Wednesday 7 November 2018

Common Issues trial transcript: Day 1

This is the unperfected transcript of first day of the first trial, (known as the "Common Issues" trial) in the Bates and others v Post Office group litigation going through the High Court. The trial was held in Court 26 of the High Court's Rolls Building in London. Presiding: Mr Justice Fraser.

In the morning session the claimants' barrister, Mr Patrick Green QC, gives his gives his opening statement (linked to his written opening submission, which you can find here).

In the afternoon session the defendant's barrister, Mr David Cavender QC, gives his opening statement (linked to his written opening submission, which you can find here).

Fun fact: Mr Justice Fraser, Mr Patrick Green and Mr David Cavender are all former Royal Marines.

For my (significantly shorter) write-up of the day, click here.

Day 1 transcript - Wed 7 November - Opening arguments
Day 2 transcript - Thu 8 November - Claimants: Alan Bates, Pam Stubbs part 1
Day 3 transcript - Mon 12 November - Pam Stubbs part 2, Mohammad Sabir
Day 4 transcript - Tue 13 November - Naushad Abdulla, Liz Stockdale
Day 5 transcript - Wed 14 November - Louise Dar
Day 6 transcript - Thu 15 November - Post Office: Nick Beal, Paul Williams
Day 7 transcript - Mon 19 November - Sarah Rimmer, John Breeden, AvdB part 1
Day 8 transcript - Tue 20 November - AvdB part 2
Day 9 transcript - Wed 21 November - AvdB part 3, Timothy Dance, Helen Dickinson, Michael Shields part 1
Day 10 transcript - Thu 22 November - Michael Shields part 2, Elaine Ridge, David Longbottom, Michael Webb
Day 11 transcript - Mon 26 November - Michael Haworth, Andrew Carpenter, Brian Trotter
Day 12 transcript - Mon 3 December - Claimants' closing argument: Patrick Green QC - part 1
Day 13 transcript - Tue 4 December - Claimants' closing argument: Patrick Green QC - part 2
Day 14 transcript - Wed 5 December - Post Office closing argument: David Cavender QC - part 1
Day 1 full transcript:

                                     Wednesday, 7 November 2018
   (10.30 am)
                 Opening submissions by MR GREEN
   MR GREEN:  May it please your Lordship, I appear at this
       Common Issues trial on behalf of the claimants with
       Ms Donnelly, Mr Warwick, Mr Miletic and Ms MacKenzie,
       and my learned friend Mr Cavender appears with Mr Draper
       and Mr Cohen.
           With your Lordship's leave, might one of my juniors
       sit in this row?
   MR JUSTICE FRASER:  There is actually a practice direction
       about this.  You don't have to sit in the second row
       just because you are a junior anymore, so it's
       completely up to you --
   MR GREEN:  We didn't want --
   MR JUSTICE FRASER:  It is completely up to you where your
       juniors sit.
   MR GREEN:  I am most grateful.
           My Lord, your Lordship will have had details,
       written openings from both parties.
   MR GREEN:  In the claimants' written opening I proposed to
       take your Lordship to three important aspects of the
       relationship against which the Common Issues fall to be
       determined and which won't have found expression or
       perhaps come to life fully in the written arguments.
   MR JUSTICE FRASER:  Just before you do that, and  may be it
       is not necessary to say anything about it, but
       I received an application, or what was expressed to be
       an application from the Press Association last night.
       Do either of you know about that?
   MR GREEN:  My Lord, no.
   MR JUSTICE FRASER:  Give me one second then.  It was sent
       effectively as a matter of courtesy, but just putting me
       on notice that today the Press Association was going to
       seek to have certain of the documents provided to the
       press so that they could report the proceedings
       accurately.  The reason for mentioning it now is two of
       the documents specifically identified were each side's
       written openings.
   MR GREEN:  My Lord --
   MR JUSTICE FRASER:  Now, I imagine it is not an issue
       because there is binding authority on it, but --
   MR GREEN:  It is not an issue.
   MR JUSTICE FRASER:  All right.  Very well.  Good.
   MR GREEN:  I am most grateful, my Lord.
           My Lord, the three facets of the imbalance in
       the relationship which I wish to address are, first, the
       imbalance in the contracts, second, a mechanical or
       practical imbalance which I will explain, and third,
       an information imbalance.  And I can't pretend those
       three categories are hermetically sealed but they are
       each important.
           In relation to the imbalance in the contracts, it is
       common ground that the standard contract terms were not
       open to negotiation by subpostmasters.  True it is that
       matters such as opening hours and what improvements
       might be made to the premises were recorded and agreed
       individually under what were known as conditions of
       appointment, but the standard terms themselves were just
       that, standard terms.  Those standard terms included
       a unilateral right to vary the terms exercisable by
       Post Office, such that important aspects of the
       relationship could be varied without the agreement of
       individual subpostmasters.
           There were various aspects to such variations.
       There were variations to the general contracts and there
       were variations to the individual postmaster's
       relationship with Post Office in relation to disputed
       shortfalls.  And I will show your Lordship that when we
       come to the losses and gains policy, but the short point
       is that where there was a shortfall which
       a subpostmaster was required to make good but could not
       do so immediately, they would be given time to pay on
       condition that all subsequently occurring discrepancies
       or losses said to be due to discrepancies would be paid
       without dispute.  That practice has obviously got stark
       implications for a subpostmaster afflicted by more than
       one shortfall that is disputed in a row.
           So in addition to the standard contract terms and
       the unilateral power to vary, the third aspect of the
       contract which contributed to an imbalance was the
       defendant's sole control of Horizon, its interface, its
       processes and how it had to be used by subpostmasters.
       Not only the imposition of Horizon for subpostmasters
       such as Mr Bates and Mrs Stubbs who previously started
       under the old paper-based system but also the
       requirement for all new subpostmasters to use that
       system, and the defendant's ability, for example, to
       change the periods when balancing took place, which was
       initially a week and then moved to a four- or sometimes
       five-week balancing period, at the end of which
       a trading statement had to be produced and signed off by
       the subpostmaster.
           And it was a contractual requirement that the
       subpostmasters would keep their accounts as required by
       Post Office.  There is no surprise that there is such
       a provision but it is the import of that provision which
       I will be directing your Lordship's attention to.
   MR JUSTICE FRASER:  You mean the effect of that provision,
       or the fact that that provision was imported?
   MR GREEN:  The fact that it was imported and its effect
       taken together.
           There was also a change in 2005 to the way in which
       suspense accounts worked, and from 2005 any sum that was
       disputed and put into a suspense account had to be
       cleared off in the trading period even if the
       subpostmaster did not believe that the sum was correctly
       recorded as due and owing, or, in some cases, even if
       the subpostmaster did not believe that the gain reported
       in their accounts was properly due to them.
           A not insignificant point when one comes to consider
       the position of a postmaster forced to accept on
       an accounting system a claim for money that they do not
       believe they are entitled to.
           Those were matters over which subpostmasters had no
       real or effective practical choice.  We would say no
       choice at all.
           So, my Lord, that is a very brief identification of
       the key points on the contractual imbalance side:
       standard terms, unilateral variation and Horizon.
           Under the mechanical or practical imbalance I am
       going to have to take your Lordship to some documents to
       make the point good.  There were two important aspects
       of the practical or mechanical way in which the system
       worked, to which I have already adverted obliquely.  But
       if we look at the trial bundle at {B3/2/18}, which is
       the Generic Defence, at paragraph 46(1), your Lordship
       will see that the defendant admits there the practical
       reality which I am about to identify in real life:
           "It is admitted that there is no 'option within
       Horizon' to dispute a shortfall, in the sense that the
       process of raising and resolving a dispute does not take
       place through the Horizon system.  The process for
       disputing a shortfall requires the dispute to be lodged
       by calling the Helpline."
           Your Lordship will immediately see, given the
       emphasis placed on accounting obligations by
       Post Office, the emphasis they place on accounting
       obligations, that this is not a standard accounting
       situation where one party is entitled to produce the
       account that they believe is correct and submit it.  It
       is a materially distinct system, for the reasons that
       I will identify, in relation to transaction corrections
       and the balancing at the end of the balance trading
           As to transaction corrections, could your Lordship
       look kindly at page {F3/68/1}.  This is a 2008 document.
       And if we could look, please, at page 3 of this
       "Transaction Correction/Debt Recovery Process" document
       {F3/68/3}, your Lordship will see at the foot of the
       page --
   MR JUSTICE FRASER:  You are now jumping quite quickly.  Can
       we go back to the page we started at which I think is
       page 1 {F3/68/1}.  Do you want me to read that?
   MR GREEN:  Only to note the heading, my Lord, which is
       "Transaction Correction/Debt Recovery Process".
   MR JUSTICE FRASER:  Well, the whole of paragraph 1 explains
       the background, doesn't it?
   MR GREEN:  It does indeed.  And in fact one can see in 2008
       a new step being introduced at the bottom of that page
       under "Transaction Correction Disputes".  Three lines
       down in that paragraph:
           "A further step within the dispute process has been
       agreed whereby subpostmasters can further dispute
       a debt ..."
           An important word we will come to.
           "... (branch discrepancy/transaction correction) by
       providing a written submission of evidence to the branch
           So that was new in 2008, that development.
   MR JUSTICE FRASER:  And by "agreed", that is agreed with the
       National Federation?
   MR GREEN:  It looks as if it was likely to be agreed with
       the National Federation.
           On page 3 of that document {F3/68/3} there is
       a diagram, but for present purposes I simply direct the
       court's attention to the foot of the page:
           "Please note --"
   MR JUSTICE FRASER:  Which is the end of it?
   MR GREEN:  At the bottom.
   MR JUSTICE FRASER:  So you don't want me to go through
       the --
   MR GREEN:  I am not going to take your Lordship through it
       because I have some discrete points on that.
   MR JUSTICE FRASER:  But that is the flowchart which sets out
       what is supposed to happen if there is something
       identified at the beginning which falls within the
       description of an identified P&BA or branch error.
   MR GREEN:  Indeed.  This is as at 2008.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  At the foot of that is a note saying:
           "Please note the acceptance of a TC may still result
       in a dispute.  Branch trading forces the acceptance of
       the TC on the Horizon system to enable the kit to roll
           So Post Office's internal document about this
       recognised that the transaction correction is -- the
       subpostmaster has no choice but to accept a transaction
       correction at the end of the branch trading period in
   MR JUSTICE FRASER:  In respect of a shortfall or
       a discrepancy.
   MR GREEN:  Discrepancy.  It can even be a gain.
   MR GREEN:  But they think, hold on a second, I'm not owed
   MR JUSTICE FRASER:  So by "the acceptance of a TC", is that
       referring to acceptance by the Post Office or acceptance
       by the subpostmaster?
   MR GREEN:  By the subpostmaster.  So the acceptance -- so
       what happens is the transaction correction shows up on
       their screen, either during the course of the branch
       trading period or at the end of it.
   MR GREEN:  And they can defer -- this is actually the next
       point I am going to show your Lordship, but the basic
       point is they can either defer dealing with it to try
       and give them some time to investigate it, or they can
       pay it in cash or cheque, or they can say settle
       centrally, which means I agree the debt, subject to me
       making any -- raising any dispute on the Helpline.
           There is no option to dispute a discrepancy on the
       Horizon system as the defendant itself admits in its
   MR JUSTICE FRASER:  The way it works is the dispute aspect
       of it is done separately from the Horizon system itself.
   MR GREEN:  Yes, it is separate, and it is orally to
       a Helpline.
   MR JUSTICE FRASER:  I understand that, but that is
       a separate route than using Horizon to do it.
   MR GREEN:  Yes.  So the subpostmaster is thereby required by
       Post Office to state an account with which the
       subpostmaster may strongly disagree.  There is no option
       to do anything else.
           That is a feature of the way Horizon works, which
       I will briefly touch on under information, because that
       is an unusual feature, we would respectfully submit, and
       no subpostmaster -- no hopeful subpostmaster about to
       contract with the Post Office would understand that that
       was going to be the system.  They would not have notice
       of the absence of any control in their hands over
       rendering an account of transactions said to be within
       their branch.
           I have not been able to find, my Lord, an example in
       a reported case of a similar system where a disputed sum
       becomes a debt subject to later dispute.  I looked,
       I can't say there aren't any, but I haven't found
       a similar accounting relationship of this type.
           Could I take your Lordship then, please, to
       {F4/73/1}.  In fact, I am sorry, it's probably easier to
       do it in one go and just go to {F3/87/1}.
   MR JUSTICE FRASER:  Another policy document.
   MR GREEN:  This is another policy document in relation to
       the creation and management of transaction corrections
       in POLFS, which is the Post Office's internal
       reconciliation office.
   MR JUSTICE FRASER:  What is the date of this document?
   MR GREEN:  This document is 10 February 2010, and it's
       a document to be explored more in the course of
           But can I ask your Lordship to look at {F3/87/8} at
       paragraph 2.2.6.  In 2010 -- by 2010 a high value
       transaction correction authorisation signature
       requirement had been introduced, and as that paragraph
           "As part of the transaction correction creation
       process a high value authorisation series of signatures
       has been introduced.  This is a form that goes with the
       evidence and is signed by the level of manager dictated
       by the value.  Between £10,000 and £29.99K team leader's
       signature, £30,000 to £49.99K senior manager's
       signature, and over £50K requires the head of P&BA to
       sign it."
   MR JUSTICE FRASER:  P&BA is branch accounts office?
   MR GREEN:  Branch accounts department.
           "These forms are then filed with the paperwork.  The
       reason for creating this extra check step was two fold;
       firstly to prevent large credit transaction corrections
       being issued, then a long period for the debit to be
       issued ..."
           So the cashflow point, where they make a mistake in
       favour of the subpostmaster, and it takes them a long
       time to spot that they have made an enormous mistake in
       favour of the subpostmaster.
   MR JUSTICE FRASER:  Who is "they"?
   MR GREEN:  Post Office.
   MR JUSTICE FRASER:  Do you mean Post Office within Horizon
       or Post Office ex-Horizon?
   MR GREEN:  My Lord, the only difficulty I should flag up now
       is --
   MR JUSTICE FRASER:  That is why I am asking.
   MR GREEN:  Your Lordship is right.  In the pleadings we
       defined Horizon to include everything, but for the
       purposes of the March trial we have a smaller definition
       of the Horizon issues, a narrower field of functions.
       Your Lordship will remember my learned friend
       Mr Cavender saying that he wanted to keep
       reconciliation, the manual reconciliation of data
       outside of it.
           So the way it looks to the subpostmaster, my Lord,
       because there are two different perspectives.  The way
       it looks to the subpostmaster is the subpostmaster
       either is sent a transaction correction saying you are
       entitled to take so many thousand pounds out of the
       till, or you owe so many thousand pounds, whatever it
       is.  Or at the end of the branch trading period, when
       they go to balance, they go to balance and they find
       there is an enormous discrepancy not previously
       foreshadowed.  So those are the two ways.
           But what they don't see from their -- they see it as
       Horizon, a problem on Horizon.  What they don't see is
       the fact that there are a number of data streams,
       Horizon sends data out of the system to third party
       clients, they send their data back.  Some of that data,
       for example, Camelot, can create an auto transaction
       correction, and other data more typically, where there
       is a discrepancy, gets referred to the reconciliations
       team who manually seek to reconcile, make a judgment
       about whether it is the subpostmaster's fault, and then
       send a transaction correction which will have a limited
       amount of information on it, typically.  Or sometimes
       they will send some evidence in the post to the
       subpostmaster about it.
           So that is how it seems to the subpostmaster.  So
       from the subpostmaster's perspective, Horizon is the
       system they are obliged to work with, it's the terminal,
       and it is through that terminal that they see
       everything.  But Post Office's perspective is rather
       different because they have their people doing
       reconciliations, they have people monitoring the
       performances of the Horizon system itself.  They have
       also of course got their own cash centres receiving cash
       remittances and sending out stock, and there are
       sometimes errors, human errors, on that side.  But they
       will typically then find expression in the Horizon
       system from the perspective of the subpostmaster.
           So what this high value transaction correction
       authorisation signature requirement was directed at was
       two things, and we respectfully say both of them are
       important: the first one was where Post Office was
       worried that it would wrongly send out a transaction
       correction for a credit to a subpostmaster, and then
       getting it back -- working out what had gone wrong and
       getting it back would take a long time.  So
       Post Office --
   MR JUSTICE FRASER:  It wouldn't only take a long time, it
       also says here that debit might be disputed and blocked.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  So there are two parts to it.
   MR GREEN:  Exactly.  There is a time and a dispute --
   MR JUSTICE FRASER:  And the possibility of a dispute on the
   MR GREEN:  Exactly.
           The second reason being to ensure that branches are
       not hit by a large value transaction correction which is
       subsequently found not to be proper to that branch.  So
       Post Office by 2010 had recognised that it was important
       to have a policy by which those high value errors would
       be less likely to occur because of the additional
       signatures required.
   MR JUSTICE FRASER:  There is an extra layer of consideration
       required in order for a signature to be given.
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  Depending on how much the value is.
   MR GREEN:  Precisely.  So that extra filter was hoped to
       reduce the scope for those errors.  And that is --
       your Lordship will see, or just for your Lordship's note
       perhaps, the policy itself is at {F3/79/1}.  If we just
       look at that for a moment, that is actually the policy
       itself.  Your Lordship sees that actually is deployed
       in June 2009.  It says it is revised in May 2009 but it
       is also said to be version 0.1.  So it looks as if it
       came in for the first time on 1 June 2009.
           So mechanically, in relation to transaction
       corrections, they had to be cleared at the end of the
       balance trading period.  And then as to balancing
       itself, at the end of the period when the subpostmaster
       does the balancing exercise they can find that there is
       an error which they weren't expecting.  And we are not
       talking about a book of stamps adrift.
   MR JUSTICE FRASER:  Do you mean an error or do you mean
       a discrepancy?
   MR GREEN:  A discrepancy in the accounts for which they are
       said to be liable.
   MR JUSTICE FRASER:  That is why I asked about the use of the
       word "error".
   MR GREEN:  I apologise.  I shouldn't have conflated the two.
   MR JUSTICE FRASER:  So at the end of the period they might
       find a discrepancy which they were neither expecting nor
       aware of.
   MR GREEN:  Yes.  If we look at the witness statement of
       Pam Stubbs at {C1/2/21} and we look at paragraph 90,
       Mrs Stubbs had taken over this branch the day after the
       death of her husband.
   MR GREEN:  And had been operating the branch for some years
       by the time we get to December 2009.
           At paragraph 90 she explains:
           "During December 2009, I closed the office for three
       days before Christmas for my daughter's wedding.  We
       were closed over Christmas and New Year.  Nonetheless,
       the trading statement on 5 January showed a shortage of
       £9,033.79.  This was entirely unexpected as I knew that
       there had not been this amount of cash unaccounted for
       in the branch during the trading period and the branch
       had been closed for a number of days.  I immediately
       reported it to the Helpline, who gave no assistance
       apart from to inform me to double-check my figures which
       I had already done.  As I mentioned above, the Helpline
       marked this as 'low priority'."
   MR JUSTICE FRASER:  That really goes with the paragraph
       before, doesn't it, in terms of the chronological
   MR GREEN:  It does, because there had been a previous
       attempt.  In one sense, starting with the prior one, the
       mere fact that this is actually in a genesis which
       actually starts at the top of the page.
   MR JUSTICE FRASER:  Top paragraph.
   MR GREEN:  Exactly.  And your Lordship will see at 89
       obviously she is saying she had no option but to make
       the payment to the Post Office by cheque:
           "I was not advised that I could dispute the
       shortfall.  As I mention above, there does not appear to
       be a record of my call the following day in
       Post Office's disclosed call logs."
           In December 2009 she closed for three days which
       I have just read out.
           End of paragraph 90, it is marked as "low priority".
       We only know that because of disclosure in these
           She explains at paragraph 91:
           "I believed I had accurately accounted for the cash
       and stock held at the branch and I was able to confirm
       this when I reviewed the records that I had retained
       which I refer to below.  Helpline advised me that unless
       I formally declared that I wished to dispute a shortfall
       then this would not be considered disputed.  I had not
       been informed of this before, either.  I naturally
       assumed that I had the right to dispute any alleged
       losses and that calling Helpline to question an apparent
       shortfall would give rise to an investigation.  My
       understanding was that Post Office would be obliged to
       do so as that was necessary in order to get to the
       bottom of the problem.
           "As I mention below, I understand the extent to
       which the cause of shortfalls was a matter within my
       knowledge is to be considered at the Common Issues
       trial.  Given the concerns I had, from 6 January 2010
       I obtained as much transaction information as was
       available to me on Horizon, specifically, transaction
       logs going back 42 days prior to that day, for example,
       a transaction log for 5 January ... I sought to retain
       this paperwork in an attempt to assist me in finding the
           Could I just ask that we are shown that transaction
       log in the margin there {E2/37/1}, just so the court has
       sight of -- and that goes on {E2/37/2}.  If you scroll
       down, your Lordship will see ...
   MR JUSTICE FRASER:  I'm not sure I will, actually.
   MR GREEN:  It is not the easiest thing --
   MR JUSTICE FRASER:  If we can zoom in?
   MR GREEN:  Yes, can we zoom in a bit.  So this is the
       information that subpostmaster can print out of the
       narrow print roll in their branch in order to try and
       trace what has gone wrong at the end of the trading
       period.  And this roll ran to some length.
   MR JUSTICE FRASER:  It will be however long the number of
       transactions are, won't it?
   MR GREEN:  Exactly.  So during a busy period that could be
       quite long.
   MR JUSTICE FRASER:  Which entry do you want me to look at?
   MR GREEN:  My Lord, there is no specific entry here.  I just
       wanted your Lordship to have sight of the type of
       document that we were considering.
   MR JUSTICE FRASER:  I see.  But these are the transaction
   MR GREEN:  Yes, going back 42 days.
   MR GREEN:  And then handwritten accounts for herself.  If we
       look at {E2/35/1}, and go over the page, please
       {E2/35/2}.  Pam Stubbs maintained all of these.
   MR JUSTICE FRASER:  What are the headings?
   MR GREEN:  "Deposits".  And I think -- I understood that to
       be -- I think it is "Rems out".  Remittances out is the
       full title.
   MR JUSTICE FRASER:  Then "Withdrawals".
   MR GREEN:  "Withdrawals".  And "ONCH" is overnight cash
           So if we can return back to the witness statement at
       paragraph 93 {C1/2/22}:
           "But despite carefully reviewing that information,
       I was still unable to find out for myself whether the
       apparent shortfall of £9,033.79 was a real or just
       an apparent loss and why it had occurred.  I was simply
       unable to do that without having full information from
       Horizon, to which Post Office had access and not me.
