Subpostmasters got the best deal possible in legal battle with the Post Office, says lawyer

The £57.75m settlement agreed between the Post Office and 500 subpostmasters over the controversial Horizon branch accounting system, was the best possible deal for the claimants, according to the lawyer that led their High Court action.

The Post Office this week settled a legal dispute with the group led by former subpostmaster Alan Bates, almost 20 years after he first raised concerns with the organisation about the computer system used in branches. The Post Office apologised to the affected subpostmasters and agreed to the payment, but the amount has caused further questions to be asked regarding the subpostmasters' victory.

Dividing the settlement between 550 people after taking away additional costs might seem small compensation for subpostmasters that suffered damaging and often life-changing events as a result of the way they were treated by the Post Office.

But speaking exclusively to Computer Weekly, James Hartley, partner at solicitors Freeths, the law firm managing the group action, said: “If the claimants had not pulled out of this litigation at this point, it is highly likely they would have got nothing.”

Hartley was unable to discuss any specific details about the settlement, but with social media rife with questions regarding the payment, we spoke to Hartley following the subpostmasters’s victory.

There will be deductions from the £57.75m before any money goes to the claimants, including a payment for the funder of the case, Therium, which took the financial risk of the litigation in return for a share of any settlement . There will also be payments made to lawyers that have delayed their fees to enable the case to proceed, and a payment to the insurance company providing cost insurance. The remaining money will go to the claimants using a criteria to value their claims. “This will determine what proportion each claimant is entitled to,” said Hartley.

These claims could, for example, be valued as low as £5000, if it was a case of a subpostmaster trying to recover money they had paid to the Post Office to cover a shortfall in their branch accounts. For some claimants this will be the extent of their claim, but there will also be much more serious claims that will demand a higher proportion of damages.

“But people will not recover anything like their full losses. This was always understood by everyone because we knew the group action would have a lot of costs,” added Hartley.

The lawyer said this moment in the court case was the optimum time for claimants to exit.

“The reason for this is that there were another two trials planned and to get through those trials we would have needed more funding. Even if we had got that funding, which is not certain, for every £1m we got from the case, £3m would have to go back to the funders. Every month that had gone on in the case, the value of damages available to claimants would have gone down, to the point where they would have got nothing even if we had won.”

The settlement followed quickly after a failed attempt by the Post Office to appeal the judgment in the first trial in the court battle, made by Judge Fraser. The judgment on the trial that focused on the contractual relationship between the Post Office and subpostmsters was damning, as was the Court of Appeal’s decision to reject it. Lord Justice Coulson in the Court of Appeal said the Post Office treated subpostmasters like Victorian factory workers.

The subpostmaster problems were 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 persistently and strongly denied, (see timeline of Computer Weekly articles below). 

Following the settlement, Hartley added that there were also still some “very big risks” left in the litigation, such as some cases being so old that they are time barred. This means that by law those subpostmasters would not be able to make their claims. “We were trying to find a way around this but there were serious risks,” said Hartley.

Another risk was due to the fact that some claimants had made separate settlements with the Post Office in the past that were difficult to reverse. “There was a large risk that a lot of the claims in the group would have failed, and if some of the claims had succeeded the damages pot would not have been enough to give the claimants anything,” said Hartley.

But Hartley added that there have been other benefits secured for claimants in the settlement, beyond cash. He could not go into detail, due to a confidentiality agreement, but said: “A lot of the claimants have had all sorts of problems that will now be sorted out.” These included charges over their homes that had been used by the Post Office to enforce judgements, which can now be lifted. He added that suspended subpostmasters can also be helped following the settlement.

And the settlement goes way beyond the financial agreement. It is vindication that lead claimant Alan Bates was right all along that the Post Office computer system and its businesses practices were responsible for unexplained account shortfalls and other subpostmaster problems.

The settlement will also lead to a huge transformation in the Post Office. Hartley said: “I am completely satisfied that there will be a transformation of the Post Office as a consequence of this case and the new Post Office CEO [Nick Read] coming in and recognising what has happened.”

There are also cases of potential wrongful prosecution being reviewed by the Criminal Courts Review Commission (CCRC), which will continue despite the settlement. Hartley said: “The CCRC will be massively interested in the judgment for the second trial next week. I anticipate the CCRC will come to a decision relatively quickly after the Horizon judgment." It is Computer Weekly’s understanding that if previous convictions were to go to appeal and are overturned, those claimants will still be able to claim damages separately.

On Monday 16 December, Judge Fraser will hand down his judgment on the second trial, which focused on the robustness of the Horizon computer system at the centre of the case.

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 only 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. Bates’s 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.