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From: Swil, Jonathan
Sent: 21 March 2014 19:32
To: Band, Christa
Subject: RE: Post Office
Christa
I think I must have missed you this afternoon. To keep this moving, my further comments below underlined. I will
contact Richard on the JR point on Monday, if having read my comments, you would still like me to.
I'm assuming all of this is for your benefit in view of the Board presentation, as it is too late to be making amends to
the report, to the extent any need to be made.
Jonathan
From: Band, Christa
Sent: 21 March 2014 08:40
To: Swil, Jonathan
Subject: RE: Post Office
My comments marked below.
Happy to discuss
Christa
From: Swil, Jonathan
Sent: 20 March 2014 19:34
To: Band, Christa
Subject: RE: Post Office
Christa
Richard Morgan called to discuss his comments. He said none were big picture and that to the extent we need to
make any changes arising from his comments, he suggested we gloss them in the presentation to the Board rather
than amend the document (particularly given it has now gone to the Board).
His comments were
1.6/5.84 — he queried how there could be damages for loss of a chance for a wrongful summary termination of the
contract given the SPMR is not entitled to assign his agency; if he is terminated it is entirely up to the Post Office to
pick his replacement. In other words, while he might be able to sell an associated business, it is not in his gift to
replace himself as SPMR (that fact is something which Rodric Williams commented on and I added wording in respect
of in 5.84 just before the report went out). I said what about the loss of a chance to find someone who will buy the
business and who the Post Office is happy to appoint as SPMR - does it matter that the decision about a replacement
SPMR is ultimately up to the Post Office? I agree with you. This is exactly the point made in Lailji (which I may not
have spelled correctly). It is all about loss of a chance and you can discount for as many variables as the Court thinks
appropriate. Yes, I have checked Laiji and that is precisely what it says at [11]. He and I didn’t seem to be able to
take the point much further and I said we'd go away and think about it. While perhaps a little implausible or unlikely
ever to occur in practice, I still think there is a chance to sell the business to someone who the Post Office will or has
indicated it will appoint which a wrongful summary termination causes the SPMR to lose. You are right. Also
someone might be prepared to buy the lot taking the risk that he will get the SPMR contract. I don't know how hard it
is to get them but if you were of good character and had the right skills and there was an existing subpostoffice — ie an
established need — then you might well be pretty confident. What if, for example, you were already a SPMR
somewhere else but wanted to move. You might well think that you would be bound to get the contract. Yes, agreed,
there's quite a few scenarios one can think of. Perhaps you may want to stress to the extent it comes up in the
meeting that this is probably more theoretical than real but it is at least that. Perhaps we can now ignore my last
comment; I don't think Richard's point still stands.
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§.7-5.10 — Richard questioned our broad statement that there is unlikely to be a tortious duty of care, aside from any
duties defined by the contract. He surmised a duty and its breach e.g. where someone on the support helpdesk gives
negligent advice about what to do with an entry in Horizon which subsequently causes a loss. I would have thought
that this was effectively covered by the contract — if necessary by reference to an implied term. I'm not sure itis, at
least expressly. I wasn't able to find any reference to an obligation to provide helpdesk support (perhaps not
surprisingly because the contract pre-dates Horizon by 6 years) in the contract (although that could just be my review
of it, given how difficult it is to navigate). Presumably if it is an implied term, then it will be more difficult to know how
the contract covers it — even if the court finds an implied obligation to provide support, surely it's not going to imply a
term of such detail or breadth as to make clear how if at all the term excludes or interacts with any tortious duty to
provide support with reasonable care and skill? If we claim the loss and the SPMR refuses to pay, we then terminate
him summarily, and because of the negligence, wrongly. I said even if this is not abrogated or circumscribed by the
contract, it seems the SPMR's decision whether to pay the loss breaks the chain of causation and that his remedy is
for breach of contract for the wrongful termination. I said I couldn't see any loss flowing from the negligent advice. He
said that the result seems unfair but I said the SPMR can then seek restitution of the mistakenly paid loss, so query if
it is unfair anyway. He seemed to concede the point (without acknowledging it as such) so if you agree, I'm not sure
this point calls for any change of approach. Although strictly, Richard may be right that there is a duty owed by the
support desk person (vicariously on behalf of Post Office) but there is no liability because of a lack of causation. I
agree with you but also agree that it seems unfair. It is this general “we can terminate you when we like for no
reason” point which nags away in the context of the JR issue — which I know that you think is a non starter. If we are
only advising on claims currently in the Scheme then my email from yesterday about the 3 month limitation period I
think means JR is a non-starter. If we are also interested in future claims (I didn’t think we are, but for the sake of
argument will assume we are) is it really that unfair a) to have a power to terminate on 3 months’ notice? Isn't that
common in many contracts and this is not an employment contract, it is a contract for services? and b) because the
SPMR can choose to dispute the Horizon entry and not pay and if he has good grounds i.e. “your helpdesk person
told me to do it’, we would be well advised not to terminate summarily and he can threaten an injunction etc. if we
attempt to (granted, the SPMRs have limited means so that may not be a practical solution, even if it is a legal one).
