Common Issues trial judgment: The NFSP

The NFSP's lovely Post Office-funded headquarters in Shoreham-by-Sea

The National Federation of Subpostmasters is a hopelessly compromised organisation. Simply put, the NFSP has abused its position by consistently failing to support its members when they needed it most.

Worse still, the NFSP has allowed its (now discredited) veneer of independence to be used by the Post Office as evidence that any Subpostmasters having problems with Horizon were either wrong, incompetent, or covering up some kind of criminal activity.

The NFSP holds a uniquely responsible position. It presents itself as the independent voice of Subpostmasters and is the only representative body the Post Office will deal with.

For journalists and politicians, membership bodies are one of the first ports of call when it comes to finding out more about a potential problem within an organisation.

By failing to raise concerns about Horizon publicly, and by suggesting (through its silence) that the Horizon problem is a small matter of minor importance, the NFSP has done worse than nothing. It has caused irreparable damage.

It has allowed the campaigning Subpostmasters to be presented as a tiny, disaffected minority, and it has hung its members out to dry.

The reasons why are two-fold.

The first, as former General Secretary George Thomson explained to a parliamentary inquiry, is about protecting the wider estate:

"We have to be careful that we are not creating a cottage industry that damages the brand and makes clients like the DWP and the DVLA think twice. We do £350 million a week. We pay out £18 billion a year for the DWP in Government benefits. The DWP would not have re-awarded the Post Office card account contract, which pays out £18 billion a year, in the last month if they thought for a minute that this computer system was not reliable... If we are not careful, we damage the brand, we damage the franchise and we cost my members’ ability to sell the franchise."

As a matter of policy the NFSP appears to think it is far better to throw the odd member under a bus than potentially devalue the product.

The other reason is the total corporate capture of the NFSP by the Post Office. The NFSP was apparently once a respectable union, independently representing its sub-paying members.

It is now effectively a department of the Post Office, funded by the Post Office and subject to an agreement which makes that funding contingent on a gagging clause. The clause requires the NFSP not to "take any action or engage in any commercial activities which brings, or is likely to bring, POL's [Post Office Limited's] name or reputation into disrepute."

Furthermore, a High Court judge has found both the Post Office and NFSP intended that agreement be kept secret.

The Post Office effectively controls the NFSP

Let's have a little dig into what else that Bates v Post Office Common Issues trial judgment says, shall we? Here goes:

"It is obvious, in my judgment, that the NFSP is not remotely independent of the Post Office, nor does it appear to put its members’ interests above its own separate commercial interests."...

"I do not consider that the NFSP can in these circumstances properly be considered to be independent, or to be acting in the interests of SPMs [Subpostmasters], given the way it involved its own commercial interests as a condition [of agreeing a settlement for Subpostmasters around the introduction of the NTC]"...

"[Nick Beal from the Post Office] said that it was always the intention of the Post Office and the NFSP that the contents of the Grant Framework Agreement (“GFA”) made with the NFSP would be made public. I reject that evidence, which is contrary to the detailed confidentiality provisions within the GFA itself."

There's so much more. In fact, the judge devotes an entire section of his 180,000 word judgment to the NFSP. He does this because it became apparent to him the Post Office is using the NFSP as a weapon against the claimants. He notes:

"As an example, in its written Opening [the Post Office] submitted “it should be noted that the National Federation of Subpostmasters (“NFSP”), which is the organisation which represents SPMs and their interests nationwide, does not support this action and does not endorse the factual premises of the Claims.”

and:

"Mrs Van Den Bogerd [Post Office director] also gave evidence that the NFSP has publicly supported the Post Office’s view that Horizon is robust. The Post Office therefore relies upon this support by the NFSP to support its stance in this litigation."

"Highly suspicious"

The judge decides this interesting dynamic needs to be properly investigated.

First he dissects the NFSP's actions with regards to protecting its own position during negotiations over the implementation of the Network Transformation project.

He quotes a 2013 email between the then General Secretary of the NFSP George Thomson and the Post Office in which Mr Thomson lists his demands for NFSP funding and compensation for members leaving the Post Office stating: "a signed agreement with the blood of both myself and Paula [Vennells] is necessary on the future of the NFSP before any agreement is granted on either NT and other points."

The judge considers Mr Thomson's email:

"demonstrates that the NFSP was only prepared to agree what amounted to an increase in its members’ potential compensation, if its own future was assured by the payment of substantial sums to it. I find that this shows that the NFSP put its own members’ interests well below its own, and I also find that the NFSP is not fully independent."

This email leads to the NFSP/Post Office "Grant Framework Agreement", which is bound by strict confidentiality stating: "neither party shall make public statements about this Agreement and/or the relationship established by this Agreement without the prior written agreement of the other party."

The GFA is the same agreement which contains the gagging clause described earlier. This, remember, stops the NFSP from taking "any" action which could bring the Post Office's "name or reputation" into disrepute.

The GFA only came to light after a protracted campaign by serving Postmaster and CWU rep Mark Baker, whose determined letter-writing and knowledge of the Freedom of Information Act eventually forced the Post Office to publish it.

The NFSP maintains it always meant to publish the GFA, despite clauses which require both parties to keep it confidential. The judge is having none of it. In paragraphs 580-589 of the judgment he decries the torturous manoeuvrings the NFSP uses to justify such a claim as "highly suspicious". He concludes:

"I reject the evidence that both the Post Office and the NFSP always intended that the GFA would be made public... That assertion is verging on insulting the intelligence of anyone who has read the GFA itself. The drafting of the actual document itself – which has obviously been carefully done, by highly skilled legal advisers – is directly to the contrary. The assertion is also contrary to the Post Office’s own initial responses to the Freedom of Information requests, from the very team at the Post Office whose specific role in life is to deal with such requests."

He adds:

"There is also evidence before the court that the NFSP has, in the past, put its own interests and the funding of its future above the interests of its members,"

He rules:

"The NFSP is not an organisation independent of the Post Office, in the sense that the word “independent” is usually understood in the English language. It is not only dependent upon the Post Office for its funding, but that funding is subject to stringent and detailed conditions that enable the Post Office to restrict the activities of the NFSP. The Post Office effectively controls the NFSP." [my italics]

Let that soak in for a moment - a High Court judge has ruled the NFSP appears to be in league with the Post Office, has put its own interests above its members and is not remotely independent.  Taking all this into account, it is perhaps not surprising that he notes, "the fact that the NFSP does not support the Claimants in this litigation is entirely to be expected."

Oowee.

The NFSP response

When the Common Issues trial judgment was handed down on 15 March, the Post Office, to its credit, responded by acknowledging its severity, stating:

"We take this judgment and its criticisms of Post Office very seriously. While the culture and practices of the business have improved in many ways over the years, the Judge’s comments are a forceful reminder to us that we must always continue to do better.  We have taken his criticisms on board and will take action throughout our organisation."

This was the first time the Post Office had begun to recognise that the campaigning Subpostmasters and their MPs who have been jumping up and down for years might have a point.

Admittedly a week later the Post Office was applying to have the judge recused on grounds of bias, but hey, a leopard doesn't change its spots overnight.

The NFSP, however, doesn't even have the self-awareness to accept the judge's criticisms, describing them in a circular Q&A to members as "inaccurate" and "unfair".

They contradict the judge's evidenced finding that their confidential agreement was designed to remain secret by asserting "The GFA was always intended to be a public document" without further explanation. Its removal from the NFSP website in September 2018 is described as being part of a "refresh" and its sudden reinstatement during the common issues trial in November 2018 is framed as an act of public service, done "in the spirit of transparency" - something the judge found simply didn't stand up to scrutiny.

The circular went on to assert that the NFSP can and does challenge and criticise the Post Office, that the GFA (despite the evidence in black and white) isn't that restrictive really, and that it always puts its members first. Again no evidence for this was offered.

It gets worse. A section of the circular asks:

"Has the NFSP’s status as a trade association, funded by Post Office Ltd, prevented it from supporting the Justice For Subpostmasters Alliance? 

No. The claims being brought under the current litigation are historic cases and almost of all of them pre-date the Grant Framework Agreement; at the time, the NFSP was a trade union funded by member subscriptions."

The apparent insinuation that the NFSP has ever supported the JFSA or that it might well be tacitly doing so now is a sly bit of wordplay. The NFSP has, to the best of my knowledge, never supported the JFSA, either when the NFSP was a membership organisation or union. Not just because nowadays it is contractually unable to do so, but because it never wanted to.

The next Q&A is even more risible:

"Why is the NFSP not supporting the claimants? 

Most of the cases date back to the early 2000s - before the N FSP became a trade association. Some of the claimants contacted the NFSP and we offered support and advice at that time. Many chose to take their own courses of action and act independently, including those who pursued a legal route. However, we have never tried to stop subpostmasters getting involved in the group litigation."

It comes to something when a membership organisation is boasting that it has never actively tried to stop its members from seeking justice. That's a feather in the cap.

I wonder why those members, after requesting support and advice (which turned out to be not to question the integrity of Horizon) decided to take their own courses of action.

The circular goes on to list the work the NFSP has done and is doing for its members, and I don't doubt it does do some good, or there wouldn't be any reason for it to exist.

Unfortunately it failed to help a relatively large number of members when they desperately needed it most. I have listened to the tales told by campaigning Subpostmasters about the first organisation they turned to when they realised the Post Office was going after them.

