Wednesday 5 December 2018

Common Issues trial transcript: Day 14

This is the unperfected transcript of the 14th day of the Common Issues trial in the Bates and others v Post Office group litigation. 

It is the first day of closing submissions from the Post Office's QC David Cavender, and should be read alongside Mr Cavender's written closing submission, which you can read on Scrib'd via this link or embedded on this blog here.

This is the menu for the other transcripts and the Common Issues Trial Menu which has links to my write-ups and more documents:

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 14 follows:

                                     Wednesday, 5 December 2018
   (10.30 am)
                Closing submissions by MR CAVENDER
   MR CAVENDER:  Good morning, my Lord.
   MR JUSTICE FRASER:  Mr Cavender.
   MR CAVENDER:  The court obviously has the benefit of some
       detailed written closing submissions from my side and
       I'm obviously not, given the time available, going to be
       able to go through all of those, but of course
       everything we say in there and have said throughout the
       case is maintained.  What I am going to try and do is
       bring the case to life in the important aspects to make
       our position clear.
           What I intend to do, by way of roadmap, is firstly
       to do an introduction to outline the tools available
       really for the job set for your Lordship, indicate the
       findings we think you should make and some comments on
       the approach of the claimants.  That is a rather longer
       section than I would like, but there are matters going
       to the background of this trial and what it is and isn't
       to determine that we need to go into.
           Secondly, I am going into the law on interpretation
       of contracts and on implied terms.  Again, very
       important because there seems to be a gulf between
       the parties as to the application of those terms.
           Thirdly, I am then going to go into construction to
       construe the express terms of the contract, particularly
       those relating to accounting, namely, clause 12 in
       section 12 and clause 4.1.
           I am then going to move to the agreed implied terms,
       because they are agreed.  My learned friend has not
       sought to withdraw his admission of those.  They
       themselves have a construction and a meaning which the
       court needs to determine.  And only then go to the
       question of relational contract and the implied terms
       debate that goes with it.
           I may or may not get on to agency today.  I suspect
       not but I might.
   MR JUSTICE FRASER:  So that is for today, yes.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  Agency is effectively going to be part
       two with today being part one.
   MR CAVENDER:  Correct.  But it depends --
   MR JUSTICE FRASER:  It depends how you get on.
   MR CAVENDER:  -- how much debate I have with my Lord whether
       we go through it quicker or not, but we may or may not
       get to agency.
           So introduction then.  Standing back, in my
       submission it was recognised at the outset the depth and
       the breadth of the attack on the contractual
       relationship that is mounted by these claimants, and in
       my submission and experience, is unprecedented.  They
       seek to replace the existing relationship of principal
       and agent in the business context and replace it with
       some kind of pick and mix employee-type, but not
       employee, relationship, treating the SPMs as employees
       when it suits them and not when it doesn't.
           If you imagine a copy of the SPMC or the NTC that
       contains all of the caveats to the express terms, the
       constructions my learned friend puts forward, all the
       implied terms, the strikings out based on whether
       incorporation or UCTA, you would have a document so
       covered in red that it wouldn't represent anything like
       the bargain the parties struck at inception.  That
       should cause your Lordship serious concern, but that is
       what the claimants' case is.
           The weapons they use to do that are: recasting the
       nature of the relationship entirely, ignoring agency,
       ignoring the fiduciary duties.  Blatantly ignoring the
       words of the contracts, treating them as if they are not
       there, and putting in their place words that they think
       better fit.  Ignoring the existence of the other implied
       terms, the agreed implied terms.  You didn't hear a word
       from my learned friend on that, literally not a word.
           They then seek to imply, without warrant or
       authority, a further 21 implied terms they say on the
       authority of Yam Seng, which would introduce completely
       one-sided and unworkable obligations and obligations
       that would be contrary to the express terms of the
       contract and the express nature of the agency
           Then they seek to argue that the main operative
       terms, that is all the operative terms, are not
       incorporated into the contract.  Insofar as they are
       incorporated they then seek to strike them down under
       UCTA, and so far as the termination provisions are
       concerned, they say they don't represent the true
       agreement, see Autoclenz.
           My Lord, you should not approach this in a silo and
       look at each of these points completely independently
       when adjudicating upon them.  It is the whole effect on
       the contractual relationship that your Lordship is
       concerned with.  Of course there are different rules and
       different approaches to the different points they make,
       but the overall effect is one your Lordship should keep
       in mind.
           What it is, without sounding too pompous about it,
       is the attacks we see in this case are an attack on the
       freedom of contract in terms of a commercial
       relationship and on the certainty of law.  The attacks
       go so deep and so far they do in fact attack those very
       basic principles.
           The determinations to be made at this trial relate
       principally to interpretation and the implication of
       terms.  Your Lordship said in debate with my learned
       friend yesterday, or perhaps the day before, quite
       rightly, you can interpret a contract without evidence.
       You can also imply terms without evidence and often you
       do.  Usually you do.  You can sometimes have a little
       bit of factual matrix to set the background that may or
       may not be true and relevant.
           But what has happened here is something quite
       different.  There has been an industrial scale
       introduction of evidence.
           As your Lordship will know, and I will go through
       the law, facts relating to how the relationship
       proceeded post-contract and questions of breach are
       irrelevant to making determinations as to the meaning of
       the words in the contract.  Similarly, they are
       irrelevant to the implication of terms.  So too are the
       subjective views of either side, including views on
       policy documents, that wouldn't have been available to
       the contracting parties.
           This is not a case where there are allegations of
       estoppel or waiver.  We are not dealing with
       rectification.  We are dealing with interpretation and
           So in my submission, approaching this the court
       should recognise that such matters are irrelevant in
       normal litigation, but in my submission, my Lord, this
       is not normal litigation, it is group litigation.  So
       they are doubly irrelevant, the factual matters that
       apply to these particular six.  Because the outcome of
       this trial affects 557 people, and therefore the
       individual facts and experiences of this particular six,
       randomly chosen, is even more irrelevant.
           The six leads were never intended to be and are not
       representative of the 557.  They are just six random
       leads, three chosen by each party, the only criteria
       being that they cover the SPMC and the NTC periods.
           Any judgment that is based closely on the
       experiences of those six is going to be, in my
       submission flawed, and of no use to the rest of the
       group, which is the reason why so much money and time
       has been spent on this case.  It isn't for the six, it
       is for the 557.
           My learned friend tries to obscure this by inventing
       what he calls generic evidence which he says has been
       given in this trial.  But there is no such thing as
       generic evidence.  What your Lordship has heard from the
       six is their own experiences.  That is the result of
       your Lordship ordering that the Common Issues be
       determined in the context of the six lead claims.  But
       what has happened in this court over the last four weeks
       is much more akin to some sort of public inquiry into
       the Post Office contracts which, in my submission, is
       an inappropriate way to proceed.
           The court will bear in mind, as we say at
       paragraph 16 of our closing {A/8/10}, a significant
       number of the 11,500 subpostmasters in the network are
       in fact companies or multiples.  The way my learned
       friend has presented this case is as if all of them are
       individuals in the position of someone like Mrs Stubbs.
       They are not.  So if your Lordship took the view and
       interpreted the contract on the basis they were, in my
       submission that would be wrong.
           In my submission, given the avalanche of irrelevant
       evidence and questioning by the claimants about such
       post-contractual facts and breach, there is a real risk
       of this court being led inadvertently into error by
       implicitly taking that evidence into account when
       deciding the questions of interpretation and implied
       terms as they apply to the 557 claimants.
           The claimants must anticipate that, otherwise their
       approach would be pointless.  Now that we have the
       claimants written submissions, that flawed approach has
       been made clear.  They set out in the first 134 pages of
       their narrative what can only be described as what they
       say is post-contractual evidence, or what is
       "post-contractual evidence", in inverted commas, and
       then they get to the issues.  A review of that evidence
       shows it is often partial and sometimes inaccurate.
           We have, and I will hand up in a moment, a table of
       a number of those inaccuracies.  I'm not going to go
       through them all.  But you should proceed with care with
       that document because in some respects it is tricky.
           The claimants expressly ask the court to make
       findings on the meaning of the contract based on
       post-contractual evidence, views of what witnesses are
       said to retrospectively have expected.  That, my Lord,
       is the wrong test.
           If you look at paragraph 22 of their closing
       {A/6/11}, they say contractual liability for debts falls
       to be considered against that background having set out
       in the earlier parts a whole range of inadmissible
       evidence.  No legal justification is suggested for that
       then or now.
           If you remember my learned friend yesterday, twice
       he said he was going to take your Lordship and explain
       to you the basis of the admission of all this
       post-contractual evidence.  He has not done so.  He was
       obliged to do so to help the court, he was going to take
       an expansive view of this issue-by-issue to outline what
       evidence he says that he knows is contested is
       admissible on each of these issues and what the legal
       justification for it is.
           He has nowhere done that.  If you read their closing
       submissions, there is just acres of evidence and then
       incorporation by reference saying all admissible.  It is
           At paragraph 86 {A/6/32} of his closing, he asked
       the court to consider the robustness of Horizon and then
       seeks to refer to evidence that suggests that Horizon
       was not robust.  This is the wrong question.  The
       contractual question is what parties at the time of
       contracting would have reasonably expected in relation
       to Horizon.  And that was the question I was seeking to
       elicit from the witnesses, not about implied terms, but
       by way of contractual background for a reasonable person
       in that position.  This is to say nothing of the fact
       that this is clearly a Horizon issue.
           In relation to Horizon, while we are here, there is
       no pleaded issue or case about the knowledge of
       Post Office about problems with Horizon.  There is
       nothing in the opening of these claimants suggesting
       that Post Office had a certain knowledge at a certain
       level of seniority which was corporate knowledge about
       Horizon and its operation or difficulties with it.
           No questions were put to any witness, let alone
       a senior witness, to try and elicit, over the period
       when Horizon was in play, what the corporate knowledge
       of the Post Office was about Horizon.
   MR JUSTICE FRASER:  By "corporate knowledge", do you mean at
       board level?
   MR CAVENDER:  My Lord, yes.  But there is no building of
       a case.
   MR JUSTICE FRASER:  In terms of corporate knowledge at board
       level, I don't think there were any directors, were
       there?  I might be wrong.
   MR CAVENDER:  No, my Lord.  But there was
       Angela Van Den Bogerd, the most senior witness.  If you
       look at her, it was never put -- investigated what her
       knowledge was at different stages and what the view of
       Post Office was.  And also this would be almost a plea
       of quasi-fraud, that you knew that this system had
       serious problems -- my learned friend's case -- and you
       hid that from somebody.  If you are going to make that
       case, (a) you have to plead it, and (b) you have to put
       it.  Neither was done.
   MR JUSTICE FRASER:  Let's put quasi-fraud to one side
       because I'm not quite sure what that means.
           Mr Green did put to Mrs Van Den Bogerd a series of
       documents demonstrating what he said showed an awareness
       within the Post Office of certain operating either
       difficulties or features or whatever neutral term one
       wants to put.
   MR CAVENDER:  Quite.
   MR JUSTICE FRASER:  At the end of which he asked her why he
       had had to effectively ferret it out of her in
       cross-examination.  So he did put that case to her.
   MR CAVENDER:  He did, but what he didn't -- what it seems to
       be, and your Lordship has asked for these documents to
       be collated, which caused me some concern, which is why
       I am making this submission, is that if there is a case
       somewhere that on interpretation -- part of the factual
       matrix, we say, is that the parties at the time,
       reasonable parties in the position, would have expected
       Horizon to be robust and all the things I put.  That
       case has not been impugned on this basis and nor could
       it be, because the one thing you would get from all the
       witnesses in Post Office side is a complete faith in
       Horizon.  That is one of my learned friend's complaints,
       that he said almost they were blind to it.  They had
       blind faith in it, I think.  He doesn't say that, but
       that is the effect when he is dealing with the
       complaints, that Post Office believed in their system.
           So there is no factual basis for it either, in
       truth, even though --
   MR JUSTICE FRASER:  As far as the exploration of the way in
       which the six in fact operated when they were
       subpostmasters, as a point of construction concerning
       each of their individual contracts, then obviously the
       orthodoxy is clear about the way in which that is done.
       But so far as Common Issues 12 and 13 are concerned,
       which are the agency accounting point, the court had to
       have evidence as to how that was in fact (a) required to
       be done or supposed to be done --
   MR CAVENDER:  My Lord, no, that is a question of
   MR JUSTICE FRASER:  I'm not sure it is, Mr Cavender.  If you
       turn up the Common Issues.  I know there are various
       versions of these floating around because I asked for
       the pleading references to be extracted.  I am actually
       looking at the one produced --
   MR CAVENDER:  Which one, my Lord?
   MR JUSTICE FRASER:  I am looking at the one produced for the
       beginning of the trial but I don't think it much matters
       because the wording of the issues is the same in all of
       them.  If you look at number 13, and in fact can someone
       give me the reference on the common screen so we can
       call it up, the Common Issues on the common screen.
   MR GREEN:  {B1/1/1}.  Common Issue 13 I think is on
   MR JUSTICE FRASER:  So {B1/1/3}.
           It is of course correct that a court can and often
       does construe contractual terms without evidence because
       sometimes -- well, for all the reasons we don't need to
       go through.  But the wording of these Common Issues was
       agreed by the parties.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Now, absent any evidence at all or any
       agreement as to facts between the parties, which at one
       early naive stage of the case I did invite your
       predecessor and Mr Green to do and it only went a
       particular distance, how without evidence of any
       claimant would any judge know how or what any branch
       trading statement account that was signed and/or
       returned to Post Office, even mechanically, was
       approached or expected to be approached by
       a subpostmaster?
   MR CAVENDER:  My Lord, the fact of the document, obviously
       you need to fit it into -- but in terms of the burden,
       the obligation.  Obviously 13 -- if you read from 12
       first, 12 is the extent really -- the legal effect of
       the agency is really what 12 is because the extent is
       not in dispute, ie these people were annuals.  My
       learned friend accepted yesterday, very fairly, that
       they are fiduciaries in relation to the stock and cash.
       So it is really the legal effect.  They're agents, a
       certain law is imported in relation to that.  And my
       learned friend's point is to what extent does the full
       effect of that apply to me?  We say it applies to full
       effect, but obviously if there is a disputed item when
       you submit your account then that is outside it.
   MR JUSTICE FRASER:  That is something which may or may not
       have become more important recently.  But so far as
       evidence being irrelevant of how a subpostmaster or
       postmistress operates their branch, absent evidence from
       a claimant along the lines of: these are the buttons,
       this is what would happen, these are your choices, this
       is in fact how you go about it.  And countervailing
       evidence from the Post Office along the lines of: well,
       actually, what was supposed to happen was X, Y or Z, or
       these were the choices.  And as you put it to each of
       the claimants: actually, that is not your choice.  What
       you are supposed to do is A, B, C, not X, Y, Z.
           I am struggling to see how that evidence in law can
       be irrelevant to Common Issue -- well, in particular 13,
       but also partly 12.
   MR CAVENDER:  12 is a question of law as I've just outlined.
       13 --
   MR JUSTICE FRASER:  If you look at the Defence, paragraph
       91(1) at {B3/2/41}, 91(1) describes the functions --
   MR CAVENDER:  Agent fiduciary.
   MR JUSTICE FRASER:  From line 3 onwards, evidence as to how
       those functions were performed, surely that has to be
   MR CAVENDER:  Relevant to what, my Lord?
   MR JUSTICE FRASER:  It is the Post Office's pleading.  It is
       relevant to what the subpostmasters were in fact doing.
   MR CAVENDER:  What they are doing is unpacking the fiduciary
       duties and the nature of the accounting relationship,
       ie they were agents and this is what they were doing.
       The way --
   MR JUSTICE FRASER:  Exactly.  That is exactly the point.
       They were agents and this is what they were doing.
   MR CAVENDER:  Under the contract.
   MR JUSTICE FRASER:  Obviously.  But the way in which they
       were doing it, how can that be said to be irrelevant?
   MR CAVENDER:  Because the debate is ... well, it's not --
       they are agents, contractual agents, they are
       responsible for the cash and stock at the branch.  They
       are fiduciaries in relation to that.  The law -- so it's
       a question of construction of the contract.  The law of
       agency is then incorporated and that is the position.
           Mr Green's case, as I understand it, is that for
       some reason the full law of agency doesn't apply.  There
       are certain principles of law where an agent can
       challenge an account or set it aside and we accept
       those.  In principle, on the facts, individual agents
       can try and do that.
           We also say in this relationship if there is -- and
       in any relationship -- if an agent disputes an account
       when making it, obviously he is not stating that part of
       the account he disputes.  That isn't peculiar to
       Post Office or how they do it, that is just a simple
       statement of law.  That if you state an account but put
       reservations in it or make it subject to dispute, you
       are not -- the imprimatur of the legal principle doesn't
       apply to that bit you are disputing.  That is a question
       of law.
           How the mechanics of that happened here aren't
       particularly relevant.  We have heard about them.
       I make no complaint about the bare fact that there is
       some high level description of the system.  But,
       my Lord, what we have gone into in this case, because of
       the evidence, is all the accounting evidence, their
       particular experiences, their potential falsification of
       accounts.  And you will see in my submissions I have
       steered well clear of that as well because it is unfair
       to those witnesses to make findings about that, there
       has not been full disclosure on these matters, and this
       is not an appropriate trial to get into the detail of
       how they accounted.
   MR JUSTICE FRASER:  On an individual basis.
   MR CAVENDER:  On -- certainly on an individual basis but
       also, my Lord, there has been no -- Post Office has not
       led any evidence on the accounting relationship more
       generally and how it all fitted together.  There is no
       witness statement, there is -- no one gave that evidence
       other than by reference to my learned friend, in a
       rather scattergun way, without being rude to him, over
       the period of the 20 years, various documents.  And
       there is a real risk of my Lord getting the wrong end of
       the stick or not getting the full nature of the
       evidence, because there hasn't been full disclosure on
       that, there has not been evidence in relation to it, and
       it is not an issue for this trial.
           So in some ways I confess and avoid, in relation to
       the second of the two issues, yes, you need an
       understanding, a very Noddy understanding --
   MR JUSTICE FRASER:  A very ...?
   MR CAVENDER:  Noddy understanding, of how the system worked
       here just to talk about burden of proof.  But all you
       need to know is there was a branch accounting statement,
       it was done monthly or five-weekly, they were able to
       dispute it.  That is all you need to find.  Then as
       a matter of law you decide who the burden of proof is on
       having regard to the clauses and having regard to the
       nature of the relationship.
   MR JUSTICE FRASER:  So the choices that presented themselves
       to a subpostmaster in terms of accept now, make good for
       cash, make good by cheque or settling centrally, you are
       saying (a) I don't need to know them, and (b) I think
       you are saying they are irrelevant to deciding Common
       Issue 13.  Is that right?
   MR CAVENDER:  My Lord, it's the granular detail of the
       things you talked about --
   MR JUSTICE FRASER:  That is what I am exploring.
   MR CAVENDER:  -- beneath the point you do have to determine
       which we say, in answering the Common Issue, is the
       normal rules of accounting apply, they are agents,
       fiduciaries, subject to any amounts they put in dispute.
       And they can do that in various ways.  Your Lordship may
       find it more helpful to put it in that general way
       because putting a dispute obviously in Post Office
       language is you ring up and you register a dispute.
           Your Lordship may say, and this is why it is
       important to know what one is doing here, that
       maybe --that certainly would be sufficient.  There may
       be things short of that that would indicate a dispute if
       you had raised some query or done something else in
       individual cases.  You might have written a letter.
       I think in relation to one of the -- Mr Sabir hadn't
       actually disputed, do you remember, he hadn't accounted
       for the £5,000 and then disputed it.  He said he had
       been in -- some two years earlier there had been
       a letter and this sort of thing.  So that wasn't
       accounting for it and then disputing it under the
   MR JUSTICE FRASER:  So you do accept that I need to consider
       how the process of accounting operated?  Because if
       I didn't I wouldn't necessarily, for example, be able to
       decide what you have just submitted, whether that is
       correct or not.
   MR CAVENDER:  My Lord, it is a question of degree,
       I suppose.  But what you don't need to do and what in my
       submission you cannot do -- there has not been a full
       disclosure of this -- is the full accounting in relation
       to how it worked.  You haven't -- for instance, there
       has not been disclosure of all the details of, say, the
       TCs my learned friend is very keen on.  You haven't seen
       any of the list of the TCs with supporting information
       that is given to them.  You haven't seen and there has
       not been disclosure of all the accounting evidence you
       need to go through to draw the inferences my learned
       friend on a -- again without being rude -- smoke and
       mirrors basis asks you to make.
           So these sort of questions will need to be
       determined on proper evidence at the breach trial.  What
       your Lordship is doing now is deciding what the rules
       for that are going to be, obviously together with the
       Horizon trial.
   MR JUSTICE FRASER:  That is correct.  But by "the rules",
       one has to consider, doesn't one, the way in which the
       system that the Post Office set up to deal with TCs and
       discrepancies and account for them or not account for
       them and execute a branch trading statement was
       established.  Because otherwise all any judgment --
       well, no judgment on a case of this nature would be
       adequate if it simply said in two sentences: and each
       subpostmaster or subpostmistress was required to account
       to Post Office for the trading of the branch in
       the preceding month.  That is not what Common Issue 13
       requires me to do.
   MR CAVENDER:  My Lord, that point you just made is not in
       dispute that they had to account.
   MR JUSTICE FRASER:  I know it is not.  But what I am saying
       is when one looks at Common Issue 13 -- it would have
       been possible in a different -- if the parties had
       approached this differently, it would have been possible
       at the very beginning for the Common Issues trial simply
       to have established points of contractual construction
       and just said to the court "Please decide what is the
       proper legal construction of clause 12(12), what is the
       proper legal construction of 4.1".  The parties jointly
       didn't do that.  They drafted these very numerous, 23 of
       them, issues.  Some of them are pure points of law on
       the wording but others of them aren't, it seems to me.
       Have I got that wrong?
   MR CAVENDER:  My Lord, I think you have in a way, because
       the burden is just an incidence of the relationship of
       agency which is contractual.  And Issue 13 is trying to
       put meat on the bones of, well, in this relationship was
       there something different or not?  Clearly there wasn't.
       They were agents, they were fiduciaries.
   MR JUSTICE FRASER:  I know that and I know that is
       the Post Office's case.  But the claimants' case is the
       opposite to that.
   MR CAVENDER:  I'm not sure it is.  My learned friend hasn't
       got a case, and I think you put this to him yesterday,
       that the postmasters were unable to dispute matters they
       didn't want.  When all was said and done throughout the
       period, they could dispute shortfalls in TCs or TCs that
       became shortfalls or free-standing shortfalls.  They
       could do so and in a variety of ways, but the best and
       most obvious way, repeatedly in documents and in
       evidence, was they could ring the Helpline.
           So if that were otherwise, if somehow there was some
       case being run here that they could not do so, so they
       were forced to false account, they were forced to --
       I could begin to see it.  But that is not the case being
   MR JUSTICE FRASER:  A different way of putting it is
       this: the answer to Common Issue 13 is not agreed
       between the parties.
   MR JUSTICE FRASER:  That therefore means in order to address
       Common Issue 13 I have to address my mind, don't I, to
       how a subpostmaster or subpostmistress came to account
       to Post Office each month or each period?
   MR CAVENDER:  My Lord, no.  In my submission that looks at
       the wrong question.  There is no claim here that
       Post Office agreed at some time, or within the contract,
       to disapply or limit in some way the agency principles.
       That is not a claim being advanced, nor could it be.  So
       you are starting from the position you have an agency
       relationship, a fiduciary relationship, in relation to
       stock and cash and what goes on in the branch.  And you
       are told -- and you can have evidence if you like, it is
       in the documents -- that they have to account monthly or
       five-weekly in the later period.