But turning to the JR point for any future loss recovery, I quess the question is this: is the recoupment of funds
belonging to the Post Office a commercial/corporate activity because it is for the benefit of Post Office Limited the
company or is it ultimately a public function because it is for the benefit of the public through HMG's
shareholding? The problem with the latter is by that reasoning, any and all activities of the Post Office would be
considered a public function because everything it does is ultimately aimed at making profit for the government
shareholder, not to mention provide a service of universal public importance. But that can’t be right because itis after
all a privatised, arms length company. I can see a distinction being drawn between say a decision to recover losses
and a decision by the Post Office (if it has the power) to decide not to collect mail on Tuesdays. Perhaps, therefore.
we are on the non-public function side and therefore not amenable to JR in this context. I wouldn't mind Richard
Morgan thinking about that expressly. Would you like me to ask him on Monday? He did say specifically that he
hadn't considered this before and that this is not his area, but I quess it isn’t really mine either and we can't ask
anyone else at this stage.
5.29 — he suggested that aside from erroneous key entries or a malfunction with Horizon there may be a third way in
which Horizon could show an inaccurate state of affairs — third party intervention. I think he is right about that e.g. one
of the complaints made is that someone could directly access Horizon and override a SPMR's entries without
reference to him. A more obvious example is someone hacking into the system. Assuming you don't think the ability
for a third party to intervene can be categorised as a malfunction (I don't think I do), I think this could be glossed over
if it needs to be during the presentation. I agree. There may be real issues of proof here. Also could it be said that
these losses were due to anything — at all — that the SPMR did? May depend on the facts again. For example, if you
leave your terminal switched on and someone comes in over lunch and accesses it that may be different to someone
hacking in centrally. I think that the hacking point plays directly into the provisions in the contract covering theft of
stock. Can you take a look? I'm not sure it does. The theft provisions deal specifically with cash, stock and property
of the Post Office which is located, I think by implication, at his Subpostoffice or in his custody. _I don't see how that
links in with the tampering with data in a centrally held system out of the SPMR's control, especially if the hacking
doesn't involve any “theft” at all but simply fiddles with numbers which make it appear that a SPMR has stolen or lost
stock/cash. I do agree though that leaving the terminal unwatched over lunch falls within the negligent or careless
test in the loss recovery provision and so is different at least for that reason to central hacking. I think that the
contract basically tells SPMRs to take all proper precautions to guard against theft but does not make them
responsible per se for stolen goods. Can you think about this a bit more? Yes, I think that is what the contract does.
but again, hacking could occur without the hacker stealing anything — in fact unless the hacker can somehow by his
hacking electronically divert funds from either the SPMR or the PO to himself, I don't see how he could “steal from”
Horizon (but that might just be my limited understanding of how it all works).
