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Peer calls for clear-out of Post Office board after Court of Appeal confirms major court defeat

Conservative peer championing subpostmasters’ long-running battle with Post Office suggests management clear-out after Court of Appeal rejects appeal bid

Karl Flinders
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Published: 26 Nov 2019 11:08

Conservative peer James Arbuthnot has suggested that the board and senior management of the Post Office are removed to enable the organisation to start again, after the Court of Appeal rejected its application to appeal damning judgments in its multimillion-pound legal battle with subpostmasters.

In the Court of Appeal, Lord Justice Coulson dismissed an application from the Post Office requesting leave to appeal on 26 different grounds of the judgment made in March by Judge Peter Fraser, as part of the first trial in a group litigation. Known as the Common Issues trial, the first of four planned, it focused on the contractual relationship between the Post Office and subpostmasters.

Fraser’s criticisms of the Post Office in the first trial judgment included that the organisation was engaged in “oppressive behaviour” when demanding sums of money that could not be accounted for by subpostmasters. He also said: “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.”

At the time, the judgment was described as a “stunning victory” by lead claimant Alan Bates, and was a watershed superseded only by the dismissal of an application to appeal it in the Court of Appeal last week, which confirmed the higher court’s agreement with Judge Fraser. Following the judgment, the Post Office announced its intention to appeal.

After the Court of Appeal’s dismissal of the Post Office application to appeal, former Conservative MP Arbuthnot, now in the House of Lords, said this should signal to the government, which owns the Post Office, that it is time for change. “My own suggestion is that the government should clear out the entirety of the board and senior management of the Post Office and start again, perhaps with the assistance of consultancy services from Second Sight, who know where the bodies are buried,” he said.

Second Sight is the forensic accounting firm that put the Post Office’s Horizon computer system and supporting processes under the microscope.

The Post Office commissioned Second Sight to produce a report, but when the report revealed serious problems with the technology and processes, the Post Office rejected its findings. After Second Sight’s 96-page report was published in April 2015, saying that the Post Office had been too quick to take legal action against subpostmasters, the Post Office published an 83-page report of its own, claiming that Second Sight’s conclusions were wrong.

Arbuthnot became a supporter of the subpostmasters when, as MP for Hampshire North East, he was contacted by constituent Jo Hamilton. She was a subpostmaster who was being threatened with jail for accounting irregularities that could not be explained. Hamilton was interviewed by Computer Weekly in 2009 as one of the seven initial cases made public. She ran a grocery store with a post office attached. Unable to explain accounting shortfalls and faced with the prospect of prison, Hamilton pleaded guilty to false accounting. Her house was remortgaged to pay off the money, and local villagers in South Warnborough raised £9,000 to help her.

Last week, Lord Justice Coulson was damning in his dismissal of the Post Office’s application to appeal, saying: “This application is founded on the premise that the nation’s most trusted brand was not obliged to treat their SPMs [subpostmasters] with good faith, and instead entitled to treat them in capricious or arbitrary ways which would not be unfamiliar to a mid-Victorian factory owner (the PO’s right to terminate contracts arbitrarily, and the SPMs’ alleged strict liability to the PO for errors made by the PO’s own computer system, being just two of many examples).”

Post Office difficulties ‘self-inflicted’

Coulson also said many of the Post Office’s difficulties were self-inflicted. “For example, as happened during the trial and on the application for permission to appeal both to the judge, and to this court, the Post Office has consistently put its arguments much too high,” he said. “It made sweeping statements about the trial and the judgment which were demonstrably wrong. The Post Office ascribed various findings or conclusions to the judge which, on analysis, formed no part of his judgment. As the judge himself noted when refusing permission to appeal, even when concerned with findings that he did make, the Post Office takes such findings either wholly out of context, mis-stated, or otherwise not correctly summarised.”

Arbuthnot said the dismissal of the Post Office’s application to appeal the first trial judgments by the Court of Appeal should have given the Post Office hierarchy “incontrovertible proof that they are heading firmly in the wrong direction”.