           In terms of mechanics how do they do it by way of
       a branch trading statement?  All 13 asks you to do is
       really pulling out anything from 12 as a matter of law.
       How is that done in terms of burden of proof?  Well,
       look at the answer to 12, they are agents, and if they
       want to dispute account they have to do so.  It doesn't
       require you and entitle you, in my submission, to go
       into in fact all the details of the relationship
       et cetera, particularly in a case where it is no part of
       the case that (a) the contract was varied in some way to
       delimit the principles, or (b) for some reason they
       could not dispute amounts in their accounts.  So you
       shouldn't keep them to the stated account because the
       system put in place by -- was so impossible that it
       would be wrong to do so.  Again that case has not been
           My Lord, I will come to this in more detail when
       I come to agency.  But that at the moment has been a
       helpful exchange to see what --
   MR JUSTICE FRASER:  It arose in the context of you
       submitting that effectively, as I understood your
       submission, the entirety of the different claimants'
       evidence about how Horizon worked or was supposed to
       work or did in fact work was, in law, irrelevant to any
       of the Common Issues.
   MR CAVENDER:  My Lord, in terms of the detail of it all,
       that must be right.
   MR JUSTICE FRASER:  I understand that is your submission.
       All right.
   MR CAVENDER:  So I was dealing with, if I may return to the
       script, the different ways in which the parties have
       presented the case in terms of the evidence.  If you
       look at paragraphs 374 and 375 of the opening, they seek
       to give lip service to the correct test.
   MR JUSTICE FRASER:  Do you mean opening or closing?
   MR CAVENDER:  Closing, my Lord, sorry. {A/6/186}  They say
       all the evidence relied upon set out in the first
       91 pages of the written closing was what I am saying,
       cannot fit within the rubric of what was reasonably
       expected at the date of contracting.
           What they do is say what their witnesses expected
       with hindsight, and you have to be very careful, my
       Lord, when reading their closings to bear that in mind.
       If you look at, for instance, paragraph 458 on
       suspension, they talk about "in light of the evidence".
           Now, suspension is the contractual right.  You don't
       look at it in light of how it operates in fact, and the
       facts.  At this stage -- that comes to breach.  At this
       stage you are trying to discern what the contract means.
           Another example is at paragraph 481 {A/6/240},
       a criticism that:
           "... Post Office's interpretation fails to accord
       with the view of any of its witnesses ..."
           It doesn't matter what witnesses think about various
       points of interpretation.
           So we say the approach taken by the claimants
       throughout this trial is wholly inappropriate, and nor
       is it justified by the notion they were trying to
       demonstrate that in practice the relationship was
       different to that agreed by the contracts.  That point
       is only limited to the Autoclenz point on termination.
           We say even now, even when I am closing, no proper
       basis for the inclusion of this evidence has been made.
           In terms of admissibility, my learned friend
       Mr Green said, well, I dealt with all this in October,
       in the October strike-out hearing.  But that of course
       was an interlocutory based on a threshold test, whether
       we had managed to persuade your Lordship that all of
       this was irrelevant at an interlocutory stage.  We
       failed to do so and I say no more about it.
           At this stage, as a matter of law, your Lordship has
       it determine in fact whether this evidence is admissible
       or not and you have been given no assistance at all by
       the claimant on that.  And if you recall submissions
       made to you by Mr de Garr Robinson Queen's Counsel, they
       put forward a very full, detailed analysis of all the
       evidence and all the issues, which is what your Lordship
       is going to have to do, in my submission, if you are
       going to allow any of this evidence in to identify the
       issue you are allowing it in on and the legal
       justification for it, because in my submission there is
           The law in this subject has been established at the
       highest level and is free from doubt and of course is
       binding on this court.  Put simply, the court can only
       have regard to matters that were known to the parties,
       both of them, and/or would have been known or available
       to a reasonable person in their position at the date of
       contracting.  You simply cannot have regard to
       post-contractual matters, what happened in fact, policy
       documents, views of witnesses.  All of this is
   MR JUSTICE FRASER:  In construing the contract.
   MR CAVENDER:  In construing the contract and deciding the
       implication of terms.
   MR JUSTICE FRASER:  Which is part of construing the
   MR CAVENDER:  My Lord, in my submission it is not.
   MR JUSTICE FRASER:  If you construe a contract you decide on
       the meaning of express terms, you decide on whether
       there are any implied terms or not, and if there is
       a need for them, if there is a gap for them, and what
       they are.
   MR CAVENDER:  If that is --
   MR JUSTICE FRASER:  That is what I am using as a shorthand.
       I'm not departing from what I think one of the
       authorities says is the cardinal rule that you do the
       express terms first.
   MR CAVENDER:  It is not just that, my Lord.  In M&S, and
       I'll take you to it, they are radically different
       processes --
   MR JUSTICE FRASER:  Yes, but they are all part of deciding
       what the contract between the parties in fact means.
   MR CAVENDER:  Indeed.  In that sentence I agree.
   MR JUSTICE FRASER:  And you don't take post-contractual
       matters into account on either footing.
   MR CAVENDER:  Or hindsight or views from hindsight.  You
       have to ask the right question.  The right question is
       not: well, is it reasonable?  You don't ask: well, what
       term should be implied in light of what happened in
       fact?  That is the mistake made in Bou Simon by the
       First Instance that the Court of Appeal identified.  And
       there is a real risk of doing that here --
   MR JUSTICE FRASER:  I don't think there is.
   MR CAVENDER:  It's an easy mistake to make as Bou Simon
       shows.  There is a lot of evidence here of that nature.
       My learned friend has put his case both in
       cross-examination and his closings on that basis.  So
       you have a yawning invitation to make a mistake and it
       is my job to try and prevent that happening and I intend
       to try and do that.  But in doing that, you have to be
       very careful what question you ask and what evidence you
       have regard to when you ask it.
           I will just divert a moment and put some skin on
       those bones.  When you are looking at implied terms
       particularly, my learned friend is fascinated by doing
       it in the guts of the dispute and the thing going wrong.
       When you know a lot more detail -- and at that stage you
       would be able to identify certain cardinal obligations
       and things that have gone wrong and try and put them
       right.  "Tempting but wrong", in the words of M&S.
           At the stage you're contracting you know very much
       less.  You have a very high level view of what you
       expect.  So the very notion of being able to imply
       precise terms dealing with suggested infelicities or
       difficulties down the line is itself wrong headed
       because you wouldn't be able to do that.
           That is a distinction between my learned friend's 21
       terms, which I find rather surreal he didn't take you to
       any of them but he didn't.  The idea you would imply all
       those at the date of inception of these contracts is
       nonsensical and what is much more sensible is the
       implication of a necessary co-operation term, because
       that is generic and general.  It is the kind of thing,
       if asked, the notional person at the time of
       contracting, "Do you think we should give necessary
       co-operation both ways and not inhibit the other side?"
       They would say "Of course".
           That is why that is a much more secure building
       block in a case like this, in a contract like this.  My
       learned friend makes a category error really in relation
       to the way he presents his case.
           The common reference we get from my learned friend
       is reference to commercial reality, see paragraph 400 of
       his closing {A/6/203}, or for commercial and practical
       realities, paragraph 3(1).
           This is directly contrary to Arnold v Britton in
       terms of that is all we have regard to.  Of course I'm
       not saying you don't have regard to commercial
       realities, but in relation to construction of terms you
       look at the words.  That is the prime -- that's what
       Arnold v Britton tells us.
           In relation to implied terms, Marks & Spencer, again
       my learned friend doesn't really deal with, is: is it
       necessary?  And those two cases, both presided over by
       Lord Neuberger, Arnold v Britton and M&S, are a return
       to clarity and orthodoxy in this area.
           There is no special or different rule when we come
       to relational contract, to get that out of the way, as
       was suggested to the court and recorded in the court's
       judgment at paragraph 31 of judgment number 2
       {B7/27/12}.  I don't need to go to it.  But that in my
       submission is simply wrong.  There is no special or
       different rule to interpretation or the implication of
       terms where there is an allegation of relational
           If you recall, and I will go to it, Lord Justice
       Beatson in Globe Motors, paragraph 68, says just that.
           Making good the point about retrospective evidence
       of what happened, see paragraph 298.4 of the closing
       {A/6/142}.  Seeks to rely on retrospective evidence of
       what happened, transposing to what reasonable parties at
       the date of contracting would have known.
           We will come to it in due course in more detail, but
       we say relational contract is simply a way, it's a step
       along the way to arguing for implied terms of a certain
       type.  It is not a warrant card to tear up the orthodoxy
       on implied terms or Marks & Spencer, it is just a way of
       looking at certain types of contract where the court
       will have a look with more care at whether certain terms
       are necessary to be implied.  In the same way, my Lord,
       as JVs, for very long time the same has happened.  In
       JVs, they are often informal and they're put together
       and often one side or other suggests some form of good
       faith term.  I did so in Ross River and I was successful
       in doing so, only because of the extreme facts in that
       case.  And we will go to that because it is referred to
       in Yam Seng.
           But that is not to say that every JV has a good
       faith term implied into it, no more than every
       relational contract, whatever that turns out to mean,
       we're at an early stage in the jurisprudence on it, not
       every relational contract either will have a good faith
       term, whatever that might mean in that context, either.
           But it is a helpful and a recognised, as my Lord
       pointed out to my learned friend at Court of Appeal
       level, a recognised label for a certain species of
       contract where the court might look with particular care
       at certain terms.
           The claimants' approach generally seems to be to
       give -- to encourage the court to give lip service to
       the law on admissibility while ensuring the jury light
       is burning bright throughout.  Your Lordship said
       earlier on in this litigation that this wasn't a jury
       trial, it clearly is not, and your Lordship has said,
       and no doubt you will, apply the law.
           But it seems that the claimants hope, by partially
       inaccurate description of the facts and the evidence,
       and partial evidence, to gain some kind of sympathy.  At
       this stage it is probably as well to hand up my table of
       obvious mistakes or errors in the closing.
           What I have done is gone through the closing and
       identified things that are inaccurate, at times
       misleading.  The first one by way of example,
       paragraph 65 of the closings {A/6/21}, suggests
       Mrs Van Den Bogerd accepted Post Office did not allow
       more than one set of losses to be settled centrally at
       one time.  But what she really said, if you look at all
       the references we put in the right-hand column, was that
       you could only have one repayment plan at any one time.
           My Lord, all we say is care needs to be taken when
       dealing with the closing and we have identified these
       particular points to take particular care about.
           We also say it was somewhat cynical of the claimants
       to take this approach because there has not been full
       disclosure on either side dealing with the issues they
       now seem to want to be dealt with.  In particular, what
       we call the breach allegations, we only have a few
       documents that happen to be caught in the net of the
       word searches.  Your Lordship should not think that we
       have full disclosure on all these issues.  We do not.
       And the real temptation here is to think you have and to
       draw inferences from an incomplete documentary record,
       incomplete evidence, which would in my submission be
       obviously wrong.
           So, for instance, your Lordship should not be fooled
       into thinking there has been anything like proper
       disclosure on allegations as to training or shortfalls
       or investigations.  Your Lordship did not order such
       disclosure, there has not been such disclosure, and
       Post Office has not led evidence on those issues.  My
       learned friend has put questions on those areas --
   MR JUSTICE FRASER:  You have led evidence on training.
   MR CAVENDER:  My Lord, only very, very high level.  I think
       it was a couple of paragraphs --
   MR JUSTICE FRASER:  Quite a lot of your evidence was high
       level in some areas, and I'm not criticising, I'm
       observing, but you did lead evidence on training.
   MR CAVENDER:  My Lord, only just high level evidence.  If
       you wanted evidence on training, we would have evidence
       from trainers and the proper documentary record of the
       plans et cetera.  All we did was have a few slides, that
       wasn't proper evidence.
           The other thing about training of course is it is
       wholly irrelevant.  Why?  Because my learned friend's
       case is that all the contracts were made in advance of
       even initial training, let alone subsequent training, so
       the whole question is wholly irrelevant.
   MR JUSTICE FRASER:  The irrelevance point I understand, but
       it is wrong to submit you didn't put in any evidence on
       training --
   MR CAVENDER:  We didn't put any proper evidence on
       training --
   MR JUSTICE FRASER:  Mr Cavender, there is no distinction
       between putting in evidence and putting in proper
       evidence.  You might have a point that it could have
       been more comprehensive --
   MR CAVENDER:  There has been no disclosure on training.
   MR JUSTICE FRASER:  There might not have been.  But you did
       put in evidence on training because some passages of
       your witness statements expressly deal with training.
   MR CAVENDER:  My Lord, yes, there is a paragraph or two in
       Mrs Van Den Bogerd's statement that on a very high level
       says.  But not evidence of training where your Lordship
       can make any finding.  Her evidence is about what could
       have been known or anticipated at the date of inception,
       that is what her evidence goes to if you look at it, not
       the actual experience of training, how good or bad it
       was, were shortfalls dealt with in sufficient detail,
       which is the point my learned friend wants it for.
   MR JUSTICE FRASER:  By "date of inception", do you mean ...
   MR CAVENDER:  The contractual date.
   MR JUSTICE FRASER:  The contractual date.
   MR CAVENDER:  Indeed.  That is why it is so general.
   MR JUSTICE FRASER:  I will just have to take a view about
       that.  But your case on the date the contract is
       formed -- why don't you just tell me what that is now in
       a couple of sentences, because obviously Mr Green's case
       is that it pre-dates -- I won't go into calendar dates
       in each case because I have it in my notes.
   MR CAVENDER:  He says it is when the thing was signed, the
       first thing was signed, the contract or the conditions
       of terms that -- and our case is the same.  That is
       exactly right.
   MR JUSTICE FRASER:  So that submission is that evidence of
       training you have put in is evidence in respect of
       knowledge that would have been in both parties' -- or in
       this case effectively the subpostmasters' knowledge --
       as at that date.
   MR CAVENDER:  Yes, that would be their expectation based on
       what had been said to them in interview and things of
       that kind.  It is not findings on what the training was,
       whether it was good, bad or indifferent, whether it be
       the classroom training or subsequent training.  When
       I am talking about training that is what I am talking
           In my submission, the court should be focusing its
       findings on the date of contracting, we just touched on;
       what each lead claimant knew or could be taken to have
       known at the date of contracting through his or her own
       due diligence and through the interview process;
       findings as to what a reasonable person in the position
       of the claimant would have understood about
       the relationship as at the date of contracting; and
       points of credibility going to lead claimants where they
       bear on any of those earlier points.
           On credibility we have a problem here, because
       of course someone in my position would like to rely on
       the answers of these individuals and how they accounted,
       some of which in my submission was dishonest or at least
       not credible.  The trouble with that submission is that
       would require your Lordship to make findings as to that
       which, given the nature of this trial, I am not in
       a position to do, because not least there has not been
       full disclosure of the accounting relationship, all the
       TCs and all the detail, and so I don't do so.  Because
       I have the same approach to that evidence as I have to
       all the evidence in this case.
   MR JUSTICE FRASER:  Yes, you say I don't need any of the
   MR CAVENDER:  No, subject to just the obvious background
       stuff: the subpostmaster was in charge of the branch,
       they were there.  Just that very basic background stuff.
       All the evidence, proper evidence, doesn't really
   MR JUSTICE FRASER:  Whether it assists or not is rather
       different from whether it is admissible.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  For example, Mr Abdulla -- and it may be
       that towards the end of the case this became less of a
       gulf between the parties than it was in the second week,
       but you put to him a fairly detailed and rather
       different account of how -- when I say "account", let me
       use a different word.  A rather different version of how
       he said he in fact had mechanically to deal with matters
       on a weekly basis in terms of accounting.
           So on the basis of that way that the case was put by
       the Post Office, there were issues of fact between the
       parties as to what in fact a subpostmaster was
       physically able to do when a transaction correction came
       through, for example.
           Now, it would be bold to submit that the whole of
       that is irrelevant.
   MR CAVENDER:  When you say "that" ...
   MR JUSTICE FRASER:  Mr Green took me to it yesterday and
       reminded me of it, the sequence of physical acts that
       Mr Abdulla had available from which to choose which you
       took him through quite carefully.  And he was quite
       clear with you as to what he said, that in respect of
       your points: that is not what you do, that isn't how you
       do it, these are your options.
           Have those issues of fact been completely resolved?
       I don't think they have.
   MR CAVENDER:  But they are not relevant to this trial.
       What I am saying is someone in my position would
       normally say, well, credibility, Mr Abdulla is a bad'un,
       he lied about this, that and the other.  Therefore when
       he says he didn't receive his contract you shouldn't
       believe him.  That is what someone in my position would
       normally say if this were a normal trial of all the
           It is not a normal trial of all the issues.  I was
       cross-examining him on questions of breach -- I didn't
       want to but I had to because the evidence was in -- in
       order to try and counteract the impression given by
       those witnesses that their account of what happened was
       a complete account.  Having done that, given that there
       has not been full disclosure on the accounting
       relationship on any of those breach matters, it would be
       quite wrong and unfair for me to ask your Lordship to
       make findings against him on the basis of that.  And
       I don't do so, because there has been not been full
       disclosure or complete evidence on it.
   MR JUSTICE FRASER:  But so far as the issues of fact between
       the Post Office and the claimants about what the options
       are when someone is sitting at a terminal and deciding
       what they should do with transaction number 59 --
   MR CAVENDER:  I am not sure there is any dispute about it.
   MR JUSTICE FRASER:  That's why I asked you, have those
       issues gone away?
   MR CAVENDER:  I think it is very clear from all the
       documents and what you could do.  Are you talking about
       TCs now?  I think my learned friend explained that.  My
       learned friend gets kind of stuck on the word "accept"
       and "settle centrally" and then "disputing", as if
       somehow he wants to stop the clock.
   MR JUSTICE FRASER:  When you said "disputing", I think you
       indicated just then -- for the transcript -- pressing
       a button.  I think the disputing is done by telephone.
   MR CAVENDER:  By phone.  Indeed.
   MR JUSTICE FRASER:  But so far as the activity at the
       terminal or in the branch is concerned that doesn't
       involve phoning the Helpline, it did seem to me for the
       first part of the case, and in fact this went into
       a number of your witnesses and it may have all been
       resolved, that there were specific issues of fact
       between the parties in this litigation about what
       an SPM's choices in fact were.  Have they gone away?
   MR CAVENDER:  I think they have, yes.  I don't think there
       is any ... Yes, my learned junior is right.  If we go to
       Mr Abdulla, and we'll do it later, using the word
       "accept" and "settle centrally", you saw there was
       a confusion between us --
   MR JUSTICE FRASER:  You weren't confused, but he kept using
       the expression "accept centrally".
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  That might be where Mr Draper is
       steering you.  But that was not the full essence of the
       issues of fact as it appeared to me during the
       cross-examination, but because of what Post Office's
       case was or how it was being put to the SPMs about what
       their choices were in the branch.
   MR CAVENDER:  My Lord, there is no debate I think as to what
       buttons they could press.
   MR JUSTICE FRASER:  There isn't.
   MR CAVENDER:  No.  But my learned friend's point is he wants
       to stop the clock once you press "accept" and "settle
       centrally", and he says that's it, you stop then.  And
       you say, well, within Horizon, narrowly construed, that
       has a certain effect.  And I'm saying no.  As was known,
       and as was in fact used, the system includes the
       Helpline and the ability to phone.
   MR JUSTICE FRASER:  I do understand that.
   MR CAVENDER:  So that is the difference between the parties,
       not what buttons you could press or not press.
   MR JUSTICE FRASER:  Well, if there is no dispute about what
       buttons an SPM can press or can't press, has Mr Green
       correctly analysed it or, if not, what has he got wrong
       about "accept now" and then those three choices?  And
       I will tell you what my understanding is and then you
       can correct me if I have got the wrong end of the stick.
           If a transaction correction comes in, an SPM has
       a choice of whether to press a button "accept now" or
       effectively defer the question of accepting it for
       a particular length of time but only to the end of the
       branch trading period, is that correct?
   MR CAVENDER:  Those two are correct.  And later on there was
       a "seek evidence" button, if you remember.
   MR JUSTICE FRASER:  Just remind me when that was introduced.
   MR CAVENDER:  It was only for some ... and of course that
       is, if you like, a subcategory of deferring, in a way,
       because you are saying I want evidence before I consider
   MR JUSTICE FRASER:  So you accept now or defer.
   MR CAVENDER:  So you press "accept" and then you get
       a choice whether to settle centrally.
   MR JUSTICE FRASER:  As I understand what happens once
       someone has pressed "accept now", there is make good by
       cash, make good by cheque or settle centrally, is that
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Right.  What I would like you both to
       do, and when I say "both" I don't mean you and
       Mr Draper, I just mean you and Mr Green, and on the
       basis of what you have said I am sure this can be
       accomplished without any difficulty, is simply to agree
       a single sequence flowchart of this particular series of
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  Because that will just be very useful
       for me.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Those differences have gone away but
       I accept -- I understand your submission: you are not,
       because of the nature of the peculiar situation in which
       the claimants find themselves, inviting me to make
       adverse findings on their credibility.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Is that right?
   MR CAVENDER:  It is.
   MR JUSTICE FRASER:  So when you put to at least some of
       them, I think, that they weren't telling me the truth,
       do you want me to ignore their answers?
   MR CAVENDER:  My Lord, it is really a matter for you at the
       end of the day, what you think is proper.  What I am
       saying is that there has not been full disclosure on
       those matters, that the reason that it was put was to
       seek to undermine the impression they had given in their
       witness statements that they were telling the full
       story.  So what we are left with, my Lord, in my
       submission, is, you should treat their witness evidence
       with caution, because you have seen that not in every
       respect has their account of the way things worked out
       been full or sometimes fair.
           But the other point of course is that a lot of this
       evidence is very, very old, and in terms of looking at
       the documents, compared to their evidence anyway, one
       would normally prefer the documents and the
       probabilities.  And it's only really in relation to
       whether they received the contract or not, that is
       really the crucial factual point you have to make in
       relation to the six LCs.
   MR JUSTICE FRASER:  To some of them.
   MR CAVENDER:  Well, to some of them.  Certainly the last two
       signed it and there was no problem --
   MR JUSTICE FRASER:  That is why I said "some of them".
   MR CAVENDER:  Indeed.  Mr Bates, although he has a special
       case, Mrs Stubbs is special for a different reason, and
       then we have Mr Abdulla and Mr Sabir who say, well, they
       don't know or they don't think they got it, things of
       that kind.  I will come to that later.
   MR JUSTICE FRASER:  But Mrs Dar and Mrs Stockdale signed
   MR CAVENDER:  Quite.
   MR JUSTICE FRASER:  And I would have thought across the
       500-odd that it is highly unlikely that all of them fall
       into exactly the same category.
   MR CAVENDER:  Quite.  And that is why I said in my opening,
       if you remember, that although hypothetical findings
       aren't generally liked, here if you took a particular
       view that a certain document was or wasn't obtained or
       got at an early stage, and therefore you find a certain
       result flows from that, it might be helpful to express
       a view, well, if that document had been obtained or seen
       or signed it would alter your view, because there might
       be some of the 557, there most certainly would be, where
       that would be useful.
   MR JUSTICE FRASER:  An example is the Mr Bates situation
       because I think you asked him where he got his number
       from in his witness statement, about there are lots of
       people in that situation, and he said he got it from the
       spreadsheet.  Let's put that to one side.
           Even if he were the only person, he said it wasn't
       in the envelope.  If it was in the envelope certain
       consequences might flow.  If it wasn't in the envelope
       certain consequences might flow.  You are not inviting
       me to avoid making a finding as to whether it was in
       the envelope.