5.31 — more of an observation than a point for clarification, he said that Horizon is extremely complicated and has
been built up over many years so it would be very difficult to produce the baseline report that we are expecting
Second Sight to have done i.e. he has a bit of sympathy for them in that regard at least. I acknowledged that but said
presumably someone who has had the knowledge over the years i.e. Fujitsu or someone else wit relevant technical
2
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expertise, not SS, could do it. I also said Post Office are in any event not unhappy for us to disparage
them. Noted. But so what? This case is all about whether Horizon works properly and no one has anything clear to
which they can point which gives an answer which could be relied on.
5.43 — he said the reason why there is a distinction between a SPMR's liability for negligence, carelessness and error
and strict liability for his assistants is because the contractual relationship is with the SPMR and the Post Office wants.
recourse against the SPMR, not his assistants i.e. the SPMR would try to shift blame or liability to his assistants if it
were otherwise. He suggested ideally we'd delete the last sentence of this paragraph where we say we don't know
what the thinking was behind the distinction. I agree with this but again, it's probably not something that requires
anything more than an oral acknowledgement in the meeting, if necessary. This must be nonsense surely. The
SPMR takes vicarious responsibility and has vicarious liability for his assistants. What am I missing? Does vicarious
liability arise in respect of all forms of liability or only negligence/non-strict tortious liability? I thought it was only the
latter. And what if there is no general law liability of any sort in any event? E.g. what if what the assistant does is not
negligence or otherwise tortious and is simply a mistake? The SPMR would say the assistant did it. The assistant
wasn't negligent so the Post Office has no recourse directly against the assistant because there is no contract with
him, nor against the SPMR vicariously, without the strict liability provision in the Contract.
Perhaps though, it is an odd distinction because why not match the SPMR's contractual “vicarious” liability for the
assistant's conduct to his own i.e. negligence, carelessness and error? The PO has recourse for mistakes by the
assistant just as it does for those made by the SPMR but not, some would say unfairly, also for say, theft by the
assistant where adequate precautions were taken or a genuine error in Horizon etc. where the assistant was on the
terminal (although in the latter case, presumably neither the assistant nor the SPMR has caused the loss). So on
reflection, maybe there is something to be said in the comment, although I don't know if it is simply because the
SPMR would be vicariously liable under general law principles for his assistants, to the extent that he is.
I assume we do not need to volunteer these to the Post Office, although they will no doubt ask what his comments
were. Perhaps we could briefly explain his comments but say they are not material points and you will bring them out
in the presentation if necessary. Let's discuss later.
Jonathan
From: Swil, Jonathan
Sent: 20 March 2014 14:47
ista
Subject: RE: Post Office
Richard
I attach our report to the Post Office Board in respect of legal issues raised by the complaints/claims made in the Post
Office mediation scheme we discussed briefly on the phone. We were pressed for time to get this to the Post Office
today in final form before sending it to you so that it could go to the Board ahead of the Board meeting next week at
which Christa will be presenting the advice. Accordingly, please limit your comments to high level points of which you
think we or the Post Office should be aware before the Board meeting.
We should be grateful if you could get any comments back to us by Monday. Do let me know if, as you suggested,
you would prefer to set up a call to discuss your views or if you have any questions about anything which is unclear to
you in the document.
Kind regards
Jonathan
From: Richard Morgan QC [mailto! ~ GRO i
Sent: 19 March 2014 11:04
To: Swil, Jonathan
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Cc: Band, Christa
Subject: RE: Post Office
Jonathan,
Receipt acknowledged!
Nice to speak to you, and I look forward to receiving the draft when you are ready.
All the best,
Richard
From: Swil, Jonathan [mailto!
Sent: 19 March 2014 10:58
To: Richard Morgan QC
Cc: Band, Christa
Subject: Post Office
Dear Richard
You now have my details. As I mentioned, we will send you a draft of our report later today and would be most
grateful for any high level comments you have which if you prefer, we are happy to discuss over the phone.
Kind regards
Jonathan Swil
Managing Associate (Solicitor, New South Wales)
Linklaters LLP, London
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