Post Office made to repay public money it allocated to fund Horizon litigation

The Post Office was told by a civil servant to pay back government funds which had been wrongly allocated to cover its costs in the ongoing legal battle with subpostmasters.

The funds from the Department for Business, Energy and Industrial Strategy (DBEIS) were meant to be for transforming subpostmaster branches, but a letter from the government to then Post Office CEO Paula Vennells revealed the Post Office had other plans.

According to website Better Retailing, DBEIS permanent secretary Alex Chisholm wrote to Vennells about the matter. “In your recent funding request, you indicated that you intended to use DBEIS funds for non-transformation-related spend specifically in relation to the ongoing Horizon litigation,” read the letter. 

The letter went on to say this was not allowed.

In January 2019, Vennells responded and agreed to pay back £2.3m that had been allocated to the trial defence and cancelled a request for a further £2.4m in funding for the trial. 

Vennells said “change funding” comes from Post Office revenue and government money. “The group litigation order (GLO) work draws on shared (scarce) resources from this change budget; we have been transparent about these costs,” said Vennells in her response.

The GLO, through which more than 500 subpostmasters are suing the Post Office, is being heard in the High Court. These subpostmasters, who run local Post Offices, claim they have been made to repay losses they are not responsible for. They blame errors in the accounting and retail system they use, known as Horizon.

The plight of some subpostmasters was first reported in 2009 (see timeline below), when Computer Weekly revealed that the lives of some subpostmasters had been turned upside-down as a result of being fined, sacked, made bankrupt and even imprisoned because of unexplained accounting shortfalls. They blame the accounting and retail system they use, known as Horizon, for the problems. The Post Office denies this.

Horizon, which was introduced in 1999/2000, is used by nearly 12,000 Post Office branches. Subpostmasters are held liable for any unexplained losses.

The case has four planned trials. The first, held in November 2018, focused on the contractual relationship between subpostmasters and the Post Office. The second trial, which looks closely at the Horizon system, was dramatically suspended at the end of its second week as the Post Office legal team made an application for the judge to recuse himself and be replaced because of alleged bias.

This followed the announcement of the judgment from the first trial, which was a huge victory for the subpostmasters. The judge’s criticisms of the Post Office included “oppressive behaviour” when demanding sums of money that could not be accounted for by subpostmasters.

“The Post Office describes itself on its own website as ‘the nation’s most trusted brand’. So far as these claimants, and the subject matter of this group litigation, are concerned, this might be thought to be wholly wishful thinking,” Fraser said in the ruling.

The judge also accused the Post Office’s most senior witness, director Angela van den Bogerd, of deliberately misleading him, saying there were two specific matters where she “did not give me frank evidence, and sought to obfuscate matters, and mislead me”.

During the second trial, multiple bugs in Horizon have been revealed, which could lead to losses at branches that subpostmasters would be responsible for.

There will be a hearing on 3 April about the Post Office’s application for the judge to be changed.

A Post Office spokesperson told Better Retailing: “The Post Office is funding its defence, not the government.”

The subpostmaster claimants are being funded by Therium through third-party litigation funding. This involves a number of investors funding the litigation, paying fees and other costs. If the case succeeds, they make a profit, but their investment is at risk if the case is lost.

The case continues.