   MR CAVENDER:  Quite.
   MR JUSTICE FRASER:  But I should go on and explain what
       would happen if someone in his position had received it
       in the envelope compared to if they hadn't.
   MR CAVENDER:  Precisely.
   MR JUSTICE FRASER:  Because it will help --
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  -- so far as some of the claims.
   MR CAVENDER:  My Lord has the point.
   MR JUSTICE FRASER:  So far as the claimants' evidence is
       concerned, therefore, you say treat it all with caution
       for all the reasons you have gone through, but you are
       inviting me not to make any findings on their
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Any adverse findings on their
       credibility, is that right?
   MR CAVENDER:  Yes, because to do so you would have to make
       findings as to the accounting system, to the TCs, what
       happened in fact, and you haven't had full evidence on
       that by any means.
           You can test it in this way: these are questions of
       breach, this is a classic question of breach.  This is
       what they will be if there is a breach trial in October,
       or whenever it is going to be, that will be exactly what
       these witnesses will be putting forward.  But then with
       the benefit of the judgment here as to what the rules
       are, and with Horizon and how good or bad that is.  But
       this will be the meat and drink of that breach trial.
           Now, what has happened in this court in the last
       four weeks is a fact.  It has been recorded, it is in
       the transcript.  Those witnesses can of course be taken
       back to that evidence during the breach trial and it
       will be surprising if they were not.  So it is not
       wasted, it is in the can... It is still as a matter of
       record it is there.  But for you to make findings on it,
       my Lord, we go further, for the same reason you
       shouldn't make findings on the accounting processes
       generally and all these other matters that have come in
       by a side wind but there has not been full disclosure
           I am going to go through in a minute to remind you
       of some of the disclosure orders you made and some of
       the contests and how you resolved them and on what basis
       you did so.  That was on a much more orthodox basis, it
       was before the IPOCs were drafted, which then broadened
       out everything, and then the witness statements were
       based on that.  But before that, the disclosure was on
       a much more orthodox, narrow basis.
   MR JUSTICE FRASER:  Mr Cavender, just to consider the
       Mr Bates situation for a moment, Mr Bates gave evidence
       which you tested quite strongly as to whether
       a particular chunky document was in an envelope, and he
       said it wasn't, and you put to him quite forcefully that
       it was.  It is accepted that I need to find whether it
       was or not for the obvious contractual reasons.  How
       do I do that without making a finding about Mr Bates'
   MR CAVENDER:  Well --
   MR JUSTICE FRASER:  I am slightly puzzled.
   MR CAVENDER:  Because you can make findings on the basis of
       reliability generally.  His memory.  The documents
       I showed him in that case, do you remember, the two- and
       three-page documents in his evidence there about he
       thought that was the standard terms, which in my
       submission it clearly wasn't and he knew it wasn't.
       Evidence that he was a details man and if a set of flags
       came in he would notice two were missing, he would
       certainly notice if there was a contract missing.  So he
       constructs an account really around that, and then he
       does the same thing at the back end in relation to
       the contract and the complaint.  He over-reaches himself
       by constructing a case that is obviously false because
       he must have had the contract to write the letter.  My
       learned friend says, oh well, he just got the date
       wrong.  It's not quite as simple as that.
           So Mr Bates, and the fact of course he is obviously
       a campaigner, et cetera, and has convinced himself
       no doubt that what he is saying is true.  It doesn't
       mean to say it is true.
   MR JUSTICE FRASER:  But those submissions you have just made
       in the last half a page are classic features, aren't
       they, that are taken into account when any judge is
       deciding on the credibility of a witness.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  I'm not saying there is not material
       there.  What I am saying is it seems to me that inherent
       in resolving an issue of fact, which you correctly
       identify is an issue I do have to resolve, I will be
       considering Mr Bates' credibility, won't I?
   MR CAVENDER:  You will, but there might be certain features
       of it.  He is not a good example, in a way, because
       although we made complaints about the way he accounted,
       and he seemed to think it was getting him to seek to
       pay, that was the dichotomy there.  It was no, no, no,
       we're not asking you to pay, we're asking you to
       account.  We'd like you to pay but we want you to
       account properly.  And whether you took a view on that
       or not.  To do that, you would need to understand much
       more about his accounting, his records.  In his case we
       don't have them, but if it was another claimant we
       would, and you would then be able to -- because
       otherwise, my Lord, you would be making inferences and
       findings based on partial evidence and partial
       disclosure.  That, in my submission, would be unfair.
       And although every bone in my body says, oh yes, let's
       make wonderful submissions on credibility because we
       made some headway with some of these witnesses --
   MR JUSTICE FRASER:  You just made submissions on credibility
       about Mr Bates --
   MR CAVENDER:  But my Lord, going beyond that, going to the
       liability and breach issues.  None of those submissions
       touched on that.
   MR JUSTICE FRASER:  No, and I am entirely clear that nobody
       wants me to go near breach.
   MR CAVENDER:  But you would have to in order to make
       findings on credibility relating to breach --
   MR JUSTICE FRASER:  But I have to make findings of
       credibility relating to their evidence about contract
       formation, don't I?
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  For example Mrs Stockdale, there is
       an issue of fact about what happened at her interview.
       She says one thing.  I can't remember the name of the
       witness --
   MR CAVENDER:  Mr Trotter.
   MR JUSTICE FRASER:  Mr Trotter.
   MR CAVENDER:  Sorry, Mr Carpenter.
   MR JUSTICE FRASER:  Mr Carpenter.  Now, to decide -- those
       are issues of fact which I imagine both parties want me
       to decide.
   MR CAVENDER:  In that case --
   MR JUSTICE FRASER:  Unless the interview record has been
       miraculously de-encrypted, which I imagine it hasn't.
   MR CAVENDER:  We are still trying.
   MR JUSTICE FRASER:  So as at today I have two people's
       account and I have to decide, haven't I?
   MR CAVENDER:  My Lord --
   MR JUSTICE FRASER:  Or do you say I don't?
   MR CAVENDER:  In many ways in relation to those cases, it is
       the NTC cases, they have signed it and all the rest of
       it, I don't know what is left -- what happened at the
       interview in relation to those cases.  In relation to
       the cases of the SPMC, of Mr Sabir and Mr Abdulla, there
       may be in those cases the interview -- because they say
       they may not receive the contracts, it becomes more
       germane than.  But the NTC ones, it is of much less
       relevance, I think, what happened at the interview.
   MR GREEN:  My Lord, I'm sorry to interrupt, but I have let
       this run since page {Day14/38:14}, what my learned
       friend is saying.  He said someone in his position might
       say Mr Abdulla lied.  Well, that is exactly what he does
       say at paragraph 592 of his closing submissions
       {A/8/210}.  So I don't understand --
   MR JUSTICE FRASER:  All right.
   MR GREEN:  -- where he is on it.
   MR CAVENDER:  But I don't ask for findings on it.
   MR JUSTICE FRASER:  Mr Green, as a rule, I am not saying you
       can't make these points, but you might want to store
       them up.
   MR GREEN:  I am grateful.
   MR JUSTICE FRASER:  All right.
   MR CAVENDER:  Because we say you can obviously make findings
       on admissible pre-contract evidence, obviously.  The
       bright line I am making is issues of breach really.
   MR JUSTICE FRASER:  You are saying don't go near findings
       that relate to breach, is that right?
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Is that the best way of summarising it?
   MR CAVENDER:  It is, and we said that at the beginning.  And
       your Lordship said in judgment 2 you are not going to
       make findings on breach, and I said good, obviously, but
       also don't make findings of fact leading to those
       questions of breach.  Not obviously whether there is
       a contract or not, you could -- if you took that too
       far.  But not in directly leading up to findings on
       breach, or would do.  Platforms of fact that would lead
       to that.
   MR JUSTICE FRASER:  Understood.
   MR CAVENDER:  There is a number of reasons for that, and
       maybe I should give you an example of why we are
       concerned about this.  It arose out of yesterday's
       debate with my learned friend, in relation to the losses
       and gains policy.  Does your Lordship remember that?
   MR JUSTICE FRASER:  I do.  Well, I remember the losses and
       gains policy.
   MR CAVENDER:  The suggestion was by my learned friend,
       effectively, that the old losses and gains policy, he
       doesn't know when it ended, but it went on for ever was
       kind of the point.
           My learned friend has not built any evidential
       foundation for that, as he hasn't in most of the
       documents in this case where they have an earlier date.
       There has been no attempt really to analyse or
       forensically go through and say what date did they
       no longer operate.
           So let's take the losses and gains policy, one of
       his favourites.  Yesterday he took you to, can we put
       this on screen, {F4/66/1}.  And for your Lordship's note
       this passage was Day 13, page 106, lines 14 to 24
       {Day13/106:14-24}, when he said that the court should
       infer the losses and gains policy was still in force in
           This document, despite the date on the print-out
       there, is a 2010 document, not 2018.
   MR JUSTICE FRASER:  Yes, because it just -- I think that was
       explained that it is a field that refreshes itself
       whenever it is opened.
   MR CAVENDER:  Exactly.  This document wasn't put to any of
       our witnesses, so it is without explanation as to what
       it is.  It only refers to parts of the L and G policy
       and not parts that my learned friend likes about SPM
           So if we go to page {F4/66/2} of this, you see it
       is, looking at the top there, dealing with HOL back
       office reports.  That is its focus.  And if you look to
       page {F4/66/7}, you can see here it's dealing with
       surprise stock levels and things of that kind, halfway
       down, surprise stock checks.  It is that part which
       indeed is covered in the losses and gains policy that
       seems to have a reflection in the later document, not
       this thing about losses.  The parts of the old losses
       and gains policy that deals with shortfalls and reliefs
       are specific to the SPMC and pre-date Horizon, let alone
       HOL, which is what this is dealing with.
           We have identified in correspondence with the
       claimants various documents, after the losses and gains
       policy, that replaced it.  And they have different
       names.  Which is why my learned friend says at page 106,
       lines 3 to 5 {Day13/106:3-5}:
           "There is no other disclosed document which is
       a losses and gains policy so-called anywhere."
           That's a very careful statement.  And he is right,
       there is no document with that title, but there are
       other documents that deal with issues of things of that
       kind.  One replacement document at {F3/212/1}, you will
       notice again it's a document not put to any witness
       despite the fact at the top you see it is a John Breeden
   MR JUSTICE FRASER:  How do I see that?
   MR CAVENDER:  At the top, my Lord, "Contracts team".
   MR JUSTICE FRASER:  Yes.  What the date of this document?
   MR CAVENDER:  First version is September 2013.  This
       particular version is 4 December 2014.
   MR JUSTICE FRASER:  And this is called a policy document,
   MR CAVENDER:  Yes, in service debt.  And if we go through it
           "The purpose of this policy is to clearly set out
       the processes Post Office will follow to recover debt
       incurred by Post Office ..."
           Et cetera."
   MR CAVENDER:  So why I show you this is you would be left
       with the impression, if I hadn't shown you this, that my
       learned friend's point was right, there was a losses and
       gains policy, and there is no evidence to show that this
       didn't go on forever.
           There is a risk of that throughout this case.  The
       way this case has been presented there has been no
       attempt to build it properly from the bottom up.  There
       has been an approach of effectively a scattergun on
           And if you go on this same point to an earlier
       document {F3/36/1} in 2004.  This is a 2004 document and
       you will see it's talking about the recovery of invoice
       debts and the approach to be taken to that.
   MR JUSTICE FRASER:  How many documents are there after what
       is in fact entitled the "Losses and Gains Policy" going
       forward in the sequence?
   MR CAVENDER:  My Lord, I am giving you some -- again, we
       have no evidence on this --
   MR JUSTICE FRASER:  This is a useful -- Mr Draper, do just
       give me a second with Mr Cavender, if that is all right.
       This is quite important because so far as the evidence
       is concerned, and I have looked at this again carefully,
       the evidence goes as follows: Mr Green put the 1998
       losses and gains policy to Mrs Van Den Bogerd.  She said
       that wasn't the policy anymore.  He said this is the
       most recent document that we have that is called "Losses
       and Gains Policy", and that was as far as the evidence
       went.  And her evidence to me was, well, that is not
       what we do.  Along those lines.
           Now, that evidence falls to be looked at from a very
       different perspective.  If there are subsequent
       documents dealing with policy that post-date the 1998
       one --
   MR CAVENDER:  Which is what I am doing now.
   MR JUSTICE FRASER:  Which is what you are doing, compared to
       if there aren't.
   MR CAVENDER:  The slight confusion is these documents aren't
       called necessarily losses and gains, so it is that
       rubric, but they deal with the subject matter.
   MR JUSTICE FRASER:  How many are there on your list?
   MR CAVENDER:  There are four.  I have taken you to one, this
       is the second, and there are two others.  This is 2004.
   MR JUSTICE FRASER:  So {F4/66/1}, what was the date of that
       document?  That is the HOL document Mr Green showed me
       yesterday.  So you have given me {F3/212/1}.
   MR CAVENDER:  2014.
   MR JUSTICE FRASER:  Although it originated
       in September 2013.  And {F3/36/1} is?
   MR CAVENDER:  2004.
   MR JUSTICE FRASER:  And what is that called?
       "Implementation of New Initiatives".
   MR CAVENDER:  For recovery of debt from postmasters.  But it
       deals with --
   MR JUSTICE FRASER:  It's just so I have a specific note.
   MR CAVENDER:  I'm not suggesting this is a replacement of
       the losses -- because that is a big document, but it is
       aspects of losses and gains --
   MR JUSTICE FRASER:  By "that is a big document", you are
       talking about the 1998 document?
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  But the fact this says "New Initiatives"
       does suggest the process for recovery of debt in 2004
       was changed.
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  From the 1998 document.
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  And you don't object to me looking
       at these, do you?
   MR CAVENDER:  I am not quite sure what the relevance of any
       of this is.
   MR JUSTICE FRASER:  Maybe you are not.  Maybe you are not.
   MR CAVENDER:  And I am not sure, what I'm saying is not
       admissible --
   MR JUSTICE FRASER:  You are saying these documents are not
   MR CAVENDER:  For what purpose?  My learned friend hasn't
       established a case for what their relevance is.
   MR JUSTICE FRASER:  Well, no, Mr Cavender, it really just
       comes down to the correct way in which the evidence is
       dealt with.  He put a 1998 document to your witness and
       her answer to that was effectively: that is an old
       document, it doesn't contain what our policy is or our
       recent or modern policy is.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  You didn't put an alternative document
       to her in re-examination, though you would have been
       entitled to do so but you didn't.  That is fine.
       Mr Green made his submission yesterday, which is along
       the lines of: there is no more recent document.  As
       a matter of fact you are correcting that by giving me
       these references.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  So I imagine if, in the process of
       writing my judgment, I take the view that I need to
       consider or recite or in other words "look at" the way
       Post Office dealt with losses and gains, you don't want
       me to stop at 1998.
   MR CAVENDER:  No, of course, no.  If we are doing the job,
       we have to do the whole job.  My question is whether the
       job should be done at all.  But, yes, if we are doing
       the job, let's do the job.
   MR JUSTICE FRASER:  I know that.  So we have 2004,
   MR CAVENDER:  Indeed.  Then we go to {F3/45/1} which is
   MR JUSTICE FRASER:  I thought we were going in reverse
       chronological order.  Don't worry.  If there are only
       four, it doesn't matter.  "Losses Policy - Overarching".
   MR CAVENDER:  Then {F3/210.1/1}, a 2014 document.
   MR JUSTICE FRASER:  That is 2014?
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  Dispute process.  {F3/210.1/1}.  Okay.
   MR CAVENDER:  So the reason I do that is for that reason.
       Also just to make sure your Lordship is aware that you
       should be quite careful in the way the case is presented
       with documents, not only the way the witnesses were
       dealt with, going across 20 years with different
       documents going to and fro with the same subjects and
       putting something else in and back.  Sometimes I don't
       understand what my learned friend is saying, so the
       witnesses should be excused for not understanding
       either.  But the point here is you should be very
       careful about -- it seems my learned friend's request to
       accept inferences, et cetera, for him to say yesterday:
       well, 2010 losses and gains, it's (inaudible) document,
       isn't it, is actually quite misleading in terms of what
       in fact the documentary record shows.
           A similar point can be made about the induction
       document that Mr Bates refers to at {E1/12/1}.  That is
       a 1990s document.  My learned friend is very keen on
       citing it.  Do you remember it has all the warm feelings
       about the relationship?  There is no evidence that
       anyone but Mr Bates got this document.
   MR JUSTICE FRASER:  Anyone but Mr Bates?
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  I know, but Mr Bates is one of the six
       lead claimants.
   MR CAVENDER:  But my learned friend tries, when you look at
       his submissions, to sort of broaden it out to say this
       reflects ... and he cross-examined everyone about: well,
       would you agree with that?  Again Mr Bates can say that.
       He got this.  But the others can't.  So you have to be
       slightly careful with the dates of documents and almost
       the assumption that this continued forever when there is
       no evidential foundation for that.
           Also the approach of the claimants on issues of
       finding -- issues of fact is scattergun.  So for
       instance at paragraph 70.5 they seek a finding on the
       issue of Mr Abdulla's accounting.  They actually ask you
       at paragraph 70.5 to do that, and at paragraphs 121 and
       122 they seek findings on training despite the fact
       their case is it is irrelevant.  So we have a scattergun
       approach; a lack of analysis as to what findings the
       court can make or should make in support of the case
       that is being run.
           My Lord, is that a good time for a break?
   MR JUSTICE FRASER:  That is probably not a bad idea.
       12.05 pm.
   (11.55 am)
                         (A short break)
   (12.05 pm)
   MR CAVENDER:  My Lord, carrying on with the introduction,
       an important feature; you will notice the claimants have
       sought to subtly move away from their admission that
       the agreed implied terms are to be implied into the
       agreements by seeking to suggest they are somehow
       Post Office's terms now, and you will see that at
       paragraph 322.3 of their closing where claimants refer
       to the agreed implied terms as terms for which the
       defendant contends.  It is obviously too late for them
       to do so, they have not sought permission to withdraw
       any admission and the agreed implied terms are terms of
       these contracts and those are, at this stage, no less
       terms than the express terms of the contract.  They have
       meaning and effect, they have a construction, and my
       learned friend did not say a single word on these.  He
       seeks to disown them.  That, in my submission, was
       a serious error because it is upon him the burden to
       show, notwithstanding their existence, that there is
       space and lacuna into which he can put his 21 further
       implied terms.  He has made no attempt to explain to
       your Lordship the meaning and effect of those agreed
       implied terms, the necessary co-operation term and the
       Stirling v Maitland term.  He would necessarily have had
       to have done so to make the case he purports to make.
       Because there is a space occupied by, firstly, the
       express terms of the contract, the legal relationship of
       agency and the fiduciary relationship that that involves
       and the agreed implied terms.  They have in effect, the
       way they have presented this, tried to shift the burden
       on to Post Office to show that further terms are not
       necessary.  And that, as we will see, is completely the
       wrong approach.
           So in summary on important points of this
       introduction in terms of scope, the court should not
       have regard to post-contractual evidence, evidence of
       breach, for two distinct reasons: firstly, to do so
       would involve a basic error of law, and, secondly, would
       involve a serious procedural irregularity.  It would do
       the second because the orders of the court setting out
       the issues for trial and the issues on which evidence
       were to be admitted is set out in the Common Issues.
       The Statements of Case have been ordered to be limited
       to those issues, see paragraph 8, and the witness
       statements were limited to those issues, see
       paragraph 10.  That is the trial Post Office has
       attended and involved itself in.  It has not engaged in
       wide-ranging evidence on breach, which the claimants
       have, and so not only would it be an error of law to
       have regard to it, it would also be procedurally unfair
       for that reason.  Because in the absence of full
       disclosure on matters such as the dispute, Horizon,
       accounting, procedures, deficits, training and Helpline,
       without full evidence and disclosure on all those
       points, the court should not engage in inferential
       findings or comments along the way.  It shouldn't do so
       as a matter of procedural fairness but also particularly
       given there are two other trials that have been loaded
       in the system effectively on Horizon and on breach,
       where on those very matters there will be full
       disclosure, there will be full evidence and there will
       be determinations.
           The other point I mentioned I think earlier was
       whether you should also be careful because of the nature
       of the way it has been set up -- we had a humorous
       debate about whether it was odd or not, but whether you
       should make comments as well about "be careful to",
       because, otherwise, an independent observer might think,
       wrongly obviously, that the comments you make are
       a route along the way to reaching a particular view or
       a finding, which you would then have to find in judgment
       two or three -- sorry, in trial two or three.  So again
       there is that sensitivity, which your Lordship no doubt
       will obviously have in mind.
           In terms of the disclosure piece, let me give you
       a little bit of detail just for your note essentially,
       in terms of reminding your Lordship what happened.  I am
       sure you remember but just for your note --
   MR JUSTICE FRASER:  I'm not sure I do remember to be honest.
       These are on the contested disclosure hearings?
   MR CAVENDER:  My Lord, yes.  Just to get a view on whether
       I am saying is right or wrong.  Obviously I say it is
       right.  Firstly, stage one and stage two disclosure
       ordered before the Individual Particulars of Claim and
       was not scoped by reference to the broad allegations in
       those pleadings.  It was done by reference to the
       general Particulars of Claim, which is much more
       generic.  For your Lordship's note, stage one disclosure
       was ordered under paragraph 9, Schedule 1 of the second
       CMC order on 2 February {B7/11/4} and {B7/11/7}.
   MR JUSTICE FRASER:  Can you just give me a date for that
   MR CAVENDER:  That was 2 February, my Lord.  Stage two
       disclosure was ordered under paragraph 10, Schedule 2 to
       the same order, see {B7/11/4} and {B7/11/11}.
           The court determined the disputes over disclosure by
       reference to the likely relevance of documents to the
       Common Issues, not the broad allegations of breach that
       the claimants decided to plead in their IPOCs.
           Your Lordship will recall the court also had a view
       giving early disclosure would properly be required
       anyway in relation to Horizon and Post Office does not
       resist that.  Such approach was entirely for good reason
       just by way of background.  But the overwhelming focus
       was on the documents that might be relevant to the
       Common Issues.  So to give two examples at the hearing
       on 22 February the court rightly rejected a request for
       broader disclosure in relation to Helpline on the basis
       of the operation of the Helpline "does not arise in
       the Common Issues at all" and that is {B8.4/4/46}
       referring to paragraph 61 of the defence.
           At the same hearing the court ordered only limited
       disclosure in relation to certain policy and process
       documents relating to shortfalls, pointing out the
       requests seemed to be aimed at fundamentally Horizon
       issues, see {B8.4/4/39}.
           So the upshot of the approach taken to disclosure is
       the Post Office has not conducted searches for documents
       that would enable the parties and the court to properly
       explore all the irrelevant post-contractual material and
       breach that the claimants want to put in issue at this
       trial nor has Post Office extracted documents from
       custodians other than the 62 that were largely chosen by
       the claimants.
           So to give concrete examples, we do have records of
       TCs that were issued to these six branches.  We do not
       have the underlying documents as to how that TC was
       decided upon, the evidence underlying it, the
       transaction data, internal communications relating to
       the decision-making process; the kind of thing that
       would go to whether the TC was rightly made, mistaken or
       how the mistake came about.
           We have no disclosure or evidence from the Helpline
       operators; nothing with which to meet the suggestion
       a particular operator said something wrong on
       a particular date in 2002 or 2010.
           We have no disclosure showing how enquiries and
       disputes were then escalated and addressed by the
       Helpline.  Your Lordship will recall a reference to
       classification of calls as "low priority".  No evidence
       as to what that means because it doesn't fall within the
       Common Issues, and the relevant documents would not be
       caught by the disclosure that was ordered.