In many cases it was the NFSP, and in almost every case (there are some honourable exceptions at local level), the NFSP completely failed, because it had decided, as a matter of policy, not to question the integrity of Horizon.

This directly resulted in the NFSP's own members being suspended, sacked, prosecuted, criminalised, hounded for their life savings and ruined.

These people depended on the NFSP for protection. They got eaten alive.

The NFSP's response to the High Court judgment suggests it doesn't even have the corporate self-awareness to realise it needs to go back and investigate what it has done in the past and start to make changes.

I suspect it is not long for this world.

Yet while it is still in existence, the NFSP remains capable of doing huge damage. It is powerful. It has a voice. It is still relied on by 8,000 Subpostmasters to protect their interests. Any of those Subpostmasters could have problems with Horizon at any time.

The Post Office has the NFSP exactly where it wants it - in its back pocket. It can ignore it, collude with it, or use the NFSP's status and lack of involvement in this litigation as a fig leaf to protect its own interests. It does so, of course, safe in the knowledge that the NFSP won't get out of line. It has the contractual capacity to pull the NFSP's funding if it takes exception to any criticism the NFSP might dare make.

I asked the NFSP for a statement or interview so it can state its case in the light of the judgment and my criticisms above.

The response in full: "We won’t be responding to your questions or taking part in an interview."

Way to go, lads.

****************

I realise this blog is read by serving and former Subpostmasters, many of whom were/are NFSP members. Most of the stories I've heard about the NFSP have been negative, but I doubt that's the whole picture. If there are examples of Postmasters who were helped out of a Horizon-shaped hole by the NFSP, and I'm sure there are, I'd be delighted to hear from you. Please use the contact form on this website.

Likewise if you have an NFSP horror-story, please let's hear it.

I am also more than happy to have a confidential conversation or correspond with any serving member of the NFSP at any level. Please do get in touch. Background information is very welcome.

***************************

Please feel free to forward the link to this blog post. The more people who read it, the more people find out about what is the biggest trial going through the UK courts right now.

Please also consider a donation to keep the postofficetrial.com website going by choosing an amount and clicking the button at the bottom of this post. Contributors who donate £20 or more will be added to this secret email list. Thanks!

Choose an amount

- £2.50 GBP -- £5.00 GBP --- £20.00 GBP ---- £30.00 GBP ------ £40.00 GBP ------- £50.00 GBP -------- £75.00 GBP --------- £100.00 GBP ---------- £250.00 GBP ----------- £1,000.00 GBP

Common issues trial judgment: part 5 - the Common Issues - who won what?

This is part 5 of a six or seven part series which breaks down the common issues trial High Court judgment into bite-size chunks for the casual reader. Parts 1 - 4 are listed and linked to at the bottom of this blog post. I'll tell you now, parts three and four are the best.

This part is concerned with the actual common issues which gave their name to the first trial. The findings have a huge bearing on the relationship between every single Subpostmaster and the Post Office both retrospectively and going forward. If you are a serving Subpostmaster, you may want to read this - large chunks of your contract with the Post Office have just become unenforceable.

Also if you have ever been held liable for a negative discrepancy in your branch which you don't think was your fault... you might have a claim for getting it back. Again, the findings are below.

I hope this has piqued your interest because, to be honest, this was the toughest part of the judgment to get through - very few zingers, plenty of ifs and buts and lots and lots of case law, all of which I have tried to excise, in order to make the conclusions clear.

You've been warned. But first... some context:

What are these Common Issues things?

Most people aware of the grievances held by claimant Subpostmasters in this litigation know about the Post Office's IT system Horizon. Few will have heard of the "common issues" and may want to know why they were the focus of the first trial.

The common issues trial was essentially a trial of the Subpostmasters' contract. It covered how (and as it turns out, if) claimant Subpostmasters were contracted, the help they received or were entitled to under that contract (especially when they were having problems with Horizon), and the way they were suspended and/or "terminated" when things got ugly.

The theory behind exploring the nature of the Subpostmaster contract was that once the judge had decided what the various iterations of the contract meant in law, it would make it easier to decide if the Post Office had been in breach of their contractual responsibilities in the way it dealt with individual claimant Subpostmasters.

To simplify matters, the issues around the contract were boiled down to 23 "common issues" - areas which both the claimant Subposmasters and Post Office agreed needed a decision from the court.

Unfortunately that's the only simple thing about it. The 23 common issues are subdivided many times (the common issues document runs to 20 pages - read it here!), and the findings of the judge are manifold - ie some of his primary findings for some of the common issues are contingent on his findings of other common issues. To mitigate this, he makes separate secondary (and sometimes tertiary) findings on some of the common issues which aren't contingent on other findings.

Also the judge does not deal with the common issues in order. Whilst there may be logical reasons for this, it makes it tricky to unpick the findings and present them in a way that makes sense to a lay person.

To further complicate matters there are two main Subpostmaster contracts - the Subpostmaster contract [SPMC] which was largely in force from 1994 (well before Horizon was introduced in 1999/2000) and continues to exist today - and the Network Transformation contract [NTC], which started to appear in 2010. There are other iterations, such as the Modified SPMC, but leaving those aside, there are significant differences in the SPMC and NTC and, as he must, the judge applies both to the common issues. This, of course, introduces a whole subset of variations.

On top of that - the Post Office contended that changes to operational manuals and various other communiqués sent down to Subpostmasters whilst they were contracted to the Post Office had a contractual effect.

But you've made it all nice and easy to understand, haven't you?

Up to a point. As well as the contractual issues above, there are also issues of significance to both parties surrounding the actions of both the Post Office and their Subpostmasters, not least whether pressing a button to agree or sign off branch accounts (a Branch Trading Statement) has the same legal import as an agent signing off a set of "settled" accounts to a principal. The Post Office claimed it did, which it felt then allowed it to initiate legal proceedings against some Subpostmasters for false accounting on that basis. The judge disagreed, and has found that if a Subpostmaster had raised an issue with those accounts before, during or shortly after "signing them off", they should not be treated as a final set of accounts. Unless I am missing something, that in itself makes the prosecutions for false accounting questionable - if a Subpostmaster had at any stage disputed them to the Post Office.

But I'm getting ahead of myself.

If you want to read the judgment to get the detail, by all means do. What I have tried with this blog post is to draw out the headline findings and any interesting comments made by the judge (J Fraser) along the way. It is therefore not a complete picture, and given how dense the judgment is (400 pages, 180,000 words), I realise my selections may create inconsistencies. If that appears to be the case to you, please read the full judgment for clarity, and get in touch if I'm missing something important.

So here goes: a fisking of paragraphs 640 - 1122 of the Common Issues trial judgment. I have paraphrased the common issues in italics, and put my own comments in bold. The judge's findings are prefaced by paragraph numbers or are presented in quotes. I will buy anyone who finishes this blog post a pint.

Common Issue 1

Is the nature of the contract between the Post Office and the Subpostmaster "relational" - ie such that Post Office was subject to duties of good faith, fair dealing, transparency, co-operation, and trust and confidence?

Short answer: Yes. Win for the claimants.

J Fraser:

728. I find that there are also the other following features of the Post Office/SPM relationship that influence these particular contracts being categorised as relational contracts. These are:
1. In a great many cases, the investment of the SPMs in buying or leasing premises for the branch represented a major and significant financial personal commitment to running that branch, which operates for the joint benefit of the SPM and the Post Office. This is more than merely “a significant degree of investment”. For many (if not all) SPMs, this investment would represent the most significant investment they would make
2. The Post Office knew not only of the size of this investment, but the source of an incoming SPM’s funds, as these were included in the business plans submitted by the SPMs. If the source of funds was not identified, this information would be sought by the Post Office.
3. The role of a SPM providing personal service entitled that SPM to benefits that had similar characteristics to that of an employment contract, such as entitlement to holiday substitution allowance.
4. The Post Office was careful, when considering potential SPMs for appointment, to assess the financial viability of the applicant for appointment. An element of approval, or “vetting”, was therefore involved in the Post Office deciding that an SPM’s business plan was viable. This is so regardless of the disclaimer (or variety of disclaimer) used by the Post Office, such as that identified at [444]. This disclaimer does not mean, on its words, that the Post Office was not approving for its own purposes the contents of the business plan.
5. As the Post Office put it in its Opening, the Post Office is required by the Government to maintain a broad network of branches across the country, even in locations that would
not normally be commercially viable. There was therefore an aspect to this relationship that was other than purely commercial.
6. Trust is integral to almost all of the Post Office’s activities carried out in a branch between the SPM and members of the public wishing to use that branch Post Office.
7. The Post Office itself submits that it is essential that it can repose trust in its SPMs. I find that it is similarly essential that SPMs can repose trust in the Post Office, and I find as a fact that all six of the Lead Claimants did so.

738. In all the circumstances therefore, and in the context of the commercial relationship between each SPM and the Post Office, I find that these were relational contracts. I find that this means the contracts included an implied obligation of good faith. This means that both the parties must refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people. Transparency, co-operation, and trust and confidence are, in my judgment, implicit within the implied obligation of good faith.

Common Issue 2

What implied terms exist within the contract between Subpostmasters and the Post Office?

Short answer: Lots, but not all. Win for the claimants.

Longer answer:

(a) To provide adequate training and support (particularly if and when the Defendant imposed new working practices or systems or required the provision of new services)

Implied for reasons of business efficacy.