           "Though I had disputed the apparent shortfall,
       I began receiving demand letters from Post Office, which
       stated that I was contractually obliged to repay it, and
       asked me to settle the sum and threatened to deduct it
       from my remuneration if I did not do so within seven
           Could you please click on {E2/40/1}.
   MR JUSTICE FRASER:  At the bottom that says it excludes
       items currently in dispute.
   MR GREEN:  "... or held awaiting transaction correction."
           But the point is --
   MR JUSTICE FRASER:  I have got the point.  There are
       probably two.  This witness's evidence is that she had
       done all that was necessary under her instructions to
       dispute the item.
   MR GREEN:  Precisely.  And nonetheless -- my Lord, the
       problem is that mechanically, and this is why I put it
       under the mechanical/practical heading, is what
       subpostmasters have to do at the moment they are going
       to close out that branch trading period and then roll
       over to open the office next day, they have to accept
       any transaction corrections that are in dispute.
           So at that moment they have to sign an account
       saying that they owe the money but make a telephone call
       to the Helpline.  So the account that they have no
       choice but to go along with records it as a debt owing
       to them -- owing from them to Post Office even in
       circumstances such as this.
           And it may be, we think it is likely, that when it
       refers to:
           "The statement excludes any items currently in
       dispute --"
   MR JUSTICE FRASER:  It must mean for that trading period.
   MR GREEN:  Yes.  What it means is you can't rely on this as
       your total liability.
   MR JUSTICE FRASER:  Whether that is right or not, what you
       are saying is that last passage only makes sense if it
       is interpreted as meaning items currently in dispute in
       the instant accounting period.
   MR GREEN:  Yes.  Not in the accounting period to which that
       related because you had to roll over already.
           But on any view, firstly you get a letter referring
       to a debt.
   MR GREEN:  And that is the first line of the letter, an
       outstanding debt.  So by the mechanical device of not
       offering, on the menu, any way of disputing this, a debt
       is created in the account even if it is one with which
       the subpostmaster completely disagrees.  It is then
       recorded as a debt in the letter.  And then the second
       paragraph, and we will see the source of this when we
       come to information, records:
           "Since you are contractually obliged to make good
       any losses incurred during your term of office ..."
           And your Lordship will know that under the SPMC
       that's any losses caused by your own negligence or
   MR JUSTICE FRASER:  Clause 12 of section 12.
   MR GREEN:  Indeed.  So the contractual recital and I think
       the broad pattern, to try and be fair to Post Office,
       the broad pattern is that the initial few letters
       chasing the debt recite this with no reference to the
       necessary condition of fault, and then eventually
       a letter tends to come in the series where that then
       does appear.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  If we can go back to the witness statement, just
       to complete this short piece {C1/2/22}.  Can you look
       at -- would your Lordship look kindly at paragraph 96 on
       that page:
           "I continued to contact the Helpline about my
       concerns, and each time they said either that they were
       unable to assist or that they would look into the matter
       and call me back, which they didn't.  Eventually
       I requested direct access to Fujitsu, who I knew handled
       the Horizon system for Post Office, so that I could
       discuss the problem but this was refused.
           "Instead I was told by the Helpline that Post Office
       would contact Fujitsu themselves.  Having apparently
       spoken to Fujitsu, Post Office said that there was
       nothing wrong with Horizon, though they had not asked me
       to produce the evidence I had assembled, to which
       I refer above, nor attended the branch at this point.
           "I am aware from Post Office's call logs that it
       appears that in late January 2010, Fujitsu or
       Post Office had identified a further large cash
       shortfall.  I asked the Helpline if Post Office had
       accounted for a cash remittance of £26,000 which had
       occurred on 5 January 2010.  Despite --"
   MR JUSTICE FRASER:  When it says "which had occurred", that
       effectively means which had been paid by this branch,
       doesn't it?
   MR GREEN:  Yes, Pam Stubbs had remitted £26,000.
   MR JUSTICE FRASER:  Yes.  Saying "cash remittance which had
       occurred" is slightly neutral language.
   MR GREEN:  I agree.
   MR JUSTICE FRASER:  It means she paid --
   MR GREEN:  She paid £26,000.  Exactly:
           "Despite Helpline staff saying they would check this
       and confirm, they never came back to me.  I have since
       seen from Post Office's call logs that it had no record
       of this cash remittance at the time.  I do not
       understand how I could ever have been expected to
       investigate and conclude either way why there was
       an apparent shortfall when Post Office did not have
       a record of one straightforward transaction and
       a remittance going back to its own cash centre.  Out of
       concern at the missing cash remittance in early February
       2010 I called Post Office's cash centre and was told the
       £26,000 cash remittance had in fact been received on
       8 January 2010."
           My Lord, I'm not obviously going to -- there is
       a lot of this sort of evidence, but I thought it might
       be helpful for your Lordship to see that one of them and
       see what the process was and how that was gone through.
           So that is the system on balancing transactions.
       The significance of that is that a postmaster is
       required to make that account good by cheque or cash.
       Because you have to -- there are two layers of
       implications.  There is the visual and accounting
       implication of having to accept and make good on the
       screen and say you have put in cash or cheque to make
       good a shortfall, and then there is the practical
       implication of being there at 6.30/7.00 that evening,
       finding this number, and knowing that you are
       contractually obliged, because there is no way of
       disputing it, to put a cheque for £9,033-odd or cash of
       your own to that value into the till then and sign and
       say you have done so.
   MR JUSTICE FRASER:  Aren't they just two different sides of
       the same coin?
   MR GREEN:  Precisely.  One imports the obligation.  The
       obligation to either accept a transaction at the end of
       the period which hasn't been -- transaction correction
       at the end of the period, or to make good on the balance
       at the end of the branch trading period, both present
       the subpostmaster with this obligation to put cash or
       cheque into ...
           And of course if a transaction correction emerges
       close to the balance trading period end, or if it is
       just a balancing shortfall which you find out about when
       you do balancing at the end, you are then presented with
       this obligation to put in this case £9,000 of cash into
       the till.  And if you haven't got that in your wallet or
       available to you practically, you have to write
       a cheque.
   MR JUSTICE FRASER:  Mr Green, that is really what the case
       is about, isn't it?
   MR GREEN:  Indeed.  That is exactly what the case is about.
   MR JUSTICE FRASER:  So I think I have grasped that point
       some months ago.
   MR GREEN:  I am grateful.
           So, my Lord, we then move to the information
       imbalance.  So I have dealt with the contracts point,
       the mechanical point, the mechanical/practical way
       Horizon worked.  And the third limb of the imbalance in
       the relationship is the information imbalance.
           The first point which I have already adverted to is
       that incoming subpostmasters, prior to contracting with
       Post Office, would have no knowledge of how Horizon
       itself worked and in particular the accounting points
       that I have just been referring to.  It's a very
       one-sided mirror in that respect.
           The second point is that the manner in which
       subpostmasters were informed about any liability for
       losses was not consistent and was qualified and wasn't
       particularly clear.
           To give your Lordship examples, some of the lead
       claimants received no notice of the liability clause,
       although Pam Stubbs says she thought she would only be
       liable if something was her fault.  But she was not
       provided with a copy of the standard subpostmasters'
       contract after her husband died.
           Others, such as Mr Sabir and Mr Abdulla, were
       provided with documents in advance.  And if we can look
       at {E3/53/3}, we can see that the brief summary of
       certain sections of the subpostmasters' contract
       includes there a paragraph at the bottom of the page in
       relation to losses:
           "The subpostmaster is responsible for all losses
       caused through his own negligence, carelessness or
       error, and also for all losses caused by his assistants.
       Deficiencies due to such losses must be made good
       without delay."
           At the top of the page it says:
           "For use as a guide only; Post Office Limited will
       be in no way responsible for any action taken as
       a result of this summary."
           So it wasn't something that they could rely on.
           And if we look at page {E3/53/7}, please.
   MR JUSTICE FRASER:  But it does refer to the subpostmasters'
   MR GREEN:  Absolutely.  There is a question as -- it does
       indeed, my Lord, yes.
           If we go to page 7, there is a note --
   MR JUSTICE FRASER:  This is page 8.  Do you mean 7 of 11?
   MR GREEN:  8 of 11.  The note says:
           "The above paragraphs summarise certain sections
       only of the subpostmasters' contract.  They are by no
       means a comprehensive description of the contract and
       should not be used in place of a thorough review of the
       contract.  A subpostmaster may not rely upon points made
       in this summary as they are for reference purposes
           Your Lordship should know, at this stage he has not
       been sent the contract.
   MR GREEN:  It does refer to a contract, absolutely, and it
       does refer to a liability for losses.
   MR JUSTICE FRASER:  And it also refers -- I know the
       situation is different for some of the different lead
   MR GREEN:  Indeed.  The terms themselves in both the SPMC,
       both versions of the SPMC, and the NTC --
   MR JUSTICE FRASER:  Can we look at those quickly?
   MR GREEN:  Certainly.  I have a discrete piece on those.
       Can I --
   MR JUSTICE FRASER:  Alright.  Are we going to look at them
       when we get to --
   MR GREEN:  We are, yes, exactly.  The terms themselves were
       in quite a large volume of documents.
   MR JUSTICE FRASER:  I understand that.  In fact part of the
       reason I asked is I actually found some difficulty
       finding it originally, because one of them at least has
       the appendices inserted within the document itself.
   MR GREEN:  The 2006 contracts, both the standard and the
       modified, have between 40 and I think 48-ish individual
       prior sheets of variations or qualifications or
       additions before you get to the actual document.
   MR JUSTICE FRASER:  I understand that.  But even when you
       get to the actual document, in one of versions some of
       the appendices are then inserted within the document.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  I don't know if that has been done for
       the purposes of the trial or whether it was given to the
       individuals like that.
   MR GREEN:  That is how we understand the individuals got it.
   MR JUSTICE FRASER:  But part of the reason for asking to go
       to it is it is relatively difficult to track through it
       to the parts that you want to see.
   MR GREEN:  Indeed.  So the clauses were there.
   MR GREEN:  In relation to the meaning of the clause at
       12(12), obviously that is one of the Common Issues, and
       it is notable that the defendant's construction for
       which it contends in the Generic Defence at
       paragraph 94.1 on page {B3/2/43} -- your Lordship will
       have seen in my learned friend's written opening the
       suggestion that the claimants are trying to rewrite the
       contract.  And we know what section 12, clause 12 said.
       And the defendant's version at 94(2) is:
           "On the true construction of section 12, clause 12,
       subpostmasters are responsible for all losses(as defined
       in paragraph 41 above) disclosed in their branch
       accounts save for loss which is were neither caused by
       any negligence, any carelessness, or any error on their
       part nor caused by any act or omission ... on the part
       of their assistants."
           So the irony of the defendant's position in relation
       to the clarity of that clause is that in order to get
       the construction for which they contend, they have not
       metaphorically rewritten the clause, they have actually
       rewritten the clause as they now contend they would like
       it to be.  So at the very lowest, the clause was lacking
       in clarity if the defendant had intended to achieve by
       its drafting a result which essentially inverts the
       words they actually chose to use at the time and
       reverses that qualification putting all the burden on
       the subpostmasters.
           My Lord, just to compare -- I know your Lordship has
       it -- but if we just quickly go to {D2.1/3/53}.  This is
       clause 12(12) in the 1994 standard SPMC contract.  So as
       your Lordship knows, there was a standard SPMC contract,
       and then there was a modified one which was for former
       Crown Offices.  They were largely but not completely the
       same.  But for these purposes, for this purpose, the
       clause 12 in section 12 was the same.
           So a very ready comparison between what the
       defendant chose to draft where it had unilateral power
       to impose anything it liked, and what it has identified
       as what it wants the contract to mean in 94(2), shows
       the difference up quite starkly.
   MR JUSTICE FRASER:  Can we go to the page before this,
       please {D2.1/3/52}.
   MR GREEN:  Indeed.  There is also, my Lord, I should
       probably mention, I think if we go two pages on
       {D2.1/3/54}, your Lordship will see "Relief":
           "Counter losses.  A subpostmaster may exceptionally
       not be required to make good the full amount of certain
       losses at his office.  If he feels entitled to relief in
       making a good a loss he should apply to the retail
       network manager."
           And then there is theft or burglary and fraud dealt
       with separately.  But that is under relief.  I just
       mention that because that becomes relevant when we look
       in a minute at the policies that Post Office operated in
       relation to the application of section 12(12).
   MR JUSTICE FRASER:  So the one that you have just taken me
       to, which is at {D2.1/3/53}.  The one at {D2.1/1/39} and
       {D2.1/1/40}, that is the earlier version, the 1991
   MR GREEN:  That is the 1991 version.
   MR JUSTICE FRASER:  But the wording is exactly the same.
   MR GREEN:  The wording is exactly the same.  Your Lordship
       has slightly led me to the point I was about to make,
       which is essentially they the kept the contractual terms
       in this respect identical but Horizon came in which
       completely changed the way everyone was working.  But
       the contractual provisions in that respect did not
       change at all.
   MR JUSTICE FRASER:  And in a way that is why there is
       notionally a potential watershed between -- some of the
       claimants already had existing contractual relations
       when Horizon was brought in, and the bulk of them it
       appears didn't and Horizon was already in existence --
   MR GREEN:  Exactly.  So basically the split is 2/4, it's
       Mr Bates and Mrs Stubbs, who are pre-Horizon, and the
       other lead claimants post.
           I think just to foreshadow at least our broad
       submission on that, we respectfully say that because of
       the particular way that Horizon operated on this point,
       we would say in fact there ends up being no difference.
   MR GREEN:  You anticipate that submission.
   MR JUSTICE FRASER:  I am aware of that.  That is a point
       down the line.
   MR GREEN:  Yes.  I am most grateful.
   MR JUSTICE FRASER:  But the terms stay the same.
   MR GREEN:  The terms stay the same.  There is then
       a question of what they mean in this context.
           So under this third limb of imbalance, which is the
       information imbalance, the first point is that those
       contracting didn't understand the operation of Horizon
       in the way that I have described, either because when
       they came in, Mr Bates and Mrs Stubbs, it didn't exist,
       or because of the very particular way in which these
       debts were created, and other matters, were not likely
       to be in their minds prior to contracting.
           The second point is the information in the contracts
       relating to losses which I have dealt with by reference
       to those examples.
           The final example was just Mr Bates only got the
       Serv 135 document, which makes reference to losses, on
       his transfer day.  So he never had the SPMC.  He got the
       SPMC when he queried an issue relating to holiday pay.
           My Lord, could I just take your Lordship to
   MR JUSTICE FRASER:  This is the certificate of appointment.
   MR GREEN:  This is the certificate of appointment.  It says:
           "I ... agree to be bound by the terms of my
       contract, the personal declaration signed by me, and by
       the rules contained in the Book of Rules and the
       instructions contained in those postal instructions
       issued to me."
           Your Lordship will know from our written opening
       that the Book of Rules, so-called, doesn't seem to have
       existed at this time, and no document by that title has
       been disclosed or claimed to exist by Post Office.
           So one of the features of this case, just to give
       your Lordship a feel for how well acquainted people were
       likely to be with what they were agreeing to, is on the
       very face of the certificate of appointment it refers to
       a document by a title, capitalised, which as far as we
       are aware does not exist by that title.  It may have
       done in the 1980s, but we are not aware of that document
       existing anywhere and it hasn't been disclosed.  No
       document by that title has been disclosed at all.
           If we can just look quickly at {D1.3/4/1}.  It is
       the rules contained in the book of rules, small B, small
       R.  And your Lordship will be shown the profusion of
       manuals and documents which there are.
   MR JUSTICE FRASER:  This is Mr Sabir.
   MR GREEN:  This is Mr Sabir.  And then if we look at
       {D1.5/3/1}, this is Louise Dar's, Mrs Dar's one.  And
       that is an NTC contract, my learned friend Ms Donnelly
       helpfully reminds me.
           Your Lordship will be aware from the hearing of the
       application on 10 October that there is some uncertainty
       as to exactly on which date the obligations with which
       the court is concerned are entered into.  Is it when the
       first document is signed?  It varies between claimants,
       we will explore this.  Or is it on the moment of branch
       transfer where they sign their acknowledgment of
       appointment?  And is that a novation or is that taking
       on a wider group of obligations than was there before?
           But it is, shall we say, reasonably neutrally, for
       an organisation such as Post Office it would have been
       possible, throughout the period with which the court is
       dealing, to have made the contractual position clearer
       to individual subpostmasters.
           So, my Lord, that is -- so still under
       the information pillar.  The three pillars, contracts,
       mechanical and practical and information.  Still under
       the information pillar, there is Horizon, and obviously
       then what the contractual documents said.  And I will
       supplement this a little when I show your Lordship some
       aspects of the contractual documents in a moment.
           The first one is what the contractual documents
       said.  The second one is order of magnitude of losses.
       And a subset of that is order of magnitude of losses of
       this sort.  And the short point is the extent to which
       a notional reasonable party in the position of
       a subpostmaster going into this relationship, provided
       with such information as they were provided by
       Post Office, would have appreciated that they were
       taking a commercial risk of this magnitude in relation
       to sums which they would wish to dispute, such that
       those substantial sums, very large sums, would
       automatically become debts owed by them, save insofar,
       from Post Office's perspective, as they could find
       an explanation for what had gone wrong.
           So that is the third point, the order of magnitude
       point and the extent to which, for example, in
       interviews some of Post Office's witnesses say yes,
       I mentioned it could be hundreds of pounds.  That is
       a factual issue between the parties.
           So the extent of that sort of awareness of those
       losses, and losses on that magnitude and of that type.
   MR JUSTICE FRASER:  The subjective awareness cannot affect
       the process of construing the terms.
   MR GREEN:  My Lord, no.  The only point is that
       your Lordship needs to reach an informed view of what
       a notional reasonable party would be likely to have
       known, and you can only do that from a real appraisal of
       some lead cases and their facts.  The particular
       eccentricities of one lead claimant or another are
       neither here nor there.
   MR JUSTICE FRASER:  Nor their subjective awareness.
   MR GREEN:  Precisely.
           Then the fourth point under this heading is the
       other thing that subpostmasters weren't aware of was how
       in practice, as a matter of process, Post Office dealt
       with these losses.  Could I ask, please, for the court
       to be shown the Losses and Gains Policy at {F3/8/1}.
       My Lord, this is an internal Post Office policy about
       how internally Post Office deals with subpostmasters.
           If we go over the page {F3/8/2}.
   MR JUSTICE FRASER:  POCL is Post Office Counters Limited.
   MR GREEN:  Which at that time was the relevant party.
           Version 1, 20 November 1998.  So it pretty
       conveniently gets the sweep, before the sweep of events
       with which the court is concerned.
           If we go to the next page, please {F3/8/3}, we have
       index and we can see section 3 deals with accounting
       losses.  Section 5 authority levels, write off authority
       levels.  Appendix B deals with financial hardship.  D,
       losses and gains at agency outlets.  G, transaction
       errors.  And another write off related one at appendix L
       which is the write off process.  So that is
       the structure of the document.
           Then if we can just go over to page {F3/8/4}.  The
       policy, it says:
           "... has been developed under the auspices of
       Counters Risk Management Committee in order to provide
       clear and consistent guidelines about financial losses
       within the agency network."
           The overall purposes are:
           "To ensure probity, objectivity and conformity
       across the network.
           "To protect business finances and minimise
       outstanding losses.
           "To clarify roles and responsibilities.
           "To ensure equality and fairness of treatment of
       subpostmasters and other agents."
           It replaces a previous document from 1988 which
       I don't think we need to deal with because this
       pre-dates the introduction of Horizon.  And it replaces
       all preceding instructions on the treatment of agency
       losses.  So it is helpful because a lot of Post Office
       documents interrelate with others but this document at
       least gives us a clear navigation point to start from.
           Your Lordship has probably seen already the key
       paragraph immediately follows:
           "From a purely contractual perspective ..."
           And we respectfully say that that is the perspective
       with which this court is concerned on this issue:
           "... a subpostmaster or other agent is responsible
       for all losses caused through his own negligence,
       carelessness or error.  He is also responsible for all
       kinds of losses caused by the actions of any assistants,
       managers or relief subpostmaster employed by him.
       However, this stance may be varied in appropriate
       circumstances.  These guidelines, which are consistent
       with the contractual relationships we have with our
       subpostmasters and other agents, seek to clarify those
       circumstances where some mitigation might be admissible
       and provide a clear framework for line managers to
       approach the issues of financial losses within outlets."
           Then it explains:
           "The general principles ... are, of necessity,
       mandatory upon regions."
           And then:
           "... the detailed processes by which these
       principles are deployed are for regions to determine in
       the light of their particular circumstances ..."
           There is some variation there.
           Then the final paragraph on the next page {F3/8/5}:
           "These guidelines are structured by initially
       looking at the preventative measures that are available
       to minimise the occurrence of losses in the first place,
       followed by consideration of the approaches to be taken
       when there is crime committed against the Post Office
       which leads to financial loss.  They also cover
       accounting losses at outlets which are not due to crime
       but may be due to careless and poor accounting practice.
       Finally they deal with appropriate levels of authority
       that should be deployed for write offs."
           When we go, please --
   MR JUSTICE FRASER:  I am just going to get you to pause
       there for this reason: because we have an electronic
       trial bundle the transcript will be hyperlinked.  So if
       you say "the next page" or "over the page" --
   MR GREEN:  I apologise.
   MR JUSTICE FRASER:  You don't need to apologise, it is the
       first time it has happened.  It is less helpful than
       saying the reference, because that will go in the
       transcript, and then when you read it this evening you
       will just be able to click on it.
   MR GREEN:  I am most grateful, my Lord.
           If we look at {F3/8/6} -- my Lord, would noon be
       a convenient moment for the break?
   MR JUSTICE FRASER:  Yes, any time between about 10 to 12 and
       12 o'clock.
   MR GREEN:  I am grateful.
           If we look at "Preventative Measures", the layout is
       that item 1 is preventative measure by outlets.  And
       then item 2 on {F3/8/7} is preventative measures by
       POCL.  And the regional network manager loss control
       process makes them:
           "... accountable for all [underlined] losses at
       their outlets and therefore the need to practice
       preventative measures in this area cannot be
       over-emphasised.  This is particularly true in misuse of
       funds cases, which are breaches of contract and must not
       be treated leniently since this encourages low standards
       of financial propriety."
           Authority to hold losses in unclaimed payments is
       then dealt with:
           "The subpostmasters' contract requires that losses
       are made good without delay.  Immediate settlement is
       therefore the contractual norm.  RNMs, however, can
       authorise losses to be held in unclaimed payments for
       a period up to 8 weeks."
           So this is before the 2005 change in suspense
       accounts as we understand it.
           "This arrangement should not be seen as a rubber
       stamping exercise and agents should have to justify
       their reasons for not making losses good immediately
       (eg known error made and error notice to be issued;
       misbalance is against current balancing record).
           "Immediately following the 8 week period, it is the
       RNM's responsibility to pursue such cases.  Where error
       notices have not been issued to clear the original loss
       then arrangements should be made without further delay
       to make the loss good."