   MR JUSTICE FRASER:  When you say "we have no disclosure",
       what you really mean is the claimants have no
       disclosure.  Because they are all your documents, aren't
   MR CAVENDER:  My Lord, yes, "there has been no disclosure"
       is probably the correct way of putting it.  By "we"
       I mean the court and the parties really.  We have --
   MR JUSTICE FRASER:  The court and the claimants, because
       Post Office has got it.  Because it is all Post Office
   MR CAVENDER:  We haven't searched for it --
   MR JUSTICE FRASER:  I am just being precise about it.
   MR CAVENDER:  Yes, my Lord, you are right.  We have not
       given disclosure covering investigations into
       shortfalls, emails and other documents from within the
       FSC for example, we heard something about.  Any
       documents of that kind that are in the bundles have been
       caught incidentally through disclosure orders aimed at
       something else by luck or because one of the selected
       disclosure (inaudible) happened to have it within the
       exchanges; potluck and not a proper approach on which to
       examine what happened.
           Your Lordship will recall my efforts to piece
       together from a few documents here and there what
       investigations had in fact been done into Mrs Stubbs'
       problems, and you will recall there was quite a lot
       done.  She said: well, I thought you were doing nothing
       and I put to her a whole slew of documents that happened
       to be in the bundles by accident or mistake that showed
       in fact we were going back to Fujitsu, we were asking
       questions.  If you are going to form a view, my Lord, on
       any of that, you need the full documentary record, you
       need evidence led on it and tested, not it be done in
       this sort of casual half-hearted way.
   MR JUSTICE FRASER:  If the documents you were putting to
       Mrs Stubbs were only there by accident or mistake, there
       was nothing to stop you producing a document, was there,
       which showed the conclusion or upshot of the
       investigation which she had been promised?  If such
       a document existed.
   MR CAVENDER:  My Lord, that is true in relation to all of
       the six, in relation to every TC and every dispute.
   MR JUSTICE FRASER:  No, no, I am asking a focused question
       on the investigation in relation to Mrs Stubbs.
   MR CAVENDER:  My Lord, yes.  But that hasn't been done.
       That is not our understanding of what this trial was
       about or the disclosure sought or the issues to be
       determined.  I am giving that example for saying where
       I thought I ought to correct that impression with that
       witness.  I was able to by luck with a number of
       documents.  But it is not the full documentary record at
       all, clearly not, and we didn't have evidence from the
       people that were doing the investigations, et cetera, so
       your Lordship could then opine and see whether it was
       good, bad or indifferent.  You are asked to do so on
       a very casual basis on a partial -- not partial, without
       the full documentary record at all.  And it would be
       wrong to do so, in my submission.
           To complete the disclosure reference, also model C
       disclosure was ordered on 22 February and the order at
       {B7/12/1} that followed the same approach to that which
       I have already outlined.
           By way of example, as you have seen, many references
       in the leading claimants' witness statements to
       Post Office staff that were not witnesses.  For example
       Mr Abdulla at paragraph 93 refers to a TC signed off by
       a Karen Cooper. {C1/4/18}.  We have no disclosure
       relating to that TC or evidence from Mrs Cooper.
       Mrs Dar refers at paragraphs 114 and 115 of her witness
       statement to communications with a Jamie Haugh
       {C1/5/21}.  He was not a disclosure custodian.  He has
       not given evidence.  Mr Sabir at paragraph 73 of his
       witness statement refers to intervention visits and
       a verbal warning from a Ms Wrangham --
   MR JUSTICE FRASER:  There is a series of documents flashing
       up on the common screen and then disappearing.  Are
       these the ones that you are --
   MR CAVENDER:  I think they are, yes.  I don't intend to take
       you to them.  It is just for your note.
   MR JUSTICE FRASER:  It's just the top of my screen has been
       cut off, so I can't actually tell whose statements they
       are to be honest.  {C1/5/21}.
   MR CAVENDER:  That is Mrs Dar.
   MR JUSTICE FRASER:  Which paragraph?
   MR CAVENDER:  Paragraphs 114 to 115.
   MR JUSTICE FRASER:  But you don't want me to look at them
   MR CAVENDER:  No, I am making the general point, I am giving
       some examples of the kind of evidence you would normally
       expect to get if you were going to have a proper go at
       making findings on this.  So it is not just
       a theoretical point, I am trying to ground it in
       a granular basis.
           Mr Sabir refers at paragraph 73 of his witness
       statement to intervention visits and verbal warning from
       Ms Wrangham.  That is {C1/3/13}.  She was not
       a disclosure custodian either and she has not given
           Your Lordship will also know a point I put to
       various witnesses is we hadn't had disclosure from the
       claimants' retail businesses; in terms of the accounts,
       what the money is that was, whether there was
       a possibility there was cross-over, things of that kind,
       which of course will be relevant to whether a mistake
       has been made and things of that kind.  It just hasn't
       been done.  Because that goes to breach.
           You will recall that the direction for evidence was
       expressly limited to disclosure in respect of each lead
       claimant in relation to the Common Issues, see
       paragraph 10 of the first CMC order {B7/7/5}.  That
       is what Post Office has done, and that is why there is
       no substance to my learned friend's reference to
       "generic evidence"; there is no such beast, there is
       just evidence given by the lead claimants.
           My Lord, that is the introduction phase of the
       submissions.  I'm now going to move on, with
       your Lordship's leave, to the question of the law on
       interpretation of contracts.
           I would not normally feel the need in a case like
       this to go through the basic authorities on
       admissibility and interpretation but, given the approach
       of the claimants, I think it is important that at least
       your Lordship is told and go through them, if briefly,
       to see what the rules are.  Particularly alarming, my
       learned friend makes no reference to Arnold v Britton,
       the leading authority on construction, in their summary
       of the law on construction at paragraph 381 of their
       closing.  In fact it is not referred to in their closing
       at all.  That must be almost unprecedented in a trial on
       contractual construction in recent years and it rings
       alarm bells that they can make submissions without
       reference to it.
           As I said earlier, my Lord, the law on this subject
       is clear, free from doubt and obviously binding on this
       court.  The key principles are on admissibility of
       matrix.  You look at what the parties to the contract
       knew or what reasonable people in the position of the
       contracting parties will have known.  On interpretation,
       unsurprisingly the words of the contractual provision
       are the main tool, but the words of the relevant clause
       need to be construed in the light of the contract
       as a whole and any admissible matrix.  Business
       common sense has a role to play but that role is not to
       rewrite the contract, especially not with the benefit of
           On the first of those, what you don't include --
   MR JUSTICE FRASER:  This is matrix?
   MR CAVENDER:  Of matrix, my Lord, yes.  If you go to what
       the claimants say.  At 393.8 they rely on possible
       errors in Horizon.  That is --
   MR JUSTICE FRASER:  We are in their closing, are we?
   MR CAVENDER:  393.8, my Lord.  {A/6/200}.
   MR JUSTICE FRASER:  Yes.  393.8.
   MR CAVENDER:  My Lord, yes.  We say that is obviously not
       relevant to construction.  It is doubly irrelevant
       because of course it ignores the differential between
       this trial and the Horizon issues trial.  At
       paragraph 397, while you are there, they ask
       your Lordship to have regard to internal Post Office
       documents in relation to TCs.  No suggestion any of
       these were seen by the claimants at any relevant time.
   MR JUSTICE FRASER:  397, did you say?
   MR CAVENDER:  My Lord, yes, 397.5.  They ask your Lordship
       to have regard to the payments mismatch error.  Again,
       no suggestion that is a matrix to anyone's contract.
       And paragraph 398 you will see relies on further
       inadmissible evidence.
           The one excuse, one sees the admission of all this,
       is at paragraph 400, which is a classic from my learned
       friend's style which is to say that the reference to
       "the commercial reality which the evidence speaks to".
       I'm not quite sure what that means but I do know it is
       an invitation, at the very least, to make the error of
       law that Lord Neuberger warned against in paragraph 19
       of Arnold v Britton, which I am taking you to in
       a moment.
           On business common sense, my learned friend's case
       appears to be, at 381.2:
           "The approach of the court should start and finish
       with common sense."
           Clearly that is not the right approach, and
       of course it is not the approach your Lordship will
       doubtless take.  We can see the invitations you are
       being made constantly is to fall into error.  So Arnold
       v Britton is in the authorities opening bundle at tab 4.
       {A1.1/58/1}.  If we go to the headnote -- your Lordship
       I am sure is aware of the broad facts of this.  It
       related to payment obligations under some leases for
       chalets.  If we go to the middle of the headnote, three
       lines down from D:
           "Clause 3 of the group of leases including
       clause 3.2 are lessees covenant to pay a proportionate
       part ... (Reading to the words) ... to pay a variable
       sum, being a fair proportion to the cost of providing
       the services which are the specified sum, being no more
       than a cap on their maximum sum payable."
           If we go down:
           "The judge accepted the construction contended for
       tenants though dismissed claim ... (Reading to the
       words) ... whereas the construction contended for by the
       tenants would involve rewriting the bargain which the
       parties had made."
           "Dismissing the tenants appeal, the Court of Appeal
       affirmed the High Court's reasoning and held
       additionally the words 'a proportionate part' were not
       inconsistent with a fixed charge."
           It goes to the House of Lords, Lord Carnwath
           "The interpretation of contractual provision
       including ones of service charges involved in
       identifying ... (Reading to the words) ... The
       commercial common sense was relevant only to the extent
       of how matters would or could have been perceived by the
       parties by reasonable people in the position of the
       parties at the date on which the contract had been
           So that was the background, and you can see the
       merits of the point; that it appeared to be an
       unreasonable result, it appeared not to be -- to be
       a service charge that was meant to be for provision of
       maintenance but what in fact provided was a much larger
       sum, and of course the opponents were shouting: it was
       unfair, the words can't mean that.
           In terms of the decision, if we go to paragraph 14
       and following where the principles applied to those
       facts are outlined.  We are in the decision here of
       Lord Neuberger.  At paragraph 15, having dealt with
       Rainy Sky in 14, just above H talking about Chartbrook:
           "... and it does so by focusing on the meaning of
       the relevant words in this case clause 3.2 of each of
       the 25 leases in their documentary, factual and
       commercial contexts."
           That is setting up the test.  Then over the page at
       paragraph 16 the learned judge then outlines and
       emphasises seven factors:
           "First, the reliance placed in some cases on
       commercial common sense and the surrounding
       circumstances should not be invoked to undervalue the
       importance of the language of the provision which is to
       be construed."
           Three or four lines down:
           "The parties have control over the language they use
       in the contract ..."
           And again:
           "Save perhaps in a very unusual case, the parties
       must have specifically focused on the issue covered by
       the provision when agreeing the wording of that
           "Secondly, when it comes to construing the centrally
       relevant words, and I accept the less clear they are, or
       to put it another way, the worse their drafting ... can
       properly depart from the natural meaning."
           Paragraph 19, and this is the crucial point:
           "The third point I should mention is commercial
       common sense is not to be invoked retrospectively."
           That exactly in my submission is what my learned
       friend is asking you to do:
           "The mere fact that a contractual arrangement, if
       interpreted according to its natural language, has
       worked out badly or even disastrously for one of
       the parties is not a reason for departing from the
       natural language.  Commercial common sense is only
       relevant to the extent of how matters would or could
       have been perceived by the parties or by reasonable
       people in the position of the parties at the date when
       the contract was made."
           I emphasise those words.  At 20:
           "Fourthly, while commercial common sense is a very
       important factor to take into account when interpreting
       a contract, a court should be very slow to reject the
       natural meaning of the provision as correct simply
       because it appears to have been a very imprudent term
       for one of the parties to have agreed, even ignoring the
       benefit of wisdom of hindsight."
           That is expressly rejecting my learned friend's case
       that I outlined earlier; that it begins and ends with
       commercial common sense.  It does not.  At 21:
           "The fifth point concerns the facts known to the
       parties ... (Reading to the words) ... which existed at
       the time the contract was made and which were known or
       reasonably available to both parties."
           "Sixthly, in some cases an event subsequently
       occurs which is plainly not intended or contemplated ...
       it only based on what the parties had in mind when
       entering the contract."
           Going back to the knowledge point, and the seventh
       doesn't really apply.  It is about service charges and
       restrictions in that particular case.
   MR JUSTICE FRASER:  The seventh ... everyone runs out of
       steam when they get to seven because it is really quite
   MR CAVENDER:  Quite, and I follow that well-trodden path.
       But then I get more steam when I go to 24:
           "When one turns to clause 3.2 ... the natural
       meanings of the words, at least until one considers the
       commercial consequences, seems clear."
           So you start with the natural words.  What you don't
       do is start with the commercial consequences and say:
       well, this can't have been intended, which is my learned
       friend's approach.  You start with the words.  Over the
       page at 28, at the bottom of paragraph 28,
       Lord Neuberger says:
           "As already explained, the mere fact that a court
       may be pretty confident that the subsequent effect or
       consequences of a particular interpretation was not
       intended by the parties does not justify rejecting that
           That is important.  Over the page at the top:
           "However, as explained in paragraphs 24 and 25 above
       this argument would, in my view, involve the court
       inventing a lack of clarity in the clause as an excuse
       for departing from its natural meaning in the light of
       subsequent developments."
           So what he is saying there is you can't invent some
       difficulty and say: well, it's not clear and then say:
       therefore, I can wade in and change it.  That is not
       an approach that Supreme Court would find attractive.
           At 32 it shows the judge is not immune to the
           "Despite the unattractive consequences, particularly
       for the lessee holding a chalet under one of the ...
       leases, I am unconvinced by this argument ..."
           Namely, how could they have intended it on
       a commercial basis set out 30 and 31:
           "... involved departing from the natural meaning of
       clause 3(2) in each of those leases and it involves
       inserting words which are not there."
           Then Lord Hodge at paragraph 66.  He agrees with
       Lord Neuberger and then he says, quite interestingly, at
       paragraph 77 about this process which is particularly
       relevant I think here, talks about the unitary exercise
       involves an iterative process.  There is no debate about
   MR JUSTICE FRASER:  Where are we --
   MR CAVENDER:  77, my Lord, opposite C.  Four lines down he
       says this:
           "But there must be a basis in the words used and the
       factual matrix for identifying a rival meaning.  The
       role of the construct 'the reasonable person' is to
       ascertain objectively with the benefit of the relevant
       background knowledge the meaning of the words which the
       parties used.  The construct is not there to rewrite the
       parties' agreement because it was unwise to gamble on
       future economic circumstances in a long-term contract or
       because subsequent events have shown that the natural
       meaning of the words has produced a bad bargain for one
       side.  The question for the court is not whether
       a reasonable and properly-informed tenant would enter
       into such an undertaking.  That would involve the
       possibility of rewriting the parties' bargain in
       the name of commercial good sense."
           That is what my learned friend asks you to do:
           "In my view Mr Moorhead's formulation at paragraph
       67 above on which his case depends asks the court to
       rewrite the parties' leases on this illegitimate basis."
           As we will see when we come to 12(12) and 4.1 my
       learned friend asks you to do the same.
   MR JUSTICE FRASER:  Are we moving on from Arnold v Britton
   MR CAVENDER:  I have a few more comments on it, my Lord.
   MR JUSTICE FRASER:  I just have one question on it, but
       I will leave it until you have finished.
   MR CAVENDER:  A couple of points to note.  The parties to
       this are people taking leases of chalets in Wales, not
       huge companies or commercial people, they are ordinary
       people.  So if there is an ordinary people test my
       learned friend is applying, you don't see it in Arnold.
           It is a strong case, in my submission, where the
       words of the clause were clear and didn't permit of any
       alternative construction, and Lord Neuberger's speech
       provides a very clear and authoritative statement on the
       principles of construction, when we come to my learned
       friend's construction of 12(12), where he seeks to
       import a whole range of words into 12(12), about the
       meaning of loss and what Post Office have to do in order
       to qualify as loss, it is not construction, it is
       a series of further implied terms in reality, as we will
       see, but it is a million miles from the process of
       construction that Arnold v Britton instructs
       your Lordship to do.
           My Lord, I was going to finish there.  So your
   MR JUSTICE FRASER:  If you go back to paragraph 17 between
       letters C and D {A1.1/58/10}, and this is a different
       feature of the instant proceedings, where Lord Neuberger
           "Unlike commercial commonsense and the surrounding
       circumstances the parties have control over the language
       they use in a contract."
           In this case, if one takes "the parties" to mean
       a particular subpostmaster or subpostmistress and the
       Post Office, the subpostmaster or subpostmistress
       doesn't have any control over the language, do they?
   MR CAVENDER:  My Lord, I think that is to mis-state the
       point.  What Lord Neuberger is here saying is -- he is
       talking about freedom of contract generally.  He is
       taking the general principle.  Applied to the particular
       facts of Arnold of course these were leases for chalets,
       which were standard form.  So the same point put to
       my Lord would also be available on the facts of this
       case.  In our case actually the postmasters are in
       a better position because they do have a trade union
       type organisation negotiating for them.  So in fact in
       this case the parties are in a better position vis-a-vis
       that point than the unfortunate chalet owners in that
   MR JUSTICE FRASER:  So you are saying that actually he
       didn't really mean that, are you?
   MR CAVENDER:  No, he did mean it, my Lord.  But he was
       obviously aware that -- what he was doing was reflecting
       the position of freedom of contract.  Obviously the
       reality is, depending on the relationship, you have more
       or less freedom.  In this particular case, in Arnold,
       they have no freedom at all.  They were standard form
       leases, as you can see.  But the point I am putting,
       my Lord, is in the present case these claimants are in
       a better position.
   MR JUSTICE FRASER:  And if I were to be persuaded by
       Mr Green that actually the National Federation
       of Subpostmasters is no such thing, so far as an
       independent ...
   MR CAVENDER:  Sorry, my Lord?
   MR JUSTICE FRASER:  I am just waiting for the boisterousness
       of your juniors temporarily to subside.
   MR CAVENDER:  So am I, my Lord.
   MR JUSTICE FRASER:  They are an energetic pair.  If I were
       to be persuaded by Mr Green that I shouldn't pay too
       much attention to the involvement of the NFSP, what
       would you have to say about the inability, as
       I understand it on the evidence, of an intending
       subpostmaster or subpostmistress to have any effect over
       the language?  Are you saying their freedom is whether
       to be a subpostmaster or subpostmistress or not?
   MR CAVENDER:  Exactly.  Really, in effect.  As it was in
       Arnold to have the chalet or not.  It's exactly the
       same.  But whatever view you take of the NFSP, and
       obviously there is not full disclosure on this, but it
       is quite clear they do act on behalf of postmasters and
       don't always agree with Post Office.  They are -- true
       it is their independence is subject to the fact they are
       funded under the plan and we all know what that is, but
       to say they have no say and they have less say than the
       lessees in Arnold would be wrong.  At least they have
       someone who is in position to negotiate for them, who
       can take legal advice, we heard, on the document on
       their behalf, to report to them.  These are all
       functions the lessee in Arnold did not have.
           So what Arnold v Britton says is a strict approach
       to the notion of business common sense.  It doesn't
       provide a warrant to read over the actual words and,
       just because the construction is tough, doesn't mean to
       say the court should roll up its sleeves and rewrite the
           So Wood v Capita was the next I was going to refer
       you to.  {A1.1/67/1}.  This involved, if you recall,
       interpretation of an indemnity in a contract of purchase
       of shares.  A company was involved in the issuance of
       brokerage in classic cars and there was an indemnity.
       If you look at the headnote you can see what happened
       there in line four.  The indemnity was:
           "... to indemnify the Borough against inter alia all
       fines, compensation or remedial actions or payments
       imposed on the company arising out of claims or
       complaints registered with inter alia the FSA."
           What then happened:
           "The purchasing company carried out a review and
       ruled in many cases the company's telephone operator had
       misled customers ... (Reading to the words) ... The
       seller defended the claim on the ground that the
       compensation scheme fell outside the scope of the terms
       of the indemnity clause properly understood.  The judge
       construed 'indemnity' as requiring the seller to
       indemnify the buyer even though there had been no claim
       or complaint."
           That was the point, my Lord; whether it was a claim
       or complaint under the scheme set up.  So because there
       was no claim or complaint, that therefore the scheme set
       up wasn't within the four corners and the sums paid
       under it didn't attract the indemnity:
           "The Court of Appeal construed the indemnity clause
       as being confined to losses arising out of customers'
       claims or complaints and accordingly allowed the
       seller's appeal ... (Reading to the words) ... That that
       was not a literalist exercise focused solely on the
       parsing of the wording of a particular clause but
       required consideration of the contract as a whole ...
       more or less weight was given to elements in the wider
       context ..."
           And reference there to the unitary exercise.  So
       that was the context of what was done.  We pick up
       Lord Hodge at page 12, having outlined above page 12
       between 8 and 12 some background cases.
   MR JUSTICE FRASER:  Sorry, which paragraph?
   MR CAVENDER:  Paragraph 12 is the place I want to take you
   MR CAVENDER:  It talks about the unitary exercise:
           "... involves an iterative process ... (Reading to
       the words) ... commercial consequences are
           And Arnold is cited there.  He says:
           "To my mind, once one has read the language in
       dispute ... does not matter whether the more detailed
       analysis commences with the factual background ... or
       close examination.  Textualism and contextualism are not
       conflicting paradigms in ... (Reading to the words)
       ... which the parties have chosen in their agreement."
           At 15:
           "The recent history of the common law of contractual
       interpretation is one of continuity ..."
                   (Interruption due to alarm)
   MR JUSTICE FRASER:  I can safely say that is not a drill.
       So if there is a further announcement, it might be
       an evacuation.  But, until we get that, it is perfectly
       in order to continue.
   MR CAVENDER:  I am obliged.  So paragraph 15 then:
           "The recent history of the common law of contractual
       interpretation is one of continuity rather than
       change ... (Reading to the words) ... particularly in
       regard to contractual interpretation."
           What happened here of course you can see in practice
       was a narrow view was taken --
                   (Interruption due to alarm)
   MR JUSTICE FRASER:  It just goes to show one can't always
       predict what the next announcement is going to be.
   MR CAVENDER:  So what you can see in this case is that
       a narrow view was taken of the words.
   MR CAVENDER:  In Woods, yes.  Again.  It is another standard
       case where, although you might think that the indemnity
       in terms of spirit, and the first instance judge thought
       this, was to cover claims more generally in that area,
       the court looked at the words of contract and applied
   MR JUSTICE FRASER:  But, Mr Cavender, one interesting
       passage in Woods is at paragraph 14 which basically says
       there is no difference between Rainy Sky and Arnold.
   MR CAVENDER:  My Lord, with the greatest respect I think
       that is just a kind way of saying --
   MR JUSTICE FRASER:  That Rainy Sky is wrong.
   MR CAVENDER:  Quite.  People understood it incorrectly.
       People understood it to mean a much more liberal
       approach than -- as a much more liberal approach than
       the words of Rainy Sky deserved, and certainly in Arnold
       that was the case and Wood v Capita was -- effectively
       Lord Hodge was saying, well, that is how you look at
       those two lines of authority.
   MR JUSTICE FRASER:  But whether Rainy Sky and Arnold say the
       same thing or not, if one reads Arnold and Woods
       together, they are the bedrock on how one should
       approach it.
   MR CAVENDER:  Indeed.  That is a very fair way of putting
                   (Interruption due to alarm)
   MR JUSTICE FRASER:  I'm very happy to continue, Mr Cavender.
   MR CAVENDER:  I am loving this, my Lord.
   MR JUSTICE FRASER:  I will see what happens when the
       associate comes back.  We don't have that long before we
       need to stop anyway.