(b) To provide a system which was reasonably fit for purpose, including any or adequate error repellency

Implied for reasons of business efficacy.

(c) Properly and accurately to effect, record, maintain and keep records of all transactions effected using Horizon
(d) Properly and accurately to produce all relevant records and/or to explain all relevant transactions and/or any alleged or apparent shortfalls attributed to Claimants
(e) To co-operate in seeking to identify the possible or likely causes of any apparent or alleged shortfalls and/or whether or not there was indeed any shortfall at all
(f) To seek to identify such causes itself, in any event
(g) To disclose possible causes of apparent or alleged shortfalls (and the cause thereof) to Claimants candidly, fully and frankly
(h) To make reasonable enquiry, undertake reasonable analysis and even-handed investigation, and give fair consideration to the facts and information available as to the possible causes of the appearance of alleged or apparent shortfalls (and the cause thereof)
(i) To communicate, alternatively, not to conceal known problems, bugs or errors in or generated by Horizon that might have financial (and other resulting) implications for Claimants
(j) To communicate, alternatively, not to conceal the extent to which other Subpostmasters were experiencing relating to Horizon and the generation of discrepancies and alleged shortfalls
(k) Not to conceal from Claimants the Defendant's ability to alter remotely data or transactions upon which the calculation of the branch accounts (and any discrepancy, or alleged shortfalls) depended
(l) Properly, fully and fairly to investigate any alleged or apparent shortfalls
(m) Not to seek recovery from Claimants unless and until: (i) the Defendant had complied with its duties above (or some of them); (ii) the Defendant has established that the alleged shortfall represented a genuine loss to the Defendant; and (iii) the Defendant had carried out a reasonable and fair investigation as to the cause and reason for the alleged shortfall and whether it was properly attributed to the Claimant under the terms of the Subpostmaster contract (construed as aforesaid)

(c) to (m) implied as "incidents" of the judge's finding that the terms are relational ones.

(n) Not to suspend Claimants: (i) arbitrarily, irrationally or capriciously; (ii) without reasonable and proper cause; and/or (iii) in circumstances where the Defendant was itself in material breach of duty
(o) Not to terminate Claimants' contracts: (i) arbitrarily, irrationally or capriciously; (ii) without reasonable and proper cause; and/or (iii) in circumstances where the Defendant was itself in material breach of duty

Implied - but are narrower in scope than pleaded by the Claimants.

(p) Not to take steps which would undermine the relationship of trust and confidence between Claimants and the Defendant
(q) To exercise any contractual, or other power, honestly and in good faith for the purpose for which it was conferred
(r) Not to exercise any discretion arbitrarily, capriciously or unreasonably
(s) To exercise any such discretion in accordance with the obligations of good faith, fair dealing, transparency, co-operation, and trust and confidence

Implied.

(t) To take reasonable care in performing its functions and/or exercising its functions within the relationship, particularly those which could affect the accounts (and therefore liability to alleged shortfalls), business, health and reputation of Claimants

Implied but without reference to the business, health and reputation of the SPMs.


(u - also known in the judgment as 2(ii) a) The ability of the Defendant to recover and/or seek to recover any alleged shortfalls, whether while the relevant Claimant was a Subpostmaster or post- termination, was subject to an implied term requiring Post Office to do the same within a reasonable time of discovery or the date by which, with reasonable diligence, Post Office could have made such discovery.

Not implied.

Common Issue 3

If the terms alleged above at (q), (r), (s), and (t) are to be implied, to what contractual powers, discretions and/or functions in the SPMC and NTC do such terms apply?

Short answer: All of them. Win for the claimants.

J Fraser:

768. Common Issue 3 is concerned with the consequences of the terms alleged at Common Issue 2(a)(q), (r), (s) and (t) being found to be implied for reasons of business efficacy, or as incidents of the contracts being relational contracts. The answer is that the implied duty of good faith applies to the exercise by the Post Office of all its contractual powers and discretions under both the SPMC and the NTC, including the four identified in this Common Issue.

Common Issue 4

Did Post Office supply Horizon, the Helpline and/or training/materials to Subpostmasters (i) as services under “relevant contracts for the supply of services” and (ii) in the course of its business, such that there was an implied term requiring Post Office to carry out any such services with reasonable care and skill, pursuant to section 13 of the Supply of Goods and Services Act 1982?

Short answer: No, but a functioning useful Helpline and decent training are to be implied under the terms of a relational contract. Win for the claimants.

Common Issue 5

Were any or all of the express terms in the paragraphs listed below [lists several pages worth of express terms in the SPMC and NTC] onerous and unusual, so as to be unenforceable unless Post Office brought them fairly and reasonably to the Subpostmasters’ attention?

Common Issue 6

If so, what, if any, steps was Post Office required to take to draw such terms to the attention of the Subpostmaster?

Common Issue 7

Were any or all of the terms at paragraph (5) above unenforceable pursuant to the Unfair Contract Terms Act 1977?

Short answer: There is no short answer. The questions raised by common issues 5, 6 and 7 take up a few pages, and the judge's answers several dozen more. The general conclusion is that, in the judge's opinion, some of the terms of the SPMC and NTC are so onerous, unusual and unfair that they are unenforceable. Highlights:

1. The clause which allows the Post Office to unilaterally change the terms of a Subpostmasters' terms of appointment without agreement from the Subpostmaster has the potential to be onerous and unusual and may be unenforceable, depending on the scale of change the Post Office might wish to introduce.

2. The clauses in the NTC contract which hold the Subpostmaster strictly liable for any negative discrepancies in their branch accounts for any reason (save a robbery), or any negative discrepancy discovered in the Subpostmasters absence is onerous, unfair, unusual and unenforceable.

3. The clause in both contracts which allows the Post Office to suspend Subpostmasters without pay without giving good reason:

"I accept that there is a high hurdle to be overcome to establish that provisions are onerous and unusual. These provisions, in my judgment, easily clear that hurdle by a significant margin... Indeed, in my judgment, they are on their terms capable of putting a SPM in a simply impossible position, under either contract form [SPMC or NTC]. Even after reinstatement, which may have eventually occurred after a very lengthy period of suspension (for which the suspended SPM has been paying the costs of keeping open the branch) the Post Office may decide not to pay any remuneration that would otherwise have been due. The consequences are potentially financially ruinous for any SPM."

4. The clause which allows the Post Office to terminate a Subpostmaster without for any breach of contract, no matter how small: onerous and unusual. Unenforceable.

5. The clause in the SPMC which allows the Post Office to terminate a contract with three months notice, without giving a reason: onerous and unusual. Unenforceable.

6. The clause in the SPMC which states: "The terms of the appointment of Subpostmaster do not entitle the holder to be paid... compensation for loss of office." and the clause in the NTC which states: “The Operator acknowledges that he shall not be entitled to receive any compensation or other sums in the event of the termination or suspension of the Agreement.” Both onerous, unusual and unenforceable.

Common Issue 8

What is the proper construction of section 12, clause 12 of the SPMC?

“The Subpostmaster is responsible for all losses caused through his own negligence, carelessness or error, and also for losses of all kinds caused by his Assistants. Deficiencies due to such losses must be made good without delay."

Short answer: It is as it reads, but the Post Office must prove negligence, carelessness or error and/or the negligence, carelessness or error of the Subpostmasters assistance before demanding any losses are made good. Win for the claimants.

J Fraser: 

646. ... I consider that the correct meaning of Section 12 Clause 12 is that the SPM [Subpostmaster] is responsible for losses that are caused by his own negligence, careless or error, and that it is for the Post Office to prove that any particular loss falls within that category. I consider that this is clear on the natural meaning of the words.

647. It might be thought that such a construction of the words ought not to be wholly controversial, but it is hotly controversial when one considers the argument advanced by the Post Office.

652... By entirely circular reasoning, the Post Office contends that it can rely upon Section 12 Clause 12 for what the Claimants called Horizon generated shortfalls, unless the SPM could show that such deficiencies were not due to his or her negligence, carelessness or error... Because this has the effect of shifting the burden back on to the SPM, the Post Office both argues for, and has in the past applied Section 12 Clause 12 as justifying, recovery under this clause for all losses, unless an SPM could show that the deficiencies and shortfalls were not due to their own negligence, carelessness or error.

653... It is not for a SPM to demonstrate that there was no negligence, carelessness or error on his or her part. It is for the Post Office to demonstrate that there is.

(the judge goes on to say Subpostmasters are not responsible for all discrepancies caused by their staff howsoever they are caused, as contended by the Post Office. He agrees Subpostmasters are only liable if their assistants cause discrepancies through "negligence, carelessness or error", which as of his finding above, the Post Office now has to prove)

Common Issue 9

What is the proper construction of Part 2, paragraph 4.1 of the NTC?

“The Operator shall be fully liable for any loss of or damage to, any Post Office Cash and Stock (however this occurs and whether it occurs as a result of any negligence by the Operator, its Personnel or otherwise, or as a result of any breach of the Agreement by the Operator) except for losses arising from the criminal act of a third party (other than Personnel) which the Operator could not have prevented or mitigated by following [the Defendant’s] security procedures or by taking reasonable care. Any deficiencies in stocks of Products and/or any resulting shortfall in the money payable to [the Defendant] must be made good by the Operator without delay so that, in the case of any shortfall, [the Defendant] is paid the full amount when due in accordance with the Manual”

Short answer: the judge rules it confers strict liability on the Subpostmaster, but as we have seen above, he also finds it is unenforceable on grounds of being onerous and unusual, and unfair. Win for the claimants.

