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[POST OFFICE LETTERHEAD]
PRIVATE AND CONFIDENTIAL
Ron Warrington & lan Harrington
Second Sight Support Services Limited
(By email)
{] August 2014
Dear Sirs
Second Sight’ ParéFwo-Mediation Briefing Report {+ —_the Repéittjagerent
I refer to the first-draft-ofthe-Part Two Mediation Briefing Report (‘the Report” Report and our
letter of 14 August 2014.
The draft-Report gives Post Office cause for concern. It falls well below the standard Post Office
would expect from a firm of forensic accountants engaged to prepare an independent evidence-
based report into questions of fact. We-have explained the bases for that concern in our letter of
14 August and in the table of comments it enclosed_in respect of the initial draft_of the Report
ou_sent_us. Unfortunately, it appears that the final version of the Report does not address
many of those issues and many of our concerns remain. Accordingly, as we made clear in the
14 August letter, Post Office is now considering its position. It will likely now need to take steps
to ensure the full, accurate and balanced factual position in respect of the issues covered in the
Report is communicated to the Working Group and to Applicants in order to lessen the risk that
the Report creates or exacerbates unrealistic expectations for Applicants about the outcome of
their applications and thereby jeopardises the utility of the Scheme
HowevertThe purpose of this letter, however, is to outline Report+eflectsmore general
concerns Post Office has with Second Sight’ s work to _dateaddition to the Report), its
relationship with Post Office and the Working Group and Second Sight’ s role within the Scheme.
In short, Post Office has become increasingly concerned that Second Sight is failing to fulfil its
role as _an independent fact-finder engaged by Post Office to assist the Working Group and to
aid the speedy and satisfactory resolution of applications in the Scheme. We therefore wishto
takethis-opportunityte—set out in this letter what those broader concerns are and t<-invite
Second Sight Aew-to explain how it will [as a matter of urgency] take meaningful steps to allay
them.
Second Sight’ s role and the work product it is expected to produce are clearly set out in the
letter of engagement dated 1 July 2014 between Post Office and Second Sight. That letter
provides that:
. the Scheme has been set up to resolve Subpostmasters’ concerns about “ Horizon
associated issues” (clause 2.1);
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. Second Sight is a member of the Working Group whose role it is to oversee the Scheme and
assist investigating individual complaints (clause 2.2);
. Post Office has engaged Second Sight to provide Services to the Working Group in relation
to the Scheme (clause 2.3);
. the Services Second Sight has been engaged to provide are serving as a Member of the
Working Group, advising, as requested by Post Office or the Working Group, on the format
style and content of documents submitted by Post Office and/or Subpostmasters during the
Scheme, investigating specific complaints raised by each Subpostmaster and assisting with
reasonable requests made by the Working Group or Post Office (paragraph 1 of Schedule
1);
. Second Sight is to act independently in providing the Services and assessments or opinions
it gives shall be without bias and based on the facts and evidence available (Paragraph 4 of
Schedule 1); and
. Second Sight shall act with the skill and care of qualified experienced accountants and it is
acknowledged that matters relating to criminal law and procedure are outside SS’ s scope of
expertise and accordingly SS shall not be required to give an opinion in relation to such
matters (Paragraph 5.1 of Schedule 1).
ta-short—The terms of the engagement letter make it clear that Second Sight are engaged by
Post Office and are paid by Post Office to provide services to the Working Group and Post
Office only in respect of and in furtherance of the Scheme and its objectives. You are engaged
to provide quality and independent professional forensic accounting services based on your
apparent expertise in that field only. Yet, much of Second Sight’ s conduct to date, and in
particular its provision of the draft Report, appears in several respects to be at odds with those
requirements. We wish-te-explain in more detail the nature of Post Office’ s concerns.
Second Sight is engaged by Post Office to provide services to the Working Group
First, Second Sight must understand that while you have been engaged to provide independent
fact-finding and analytic services, you are engaged and paid by Post Office in order to assist the
Working Group. Accordingly, on matters of process, you should ordinarily follow Post Office’ s
and the Working Group’ s reasonable directiGnsmatters-of substance_you should genuinely
For example, Second Sight promised to provide the Working Group with the draft Report in
fMarch 2014}. You only then did so in August 2014. Given the potential importance of the
Report within the Scheme as a whole, the number of parties (not just Post Office) potential
relying on or affected by it and the need for the Scheme now to progress as swiftly as possible,
such delay cannot be repeated in future
2, / expected comments from Post Office within 24 hours. It is
inappropriate in any circumstances for Second Sight, as the service provider, to seek to impose
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unreasonable and unrealistic _deadlines_on Post Office and the Working Group. This is
especially the case in respect of such an important and lengthy document and where the need.
now, for tight deadlines arises primarily because of lengthy delays caused by Second Sight.