   MR CAVENDER:  I will move on now from contractual
       interpretation to the law on implied terms.
   MR CAVENDER:  Here of course we are dealing with M&S.  I'm
       sure your Lordship is --
   MR CAVENDER:  Tab 5 of the opening authorities, my Lord.
       {A1.1/61/1}.  Our written submissions on this are
       between paragraph 79 and 92 of our written closing.
           Looking at the headnote, if you recall, this is
       a case where there was a termination of a lease based on
       the terms and, as a result of the date at which that
       was done, there was in effect overpayment of rent
       because the lease was terminated, you see on line 3, on
       24 January 2012.  But because of the way the rent
       quarters fell, rent was paid to 24 March 2012.  So what
       was said was: look, that can't have been intended.
       Please can I have the extra rent back?  And you can see
       the commercial sense in that.
           You can see the judge allowed the claim, the
       Court of Appeal allowed the landlord's appeal and the
       Supreme Court dismissed the appeal.  It said:
           "A term would be implied into a detailed commercial
       contract only if it were necessary to give the contract
       business efficacy or so obvious that it went without
   MR JUSTICE FRASER:  Given it is 12.50 pm and you are about
       to take me to M&S, I think we will stop now.  I will
       actually go and re-read, not only the full authority,
       but those paragraphs again and that will probably save
       the constant interruption, which I don't think is really
       fair to you to be honest.  Unless you would rather
       I didn't do that?
   MR CAVENDER:  I am happy for that.
   MR JUSTICE FRASER:  It seems a sensible, pragmatic solution.
       We will resume at 2 o'clock.  There is a chance that at
       2 o'clock this building might be evacuated and we can't
       get back in.  If that is the case and we are not allowed
       in, I will present myself in the roadway outside the
       front of the Rolls Building and will just address with
       both of you two the practicalities based on any
       knowledge I will have gleaned by then about whether
       there is a proper alarm or not.  That has happened only
       once before.  I think it is unlikely.  But just in case.
       Other than that, we will start again at 2 o'clock.
   (12.50 pm)
                     (The short adjournment)
   (2.00 pm)
   MR CAVENDER:  Good afternoon, my Lord.  We were about to
       look at M&S, I think your Lordship took the opportunity
       over the break to re-read it for which I am much
       obliged. {A1.1/61/1}
           You had obviously read the facts and about the rent
       period, I think I mentioned that before the alarm became
           The points I would like to pick up at paragraph 19
       and following, if we may {A1.1/61/12}.  I just say in
       passing that we deal with this at paragraphs 79 to 92 of
       our written closing.  {A/8/34}
           So 19 {A1.1/61/12} is where the Philips Electronique
       case is mentioned by Lord Neuberger:
           "... which distilled the essence of ... almost be
           And then refers to what Lord Bingham
       Master of the Rolls, as he then was, says below letter B
       which we draw your Lordship's attention to in particular
       because we say that is what might happen if we're not
       careful {A1.1/61/13}:
           "The question of whether a term should be implied,
       and, if so, what ...(Reading to the words)... which will
       reflect the merits of the situation as they then appear.
       Tempting but wrong."
           My Lord, we say that is an approach you should have
       very close regard to in this case to make sure you don't
       fall into that trap.
           Then at 21 Lord Neuberger says:
           "In my judgment, judicial observations so far
       considered represent a clear, consistent and principled
           Then he outlines in a number of paragraphs, six
       paragraphs, numbered principles.  21:
           "First, in Equitable Life Lord Steyn rightly
       observed the implication of a term was not critically
       dependent on proof of an actual intention of parties."
           He then goes on three lines down:
           "... one is not strictly concerned with the
       hypothetical answer of the actual parties but that of
       a notional reasonable person in the position of the
       parties at the time they were contracting."
           That's the important point I make there.  Because
       a lot of the stuff we say my learned friend prays in aid
       is not at the time of contracting, with hindsight, in
       the jaws of the dispute or alleged dispute on his
       version of the facts later on saying, well, given these
       facts, it would be a jolly good idea to imply these
       terms.  That is with the greatest of respect the wrong
           "Secondly, the term should not be implied into a
       detailed contract merely because it appears fair or
       because one considers the parties would have agreed it
       if it had been suggested to them."
           Another problem with my learned friend, when he
       cross-examines witnesses whether a thing could be
       reasonable or fair to put it in, that is the mistake he
       is making there too:
           "Thirdly, it is questionable whether Lord Simons'
       first requirement ... (Reading to the words) ... it is
       vital ..."
           And I emphasise that word:
           "... to formulate the question to be posed by him
       with the utmost care ... Sixthly, necessity for business
       efficacy involves a value judgment."
           Pausing there.  My learned friend relies on that
       throughout his submissions and he mischaracterises it.
   MR JUSTICE FRASER:  What does value judgment mean?
   MR CAVENDER:  I can tell you what it doesn't mean.
   MR JUSTICE FRASER:  You can tell me what it doesn't mean?
   MR CAVENDER:  Yes.  It doesn't mean an entry into all the
       facts that under the hindsight principle wouldn't be
       allowed in.  And I can tell you what it does include,
       which is an objective evaluation as at the date of
       contract based on the facts known to the parties at that
   MR JUSTICE FRASER:  Objective evaluation of what, though?
   MR CAVENDER:  Of the situation in which the parties are
       embarking on the commercial endeavour and what is
       necessary by reference to that endeavour, if anything.
   MR JUSTICE FRASER:  Because it is a phrase -- I'm not being
       difficult.  "Value judgment" is a phrase lots of people
       use, and I am never sure necessarily everyone is using
       it in the same way.
   MR CAVENDER:  All it is saying I think is that it involves
       a judgment by the court as to what the necessity, really
       the degree of necessity, I suppose --
   MR JUSTICE FRASER:  Degree of necessity.
   MR CAVENDER:  Yes.  I think that is clear from the bit that
       follows {A1.1/61/14}:
           "It is rightly common ground ..."
           So if you ask that question and pause and then read
       this bit:
           "It is rightly common ground on this appeal that the
       test is not one of 'absolute necessity' ...(Reading to
       the words)... the contract would lack commercial or
       practical coherence."
           Again any suggestion that is the watering down, as
       my learned friend kind of flirts with, of the business
       necessity test is in my submission wrong.  What it is
       really saying about coherence is it doesn't make sense.
       That is another way of putting the point.
   MR JUSTICE FRASER:  But that is rather different to business
       necessity, isn't it?  Or isn't it?
   MR CAVENDER:  I think it is an aspect of it.  I will go to
       a case in a moment, the Ukraine case, where the Court of
       Appeal considered this word.  But sticking with this
       case for the moment, 23:
           "First, the notion that ..."
           That paragraph.  If you go down to the words:
           "The first proviso emphasises that the question
       whether a term is implied is to be judged at the date
       the contract is made ...(Reading to the words)... For
       the same reason it would be wrong to treat Lord Steyn's
       statement in Equitable Life that a term will be implied
       if it 'essential to give effect to the reasonable
       expectations of the parties' as diluting the test of
           That is really important:
           "That is clear from what Lord Steyn said earlier on
       the same page, namely, 'the legal test of implication
       of ... a term is ... strict necessity' which he
       described as a stringent test."
           Then over the page to 28 {A1.1/61/15}:
           "In most, possibly all, disputes about whether
       a term should be implied into a contract, it is only
       after the process of construing the express words
       ...(Reading to the words)... difficult to see how one
       can set about deciding whether a term should be implied
       and, if so, what term."
           Reading on:
           "Further, given that it is a cardinal rule that no
       term can be implied into a contract if it contradicts an
       express term, it would seem logically to follow that
       until the express terms of the contract have been
       construed it is at least normally not sensibly possible
       to decide whether a further term should be applied."
           Pausing there.  We say that is obviously right.  We
       say in due course that the implied terms that my learned
       friend advances do conflict with the express terms.  And
       furthermore we say under that principle you should also
       have regard to the agreed implied terms, because they
       are every bit part of the contract as the express terms,
       before deciding what, if any, implied terms that are
       disputed you are going to imply.
           29 {A1.1/61/16}.  Any notion my learned friend again
       flirted with the construction of the contract or
       interpretation of the contract and the implication of
       terms are anywhere close together, they are distinct and
       different processes.  What we learn at 29 is the process
       is very different:
           "In any event, the process of implication involves
       a rather different exercise from that of
       construction ... (Reading to the words) ... The
       implication of contract terms ..."
           And these are the words I emphasise:
           "... involves a different and altogether more
       ambitious undertaking: the interpolation of terms to
       deal with matters which ex hypothesi the parties
       themselves have made no provision it is because the
       implication of terms.  It is because the implication of
       terms is so potentially intrusive that the law imposes
       strict constraints on the exercise of this extraordinary
           In their words I particularly emphasise.
           So you can see the discussion that goes on in terms
       of the application of those principles to this case that
       you have read.  And you can see the background this:
       every commercial reason why you might say that rent that
       effectively is being paid into the yonder, simply
       because of the timing of the termination, would on one
       view seem to be uncommercial.  And you will see that
       recorded at paragraph 37 {A1.1/61/18} where
       Lord Neuberger says:
           "There is considerable force in the points discussed
       at paragraphs 33 to 35 above ...(Reading to the
       words)... however, it is necessary to consider
       countervailing arguments."
           And he goes on.  38 very detailed, 39 express
       provisions.  And we know the result.
           My Lord, in my submission that is obviously binding
       Supreme Court authority, absolutely clear, returning to
       the orthodoxy, back to the old days of Liverpool v
       Irwin, that kind of approach.
           The fact is that that approach also applies to
       relational contracts, when we come to that later.  This
       is implied terms of all sorts, it is not delimited or
       restricted in any way.
           The value judgment.  My learned friend refers
       for instance on Day 12, pages 60 to 61 {Day12/60:1} and
       Day 12, page 127 {Day12/127:1}, to the practical
       realities of the relationship.  I'm not saying you can't
       have regard to the relevant factors, but it is very
       clear that you can't have hindsight and you must have
       the right question to the reasonable person at the date
       of contracting.  Those are crucial.  Because that is
       reflective of the requirement for necessity.
           If we go to Ukraine on the meaning of the word
       "coherence" et cetera.  That is volume V2, tab 42.
       {A1.1/73/1}.  A decision of the Court of Appeal.
   MR CAVENDER:  Yes, my Lord, as my learned friend has called
       it.  It's a decision of the Court of Appeal.  I'm not
       going to the facts, it doesn't particularly matter.  The
       argument on this point is at --
   MR JUSTICE FRASER:  It's invasion and defaulting on bonds,
       isn't it?
   MR CAVENDER:  Exactly.  The argument put forward as relevant
       for this point is at {A1.1/73/55}.
   MR JUSTICE FRASER:  Paragraph 200?
   MR CAVENDER:  Yes, 200, my Lord.  What happens at 200 is the
       Court of Appeal set out the contentions the barrister
       there, Mr Thanki, at (v) and (vi):
           "... based on a misunderstanding of ... the business
       efficacy test ...
           "... if the test were whether the contract could be
       effective without it, the implied term against
       preventing performance would never arise."
           Those were the kind of points being made.
           And then the judgment of the court is at 210 on this
       point {A1.1/73/63} given by Lady Justice Gloster:
           "Secondly, we agree with the judge that the
       suggested implied terms are unnecessary the Agreements
       work perfectly well without the suggested terms; they do
       not 'lack commercial or practical coherence' without the
       inclusion of such terms.  Nor do we consider that the
       judge's conclusion represents a misunderstanding of the
       business efficacy test as explained by Lord Neuberger in
       Marks and Spencer plc at 21, as quoted above, as Mr
       Thanki submitted. The question is not whether the
       implied terms create a commercially coherent result but
       rather whether the terms are so necessary or obvious
       that, without such terms, the contract would lack
       commercial or practical coherence.  Despite the attempts
       by Ukraine to re-characterise the arrangement as a
       bilateral loan, or a tri-partite agreement, the court
       must look at the terms of the actual contracts entered
           And you can see they are given:
           "Given this reality, the suggested terms are not
       necessary for business efficacy."
           The next authority I want to show you on the same
       point is Bou Simon, the opening authorities tab 9,
       please.  Another decision of the Court of Appeal on
       implied terms.  I'm not sure the facts are beyond those
       in the headnote, particularly to take you to
           If we go to paragraph 13 -- at paragraph 12 it
       starts with "Discussion and Conclusion", does my Lord
       have that? {A1.1/75/12}
   MR CAVENDER:  "It seems to me that the judge succumbed to
       the temptation described by Bingham MR in the Philips
       case ... (Reading to the words) ... the parties would
       have it if it had been suggested to them."
           And obviously reference there to Lord Neuberger.
           "Furthermore, in my view, the judge began the task
       of determining whether a term should be implied from the
       wrong starting point ... (Reading to the words)
       ... Until one has determined what the parties have
       expressly agreed, it is difficult to determine ... what
       the term should be."
           Then missing out the bits of the quote:
           "It seems to me that in doing so, he construed the
       agreement in order to fit the implied term rather than
       begin with the express terms themselves."
           We can then jump to paragraphs 18 and 19
           "In my view, therefore, the reasonable reader ...
       (Reading to the words) ... On the contrary, there was no
       lacuna of the kind BGC contends for ..."
   MR JUSTICE FRASER:  "At all".
   MR CAVENDER:  Indeed, "at all", my Lord, yes.
           Then paragraph 21 {A1.1/75/15}:
           "Furthermore, it seems to me that there is no lack
       of commercial or practical coherence ... (Reading to the
       words) ... there is nothing uncommercial or absurd about
       a limited recourse loan."
           Pausing there.  You can see what was being said
       here, that under the terms of the agreement itself this
       was the result and that can't have been intended.
           "The agreement was drafted on the basis that
       Mr Bou Simon would become a partner ... (Reading to the
       words) ... It was not subject to decision by the judge
       below and is not before the court on this appeal."
           And then 22 the Lord Justice further criticises the
           "The judge failed to exercise the utmost care in
       formulating the question which one ought to pose to the
       officious bystander ... (Reading to the words) ... As
       Lord Neuberger pointed out, a term which is not
       necessary to give business efficacy to a contract is
       very unlikely to be so obvious that it goes without
           So, my Lord, you will see the relevance of this to
       our case.  The claimants have all sorts of
       non-contractual claims against the Post Office,
       including in deceit you will recall from the pleading.
       The contracts do not need to be rewritten to seek to
       deal with all eventualities, even those not anticipated
       by reasonable parties at the date of contracting, even
       those which would be unlawful for other reasons, eg
       fraud or restitution.  Your Lordship will recall the
       alleged implied term not to conceal various things,
       a term that seems to be invented merely to provide
       a contractual basis for a claim that can only properly
       be advanced in deceit.
           So the takeaway points from this passage on implied
       terms: the judgment must be done at the time of making
       the contract; you can't rely on hindsight; the term must
       be necessary, not merely reasonable.
           Pausing there, that produces a real problem for
       these claimants because we know, and the court can't
       close its eyes to the fact, that these six are part of
       a body of 557.  They are also part of another body of
       11,500, all of whom operate on one or other of these
       contracts perfectly well and have no necessity, whether
       absolute or otherwise, for the rewriting and the
       implication of the 21 terms that my learned friend
       implies here.
           That is not just a jury point.  It is very unusual
       for someone in my position to be able to say that, to
       say, look, here's the contract, and look, there is
       a test bed over there, there is a culture plate, the
       test, in which you can see what is happening.
           I can say that, and I can say it to the sound of
       trumpets because there are many -- I see your Lordship
       is not impressed by it but --
   MR JUSTICE FRASER:  It is a jury point really if one is
       approaching it as a matter of law.
   MR CAVENDER:  Is that right?
   MR JUSTICE FRASER:  Well, if the test is business necessity,
       and you have very carefully taken me through the proper
       sequence of considering that, what difference does it
       make that you say there are lots of SPMs for whom it
       works perfectly well?
   MR CAVENDER:  Because the threshold, as we have seen, for
       implying a term, is necessity.  I can point unusually in
       this kind of case to many thousands of other people who
       operate on these contracts perfectly well, without the
       term.  It's powerful evidence and it requires answering
       I'm not saying it is a slam dunk but it is relevant.
       And my learned friend has to grapple with that and
       explain why, despite that fact, it is necessary.  Not
       just reasonable or he would like it for these six or
       these 557, but why it is necessary and why otherwise the
       contract lacks practical coherence.  Because those
       11,000-odd other people don't think so and they operate
       every day on the ... they don't think there is any
       problem at all.
           So that was the second point: you can't have
       hindsight, must be necessary, not merely reasonable.
       There must be a gap or hole in the contract, a lacuna,
       necessary to fill in order to give it practical
       coherence, or I prefer business necessity.
           So although it is not absolute logical necessity,
       I accept that, it is nonetheless a very high hurdle to
   MR JUSTICE FRASER:  It is business necessity, isn't it?
   MR CAVENDER:  Indeed.  We have looked at the cases where it
       has come up and it is a harsh test.  The idea of
       interpolation of terms into agreements is an ambitious
       undertaking.  To imply 21 terms into a contract is a
       particularly ambitious undertaking.
           You would also, my Lord, even if you embarked on
       this course at all, you would have to re-address the
       test after you implied each term.  Because you would
       have to ask yourself, having implied one of the terms,
       does that then obviate the necessity to imply any more?
       And normally in a case it doesn't matter because there
       is one term or two terms, but when we have 21 that is
       a real point.  You have to reassess the test after each
       term.  Because it may be said that or your Lordship may
       form the view the implication of one of them is
       sufficient and there are other areas where you are not
       satisfied it is necessary to imply a term.
           So the task my learned friend has given you,
       without, with great respect, any real assistance, is
       quite a special one.  It is particularly special when he
       has not actually shown you any one of the 21 terms.
           I will take you to them under the implied term
       section but let's have a look now just to remind
       your Lordship.  I'm not going to go through them but
       just to remind you in terms of getting you warmed up and
       thinking about what you are being asked to do and the
       scope of it.
   MR JUSTICE FRASER:  So we are putting the authorities away.
   MR CAVENDER:  We are putting -- after this I am going to
       construction, but before I do that I want to --
   MR JUSTICE FRASER:  Just in terms of my clearing my desk.
   MR CAVENDER:  Indeed, my Lord, yes, we have.  As I say, I'm
       only dipping my toe in this now just to remind you
       within that debate what are being asked to do.
           So it's bundle B, {B3/1/35}.
   MR JUSTICE FRASER:  Common Issue 2?
   MR CAVENDER:  My Lord, yes.  It's implied terms.  It's
       paragraph 63 of the pleading I want to go to.
   MR JUSTICE FRASER:  We are going to the pleading?
   MR CAVENDER:  Yes, {B3/1/35}.  What we have in 63 is the
       so-called Yam Seng term with --
   MR JUSTICE FRASER:  It is not "so-called".  It is the
       Yam Seng term, isn't it?
   MR CAVENDER:  Well, not the term that was implied in that
       contract in fact.
   MR JUSTICE FRASER:  No, but 63 seeks -- we can go round and
       round in circles on semantics and it is very tedious.
       Relational contracts are effectively a tag which was
       first expounded in Yam Seng.  So that is what 63 is.
       And that, as I understand your submissions on approach,
       is a question I should come to at the end having done
       express terms and implied terms.
   MR CAVENDER:  Express terms and agreed implied terms.
   MR JUSTICE FRASER:  Well, you say agreed.  Whether agreed or
       not, you say express terms, the agreed implied terms and
       other implied terms after that because of the necessity.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  And once I have done those two
       categories, then I can go on to consider the case that
       is advanced on relational contracts.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  Because it has to be considered at some
       point.  Mr Green said he wasn't much bothered whether it
       was second or third but he agreed express terms had to
       be done first.  You say it should be done after implied
   MR CAVENDER:  Yes, as part of really.  Because my learned
       friend, the way he puts the case is his term in 63,
       largely the Yam Seng term is like an authority or
       warrant card he uses for justifying, implying the 21.
       He also does so separately --
   MR JUSTICE FRASER:  He does it separately as well.  That is
       why I was anxious -- "anxious" might be the wrong
       word -- careful to explore the sequential order that
       each of you seeks to have me adopt.  Because Mr Green
       has relational contracts as a separate tag, but he also
       uses it as a springboard for his other implied terms.
       And it can't be a springboard if you are going to do the
       implied terms before you do Yam Seng.  So do you say it
       can be done contemporaneously?
   MR CAVENDER:  It doesn't matter whether you do it at the
       same time or not because Yam Seng is a step along the
       way to implying a term, so it is part of the implied
       terms debate.  As my Lord says, it is simply -- or we
       say, I'm not sure if he accepts it or not -- it's
       a staging post along the way, a recognised type of
       contract, which may require the court to look
       particularly carefully at certain possible implied
   MR JUSTICE FRASER:  Or at the nature of the relationship.
   MR JUSTICE FRASER:  Which within it would include, if one
       found a relational contract, the potential for implying
       terms as a function of it being a particular species of
   MR CAVENDER:  We say that is the wrong way of looking at
       it --
   MR JUSTICE FRASER:  Okay, it may or may not be semantics.
       But I think in opening your position was somewhat more
       robustly against it as a concept at all.
   MR CAVENDER:  My Lord, no, no.  It is obviously a concept,
       it has been recognised.  The debate we had, and I don't
       want to have it again because it's out of order, but if
       you look at what Lord Justice Beatson says in Globe, it
       is quite clear he is saying that a relational contract
       is a thing.  Whether or not in a particular relational
       contract you imply the Yam Seng duty will depend on the
       terms of the contract.  Once you take that on board, it
       is very clear in my submission that he would not advance
       or accept the position that the finding of a relational
       contract in and of itself means you then imply the
       Yam Seng term.
           They are separate stages and in my submission -- and
       I will make it good -- that is the position, and it's
       for good reason because even my learned friend accepted
       you can imagine a relational contract, ie one that
       fulfils some of the criteria, having sufficient express
       terms not to require the Yam Seng term.  Point one.
       Point two, the danger with rolling it up in the way that
       attracts my Lord is the danger of not applying --
   MR JUSTICE FRASER:  Why do you say the way that I am
       attracted to?
   MR CAVENDER:  Because when you put it to me, you seem to be
       attracted at the moment to the idea that as part of the
       finding of a relational contract --
   MR JUSTICE FRASER:  No, I am just fairly clear as to what a
       relational -- what the consequences of finding
       a relational contract are.
   MR CAVENDER:  Yes, my Lord, and I'm not agreeing with you.
   MR JUSTICE FRASER:  I think you are.  But if and insofar as
       you are not, this arose in opening and it may just be
       a miscommunication issue, the expression "relational
       contract" has certain characteristics or it is used to
       describe a contract with certain characteristics.  The
       way in which parties' obligations are defined between
       the two of them in a contract situation, insofar as they
       are not expressly agreed, express terms, they are
           So if one says, well, a relational contract means
       a duty of good faith, that duty of good faith can only
       go into a contract by means of an implication if it is
       not dealt with expressly.  That is all it comes down to.
   MR CAVENDER:  My point in response, my Lord, is I can
       imagine a world, Lord Justice Beatson can too, where you
       have a relational contract, you say it is long-term,
       there's lots of communication, all the incidents that
       one gets.  It's quite an early stage of the
       jurisprudence on what a relational contract is, but it
       has those.  But nonetheless there is no necessity to
       imply a term of good faith.
   MR JUSTICE FRASER:  That might simply be a way of saying it
       isn't a relational contract.  If one defines relational
       contract --
   MR CAVENDER:  That is the point.
   MR JUSTICE FRASER:  That is the point.
   MR JUSTICE FRASER:  And I understand the Post Office's
       position is effectively, whether it is a relational
       contract or not, there is no duty of good faith --
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  -- in this contract.