J Fraser:

682. On the natural meaning of the words, I consider that as a matter of construction this clause in the NTC imposes full liability upon a SPM for any losses to cash and stock, whether by as a result of negligence or otherwise, with the sole exception being losses arising from criminal acts which could not have been prevented.

687. The Post Office must, however, demonstrate that there is a “loss” and “a resulting shortfall”. This means a real and actual loss. A Horizon generated figure that was incorrect due to a bug or software glitch would not be a real and actual loss.

1010. [It] is, in my judgment, an onerous and unusual term. It has a very wide ambit, with potentially very serious financial implications for any SPM. Its effect is, absent any fault on the part of that SPM, that they may become liable for very sizeable sums with no upper limit, for something entirely out of their control.

Common Issue 10

Was Post Office the agent of Subpostmasters:

(a) For the purpose of rendering and making available accounts and/or was under an
equitable duty to render accounts

(b) Further or alternatively, for the specific purpose of effecting, reconciling and recording transactions initiated by the Claimants, the Defendant acted for itself and, simultaneously, for the Claimants, as their agent

Short answer: No. Win for the Post Office. Nothing changes.

Common Issue 11

If so, was the Defendant thereby required to comply with any or all of the following obligations:

(a) Properly and accurately to effect, execute, record, and/or maintain and keep records of all transactions which the Claimants initiated using Horizon or for which the Claimants were potentially responsible

(b) To render and make available to the Claimant accounts

(c) Further or alternatively, where the Defendant alleged shortfalls to be attributed to the Claimants, to comply with the duties set out in paragraph 2 (d) to (l) above.

Short answer: No. Win for the Post Office. Nothing changes.

Common Issue 12

Was the extent and effect of the agency of Subpostmasters to Post Office such that:

(a) (i) Subpostmasters owed fiduciary duties to Post Office, including a duty to act in Post Office's interests in relation to the functions they undertook on Post Office's behalf (which functions included holding and dealing with Post Office cash and stock, effecting and recording Post Office transactions, generating liabilities for Post Office, maintaining proper and accurate records and preparing and rendering accounts); 

(ii) Subpostmasters owed a duty to account to Post Office

(b) Where an agent renders an account to his or her principal, he is bound by that account unless and to the extent that he discharges the burden of demonstrating that there are mistakes in the account that he should be permitted to correct

(c) Where an agent deliberately renders a false account to his or her principal, in relation to the matters covered by the account the Court should make all presumptions of fact against that Subpostmaster as are consistent with the other facts as proven or admitted

Short answer: No. Win for the claimants.

J Fraser:

820. I consider that if and insofar as, during or at the end of any branch trading period, any SPM contacted the Helpline in relation to any shortfall, discrepancy or disputed TC, the Branch Trading Statement for that period cannot be treated as an account rendered by an agent to the principal which can only be opened up if the SPM can demonstrate a mistake. I also consider that this conclusion applies regardless of whether the matter is approached (correctly) through the contractual obligation upon a SPM in either the SPMC or the NTC, or whether the Post Office’s approach relying upon common law principles were applied (although I do not consider this to be the correct approach).

821. The issue of an SPM as an agent deliberately rendering a false account to his or her principal, in relation to any such Branch Trading Statement for such a period therefore simply does not, in my judgment, arise."

Common Issue 13

Did Subpostmasters bear the burden of proving that any Branch Trading Statement account they signed and/or returned to Post Office was incorrect?

Short answer: No. BIG win for the claimants.

J Fraser:

822. I... simply do not see how it can sensibly be suggested that SPMs bear such a burden, for any branch trading period when a SPM has called the Helpline and sought help for an unexplained shortfall, discrepancy or disputed TC. 

If you get the chance, do please read the section of the judgment from 822 - 853 in which the judge spells out the impossibility of a Branch Trading Statement being what is known as an expression of settled accounts, if the Subpostmaster had raised an issue with any aspect of compiling them. In my view it makes a charge of false accounting almost impossible to stick.

Common Issue 14

On a proper construction of the SPMC and NTC, in what circumstances and/or on what basis was Post Office entitled to suspend...[sniiiip!]?

Short answer: Proportionally. Score draw.

However - J Fraser:

886. There are policies that the Post Office has adopted, which it deploys in parallel with suspension, which I do not consider justified on the terms of the contract, even without the finding that they are relational. Suspended SPMs are not only entirely excluded from the Post Office part of their premises, they appear to be excluded (in some cases) from the entire premises, and also are completely denied access to any information or records. Given the severe effect upon a SPM of having their appointment terminated, it is not only important, but I would go so far as to say crucial, that they are given a reasonable opportunity to meet the case being brought against them by the Post Office. It is difficult to see how they can have such an opportunity if they are denied access even to copies of information or records. The experience of Mr Abdulla shows that he was, at his interview with Mrs Ridge, not given access to documents that showed his account concerning the TC and the lottery in the sum of £1,092 was substantiated by internal Post Office records. Mrs Ridge did not have these either. I do not see how a decision about a SPM’s future can sensibly be taken on proper grounds in the absence of such a document being made available either to the SPM, or to the Post Office personnel tasked with taking such a decision. Such an approach is not justified on the terms of either the SPMC or the NTC.

Common Issue 15

On a proper construction of the SPMC and NTC, in what circumstances and/or on what basis was Post Office entitled summarily to terminate?

    

Common Issue 16

On a proper construction of the SPMC and NTC, in what circumstances and/or on what basis was Post Office entitled to terminate on notice, without cause?

Short answer from J Fraser:

899. I consider that in both instances – termination without notice, and termination summarily – the Post Office must take the decision in accordance with the obligation of good faith. The decision to terminate without notice can only be taken if the contractual right to do so has arisen, which on the construction that I have considered, means a SPM must be in repudiatory breach of contract. Good faith, on my findings that these contracts are relational ones, govern the behaviour of both parties, the Post Office and SPMs.

Common Issue 17

Do the express written terms of the SPMC and NTC between Post Office and Subpostmasters represent the true agreement between the parties, as to termination ?

Common Issue 18

If not, was the “true agreement” between the parties that:

i. neither party intended that the Claimants' investments in goodwill or otherwise in the business should or would be forfeited on 3 months' notice:

(a) without substantial cause or reason, established after a fair investigation and consideration;

(b) if the Defendant was itself in material breach of contract;

(c) vindictively, capriciously or arbitrarily; or

(d) in response to reasonable correspondence about (i) any apparent breach by the Defendant, or (ii) alleged shortfalls and the difficulties faced by Subpostmasters in investigating alleged shortfalls (such as in the case of Alan Bates and his letters dated 19 December 2000, 18 July 2001, 7 January 2002, and 13 February 2002).

ii. the Defendant would not terminate without giving such notice as the court may hold to be reasonable (which the Claimants will contend was, on any view, never to be less than 12 months)?

Short answer: the judge decided the decisions he made in Common Issues 15 and 16 largely obscured the necessity to make a definitive ruling on Common Issues 17 and 18.

Common Issue 19

On a proper construction of the SPMC and NTC, where Post Office lawfully and validly terminated a Subpostmaster’s engagement, on notice or without notice for cause, was the Subpostmaster entitled to any compensation for loss of office or wrongful termination?

Common Issue 20

On a proper construction of the SPMC and NTC, in what, if any, circumstances are Subpostmaster’s breach of contract claims for loss of business, loss of profit and consequential losses (including reduced profit from linked retail premises) limited to such losses as would not have been suffered if Post Office had given the notice of termination provided for in those contracts?

Short answer: No separate ruling was needed by the judge on Common Issues 19 and 20 as the issues were dealt with in Common Issues 5, 6 and 7.

Common Issue 21

On a proper construction of the SPMC and NTC, what if any restrictions were there on Post Office’s discretion as to whether or not to appoint as a Subpostmaster the prospective purchaser of a Subpostmasters’ business?

Short answer: None. Win for the Post Office.

Common Issue 22

Did SPMC section 15, clause 7.1; NTC, Part 2, clauses 2.3 and 2.5 and/or any of the implied terms contended for by the parties and found by the Court purport to confer a benefit on Assistants for the purposes of section 1 of the Contracts (Rights of Third Parties) Act, and if so which of these terms did so?

Short answer: No it didn't. Win for the Post Office.

Common Issue 23

What was the responsibility of Subpostmasters under the SPMC and the NTC for the training of their Assistants?

Short answer: Postmasters are responsible for training their assistants. But they cannot be expected to train them better than they have been trained themselves [by the Post Office]. An assistant can only be expected to operate to the same level as the Postmaster who trained them. And if the Post Office has been deficient in training them, it's not the assistant, or the Subpostmaster's responsibility. Score draw.

J Fraser: 

951. ... The Post Office takes issue with the SPMs’ argument that they cannot “have been better able to train Assistants than the training provided by the Defendant would allow or enable”. The Post Office stated that this was an assertion of “a limiting principle that would have to be implied and which does not stand scrutiny”. However, the Post Office’s case ignores what the word “cascade” in Part 2 Paragraph 2.4 of the NTC must connote. This must mean passing down of the training or knowledge acquired during training, and that training (or acquired knowledge) was to be provided by, originate with, and come from the Post Office.