           We have some letters which your Lordship will see in
       the course of evidence where that was used and the eight
       weeks come to an end without resolution.
           If I could now look, please, at {F3/8/14}.
           At 3.1:
           "The subpostmaster is required to make good all
       losses however they occur."
           So there is an immediate difference noticeable
       between the recital of the purely contractual
       perspective at the beginning of the document at {F3/8/4}
       and the actual policy as in fact it worked in practice.
       And what in fact happens --
   MR JUSTICE FRASER:  Did you mean to go back to ...
   MR GREEN:  ... at {F3/8/14}, if I may go back to that, is
       after reciting the bare position that we see -- for
       example, we have seen in the position of Pam Stubbs, in
       her case of £9,033 and so forth, make good all losses,
       without qualification.
   MR JUSTICE FRASER:  And then gives a reference to the clause
       that is in fact the correct clause.
   MR GREEN:  Indeed.
           It says:
           "However, there may occasionally be exceptional
       circumstances that allow for relief.  The table below
       details types of losses and the scope that may be
       considered for relief.  Error notices issued should be
       brought it account in the next available/possible cash
           Then there are different sorts of relief available
       there which are for new agents --
   MR JUSTICE FRASER:  Is a new agent a type of loss?
   MR GREEN:  No, it is -- I think what is intended to be there
       is losses occurring under a new subpostmaster.
   MR JUSTICE FRASER:  What does C/A mean?
   MR GREEN:  Cash account, I'm told helpfully.  The first six
       cash account weeks.  Because at that time the balancing
       was done weekly.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  So the short point is that there is relief being
       considered here, and what appears to be happening is
       that Post Office are conflating the provision that
       I showed your Lordship in the 1994 SPMC standard
       contract for relief with the entire universe of events
       when a subpostmaster will not be liable.
           The reason that I make that submission is
       twofold: one is that postmasters would not have -- a
       notional reasonable subpostmaster taking up
       an appointment would not have expected this approach
       from the contractual term, which says something
       different in words.  And the second point is that my
       learned friend's written opening makes very clear that
       the court is almost being warned against adopting
       a construction of the legal relationship which differs
       from Post Office's present practice.
           So at paragraph 3 of the defendant's skeleton, which
       is at {A/2/3}.
   MR JUSTICE FRASER:  The "existential threat".
   MR GREEN:  The "existential threat" paragraph.  It just
       requires a tiny bit of unpicking.
           Paragraph 3:
           "In broad summary, the claimants mount a two-pronged
       attack on (1) the responsibility of SPMs to Post Office
       for what goes on in their branches (with money and
       stock) and to duly account to Post Office in respect
       thereof, and (2) the ability of Post Office to terminate
       the agency contract on notice (or otherwise) when things
       go wrong.  If claimants were right in the broad thrust
       of their case, this would represent an existential
       threat to Post Office's ability to continue to carry on
       its business throughout the UK in the way it presently
           My Lord, we foreshadow, we anticipated this argument
       at paragraph 209 of our skeleton which is internal
       page 80 {A/1/84}.
   MR JUSTICE FRASER:  Which paragraph?
   MR GREEN:  209:
           "The defendant's position involves two assumed, if
       not express, premises:
           "That deviating from its own practices would be
       unfairly disruptive to the defendant and impose
       impossible or undue administrative burdens; and
           "Therefore, the court's contractual construction
       must conform to the defendant's own internal practices -
       the very subject of this dispute."
           My Lord, where a party before the court makes
       a submission to that effect, the extent to which their
       own practices align or do not align with the words they
       have chosen to put in the contractual documents
       themselves requires some proper scrutiny.  So it's
       against that background, if I could just go back, if
       I may, to --
   MR JUSTICE FRASER:  If you are going to another document
       I think we will have a break.
   MR GREEN:  I am grateful.
   MR JUSTICE FRASER:  I am only going to say this once and it
       is just because it is the first day of the trial and the
       court is quite full.  We have a break part-way through
       the morning and part-way through the afternoon for the
       two ladies here who are doing the simultaneous
       transcription which is a quite a burdensome exercise.
       It's usually about ten minutes.  The break is actually
       for them, it's not for all of you, and it is quite
       difficult for the Associate to make sure everyone gets
       back into court in time.
           Please feel free to leave court, but please make
       sure you are back so that the ten minutes doesn't become
       15, and the 15 doesn't become 18.  We will resume, using
       that clock, at 12.05 pm.
   (11.55 am)
                         (A short break)
   (12.05 pm)
   MR GREEN:  Just to pick up where I was returning to,
       {F3/8/14}.  In this accounting losses section there is
       the approach to granting relief and your Lordship has
       already seen the way in which the subpostmaster's
       liability was recited at 3.1.  Just for your Lordship --
   MR JUSTICE FRASER:  Yes.  We have seen that at the
       beginning, the text.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  Now we are looking at the box, I think.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Is that where we are going to now?
   MR GREEN:  Can I just make good one point on the 3.1 text
       before I then deal with the box.
           If your Lordship looks over the page at {F3/8/16}
       your Lordship will see at 4.1, this is in relation to
       recovery of deficiencies following termination.  The
       reminder is in the same terms as the practical line that
       is being taken at 3.1 during the period.  So all losses
       incurred during the period of office.  So that is
       a consistent theme throughout.
           Going back to {F3/8/14}, there are the new agents
       who get relief -- up to full relief, that is at
       the discretion of the CNM, the contract network manager.
           "Unidentified cash account loss" is:
           "No relief unless financial hardship caused."
           And that of course may conceal the necessary prior
       question of whether something that is shown on the
       system as a cash loss actually is one.
   MR JUSTICE FRASER:  Understood.
           Error notice?
   MR GREEN:  "Error notice with no compensating misbalance."
           So that is:
           "Errors should be brought to account in the next
       cash account - special checks of vouchers can be
       arranged.  Amount may be held in unclaimed payments for
       a period of up to 8 weeks pending result of checks.  If
       checks reveal nothing no relief unless financial
       hardship caused."
           So that's the suspense account maximum period of
       eight weeks when they had that system.  So you could
       have an error which you are trying to dispute and get to
       the bottom of, but if you, as a subpostmaster, haven't
       managed to get to the bottom of it within the eight
       weeks you have to pay it.
   MR JUSTICE FRASER:  So those are checks by the
   MR GREEN:  Yes, and they can ask for checks to be made by
       Post Office.  To what extent Post Office has to
       co-operate is one of the aspects that is in issue in
       this trial.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  Then:
           "Transaction errors including irregular payments and
       RD cheques."
           I think those are -- I will come back to what RD
       cheques are, I think they're returned but ...
           The precise meaning of the RD cheque doesn't
       actually matter.  The point being made is that in
       relation to transaction errors:
           "No relief if evidence is conclusive.  If evidence
       is not conclusive, up to 100 per cent relief."
           Then "Disputed remittance error":
           "No relief providing distribution centre can supply
       evidence unless financial hardship would be caused.  If
       no evidence available, up to 100 per cent relief."
           My Lord, then you have "Loss by relief
           "No relief unless financial hardship ..."
           Then "Loss incurred during sudden illness of agent":
           "Up to full relief for one cash account week."
           And it could be extended in exceptional
           When we go back to the SPMC at {D2.1/3/54} ...
   MR JUSTICE FRASER:  Which is the 1994 -- the one we were
       looking at.
   MR GREEN:  The 1994 standard SPMC which we looked at.  We
       would respectfully submit that these matters properly
       fall under clause 17.
   MR GREEN:  Not 12.
   MR JUSTICE FRASER:  Understood.  But on the basis that is an
       internal policy document anyway, I know that affects the
       factual experiences of the individual claimants.  But so
       far as the points of construction are concerned ...
   MR GREEN:  That is the point I am coming to, my Lord.  That
       the consequence of this information asymmetry is that
       this document wasn't given to subpostmasters.  So we
       would respectfully say nor would they expect the clause
       to be applied in the way that we can see it was.
   MR JUSTICE FRASER:  But how it is applied and what it means
       in law are two different things.
   MR GREEN:  Completely.  What I mean, my Lord, is this.
       Your Lordship's point, the first one, is that this is
       an internal policy, it doesn't affect construction of
       the clause, subject to my learned friend's in terrorem
       point if not the existential threat point.  But as
       a matter of law, we say it cannot possibly alter the
       contractual construction of the clause, the true
       contractual construction which is actually recited in
       the policy in any event at the beginning.
           But what it does show or what is striking is that
       the subpostmasters, the lead claimants, were not aware
       of any criteria by which financial hardship -- any
       availability, any criteria by which any hardship relief
       would be granted at any stage.
   MR JUSTICE FRASER:  But the financial hardship aspect of it
       is a subsequent one to whether there is a liability.
   MR GREEN:  Indeed, completely subsequent.  Really the
       contractual point of construction I was seeking to make
       is that there is an anterior condition in clause 12(12)
       as to when there is liability at all, and that is
       necessarily a prior exercise to considering any relief
       under clause 17 from the liability imposed by clause
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  17 is not a substitute for the exercise for which
       clause 12(12) provides.
           Could I now ask my Lord to look at {F3/8/15}, it's
       back in the Losses and Gains Policy document.
       Clause 3.2 details the RNM's role in deciding the
       amount --
   MR JUSTICE FRASER:  RNM standing for ...
   MR GREEN:  Retail network manager.
   MR GREEN:  And informs the subpostmaster of the decision and
       his rights of appeal:
           "The RNM should in this correspondence ask how the
       agent intends to pay the decided level of contribution.
       If the agent claims they are not in a position to repay
       the sum immediately, the RNM can give consideration to
       the repayment being spread over instalments.  This is
       a discretionary action that must conform to the
       following commitments:
           "Losses are made good by deduction from
           "The repayment period is up to a maximum of 12
           "During the repayment period, further losses must be
       made good immediately.
           "Any credit error notice relating to the same cash
       account week must be used to reduce the outstanding
           "The amount will become payable in full should the
       agent's contract with POCL come to an end.
           "The standard vouchers ... must be used.
           "No more than two repayment cases for the same agent
       have previously been allowed in the past two years."
           Then 3.3 and 3.4 deal with the right of appeal.
           And at this stage, in 1998, your Lordship will see
       from 3.4:
           "The appeal can be conducted in writing or in person
       ...  The head of retail network will take a view on the
       case put to him about whether the contribution requested
       is appropriate and whether the repayment terms are
       consistent with the financial position of the agent."
           When that has been done, your Lordship will see from
       3.3 that in the appeal the agent has the right to be
       represented by a recognised trade union and/or friend.
   MR JUSTICE FRASER:  As long as they --
   MR GREEN:  As long as they work for them, exactly.
           So that basically mirrors the provisions that the
       Labour Government introduced in relation to employees'
       rights in the late 1990s.
           My Lord, just pausing there, one last point to make
       on this policy.  This is basically a pre-introduction of
       Horizon policy.  It is in the run-up to the introduction
       of Horizon.  And it may be, and certainly the evidence
       of Mr Bates and Mrs Stubbs would suggest, that the scope
       for any errors or shortfalls that they couldn't explain
       was of a quite different order of magnitude if not close
       to vanishing point.  Certainly close to vanishing point
       for sums of the sizes that we are considering here,
       hundreds, sometimes thousands of pounds.
           So it may be that practically Post Office thought
       that that was a reasonable way to approach it before
       Horizon came in.  I am afraid I can't speculate --
   MR JUSTICE FRASER:  It doesn't matter.
   MR GREEN:  It ultimately doesn't matter.  So that is the
           Then as to the causes of errors and the information
       available to the respective parties using the Horizon
       system, can we look, please, at page {E2/10/2}.
       My Lord, this relates to, by way of context, this
       relates to shortfall and Horizon system crashes, about
       which --
   MR JUSTICE FRASER:  And the electricity supplier.
   MR GREEN:  Exactly, Pam Stubbs was concerned back in 2000.
           If we look at the top hole-punch, there is a message
       from Frank Manning to Sue Lock.  The subject line is
       "Horizon matters - Barkham SPSO":
           "We talked about this case when I was in St Albans
       last month and it is still ongoing.  I visited there
       today and was too scared to accept a cup of tea in case
       the Horizon system crashed cos the electricity supply is
       still a live (excuse the pun) issue.
           "The balances are a mess (in pre-Horizon times the
       postmistress virtually achieved a clean balance every
       week) and I have got the RNM going in there next
       Wednesday to see what actually happens on the ground but
       [in bold] I worry that something like 25 reboots in one
       day is having an effect overall.
           "Need your best offices to get this case to a proper
       solution - she keeps getting promises of attention - but
       nothing is actually being done now to clear up the
           Then in bold:
           "It is Horizon related - the problems have only
       arisen since install and the postmistress is now barking
       and rightly so in my view."
           That is referred to by Pam Stubbs at paragraph 78 of
       her witness statement.  The two points on information
       asymmetry here are, one, that she was not herself able
       to demonstrate and prove that the problem was Horizon
       related, and we know that the defendant has expressly
       pleaded in its Generic Defence that no subpostmaster has
       ever been able to prove that the problem, a shortfall,
       is caused by Horizon error.  Ever.  And she is one of
           So there is that dimension, the difference in
       information available to the subpostmaster about what
       the true cause was.  And the second point is that she
       has only found out about that view from disclosure in
       these proceedings.
   MR JUSTICE FRASER:  Both of those are, however, jury points.
   MR GREEN:  My Lord, we respectfully say that if there was
       in fact no way in the Horizon --
   MR JUSTICE FRASER:  I know that that is your case, and I'm
       not saying that it is a good or bad case at the moment.
       But what I am saying is that the two points about this
       particular event are effectively jury points, really,
       because the whole basis of the claimants' case, as
       I understand it, is they simply were unable to and did
       not have the tools to demonstrate that it was Horizon.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  Vis-a-vis the argument between the two
       parties about who has the burden of showing what was
       causing the losses.
   MR GREEN:  Precisely.  All I was trying to do was just to
       show examples, and I accept the jury point to some
       extent, but just to show examples of the types,
       categories of information which in a generic sense, not
       a prisoner to the particular facts of a particular
       person, but in a generic sense the defendant, Post
       Office, had access to the sort of information that could
       allow it to reach a view of that sort.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  And that was not something that a notional
       reasonable subpostmaster would ordinarily have.
   MR JUSTICE FRASER:  Understood.  And in terms of issues in,
       for example, Mrs Stubbs' case, moving on through the
       different sequences of trials, the fact that she could
       not demonstrate it was a Horizon issue, and there was no
       notification to her that Post Office employees
       considered it was, is probably a point very strongly in
       her favour.  However, for the Common Issues it is a jury
   MR GREEN:  I am grateful, my Lord.
   MR JUSTICE FRASER:  That is not to disparage what happened
       to Mrs Stubbs.
   MR GREEN:  My Lord, I am sure that is understood by
       Mrs Stubbs.
           On that basis, your Lordship has seen in
       an interlocutory hearing, following my learned friend's
       skeleton argument where there was a statement that
       errors in Horizon do not cause errors in branch
       accounts, in response your Lordship will remember we
       provided to the court copies of the payments mismatch
       error documentation demonstrating that that was
       factually incorrect as a basic premise.  The degree and
       so forth are matters for another trial, but the
       impossibility of that happening has already been
       canvassed before the court in the payments mismatch
       documents.  And I had been minded --
   MR JUSTICE FRASER:  That is a Horizon issue, really, isn't
   MR GREEN:  All I would say is this: on the premise that it
       is possible for it to happen, the degree of that is
       a Horizon issue.
   MR GREEN:  And I think that is agreed.  So, my Lord,
       your Lordship will remember the payments mismatch
       document was the document in which there were identified
       errors affecting a number of branches, about which it
       was recorded the subpostmasters were not aware, and they
       had made those good under the system which I described
       in the mechanical/practical section of --
       mechanical/practical pillar, these three pillars of
       relational imbalance.
           And the payments mismatch document is an opposed
       document I think.  I don't know whether any -- it was
       originally opposed, that was before 10 October, so
       I don't know whether that is a point to be taken.  But
       it is at {G/8/2} in the bundle.
   MR JUSTICE FRASER:  It says here "opposed by D" at the top
       of ...
   MR GREEN:  My Lord, that is correct.  So that was recording
       that prior to 10 October that was an opposed document
       for inclusion in the bundle.  We are not sure why,
       because it is the defendant's case that knowledge of
       these things lay peculiarly within our knowledge, and
       I'm not absolutely sure whether my learned friend is
       actually going to object to me showing your Lordship the
       document now.
   MR JUSTICE FRASER:  Mr Cavender, are you objecting to me
       looking at this document?
   MR CAVENDER:  My Lord, we have made our position clear about
       the risks in this trial.  I don't want to be silly.  If
       you want to read it, you can read it.  But I do repeat
       my points about Horizon and issues of that kind being
   MR GREEN:  My Lord, I only want to focus on the information
       imbalance between parties at this stage.  So the
       receipt/payments mismatch issues note refers to a
       discrepancy between the Post Office office system and
       the Horizon system.
           The second line at the top records:
           "So the branch will then believe they have
           Then it says:
           "If at the next screen the rollover is completely
       cancelled, then no harm is done.  However, if the
       rollover is re-attempted at this point, the rollover
       will continue without any discrepancy meaning Horizon
       doesn't match POLSAP or Credence."
           Which are the two Post Office internal systems.
           "This has the following consequences: there will be
       a receipts and payments mismatch corresponding to the
       value of discrepancies that were 'lost'.
           "Note the branch will not get a prompt from the
       system to say there is a receipts and payments mismatch,
       therefore the branch will believe they have balanced
       correctly.  When the branch begins the new branch
       trading period, the discrepancies will show at zero.
       However, the receipts and payments mismatch will carry
       over into the next period."
           So this is unlike -- this is just a slightly
       different problem in terms of the mechanical system,
       just so your Lordship has it in mind.  This is one where
       instead of appearing at the end of the branch trading
       period, it actually --
   MR JUSTICE FRASER:  Rolls over.
   MR GREEN:  -- goes into a different period.
   MR JUSTICE FRASER:  Actually I won't use the word "rollover"
       because that is used in the document.  I understand.  It
       carries over into the next period.
   MR GREEN:  Indeed.
           And then impact is considered at the bottom:
           "The branch has appeared to have balanced, whereas
       in fact they could have a loss or a gain.
           "Our accounting systems will be out of sync with
       what is recorded at the branch.
           "If widely known could cause a loss of confidence in
       the Horizon system by branches.
           "Potential impact upon ongoing legal cases where
       branches are disputing the integrity of Horizon data.
           "It could provide branches ammunition to blame
       Horizon for future discrepancies."
           Then there is consideration on how to deal with this
       over the page at {G/8/3}.  The proposals there in the
       middle of the page are three possible solutions to the
       impacted branches.
           So pausing there.  My Lord, this had been going on
       I think for a few months and a number of branches had
       been affected but at this stage were completely unaware
       that they were affected branches.
   MR JUSTICE FRASER:  Just give me the date of this document.
   MR GREEN:  So the document is dated ... sorry, can I give
       your Lordship the date in a second?
   MR JUSTICE FRASER:  Don't worry, I will be able to find it.
       17 October 2012.
   MR GREEN:  17 October.
   MR GREEN:  So the difficulties for Post Office in terms of
       how they dealt with that were addressed by the group who
       met, we can see on the first page, which is
       representatives of Post Office and Fujitsu.  Their
       recommendation is that solution two should be progressed
       but they give three possible solutions for
           "Solution one":
           "Alter the Horizon branch figure at the counter to
       show the discrepancy.  Fujitsu would have to manually
       write an entry value to the local branch account."
           So that means Fujitsu writing in an entry value in
       the local branch's account.
           "When the branch comes to complete next trading
       period they would have a discrepancy which they would
       have to bring to account."
           "This has significant data integrity concerns and
       can lead to questions of tampering with the branch
       system and could generate questions around how the
       discrepancy was caused.  This solution could have moral
       implications of Post Office changing branch data without
       informing the branch."
           "Solution two":
           "Branch will journal values from the discrepancy
       account into the customer account and recover/refund via
       normal processes."
           I think the overall -- there was a net loss,
       I think -- we will come to that in a moment.
           "This will need to be supported by an approved POL
       communication.  Unlike the branch POLSAP remains in
       balance albeit with an account (discrepancies) that
       should be cleared."
           "Post Office will be required to explain the reason
       for a debt recovery/refund even though there is no
       discrepancy at the branch."
           "Could potentially highlight to branches that
       Horizon can lose data."
           Then "Solution three":
           "It is decided not to correct the data in
       the branches (ie Post Office would prefer to write off
       the 'lost'."
           "Post Office must absorb circa 20K loss."
           My Lord, I think the figures we see elsewhere show
       that while some branches had a gain, others had a loss,
       but the net figure would effectively represent 20,000
       loss to the Post Office.
           "Huge moral implications to the integrity of the
       business as there are agents that were potentially due
       a cash gain on their system."
           So that -- what that means is it is all very well
       for Post Office to write off the net loss but that would
       mean some would suffer and others ...
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  And the document that goes with that document, if
       your Lordship wants to look at it, is {G/9/1} and gives
       further detail.
           But what is clear is that there obviously is the
       ability to write an entry value in a local branch
       account, because it is recited there as a possible way
       of doing it, and it sharply shows the degree of control
       that Post Office and Fujitsu have over not only the
       Horizon system itself but also how errors that arise,
       system-related errors that arise, are dealt with.
           And all the way down to the individual branch
       accounts, at least potentially.  So that the control and
       the imbalance in the relationship is not only because
       Post Office is a huge organisation and individual
       subpostmasters are mostly self-employed agents of
       theirs, but also for these reasons, the contracts,
       mechanical and practical side, and then the information
       side, coming all way down to this.
           Finally, my Lord, in relation to information, there
       are two further points.  One is Post Office's
       understanding of what information should be made
       available to postmasters even when they have been
           The document there is {G/28/32} which is
       Post Office's response to the Second Sight report.  That
       was formerly an opposed document as well.  I only want
       to look at three paragraphs relating to data that is not
       available after suspension and what Post Office said
       about that.  I don't know if that is ...
   MR CAVENDER:  My response is the same, my Lord.
   MR JUSTICE FRASER:  Same approach.  Understood.
   MR GREEN:  10.13, this is responding to concerns expressed
       by Second Sight in the mediation scheme which your
       Lordship will remember was set up at the invitation of
       the Select Committee to try and address the difficulties
       subpostmasters had encountered.
           The Post Office response at 10.13 says:
           "Paragraph 10.10 of the report highlights that some
       applicants were refused access to data following their
       suspension and access to their own records that may have
       been seized upon audit.  As a result they say they were
       unable to defend themselves from any claim made by
       Post Office for the recovery of monies."
