly to the POL board or a committee of the board.
STATEMENT OF TRUTH
I believe the content of this statement to be true.
= GRO
Dated: 9 October 2024
Page 28 of 31
Index to First Witness Statement of Arthur Leslie Owen
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URN
Document Description
Control Number
POL00294837
Report prepared by Rod
Ismay titled “Horizon —
Response to Challenges
Regarding Systems Integrity”
and dated 2 August 2010
POL-BSFF-0132887
RMG00000004
Minutes of Royal Mail
Holdings pic Audit & Risk
Committee meeting held on
13 May 2010
VIS00007412
RMG00000005
Minutes of Royal Mail
Holdings pic Audit & Risk
Committee meeting held on
20 May 2011
VIS00007413
POL00021499
Post Office Limited — Board of
Directors — Minutes of
meeting held on 27 May 2011
POL0000032
POL00021500
Post Office Limited — Board of
Directors — Minutes of
meeting held on 4 July 2011
POL0000033
POL00030217
Ernst & Young management
letter for the year ended 27
March 2011 dated August
2011 and addressed to Post
Office Limited
POL-0026699
RMG00000003
Minutes of Royal Mail
Holdings pic Audit & Risk
Committee meeting held on 8
December 2011
ViIS00007411
POL00029114
Post Office Limited - Review
of Key System Controls in
Horizon: Assurance Review
(Draft 11/005) dated February
2012
POL-0025596
POL00030482
Post Office Limited - Review
of Key System Controls in
Horizon, Assurance Review
Report dated March 2012
POL-0026964
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10.
POL00021503
Post Office Limited — Board of
Directors — Minutes of
meeting held on 12 January
2012
POL0000036
11.
POL00405910
Email from Donald Brydon to
Paula Vennells and others
dated 29 September 2011
with the subject “Class Action
POL-BSFF-0231758
12.
POLO0095595
Significant litigation report
(POLB (12)13) prepared by
Susan Crichton for the
meeting of the Post Office
Limited Board of Directors
held in January 2012
POL-0095178
13.
POL00095835
Post Office Limited Litigation
Matters - Commercial
Litigation (POLB (12)23)
provided to the Post Office
Limited Board of Directors in
January 2012
POL-0095418
14.
POLO0096033
Post Office Limited Matters —
Dispute Resolution (POLB
(12)42) provided to the Post
Office Limited Board of
Directors in February 2012
POL-0095616
15.
POL00027579
Post Office Limited — Board of
Directors — Minutes of
meeting held on 9 February
2012
POL-0024220
16.
RMG00000126
Report by the Company
Secretary of Royal Mail
Holdings pic on a number of
matters, including material
litigation dated October 2011
VIS00013025
17.
RMG00000007
Minutes of Royal Mail
Holdings pic Audit & Risk
Committee meeting held on
17 November 2011
VIS00007415
18.
RMG00000083
Paper provided to Royal Mail
Holdings plc’s Audit & Risk
Committee addressing
Horizon controls and POL’s
ViS00009942
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relationship with Fujitsu and
providing a brief summary of
subpostmaster challenges to
Horizon dated December
2011
19.
POL00021505
Post Office Limited - Board of
Directors — Minutes of
meeting held on 15 March
2012
POL0000038
20.
POL00191953
Email chain between Alice
Perkins and others, dated 12
July 2013 with the subject
“David Brydon call”
POL-BSFF-0030016
21.
POLO0006357
Simon Clarke’s advice of 15
July 2013 on the use of expert
evidence relating to the
integrity of the Fujitsu
Services Ltd Horizon System
POL-0017625
22.
POL00129453
Simon Clarke’s advice of 2
August 2013 on disclosure
and the duty to record and
retain material
POL-0134937
23.
POL00028069
Deloitte draft Project Zebra
briefing further to report
“Horizon: Desktop review of
assurance sources and key
control features”, dated 4
June 2014
POL-0023072
24.
UKGI00002054
Email chain between
Shareholder Executive and
Freshfields, dated 18
September 2013 with the
subject “Prospectus — POL
comments”
UKGI012868-001
25.
POL00381747
Email chain between Martin
Edwards and others, dated 20
September 2013 with the
subject “Prospectus update”
POL-BSFF-0208634
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