952. The Post Office’s arguments on this also suffer from a complete lack of logic. There is no way that a SPM could, on Horizon, train his or her assistants to a higher level of competence than the Post Office’s own training had given that SPM. In other words, any deficiency of training given to the SPM by the Post Office is not cured, in contractual terms, to the Post Office’s benefit by that deficient training being passed on to an assistant by that deficiently trained SPM. I find this argument by the Post Office to fly in the face of commercial, business and indeed common sense. I construe the relevant terms in the contracts to that effect, but if it is necessary to imply a term (and at least so far as the non-modified SPMC it is, because it does not deal with this subject expressly at all) then I do so due to business necessity.

953. The second qualification or feature, is that a subject such as training an individual to work on a computer system is something that should be approached co-operatively. Given my finding that these contracts are relational contracts, I would expect the parties to co-operate in terms of the provision of training on Horizon. It is in both parties’ interests that the assistants being used by a SPM had reached a particular standard in use of the Horizon system.

AND THAT CONCLUDES THE FISKING OF THE COMMON ISSUES BIT OF THE COMMON ISSUES TRIAL JUDGMENT!!!!

If you really did read this far and didn't just scroll to the bottom to find out what happened, then you have won a pint of beer, redeemable when you next see me.

Don't forget there are many more amazing blog posts in this series:

Common Issues trial: the judge's comments - part 1 (paragraphs 1 to 279 best bits) 
Common Issues trial: the judge's comments - part 2 (paragraphs 280 to 364 best bits)
Common Issues trial: the judge's comments - part 3, (paragraphs 365 to 558) which deals with the credibility or otherwise of the 14 Post Office witnesses who took the stand, and is very readable. 

Common Issues trial: the judge's comments - part 4 - the Post Office's attitude problem (paragraphs 559 - 639)

***************************

Please feel free to forward the link to this blog post. The more people who read it, the more people find out about what is the biggest trial going through the UK courts right now.

Please also consider a donation to keep the postofficetrial.com website going by choosing an amount and clicking the button at the bottom of this post. Contributors who donate £20 or more will be added to this secret email list. Thanks!

Choose an amount

- £2.50 GBP -- £5.00 GBP --- £20.00 GBP ---- £30.00 GBP ------ £40.00 GBP ------- £50.00 GBP -------- £75.00 GBP --------- £100.00 GBP ---------- £250.00 GBP ----------- £1,000.00 GBP

Common Issues trial: the judge's comments - part 4 - the Post Office's attitude problem

This post contains extracts from paragraphs 559 - 724 of the Bates v Post Office Common Issues trial judgment. They are being broken down in this way in order to provide digestible chunks for the casual reader.

The extracts in all these posts are chosen because I thought they were of interest. They are therefore subjective and do not give the whole or complete picture of the judgment. If you want that, read the whole judgment.

This post mainly covers the Post Office's general attitude to Subpostmasters and the infamous 12:12 clause of the Subpostmaster contract:

"The Subpostmaster is responsible for all losses caused through his own negligence, carelessness or error, and also for losses of all kinds caused by his Assistants. Deficiencies due to such losses must be made good without delay."

My commentary is in bold.

On the Post Office's conduct, attitude and culture of excessive secrecy:

523… The Post Office appears, at least at times, to conduct itself as though it is answerable only to itself. The statement that it is prepared to preserve documents – as though that were a concession – and the obdurate [sic] to accept the relevance of plainly important documents, and to refuse to produce them, is extremely worrying. This would be a worrying position were it to be adopted by any litigant; the Post Office is an organisation responsible for providing a public service, which in my judgment makes it even worse. 


559. There is no doubt that the Post Office is acutely aware of the potentially damaging repercussions in terms of its reputation, if this litigation succeeds. That is entirely understandable. I have dealt with the cautions urged upon me.. and in my judgment on the pre-trial application seeking to strike out evidence I also identified that the Post Office’s own evidence for that hearing explained that it wished to avoid adverse publicity.

560. What is less understandable is the way that this approach seems to have affected the Post Office’s approach to documents....

561. ... [there is] a culture of excessive secrecy at the Post Office about the whole subject matter of this litigation. They are directly contrary to how the Post Office should be conducting itself. I do not consider that they can be a sensible or rational explanation for any of them.

On the Post Office's legal deviousness:

671. This argument [on the construction of Section 12:12] by the Post Office is, in my judgment, both circular, and is an overly intricate attempt to sow confusion and obscure the true issues in the case.

On the Post Office's attitude to branch discrepancies:

569.40 [The Post Office] sought recovery from the Claimants for apparent shortfalls. I would also add that on the evidence the Post Office did this regardless of whether disputes had been reported to the Helpline or not. This was accepted by all the Post Office witnesses, and occurred whether the SPM in question was appointed under the SPMC [Subpostmaster Contract] or the NTC [Network Transformation Contract], even though the terms of those contracts were different. It was also done regardless of any analysis of any causative fault on the part of SPMs [Subpostmasters]. It was also done when the SPM in question had been told that no action would be taken in respect of a disputed shortfall. 

On the infamous Section 12:12 of the Subpostmaster contract:

646. I consider that the correct meaning of Section 12 Clause 12 is that the SPM is responsible for losses that are caused by his own negligence, careless or error, and that it is for the Post Office to prove that any particular loss falls within that category. I consider that this is clear on the natural meaning of the words. 

649. ... it was joined with the inference adopted by the Post Office regarding the Horizon system, which is that Horizon-generated losses do not occur. The Post Office therefore argued that it is entitled to conduct itself as though shortfalls are the responsibility of SPMs, unless the SPM could prove the loss was not caused by his or her negligence, carelessness or error. 


653. In my judgment... it is the Claimant’s construction that I consider to be the correct one. It is not for a SPM to demonstrate that there was no negligence, carelessness or error on his or her part. It is for the Post Office to demonstrate that there is.

654. I consider there is a contractual burden upon the Post Office to demonstrate that the loss for which it seeks to hold a SPM responsible was caused by the negligence, carelessness or error of the SPM. 

On the impossibility of a Subpostmaster proving they were not at fault for a branch discrepancy:

655. For a SPM to demonstrate they were not at fault, if there was a loss, could be verging on nigh on impossible. Firstly, they would have to concentrate upon and analyse all of the branch records for every single transaction within the particular trading period. That would be an onerous burden for a single SPM. Secondly, those records would only be between the branch and the Post Office; SPMs have no access to data between the Post Office and its clients, and are not able to obtain it. A further factor – though far less important - is all of this would have to be done whilst the SPM was complying with their obligation to open and run the branch during working hours during the week. I am also confident, from the evidence in this trial but especially that of Mrs Stockdale, who appeared in my judgment to have done all that was humanly possible in order to work out what was happening, that a SPM simply does not have access to the type of information that would make such an onerous exercise possible even in theory. 

On why the Post Office has a clear responsibility to prove a discrepancy is the fault of a Subpostmaster (this alone could make a lot of the convictions unsafe):

656. For the Post Office, however, to do this, would be less difficult. All of the transactions of that branch could be analysed and compared with the relevant data between the Post Office and what it calls its clients, which include companies like Camelot. Secondly, that workload would be borne by the (or a) relevant department, and not by one sole individual, who would be trying to run a branch Post Office during normal business hours at the same time. Thirdly – and in contractual terms this is less important, but it is an implication of a rival construction, and hence appropriate to consider it - the Post Office is responsible for compiling evidence for prosecutions for offences of false accounting and theft by SPMs. As such, it bears the burden of proof of demonstrating to the appropriate criminal standard that conduct by SPMs is dishonest. It must therefore have the ability to demonstrate how a loss has been caused. 

665. One has only to state the Post Office’s proposition to see how far it is from commercial reality. It can only be arrived at by treating the single clause as though it were two entirely separate and distinct provisions, and by construing the second in complete isolation from the first, and by reading the second part as though it included words that are not there. 

On the Post Office's investigations department acting like a sort of comedy goon squad:

723. I agree that there is a lot to be desired from the Post Office’s behaviour as identified in the cases of the Lead Claimants. I shall give four examples only.


1. Even though the Post Office’s own case on the relevant provision in the SPMC dealing with liability for losses requires negligence or fault on the part of a SPMC, this was routinely and comprehensively ignored by the Post Office, who sent letters of demand for disputed sums in express terms as though the SPM had strict liability for losses. These letters entirely misstated the legal basis of a SPM’s liability, even where they had been appointed under the SPMC. 


2. Legal representation is not permitted by the Post Office at interviews which deal with whether a suspended SPM is to have their engagement terminated – which effectively ends that part of their livelihood. Regardless of whether this is justified or not, the specific grounds and proper particulars of why they face potential termination are not even clearly identified in advance to the SPM in question. Additionally, information directly relevant to the grounds (or at least what the Post Office is concerned about, in the absence of properly identified grounds) is not provided to the SPM either, or at least not in the case of the Lead Claimants who faced such procedures. Mr Abdulla tried at his interview to explain the situation regarding TCs [transaction corrections] and the Lottery. He was disbelieved. The documents available in the trial show that, whatever else he had done, he was telling the truth about the existence of these TCs. Neither he nor the interviewer had this information available to them at the time. 


3. I have already dealt with what happened to Mrs Stockdale after she was one of the first Claimants in the litigation. Mrs Stubbs’ evidence, which I accept, was that the Temporary SPM who replaced her was told to destroy all documentation in the branch that related to her appointment. There can never, in my judgment, be any sensible rational for such destruction of important documents, and I cannot understand why the Post Office would wish to behave in such a way. 