   MR CAVENDER:  Correct.  But I say, and this is important in
       terms of the development of jurisprudence, it is
       important as a question of developing that jurisprudence
       to isolate the elements that make it potentially
       a relational contract, what that then makes you as
       a judge look at to see the kinds of terms you might
       imply, decide whether in fact you are going to imply
       them, and then apply the Marks & Spencer test to that.
       If you do it all in one, and you can do, there is a real
       risk in missing the stages, particularly the application
       of the Marks & Spencer test in that, which clearly has
       to be done.
   MR JUSTICE FRASER:  There is no doubt the Marks & Spencer
       test clearly has to be applied to see what implied terms
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  There may also be no difference in
       result depending on the stage at which one does it.
   MR CAVENDER:  Quite.
   MR JUSTICE FRASER:  But I understood the Post Office case
       from opening, and it seems I have misunderstood it, was
       effectively challenging the concept of relational
       contracts at all.
   MR CAVENDER:  My Lord, no.
   MR JUSTICE FRASER:  I explored it in quite a lot of detail
       on the first day and I think invited you to go back and
       re-read some of it because it didn't seem to me
       necessarily to make -- to be entirely easy to follow.
           As I understand it now, you accept as a legal
       species there is a type of contract that can be
       described as a relational contract.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  But, and if I am wrong tell me, you
       don't accept that simply because something is as, so
       described, a relational contract, it necessarily
       includes a duty of good faith.
   MR CAVENDER:  Correct.
   MR CAVENDER:  You have to decide that separately and you
       have to decide what type of implied term, because good
       faith is obviously a full church, you are minded to
       imply and then apply the M&S test to that.
   MR JUSTICE FRASER:  Therefore if there are two types of
       relational contract, one that has a duty of good faith
       and one that doesn't, what terms should one use to
       describe a relational contract that does not have any
       such duty?
   MR CAVENDER:  It is a relational contract.  It is --
   MR JUSTICE FRASER:  It has the same name as the one that has
       a duty of good faith?
   MR CAVENDER:  What about a joint venture agreement?  You
       have a joint venture --
   MR JUSTICE FRASER:  Not all joint ventures are relational
       contracts though.
   MR CAVENDER:  I know, but some have the term of good faith
       implied, see Ross River, and some do not.  What it is is
       a helpful road along the way for the court to identify,
       very usefully, that it is a species of contract where
       you have ongoing co-operation and long-term.  And
       your Lordship has put your finger on this, I know it is
       not in the authorities, but you are quite right when you
       say the long-term element is crucial.  Why?  Because you
       are locked in.  You are locked in for a period of time
       and one knows from life that events change in, say,
       a five-year term or 25 years in the case you brought our
       attention to.
           In a short-term contract or one with a notice period
       that is short your response to that as contracting party
       is you can terminate and leave.  In a long-term contract
       you cannot do that.  And in a relational contract that
       makes it even worse because you are thrown together.
       It's not just the bilateral sale of goods or something,
       it is an ongoing relationship.  And those are the two
       elements that require an answer from the court to have
       particular regard to whether, in those circumstances, it
       is necessary to imply a term.
   MR JUSTICE FRASER:  It is very clear to understand,
       therefore, that the Post Office case is that a contract
       can be a "relational contract" but not necessarily
       include a duty of good faith.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  All right.
   MR CAVENDER:  We will go to Globe and see --
   MR JUSTICE FRASER:  No, no, that is fine.
           Right.  So we went to the pleadings so you could
       show me the implied terms.
   MR CAVENDER:  Not to go through them, just to see the order
       of magnitude having just looked at the test of what you
       are being asked to do.  So you have the headline term of
       Yam Seng, and then cast your eye down in 64 {B3/1/35}
       the range of the 21 terms that you are being asked to
       imply here.
           So we have at 64.1 training, 64.1A reasonably fit
       for purpose system.  Then 64.2 through to 64.12 is all
       about accounting and what you can and can't do.  64.13
       is suspension, 64.14 is termination, 64.15 to 18 is good
       faith and other things.
           So the scope of what you are being asked to do and
       say that each and every one of these is necessary to
       give coherence to the contracts, and you are asked to do
       that without any submissions, detailed submissions on
       which ones of these and on what basis.  So very globally
       in closing by my learned friend.  He touches on it and
       he tries to parse them up and no real work is done to
       try and justify them.  And this is being done when you
       have already got the agreed implied terms, necessary
       co-operation, which my learned friend says, we will come
       to it in a moment, is a wide term, filling the space,
       along with the fiduciary relationship, the agency, as
       well as the express terms.  So that is the task on which
       your Lordship is asked to embark.  I will return to
       implied terms in due course.
           As you have not seen them before --
   MR JUSTICE FRASER:  I have seen them before.
   MR CAVENDER:  But not in terms of submissions and ...
   MR CAVENDER:  So now we are getting to the construction
       point, express terms, clause 12(12).
   MR JUSTICE FRASER:  Can I just check before you do as
       a global headline point, because obviously the first
       four lead claimants are on the SPMC, the fifth and sixth
       are on the NTC.  Is there scope for, given the different
       knowledge of the parties or the hypothetical reasonable
       person, so far as the NTC formation is concerned,
       because it is so much later in time, the different
       implied terms in the NTC than in the SPMC?  Or do you
       say the answer will inevitably be the same for both
   MR CAVENDER:  My Lord, I think it would be really.
   MR JUSTICE FRASER:  It would inevitably be the same.
   MR CAVENDER:  Yes, because I don't think there has been any
       attempt by either side to put forward factual matrix
       that would differ.
   MR JUSTICE FRASER:  The factual matrix is going to be
       different, isn't it?
   MR CAVENDER:  But not appreciably.  We say the main factual
       matrix in closing is that the SPMs have control of the
       branch, they know what is going on, they are doing the
       transactions --
   MR JUSTICE FRASER:  But that is after they formed the
       contract, you're saying then.
   MR CAVENDER:  No, no.  They know that is going to happen.
   MR JUSTICE FRASER:  That is correct.  But if one looks at
       the two NTC claims, Mrs Dar and Mrs Stockdale, they are
       forming their contracts, what, 12 years, 14 years, 16
       years after some of the other lead claimants.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  And the question which has to be posed,
       which is -- I don't have the exact terms written down in
       front of me, about the state of knowledge of the
       reasonable person, might be different in 2012 than it
       was in 2000.
   MR CAVENDER:  Theoretically of course that must be right and
       no one has identified any material difference that is
       relevant to construction.
   MR JUSTICE FRASER:  And you might well be right about that,
       but it just seems to me a potential wrinkle which is why
       I wanted to ask you about it.
           The Justice for Subpostmasters had in fact been
       created pre-2012, I think, the Parliamentary inquiry
       et cetera, et cetera, that had all happened
       pre-claimants five and six.  Well, not all of it but
       some of it had.  So there is a possibility for
       a different factual matrix for claimants 5 and 6 than 1
       to 4.  But if your case is in practical terms it is
       going to be the same, then that is your case.
   MR CAVENDER:  My Lord, it is.  Because remember it has to be
       known to both parties if you are going to have it in as
       a matrix.  We are talking about construction here.
   MR JUSTICE FRASER:  All right.  It has to be an objective
       evaluation, remember.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  All right.
   MR CAVENDER:  So we say the point of departure for
       construction is the fact that this is a contract of
   MR CAVENDER:  An express appointment both under the SPMC and
       the NTC.  The appointment of an agent is an important
       feature when considering the issues of construction and
       implied terms, we will come to later.  That agency
       necessarily brings with it fiduciary obligations owed by
       the subpostmaster as agent to their principal, the
       Post Office, which I think was accepted by my learned
       friend yesterday, and necessarily so.
           So in short, the relation of agency is a fiduciary
       one and the contractual provisions we are debating sit
       atop that.  That is important.  Your Lordship will have
       seen the claimants seem to be moving away from the
       admission they were agents, see paragraph 339.1 of the
       written closings {A/6/161}, and they make the striking
       submission that the subpostmasters' express agency
       special agreement to be a fiduciary gave rise to what
       they call a "relatively hollow" agency relationship.
       I'm not sure what that means.  They were agents and they
       had all the obligations of an agent and a fiduciary
       relating to the cash and stock and the running of the
       branch and I'm not sure that can be sensibly contested.
           So going to the clause itself, my Lord, can we turn
       up the clause in whichever version you have.
   MR JUSTICE FRASER:  "The clause" being 12(12)? {D2.1/3/53}
   MR CAVENDER:  12(12), yes.  A couple of things before we
       come to the actual words.  Because of the way it has
       been debated in court you can sort of approach it almost
       from the wrong angle.
           Firstly, this clause is obviously dealing with
       losses, but it is not solely dealing with
       Horizon-generated losses and trying to get them in or
       out of the wording.  That is the first point.  I am
       assuming for the purposes of this argument that
       Horizon-generated losses or bugs are in fact a thing.
       I'm assuming that.
           The second point to make is that this clause was
       introduced before Horizon but its application in
       post-Horizon times has been the main focus of the
       debate, and understandably.  Within that there has been
       particular focus on whether there is contractual
       allocation of burden within the clause and, if so, what
       allocation.  That again has been the main focus.
           But before we get to burden of proof, leave that to
       one side, the court first has to determine the meaning
       of the clause.  Because once it does that it may find
       that issues of burden satisfy or answer themselves.
           So in my submission there are two stages.  One is
       what is the meaning of the clause?  And keeping one eye
       to how Horizon-generated losses fit into that.  And
       secondly, what is the burden of proof in the clause, if
   MR JUSTICE FRASER:  If I keep one eye on how
       Horizon-generated losses fit in I am applying hindsight,
       am I not?  Don't I look at the words as though Horizon
       hadn't even been invented?
   MR CAVENDER:  My Lord, yes.  But it is more for the purposes
       of the argument because my learned friend effectively,
       as I understand his argument, says, look,
       Horizon-generated losses are a thing, they are included
       within losses and 12(12), and postmasters had the burden
       of disproving all of that and isn't that a terrible
       thing.  So that is the argument that is put.
           So what I say is that isn't right.  Let's look at
       the meaning of the clause first and then look at burden
       second, and then what we will do, third, is to run
       through how in fact my construction would work as
       a matter of practice at the breach trial, and that is
       where the inference point arises.  Not as a matter of
       construction, not as a prior point.  The reason I do
       that is to persuade my Lord I'm not trying to sell you a
       false prospectus and give you a construction that won't
       work in fact.  So I am working it through and saying
       this is my meaning, this is the burden of proof, this is
       how it would work in fact in relation to Horizon
       relating to the submission of an account.  This is how
       it would work in fact.
           Not that you have to find that in this trial, just
       to give you comfort that my construction is correct.
           So meaning.  Again, with the Horizon-generated
       losses on my shoulder I say Horizon-generated losses do
       not come within 12(12) due to the meaning of the clause
       and that is for two distinct reasons.  One, because of
       the word "deficiency".  You will see the word there, it
       starts with losses and errors, and it says finally
       deficiencies due to such losses must be made good
       without delay.
           Deficiency, the Post Office meaning on that is
       simple.  Deficiencies often in this litigation have been
       referred to as shortfalls, they are the same thing.
       A deficiency focuses on what has gone on at the branch
       and a deficiency is reflective of the fact there is
       a loss.  A deficiency is a difference between what is
       shown in terms of cash and stock counting at the branch,
       what I refer to as the "as is" position, comparing that
       and what the position should be as shown by the
       transactions entered into on Horizon in the branch, what
       I call the "should be" position.  A deficiency is
       a difference between those two things.
           Therefore, it does not include any sums entered on
       to the Horizon system by way of a bug or something of
       that kind.  They are not a deficiency.
   MR JUSTICE FRASER:  That is a circular argument.  But let's
       say for the sake of argument that it is correct.  If
       that is correct and what are described as
       Horizon-generated losses don't fall under 12(12), under
       which clause would Post Office seek to recover losses of
       other types?  I'm not pegging it to Horizon, to do it
       neutrally.  Losses of other types would be recovered
       under which clause in section 12(12) or any other
   MR CAVENDER:  They would come under 12(12).
   MR JUSTICE FRASER:  They would come under 12(12).
   MR CAVENDER:  Yes, other types.  I defined deficiency and
       explained it is a comparison between two things.  So if
       for instance you compared the "as is" position with what
       you had entered into Horizon, you had made a mistake of
       £100, and so you have £100 less than you should, that is
       a loss, it is a deficiency, and under 12(12) you would
       be responsible for it.
   MR JUSTICE FRASER:  But I thought you started this passage
       by saying you were going to assume, for the purposes of
       argument, that Horizon-generated loss was a thing.
   MR CAVENDER:  And what I have done is identify by reason of
       the meaning of the clause, not a gateway or anything
       else.  In terms of the meaning of the clause,
       deficiency, because it compares two things the "as is"
       position, ie the cash and stock in the branch, and the
       transactions done on Horizon by the postmaster at the
       branch, ie the stamps and stock that should be there, if
       there's a difference between those two then there is
       a deficiency.  If there is a difference between those
       two because there is a bug in Horizon, that is not
       a deficiency.
   MR JUSTICE FRASER:  All right.  So on your analysis of
       Horizon-generated losses being a thing, how would that
       be recovered within section 12(12)?
   MR CAVENDER:  It wouldn't.
   MR JUSTICE FRASER:  Mr Cavender, it might be me being a bit
       dense but I have difficulties in following.
           If you are going to accept for the sake of argument
       that Horizon-generated losses do exist --
   MR CAVENDER:  That is a loss that is generated wholly by
       a bug, nothing to do with the subpostmaster or any error
       by him.
   MR JUSTICE FRASER:  But then you are not accepting for
       purposes of argument any counterfactual scenario
       relating to what this case is in fact about.  Because
       you are defining Horizon-generated loss as something
       that would never, effectively, hit the radar of recovery
       from the SPMs at all.  And this whole case is about, and
       I appreciate it is not going to be -- you can shake your
       head but it is.  Their case is that there were such
   MR JUSTICE FRASER:  And that they were recovered from them
       under clause 12(12).
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Incorrectly.
   MR CAVENDER:  That is what they say.
   MR JUSTICE FRASER:  Yes.  So if for the purposes of argument
       you are going to accept there is such a thing as a
       Horizon-generated --
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  It is not enormously helpful to say you
       accept it for purposes of argument but then define it in
       such a narrow way that it simply would never occur in
       terms of recovery from an SPM.
   MR CAVENDER:  My Lord, it is, because that analysis involves
       a misunderstanding and it is this --
   MR JUSTICE FRASER:  Well, I am misunderstanding whatever it
       is you are saying.
   MR CAVENDER:  Clause 12(12) is about recovering loss for
       which the postmaster is responsible.
   MR JUSTICE FRASER:  Understood.
   MR CAVENDER:  This is my second point, the second reason why
       they are not responsible for Horizon-generated losses.
       The first one is deficiency, they are not a deficiency.
       The second is when you look at the terms of
       clause 12(12), and let's look at it together now:
           "... is responsible for all losses caused through
       his own negligence, carelessness or error, and also for
       losses of all kinds caused by his assistants."
           Pausing there.  A horizon-generated loss in the way
       we have been describing is not caused by a subpostmaster
       or by an assistant.  So for the second distinct reason
       it is not recoverable under clause 12(12).  It has been
       done so, then Post Office were not entitled to do that.
           That, in my submission, is the proper construction
       of 12(12) in terms of its meaning, deficiency on the one
       hand and cause on the other, both independently working,
       in terms of the words used, to make clear that assuming
       that Horizon-generated losses are a thing, and I accept
       that for the purpose of argument, they wouldn't get in.
       So that is my gateway point that my Lord and I debated
       in opening.  They wouldn't get through the gateway.
       I use that word in order to try and explain and make it
       simpler.  But I think actually it is probably simpler to
       look at the meaning of the words.
   MR CAVENDER:  So therefore, to the extent that
       Horizon-generated losses are a beast that exist at all,
       and I accept for the purposes of argument they might be,
       they do not fall within clause 12(12) and cannot be
       recovered under it.
           We then come to the separate question in light of
       that of burden of proof.
   MR CAVENDER:  Post Office have the persuasive burden,
       sometimes called the legal burden, I'm happy with either
       term if you look at Phipson, of showing a deficiency.
       This will include in cases where it is relevant or
       suggested that the deficiency was not, in fact, a
       Horizon-generated loss.
   MR CAVENDER:  When you get to discussing burden within
       clause 12(12), Horizon-generated losses have already
       been dealt with outside it.  They can't come within it
       for the two reasons I have said: they are not
       a deficiency and have not been caused by
       the subpostmaster or an assistant.  So you don't need to
       strangulate or alter the construction of 12(12) as
       regards burden to get them out.  They are already out.
           So 12(12) is dealing with all other losses, apart
       from Horizon-generated losses, at this stage of the
   MR JUSTICE FRASER:  I don't think it is, though, is it,
       because 12(12) is only dealing with losses caused by the
       negligence, carelessness or error of the postmasters.
       Isn't it?
   MR CAVENDER:  The error, yes.
   MR JUSTICE FRASER:  So it is not dealing with all losses
       except Horizon, although you are defining
       Horizon-generated losses in a particular way to construe
       it that way.  There is at least on the words the
       possibility of losses not caused by negligence --
   MR CAVENDER:  Carelessness or error?
   MR JUSTICE FRASER:  Or carelessness or error.
   MR CAVENDER:  It is possible, my Lord.  But when it comes to
       burden -- you are quite right, and this is where our
       pleading comes in --
   MR JUSTICE FRASER:  What, your Generic Defence?
   MR CAVENDER:  Yes, the practicalities.  At this stage you
       say, well, you are in charge of the branch.  If you do
       things as you should do then you shouldn't suffer losses
       unless you have made an error.  It is possible you might
       be robbed, there might be other things.  But on balance
       then that won't happen.
           So when you look at our paragraph 93 of the Defence
       in that light you can fully understand it.
           So if we look at paragraph 93. {B3/2/42}
   MR JUSTICE FRASER:  I have it open.
   MR CAVENDER:  The famous paragraph my learned friend calls
       it.  "Infamous" may be a better word.  But what that is
       doing, my Lord, and bear in mind in 93 the first two
       words of the second sentence:
           "More generally ..."
           So this is a generic pleading --
   MR JUSTICE FRASER:  But if you are using "shortfalls" as
       being synonymous with "deficiencies", what is said at
       93(1), the second line of 93(1), is contrary to what you
       have just said to me in the last five minutes.
   MR CAVENDER:  Which part, my Lord?
   MR JUSTICE FRASER:  You said that you have the persuasive or
       legal burden of showing a deficiency.  93(1) says, if
       you read the introductory words of 93:
           "... as regards shortfalls disclosed in
       a subpostmaster's accounts ...
           "(1) Where a subpostmaster asserts that he or she is
       not responsible or liable for a shortfall, the legal
       and/or evidential burden of proof is on him or her ..."
           And I understood you a few minutes ago to accept
       that the Post Office had the legal or evidential burden
       of showing that there was a deficiency.
   MR CAVENDER:  My Lord, you have to read the whole of 93 and
       94.  94 actually is the construction of section 12(12).
           And read for me, my learned friend didn't, 94(2)
           "On the true construction of section 12(12),
       subpostmasters are responsible for all losses (as
       defined in paragraph 41 above) ..."
           Let's look at what that means because that imports
       some definitions that are rather important in this
       connection.  It's page 15 of the pleading.
   MR JUSTICE FRASER:  I don't know why that is any more
       helpful than the expression of legal or evidential
       burden in 93(1).
   MR CAVENDER:  Because what it does --
   MR JUSTICE FRASER:  Go to 41.
   MR CAVENDER:  I'm not sure you have been there yet.
   MR JUSTICE FRASER:  I have that open as well.  It's on
       page 15, internal numbering. {B3/2/15}
   MR CAVENDER:  Exactly.  So what you have is definitions
       which are incorporated into 94 and 94(2) in particular.
       You have a discrepancy which refers to the difference
       between the actual cash and stock in the branch and the
       cash and stock as shown on Horizon as derived from
       transactions input by branch staff.  That is exactly the
       same as what I said to my Lord a moment ago in terms of
       the difference between the "as is" and the "should be".
           If you then go to subparagraph (3), a loss refers to
       an event that causes a negative discrepancy.  A
       discrepancy is positive or negative and it's saying
       a loss is a negative discrepancy.
           Subparagraph (4), a shortfall refers to a negative
       net discrepancy at the end of a trading period.  All so
       far consistent.
           And then we have at (6) {B3/2/16} something called
       a Horizon-generated shortfall, it refers to a shortfall
       attributable to errors and/or bugs in Horizon.
           You will see nothing in this pleading expressly or
       implicitly that suggests that postmasters are liable for
       Horizon-generated shortfalls.
   MR JUSTICE FRASER:  No, that is not the point.  The point
       was who has the legal and evidential burden of proof.
       I know that Post Office's case is that they have never
       chased any subpostmasters for Horizon-generated
       shortfalls because they accept on one way of looking at
       the case, and as they define Horizon-generated
       shortfalls, that that is not something that could be
       caused by the subpostmasters.  But the reason for that
       is because of how Horizon-generated shortfalls are
       defined.  What I am asking you about is the legal and
       evidential burden.
   MR CAVENDER:  Quite.  Let's go to that.  This is talking
       about generally.  If you look at 93:
           "More generally, as regards shortfalls disclosed in
       a subpostmaster's accounts, Post Office notes the
       following principles ..."
           This is talking about downstream at a breach trial.
       It is not saying as a matter of construction of 12(12),
       what it is saying is once you decide what it means, this
       clause, and we will come to this when I say its
       implication.  You will then have a debate about whether
       clause 12(12) itself allocates the burden.  And my
       submission is it doesn't.
   MR JUSTICE FRASER:  Understood.
   MR CAVENDER:  But what you then do downstream is say in
       a particular case Mr Abdulla with his problems, or
       Mr Sabir, they say they didn't get the scratch cards or
       didn't get whatever it was, and within that evidentially
       there will be burdens of proof according to procedural
       law or the law of evidence.  All 93 is doing is saying
       in that context later what Post Office is going to say.
       It is not saying that what I have just said is wrong.
   MR JUSTICE FRASER:  All right.
   MR CAVENDER:  So 93(1) assumes a shortfall, and what it is
       saying is in the absence of evidence that a shortfall
       arose and was responsible, it is appropriate to assume
       it is for them to explain.  And that is doing no more
       than stating the obvious because you have
       Horizon-generated shortfalls out of the picture, you
       have a difference between the cash and stock at branch
       and what the transaction you have entered on to Horizon
       show.  And you then say -- we say, well, this doesn't
       happen by osmosis, this happens due to normally an error
       or negligence on behalf of the postmaster.  You as
       a matter of practice have more knowledge about that.  So
       when the court is allocating -- is deciding burden of
       proof at the breach trial, you will have regard to those
   MR JUSTICE FRASER:  Mr Green, I am sure the sotto voce
       chirping stage left is not going to be useful.  If
       Mr Cavender wants you to help him explain it, I am sure
       he will invite you.  But for the moment these are the
       Post Office's submissions, and they didn't interrupt you
       on Monday or Tuesday.
           Mr Cavender.
   MR CAVENDER:  My Lord, some of the confusion that has been
       brought in here I think in this aspect of the case is
       people not being absolutely clear as to the burden of
       proof at what stage.  So I say what you must first do is
       decide what the words mean.  You decide then whether
       contractually there is any allocation of burden
       expressly or implicitly within the clause.