           "Whilst Post Office are aware some applicants have
       raised the issue that their own records were removed and
       not returned to them, there is no evidence produced or
       referenced by the report to support the position that
       data being withheld has prejudiced an applicant in any
           "As to other branch records, these are the property
       of Post Office.  In the event of a subpostmaster being
       suspended, Post Office may take away some branch records
       for investigation."
           So, my Lord, that is a reference to both the
       information and control aspects which were inherent in
       the contractual -- in the express terms of the contract
       and the fact that Post Office owns the branch records.
       That may speak, we would respectfully submit --
       obviously we are going to pull these strands together in
       closing, but that may speak to the need for any implied
       term to give commercial and practical coherence to
       a situation that otherwise results in quite a stark
   MR GREEN:  My Lord, those are the -- that was the last two
           A final one is at {E2/99/4}.  This refers to the
       raising of an ARQ, a questionnaire from Fujitsu in the
       case of Mrs Stubbs in 2010:
           "Nigel.  No probs with requesting data from Fujitsu
       but it will take around three weeks.  Has Jason agreed
       to take this case on, because we don't hand over Horizon
       logs to an SPMR.  It needs an expert to understand what
       it says and usually this requires one of the
           "I will give Jason a call in the morning then I will
       raise an ARQ from Fujitsu.
           "Is this for our benefit, as there is a cost
       attached to ARQ requests, we do get a supply free of
       charge as part of the contract but we usually don't have
       enough, therefore we usually charge the defence
           We have got elsewhere in the bundle, the sum charged
       I think was between about £400 and £500 per request.
           So we respectfully submit that the basis upon which
       Post Office chose to procure the Horizon system and its
       maintenance is not relevant and cannot be relied upon in
       opposition to any terms that would require Post Office
       to provide relevant information to subpostmasters.
   MR JUSTICE FRASER:  Understood.  In other words, the terms
       of their contract with Fujitsu are not relevant to
       construing the contract between them and the
   MR GREEN:  That is our submission.
   MR JUSTICE FRASER:  I understand.
   MR GREEN:  I am most grateful.
   MR JUSTICE FRASER:  And by "defence lawyers", one assumes
       that is referring to other subpostmasters who have found
       themselves being prosecuted.
   MR GREEN:  Or sued.
   MR JUSTICE FRASER:  Or sued civilly for recovery.
   MR GREEN:  Yes.  Prosecution allows -- if there was a guilty
       plea that would allow POCA to be used and get a recovery
       order that way, so it had some advantages.
   MR GREEN:  But there were both.
           My Lord, those are the three pillars which I wished
       to address in relation to the imbalance between
       subpostmasters and Post Office: contracts, mechanical
       and practical and then the information one.
           I did say I would take your Lordship to the
       contracts themselves.
   MR GREEN:  Can I -- I showed your Lordship already the SPMC,
       the standard SPMC provisions at section 12(12) and
       section 12(17).
   MR JUSTICE FRASER:  Yes, relief.
   MR GREEN:  Can I take your Lordship in a little bit more
       detail to the pack that Mrs Dar was sent, who is an NTC
       claimant.  So your Lordship effectively has an SPMC at
       the beginning and an NTC at the end, if that is
       a convenient way of doing it.
           So could we look first, please, at {E5/148/1}.
       Your Lordship will immediately see that this is headed
       "Preface".  Sorry, it's easier if we go, please, to
       {E5/137/3}.  That is a better way through it.
           So this is the actual pack as sent.  I was taking
       your Lordship to the one she signed and returned.  This
       is the pack as sent.  Your Lordship will see at the top
       this is the NTC agreement for Mrs Dar.  At the top
       your Lordship will see the word "Preface" and then
       "Part A", and then:
           "All capitalised terms not defined in this preface
       have the meanings given to them in the standard
       conditions for the operation of a local Post Office
       branch (off site, Post Office Limited cash) (the
       standard conditions).
           "This preface is part of an agreement between
       Post Office Limited and the operator for the operation
       of a local Post Office branch (as defined in the
       standard conditions) at the branch premises ...
           "The agreement consists of the following documents:
       this preface and the following appendices to it ...
           "Appendix 1 - works at the branch premises and plan.
           "Appendix 2 - equipment.
           "Appendix 3 - conditions of appointment."
           I can just show your Lordship very quickly those,
       where they are found.  Appendix 1 is at {E5/137/10}.  So
       that is planning for what works will be done.  We
       needn't tarry too long with that.  Then equipment is at
       {E5/137/22}.  Identifying equipment.  Then appendix 3
       conditions of appointment, {E5/137/24}.
           Those conditions of appointment, if we just scroll
       down a page, please, to {E5/137/25}.  Then that is
       tabulated accessibility conditions of appointment, and
       then that document runs on to {E5/137/27}, please.  And
       ends there.
           Then begin the standard conditions {E5/137/28}.  Can
       we go back to {E5/137/3}, please.  I am taking
       your Lordship back to the first page, the preface page.
       So we have looked at --
   MR JUSTICE FRASER:  We have seen the three appendices.
   MR GREEN:  Next is standard conditions, after that is manual
       and then the fees booklet.
   MR JUSTICE FRASER:  Are we going to standard conditions?
   MR GREEN:  We are going to standard conditions now, and
       standard conditions are at {E5/137/28}.  So these are
       the standard conditions themselves.  Your Lordship will
       see an agreement under clause 1.1:
           "The local Post Office agreement between Post Office
       Limited and the operator relating to the branch and
       consisting of the documents listed in the preface as
       each of them may be amended by Post Office from time to
       time in accordance with these standard conditions."
   MR GREEN:  My Lord, just to let your Lordship know, the
       difference in that respect was there was three months'
       notice in the NTC contracts and there wasn't in
       the SPMC.  So that is the only difference in relation to
       the unilateral power to vary which I mentioned earlier.
           Then moving forward --
   MR JUSTICE FRASER:  Fees booklet is defined on {E5/137/29}.
   MR GREEN:  Exactly, and then the manual is referred to, if
       we look {E5/137/30}.
   MR JUSTICE FRASER:  Yes, I have seen that.
   MR GREEN:  Your Lordship has seen that.  Then if we go to
       {E5/137/63}, we get the manual for a local branch at the
       bottom of that page.  If we go over the page
       {E5/137/64}, the manual is listed to include the
       documents your Lordship then sees in turn included.  So
       these are the grandchildren, if you like.
   MR GREEN:  And that is a list.  Your Lordship can see it
       there.  I don't need to read it out.  The only one
       I direct your Lordship's attention to is the last one
       which says that the manual, the definition of manual
           "... any other instructions to operators or updates
       to such instructions issued by Post Office Limited from
       time to time."
   MR JUSTICE FRASER:  There is also the on-line help and the
       user guide for Horizon as well.
   MR GREEN:  Indeed, and the Horizon system user guide is
       550 pages I think.  So within that document, which
       I won't spend much more time on given the time it is
       now, if we look at {E5/137/39}, this is where one finds
       the liability provision for Post Office cash and stock,
       at clause 4.1:
           "The operator shall be fully liable for any loss of,
       or damage to, any Post Office cash and stock (however
       this occurs and whether it occurs as a result of any
       negligence by the operator, its personnel or otherwise
       or as a result of any breach of the agreement by the
       operator) except for losses arising from the criminal
       act of a third party (other than personnel) which the
       operator could not have prevented or mitigated by
       following Post Office Limited's security procedures or
       by taking reasonable care.  Any deficiencies in stocks
       of products and/or any resulting shortfall in the money
       payable to Post Office Limited must be made good by the
       operator without delay, so that in the case of any
       shortfall Post Office Limited is paid the full amount
       when due in accordance with the manual."
           So your Lordship I think made the point to me
       in fact that the manual includes the Horizon operating
       manual.  That obviously imports all the processes that
       I identified for -- except settled centrally and so
       forth on the Horizon system.
           There is one significant feature of this clause,
       just in passing, my Lord -- your Lordship has our
       submissions in writing, but it is interesting how it is
       worded.  The first line is:
           "The operator shall be fully liable for any loss of,
       or damage to, any Post Office cash and stock ..."
           So those are things that are in the branch.
   MR JUSTICE FRASER:  Then you are going to say it goes on
       "however, to include any shortfall ..."
   MR GREEN:  It is quite interesting how they have done it.
       Can I just pause there, breaking it down finally.
       Your Lordship will remember paragraph 3 of my learned
       friend's skeleton argument, the one about the
       existential threat, which is {A/2/1} --
   MR JUSTICE FRASER:  There is no need to turn it up.  I have
       it here.
   MR GREEN:  I am grateful:
           "In broad summary Cs mount a two-pronged attack on
       (1) responsibility of SPMs to Post Office for what goes
       on in their branches."
           Well, no, they don't.  That is no part of the
       claimants' case.  Responsibility for what goes on in
       your branch is defined under clause 12(12) very clearly
       and these claimants were not saying: this happened in my
       branch but I am denying responsibility for it.  They
       were saying: this doesn't seem to be anything to do with
       my branch.
   MR JUSTICE FRASER:  The cash and stock in the earlier
       versions, not of the NTC but of the --
   MR JUSTICE FRASER:  -- SPMC has the phrase I think it is
       "strictly responsible", and it is a clause about five or
       six clauses earlier than clause 12.
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  Is it all rolled up together in this or
       are you going to take me to another clause dealing with
       the parallel of clause 12 in this document?
   MR GREEN:  I think this clause I think deals with -- is it.
   MR JUSTICE FRASER:  So rather than them being dealt with
       separately, they have been rolled up together.
   MR GREEN:  It looks that way.  What is interesting is it
           "... fully liable for any loss or damage to any
       Post Office cash or stock ..."
           Then lists how -- except where it is criminal,
       a break-in they couldn't have prevented with reasonable
       care, a robbery.  So one understands that.  But what is
       interesting is that it then says:
           "Any deficiencies in stocks of products and/or any
       resulting shortfall in the money payable to Post Office
       must be made good by the operator without delay."
           So in the case of any shortfall, Post Office is paid
       the full amount when due in accordance with the manual.
           Your Lordship will have seen in our written opening
       the emphasis in the cases on the different approaches
       which may apply to construing contracts which have been
       the subject of detailed negotiation between firms of
       commercial solicitors on the one hand, and there is
       a different end of the spectrum.  We would respectfully
       say that neither 12(12) nor this is a model of clarity.
           My Lord, given the time, I was only proposing to
       deal now with two very short final points.
       Your Lordship has seen in our written opening the
       observations we have made about the utility of this
       trial and the approach to identifying the reality of any
       implied terms which fall under the umbrella of the terms
       for which the defendant contends, and we have set that
       out reasonably extensively and I don't want to make any
       submissions about that matter which might seem
       ungracious but I do want to clarify three points, if
       I may.
           The claimants make no complaint that the defendant
       does not agree with the claimants about the terms to be
       implied.  That is their right.  That is what this court
       is for; to determine the difference between us.  The
       only complaint is that the defendant has not been
       prepared to clarify in a way which will actually
       contribute to the successful resolution of this group
       litigation what the incidence of its implied terms mean
       insofar as they overlap with or indeed conflict with the
       implied terms or express terms; either the implied terms
       for which we contend or the express terms which are --
   MR JUSTICE FRASER:  Do you mean incidence or do you mean
       effect?  Because they concede two implied terms,
       I think.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  And I think your criticism is they
       haven't said what effect that concession has.  Is that
       what it comes down to?
   MR GREEN:  Precisely.  The way we worded it in the actual
       Common Issue itself, by agreement and as ordered by the
       court, if we look at the consolidated Common Issues
       {B1/2/1}, "Implied Terms":
           "Which, if any, of the terms in the paragraphs
       listed below were implied terms (or incidents of such
       implied terms) of the contracts between Post Office and
           That is by agreement, and that was obviously because
       if, in reality, they accept that the breadth of a term
       that they admit includes an obligation to provide
       adequate training, it is pointless us arguing about it.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  Your Lordship has seen that we have taken quite
       a lot of trouble and indeed obtained an order to try
       and clarify that.  And, to be fair, Post Office has done
       what it said in the sense that they refused to provide
       details on the pleadings on the basis that that was
       a matter for submissions.  And they have made some
       submissions about it, but our concern is that the
       submissions are unhelpful for two reasons: the first is
       that they don't actually condescend to the particulars
       necessary for the court to determine what is actually in
       issue in real life.  I don't mean on the particular
       facts of a particular subpostmaster's case.
           Could we look at {E6/128.1/1}.
   MR JUSTICE FRASER:  No, I don't think that is the right
       reference.  Where do you want to go?
   MR GREEN:  Sorry, {E1/42.2/2}.  Can we just go up a page
   MR JUSTICE FRASER:  It is a termination letter, is that
   MR GREEN:  It is a letter actually about allowing access at
       the time of termination.
   MR GREEN:  Your Lordship will see that in the fourth
       paragraph Post Office writes to Mr Bates:
           "I agree that this situation is not expressly
       covered in the standard subpostmasters' contract but
       I am sure you will appreciate that Post Office needs to
       inspect the area to see if there will be any
       problems ..."
           If we go over the page to {E1/42.2/2}:
           "Although not a specific term of the contract,
       I have been advised that it would be an implied term of
       the contract to allow Post Office Limited's business to
       function properly that access should be granted to
       an authorised Post Office employee who properly
       identifies himself."
           So Post Office themselves, when they need to, have
       no problem whatsoever in defining a perfectly workable
       specific term which may differ in application in
       different situations on the ground but is at a lower
       level of abstraction and generality than the two
       overarching terms which Post Office has admitted but
       refused to clarify against the terms which the claimants
       contend for.
   MR JUSTICE FRASER:  I understand.
   MR GREEN:  My Lord, that is our concern.  In a case listed
       to take five weeks, there is obviously more that could
       be said, but I hope that has been helpful.
   MR JUSTICE FRASER:  I have your extensive written
       submissions as well.  Thank you very much.
   MR GREEN:  I am most grateful.
   MR JUSTICE FRASER:  So we are going to have the short
       adjournment now until 2 o'clock.  Mr Cavender, you have
       the afternoon.  Thank you all very much.
   (1.00 pm)
                     (The short adjournment)
   (2.00 pm)
                Opening submissions by MR CAVENDER
   MR CAVENDER:  Good afternoon, my Lord.  Can I hand up
       an index to a bundle, index to bundle I.  (Handed)
           This is a new bundle that was put on the system at
       my instigation having found it difficult to navigate
       around the existing ones.  What it is -- it is
       electronic, you can have a hard copy if you like -- is
       by each lead claimant is essentially the core documents,
       so the various contractual, or we say contractual, there
       is some debate, sometimes they are contractual, but the
       main documents.
   MR JUSTICE FRASER:  The main documents that go with each of
       the lead claimants.
   MR CAVENDER:  In terms of the things leading up to their
       contract, the things they were shown or signed, the
       actual contract or reference to it, and the main manual
       that applies to them.
           So you hopefully have in what is two lever-arch
       files the main documents in the case.  There are other,
       in F bundles, various manuals and other things that we
       will go and see, but they are the pain documents.
       I found it helpful to have them in one place and you may
       as well.
   MR JUSTICE FRASER:  And that has gone on the Opus?
   MR CAVENDER:  It has, as bundle I, my Lord.  Last night
       I believe.  You couldn't see it previously but then we
       agreed you could.
   MR JUSTICE FRASER:  Yes.  It's called something slightly
   MR CAVENDER:  Custom bundle, my Lord, yes.  If you want
       a hard copy, we have a hard copy here for you.
   MR JUSTICE FRASER:  Yes, please.  Thank you. (Handed)
           You have pre-empted one of my miscellaneous points.
   MR CAVENDER:  My Lord, you have the benefit obviously of
       very lengthy written submissions for which I apologise.
   MR JUSTICE FRASER:  You don't have to apologise.
   MR CAVENDER:  For the length, I mean, rather than the
       content.  The submissions I am going to make really are
       under probably six heads.  Firstly, an introduction.
       Secondly, to look at the liability provisions,
       clause 12(12) and 4.1.  Then to look at the agreed
       implied terms.  Then to touch on the relational contract
       aspect.  Termination.  And then look, if we have time at
       the end, at the evidence and explain the approach we are
       going to take to it.
           Firstly, introduction.  You will have seen in our
       written opening what we say is about the essential
       nature of the Post Office business.  A few points that
       bear emphasis.
           Of course, Post Office is required by Government to
       maintain a broad network of branches across the country,
       even in locations where that would not normally be
       commercially viable.  It has to do that so important
       Governmental and other services are available to almost
           I think we said, to give you some size of scale,
       there are approximately 47 million transactions
       undertaken in Post Office branches every week.  At any
       given time, some £643 million in cash is held within
       that 11,000-odd branches.  It means an average branch
       roughly holds about £50-60,000 in cash.  There are more
       Post Offices, vastly more branches than there are Tescos
       or branches of any other supermarket.
           So it is an enormous outfit, it has very wide reach,
       and of course that is relevant to the background of
       this -- my learned friend -- it's obviously a standard
       form contract.  It needs to control the network.
           In order to do that, to operate that network, it has
       to rely upon and trust its agents to look after its cash
       and stock and to account to it properly in relation to
       it.  It is, of course, Post Office's cash and stock, not
       the cash and stock of the postmaster.
           In terms of the relationship created by postmasters,
       it's the Post Office that contracts with the providers
       of the goods, so the clients as Post Office calls it.
       That contract is with Post Office, not the postmaster
       himself.  Post Office has obligations to those clients
       as to how those goods and services are sold and
       sometimes in how many branches.
           It is Post Office that contracts with the customer
       that buys those goods in the branch, not the postmaster.
       The postmaster is not a party to that sale.  He
       contracts as agent and binds the postmaster through that
   MR JUSTICE FRASER:  Binds Post Office.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  You said postmaster.
   MR CAVENDER:  I apologise.  So binds Post Office obviously.
           The net effect is of course that all the
       transactions that take place in agency branches are the
       Post Office's transactions.
           If a customer in a branch withdraws money from
       a bank account, taking cash from the branch, if the bank
       fails to make payment to Post Office in relation to that
       withdrawal it is the Post Office that loses out, not the
           If a customer has complained about a good or
       service, that complaint comes to Post Office, not the
           If a customer brings a claim in relation to
       something purchased in an agency branch, Post Office
       defends the claim, not the subpostmaster.
           So that is quite important to understand the nature
       of that relationship.  It is Post Office that has the
       contractual relationship both with the client and with
       the customer, and it is the subpostmaster as agent that
       contracts with the customer in the branch.
           More on that, if one wanted it, at paragraphs 77 to
       80 of Angela van den Bogerd's witness statement
           So the net effect of that is under that agency
       business model the subpostmaster is protected from much
       of the ordinary commercial risk of running
       a cash-intensive business.  He also has very modest
       set-up costs compared to a stand-alone business.  He
       does not need to find vast numbers of clients because
       they come to the Post Office brand.  He doesn't need to
       find large amounts of working capital.  He does not need
       to enter contracts with all the third party clients.  He
       doesn't need to worry about regulations, things of that
       kind.  All that is dealt with.  What he does, he enters
       into a contract for a prepacked business.  That is
       really what he does.  The quid pro quo of all this is
       the Post Office must have a measure of control in
           Subpostmasters have very large amounts of cash and
       stock that belong to Post Office.  If they or their
       assistants are careless or incompetent or dishonest, the
       Post Office stands to lose large sums of money.  What
       the contract does, what the contract of agency does, is
       provide essential controls and protections.  The fact
       that it does so does not turn this business contract
       into a contract of employment or anything like it.  My
       learned friend concedes the first, but contests the
       second.  This is, at the end of the day, a business
           It is common ground that the subpostmasters were
       agents for the Post Office.  It's also common ground
       that that is an express term of both the subpostmasters'
       contract and the NTC.  So it's an express term of the
       contract that the parties have agreed that the
       relationship of agency will govern their relationship.
           What the claimants try and do in this case is to
       water down almost to vanishing point the effect of that
       agency-principal relationship and say somehow it is
       marginal.  The simple point is a matter of law, because
       where parties agree as an express term, or at least in
       the case of an express term and otherwise, the agreement
       of agent and principal brings with it a whole lot of
       common law by definition, just by saying you are
       an agent.
           This is a reference to Chitty, paragraph 31-006.
       Perhaps we can flick that up {A1.3/2/24}.
           We can see there the basic position:
           "On the orthodox and accepted common law analysis,
       the full paradigm relationship of principal and agent
       arises where one party, the principal, consents that
       another party, the agent, shall act on his behalf, and
       the agent so consents to act."
           So that is basic and is basic to this case.
           We are all familiar with those principles, that
       Post Office is entitled to their single-minded loyalty,
       they're required to account to Post Office honestly, and
       of course by definition not to render false accounts.
       That all goes just from the nature of the relationship.
           Of course the parties can modify the application of
       those common law principles by the words of the
       contract.  But what you don't do is what these claimants
       do, which is ask the court really to enter de novo, as
       if there is a blank piece of paper, and then filling it
       with what are the obligations they say should arise.
           What they need to do is say the express terms of the
       contract disapply certain of these agency principles and
       therefore you should construe the arrangement in
       a certain way.  That is what they should do but that is
       not what they do do.
           Every time they want to say the ordinary agency law
       principles are somehow not part of this contractual
       relationship they have to point to where in these
       contracts, as a matter of construction, those principles
       are excluded, because if they don't then they are
       included.  And they have to do that as a matter of
       contractual construction, not as a matter of value
       judgment or discretion, this is how they would prefer it
       to be, which is how they present their case.
           So the starting point is these parties have chosen
       a specific type of legal relationship called agency
       known to the law.  They have then expressed how that is
       to operate by the express terms of a contract.  They
       must be construed against the backdrop that this is
       an agency contract.  And of course there is a lot of
       granular detail to how that relationship is to operate
       in the various manuals that you see.
           So we say the express and implied terms of the
       subpostmasters' contract, the NTC, have to be looked at
       through the prism of that expressly created
       relationship.  The express terms sit atop the body of
       law of the agency regulating that relationship.
           Despite the control, the degree of control that
       Post Office has, and influence, it remains the case the
       Post Office branches are in important respects their own
       business.  They invariably run alongside completely
       free-standing commercial business offerings.  The lead
       claimants all had such businesses.  Indeed the key
       attraction, very often, of people becoming
       subpostmasters is that freedom and the availability of
       Post Office products and services to drive footfall and
       increase the turnover of that separate business.  That
       is the attraction.
           So they have their free-standing business they want
       to run, and they want another business in that space,
       and the Post Office provides that further business
       relationship.  It's a business-to-business relationship.
           On both sides it is driven by commercial objectives,
       both sides profiting from the operation of that branch
       in a commercial way.  The subpostmasters produce
       business plans and they ask to discuss those plans.
           A significant number of the postmasters are limited
       companies, partnerships, or those that run multiple
       branches.  So out of the 557 in this group litigation,
       I am instructed there are 26-odd of claimants who are
       companies or partnerships, 30 who are contracted through
       limited companies and some 84 who are multiples, that is
       they run one or more branch.