4. The approach of the Post Office is to brook no dissent, and it will adopt whatever measures are necessary to achieve this. An example of this is in the Modified SPMC, which in Section 15 clause 19 deals with something called an Investigation Division Interview. This Division includes investigation of potential criminal offences against the Post Office. One part deals with the presence at such an interview of a friend of the SPM. The relevant clause states: 

Modified SPMC Section 15 clause 19:
“A friend may only attend and listen to the questions and answers. He must not interrupt in any way, either by word or signal; if he does interrupt he will be required to leave at once and the interview will proceed without him. Whatever is said at the interview is to be treated as in strictest confidence. The friend may take notes of the interview but he must keep the notes in the strictest confidence. The only communication the friend is entitled to make on behalf of the person who has been questioned will be in the form of a written "in strictest confidence" statement which may be submitted by the latter, in support of any official appeal which the person questioned may desire to make in connection with the methods followed at the enquiry. No other communication about the interview is allowed (unless made by permission of the Post Office) as it might constitute a breach of the Official Secrets Acts.”
 

Other parts of Section 15 deals with the requirement for a caution and so on, but I find it somewhat unusual, and potentially oppressive, that the Post Office could seek to use the Official Secrets Acts in this way. I do not see how, in a routine case, these Acts could possibly apply in the way suggested by the Post Office in this contract. 

****************************

The remainder of the judgment (paragraphs 725 - 1122) deals with the 23 Common Issues at the heart of the first trial, and who the judge finds for, with lots of working out. I'll get something up about that soon.

More judgment-fisking:

Common Issues trial: the judge's comments - part 1 (paragraphs 1 to 279 best bits) 
Common Issues trial: the judge's comments - part 2 (paragraphs 280 to 364 best bits)
Common Issues trial: the judge's comments - part 3, (paragraphs 365 to 558) which deals with the credibility or otherwise of the 14 Post Office witnesses who took the stand, and is very readable. 

The Smoking Gun: or, "Whither Gareth?"

On a day of stunning drama at the High Court last week, we also had a series of startling admissions about bugs in the Post Office's Horizon IT system.

Before the recusal hand-grenade was lobbed into proceedings, Torstein Godeseth, Horizon Chief Architect at Fujitsu, was being cross-examined by Patrick Green, QC for the claimants.

Mr Green's cross-examination was the fruit of what looked like several months work by the claimants' legal team. They had painstakingly put together a series of conclusions based on evidence disclosed, which they then put to Mr Godeseth. It delivered, to my mind, the first concrete evidence of a smoking gun - an error generated outside a branch blamed on a Subpostmaster - and it raised the question as to how many more have slipped through unnoticed.

The financial discrepancy was mistakenly generated in 2007 by a Fujitsu engineer who was trying to replace a missing line of code in a Subpostmaster's terminal without the Subpostmaster's knowledge or permission.

During a bungled attempt to fix the glitch, the engineer put in an incorrect manual entry, causing a $1000 discrepancy in a forex transaction. It wasn't picked up by Fujitsu at the time, or rather the discrepancy was picked up, but the source of it wasn't, so it was blamed on the Subpostmaster. The incorrect manual entry was only spotted during this litigation whilst the claimants' legal team were preparing for the Horizon trial.

That's the short version. The detail below exposes the range and depth of the Horizon errors the claimants' team were able to explore.

Small beer

Let's start with a reminder of the Post Office's general position on errors in Horizon. On the first day of this Horizon trial (11 March 2019), each QC gave their opening statement to the court. Mr de Garr Robinson, for the Post Office, made reference to a joint document prepared by the two independent IT experts contracted by the claimants (Jason Coyne) and the Post Office (Dr Robert Worden) to look at the Horizon system. It is called "Table of bugs/errors/defects with acknowledged or disagreed evidence of financial impact."

There are 29 bugs listed of which 12 are agreed. As part of the table, Dr Worden estimates that the total financial impact of the agreed bugs was £165,000 and the possible financial impact of each bug on each affected Subpostmaster and would be no more than an average of £13,800. This was before any corrective action was taken to compensate the Subpostmaster and fix the bugs.

£13,800 is potentially significant to an individual Subpostmaster, but in the general scheme of things, small beer. Especially as Dr Worden calculated the likelihood of a Subpostmaster being compensated for each individual bug once it had been discovered, and concluded that the bigger the bug, the more likely it would get rectified and the Subpostmaster compensated. In Mr de Garr Robinson's words:

"In a system handling the volumes of transaction that Horizon handled, which was used by the number of branches that used it, over a period of 20 years, bugs of this number and scale can have no material impact on the overall robustness of Horizon, or putting the point more pertinently, the chances of one of these bugs affecting a given set of accounts is vanishingly small....
"... that's not to say that a claimant could not have been hit by a bug.  As I hope I have made clear to your Lordship, Horizon is not perfect. It remains a possibility, but the important point is how unlikely it is."

So there you go. The claimants believe a total of £18.7m has gone missing from their branch accounts due to Horizon errors. The Post Office believes it could be nil.

Remote access

Also in his opening statement, Mr de Garr Robinson addressed remote access, vehemently denied to the BBC's Panorama programme in 2015, then admitted to the court by the Post Office in 2017.

The issue of remote access, said Mr de Garr Robinson, was something of a red herring:

"These remote access issues are here because of concern expressed that Fujitsu... was using its administrator rights in such a way and on such a scale as to undermine the reliability of the claimants' branch accounts...
"In the real world this is...  not going to have a bearing on the robustness of the system and on the reliability of any given branch accounts in any given month.... There's a sense of unreality.... even if the claimants' case succeeds at its highest, it's never actually going to have a material impact."

Let's have a look at the evidence, shall we?

Whither Gareth?

Torstein Olav Godeseth certainly looks the part. Tall, pencil thin, with a slightly pinched expression, high cheekbones and thinning hair, he is an Oxbridge graduate who has worked on and off for both the Post Office and Fujitsu's IT departments since 1987.  He was a technical advisor at the Post Office when they, together with the Benefits Agency, procured the Horizon system. Now, he is Fujitsu's Chief Architect on the Post Office Account. He spoke in court with a a broad West Country accent, which was a surprise. There can't be many Torstein Olavs who sound like they come from somewhere outside of Bristol.

On the first day of Mr Godeseth's evidence, Patrick Green QC started the standard cross-examination practice of ripping a witness statement to shreds. In this instance Mr Godeseth had provided three witness statements, statements two and three correcting or clarifying elements of their predecessor(s).

Mr Green was interested in how much of Mr Godeseth's evidence was actually his evidence. A lot of it appeared to come from a series of conversations Mr Godeseth had had with his colleagues at Fujitsu, particularly a certain Mr Gareth Jenkins.

Gareth Jenkins was the Post Office's expert witness at the Seema Misra trial in late 2010. He was also present at a meeting between Post Office and Fujitsu (also in late 2010) where fixes to a long-standing Horizon bug (which had not been disclosed to the Misra trial or the Subpostmasters it was affecting) were being discussed.

When it came to Mr Godeseth's evidence about the Riposte system, a database used by the pre-2010 iteration of Horizon (known as "legacy" Horizon), Mr Green asked:

"it is fair to say that really the source of that information that you're giving is Mr Jenkins, isn't it, because you were working for Post Office at the time?"

Mr Godeseth agreed, saying: "I feel I had a pretty good knowledge of how Riposte works, since I needed it when I was working on Impact, but it's absolutely the case that I would get more detailed information from Gareth."

Mr Green read out a few more paragraphs Mr Godeseth had written about Riposte, focusing on his source of knowledge:

"I understand from Gareth that each message included three key pieces of information ..."
"I also understand from Gareth that messages also had an associated 'Expiry Date' ..."
"I understand from Gareth that due to the size of the Post Office network..."
"I understand from Gareth that the audit application..."
"I also understand from Gareth that once these files had been written ..."

Mr Green wondered if Mr Jenkins might be a better person to talk to about Riposte. Mr Godeseth agreed.

Mr Green moved on from Riposte to the issue of remote access to branch terminals. He quoted from Mr Godeseth's first witness statement.

"In Legacy Horizon, any transactions injected by SSC [Fujitu's Software Support Centre] would have used the computer server address as the counter position which would be a number greater than 32, so it would be clear that a transaction had been injected in this way."

It transpired that although he didn't say so in this case, Mr Godeseth had got his information from Gareth Jenkins. "So" asked Mr Green, "we could write in there "I understand from Gareth"?"

"Yes." said Mr Godeseth.

Sadly, it turns out Mr Jenkins had not given Mr Godeseth the correct information about counter position computer server addresses. It could be a number below 32, so that it wouldn't be clear it had been injected by someone from Fujitsu.

Was Mr Godeseth shocked by this? No, he wasn't shocked, that would be too strong a way of putting it.

Was Mr Godeseth aware it was a contentious point within the litigation? Yes, he was.

And was he aware that he had stated the information as fact within his witness statement without any reference to the fact he had received the information from Mr Jenkins? Mr Godeseth accepted this.

Mr Godeseth had managed to put the correct information in his second witness statement, after a discussion with a different Fujitsu colleague.

Mr Green was interested in this. Had Mr Godeseth gone back to Mr Jenkins and discussed the incorrect information? No, said Mr Godeseth, he hadn't.