   MR CAVENDER:  Whatever the answer to those questions, you
       then say at the breach trial, in light of those
       findings, depending on the allegations of breach,
       remember, and what particular product it is and how it
       was said the problem is caused, Mr Abdulla says he
       didn't receive the scratch cards or someone says they
       didn't receive the lottery tokens, whatever it is,
       inherent within that there will be evidentially they
       would have to prove certain things.  They didn't receive
       a certain amount of cash, they received another amount.
       So it is in that connection that 93 is particularly
           But of course that is not for this trial.  That is
       not for your Lordship to determine.  And you couldn't,
       absent the facts of the relevant -- the breach facts in
       a given trial, how you finally allocate the evidential
       burden, if you like, based on the allegations.  All
       your Lordship can do sensibly, in my submission, is see
       whether there is an express or implicit burden within
       the clause.
   MR CAVENDER:  So my submission on that is that the clause
       itself does not expressly allocate the burden.  It
       doesn't say as some clauses do in some contracts: you
       can do this, that or the other if you want this
       further -- the seller, if he delivers late, to justify
       the reason why, otherwise he has to do this that or the
           That kind of language that expressly says it is for
       one party or the other to do something or provide
       a certificate or a record or something to enjoy some
       kind of contractual right.  So it is not express in that
           The next level is: is it implicit in some way?  Are
       there words there we can implicitly see that there is
       an allocation of burden there?  In my submission, no to
       that as well.
           But insofar as you want to go down that particular
       route, let's have a look to see if that is right or
       wrong.  As a matter of construction of clause 12(12),
       the first thing the subpostmaster has to do is show that
       the loss was not one caused by his assistant.  Why?
       Because losses caused by his assistant, there is strict
       liability.  The own negligence, carelessness or error
       only applies to the subpostmaster.  That is what the
       words say.  And it is obviously right that they say that
       because, as we know, subpostmasters are not obliged to
       employ assistants, they employ them or not at their own
       will, they choose them, they train them, they supervise
       them.  Whether they do so is a matter entirely for them
       so it is not surprising that the clause reflects that
           So the first stage is, looking at burden of proof,
       it is for the postmaster to show, in relation to
       a particular loss for which claim is made, that it was
       not caused by his assistant.  If he can do that, we then
       get into: was it caused by your error or carelessness?
       In my submission at that stage, implicitly it is for him
       to show that.  If he is going to escape liability and
       say, firstly, "I can fulfil the burden that it wasn't my
       assistant", and he says "Well, it wasn't due to my error
       or negligence", which at this stage remember are not
       Horizon-generated losses, these are losses based on the
       difference between the "as is" and the "should be", it
       is for him to show that.
           Otherwise, it would be -- for Post Office to recover
       under this clause would require it to prove precisely
       the cause of a given loss by something done by its agent
       in branch about which the Post Office will never have
       any knowledge but the postmaster potentially will.  At
       least he is in a much better position to know in
       the ordinary course of events.
           That approach, in my submission, is also in keeping
       with clause 17, relief, where {D2.1/3/54}:
           "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 good a
       loss he should apply to the retail network manager."
           Again, in my submission, that clause can only be
       interpreted that it is the burden on the postmaster who
       wants to achieve relief under that clause to put forward
       facts and matters that could relieve it.
           (inaudible) contractual scheme to implicitly place
       the -- well, place the burden on the postmaster for the
       second line of clause 12(12) to show it wasn't caused by
       his assistant, place the burden on Post Office to show
       that the loss which at this stage must have been caused
       by the postmaster was by his error or carelessness.  And
       then in relation to clause 17, it is for the postmaster
       to prove facts for him to obtain relief.
           That would not, in my submission, be implicitly
       a sensible construction of this clause as regards burden
       assuming for a moment that it does implicitly contain
       such a provision.
           My learned friend says this is a new construction.
       It is not.  I have just shown my Lord where in
       the pleading these terms have originated.  It is fair to
       observe that in the way this case has been pleaded out,
       my learned friends haven't pleaded a proper construction
       of 12(12).  So we never got into the detailed pleading
       to make this point even more obvious.  It is true the
       pleadings never got to that stage, but that is not
       something the Post Office in my submission should be
       criticised for simply because the claimants didn't
       ever -- and you can see it in the pleading -- plead
       a proper meaning of 12(12).
           You will never see any reference in our pleadings to
       saying that postmasters are responsible for
       Horizon-generated losses.  They are not, it has never
       been our case that they were.  It has been my learned
       friend's straw man to suggest that somehow we were
       saying that in order to effect the proper construction
       of 12(12) for all losses.  Despite the fact it is
       fiduciary, despite the fact it is an agent, he is saying
       despite all that, because of the existence of the
       Horizon-generated problem, to use that as a stalking
       horse to say it is all so difficult, enormous
       difficulty, therefore you should construe 12(12) about
       all losses in the way he suggests.
           What my argument does is say no, no, no (a) that is
       not the right reading, and (b) your Trojan horse of
       Horizon-generated losses is outside 12(12).
           My Lord, is that a convenient moment for a break?
   MR JUSTICE FRASER:  I think it is.  Ten minutes.  We are
       only able to go to 4.15 pm but we can start at 10
       tomorrow and go until 5 o'clock to make up some time
       from this morning.
   (3.11 pm)
                         (A short break)
   (3.22 pm)
   MR CAVENDER:  My Lord, moving on with the analysis, what I
       am now going to do is give two examples of putting in
       practice my favoured construction in two separate
       situations.  One is where there is a loss but it is not
       covered by agent-submitted accounts, let's say it has
       been settled centrally subject to dispute.  And then
       I am going to an example where the lost amount is
       subject to the postmaster's declaration of accounts.
           So what I am doing now is adding the third feature
       here, the agency relationship, and the submission of
       accounts, and how that impacts on this analysis in terms
       of the breach trial we are talking about here.  So we're
       moving off construction and we are testing my
       construction in those circumstances to see whether it is
       good, bad or indifferent.
           The first example is where the loss is not covered
       by agent-submitted accounts.  I accept the burden is on
       Post Office there to show there is a deficiency/loss
       with the meaning of the clause, ie gets into the clause.
       So this includes where, if the postmaster puts it in
       issue to say it is a Horizon-generated loss, to show on
       balance that it is not.
           Post Office would ordinarily discharge that
       burden -- this is your inference point -- by reference
       to the figures produced by Horizon and relying on that
       as evidence and saying because Horizon is a good system,
       look at your second judgment your Lordship is going to
       bring.  This is, remember, looking at the breach trial,
       so on that basis.
   MR JUSTICE FRASER:  So it's going to be the -- when you say
       "second judgment"?
   MR CAVENDER:  The second trial, my Lord.
   MR JUSTICE FRASER:  The Horizon trial.
   MR CAVENDER:  Indeed.  As a result of that we will say, if
       we did well there, it's a hypothesis, it's a generally
       reliable system.  In the balance of probabilities the
       loss is not a Horizon-generated loss and therefore that
       possibility on balance should be excluded.
           The loss deficiency then gets through into the
       clause and is dealt with by the mechanics of the clause
       as previously described.  At this stage of the analysis
       the loss or deficiency is not by definition
       a Horizon-generated loss, and the subpostmaster is
       liable for it unless he can show it was not caused by
       an assistant and it was not caused by his error.
           If the Post Office is able to demonstrate that, as
       regards the point in issue, Horizon was reliable, the
       loss wouldn't even get into 12(12) and the
       subpostmaster, as I say, wouldn't be liable for it.
           So discussing that, standing back, at this stage,
       once Horizon-generated losses are put to one side, if
       there is a loss Post Office say the overwhelming
       likelihood is that that resulted from an error on the
       part of the postmaster or his assistant.  It seems to be
       on one view a high submission, but it merely reflects
       a simple fact that a proper executed transaction doesn't
       result in deficiency.  That is not to say that the
       circumstances might -- things can go wrong, and
       of course the subpostmaster can adduce evidence to show
       in his case things did go wrong.
           The claimants' attempt to make this a point of
       construction about Horizon issues and unfairness is
       misconceived, firstly because as a matter of law at the
       time of contracting neither party foresaw Horizon would
       not work properly and accurately insofar as any computer
       system doesn't, and it is misconceived on the facts
       because the vast majority of losses we say result from
       errors in the branch.
           We see the leads in these cases, by way of example,
       you have to find evidence, there were errors and thefts
       in fact by postmasters or temporary ones, and errors
       made, and that is not necessarily unusual.  So that is
       how we say if you have -- the interpretation of this
       cause at the breach trial, that is how it would work.
           The next thing I am going to do is look at the same
       thing but where the postmaster has declared the accounts
       to be true.
   MR JUSTICE FRASER:  In your first example, how do you say
       they dealt with that particular loss in their accounts?
       Because you used the expression "agent-submitted
   MR CAVENDER:  In my first example it is not covered by
       submitted accounts, so it is settled centrally subject
       to a dispute is the example I gave.  So it is subject to
       a dispute, so it's outside the submission.
   MR JUSTICE FRASER:  Settled centrally subject to a dispute
       by phoning up.
   MR CAVENDER:  Indeed.  The second one is where they don't do
       that, and it is part of the declaration of the accounts.
   MR JUSTICE FRASER:  By defining it in those terms you are
       I think implicitly, but I just want to be clear with
       you, using "declaration of the accounts" to mean making
       good for cash or making good for a cheque or settling
       centrally without disputing.
   MR CAVENDER:  My Lord, no.  What I am saying by "declaring"
       is at rollover, at the end of the trading period, you
       submit accounts saying that they represent a true and
       fair view of the accounts, and you subsequently want to
       re-open those and say no, no, in fact there is some loss
       or deficiency there I'm not responsible for.
   MR JUSTICE FRASER:  But isn't that what they have done in
       the first one as well, because otherwise they wouldn't
       be able to go into their next trading period.
   MR CAVENDER:  No, because they have there -- the imprimatur
       of the submission doesn't apply because they have
       registered a dispute in relation to amount.
   MR JUSTICE FRASER:  But they still have to declare
       an account, haven't they?
   MR CAVENDER:  They do, but the imprimatur of the law of
       agency doesn't apply to that element you dispute.
   MR JUSTICE FRASER:  Because they disputed it prior to the
       date of declaring the account, you mean?
   MR CAVENDER:  At the same time or the day after normally it
       happened.  Contemporaneously with.  Because the law of
       agency and the principles that apply don't apply to such
       amount of the account that you dispute at the date you
       submit it, obviously.  So the amount in my first example
       doesn't have -- they don't need to set aside the account
       or say it is mistaken, because it is not part of the
       account, it was always subject to dispute.
           My second example is where the loss or deficiency
       they want to dispute is subject to a declaration.  And
       there, in my submission, the subpostmaster needs to
       adduce some evidence or argument that a particular loss
       or deficiency, again through the prism of the
       Horizon-generated loss, was a Horizon-generated loss in
       order to justify correcting a mistake in their account.
       They have to adduce some evidence to say -- they can't
       just say generally, well, the whole 8,000, I'm not sure
       I want to pay that anymore.  They have to identify --
       this isn't anything to do with the construction of the
       clause, this is to do with agency law and what you need
       to do to dispute an account.  You need to show some
       evidence or argument that the particular loss or
       deficiency needs to be re-opened.
   MR JUSTICE FRASER:  Isn't that the same as your first
       example, though?
   MR CAVENDER:  No, my Lord.  My first example, I accept that
       the burden is on the Post Office to show that there is
       a deficiency which involves disproving any allegation
       from the postmaster that the deficiency was in fact not
       a true deficiency, it was a Horizon-generated loss.
   MR JUSTICE FRASER:  I thought you said in your first example
       that Post Office would rely on the figures generated by
       Horizon.  Horizon is generally reliable.  Therefore you
       could exclude, by definition, a Horizon-generated
       shortfall so-called, so the burden was on the
       subpostmaster to show ...
   MR CAVENDER:  That's later on in the analysis.  That's later
   MR JUSTICE FRASER:  But that was your first example.
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  So in the first example the burden is on
       the subpostmaster by the route that you have gone
   MR CAVENDER:  Eventually.  Eventually.
   MR JUSTICE FRASER:  In this one the burden is also on the
       subpostmaster, isn't it?  You are just saying it comes
       at an earlier stage.
   MR CAVENDER:  My Lord, yes.  In the second example it comes
       at the beginning.  In the first one it comes later if --
       if -- Post Office is able to show that it is
       a deficiency and not a Horizon-generated loss.  In
       the first example, when there is no accounting
       imprimatur, I accept it is for Post Office to show it is
       a deficiency, ie to show it is not a Horizon-generated
       loss.  I then go on to say in that example how
       I anticipate Post Office will seek to do that.
   MR JUSTICE FRASER:  So what you are saying then, as far as
       I understand it, is that for anything that has been
       settled centrally and made subject to a dispute by
       phoning the Helpline, you accept that the Post Office
       would have to demonstrate that Horizon was not to blame.
       But the way you anticipate doing that is a finding at
       the second trial that the figures generated by Horizon
       were generally reliable, is that correct?
   MR CAVENDER:  That is correct.
   MR JUSTICE FRASER:  For everything that has been settled
       centrally but made subject to a dispute.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  If that is right, though, where does
       your inference come in?
   MR CAVENDER:  It comes in in the second part you describe,
       the inference based on Horizon being generally reliable.
   MR JUSTICE FRASER:  But that is what has been applied
       up-to-date, isn't it, as I understand it?  Post Office
       has relied on that inference throughout since
       2000-and-whenever onwards?
   MR CAVENDER:  My Lord, certainly as a matter on the ground,
       but I am talking about analysis of this contractual
       provision and what I am saying is that at this stage
       Horizon is merely evidence and the reliability of
       a system will, we say, produce an inference that
       the likelihood is that these are not Horizon-generated
   MR JUSTICE FRASER:  I do know that and I am aware that that
       has been the approach of the Post Office throughout.
       That is part of the reason we are here.  But if that is
       applied where something is settled centrally and made
       subject to a dispute, how is that different from your
       second example which is that the subpostmaster needs to
       adduce evidence of a loss or deficiency being
       a Horizon-generated loss?  The burden is on them in both
   MR CAVENDER:  My Lord, it is not.  In the first example,
       I have accepted, the burden is on Post Office to show
       a deficiency, ie to disprove -- if someone is saying
       "No, no, it's £1,000", they're saying, "No, this is a
       Horizon-generated loss".  And I say "No, it is not, it
       is a deficiency --"
   MR JUSTICE FRASER:  Which you disprove by applying your
   MR CAVENDER:  No, they -- for all sorts of evidence.  They
       might put forward branch-specific evidence.  Mrs Stubbs
       might say it was a connection between this and that, you
       might get evidence from postmasters that shows that the
       inference is incorrect.
   MR JUSTICE FRASER:  Yes, but you don't get to that until you
       have applied the inference.  Because on your analysis,
       as I understand it, the application of the inference
       means -- let's use Mrs Stubbs just as a shorthand.
       Mrs Stubbs undoubtedly raised a dispute in respect of
       some items.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  If you meet the burden which you seem to
       accept on the face of it the Post Office has, and apply
       the inference, it is then for Mrs Stubbs to show that
       actually this was caused by a power outage or an
       electrical connection or some other issue in order to
       show it isn't caused by her carelessness, fault,
       negligence or error, is that right?
   MR CAVENDER:  We're certainly able to do that, yes.
   MR JUSTICE FRASER:  But that is on your first example.
   MR JUSTICE FRASER:  Where there is a settlement -- something
       has been settled centrally but made subject to
       a dispute.
   MR CAVENDER:  The point about that is so there is no
       accounting assumption.
   MR JUSTICE FRASER:  I understand that because you say now
       that the accounting assumption does not apply to
       circumstances or accounts where there is already an
       extant dispute.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  But in your second case, where there has
       been a declaration at rollover that does declare
       an account, I think implicit within that is
       a declaration without any prior notification to the
       Helpline of the dispute.
   MR CAVENDER:  Or subsequent.  Or subsequent.  Because you
       roll over and then you can do it the next day.
       Contemporaneously with.
   MR JUSTICE FRASER:  Okay.  Just so I am clear: without
       a contemporaneous declaration of a dispute, the burden,
       because of the nature of agency account, is also on
   MR CAVENDER:  It is not a burden, my Lord, it is a different
       thing.  Under the law of agency they would need to
       adduce some evidence or argument --
   MR JUSTICE FRASER:  Of a loss or deficiency being
       a Horizon-generated loss, that is what I wrote down:
           "Subpostmaster needs to adduce evidence of a loss or
       deficiency being a Horizon-generated loss."
   MR CAVENDER:  In a world where that is what we are talking
       about, that is the debate, yes, exactly so.
   MR JUSTICE FRASER:  So that takes me back to my first
       question which is: apart from the declaration of
       the account, how is the process any different in that
       example to your first example?
   MR CAVENDER:  Because there is some initial requirement in
       my second example upon the postmaster before the
       Post Office has any burden to -- you can't just say "My
       account is all mistaken, it is all wrong".  You have to
       identify a particular loss or discrepancy within that
       that you say is mistaken and put forward some evidence
       or argument -- I'm not saying the burden is on them.
       And also remember, my Lord, when we are doing this, it
       is my case that there is the implied term of necessary
       co-operation --
   MR JUSTICE FRASER:  I am aware of that.
   MR CAVENDER:  So that fits in here.  If, for instance, they
       say it was this TC or it was that, you know, I need some
       evidence of that.  If it's that they need through that
       term "necessary co-operation" to provide that,
       Post Office would have to do that as part of this
       process.  Because that implied term applies throughout
       this contract at all times.
           So the Post Office would have to provide necessary
       co-operation.  On the flipside if in fact the
       subpostmaster has been false accounting for six months
       and not declaring its accounts and all the other things,
       then as I will come on to later the duty, the standard
       of duty on necessary co-operation wouldn't be as high.
           That said, the worst false accounter ever, if there
       was evidence of a Horizon-generated loss they would
       still be able to forward it.
   MR JUSTICE FRASER:  By not declaring his or its or her
       accounts, do you mean not declaring them or do you mean
       declaring them inaccurately?
   MR CAVENDER:  Declaring them falsely.  And once the
       subpostmaster successfully opened the account by showing
       a mistake or generally, then we go back to the first
       example.  Once they have got through that threshold it
       is still then for the Post Office to show it is
       a deficiency and all the other things in the first
           The reason I give you this is just to try and give
       an example of downstream in the breach trial, with or
       without the accountancy elements.  When I come to agency
       tomorrow you will understand how it fits in on my
       construction of 12(12).
           So you understand, I am not selling you a false
       prospectus and saying this is clever construction.  When
       it comes to either the accounting imprimatur or
       downstream on breach, on burden, there is some hidden
       impossible burden.  In my submission there is not.  Not
       that your Lordship has to decide that today, but you do
       in my submission have to regard to obviously the results
       of the competing constructions.  So as part of that
       I have made those submissions.
           One of the main thrusts in this case, one of the
       main points has been my learned friend's (inaudible) is
       TCs.  A TC is obviously, as you know, a transaction
       correction and it is to correct errors often made by
       postmasters.  Not always of course, there are errors by
       other people as well.  The first thing your Lordship has
       to know is the scale of this problem is generally very
       small.  Why do I say that?  If we put up {G/54/1},
       please, on screen.  Do you remember this table?  The
       total volume on the right-hand side.  And if you take
       an average of those numbers at 140,000 TCs per annum,
       you split that between the 11,000-odd branches, and that
       gives you, on the maths, twelve-odd per branch per year,
       which is about one per month per branch.  So you should
       first have a sense of scale about TCs across the
   MR JUSTICE FRASER:  You are looking at the total volume?
   MR CAVENDER:  Indeed.  If you split that between the
       11,500-odd, it's about twelve per branch in rough terms,
       which is about one per month per branch.  So of course
       while there will be clusters and certain people will
       have more mistakes than others depending on the people
       they employ, and we have heard some evidence of that,
       this is not a massive problem in terms of the way my
       learned friend would have it, the way he puts the points
       as if they have hundreds of these each week.
           When you look at paragraph 28 of
       Angela Van Den Bogerd's statement at {C2/1/7}, please,
       you will see there the numbers of transactions:
           "Based on data over the last six weeks, there were
       on average around 900 transactions per week in smaller
       branches and 2,500 transactions per week in larger
           So that is between 3,500 and 10,000 per month doing
       the maths.  So that is the number of transactions you
       would do of it which you might get a few TC, one, two,
       three.  Of course it depends on each branch but you need
       to put it in perspective.  My learned friend suggests
       almost there is an avalanche of TCs.  That is not how it
       goes.  You get a TC to try and correct, you get evidence
       of (inaudible), and you have obviously the opportunity
       to dispute it, ask for more evidence, and we know the
       procedure.  But the impression given that you have piles
       of these the whole time in my submission is the wrong
           The TC of course doesn't have a separate life within
       this accounting dispute because the TC at rollover, as
       we know, has to become part of the amount subject to the
       account which can be disputed or not.  There could be
       various reasons for TCs of course but ultimately it
       comes through, contractually and in terms of the
       procedure we have seen, into the submission of
       the accounts which are subject to a dispute or they are
           That is what we say clause 12(12) does and how it is
       to be interpreted.  What do the claimants say?  We deal
       with this at page 153 of our closing.  Of course
       your Lordship has read this.  But what they seek to do,
       before we go to it, is they seek to ignore the words of
       the clause --
   MR JUSTICE FRASER:  Are we in paragraph 423?
   MR CAVENDER:  153 and following.
   MR JUSTICE FRASER:  No, which paragraph?
   MR CAVENDER:  Paragraph 153.  Page 55 {A/8/59}.
   MR JUSTICE FRASER:  So claimants' closing ...
   MR CAVENDER:  Sorry, defendant's closing.  Internal page 55.
       "Four supposed restrictions on Post Office ability to
       enforce a shortfall", do you see that?
           Before we go into the detail of what they say, we
       say they seek to ignore the words of the clause, they
       seek to ignore the point that Horizon-generated losses,
       to the extent they exist at all, are dealt with outside
       of the clause.  And then they say, in effect, that is an
       impossible burden, and then use that as a way of trying
       to construe the clause in the way they do.  They do it
       by seeking to impose restrictions on the ability of
       Post Office to recover losses and we say none are
       justified or explained.
           The first they do is say that "losses" doesn't mean
       losses, it means actual losses, namely an economic
       approach to losses which focuses not on the branch but
       on Post Office and the downstream transactions
       Post Office does with its clients.  So they try and
       bring all of that as a matter of construction into the
       meaning of the word "loss" rather than looking at what
       happens in the branch.
           As your Lordship will be aware, the transactions
       downstream with clients have nothing at all to do with
       the subpostmaster in terms of risk or anything of that
       nature.  They are interested in what goes on in the
       branch and don't have a risk or loss possibilities based
       on what happens on client side.
           So that is the first thing they do.
           The second thing they do is say that the losses must
       be established as such after due enquiry.  As a matter
       of construction they say that and, as would appear to
       your Lordship, that is not a question of construction of
       12(12), it is seeking to imply a term into it.  But they
       say it is construction.
           And the third thing they do, they say that the
       relevant loss must not be caused or contributed to by
       the defendant's breach of duty, otherwise again they say
       it is not a loss.
           We think they are not sensible points of
       construction.  We deal with those at paragraph 157 in
       this where we deal with the first restriction {A/8/60}.
       Second restriction at paragraph 161 {A/8/64} and the
       third restriction at paragraph 163 {A/8/65}.  I'm not
       going to go through those now, your Lordship has
       obviously read those points, but none have any merit at
       all, they can't possibly be points of construction and
       fulfil none of the criteria.  It is all the faults and
       problems that in Arnold that we were talking about,
       ignoring the words, trying to stand back and put the
       words in the contract you wish you had.  So it fails all
       the relevant tests and I say no more about it.