Further, on a telephone call between Second Sight and Post Office on 11 August 2014 to
discuss the draft Report, Second Sight refused to allow Post Office even to_make (let alone
consider) any substantive comments on the draft Report on the basis that, so you said, this was
outside the agreed process. Post Office wishes to see a speedy resolution of applications
through the Scheme, but on any view, such-an—expectation-such obstructive behaviour isis
simply unacceptable. Giverthe-import £-the-Report-within-the-Scheme-as hole—th
ber-of-parties-_(not- just Rost Office) potentially ralyi facted-by-it-and-th: hf
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Second Sight have also displayed un-cooperative and otherwise inappropriate behaviour as a
service provider to the Working Group in the following ways
e Post Office has sent 4 briefing notes to Second Sight on specific technical topics in
respect of which you requested further information - P&A Fraud, ATM retracts, Suspense
Accounts and One-sided transactions. Post Office has received no feedback from you
on any of these notes.
¢__Post Office sent you 10 Spot Reviews on specific process or Horizon issues. Other than
a few minor follow-up questions, Second Sight did not provide any feedback on those
Spot Reviews before you sought to draw conclusions on the issues they covered in your
interim report in July 2013. But even then, the interim report did not refer to 6 of the 10
reviews.
e__Post Office has sent letters to Second Sight with comments on 12 [draft CRRs]__ The
majority of the information Post Office provided in those letters is not referred to _at all in
the [final] CRRs. Second Sight has to date failed to explain why it appears to have
rejected most of the information provided by Post Office.
e__ Save for one meeting on 31 July 2014, Second Sight has, since the commencement of
the Scheme, failed to_ attend without reasonable explanation any face-to-face meetings
with Post Office alone to discuss substantive issues that might affect Applicants.
We expect Second Sight not to repeat such conduct in future and properly to engage with Post
Office as its and the Working Group’ s service provider
Second Sight’ s work has not been satisfactory
Secondly, as we pointed out in our letter of 14 August, the draft Report (and now the final
Report) strays into areas beyond the subject matter of the Scheme and well beyond Second
Sight’ s professed area of expertisealso suffers from the various other deficiencies outlined
in that letter. This is also plainly unacceptable. Not only do those deficiencies mean that the
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draft-Report falls well below the standard required by the letter of engagement and expected by
Post Office (and, for that matter, that would reasonably be expected by any person engaging
reasonably competent accountants), it was provided after considerable delay and in a modified
form that was specifically requested by Second Sight to enable it to meet deadlines and properly
carry out its role. Post Office dees-net-considers it uareasonable therefore to take the view that
Second Sight has had more than sufficient time, opportunity, information and evidence available
to it to produce a comprehensive, balanced, evidence-based analysis of the issues it seeks to
address in the Report but has seriously failed to do so.
Qne notable example of this is paragraphs 16.5-16.10 of the Report which replicate, almost
verbatim, what one particular Applicant has said in their COR. Second Sight thus appears to
present the process described in those paragraphs as an established fact. Yet, Post Office has
not_completed_its investigation into this case and presented its version of events, so it is
premature and, frankly, irresponsible for Second Sight to present such matters as established
fact.
We uld_like to be able to say the draft Reportand th nnerin-which-it provided_ar
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produced to-date—Unfortunately, the Report is not the only example of such unsatisfactory work
we—cannet. Second Sight has in the past repeatedly missed deadlines and produced
unsatisfactory work product suffering from several of the same deficiencies we have pointed out
in respect of the draftReport._IIn particular, as we have pointed out on several occasions, much
of Second Sight’ s_work is not balanced or based firmly on verifiable evidence. As such, if
nothing else, it_is likely to be unhelpful to the stakeholders within the Scheme, including
mediators, and of limited utility in achieving satisfactory resolutions of applications. For example
Second Sight’ s_ recent CRR on M019 highlights two issues that_are in dispute between the
Applicant_and Post Office. It does not, however, form any view whatsoever on the outcome of
those issues or whether those issues could have been causative of losses in the relevant
branch. This CRR is therefore of little or no use to Post Office, the relevant Applicant or a
mediator. Indeed, such unhelpfulness is also becoming apparent from the first few completed
mediations
—We ask you to explain how you intend to rectify such failings in future.