Was he not interested in why he had been given duff information?

Mr Godeseth repeated his previous answer. He had not spoken again about it to Mr Jenkins.

Mr Green took Mr Godeseth back through his long association with Horizon and asked if he considered himself to be "very knowledgeable" on the subject of remote access. Mr Godeseth agreed he considered himself to be very knowledgeable. Mr Green wondered if he should have been surprised when Mr Jenkins told him that remote access of the sort they had been discussing was possible. Mr Jenkins replied:

"If you are looking to support a large system, then I think the logical conclusion is it's inevitable that you have to do this sort of thing on occasion."

Mr Green asked why this statement seemed to directly contradict his witness statement. Mr Godeseth refused to accept that it did.

Legacy Horizon ------------> Horizon Online

The second phase of Mr Godeseth's cross-examination took place during the afternoon of Wednesday 20 March. Here, Mr Green and Mr Godeseth dwelt for some time on the migration from legacy Horizon (where transaction data was stored on Horizon terminals in branch and uploaded to the servers overnight) to Horizon Online (where branch transaction data was updated to the servers in real time).

Mr Green started listing some of the problems which individual Subpostmasters told the Post Office they were having when Horizon Online was rolled out eg:

"On the 1st of March at the close of business we found that on node 5 [each Horizon terminal within a branch is known as a node] the cash was short of £1,000.  All of the figures for that day match the figures presented at the time of each transactions.  An instant saver withdrawal of £1,000 was transacted that day, but I was unable to find this transaction using the online report facility.  I feel very anxious as I believe a system error has occurred at the time of this transaction."

and

"On the 2nd of March a transaction for a cash withdrawal was completed where the system commanded a member of staff to issue the money to the customer on screen but the receipt printed for that transaction printed out a decline slip. The customer was honest enough to bring back the decline receipt a day later with the money."

Mr Godeseth agreed the migration was traumatic for some, and that when he went over to Fujitsu during the rollout Fujistu was in a state of "red alert".

Mr Green asked: "Can we infer from "red alert" that it is quite serious?"
Mr Godeseth replied: "Oh, it was very serious."
"And can you tell his Lordship why it was serious?"
"There was an issue with Oracle which was the biggest problem, but clearly there were other problems going on at the same time because it was a brand new system, but the big one was an Oracle issue which I got involved in."

Mr Godeseth couldn't remember any other specific problems with the Horizon Online rollout, but did volunteer: "there certainly were issues with the software in the early days."

Mr Green wondered why there wasn't a single reference to any of these problems in any of Mr Godeseth's witness statements. Mr Godeseth replied he was "looking to give an overall explanation as to how Horizon works."

The morning after the night before

As Mr Godeseth finished his first day of cross-examination, he was given some homework, or very possibly, hotelwork.

He was handed a KEL and a PEAK to study. A KEL is a Known Error Log generated by Horizon support level two. A PEAK is developed by Horizon support level three or four to manage, investigate and hopefully fix the known error identified by the KEL. A PEAK can list notes left about the error by helpline support, plus the discussions between the engineers at Fujitsu who are looking at it.

On his return to the witness box on the morning of Day 8 of the trial, Mr Godeseth was asked about the documents he had been asked to study.

The error described in the documents (and referred to in précis in the introduction to this blog post) occurred in 2007 at a post office branch during a foreign exchange transaction for US dollars.

This error has not been reported by the branch Subpostmaster, but has rather been picked up by the system. So far so good.

For some reason, during the forex transaction, the computer chose not to write a line of code into the Horizon message store creating a surplus of $1000 (around £484 at the time).

A fix was proposed - go into the Subpostmaster's computer and manually enter the line of code which was missing. This was done over a period of 10 minutes at 5pm on the 5 Dec 2007, and as Fujistu engineer Andy Keil adds to the PEAK: "Worth noting that the branch did not have any issues with the mismatched transactions because this was fixed before they did the roll. The branch is not aware of this and it's best that the branch is not advised."

Mr Green paused to ensure collect Mr Godeseth's understanding of the situation:

"you would fairly accept, wouldn't you, that although there are documents elsewhere that show that sometimes SPMs were advised, this shows an occasion when the SPM at this stage has not been advised, doesn't it?"

Mr Godeseth was precise: "I don't know that it shows that, but it's a fair inference from it. I think I would say that Post Office were well aware of this and I would argue that it's a Post Office decision whether or not to tell a subpostmaster."

The fix goes in. But, instead of writing the proposed:

"[Quantity]:-1, SaleValue:-484, PQty:-1,000 with, other attributes (including exchange rate) as before."

... Mr Kiel manages to update the POLFS feed for the branch with a sale value of 1,014.73 and PQty of 2,080. This has the effect of just over $2,000 being inserted in the Post Office system, generating a $1000 loss at the branch.

An update to the PEAK by Fujitsu's Anne Chambers is recorded on 14 Dec 2007:

"The counter problem which caused the first issue has been corrected by inserting a message into the messagestore, for equal but opposite values/quantities, as agreed with POL... Once the problem was corrected, there should have been no impact on the branch.  However, it has been noted that the stock unit BDC had a loss of $1,000, which was generated after the correction was made."

Don't worry, says Ms Chambers: "We have already notified Gary Blackburn at POL ... this appears to be a genuine loss at the branch, not a consequence of the problem or correction."

Fujitsu failed to spot their own engineer's mistake.

Mr Green asks Mr Godeseth if that is his reading of what happened. Mr Godeseth replied:

"Having read this PEAK in more detail overnight then yes, clearly that is what appears to have been the case."

The smoking gun. It's one of those mysterious Horizon errors we kept being told about back when I was putting together my first report on this subject in 2011. The sort of thing the Post Office told us was nonsense and then sent us legal letters to make sure we knew how serious they were about it.

This morsel was just a curtain-raiser (to mix metaphors) for the rest of the day's cross-examination.

The Callendar Square bug

Mr Green described the Callendar Square bug, which affected legacy Horizon users, and was a problem with Riposte (the database Horizon was built on, owned and operated by an American firm called Escher). It could cause discrepancies in branches and it was known internally as the "Riposte lock or unlock" problem. So far, so uncontroversial

Using PEAK and KEL reports, Mr Green noted examples of lock/unlock problems reported by Subpostmasters in 2000, 2003, 2004 and finally at the Callendar Square branch in 2005. Mr Green read out a few of the PEAK reports from those periods and posited the suggestion that "we can see that although Callendar Square experienced this bug in 2005, the genesis of it appears to go back to February 2003 and similar lock agent problems back in November 2000, is that fair?"

Mr Godeseth agreed.

With regards to one of the branches affected in 2004, the KEL report read: "Transfer in accepted Twice, thus causing a Discrepancy." The discrepancy totalled £22,290.

The "solution" was "currently with Escher for investigation."

Mr Green listed a few more reports:

"This has resulted in a loss of 3,489.69.... Phoned the PM [Subpostmaster] to explain what the problem was.  He is concerned about other transactions which he has input twice (3 Giro deposits and another cheque) because of the replication problem.  Have advised him to contact the NBSC [National Business Support Centre - one of the Horizon helplines] as this is a business issue."

"When clerk accepted transfer in it accepted it. After she had accepted it she went back into transfers and node 4 transaction for £608.13 appeared."

"PM was trying to transfer £2,490 from node 7 onto node 2.  She states that she has accepted the transfer on node 2 but the system is not showing this... On node 7 it is showing pending transfer but it is not showing on node 2... It appears on her transfer sheet as completed."

"This office had severe problems balancing on week 25, resulting in a shortage of £6,414.46...."

These are not insignificant sums and not insignificant problems.

Mr Green picked up on the latter case. The Subpostmaster is convinced the discrepancy is a Horizon error and he is getting the support of his area manager. However the Horizon helpline muddies the water:

"They told the SPMR that they would report to NBSC that they had identified and rectified the problem and that the amount could be held in the suspense account.  However, as part of the shortage relates to transfers, and no error notice will be issued, then the Suspense Account Team are not prepared to authorise the entry."

Mr Green suggested it wasn't easy for the Subpostmaster.

"No, indeed," agreed Mr Godeseth, it was "a horrible position to be in."

Mr Green continues reading from the document "No follow-up was received from [Post Office's] Service Support regarding this call."

On we went with the Callendar Square bug. Mr Green read more internal logs noting that Subpostmasters were being advised of odd workarounds:

"Discussed ongoing issues of loss due to Horizon misbalance. SPMR concerned that he has now made a fraudulent entry in that he has rolled over to the next trading period and put the loss into  suspense. He has then gone on to state that the cash has been made good, which it hasn't.  This was done on the advice of the Helpdesk."

Some Subpostmasters were being met with flat denials that there was anything wrong with the system at all:

"[Subpostmaster] said that he was having problems again with transfers.  He has contacted the Horizon helpdesk who have subsequently come back to him to say that there is no system problem and that he should contact NBSC."

We finally get to an internal log written about the bug by Anne Chambers from Fujitsu in Feb 2006:

"Haven't looked at the recent evidence, but I know in the past this site had hit this Riposte lock problem 2 or 3 times within a few weeks.  This problem has been around for years and affects a number of sites most weeks, and finally Escher say they have done something about it. I am interested in whether they really have fixed it which is why I left the call open - to remind me to check over the whole estate once S90 [the fix] is live - call me cynical but I do not just accept a 3rd party's word that they have fixed something!"