           So that is 12(12), my Lord.  Unless you have any
       questions on that I will move on to 4.1.
   MR JUSTICE FRASER:  You say 4.1 I think should be construed
       as having the same effect as 12(12), is that right?  It
       is different words but ...
   MR CAVENDER:  It is different words and it has -- in terms
       of its overall -- if you explain to somebody like
       a non-lawyer you would probably say that.
   MR JUSTICE FRASER:  Probably say what?
   MR CAVENDER:  That it broadly has the same effect.  But it
       has different words, and particularly what it does it
       makes the liability for losses strict for both losses
       caused by assistants and for losses caused by
       subpostmasters.  There is no negligence or error
       carve-out in 4.1.
   MR JUSTICE FRASER:  So it is a strict liability clause.
   MR CAVENDER:  Indeed.  Subject to the express words that
       were in parenthesis which we'll see.
           So if we go to 4.1 and remind ourselves what is
       says.  I think your Lordship has said before, and I have
       agreed with you before because it seems to be the
       position, that what 4.1 does is include both what was
       previously in 12(12) and in 12(5).
   MR JUSTICE FRASER:  It does seem to roll them all up
   MR CAVENDER:  It does indeed.  But my submission is -- and
       the net effect isn't very different from what my learned
       friend says I don't think -- is that first you read the
       clause as a whole, and if you split it into two and the
       second half begins with "any deficiencies" four lines
       from the bottom, for the purposes of the argument rather
       than anything else.  So the first part of the clause is
       the whole clause down to "any deficiencies" and
       thereafter is the second part of the clause.
   MR JUSTICE FRASER:  I am sorry, I seem to have -- the yellow
       sticker I put on your helpful document pack has fallen
       off and I'm worried I have the wrong one.  (Pause)
           That is the modified one.  You don't have a ready
       reference to hand, have you, by any chance?
   MR GREEN:  {E5/137/39} is clause 4.1.
   MR JUSTICE FRASER:  No, I am talking about the hard copy
       files that Mr Cavender gave me.  I can find the clause
       of the NTC very easily.
   MR CAVENDER:  Your Lordship has maybe marked it.
   MR JUSTICE FRASER:  It is just my sticker had fallen off.
       I will deal with it on the screen.
   MR CAVENDER:  So "Liability for Post Office Cash and Stock":
           "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) ..."
           2 -- and I'm inserting 2 here:
           "... which the operator could not have prevented or
       mitigated by following Post Office Limited's security
       procedures or ..."
           3 I'm inserting here:
           "... by taking reasonable care."
           So there is an absolute strict liability subject to
       three carve-outs.  And that is in relation to "loss or
       damage to any Post Office cash and stock (however this
       occurs ...).  So that is part 1 of the clause as I have
       called it, or part A shall we say --
   MR JUSTICE FRASER:  That's cash and stock.
   MR CAVENDER:  Indeed.  And then --
   MR JUSTICE FRASER:  And that is a mirror or an evolution or
       a reflection of 12(4).
   MR CAVENDER:  But not only that.  It is broader than that
       but it certainly includes that, my Lord, yes.
           Then the second part, or part B shall we call it of
       the clause is:
           "Any deficiencies {an important word} in stocks of
       products and/or any resulting shortfall ..."
           Another important word, 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
           Pausing there.  In my submission the use of the word
       "deficiencies" and "shortfall", "deficiencies" once and
       "shortfall" twice in the second part of the clause,
       indicates it is dealing with, including other things,
       what you could call briefly our accounting losses.  It
       is going beyond cash and stock which is dealt with in
       the first part.
           Also in my submission, because you read the clause
       as a whole, the postmaster would gain the benefit of the
       three carve-outs not just in relation to cash and stock
       but also in relation to any deficiencies.  So you would
       read it as one.  And so the "except for" would apply not
       just to cash and stock, it would also apply to
       accounting losses.
           Post Office say "deficiencies" here and "shortfall"
       here has exactly the same meaning as in clause 12(12),
       so exactly the same analysis applies here vis-a-vis the
       suggested Horizon-generated losses.  They are outside of
       this clause for that same reason.
   MR JUSTICE FRASER:  So you say or the Post Office says they
       are dealt with exactly the same in terms of imposing
       liability on subpostmaster.  It makes no difference
       whether it is an SPM or an NTC, the scope of their
       liability is the same?
   MR CAVENDER:  No, my Lord, because this is strict liability
       for both.  If you recall in the SPMC as regards the
       subpostmaster as opposed to the assistant, as regards
       the assistant it is strict, in relation to
       the subpostmaster you have to show error or negligence.
       Here that carve-out does not exist, and that is
       the difference I identified right at the beginning.
   MR JUSTICE FRASER:  Sorry, what carve-out?
   MR CAVENDER:  If you look at 12(12) alongside this --
   MR JUSTICE FRASER:  No, let's look at 4.1 because I am just
       trying to ...
           The requirement to take reasonable care plainly
       applies to cash and stock.  Sorry, let me put it
       slightly differently.  A failure to take reasonable care
       is expressly catered for in part A in relation to cash
       and stock, agreed?
   MR CAVENDER:  Well, it occurs.  Whether it occurs as
       a result of negligence, personnel ...
   MR JUSTICE FRASER:  No, I am looking at 4.1, Mr Cavender.
   MR CAVENDER:  So am I.  The "however this occurs" in my
       submission is strict.  So that means however it occurs.
       And it then outlines what it means by that, whether it
       occurs by negligence, personnel or otherwise.  So it is
       saying that.  It is strict in relation to cash and
   MR JUSTICE FRASER:  It then says:
           "... which the operator could not have prevented or
       mitigated by following Post Office's security procedures
       or by taking reasonable care."
           So if they had taken reasonable care, how would they
       still be liable?
   MR CAVENDER:  The criminal act of a third party or ...
       because if you look, it says "except for" --
   MR JUSTICE FRASER:  So you are saying "or by taking
       reasonable care" ...
   MR CAVENDER:  That only relates to acts resulting from
       criminal acts.  What it is talking about is robberies
       and burglaries.
   MR JUSTICE FRASER:  All right.  Then when you get on to
       part B, is that strict liability as well?
   MR CAVENDER:  Yes.  What I am saying is but that is -- you
       read in the benefit of the three exceptions in relation
       to cash and stock into that implicitly.  So if you have
       deficiencies that result from the criminal act of
       a third party which couldn't have been prevented,
       someone comes into the post office and starts entering
       all sorts of different items into the computer, which
       you couldn't have prevented or mitigated following
       procedure measures or taking reasonable care, then that
       would not be a deficiency for which you are responsible
       under this clause.
   MR JUSTICE FRASER:  That is where I started to get a bit
       puzzled.  The bit that you are inviting me to read into
       part B are the parentheses in lines 2 and 3 of part A, I
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  Is that right?
   MR JUSTICE FRASER:  But those parentheses are however the
       loss occurs and whether it occurs as a result of
       negligence by the operator or not.
           So negligence in terms of cash and stock doesn't
       matter in the parentheses, does it?  So if you read that
       across to the second part and say, well, you must read
       part A into part B, you get strict liability for
       deficiencies and resulting shortfalls in part B as well,
       don't you?
   MR CAVENDER:  Yes, you do.  That is what I say the
       difference is.  Because do you remember at the beginning
       you said is there any difference, and I said yes --
   MR JUSTICE FRASER:  I know there is a difference on the
       wording, I am talking about a difference on the meaning.
       So you are saying 4.1 is a strict liability clause for
       cash, stock, deficiencies in stock and resulting
   MR CAVENDER:  Subject to the three carve-outs --
   MR JUSTICE FRASER:  Yes, but the three carve-outs are
       whether it occurs as a result of negligence or not.
   MR CAVENDER:  Quite.  But then it goes on, doesn't it, to
       losses arising from the criminal act of a third party.
       What I am trying to do is give them the benefit of those
       carve-outs rather than saying it's --
   MR JUSTICE FRASER:  If you define the bit of the carve-out
       you mean, I am not quibbling with that, I am just trying
       to follow how part A flows into part B to restrict it.
       Because on the face of what you told me about part A,
       which is effectively strict liability.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  And it's strict liability because of the
       words "fully liable" and "however this occurs and
       whether it occurs as a result of negligence or not".
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  So if I read "however this occurs and
       whether it occurs as a result of negligence or not" into
       part B, part B becomes strict liability as well.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Right.  That therefore means on its
       wording it is a strict liability clause for cash, stock,
       deficiencies in stock and accounting shortfalls.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Is that right?
   MR CAVENDER:  Yes.  Subject to, if they fit, the carve-outs
       in stock and cash apply equally to shortfalls and
       accounting losses in part B.
   MR JUSTICE FRASER:  Yes, but the shortfalls -- if we look at
       negligence for the moment, negligence does not work to
       the benefit of the subpostmaster on cash and stock, does
       it, on part A?
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  So is negligence necessary at all for
       an accounting shortfall in part B?
   MR JUSTICE FRASER:  Right.  Therefore -- that is what
       I thought you were saying.  So clause 4.1 of the NTC is
       a strict liability clause.
   MR CAVENDER:  Correct.
   MR JUSTICE FRASER:  But clause 12(12) of the SPMC is not
       a strict liability clause.
   MR CAVENDER:  My Lord, it isn't the same, no.  That is why
       I said at the beginning they are different.  But if you
       look at 12(12), it is responsible for all losses through
       his error.
   MR JUSTICE FRASER:  Correct.  Well, carelessness, negligence
       et cetera.
   MR CAVENDER:  Or error.  And that error is not qualified by
       an error which is negligent.
   MR JUSTICE FRASER:  No, but all of those connote fault.
   MR CAVENDER:  True.
   MR JUSTICE FRASER:  Whereas strict liability does not
       connote fault.
   MR CAVENDER:  That is true.
   MR JUSTICE FRASER:  So therefore is it correct to say the
       liability under the NTC under 4.1 is broadly the same as
       the liability under 12(12)?  Because one of them is
       fault and one of them is strict liability.
   MR CAVENDER:  My Lord, yes, there is that difference.
   MR JUSTICE FRASER:  That is quite an important difference.
   MR CAVENDER:  It is, quite.  But in terms of the way it
       works with 12(12) is all you have to show is an error.
       Once you take out Horizon-generated losses -- and they
       are taken out of both clauses so that we are absolutely
       clear -- my position is deficiency has the same meaning,
       so the same debate that I put forward on the SPMC
       applies to 4.1.  Postmasters can say, "Well, no, there
       is not a deficiency, there is a Horizon-generated loss",
       and Post Office would have to show that on the balance
       of probabilities that wasn't right in relation to
       the particular loss.
   MR JUSTICE FRASER:  So you are saying in practical terms
       there may be no difference in how each clause is
       applied.  But in terms of construing them on their
       express terms there is a difference, is that right?
   MR CAVENDER:  That is right.
   MR JUSTICE FRASER:  I know subjective intention makes no
       difference to anything, but Mr Beal I think it was said
       that it was intended to have the same effect.
   MR CAVENDER:  He said that in a sort of general sense, that
       is true.  My learned friend said, although I'm not sure
       my Lord was particularly impressed by this submission,
       that you would construe the NTC in light of the SPMC,
       which in my submission must be wrong.  Except in a case
       where you are moving from the SPMC to the NTC, there
       would arguably be part of the background factual
       matrix --
   MR JUSTICE FRASER:  Depending on how that movement was
   MR CAVENDER:  Exactly.
   MR JUSTICE FRASER:  But as I understand it, and tell me if
       I am wrong in fact, anyone who was on board with
       an SPMC, when the network transformation programme came
       along if they wanted to stay being a subpostmaster they,
       or most of them, qualified for compensation, gave up
       their rights under the SPMC, and were re-engaged on
       an NTC, is that correct?
   MR CAVENDER:  My Lord, I believe that is correct.  (Pause)
           Yes, it is right, but there are loads still on the
       SPMC so that wasn't --
   MR JUSTICE FRASER:  Well, it wasn't universal.  There are
       still some -- you still have a number of people --
   MR CAVENDER:  2,700 apparently still on the SPMC.  So not
       everyone was offered -- I think Mr Bates, we saw from
       his correspondence he was I think offered NTC, dependent
       upon all sorts of criteria.
   MR JUSTICE FRASER:  So there are still SPMC SPMs.
   MR CAVENDER:  Very many, yes.
   MR JUSTICE FRASER:  Some transferred on to the NTC.  But
       those who did transfer on to the NTC gave up their
       rights, effectively, under the SPMC because as a process
       of moving on to the NTC there was -- it is effectively
       a watershed or a step in their contractual development.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  So Mr Green's suggestion that I construe
       the 4.1 as being child of or evolutionary to the SPMC
       might seem to be a bit ambitious.
   MR CAVENDER:  My Lord, yes.
   MR JUSTICE FRASER:  But for anyone like Mrs Dar or
       Mrs Stockdale who contracted on the NTC, the terms of
       the SPMC are not relevant at all.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Right.  Now, just so that you know,
       before I heard anything in this case at all in terms of
       the trial, I looked at this clause of the NTC with some
       care, and also the clauses it replaced.  It seemed to me
       to do two things, and I imagine you will agree this from
       what you have just said but I need to check it with you
       expressly, that it blended -- is it 12(5)?
   MR JUSTICE FRASER:  It blended 12(5) and 12(12) together,
       I think you agreed it did.
   MR CAVENDER:  It did.
   MR JUSTICE FRASER:  And on its face it reads as a strict
       liability clause.
   MR CAVENDER:  Indeed, except for losses arising from
       criminal acts where they followed the procedure and have
       taken reasonable care.
   MR JUSTICE FRASER:  All right.
   MR CAVENDER:  So that applies --
   MR JUSTICE FRASER:  What year did this start being used?
   MR CAVENDER:  2012 I think.  October 2012 I think was the
       first one.
   MR JUSTICE FRASER:  Interesting.
   MR CAVENDER:  So if there was a theft or something then
       of course there would be a benefit, and if that resulted
       in an accounting loss then they would have the benefit
       of that caveat to protect them.  Or my example, if
       someone came in and started entering transactions and
       created losses on the system --
   MR JUSTICE FRASER:  So save for anything that occurred as
       a result of a criminal act, an SPM under 4.1 of the NTC
       would have wider liability than an SPM under clauses
       12(5) and 12(12) of the SPMC.
   MR CAVENDER:  Indeed.
   MR JUSTICE FRASER:  Thank you very much.
   MR CAVENDER:  My Lord, that is construction of 4.1.
           Perhaps we can start relational because it is
       obviously everyone's favourite topic and it is a long
       topic.  Can you sit until twenty past, my Lord?
   MR JUSTICE FRASER:  Let's say quarter past.
   MR CAVENDER:  So we will have an introduction to my
       favourite subject.
           Before dealing with relational contract, though,
       what we have to deal with is the implied terms that both
       parties have agreed are parts of this contract and
       therefore are good as express terms of necessary
       co-operation, and that is necessary co-operation from
       one to the other.  So it's a mutual obligation relating
       to performance of one to the other.
           We set this out in paragraph 238 of our closing
       {A/8/89}, particularly starting -- 238 is the
       introduction, 242 is where we get into the meat of this.
           If you recall, if we go to paragraph 165 of the
       claimants' opening {A/1/65}.  At paragraph 165 you will
       see at the end of it:
           "... albeit, the defendant's own implied terms of
       wide application, namely implied duties to co-operate
       and not to prevent performance of the contracts."
           So although this is the beginning of their seeking
       to reverse out of the fact they are agreed implied
       terms, they are saying they are of wide application.
       That is important because it is actually true, they are
       of wide application.  They are protean terms that apply
       both ways, depending on the necessities of the contract.
           Again the necessary is not absolutely necessary but
       it is one step down from that, but it is not reasonable
       or I would like, it is necessary, but it is not
       absolutely sort of logically necessary.  That is not the
           We say at 247 that these kind of terms are often
       implied into commercial agreements {A/8/91}, and the
       function is ensuring that the parties' legitimate
       expectations are respected.  And over at 248 {A/8/92} we
           "The necessary cooperation term is in many respects
       similar to the Stirling v Maitland term.  But it creates
       a broader and more powerful obligation in that it may
       require positive action to facilitate the other party's
       performance, rather than merely not hindering it."
           And we refer there to James McCabe v Scottish
       Courage where Mr Justice Cooke in the middle of that
       passage talks about the duty of co-operation to the
       extent necessary to make the contract workable.
   MR JUSTICE FRASER:  He rolls the two together, really,
       doesn't he.
   MR CAVENDER:  He does.  But in terms of necessary he makes
       it workable, that is the kind of test he is applying, in
       accordance with obviously the terms of the contract.
           And you will see at footnote 137, Ukraine v Law
       Debenture Trust Corp, the Court of Appeal approved that.
           As we say in 251 {A/8/93}, the Post Office
       submission that sees challenge to that and the
       importance of these is wrong headed.  They are common
       ground.  They are as much part of the agreement as the
       express terms.  They have a proper construction and they
       must be understood on that basis.
           Pausing there, your Lordship will need to find as
       part of your role in deciding whether there is a gap or
       not, and if what it is into which to put other implied
       terms, to decide what they mean and their reach, in the
       broad sense of an assessment.
   MR JUSTICE FRASER:  Where is the best place to see them
       written down just as a single reference?  It doesn't
       matter if you don't have ...
   MR CAVENDER:  I can explain what they are.
   MR JUSTICE FRASER:  I know what they are.  I am just saying
       in terms of the actual terms of them, because I know
       they are admitted, where is the best place for me to go
       and look at them?
   MR CAVENDER:  I will get a reference while I am speaking.
       They are obviously pleaded in our defence but I can get
           In terms of their application, as we say, they are
       obviously fact-sensitive in application which is one of
       their great benefits.  My learned friend has been very
       critical throughout this that we haven't somehow been
       able to answer all his questions about them, but that is
       not surprising because they are sensitive to fact.  And
       whilst we have -- and I can give you the references --
       tried to co-operate with meetings between leading
       counsel, provide further information, a lot of letters
       have been written to try and explain the position, and
       we have in this document for instance provided examples.
           So 252 {A/8/94}, how the agreed implied terms would
       work in relation to various aspects.  253 as regards
       training and support.  254 {A/8/95} as regards
       accounting.  255 {A/8/96} as regards investigation of
       shortfalls.  So you can see it is accepted that these
       implied terms have that reach.
           We have given some examples of high watermark and
       low watermark when we say they would or wouldn't react,
       which is at this level of (inaudible) in group
       litigation the best one can realistically hope for.
       Furthermore, it is the most that the reasonable person
       at the time of contracting with their then knowledge
       would be able to agree a hearty "of course" to.
           The other thing about them that makes them
       particularly appropriate is they are mutual.  All my
       learned friend's obligations when we go to the 21, you
       have seen them, provide onerous, unilateral obligations
       on Post Office to do something.  So for instance to
       investigate shortfalls.  And it asks -- and the
       obligation is on Post Office whatever the circumstances,
       whatever the subpostmaster has or hasn't done in
       advance, and on shortfalls whether or not the postmaster
       even disputes the shortfall, as we will see tomorrow
       when we go through them.
           They are completely inappropriate in a contract like
       this, not least because they undermine and chip away at
       the very foundation of the agency fiduciary
       relationship.  Indeed when you look at this debate
       through the prism of the Yam Seng term of good faith
       going from the Post Office to the postmaster, that is
       cutting away and undermining the very fiduciary
       relationship of agency that pre-exists.  Not only is it
       in conflict with it but it seeks to cut away and
       undermine, hollow out, the obligations of the agent to
       account, and to account as a fiduciary.  All the
       obligations we see is about 15 implied terms about
       accounting, they all undermine, are in conflict with,
       that fiduciary duty and that is important to note.
           So if we for instance take shortfalls because that
       is the most familiar area, 255, we say in (a) it's
       highly fact-specific, of course it is, nonetheless we
       provide examples.
           And (c):
           "In the first category -- cases where the agreed
       implied terms who require Post Office to act -- the most
       obvious example is where Post Office is aware of some
       important fact about the branch's accounts that is not
       known to the SPM.  If Post Office is aware, for example,
       that a transaction shown in the account is in fact
       mistaken and can be corrected, it must inform the SPM of
       this.  This is done by means of proposing a transaction
       correction to the branch ..."
           Et cetera.
           "In the second category -- cases where the agreed
       implied terms would not require Post Office to act --
       the most obvious example is where the SPM has made any
       effective investigation impossible through false
       accounting and/or his own refusal to cooperate.  An SPM
       may disguise the existence of a shortfall for months by
       inflating his cash declarations to Post Office and
       falsifying his accounts, making it at least extremely
       difficult for anyone other than the SPM to identify even
       the time at which the loss(es) underlying the shortfall
       arose.  In that kind of case, the SPM may then refuse to
       attend an interview and/or refuse to provide any answers
       to questions that Post Office has about the account.  In
       a case where the party seeking cooperation has acted
       dishonestly and/or in such a way as to render the object
       of the cooperation impossible or excessively difficult,
       no cooperation may be necessary (or, which amounts to
       much the same thing, it may be reasonable to take no
       active steps in cooperation)."
           All that shows you is that is reflective of the
       mutuality of the obligation.  In any case, and we will
       go to Yam Seng tomorrow, what Mr Justice Leggatt was
       very keen on in that case, in the application of that
       case, the ratio of that case, was ensuring the implied
       terms he implied under the banner of good faith both had
       knowing or honesty in them.  He wasn't willing to imply
       what he called onerous terms of unilateral duties upon
       the party in that case.  He was only willing to do it if
       it had knowing or dishonest in it.  And we will come to
       that tomorrow.
           In some ways the necessary co-operation terms in
       this respect are broader because they don't need that.
       You don't need to show for necessary co-operation that
       they were acting in bad faith or are dishonest or any of
       those things.  These are co-operation that is necessary
       to perform the contract, whether it is in bad faith,
       good faith, it doesn't matter.  So in that respect these
       terms are more appropriate to assist in the operation of
       a commercial contract which is why -- and this isn't the
       first case they have been agreed to be implied, they are
       often implied.
           To take my learned friend's point, that doesn't mean
       the contract is bad or has been badly drafted.  All it
       does is reflect the fact that these kinds of contracts
       are assisted by terms of this type.  And what my learned
       friend has to do is to mount an argument, which he
       hasn't done, as to why in spite of these and their wide
       reach all the implied terms should be implied.
           Paragraph 105 of the Defence {B3/2/47} is the
       reference to the defence where the two implied terms are
   MR JUSTICE FRASER:  Thank you very much.
           So tomorrow.  Do you want 10 o'clock?
   MR CAVENDER:  Yes, please.  We have a lot to get through.
   MR JUSTICE FRASER:  You have to leave some time for my
       questions at the end of tomorrow.
   MR CAVENDER:  Of course.
   MR JUSTICE FRASER:  And then I also have to give you a date
       for the CMC that is going to happen in respect of trial
       number three.  So there will be a bit of discussion
       about that at the end of tomorrow.
   MR GREEN:  My Lord, there was agreed by my learned friend
       the possibility of my replying very briefly.
   MR CAVENDER:  When what is that agreed?
   MR GREEN:  When we discussed me going first -- I can take
       you to the transcript -- and we have been taking notes
       on that basis.
   MR JUSTICE FRASER:  I'm really not interested in going to
       the transcript at the moment, we will address that point
       tomorrow.  It might be that you can just put points in
       writing.  As far as I was concerned it was two days
       each, but I am not going to shut you out from putting in
       any short points if there are any.  I have also got
       a couple of points I need to go through.
           So 10.00 am tomorrow.  Thank you all very much.
   (4.20 pm)
        (The court adjourned until 10.00 am on Thursday,
                         6 December 2018)