Second Sight— independenceisin-deubtis not performing its proper role
Thirdly, Post Office is concerned about the utility of Second Sight’ s role within the Scheme as an
impariatand-independent fact-finder. On matters of substance, you should genuinely give Post
Office an opportunity to provide, and you should take into account and reflect, its point of view
and comments in the same way and to the same degree that you take account of and rely on
the views of and information provided by Applicants. The Report is a good example of why Post
Office believes this is not currently occurring.
In other words, Second Sight is not engaged merely to attempt to find the facts on whatever
basis it chooses and “ for its own sake” You have been engaged as fact-finders to aid the
operation of an important, bespoke dispute resolution scheme funded (indirectly) with tax-
payers’ money. Your role is to assist, not hinder, the speedy resolution of applications within the
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Scheme to the satisfaction of all parties. As such, it is vital that Second Sight takes a balanced
and_evidence-based approach to its work. Again, the Report is a good example of why Post
Office believes this is not currently occurring.
k to th, i lottar-of 44 " pect ofthe draft Report Iti
that Post Office-finds-itself compelled_againt lai jous-factual issues Ad-Sight
bof thi putsforwardt pport_theimvi dd. 1 s. that -basis—Thi
Report does_neither—As we have said previously Second Sight is, of course, free to show.
where supported by evidence and analysis, that information provided by Post Office is open to
question or incorrect. But it is inappropriate, and again, unhelpful to the Scheme, for Second
Sioht Simpl to cistegard information without providing a 2000 reason for doing so. Pest-Office
7 oth interests-of the Working-Group ad the Set ham a-whole—If Second Sight is
2
not prepared to consider and record all ‘sides’ views equally, it risks creating a perception that it
is not t impartial and, consequently, it fisks $ jeopardising the integrity and wate of the Scheme.
Second Sight has not provided value for money
Fourthly, Post Office has serious concerns about the value for money it (and, in turn, tax-payers)
have received from Second Sight’ s services. Second Sight has been engaged continuously by
Post Office since [MOnth?] 2012 to assist Post Office and the Working Group to operate the
Scheme. During that time, Post Office has invested a considerable amount of valuable time and
resource to provide Second Sight with a significant amount of information, in some instances on
more than one occasion, to assist your investigation into Horizon. However, since [f
2012, aside from attending Working Group meetings, Second Sight has only produced {two,
largely (for the reasons identified above and in our letter of 14 August) unsatisfactory and
unhelpful, * thematic repoatsd investigated and reported on [XJ applications. Second Sight
has billed Post Office for approximately ever {£800750,000}. Post Office does not consider that
either the quality or volume of the work Second Sight has produced to date justifies such an
amount.
For example, in order to assist Second Sight meet_a deadline) Post Office prepared
a“ fact-file” on how Horizon works. Content from the fact-file formed the vast majority of the
content_of Second Sight’ s July 2013 interim report. Accordingly, Second Sight produced very
little, if anything, of value in the interim report, despite billing Post Office approximately (E3088)
over the relevant period.
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Accordingly, we also invite you to explain the value you believe the Working Group, Post Office
and Applicants Rest Office-haves received for tax-payers’ its-money over the entire course of
your engagement- and what steps you intend to take, if different to those I mention below, to
ensure that it will receive value for money in future.
Despite the issues I have raised above, Post Office remains of the view and stresses that
Second Sight's status as a credible, independent investigator is key to the success of the
Scheme. Post Office is not looking to fetter that independence or to undermine Second Sight’ s
position. # _in-thefirst instance Post Offi pects_that the _numerous ‘AS.
ai
mpelled_totake further -steps_to-ensure_that-all of the facts_and Rost Office” s-position are
You have indicated you would provide Post Office with potential new billing arrangements which
are linked to the achievement of productivity and/or deliverable targets. We have not yet heard
from _you_on this. We again ask that you provide your proposals in this regard without further
delay so that we can ensure we have new arrangements in place by September. [In the light of
the matters raised in this letter and our letter of 14 August, Post Office will stop paying any
invoices issued by Second Sight in respect of the period from 1 September onwards until you
provide such proposals_and engage with Post Office to agree a new billing regime.] [Query if
we want to threaten this in a letter which may become public, so perhaps the letter can be
followed by a phone call on this point?] Post Office now considers this to be a matter of the
utmost importance in order to ensure it and tax-payers receive value for money.
irae Iso-find_itself compelled _totake-other-steps-directly with Second Sight whetherunder
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th tt therwise]
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I look forward to hearing from you_by [w/c 1 September] so that _I can consider what, if any.
further steps Post Office may wish to take to address these issues.-
Yours sincerely
[Chris DayAujard
General Counsel
Solicitor]
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