So a serious bug affecting multiple branches for years.

Mr Green takes Mr Godeseth to a letter from Post Office's solicitors to the claimants' solicitors dated 28 July 2016. The letter asserts the Callendar Square bug "was discovered in 2005 and fixed in March 2006".  He then shows Mr Godeseth another Post Office solicitors letter which says: ""The Falkirk/Callendar Square issue was only known to have affected that one branch."

Mr Green invites Mr Godeseth to agree that these assertions are both wrong.

"On the face of it." replies Mr Godeseth.

The Receipts and Payments Mismatch bug

This was a Horizon Online bug, which Mr Godeseth says in his witness statement started in September 2010.

The problem is, Mr Godeseth had got his information about this bug from Gareth Jenkins, which as we have previously seen, may not be good information to put in a witness statement. Mr Green double-checked:

"So your evidence is that it arose in September 2010, yes?"
"Yes."
"And Fujitsu identified it in September 2010?"
"I have not checked the detail, but I'm comfortable with that, yes."

That was unwise. Even I know about this bug's history and I'm not even Horizon's Chief Architect (though I was paying attention during the first trial).

Mr Godeseth is taken to an internal Post Office document about the receipts and payments mismatch bug which was written between 29 September and 4 October 2010: "Discrepancies showing at the Horizon counter disappear when the branch follows certain... steps but will still show within the back end branch account ... impacting circa 40 branches since migration [from legacy Horizon to Horizon online] ... with an overall cash value of... £20K loss."

Furthermore: "At this time we have not communicated with branches affected and we do not believe they are exploiting this bug intentionally."

And: "We have asked Fujitsu why it has taken so long to react to and escalate an issue which began in May. They will provide feedback in due course."

Although he had been given a chance to challenge the information in his own witness statement a minute or two earlier, Mr Godeseth had chosen to say he was comfortable with it. He was asked about it again. He agreed that his witness statement suggesting the receipts and payments bug started in September 2010 was materially wrong.

Mr Godeseth's witness statement also suggested that 60 (later 62) branches had been affected by this bug. He wasn't very clear on how he had arrived at this figure, but it appeared to come about during discussions with Gareth Jenkins.

Mr Green drew Mr Godeseth's attention to a spreadsheet dated 16 July 2010, well before Mr Jenkins suggested to Mr Godeseth that the number of branches affected by this bug was in double figures:

"If we look please at the "Affected Branches" spreadsheet for a moment please and if you look at line 7, do you see there minus 777 in July 2010?"

Mr Godeseth did.

The local suspense account bug

According to Mr Godeseth's witness statement:

"As a result of some changes that were made on 3 July 2011 to the Horizon archiving strategy relating to Stock Units that had been deleted in a branch, any branch that deleted a Stock Unit at the end of 2010 which had a local suspense transaction in that Stock Unit before it was deleted were left in the table used for constructing the branch trading statement."

It transpired that this section of Mr Godeseth's witness statement had essentially been copied and pasted from a document written by Gareth Jenkins. According to Mr Godeseth:

"The bug was discovered in January 2013 when two Subpostmasters, who experienced the largest discrepancies, raised the issue with Post Office. I understand from Gareth Jenkins that Post Office could see the impact of the problem in their back end system and wrote off the discrepancies."

This resulted to the following exchange, led by Mr Green:

"The point there is that although it had persisted for years not months, it was SPMs who drew it to Post Office's attention and when they did, then Fujitsu saw it and was able to try and correct it?"
"We became aware of it in 2013, from my understanding."
"Yes, because it was raised by SPMs?"
"Correct."
"And Post Office had known about it since 2012?"
"I can't comment on that."

The Dalmellington bug

This time Mr Green stopped teasing and dealt with the Gareth issue up front:

"This was also known as the Branch Outreach issue and again here you are heavily reliant on Mr Jenkins who you refer to at paragraphs 55, 57, 58 and 61 of your witness statement, is that fair?"
"Correct." replied Mr Godeseth.

Having got that out of the way, we found out more about the Dalmellington bug from an internal Fujitsu document. It affected 65 branches and had two fixes, one issued in 2010 and another issued in 2011.

Neither did the job. The same internal document listed several reports of the bug resurfacing in several branches between 2011 and 2016. The document notes a 2016 fix to be released with Post Office's approval. The document also notes that between 2012 and 2014 the Post Office didn't raise the issue with Fujitsu.

"So the point that someone was making at Fujitsu" said Mr Green, "was that Post Office had not raised the matter with Fujitsu so that it could be corrected earlier.... isn't it?"

Mr Godeseth refused to comment.
"What do you think it looks like?" ventured Mr Green.
"It looks like that." conceded Mr Godeseth.

Mr Green went on to suggest that because the Post Office hadn't told Fujitsu about the reoccurrence of this bug, no root cause analysis was being done on it.

Mr Godeseth replied: "I think these incidents came from us going through the audit trail to identify where there had been duplicate pouches."
"So SPMs were suffering duplicate pouches over a number of years due to a known problem with the system and Fujitsu was not informed over that period of years until 2015?"

Mr Godeseth wasn't sure, so Mr Green tried a wider point:

"It does not show that any supposed countermeasures to ensure the robustness of Horizon as a system were working, does it?"

Mr Godeseth answered:

"Unfortunately this particular error is not subject to receipts and payments problems because it could be... it could be user doing something twice, it's the bug had the effect of making it look as though a user was simply doing something multiple times."

You have to admit it's getting better

Before Mr Godeseth left the witness box he was asked if he thought Horizon as a system had improved over time. Mr Godeseth asserted he believed all systems improved over time. He was asked if he thought that specifically about Horizon. "Yes." said Mr Godeseth.

Mr Green took him to a recent issue which arose when a requirement to remove mobile phone 'Top Up' options associated with Orange and T-mobile, now they had been bought by EE.

Unfortunately:

"there was a human mistake made when undertaking the change to the reference data for these products. The 'front-end' reference was correctly removed. The 'back-end' reference was incorrectly removed at the same time... This would have shown as a mismatch that the branch had to accept."

This was not just an example of a discrepancy caused outside of a branch directly affecting a branch's accounts, but, according to Mr Green it was a recent one which shows us how "how branch data is incorporated into transaction data and accounts for which a mismatch for which an SPM may be held liable can arise."

Mr Godeseth pointed out it would be picked up by Horizon's own monitoring systems.

Mr Green moved on to another problem caused by the introduction of Smart ID (known internally as EUM) across the branch network, designed to "allow a given EUM user to lock a counter and then log on to another counter."

The internal report about this change noted EUM "has caused incidents to occur in the live estate ... if the active user session rolls over the current stock unit, and a locked session on another counter attached to the same stock unit is then resumed."

Mr Green noted that as of 22 January 2019, the bug had "impacted 19 branches to date over a 6-month period."

Mr Godeseth agreed it was a new problem, but Mr Green had a newer one. This was dated Feb 2019 and was caused by: "a data cleanse on obsolete IDs". When it came to "Official Postage" which was due to end, there was a problem:

"When a branch was processing a claim for Official Postage this was increasing the cash on hand figure rather than decreasing which could potentially result in the branch having a discrepancy if not identified. NBSC received further calls and it became apparent that the accounting sense being applied at the counter was positive value not negative value. We spoke to a couple of contacts at Fujitsu but they couldn't explain why this was so"

Oh dear. Impact? "As of [2 February 2019] 720 branches are impacted including the live kit in NBSC ..."

Mr Godeseth didn't know about that one.

Where do we go from here

The brutal dissection of Mr Godeseth's knowledge and witness statement(s) was a bleak reminder of Richard Roll's trammelling at the hands of Mr de Garr Robinson. Cross-examination of knowledgeable people at the hands of a skilled QC is a vital part of the justice system and can have a dramatic effect on the understanding of a situation. You just wouldn't want to be on the end of it.

Nonetheless, over four days of questioning by Patrick Green for the claimants, we discovered there was a possibility the Post Office may have used incomplete evidence to prosecute people for theft and false accounting, a litany of Horizon errors revealed during Angela van den Bogerd's cross-examination, the bizarre approach the Post Office's debt collection department takes when it comes to branch discrepancies and the previous week, during the cross-examination of claimant witnesses, we found out about the sheer scale of the tinkering in branch accounts by Fujitsu engineers revealed by Richard Roll.

But Mr Godeseth's cross-examination was something else altogether. It contained an admission of a smoking gun - a branch discrepancy which the evidence suggests was more than likely caused by a Fujitsu engineer, being pinned by the Post Office on a hapless Subpostmaster.

There are two more Post Office witnesses to be cross-examined, but as things stand we are in limbo, waiting for the hearing of the Post Office's recusal application.

Stay tuned for more developments. Or come along to the recusal hearing on Wed 3 April at the High Court's Rolls Building. All welcome.

*****************************
Please feel free to forward the link to this blog post. The more people who read it, the more people find out about what is the biggest trial going through the UK courts right now.

Please also consider a donation to keep the postofficetrial.com website going by choosing an amount and clicking the button at the bottom of this post. Contributors who donate £20 or more will be added to the secret email list. Thanks!

Choose an amount

- £2.50 GBP -- £5.00 GBP --- £20.00 GBP ---- £30.00 GBP ------ £40.00 GBP ------- £50.00 GBP -------- £75.00 GBP --------- £100.00 GBP ---------- £250.00 GBP ----------- £1,000.00 GBP