           But of course we are not just dealing with the
       claimant group here when we are looking at this
       contract, we are looking at the 11,000-odd, and there
       are within that, I don't know the precise figures,
       significant numbers of corporate entities that you are
       contracting with.  So Mrs Stubbs is used as an example
       by my learned friend quite a lot today and she of course
       is one end of the spectrum, but there are other people
       at the other end as well, and this contract applies to
       them all.  One of the challenges to the court might be
       how it approaches that situation where its sympathies on
       one side might be in a certain subpostmaster group in
       one direction and with a more commercial group another.
       I just point that out.
   MR JUSTICE FRASER:  There is no personal sympathy involved
       in any of the decision-making, just to put everybody's
       mind at rest.
   MR CAVENDER:  My Lord, no.  But it is a matter of
       background.  My learned friend made a number of jury
       points today, I am just conscious to try and move things
       back to a case involving a contract and construction.
           But we say at all events this is a million miles
       away from a consumer relationship or the type of
       relationship where policy considerations were at the
       height.  For instance, in the Autoclenz case, the car
       wash case, which I think my learned friend was
       personally involved in as junior counsel in that case,
       we are millions of miles from that position.
           These are business people and they have chosen to
       engage in running a business.  They decide how much work
       to carry out themselves, they decide whether to carry
       out any work at all in the branch, whether to delegate
       the whole of it to assistants.
           And as regards assistants and looking at the
       construction of the clause, as we will in due course,
       the normal position is if you are appointed as
       a subpostmaster or anything and you wish to employ other
       people to perform that role, then you are normally
       responsible for them and what they do.  We say the
       construction of the clause merely reflects that.  The
       dichotomy we have seen about the postmaster being
       responsible for all acts of assistants is not
       a surprise, it's merely a reflection of what you would
       expect in a situation where they choose, but don't have
       to, to employ assistants.
           Similarly, as befits any business-to-business
       relationship, the subpostmasters could if they wanted
       have taken legal advice on any of the contractual terms
       on offer.  A business can decide to do that or not, it
       is really up to them.  They have the opportunity to do
       so, and if they didn't do so then they can't blame, in
       my submission, the Post Office.
           My learned friend will try and persuade you the
       court must intervene to undo this commercial bargain
       and strike a different one that would better suit the
       claimants in the events that have occurred or they say
       have occurred.  But he misses the point that the
       existing commercial bargain is an entirely
       comprehensible one.  It has benefited many thousands of
       subpostmasters over the years and it works perfectly
       well and has worked perfectly well.
           So the idea of tearing it all up and saying, well,
       in business common sense in terms of interpretation or,
       we'll see, implication of terms this must happen is, in
       my submission, an unattractive one against that
           That takes me to the nature and extent of the
       attacks on the contracts.  In these proceedings the
       claimants seek to try to rewrite the agency contracts by
       what they call construction and by the implication of
       some 21 implied terms, and rejecting the agreement on
       termination with what they call the true agreement under
       Autoclenz.  The goal of all this seems to replace what
       is a principal to agent business-to-business
       relationship with some kind of quasi-employment
           There are two introductory points on this.  First,
       it is common ground the subpostmasters were not employed
       by Post Office.  On the contrary, the agreements
       expressly appoint them as agents.  And as I have said
       a moment ago, some of those were companies or
       partnerships or multiples.  It's very hard to see how
       you could say it's quasi-employment on some spectrum.
       It's a million miles from that.
           Second, C's case would be extreme and wrong even if
       it were an employment relationship.  We referred in
       opening to a case called Geys v Societe Generale in
       the Supreme Court in which I acted for Mr Geys.  He was
       a senior banker for Societe Generale.  He reputedly,
       according to The Times, earned more money than the
       chairman of SocGen, and he was given three months'
       notice.  He was basically too successful to keep on.  He
       had built up this team.  The reason they dismissed him,
       rather cynically, was to prevent him getting his
       year-end bonus.  They dismissed him on three months'
       notice.  They mucked up, as it turned out, the machinery
       of that.
           But the important point is although it was cynical,
       although it was unfair, it was lawful.  They gave him
       three months' notice, that is what happens.  So even in
       employment relationship you are entitled to have notice
       provisions and you are entitled to exercise them.
       Whether the Employment Rights Act 1996 has something to
       say about that unfair dismissal, of course it does.  But
       what my learned friend is trying to do here is trying to
       bring in by the common law really some doctrine of
       unfair termination of commercial agreements, that is
       what he is doing, and in my submission it is completely
           In terms of the implied terms, they need to be
       implied on the orthodoxy in accordance with the very
       clear guidance in Marks & Spencer: it must be necessary.
       None of the implied terms which are put forward by my
       learned friend are necessary and begin to meet that
           So a potted summary of the issues on this trial,
       although there is lots of paper and lots of noise, are
       really on two elements.  One is the clause 12(12)/4.1
       point, and one is the termination provisions, three
       months under the SPMC and six months under the NTC.
           But essentially it is that (inaudible).  The
       responsibility of the subpostmasters to Post Office and
       what goes on in their branch with money and stock and to
       duly account.  That is dispute one.  Dispute two is the
       ability of Post Office to terminate the agency contract
       on notice or otherwise when things go wrong.  They are
       really the two debates.  So the contractual terms
       governing liability for losses and termination are the
       two main targets.  And my learned friend today, in
       showing the contracts, only showed you really the
       section 12(12) point and 4.1, he didn't show you the
       termination provisions, they're not very exciting.  But
       that is really what this case is all about.
   MR JUSTICE FRASER:  By "this case", do you mean the Common
       Issues or do you mean the litigation as a whole?
   MR CAVENDER:  No, the Common Issues, my Lord.  I am limiting
       myself obviously to this trial.
   MR JUSTICE FRASER:  Because in a way, the way you framed the
       first issue, which is the responsibility of the
       subpostmasters to the Post Office and what goes on in
       their branch with the money.  By "what goes on in their
       branch with the money", that is open to different
       interpretation so far as Horizon is concerned, isn't it?
   MR CAVENDER:  Obviously that includes their operation of
       Horizon in the branch.
   MR JUSTICE FRASER:  Their operation of Horizon.
   MR CAVENDER:  That is correct.
   MR JUSTICE FRASER:  Well, that is the whole point, isn't it,
       in a way?
   MR CAVENDER:  It is.  But what it doesn't do, and I'll come
       to this in a moment, if Horizon, as my learned friend
       alleges in the Horizon trial, introduces bugs and other
       things, that is not their responsibility.
   MR JUSTICE FRASER:  Well, on the way he seeks to have the
       contract construed.
   MR JUSTICE FRASER:  That is what he says.
   MR CAVENDER:  But I agree.
   MR JUSTICE FRASER:  You agree it is not their
   MR CAVENDER:  Yes.  We will come to this, and this is
       perhaps not made clear but it is in our written
       submissions in some detail.  If there are, and we
       actually define in our pleading, Horizon-generated
       losses, if there is such a beast, then that is not
       something that is either caused by an assistant, in the
       word of clause 12, nor caused by the negligence or error
       of the postmaster.
           It doesn't fit within clause 12, it doesn't even get
       into the gateway.  This is what we have been saying all
       along.  I will come to this but I am pleased
       your Lordship asked that because it does kind of help
       that argument, help bring it out.
           We say if they were right about those two attacks,
       that they weren't fully responsible for what goes on in
       branch, didn't have to account to us in the way a normal
       agent would, and we couldn't terminate them, then that
       would be a real threat to the way the Post Office does
       business at the moment.  Because it needs those two
       controls to maintain these 11,000 branches throughout
       the UK with all this money and all these transactions.
       They are the two pivotal point in the relationship.
           So it isn't some veiled threat, as my learned friend
       said, at all.  What it is, it's indicating the scale of
       the rewriting, I think, that my learned friend engages
       in to completely nullify, really, the existing
       relationship, as the parties have agreed in this
       contract, and replacing it with something very
       fundamentally different.
           So to give a specific example: if in relation to
       liability it were right that Post Office had to prove
       how specific losses of cash and stock had occurred in
       a branch in order to recover them, that would have
       a very serious impact.  Post Office is not in
       the branch, it does not know and cannot know whether the
       missing cash has been mistakenly provided to a customer,
       lost in the associated retail business, put in the wrong
       till or something of that kind, or simply shovelled into
       someone's pocket or handbag or rubbish bin.
           To give a specific example on termination: if
       Post Office is not able to bring contracts to an end on
       three or six months' notice when problems have emerged,
       Post Office would be required to keep in place
       subpostmasters who, for whatever reason, were failing to
       meet the standards set by Post Office and they could
       no longer be trusted.
           It would be a relationship where neither party could
       extricate themselves.  It would be utterly exceptional
       that where the subpostmasters are our agents, they can't
       be terminated on notice in accordance with the terms of
       the contract, putting the assets of the Post Office at
       risk for still longer period.
           It cuts the other way, of course.  These terms my
       learned friend is implying I am assuming must be mutual
       on termination.  So if you are going to have, say,
       a year's notice, which I think is his favourite number,
       that would be reciprocal.  So the postmaster would, on
       this score, have to be kept in post for a year even
       though he didn't want to.
           It's very odd.  It's almost akin to those cases on
       slavery and things and contracts and not wanting to
       perform a service but being made contractually to do so.
       It is completely uncommercial to have a term of that
       type, of that length, to keep an agent in position when
       he wants to go.
           Those are just two examples.  There is a myriad of
       other bizarre uncommercial consequences that flow from a
       free rein to rewrite these contracts.
           Further, your Lordship will have seen the claimants
       advance an entirely unparticularised case on
       incorporation and the validity of terms using the
       Interfoto and UCTA principles.  They also invoke the
       exceptional principle of Autoclenz to say that the
       express terms in the termination don't reflect the true
       agreement.  We say there are short answers to many of
       these radical arguments that Cs advance.
           The only sensible inference I can draw by them
       seeking to essentially ask for the world, that if you
       ask for so much you may not get that but you might get
       some little bit at the end.
   MR JUSTICE FRASER:  This is your half a loaf point.
   MR CAVENDER:  Yes, my Lord.  But of course that is not how
       the law works, it's not how contractual construction
           Moving now to the second head which is the lead
       claims and their role in this.  Your Lordship is faced
       with a large number of claims, 557 currently.  The lead
       claims are little more than 1 per cent of the body of
       claims.  And of course you will bear in mind that 557
       claimants are, in turn, an only very small minority of
       the 35,000-odd subpostmasters who we anticipate have
       operated Post Office branches over the last twenty
       years, so about 1 per cent.  Because what my learned
       friend is doing is attacking the whole of the edifice of
       this relationship over -- since 2000.
           Your Lordship is only inevitably going to see those
       cases where something is alleged to have gone wrong.
       The 99 per cent who are perfectly happy and who work
       perfectly well are not here.  What you are seeing is the
       most exceptional of exceptional cases chosen as leads.
           Now, the purpose of this Common Issues trial is to
       advance the resolution of the group litigation by
       construing the key provisions in the contract.  My
       learned friend I think put at the first CMC:
           "The relevance of the evidence here is to give
       the court the context in which to construe and determine
       the contractual questions and to provide evidence the
       court is not doing the exercise in a vacuum."
           But the six cases before this court are lead cases,
       not test cases technically.  They have not been chosen
       and couldn't be chosen to represent the large proportion
       of claims in this group or beyond.
   MR JUSTICE FRASER:  You have each chosen three, I think,
       haven't you?
   MR CAVENDER:  We have, simply because -- by no criteria
       other than to cover the SPMC and the NTC.  But there is
       no attempt that they are representative of anything,
       they are just vehicles to bring before the court the
       contractual documents that they were shown in that
           But they are only exemplar, really, of that.  So you
       don't do it in a vacuum.  You could have not had them at
       all and had -- you could have agreed ten notional people
       with certain characteristics.  They saw the Serv 135,
       they didn't sign the ARS110, or something, and see
       whether that altered the background.
           But we have them, of course they are very welcome,
       and we will test the evidence.  But one needs to be
       careful about what regard you have and the relevance you
       give to their experience as being representative of
       others because they are not.  The only representation is
       they cover the broad periods and have two of the main
       contract types.
           Of course the Post Office acknowledges that many of
       the claimants feel aggrieved and wish to put forward
       their stories, and they have done so.  And that is
       of course an important part of the process of the group
       litigation as a whole.  But it is very much less a part
       of this trial which is interpreting the agreements.
       Each of the six leads have put in evidence of what looks
       to be their whole story, and at the recent strike-out
       application the court was not persuaded to shut that out
       on the basis -- paraphrasing obviously -- that it may
       turn out to have some relevance.  My learned friend
       urged the court really to wait and see.
           For our part we have waited but not seen.  We have
       seen 244 pages of written opening, and nowhere there
       will you see any reference to this evidence and its
       supposed relevance to this trial.
   MR JUSTICE FRASER:  It's a mischaracterisation of my written
       ruling on the strike-out to say that I left the evidence
       in on a wait and see basis.
   MR CAVENDER:  I didn't ... it was more my learned friend's
       submission I think that I was trying to paraphrase.
       What your Lordship did was to say we didn't reach the
       threshold to make it clear it was clearly relevant.  It
       may be relevant to some issues.
           But on that, and based on the submissions you heard,
       on one view you may have been sold a false prospectus
       because there is no pleading or even argument in the
       244 pages that, for instance, Mr Bates' experience was
       relevant to the interpretation to Mr Abdulla or Mr Sabir
       or somebody else's contract.  You just don't see that.
       It has never been pleaded.  But there is no argument
       either in that opening that gives you any sense of the
       relevance of it and on one view that is quite
       surprising.  Because if the argument was, and I think
       this is how my learned friend was putting it, that
       somehow Post Office had guilty knowledge in some way
       about the defects in Horizon at a subsequent time from
       Mr Bates' experience, they need to plead that.  There is
       no pleading to that effect.  There is no argument to
       that effect in the 244 pages.
           So I won't say any more about it, but that is the
       position that we are in.
           Moving on to the liability provisions, section 12,
       clause 12, and if we can take up the SPMC which is the
       best place to find that, which is in bundle --
   MR JUSTICE FRASER:  Which version?
   MR CAVENDER:  The SPMC, the one that we are using is
       attached to the pleading.  It's the 1994 version I
   MR JUSTICE FRASER:  Is that the one at --
   MR CAVENDER:  {D2.1/3/53}.  We looked at this before and
       your Lordship is obviously very familiar with it:
           "The subpostmaster is responsible for all losses
       caused through his own negligence carelessness or error,
       and also for losses of all kinds caused by his
       assistants.  Deficiencies due to such losses must be
       made good without delay."
           We deal with this in paragraph 84 and following of
       our opening.  That is at {A/2/25}.
           The first point I want to make is a point I touched
       on a moment ago.  The claimants seem to want to think
       that somehow we are fixing them with liability for
       apparent shortfalls.  That is things shown as shortfalls
       that do not reflect the true position because of some
       error or bug in Horizon's system.
           Let me say very clearly: that is not and has never
       been our case.  The first point of why it can't be our
       case, if you look at the words at clause 12.  Imagine
       an apparent shortfall, a Horizon-generated shortfall, as
       we plead in the Defence.  It is not a loss caused by the
       negligence, carelessness or error of a subpostmaster.
       It is not a loss caused by his assistant.  So it's not
       within clause 12.
   MR JUSTICE FRASER:  So on the analysis you have just given
       me you accept that in those circumstances, if there was
       a shortfall thrown up by the Horizon system, that would
       be a loss -- or that would not be something which the
       Post Office would try to pass on to the subpostmaster?
   MR CAVENDER:  It would not be -- yes, because if it is
       a Horizon-generated loss it is not a loss for the
       purposes of clause 12(12).
   MR CAVENDER:  We explain this at paragraphs 94 to 96 of our
       written opening.  If you want to go back and re-read
       that with that knowledge then it might make more sense.
           Coming then to the burden of proof which is really
       what the real debate has been about this clause.  It is
       not really -- my learned friend tries to insert the word
       "such" into this clause.  We might as well deal with
       that now.
           He says that --
   MR JUSTICE FRASER:  Am I looking in yours or his?
   MR CAVENDER:  Of what, my Lord?
   MR JUSTICE FRASER:  Sorry, I thought you said go to 94 of
       your written opening.
   MR CAVENDER:  No, it's at paragraphs 84 and following, my
       Lord {A/2/25}.  I don't want to read through that now
       because it's a long section.
   MR JUSTICE FRASER:  I have read it already.  I was just --
       I misunderstood what you asked me to do, I'm sorry.
           I interrupted you.
   MR CAVENDER:  My Lord, so sticking with the clause then and,
       while we are looking at it, reminding you of the
       construction that my learned friend urges upon you,
       looking at clause 12(12) he wants you to insert the word
       "such".  So it says:
           "... and also for such losses of all kinds."
           Does my Lord see that?
   MR JUSTICE FRASER:  Yes, although based on what you have
       just said about the way the word "caused" should be
       considered vis-a-vis Horizon, whether "such" is in there
       or not wouldn't necessarily make any difference to the
       meaning at all.
   MR CAVENDER:  But it would to -- this argument, my Lord,
       goes to the liability for assistants being absolute.
       That is why -- it's on that argument.
   MR JUSTICE FRASER:  But "caused" can't mean a different
       thing in line one than line two, surely.
   MR CAVENDER:  No, no.  The point I made, the big point
       applies obviously to both.
   MR JUSTICE FRASER:  Yes.  That is where I understood the
       "such" was aimed at but I might have misunderstood.
   MR CAVENDER:  I think you misunderstood, my Lord.  I think
       what "such" was trying to do was to bring in a carve-out
       for assistants that mirrors the subpostmasters'
       carve-out, which is only caused through his negligence
       or error.
   MR JUSTICE FRASER:  I understand.  Now I understand what you
   MR CAVENDER:  So what he says, "also for such losses".  The
       trouble with that of course is it is followed by the
       word "of all kinds".
   MR JUSTICE FRASER:  But the example given in his written
       opening, which may or may not be a valid example but it
       is the one he gave, was imagine Mr Bates is at the
       terminal and something happened, or his assistant is at
       the terminal and something happened.  And by
       "something", I mean something Horizon related.
           But on your analysis of the "caused", neither of
       those scenarios would lead to a loss being sought to be
       recovered from the subpostmaster.
   MR CAVENDER:  Correct.  Absolutely.
           So coming to burden of proof, because apart from
       that "such" point most of the debate on this clause is
       about burden of proof, and you can be very careful when
       you are talking about this whether you are talking about
       as a matter of construction does it allocate the burden
       either expressly or implicitly, or whether you are
       talking about what Phipson calls the persuasive burden,
       that is the burden in terms of pleading and proof at the
       trial.  He who asserts must prove those kinds of
       principles.  Because the two are very easy to merge at
       any given time as to what people are saying and the
       basis on which they are saying it.
           So the first point is that clause 12(12) doesn't
       expressly, in my submission, allocate the burden of
       proof at all, save in one respect, and I will come back
       to that as it relates to assistants.  But as you will
       have seen from our submissions, Post Office accepts that
       we have the persuasive burden of showing there is a loss
       arising obviously from a shortfall or deficiency.  In
       the ordinary way, if you allege there is a loss you need
       it show it.  He who asserts must prove.  But it is not
       a matter of construction of the clause.
           The Post Office will seek to discharge that
       persuasive burden by relying on signed accounts or
       evidence derived from audit or Horizon.  But Horizon is
       just evidence here.  It will either be good enough or
       not to prove a shortfall generally or in an individual
       case.  However, once a shortfall or loss has been shown
       by Post Office, ie it is taken out on the balance of
       probabilities, this being a Horizon-generated event, in
       that world --
   MR JUSTICE FRASER:  What do you mean, it's taken out?
   MR CAVENDER:  In order to show loss we will need to show
       that this is a loss which is not a Horizon-generated
   MR JUSTICE FRASER:  As a first step.
   MR CAVENDER:  Yes, as a persuasive burden we would have to
       show that.
   MR JUSTICE FRASER:  Let's just put the word "burden" off to
       one side and do a real world worked example so that
       I can understand what your submissions are as to
       Post Office's case on how this clause should be
       construed.  And in order not to personalise it, let's
       just say Mrs X.
           Mrs X is a subpostmaster or postmistress and she is
       notified that Horizon is showing there is a shortfall at
       her branch of £2,000.  Do you say that notification
       follows or precedes what you have just explained which
       is that Post Office need to show that it is not
       a Horizon-generated loss, or does that notification just
       come at the same time as Post Office considers whether
       it is or not?
   MR CAVENDER:  It is not really a timing thing.  In these
       cases what happens is generally the postmaster's in
       charge of the branch, he does a trading statement, there
       is a rollover, and he says there is a certain amount
       of cash in the branch, et cetera.  There is an audit and
       the audit shows there is £2,000 missing and the
       Post Office says, well, it looks like you owe me £2,000.
   MR JUSTICE FRASER:  Mr Cavender, you are astute enough to
       know that you have moved on to dealing with an audit
       I am dealing with a worked example of
       a Horizon-generated -- sorry, of a shortfall which has
       come to Post Office's notice as a result of what Horizon
       is showing.  Because that is what this case is about, it
       is not about losses that are shown on audits.
   MR CAVENDER:  On your example, my Lord, how do Post Office
       know this?
   MR JUSTICE FRASER:  Well, as I understand it, and this will
       come through the evidence, the subpostmaster has notice
       or is notified of a shortfall on the terminal, but it
       may not be on the terminal, it may be in some other way.
       That is not --
   MR CAVENDER:  It's normally when they balance, my Lord, that
       is when it happens.  They come to the end of a period
       and they balance.  That is when the shortfall, if you
       like, of the event is crystallised.
   MR JUSTICE FRASER:  That is a good way of putting it.
           Let me just ask Shams one question, he is the EPE
       officer.  (Pause)
           Sorry, Mr Cavender.
   MR CAVENDER:  Not at all.  The answer to your question might
       be more readily found in our written opening at
       paragraph 122, {A/2/36}.
   MR JUSTICE FRASER:  I'm not sure that ... I'm not sure it
   MR CAVENDER:  It's 122(b), my Lord:
           "Where the deficiency is not apparent from accounts
       that have been signed off, any dispute as to the
       accuracy of the figures on which Post Office relies to
       show a deficiency is at large.  Post Office may rely on
       an inference from the general reliability of Horizon
           Saying that Horizon is generally reliable --
   MR JUSTICE FRASER:  Just pause there.  Let me just find the
       part I was asking you about.  It's {Day1/107:23}, when
       you said:
           "... once a shortfall or loss has been shown by
       Post Office, ie it is taken out on the balance of
       probabilities, this being a Horizon-generated event ..."
           I said:
           "What do you mean, it is taken out?"