He added: “One of the problems we all face is that the government, which owns the Post Office, has, for reasons which seemed good at the time, handed over responsibility to a commercial-type board, so it feels it cannot intervene. But that commercial board has been accumulating vast legal debts and liability for damages, for which the government is liable. This cannot, and in my view will not, continue. Maybe a new government after the election, of whatever colour, will be able to say ‘that was then, this is now – we need a fresh approach’.”

Responding to the Court of Appeal ruling, Alan Bates, lead claimant and chairman of the Justice for Sub Postmasters Alliance, which he set up in September 2009, said: “The judge, in a damning decision, has dismissed the Post Office’s appeal on all 26 grounds. Therefore, the entirety of the Common Issues judgment in the claimants’ favour still stands. Yet again, this shows that the Post Office has wasted good public money in defending the indefensible and it is about time that someone at a very senior level steps in to control this storm that Post Office finds itself in.” 

The Post Office said in a statement: “We are looking at the Court of Appeal’s decision in detail. The litigation is complex – the claims stretch back over around two decades. We remain focused on the work we are doing to improve the ways in which we work with postmasters, which is of the utmost importance. We have taken determined action at every level of the business to provide better support to the people operating the UK’s 11,500 Post Office branches. The litigation is continuing – none of the trials to date decide liability or the individual claimants’ cases.”

Although mediation is going on behind the scenes, the rulings are coming quickly, with the High Court judgments on the second trial in the litigation due before 4 December. The second trial examined the controversial computer system, known as Horizon, at the centre of the case. Horizon, a Fujitsu system that was introduced in 1999/2000, is used by nearly 12,000 post office branche, and the claimants allege it is the cause of unexplained accounting shortfalls.

Known errors log

The Post Office has always denied this. But in preparation for the trial, a document known as the known errors log was disclosed, revealing thousands of errors that the Post Office and Fujitsu knew about but did not inform the subpostmaster network about. One known error, which featured heavily on day one of the trial, was first made public by Computer Weekly in November 2015. The issue, which has become known as the Dalmellington case – named after the branch – involved an incident in which thousands of pounds’ worth of payments were duplicated for one subpostmaster. If undetected, this would have appeared as a loss when the accounts were completed, which would be the responsibility of the subpostmaster.

The plight of some subpostmasters was first reported in May 2009, when Computer Weekly revealed that the lives of some of them had been turned upside down after being fined, sacked, made bankrupt or even imprisoned because of unexplained accounting shortfalls. They blamed the Horizon accounting and retail system for the problems, which the Post Office rejects (see timeline of Computer Weekly articles below). 

It is now more than a decade since Computer Weekly first published an article about the controversy. But it was as early as 2004 that Bates, previously subpostmaster in Craig-y-don, Wales, first contacted Computer Weekly with his concerns that the computer system could be the cause of unexplained accounting errors in Post Office branches.

But even that first contact came some years after Bates had alerted the Post Office to potential problems at the end of 2000. He first wrote to his area manager about the issue in December 2000, when he raised a number of queries about Horizon. In 2003 he set up a website, www.postofficevictims.org.uk, seeking to find subpostmasters with similar problems.

In his letter to Computer Weekly in 2004, Bates wrote: “We have lost our investment and livelihood by daring to raise questions over a computer system we had thrust upon us…”

From the start, Bates identified the contractual relationship between the Post Office and subpostmasters as a major problem. Judges Fraser and Coulson both tore into this contract in separate judgments. Bates’ 2004 letter continued: “The core of our problem stems from our refusal to blindly accept liability for figures derived from the system without having full access to the system to check the data we have entered. As a subpostmaster, I was an agent and not an employee of the Post Office and the system was brought in a couple of years after the contract was signed with them.”

In that letter, Bates made clear that he would not back down. “I fully expect it to take a number of years to bring Post Office Ltd to account for what they have done to us, but we are determined to do it,” he wrote.  Now, almost 20 years after his first letter to the Post Office, Bates is still embroiled in the dispute.

The case, which has so far cost tens of millions of pounds, continues.

Timeline of the Post Office Horizon case since Computer Weekly first reported on it in 2009:

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