           And you said:
           "In order to show loss we will need to show it's
       a loss which is not a general Horizon-generated loss."
           And it was that point that I was exploring with you.
           Am I therefore to equate that with the
       antepenultimate line on page 36, or the third line of
       122(b) {A/2/36}, which is Post Office relying on
       an inference from the general reliability of Horizon.
       Is that just a different way of saying the same thing?
   MR CAVENDER:  It is, yes.
   MR JUSTICE FRASER:  Right, thank you.  Because actually
       an inference is rather different to the way you were
       explaining it to me at page 120, isn't it?
   MR CAVENDER:  I don't believe so, my Lord, and if it was --
   MR JUSTICE FRASER:  Okay.  That is fine, I understand it
   MR CAVENDER:  But what I am trying to do is to try and
       address the case that somehow we are trying to fix
       postmasters for all Horizon-generated losses.  That is
       the target of my -- we are not saying that.  And 122 of
       our opening makes that clear.  122(a) deals with the
       inferences where they have signed off relevant accounts
       et cetera, and 122(b) addresses the situation where they
       haven't, which is more of your Lordship's example.
           The point I was going on to make is once -- and this
       is where your Lordship picked it up -- once a shortfall
       or loss has been shown by Post Office, it is then for
       the postmaster to show he doesn't have to pay it.  And
       that is when you get into the clause proper.  That is
       when we say it is for the postmaster to say you have
       a loss at this stage and you are persuaded it is not
       a Horizon-generated loss --
   MR JUSTICE FRASER:  Well, there you are making an inference,
       aren't you?
   MR CAVENDER:  Of course, but --
   MR JUSTICE FRASER:  Mr Cavender, you must realise there is
       a crucial difference between them.  One is the default
       position as I had understood it to be, on everything
       I have been involved with on this case over 12 months,
       is the way in which these incidents were approached
       which, as I understand it from the written opening, it's
       effectively an acceptance ab initio or an understanding
       by Post Office that if Horizon says X, X being
       a shortfall, then it is a shortfall.  Whereas the way
       I understood what you are saying orally is it's almost
       as if there was a preliminary filter --
   MR CAVENDER:  My Lord, no, no.  If you thought that then
       I was --
   MR JUSTICE FRASER:  Because Post Office's approach is, as
       I understood it, or was, and may still be, that Horizon
       is reliable.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Ergo, a shortfall by definition is
       something for the subpostmaster to demonstrate falls
       within the caveat or the proviso in clause 12.
   MR CAVENDER:  No, but that is where there is the difference,
       that there is a prior stage before you get into the
       caveat, almost like a gateway point, that it's a loss,
       and it's at that point the inferences of 122 come in.
           Because of course we say at the early stage that
       Horizon is reliable, and if it says there's a shortfall,
       there's a shortfall.  But the postmaster can say, well,
       no, it's not, in the Horizon trial, and say no, no, that
       isn't the case, not necessarily the case, or Horizon was
       totally terrible.
   MR JUSTICE FRASER:  That of course is correct in terms of
       specific issues, as in the way they have been split
       between Common Issues and Horizon, save for this: so far
       as the parties are arguing about who has the burden of
       demonstrating what a discrepancy in fact should be
       characterised as, whether it is a loss that falls within
       12(12) or not, that is, as I understood it, something
       that is being resolved at this trial.
   MR CAVENDER:  My Lord, I'm not quite sure that -- insofar as
       it is construction of the clause, that is so.  Insofar
       as it is a persuasive burden, which I think in reality
       it probably is, then strictly it is not a common issue.
       But we have outlined our case on it, we are not being
       funny about that, but you can see how the two -- it is
       important to know whether you are talking about as
       a matter of construction of the clause or are you
       talking about the persuasive burden generally?  But you
       have my submission on what the persuasive burden is in
       that eventuality.
           The points I have made can be made either as
       persuasive burden or, at a stretch, and I think it is
       a bit of a stretch, an implicit allocation under the
       clause.  Because it really is -- it comes in advance of
       construction of the clause.
           My Lord, if in light of that hopefully highlighting
       the subtly of this point you go back and read our
       written submissions --
   MR JUSTICE FRASER:  I will do that many times.  I am sure it
       will come up in closing as well.
           But when you describe it as the subtly of the point
       or ... it isn't a subtle point at all, is it?  It is
       what a large part of this whole case is about.
   MR CAVENDER:  Quite.
   MR CAVENDER:  What it comes down to is we say Horizon is
       reliable and when Horizon says there is a shortfall,
       there is a shortfall.
   MR JUSTICE FRASER:  And it falls within clause 12(12).
   MR CAVENDER:  Not automatically, because the postmaster is
       saying no, no, it doesn't.  That is the
       Horizon-generated shortfall.  So it doesn't come through
       the gateway and then into clause 12(12).  That is
       the argument, that is the conceptual difference.
   MR JUSTICE FRASER:  But the -- well, I suppose it depends at
       what point one comes to apply what you describe as
       a persuasive burden.  But if you then take your analysis
       to the next step, where the postmaster says no, it
       isn't, it is a Horizon-generated shortfall, your
       interpretation of the clause or the construction for
       which you contend is that it is the postmaster
       thereafter who has to demonstrate that it is in fact
       a Horizon-generated shortfall.
   MR CAVENDER:  No, because you would have determined that
       before you get through the gateway.
   MR JUSTICE FRASER:  But Mr Cavender, this is the point I am
       struggling to follow.  Because as I understand your
       written submissions, the gateway is the inference that
       everything Horizon tells you is reliable.
   MR CAVENDER:  My Lord, that is evidence really.  It is
       not --
   MR JUSTICE FRASER:  That really is not an answer.  That is
       not evidence.  We are talking about the way in which the
       clause works for a Horizon-generated shortfall.  Okay?
       And I am having difficulty in understanding why where
       the gateway is, which is your word, could be a matter of
   MR CAVENDER:  No, you misunderstand.  Horizon is evidence at
       that point.  The results of Horizon are evidence.  We
       say Horizon evidences a shortfall that is real.
   MR JUSTICE FRASER:  Hence it is through your gateway.
   MR CAVENDER:  If the court accepts that, then it gets
       through the gateway, yes.
   MR JUSTICE FRASER:  At the moment I just want to know where
       your gateway is.  Your gateway is a step that is reached
       after applying your inference that Horizon is reliable.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  So if that is right ...
   MR CAVENDER:  You then get into the clause.
   MR JUSTICE FRASER:  That gets you into clause 12.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Clause 12 says what it says.  And the
       postmaster says "This is not a loss that falls within
       the clause because it hasn't been caused by my
       negligence, carelessness or error".  So in other words,
       seeks to rely on the proviso.
           And as I understand the burden point, Post Office's
       case is that in each instance of this its reaction is
       that is all very well and good, but you have the burden
       of proving that, is that right?
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Therefore, based on your inference, what
       role does the gateway play at all?  Because if there is
       such an inference, all the shortfalls which are
       demonstrated on the Horizon system will automatically
       all go through the gateway, won't they?
   MR CAVENDER:  My Lord, no.
   MR JUSTICE FRASER:  You explain the situation to me, please,
       whereby something doesn't reach the gateway stage.
   MR CAVENDER:  Well, it doesn't go through the gateway
       because in an individual case we say at the gateway
       stage, "Look, there is a loss of £2,000 and we say
       Horizon is fine.  Based on a Horizon trial it is
       reliable.  Therefore the inference is there is
       a shortfall".  The postmaster says, "No, that is not
       true, we don't accept that", for whatever reason in this
       case.  "I have my own expert evidence about this
       particular loss and how it happened and there was
       for instance a bug on that day or month affecting me.
       Furthermore, I have CCTV, I have all these accounts
       here, we only had ten transactions.  There is no way we
       could possibly have had that loss".
           In that world the court may well say that on the
       balance of probabilities on this occasion I don't accept
       that Horizon was reliable, and so we have
       a Horizon-generated shortfall.
   MR JUSTICE FRASER:  But to get to that point, as
       I understand it, you are saying it doesn't in any way
       affect the construction of this clause.  This clause --
       all Horizon losses will reach this clause because you
       have just given me an explanation of something that got
       through the gateway.
   MR CAVENDER:  My Lord, it wouldn't get through the gateway.
       It would stop at the gateway.  At the gateway stage that
       wouldn't get through because it was a Horizon-generated
       loss by definition.
   MR JUSTICE FRASER:  No, it isn't a Horizon-generated loss at
       that stage because you say the court has to go through
       the evidence and decide was, in fact, it something which
       was caused by a bug?
   MR CAVENDER:  My Lord, yes.  But the premise of my example
       was the court would find in that example I gave that
       Horizon was not reliable and therefore it was
       a Horizon-generated loss.  That was the example I gave
           So in the world in which there is, on the balance of
       probabilities, a Horizon-generated loss at the gateway
       stage it doesn't get through the gateway.  It doesn't
       get to clause 12 at all.
   MR JUSTICE FRASER:  Alright.  Final question and then I am
       going to-- I am going to expressly, though, invite you
       to re-read the last eight pages of the transcript
       because at the moment it is relatively unclear.  But if
       what you have explained is correct, are you saying that
       in order to decide if something goes through the gateway
       stage the burden is on Post Office, or the burden is on
       the subpostmaster?
   MR CAVENDER:  That is the persuasive burden, and the
       persuasive burden is normally on the person that is
       asserting it.
   MR JUSTICE FRASER:  So in this case it is ...
   MR CAVENDER:  It would be Post Office would have the
       persuasive burden.
   MR JUSTICE FRASER:  What, demonstrating that something
       should go through gateway?
   MR CAVENDER:  Yes.  It's a loss and a shortfall, yes, that
       is right.  And I think that is, if you read our opening,
       that is what we say over a number of pages.
   MR JUSTICE FRASER:  Can you stop using the conditional.
       I have read your opening, I have actually read it twice,
       and I will read it again.
   MR CAVENDER:  My Lord, yes.  But sometimes when things are
       discussed orally, and you say, oh right, and then you go
       back and read it, it can sometimes have a slightly
       different complexion.
           My Lord, moving on then from the general point of
       postmasters to the liability for assistants point.
       I touched on this a moment ago with the "such", this is
       the "such" point, and your Lordship quite rightly put to
       me that this is, if you like, of a lower order than the
       point we have just been discussing.
           This point is whether the caveats that applied to
       the subpostmaster in clause 12(12) apply to assistants.
       We say those caveats do not apply.  The liability for
       assistants is strict under this clause.  My learned
       friend says no, you have to rewrite the clause and put
       the word "such" in.  You have my submissions on that.
       But putting "such" before the words "losses of all
       kinds" creates a complete nonsense of it.  It is clearly
       not what was intended.  It is not reflected by the other
       clauses in the contract where the postmaster is liable,
       unsurprisingly, for his employees, and I do not think
       I need to say much more about it.
           Coming now to clause 4.1 of the NTC.  Again you were
       shown that briefly.  The relevant page is {D1.6/3/13}.
       My learned friend's submission on this really is that it
       is to be read as if it is clause 12(12).  Not a very
       promising start in a way because of course it is
       a different clause and different words.
           What is clear here is that there is no real
       distinction between postmasters or their assistants.  He
           "... fully liable for any loss of or damage to any
       Post Office cash and stock (however this occurs ...)"
           And "however this occurs" is of course an important
       contractual indicator of including losses of all kinds.
           And the last line:
           "Any deficiencies in stocks of products and/or any
       resulting shortfall in the money payable to Post Office
       Limited must be made good ... without delay ..."
           Et cetera.
           So the points I have made, and your Lordship -- we
       had a debate about, apply equally to this clause.  It is
       not as clear but the same point arises, that
       Horizon-generated shortfalls, assuming there is such
       a beast, if there were shown to be such a beast it would
       not come within the wording of -- or come within the
       structure of 4.1.
   MR JUSTICE FRASER:  Where would it come within 4.1 anyway?
       Is it just -- is it the sentence that deals with
   MR CAVENDER:  Yes, because it is not --
   MR JUSTICE FRASER:  "... and/or any resulting shortfall ..."
   MR CAVENDER:  Yes, it doesn't deal with apparent shortfall
       because an apparent shortfall is not a real shortfall.
       It is nothing.  It is an error in Horizon.  And what
       clause 4.1 is doing is not dealing with things that
       aren't real and so they don't get to 4.1.
   MR JUSTICE FRASER:  But if they do, they are not cash and
       stock, it is the words "and/or any resulting shortfall
       in the money".
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Yes.  Right.  Because this contract,
       unlike the earlier -- unlike the ...
   MR JUSTICE FRASER:  SPMC, I'm getting my initials mixed up,
       seems to roll together clause 5 and 12 of the SPMC into
       clause 4.1.
   MR CAVENDER:  My Lord, you are right about that.  Exactly
           Now I was going to have a passage on the law on
       construction but I see the time.  We have spent some
       time on clause 12(12), and obviously so because it is
       important.  We produced a bundle of authorities.
   MR JUSTICE FRASER:  I was very grateful for that.  It would
       be useful to go to some law but I'm in your hands.
   MR CAVENDER:  We set out detailed submissions obviously
       about the law on construction firstly.  Paragraphs 32 to
       43 of our written opening at {A/2/11}.  I won't go to it
       now.  But we say most of the principles can be accessed
       through two recent decisions of the Supreme Court,
       Arnold v Britton and Wood v Capita.  The reason we are
       going to these is because the main thrust of my learned
       friend's case on construction appears to be commercial
       common sense that the contract can't mean that for
       reasons of commercial common sense.
           What you learn from Arnold v Britton which is in
       tab 4 of the authorities bundle at {A1.1/58/1} --
       I don't know if you have had a chance to read Arnold v
       Britton or are otherwise familiar with it?
   MR JUSTICE FRASER:  I have and I am.
   MR CAVENDER:  You will see on one view the result, namely,
       to impose on these -- pick a group of lessees.  There is
       quite, on one view, a draconian obligation, on one view,
       to lack of commercial common sense.  But nonetheless
       that is what the words required and therefore that is
       what the Supreme Court upheld.
           Effectively, you remember, there was payment of
       a yearly sum and that was fixed at £90 in that case.
       And this idea of proportionate and all the rest of it
       didn't work and there was a ratchet of 10 per cent
       per annum which over a long period of time produced
       a very large number, which the complainants there said
       could not have been possibly anticipated.  But the
       majority dismissed the lessee's argument and said the
       clause meant what it said.
           We have elements of that in this case too, in my
       submission.  The main meat of the judgment is
       Lord Neuberger, paragraph 17. {A1.1/58/10}
   MR JUSTICE FRASER:  Yes, 17 through to about 23.  Although
       23 is just dealing with service charge contracts
   MR CAVENDER:  Indeed.
           If you go over the page {A1.1/58/11}, you obviously
       read those, there is no point in referring to those.
       The point at the top of page 1631, internal numbering
       {A1.1/58/13}, one thing Lord Neuberger did say is the
       court shouldn't invent a lack of clarity in the clause
       as an excuse for departing from its natural meaning in
       the light of subsequent developments."
           That is a point I think I need to pray in aid here.
   MR JUSTICE FRASER:  Yes.  As I understand it, your position
       is there is no lack of clarity and you don't need to go
       further than just construing the natural words.
   MR CAVENDER:  Indeed, that is precisely so.
           What I think you get from it is there is a very
       strict view of this idea of business common sense that
       some people sometimes lay more stall by, and you get
       that both from Arnold v Britton and indeed from Wood v
       Capita, the FSA case involving an indemnity.  I won't
       take you to it but the same points can be made, the
       leading judgment there of Lord Hodge.
           I will leave that there because I don't have much
           The next point is a pretty crucial point in
       the structure of the argument in this case and that is
       the agreed implied terms point.  They are agreed implied
       terms, I call them that, because they are agreed that
       they are things that we asserted I think in pre-action
       correspondence, they are things we plead in our defence,
       and they are things that these claimants accept.  So
       they are agreed.  They're no longer ours, we don't own
       them.  They are now part of the contract.
           That is important because in terms of sequencing,
       I think my learned friend has a passage on it in his
       written opening.  Before you consider contested implied
       terms you have to look at the express terms and see what
       they mean, and you also have to incorporate within that
       in this case the agreed implied terms.  They are as much
       part of the contract as the express terms, ie they are
       the contract, the meaning, which these parties agree
       this court needs to construe.
           And importantly that is the backdrop against the
       question of (a) construction, and (b) the question of
       whether any further implied terms need to be implied.
       This is important because one of those implied terms,
       one barrel of it of course is the necessary co-operation
   MR JUSTICE FRASER:  Or one of the agreed terms.
   MR CAVENDER:  One of the agreed terms, my Lord, yes.
           So you will have to, in my submission, when it comes
       to the final analysis, work out how that term, which is
       effectively oil to the commercial relationship, works
       with the express terms of the agreement and work that
       out before deciding, well, in light of that is there
       a necessity -- and the word is appropriate,
       "necessity" -- under Marks & Spencer to imply any
       further implied terms and, if so, what.
           You will see that the claimants' admission of these
       implied terms is recorded in the order for the Common
       Issues trial at {B7/7/13}.
           These implied terms, the Stirling v Maitland and the
       necessary co-operation term, I will now call them the
       agreed implied terms.
   MR JUSTICE FRASER:  Are we looking at the older version of
       the Common Issues or the consolidated Common Issues?
   MR CAVENDER:  Consolidated, my Lord.
   MR JUSTICE FRASER:  I think consolidated might be a better
       place to go.
   MR CAVENDER:  Have I got the wrong reference?
   MR JUSTICE FRASER:  That isn't the wrong reference, that is
       the original schedule to the original CMC order.
       A better place to go is probably the consolidated Common
   MR CAVENDER:  My Lord, yes, but I think the point is the
       same obviously in both.
   MR JUSTICE FRASER:  I know it's the same.  I am just talking
       about efficacy or utility of the cross-referencing.
   MR CAVENDER:  I am obliged.
   MR JUSTICE FRASER:  So which one do you want me to look at?
   MR CAVENDER:  {B7/7/13}.
   MR JUSTICE FRASER:  No, that is the Common Issues.
   MR CAVENDER:  {B1/2/1} I am being told.
   MR JUSTICE FRASER:  Yes, that is the consolidated one.
   MR CAVENDER:  It's the bottom of page 3.  So {B1/2/3} at the
       bottom, above paragraph 3:
           "For the avoidance of doubt, the implied terms
       admitted at Defence paragraph 105 are agreed."
           Does my Lord have that?
   MR JUSTICE FRASER:  I do, yes.  It's not exactly what
       I meant but it doesn't matter.
   MR CAVENDER:  These implied terms, the necessary
       co-operation and the Stirling v Maitland ones, are
       ordinary implied terms, unobjectionable, and are often
       implied into complex commercial agreements.
           The claimants here try and argue that because we
       aver and accept that these terms are to be implied that
       somehow that gives some kind of succour or raft to other
       implied terms as well and/or that somehow that shows
       that we accept the contract was badly drafted.
           We accept neither of these things.  These terms are
       conventionally applied into all sort of sophisticated
       well drafted contracts.  They are perfectly suited to
       filling gaps that cannot sensibly be filled by express
       provision.  The whole point of them is they will often
       have gone without saying but are necessary for practical
       commercial coherence of the agreement.
           It is now common ground these are to be implied into
       these contract.  They are, as I say, equivalent
       therefore to express terms.  Like the express terms they
       have a proper construction.  They form part of
       a contract into which my learned friend has to persuade
       you that his additional terms should be implied.  The
       claimants' 244 pages of written opening almost entirely
       ignore them or the effect they have on the arguments in
       this case.
           Your Lordship will see, and my learned friend turned
       to it a little bit at the end of his submissions this
       morning, that Post Office often criticised at length not
       showing in more detail how they would work, those
       implied terms would work in practice, and whether they
       cover some of the ground of the terms my learned friend
       urges you to imply as well.
           We are attacked for not having done even more than
       we have to help the claimants understand our case.  In
       my submission, that whole attack is misconceived.  They
       have accepted this these terms are to be implied, and
       now it seems, having done that, they want us to tell
       them what they mean, what it is they have accepted, what
       their precise effect might be in a myriad of possible
       factual circumstances.
           Imagine they were to do the same in relation to an
       express term of an agreement, explain how express term X
       overlaps with our alleged implied term.  That would
       never be a proper request or exercise.  These agreed
       implied terms are as good as express terms when it comes
       to the question of construction and the question whether
       other contested implied terms should be incorporated.
           It is therefore for the claimants to show that they
       are necessary, these further implied terms, and part of
       that burden showing why they are necessary
       notwithstanding the existence of the agreed implied
           The second point: is we have in fact done a good
       deal, to try and provide further clarification.  We have
       had a counsel to counsel meeting, we have produced
       a table to compare the obligations.  In our written
       opening you will see we gave further examples at
       paragraphs 181 and following {A/2/53}.
           The reason we can't go any further is because these
       implied terms are, by definition, ambulatory.  They fit
       in a number of things within them.  You would have to
       posit particular factual circumstances before -- and
       plead those out, if you want to take the pleading point,
       before you could sensibly ask the opposing party, say,
       well, would your implied term react here and in what
       way?  That has never been done.
           We have done our best to try and give examples of
       the extremes of where it would definitely work and where
       it would definitely not work.  See paragraph 181.  But
       what we can't do is fill in the multitude in the middle
       of degrees of situations where they may or may not
       respond, or how.
           I am slightly at a loss to see why my learned
       friends are doing this.  Maybe they are shy about making
       the argument, attacking the implied terms, the agreed
       implied terms, because they quite like having them, and
       they don't want to say too much about them being narrow
       in case that is all they are left with, and at the
       breach trial they have to say in fact they're wonderful
       and involve all sorts of possibilities.  That is a
           It is interesting it note, though, in my learned
       friend's opening at paragraph 165, bundle {A/1/65}, we
       can perhaps turn that up.
           He says at the end:
           "... albeit, the defendant's own implied terms ..."
           Because he is not taking ownership, he is still
       saying they are ours even though he has adopted them.
           "... of wide application, namely implied duties to
       co-operate and not to prevent performance of the
           So he says they are "of wide application".
           So, my Lord, what he has to do is ride two horses.
       He is saying the necessary co-operation term has a wide
       application on the one hand, and then married with the
       express terms.  At the same time he is trying to say
       that it is necessary, to give commercial coherence to
       this contract, to imply a raft of other implied terms.
       So that is what is going on and that is what he needs to
           Of these, the master of the implied terms really he
       is implying is the relational contract debate to which
       I now turn.
   MR JUSTICE FRASER:  That is probably a good time to give the
       shorthand writers a break.  So we will take ten minutes
       and resume at 3.24 pm.
   (3.15 pm)
                         (A short break)
   (3.24 pm)
   MR CAVENDER:  We are going to relational contract.  The
       first point to note here is the whole purpose of
       characterising a contract as "relational" is to take
       a step towards arguing for the implication of a term of
       good faith.  We of course do not accept there is any
       real utility in this step because we do not consider
       Yam Seng to add anything to the existing law, but for
       the purpose of this argument assume it to be
       a worthwhile exercise at least to investigate the
           There are a number of problems with the argument
       this is a relational contract here.  I will list them
       and then expand on a few of them.  Firstly, it only
       applies to long-term agreements.
           Secondly, it normally applies where there is
       a lacuna or gap in a relationship.  Here there is no
       gap, there is an agency relationship and a detailed
           Thirdly, there is a difficulty of the agreed implied
       terms and the necessary co-operation term already doing
       a good deal of the work that is said to be covered by
       this good faith term.
           Fourthly, in the terms put it would be contrary to
       the express terms of this contract.
   MR JUSTICE FRASER:  Contrary to them?
   MR CAVENDER:  Contrary to, my Lord, yes.
           And finally, it is far too wide and far too deep in
       terms of the things put forward in its wake to begin to
       be justified in Yam Seng.  We will go to Yam Seng.  If
       you remember, there was this debate about good faith, a
       very interesting discussion about it.  But in the final
       analysis Mr Justice Leggatt implied two very narrow
       implied terms based on honesty, so he rejected anything
           What we see here, standing back from it, is my
       learned friend saying relational, relational, Yam Seng.
       He then lists a whole number of incidents, he says, of
       that.  And then he has his 21 implied terms he says are
       justified by reference to it.  So just bear in mind that
       is the structure of it.
   MR JUSTICE FRASER:  He may or may not be right about any or
       all or none of them, but whether a contract is
       relational or not doesn't necessarily require the
       implication of all 21 of those terms.  It is the
       characterisation of the contractual relationship, isn't
   MR CAVENDER:  Yes.  And even if it is relational, it doesn't
       necessarily mean you imply any term at all, let alone
       a good faith one.  What it is is -- what certain cases
       have done is identify a relationship where sometimes the
       court looks with particular care about whether certain
       terms might be implied or not.  The same in joint
       venture agreement.  Ross River, there we managed to get
       the judge to imply a term of good faith in a joint
       venture agreement and it was upheld by the Court of
       Appeal.  But not because it was a joint venture, because
       it was an odd joint venture where the sleeping partner
       had virtually no power and the operative partner had all
       the power and all the money and paid it to himself.
   MR JUSTICE FRASER:  But whether a contract is -- the term
       "relational contract" is one generally understood as
       being a particular characterisation of imports into the
       contract, a standard of dealing between the contracting
       parties which wouldn't necessarily otherwise be there.
   MR CAVENDER:  My Lord, I'm not sure I would agree with that.
   MR JUSTICE FRASER:  I think you said Yam Seng doesn't change
       the law at all.
   MR CAVENDER:  No, all it does, it's the application.  We'll
       go to it.  What the judge actually did, he had really
       interesting debate about lots of things, but what he
       actually did was imply two terms he found to be
           On the first point, the first obstacle in
       the road -- we will come to Yam Seng -- was the
       long-term point.  In Yam Seng itself and all the cases
       that we cite in our opening at paragraph 210, a case
       called Acer and a case called Hamsard, see paragraph 210
       of our opening {A/2/63}, they were -- no implied term of
       the type, the good faith one, was implied, and one of
       reasons for that was the absence of a long-term minimum
           In Yam Seng itself, as we will see at paragraph 142,
       we will come to it, the judge was talking about longer
       term relationships.  In Al Nehyan, paragraphs 168 to
       169, and again we will come to this, I am just trying to
       get the flavour at the moment, the two cases he relies
       upon, Bristol Groundschool and D&G Cars, both were long
       term.  Bristol Groundschool was a contract for five
       years, then extended on a rolling basis, D&G Cars
       similarly was for five years with an option to extend
       for a further year.  Lord Justice Beatson in
       Globe Motors, tab 7 of the bundle, again said a
       relational contract must involve a longer term
           So just taking those points cumulatively, a contract
       terminable on short notice is a non-starter.  Here one
       contract was terminable on three months' notice, the
       other on six months' notice.  Based on that one
       principle alone, these are not relational contracts.
           What that then tells one is for this to get off the
       ground at all, my learned friend has to win on
       Autoclenz.  He has to strike out, effectively, the three
       month and the six month notice provisions.  Because if
       he doesn't, then they can't begin to be long term.  But
       even if he does, he won't quite tell you what term he
       says should be implied, but he does at one point in his
       opening talk about 12 months.  Even 12 months, the term
       he says should be implied when you vacate the three and
       six month terms, is only 12 months.  It isn't the
       five-year rolling contract that the authorities
           That is the first obstacle.
           The second is that again in Yam Seng, if you recall,
       I think there were five clauses, it was a handmade
       agreement.  There was a huge hole in the middle of that
       relationship.  Similarly in Al Nehyan there was
       a friendship relationship between a businessman and
       another individual.  There was huge -- potentially
       lacunas in those contracts.
           Here we have an agency relationship.  We have
       express terms of contracts.  They in turn incorporate
       manuals and directives.  There is no failure to make
           The further road block is the agreed implied terms.
       Again, at the stage when you are saying do you imply,
       because it is relational, any kind of good faith type
       term, you have to have regard for the fact you have
       already got a necessary co-operation term within the
           I'm not sure if your Lordship has seen the most
       recent edition of Chitty on this story.  We have
       uploaded it to the -- and it should be in
       the authorities bundle at the back.  Did it find its way
       into your Lordship's hard copy authorities bundle?
   MR JUSTICE FRASER:  Do you mean the core authorities or the
       bigger one?
   MR CAVENDER:  The ones for the opening.  (Handed)
   MR JUSTICE FRASER:  I have looked at the 33rd Edition but I
       can't ... I was looking at it actually in the book.  Let
       me just have a look.
   MR CAVENDER:  It's paragraph 1-058 really.
   MR JUSTICE FRASER:  Shall I add this to ...
   MR CAVENDER:  At the back, my Lord, yes.  Implied terms
       start at 57.  57 starts about -- it deals with the
       implied term of trust and confidence in employment
   MR CAVENDER:  Then at the bottom of that page {A1.3/6/3}
       where it says:
           "On the other hand, it has been said that a court
       should not imply a term requiring good faith in a party
       to a contract where it would be 'inconsistent with the
       express terms which set out the parties' mutual
       obligations', though this leaves a duty of honesty."
           Then we come to "A general implied term to perform
       in good faith", and we come to Yam Seng at 1-058:
           "In Yam Seng ... Leggatt J. considered, obiter, that
       a contract for a licence to distribute and for the
       supply of branded goods contained an implied term of
       good faith in its performance which had the significance
       in the context of not knowingly providing false
       information on which the other party was likely to
   MR JUSTICE FRASER:  Chitty disagrees with it.
   MR CAVENDER:  What it says is that -- he disagrees with the
       general debate, but he says in this case what he did was
       perfectly orthodox on Marks & Spencer, you know,
       necessary implied term.
           But my learned friend doesn't rely on that, he
       relies on the more general academic discussion for
       representing the law of England which, in my submission,
       it does not.
   MR JUSTICE FRASER:  It is, I think, generally accepted it's
       a difficult area.
   MR CAVENDER:  A difficult area?
   MR JUSTICE FRASER:  Relational contracts.  They are
       a controversial subject.
   MR CAVENDER:  There have been a number of cases.  And
       Mr Justice Leggatt -- obviously in Yam Seng there is a
       very interesting debate about it.  The Court of Appeal
       have expressed their views a couple of times since and
       are certainly, to put it mildly, less enthusiastic
       about --
   MR JUSTICE FRASER:  But not saying there is in such concept.
   MR CAVENDER:  My Lord, no.  But the concept really is just a
       door to another debate, really, and the debate is
       Marks & Spencer is the law on implied terms.
   MR JUSTICE FRASER:  Yam Seng is seen as the first word on
       a duty of good faith in commercial contracts.  Not all
       commercial contracts.
   MR CAVENDER:  But that preceded Marks & Spencer, obviously.
   MR CAVENDER:  What the authors of Chitty say in this debate
       is that the broader comments in Yam Seng -- we will go
       to it -- are not really justified and they undermine the
       general reluctance of English law to imply good faith in
   MR JUSTICE FRASER:  Which was the entire point of the dicta
       or obiter dicta in Yam Seng, that English common law's
       hostility to a doctrine of good faith has effectively
       been watered down over time, is the general summary.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  But the editors of Chitty don't agree
       with that.
   MR CAVENDER:  No.  And what they say is it shouldn't be seen
       as a general principle but rather is recognised as a
       particular example of a contract where a term as to good
       faith, meaning honesty, should be implied.
   MR JUSTICE FRASER:  I know.  But that passage in here is
       wrong because the judge is rather careful to say -- or
       the way he puts it is: bad faith does not mean
       dishonesty.  So if bad faith doesn't mean dishonesty,
       good faith can't mean honesty, it means something else.
   MR CAVENDER:  My Lord, I will go to Yam Seng and I will show
       you what he says.  And I'm not sure I am going to agree
       with you.
   MR JUSTICE FRASER:  Let's go to Yam Seng now then, because
       I would rather look at the authorities than look at what
       the editors of Chitty say the case says.
   MR CAVENDER:  My Lord, before you do, can I, if I may, look
       at the last paragraph before 059:
           "Moreover, the approach of the Supreme Court to the
       implications ... in Marks & Spencer ... may lead to a
       greater reluctance in the courts to imply terms
       requiring good faith in at least some commercial
       contracts ..."
           So you do have the spectre of Marks & Spencer --
   MR JUSTICE FRASER:  There is a Court of Appeal authority
       from this summer, which I think is called Birmingham
       City Council v Amey, which says the PFI contract in that
       case is a relational contract but it is unnecessary to
       go any further.  So as a tag it does exist.
   MR CAVENDER:  My Lord, yes.  I am not saying it doesn't
       exist, it is really what it tells you.  As I said at the
       beginning, the relevance of it is people say it in order
       to try and get some good faith kind of implied term off
       the ground.
   MR JUSTICE FRASER:  If you are saying a contract could be
       what is currently described as a relational contract,
       that does not mean it imports any obligation of good
       faith.  Well, that is an argument.  But it is generally
       understood, as far as I am concerned, that it is
       a shorthand tag for a contract that has an obligation of
       good faith within it.
   MR CAVENDER:  My Lord, we will come to it in detail when we
       come to it.  Let's --
   MR JUSTICE FRASER:  Let's look at it now.
   MR CAVENDER:  Let's look at Yam Seng.  It's behind tab 2.
           The first point is paragraph 26 {A1.1/43/10}:
           "The distribution agreement is a short document,
       which was evidently prepared by the parties themselves
       without the assistance of lawyers. It consists of eight
       clauses ..."
           So two points there.  It was a handmade agreement,
       very short, and therefore very easy to incorporate terms
       within, potentially.
           At paragraph 121 {A1.1/43/28}, the judge recites the
       general reluctance about good faith.  We don't need to
       detain ourselves about that.
           Paragraph 131 {A1.1/43/30}:
           "Under English law a duty of good faith is implied
       by law as an incident of certain categories of contract,
       for example contracts of employment and contracts
       between partners or others whose relationship is
       characterised as a fiduciary one.  I doubt that English
       law has reached the stage, however, where it is ready to
       recognise a requirement of good faith as a duty implied
       by law, even as a default rule, into all commercial
       contracts.  Nevertheless, there seems to me to be no
       difficulty, following the established methodology of
       English law for the implication of terms in fact, in
       implying such a duty in any ordinary commercial contract
       based on the presumed intention of the parties."
           That is all orthodoxy.
           It then goes on at paragraph 134 and following
       {A1.1/43/31} about the background, expectations of
       honesty and things of that kind.
           At 138 he mentions --
   MR JUSTICE FRASER:  You need to look at the beginning of
   MR CAVENDER:  "In addition to honesty, there are other
       standards of commercial dealing which are so generally
       accepted that the contracting parties would reasonably
       be understood to take them as read without explicitly
       stating them in their contractual document. A key aspect
       of good faith, as I see it, is the observance of such
       standards. Put the other way round, not all bad faith
       conduct would  necessarily be dishonest."
   MR JUSTICE FRASER:  That is exactly the point I made on the
       Chitty passage.
   MR CAVENDER:  Quite so.
   MR JUSTICE FRASER:  So if Chitty is looking at it from the
       point of view that good faith means honesty, that is not
       what the judge is talking about in Yam Seng.
   MR CAVENDER:  Actually Chitty quotes that paragraph --
   MR JUSTICE FRASER:  Whether it does or not, the sentence
       that we are debating is a passage in Chitty, a sentence
       in Chitty that has been put in by the editors.
   MR CAVENDER:  My Lord, yes.  Let's see what the judge does
       in fact --
   MR JUSTICE FRASER:  Yes.  That is what we are doing.
   MR CAVENDER:  Yes.  Let's go to paragraph 154 {A1.1/43/34}:
           "I have emphasised in this discussion ..."
           So he is bringing the threads together now.
           "... the extent to which the content of the duty to
       perform a contract in good faith is dependent on
       context. It was Mr Salter’s submission that the relevant
       content of the duty in this case ..."
           So he's looking now, going from the general to the
       specific, and this is my point:
           "... was captured by two more specific terms which
       Yam Seng contends are to be implied into the agreement."
           So to paraphrase, he has had the debate about good
       faith and relational, and now he's saying, okay, how
       does that apply here?
   MR JUSTICE FRASER:  I understand that.  But in
       paragraphs 139 through all the way to 145 --
   MR CAVENDER:  He is talking more widely.
   MR JUSTICE FRASER:  Yes, and it is that discussion of wider
       principle that Mr Green is relying on.  I appreciate
       your points as to why you say that doesn't apply, but
       those specific paragraphs deal with the potential
       importing into a relational contract of the doctrine of
       good faith and what that might mean in practice.
   MR CAVENDER:  My point is, yes, I see the discussion, let's
       see what the judge did in this case, so how he sees it
       being applied.
   MR JUSTICE FRASER:  In the Yam Seng case?
   MR CAVENDER:  Exactly.  We are at paragraph 155
       {A1.1/43/35}.  So he is saying here that the submission
       is that there are two -- the content of the relevant
       duty here, the Yam Seng duty, the good faith duty,
       whatever it is, is given expression in these two terms.
       So firstly a duty not to give false information:
           "The first more specific term said by Yam Seng to be
       implied in the agreement is a term that 'insofar as ITC
       instructed or encouraged Yam Seng to incur marketing
       expenses it would not do so for products which it was
       unable or unwilling to supply, nor offer false
       information on which Yam Seng was likely to rely to its
           That was the proposal of counsel based on the
       Yam Seng principle.
           The judge says:
           "As I see it, the essential difficulty with this
       formulation is that it does not distinguish between
       encouraging expenditure in the expectation that products
       would be supplied, or providing false information,
       dishonestly and doing so innocently.  In my view, such
       a distinction is critical."
           He goes on, the words down:
           "The position would be different if ITC wilfully led
       Yam Seng to expect that products would be supplied in
       circumstances where ITC did not in fact intend to supply
       them or knew that it would be unable to do so."
           Last line:
           "By contrast, it was clearly implied ITC would not
       knowingly provide false information on which Yam Seng
       was likely to rely."
           So if you take, below 156, "dishonest" and draw
       a line to "knowingly", what the judge is clearly saying
       is the implied term he is willing to imply here is
       either a knowing/dishonest term.  So the term would
       read: you shall not dishonestly encourage Yam Seng to
       incur marketing expenses for products which it was
       unable or unwilling to supply.  A very narrow implied
       term and one based on dishonesty.  He expressly disavows
       that put forward by counsel on a general basis.
           He does exactly the same in relation to the second
       implied term dealing with pricing, the duty not to
       undercut duty free prices.  You will see that at the end
       of 164.
   MR JUSTICE FRASER:  He finds that there were three features
       that led him to conclude that there was an implied term.
   MR CAVENDER:  Exactly.  And the thing to ask yourself,
       my Lord -- so the first point is he is talking here
       about dishonesty and that is why no doubt Chitty have
       picked up on that.  Because he has the discussion but
       then, when it comes to it, he rejects counsel's view of
       a general duty.  He says no, you have to be knowing or
           What they were doing in this case was dishonestly
       providing -- or alleged to be doing -- information to
       the parties, the distribution agreement, to incur
       marketing expenses for goods they weren't going to
       supply, had no intention of supplying or couldn't.
   MR JUSTICE FRASER:  But that doesn't apply to the
       undercutting prices point.  It does apply to the first
   MR CAVENDER:  It does.  My Lord, but there were particular
       features of the cutting prices point which he
       outlines --
   MR JUSTICE FRASER:  I think they were features of the case
       because what he says at 160:
           "In ordinary circumstances there would be no
       justification for implying such a term ..."
           Pausing there, the term is that the supplier would
       not prejudice the sales by selling the same products at
       a lower price.
   MR CAVENDER:  Quite.  Because it was a duty free thing, and
       the duty free was always meant to be cheaper than the
       outside price.  That was the basis of --
   MR JUSTICE FRASER:  Exactly.  But the three features he
       identifies in 161, 162 and 163 lead him to imply such
       a term.
   MR CAVENDER:  Exactly.  But that is rather different,
       really.  It is there, I'm not sure it helps this debate.
           This debate, my Lord, is in the particular case he
       actually rejected counsel's more general implied terms
       saying there has to be dishonesty.  And in terms of the
       focus of our debate, question: would a necessary
       co-operation term of the type I advance prevent you
       giving dishonest information to the other party to
       encourage it to incur expenditure?
   MR JUSTICE FRASER:  If the definition of a duty of good
       faith is as you are explaining it to be, then a certain
       set of consequences will flow.  And I understand your
       case being that is how you should approach relational
       contracts, that is what they are, and there is no
       necessity for finding it's a relational contract because
       there is the agreed implied term that effectively does
       the same job.
   MR CAVENDER:  It doesn't do the same job, my Lord.  It -- it
       fills any gap it is necessary it fill.  Because
       "necessary" is the game we are in here, Marks & Spencer.
       And it more than fills the gap that is there.
           If we go to Al Nehyan as well, have a quick look at
       that, which is the subsequent case.  It's at tab 8.
       It's a bit more difficult to access, but he again
       obviously refers to Yam Seng.
           If we start maybe at paragraph 150 and pick it up
       there under the heading "Partnership" {A1.1/72/40}.
       Then over the page at 153 {A1.1/72/41}, fiduciary
       relationships, he refers to the Ross River case there
       and joint ventures and then distinguishes that
       relationship to some lesser form of good faith.
           He picks it up at paragraph 167 {A1.1/72/45}, having
       found there was no fiduciary duty:
           "It does not follow ... that he did not owe any
       fiduciary duties ..."
           That his entitlement was untrammelled.
           At 168 he then refers to the Bristol Groundschool
       case and at 169 the D&G Cars case.  Both have five-year
       terms with rollover in them.
   MR JUSTICE FRASER:  167 really summarises at least what the
       judge himself considered Yam Seng to be about.
   MR CAVENDER:  Yes, obviously -- yes, exactly.  That is very
       fair.  He does do that.
   MR JUSTICE FRASER:  It might be thought the editors of
       Chitty would possibly give a bit more consideration to
       167 in this case than they do to their -- but that is
       a sort of comment en passant.
   MR CAVENDER:  Paragraph 170, my Lord, in this, where the
       judge quotes Lord Justice Beatson in Globe Motors is
       quite interesting because he says:
           "... duty of good faith which he characterised
       essentially as a duty to co-operate."
           So that is where my point comes around.
       Lord Justice Beatson said we are talking about this as
       a duty to co-operate.  So it is obviously an interesting
   MR JUSTICE FRASER:  It is an area that is currently open to
       some debate.
   MR CAVENDER:  In terms of the Court of Appeal, my Lord, they
       have expressed their views on this.  You have probably
       seen MSC Shipping.  I'm not sure that made its way into
       my bundle actually.
   MR JUSTICE FRASER:  I don't think it did.
   MR CAVENDER:  But certainly there Lord Justice Moore-Bick,
       it is paragraph 44, wasn't very enthusiastic about the
       approach.  Also the Carewatch case, which I think is
       Mr Justice Henderson, is behind tab 3 of my bundle.
       That is worth having a quick look at because that is
       quite similar to this case in the sense that it was
       a long term contract, although ours isn't, but this one
       was.  So it is potentially into the realm of
       a relational contract.  {A1.1/53/1}.  Taking on
       your Lordship's point, if it is relational, somehow you
       get good faith in --
   MR JUSTICE FRASER:  No, no, that is not what I said.
       I didn't say, if it is relational, you somehow get good
       faith in.  I was explaining that my understanding of the
       term "relational contract" is a term which refers to
       a contract that has a duty of good faith within it.
       That might be right or wrong.
   MR CAVENDER:  I think what Carewatch tells us is it might
       not be right, because this was a long term contract that
       had some of the features that people who say things
       a relational contract contains, and the judge looked at
       it and said: no, there is a perfectly good written
       agreement here.  I see no --
   MR JUSTICE FRASER:  But just because it is not a relational
       contract in that case doesn't mean that the
       categorisation of a relational contract as connoting
       a duty of good faith is incorrect, does it?
   MR CAVENDER:  My Lord, I think the only debate between us --
       and it is just semantics really -- is whether you say,
       in order to call it a relational contract, that
       presupposes you have implied a duty of good faith or
       whether you say it is relational before you decide that
       question, into which you may or may not imply a duty of
       good faith.
   MR JUSTICE FRASER:  It is rather important when one takes
       account of the fact that Common Issue 1 is:
           "Was the contractual relationship between
       Post Office and subpostmasters a relational contract
       such that Post Office was subject to duties of good
       faith, fair dealing ..."
           Et cetera, et cetera.  I have to decide that.  That
       is an issue agreed --
   MR CAVENDER:  Quite.
   MR JUSTICE FRASER:  -- the wording of which is agreed.  It
       is correct that co-operation is one of the six
       components within there.
   MR CAVENDER:  And good faith is as well.
   MR JUSTICE FRASER:  Yes.  It is good faith, fair dealing,
       transparency, co-operation, trust and confidence.  And
       you say, I think, that it could be -- well,
       I don't know.  We will explore this in due course on
       another occasion.  But you say there is no necessity to
       find that in favour of the subpostmasters because the
       agreed implied term of co-operation fills the gap that
       is necessary.
   MR CAVENDER:  Correct.  Exactly so.
   MR JUSTICE FRASER:  Understood.
   MR CAVENDER:  So going to Carewatch then, this is
       an application in this area.  If you go to -- I won't go
       to the detail of it.  Carewatch was the second largest
       provider of home care services in the UK, see
       paragraph 2.  The implied terms here, see paragraph 101,
       were very wide-ranging, pretty similar to the kind of
       thing that is being done here {A1.1/53/2}.  Implied term
       of the agreements, the purpose was to enable it to carry
       on business, et cetera.  If you flick over those.  The
       argument was (a) they are too wide and don't know what
       they mean and (b) they are not necessary and counsel won
       on both points.
   MR JUSTICE FRASER:  Where is the part where the judge
       expressed his disagreement about the nature of
       relational contracts?
   MR CAVENDER:  No, he doesn't express it, my Lord, but this
       is an example of a case that has the incidence, if you
       like, the characteristics of a long-term relationship
       that has the toing and froing of information, all the
       ingredients that point you towards this is relational
       but he says, no, he is not going to imply this raft of
       implied terms.
   MR CAVENDER:  If you look at paragraph 109.
   MR JUSTICE FRASER:  Yes, I have seen that.
   MR CAVENDER:  He cites Yam Seng at the top, above 109
   MR JUSTICE FRASER:  Yes.  I think he is actually citing
       Hamsard v Boots, isn't he?
   MR JUSTICE FRASER:  The commentary of Mr Justice Norris on
       Yam Seng.
   MR CAVENDER:  Indeed.  At 109 is really his finding:
           "In the light of these principles, the first point
       to make about the Norwich agreement is that it contains
       very detailed express terms, dealing with all aspects of
       the franchised business from its inception to its
           So too ours, I would say.
           "The agreement is for a commercial relationship,
       from which both parties hoped to profit, and where both
       sides had interests of their own to protect. I can find
       no 'clear lacuna' in the detailed provisions of the
       agreement which has to be filled if the agreement is to
       work commercially, let alone by terms framed in such
       wide and imprecise language as those which are pleaded."
           So too here, I say.
           That is really just an example of the application of
       the principle in that case.
           We say the important point is there is no specific
       rule of construction or approach to relational contracts
       any more than there is to joint ventures.
   MR JUSTICE FRASER:  Is that a semantic point or is that
       a point of substance?
   MR CAVENDER:  It might be dependent on the way you approach
       it.  Certainly joint ventures have for a very long time
       been the kind of contract that people sometimes try and
       imply a duty of good faith, and Ross River is
       an example.  That does not mean to say in every joint
       venture agreement so-called there is a duty of good
       faith.  That is the only point I make.
           Moving on then to termination on notice.  It's
       rather difficult to follow my learned friend's case
       because he says at paragraph 102.5 {A/1/46} of his
       opening he:
           "... does not contend the court should use duties to
       co-operate or to act in good faith to cut across the
       express provisions."
           And any with limitations in them.  But nevertheless
       he seems to ask you to read down the express right to
       terminate from three and/or six months.  And we see from
       his paragraph 402 at {A/1/155} the period they seem to
       have in mind is twelve months.  You will see what we say
       about this in our written opening at paragraphs 326 and
       following.  That is in bundle {A/2/92}.  And we say
       there is no proper basis to read in any of the vague
       restrictions that the claimants want to introduce.
           For instance, the court is asked, taking claimants'
       case at its lowest, to read in the words "at least three
       months" to mean notice of three months would
       not necessarily be enough.  There is some subjectivity
       in that.  Those words, as your Lordship knows, or
       similar, apply and appear in many commercial contracts
       and have a very clear meaning.
           So when parties say "this contract may be terminated
       on notice by giving three months' notice", they don't
       mean to say "this contract may be terminated on notice
       by giving such notice as may be reasonable but never
       less than three months."  That is really the import of
       what my learned friend is asking you to find.
       Of course, to find that, there would be a dramatic
       change in the law and there is no justification for it.
       In this case the parties are entitled to certainty and
       a minimum period of termination on notice.  It has
       advantages for both sides, as I have said.  It is
       a two-way street.  It is reciprocal.
           My learned friend doesn't spend any time working out
       what that means for his case.  Is he saying that his
       chosen twelve months goes both ways in both the SPMC and
       in the NTC?  He is silent on that.
           One of the other requirements added in is the idea
       of conscientious consideration; there is some duty
       before we exercise to give conscientious consideration.
       Again, it is clearly an unwarranted and unworkable
       requirement.  And presumably it is mutual.  How does it
       work the other way?  If a postmaster gives notice for,
       say, health reasons, do we have to investigate that and
       see whether that is conscientious or not or whether they
       just want to leave for their own reasons.  None of this
       has been thought through.
           The case on termination has all the hallmarks of
       a case that has been invented to try and create
       liability for Post Office for doing what it was
       permitted to do, namely, give notice of three or six
       months rather than trying to make sense of the words of
       the agreement itself.
           We say there is nothing unfair or inappropriate
       about a mutual right to terminate.  Very many commercial
       agreements have it.  It would be very unusual not to
       have it.
           Mr Geys, the example I gave earlier; he had
       a provision in a contract and was terminated, and that
       was an employment relationship, where the courts do give
       a degree of consideration of policy, considerations of
       that kind, as Lord Sumption said in that case.  But only
       to a limited degree, that being a case about repudiatory
       breach, if you recall.  So the idea that somehow you
       should give these words of termination anything but
       their natural meaning in commercial law is, in my
       submission, a non-starter.  And pointing to the fact
       that in practice Post Office might not -- as a matter of
       its own commercial reasons not enforce those contractual
       terms to its full force is neither here nor there.  That
       is a matter for it if particular circumstances apply,
       but that doesn't alter the meaning of the clause.
           Similarly, payments made to outgoing subpostmasters
       when there were closure programmes again says nothing
       about the right of Post Office to rely on its contract.
           On going through these submissions, my Lord, one of
       the points that -- and perhaps I should have dealt with
       it in relation to the implied terms in relational
       contracts is the claimants' case is all at sea in
       relation to what they are alleging at any given time.
       So if you look at the pleading, it is paragraph 63 of
       the Amended Generic Particulars of Claim, we have seen
       that so many times, you know what that says about
       the pleading of good faith, fair dealing, transparency,
       trust and confidence.  But if you look in their written
       opening, paragraphs 138 to 143, there is a germ of
       a different case.  If we turn it up.  {A/1/57}.  At
       paragraph 138, we have the normal -- what we expect,
       139, 140.  If we go to 142 in particular {A/1/58}:
           "For present purposes, the claimants invite the
       court to find that the content of the implied obligation
       extends to:
           "Acting honestly with fidelity to the bargain.
           "Not acting dishonestly ..."
           This seems to be potential for a different case.
   MR JUSTICE FRASER:  I think those are expressions within
       Yam Seng itself.
   MR CAVENDER:  I think they are from Al Nehayan actually.
   MR JUSTICE FRASER:  I think you will find they are in --
   MR CAVENDER:  They might be in both then.  But what it
       doesn't do, my Lord, obviously the claimants have to
       plead a case of what the implied term meant, and
       of course you can justify it by legal principles but
       ultimately you have to come down to, as Yam Seng did and
       Mr Salter did, what is your implied term.  And it is
       a concern that we seem to be ranging the whole range of
       principles without identifying what the actual implied
       term is.  If you read 142 on its own:
           "For present purposes, the claimants invite the
       court to find that the content of the implied
       obligation ..."
           Ie the whole of it, I think, is that.  And we don't
       see that anywhere else.  That is the first we see that,
       acting honestly, et cetera.  I just raise it.  Because
       obviously, if my learned friend wants to amend his
       pleading, then he certainly hasn't done so yet.
           Moving on to evidence, my Lord.  You know the
       Post Office's position on evidence and the extent and
       utility of it in this trial.  You won't be surprised to
       hear me say that the focus will be on pre-contractual
       evidence in terms of documents received, things of that
       kind.  But of course it won't be limited to that any
       more.  I necessarily have to stray further afield.  The
       lead claimants are asking you to prefer their
       recollection to the policies and processes of
       Post Office at the time, and the quality of their
       recollection is obviously -- and even their credibility
       in some cases is in issue.  So that will need to be
           It is also the fact that they are telling the whole
       of their story for the jury effectively, involving
       losses and things of that kind and, when they swear
       their evidence, it all goes in.  What I don't want to be
       said at the end is, well, this evidence is evidence, you
       never challenged it.  Therefore, this is the evidence.
       So I need to challenge that as well.
   MR JUSTICE FRASER:  What, challenge the evidence going to
       specific losses you mean?
   MR CAVENDER:  My Lord, yes.  Not specifically, but just the
       processes really.  Because if my learned friend is going
       to have this sort of jury type trial and put all this
       in, I at least need to test --
   MR JUSTICE FRASER:  I would have thought I have now made it
       clear to both of you at least a dozen times and put it
       in my written ruling and I will make it clear again
       today: you are not having jury trial.
   MR CAVENDER:  My Lord, no.  But the point is that these
       people are quite understandably putting forward their
       complaints and their experiences, much of which we say
       is wholly irrelevant but --
   MR JUSTICE FRASER:  I know.  But, Mr Cavender, that was the
       subject matter of a strike-out application and I have
       given you a ruling on it.
   MR CAVENDER:  Exactly.  All I am saying is the consequences
       of that, so we are all on the same page, one of the
       things is of course the timetable was done on that
       basis.  I'm not saying there is a problem with the
       timetable, we will see how we go, but I may have to ask
       to start early or stay late one day by a little bit.
       That is all I am saying.  I am just raising a little
       flag saying I need to go wider than originally
       anticipated.  I may well not have to but, if I do, at
       least I have mentioned it in opening, that there might
       be some tension on one or two of the days.
           The other point you would have noticed, my Lord, in
       my learned friend's opening -- this really is a point
       for you -- it is paragraph 253 of his opening.
       {A/1/99}.  He says he doesn't want findings on
       particular cases on incorporation.  Did you recall that?
       Paragraph 253.
   MR JUSTICE FRASER:  Which paragraph?
   MR CAVENDER:  Paragraph 253, my Lord.  I'm not quite sure
       what that means really for the trial.  It seems to be
       saying that he doesn't want any findings as to what
       individual lead claimants -- what documents they got and
       what was incorporated into their contract.  He doesn't
       want any findings of fact on that.  Which, in my
       submission, is somewhat surprising.  I thought that was
       one of the main reasons you were having lead claimants.
   MR JUSTICE FRASER:  I read that as going to termination.
       But I might be wrong.
   MR CAVENDER:  No, I think this is talking about bringing
       terms to the attention of the parties.  Look at the last
       line, my Lord.  It is going towards -- when we get
       a lead claimant up, there are various documents I will
       put to them, like the Serv 135, the ARS this, the ARS
       that.  250 I think makes that point clear.
           My understanding is that one of the main reasons we
       have lead claimants is to give the arguments on things
       like Interfoto and UCTA some real substance.  So you
       say: yes, I find they received Serv 135 or they received
       whatever it was, so knew at the time or had the
       opportunity to take legal advice, all these things.
       Therefore, they were incorporated into their contracts.
   MR CAVENDER:  My learned friend seems not to do that, and
       I'm not quite sure why.  I would have thought that was
       one of the main reasons they are here.  Otherwise, why
       have them really at all?  Because that is one of the
       main roles they serve factually.  I am in
       your Lordship's hands.  Obviously you make findings or
       don't make findings but I thought I would bring to your
       attention this is what is being asked for.  He has
       not covered it opening.
   MR JUSTICE FRASER:  I understood from what you said about
       ten minutes ago -- I might be wrong -- that you are
       going to approach each of the lead claimants
       conventionally in terms of putting documents to them
       that they saw at the time or didn't see at the time,
       et cetera.
   MR CAVENDER:  Correct.  But the question is what you do
       with -- is the court going to say it is not going to
       make findings on that or ...
   MR JUSTICE FRASER:  I think that is probably something to be
       addressed in closing, isn't it?  Rather than in advance
       of the evidence.
   MR CAVENDER:  Possibly.  I just wondered if we could agree
       what the game is on that score; whether it is just
       exemplar or whether we are actually drilling down --
       because it may depend how long I spend and the time the
       court spends on this.  If it is all hypothetical and it
       is just exemplar of the sort of things that were around,
       that is one thing.  If there are to be findings of fact
       that Mrs Stubbs or Mr Bates or whoever received their
       contract on date X, then that is a rather different
       beast.  And here the claimants are asking you not to
       make findings on it, which is slightly unusual, in my
       experience.  But there you are.  I can't say any more
       about that.
           You will see what we said in our written opening
       about things that it would be useful -- findings to make
       and not to make.  In your number two judgment you made
       it clear you are not making findings on the breach
       allegations or allegations about Horizon.
   MR JUSTICE FRASER:  Everyone is agreed about that.
   MR CAVENDER:  See paragraph 52.  What I also ask that you
       don't do is make any findings of fact that go to -- are
       ancillary to those breach allegations or Horizon
       allegations, rather than the Common Issues.  Otherwise,
       again, you have the difficulty of overlap and arguments
       about issue estoppel and all these kinds of things.
   MR JUSTICE FRASER:  It depends what you mean by findings of
       fact that go to breach.  I imagine, if there are any
       necessary findings of fact at the end of the evidence in
       terms of disputes of fact as to whether Mr Bates got
       document X, you won't want me to leave that floating in
       the air, will you?
   MR CAVENDER:  My Lord, no.  That goes to my first
       category of --
   MR JUSTICE FRASER:  I know that and I haven't yet bottomed
       that out with Mr Green.  Because, on one view, a finding
       of fact that goes to breach could involve any finding of
       fact in relation to the contractual relationship,
       couldn't it?
   MR CAVENDER:  But what I am talking about is downstream.  So
       the training wasn't good enough, that they didn't have
       sufficient report writing, that they didn't have enough
       help with investigations; all those things that are
       downstream.  Potentially breach.  We haven't brought the
       evidence to the trial to deal with it.  There hasn't
       been full disclosure on some of these issues.  So we
       won't be dealing -- and this has been our persistent
       position -- obviously this is a trial about the contract
       and the relationship.  Those are my submissions.
       Obviously the court will do what it will do.
           The only other point I was going to touch on was the
       question of order of closing submissions.  We will come
       to that later, but the reason I raise it is, and we have
       raised it in our written openings, is how many times --
       and it is quite surprising when you go through it -- we
       don't know what the claimants' case is.
   MR JUSTICE FRASER:  I have heard that many times from many
       different defendants.
   MR CAVENDER:  My Lord, in this case -- let me give you two
       examples then.  They say that all the relevant
       contractual terms that are in issue in this case, all
       the real ones, are all unreasonable under UCTA.  They
       have no pleaded case on why, in relation to each term,
       that is the case.  Normally you have a trial that is
       about one of them perhaps --
   MR JUSTICE FRASER:  You want to go last.
   MR CAVENDER:  Correct.  I have to go last.
   MR JUSTICE FRASER:  You have an almost unanswerable case as
       to why you should go last, which is Mr Green has not
       opened on the law at all.  So if you are going to be
       given the opportunity to reply on the law, you would
       have to go last.  As I have made clear to everyone, this
       case is not going to be decided on who gets the last
   MR CAVENDER:  But, my Lord, this is an extraordinary case,
       in my experience, where you don't know what the other
       side is saying.  For instance, they say every discretion
       or right in the contract is subject to an implied term
       of exercising it, not capriciously, et cetera.  They
       don't identify which terms they say that applies to.
   MR JUSTICE FRASER:  I understand.
   MR CAVENDER:  It is grossly unfair for me to get up first,
       given there is nothing in the opening to decide which
       ones --
   MR JUSTICE FRASER:  Mr Cavender, I understand.
   MR CAVENDER:  I am obliged.  I won't say any more about
   MR JUSTICE FRASER:  You have raised that point before in
       slightly different terms.  I understand the position
       about closings.  One question I have for you both, but
       I will ask you first, is: I'm always concerned in any
       lengthy trial when somebody mentions tensions with the
       timetable.  You have seen I think, well, I know you
       have, that I managed to carve out an extra week, so that
       we are now using the week of the 3rd.
   MR CAVENDER:  My Lord, yes.  For submissions.
   MR JUSTICE FRASER:  You will have also hopefully on your
       desks this morning had a bunch of miscellaneous points
       about some minor timetable --
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  When you say "tensions in the
       timetable", do you mean that you anticipate now going
       past the end of Wednesday the 14th to cross-examine the
       claimants' witnesses?
   MR CAVENDER:  My Lord, that is what I anticipate, but
       I anticipate I won't need to with a little bit of
       wriggle room for half an hour here and there.
   MR JUSTICE FRASER:  Because anticipating that four days
       isn't going to be enough is more than a tension of the
       timetable, it is actually seeking a review of the
   MR CAVENDER:  My Lord, what I am trying to say is I might --
       if, for instance, Mr Bates takes longer because he is
       the first.
   MR JUSTICE FRASER:  I understand that.
   MR CAVENDER:  So if I finish tomorrow at 4 o'clock and
       Mr Bates is in the witness box, which is possible, and
       Mrs Stubbs is meant to be appearing as well, then
       I really need to finish Mr Sabir by the end of Monday,
       come what may.
   MR JUSTICE FRASER:  This is why I need you -- and, in fact,
       I thought I had asked you to do this last time, and the
       timetable that came through was two-thirds complete, you
       have to plan out between the two of you which people are
       going to be called on which days.
   MR CAVENDER:  We have done that, my Lord.
   MR JUSTICE FRASER:  No one has told me that.
   MR CAVENDER:  I think if you look at the chronology, and
       behind that is --
   MR JUSTICE FRASER:  No, the one I have is just running
       order.  I don't have a document -- and in fact, that is
       why it is included on that point of miscellany.
           Let's not take up time.  If it exists, send --
   MR CAVENDER:  It exists, my Lord.  If you don't have it, we
       can provide a hard copy.
   MR JUSTICE FRASER:  I know Mr Bates is going to be first,
       and I assumed you would be most of tomorrow with him.
   MR CAVENDER:  Exactly.  It depends how we go, but Mrs Stubbs
       is also on the ticket for tomorrow.
   MR JUSTICE FRASER:  Is she on the ticket going over into
       Monday or not?
   MR CAVENDER:  Yes.  She is, yes.  So is Mr Sabir.  If I get
       through Mr Sabir on Monday then we are okay.  But what
       I might do tomorrow, if we don't get on that well, is to
       ask to maybe sit at 10 o'clock on Monday.  We are not
       talking about extra days.
   MR JUSTICE FRASER:  I understand.  It is just that it
       affects other court business, that is why I raise it.
       (Handed)  Thank you very much.  Yes, I haven't actually
       got this document.  Thank you very much.
   MR CAVENDER:  My Lord, those really were my --
   MR JUSTICE FRASER:  And the hard start for your witnesses on
       that Thursday the 15th, which is the point I made this
       morning, I assume that is uncontroversial ...
   MR CAVENDER:  My Lord, yes.
           I need to ask Mr Green two points which have arisen
       out of what you said.  Is there anything you would like
       to add?
   MR CAVENDER:  My Lord, no.
   MR JUSTICE FRASER:  Do be assured -- and I know it might not
       seem this necessarily to everyone in court -- I have
       read both of your written submissions, including all the
       appendices or annexes with considerable care and I will
       be reading them again.
   MR CAVENDER:  I am obliged.
   MR JUSTICE FRASER:  Mr Green.  The first point about order
       of closings is, so far as I am concerned, a non-point.
       But you have the opportunity to spend a couple of
       minutes trying to persuade me I am wrong; that
       Mr Cavender should have the Wednesday and the Thursday
       and you should have the Monday and Tuesday.
   MR GREEN:  My Lord, can I just raise one issue and that is
       this complete opacity about which of our implied terms
       are included, or "governed" as they said in their
       pleading, by the terms that they have admitted.  So --
   MR JUSTICE FRASER:  No.  I am dealing purely with
       a logistical point.  I am giving you the opportunity --
   MR GREEN:  I am happy to go first --
   MR JUSTICE FRASER:  I don't want to hear whining about
       pleadings on the point that I am asking you about.
   MR GREEN:  My Lord, can I express the whining in a different
       way and say I am perfectly happy to go first, so that my
       learned friend is left in no doubt, provided that his
       position by the end of the trial, by the end of the
       evidence, as to which of the incidents --
   MR JUSTICE FRASER:  Mr Green, that might be a very good
       forensic point but it might be that the position is no
       more clear, in which case it is what it is and I will
       take a view.  I understand --
   MR GREEN:  I am only highlighting the difficulty I will
   MR JUSTICE FRASER:  I know.  I am just talking about the
       order in which the two parties go, and I think I have
       made it clear on the basis -- apart from anything else,
       just conventionally -- you haven't opened on the law.
       I understand why that is; you only had half a day.  So
       it is sensible for him to go second and you can go
   MR GREEN:  My Lord, I am grateful.
   MR JUSTICE FRASER:  I haven't actually really given you
       anything but I am happy that you are grateful.  The next
       point is Mr Cavender's point on your paragraph 253.
   MR GREEN:  We had understood that was the fruit of
       defendant's own sensitivity.  Because issues 5 and 6,
       when those issues originally came up and were agreed, we
       had understood it was the defendant that was sensitive
       to not having any actual findings in a specific case as
       to whether in fact adequate notice had been given of the
   MR JUSTICE FRASER:  Mr Green, it sounds as if you have
       misunderstood or their sensitivities have in fact
       resolved themselves.
   MR GREEN:  Which is fine by us.
   MR JUSTICE FRASER:  Then you don't need to say anything
   MR GREEN:  I am most grateful.
   MR JUSTICE FRASER:  Obviously we will start with Mr Bates
       tomorrow.  I am grateful to you all for your submissions
       today.  10.30 am.  And, Mr Cavender, we will just review
       progress generally at the end of tomorrow and we will
       generally review it -- ordinarily I would review it
       every Thursday, but we might review it and keep it under
       constant review because of the points you have made.
       Anything else?
   MR GREEN:  My Lord, no.
   MR JUSTICE FRASER:  Thank you all very much.
   (4.20 pm)
        (The court adjourned until 10.30 am on Thursday,
                         8 November 2018)

   Opening submissions by MR GREEN ......................1
   Opening submissions by MR CAVENDER ..................80

Day 1 transcript - Wed 7 November - Opening arguments
Day 2 transcript - Thu 8 November - Claimants: Alan Bates, Pam Stubbs part 1
Day 3 transcript - Mon 12 November - Pam Stubbs part 2, Mohammad Sabir
Day 4 transcript - Tue 13 November - Naushad Abdulla, Liz Stockdale
Day 5 transcript - Wed 14 November - Louise Dar
Day 6 transcript - Thu 15 November - Post Office: Nick Beal, Paul Williams
Day 7 transcript - Mon 19 November - Sarah Rimmer, John Breeden, AvdB part 1
Day 8 transcript - Tue 20 November - AvdB part 2
Day 9 transcript - Wed 21 November - AvdB part 3, Timothy Dance, Helen Dickinson, Michael Shields part 1
Day 10 transcript - Thu 22 November - Michael Shields part 2, Elaine Ridge, David Longbottom, Michael Webb
Day 11 transcript - Mon 26 November - Michael Haworth, Andrew Carpenter, Brian Trotter